Financial Statements of Guarantors (Tables)

12 Months Ended

Dec. 31, 2012

Financial Statements of Guarantors

Schedule of condensed consolidating statements of operations

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
SUCCESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			10,889			—			10,889
Operating revenues—affiliates		—			4			467			(4	)		467
Total operating revenues		—			4			11,356			(4	)		11,356
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			(4	)		4,818			—			4,814
Selling, general and administrative		8			2			1,707			—			1,717
Operating expenses—affiliates		—			—			603			(4	)		599
Depreciation and amortization		62			—			2,886			—			2,948
Total operating expenses		70			(2	)		10,014			(4	)		10,078
OPERATING (LOSS) INCOME		(70	)		6			1,342			—			1,278
OTHER INCOME (EXPENSE)
Interest expense		(99	)		(68	)		(444	)		—			(611	)
Interest expense—affiliates		(91	)		(110	)		(50	)		107			(144	)
Net loss on early retirement of debt		27			—			(50	)		—			(23	)
Income (loss) from equity investments in subsidiaries		528			219			—			(747	)		—
Other income (expense)		—			106			5			(107	)		4
Total other income (expense)		365			147			(539	)		(747	)		(774	)
INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		295			153			803			(747	)		504
Income tax (benefit) expense		(13	)		(375	)		584			—			196
NET INCOME (LOSS)	$	308			528			219			(747	)		308
COMPREHENSIVE INCOME	$	(64	)		528			219			(747	)		(64	)

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2011
SUCCESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			8,276			—			8,276
Operating revenues—affiliates		—			20			76			(45	)		51
Total operating revenues		—			20			8,352			(45	)		8,327
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			3,523			—			3,523
Selling, general and administrative		13			20			1,708			—			1,741
Operating expenses—affiliates		—			—			171			(45	)		126
Depreciation and amortization		61			—			2,333			—			2,394
Total operating expenses		74			20			7,735			(45	)		7,784
OPERATING (LOSS) INCOME		(74	)		—			617			—			543
OTHER INCOME (EXPENSE)
Interest expense		(131	)		(53	)		(302	)		—			(486	)
Interest expense—affiliates		(12	)		(68	)		1			79			—
Interest income—affiliates		—			79			—			(79	)		—
Net loss on early retirement of debt		—			—			(8	)		—			(8	)
Income (loss) from equity investments in subsidiaries		223			(79	)		—			(144	)		—
Other income (expense)		1			3			(2	)		—			2
Total other income (expense)		81			(118	)		(311	)		(144	)		(492	)
INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		7			(118	)		306			(144	)		51
Income tax (benefit) expense		(12	)		(335	)		379			—			32
NET INCOME (LOSS)	$	19			217			(73	)		(144	)		19
COMPREHENSIVE INCOME	$	(427	)		217			(73	)		(144	)		(427	)

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			2,846			—			2,846
Operating revenues—affiliates		—			2			9			(11	)		—
Total operating revenues		—			2			2,855			(11	)		2,846
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			1,178			—			1,178
Selling, general and administrative		3			2			551			—			556
Operating expenses—affiliates		—			—			11			(11	)		—
Depreciation and amortization		—			—			533			—			533
Total operating expenses		3			2			2,273			(11	)		2,267
OPERATING INCOME		(3	)		—			582			—			579
OTHER INCOME (EXPENSE)
Interest expense		(56	)		(19	)		(152	)		—			(227	)
Interest expense—affiliates		(1	)		(26	)		(1	)		28			—
Interest income—affiliates		—			28			—			(28	)		—
Income from equity investments in subsidiaries		272			226			—			(498	)		—
Other income (expense)		—			(1	)		6			—			5
Total other income (expense)		215			208			(147	)		(498	)		(222	)
INCOME BEFORE INCOME TAX EXPENSE(BENEFIT)		212			208			435			(498	)		357
Income tax expense (benefit)		1			(64	)		209			—			146
NET INCOME	$	211			272			226			(498	)		211
COMPREHENSIVE INCOME	$	218			272			226			(498	)		218

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
PREDECESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			11,730			—			11,730
Operating revenues—affiliates		—			(1	)		24			(23	)		—
Total operating revenues		—			(1	)		11,754			(23	)		11,730
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			5,011			—			5,011
Selling, general and administrative		75			(2	)		2,445			—			2,518
Operating expenses—affiliates		—			—			23			(23	)		—
Depreciation and amortization		—			—			2,200			—			2,200
Total operating expenses		75			(2	)		9,679			(23	)		9,729
OPERATING INCOME		(75	)		1			2,075			—			2,001
OTHER INCOME (EXPENSE)
Interest expense		(318	)		(101	)		(620	)		—			(1,039	)
Interest expense—affiliates		(1	)		(292	)		—			293			—
Interest income—affiliates		—			293			—			(293	)		—
Net loss on early retirement of debt		(5	)		(40	)		—			—			(45	)
Loss on embedded option in convertible debt		(475	)		—			—			—			(475	)
Income from equity investments in subsidiaries		755			602			—			(1,357	)		—
Other income (expense)		—			8			—			—			8
Total other income (expense)		(44	)		470			(620	)		(1,357	)		(1,551	)
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(119	)		471			1,455			(1,357	)		450
Income tax (benefit) expense		(64	)		(284	)		853			—			505
NET (LOSS) INCOME	$	(55	)		755			602			(1,357	)		(55	)
COMPREHENSIVE INCOME	$	62			755			598			(1,357	)		58

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

Schedule of condensed consolidating balance sheets

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2012
SUCCESSOR

	QCII(1)		QSC(2) & QCF(3)		Subsidiary Non- Guarantors		Eliminations			QCII Consolidated
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	11		59		17		—			87
Accounts receivable, less allowance		10		—		1,167		—			1,177
Advances to affiliates		—		938		223		(661	)		500
Notes receivable—affiliates		—		1,413		—		(1,413	)		—
Deferred income taxes, net		—		272		201		—			473
Other		8		—		321		(9	)		320
Total current assets		29		2,682		1,929		(2,083	)		2,557
Net property, plant and equipment		—		—		9,127		—			9,127
Goodwill		—		—		10,123		—			10,123
Customer relationships, net		—		—		5,822		—			5,822
Other intangible assets, net		64		—		1,213		—			1,277
Investments in subsidiaries		14,322		13,478		—		(27,800	)		—
Deferred income taxes, net		1,336		931		—		(2,267	)		—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		1,697		—		—		(1,693	)		4
Other		37		7		292		—			336
TOTAL ASSETS	$	17,485		17,098		28,506		(33,843	)		29,246
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		—		856		—			856
Current debt—affiliates		1,322		1,413		701		(1,413	)		2,023
Accounts payable		—		1		695		(9	)		687
Accounts payable—affiliates		661		—		—		(661	)		—
Accrued expenses and other liabilities		178		57		689		—			924
Advance billings and customers deposits		—		—		452		—			452
Total current liabilities		2,161		1,471		3,393		(2,083	)		4,942
LONG-TERM DEBT		849		1,008		6,915		—			8,772
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenues		—		—		192		—			192
Benefit plan obligations, net		3,699		—		—		—			3,699
Deferred income taxes		—		—		2,761		(2,267	)		494
Other		152		27		344		—			523
Other—affiliates		—		270		1,423		(1,693	)		—
Total deferred credits and other liabilities		3,851		297		4,720		(3,960	)		4,908
Stockholder's equity		10,624		14,322		13,478		(27,800	)		10,624
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	17,485		17,098		28,506		(33,843	)		29,246

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2011
SUCCESSOR

	QCII(1)		QSC(2) & QCF(3)		Subsidiary Non- Guarantors		Eliminations			QCII Consolidated
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—		40		8		—			48
Accounts receivable, less allowance		15		2		1,184		—			1,201
Accounts receivable—affiliates, net		211		336		36		(583	)		—
Advances to affiliates		184		1,694		400		(1,536	)		742
Deferred income taxes, net		—		438		121		—			559
Other		—		19		259		(13	)		265
Total current assets		410		2,529		2,008		(2,132	)		2,815
Net property, plant and equipment		—		—		9,461		—			9,461
Goodwill		—		—		10,123		—			10,123
Customer relationships, net		—		—		6,788		—			6,788
Other intangible assets, net		126		—		1,461		—			1,587
Investments in subsidiaries		14,856		13,999		—		(28,855	)		—
Deferred income taxes, net		1,102		1,390		117		(2,609	)		—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,851		76		955		(3,882	)		—
Other		36		7		338		—			381
TOTAL ASSETS	$	19,381		18,001		31,251		(37,478	)		31,155
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		—		117		—			117
Current debt—affiliates		122		1,413		—		(1,535	)		—
Accounts payable		4		19		950		—			973
Accounts payable—affiliates, net		360		42		23		(31	)		394
Dividends payable—affiliates		200		—		310		(310	)		200
Accrued expenses and other liabilities		272		40		700		(1	)		1,011
Accrued expenses and other—affiliates		1		62		192		(255	)		—
Advance billings and customers deposits		—		—		400		—			400
Total current liabilities		959		1,576		2,692		(2,132	)		3,095
LONG-TERM DEBT		2,767		1,009		8,403		—			12,179
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenue		—		—		110		—			110
Benefit plan obligations, net		3,198		—		—		—			3,198
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,031		344		2,507		(3,882	)		—
Deferred income taxes, net		—		223		3,016		(2,609	)		630
Other		150		31		486		—			667
Total deferred credits and other liabilities		4,379		598		6,119		(6,491	)		4,605
STOCKHOLDER'S EQUITY		11,276		14,818		14,037		(28,855	)		11,276
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	19,381		18,001		31,251		(37,478	)		31,155

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

Schedule of condensed consolidating statements of cash flows

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2012
SUCCESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(593	)		756			2,656			(13	)		2,806
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(1,589	)		—			(1,589	)
Changes in advances to affiliates		395			(820	)		(714	)		1,381			242
Dividends received from subsidiaries		1,025			1,150			—			(2,175	)		—
Proceeds from sale of property, plant and equipment		—			—			133			—			133
Net cash provided by (used in) investing activities		1,420			330			(2,170	)		(794	)		(1,214	)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		—			—			896			—			896
Payments of long-term debt		(1,851	)		—			(1,484	)		—			(3,335	)
Early retirement of debt costs		(22	)		—			(178	)		—			(200	)
Dividends paid to CenturyLink, Inc.		(750	)		(1,025	)		(1,150	)		2,175			(750	)
Changes in notes payable—affiliate		1,322			—			701			—			2,023
Changes in accounts payable—affiliates		485			(42	)		738			(1,368	)		(187	)
Net cash used in financing activities		(816	)		(1,067	)		(477	)		807			(1,553	)
Net increase in cash and cash equivalents		11			19			9			—			39
Cash and cash equivalents at beginning of period		—			40			8			—			48
Cash and cash equivalents at end of period	$	11			59			17			—			87

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2011
SUCCESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(171	)		316			2,007			—			2,152
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(1,207	)		—			(1,207	)
Changes in advances to affiliates		(184	)		(277	)		(240	)		38			(663	)
Dividends received from subsidiaries		770			990			—			(1,760	)		—
Cash infusion to subsidiaries		—			(555	)		—			555			—
Other, net		—			—			2			—			2
Net cash provided by (used in) investing activities		586			158			(1,445	)		(1,167	)		(1,868	)
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		(115	)		153			—			(38	)		—
Net proceeds from issuance of long-term debt		—			—			2,126			—			2,126
Payments of long-term debt		—			—			(2,402	)		—			(2,402	)
Early retirement of debt costs		—			—			(66	)		—			(66	)
Cash infusion from parent		—			—			555			(555	)		—
Dividends paid to parent		(300	)		(770	)		(990	)		1,760			(300	)
Other		—			—			(18	)		—			(18	)
Net cash used in financing activities		(415	)		(617	)		(795	)		1,167			(660	)
Net (decrease) increase in cash and cash equivalents		—			(143	)		(233	)		—			(376	)
Cash and cash equivalents at beginning of period		—			183			241			—			424
Cash and cash equivalents at end of the period	$	—			40			8			—			48

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating activities	$	7			(62	)		828			4			777
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(410	)		—			(410	)
Changes in advances to affiliates		—			180			1			(181	)		—
Dividends received from subsidiaries		—			590			—			(590	)		—
Changes in interest in investments managed by QSC		—			(3	)		3			—			—
Cash infusion to subsidiaries		—			(191	)		—			191			—
Other, net		—			—			2			—			2
Net cash provided by (used in) investing activities		—			576			(404	)		(580	)		(408	)
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		119			(300	)		—			181			—
Payments of long-term debt		—			(179	)		(24	)		—			(203	)
Cash infusion from parent		—			—			191			(191	)		—
Dividends paid		(141	)		—			—			—			(141	)
Dividends paid to parent		—			—			(590	)		590			—
Net proceeds from issuance of common stock		14			—			—			—			14
Other, net		1			—			16			(4	)		13
Net cash used in financing activities		(7	)		(479	)		(407	)		576			(317	)
Net increase in cash and cash equivalents		—			35			17			—			52
Cash and cash equivalents at beginning of period		—			148			224			—			372
Cash and cash equivalents at end of the period	$	—			183			241			—			424

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2010
PREDECESSOR

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(358	)		514			3,106			105			3,367
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(1,488	)		—			(1,488	)
Changes in advances to affiliates		—			3,254			3			(3,257	)		—
Dividends received from subsidiaries		2,320			2,611			—			(4,931	)		—
Proceeds from sales or maturities of investment securities		—			943			—			—			943
Purchase of investment securities		—			(944	)		—			—			(944	)
Changes in interest in investments managed by QSC		10			7			(17	)		—			—
Cash infusion to subsidiaries		—			(577	)		—			577			—
Other, net		—			—			1			—			1
Net cash provided by (used in) investing activities		2,330			5,294			(1,501	)		(7,611	)		(1,488	)
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term affiliate debt		5			(3,262	)		—			3,257			—
Net proceeds from issuance of long-term debt		775			—			—			—			775
Payments of long-term debt		(1,790	)		(1,025	)		(564	)		—			(3,379	)
Early retirement of debt costs		(1	)		(40	)		—			—			(41	)
Cash infusion from parent		—			—			577			(577	)		—
Dividends Paid		(555	)		—			—			—			(555	)
Dividends paid to parent		—			(2,320	)		(2,611	)		4,931			—
Net proceeds from issuance of common stock		67			—			—			—			67
Purchase of treasury stock		(136	)		—			—			—			(136	)
Settlement of embedded option in convertible debt		(640	)		—			—			—			(640	)
Other, net		109			—			(8	)		(105	)		(4	)
Net cash used in financing activities		(2,166	)		(6,647	)		(2,606	)		7,506			(3,913	)
Net (decrease) increase in cash and cash equivalents		(194	)		(839	)		(1,001	)		—			(2,034	)
Cash and cash equivalents at beginning of period		194			987			1,225			—			2,406
Cash and cash equivalents at end of period	$	—			148			224			—			372

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.