Condensed Consolidating Financial Information (Notes)

9 Months Ended

Sep. 30, 2017

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

(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 also 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 the Level 3 Financing, Inc. Senior Notes, the accompanying condensed consolidating financial information has been prepared and presented 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, balance sheets and statements of cash flows of each legal entity and, on an aggregate basis, the 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, 2017

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	932		$	1,168		$	(41	)	$	2,059
Costs and Expense:
Network Access Costs	—			—			329			390			(41		)	678
Network Related Expenses	—			—			254			91			—			345
Depreciation and Amortization	—			—			114			219			—			333
Selling, General and Administrative Expenses	2			1			272			73			—			348
Total Costs and Expenses	2			1			969			773			(41		)	1,704
Operating Income (Loss)	(2		)	(1		)	(37		)	395			—			355
Other Income (Expense):
Interest income	—			—			6			—			—			6
Interest expense	(9		)	(121		)	—			(4		)	—			(134		)
Interest income (expense) affiliates, net	377			562			(868		)	(71		)	—			—
Equity in net earnings (losses) of subsidiaries	(212		)	(614		)	215			—			611			—
Other, net	—			—			12			(6		)	—			6
Total Other Income (Expense)	156			(173		)	(635		)	(81		)	611			(122		)
Income (Loss) before Income Taxes	154			(174		)	(672		)	314			611			233
Income Tax Benefit (Expense)	3			(38		)	(1		)	(40		)	—			(76		)
Net Income (Loss)	157			(212		)	(673		)	274			611			157
Other Comprehensive Income (Loss), Net of Income Taxes	44			—			—			44			(44		)	44
Comprehensive Income (Loss)	$	201		$	(212	)	$	(673	)	$	318		$	567		$	201

Condensed Consolidating Statements of Comprehensive Income (Loss)

Nine Months EndedSeptember 30, 2017

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	2,785		$	3,499		$	(116	)	$	6,168
Costs and Expense:
Network Access Costs	—			—			991			1,169			(116		)	2,044
Network Related Expenses	—			—			743			275			—			1,018
Depreciation and Amortization	—			—			327			656			—			983
Selling, General and Administrative Expenses	4			3			843			228			—			1,078
Total Costs and Expenses	4			3			2,904			2,328			(116		)	5,123
Operating Income (Loss)	(4		)	(3		)	(119		)	1,171			—			1,045
Other Income (Expense):
Interest income	—			—			11			—			—			11
Interest expense	(27		)	(358		)	(2		)	(13		)	—			(400		)
Interest income (expense) affiliates, net	1,132			1,703			(2,605		)	(230		)	—			—
Equity in net earnings (losses) of subsidiaries	(703		)	(1,892		)	618			—			1,977			—
Other, net	—			(44		)	16			(7		)	—			(35		)
Total Other Income (Expense)	402			(591		)	(1,962		)	(250		)	1,977			(424		)
Income (Loss) before Income Taxes	398			(594		)	(2,081		)	921			1,977			621
Income Tax Benefit (Expense)	8			(109		)	(2		)	(112		)	—			(215		)
Net Income (Loss)	406			(703		)	(2,083		)	809			1,977			406
Other Comprehensive Income (Loss), Net of Income Taxes	106			—			—			106			(106		)	106
Comprehensive Income (Loss)	$	512		$	(703	)	$	(2,083	)	$	915		$	1,871		$	512

Condensed Consolidating Statements of Comprehensive Income (Loss)

Three Months Ended September 30, 2016

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	907		$	1,160		$	(34	)	$	2,033
Costs and Expense:
Network Access Costs	—			—			330			379			(34		)	675
Network Related Expenses	—			—			242			95			—			337
Depreciation and Amortization	—			—			100			219			—			319
Selling, General and Administrative Expenses	1			1			262			84			—			348
Total Costs and Expenses	1			1			934			777			(34		)	1,679
Operating (Loss) Income	(1		)	(1		)	(27		)	383			—			354
Other Income (Expense):
Interest income	—			—			1			—			—			1
Interest expense	(9		)	(124		)	(1		)	(5		)	—			(139		)
Interest income (expense) affiliates, net	342			526			(804		)	(64		)	—			—
Equity in net earnings (losses) of subsidiaries	(193		)	(539		)	169			—			563			—
Other, net	—			—			(1		)	2			—			1
Total Other Income (Expense)	140			(137		)	(636		)	(67		)	563			(137		)
Income (Loss) before Income Taxes	139			(138		)	(663		)	316			563			217
Income Tax Expense	4			(55		)	—			(23		)	—			(74		)
Net Income (Loss)	143			(193		)	(663		)	293			563			143
Other Comprehensive Income (Loss), Net of Income Taxes	(15		)	—			—			(15		)	15			(15		)
Comprehensive Income (Loss)	$	128		$	(193	)	$	(663	)	$	278		$	578		$	128

Condensed Consolidating Statements of Comprehensive Income (Loss)

Nine Months EndedSeptember 30, 2016

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	2,652		$	3,590		$	(102	)	$	6,140
Costs and Expense:
Network Access Costs	—			—			965			1,182			(102		)	2,045
Network Related Expenses	—			—			716			298			—			1,014
Depreciation and Amortization	—			—			280			650			—			930
Selling, General and Administrative Expenses	3			4			775			279			—			1,061
Total Costs and Expenses	3			4			2,736			2,409			(102		)	5,050
Operating (Loss) Income	(3		)	(4		)	(84		)	1,181			—			1,090
Other Income (Expense):
Interest income	—			—			2			1			—			3
Interest expense	(27		)	(380		)	(2		)	(5		)	—			(414		)
Interest income (expense) affiliates, net	1,027			1,585			(2,407		)	(205		)	—			—
Equity in net earnings (losses) of subsidiaries	(581		)	(1,568		)	569			—			1,580			—
Other, net	—			(39		)	2			(17		)	—			(54		)
Total Other Income (Expense)	419			(402		)	(1,836		)	(226		)	1,580			(465		)
Income (Loss) before Income Taxes	416			(406		)	(1,920		)	955			1,580			625
Income Tax Expense	11			(175		)	(2		)	(32		)	—			(198		)
Net Income (Loss)	427			(581		)	(1,922		)	923			1,580			427
Other Comprehensive Income (Loss), Net of Income Taxes	8			—			—			8			(8		)	8
Comprehensive Income (Loss)	$	435		$	(581	)	$	(1,922	)	$	931		$	1,572		$	435

Condensed Consolidating Balance Sheets

September 30, 2017

	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	$	14	$	—			$	2,141		$	97	$	—		$	2,252
Restricted cash and securities	—		—				1			4		—			5
Receivables, less allowances for doubtful accounts	—		—				25			725		—			750
Due from affiliates	18,214		22,749				—			3,253		(44,216		)	—
Other	—		—				110			26		—			136
Total Current Assets	18,228		22,749				2,277			4,105		(44,216		)	3,143
Property, Plant, and Equipment, net	—		—				4,204			6,281		—			10,485
Restricted Cash and Securities	19		—				10			—		—			29
Goodwill and Other Intangibles, net	—		—				352			8,150		—			8,502
Investment in Subsidiaries	16,947		17,141				3,626			—		(37,714		)	—
Deferred Tax Assets	58		2,577				—			527		—			3,162
Other Assets, net	—		—				18			34		—			52
Total Assets	$	35,252	$	42,467			$	10,487		$	19,097	$	(81,930	)	$	25,373
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	1			$	331		$	372	$	—		$	704
Current portion of long-term debt	—		—				2			5		—			7
Accrued payroll and employee benefits	—		—				216			31		—			247
Accrued interest	3		86				—			6		—			95
Current portion of deferred revenue	—		—				128			148		—			276
Due to affiliates	—		—				44,216			—		(44,216		)	—
Other	—		(1		)		92			48		—			139
Total Current Liabilities	3		86				44,985			610		(44,216		)	1,468
Long-Term Debt, less current portion	593		9,820				13			160		—			10,586
Deferred Revenue, less current portion	—		—				843			289		—			1,132
Other Liabilities	16		—				185			436		—			637
Commitments and Contingencies						—
Stockholders' Equity (Deficit)	34,640		32,561				(35,539		)	17,602		(37,714		)	11,550
Total Liabilities and Stockholders' Equity (Deficit)	$	35,252	$	42,467			$	10,487		$	19,097	$	(81,930	)	$	25,373

Condensed Consolidating Balance Sheets

December 31, 2016

	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	$	15	$	—	$	1,700		$	104	$	—		$	1,819
Restricted cash and securities	—		—		1			6		—			7
Receivables, less allowances for doubtful accounts	—		—		26			686		—			712
Due from affiliates	17,032		21,715		—			2,180		(40,927		)	—
Other	—		—		87			28		—			115
Total Current Assets	17,047		21,715		1,814			3,004		(40,927		)	2,653
Property, Plant, and Equipment, net	—		—		3,869			6,270		—			10,139
Restricted Cash and Securities	22		—		9			—		—			31
Goodwill and Other Intangibles, net	—		—		353			8,291		—			8,644
Investment in Subsidiaries	16,869		17,599		3,674			—		(38,142		)	—
Deferred Tax Assets	51		2,687		—			632		—			3,370
Other Assets, net	—		—		16			35		—			51
Total Assets	$	33,989	$	42,001	$	9,735		$	18,232	$	(79,069	)	$	24,888
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	—	$	307		$	399	$	—		$	706
Current portion of long-term debt	—		—		2			5		—			7
Accrued payroll and employee benefits	—		—		160			35		—			195
Accrued interest	11		110		—			8		—			129
Current portion of deferred revenue	—		—		116			150		—			266
Due to affiliates	—		—		40,927			—		(40,927		)	—
Other	—		—		127			41		—			168
Total Current Liabilities	11		110		41,639			638		(40,927		)	1,471
Long-Term Debt, less current portion	592		10,108		13			164		—			10,877
Deferred Revenue, less current portion	—		—		719			282		—			1,001
Other Liabilities	16		—		155			451		—			622
Commitments and Contingencies
Stockholders' Equity (Deficit)	33,370		31,783		(32,791		)	16,697		(38,142		)	10,917
Total Liabilities and Stockholders' Equity (Deficit)	$	33,989	$	42,001	$	9,735		$	18,232	$	(79,069	)	$	24,888

Condensed Consolidating Statements of Cash Flows

Nine Months EndedSeptember 30, 2017

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations		Total
	(dollars in millions)
Net Cash Provided by (Used in) Operating Activities	$	(32	)	$	(378	)	$	698		$	1,503		$	—	$	1,791
Cash Flows from Investing Activities:
Capital expenditures	—			—			(614		)	(404		)	—		(1,018		)
Decrease (increase) in restricted cash and securities, net	3			—			(1		)	2			—		4
Purchases of marketable securities	—			—			(1,127		)	—			—		(1,127		)
Maturity of marketable securities	—			—			1,127			—			—		1,127
Proceeds from the sale of property, plant and equipment and other assets	—			—			1			—			—		1
Net Cash Provided by (Used in) Investing Activities	3			—			(614		)	(402		)	—		(1,013		)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs	—			4,569			—			—			—		4,569
Payments on and repurchases of long-term debt and capital leases	—			(4,911		)	1			(7		)	—		(4,917		)
Increase (decrease) due from/to affiliates, net	28			720			356			(1,104		)	—		—
Net Cash Provided by (Used in) Financing Activities	28			378			357			(1,111		)	—		(348		)
Effect of Exchange Rates on Cash and Cash Equivalents	—			—			—			3			—		3
Net Change in Cash and Cash Equivalents	(1		)	—			441			(7		)	—		433
Cash and Cash Equivalents at Beginning of Period	15			—			1,700			104			—		1,819
Cash and Cash Equivalents at End of Period	$	14		$	—		$	2,141		$	97		$	—	$	2,252

Condensed Consolidating Statements of Cash Flows

Nine Months EndedSeptember 30, 2016

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations		Total
	(dollars in millions)
Net Cash Provided by (Used in) Operating Activities	$	(35	)	$	(332	)	$	489		$	1,664		$	—	$	1,786
Cash Flows from Investing Activities:
Capital expenditures	—			—			(537		)	(491		)	—		(1,028		)
Decrease in restricted cash and securities, net	5			—			6			—			—		11
Proceeds from the sale of property, plant and equipment and other assets	—			—			—			1			—		1
Net Cash Used in Investing Activities	5			—			(531		)	(490		)	—		(1,016		)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs	—			764			—			—			—		764
Payments on and repurchases of long-term debt and capital leases	—			(806		)	(1		)	(11		)	—		(818		)
Increase (decrease) due from/to affiliates, net	34			368			798			(1,200		)	—		—
Net Cash Provided by (Used in) Financing Activities	34			326			797			(1,211		)	—		(54		)
Effect of Exchange Rates on Cash and Cash Equivalents	—			—			—			(1		)	—		(1		)
Net Change in Cash and Cash Equivalents	4			(6		)	755			(38		)	—		715
Cash and Cash Equivalents at Beginning of Period	12			6			727			109			—		854
Cash and Cash Equivalents at End of Period	$	16		$	—		$	1,482		$	71		$	—	$	1,569