Condensed Consolidating Financial Information

12 Months Ended

Dec. 31, 2017

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

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 (loss), 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)

For the period ended December 31, 2017 (Successor)

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(Dollars in millions)
OPERATING REVENUE
Operating revenues	$	—		—			748			671			(28		)	1,391
Operating revenues - affiliate	—			—			16			—			—			16
Total operating revenues	—			—			764			671			(28		)	1,407
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—			418			300			(28		)	690
Selling, general and administrative	1			3			179			70			—			253
Operating expenses - affiliate	—			—			24			—			—			24
Depreciation and amortization	—			—			117			165			—			282
Total costs and expenses	1			3			738			535			(28		)	1,249
OPERATING (LOSS) INCOME	(1		)	(3		)	26			136			—			158
OTHER INCOME (EXPENSE)
Interest income	—			—			1			—			—			1
Interest income - affiliate	11			—			—			—			—			11
Interest expense	(5		)	(72		)	—			(3		)	—			(80		)
Interest income (expense) - affiliates, net	251			368			(578		)	(41		)	—			—
Equity in net (losses) earnings of subsidiaries	(827		)	(15		)	71			—			771			—
Other income, net	1			—			2			—			—			3
Total other expense, net	(569		)	281			(504		)	(44		)	771			(65		)
(LOSS) INCOME BEFORE INCOME TAXES	(570		)	278			(478		)	92			771			93
Income tax benefit (expense)	429			(1,105		)	433			9			—			(234		)
NET INCOME (LOSS)	(141		)	(827		)	(45		)	101			771			(141		)
Other comprehensive income, net of income taxes	18			—			—			18			(18		)	18
COMPREHENSIVE INCOME (LOSS)	$	(123	)	$	(827	)	$	(45	)	$	119		$	753		$	(123	)

Condensed Consolidating Statements of Comprehensive Income (Loss)

For the period ended October 31, 2017 (Predecessor)

	Level 3 Parent, LLC			Level 3 Financing, Inc.		Level 3 Communications, LLC		Other Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	—		—		3,108		3,891		(129	)	6,870
Total operating revenues	—			—		3,108		3,891		(129	)	6,870
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—		1,942		1,680		(129	)	3,493
Selling, general and administrative	4			3		942		259		—		1,208
Depreciation and amortization	—			—		356		662		—		1,018
Total costs and expenses	4			3		3,240		2,601		(129	)	5,719
OPERATING (LOSS) INCOME	(4		)	(3	)	(132	)	1,290		—		1,151
OTHER INCOME (EXPENSE)
Interest income	—			—		12		1		—		13
Interest income (expense) - affiliate, net	1,260			1,890		(2,896	)	(254	)	—		—
Interest expense	(30		)	(397	)	(2	)	(12	)	—		(441	)
Loss on modification and extinguishment of debt	—			(44	)	—		—		—		(44	)
Equity in net (losses) earnings of subsidiaries	(815		)	(2,138	)	692		—		2,261		—
Other income (expense) , net	3			—		15		(4	)	—		14
Total other expense, net	418			(689	)	(2,179	)	(269	)	2,261		(458	)
INCOME (LOSS) BEFORE INCOME TAXES	414			(692	)	(2,311	)	1,021		2,261		693
Income tax benefit (expense)	11			(123	)	(2	)	(154	)	—		(268	)
NET INCOME (LOSS)	425			(815	)	(2,313	)	867		2,261		425
Other comprehensive income, net of income taxes	80			—		—		—		—		80
COMPREHENSIVE INCOME (LOSS)	$	505		(815	)	(2,313	)	867		2,261		505

Condensed Consolidating Statements of Comprehensive Income (Loss)

For the year ended December 31, 2016 (Predecessor)

	Level 3 Parent, LLC			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	—		$	—		$	3,558		$	4,747		$	(132	)	8,173
Total operating revenues	—			—			3,558			4,747			(132		)	8,173
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—			2,249			2,045			(132		)	4,162
Selling, general and administrative	16			5			1,025			361			—			1,407
Depreciation and amortization	—			—			372			787			—			1,159
Total costs and expenses	16			5			3,646			3,193			(132		)	6,728
OPERATING (LOSS) INCOME	(16		)	(5		)	(88		)	1,554			—			1,445
OTHER INCOME (EXPENSE)
Interest income	—			—			3			1			—			4
Interest income (expense) - affiliate, net	1,385			2,113			(3,215		)	(283		)	—			—
Interest expense	(36		)	(505		)	(2		)	(1		)	—			(544	)
Equity in net (losses) earnings of subsidiaries	(669		)	(2,033		)	757			—			1,945			—
Other (expense) income, net	(1		)	(39		)	2			(25		)	—			(63	)
Total other income (expense), net	679			(464		)	(2,455		)	(308		)	1,945			(603	)
INCOME (LOSS) BEFORE INCOME TAXES	663			(469		)	(2,543		)	1,246			1,945			842
Income tax benefit (expense)	14			(200		)	(2		)	23			—			(165	)
NET INCOME (LOSS)	677			(669		)	(2,545		)	1,269			1,945			677
Other comprehensive (loss) income, net of income taxes	(86		)	—			—			(86		)	86			(86	)
COMPREHENSIVE INCOME (LOSS)	$	591		(669		)	(2,545		)	1,183			2,031			591

Condensed Consolidating Statements of Comprehensive Income (Loss)

For the year ended December 31, 2015 (Predecessor)

	Level 3 Parent, LLC			Level 3 Financing, Inc.		Level 3 Communications, LLC		Other Non-Guarantor Subsidiaries		Eliminations		Total
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	—		—		3,326		5,077		(173	)	8,230
Total operating revenues	—			—		3,326		5,077		(173	)	8,230
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—		2,201		2,321		(173	)	4,349
Selling, general and administrative	4			—		1,064		401		—		1,469
Depreciation and amortization	—			—		298		784		—		1,082
Total costs and expenses	4			—		3,563		3,506		(173	)	6,900
OPERATING (LOSS) INCOME	(4		)	—		(237	)	1,571		—		1,330
OTHER INCOME (EXPENSE)
Interest income	—			—		—		1		—		1
Interest income (expense) - affiliates, net	1,310			1,984		(3,041	)	(253	)	—		—
Interest expense	(51		)	(574	)	(3	)	(12	)	—		(640	)
Equity in net earnings (losses) of subsidiaries	2,162			(1,693	)	177		—		(646	)	—
Other (expense) income, net	(18		)	(200	)	2		(192	)	—		(408	)
Total other income (expense), net	3,403			(483	)	(2,865	)	(456	)	(646	)	(1,047	)
INCOME (LOSS) BEFORE INCOME TAXES	3,399			(483	)	(3,102	)	1,115		(646	)	283
Income tax benefit (expense)	34			2,645		(1	)	472		—		3,150
NET INCOME (LOSS)	3,433			2,162		(3,103	)	1,587		(646	)	3,433
Other comprehensive (loss) income, net of income taxes	(154		)	—		—		(154	)	154		(154	)
COMPREHENSIVE INCOME (LOSS)	$	3,279		2,162		(3,103	)	1,433		(492	)	3,279

Condensed Consolidating Balance Sheets

December 31, 2017 (Successor)

	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	$	13	—	175		109		—		297
Restricted cash and securities	—		—	1		4		—		5
Assets held for sale	68		—	5		67		—		140
Accounts receivable	—		—	26		722		—		748
Accounts receivable - affiliate	—		—	60		4		(51	)	13
Advances to affiliates	16,251		21,032	—		5,200		(42,483	)	—
Note receivable - affiliate	1,825		—	—		—		—		1,825
Other	—		—	54		63		—		117
Total Current Assets	18,157		21,032	321		6,169		(42,534	)	3,145
NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	—		—	3,285		6,270		—		9,555
Accumulated depreciation	—		—	(48	)	(95	)	—		(143	)
Net property, plant and equipment	—		—	3,237		6,175		—		9,412
Restricted cash and securities	19		—	10		—		—		29
GOODWILL AND OTHER ASSETS
Goodwill	—		—	1,200		9,637		—		10,837
Customer relationships, net	—		—	4,324		4,521		—		8,845
Other intangible assets, net	—		—	378		—		—		378
Investment in subsidiaries	16,954		18,403	3,616		—		(38,973	)	—
Deferred tax assets	280		1,795	—		122		(1,771	)	426
Other, net	—		—	32		31		—		63
Total goodwill and other assets	17,234		20,198	9,550		14,311		(40,744	)	20,549
TOTAL ASSETS	35,410		41,230	13,118		26,655		(83,278	)	33,135
LIABILITIES AND MEMBER'S/STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES										—
Current maturities of long-term debt	—		—	2		6		—		8
Accounts payable	—		1	323		371		—		695

Accounts payable - affiliate	11		—	—		81	(51	)	41
Accrued expenses and other liabilities
Income and other taxes	—		—	55		45	—		100
Salaries and benefits	—		—	109		27	—		136
Interest	11		91	—		7	—		109
Current portion of deferred revenue	—		—	127		131	—		258
Current portion of deferred revenue - affiliate	—		—	2		—	—		2
Other	16		—	23		18	—		57
Due to affiliates	—		—	42,483		—	(42,483	)	—
Total current liabilities	38		92	43,124		686	(42,534	)	1,406
LONG-TERM DEBT	616		10,096	13		157	—		10,882
DEFERRED CREDITS AND OTHER LIABILITES
Deferred credits	—		—	841		252	—		1,093
Deferred credits - affiliate	—		—	5		1	—		6
Deferred tax liability	648		—	870		465	(1,771	)	212
Other	1		1	98		164	—		264
Total deferred revenues and other liabilities	649		1	1,814		882	(1,771	)	1,575
COMMITMENTS AND CONTINGENCIES
MEMBER'S/STOCKHOLDERS' EQUITY (DEFICIT)	34,107		31,041	(31,833	)	24,930	(38,973	)	19,272
TOTAL LIABILITIES AND MEMBER'S/STOCKHOLDERS' EQUITY (DEFICIT)	$	35,410	41,230	13,118		26,655	(83,278	)	33,135

Condensed Consolidating Balance Sheets

December 31, 2016 (Predecessor)

	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
Accounts receivable	—		—	26		686		—		712
Advances to 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
NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	—		—	10,424		10,964		—		21,388
Accumulated Depreciation	—		—	(6,555	)	(4,694	)	—		(11,249	)
Net property, plant and equipment	—		—	3,869		6,270		—		10,139
Restricted cash and securities	22		—	9		—		—		31
GOODWILL AND OTHER ASSETS
Goodwill	—		—	352		7,377		—		7,729
Customer relationships, net	—		—	—		860		—		860
Other intangible assets, net	—		—	1		54				55
Investment in subsidiaries	16,869		17,599	3,674		—		(38,142	)	—
Deferred tax assets	51		2,687	—		632		—		3,370
Other, net	—		—	16		35		—		51
Total goodwill and other assets	16,920		20,286	4,043		8,958		(38,142	)	12,065
TOTAL ASSETS	$	33,989	42,001	9,735		18,232		(79,069	)	24,888
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt	—		—	2		5		—		7
Accounts payable	—		—	307		399		—		706
Accrued expenses and other liabilities
Income and other taxes	—		—	103		13		—		116
Salaries and benefits	—		—	160		35		—		195
Interest	11		110	—		8		—		129
Due to affiliates	—		—	40,927		—		(40,927	)	—
Current portion of deferred revenue	—		—	116		150		—		266

Other	—		—	24		28	—		52
Total current liabilities	11		110	41,639		638	(40,927	)	1,471
LONG-TERM DEBT	592		10,108	13		164	—		10,877
DEFERRED REVENUES AND OTHER LIABILITES
Deferred credits	—		—	719		282	—		1,001
Deferred tax liability	—		—	—		248	—		248
Other	16		—	155		203	—		374
Total deferred revenues and other liabilities	16		—	874		733	—		1,623
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

For the period ended December 31, 2017 (Successor)

	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	$	(1	)	—	172		137		—	308
INVESTING ACTIVITIES
Capital expenditures	—			—	(110	)	(97	)	—	(207	)
Note receivable - affiliate	—			—	(1,825	)	—		—	(1,825	)
Net cash used in investing activities	—			—	(1,935	)	(97	)	—	(2,032	)
FINANCING ACTIVITIES
Payments of long-term debt	—			—	—		(1	)	—	(1	)
Distributions	(250		)	—	—		—		—	(250	)
Increase (decrease) due to from affiliate, net	250			—	(250	)	—		—	—
Net cash used in financing activities	—			—	(250	)	(1	)	—	(251	)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities	—			—	—		(2	)	—	(2	)
Net increase (decrease) in cash, cash equivalents and restricted cash and securities	(1		)	—	(2,013	)	37		—	(1,977	)
Cash, cash equivalents and restricted cash and securities at beginning of period	33			—	2,199		76		—	2,308
Cash, cash equivalents and restricted cash and securities at end of period	$	32		—	186		113		—	331

Condensed Consolidating Statements of Cash Flows

For the period ended October 31, 2017 (Predecessor)

	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	$	(61	)	(401	)	1,615		761		—	1,914
INVESTING ACTIVITIES
Capital expenditures	—			—		(667	)	(452	)	—	(1,119	)
Purchase of marketable securities	—			—		(1,127	)	—		—	(1,127	)
Maturity of marketable securities	—			—		1,127		—		—	1,127
Proceeds from sale of property, plant and equipment and other assets	—			—		1		—		—	1
Net cash used in investing activities	—			—		(666	)	(452	)	—	(1,118	)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	—			4,569		—		—		—	4,569
Payments of long-term debt	—			(4,911	)	1		(7	)	—	(4,917	)
Increase (decrease) due from/to affiliates, net	57			743		(460	)	(340	)	—	—
Net cash provided by (used in) financing activities	57			401		(459	)	(347	)	—	(348	)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities	—			—		—		3		—	3
Net increase (decrease) in cash, cash equivalents, and restricted cash and securities	(4		)	—		490		(35	)	—	451
Cash, cash equivalents and restricted cash and securities at beginning of period	37			—		1,710		110		—	1,857
Cash, cash equivalents and restricted cash and securities at end of period	$	33		—		2,200		75		—	2,308

Condensed Consolidating Statements of Cash Flows

For the year ended December 31, 2016 (Predecessor)

	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	)	(468	)	565		2,295		—	2,343
INVESTING ACTIVITIES
Capital expenditures	—			—		(704	)	(630	)	—	(1,334	)
Proceeds from sale of property, plant and equipment and other assets	—			—		1		2		—	3
Net cash used in investing activities	—			—		(703	)	(628	)	—	(1,331	)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	—			764		—		—		—	764
Payments of long-term debt	—			(806	)	(1	)	(13	)	—	(820	)
Increase (decrease) due from/to affiliates, net	47			504		1,107		(1,658	)	—	—
Net cash provided by (used in) financing activities	47			462		1,106		(1,671	)	—	(56	)
Effect of exchange rates on cash, cash equivalents, restricted cash and securities	—			—		—		(3	)	—	(3	)
Net increase (decrease) in cash, cash equivalents, and restricted cash and securities	(2		)	(6	)	968		(7	)	—	953
Cash, cash equivalents and restricted cash and securities at beginning of period	39			6		742		117		—	904
Cash, cash equivalents and restricted cash and securities at end of period	$	37		—		1,710		110		—	1,857

Condensed Consolidating Statements of Cash Flows

For the year ended December 31, 2015 (Predecessor)

	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	$	(41	)	(617	)	193		2,320		—	1,855
INVESTING ACTIVITIES
Capital expenditures	—			—		(453	)	(776	)	—	(1,229	)
Cash related to deconsolidated Venezuela operations	—			—		—		(83	)	—	(83	)
Proceeds from sale of property, plant and equipment and other assets	—			—		—		4		—	4
Other	—			—		(14	)	—		—	(14	)
Net cash used in investing activities	—			—		(467	)	(855	)	—	(1,322	)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	—			4,832		—		—		—	4,832
Payments of long-term debt	(313		)	(4,725	)	(2	)	(11	)	—	(5,051	)
Increase (decrease) due from/to affiliates, net	383			511		693		(1,587	)	—	—
Net cash provided by (used in) financing activities	70			618		691		(1,598	)	—	(219	)
Effect of exchange rates on cash, cash equivalents, restricted cash and securities	—			—		—		(18	)	—	(18	)
Net increase (decrease) in cash, cash equivalents, and restricted cash and securities	29			1		417		(151	)	—	296
Cash, cash equivalents and restricted cash and securities at beginning of period	10			5		325		268		—	608
Cash, cash equivalents and restricted cash and securities at end of period	$	39		6		742		117		—	904