Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2018

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

(10) 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)

Three Months Ended March 31, 2018 (Successor)

	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	$	—		$	—		$	956		$	1,146		$	(40	)	2,062
Operating revenues - affiliate	—			—			25			—			—			25
Total operating revenues	—			—			981			1,146			(40		)	2,087
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—			589			449			(40		)	998
Selling, general and administrative	—			1			259			84			—			344
Operating expenses - affiliate	—			—			53			—			—			53
Depreciation and amortization	—			—			170			261			—			431
Total cost and expenses	—			1			1,071			794			(40		)	1,826
OPERATING INCOME (LOSS)	—			(1		)	(90		)	352			—			261
OTHER INCOME (EXPENSE)
Interest income	—			—			—			1			—			1
Interest income - affiliate	16			—			—			—			—			16
Interest expense	(8		)	(108		)	(1		)	(3		)	—			(120	)
Interest income (expense) - intercompany, net	355			608			(881		)	(82		)	—			—
Equity in net earnings (losses) of subsidiaries	(315		)	(839		)	(1		)	—			1,155			—
Other income, net	—			—			1			5			—			6
Total other income (expense)	48			(339		)	(882		)	(79		)	1,155			(97	)
INCOME (LOSS) BEFORE INCOME TAXES	48			(340		)	(972		)	273			1,155			164
Income tax benefit (expense)	14			25			(47		)	(94		)	—			(102	)
NET INCOME (LOSS)	62			(315		)	(1,019		)	179			1,155			62
Other comprehensive income (loss), net of income taxes	72			—			—			72			(72		)	72
COMPREHENSIVE INCOME (LOSS)	$	134		(315		)	(1,019		)	251			1,083			134

Condensed Consolidating Statements of Comprehensive Income (Loss)

Three Months Ended March 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	$	—		$	—		$	920		$	1,157		$	(29	)	$	2,048
Operating revenues - affiliate	—			—			—			—			—			—
Total operating revenues	—			—			920			1,157			(29		)	2,048
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	—			—			583			497			(29		)	1,051
Selling, general and administrative expenses	1			1			277			85			—			364
Operating expenses - affiliate	—			—			—			—			—			—
Depreciation and amortization	—			—			87			209			—			296
Total cost and expenses	1			1			947			791			(29		)	1,711
OPERATING INCOME (LOSS)	(1		)	(1		)	(27		)	366			—			337
OTHER INCOME (EXPENSE)
Interest income	—			—			2			—			—			2
Interest income - affiliate	—			—			—			—			—			—
Interest expense	(9		)	(120		)	(1		)	(4		)	—			(134		)
Interest income (expense) - intercompany, net	377			574			(869		)	(82		)	—			—
Equity in net earnings (losses) of subsidiaries	(275		)	(646		)	203			—			718			—
Loss on modification and extinguishment of debt	—			(44		)	—			—			—			(44		)
Other income, net	—			—			5			(1		)	—			4
Total other income (expense)	93			(236		)	(660		)	(87		)	718			(172		)
INCOME (LOSS) BEFORE INCOME TAXES	92			(237		)	(687		)	279			718			165
Income tax expense	3			(38		)	(1		)	(34		)	—			(70		)
NET INCOME (LOSS)	95			(275		)	(688		)	245			718			95
Other comprehensive income (loss), net of income taxes	21			—			—			21			(21		)	21
COMPREHENSIVE INCOME (LOSS)	$	116		$	(275	)	$	(688	)	$	266		$	697		$	116

Condensed Consolidating Balance Sheets

March 31, 2018 (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	$	39	—	133	87	—		259
Restricted cash and securities	—		—	1	4	—		5
Assets held for sale	68		—	5	67	—		140
Accounts receivable	—		—	10	716	—		726
Accounts receivable - affiliate	—		—	—	3	—		3
Intercompany advances	16,493		21,422	—	5,368	(43,283	)	—
Note receivable - affiliate	1,825		—	—	—	—		1,825
Other	—		—	95	88	—		183
Total current assets	18,425		21,422	244	6,333	(43,283	)	3,141
Property, plant, and equipment, net	—		—	3,103	6,439	—		9,542
Restricted cash and securities	19		—	10	—	—		29
GOODWILL AND OTHER ASSETS
Goodwill	—		—	1,658	9,483	—		11,141
Customer relationships, net	—		—	3,979	4,227	—		8,206
Other intangible assets, net	—		—	390	—	—		390
Investment in subsidiaries	16,955		18,788	3,609	—	(39,352	)	—
Deferred tax assets	279		1,826	114	10	(1,771	)	458
Other, net	—		—	54	42	—		96
Total goodwill and other assets	17,234		20,614	9,804	13,762	(41,123	)	20,291
TOTAL ASSETS	$	35,678	42,036	13,161	26,534	(84,406	)	33,003
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	—	—	2	7	—		9
Accounts payable	—		1	318	359	—		678
Accounts payable - affiliate	27		—	66	2	—		95
Accrued expenses and other liabilities
Income and other taxes	—		1	45	41	—		87
Salaries and benefits	—		—	129	34	—		163
Interest	3		85	—	7	—		95

Current portion of deferred revenue	—		—	135		138	—		273
Current portion of deferred revenue - affiliate	—		—	2		—	—		2
Intercompany payables	—		—	43,283		—	(43,283	)	—
Other	—		—	16		51	—		67
Total Current Liabilities	30		87	43,996		639	(43,283	)	1,469
LONG-TERM DEBT	615		10,088	13		156	—		10,872
DEFERRED REVENUES AND OTHER LIABILITIES
Deferred revenues	—		—	843		263	—		1,106
Deferred revenues - affiliate	—		—	5		1	—		6
Deferred tax liability	648		—	849		483	(1,771	)	209
Other	1		—	174		146	—		321
Total deferred credits and other	649		—	1,871		893	(1,771	)	1,642
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY (DEFICIT)	34,384		31,861	(32,719	)	24,846	(39,352	)	19,020
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	35,678	42,036	13,161		26,534	(84,406	)	33,003

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
Intercompany advances	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
Property, plant, and equipment, net	—		—	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 EQUITY
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
Intercompany payables	—		—	42,483		—	(42,483	)	—
Other	16		—	23		18	—		57
Total current liabilities	38		92	43,124		686	(42,534	)	1,406
LONG-TERM DEBT	616		10,096	13		157	—		10,882
DEFERRED REVENUES AND OTHER LIABILITIES
Deferred revenues	—		—	841		252	—		1,093
Deferred revenues - affiliate	—		—	5		1	—		6
Deferred tax liability	648		—	870		465	(1,771	)	212
Other	1		1	98		164	—		264
Total deferred credits and other liabilities	649		1	1,814		882	(1,771	)	1,575
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY (DEFICIT)	34,107		31,041	(31,833	)	24,930	(38,973	)	19,272
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	35,410	41,230	13,118		26,655	(83,278	)	33,135

Condensed Consolidating Statements of Cash Flows

Three Months EndedMarch 31, 2018 (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 provided by (used in) operating activities	$	(8	)	—	490		89		—	571
INVESTING ACTIVITIES
Capital expenditures	—			—	(142	)	(110	)	—	(252	)
Proceeds from the sale of property, plant and equipment and other assets	—			—	—		1		—	1
Deposits received on assets held for sale	34			—	—		—		—	34
Net cash provided by (used in) investing activities	34			—	(142	)	(109	)	—	(217	)
FINANCING ACTIVITIES
Payments of long-term debt	—			—	—		(1	)	—	(1	)
Distributions	(390		)	—	—		—		—	(390	)
Increase (decrease) due from/to affiliates, net	390			—	(390	)	—		—	—
Net cash provided by (used in) financing activities	—			—	(390	)	(1	)	—	(391	)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities	—			—	—		(1	)	—	(1	)
Net increase (decrease) in cash, cash equivalents and restricted cash and securities	26			—	(42	)	(22	)	—	(38	)
Cash, cash equivalents and restricted cash and securities and beginning of period	32			—	186		113		—	331
Cash, cash equivalents and restricted cash and securities and end of period	$	58		—	144		91		—	293

Condensed Consolidating Statements of Cash Flows

Three Months EndedMarch 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 Provided by (Used in) Operating Activities	$	(16	)	(135	)	109		581		—	539
INVESTING ACTIVITIES
Capital expenditures	—			—		(233	)	(135	)	—	(368	)
Net cash provided by (used in) investing activities	—			—		(233	)	(135	)	—	(368	)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	—			4,569		—		—		—	4,569
Payments of long-term debt	—			(4,611	)	—		(2	)	—	(4,613	)
Increase (decrease) due from/to affiliates, net	16			177		262		(455	)	—	—
Net cash provided by (used in) financing activities	16			135		262		(457	)	—	(44	)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities	—			—		—		1		—	1
Net increase (decrease) in cash, cash equivalents and restricted cash and securities	—			—		138		(10	)	—	128
Cash, cash equivalents and restricted cash and securities and beginning of period	37			—		1,710		110		—	1,857
Cash, cash equivalents and restricted cash and securities and end of period	$	37		—		1,848		100		—	1,985