Document and Entity Information
Document and Entity Information Document - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 02, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | CENTURYLINK, INC | |
Entity Central Index Key | 18,926 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 1,080,659,270 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
OPERATING REVENUES | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 |
OPERATING EXPENSES | ||||
Cost of services and products (exclusive of depreciation and amortization) | 2,672 | 1,927 | 8,205 | 5,705 |
Selling, general and administrative | 967 | 710 | 3,191 | 2,404 |
Depreciation and amortization | 1,285 | 910 | 3,858 | 2,739 |
Total operating expenses | 4,924 | 3,547 | 15,254 | 10,848 |
OPERATING INCOME | 894 | 487 | 2,411 | 1,485 |
OTHER (EXPENSE) INCOME | ||||
Interest expense | (557) | (362) | (1,638) | (1,000) |
Net loss on early retirement of debt | (33) | 0 | (34) | (5) |
Other income, net | 25 | 14 | 63 | 6 |
Total other expense, net | (565) | (348) | (1,609) | (999) |
INCOME BEFORE INCOME TAX EXPENSE | 329 | 139 | 802 | 486 |
Income tax expense | 57 | 47 | 123 | 214 |
NET INCOME | $ 272 | $ 92 | $ 679 | $ 272 |
BASIC AND DILUTED EARNINGS PER COMMON SHARE | ||||
BASIC (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.64 | $ 0.50 |
DILUTED (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.63 | $ 0.50 |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||
BASIC (in shares) | 1,066,904 | 541,521 | 1,065,410 | 541,113 |
DILUTED (in shares) | 1,072,351 | 541,963 | 1,069,726 | 541,879 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
NET INCOME | $ 272 | $ 92 | $ 679 | $ 272 |
Items related to employee benefit plans: | ||||
Change in net actuarial loss, net of $(11), $(15), $(33) and $(57) tax | 34 | 36 | 102 | 97 |
Change in net prior service costs, net of $—, $(1), $(2) and $(3) tax | 3 | 2 | 7 | 6 |
Foreign currency translation adjustment and other, net of $(1), $—, $29 and $— tax | (1) | 18 | (161) | 20 |
Other comprehensive income (loss) | 36 | 56 | (52) | 123 |
COMPREHENSIVE INCOME | $ 308 | $ 148 | $ 627 | $ 395 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Change in net actuarial loss, tax | $ (11) | $ (15) | $ (33) | $ (57) |
Change in net prior service costs, tax | 0 | (1) | (2) | (3) |
Foreign currency translation adjustment and other, tax | $ 1 | $ 0 | $ 29 | $ 0 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 390 | $ 551 |
Restricted cash and securities | 3 | 5 |
Accounts receivable, less allowance of $153 and $164 | 2,465 | 2,557 |
Assets held for sale | 19 | 140 |
Other | 1,237 | 941 |
Total current assets | 4,114 | 4,194 |
Property, plant and equipment, net of accumulated depreciation of $26,493 and $24,352 | 26,168 | 26,852 |
GOODWILL AND OTHER ASSETS | ||
Goodwill | 30,770 | 30,475 |
Restricted cash and securities | 27 | 31 |
Customer relationships, net | 9,309 | 10,876 |
Other intangibles, net | 1,857 | 1,897 |
Other, net | 1,126 | 1,286 |
Total goodwill and other assets | 43,089 | 44,565 |
TOTAL ASSETS | 73,371 | 75,611 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 778 | 443 |
Accounts payable | 1,387 | 1,555 |
Accrued expenses and other liabilities | ||
Salaries and benefits | 993 | 890 |
Income and other taxes | 409 | 370 |
Interest | 362 | 363 |
Other | 374 | 344 |
Current portion of deferred revenue | 983 | 892 |
Total current liabilities | 5,286 | 4,857 |
LONG-TERM DEBT | 35,749 | 37,283 |
DEFERRED CREDITS AND OTHER LIABILITIES | ||
Deferred income taxes, net | 2,502 | 2,413 |
Benefit plan obligations, net | 4,392 | 5,178 |
Other | 2,639 | 2,389 |
Total deferred credits and other liabilities | 9,533 | 9,980 |
COMMITMENTS AND CONTINGENCIES (Note 12) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock—non-redeemable, $25 par value, authorized 2,000 and 2,000 shares, issued and outstanding 7 and 7 shares | 0 | 0 |
Common stock, $1.00 par value, authorized 1,600,000 and 1,600,000 shares, issued and outstanding 1,080,573 and 1,069,169 shares | 1,081 | 1,069 |
Additional paid-in capital | 23,399 | 23,314 |
Accumulated other comprehensive loss | (2,454) | (1,995) |
Retained earnings | 777 | 1,103 |
Total stockholders' equity | 22,803 | 23,491 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 73,371 | $ 75,611 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 153 | $ 164 |
PP&E, accumulated depreciation | $ 26,493 | $ 24,352 |
Preferred stock-non-redeemable, par value (in dollars per share) | $ 25 | $ 25 |
Preferred stock-non-redeemable, shares authorized (in shares) | 2,000,000 | 2,000,000 |
Preferred stock-non-redeemable, shares issued (in shares) | 7,000 | 7,000 |
Preferred stock-non-redeemable, shares outstanding (in shares) | 7,000 | 7,000 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 1,600,000,000 | 1,600,000,000 |
Common stock, shares issued (in shares) | 1,080,573,000 | 1,069,169,000 |
Common stock, shares outstanding (in shares) | 1,080,573,000 | 1,069,169,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 679 | $ 272 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,858 | 2,739 |
Deferred income taxes | 486 | (243) |
Loss on the sale of data centers and colocation business | 0 | 82 |
Impairment of assets | 46 | 11 |
Provision for uncollectible accounts | 119 | 127 |
Net loss on early retirement of debt | 30 | 5 |
Share-based compensation | 144 | 64 |
Changes in current assets and liabilities: | ||
Accounts receivable | (8) | 2 |
Accounts payable | (151) | (93) |
Accrued income and other taxes | 217 | 103 |
Other current assets and liabilities, net | (42) | (221) |
Retirement benefits | (639) | (181) |
Changes in other noncurrent assets and liabilities, net | 324 | (54) |
Other, net | (27) | 87 |
Net cash provided by operating activities | 5,036 | 2,700 |
INVESTING ACTIVITIES | ||
Capital expenditures | (2,260) | (2,363) |
Proceeds from the sale of data centers and colocation business, less cash sold | 0 | 1,467 |
Proceeds from sale of property, plant and equipment and other assets | 125 | 51 |
Other investing, net | (61) | (5) |
Net cash used in investing activities | (2,196) | (850) |
FINANCING ACTIVITIES | ||
Net proceeds from issuance of long-term debt | 130 | 6,608 |
Proceeds from financing obligation | 0 | 356 |
Payments of long-term debt | (1,539) | (1,612) |
Net borrowings (payments) on revolving line of credit | 185 | (370) |
Dividends paid | (1,735) | (881) |
Other financing, net | (48) | (11) |
Net cash (used in) provided by financing activities | (3,007) | 4,090 |
Net (decrease) increase in cash, cash equivalents, restricted cash and securities | (167) | 5,940 |
Cash, cash equivalents, restricted cash and securities at beginning of period | 587 | 224 |
Cash, cash equivalents, restricted cash and securities at end of period | 420 | 6,164 |
Supplemental cash flow information: | ||
Income taxes refunded (paid), net | 674 | (378) |
Interest paid (net of capitalized interest of $42 and $61) | $ (1,571) | $ (917) |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Cash Flows [Abstract] | ||
Capitalized interest | $ 42 | $ 61 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED OTHER COMPREHENSIVE LOSS | RETAINED EARNINGS |
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | $ 0 | $ 0 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 0 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 3 | ||||
Balance at beginning of period at Dec. 31, 2016 | $ 547 | $ 14,970 | (2,117) | (1) | |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 3 | 5 | |||
Shares withheld to satisfy tax withholdings | (16) | ||||
Share-based compensation and other, net | 59 | ||||
Dividends declared | (648) | (240) | |||
Acquisition of additional minority interest in a subsidiary | 0 | ||||
Other comprehensive income | $ 123 | 123 | |||
Net income | 272 | 272 | |||
Balance at end of period at Sep. 30, 2017 | $ 12,960 | 550 | 14,370 | (1,994) | 34 |
Increase (Decrease) in Stockholders' Equity | |||||
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.62 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | 0 | 0 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 0 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 0 | ||||
Balance at beginning of period at Jun. 30, 2017 | 550 | 14,637 | (2,050) | (51) | |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 0 | 2 | |||
Shares withheld to satisfy tax withholdings | (1) | ||||
Share-based compensation and other, net | 21 | ||||
Dividends declared | (289) | (7) | |||
Acquisition of additional minority interest in a subsidiary | 0 | ||||
Other comprehensive income | $ 56 | 56 | |||
Net income | 92 | 92 | |||
Balance at end of period at Sep. 30, 2017 | $ 12,960 | 550 | 14,370 | (1,994) | 34 |
Increase (Decrease) in Stockholders' Equity | |||||
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.54 | ||||
Cumulative effect of adoption of ASU | $ (407) | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | (407) | 407 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 346 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 0 | ||||
Balance at beginning of period at Dec. 31, 2017 | 23,491 | 1,069 | 23,314 | (1,995) | 1,103 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 12 | (2) | |||
Shares withheld to satisfy tax withholdings | (50) | ||||
Share-based compensation and other, net | 142 | ||||
Dividends declared | 0 | (1,758) | |||
Acquisition of additional minority interest in a subsidiary | (5) | ||||
Other comprehensive income | (52) | (52) | |||
Net income | 679 | 679 | |||
Balance at end of period at Sep. 30, 2018 | $ 22,803 | 1,081 | 23,399 | (2,454) | 777 |
Increase (Decrease) in Stockholders' Equity | |||||
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 1.62 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | 0 | 0 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 49 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 0 | ||||
Balance at beginning of period at Jun. 30, 2018 | 1,079 | 23,360 | (2,490) | 1,040 | |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 2 | 7 | |||
Shares withheld to satisfy tax withholdings | (15) | ||||
Share-based compensation and other, net | 48 | ||||
Dividends declared | 0 | (584) | |||
Acquisition of additional minority interest in a subsidiary | (1) | ||||
Other comprehensive income | $ 36 | 36 | |||
Net income | 272 | 272 | |||
Balance at end of period at Sep. 30, 2018 | $ 22,803 | $ 1,081 | $ 23,399 | $ (2,454) | $ 777 |
Increase (Decrease) in Stockholders' Equity | |||||
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.54 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
RETAINED EARNINGS | Accounting Standards Update 2014-09 | ||
Cumulative net effect of adoption, tax | $ (17) | $ (117) |
Background
Background | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Background General We are an international facilities-based communications company engaged primarily in providing an integrated array of services to our residential and business customers. Our communications services include local and long-distance voice, virtual private network ("VPN") data network, private line (including special access business data services), Ethernet, network access, information technology, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services. On November 1, 2017, we acquired Level 3 in a cash and stock transaction. See Note 2—Acquisition of Level 3 for additional information. On May 1, 2017, we sold our data centers and colocation business to a consortium of private equity purchasers for a combination of cash and equity. See Note 3—Sale of Data Centers and Colocation Business for additional information. Basis of Presentation Our consolidated balance sheet as of December 31, 2017 , 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, 2017 . The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. These subsidiaries include Level 3 on and after November 1, 2017. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. In connection with our acquisition of Level 3, we acquired its deconsolidated Venezuela subsidiary, and due to exchange restrictions and other conditions, we have assigned no value to this subsidiary's assets. Additionally, we have excluded this subsidiary from our consolidated financial statements. To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income (expense), net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities. We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 11—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. Income Taxes As of September 30, 2018 , we have not completed our accounting for the tax effects of the Tax Cuts and Jobs Act (the "Act") which was signed into law in late December 2017. In order to complete our accounting for the impact of the Act, we continue to obtain, analyze and interpret additional guidance as such guidance becomes available from the U.S. Treasury Department, the Internal Revenue Service (“IRS”), state taxing jurisdictions, the Financial Accounting Standards Board ("FASB"), and other standard-setting and regulatory bodies. Guidance issued by these bodies to date does not allow us to definitively calculate the tax effects of the Act. New guidance or interpretations may materially impact our provision for income taxes in future periods. Additional information that is needed to complete the analysis but is currently unavailable includes, but is not limited to, the amount of earnings of foreign subsidiaries, the final determination of certain net deferred tax assets subject to remeasurement due to purchase accounting adjustments and other matters, and the tax treatment of such provisions of the Act by various state tax authorities. We have provisionally recognized the tax impacts related to the remeasurement of deferred tax assets and liabilities. The ultimate impact may differ from our current provisional estimate due to additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the Act. The change from our current provisional estimates will be reflected in our fourth quarter statement of operations and could be material. We expect to complete the accounting in the fourth quarter of 2018. The Act reduced the U.S. corporate income tax rate from a maximum of 35% to 21% for all C corporations, effective January 1, 2018, introduced further limitations on the deductibility of interest expense, made certain changes to the tax treatment of capital expenditures and various other items, and imposed a one-time repatriation tax on certain earnings of certain foreign subsidiaries. In addition, the Act introduces additional base-broadening measures, including Global Intangible Low-Taxed Income and the Base-Erosion Anti-Abuse Tax. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, we provisionally re-measured our net deferred tax liabilities at December 31, 2017 and recognized a tax benefit of approximately $1.1 billion in our consolidated statement of operations for the year ended December 31, 2017. During the first nine months of 2018 , we reduced this $1.1 billion tax benefit by $83 million due to changes in certain purchase accounting adjustments related to the Level 3 acquisition, which was reflected in income tax expense over such nine-month period. Additionally, this provisional benefit was further reduced by $208 million by the net deferred tax impact of certain tax accounting method changes filed with our 2017 Federal income tax return that significantly accelerated certain tax deductions into 2017. During the third quarter of 2018 , we continued to evaluate and analyze the tax impacts of the Act. While we have not finalized our analysis, we do not expect the provisions of the Act, exclusive of the rate reduction, to materially impact us during the remainder of 2018 . However, we cannot provide any assurance that, upon completion of our analysis, the impact will not be material or that there will not be material tax impacts in future years. Accordingly, other than as noted above, we have not made any additional adjustments related to the Act in our consolidated financial statements. As noted above, we accelerated a significant amount of tax deductions into 2017. The accelerated tax deductions resulted in a 2017 net operating loss for tax purposes, a portion of which was carried back to 2016 to generate a cash refund of $392 million , which was received in the third quarter of 2018 . Additionally, we received a $314 million refund in the second quarter of 2018 related to 2017 federal income taxes. Based on current circumstances, we do not expect to experience a material near term reduction in the amount of cash income taxes paid by us from the Act due to utilization of net operating loss carryforwards. However, we anticipate that the provisions of the Act may reduce our cash income taxes in future years. Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers ”, ASU 2018-02, “ Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ” and ASU 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory ”. Each of these is described further below. Revenue Recognition In May 2014, the FASB issued ASU 2014-09 which replaces virtually all existing generally accepted accounting principles on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We adopted the new revenue recognition standard under the modified retrospective transition method. During the three and nine months ended September 30, 2018, we recorded a cumulative catch-up adjustment that increased our retained earnings by $49 million , net of $17 million of income taxes, and $346 million , net of $117 million of income taxes, respectively. The catch-up adjustment recorded during the three months ended September 30, 2018 resulted from the identification of additional fulfillment costs that should have been considered in our adoption and from correcting certain issues in the accounting system we utilize in calculating revenue under the new revenue recognition standard. Under ASU 2014-09, we are now deferring incremental contract acquisition and fulfillment costs and are recognizing (or amortizing) such costs over either the initial contract (plus anticipated renewal contracts to which the costs relate) or the average customer life. Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average customer life of 30 months for consumer customers and 12 to 60 months for business customers and are included in cost of services and products and selling, general and administrative expenses in our consolidated statement of operations. A portion of these costs are amortized on a portfolio basis using an average expected contract term of 30 months. The amounts of these deferred costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. See Note 5—Revenue Recognition for additional information. Comprehensive Income ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. We early adopted and applied ASU 2018-02 in the first quarter of 2018. The adoption of ASU 2018-02 resulted in a $407 million increase to retained earnings and in accumulated other comprehensive loss. See Note 14 — Accumulated Other Comprehensive Loss for additional information. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. Our adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recently Issued Accounting Pronouncements Retirement Benefits In August 2018, the FASB issued ASU 2018-14, " Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans " (“ASU 2018-14“). ASU 2018-14 eliminates requirements for certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures under defined benefit pension plans and other postretirement plans. We are required to adopt this guidance beginning January 1, 2021. Early adoption is permitted. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. We are currently evaluating the potential impact of the adoption of this standard on our disclosures. Goodwill Impairment In January 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment ” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above its fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt it for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. Financial Instruments In June 2016, the FASB issued ASU 2016-13, " Measurement of Credit Losses on Financial Instruments " ("ASU 2016-13"). 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 currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. Leases In February 2016, the FASB issued ASU 2016-02, “ Leases ” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which under GAAP are currently not required to be reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective transition approach includes a number of optional practical expedients that we may elect to apply. In January 2018, the FASB issued ASU 2018-01, “ Leases: Land Easement Practical Expedient for Transition to ASU 2016-02 " ("ASU 2018-01"). ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. In July 2018, the FASB issued ASU 2018-11, " Leases: Targeted Improvements " ("ASU 2018-11"). ASU 2018-11 provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We have not yet determined whether we will use ASU 2018-11's newly permitted adoption method. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Additionally, upon implementing ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3 — Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation described therein will be derecognized from our consolidated financial statements. |
Acquisition of Level 3
Acquisition of Level 3 | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisition of Level 3 | Acquisition of Level 3 On November 1, 2017, CenturyLink acquired Level 3 through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as our indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC. Level 3's results of operations have been included in our consolidated results of operations since November 1, 2017. As of September 30, 2018, our preliminary estimated amount of aggregate consideration was $19.6 billion . We have recognized the assets and liabilities of Level 3 based on our preliminary estimates of the fair value of the acquired tangible and intangible assets and assumed liabilities of Level 3 as of November 1, 2017, the consummation date of the acquisition, with the excess aggregate consideration recorded as goodwill. The final determination of the allocation of the aggregate consideration we paid in the combination is based on the fair value of such assets and liabilities as of the acquisition date with any excess aggregate consideration to be recorded as goodwill. The estimation of such fair values and the estimation of lives of depreciable tangible assets and amortizable intangible assets require significant judgment. We are reviewing our valuation analysis along with the related allocation to goodwill. We expect to complete our final fair value determinations during the fourth quarter of 2018. We are also reviewing our calculations of the estimates of the fair value of Level 3’s deferred tax assets acquired and liabilities assumed and performing related final controls. Our final fair value determinations may be different than those reflected in our consolidated financial statements at September 30, 2018, however we do not expect that any subsequent modifications to the preliminary purchase price allocation will be material. The U.S. Department of Justice approved the acquisition subject to conditions of a consent decree on October 2, 2017, which required us to divest (i) certain Level 3 metro network assets in three markets and (ii) 24 strands of dark fiber connecting 30 specified city-pairs across the United States in the form of an indefeasible right of use agreement. During the second quarter of 2018, we sold network assets in Boise, Idaho and Albuquerque, New Mexico that we were required to divest as a condition of the merger. The proceeds from these sales were included in the proceeds from sale of property, plant and equipment in our consolidated statements of cash flows. No gain or loss was recognized with these transactions. All of the metro network assets were classified as assets held for sale on our consolidated balance sheet as of December 31, 2017. The Tucson, Arizona assets continued to be classified as assets held for sale on our consolidated balance sheet as of September 30, 2018. In October 2018, we sold the Tucson, Arizona assets for their net book value. Based solely on our preliminary estimates through September 30, 2018, the aggregate consideration exceeds the aggregate estimated fair value of the acquired assets and assumed liabilities by $11.2 billion , which we have recognized as goodwill. The goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes. As of September 30, 2018, the following is our updated assignment of the preliminary estimated aggregate consideration: Adjusted November 1, 2017 Balance as of December 31, 2017 Purchase Price Adjustments (3) Adjusted November 1, 2017 Balance as of September 30, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (25 ) 3,292 Property, plant and equipment 9,311 86 9,397 Identifiable intangible assets (2) Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 203 985 Current liabilities, excluding current maturities of long-term debt (1,461 ) (31 ) (1,492 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,629 ) (102 ) (1,731 ) Goodwill 10,837 353 11,190 Total estimated aggregate consideration $ 19,617 (5 ) 19,612 ____________________________________________________________________________________________________________ (1) Includes accounts receivable, which had a gross contractual value of $884 million on November 1, 2017 and September 30, 2018. (2) The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately 12.0 years . (3) All purchase price adjustments occurred during the nine months ended September 30, 2018 . On the acquisition date, we assumed Level 3’s contingencies. For more information on our contingencies, see Note 12—Commitments and Contingencies and Other Items. Acquisition-Related Expenses We have incurred acquisition-related expenses related to our acquisition of Level 3. The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Transaction-related expenses $ 1 6 2 23 Integration-related expenses 43 28 275 40 Total acquisition-related expenses $ 44 34 277 63 Through September 30, 2018 , we had incurred cumulative acquisition-related expenses of $600 million for Level 3. The total amounts of these expenses have been included in our selling, general and administrative expenses beginning in the fourth quarter of 2016. Level 3 incurred transaction-related expenses of $47 million on the date of acquisition. This amount is not included in our results of operations. References to Acquired Businesses In the discussion that follows, we refer to the incremental business activities that we now operate as a result of the Level 3 acquisition as “Legacy Level 3”. References to “Legacy CenturyLink”, when used to compare our consolidated results for the three and nine months ended September 30, 2018 and 2017, mean the business we operated prior to the Level 3 acquisition. Combined Pro Forma Operating Results (Unaudited) For the three and nine months ended September 30, 2018, our results of operations included operating revenues (net of intercompany eliminations) attributable to Level 3 of $1.984 billion and $6.071 billion , respectively. The following unaudited pro forma financial information presents the combined results of CenturyLink as if the Level 3 acquisition had been consummated as of January 1, 2017: Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 (Dollars in millions, except per share amounts) Operating revenues $ 6,031 18,316 Net income 194 459 Basic earnings per common share 0.18 0.43 Diluted earnings per common share 0.18 0.43 This pro forma information reflects certain adjustments to previously-reported operating results, consisting primarily but not exclusively of: • decreased operating revenues and expenses due to the elimination of transactions among CenturyLink and Level 3 that are now subject to intercompany elimination and the elimination of deferred revenues associated with installation activities that were preliminarily assigned no value at the acquisition date; • increased amortization expense related to identifiable intangible assets, net of decreased depreciation expense to reflect the preliminary fair value of property, plant and equipment; • increased interest expense resulting from (i) interest on the new debt to finance the combination and amortization of the related debt discount and debt issuance costs, (ii) the elimination of Level 3’s historical amortization of debt discount and debt issuance costs and (iii) a reduction in interest expense due to the accretion of an adjustment to reflect the increased preliminary fair value of the long-term debt of Level 3 recognized on the acquisition date; and • the related income tax effects. The pro forma information is presented for illustrative purposes only and does not necessarily reflect the actual results of operations had the Level 3 acquisition been consummated at January 1, 2017, nor is it necessarily indicative of future operating results. The pro forma information does not reflect: • the transaction costs incurred by us and Level 3 during the periods presented above (which are further described above in this note); • integration costs incurred by us in future periods; or • potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition As a result of the acquisition of Level 3's net operating losses ("NOL"s), we expect to significantly reduce our federal cash taxes for the next several years. |
Sale of Data Centers and Coloca
Sale of Data Centers and Colocation Business | 9 Months Ended |
Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Sale of Data Centers and Colocation Business | Sale of Data Centers and Colocation Business On May 1, 2017, we sold our data centers and colocation business to a consortium led by BC Partners, Inc. and Medina Capital in exchange for cash and a minority stake in the limited partnership that owns the consortium's newly-formed global secure infrastructure company, Cyxtera Technologies ("Cyxtera"). We received pre-tax cash proceeds of $1.8 billion , and we have valued our minority stake at $150 million , which was based upon the total equity contribution to the limited partnership on the date made. In connection with our sale of the data centers and colocation business to Cyxtera, we agreed to lease back from Cyxtera a portion of the data center space to provide data hosting services to our customers. Because we have continuing involvement in the business through our minority stake in Cyxtera's parent, we do not meet the requirements for a sale-leaseback transaction as described in ASC 840-40, Leases - Sale-Leaseback Transactions . Under the failed-sale-leaseback accounting model, we are deemed under GAAP to still own certain real estate assets sold to Cyxtera, which we must continue to reflect on our consolidated balance sheets and depreciate over the assets' remaining useful lives. Under this accounting model, we must also treat a certain amount of the pre-tax cash proceeds from the divestiture as though it were the result of a financing obligation on our consolidated balance sheets, and our consolidated results of operations must include imputed revenue associated with the portion of the real estate assets that we have not leased back and imputed interest expense on the financing obligation. A portion of the rent payments required under our leaseback arrangement with Cyxtera are recognized as reductions of the financing obligation, resulting in lower recognized rent expense than the amounts actually paid each period. Under the failed-sale-leaseback accounting model, the remaining net book value of the real estate assets must be derecognized at the end of the lease term. Please see "Leases" (ASU 2016-02) in Note 1—Background for additional information on how the new lease accounting standard will accelerate the derecognition of such amounts. The following table reflects the assets sold to and the liabilities assumed by Cyxtera on May 1, 2017, including our estimate of the impact of failed-sale-leaseback: Dollars in millions Goodwill $ 1,142 Property, plant and equipment 1,051 Other intangible assets 249 Other assets 66 Less assets recorded as part of the failed-sale-leaseback (526 ) Total net amount of assets derecognized $ 1,982 Capital lease obligations $ 294 Other liabilities 274 Less imputed financing obligations from the failed-sale-leaseback (628 ) Total net imputed liabilities recognized $ (60 ) Based on our assessment of our minority stake in the limited partnership, we classified our $150 million investment in the limited partnership in other assets on our consolidated balance sheet as of September 30, 2018 . |
Goodwill, Customer Relationship
Goodwill, Customer Relationships and Other Intangible Assets Goodwill, Customer Relationships and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill, Customer Relationships and Other Intangible Assets | Goodwill, Customer Relationships and Other Intangible Assets Goodwill, customer relationships and other intangible assets consisted of the following: September 30, 2018 December 31, 2017 (Dollars in millions) Goodwill $ 30,770 30,475 Customer relationships, less accumulated amortization of $8,153 and $7,096 $ 9,309 10,876 Indefinite-life intangible assets $ 269 269 Other intangible assets subject to amortization: Capitalized software, less accumulated amortization of $2,547 and $2,294 1,450 1,469 Trade names and patents, less accumulated amortization of $54 and $31 138 159 Total other intangible assets, net $ 1,857 1,897 Our goodwill was derived from numerous acquisitions where the purchase price exceeded the fair value of the net assets acquired (including the acquisition described in Note 2—Acquisition of Level 3). At September 30, 2018 and December 31, 2017, the net carrying amounts of goodwill, customer relationships and other intangible assets included preliminary estimates of $19.3 billion and $20.1 billion , respectively, as a result of our Level 3 acquisition. Total amortization expense for intangible assets for the three and nine months ended September 30, 2018 totaled $446 million and $1.3 billion , respectively, and for the three and nine months ended September 30, 2017 totaled $269 million and $820 million , respectively. As of September 30, 2018 , the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $52.7 billion . We estimate that total amortization expense for intangible assets (which include preliminary estimates for the intangible assets acquired from Level 3) for the years ending December 31, 2018 through 2022 will be as follows: (Dollars in millions) 2018 (remaining three months) $ 443 2019 1,692 2020 1,589 2021 1,158 2022 982 The following table shows the rollforward of goodwill assigned to our reportable segments from December 31, 2017 through September 30, 2018 : Business Consumer Total (Dollars in millions) As of December 31, 2017 $ 20,197 10,278 30,475 Purchase accounting and other adjustments 353 — 353 Effect of foreign currency rate change (58 ) — (58 ) As of September 30, 2018 $ 20,492 10,278 30,770 As of September 30, 2018, the $20.5 billion of goodwill assigned to our business reportable segment had not been allocated to our customer sales channels ((i) medium and small business, (ii) enterprise, (iii) international and global accounts and (iv) wholesale and indirect as we had not completed our valuation analysis and calculation. Our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), continues to review the operational and internal reporting structure as a result of our acquisition of Level 3. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition We earn most of our consolidated revenue from contracts with customers, primarily through the provision of telecommunications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606, which we adopted on January 1, 2018 using the modified retrospective approach. We also earn revenues from leasing arrangements (primarily fiber capacity agreements) and governmental subsidy payments, neither of which are accounted for under ASC 606. Under ASC 606, revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. Revenue is recognized based on the following five-step model: • Identification of the contract with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and, • Recognition of revenue when, or as, we satisfy a performance obligation. We provide an array of communications services, including VPN, Ethernet, data, broadband, private line, transport, voice, information technology and other ancillary services. We provide these services to a wide range of businesses, including global/international, enterprise, wholesale, government, small and medium business customers, as well as residential customers. Certain contracts also include the sale of equipment, which is not significant to our business. For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage, installation and other ancillary services, we generally bill in arrears and recognize revenue as usage or delivery occurs. In most cases, the amount invoiced for our service offerings constitutes the price that would be billed on a standalone basis. To the extent certain products or services are discounted as a part of a bundle arrangement, the bundle discounts are included in our calculation of the total transaction price with the customer, which is allocated to the various services in the bundle offering based on the estimated selling price of services included in each bundle combination. Under ASC 606, we recognize revenue for services when we provide the applicable service or when control is transferred. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include certain activation and certain installation charges. If the activation and installation charges are not separate performance obligations, we recognize as revenue over the actual or expected contract term using historical experience, which ranges from one year to seven years depending on the service. In most cases, termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term. A performance obligation is a promise in a contract with a customer to provide a good or service to the customer. We recognize revenue for services when we satisfy our performance obligation. Promotional or performance-based incentive payments are estimated at contract inception (and updated on a periodic basis as needed) and accounted for as variable consideration. In certain cases, customers may be permitted to modify their contracts without incurring a penalty. We evaluate the change in scope or price to identify whether the modification should be treated as a separate contract, whether the modification is a termination of the existing contract and creation of a new contract, or if it is a change to the existing contract. The impact of contract modifications has not been significant to our results in 2018. Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price that we expect to receive with the customer is allocated to each performance obligation based on its relative standalone selling price. The revenue associated with each performance obligation is then recognized as earned. The portion of any advance payment allocated to the service based upon its relative selling price is recognized ratably over the contract term. We periodically sell optical capacity on our network. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 10 to 20 years. In most cases, we account for the cash consideration received on transfers of optical capacity as ASC 606 revenue which we recognize ratably over the term of the agreement. Dark fiber is accounted for as non-ASC 606 lease revenue, which we also recognize ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other non-owned optical capacity assets. In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligations associated with the transaction. Based on our agreement with DIRECTV, we offer this service through a sales agency relationship which we report on a net basis. We have service level commitments pursuant to contracts with certain of our customers. To the extent that such service levels are not achieved or are otherwise disputed due to performance or service issues or other service interruptions or conditions, we will estimate the amount of credits to be issued and record a corresponding reduction to revenues in the period that the service level commitment was not met. Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis. For certain products or services and customer types, payment is required before products or services are provided. Comparative Results During the three months ended September 30, 2018, we identified and corrected certain issues in the accounting system we utilize in calculating the effects of ASC 606. Our revenue for the three months ended September 30, 2018 includes an adjustment of $43 million that is attributable to the six months ended June 30, 2018. The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended September 30, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Operating revenues $ 5,818 (14 ) $ 5,804 Cost of services and products (exclusive of depreciation and amortization) 2,672 8 2,680 Selling, general and administrative 967 16 983 Interest expense 557 (7 ) 550 Income tax expense 57 (8 ) 49 Net income $ 272 (23 ) $ 249 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.25 (0.02 ) 0.23 DILUTED $ 0.25 (0.02 ) 0.23 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,066,904 — 1,066,904 DILUTED 1,072,351 — 1,072,351 Nine Months Ended September 30, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Operating revenues $ 17,665 12 $ 17,677 Cost of services and products (exclusive of depreciation and amortization) 8,205 18 8,223 Selling, general and administrative 3,191 42 3,233 Interest expense 1,638 (7 ) 1,631 Income tax expense 123 (11 ) 112 Net income $ 679 (30 ) $ 649 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.64 (0.03 ) 0.61 DILUTED $ 0.63 (0.03 ) 0.60 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,065,410 — 1,065,410 DILUTED 1,069,726 — 1,069,726 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of September 30, 2018 (Dollars in millions) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Other current assets $ 1,237 (390 ) $ 847 Other long-term assets, net 1,014 (93 ) 921 Deferred revenue 2,547 (101 ) 2,446 Deferred income taxes, net 2,502 (127 ) 2,375 Other long-term liabilities 1,075 122 1,197 Retained earnings 777 (377 ) 400 Disaggregated Revenue by Service Offering The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the three and nine months ended September 30, 2018 , respectively. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards. The adjustment of $43 million noted above was included in the revenue of the consumer segment for the three months ended September 30, 2018; $34 million was recorded to voice and collaboration and $9 million was recorded to transport and infrastructure. Three Months Ended September 30, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 1,726 — $ 1,726 Transport & Infrastructure (2) 1,331 (71 ) 1,260 Voice & Collaboration (3) 1,075 — 1,075 IT & Managed Services (4) 153 — 153 Total business segment revenues 4,285 (71 ) 4,214 Consumer segment IP & Data Services (5) 70 (9 ) 61 Transport & Infrastructure (6) 720 (54 ) 666 Voice & Collaboration (3) 565 — 565 Total consumer segment revenues 1,355 (63 ) 1,292 Non-segment revenues Regulatory revenues (7) 178 (178 ) — Total non-segment revenues 178 (178 ) — Total revenues $ 5,818 $ (312 ) $ 5,506 Timing of Revenue Goods transferred at a point in time $ 51 Services performed over time 5,455 Total revenues from contracts with customers $ 5,506 Nine Months Ended September 30, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 5,212 — $ 5,212 Transport & Infrastructure (2) 4,021 (217 ) 3,804 Voice & Collaboration (3) 3,324 — 3,324 IT & Managed Services (4) 476 — 476 Total business segment revenues 13,033 (217 ) 12,816 Consumer segment IP & Data Services (5) 249 (25 ) 224 Transport & Infrastructure (6) 2,171 (159 ) 2,012 Voice & Collaboration (3) 1,666 — 1,666 Total consumer segment revenues 4,086 (184 ) 3,902 Non-segment revenues Regulatory revenues (7) 546 (546 ) — Total non-segment revenues 546 (546 ) — Total revenues $ 17,665 (947 ) $ 16,718 Timing of Revenue Goods transferred at a point in time $ 132 Services performed over time 16,586 Total revenues from contracts with customers $ 16,718 (1 ) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3 ) Includes local, long-distance and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes retail video revenues (including our facilities-based video revenues). (6 ) Includes primarily broadband and equipment sales and professional services revenues. (7 ) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. (8 ) Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, 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, 2018 and January 1, 2018: September 30, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 2,436 2,504 Contract liabilities 716 623 Contract assets 352 255 (1) Gross customer receivables of $2.6 billion and $2.7 billion , net of allowance for doubtful accounts of $153 million and $155 million , at September 30, 2018 and January 1, 2018, respectively. Contract liabilities are consideration we have received from our customers 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 sheet. Performance Obligations We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (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. As of September 30, 2018, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $9.2 billion . We expect to recognize approximately 73% of this revenue through 2020, with the balance recognized thereafter. Contract Costs The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs Beginning of period balance $ 286 161 268 133 Costs incurred 53 46 152 105 Amortization (44 ) (34 ) (125 ) (65 ) End of period balance $ 295 173 295 173 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 the average customer life of 30 months for consumer customers and 12 to 60 months for business customers and are included in cost of services and products and selling, general and administrative expenses in our consolidated statement of operations. The amount of these deferred costs that are anticipated 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. We recognize incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is less than one year. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis. During the three months ended September 30, 2018 we made a $45 million adjustment to the beginning balance of the fulfillment costs shown in the table above for additional fulfillment costs we identified that should have been considered in our adoption. The impact to our expenses was less than $3 million for both the three and nine months ended September 30, 2018. |
Long-Term Debt and Credit Facil
Long-Term Debt and Credit Facilities | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt and Credit Facilities | Long-Term Debt and Credit Facilities The following chart reflects our consolidated long-term debt, including unamortized discounts and premiums and unamortized debt issuance costs, but excluding intercompany debt: Interest Rates (1) Maturities September 30, 2018 December 31, 2017 (Dollars in millions) Senior Secured Debt: CenturyLink, Inc. 2017 Revolving Credit Facility (2) 4.898% - 4.908% 2022 $ 590 405 Term Loan A 4.992% 2022 1,643 1,575 Term Loan A-1 4.992% 2022 356 370 Term Loan B 4.992% 2025 5,955 6,000 Subsidiaries: Level 3 Financing, Inc. Tranche B 2024 Term Loan (3) 4.432% 2024 4,611 4,611 Embarq Corporation subsidiaries First mortgage bonds 7.125% - 8.370% 2023 - 2025 138 151 Senior Notes and Other Debt: CenturyLink, Inc. Senior notes 5.625% - 7.650% 2019 - 2042 8,115 8,125 Subsidiaries: Level 3 Financing, Inc. Senior notes 5.125% - 6.125% 2021 - 2026 5,315 5,315 Level 3 Parent, LLC Senior notes 5.125% - 6.1250% 2022 600 600 Qwest Corporation Senior notes 6.125% - 7.750% 2021 - 2057 5,955 7,294 Term loan 4.250% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 979 981 Embarq Corporation and subsidiary Senior note 7.995% 2036 1,485 1,485 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 825 891 Unamortized premiums and other, net 2 23 Unamortized debt issuance costs (292 ) (350 ) Total long-term debt 36,527 37,726 Less current maturities (778 ) (443 ) Long-term debt, excluding current maturities $ 35,749 37,283 ______________________________________________________________________ (1) As of September 30, 2018 . (2) The weighed-average interest rate payable on our outstanding revolving line of credit borrowings at December 31, 2017 was 4.186% . The aggregate amount of outstanding revolving line of credit borrowings typically change on a regular basis. (3) The Tranche B 2024 Term Loan is a secured obligation and is guaranteed by Level 3 Parent, LLC and certain other subsidiaries. The Tranche B 2024 Term Loan had an interest rate of 4.432% as of September 30, 2018 and 3.557% as of December 31, 2017. The interest rate on the Tranche B 2024 Term Loan is set with a minimum London Interbank Offered Rate ("LIBOR") of zero percent. Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt (excluding unamortized discounts, net and unamortized debt issuance costs) maturing during the following years: (Dollars in millions) (1)(2) 2018 (remaining three months) $ 241 2019 651 2020 1,202 2021 3,115 2022 5,323 2023 and thereafter 25,785 Total long-term debt $ 36,317 _______________________________________________________________________________ (1) In Note 3—Sale of Data Centers and Colocation Business, we describe an imputed financing obligation. The amount outstanding on that imputed financing obligation at September 30, 2018 was $568 million . The aggregate maturities of long-term debt do not include $499 million of this obligation, which prior to the end of the lease term on April 30, 2020, will be derecognized along with the remaining net book value of the associated real estate assets. (2) Actual principal paid in any year may differ due to the possible future refinancing of outstanding debt or the issuance of new debt. The projected amounts in the table also exclude any impacts from any further acquisitions. Repayments During the three months ended September 2018, we retired approximately $1.3 billion in debt securities including approximately $164 million of Qwest 7.5% Notes due 2051, $925 million of Qwest 7.0% Notes due 2052, and $250 million of Qwest 7.25% Notes due 2035. Covenants Certain of our debt instruments contain affirmative and negative covenants. Debt at CenturyLink, Inc., Level 3 Parent, LLC, and Level 3 Financing, Inc. contain more extensive covenants including, among other things and subject to certain 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, dispose of assets and merge or consolidate with any other person. Also, CenturyLink, Inc. and certain of its affiliates will be required to offer to purchase certain of their respective outstanding debt under certain circumstances in connection with certain specified "change of control" transactions. Certain of our debt instruments contain cross acceleration provisions. Compliance As of September 30, 2018 , we were in compliance with the provisions and financial covenants in our material debt agreements. Other For additional information on our long-term debt and credit facilities, see Note 5 — Long-Term Debt and Credit Facilities 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, 2017. |
Severance and Leased Real Estat
Severance and Leased Real Estate | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Severance and Leased Real Estate | 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 our post-acquisition integration plans, 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. At September 30, 2018 , the current and noncurrent portions of our leased real estate accrual were $21 million and $87 million , respectively. The remaining lease terms range from 0.26 years to 12.3 years , with a weighted-average of 7.0 years . Changes in our accrued liabilities for severance expenses and leased real estate were as follows: Severance Real Estate (Dollars in millions) Balance at December 31, 2017 $ 33 64 Accrued to expense 126 60 Payments, net (137 ) (16 ) Balance at September 30, 2018 $ 22 108 |
Employee Benefits
Employee Benefits | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefits | Employee Benefits Net periodic benefit (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Service cost $ 17 16 49 47 Interest cost 99 102 296 308 Expected return on plan assets (171 ) (166 ) (513 ) (499 ) Recognition of prior service credit (2 ) (2 ) (6 ) (6 ) Recognition of actuarial loss 45 51 135 154 Net periodic pension benefit (income) expense $ (12 ) 1 (39 ) 4 Net periodic benefit expense for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Service cost $ 4 4 13 13 Interest cost 24 25 73 75 Expected return on plan assets (1 ) — (1 ) (1 ) Recognition of prior service cost 5 5 15 15 Net periodic post-retirement benefit expense $ 32 34 100 102 Benefits paid by our qualified pension plan are paid through a trust that holds all plan assets. Based on current laws and circumstances, we do not expect any contributions to be required for our qualified pension plan during the remainder of 2018. However, we made voluntary contributions of $500 million to the trust for our qualified pension plan during the nine months ended September 30, 2018 , including $400 million during the third quarter of 2018. |
Earnings Per Common Share
Earnings Per Common Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | Earnings Per Common Share Basic and diluted earnings per common share were calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 272 92 679 272 Earnings applicable to non-vested restricted stock — — — — Net income applicable to common stock for computing basic earnings per common share 272 92 679 272 Net income as adjusted for purposes of computing diluted earnings per common share $ 272 92 679 272 Shares (Denominator): Weighted-average number of shares: Outstanding during period 1,080,589 549,618 1,077,712 548,779 Non-vested restricted stock (13,685 ) (8,097 ) (12,302 ) (7,666 ) Weighted-average shares outstanding for computing basic earnings per common share 1,066,904 541,521 1,065,410 541,113 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 10 10 Shares issuable under incentive compensation plans 5,437 432 4,306 756 Number of shares as adjusted for purposes of computing diluted earnings per common share 1,072,351 541,963 1,069,726 541,879 Basic earnings per common share $ 0.25 0.17 0.64 0.50 Diluted earnings per common share $ 0.25 0.17 0.63 0.50 Our calculation of diluted earnings per common share excludes shares of common stock that are issuable upon exercise of stock options when the exercise price is greater than the average market price of our common stock. We also exclude unvested restricted stock awards that are anti-dilutive as a result of unrecognized compensation cost. Such shares averaged 1.5 million and 5.1 million for the three months ended September 30, 2018 and 2017 , respectively, and averaged 3.0 million and 4.2 million for the nine months ended September 30, 2018 and 2017 , respectively. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: September 30, 2018 December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 35,702 35,750 36,835 36,402 |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Segment Data In connection with our acquisition of Level 3 (discussed further in Note 2—Acquisition of Level 3), effective November 1, 2017, we implemented a new organization structure and began managing our operations in two segments: business and consumer. Our consumer segment remains substantially similar under this reorganization, and our newly reorganized business segment includes the Legacy CenturyLink enterprise segment operations and the Legacy Level 3 operations. In addition, we reassigned our information technology, managed hosting, cloud hosting and hosting area network operations back into the business segment, thereby eliminating a former non-reportable operating segment. At September 30, 2018 , we had the following two reportable segments: • Business Segment. This segment consists generally of providing products and services to small, medium and enterprise business, wholesale, government and international customers, including other communication providers. Our products and services offered to these customers include our local and long-distance voice, VPN data network, private line (including business data services), Ethernet, information technology, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services, all of which are described further under "Products and Services Categories"; and • Consumer Segment. This segment consists generally of providing products and services to residential customers. Our products and services offered to these customers include our broadband, local and long-distance voice, video and other ancillary services. The results of our two reportable segments, business and consumer, are summarized below: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Total reportable segment revenues $ 5,640 3,845 17,119 11,789 Total reportable segment expenses 2,969 2,197 9,244 6,572 Total reportable segment adjusted EBITDA $ 2,671 1,648 7,875 5,217 Total margin percentage 47 % 43 % 46 % 44 % Business segment: Revenues $ 4,285 2,425 13,033 7,485 Expenses 2,446 1,537 7,540 4,641 Adjusted EBITDA $ 1,839 888 5,493 2,844 Margin percentage 43 % 37 % 42 % 38 % Consumer segment: Revenues $ 1,355 1,420 4,086 4,304 Expenses 523 660 1,704 1,931 Adjusted EBITDA $ 832 760 2,382 2,373 Margin percentage 61 % 54 % 58 % 55 % Our CODM continues to review the operational and internal reporting structure as a result of our acquisition of Level 3 (See Note 2 — Acquisition of Level 3). Product and Service Categories We categorize our products, services and revenues among the following five categories: • IP and data services , which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services; • Transport and infrastructure , which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services, dark fiber services and other ancillary services; • Voice and collaboration , which includes primarily local and long-distance voice, including wholesale voice, and other ancillary service; • IT and managed services , which include information technology services and managed services, which may be purchased in conjunction with our other network services; and • Regulatory revenues, which consists of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues. We receive federal support payments from both federal and state USF programs and from the federal CAF program. The USF and CAF support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services. We generate other operating revenues from the leasing and subleasing of space in our office buildings, warehouses and other properties and from rental income associated with the failed-sale-leaseback. Because we centrally manage the activities that generate these regulatory revenues, these revenues are not included in our segment revenues. Our operating revenue detail for our products and services consisted of the following categories: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Business segment IP and data services (1) $ 1,726 755 5,212 2,256 Transport and infrastructure (2) 1,331 735 4,021 2,426 Voice and collaboration (3) 1,075 765 3,324 2,319 IT and managed services (4) 153 170 476 484 Total business segment revenues 4,285 2,425 13,033 7,485 Consumer segment IP and data services (5) 70 98 249 308 Transport and infrastructure (6) 720 697 2,171 2,063 Voice and collaboration (3) 565 625 1,666 1,933 Total consumer segment revenues 1,355 1,420 4,086 4,304 Non-segment revenues Regulatory revenues (7) 178 189 546 544 Total non-segment revenues 178 189 546 544 Total revenues $ 5,818 4,034 17,665 12,333 ______________________________________________________________________ (1) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3) Includes local, long-distance and other ancillary revenues. (4) Includes IT services and managed services revenues. (5) Includes retail video revenues (including our facilities-based video revenues). (6) Includes primarily broadband and equipment sales and professional services revenues. (7) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. We recognize revenues 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. The total amount of such surcharges and transaction taxes that we included in revenues aggregated $221 million and $129 million for the three months ended September 30, 2018 and 2017 , respectively, and $698 million and $392 million for the nine months ended September 30, 2018 and 2017 , respectively. These USF surcharges, where we record revenue, and transaction taxes are assigned to the products and services categories of each segment based on the underlying revenues. 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. Allocations of Revenues and Expenses Our segment revenues include all revenues from our business and consumer segments as described in more detail above. Our segment revenues are based upon each customer's classification. We report our segment revenues based upon all services provided to that segment's customers. Our segment expenses include specific expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are (i) directly associated with specific segment customers or activities and (ii) allocated expenses, which include network expenses, facilities expenses and other expenses such as fleet and real estate expenses. We do not assign depreciation and amortization expense or impairments to our segments, as the related assets and capital expenditures are centrally managed and are not monitored by or reported to the CODM by segment. Generally speaking, severance expenses, restructuring expenses and certain centrally managed administrative functions (such as finance, information technology, legal and human resources) are not assigned to our segments. Interest expense is also excluded from segment results because we manage our financing on a consolidated basis and have not allocated assets or debt to specific segments. Other income and expense items are not monitored as a part of our segment operations and are therefore excluded from our segment results. The following table reconciles total reportable segment adjusted EBITDA to net income: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Total reportable segment adjusted EBITDA $ 2,671 1,648 7,875 5,217 Regulatory revenues 178 189 546 544 Depreciation and amortization (1,285 ) (910 ) (3,858 ) (2,739 ) Other operating expenses (670 ) (440 ) (2,152 ) (1,537 ) Total other expense, net (565 ) (348 ) (1,609 ) (999 ) Income before income tax expense 329 139 802 486 Income tax expense 57 47 123 214 Net income $ 272 92 679 272 |
Commitments and Contingencies a
Commitments and Contingencies and Other Items | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies and Other Items | Commitments and 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, 2018 aggregated to approximately $138 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. Shareholder Litigation CenturyLink and certain members of the CenturyLink Board of Directors have been named as defendants in a putative shareholder class action lawsuit filed on January 11, 2017 in the 4th Judicial District Court of the State of Louisiana, Ouachita Parish, captioned Jeffery Tomasulo v. CenturyLink, Inc., et al. The complaint asserts, among other things, that the members of CenturyLink’s Board allegedly breached their fiduciary duties to the CenturyLink shareholders in approving the Level 3 merger agreement and, more particularly, that: the consideration that CenturyLink agreed to pay to Level 3 stockholders in the transaction is allegedly unfairly high; the CenturyLink directors allegedly had conflicts of interest in negotiating and approving the transaction; and the disclosures set forth in our preliminary joint proxy statement/prospectus filed in December 2016 are insufficient in that they allegedly fail to contain material information concerning the transaction. The complaint seeks, among other things, a declaration that the members of the CenturyLink Board have breached their fiduciary duties, corrective disclosure, rescissory or other damages and equitable relief, including rescission of the transaction. On February 13, 2017, the parties entered into a memorandum of understanding providing for the settlement of the lawsuit. The proposed settlement is subject to court approval, among other conditions, and the amount of the settlement is not material to our consolidated financial statements. CenturyLink and certain CenturyLink board members and officers were named as defendants in a putative shareholder class action lawsuit filed on June 12, 2018 in the Boulder County District Court of the state of Colorado, captioned Houser et al. v. CenturyLink, et al. The complaint asserts claims on behalf of a putative class of former Level 3 shareholders who became CenturyLink shareholders as a result of the transaction. It alleges that the proxy statement provided to the Level 3 shareholders failed to disclose material information of several kinds, including information about strategic revenues, customer loss rates, and customer account issues, among other items. The complaint seeks damages, costs and fees, rescission, rescissory damages, and other equitable relief. Switched Access Disputes Subsidiaries of CenturyLink, Inc. are among hundreds of companies involved in an industry-wide dispute, raised in nearly 100 federal lawsuits (filed between 2014 and 2016) that have been consolidated as In Re: IntraMTA Switched Access Charges Litigation, in the United States District Court for the Northern District of Texas for pretrial procedures. The disputes relate to switched access charges that local exchange carriers ("LECs") collect from interexchange carriers ("IXCs") for IXCs' use of LEC's access services. In the lawsuits, various IXCs assert that LECs are prohibited from collecting access charges when IXCs exchange certain types of calls between mobile and wireline devices. Some of these IXCs seek refunds for access charges previously paid and declaratory relief from future access charges. In November 2015, the court rejected the IXCs' claims under federal law and entered final judgments against the IXCs on the LECs' claims for unpaid access charges and for late payment charges. The cases are now on appeal before the U.S. Court of Appeals for the Fifth Circuit. Separately, some of the defendants have petitioned the FCC to address these issues on an industry-wide basis. As both an IXC and a LEC, we both pay and assess significant amounts of the charges in question. The outcome of these disputes and lawsuits, as well as any related regulatory proceedings that could ensue, could affect our financial results and are currently not predictable. State Tax Suits Several Missouri municipalities have, beginning in May 2012, asserted claims alleging underpayment of taxes against CenturyLink, Inc. and several of its subsidiaries in a number of proceedings filed in the Circuit Court of St. Louis County, Missouri. These municipalities are seeking, among other things, declaratory relief regarding the application of business license and gross receipts taxes and back taxes from 2007 to the present, plus penalties and interest. In a February 2017 ruling in connection with one of these pending cases, the court entered an order awarding plaintiffs $4 million and broadening the tax base on a going-forward basis. We have appealed that ruling. In a June 2017 ruling in connection with another one of these pending cases, the court made findings which, if not overturned, will result in a tax liability to us well in excess of the contingent liability we have established. In due course, we plan to appeal that decision. We continue to vigorously defend against these claims. Billing Practices Suits In June 2017, a former employee filed an employment lawsuit against us claiming that she was wrongfully terminated for alleging that we charged some of our retail customers for products and services they did not authorize. Starting shortly thereafter and continuing since then, and based in part on the allegations made by the former employee, several legal proceedings have been filed. In June 2017, McLeod v. CenturyLink, a putative consumer class action, was filed against us in the U.S. District Court for the Central District of California alleging that we charged some of our retail customers for products and services they did not authorize. A number of other complaints asserting similar claims have been filed in other federal and state courts, as well. The lawsuits assert claims including fraud, unfair competition, and unjust enrichment. Also in June 2017, Craig. v. CenturyLink, Inc., et al., a putative securities investor class action, was filed in U.S. District Court for the Southern District of New York, alleging that we failed to disclose material information regarding improper sales practices, and asserting federal securities law claims. A number of other cases asserting similar claims have also been filed. Both the putative consumer class actions and the putative securities investor class actions have been transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. Beginning June 2017, we also received several shareholder derivative demands addressing related topics. In August 2017, the Board of Directors formed a special litigation committee of outside directors to address the allegations of impropriety contained in the shareholder derivative demands. In April 2018, the special litigation committee concluded its review of the derivative demands and declined to take further action. Since then, another demand has been received, and six derivative cases were filed. Two of these cases, Castagna v. Post and Pinsly v. Post, were filed in Louisiana state court in the Fourth Judicial District Court for the Parish of Ouachita; four others, Ault v. Post, Barbree v. Post, Flanders v. Post, and Palkon v. Boulet, were filed in Louisiana federal court in the Monroe Division of the Western District of Louisiana. These cases have been brought on behalf of CenturyLink against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties. In July 2017, the Minnesota state attorney general filed State of Minnesota v. CenturyTel Broadband Services LLC, et al. in the Asoka County Minnesota District Court, alleging claims of fraud and deceptive trade practices relating to improper consumer sales practices. The suit seeks an order of restitution on behalf of all CenturyLink customers, civil penalties, injunctive relief, and costs and fees. Additionally, we have received and responded to information requests and inquiries from other states. 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, the total amount of exposure is $13 million at September 30, 2018 . 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. That appeal is pending. Employee Severance and Contractor Termination Disputes A number of former employees and third-party contractors have asserted a variety of claims in litigation against certain of Level 3’s Latin American subsidiaries for separation pay, severance, commissions, pension benefits, unpaid vacation pay, breach of employment contracts, unpaid performance bonuses, property damages, moral damages and related statutory penalties, fines, costs and expenses (including accrued interest, attorneys' fees and statutorily mandated inflation adjustments) as a result of their separation from Level 3 or termination of service relationships. Level 3 is vigorously defending itself against the asserted claims, which aggregate to approximately $30 million at September 30, 2018 . 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 $34 million at September 30, 2018 in excess of the accruals established for these matters. Qui Tam Action Level 3 was 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 Level 3, 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. Level 3 is evaluating its defenses to the claims. At this time, Level 3 does not believe it is probable Level 3 will incur a material loss. If, contrary to its 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 into a plea agreement, and the other is deceased. Level 3 is 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 September 30, 2018 and December 31, 2017 , we had outstanding letters of credit or other similar obligations of approximately $129 million and $104 million , respectively. 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 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, 2017 . 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. |
Other Financial Information
Other Financial Information | 9 Months Ended |
Sep. 30, 2018 | |
Additional Financial Information Disclosure [Abstract] | |
Other Financial Information | Other Financial Information Other Current Assets The following table presents details of other current assets reflected in our consolidated balance sheets: September 30, 2018 December 31, 2017 (Dollars in millions) Prepaid expenses $ 379 294 Income tax receivable 79 258 Materials, supplies and inventory 131 128 Contract assets 359 128 Contract acquisition costs 155 — Other 134 133 Total other current assets $ 1,237 941 Selected Current Liabilities The following table presents details of other current liabilities reflected in our consolidated balance sheets: September 30, 2018 December 31, 2017 (Dollars in millions) Other current liabilities: Accrued contributions to federal programs $ 136 74 Dividends payable 51 34 Accrued rents 41 14 Accrued rents-telephone poles 35 34 Litigation contingencies 31 45 Other 80 143 Total other current liabilities $ 374 344 Included in accounts payable at September 30, 2018 and December 31, 2017 , were $58 million and $36 million , respectively, representing book overdrafts. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Information Relating to 2018 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, 2018 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2017 $ (1,731 ) (235 ) (29 ) (1,995 ) Other comprehensive income before reclassifications — — (161 ) (161 ) Amounts reclassified from accumulated other comprehensive income 97 12 — 109 Net current-period other comprehensive income 97 12 (161 ) (52 ) Cumulative effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (375 ) (32 ) — (407 ) Balance at September 30, 2018 $ (2,009 ) (255 ) (190 ) (2,454 ) The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2018 : Three Months Ended September 30, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 45 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 48 Income tax benefit (11 ) Income tax expense Net of tax $ 37 Nine Months Ended September 30, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 135 Other income (expense), net Prior service cost 9 Other income (expense), net Total before tax 144 Income tax benefit (35 ) Income tax expense Net of tax $ 109 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. Information Relating to 2017 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, 2017 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2016 $ (1,895 ) (162 ) (60 ) (2,117 ) Other comprehensive income before reclassifications — — 20 20 Amounts reclassified from accumulated other comprehensive income 93 10 — 103 Net current-period other comprehensive income 93 10 20 123 Balance at September 30, 2017 $ (1,802 ) (152 ) (40 ) (1,994 ) The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2017 : Three Months Ended September 30, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 51 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 54 Income tax benefit (16 ) Income tax expense Net of tax $ 38 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. Nine Months Ended September 30, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 154 Other income (expense), net Prior service cost 9 Other income (expense), net Total before tax 163 Income tax benefit (60 ) Income tax expense Net of tax $ 103 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. |
Labor Union Contracts
Labor Union Contracts | 9 Months Ended |
Sep. 30, 2018 | |
Labor Union Contracts [Abstract] | |
Labor Union Contracts | Labor Union Contracts As of September 30, 2018, approximately 26% of our employees were members of various bargaining units represented by the Communication Workers of America ("CWA") and the International Brotherhood of Electrical Workers ("IBEW"). We believe that relations with our employees continue to be generally good. Approximately 300 (less than 1% ) of our employees were subject to collective bargaining agreements that have expired as of September 30, 2018 and are currently being renegotiated. |
Background (Policies)
Background (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation policy | To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income (expense), net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities. |
Reclassification policy | We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 11—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. |
Recently adopted accounting pronouncements and recent accounting pronouncements | Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “ Revenue from Contracts with Customers ”, ASU 2018-02, “ Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ” and ASU 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory ”. Each of these is described further below. Revenue Recognition In May 2014, the FASB issued ASU 2014-09 which replaces virtually all existing generally accepted accounting principles on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We adopted the new revenue recognition standard under the modified retrospective transition method. During the three and nine months ended September 30, 2018, we recorded a cumulative catch-up adjustment that increased our retained earnings by $49 million , net of $17 million of income taxes, and $346 million , net of $117 million of income taxes, respectively. The catch-up adjustment recorded during the three months ended September 30, 2018 resulted from the identification of additional fulfillment costs that should have been considered in our adoption and from correcting certain issues in the accounting system we utilize in calculating revenue under the new revenue recognition standard. Under ASU 2014-09, we are now deferring incremental contract acquisition and fulfillment costs and are recognizing (or amortizing) such costs over either the initial contract (plus anticipated renewal contracts to which the costs relate) or the average customer life. Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average customer life of 30 months for consumer customers and 12 to 60 months for business customers and are included in cost of services and products and selling, general and administrative expenses in our consolidated statement of operations. A portion of these costs are amortized on a portfolio basis using an average expected contract term of 30 months. The amounts of these deferred costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. See Note 5—Revenue Recognition for additional information. Comprehensive Income ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. We early adopted and applied ASU 2018-02 in the first quarter of 2018. The adoption of ASU 2018-02 resulted in a $407 million increase to retained earnings and in accumulated other comprehensive loss. See Note 14 — Accumulated Other Comprehensive Loss for additional information. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. Our adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recently Issued Accounting Pronouncements Retirement Benefits In August 2018, the FASB issued ASU 2018-14, " Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans " (“ASU 2018-14“). ASU 2018-14 eliminates requirements for certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures under defined benefit pension plans and other postretirement plans. We are required to adopt this guidance beginning January 1, 2021. Early adoption is permitted. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. We are currently evaluating the potential impact of the adoption of this standard on our disclosures. Goodwill Impairment In January 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment ” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above its fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt it for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. Financial Instruments In June 2016, the FASB issued ASU 2016-13, " Measurement of Credit Losses on Financial Instruments " ("ASU 2016-13"). 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 currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. Leases In February 2016, the FASB issued ASU 2016-02, “ Leases ” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which under GAAP are currently not required to be reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective transition approach includes a number of optional practical expedients that we may elect to apply. In January 2018, the FASB issued ASU 2018-01, “ Leases: Land Easement Practical Expedient for Transition to ASU 2016-02 " ("ASU 2018-01"). ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. In July 2018, the FASB issued ASU 2018-11, " Leases: Targeted Improvements " ("ASU 2018-11"). ASU 2018-11 provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We have not yet determined whether we will use ASU 2018-11's newly permitted adoption method. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Additionally, upon implementing ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3 — Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation described therein will be derecognized from our consolidated financial statements. |
Acquisition of Level 3 (Tables)
Acquisition of Level 3 (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | As of September 30, 2018, the following is our updated assignment of the preliminary estimated aggregate consideration: Adjusted November 1, 2017 Balance as of December 31, 2017 Purchase Price Adjustments (3) Adjusted November 1, 2017 Balance as of September 30, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (25 ) 3,292 Property, plant and equipment 9,311 86 9,397 Identifiable intangible assets (2) Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 203 985 Current liabilities, excluding current maturities of long-term debt (1,461 ) (31 ) (1,492 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,629 ) (102 ) (1,731 ) Goodwill 10,837 353 11,190 Total estimated aggregate consideration $ 19,617 (5 ) 19,612 ____________________________________________________________________________________________________________ (1) Includes accounts receivable, which had a gross contractual value of $884 million on November 1, 2017 and September 30, 2018. (2) The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately 12.0 years . (3) All purchase price adjustments occurred during the nine months ended September 30, 2018 . |
Summary of Acquisition Related Expenses | The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Transaction-related expenses $ 1 6 2 23 Integration-related expenses 43 28 275 40 Total acquisition-related expenses $ 44 34 277 63 |
Summary of Pro Forma Information | The following unaudited pro forma financial information presents the combined results of CenturyLink as if the Level 3 acquisition had been consummated as of January 1, 2017: Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 (Dollars in millions, except per share amounts) Operating revenues $ 6,031 18,316 Net income 194 459 Basic earnings per common share 0.18 0.43 Diluted earnings per common share 0.18 0.43 |
Sale of Data Centers and Colo_2
Sale of Data Centers and Colocation Business (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of disposal assets held-for-sale and liabilities attributable to disposal assets held-for-sale | The following table reflects the assets sold to and the liabilities assumed by Cyxtera on May 1, 2017, including our estimate of the impact of failed-sale-leaseback: Dollars in millions Goodwill $ 1,142 Property, plant and equipment 1,051 Other intangible assets 249 Other assets 66 Less assets recorded as part of the failed-sale-leaseback (526 ) Total net amount of assets derecognized $ 1,982 Capital lease obligations $ 294 Other liabilities 274 Less imputed financing obligations from the failed-sale-leaseback (628 ) Total net imputed liabilities recognized $ (60 ) |
Goodwill, Customer Relationsh_2
Goodwill, Customer Relationships and Other Intangible Assets Goodwill, Customer Relationships and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets and Goodwill | Goodwill, customer relationships and other intangible assets consisted of the following: September 30, 2018 December 31, 2017 (Dollars in millions) Goodwill $ 30,770 30,475 Customer relationships, less accumulated amortization of $8,153 and $7,096 $ 9,309 10,876 Indefinite-life intangible assets $ 269 269 Other intangible assets subject to amortization: Capitalized software, less accumulated amortization of $2,547 and $2,294 1,450 1,469 Trade names and patents, less accumulated amortization of $54 and $31 138 159 Total other intangible assets, net $ 1,857 1,897 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | We estimate that total amortization expense for intangible assets (which include preliminary estimates for the intangible assets acquired from Level 3) for the years ending December 31, 2018 through 2022 will be as follows: (Dollars in millions) 2018 (remaining three months) $ 443 2019 1,692 2020 1,589 2021 1,158 2022 982 |
Schedule of Goodwill | The following table shows the rollforward of goodwill assigned to our reportable segments from December 31, 2017 through September 30, 2018 : Business Consumer Total (Dollars in millions) As of December 31, 2017 $ 20,197 10,278 30,475 Purchase accounting and other adjustments 353 — 353 Effect of foreign currency rate change (58 ) — (58 ) As of September 30, 2018 $ 20,492 10,278 30,770 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Effect of New Accounting Pronouncements | The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended September 30, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Operating revenues $ 5,818 (14 ) $ 5,804 Cost of services and products (exclusive of depreciation and amortization) 2,672 8 2,680 Selling, general and administrative 967 16 983 Interest expense 557 (7 ) 550 Income tax expense 57 (8 ) 49 Net income $ 272 (23 ) $ 249 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.25 (0.02 ) 0.23 DILUTED $ 0.25 (0.02 ) 0.23 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,066,904 — 1,066,904 DILUTED 1,072,351 — 1,072,351 Nine Months Ended September 30, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Operating revenues $ 17,665 12 $ 17,677 Cost of services and products (exclusive of depreciation and amortization) 8,205 18 8,223 Selling, general and administrative 3,191 42 3,233 Interest expense 1,638 (7 ) 1,631 Income tax expense 123 (11 ) 112 Net income $ 679 (30 ) $ 649 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.64 (0.03 ) 0.61 DILUTED $ 0.63 (0.03 ) 0.60 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,065,410 — 1,065,410 DILUTED 1,069,726 — 1,069,726 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of September 30, 2018 (Dollars in millions) Reported Balances as of September 30, 2018 Impact of ASC 606 ASC 605 Historical Adjusted Balances Other current assets $ 1,237 (390 ) $ 847 Other long-term assets, net 1,014 (93 ) 921 Deferred revenue 2,547 (101 ) 2,446 Deferred income taxes, net 2,502 (127 ) 2,375 Other long-term liabilities 1,075 122 1,197 Retained earnings 777 (377 ) 400 |
Disaggregation of Revenue | The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the three and nine months ended September 30, 2018 , respectively. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards. The adjustment of $43 million noted above was included in the revenue of the consumer segment for the three months ended September 30, 2018; $34 million was recorded to voice and collaboration and $9 million was recorded to transport and infrastructure. Three Months Ended September 30, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 1,726 — $ 1,726 Transport & Infrastructure (2) 1,331 (71 ) 1,260 Voice & Collaboration (3) 1,075 — 1,075 IT & Managed Services (4) 153 — 153 Total business segment revenues 4,285 (71 ) 4,214 Consumer segment IP & Data Services (5) 70 (9 ) 61 Transport & Infrastructure (6) 720 (54 ) 666 Voice & Collaboration (3) 565 — 565 Total consumer segment revenues 1,355 (63 ) 1,292 Non-segment revenues Regulatory revenues (7) 178 (178 ) — Total non-segment revenues 178 (178 ) — Total revenues $ 5,818 $ (312 ) $ 5,506 Timing of Revenue Goods transferred at a point in time $ 51 Services performed over time 5,455 Total revenues from contracts with customers $ 5,506 Nine Months Ended September 30, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 5,212 — $ 5,212 Transport & Infrastructure (2) 4,021 (217 ) 3,804 Voice & Collaboration (3) 3,324 — 3,324 IT & Managed Services (4) 476 — 476 Total business segment revenues 13,033 (217 ) 12,816 Consumer segment IP & Data Services (5) 249 (25 ) 224 Transport & Infrastructure (6) 2,171 (159 ) 2,012 Voice & Collaboration (3) 1,666 — 1,666 Total consumer segment revenues 4,086 (184 ) 3,902 Non-segment revenues Regulatory revenues (7) 546 (546 ) — Total non-segment revenues 546 (546 ) — Total revenues $ 17,665 (947 ) $ 16,718 Timing of Revenue Goods transferred at a point in time $ 132 Services performed over time 16,586 Total revenues from contracts with customers $ 16,718 (1 ) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3 ) Includes local, long-distance and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes retail video revenues (including our facilities-based video revenues). (6 ) Includes primarily broadband and equipment sales and professional services revenues. (7 ) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. (8 ) Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, which are not within the scope of ASC 606. |
Contract with Customer, Asset and Liability | The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2018 and January 1, 2018: September 30, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 2,436 2,504 Contract liabilities 716 623 Contract assets 352 255 (1) Gross customer receivables of $2.6 billion and $2.7 billion , net of allowance for doubtful accounts of $153 million and $155 million , at September 30, 2018 and January 1, 2018, respectively. |
Capitalized Contract Cost | The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs Beginning of period balance $ 286 161 268 133 Costs incurred 53 46 152 105 Amortization (44 ) (34 ) (125 ) (65 ) End of period balance $ 295 173 295 173 |
Long-Term Debt and Credit Fac_2
Long-Term Debt and Credit Facilities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt including unamortized discounts and premiums | The following chart reflects our consolidated long-term debt, including unamortized discounts and premiums and unamortized debt issuance costs, but excluding intercompany debt: Interest Rates (1) Maturities September 30, 2018 December 31, 2017 (Dollars in millions) Senior Secured Debt: CenturyLink, Inc. 2017 Revolving Credit Facility (2) 4.898% - 4.908% 2022 $ 590 405 Term Loan A 4.992% 2022 1,643 1,575 Term Loan A-1 4.992% 2022 356 370 Term Loan B 4.992% 2025 5,955 6,000 Subsidiaries: Level 3 Financing, Inc. Tranche B 2024 Term Loan (3) 4.432% 2024 4,611 4,611 Embarq Corporation subsidiaries First mortgage bonds 7.125% - 8.370% 2023 - 2025 138 151 Senior Notes and Other Debt: CenturyLink, Inc. Senior notes 5.625% - 7.650% 2019 - 2042 8,115 8,125 Subsidiaries: Level 3 Financing, Inc. Senior notes 5.125% - 6.125% 2021 - 2026 5,315 5,315 Level 3 Parent, LLC Senior notes 5.125% - 6.1250% 2022 600 600 Qwest Corporation Senior notes 6.125% - 7.750% 2021 - 2057 5,955 7,294 Term loan 4.250% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 979 981 Embarq Corporation and subsidiary Senior note 7.995% 2036 1,485 1,485 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 825 891 Unamortized premiums and other, net 2 23 Unamortized debt issuance costs (292 ) (350 ) Total long-term debt 36,527 37,726 Less current maturities (778 ) (443 ) Long-term debt, excluding current maturities $ 35,749 37,283 ______________________________________________________________________ (1) As of September 30, 2018 . (2) The weighed-average interest rate payable on our outstanding revolving line of credit borrowings at December 31, 2017 was 4.186% . The aggregate amount of outstanding revolving line of credit borrowings typically change on a regular basis. (3) The Tranche B 2024 Term Loan is a secured obligation and is guaranteed by Level 3 Parent, LLC and certain other subsidiaries. The Tranche B 2024 Term Loan had an interest rate of 4.432% as of September 30, 2018 and 3.557% as of December 31, 2017. The interest rate on the Tranche B 2024 Term Loan is set with a minimum London Interbank Offered Rate ("LIBOR") of zero percent. |
Schedule of maturities of long-term debt | Set forth below is the aggregate principal amount of our long-term debt (excluding unamortized discounts, net and unamortized debt issuance costs) maturing during the following years: (Dollars in millions) (1)(2) 2018 (remaining three months) $ 241 2019 651 2020 1,202 2021 3,115 2022 5,323 2023 and thereafter 25,785 Total long-term debt $ 36,317 _______________________________________________________________________________ (1) In Note 3—Sale of Data Centers and Colocation Business, we describe an imputed financing obligation. The amount outstanding on that imputed financing obligation at September 30, 2018 was $568 million . The aggregate maturities of long-term debt do not include $499 million of this obligation, which prior to the end of the lease term on April 30, 2020, will be derecognized along with the remaining net book value of the associated real estate assets. (2) Actual principal paid in any year may differ due to the possible future refinancing of outstanding debt or the issuance of new debt. The projected amounts in the table also exclude any impacts from any further acquisitions. |
Severance and Leased Real Est_2
Severance and Leased Real Estate (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Schedule of changes in accrued liabilities for severance expenses and leased real estate | Changes in our accrued liabilities for severance expenses and leased real estate were as follows: Severance Real Estate (Dollars in millions) Balance at December 31, 2017 $ 33 64 Accrued to expense 126 60 Payments, net (137 ) (16 ) Balance at September 30, 2018 $ 22 108 |
Employee Benefits (Tables)
Employee Benefits (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Schedule of components of net periodic pension benefit (income) expense and post-retirement benefit expense | Net periodic benefit (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Service cost $ 17 16 49 47 Interest cost 99 102 296 308 Expected return on plan assets (171 ) (166 ) (513 ) (499 ) Recognition of prior service credit (2 ) (2 ) (6 ) (6 ) Recognition of actuarial loss 45 51 135 154 Net periodic pension benefit (income) expense $ (12 ) 1 (39 ) 4 Net periodic benefit expense for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Service cost $ 4 4 13 13 Interest cost 24 25 73 75 Expected return on plan assets (1 ) — (1 ) (1 ) Recognition of prior service cost 5 5 15 15 Net periodic post-retirement benefit expense $ 32 34 100 102 |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted earnings per common share | Basic and diluted earnings per common share were calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 272 92 679 272 Earnings applicable to non-vested restricted stock — — — — Net income applicable to common stock for computing basic earnings per common share 272 92 679 272 Net income as adjusted for purposes of computing diluted earnings per common share $ 272 92 679 272 Shares (Denominator): Weighted-average number of shares: Outstanding during period 1,080,589 549,618 1,077,712 548,779 Non-vested restricted stock (13,685 ) (8,097 ) (12,302 ) (7,666 ) Weighted-average shares outstanding for computing basic earnings per common share 1,066,904 541,521 1,065,410 541,113 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 10 10 Shares issuable under incentive compensation plans 5,437 432 4,306 756 Number of shares as adjusted for purposes of computing diluted earnings per common share 1,072,351 541,963 1,069,726 541,879 Basic earnings per common share $ 0.25 0.17 0.64 0.50 Diluted earnings per common share $ 0.25 0.17 0.63 0.50 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values | The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: September 30, 2018 December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 35,702 35,750 36,835 36,402 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of segment results | The results of our two reportable segments, business and consumer, are summarized below: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Total reportable segment revenues $ 5,640 3,845 17,119 11,789 Total reportable segment expenses 2,969 2,197 9,244 6,572 Total reportable segment adjusted EBITDA $ 2,671 1,648 7,875 5,217 Total margin percentage 47 % 43 % 46 % 44 % Business segment: Revenues $ 4,285 2,425 13,033 7,485 Expenses 2,446 1,537 7,540 4,641 Adjusted EBITDA $ 1,839 888 5,493 2,844 Margin percentage 43 % 37 % 42 % 38 % Consumer segment: Revenues $ 1,355 1,420 4,086 4,304 Expenses 523 660 1,704 1,931 Adjusted EBITDA $ 832 760 2,382 2,373 Margin percentage 61 % 54 % 58 % 55 % |
Schedule of operating revenues by products and services | Our operating revenue detail for our products and services consisted of the following categories: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Business segment IP and data services (1) $ 1,726 755 5,212 2,256 Transport and infrastructure (2) 1,331 735 4,021 2,426 Voice and collaboration (3) 1,075 765 3,324 2,319 IT and managed services (4) 153 170 476 484 Total business segment revenues 4,285 2,425 13,033 7,485 Consumer segment IP and data services (5) 70 98 249 308 Transport and infrastructure (6) 720 697 2,171 2,063 Voice and collaboration (3) 565 625 1,666 1,933 Total consumer segment revenues 1,355 1,420 4,086 4,304 Non-segment revenues Regulatory revenues (7) 178 189 546 544 Total non-segment revenues 178 189 546 544 Total revenues $ 5,818 4,034 17,665 12,333 ______________________________________________________________________ (1) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3) Includes local, long-distance and other ancillary revenues. (4) Includes IT services and managed services revenues. (5) Includes retail video revenues (including our facilities-based video revenues). (6) Includes primarily broadband and equipment sales and professional services revenues. (7) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. |
Reconciliation of operating profit (loss) from segments to consolidated net income | The following table reconciles total reportable segment adjusted EBITDA to net income: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (Dollars in millions) Total reportable segment adjusted EBITDA $ 2,671 1,648 7,875 5,217 Regulatory revenues 178 189 546 544 Depreciation and amortization (1,285 ) (910 ) (3,858 ) (2,739 ) Other operating expenses (670 ) (440 ) (2,152 ) (1,537 ) Total other expense, net (565 ) (348 ) (1,609 ) (999 ) Income before income tax expense 329 139 802 486 Income tax expense 57 47 123 214 Net income $ 272 92 679 272 |
Other Financial Information (Ta
Other Financial Information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Additional Financial Information Disclosure [Abstract] | |
Schedule of components of other current assets | The following table presents details of other current assets reflected in our consolidated balance sheets: September 30, 2018 December 31, 2017 (Dollars in millions) Prepaid expenses $ 379 294 Income tax receivable 79 258 Materials, supplies and inventory 131 128 Contract assets 359 128 Contract acquisition costs 155 — Other 134 133 Total other current assets $ 1,237 941 |
Schedule of current liabilities including accounts payable and other current liabilities | The following table presents details of other current liabilities reflected in our consolidated balance sheets: September 30, 2018 December 31, 2017 (Dollars in millions) Other current liabilities: Accrued contributions to federal programs $ 136 74 Dividends payable 51 34 Accrued rents 41 14 Accrued rents-telephone poles 35 34 Litigation contingencies 31 45 Other 80 143 Total other current liabilities $ 374 344 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Summary of the entity's accumulated other comprehensive income (loss) by component | 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, 2018 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2017 $ (1,731 ) (235 ) (29 ) (1,995 ) Other comprehensive income before reclassifications — — (161 ) (161 ) Amounts reclassified from accumulated other comprehensive income 97 12 — 109 Net current-period other comprehensive income 97 12 (161 ) (52 ) Cumulative effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (375 ) (32 ) — (407 ) Balance at September 30, 2018 $ (2,009 ) (255 ) (190 ) (2,454 ) 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, 2017 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2016 $ (1,895 ) (162 ) (60 ) (2,117 ) Other comprehensive income before reclassifications — — 20 20 Amounts reclassified from accumulated other comprehensive income 93 10 — 103 Net current-period other comprehensive income 93 10 20 123 Balance at September 30, 2017 $ (1,802 ) (152 ) (40 ) (1,994 ) |
Schedule of reclassifications out of accumulated other comprehensive income (loss) by component | The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2018 : Three Months Ended September 30, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 45 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 48 Income tax benefit (11 ) Income tax expense Net of tax $ 37 Nine Months Ended September 30, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 135 Other income (expense), net Prior service cost 9 Other income (expense), net Total before tax 144 Income tax benefit (35 ) Income tax expense Net of tax $ 109 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2017 : Three Months Ended September 30, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 51 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 54 Income tax benefit (16 ) Income tax expense Net of tax $ 38 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. Nine Months Ended September 30, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 154 Other income (expense), net Prior service cost 9 Other income (expense), net Total before tax 163 Income tax benefit (60 ) Income tax expense Net of tax $ 103 ________________________________________________________________________ (1) See Note 8—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. |
Background (Details)
Background (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Provisional income tax expense (benefit) | $ (1,100) | ||||||
Purchase accounting adjustment | $ 83 | ||||||
Reduction to provisional benefit | $ 208 | ||||||
Proceeds from income tax refunds | $ 392 | $ 314 | |||||
Cumulative effect of adoption of ASU | (407) | ||||||
Contract term | 30 months | ||||||
Reclassification from AOCI to retained earnings, tax effect | $ 407 | ||||||
Minimum | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Contract term | 1 year | ||||||
Maximum | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Contract term | 7 years | ||||||
Business Customer | Minimum | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Length of customer life | 12 months | ||||||
Business Customer | Maximum | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Length of customer life | 60 months | ||||||
Consumer Customers | Weighted Average | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Length of customer life | 30 months | ||||||
Accounting Standards Update 2014-09 | RETAINED EARNINGS | |||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||
Cumulative effect of adoption of ASU | 49 | 346 | $ 0 | $ 0 | |||
Cumulative net effect of adoption, tax | $ 17 | $ 117 |
Acquisition of Level 3 - Additi
Acquisition of Level 3 - Additional Information (Details) $ in Millions | Nov. 01, 2017USD ($)citydark_fiber | Sep. 30, 2018USD ($) | Sep. 30, 2018USD ($) | Sep. 30, 2018USD ($) | Dec. 31, 2017USD ($) |
Business Acquisition [Line Items] | |||||
Goodwill | $ 30,770 | $ 30,770 | $ 30,770 | $ 30,475 | |
Level 3 Parent, LLC | |||||
Business Acquisition [Line Items] | |||||
Consideration transferred | $ 19,600 | ||||
Number of strands of dark fiber divested | dark_fiber | 24 | ||||
Number of cities connected by dark fiber | city | 30 | ||||
Goodwill | 11,190 | 11,190 | 11,190 | $ 10,837 | |
Transaction costs and integration-related costs | $ 600 | ||||
Transaction costs | $ 47 | ||||
Revenue of acquiree since acquisition date, actual | $ 1,984 | $ 6,071 |
Acquisition of Level 3 - Prelim
Acquisition of Level 3 - Preliminary Estimated Aggregate Consideration (Details) - USD ($) $ in Millions | Nov. 01, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 30,770 | $ 30,475 | |
Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Cash, accounts receivable and other current assets | 3,292 | 3,317 | |
Property, plant and equipment | 9,397 | 9,311 | |
Other noncurrent assets | 985 | 782 | |
Current liabilities, excluding current maturities of long-term debt | (1,492) | (1,461) | |
Current maturities of long-term debt | (7) | (7) | |
Long-term debt | (10,888) | (10,888) | |
Deferred revenue and other liabilities | (1,731) | (1,629) | |
Goodwill | 11,190 | 10,837 | |
Total estimated aggregate consideration | 19,612 | 19,617 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Cash, accounts receivable and other current assets | (25) | ||
Property, plant and equipment | 86 | ||
Other noncurrent assets | 203 | ||
Current liabilities, excluding current maturities of long-term debt | (31) | ||
Current maturities of long-term debt | 0 | ||
Long-term debt | 0 | ||
Deferred revenue and other liabilities | (102) | ||
Goodwill | 353 | ||
Total estimated aggregate consideration | (5) | ||
Accounts receivable contractual value | $ 884 | 884 | |
Weighted average useful life | 12 years | ||
Level 3 Parent, LLC | Customer relationships | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 8,488 | 8,964 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Identifiable intangible assets | (476) | ||
Level 3 Parent, LLC | Other intangible assets | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 378 | $ 391 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Identifiable intangible assets | $ (13) |
Acquisition of Level 3 - Acquis
Acquisition of Level 3 - Acquisition Related Expenses (Details) - Level 3 Parent, LLC - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Business Acquisition [Line Items] | ||||
Transaction-related expenses | $ 1 | $ 6 | $ 2 | $ 23 |
Integration-related expenses | 43 | 28 | 275 | 40 |
Total acquisition-related expenses | $ 44 | $ 34 | $ 277 | $ 63 |
Acquisition of Level 3 - Pro Fo
Acquisition of Level 3 - Pro Forma Information (Details) - Level 3 Parent, LLC - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Sep. 30, 2017 | |
Business Acquisition [Line Items] | ||
Operating revenues | $ 6,031 | $ 18,316 |
Net income | $ 194 | $ 459 |
Basic earnings per common share (in dollars per share) | $ 0.18 | $ 0.43 |
Diluted earnings per common share (in dollars per share) | $ 0.18 | $ 0.43 |
Sale of Data Centers and Colo_3
Sale of Data Centers and Colocation Business (Details) - USD ($) $ in Millions | May 01, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Total net amount of assets derecognized | $ 19 | $ 140 | |
Less imputed financing obligations from the failed-sale-leaseback | (568) | ||
Cyxtera Technologies | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Less assets recorded as part of the failed-sale-leaseback | $ (526) | ||
Less imputed financing obligations from the failed-sale-leaseback | (628) | ||
SIS Holdings, LP | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
CenturyLink, Inc.'s value of minority stake | $ 150 | ||
Colocation Business and Data Centers | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Net proceeds from sales of data centers and colocation business | 1,800 | ||
Colocation Business and Data Centers | Disposal group disposed of by sale, not discontinued operations | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Goodwill | 1,142 | ||
Property, plant and equipment | 1,051 | ||
Other intangible assets | 249 | ||
Other assets | 66 | ||
Total net amount of assets derecognized | 1,982 | ||
Capital lease obligations | 294 | ||
Other liabilities | 274 | ||
Total net imputed liabilities recognized | $ (60) |
Goodwill, Customer Relationsh_3
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill, Customer Relationships, and Other Intangible Assets (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Goodwill [Line Items] | ||
Goodwill | $ 30,770 | $ 30,475 |
Finite-lived intangible assets, net | 9,309 | 10,876 |
Indefinite-life intangible assets | 269 | 269 |
Total other intangible assets, net | 1,857 | 1,897 |
Customer relationships | ||
Goodwill [Line Items] | ||
Finite-lived intangible assets, net | 9,309 | 10,876 |
Accumulated amortization | (8,153) | (7,096) |
Computer Software, Intangible Asset | ||
Goodwill [Line Items] | ||
Finite-lived intangible assets, net | 1,450 | 1,469 |
Accumulated amortization | (2,547) | (2,294) |
Trade Names and Patents | ||
Goodwill [Line Items] | ||
Finite-lived intangible assets, net | 138 | 159 |
Accumulated amortization | $ (54) | $ (31) |
Goodwill, Customer Relationsh_4
Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Goodwill [Line Items] | |||||
Intangible assets, net (including goodwill) | $ 19,300 | $ 19,300 | $ 20,100 | ||
Amortization of intangible assets | 446 | $ 269 | 1,300 | $ 820 | |
Intangible assets, gross (including goodwill) | 52,700 | 52,700 | |||
Goodwill | 30,770 | 30,770 | 30,475 | ||
Business | |||||
Goodwill [Line Items] | |||||
Goodwill | $ 20,492 | $ 20,492 | $ 20,197 |
Goodwill, Customer Relationsh_5
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Amortization Expense (Details) $ in Millions | Sep. 30, 2018USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2018 (remaining three months) | $ 443 |
2,019 | 1,692 |
2,020 | 1,589 |
2,021 | 1,158 |
2,022 | $ 982 |
Goodwill, Customer Relationsh_6
Goodwill, Customer Relationships and Other Intangible Assets - Rollforward of Goodwill (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Goodwill [Roll Forward] | |
As of December 31, 2017 | $ 30,475 |
Purchase accounting and other adjustments | 353 |
Effect of foreign currency rate change | (58) |
As of September 30, 2018 | 30,770 |
Business | |
Goodwill [Roll Forward] | |
As of December 31, 2017 | 20,197 |
Purchase accounting and other adjustments | 353 |
Effect of foreign currency rate change | (58) |
As of September 30, 2018 | 20,492 |
Consumer | |
Goodwill [Roll Forward] | |
As of December 31, 2017 | 10,278 |
Purchase accounting and other adjustments | 0 |
Effect of foreign currency rate change | 0 |
As of September 30, 2018 | $ 10,278 |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contract term | 30 months | |||||
Revenues | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 | ||
Contract Fulfillment Costs | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Capitalized contract cost, net | 173 | $ 161 | 173 | $ 133 | ||
Consumer | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Revenues | 1,355 | $ 1,420 | 4,086 | $ 4,304 | ||
Restatement Adjustment | Contract Fulfillment Costs | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Capitalized contract cost, net | $ 45 | |||||
Accounting Standards Update 2014-09 | Impact of ASC 606 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Revenues | (14) | 12 | ||||
Costs and expenses (less than) | $ 3 | $ 3 | ||||
Accounting Standards Update 2014-09 | Impact of ASC 606 | Contract Fulfillment Costs | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Capitalized contract cost, net | 45 | |||||
Accounting Standards Update 2014-09 | Impact of ASC 606 | Consumer | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Revenues | 43 | |||||
Accounting Standards Update 2014-09 | Impact of ASC 606 | Consumer | Voice & Collaboration | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Revenues | 34 | |||||
Accounting Standards Update 2014-09 | Impact of ASC 606 | Consumer | Transport & Infrastructure | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Revenues | $ 9 | |||||
Minimum | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contract term | 1 year | |||||
Customer relationship period | 10 years | |||||
Minimum | Business Customer | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Length of customer life | 12 months | |||||
Maximum | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contract term | 7 years | |||||
Customer relationship period | 20 years | |||||
Maximum | Business Customer | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Length of customer life | 60 months | |||||
Weighted Average | Consumer Customers | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Length of customer life | 30 months |
Revenue Recognition - Reported
Revenue Recognition - Reported Results Under ASC 606 (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
OPERATING REVENUES | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 | |
Cost of services and products (exclusive of depreciation and amortization) | 2,672 | 1,927 | 8,205 | 5,705 | |
Selling, general and administrative | 967 | 710 | 3,191 | 2,404 | |
Interest expense | 557 | 362 | 1,638 | 1,000 | |
Income tax expense | 57 | 47 | 123 | 214 | |
Net income | $ 272 | $ 92 | $ 679 | $ 272 | |
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||||
BASIC (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.64 | $ 0.50 | |
DILUTED (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.63 | $ 0.50 | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||||
BASIC (in shares) | 1,066,904 | 541,521 | 1,065,410 | 541,113 | |
DILUTED (in shares) | 1,072,351 | 541,963 | 1,069,726 | 541,879 | |
Other current assets | $ 1,237 | $ 1,237 | $ 941 | ||
Other long-term assets, net | 1,014 | 1,014 | |||
Deferred revenue | 2,547 | 2,547 | |||
Deferred income taxes, net | 2,502 | 2,502 | 2,413 | ||
Other long-term liabilities | 1,075 | 1,075 | |||
Retained earnings | 777 | 777 | $ 1,103 | ||
Impact of ASC 606 | Accounting Standards Update 2014-09 | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
OPERATING REVENUES | (14) | 12 | |||
Cost of services and products (exclusive of depreciation and amortization) | 8 | 18 | |||
Selling, general and administrative | 16 | 42 | |||
Interest expense | (7) | (7) | |||
Income tax expense | (8) | (11) | |||
Net income | $ (23) | $ (30) | |||
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||||
BASIC (in dollars per share) | $ (0.02) | $ (0.03) | |||
DILUTED (in dollars per share) | $ (0.02) | $ (0.03) | |||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||||
BASIC (in shares) | 0 | 0 | |||
DILUTED (in shares) | 0 | 0 | |||
Other current assets | $ (390) | $ (390) | |||
Other long-term assets, net | (93) | (93) | |||
Deferred revenue | (101) | (101) | |||
Deferred income taxes, net | (127) | (127) | |||
Other long-term liabilities | 122 | 122 | |||
Retained earnings | (377) | (377) | |||
ASC 605 Historical Adjusted Balances | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
OPERATING REVENUES | 5,804 | 17,677 | |||
Cost of services and products (exclusive of depreciation and amortization) | 2,680 | 8,223 | |||
Selling, general and administrative | 983 | 3,233 | |||
Interest expense | 550 | 1,631 | |||
Income tax expense | 49 | 112 | |||
Net income | $ 249 | $ 649 | |||
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||||
BASIC (in dollars per share) | $ 0.23 | $ 0.61 | |||
DILUTED (in dollars per share) | $ 0.23 | $ 0.60 | |||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||||
BASIC (in shares) | 1,066,904 | 1,065,410 | |||
DILUTED (in shares) | 1,072,351 | 1,069,726 | |||
Other current assets | $ 847 | $ 847 | |||
Other long-term assets, net | 921 | 921 | |||
Deferred revenue | 2,446 | 2,446 | |||
Deferred income taxes, net | 2,375 | 2,375 | |||
Other long-term liabilities | 1,197 | 1,197 | |||
Retained earnings | $ 400 | $ 400 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 |
Adjustments | (312) | (947) | ||
Total Revenue from Contracts with Customers | 5,506 | 16,718 | ||
Transferred at Point in Time | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Total Revenue from Contracts with Customers | 51 | 132 | ||
Transferred over Time | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Total Revenue from Contracts with Customers | 5,455 | 16,586 | ||
Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 4,285 | 2,425 | 13,033 | 7,485 |
Consumer | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,355 | 1,420 | 4,086 | 4,304 |
Operating segments | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 5,640 | 3,845 | 17,119 | 11,789 |
Operating segments | Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 4,285 | 2,425 | 13,033 | 7,485 |
Adjustments | (71) | (217) | ||
Total Revenue from Contracts with Customers | 4,214 | 12,816 | ||
Operating segments | Consumer | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,355 | 1,420 | 4,086 | 4,304 |
Adjustments | (63) | (184) | ||
Total Revenue from Contracts with Customers | 1,292 | 3,902 | ||
Operating segments | IP & Data Services | Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,726 | 755 | 5,212 | 2,256 |
Adjustments | 0 | 0 | ||
Total Revenue from Contracts with Customers | 1,726 | 5,212 | ||
Operating segments | IP & Data Services | Consumer | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 70 | 98 | 249 | 308 |
Adjustments | (9) | (25) | ||
Total Revenue from Contracts with Customers | 61 | 224 | ||
Operating segments | Transport & Infrastructure | Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,331 | 735 | 4,021 | 2,426 |
Adjustments | (71) | (217) | ||
Total Revenue from Contracts with Customers | 1,260 | 3,804 | ||
Operating segments | Transport & Infrastructure | Consumer | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 720 | 697 | 2,171 | 2,063 |
Adjustments | (54) | (159) | ||
Total Revenue from Contracts with Customers | 666 | 2,012 | ||
Operating segments | Voice & Collaboration | Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 1,075 | 765 | 3,324 | 2,319 |
Adjustments | 0 | 0 | ||
Total Revenue from Contracts with Customers | 1,075 | 3,324 | ||
Operating segments | Voice & Collaboration | Consumer | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 565 | 625 | 1,666 | 1,933 |
Adjustments | 0 | 0 | ||
Total Revenue from Contracts with Customers | 565 | 1,666 | ||
Operating segments | IT & Managed Services | Business | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 153 | 170 | 476 | 484 |
Adjustments | 0 | 0 | ||
Total Revenue from Contracts with Customers | 153 | 476 | ||
Corporate, Non-Segment | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 178 | 189 | 546 | 544 |
Adjustments | (178) | (546) | ||
Total Revenue from Contracts with Customers | 0 | 0 | ||
Corporate, Non-Segment | Regulatory Revenue | ||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||
Revenues | 178 | $ 189 | 546 | $ 544 |
Adjustments | (178) | (546) | ||
Total Revenue from Contracts with Customers | $ 0 | $ 0 |
Revenue Recognition - Contract
Revenue Recognition - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Jan. 01, 2018 |
Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 2,436 | $ 2,504 |
Contract liabilities | 716 | 623 |
Contract assets | 352 | 255 |
Accounts receivable, gross | 2,600 | 2,700 |
Allowance for doubtful accounts receivable | $ 153 | $ 155 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligation (Details) $ in Billions | Sep. 30, 2018USD ($) |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 9.2 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 73.00% |
Remaining performance obligation, satisfaction period | 2 years 3 months |
Revenue Recognition - Capitaliz
Revenue Recognition - Capitalized Contract Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Contract Acquisition Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | $ 286 | $ 268 |
Costs incurred | 53 | 152 |
Amortization | (44) | (125) |
End of period balance | 295 | 295 |
Contract Fulfillment Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | 161 | 133 |
Costs incurred | 46 | 105 |
Amortization | (34) | (65) |
End of period balance | $ 173 | $ 173 |
Long-Term Debt and Credit Fac_3
Long-Term Debt and Credit Facilities - Schedule of Long Term Debt (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Long-term Debt and Credit Facilities | ||
Capital lease and other obligations | $ 825 | $ 891 |
Unamortized premiums and other, net | 2 | 23 |
Unamortized debt issuance costs | (292) | (350) |
Total long-term debt | 36,527 | 37,726 |
Less current maturities | (778) | (443) |
Long-term debt, excluding current maturities | 35,749 | $ 37,283 |
CenturyLink, Inc. | Line of credit | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, weighted average interest rate | 4.186% | |
CenturyLink, Inc. | Line of credit | New Revolving Credit Facility | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 590 | $ 405 |
CenturyLink, Inc. | Line of credit | New Revolving Credit Facility | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.898% | |
CenturyLink, Inc. | Line of credit | New Revolving Credit Facility | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.908% | |
CenturyLink, Inc. | Medium-term notes | Term Loan A | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.99219% | |
Long-term debt, gross | $ 1,643 | 1,575 |
CenturyLink, Inc. | Medium-term notes | Term Loan A-1 | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.99219% | |
Long-term debt, gross | $ 356 | 370 |
CenturyLink, Inc. | Medium-term notes | Term Loan B | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.99219% | |
Long-term debt, gross | $ 5,955 | 6,000 |
CenturyLink, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 8,115 | $ 8,125 |
CenturyLink, Inc. | Senior notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 5.625% | |
CenturyLink, Inc. | Senior notes | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 7.65% | |
Level 3 Financing, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.432% | 3.557% |
Long-term debt, gross | $ 4,611 | $ 4,611 |
Level 3 Financing, Inc. | Medium-term notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Basis spread on variable rate | 0.00% | |
Level 3 Financing, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 5,315 | 5,315 |
Level 3 Financing, Inc. | Senior notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 5.125% | |
Level 3 Financing, Inc. | Senior notes | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 6.125% | |
Embarq Corporation | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 138 | 151 |
Embarq Corporation | First mortgage bonds | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 7.125% | |
Embarq Corporation | First mortgage bonds | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 8.37% | |
Embarq Corporation | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 7.995% | |
Long-term debt, gross | $ 1,485 | 1,485 |
Embarq Corporation | Other | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 9.00% | |
Long-term debt, gross | $ 150 | 150 |
Level 3 Parent, LLC | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 600 | 600 |
Level 3 Parent, LLC | Senior notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 5.125% | |
Level 3 Parent, LLC | Senior notes | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 6.125% | |
Qwest Corporation | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 4.25% | |
Long-term debt, gross | $ 100 | 100 |
Qwest Corporation | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 5,955 | 7,294 |
Qwest Corporation | Senior notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 6.125% | |
Qwest Corporation | Senior notes | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 7.75% | |
Qwest Capital Funding, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 979 | $ 981 |
Qwest Capital Funding, Inc. | Senior notes | Minimum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 6.50% | |
Qwest Capital Funding, Inc. | Senior notes | Maximum | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate | 7.75% |
Long-Term Debt and Credit Fac_4
Long-Term Debt and Credit Facilities - Schedule of Maturities of Long Term Debt (Details) $ in Millions | Sep. 30, 2018USD ($) |
Long-term Debt, Fiscal Year Maturity | |
2018 and remaining | $ 241 |
2,019 | 651 |
2,020 | 1,202 |
2,021 | 3,115 |
2,022 | 5,323 |
2023 and thereafter | 25,785 |
Total long-term debt | 36,317 |
Capital lease obligations | 568 |
Excluded from maturity of long term debt | $ 499 |
Long-Term Debt and Credit Fac_5
Long-Term Debt and Credit Facilities - Additional Information (Details) $ in Millions | 3 Months Ended |
Sep. 30, 2018USD ($) | |
Long-term Debt and Credit Facilities | |
Repayments of debt | $ 1,300 |
Senior notes | Qwest Notes Due 2051 | |
Long-term Debt and Credit Facilities | |
Repayments of debt | $ 164 |
Stated interest rate | 7.50% |
Senior notes | Qwest Notes due 2052 | |
Long-term Debt and Credit Facilities | |
Repayments of debt | $ 925 |
Stated interest rate | 7.00% |
Senior notes | Qwest Notes 2035 | |
Long-term Debt and Credit Facilities | |
Repayments of debt | $ 250 |
Stated interest rate | 7.25% |
Severance and Leased Real Est_3
Severance and Leased Real Estate (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Employee severance | |
Restructuring reserve | |
Balance at the beginning of the period | $ 33 |
Accrued to expense | 126 |
Payments, net | (137) |
Balance at the end of the period | 22 |
Leased real estate | |
Leased Real Estate | |
Current portion of leased real estate accrual | 21 |
Noncurrent portion of leased real estate accrual | 87 |
Restructuring reserve | |
Balance at the beginning of the period | 64 |
Accrued to expense | 60 |
Payments, net | (16) |
Balance at the end of the period | $ 108 |
Minimum | Leased real estate | |
Leased Real Estate | |
Lease term | 3 months 5 days |
Maximum | Leased real estate | |
Leased Real Estate | |
Lease term | 12 years 3 months 19 days |
Weighted Average | Leased real estate | |
Leased Real Estate | |
Lease term | 7 years 2 days |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Pension plans | ||||
Components of net periodic (benefit) expense | ||||
Service cost | $ 17 | $ 16 | $ 49 | $ 47 |
Interest cost | 99 | 102 | 296 | 308 |
Expected return on plan assets | (171) | (166) | (513) | (499) |
Recognition of prior service credit | (2) | (2) | (6) | (6) |
Recognition of actuarial loss | 45 | 51 | 135 | 154 |
Net periodic pension benefit (income) expense | (12) | 1 | (39) | 4 |
Voluntary contributions to plan by employer | 400 | 500 | ||
Post-retirement benefit plans | ||||
Components of net periodic (benefit) expense | ||||
Service cost | 4 | 4 | 13 | 13 |
Interest cost | 24 | 25 | 73 | 75 |
Expected return on plan assets | (1) | 0 | (1) | (1) |
Recognition of prior service credit | 5 | 5 | 15 | 15 |
Net periodic pension benefit (income) expense | $ 32 | $ 34 | $ 100 | $ 102 |
Earnings Per Common Share (Deta
Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income (Numerator): | ||||
Net income | $ 272 | $ 92 | $ 679 | $ 272 |
Weighted-average number of shares: | ||||
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 1,066,904 | 541,521 | 1,065,410 | 541,113 |
Incremental common shares attributable to dilutive securities: | ||||
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 1,072,351 | 541,963 | 1,069,726 | 541,879 |
Basic earnings per common share (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.64 | $ 0.50 |
Diluted earnings per common share (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.63 | $ 0.50 |
Common Class A | ||||
Income (Numerator): | ||||
Net income | $ 272 | $ 92 | $ 679 | $ 272 |
Earnings applicable to non-vested restricted stock | 0 | 0 | 0 | 0 |
Net income applicable to common stock for computing basic earnings per common share | 272 | 92 | 679 | 272 |
Net income as adjusted for purposes of computing diluted earnings per common share | $ 272 | $ 92 | $ 679 | $ 272 |
Weighted-average number of shares: | ||||
Outstanding during period (in shares) | 1,080,589 | 549,618 | 1,077,712 | 548,779 |
Non-vested restricted stock (in shares) | (13,685) | (8,097) | (12,302) | (7,666) |
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 1,066,904 | 541,521 | 1,065,410 | 541,113 |
Incremental common shares attributable to dilutive securities: | ||||
Shares issuable under convertible securities (in shares) | 10 | 10 | 10 | 10 |
Shares issuable under incentive compensation plans (in shares) | 5,437 | 432 | 4,306 | 756 |
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 1,072,351 | 541,963 | 1,069,726 | 541,879 |
Basic earnings per common share (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.64 | $ 0.50 |
Diluted earnings per common share (in dollars per share) | $ 0.25 | $ 0.17 | $ 0.63 | $ 0.50 |
Number of shares of common stock excluded from the computation of diluted earnings per share (in shares) | 1,500 | 5,100 | 3,000 | 4,200 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) - Fair value measurements determined on a nonrecurring basis - Fair value inputs, Level 2 - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Carrying amount | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 35,702 | $ 36,835 |
Fair value | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 35,750 | $ 36,402 |
Segment Information - Results (
Segment Information - Results (Details) $ in Millions | Nov. 01, 2017segment | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2018USD ($)categorysegment | Sep. 30, 2017USD ($) |
Segment Reporting Information [Line Items] | |||||
Number of reportable segments | segment | 2 | 2 | |||
Revenues | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 | |
Expenses | 4,924 | 3,547 | 15,254 | 10,848 | |
OPERATING INCOME | 894 | 487 | $ 2,411 | 1,485 | |
Number of categories of products and services | category | 5 | ||||
Business | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 4,285 | 2,425 | $ 13,033 | 7,485 | |
Expenses | 2,446 | 1,537 | 7,540 | 4,641 | |
OPERATING INCOME | $ 1,839 | $ 888 | $ 5,493 | $ 2,844 | |
Margin percentage | 43.00% | 37.00% | 42.00% | 38.00% | |
Consumer | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 1,355 | $ 1,420 | $ 4,086 | $ 4,304 | |
Expenses | 523 | 660 | 1,704 | 1,931 | |
OPERATING INCOME | $ 832 | $ 760 | $ 2,382 | $ 2,373 | |
Margin percentage | 61.00% | 54.00% | 58.00% | 55.00% | |
Operating segments | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 5,640 | $ 3,845 | $ 17,119 | $ 11,789 | |
Expenses | 2,969 | 2,197 | 9,244 | 6,572 | |
OPERATING INCOME | $ 2,671 | $ 1,648 | $ 7,875 | $ 5,217 | |
Margin percentage | 47.00% | 43.00% | 46.00% | 44.00% | |
Operating segments | Business | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 4,285 | $ 2,425 | $ 13,033 | $ 7,485 | |
Operating segments | Consumer | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 1,355 | $ 1,420 | $ 4,086 | $ 4,304 |
Segment Information - Operating
Segment Information - Operating Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Operating revenues by products and services | ||||
Revenues | $ 5,818 | $ 4,034 | $ 17,665 | $ 12,333 |
Surcharge amount on customers' bills | 221 | 129 | 698 | 392 |
Business | ||||
Operating revenues by products and services | ||||
Revenues | 4,285 | 2,425 | 13,033 | 7,485 |
Consumer | ||||
Operating revenues by products and services | ||||
Revenues | 1,355 | 1,420 | 4,086 | 4,304 |
Operating segments | ||||
Operating revenues by products and services | ||||
Revenues | 5,640 | 3,845 | 17,119 | 11,789 |
Operating segments | Business | ||||
Operating revenues by products and services | ||||
Revenues | 4,285 | 2,425 | 13,033 | 7,485 |
Operating segments | Business | IP & Data Services | ||||
Operating revenues by products and services | ||||
Revenues | 1,726 | 755 | 5,212 | 2,256 |
Operating segments | Business | Transport & Infrastructure | ||||
Operating revenues by products and services | ||||
Revenues | 1,331 | 735 | 4,021 | 2,426 |
Operating segments | Business | Voice & Collaboration | ||||
Operating revenues by products and services | ||||
Revenues | 1,075 | 765 | 3,324 | 2,319 |
Operating segments | Business | IT & Managed Services | ||||
Operating revenues by products and services | ||||
Revenues | 153 | 170 | 476 | 484 |
Operating segments | Consumer | ||||
Operating revenues by products and services | ||||
Revenues | 1,355 | 1,420 | 4,086 | 4,304 |
Operating segments | Consumer | IP & Data Services | ||||
Operating revenues by products and services | ||||
Revenues | 70 | 98 | 249 | 308 |
Operating segments | Consumer | Transport & Infrastructure | ||||
Operating revenues by products and services | ||||
Revenues | 720 | 697 | 2,171 | 2,063 |
Operating segments | Consumer | Voice & Collaboration | ||||
Operating revenues by products and services | ||||
Revenues | 565 | 625 | 1,666 | 1,933 |
Corporate, Non-Segment | ||||
Operating revenues by products and services | ||||
Revenues | 178 | 189 | 546 | 544 |
Corporate, Non-Segment | Regulatory Revenue | ||||
Operating revenues by products and services | ||||
Revenues | $ 178 | $ 189 | $ 546 | $ 544 |
Segment Information - Reconcili
Segment Information - Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Segment Reporting Information [Line Items] | ||||
Depreciation and amortization | $ (1,285) | $ (910) | $ (3,858) | $ (2,739) |
Total other expense, net | (565) | (348) | (1,609) | (999) |
Income before income tax expense | 329 | 139 | 802 | 486 |
Income tax expense | 57 | 47 | 123 | 214 |
NET INCOME | 272 | 92 | 679 | 272 |
Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Total reportable segment adjusted EBITDA | 2,671 | 1,648 | 7,875 | 5,217 |
Segment Reconciling Items | ||||
Segment Reporting Information [Line Items] | ||||
Regulatory revenues | 178 | 189 | 546 | 544 |
Depreciation and amortization | (1,285) | (910) | (3,858) | (2,739) |
Other operating expenses | (670) | (440) | (2,152) | (1,537) |
Total other expense, net | $ (565) | $ (348) | $ (1,609) | $ (999) |
Commitments and Contingencies_2
Commitments and Contingencies and Other Items (Details) $ in Millions | 1 Months Ended | 6 Months Ended | 9 Months Ended | ||
Feb. 28, 2017USD ($)lawsuit | Sep. 30, 2018USD ($)lawsuit | Sep. 30, 2018USD ($)lawsuit | Dec. 31, 2017USD ($) | Dec. 31, 2005USD ($) | |
Loss Contingencies | |||||
Estimate of possible loss | $ 138 | $ 138 | |||
New claims filed, number | lawsuit | 6 | ||||
Letters of credit outstanding, amount | $ 129 | $ 129 | $ 104 | ||
Patents allegedly infringed | lawsuit | 1 | ||||
Louisiana State Court | |||||
Loss Contingencies | |||||
New claims filed, number | lawsuit | 2 | ||||
Louisiana Federal Court | |||||
Loss Contingencies | |||||
New claims filed, number | lawsuit | 4 | ||||
Level 3 Parent, LLC | |||||
Loss Contingencies | |||||
Loss contingency, damages sought, value | $ 50 | ||||
Level 3 Parent, LLC | Pending litigation | Peruvian Tax Litigation, Before Interest | |||||
Loss Contingencies | |||||
Loss contingency, asserted claim | $ 26 | ||||
Level 3 Parent, LLC | Pending litigation | Peruvian Tax Litigation | |||||
Loss Contingencies | |||||
Loss contingency, asserted claim | $ 13 | 13 | |||
Level 3 Parent, LLC | Pending litigation | Employee Severance and Contractor Termination Disputes | |||||
Loss Contingencies | |||||
Loss contingency, asserted claim | 30 | 30 | |||
Level 3 Parent, LLC | Pending litigation | Brazilian Tax Claims | Maximum | |||||
Loss Contingencies | |||||
Loss contingency, range of possible loss, portion not accrued | $ 34 | $ 34 | |||
Interexchange Carriers | CenturyLink, Inc. | |||||
Loss Contingencies | |||||
Number of lawsuits | lawsuit | 100 | 100 | |||
Missouri municipalities | Judicial ruling | |||||
Loss Contingencies | |||||
Number of cases, final court order | lawsuit | 1 | ||||
Litigation settlement amount | $ 4 |
Other Financial Information (De
Other Financial Information (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Prepaid Expenses and Other Current Assets [Abstract] | ||
Prepaid expenses | $ 379 | $ 294 |
Income tax receivable | 79 | 258 |
Materials, supplies and inventory | 131 | 128 |
Contract assets | 359 | 128 |
Contract acquisition costs | 155 | 0 |
Other | 134 | 133 |
Total other current assets | 1,237 | 941 |
Other Current Liabilities | ||
Accrued contributions to federal programs | 136 | 74 |
Dividends payable | 51 | 34 |
Accrued rents | 41 | 14 |
Accrued rents-telephone poles | 35 | 34 |
Litigation contingencies | 31 | 45 |
Other | 80 | 143 |
Total other current liabilities | 374 | 344 |
Accounts Payable, Current [Abstract] | ||
Book overdraft balance | $ 58 | $ 36 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Accumulated other comprehensive loss | |||||
Balance at beginning of period | $ 23,491 | ||||
Other comprehensive income (loss) before reclassifications | (161) | $ 20 | |||
Amounts reclassified from accumulated other comprehensive income | 109 | 103 | |||
Other comprehensive income (loss) | $ 36 | $ 56 | (52) | 123 | |
Cumulative effect of adoption of ASU | $ (407) | ||||
Balance at end of period | 22,803 | 12,960 | 22,803 | 12,960 | |
Defined benefit plan | Pension plans | |||||
Accumulated other comprehensive loss | |||||
Balance at beginning of period | (1,731) | (1,895) | |||
Other comprehensive income (loss) before reclassifications | 0 | 0 | |||
Amounts reclassified from accumulated other comprehensive income | 97 | 93 | |||
Other comprehensive income (loss) | 97 | 93 | |||
Cumulative effect of adoption of ASU | (375) | ||||
Balance at end of period | (2,009) | (1,802) | (2,009) | (1,802) | |
Defined benefit plan | Post-retirement benefit plans | |||||
Accumulated other comprehensive loss | |||||
Balance at beginning of period | (235) | (162) | |||
Other comprehensive income (loss) before reclassifications | 0 | 0 | |||
Amounts reclassified from accumulated other comprehensive income | 12 | 10 | |||
Other comprehensive income (loss) | 12 | 10 | |||
Cumulative effect of adoption of ASU | (32) | ||||
Balance at end of period | (255) | (152) | (255) | (152) | |
Foreign currency translation adjustment and other | |||||
Accumulated other comprehensive loss | |||||
Balance at beginning of period | (29) | (60) | |||
Other comprehensive income (loss) before reclassifications | (161) | 20 | |||
Amounts reclassified from accumulated other comprehensive income | 0 | 0 | |||
Other comprehensive income (loss) | (161) | 20 | |||
Cumulative effect of adoption of ASU | $ 0 | ||||
Balance at end of period | (190) | (40) | (190) | (40) | |
Accumulated other comprehensive income | |||||
Accumulated other comprehensive loss | |||||
Balance at beginning of period | (2,490) | (2,050) | (1,995) | (2,117) | |
Other comprehensive income (loss) | 36 | 56 | (52) | 123 | |
Balance at end of period | $ (2,454) | $ (1,994) | $ (2,454) | $ (1,994) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Loss - Reclassifications (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Reclassifications out of accumulated other comprehensive income loss by component | ||||
Other income (expense), net | $ 25 | $ 14 | $ 63 | $ 6 |
Total before tax | 329 | 139 | 802 | 486 |
Income tax expense | (57) | (47) | (123) | (214) |
NET INCOME | 272 | 92 | 679 | 272 |
Reclassification out of Accumulated Other Comprehensive Income | Net actuarial loss | ||||
Reclassifications out of accumulated other comprehensive income loss by component | ||||
Other income (expense), net | 45 | 51 | 135 | 154 |
Reclassification out of Accumulated Other Comprehensive Income | Prior service cost | ||||
Reclassifications out of accumulated other comprehensive income loss by component | ||||
Other income (expense), net | 3 | 3 | 9 | 9 |
Reclassification out of Accumulated Other Comprehensive Income | Defined benefit plan | ||||
Reclassifications out of accumulated other comprehensive income loss by component | ||||
Total before tax | 48 | 54 | 144 | 163 |
Income tax expense | (11) | (16) | (35) | (60) |
NET INCOME | $ 37 | $ 38 | $ 109 | $ 103 |
Labor Union Contracts (Details)
Labor Union Contracts (Details) | 9 Months Ended |
Sep. 30, 2018 | |
Concentration risk | |
Number of unionized employees (less than) | 300 |
Total number of employees | Unionized employees concentration risk | |
Concentration risk | |
Concentration risk, percent | 26.00% |
Workforce Subject to Collective Bargaining Arrangements Expiring within One Year | Unionized employees concentration risk | |
Concentration risk | |
Concentration risk, percent | 1.00% |