Document and Entity Information
Document and Entity Information Document - shares | 3 Months Ended | |
Mar. 31, 2018 | May 03, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | LEVEL 3 PARENT, LLC | |
Entity Central Index Key | 794,323 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING REVENUES | ||
Operating revenues | $ 2,062 | |
Operating revenues - affiliate | 25 | |
Total operating revenues | 2,087 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 998 | |
Selling, general and administrative expenses | 344 | |
Operating expenses - affiliate | 53 | |
Depreciation and amortization | 431 | |
Total costs and expenses | 1,826 | |
OPERATING INCOME | 261 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 1 | |
Interest income - affiliate | 16 | |
Interest expense | (120) | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | 6 | |
Total other income (expense), net | (97) | |
INCOME BEFORE INCOME TAX EXPENSE | 164 | |
Income tax expense | (102) | |
NET INCOME | $ 62 | |
Predecessor | ||
OPERATING REVENUES | ||
Operating revenues | $ 2,048 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 2,048 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 1,051 | |
Selling, general and administrative expenses | 364 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 296 | |
Total costs and expenses | 1,711 | |
OPERATING INCOME | 337 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 2 | |
Interest income - affiliate | 0 | |
Interest expense | (134) | |
Loss on modification and extinguishment of debt | (44) | |
Other income, net | 4 | |
Total other income (expense), net | (172) | |
INCOME BEFORE INCOME TAX EXPENSE | 165 | |
Income tax expense | (70) | |
NET INCOME | $ 95 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
NET INCOME | $ 62 | |
OTHER COMPREHENSIVE INCOME: | ||
Foreign currency translation adjustments, net of tax effect of ($14) and ($8) | 72 | |
Defined benefit pension plan adjustments, net of tax effect of $0 and $0 | 0 | |
Other Comprehensive Income, net of tax | 72 | |
COMPREHENSIVE INCOME | $ 134 | |
Predecessor | ||
NET INCOME | $ 95 | |
OTHER COMPREHENSIVE INCOME: | ||
Foreign currency translation adjustments, net of tax effect of ($14) and ($8) | 20 | |
Defined benefit pension plan adjustments, net of tax effect of $0 and $0 | 1 | |
Other Comprehensive Income, net of tax | 21 | |
COMPREHENSIVE INCOME | $ 116 |
Consolidated Statements of Com4
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Comprehensive Income Parenthetical [Abstract] | ||
Foreign currency translation adjustments, tax effect | $ (14) | $ (8) |
Defined benefit pension plan adjustments, tax effect | $ 0 | $ 0 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 259 | $ 297 |
Restricted cash and securities | 5 | 5 |
Assets held for sale | 140 | 140 |
Accounts receivable, less allowance of $4 and $3, respectively | 726 | 748 |
Accounts receivable - affiliate | 3 | 13 |
Note receivable - affiliate | 1,825 | 1,825 |
Other | 183 | 117 |
Total current assets | 3,141 | 3,145 |
Property, plant and equipment, net of accumulated depreciation of $380 and $143, respectively | 9,542 | 9,412 |
Restricted cash and securities | 29 | 29 |
GOODWILL AND OTHER ASSETS | ||
Goodwill | 11,141 | 10,837 |
Deferred tax assets | 458 | 426 |
Other, net | 96 | 63 |
Total goodwill and other assets | 20,291 | 20,549 |
TOTAL ASSETS | 33,003 | 33,135 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 9 | 8 |
Accounts payable | 678 | 695 |
Accounts payable - affiliate | 95 | 41 |
Accrued expenses and other liabilities | ||
Income and other taxes | 87 | 100 |
Salary and benefits | 163 | 136 |
Interest | 95 | 109 |
Current portion of deferred revenue | 273 | 258 |
Current portion of deferred revenue - affiliate | 2 | 2 |
Other | 67 | 57 |
Total current liabilities | 1,469 | 1,406 |
LONG-TERM DEBT | 10,872 | 10,882 |
DEFERRED CREDITS AND OTHER LIABILITIES | ||
Deferred revenue | 1,106 | 1,093 |
Deferred revenue - affiliate | 6 | 6 |
Deferred tax liability | 209 | 212 |
Other | 321 | 264 |
Total deferred credits and other liabilities | 1,642 | 1,575 |
COMMITMENTS AND CONTINGENCIES | ||
MEMBER'S EQUITY | ||
Member's equity | 18,924 | 19,254 |
Accumulated other comprehensive income | 96 | 18 |
Total member's equity | 19,020 | 19,272 |
Total liabilities and member's equity | 33,003 | 33,135 |
Customer Contracts And Relationships | ||
GOODWILL AND OTHER ASSETS | ||
Intangible assets, net | 8,206 | 8,845 |
Other Intangible Assets | ||
GOODWILL AND OTHER ASSETS | ||
Intangible assets, net | $ 390 | $ 378 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 4 | $ 3 |
Accumulated depreciation | $ 380 | $ 143 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash Flows from Operating Activities: | ||
NET INCOME | $ 62 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 431 | |
Share-based compensation | 27 | |
Loss on modification and extinguishment of debt | 0 | |
Net long-term debt issuance costs and premium amortization | (9) | |
Accrued interest on long-term debt, net | (14) | |
Deferred income taxes | 104 | |
Other, net | 5 | |
Changes in current assets and liabilities | ||
Accounts receivable | 21 | |
Accounts payable | (18) | |
Deferred revenue | 15 | |
Other current assets and liabilities | (90) | |
Other current assets and liabilities, affiliate | 37 | |
Net cash provided by operating activities | 571 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (252) | |
Deposits received on assets held for sale | 34 | |
Proceeds from sale of property, plant and equipment and other assets | 1 | |
Net cash used in investing activities | (217) | |
FINANCING ACTIVITIES | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | (1) | |
Distributions | (390) | |
Net cash used in financing activities | (391) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | (1) | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | (38) | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 331 | |
Cash, cash equivalents and restricted cash and securities and end of period | 293 | |
Supplemental cash flow information: | ||
Interest paid | 129 | |
Income taxes paid, net | $ 8 | |
Predecessor | ||
Cash Flows from Operating Activities: | ||
NET INCOME | $ 95 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 296 | |
Share-based compensation | 48 | |
Loss on modification and extinguishment of debt | 44 | |
Net long-term debt issuance costs and premium amortization | 5 | |
Accrued interest on long-term debt, net | (28) | |
Deferred income taxes | 62 | |
Other, net | (5) | |
Changes in current assets and liabilities | ||
Accounts receivable | 6 | |
Accounts payable | 42 | |
Deferred revenue | 50 | |
Other current assets and liabilities | (76) | |
Other current assets and liabilities, affiliate | 0 | |
Net cash provided by operating activities | 539 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (368) | |
Deposits received on assets held for sale | 0 | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Net cash used in investing activities | (368) | |
FINANCING ACTIVITIES | ||
Net proceeds from issuance of long-term debt | 4,569 | |
Payments of long-term debt | (4,613) | |
Distributions | 0 | |
Net cash used in financing activities | (44) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 1 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 128 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 1,857 | |
Cash, cash equivalents and restricted cash and securities and end of period | 1,985 | |
Supplemental cash flow information: | ||
Interest paid | 153 | |
Income taxes paid, net | $ 10 |
Consolidated Statements of Memb
Consolidated Statements of Member's/Stockholders' Equity - USD ($) $ in Millions | Total | Member Units | AOCI Attributable to Parent | Common Stock | Additional Paid-in Capital | AOCI Attributable to Parent | Accumulated Deficit |
MEMBER'S EQUITY | |||||||
Net income | Predecessor | $ 95 | $ 95 | |||||
Other comprehensive income | Predecessor | 21 | $ 21 | |||||
Balance at beginning of period (Predecessor) at Dec. 31, 2016 | $ 4 | $ 19,800 | (387) | (8,500) | |||
Balance at beginning of period at Dec. 31, 2016 | (387) | ||||||
STOCKHOLDERS' EQUITY | |||||||
Common stock issued under employee stock benefit plans and other | Predecessor | 10 | ||||||
Share-based compensation | Predecessor | 38 | ||||||
Balance at end of period (Predecessor) at Mar. 31, 2017 | 11,081 | $ 4 | $ 19,848 | (366) | $ (8,405) | ||
Balance at end of period at Mar. 31, 2017 | (366) | ||||||
MEMBER'S EQUITY | |||||||
Cumulative Effect of New Accounting Principle in Period of Adoption | Accounting Standards Update 2014-09 | $ 9 | ||||||
Cumulative Effect of New Accounting Principle in Period of Adoption | Accounting Standards Update 2018-02 | (6) | $ 6 | |||||
Balance at beginning of period at Dec. 31, 2017 | 19,254 | 18 | |||||
MEMBER'S EQUITY | |||||||
Distributions | (390) | ||||||
Purchase price accounting adjustments | (5) | ||||||
Net income | 62 | 62 | |||||
Other comprehensive income | 72 | 72 | |||||
Balance at end of period at Mar. 31, 2018 | 19,020 | $ 18,924 | $ 96 | ||||
Balance at beginning of period at Dec. 31, 2017 | 19,272 | 18 | |||||
Balance at end of period at Mar. 31, 2018 | $ 19,020 | $ 96 |
Background
Background | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Background | (1) Background General We are a facilities-based provider (that is, a provider that owns or leases a substantial portion of the property, plant and equipment necessary to provide our services) of a broad range of integrated communications services. We created our communications network by constructing our own assets and through a combination of purchasing other companies and purchasing or leasing facilities from others. Our network is an international, facilities-based communications network. We designed our network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies. On October 31, 2016, we entered into an agreement and plan of merger (the "Merger Agreement") with CenturyLink, Inc., a Louisiana corporation ("CenturyLink"), Wildcat Merger Sub 1 LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of CenturyLink ("Merger Sub 1"), and WWG Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of CenturyLink ("Merger Sub 2"), pursuant to which, effective November 1, 2017, we were acquired by CenturyLink in a cash and stock transaction, including the assumption of our debt (the "CenturyLink Merger"). See Note 2 - CenturyLink Merger . Basis of Presentation On November 1, 2017, we became a wholly owned subsidiary of CenturyLink. On the date of the acquisition, our assets and liabilities were recognized at CenturyLink's preliminary estimates of fair value. This revaluation has been reflected in our financial statements and, therefore, has resulted in a new basis of accounting for the successor period beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods are not comparable to our previously reported financial statements, including the predecessor period financial statements in this report. The consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. All significant intercompany accounts and transactions have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. As part of our consolidation policy, we consider our controlled subsidiaries, investments in businesses in which we are not the primary beneficiary or do not have effective control but have the ability to significantly influence operating and financial policies, and variable interests resulting from economic arrangements that give us rights to economic risks or rewards of a legal entity. We do not have variable interests in a variable interest entity where we are required to consolidate the entity as the primary beneficiary. Due to exchange restrictions and other conditions, effective at the end of the third quarter of 2015 we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the first quarter of 2018. In conjunction with our acquisition on November 1, 2017, we changed the definitions we use to classify expenses as cost of services and products and selling, general and administrative, and as a result, we reclassified previously reported amounts to conform to the current period presentation. We revised our definitions so that our expense classifications are more consistent with the expense classifications used by our new ultimate parent company, CenturyLink. These revisions resulted in the reclassification of $24 million from depreciation and amortization to cost of services and products for the predecessor three months ended March 31, 2017 . Although we continued as a surviving corporation and legal entity after the acquisition, the accompanying consolidated statements of operations, comprehensive income, member's/stockholders' equity and cash flows are presented for two periods: predecessor and successor, which relates to the period preceding the acquisition and the period succeeding the acquisition. Our current definitions are as follows: • Cost of services and products (exclusive of depreciation and amortization) are expenses incurred in providing products and services to our customers. These expenses include: employee-related expenses directly attributable to operating and maintaining our network (such as salaries, wages, benefits and professional fees); facilities expenses (which are third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); rents and utilities expenses; costs for universal service funds ("USF") (which are federal and state funds that are established to promote the availability of telecommunications services to all consumers at reasonable and affordable rates, among other things, and to which we are often required to contribute); taxes (such as property and other taxes); and other expenses directly related to our network. • Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses. These expenses include: employee-related expenses (such as salaries, wages, internal commissions, benefits and professional fees) directly attributable to selling products or services and employee-related expenses for administrative functions; marketing and advertising; taxes (such as state and local franchise taxes and sales and use taxes) and fees; external commissions; bad debt expense; and other selling, general and administrative expenses. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law and in December 2017, the SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that have not completed their accounting for the income tax effects of the Act. As of March 31, 2018, we have not completed our accounting for the tax effects of the Act. 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 FASB, and other standard-setting and regulatory bodies. 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 re-measurement of deferred tax assets and liabilities. The ultimate impact may differ from our provisional amount 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 future statements of operations and could be material. We expect to complete the accounting in the fourth quarter of 2018, although we cannot assure you of this. 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 assets at December 31, 2017 and recognized a tax expense of approximately $195 million in our consolidated statement of operations for the year ended December 31, 2017. During the first three months of 2018, we increased the tax expense from tax reform by $64 million due to changes in certain purchase accounting adjustments related to CenturyLink’s acquisition of us. The Act imposed a one-time repatriation tax on certain earnings of foreign subsidiaries. Although we have not determined a reasonable estimate of the impact of the one-time repatriation tax, we do not expect this one-time tax to materially impact us, but we cannot provide any assurance that upon completion of the analysis the amount will not be material. Because of our net operating loss carryforwards, we do not expect to experience a material immediate reduction in the amount of cash taxes paid by us to CenturyLink as part of our tax allocation policy. However, we anticipate that this provision may reduce our cash income taxes in future years. Recently Adopted Accounting Pronouncements In the first quarter or 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, and ASU 2018 - 02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Each of these is described further below. Revenue Recognition On May 28, 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. ASU 2014-09 may be adopted by applying the provisions of this standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2018. We adopted the new revenue recognition standard under the modified retrospective transition method. Upon adoption, we are deferring (i.e. capitalizing) incremental contract acquisition costs and are recognizing (i.e. amortizing) them over the term of the initial contract and anticipated renewal contracts to which the costs relate. Our deferred contract costs for our customers have average amortization periods of approximately 12 months to 60 months and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we assess our deferred contract cost asset for impairment on a periodic basis. We have material obligations to our customers in our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, which are accounted for as operating leases and service contracts. As our service contracts contain a significant financing component that are not separately accounted for, we are required to estimate and record incremental revenue and interest cost associated with these contractual terms. Most of our indefeasible right of use arrangements are accounted for as operating leases. We recognized a cumulative adjustment of $9 million to beginning retained earnings, net of tax effect, on January 1, 2018, as a result of deferring commissions as contract acquisition costs that were not previously deferred. Adoption of this standard increased our disclosures regarding revenue recognition, see Note 5 - Revenue Recognition for additional information. Income Taxes On October 24, 2016, FASB issued ASU 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory” ("ASU 2016-16") . ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. After adoption of this ASU, 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. We adopted ASU 2016-16 on January 1, 2018. The adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. 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 Tax Cuts and Jobs Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs 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 Tax Cuts and Jobs 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 Tax Cuts and Jobs Act is recognized. We early adopted ASU 2018-02 in the first quarter of 2018 and applied it in the period of adoption. The adoption of ASU 2018-02 resulted in a $6 million decrease to member's equity and increase to accumulated other comprehensive income. See Note 9 - Accumulated Other Comprehensive Income (Loss) for additional information. Recent Accounting Pronouncements Leases On February 25, 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 are currently not reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. 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 approach includes a number of optional practical expedients that we may elect to apply. On January 25, 2018, the FASB issued ASU 2018-01, “Leases: Land Easement Practical Expedient for Transition to ASU 2016-02. ASU 2018-01permits the election of an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASC 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. We are in the process of implementing a new lease administrative and accounting system. We plan to adopt the standard when it becomes effective for us beginning January 1, 2019 and the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been 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. Financial Instruments On June 16, 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. Goodwill Impairment On January 26, 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 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 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. |
CenturyLink Merger
CenturyLink Merger | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
CenturyLink Merger | (2) CenturyLink Merger On November 1, 2017 , CenturyLink acquired us through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as CenturyLink's indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC. As a result of the acquisition, Level 3 Communications, Inc. shareholders received $26.50 per share in cash and 1.4286 shares of CenturyLink common stock, with cash paid in lieu of fractional shares, for each outstanding share of Level 3 Communications, Inc. common stock they owned at closing, subject to certain limited exceptions. CenturyLink issued this consideration with respect to all of the outstanding common stock of Level 3, with the exception of shares held by the dissenting common shareholders. Upon closing, CenturyLink shareholders owned approximately 51% and former Level 3 shareholders owned approximately 49% of the combined company. In addition, each outstanding Level 3 restricted stock unit award granted prior to April 1, 2014 or granted to an outside director of Level 3 was converted into $26.50 in cash and 1.4286 shares of CenturyLink common stock (and cash in lieu of fractional shares) with respect to each Level 3 share covered by such award (the "Converted RSU Awards"). Each outstanding Level 3 restricted stock unit award granted on or after April 1, 2014 (other than those granted to outside directors of Level 3) was converted into a CenturyLink restricted stock unit award using a conversion ratio of 2.8386 to 1 as determined in accordance with a formula set forth in the merger agreement (“the Continuing RSU Awards”). The preliminary estimated amount of aggregate consideration of $19.628 billion is based on: • the 517.3 million shares of CenturyLink’s common stock (including those issued in connection with the Converted RSU Awards) issued to consummate the acquisition and the closing stock price of CenturyLink common stock at October 31, 2017 of $18.99 ; • the cash consideration of $26.50 per share on the 362.2 million common shares of Level 3 issued and outstanding as of October 31, 2017, and the cash consideration of $1 million paid on the Converted RSUs awards; • the estimated value of $131 million of Continuing RSU Awards, which represents the pre-combination portion of Level 3’s share-based compensation awards replaced by CenturyLink; and • the approximately $58.0 million of cash paid to settle claims of former holders of dissenting shares. At closing, CenturyLink assumed Level 3's long-term debt of approximately $10.6 billion . In connection with the closing of the Merger Agreement, we loaned $1.825 billion to CenturyLink in exchange for an unsecured demand note that bears interest at 3.5% per annum. The principal amount of such note is payable upon demand by Level 3 Parent but no later than November 1, 2020, and may be prepaid by CenturyLink at any time. The U.S. Department of Justice approved the acquisition subject to conditions of a consent decree on October 2, 2017, which requires the combined company to divest certain Level 3 metro network assets in the markets located in Albuquerque, New Mexico; Boise, Idaho; and Tucson, Arizona and the combined company will divest 24 strands of dark fiber connecting 30 specified city-pairs across the United States in the form of an Indefeasible Right of Use agreement. The metro network assets are classified as assets held for sale on the consolidated balance sheets as of March 31, 2018 and December 31, 2017 . Our results of operations have been included in the consolidated results of operations of CenturyLink beginning November 1, 2017. CenturyLink recognized our assets and liabilities based on CenturyLink’s preliminary estimates of the fair value of the acquired tangible and intangible assets and assumed liabilities of us 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 paid by CenturyLink in the combination will be 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 will require significant judgment. As such, CenturyLink has not completed its valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of our assets acquired and liabilities assumed, along with the related allocation to goodwill. The fair values of certain tangible assets, intangible assets, certain liabilities and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. CenturyLink expects to complete the final fair value determinations prior to the anniversary date of the acquisition. CenturyLink’s final fair value determinations may be significantly different than those reflected in our consolidated financial statements at March 31, 2018. The recognition of assets and liabilities at fair value are reflected in our financial statements and therefore result in a new basis of accounting for the “successor period” beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods will not be comparable to our previously reported financial statements, including the financial statements in this report. Based solely on CenturyLink’s preliminary estimates, the aggregate consideration exceeds the aggregate estimated fair value of the acquired assets and assumed liabilities by $11.141 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 CenturyLink expects to realize. 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 March 31, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (3 ) 3,314 Property, plant and equipment 9,311 92 9,403 Identifiable intangible assets (2) — Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 156 938 Current liabilities, excluding current maturities of long-term debt (1,461 ) — (1,461 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,613 ) (65 ) (1,678 ) Goodwill 10,837 304 11,141 Total estimated aggregate consideration $ 19,633 (5 ) 19,628 (1) Includes a preliminary estimated fair value of $863 million for accounts receivable, which had a gross contractual value of $884 million on November 1, 2017. The $21 million difference between the gross contractual value and the preliminary estimated fair value assigned represents our best estimate as of November 1, 2017 of contractual cash flows that will not be collected. (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 three months ended March 31, 2018. Acquisition-Related Expenses We have incurred acquisition-related expenses related to our activities surrounding the CenturyLink Merger. The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses: Successor Predecessor Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (Dollars in millions) Transaction-related expenses $ — 3 Integration-related expenses 18 18 Total acquisition-related expenses $ 18 21 Subsequent Events In April 2018 we distributed $15 million to CenturyLink. On May 4, 2018, we sold network assets in Boise that we were required to divest as a condition to the merger. These assets were classified as assets held for sale on our March 31, 2018 and December 31, 2017 consolidated balance sheets and no gain or loss was recognized on this transaction. On January 22, 2018, we entered an agreement to sell certain intangible assets for $68 million . We received a deposit of $34 million in the first quarter of 2018 and it is recorded in other current liabilities on our March 31, 2018 consolidated balance sheet. The receipt of this $34 million is reflected in our cash flows from investing activities on our March 31, 2018 statement of cash flows. The remaining $34 million was collected in the second quarter of 2018. |
Goodwill, Customer Relationship
Goodwill, Customer Relationships and Other Intangible Assets | 3 Months Ended |
Mar. 31, 2018 | |
Acquired Intangible Assets Disclosure [Abstract] | |
Goodwill, Customer Relationships and Other Intangible Assets | (3) Goodwill, Customer Relationships and Other Intangible Assets Goodwill, customer relationships and other intangible assets consisted of the following: March 31, 2018 December 31, 2017 (Dollars in millions) Goodwill $ 11,141 10,837 Customer relationships, less accumulated amortization of $300 and $126 8,206 8,845 Other intangible assets subject to amortization: Trade names, less accumulated amortization of $11 and $4 119 126 Developed technology, less accumulated amortization of $22 and $9 271 252 Total other intangible assets, net $ 390 378 Our goodwill balance at December 31, 2017 includes $16 million of goodwill that was allocated to us from CenturyLink associated with differences in the deferred state income taxes that CenturyLink expects to realize due to its consolidation of our results of operations into its state tax returns. Total amortization expense for intangible assets for the successor three months ended March 31, 2018 and the predecessor three months ended March 31, 2017 was $194 million and $52 million , respectively. As of the successor date of March 31, 2018 , the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $20 billion . As of March 31, 2018 , the weighted average remaining useful lives of our finite-lived intangible assets was 11.6 years in total; 11.9 years for customer contracts and relationships, 4.6 years for trade names, and 4.6 years for developed technology. We estimate that total amortization expense for intangible assets for the successor years ending December 31, 2018 through 2022 will be as follows: (Dollars in millions) 2018 (remaining nine months) $ 599 2019 799 2020 799 2021 799 2022 787 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-term Debt | (4) Long-Term Debt The following table summarizes our long-term debt: Interest Rates Maturities March 31, 2018 December 31, 2017 (Dollars in millions) Level 3 Parent, LLC Senior notes (1) 5.750% 2022 $ 600 600 Subsidiaries Level 3 Financing, Inc. Senior notes (2) 5.125% - 6.125% 2021 - 2026 5,315 5,315 Term loan (3) LIBOR + 2.25% 2024 4,611 4,611 Capital Leases Various Various 177 179 Total long-term debt, excluding unamortized premiums 10,703 10,705 Unamortized premiums, net 178 185 Total long-term debt 10,881 10,890 Less current maturities (9 ) (8 ) Long-term debt, excluding current maturities $ 10,872 $ 10,882 (1) The notes are not guaranteed by any of Level 3 Parent, LLC's subsidiaries. (2) The notes are fully and unconditionally guaranteed on an unsubordinated unsecured basis by Level 3 Parent, LLC and Level 3 Communications, LLC. (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 4.111% as of March 31, 2018 and 3.557% as of December 31, 2017 . The interest rate on the Tranche B 2024 Term Loan is set with a minimum LIBOR of zero percent. Capital Leases As of March 31, 2018 , we had $177 million of capital leases. We lease property, equipment, certain dark fiber facilities and metro fiber under non-cancelable IRU agreements that are accounted for as capital leases. The weighted average interest rate on these capital leases approximated 5.8% as of March 31, 2018 . Issuances On February 22, 2017, we completed the refinancing of all of our then outstanding $4.611 billion senior secured term loans through the issuance of a new Tranche B 2024 Term Loan in the principal amount of $4.611 billion . The term loans refinanced were our Tranche B-III 2019 Term Loan, Tranche B 2020 Term Loan, and the Tranche B-II 2022 Term Loan. The new Tranche B 2024 Term Loan bears interest at LIBOR plus 2.25 percent, with a zero percent minimum LIBOR, and will mature on February 22, 2024. The Tranche B 2024 Term Loan was priced to lenders at par, with the payment to the lenders at closing of an upfront 25 basis point fee. We recognized a charge of approximately $44 million for modification and extinguishment in the first quarter of 2017 related to this refinancing. Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt and capital leases (excluding unamortized premiums) maturing during the following years: (Dollars in millions) 2018 (remaining nine months) $ 9 2019 8 2020 10 2021 651 2022 1,726 2023 and thereafter 8,299 Total long-term debt $ 10,703 Covenants The senior notes of Level 3 Parent, LLC and term loan and senior notes of Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant 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 including CenturyLink and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, Level 3 Parent, LLC, as well as Level 3 Financing, Inc., will be required to offer to purchase certain of its long-term debt securities under certain circumstances in connection with a "change of control" of Level 3 Parent, LLC. Certain of CenturyLink's and our debt instruments contain cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument. Compliance At March 31, 2018 , we believe we were in compliance with the financial covenants contained in their respective material debt agreements. For additional information on our long-term debt, see Note 4 — Long-Term Debt 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. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | (5) Revenue Recognition Level 3 earns revenue from contracts with customers, primarily through the provision of telecommunications and other services. Revenue from contracts with customers is accounted for under ASC 606, which we adopted on January 1, 2018 using the modified retrospective approach. We also earn revenues that are not accounted for under Accounting Standards Codification ("ASC") 606 from leasing arrangements (primarily fiber capacity agreements). 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 recognition is recognized based on the following five-step model: • Identification of the contract(s) 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 local voice, broadband, private line (including special access), network access, Ethernet, information technology, video and other ancillary services. Our customers include global/international, enterprise, wholesale, government and small and medium business 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 enforceable contract term in alignment with the period of customer benefit. 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 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 bundled offering based on the estimated selling price of services included in each bundled combination. Promotional or performance-based incentives 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 is not typically significant to our results. 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. Disaggregated Revenue by Service Offering The following table provides disaggregation of revenue from contracts with customers based on service offering for the three months ended March 31, 2018 as well as a reconciliation of adjustments to revenue from the adoption of ASC 606 to ASC 605: Successor Three Months Ended March 31, 2018 (Dollars in millions) Total Revenues Adjustments (7) Total Revenue from Contracts with Customers Voice & Collaboration (1) $ 381 — 381 IT and Managed Services (2) 1 — 1 Transport & Infrastructure (3) 675 (42 ) 633 IP & Data Services (4) 1,003 — 1,003 Regulatory revenues (5) 2 (2 ) — Affiliate revenues (6) 25 — 25 Total revenues $ 2,087 (44 ) 2,043 Timing of revenue Goods transferred at a point in time $ — Services performed over time 2,043 Total revenue from contracts with customers $ 2,043 (1) Includes local, long-distance and other ancillary revenues. (2) Includes IT services and managed services revenues. (3) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (4) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (5) Includes sublease rental income. (6) Includes telecommunications and data services we bill to our affiliates. (7) Includes sublease rental income and revenue from fiber capacity lease arrangements. Customer Receivables and Contract Balances The following table provides balances of customer receivables and contract liabilities as of March 31, 2018 and December 31, 2017: Successor March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 726 748 Contract liabilities 373 353 (1) Gross customer receivables of $730 and $751 , net of allowance for doubtful accounts of $4 and $3 , respectively. Contract liabilities are consideration we have received from our customers in advance of providing the goods or services promised in the contract. We defer this consideration 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 five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheet. The following table provides information about revenues recognized for the three months ended March 31, 2018: Successor March 31, 2018 (Dollars in millions) Revenue recognized in the period from: Amounts included in contract liability at the beginning of the period $ 97 Performance obligations satisfied in previous periods — Performance Obligations A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer. We recognize revenue for services when we satisfy our performance obligation as services are provided. 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, which we recognize as revenue over the actual or expected contract term, which ranges from one to five years depending on the service. Expected contract term periods are estimated using historical experience. 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. We periodically transfer optical capacity assets on our network to other telecommunications service carriers. 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 assets and on all of the other elements deliverable under the capacity IRU as lease revenue ratably over the term of the agreement. IRUs that are not classified as leases are accounted for as service contracts under ASC 605. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other optical capacity assets. In connection with offering products and services provided by third-party vendors, we review the relationship between us, the vendor and the end customer 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 or services used to fulfill the performance obligation(s) associated with the transaction. 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 reduction to revenues in the period that the service level commitment was not met. As of March 31, 2018, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts (including affiliates) that are unsatisfied (or partially satisfied) is approximately $7.5 billion . We expect to recognize approximately 56% of this revenue through 2019, with the balance recognized thereafter. 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. Contract Costs The following table provides changes in our contract acquisition costs and fulfillment costs for the three months ended March 31, 2018: Successor Three Months Ended March 31, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Beginning of period balance $ 13 14 Costs incurred 15 23 Amortization (2 ) (2 ) Impairments — — End of period balance $ 26 35 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. The amount of these capitalized costs that are anticipated to be amortized in the next twelve months are included in other current assets on the consolidated balance sheet. The amount of capitalized costs expected to be amortized beyond the next twelve months is included on other assets on our consolidated balance. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis. Acquisition and fulfillment costs are amortized based on the transfer of services to which the assets relate to which typically range from 12 months to 60 months, 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. Comparative Results The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 2,087 — $ 2,087 Cost of services and products (exclusive of depreciation and amortization) 998 — 998 Selling, general and administrative 344 13 357 Income tax expense 102 (3 ) 99 Net income 62 (10 ) 52 As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 183 (11 ) $ 172 Other long-term assets, net 96 (15 ) 81 Deferred income taxes, net 249 3 252 Member's Equity 18,924 (19 ) 18,905 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | (6) 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: As of As of March 31, 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 $ 10,704 10,435 10,711 10,528 |
Commitments, Contingencies and
Commitments, Contingencies and Other Items | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies and Other Items | (7) Commitments, Contingencies and Other Items We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. Amounts accrued for such contingencies aggregate to $92 million and are included in “Other” current liabilities and “Other Liabilities” in our consolidated balance sheet at March 31, 2018 . 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 would have no effect on our results of operations but could materially adversely affect our cash flows for the affected period. We review our accruals at least quarterly and adjust them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. Below is a description of material legal proceedings and other contingencies pending at March 31, 2018 . Although we believe we have accrued for these matters in accordance with the accounting guidance for contingencies, contingencies are inherently unpredictable and it is possible that results of operations or cash flows could be materially and adversely affected in any particular period by unfavorable developments in, or resolution or disposition of, one or more of these matters. For those contingencies in respect of which we believe it is reasonably possible that a loss may result that is materially in excess of the accrual (if any) established for the matter, we have either provided an estimate of such possible loss or range of loss or included a statement that such an estimate cannot be made. In addition to the contingencies described below, we are party to many other legal proceedings and contingencies, the resolution of which are not expected to materially affect our financial condition or future results of operations beyond the amounts accrued. Rights-of-Way Litigation We have been party to a number of purported class action lawsuits involving our right to install fiber optic cable network in railroad right-of-ways adjacent to plaintiffs' land. In general, we obtained the rights to construct our networks from railroads, utilities, and others, and have installed our networks along the rights-of-way so granted. Plaintiffs in the purported class actions asserted that they are the owners of lands over which the fiber optic cable networks pass, and that the railroads, utilities and others who granted us the right to construct and maintain our network did not have the legal authority to do so. The complaints sought damages on theories of trespass, unjust enrichment and slander of title and property, as well as punitive damages. We also received, and may in the future receive, claims and demands related to rights-of-way issues similar to the issues in these cases that may be based on similar or different legal theories. We have defeated motions for class certification in a number of these actions but expected that, absent settlement of these actions, plaintiffs in the pending lawsuits would continue to seek certification of statewide or multi-state classes. The only lawsuit in which a class was certified against us, absent an agreed upon settlement, occurred in Koyle, et. al. v. Level 3 Communications, Inc., et. al., a purported two state class action filed in the United States District Court for the District of Idaho. The Koyle lawsuit has been dismissed pursuant to a settlement reached in November 2010 as described further below. We negotiated a series of class settlements affecting all persons who own or owned land next to or near railroad rights of way in which we have installed our fiber optic cable networks. The United States District Court for the District of Massachusetts in Kingsborough v. Sprint Communications Co. L.P. granted preliminary approval of the proposed settlement; however, on September 10, 2009, the court denied a motion for final approval of the settlement on the basis that the court lacked subject matter jurisdiction and dismissed the case. In November 2010, we negotiated revised settlement terms for a series of state class settlements affecting all persons who own or owned land next to or near railroad rights of way in which we have installed our fiber optic cable networks and thereafter presented these proposed settlements to the applicable courts. The settlements, affecting current and former landowners, have received final federal court approval in all but one of the applicable states and the parties are actively engaged in, or have completed, the claims process for the vast majority of the applicable states, including payment of claims. We continue to seek approval in the remaining state. Management believes that we have substantial defenses to the claims asserted in the remaining action and intends to defend it vigorously if a satisfactory settlement is not ultimately approved for all affected landowners. Additionally, given the now-final resolution of all but the last of these matters, management anticipates excluding specific discussion of them in our future reports. 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 $14 million at March 31, 2018 , and is accrued for on the consolidated balance sheet. 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. That appeal 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 our 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 us or termination of service relationships. We are vigorously defending against the asserted claims, which aggregate to approximately $32 million at March 31, 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 $54 million at March 31, 2018 in excess of the accruals established for these matters. We are vigorously contesting all such assessments in both states and, in particular, view the assessment of ICMS on revenue from leasing movable properties to be without merit. Other Matters We have recently been notified of a qui tam action pending against Level 3 Communications, Inc., certain former employees 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 we, 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. We are evaluating our defenses to the claims. At this time, we do not believe it is probable we will incur a material loss. If, contrary to our expectations, the relator 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. The two former Level 3 employees named in the qui tam amended complaint and others were also 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. We are 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. Letters of credit are conditional commitments issued on our behalf in accordance with specified terms and conditions. As of both March 31, 2018 and December 31, 2017 , we had outstanding letters of credit or other similar obligations of approximately $36 million , of which $30 million are collateralized by cash that is reflected on the consolidated balance sheets as restricted cash and securities. We do not believe exposure to loss related to our letters of credit is material. |
Other Financial Information
Other Financial Information | 3 Months Ended |
Mar. 31, 2018 | |
Statement of Financial Position [Abstract] | |
Other Financial Information | (8) Other Financial Information Other Current Assets The following table presents details of other current assets in our consolidated balance sheets: March 31, 2018 December 31, 2017 (Dollars in millions) Prepaid expenses $ 90 68 Material, supplies and inventory 4 3 Deferred activation and installation charges 18 17 Deferred commissions 12 — Other 59 29 Total other current assets $ 183 117 Other Current Liabilities The following table presents details of other current liabilities in our consolidated balance sheets: March 31, 2018 December 31, 2017 (Dollars in millions) Self insurance $ 6 11 Legal and tax reserves 15 31 Other 46 15 Total other current liabilities $ 67 57 Included in accounts payable at March 31, 2018 and December 31, 2017 were $73 million and $74 million , respectively, associated with capital expenditures. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | (9) Accumulated Other Comprehensive Income (Loss) The tables below summarize changes in accumulated other comprehensive income recorded on our consolidated balance sheets by component for the successor three months ended March 31, 2018 : Foreign Currency Translation Adjustments and Other Total Balance at December 31, 2017 $ 18 18 Other comprehensive income (loss) before reclassifications, net of tax 72 72 Adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 6 6 Net other comprehensive (loss) income 78 78 Balance at March 31, 2018 $ 96 96 The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the predecessor three months ended March 31, 2017 : Pension Plans Foreign Currency Translation Adjustments and Other Total (Dollars in millions) Balance at December 31, 2016 $ (34 ) (353 ) (387 ) Other comprehensive income before reclassifications, net of tax — 20 20 Amounts reclassified from accumulated other comprehensive loss 1 — 1 Net other comprehensive (loss) income 1 20 21 Balance at March 31, 2017 $ (33 ) (333 ) (366 ) |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | 3 Months Ended |
Mar. 31, 2018 | |
Condensed Consolidating Financial Information [Abstract] | |
Condensed Consolidating Financial Information | (10) Condensed Consolidating Financial Information Level 3 Financing, Inc., a wholly owned subsidiary, has issued Senior Notes that are unsecured obligations of Level 3 Financing, Inc.; however, they are also fully and unconditionally and jointly and severally guaranteed on an unsecured senior basis by Level 3 Parent, LLC and Level 3 Communications, LLC. In conjunction with the registration of the Level 3 Financing, Inc. Senior Notes, the accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 "Financial statements of guarantors and affiliates whose securities collateralize an issue registered or being registered." The operating activities of the separate legal entities included in our consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the statements of comprehensive income (loss), balance sheets and statements of cash flows of each legal entity and, on an aggregate basis, the other non-guarantor subsidiaries based on amounts incurred by such entities, and is not intended to present the operating results of those legal entities on a stand-alone basis. Level 3 Communications, LLC leases equipment and certain facilities from other wholly owned subsidiaries of Level 3 Parent, LLC. These transactions are eliminated in our consolidated results. Condensed Consolidating Statements of Comprehensive Income (Loss) Three Months Ended March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING REVENUES Operating revenues $ — $ — $ 956 $ 1,146 $ (40 ) 2,062 Operating revenues - affiliate — — 25 — — 25 Total operating revenues — — 981 1,146 (40 ) 2,087 OPERATING EXPENSES Cost of services and products (exclusive of depreciation and amortization) — — 589 449 (40 ) 998 Selling, general and administrative — 1 259 84 — 344 Operating expenses - affiliate — — 53 — — 53 Depreciation and amortization — — 170 261 — 431 Total cost and expenses — 1 1,071 794 (40 ) 1,826 OPERATING INCOME (LOSS) — (1 ) (90 ) 352 — 261 OTHER INCOME (EXPENSE) Interest income — — — 1 — 1 Interest income - affiliate 16 — — — — 16 Interest expense (8 ) (108 ) (1 ) (3 ) — (120 ) Interest income (expense) - intercompany, net 355 608 (881 ) (82 ) — — Equity in net earnings (losses) of subsidiaries (315 ) (839 ) (1 ) — 1,155 — Other income, net — — 1 5 — 6 Total other income (expense) 48 (339 ) (882 ) (79 ) 1,155 (97 ) INCOME (LOSS) BEFORE INCOME TAXES 48 (340 ) (972 ) 273 1,155 164 Income tax benefit (expense) 14 25 (47 ) (94 ) — (102 ) NET INCOME (LOSS) 62 (315 ) (1,019 ) 179 1,155 62 Other comprehensive income (loss), net of income taxes 72 — — 72 (72 ) 72 COMPREHENSIVE INCOME (LOSS) $ 134 (315 ) (1,019 ) 251 1,083 134 Condensed Consolidating Statements of Comprehensive Income (Loss) Three Months Ended March 31, 2017 (Predecessor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING REVENUES Operating revenues $ — $ — $ 920 $ 1,157 $ (29 ) $ 2,048 Operating revenues - affiliate — — — — — — Total operating revenues — — 920 1,157 (29 ) 2,048 OPERATING EXPENSES Cost of services and products (exclusive of depreciation and amortization) — — 583 497 (29 ) 1,051 Selling, general and administrative expenses 1 1 277 85 — 364 Operating expenses - affiliate — — — — — — Depreciation and amortization — — 87 209 — 296 Total cost and expenses 1 1 947 791 (29 ) 1,711 OPERATING INCOME (LOSS) (1 ) (1 ) (27 ) 366 — 337 OTHER INCOME (EXPENSE) Interest income — — 2 — — 2 Interest income - affiliate — — — — — — Interest expense (9 ) (120 ) (1 ) (4 ) — (134 ) Interest income (expense) - intercompany, net 377 574 (869 ) (82 ) — — Equity in net earnings (losses) of subsidiaries (275 ) (646 ) 203 — 718 — Loss on modification and extinguishment of debt — (44 ) — — — (44 ) Other income, net — — 5 (1 ) — 4 Total other income (expense) 93 (236 ) (660 ) (87 ) 718 (172 ) INCOME (LOSS) BEFORE INCOME TAXES 92 (237 ) (687 ) 279 718 165 Income tax expense 3 (38 ) (1 ) (34 ) — (70 ) NET INCOME (LOSS) 95 (275 ) (688 ) 245 718 95 Other comprehensive income (loss), net of income taxes 21 — — 21 (21 ) 21 COMPREHENSIVE INCOME (LOSS) $ 116 $ (275 ) $ (688 ) $ 266 $ 697 $ 116 Condensed Consolidating Balance Sheets March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) ASSETS CURRENT ASSETS Cash and cash equivalents $ 39 — 133 87 — 259 Restricted cash and securities — — 1 4 — 5 Assets held for sale 68 — 5 67 — 140 Accounts receivable — — 10 716 — 726 Accounts receivable - affiliate — — — 3 — 3 Intercompany advances 16,493 21,422 — 5,368 (43,283 ) — Note receivable - affiliate 1,825 — — — — 1,825 Other — — 95 88 — 183 Total current assets 18,425 21,422 244 6,333 (43,283 ) 3,141 Property, plant, and equipment, net — — 3,103 6,439 — 9,542 Restricted cash and securities 19 — 10 — — 29 GOODWILL AND OTHER ASSETS Goodwill — — 1,658 9,483 — 11,141 Customer relationships, net — — 3,979 4,227 — 8,206 Other intangible assets, net — — 390 — — 390 Investment in subsidiaries 16,955 18,788 3,609 — (39,352 ) — Deferred tax assets 279 1,826 114 10 (1,771 ) 458 Other, net — — 54 42 — 96 Total goodwill and other assets 17,234 20,614 9,804 13,762 (41,123 ) 20,291 TOTAL ASSETS $ 35,678 42,036 13,161 26,534 (84,406 ) 33,003 LIABILITIES AND MEMBER'S EQUITY CURRENT LIABILITIES Current portion of long-term debt $ — — 2 7 — 9 Accounts payable — 1 318 359 — 678 Accounts payable - affiliate 27 — 66 2 — 95 Accrued expenses and other liabilities Income and other taxes — 1 45 41 — 87 Salaries and benefits — — 129 34 — 163 Interest 3 85 — 7 — 95 Current portion of deferred revenue — — 135 138 — 273 Current portion of deferred revenue - affiliate — — 2 — — 2 Intercompany payables — — 43,283 — (43,283 ) — Other — — 16 51 — 67 Total Current Liabilities 30 87 43,996 639 (43,283 ) 1,469 LONG-TERM DEBT 615 10,088 13 156 — 10,872 DEFERRED REVENUES AND OTHER LIABILITIES Deferred revenues — — 843 263 — 1,106 Deferred revenues - affiliate — — 5 1 — 6 Deferred tax liability 648 — 849 483 (1,771 ) 209 Other 1 — 174 146 — 321 Total deferred credits and other 649 — 1,871 893 (1,771 ) 1,642 COMMITMENTS AND CONTINGENCIES MEMBER'S EQUITY (DEFICIT) 34,384 31,861 (32,719 ) 24,846 (39,352 ) 19,020 TOTAL LIABILITIES AND MEMBER'S EQUITY $ 35,678 42,036 13,161 26,534 (84,406 ) 33,003 Condensed Consolidating Balance Sheets December 31, 2017 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13 — 175 109 — 297 Restricted cash and securities — — 1 4 — 5 Assets held for sale 68 — 5 67 — 140 Accounts receivable — — 26 722 — 748 Accounts receivable - affiliate — — 60 4 (51 ) 13 Intercompany advances 16,251 21,032 — 5,200 (42,483 ) — Note receivable - affiliate 1,825 — — — — 1,825 Other — — 54 63 — 117 Total current assets 18,157 21,032 321 6,169 (42,534 ) 3,145 Property, plant, and equipment, net — — 3,237 6,175 — 9,412 Restricted cash and securities 19 — 10 — — 29 GOODWILL AND OTHER ASSETS Goodwill — — 1,200 9,637 — 10,837 Customer relationships, net — — 4,324 4,521 — 8,845 Other intangible assets, net — — 378 — — 378 Investment in subsidiaries 16,954 18,403 3,616 — (38,973 ) — Deferred tax assets 280 1,795 — 122 (1,771 ) 426 Other, net — — 32 31 — 63 Total goodwill and other assets 17,234 20,198 9,550 14,311 (40,744 ) 20,549 TOTAL ASSETS $ 35,410 41,230 13,118 26,655 (83,278 ) 33,135 LIABILITIES AND MEMBER'S EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ — — 2 6 — 8 Accounts payable — 1 323 371 — 695 Accounts payable - affiliate 11 — — 81 (51 ) 41 Accrued expenses and other liabilities Income and other taxes — — 55 45 — 100 Salaries and benefits — — 109 27 — 136 Interest 11 91 — 7 — 109 Current portion of deferred revenue — — 127 131 — 258 Current portion of deferred revenue - affiliate — — 2 — — 2 Intercompany payables — — 42,483 — (42,483 ) — Other 16 — 23 18 — 57 Total current liabilities 38 92 43,124 686 (42,534 ) 1,406 LONG-TERM DEBT 616 10,096 13 157 — 10,882 DEFERRED REVENUES AND OTHER LIABILITIES Deferred revenues — — 841 252 — 1,093 Deferred revenues - affiliate — — 5 1 — 6 Deferred tax liability 648 — 870 465 (1,771 ) 212 Other 1 1 98 164 — 264 Total deferred credits and other liabilities 649 1 1,814 882 (1,771 ) 1,575 COMMITMENTS AND CONTINGENCIES MEMBER'S EQUITY (DEFICIT) 34,107 31,041 (31,833 ) 24,930 (38,973 ) 19,272 TOTAL LIABILITIES AND MEMBER'S EQUITY $ 35,410 41,230 13,118 26,655 (83,278 ) 33,135 Condensed Consolidating Statements of Cash Flows Three Months Ended March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ (8 ) — 490 89 — 571 INVESTING ACTIVITIES Capital expenditures — — (142 ) (110 ) — (252 ) Proceeds from the sale of property, plant and equipment and other assets — — — 1 — 1 Deposits received on assets held for sale 34 — — — — 34 Net cash provided by (used in) investing activities 34 — (142 ) (109 ) — (217 ) FINANCING ACTIVITIES Payments of long-term debt — — — (1 ) — (1 ) Distributions (390 ) — — — — (390 ) Increase (decrease) due from/to affiliates, net 390 — (390 ) — — — Net cash provided by (used in) financing activities — — (390 ) (1 ) — (391 ) Effect of exchange rates on cash, cash equivalents and restricted cash and securities — — — (1 ) — (1 ) Net increase (decrease) in cash, cash equivalents and restricted cash and securities 26 — (42 ) (22 ) — (38 ) Cash, cash equivalents and restricted cash and securities and beginning of period 32 — 186 113 — 331 Cash, cash equivalents and restricted cash and securities and end of period $ 58 — 144 91 — 293 Condensed Consolidating Statements of Cash Flows Three Months Ended March 31, 2017 (Predecessor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING ACTIVITIES Net Cash Provided by (Used in) Operating Activities $ (16 ) (135 ) 109 581 — 539 INVESTING ACTIVITIES Capital expenditures — — (233 ) (135 ) — (368 ) Net cash provided by (used in) investing activities — — (233 ) (135 ) — (368 ) FINANCING ACTIVITIES Net proceeds from issuance of long-term debt — 4,569 — — — 4,569 Payments of long-term debt — (4,611 ) — (2 ) — (4,613 ) Increase (decrease) due from/to affiliates, net 16 177 262 (455 ) — — Net cash provided by (used in) financing activities 16 135 262 (457 ) — (44 ) Effect of exchange rates on cash, cash equivalents and restricted cash and securities — — — 1 — 1 Net increase (decrease) in cash, cash equivalents and restricted cash and securities — — 138 (10 ) — 128 Cash, cash equivalents and restricted cash and securities and beginning of period 37 — 1,710 110 — 1,857 Cash, cash equivalents and restricted cash and securities and end of period $ 37 — 1,848 100 — 1,985 |
Background (Policies)
Background (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation On November 1, 2017, we became a wholly owned subsidiary of CenturyLink. On the date of the acquisition, our assets and liabilities were recognized at CenturyLink's preliminary estimates of fair value. This revaluation has been reflected in our financial statements and, therefore, has resulted in a new basis of accounting for the successor period beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods are not comparable to our previously reported financial statements, including the predecessor period financial statements in this report. The consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. All significant intercompany accounts and transactions have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. As part of our consolidation policy, we consider our controlled subsidiaries, investments in businesses in which we are not the primary beneficiary or do not have effective control but have the ability to significantly influence operating and financial policies, and variable interests resulting from economic arrangements that give us rights to economic risks or rewards of a legal entity. We do not have variable interests in a variable interest entity where we are required to consolidate the entity as the primary beneficiary. Due to exchange restrictions and other conditions, effective at the end of the third quarter of 2015 we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the first quarter of 2018. In conjunction with our acquisition on November 1, 2017, we changed the definitions we use to classify expenses as cost of services and products and selling, general and administrative, and as a result, we reclassified previously reported amounts to conform to the current period presentation. We revised our definitions so that our expense classifications are more consistent with the expense classifications used by our new ultimate parent company, CenturyLink. These revisions resulted in the reclassification of $24 million from depreciation and amortization to cost of services and products for the predecessor three months ended March 31, 2017 . Although we continued as a surviving corporation and legal entity after the acquisition, the accompanying consolidated statements of operations, comprehensive income, member's/stockholders' equity and cash flows are presented for two periods: predecessor and successor, which relates to the period preceding the acquisition and the period succeeding the acquisition. Our current definitions are as follows: • Cost of services and products (exclusive of depreciation and amortization) are expenses incurred in providing products and services to our customers. These expenses include: employee-related expenses directly attributable to operating and maintaining our network (such as salaries, wages, benefits and professional fees); facilities expenses (which are third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); rents and utilities expenses; costs for universal service funds ("USF") (which are federal and state funds that are established to promote the availability of telecommunications services to all consumers at reasonable and affordable rates, among other things, and to which we are often required to contribute); taxes (such as property and other taxes); and other expenses directly related to our network. • Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses. These expenses include: employee-related expenses (such as salaries, wages, internal commissions, benefits and professional fees) directly attributable to selling products or services and employee-related expenses for administrative functions; marketing and advertising; taxes (such as state and local franchise taxes and sales and use taxes) and fees; external commissions; bad debt expense; and other selling, general and administrative expenses. |
New Accounting Pronouncements | Recently Adopted Accounting Pronouncements In the first quarter or 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, and ASU 2018 - 02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Each of these is described further below. Revenue Recognition On May 28, 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. ASU 2014-09 may be adopted by applying the provisions of this standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2018. We adopted the new revenue recognition standard under the modified retrospective transition method. Upon adoption, we are deferring (i.e. capitalizing) incremental contract acquisition costs and are recognizing (i.e. amortizing) them over the term of the initial contract and anticipated renewal contracts to which the costs relate. Our deferred contract costs for our customers have average amortization periods of approximately 12 months to 60 months and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we assess our deferred contract cost asset for impairment on a periodic basis. We have material obligations to our customers in our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, which are accounted for as operating leases and service contracts. As our service contracts contain a significant financing component that are not separately accounted for, we are required to estimate and record incremental revenue and interest cost associated with these contractual terms. Most of our indefeasible right of use arrangements are accounted for as operating leases. We recognized a cumulative adjustment of $9 million to beginning retained earnings, net of tax effect, on January 1, 2018, as a result of deferring commissions as contract acquisition costs that were not previously deferred. Adoption of this standard increased our disclosures regarding revenue recognition, see Note 5 - Revenue Recognition for additional information. Income Taxes On October 24, 2016, FASB issued ASU 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory” ("ASU 2016-16") . ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. After adoption of this ASU, 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. We adopted ASU 2016-16 on January 1, 2018. The adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. 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 Tax Cuts and Jobs Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs 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 Tax Cuts and Jobs 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 Tax Cuts and Jobs Act is recognized. We early adopted ASU 2018-02 in the first quarter of 2018 and applied it in the period of adoption. The adoption of ASU 2018-02 resulted in a $6 million decrease to member's equity and increase to accumulated other comprehensive income. See Note 9 - Accumulated Other Comprehensive Income (Loss) for additional information. Recent Accounting Pronouncements Leases On February 25, 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 are currently not reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. 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 approach includes a number of optional practical expedients that we may elect to apply. On January 25, 2018, the FASB issued ASU 2018-01, “Leases: Land Easement Practical Expedient for Transition to ASU 2016-02. ASU 2018-01permits the election of an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASC 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. We are in the process of implementing a new lease administrative and accounting system. We plan to adopt the standard when it becomes effective for us beginning January 1, 2019 and the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been 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. Financial Instruments On June 16, 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. Goodwill Impairment On January 26, 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 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 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. |
CenturyLink Meger (Tables)
CenturyLink Meger (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | 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 March 31, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (3 ) 3,314 Property, plant and equipment 9,311 92 9,403 Identifiable intangible assets (2) — Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 156 938 Current liabilities, excluding current maturities of long-term debt (1,461 ) — (1,461 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,613 ) (65 ) (1,678 ) Goodwill 10,837 304 11,141 Total estimated aggregate consideration $ 19,633 (5 ) 19,628 (1) Includes a preliminary estimated fair value of $863 million for accounts receivable, which had a gross contractual value of $884 million on November 1, 2017. The $21 million difference between the gross contractual value and the preliminary estimated fair value assigned represents our best estimate as of November 1, 2017 of contractual cash flows that will not be collected. (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 three months ended March 31, 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: Successor Predecessor Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 (Dollars in millions) Transaction-related expenses $ — 3 Integration-related expenses 18 18 Total acquisition-related expenses $ 18 21 |
Goodwill, Customer Relationsh21
Goodwill, Customer Relationships and Other Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Acquired Intangible Assets Disclosure [Abstract] | |
Schedule of acquisition-related intangible assets | Goodwill, customer relationships and other intangible assets consisted of the following: March 31, 2018 December 31, 2017 (Dollars in millions) Goodwill $ 11,141 10,837 Customer relationships, less accumulated amortization of $300 and $126 8,206 8,845 Other intangible assets subject to amortization: Trade names, less accumulated amortization of $11 and $4 119 126 Developed technology, less accumulated amortization of $22 and $9 271 252 Total other intangible assets, net $ 390 378 |
Schedule of estimated amortization expense of finite-lived acquisition-related intangible assets | We estimate that total amortization expense for intangible assets for the successor years ending December 31, 2018 through 2022 will be as follows: (Dollars in millions) 2018 (remaining nine months) $ 599 2019 799 2020 799 2021 799 2022 787 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | The following table summarizes our long-term debt: Interest Rates Maturities March 31, 2018 December 31, 2017 (Dollars in millions) Level 3 Parent, LLC Senior notes (1) 5.750% 2022 $ 600 600 Subsidiaries Level 3 Financing, Inc. Senior notes (2) 5.125% - 6.125% 2021 - 2026 5,315 5,315 Term loan (3) LIBOR + 2.25% 2024 4,611 4,611 Capital Leases Various Various 177 179 Total long-term debt, excluding unamortized premiums 10,703 10,705 Unamortized premiums, net 178 185 Total long-term debt 10,881 10,890 Less current maturities (9 ) (8 ) Long-term debt, excluding current maturities $ 10,872 $ 10,882 (1) The notes are not guaranteed by any of Level 3 Parent, LLC's subsidiaries. (2) The notes are fully and unconditionally guaranteed on an unsubordinated unsecured basis by Level 3 Parent, LLC and Level 3 Communications, LLC. (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 4.111% as of March 31, 2018 and 3.557% as of December 31, 2017 . The interest rate on the Tranche B 2024 Term Loan is set with a minimum LIBOR of zero percent. |
Schedule of aggregate future contractual maturities of long-term debt and capital leases (excluding discounts) | Set forth below is the aggregate principal amount of our long-term debt and capital leases (excluding unamortized premiums) maturing during the following years: (Dollars in millions) 2018 (remaining nine months) $ 9 2019 8 2020 10 2021 651 2022 1,726 2023 and thereafter 8,299 Total long-term debt $ 10,703 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The following table provides disaggregation of revenue from contracts with customers based on service offering for the three months ended March 31, 2018 as well as a reconciliation of adjustments to revenue from the adoption of ASC 606 to ASC 605: Successor Three Months Ended March 31, 2018 (Dollars in millions) Total Revenues Adjustments (7) Total Revenue from Contracts with Customers Voice & Collaboration (1) $ 381 — 381 IT and Managed Services (2) 1 — 1 Transport & Infrastructure (3) 675 (42 ) 633 IP & Data Services (4) 1,003 — 1,003 Regulatory revenues (5) 2 (2 ) — Affiliate revenues (6) 25 — 25 Total revenues $ 2,087 (44 ) 2,043 Timing of revenue Goods transferred at a point in time $ — Services performed over time 2,043 Total revenue from contracts with customers $ 2,043 (1) Includes local, long-distance and other ancillary revenues. (2) Includes IT services and managed services revenues. (3) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (4) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (5) Includes sublease rental income. (6) Includes telecommunications and data services we bill to our affiliates. (7) Includes sublease rental income and revenue from fiber capacity lease arrangements. |
Contract with Customer, Asset and Liability | The following table provides balances of customer receivables and contract liabilities as of March 31, 2018 and December 31, 2017: Successor March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 726 748 Contract liabilities 373 353 (1) Gross customer receivables of $730 and $751 , net of allowance for doubtful accounts of $4 and $3 , respectively. The following table provides information about revenues recognized for the three months ended March 31, 2018: Successor March 31, 2018 (Dollars in millions) Revenue recognized in the period from: Amounts included in contract liability at the beginning of the period $ 97 Performance obligations satisfied in previous periods — |
Capitalized Contract Cost | The following table provides changes in our contract acquisition costs and fulfillment costs for the three months ended March 31, 2018: Successor Three Months Ended March 31, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Beginning of period balance $ 13 14 Costs incurred 15 23 Amortization (2 ) (2 ) Impairments — — End of period balance $ 26 35 |
Effects of New Accounting Pronouncement | The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 2,087 — $ 2,087 Cost of services and products (exclusive of depreciation and amortization) 998 — 998 Selling, general and administrative 344 13 357 Income tax expense 102 (3 ) 99 Net income 62 (10 ) 52 As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 183 (11 ) $ 172 Other long-term assets, net 96 (15 ) 81 Deferred income taxes, net 249 3 252 Member's Equity 18,924 (19 ) 18,905 |
Fair Value of Financial Instr24
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of liabilities measured on a recurring basis | 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: As of As of March 31, 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 $ 10,704 10,435 10,711 10,528 |
Other Financial Information (Ta
Other Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Statement of Financial Position [Abstract] | |
Schedule of Other Assets and Other Liabilities | The following table presents details of other current liabilities in our consolidated balance sheets: March 31, 2018 December 31, 2017 (Dollars in millions) Self insurance $ 6 11 Legal and tax reserves 15 31 Other 46 15 Total other current liabilities $ 67 57 The following table presents details of other current assets in our consolidated balance sheets: March 31, 2018 December 31, 2017 (Dollars in millions) Prepaid expenses $ 90 68 Material, supplies and inventory 4 3 Deferred activation and installation charges 18 17 Deferred commissions 12 — Other 59 29 Total other current assets $ 183 117 |
Accumulated Other Comprehensi26
Accumulated Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Accumulated Other Comprehensive Income (Loss) | The tables below summarize changes in accumulated other comprehensive income recorded on our consolidated balance sheets by component for the successor three months ended March 31, 2018 : Foreign Currency Translation Adjustments and Other Total Balance at December 31, 2017 $ 18 18 Other comprehensive income (loss) before reclassifications, net of tax 72 72 Adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income 6 6 Net other comprehensive (loss) income 78 78 Balance at March 31, 2018 $ 96 96 The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the predecessor three months ended March 31, 2017 : Pension Plans Foreign Currency Translation Adjustments and Other Total (Dollars in millions) Balance at December 31, 2016 $ (34 ) (353 ) (387 ) Other comprehensive income before reclassifications, net of tax — 20 20 Amounts reclassified from accumulated other comprehensive loss 1 — 1 Net other comprehensive (loss) income 1 20 21 Balance at March 31, 2017 $ (33 ) (333 ) (366 ) |
Condensed Consolidating Finan27
Condensed Consolidating Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Condensed Consolidating Financial Information [Abstract] | |
Condensed Consolidating Statements of Comprehensive Income (Loss) | Condensed Consolidating Statements of Comprehensive Income (Loss) Three Months Ended March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING REVENUES Operating revenues $ — $ — $ 956 $ 1,146 $ (40 ) 2,062 Operating revenues - affiliate — — 25 — — 25 Total operating revenues — — 981 1,146 (40 ) 2,087 OPERATING EXPENSES Cost of services and products (exclusive of depreciation and amortization) — — 589 449 (40 ) 998 Selling, general and administrative — 1 259 84 — 344 Operating expenses - affiliate — — 53 — — 53 Depreciation and amortization — — 170 261 — 431 Total cost and expenses — 1 1,071 794 (40 ) 1,826 OPERATING INCOME (LOSS) — (1 ) (90 ) 352 — 261 OTHER INCOME (EXPENSE) Interest income — — — 1 — 1 Interest income - affiliate 16 — — — — 16 Interest expense (8 ) (108 ) (1 ) (3 ) — (120 ) Interest income (expense) - intercompany, net 355 608 (881 ) (82 ) — — Equity in net earnings (losses) of subsidiaries (315 ) (839 ) (1 ) — 1,155 — Other income, net — — 1 5 — 6 Total other income (expense) 48 (339 ) (882 ) (79 ) 1,155 (97 ) INCOME (LOSS) BEFORE INCOME TAXES 48 (340 ) (972 ) 273 1,155 164 Income tax benefit (expense) 14 25 (47 ) (94 ) — (102 ) NET INCOME (LOSS) 62 (315 ) (1,019 ) 179 1,155 62 Other comprehensive income (loss), net of income taxes 72 — — 72 (72 ) 72 COMPREHENSIVE INCOME (LOSS) $ 134 (315 ) (1,019 ) 251 1,083 134 Condensed Consolidating Statements of Comprehensive Income (Loss) Three Months Ended March 31, 2017 (Predecessor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING REVENUES Operating revenues $ — $ — $ 920 $ 1,157 $ (29 ) $ 2,048 Operating revenues - affiliate — — — — — — Total operating revenues — — 920 1,157 (29 ) 2,048 OPERATING EXPENSES Cost of services and products (exclusive of depreciation and amortization) — — 583 497 (29 ) 1,051 Selling, general and administrative expenses 1 1 277 85 — 364 Operating expenses - affiliate — — — — — — Depreciation and amortization — — 87 209 — 296 Total cost and expenses 1 1 947 791 (29 ) 1,711 OPERATING INCOME (LOSS) (1 ) (1 ) (27 ) 366 — 337 OTHER INCOME (EXPENSE) Interest income — — 2 — — 2 Interest income - affiliate — — — — — — Interest expense (9 ) (120 ) (1 ) (4 ) — (134 ) Interest income (expense) - intercompany, net 377 574 (869 ) (82 ) — — Equity in net earnings (losses) of subsidiaries (275 ) (646 ) 203 — 718 — Loss on modification and extinguishment of debt — (44 ) — — — (44 ) Other income, net — — 5 (1 ) — 4 Total other income (expense) 93 (236 ) (660 ) (87 ) 718 (172 ) INCOME (LOSS) BEFORE INCOME TAXES 92 (237 ) (687 ) 279 718 165 Income tax expense 3 (38 ) (1 ) (34 ) — (70 ) NET INCOME (LOSS) 95 (275 ) (688 ) 245 718 95 Other comprehensive income (loss), net of income taxes 21 — — 21 (21 ) 21 COMPREHENSIVE INCOME (LOSS) $ 116 $ (275 ) $ (688 ) $ 266 $ 697 $ 116 |
Condensed Consolidating Balance Sheets | Condensed Consolidating Balance Sheets March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) ASSETS CURRENT ASSETS Cash and cash equivalents $ 39 — 133 87 — 259 Restricted cash and securities — — 1 4 — 5 Assets held for sale 68 — 5 67 — 140 Accounts receivable — — 10 716 — 726 Accounts receivable - affiliate — — — 3 — 3 Intercompany advances 16,493 21,422 — 5,368 (43,283 ) — Note receivable - affiliate 1,825 — — — — 1,825 Other — — 95 88 — 183 Total current assets 18,425 21,422 244 6,333 (43,283 ) 3,141 Property, plant, and equipment, net — — 3,103 6,439 — 9,542 Restricted cash and securities 19 — 10 — — 29 GOODWILL AND OTHER ASSETS Goodwill — — 1,658 9,483 — 11,141 Customer relationships, net — — 3,979 4,227 — 8,206 Other intangible assets, net — — 390 — — 390 Investment in subsidiaries 16,955 18,788 3,609 — (39,352 ) — Deferred tax assets 279 1,826 114 10 (1,771 ) 458 Other, net — — 54 42 — 96 Total goodwill and other assets 17,234 20,614 9,804 13,762 (41,123 ) 20,291 TOTAL ASSETS $ 35,678 42,036 13,161 26,534 (84,406 ) 33,003 LIABILITIES AND MEMBER'S EQUITY CURRENT LIABILITIES Current portion of long-term debt $ — — 2 7 — 9 Accounts payable — 1 318 359 — 678 Accounts payable - affiliate 27 — 66 2 — 95 Accrued expenses and other liabilities Income and other taxes — 1 45 41 — 87 Salaries and benefits — — 129 34 — 163 Interest 3 85 — 7 — 95 Current portion of deferred revenue — — 135 138 — 273 Current portion of deferred revenue - affiliate — — 2 — — 2 Intercompany payables — — 43,283 — (43,283 ) — Other — — 16 51 — 67 Total Current Liabilities 30 87 43,996 639 (43,283 ) 1,469 LONG-TERM DEBT 615 10,088 13 156 — 10,872 DEFERRED REVENUES AND OTHER LIABILITIES Deferred revenues — — 843 263 — 1,106 Deferred revenues - affiliate — — 5 1 — 6 Deferred tax liability 648 — 849 483 (1,771 ) 209 Other 1 — 174 146 — 321 Total deferred credits and other 649 — 1,871 893 (1,771 ) 1,642 COMMITMENTS AND CONTINGENCIES MEMBER'S EQUITY (DEFICIT) 34,384 31,861 (32,719 ) 24,846 (39,352 ) 19,020 TOTAL LIABILITIES AND MEMBER'S EQUITY $ 35,678 42,036 13,161 26,534 (84,406 ) 33,003 Condensed Consolidating Balance Sheets December 31, 2017 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13 — 175 109 — 297 Restricted cash and securities — — 1 4 — 5 Assets held for sale 68 — 5 67 — 140 Accounts receivable — — 26 722 — 748 Accounts receivable - affiliate — — 60 4 (51 ) 13 Intercompany advances 16,251 21,032 — 5,200 (42,483 ) — Note receivable - affiliate 1,825 — — — — 1,825 Other — — 54 63 — 117 Total current assets 18,157 21,032 321 6,169 (42,534 ) 3,145 Property, plant, and equipment, net — — 3,237 6,175 — 9,412 Restricted cash and securities 19 — 10 — — 29 GOODWILL AND OTHER ASSETS Goodwill — — 1,200 9,637 — 10,837 Customer relationships, net — — 4,324 4,521 — 8,845 Other intangible assets, net — — 378 — — 378 Investment in subsidiaries 16,954 18,403 3,616 — (38,973 ) — Deferred tax assets 280 1,795 — 122 (1,771 ) 426 Other, net — — 32 31 — 63 Total goodwill and other assets 17,234 20,198 9,550 14,311 (40,744 ) 20,549 TOTAL ASSETS $ 35,410 41,230 13,118 26,655 (83,278 ) 33,135 LIABILITIES AND MEMBER'S EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ — — 2 6 — 8 Accounts payable — 1 323 371 — 695 Accounts payable - affiliate 11 — — 81 (51 ) 41 Accrued expenses and other liabilities Income and other taxes — — 55 45 — 100 Salaries and benefits — — 109 27 — 136 Interest 11 91 — 7 — 109 Current portion of deferred revenue — — 127 131 — 258 Current portion of deferred revenue - affiliate — — 2 — — 2 Intercompany payables — — 42,483 — (42,483 ) — Other 16 — 23 18 — 57 Total current liabilities 38 92 43,124 686 (42,534 ) 1,406 LONG-TERM DEBT 616 10,096 13 157 — 10,882 DEFERRED REVENUES AND OTHER LIABILITIES Deferred revenues — — 841 252 — 1,093 Deferred revenues - affiliate — — 5 1 — 6 Deferred tax liability 648 — 870 465 (1,771 ) 212 Other 1 1 98 164 — 264 Total deferred credits and other liabilities 649 1 1,814 882 (1,771 ) 1,575 COMMITMENTS AND CONTINGENCIES MEMBER'S EQUITY (DEFICIT) 34,107 31,041 (31,833 ) 24,930 (38,973 ) 19,272 TOTAL LIABILITIES AND MEMBER'S EQUITY $ 35,410 41,230 13,118 26,655 (83,278 ) 33,135 |
Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statements of Cash Flows Three Months Ended March 31, 2018 (Successor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ (8 ) — 490 89 — 571 INVESTING ACTIVITIES Capital expenditures — — (142 ) (110 ) — (252 ) Proceeds from the sale of property, plant and equipment and other assets — — — 1 — 1 Deposits received on assets held for sale 34 — — — — 34 Net cash provided by (used in) investing activities 34 — (142 ) (109 ) — (217 ) FINANCING ACTIVITIES Payments of long-term debt — — — (1 ) — (1 ) Distributions (390 ) — — — — (390 ) Increase (decrease) due from/to affiliates, net 390 — (390 ) — — — Net cash provided by (used in) financing activities — — (390 ) (1 ) — (391 ) Effect of exchange rates on cash, cash equivalents and restricted cash and securities — — — (1 ) — (1 ) Net increase (decrease) in cash, cash equivalents and restricted cash and securities 26 — (42 ) (22 ) — (38 ) Cash, cash equivalents and restricted cash and securities and beginning of period 32 — 186 113 — 331 Cash, cash equivalents and restricted cash and securities and end of period $ 58 — 144 91 — 293 Condensed Consolidating Statements of Cash Flows Three Months Ended March 31, 2017 (Predecessor) Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total (Dollars in millions) OPERATING ACTIVITIES Net Cash Provided by (Used in) Operating Activities $ (16 ) (135 ) 109 581 — 539 INVESTING ACTIVITIES Capital expenditures — — (233 ) (135 ) — (368 ) Net cash provided by (used in) investing activities — — (233 ) (135 ) — (368 ) FINANCING ACTIVITIES Net proceeds from issuance of long-term debt — 4,569 — — — 4,569 Payments of long-term debt — (4,611 ) — (2 ) — (4,613 ) Increase (decrease) due from/to affiliates, net 16 177 262 (455 ) — — Net cash provided by (used in) financing activities 16 135 262 (457 ) — (44 ) Effect of exchange rates on cash, cash equivalents and restricted cash and securities — — — 1 — 1 Net increase (decrease) in cash, cash equivalents and restricted cash and securities — — 138 (10 ) — 128 Cash, cash equivalents and restricted cash and securities and beginning of period 37 — 1,710 110 — 1,857 Cash, cash equivalents and restricted cash and securities and end of period $ 37 — 1,848 100 — 1,985 |
Background (Details)
Background (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Provisional income tax expense (benefit) | $ 195 | ||
Provisional income tax expense (benefit), purchase accounting adjustment | $ 64 | ||
Reclassification from AOCI to retained earnings, tax effect | $ 6 | ||
Adjustments for New Accounting Pronouncement | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Production and distribution costs | $ 24 | ||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Retained earnings (accumulated deficit) | $ 9 | ||
Minimum | Contract Acquisition and Fulfillment Costs | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Amortization period | 12 months | ||
Maximum | Contract Acquisition and Fulfillment Costs | |||
New Accounting Pronouncement, Early Adoption [Line Items] | |||
Amortization period | 60 months |
CenturyLink Merger - Additional
CenturyLink Merger - Additional Information (Details) $ / shares in Units, shares in Millions, $ in Millions | Jan. 22, 2018USD ($) | Nov. 01, 2017USD ($)citydark_fiber$ / sharesshares | Apr. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Oct. 31, 2017$ / sharesshares |
Business Acquisition [Line Items] | |||||||
Long-term debt | $ 10,881 | $ 10,890 | |||||
Goodwill | 11,141 | 10,837 | |||||
Assets held for sale, selling price | $ 68 | ||||||
Proceeds from deposits from assets held for sale | 34 | ||||||
Scenario, Forecast | |||||||
Business Acquisition [Line Items] | |||||||
Proceeds from sale of intangible assets | $ 34 | ||||||
Subsequent Event | |||||||
Business Acquisition [Line Items] | |||||||
Payments of capital distribution | $ 15 | ||||||
Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Cash consideration per share (in dollars per share) | $ / shares | $ 26.50 | ||||||
Stock conversion ratio | 1.4286 | ||||||
Common stock outstanding (in shares) | shares | 362.2 | ||||||
Level 3 Parent, LLC | Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Ownership percentage by noncontrolling owners | 49.00% | ||||||
Level 3 Parent, LLC | CenturyLink | |||||||
Business Acquisition [Line Items] | |||||||
Cash consideration per share (in dollars per share) | $ / shares | $ 26.50 | ||||||
Stock conversion ratio | 1.4286 | ||||||
Restricted stock unit conversion ratio | 2.8386 | ||||||
Consideration transferred | $ 19,628 | ||||||
Equity interest issued or issuable (in shares) | shares | 517.3 | ||||||
Share price (in dollars per share) | $ / shares | $ 18.99 | ||||||
Payment for restricted stock unit conversion | $ 1 | ||||||
Equity interests issued and issuable (in shares) | 131 | ||||||
Payment to settle claims | 58 | ||||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Long-term Debt | $ 10,600 | 10,888 | 10,888 | ||||
Number of strands of dark fiber divested | dark_fiber | 24 | ||||||
Number of cities connected by dark fiber | city | 30 | ||||||
Goodwill | $ 11,141 | $ 11,141 | $ 10,837 | ||||
Level 3 Parent, LLC | CenturyLink | Unsecured Debt | |||||||
Business Acquisition [Line Items] | |||||||
Long-term debt | $ 1,825 | ||||||
Stated interest rate | 3.50% | ||||||
Level 3 Parent, LLC | CenturyLink | Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Ownership percentage by parent | 51.00% |
CenturyLink Merger - Preliminar
CenturyLink Merger - Preliminary Estimated Aggregate Consideration (Details) - USD ($) $ in Millions | Nov. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 |
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 11,141 | $ 10,837 | |
Purchase Price Adjustments | |||
Acquired finite-lived intangible assets weighted average remaining useful lives | 11 years 7 months 6 days | ||
CenturyLink | Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Cash, accounts receivable and other current assets | $ 3,314 | 3,317 | |
Property, plant and equipment | 9,403 | 9,311 | |
Other noncurrent assets | 938 | 782 | |
Current liabilities, excluding current maturities of long-term debt | (1,461) | (1,461) | |
Current maturities of long-term debt | (7) | (7) | |
Long-term debt | $ (10,600) | (10,888) | (10,888) |
Deferred revenue and other liabilities | (1,678) | (1,613) | |
Goodwill | 11,141 | 11,141 | 10,837 |
Total estimated aggregate consideration | 19,628 | 19,633 | |
Purchase Price Adjustments | |||
Cash, accounts receivable and other current assets | (3) | ||
Property, plant and equipment | 92 | ||
Other noncurrent assets | 156 | ||
Current liabilities, excluding current maturities of long-term debt | 0 | ||
Current maturities of long-term debt | 0 | ||
Long-term debt | 0 | ||
Deferred revenue and other liabilities | (65) | ||
Goodwill | 304 | ||
Total estimated aggregate consideration | (5) | ||
Accounts receivable | 863 | ||
Accounts receivable contractual value | 884 | ||
Accounts receivable, uncollectible | $ 21 | ||
Acquired finite-lived intangible assets weighted average remaining useful lives | 12 years | ||
CenturyLink | Customer Relationships | Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 8,488 | 8,964 | |
Purchase Price Adjustments | |||
Identifiable intangible assets | (476) | ||
CenturyLink | Other Intangible Assets | Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 378 | $ 391 | |
Purchase Price Adjustments | |||
Identifiable intangible assets | $ (13) |
CenturyLink Merger - Acquisitio
CenturyLink Merger - Acquisition Related Expenses (Details) - CenturyLink - Level 3 Parent, LLC - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Business Acquisition [Line Items] | ||
Transaction-related expenses | $ 0 | |
Integration-related expenses | 18 | |
Total acquisition-related expenses | $ 18 | |
Predecessor | ||
Business Acquisition [Line Items] | ||
Transaction-related expenses | $ 3 | |
Integration-related expenses | 18 | |
Total acquisition-related expenses | $ 21 |
Goodwill, Customer Relationsh32
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 11,141 | $ 10,837 |
Customer Contracts And Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | 8,206 | 8,845 |
Accumulated amortization | 300 | 126 |
Trade Names | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | 119 | 126 |
Accumulated amortization | 11 | 4 |
Patents and Developed Technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | 271 | 252 |
Accumulated amortization | 22 | 9 |
Other Intangible Assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, net | $ 390 | $ 378 |
Goodwill, Customer Relationsh33
Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Finite-Lived Intangible Assets [Line Items] | |||
Valuation allowance, available to reduce goodwill | $ 16 | ||
Acquired finite-lived intangible asset amortization expense | $ 194 | $ 52 | |
Intangible assets including goodwill, noncurrent | $ 20,291 | $ 20,549 | |
Acquired finite-lived intangible assets weighted average remaining useful lives | 11 years 7 months 6 days | ||
Customer Contracts And Relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Acquired finite-lived intangible assets weighted average remaining useful lives | 11 years 10 months 24 days | ||
Trade Names | |||
Finite-Lived Intangible Assets [Line Items] | |||
Acquired finite-lived intangible assets weighted average remaining useful lives | 4 years 7 months 6 days | ||
Patents and Developed Technology | |||
Finite-Lived Intangible Assets [Line Items] | |||
Acquired finite-lived intangible assets weighted average remaining useful lives | 4 years 7 months 6 days |
Goodwill, Customer Relationsh34
Goodwill, Customer Relationships and Other Intangible Assets - Amortization Expense (Details) $ in Millions | Mar. 31, 2018USD ($) |
Estimated amortization expense of finite-lived acquisition-related intangible assets | |
2018 (remaining nine months) | $ 599 |
2,019 | 799 |
2,020 | 799 |
2,021 | 799 |
2,022 | $ 787 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long Term Debt (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Long-term debt | ||
Total long-term debt, excluding unamortized premiums | $ 10,703 | $ 10,705 |
Unamortized premiums, net | 178 | 185 |
Total long-term debt | 10,881 | 10,890 |
Less current maturities | (9) | (8) |
Long-term debt, excluding current maturities | $ 10,872 | 10,882 |
Senior Notes, 5.75% Due 2022 | ||
Long-term debt | ||
Stated interest rate | 5.75% | |
Total long-term debt, excluding unamortized premiums | $ 600 | 600 |
Senior Notes with Varied Maturity Date | ||
Long-term debt | ||
Total long-term debt, excluding unamortized premiums | 5,315 | 5,315 |
Tranche B 2024 | ||
Long-term debt | ||
Total long-term debt, excluding unamortized premiums | $ 4,611 | $ 4,611 |
Effective percentage | 4.111% | 3.557% |
Capital Leases | ||
Long-term debt | ||
Total long-term debt, excluding unamortized premiums | $ 177 | $ 179 |
Minimum | Senior Notes with Varied Maturity Date | ||
Long-term debt | ||
Stated interest rate | 5.125% | |
Maximum | Senior Notes with Varied Maturity Date | ||
Long-term debt | ||
Stated interest rate | 6.125% | |
London Interbank Offered Rate (LIBOR) | Tranche B 2024 | ||
Long-term debt | ||
Basis spread on variable rate | 2.25% | |
London Interbank Offered Rate (LIBOR) | Minimum | Tranche B 2024 | ||
Long-term debt | ||
Basis spread on variable rate | 0.00% | |
London Interbank Offered Rate (LIBOR) | Level 3 Financing | Tranche B 2024 | ||
Long-term debt | ||
Basis spread on variable rate | 2.25% | |
London Interbank Offered Rate (LIBOR) | Level 3 Financing | Minimum | Tranche B 2024 | ||
Long-term debt | ||
Basis spread on variable rate | 0.00% |
Long-Term Debt - Textuals (Deta
Long-Term Debt - Textuals (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Long-term debt | |||
Total debt obligations | $ 10,703 | $ 10,705 | |
Capital Leases | |||
Long-term debt | |||
Total debt obligations | $ 177 | 179 | |
Weighted average interest rate | 5.80% | ||
Tranche B 2024 | |||
Long-term debt | |||
Total debt obligations | $ 4,611 | $ 4,611 | |
Tranche B 2024 | London Interbank Offered Rate (LIBOR) | |||
Long-term debt | |||
Basis spread on variable rate | 2.25% | ||
Tranche B 2024 | London Interbank Offered Rate (LIBOR) | Minimum | |||
Long-term debt | |||
Basis spread on variable rate | 0.00% | ||
Tranche B 2024 | Level 3 Financing | London Interbank Offered Rate (LIBOR) | |||
Long-term debt | |||
Basis spread on variable rate | 2.25% | ||
Upfront basis point | 0.25% | ||
Tranche B 2024 | Level 3 Financing | London Interbank Offered Rate (LIBOR) | Minimum | |||
Long-term debt | |||
Basis spread on variable rate | 0.00% | ||
2.0 Billion Tranche B-II 2022 Term Loan | |||
Long-term debt | |||
Payment for debt extinguishment or debt prepayment cost | $ 44 |
Long-Term Debt - Debt Maturitie
Long-Term Debt - Debt Maturities (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
2018 (remaining nine months) | $ 9 | |
2,019 | 8 | |
2,020 | 10 | |
2,021 | 651 | |
2,022 | 1,726 | |
2023 and thereafter | 8,299 | |
Total long-term debt, excluding unamortized premiums | $ 10,703 | $ 10,705 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | $ 2,087 |
Adjustments | (44) |
Total revenue from contracts with customers | 2,043 |
Transferred at Point in Time | |
Disaggregation of Revenue [Line Items] | |
Total revenue from contracts with customers | 0 |
Transferred over Time | |
Disaggregation of Revenue [Line Items] | |
Total revenue from contracts with customers | 2,043 |
Voice & Collaboration | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 381 |
Adjustments | 0 |
Total revenue from contracts with customers | 381 |
IT & Managed Services | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 1 |
Adjustments | 0 |
Total revenue from contracts with customers | 1 |
Transport & Infrastructure | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 675 |
Adjustments | (42) |
Total revenue from contracts with customers | 633 |
IP & Data Services | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 1,003 |
Adjustments | 0 |
Total revenue from contracts with customers | 1,003 |
Regulatory Revenue | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 2 |
Adjustments | (2) |
Total revenue from contracts with customers | 0 |
Affiliate Revenues | |
Disaggregation of Revenue [Line Items] | |
Total Revenues | 25 |
Adjustments | 0 |
Total revenue from contracts with customers | $ 25 |
Revenue Recognition - Contract
Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 |
Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 726,000 | $ 748,000 |
Contract liabilities | 373,000 | 353,000 |
Accounts receivable, gross | 730 | 751 |
Allowance for doubtful accounts receivable | $ 4 | $ 3 |
Revenue Recognition - Deferred
Revenue Recognition - Deferred Revenue (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue from Contract with Customer [Abstract] | |
Amounts included in contract liability at the beginning of the period | $ 97 |
Performance obligations satisfied in previous periods | $ 0 |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Details) $ in Billions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 7.5 |
Minimum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 1 year |
Average expected contract term | 10 years |
Maximum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 5 years |
Average expected contract term | 20 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 56.00% |
Remaining performance obligation, timing of satisfaction | 1 year 9 months |
Contract Acquisition and Fulfillment Costs | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Average expected contract term | 30 months |
Contract Acquisition and Fulfillment Costs | Minimum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Amortization period | 12 months |
Contract Acquisition and Fulfillment Costs | Maximum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Amortization period | 60 months |
Revenue Recognition - Capitaliz
Revenue Recognition - Capitalized Contract Cost (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Contract Acquisition Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | $ 13 |
Costs incurred | 15 |
Amortization | (2) |
Impairments | 0 |
End of period balance | 26 |
Contract Fulfillment Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | 14 |
Costs incurred | 23 |
Amortization | (2) |
Impairments | 0 |
End of period balance | $ 35 |
Revenue Recognition - Effects o
Revenue Recognition - Effects of ASC 606 (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | $ 2,087 | |
Cost of services and products (exclusive of depreciation and amortization) | 998 | |
Selling, general and administrative expenses | 344 | |
Income tax expense | 102 | |
Net income | 62 | |
Other current assets | 183 | $ 117 |
Other long-term assets, net | 96 | 63 |
Deferred income taxes, net | 249 | |
Members' Equity | 18,924 | $ 19,254 |
Impact of 606 | Accounting Standards Update 2014-09 | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 0 | |
Cost of services and products (exclusive of depreciation and amortization) | 0 | |
Selling, general and administrative expenses | 13 | |
Income tax expense | (3) | |
Net income | (10) | |
Other current assets | (11) | |
Other long-term assets, net | (15) | |
Deferred income taxes, net | 3 | |
Members' Equity | (19) | |
ASC 605 Historical Adjusted Balances | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 2,087 | |
Cost of services and products (exclusive of depreciation and amortization) | 998 | |
Selling, general and administrative expenses | 357 | |
Income tax expense | 99 | |
Net income | 52 | |
Other current assets | 172 | |
Other long-term assets, net | 81 | |
Deferred income taxes, net | 252 | |
Members' Equity | $ 18,905 |
Fair Value of Financial Instr44
Fair Value of Financial Instruments - Liabilities, Recurring (Details) - Fair Value, Measurements, Recurring - Significant Other Observable Inputs (Level 2) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Carrying Amount | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Liabilities-Long-term debt, excluding capital lease and other obligations | $ 10,704 | $ 10,711 |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Liabilities-Long-term debt, excluding capital lease and other obligations | $ 10,435 | $ 10,528 |
Commitments, Contingencies an45
Commitments, Contingencies and Other Items - Lawsuits (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($)Employeecontract | |
Loss Contingencies | |
Estimated litigation liability | $ 92 |
Peruvian Tax Litigation, Before Interest | Pending Litigation | |
Loss Contingencies | |
Asserted claim | 26 |
Peruvian Tax Litigation | Pending Litigation | |
Loss Contingencies | |
Asserted claim | 14 |
Employee Severance and Contractor Termination Disputes | Pending Litigation | |
Loss Contingencies | |
Asserted claim | 32 |
Brazilian Tax Claims | |
Loss Contingencies | |
Loss Contingency, Estimate of Possible Loss | $ 54 |
United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al. | |
Loss Contingencies | |
Number of former employees names in lawsuit | Employee | 2 |
Number of government contracts in question | contract | 2 |
Damages sought, value | $ 50 |
Commitments, Contingencies an46
Commitments, Contingencies and Other Items - Other Commitments (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Commitments and Contingencies Disclosure [Abstract] | ||
Amount outstanding under letters of credit or other similar obligations | $ 36 | $ 36 |
Collateralized by cash, that is reflected on the consolidated balance sheets as restricted cash | $ 30 | $ 30 |
Other Financial Information - O
Other Financial Information - Other Current Assets (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 90 | $ 68 |
Material, supplies and inventory | 4 | 3 |
Deferred activation and installation charges | 18 | 17 |
Deferred commissions | 12 | 0 |
Other | 59 | 29 |
Total other current assets | $ 183 | $ 117 |
Other Financial Information -48
Other Financial Information - Other Current Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Statement of Financial Position [Abstract] | ||
Self insurance | $ 6 | $ 11 |
Legal and tax reserves | 15 | 31 |
Other | 46 | 15 |
Total other current liabilities | 67 | 57 |
Accounts payable, capital expenditures | $ 73 | $ 74 |
Accumulated Other Comprehensi49
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Accumulated Other Comprehensive Loss [Line Items] | ||
Balance at beginning of period | $ 19,272 | |
Other comprehensive income (loss) before reclassifications, net of tax | 72 | $ 20 |
Adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | 6 | 1 |
Net other comprehensive (loss) income | 78 | 21 |
Balance at end of period | 19,020 | |
Pension Plans | ||
Accumulated Other Comprehensive Loss [Line Items] | ||
Balance at beginning of period | (34) | |
Other comprehensive income (loss) before reclassifications, net of tax | 0 | |
Adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | 1 | |
Net other comprehensive (loss) income | 1 | |
Balance at end of period | (33) | |
Foreign Currency Translation Adjustments and Other | ||
Accumulated Other Comprehensive Loss [Line Items] | ||
Balance at beginning of period | 18 | (353) |
Other comprehensive income (loss) before reclassifications, net of tax | 72 | 20 |
Adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | 6 | 0 |
Net other comprehensive (loss) income | 78 | 20 |
Balance at end of period | 96 | (333) |
AOCI Attributable to Parent | ||
Accumulated Other Comprehensive Loss [Line Items] | ||
Balance at beginning of period | 18 | (387) |
Balance at end of period | $ 96 | $ (366) |
Condensed Consolidating Finan50
Condensed Consolidating Financial Information - Statements of Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Condensed Consolidating Financial Information | ||
Operating revenues | $ 2,087 | |
Operating revenues - affiliate | 25 | |
Total operating revenues | 2,062 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 998 | |
Selling, general and administrative expenses | 344 | |
Operating expenses - affiliate | 53 | |
Depreciation and amortization | 431 | |
Total costs and expenses | 1,826 | |
OPERATING INCOME | 261 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 1 | |
Interest income - affiliate | 16 | |
Interest expense | (120) | |
Interest income (expense) - intercompany, net | 0 | |
Equity in net earnings (losses) of subsidiaries | 0 | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | 6 | |
Total other income (expense), net | (97) | |
INCOME (LOSS) BEFORE INCOME TAXES | 164 | |
Income tax expense | (102) | |
NET INCOME | 62 | |
Other comprehensive income | 72 | |
COMPREHENSIVE INCOME (LOSS) | 134 | |
Eliminations | ||
Condensed Consolidating Financial Information | ||
Operating revenues | (40) | |
Operating revenues - affiliate | 0 | |
Total operating revenues | (40) | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | (40) | |
Selling, general and administrative expenses | 0 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | (40) | |
OPERATING INCOME | 0 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | 0 | |
Interest income (expense) - intercompany, net | 0 | |
Equity in net earnings (losses) of subsidiaries | 1,155 | |
Other income, net | 0 | |
Total other income (expense), net | 1,155 | |
INCOME (LOSS) BEFORE INCOME TAXES | 1,155 | |
Income tax expense | 0 | |
NET INCOME | 1,155 | |
Other comprehensive income | (72) | |
COMPREHENSIVE INCOME (LOSS) | 1,083 | |
Level 3 Communications, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 0 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 0 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 0 | |
Selling, general and administrative expenses | 0 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | 0 | |
OPERATING INCOME | 0 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 16 | |
Interest expense | (8) | |
Interest income (expense) - intercompany, net | 355 | |
Equity in net earnings (losses) of subsidiaries | (315) | |
Other income, net | 0 | |
Total other income (expense), net | 48 | |
INCOME (LOSS) BEFORE INCOME TAXES | 48 | |
Income tax expense | 14 | |
NET INCOME | 62 | |
Other comprehensive income | 72 | |
COMPREHENSIVE INCOME (LOSS) | 134 | |
Level 3 Financing, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 0 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 0 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 0 | |
Selling, general and administrative expenses | 1 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | 1 | |
OPERATING INCOME | (1) | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | (108) | |
Interest income (expense) - intercompany, net | 608 | |
Equity in net earnings (losses) of subsidiaries | (839) | |
Other income, net | 0 | |
Total other income (expense), net | (339) | |
INCOME (LOSS) BEFORE INCOME TAXES | (340) | |
Income tax expense | 25 | |
NET INCOME | (315) | |
Other comprehensive income | 0 | |
COMPREHENSIVE INCOME (LOSS) | (315) | |
Level 3 Communications, LLC | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 981 | |
Operating revenues - affiliate | 25 | |
Total operating revenues | 956 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 589 | |
Selling, general and administrative expenses | 259 | |
Operating expenses - affiliate | 53 | |
Depreciation and amortization | 170 | |
Total costs and expenses | 1,071 | |
OPERATING INCOME | (90) | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | (1) | |
Interest income (expense) - intercompany, net | (881) | |
Equity in net earnings (losses) of subsidiaries | (1) | |
Other income, net | 1 | |
Total other income (expense), net | (882) | |
INCOME (LOSS) BEFORE INCOME TAXES | (972) | |
Income tax expense | (47) | |
NET INCOME | (1,019) | |
Other comprehensive income | 0 | |
COMPREHENSIVE INCOME (LOSS) | (1,019) | |
Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 1,146 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 1,146 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 449 | |
Selling, general and administrative expenses | 84 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 261 | |
Total costs and expenses | 794 | |
OPERATING INCOME | 352 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 1 | |
Interest income - affiliate | 0 | |
Interest expense | (3) | |
Interest income (expense) - intercompany, net | (82) | |
Equity in net earnings (losses) of subsidiaries | 0 | |
Other income, net | 5 | |
Total other income (expense), net | (79) | |
INCOME (LOSS) BEFORE INCOME TAXES | 273 | |
Income tax expense | (94) | |
NET INCOME | 179 | |
Other comprehensive income | 72 | |
COMPREHENSIVE INCOME (LOSS) | $ 251 | |
Predecessor | ||
Condensed Consolidating Financial Information | ||
Operating revenues | $ 2,048 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 2,048 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 1,051 | |
Selling, general and administrative expenses | 364 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 296 | |
Total costs and expenses | 1,711 | |
OPERATING INCOME | 337 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 2 | |
Interest income - affiliate | 0 | |
Interest expense | (134) | |
Interest income (expense) - intercompany, net | 0 | |
Equity in net earnings (losses) of subsidiaries | 0 | |
Loss on modification and extinguishment of debt | (44) | |
Other income, net | 4 | |
Total other income (expense), net | (172) | |
INCOME (LOSS) BEFORE INCOME TAXES | 165 | |
Income tax expense | (70) | |
NET INCOME | 95 | |
Other comprehensive income | 21 | |
COMPREHENSIVE INCOME (LOSS) | 116 | |
Predecessor | Eliminations | ||
Condensed Consolidating Financial Information | ||
Operating revenues | (29) | |
Operating revenues - affiliate | 0 | |
Total operating revenues | (29) | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | (29) | |
Selling, general and administrative expenses | 0 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | (29) | |
OPERATING INCOME | 0 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | 0 | |
Interest income (expense) - intercompany, net | 0 | |
Equity in net earnings (losses) of subsidiaries | 718 | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | 0 | |
Total other income (expense), net | 718 | |
INCOME (LOSS) BEFORE INCOME TAXES | 718 | |
Income tax expense | 0 | |
NET INCOME | 718 | |
Other comprehensive income | (21) | |
COMPREHENSIVE INCOME (LOSS) | 697 | |
Predecessor | Level 3 Communications, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 0 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 0 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 0 | |
Selling, general and administrative expenses | 1 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | 1 | |
OPERATING INCOME | (1) | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | (9) | |
Interest income (expense) - intercompany, net | 377 | |
Equity in net earnings (losses) of subsidiaries | (275) | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | 0 | |
Total other income (expense), net | 93 | |
INCOME (LOSS) BEFORE INCOME TAXES | 92 | |
Income tax expense | 3 | |
NET INCOME | 95 | |
Other comprehensive income | 21 | |
COMPREHENSIVE INCOME (LOSS) | 116 | |
Predecessor | Level 3 Financing, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 0 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 0 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 0 | |
Selling, general and administrative expenses | 1 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 0 | |
Total costs and expenses | 1 | |
OPERATING INCOME | (1) | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | (120) | |
Interest income (expense) - intercompany, net | 574 | |
Equity in net earnings (losses) of subsidiaries | (646) | |
Loss on modification and extinguishment of debt | (44) | |
Other income, net | 0 | |
Total other income (expense), net | (236) | |
INCOME (LOSS) BEFORE INCOME TAXES | (237) | |
Income tax expense | (38) | |
NET INCOME | (275) | |
Other comprehensive income | 0 | |
COMPREHENSIVE INCOME (LOSS) | (275) | |
Predecessor | Level 3 Communications, LLC | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 920 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 920 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 583 | |
Selling, general and administrative expenses | 277 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 87 | |
Total costs and expenses | 947 | |
OPERATING INCOME | (27) | |
OTHER INCOME (EXPENSE) | ||
Interest income | 2 | |
Interest income - affiliate | 0 | |
Interest expense | (1) | |
Interest income (expense) - intercompany, net | (869) | |
Equity in net earnings (losses) of subsidiaries | 203 | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | 5 | |
Total other income (expense), net | (660) | |
INCOME (LOSS) BEFORE INCOME TAXES | (687) | |
Income tax expense | (1) | |
NET INCOME | (688) | |
Other comprehensive income | 0 | |
COMPREHENSIVE INCOME (LOSS) | (688) | |
Predecessor | Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Operating revenues | 1,157 | |
Operating revenues - affiliate | 0 | |
Total operating revenues | 1,157 | |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 497 | |
Selling, general and administrative expenses | 85 | |
Operating expenses - affiliate | 0 | |
Depreciation and amortization | 209 | |
Total costs and expenses | 791 | |
OPERATING INCOME | 366 | |
OTHER INCOME (EXPENSE) | ||
Interest income | 0 | |
Interest income - affiliate | 0 | |
Interest expense | (4) | |
Interest income (expense) - intercompany, net | (82) | |
Equity in net earnings (losses) of subsidiaries | 0 | |
Loss on modification and extinguishment of debt | 0 | |
Other income, net | (1) | |
Total other income (expense), net | (87) | |
INCOME (LOSS) BEFORE INCOME TAXES | 279 | |
Income tax expense | (34) | |
NET INCOME | 245 | |
Other comprehensive income | 21 | |
COMPREHENSIVE INCOME (LOSS) | $ 266 |
Condensed Consolidating Finan51
Condensed Consolidating Financial Information - Balance Sheets (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 259 | $ 297 |
Restricted cash and securities | 5 | 5 |
Assets held for sale | 140 | 140 |
Accounts receivable | 726 | 748 |
Accounts receivable - affiliate | 3 | 13 |
Intercompany advances | 0 | 0 |
Note receivable - affiliate | 1,825 | 1,825 |
Other | 183 | 117 |
Total current assets | 3,141 | 3,145 |
Property, plant, and equipment, net | 9,542 | 9,412 |
Restricted cash and securities | 29 | 29 |
Goodwill | 11,141 | 10,837 |
Investment in subsidiaries | 0 | 0 |
Deferred tax assets | 458 | 426 |
Other, net | 96 | 63 |
Total goodwill and other assets | 20,291 | 20,549 |
TOTAL ASSETS | 33,003 | 33,135 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 9 | 8 |
Accounts payable | 678 | 695 |
Accounts payable - affiliate | 95 | 41 |
Income and other taxes | 87 | 100 |
Salary and benefits | 163 | 136 |
Interest | 95 | 109 |
Current portion of deferred revenue | 273 | 258 |
Current portion of deferred revenue - affiliate | 2 | 2 |
Intercompany payables | 0 | 0 |
Other | 67 | 57 |
Total current liabilities | 1,469 | 1,406 |
LONG-TERM DEBT | 10,872 | 10,882 |
Deferred revenue | 1,106 | 1,093 |
Deferred revenue - affiliate | 6 | 6 |
Deferred tax liability | 209 | 212 |
Other | 321 | 264 |
Total deferred credits and other liabilities | 1,642 | 1,575 |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | 19,020 | 19,272 |
Total liabilities and member's equity | 33,003 | 33,135 |
Eliminations | ||
CURRENT ASSETS | ||
Cash and cash equivalents | 0 | 0 |
Restricted cash and securities | 0 | 0 |
Assets held for sale | 0 | 0 |
Accounts receivable | 0 | 0 |
Accounts receivable - affiliate | 0 | (51) |
Intercompany advances | (43,283) | (42,483) |
Note receivable - affiliate | 0 | 0 |
Other | 0 | 0 |
Total current assets | (43,283) | (42,534) |
Property, plant, and equipment, net | 0 | 0 |
Restricted cash and securities | 0 | 0 |
Goodwill | 0 | 0 |
Investment in subsidiaries | (39,352) | (38,973) |
Deferred tax assets | (1,771) | (1,771) |
Other, net | 0 | 0 |
Total goodwill and other assets | (41,123) | (40,744) |
TOTAL ASSETS | (84,406) | (83,278) |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 0 | 0 |
Accounts payable | 0 | 0 |
Accounts payable - affiliate | 0 | (51) |
Income and other taxes | 0 | 0 |
Salary and benefits | 0 | 0 |
Interest | 0 | 0 |
Current portion of deferred revenue | 0 | 0 |
Current portion of deferred revenue - affiliate | 0 | 0 |
Intercompany payables | (43,283) | (42,483) |
Other | 0 | 0 |
Total current liabilities | (43,283) | (42,534) |
LONG-TERM DEBT | 0 | 0 |
Deferred revenue | 0 | 0 |
Deferred revenue - affiliate | 0 | 0 |
Deferred tax liability | (1,771) | (1,771) |
Other | 0 | 0 |
Total deferred credits and other liabilities | (1,771) | (1,771) |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | (39,352) | (38,973) |
Total liabilities and member's equity | (84,406) | (83,278) |
Level 3 Communications, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Cash and cash equivalents | 39 | 13 |
Restricted cash and securities | 0 | 0 |
Assets held for sale | 68 | 68 |
Accounts receivable | 0 | 0 |
Accounts receivable - affiliate | 0 | 0 |
Intercompany advances | 16,493 | 16,251 |
Note receivable - affiliate | 1,825 | 1,825 |
Other | 0 | 0 |
Total current assets | 18,425 | 18,157 |
Property, plant, and equipment, net | 0 | 0 |
Restricted cash and securities | 19 | 19 |
Goodwill | 0 | 0 |
Investment in subsidiaries | 16,955 | 16,954 |
Deferred tax assets | 279 | 280 |
Other, net | 0 | 0 |
Total goodwill and other assets | 17,234 | 17,234 |
TOTAL ASSETS | 35,678 | 35,410 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 0 | 0 |
Accounts payable | 0 | 0 |
Accounts payable - affiliate | 27 | 11 |
Income and other taxes | 0 | 0 |
Salary and benefits | 0 | 0 |
Interest | 3 | 11 |
Current portion of deferred revenue | 0 | 0 |
Current portion of deferred revenue - affiliate | 0 | 0 |
Intercompany payables | 0 | 0 |
Other | 0 | 16 |
Total current liabilities | 30 | 38 |
LONG-TERM DEBT | 615 | 616 |
Deferred revenue | 0 | 0 |
Deferred revenue - affiliate | 0 | 0 |
Deferred tax liability | 648 | 648 |
Other | 1 | 1 |
Total deferred credits and other liabilities | 649 | 649 |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | 34,384 | 34,107 |
Total liabilities and member's equity | 35,678 | 35,410 |
Level 3 Financing, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Cash and cash equivalents | 0 | 0 |
Restricted cash and securities | 0 | 0 |
Assets held for sale | 0 | 0 |
Accounts receivable | 0 | 0 |
Accounts receivable - affiliate | 0 | 0 |
Intercompany advances | 21,422 | 21,032 |
Note receivable - affiliate | 0 | 0 |
Other | 0 | 0 |
Total current assets | 21,422 | 21,032 |
Property, plant, and equipment, net | 0 | 0 |
Restricted cash and securities | 0 | 0 |
Goodwill | 0 | 0 |
Investment in subsidiaries | 18,788 | 18,403 |
Deferred tax assets | 1,826 | 1,795 |
Other, net | 0 | 0 |
Total goodwill and other assets | 20,614 | 20,198 |
TOTAL ASSETS | 42,036 | 41,230 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 0 | 0 |
Accounts payable | 1 | 1 |
Accounts payable - affiliate | 0 | 0 |
Income and other taxes | 1 | 0 |
Salary and benefits | 0 | 0 |
Interest | 85 | 91 |
Current portion of deferred revenue | 0 | 0 |
Current portion of deferred revenue - affiliate | 0 | 0 |
Intercompany payables | 0 | 0 |
Other | 0 | 0 |
Total current liabilities | 87 | 92 |
LONG-TERM DEBT | 10,088 | 10,096 |
Deferred revenue | 0 | 0 |
Deferred revenue - affiliate | 0 | 0 |
Deferred tax liability | 0 | 0 |
Other | 0 | 1 |
Total deferred credits and other liabilities | 0 | 1 |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | 31,861 | 31,041 |
Total liabilities and member's equity | 42,036 | 41,230 |
Level 3 Communications, LLC | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Cash and cash equivalents | 133 | 175 |
Restricted cash and securities | 1 | 1 |
Assets held for sale | 5 | 5 |
Accounts receivable | 10 | 26 |
Accounts receivable - affiliate | 0 | 60 |
Intercompany advances | 0 | 0 |
Note receivable - affiliate | 0 | 0 |
Other | 95 | 54 |
Total current assets | 244 | 321 |
Property, plant, and equipment, net | 3,103 | 3,237 |
Restricted cash and securities | 10 | 10 |
Goodwill | 1,658 | 1,200 |
Investment in subsidiaries | 3,609 | 3,616 |
Deferred tax assets | 114 | 0 |
Other, net | 54 | 32 |
Total goodwill and other assets | 9,804 | 9,550 |
TOTAL ASSETS | 13,161 | 13,118 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 2 | 2 |
Accounts payable | 318 | 323 |
Accounts payable - affiliate | 66 | 0 |
Income and other taxes | 45 | 55 |
Salary and benefits | 129 | 109 |
Interest | 0 | 0 |
Current portion of deferred revenue | 135 | 127 |
Current portion of deferred revenue - affiliate | 2 | 2 |
Intercompany payables | 43,283 | 42,483 |
Other | 16 | 23 |
Total current liabilities | 43,996 | 43,124 |
LONG-TERM DEBT | 13 | 13 |
Deferred revenue | 843 | 841 |
Deferred revenue - affiliate | 5 | 5 |
Deferred tax liability | 849 | 870 |
Other | 174 | 98 |
Total deferred credits and other liabilities | 1,871 | 1,814 |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | (32,719) | (31,833) |
Total liabilities and member's equity | 13,161 | 13,118 |
Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Cash and cash equivalents | 87 | 109 |
Restricted cash and securities | 4 | 4 |
Assets held for sale | 67 | 67 |
Accounts receivable | 716 | 722 |
Accounts receivable - affiliate | 3 | 4 |
Intercompany advances | 5,368 | 5,200 |
Note receivable - affiliate | 0 | 0 |
Other | 88 | 63 |
Total current assets | 6,333 | 6,169 |
Property, plant, and equipment, net | 6,439 | 6,175 |
Restricted cash and securities | 0 | 0 |
Goodwill | 9,483 | 9,637 |
Investment in subsidiaries | 0 | 0 |
Deferred tax assets | 10 | 122 |
Other, net | 42 | 31 |
Total goodwill and other assets | 13,762 | 14,311 |
TOTAL ASSETS | 26,534 | 26,655 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 7 | 6 |
Accounts payable | 359 | 371 |
Accounts payable - affiliate | 2 | 81 |
Income and other taxes | 41 | 45 |
Salary and benefits | 34 | 27 |
Interest | 7 | 7 |
Current portion of deferred revenue | 138 | 131 |
Current portion of deferred revenue - affiliate | 0 | 0 |
Intercompany payables | 0 | 0 |
Other | 51 | 18 |
Total current liabilities | 639 | 686 |
LONG-TERM DEBT | 156 | 157 |
Deferred revenue | 263 | 252 |
Deferred revenue - affiliate | 1 | 1 |
Deferred tax liability | 483 | 465 |
Other | 146 | 164 |
Total deferred credits and other liabilities | 893 | 882 |
COMMITMENTS AND CONTINGENCIES | ||
Total member's equity | 24,846 | 24,930 |
Total liabilities and member's equity | 26,534 | 26,655 |
Customer Contracts And Relationships | ||
CURRENT ASSETS | ||
Customer relationships, net | 8,206 | 8,845 |
Customer Contracts And Relationships | Eliminations | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Customer Contracts And Relationships | Level 3 Communications, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Customer Contracts And Relationships | Level 3 Financing, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Customer Contracts And Relationships | Level 3 Communications, LLC | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 3,979 | 4,324 |
Customer Contracts And Relationships | Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 4,227 | 4,521 |
Other Intangible Assets | ||
CURRENT ASSETS | ||
Customer relationships, net | 390 | 378 |
Other Intangible Assets | Eliminations | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Other Intangible Assets | Level 3 Communications, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Other Intangible Assets | Level 3 Financing, Inc. | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 0 | 0 |
Other Intangible Assets | Level 3 Communications, LLC | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | 390 | 378 |
Other Intangible Assets | Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
CURRENT ASSETS | ||
Customer relationships, net | $ 0 | $ 0 |
Condensed Consolidating Finan52
Condensed Consolidating Financial Information - Statements of Cash Flows (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | $ 571 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (252) | |
Proceeds from sale of property, plant and equipment and other assets | 1 | |
Deposits received on assets held for sale | 34 | |
Net cash used in investing activities | (217) | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | (1) | |
Distributions | (390) | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | (391) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | (1) | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | (38) | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 331 | |
Cash, cash equivalents and restricted cash and securities and end of period | 293 | |
Eliminations | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 0 | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Deposits received on assets held for sale | 0 | |
Net cash used in investing activities | 0 | |
Cash Flows from Financing Activities: | ||
Payments of long-term debt | 0 | |
Distributions | 0 | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | 0 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 0 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 0 | |
Cash, cash equivalents and restricted cash and securities and end of period | 0 | |
Level 3 Communications, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | (8) | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Deposits received on assets held for sale | 34 | |
Net cash used in investing activities | 34 | |
Cash Flows from Financing Activities: | ||
Payments of long-term debt | 0 | |
Distributions | (390) | |
Increase (decrease) due from/to affiliates, net | 390 | |
Net cash used in financing activities | 0 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 26 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 32 | |
Cash, cash equivalents and restricted cash and securities and end of period | 58 | |
Level 3 Financing, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 0 | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Deposits received on assets held for sale | 0 | |
Net cash used in investing activities | 0 | |
Cash Flows from Financing Activities: | ||
Payments of long-term debt | 0 | |
Distributions | 0 | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | 0 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 0 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 0 | |
Cash, cash equivalents and restricted cash and securities and end of period | 0 | |
Level 3 Communications, LLC | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 490 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (142) | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Deposits received on assets held for sale | 0 | |
Net cash used in investing activities | (142) | |
Cash Flows from Financing Activities: | ||
Payments of long-term debt | 0 | |
Distributions | 0 | |
Increase (decrease) due from/to affiliates, net | (390) | |
Net cash used in financing activities | (390) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | (42) | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 186 | |
Cash, cash equivalents and restricted cash and securities and end of period | 144 | |
Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 89 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (110) | |
Proceeds from sale of property, plant and equipment and other assets | 1 | |
Deposits received on assets held for sale | 0 | |
Net cash used in investing activities | (109) | |
Cash Flows from Financing Activities: | ||
Payments of long-term debt | (1) | |
Distributions | 0 | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | (1) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | (1) | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | (22) | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 113 | |
Cash, cash equivalents and restricted cash and securities and end of period | $ 91 | |
Predecessor | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | $ 539 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (368) | |
Proceeds from sale of property, plant and equipment and other assets | 0 | |
Deposits received on assets held for sale | 0 | |
Net cash used in investing activities | (368) | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 4,569 | |
Payments of long-term debt | (4,613) | |
Distributions | 0 | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | (44) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 1 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 128 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 1,857 | |
Cash, cash equivalents and restricted cash and securities and end of period | 1,985 | |
Predecessor | Eliminations | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 0 | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Net cash used in investing activities | 0 | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | 0 | |
Increase (decrease) due from/to affiliates, net | 0 | |
Net cash used in financing activities | 0 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 0 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 0 | |
Cash, cash equivalents and restricted cash and securities and end of period | 0 | |
Predecessor | Level 3 Communications, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | (16) | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Net cash used in investing activities | 0 | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | 0 | |
Increase (decrease) due from/to affiliates, net | 16 | |
Net cash used in financing activities | 16 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 0 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 37 | |
Cash, cash equivalents and restricted cash and securities and end of period | 37 | |
Predecessor | Level 3 Financing, Inc. | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | (135) | |
INVESTING ACTIVITIES | ||
Capital expenditures | 0 | |
Net cash used in investing activities | 0 | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 4,569 | |
Payments of long-term debt | (4,611) | |
Increase (decrease) due from/to affiliates, net | 177 | |
Net cash used in financing activities | 135 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 0 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 0 | |
Cash, cash equivalents and restricted cash and securities and end of period | 0 | |
Predecessor | Level 3 Communications, LLC | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 109 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (233) | |
Net cash used in investing activities | (233) | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | 0 | |
Increase (decrease) due from/to affiliates, net | 262 | |
Net cash used in financing activities | 262 | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 0 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | 138 | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 1,710 | |
Cash, cash equivalents and restricted cash and securities and end of period | 1,848 | |
Predecessor | Other Non-Guarantor Subsidiaries | Reportable Legal Entities | ||
Condensed Consolidating Financial Information | ||
Net cash provided by operating activities | 581 | |
INVESTING ACTIVITIES | ||
Capital expenditures | (135) | |
Net cash used in investing activities | (135) | |
Cash Flows from Financing Activities: | ||
Net proceeds from issuance of long-term debt | 0 | |
Payments of long-term debt | (2) | |
Increase (decrease) due from/to affiliates, net | (455) | |
Net cash used in financing activities | (457) | |
Effect of exchange rates on cash, cash equivalents and restricted cash and securities | 1 | |
Net (decrease) increase in cash, cash equivalents and restricted cash and securities | (10) | |
Cash, cash equivalents and restricted cash and securities and beginning of period | 110 | |
Cash, cash equivalents and restricted cash and securities and end of period | $ 100 |