Financial Statements of Guarantors (Tables)

6 Months Ended

Jun. 30, 2012

Financial Statements of Guarantors

Schedule of CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			2,736			—			2,736
Operating revenues—affiliates		—			1			100			(1	)		100
Total operating revenues		—			1			2,836			(1	)		2,836
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			1,213			—			1,213
Selling, general and administrative		1			1			442			—			444
Operating expenses—affiliates		—			—			151			(1	)		150
Depreciation and amortization		16			—			722			—			738
Total operating expenses		17			1			2,528			(1	)		2,545
OPERATING (LOSS) INCOME		(17	)		—			308			—			291
OTHER INCOME (EXPENSE)
Interest expense		(25	)		(16	)		(113	)		—			(154	)
Interest expense—affiliates		(21	)		(28	)		(8	)		27			(30	)
Interest income—affiliates		—			27			—			(27	)		—
Income from equity investments in subsidiaries		91			15			—			(106	)		—
Net loss on early retirement of debt		—			—			(45	)		—			(45	)
Other income (expense)		5			—			(3	)		—			2
Total other income (expense)		50			(2	)		(169	)		(106	)		(227	)
INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE		33			(2	)		139			(106	)		64
Income tax (benefit) expense		(4	)		(93	)		124			—			27
NET INCOME	$	37			91			15			(106	)		37
COMPREHENSIVE INCOME	$	37			91			15			(106	)		37

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			5,461			—			5,461
Operating revenues—affiliates		—			3			214			(3	)		214
Total operating revenues		—			3			5,675			(3	)		5,675
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			2,388			—			2,388
Selling, general and administrative		3			3			922			—			928
Operating expenses—affiliates		—			—			302			(3	)		299
Depreciation and amortization		34			—			1,445			—			1,479
Total operating expenses		37			3			5,057			(3	)		5,094
OPERATING (LOSS) INCOME		(37	)		—			618			—			581
OTHER INCOME (EXPENSE)
Interest expense		(64	)		(34	)		(226	)		—			(324	)
Interest expense—affiliates		(22	)		(54	)		(11	)		53			(34	)
Interest income—affiliates		—			53			—			(53	)		—
Income from equity investments in subsidiaries		217			60			—			(277	)		—
Net loss on early retirement of debt		—			—			(37	)		—			(37	)
Other income (expense)		13			—			(10	)		—			3
Total other income (expense)		144			25			(284	)		(277	)		(392	)
INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		107			25			334			(277	)		189
Income tax (benefit) expense		(7	)		(192	)		274			—			75
NET INCOME	$	114			217			60			(277	)		114
COMPREHENSIVE INCOME	$	114			217			60			(277	)		114

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			2,763			—			2,763
Operating revenues—affiliates		—			3			15			(12	)		6
Total operating revenues		—			3			2,778			(12	)		2,769
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			1,141			—			1,141
Selling, general and administrative		5			3			648			—			656
Operating expenses—affiliates		—			—			44			(12	)		32
Depreciation and amortization		22			—			780			—			802
Total operating expenses		27			3			2,613			(12	)		2,631
OPERATING (LOSS) INCOME		(27	)		—			165			—			138
OTHER INCOME (EXPENSE)
Interest expense		(44	)		(18	)		(88	)		—			(150	)
Interest expense—affiliates		(4	)		(23	)		1			26			—
Interest income—affiliates		—			26			—			(26	)		—
Income from equity investments in subsidiaries		67			(52	)		—			(15	)		—
Net loss on early retirement of debt		—			—			(1	)		—			(1	)
Total other income (expense)		19			(67	)		(88	)		(15	)		(151	)
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(8	)		(67	)		77			(15	)		(13	)
Income tax (benefit) expense		5			(131	)		126			—			—
NET (LOSS) INCOME	$	(13	)		64			(49	)		(15	)		(13	)
COMPREHENSIVE (LOSS) INCOME	$	(13	)		64			(49	)		(15	)		(13	)

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES:
Operating revenues	$	—			—			2,846			—			2,846
Operating revenues—affiliates		—			2			9			(11	)		—
Total operating revenues		—			2			2,855			(11	)		2,846
OPERATING EXPENSES:
Cost of services and products (exclusive of depreciation and amortization)		—			—			1,178			—			1,178
Selling, general and administrative		3			2			551			—			556
Operating expenses—affiliates		—			—			11			(11	)		—
Depreciation and amortization		—			—			533			—			533
Total operating expenses		3			2			2,273			(11	)		2,267
OPERATING (LOSS) INCOME		(3	)		—			582			—			579
OTHER INCOME (EXPENSE)
Interest expense		(56	)		(19	)		(152	)		—			(227	)
Interest expense—affiliates		(1	)		(26	)		(1	)		28			—
Interest income—affiliates		—			28			—			(28	)		—
Income from equity investments in subsidiaries		272			226			—			(498	)		—
Other income (expense)		—			(1	)		6			—			5
Total other income (expense)		215			208			(147	)		(498	)		(222	)
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		212			208			435			(498	)		357
Income tax expense (benefit)		1			(64	)		209			—			146
NET INCOME	$	211			272			226			(498	)		211
COMPREHENSIVE INCOME	$	218			272			226			(498	)		218

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

Schedule of CONDENSED CONSOLIDATING BALANCE SHEETS

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)		QSC(2) & QCF(3)		Subsidiary Non-Guarantors		Eliminations			QCII Consolidated
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—		27		14		—			41
Accounts receivable, less allowance		43		—		1,177		—			1,220
Accounts receivable—affiliates, net		—		1,109		1,208		(2,244	)		73
Notes receivable—affiliates		—		1,413		—		(1,413	)		—
Deferred income taxes, net		—		430		123		—			553
Other		23		—		283		—			306
Total current assets		66		2,979		2,805		(3,657	)		2,193
Net property, plant and equipment		—		—		9,147		—			9,147
Goodwill		—		—		10,123		—			10,123
Customer relationships, net		—		—		6,300		—			6,300
Other intangible assets, net		92		—		1,330		—			1,422
Investments in subsidiaries		14,284		13,788		—		(28,072	)		—
Deferred income taxes, net		1,102		1,029		—		(2,131	)		—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,777		76		957		(3,810	)		—
Other		40		7		316		—			363
TOTAL ASSETS	$	18,361		17,879		30,978		(37,670	)		29,548
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		—		1,342		—			1,342
Accounts payable		—		1		735		—			736
Accounts payable—affiliates, net		794		—		—		(794	)		—
Notes payable—affiliates		—		1,413		583		(1,413	)		583
Dividends payable—affiliates		750		750		700		(1,450	)		750
Accrued expenses and other liabilities		246		40		679		—			965
Advance billings and customers deposits		—		—		411		—			411
Total current liabilities		1,790		2,204		4,450		(3,657	)		4,787
LONG-TERM DEBT		1,444		1,008		6,984		—			9,436
DEFERRED CREDITS AND OTHER LIABILITIES
Benefit plan obligations, net		3,124		—		—		—			3,124
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,033		351		2,426		(3,810	)		—
Deferred income taxes, net		—		—		2,832		(2,131	)		701
Other		168		32		498		—			698
Total deferred credits and other liabilities		4,325		383		5,756		(5,941	)		4,523
STOCKHOLDER'S EQUITY		10,802		14,284		13,788		(28,072	)		10,802
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	18,361		17,879		30,978		(37,670	)		29,548

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)		QSC(2) & QCF(3)		Subsidiary Non-Guarantors		Eliminations			QCII Consolidated
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—		40		8		—			48
Accounts receivable, less allowance		15		2		1,184		—			1,201
Accounts receivable—affiliates, net		211		336		36		(583	)		—
Advances to affiliates		184		1,694		400		(1,536	)		742
Deferred income taxes, net		—		438		121		—			559
Other		—		19		259		(13	)		265
Total current assets		410		2,529		2,008		(2,132	)		2,815
Net property, plant and equipment		—		—		9,461		—			9,461
Goodwill		—		—		10,123		—			10,123
Customer relationships, net		—		—		6,788		—			6,788
Other intangible assets, net		126		—		1,461		—			1,587
Investments in subsidiaries		14,856		13,999		—		(28,855	)		—
Deferred income taxes, net		1,102		1,390		117		(2,609	)		—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,851		76		955		(3,882	)		—
Other		36		7		338		—			381
TOTAL ASSETS	$	19,381		18,001		31,251		(37,478	)		31,155
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		—		117		—			117
Current debt—affiliates		122		1,413		—		(1,535	)		—
Accounts payable		4		19		950		—			973
Accounts payable—affiliates, net		360		42		23		(31	)		394
Dividends payable—affiliates		200		—		310		(310	)		200
Accrued expenses and other liabilities		272		40		700		(1	)		1,011
Accrued expenses and other—affiliates		1		62		192		(255	)		—
Advance billings and customers deposits		—		—		400		—			400
Total current liabilities		959		1,576		2,692		(2,132	)		3,095
LONG-TERM DEBT		2,767		1,009		8,403		—			12,179
DEFERRED CREDITS AND OTHER LIABILITIES
Benefit plan obligations, net		3,198		—		—		—			3,198
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		1,031		344		2,507		(3,882	)		—
Deferred income taxes, net		—		223		3,016		(2,609	)		630
Other		150		31		596		—			777
Total deferred credits and other liabilities		4,379		598		6,119		(6,491	)		4,605
STOCKHOLDER'S EQUITY		11,276		14,818		14,037		(28,855	)		11,276
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	19,381		18,001		31,251		(37,478	)		31,155

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

Schedule of CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2012
SUCCESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(415	)		(141	)		1,647			(13	)		1,078
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(752	)		—			(752	)
Changes in advances to affiliates		184			128			(1,422	)		1,779			669
Proceeds from sale of property		—			—			133			—			133
Net cash provided by (used in) investing activities		184			128			(2,041	)		1,779			50
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		—			—			897			—			897
Payments of long-term debt		(1,299	)		—			(952	)		—			(2,251	)
Early retirement of debt costs		(49	)		—			(128	)		—			(177	)
Notes payable—affiliates		—			—			583			—			583
Accounts Payable—affiliates		1,579			—			—			(1,766	)		(187	)
Net cash used in financing activities		231			—			400			(1,766	)		(1,135	)
Net (decrease) increase in cash and cash equivalents		—			(13	)		6			—			(7	)
Cash and cash equivalents at beginning of period		—			40			8			—			48
Cash and cash equivalents at end of the period	$	—			27			14			—			41

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2011
SUCCESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating activities	$	(76	)		213			563			—			700
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(347	)		—			(347	)
Cash infusion to subsidiaries		—			(168	)		—			168			—
Changes in advances to affiliates		—			(243	)		(272	)		4			(511	)
Dividends received from subsidiaries		—			120			—			(120	)		—
Other, net		—			—			2			—			2
Net cash provided by (used in) investing activities		—			(291	)		(617	)		52			(856	)
FINANCING ACTIVITIES
Payments of long-term debt		—			—			(851	)		—			(851	)
Net proceeds from (repayments of) short-term affiliate debt		76			(72	)		—			(4	)		—
Net proceeds from issuance of long-term debt		—			—			643			—			643
Cash infusion from parent		—			—			168			(168	)		—
Dividends paid to parent		—			—			(120	)		120			—
Early retirement of debt costs		—			—			(13	)		—			(13	)
Net cash used in financing activities		76			(72	)		(173	)		(52	)		(221	)
Net increase in cash and cash equivalents		—			(150	)		(227	)		—			(377	)
Cash and cash equivalents at beginning of period		—			183			241			—			424
Cash and cash equivalents at end of the period	$	—			33			14			—			47

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.

QWEST COMMUNICATIONS INTERNATIONAL INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
PREDECESSOR
(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non-Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash provided by (used in) operating activities	$	7			(62	)		828			4			777
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(410	)		—			(410	)
Changes in interest in investments managed by QSC		—			(3	)		3			—			—
Cash infusion to subsidiaries		—			(191	)		—			191			—
Changes in advances to affiliates		—			180			1			(181	)		—
Dividends received from subsidiaries		—			590			—			(590	)		—
Other, net		—			—			2			—			2
Net cash provided by (used in) investing activities		—			576			(404	)		(580	)		(408	)
FINANCING ACTIVITIES
Payments of long-term debt		—			(179	)		(24	)		—			(203	)
Net proceeds from (repayments of) short-term affiliate debt		119			(300	)		—			181			—
Dividends paid		(141	)		—			—			—			(141	)
Cash infusion from parent		—			—			191			(191	)		—
Dividends paid to parent		—			—			(590	)		590			—
Other, net		15			—			16			(4	)		27
Net cash used in financing activities		(7	)		(479	)		(407	)		576			(317	)
Net increase in cash and cash equivalents		—			35			17			—			52
Cash and cash equivalents at beginning of period		—			148			224			—			372
Cash and cash equivalents at end of the period	$	—			183			241			—			424

(1)

QCII is the issuer of the QCII Guaranteed Notes and is a guarantor of the QCF Guaranteed Notes.

(2)

QSC is a guarantor of the QCII Guaranteed Notes.

(3)

QCF is the issuer of the QCF Guaranteed Notes and is a guarantor of the QCII Guaranteed Notes.