Financial Statements of Guarantors (Tables)

6 Months Ended

Jun. 30, 2011

Financial Statements of Guarantors

Condensed Consolidating Statements of Income

Qwest Communications International Inc.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

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		43			—			780			—			823
Total operating expenses		48			3			2,613			(12	)		2,652
OPERATING (LOSS) INCOME		(48	)		—			165			—			117
OTHER INCOME (EXPENSE)
Interest expense		(44	)		(18	)		(88	)		—			(150	)
Interest expense—affiliates		(4	)		(23	)		1			26			—
Interest income—affiliates		—			26			—			(26	)		—
Loss on early retirement of debt		—			—			(1	)		—			(1	)
Income (loss) from equity investments in subsidiaries		67			(52	)		—			(15	)		—
Total other income (expense)		19			(67	)		(88	)		(15	)		(151	)
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE		(29	)		(67	)		77			(15	)		(34	)
Income tax (benefit) expense		(3	)		(131	)		126			—			(8	)
NET (LOSS) INCOME	$	(26	)		64			(49	)		(15	)		(26	)

(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

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 (expense) income, net		—			(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

(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

THREE MONTHS ENDED JUNE 30, 2010

PREDECESSOR

(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	—			—			2,930			—			2,930
Operating revenues—affiliates		—			(1	)		1			—			—
Total operating revenues		—			(1	)		2,931			—			2,930
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)		—			—			1,240			—			1,240
Selling, general and administrative		35			(2	)		600			—			633
Depreciation and amortization		—			—			548			—			548
Total operating expenses		35			(2	)		2,388			—			2,421
OPERATING (LOSS) INCOME		(35	)		1			543			—			509
OTHER INCOME (EXPENSE)
Interest expense		(82	)		(22	)		(161	)		—			(265	)
Interest expense—affiliates		—			(71	)		—			71			—
Interest income—affiliates		—			71			—			(71	)		—
Income from equity investments in subsidiaries		237			187						(424	)		—
Other income, net		21			1			—			—			22
Total other income (expense)		176			166			(161	)		(424	)		(243	)
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		141			167			382			(424	)		266
Income tax (benefit) expense		(17	)		(74	)		199			—			108
NET INCOME	$	158			241			183			(424	)		158

(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

SIX MONTHS ENDED JUNE 30, 2010

PREDECESSOR

(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
OPERATING REVENUES
Operating revenues	$	—			—			5,896			—			5,896
Operating revenues—affiliates		—			2			8			(10	)		—
Total operating revenues		—			2			5,904			(10	)		5,896
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)		—			—			2,487			—			2,487
Selling, general and administrative		39			1			1,199			—			1,239
Operating expenses—affiliates		—			—			10			(10	)		—
Depreciation and amortization		—			—			1,093			—			1,093
Total operating expenses		39			1			4,789			(10	)		4,819
OPERATING (LOSS) INCOME		(39	)		1			1,115			—			1,077
OTHER INCOME (EXPENSE)
Interest expense		(168	)		(58	)		(318	)		—			(544	)
Interest expense—affiliates		—			(155	)		—			155			—
Interest income—affiliates		—			155			—			(155	)		—
Loss on early retirement of debt		(2	)		(40	)		—			—			(42	)
Income from equity investments in subsidiaries		366			335			—			(701	)		—
Other income (expense), net		21			1			—			—			22
Total other income (expense)		217			238			(318	)		(701	)		(564	)
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)		178			239			797			(701	)		513
Income tax (benefit) expense		(18	)		(131	)		466			—			317
NET INCOME	$	196			370			331			(701	)		196

(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.

Condensed Consolidating Balance Sheets

Qwest Communications International Inc.

CONDENSED CONSOLIDATING BALANCE SHEETS

JUNE 30, 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	$	—		33		14		—			47
Accounts receivable, less allowance		15		25		1,147		—			1,187
Accounts receivable—affiliates		235		869		375		(929	)		550
Notes receivable—affiliates		—		1,402		100		(1,502	)		—
Deferred income taxes, net		65		11		168		(39	)		205
Other		5		4		244		(19	)		234
Total current assets		320		2,344		2,048		(2,489	)		2,223
Net property, plant and equipment		—		—		9,442		—			9,442
Goodwill		—		—		10,005		—			10,005
Customer relationships, net		—		—		7,365					7,365
Other intangible assets, net		323		—		1,631		—			1,954
Investments in subsidiaries		15,324		13,888		—		(29,212	)		—
Deferred income taxes, net		756		1,738		11		(2,505	)		—
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,853		72		922		(3,847	)		—
Other		37		8		253		—			298
TOTAL ASSETS		19,613		18,050		31,677		(38,053	)		31,287
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt		—		—		1,600		—			1,600
Current debt—affiliates		314		1,188		—		(1,502	)		—
Accounts payable		5		5		908		—			918
Accounts payable—affiliates		46		2		2		(50	)		—
Accrued expenses and other liabilities		300		32		762		(6	)		1,088
Accrued expenses and other—affiliates		1		118		760		(879	)		—
Deferred income taxes, net		—		39		—		(39	)		—
Advance billings and customer deposits		—		—		378		(13	)		365
Total current liabilities		666		1,384		4,410		(2,489	)		3,971
LONG-TERM DEBT		2,779		1,010		7,022		—			10,811
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenues		—		—		75		—			75
Benefit plan obligations, net		2,820		—		—		—			2,820
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		994		337		2,516		(3,847	)		—
Deferred income taxes		—		—		3,083		(2,505	)		578
Other		135		29		649		—			813
Total deferred credits and other liabilities		3,949		366		6,323		(6,352	)		4,286
Stockholders' equity		12,219		15,290		13,922		(29,212	)		12,219
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	19,613		18,050		31,677		(38,053	)		31,287

(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 BALANCE SHEETS

DECEMBER 31, 2010

PREDECESSOR

(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)		Subsidiary Non- Guarantors		Eliminations			QCII Consolidated
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—			148		224		—			372
Accounts receivable, less allowance		16			22		1,226		—			1,264
Accounts receivable—affiliates		296			277		154		(727	)		—
Notes receivable—affiliates		—			1,568		110		(1,678	)		—
Deferred income taxes, net		—			36		208		(10	)		234
Other		9			26		353		(28	)		360
Total current assets		321			2,077		2,275		(2,443	)		2,230
Property, plant and equipment, net		—			—		11,857		—			11,857
Other intangible assets, net		50			—		888		—			938
Investments in subsidiaries		1,355			429		—		(1,784	)		—
Deferred income taxes, net		840			2,045		139		(1,338	)		1,686
Prepaid pension, post-retirement and other post-employment benefits—affiliate		2,848			71		914		(3,833	)		—
Other		75			45		389		—			509
TOTAL ASSETS	$	5,489			4,667		16,462		(9,398	)		17,220
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—			179		910		—			1,089
Current debt—affiliates		118			1,560		—		(1,678	)		—
Accounts payable		8			4		1,021		—			1,033
Accounts payable—affiliates		26			20		186		(232	)		—
Accrued expenses and other liabilities		296			58		842		(7	)		1,189
Accrued expenses and other—affiliates		—			175		320		(495	)		—
Deferred income taxes, net		10			—		—		(10	)		—
Advance billings and customer deposits		—			—		572		(21	)		551
Total current liabilities		458			1,996		3,851		(2,443	)		3,862
LONG-TERM DEBT		2,598			978		7,282		—			10,858
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred revenues		—			—		459		—			459
Benefit plan obligations, net		2,979			—		—		—			2,979
Pension, post-retirement and other post-employment benefits obligations and other—affiliates		985			356		2,492		(3,833	)		—
Deferred income taxes		—			11		1,327		(1,338	)		—
Other		124			2		591		—			717
Total deferred credits and other liabilities		4,088			369		4,869		(5,171	)		4,155
Stockholders' (deficit) equity		(1,655	)		1,324		460		(1,784	)		(1,655	)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	5,489			4,667		16,462		(9,398	)		17,220

(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.

Condensed Consolidating Statements of Cash Flows

Qwest Communications International Inc.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

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 (used in) provided by 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 short-term affiliate loans		—			(243	)		(272	)		4			(511	)
Dividends received from subsidiaries		—			120			—			(120	)		—
Other, net		—			—			2			—			2
Net cash (used in) provided by investing activities		—			(291	)		(617	)		52			(856	)
FINANCING ACTIVITIES
Payments of 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 provided by (used in) financing activities		76			(72	)		(173	)		(52	)		(221	)
Net decrease 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 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.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

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	)
(Purchases) proceeds of investments managed by QSC		—			(3	)		3			—			—
Cash infusion to subsidiaries		—			(191	)		—			191			—
Net decrease (increase) in short-term affiliate loans		—			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 debt		—			(179	)		(24	)		—			(203	)
Net proceeds from (repayments of) short-term affiliate debt		119			(300	)		—			181			—
Dividends paid		(141	)		—			—			—			(141	)
Proceeds from issuance of common stock		14			—			—			—			14
Cash infusion from parent		—			—			191			(191	)		—
Dividends paid to parent		—			—			(590	)		590			—
Other, net		1			—			16			(4	)		13
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 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.

Qwest Communications International Inc.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2010

PREDECESSOR

(UNAUDITED)

	QCII(1)			QSC(2) & QCF(3)			Subsidiary Non- Guarantors			Eliminations			QCII Consolidated
	(Dollars in millions)
Net cash (used in) provided by operating activities	$	(140	)		421			1,333			27			1,641
INVESTING ACTIVITIES
Payments for property, plant and equipment and capitalized software		—			—			(717	)		—			(717	)
Proceeds from sales or maturities of investment securities		—			159			—			—			159
Purchases of investment securities		—			(821	)		—			—			(821	)
Changes in interest in investments managed by QSC		(15	)		187			(172	)		—			—
Cash infusion to subsidiaries		—			(321	)		—			321			—
Net decrease (increase) in short-term affiliate loans		—			923			16			(939	)		—
Dividends received from subsidiaries		—			1,150			—			(1,150	)		—
Net cash (used in) provided by investing activities		(15	)		1,277			(873	)		(1,768	)		(1,379	)
FINANCING ACTIVITIES
Payments of debt		(525	)		(960	)		(520	)		—			(2,005	)
Net proceeds from issuance of long-term debt		775			—			—			—			775
Net (repayments of) proceeds from short-term affiliate debt		(16	)		(923	)		—			939			—
Dividends paid		(277	)		—			—			—			(277	)
Proceeds from issuance of common stock		17			—			—			—			17
Cash infusion from parent		—			—			321			(321	)		—
Dividends paid to parent		—			—			(1,150	)		1,150			—
Early retirement of debt costs		—			(40	)		—			—			(40	)
Other, net		20			—			(13	)		(27	)		(20	)
Net cash (used in) provided by financing activities		(6	)		(1,923	)		(1,362	)		1,741			(1,550	)
Net decrease in cash and cash equivalents		(161	)		(225	)		(902	)		—			(1,288	)
Cash and cash equivalents at beginning of period		194			987			1,225			—			2,406
Cash and cash equivalents at end of period	$	33			762			323			—			1,118

(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.