Condensed Consolidating Financial Information (Notes)

6 Months Ended

Jun. 30, 2014

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

Level 3 Financing, Inc., a wholly owned subsidiary of the Company, 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 Communications, Inc. and Level 3 Communications, LLC.

In conjunction with the registration of the 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 the Company’s consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the results of operations, financial position and 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 Communications, Inc. These transactions are eliminated in the consolidated results of the Company.

Condensed Consolidating Statements of Comprehensive Income (Loss)

Three Months Ended June 30, 2014



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	760		$	918		$	(53	)	$	1,625
Costs and Expense:
Cost of Revenue	—			—			288			378			(53		)	613
Depreciation and Amortization	—			—			69			118			—			187
Selling, General and Administrative	1			1			371			196			—			569
Total Costs and Expenses	1			1			728			692			(53		)	1,369
Operating Income (Loss)	(1		)	(1		)	32			226			—			256
Other Income (Expense):
Interest expense	(34		)	(113		)	1			(3		)	—			(149		)
Interest income (expense) affiliates, net	303			459			(727		)	(35		)	—			—
Equity in net earnings (losses) of subsidiaries	(217		)	(561		)	162			—			616			—
Other, net	—			—			1			(45		)	—			(44		)
Total Other Income (Expense)	52			(215		)	(563		)	(83		)	616			(193		)
Income (Loss) before Income Taxes	51			(216		)	(531		)	143			616			63
Income Tax Expense	—			(1		)	—			(11		)	—			(12		)
Net Income (Loss)	51			(217		)	(531		)	132			616			51
Other Comprehensive Income, Net of Income Taxes	13			—			—			13			(13		)	13
Comprehensive Income (Loss)	$	64		$	(217	)	$	(531	)	$	145		$	603		$	64

Condensed Consolidating Statements of Comprehensive Income (Loss)

Six Months Ended June 30, 2014



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	1,497		$	1,849		$	(112	)	$	3,234
Costs and Expense:
Cost of Revenue	—			—			578			761			(112		)	1,227
Depreciation and Amortization	—			—			139			232			—			371
Selling, General and Administrative	1			1			696			418			—			1,116
Total Costs and Expenses	1			1			1,413			1,411			(112		)	2,714
Operating Income (Loss)	(1		)	(1		)	84			438			—			520
Other Income (Expense):
Interest expense	(68		)	(225		)	—			(7		)	—			(300		)
Interest income (expense) affiliates, net	591			918			(1,439		)	(70		)	—			—
Equity in net earnings (losses) of subsidiaries	(359		)	(1,049		)	340			—			1,068			—
Other, net	—			—			4			(42		)	—			(38		)
Total Other Expense	164			(356		)	(1,095		)	(119		)	1,068			(338		)
Income (Loss) before Income Taxes	163			(357		)	(1,011		)	319			1,068			182
Income Tax Expense	—			(2		)	(1		)	(16		)	—			(19		)
Net Income (Loss)	163			(359		)	(1,012		)	303			1,068			163
Other Comprehensive Loss, Net of Income Taxes	19			—			—			19			(19		)	19
Comprehensive Income (Loss)	$	182		$	(359	)	$	(1,012	)	$	322		$	1,049		$	182

Condensed Consolidating Statements of Comprehensive Income (Loss)

Three Months Ended June 30, 2013



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	694		$	928		$	(57	)	$	1,565
Costs and Expense:
Cost of Revenue	—			—			256			417			(57		)	616
Depreciation and Amortization	—			—			71			128			—			199
Selling, General and Administrative	—			—			412			198			—			610
Total Costs and Expenses	—			—			739			743			(57		)	1,425
Operating Income (Loss)	—			—			(45		)	185			—			140
Other Income (Expense):
Interest expense	(37		)	(125		)	—			(5		)	—			(167		)
Interest income (expense) affiliates, net	272			425			(669		)	(28		)	—			—
Equity in net earnings (losses) of subsidiaries	(259		)	(559		)	130			—			688			—
Other, net	—			—			1			13			—			14
Total Other Expense	(24		)	(259		)	(538		)	(20		)	688			(153		)
Income (Loss) before Income Taxes	(24		)	(259		)	(583		)	165			688			(13		)
Income Tax Expense	—			—			—			(11		)	—			(11		)
Net Income (Loss)	(24		)	(259		)	(583		)	154			688			(24		)
Other Comprehensive Income, Net of Income Taxes	(11		)	(11		)	—			(11		)	22			(11		)
Comprehensive Income (Loss)	$	(35	)	$	(270	)	$	(583	)	$	143		$	710		$	(35	)

Condensed Consolidating Statements of Comprehensive Income (Loss)

Six Months Ended June 30, 2013



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	1,379		$	1,884		$	(121	)	$	3,142
Costs and Expense:
Cost of Revenue	—			—			517			849			(121		)	1,245
Depreciation and Amortization	—			—			142			251			—			393
Selling, General and Administrative	1			—			793			415			—			1,209
Total Costs and Expenses	1			—			1,452			1,515			(121		)	2,847
Operating Income (Loss)	(1		)	—			(73		)	369			—			295
Other Income (Expense):
Interest expense	(76		)	(251		)	(1		)	(8		)	—			(336		)
Interest income (expense) affiliates, net	545			855			(1,338		)	(62		)	—			—
Equity in net earnings (losses) of subsidiaries	(570		)	(1,173		)	276			—			1,467			—
Other, net	—			(1		)	2			(37		)	—			(36		)
Total Other Expense	(101		)	(570		)	(1,061		)	(107		)	1,467			(372		)
Income (Loss) before Income Taxes	(102		)	(570		)	(1,134		)	262			1,467			(77		)
Income Tax Expense	—			—			(1		)	(24		)	—			(25		)
Net Income (Loss)	(102		)	(570		)	(1,135		)	238			1,467			(102		)
Other Comprehensive Income, Net of Income Taxes	(63		)	(63		)	—			(63		)	126			(63		)
Comprehensive Income (Loss)	$	(165	)	$	(633	)	$	(1,135	)	$	175		$	1,593		$	(165	)

Condensed Consolidating Balance Sheets

June 30, 2014



	Level 3 Communications, Inc.		Level 3 Financing, Inc.		Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Assets
Current Assets:
Cash and cash equivalents	$	8	$	6	$	414		$	209		$	—		$	637
Restricted cash and securities	—		—		1			5			—			6
Receivables, less allowances for doubtful accounts	—		—		85			637			—			722
Due from affiliates	16,060		17,582		(32,979		)	(663		)	—			—
Other	4		16		68			86			—			174
Total Current Assets	16,072		17,604		(32,411		)	274			—			1,539
Property, Plant, and Equipment, net	—		—		3,084			5,271			—			8,355
Restricted Cash and Securities	3		—		18			2			—			23
Goodwill and Other Intangibles, net	—		—		380			2,367			—			2,747
Investment in Subsidiaries	10,099		8,959		3,734			—			(22,792		)	—
Other Assets, net	8		105		9			242			—			364
Total Assets	$	26,182	$	26,668	$	(25,186	)	$	8,156		$	(22,792	)	$	13,028

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	1	$	284		$	328		$	—		$	613
Current portion of long-term debt	474		—		2			27			—			503
Accrued payroll and employee benefits	—		—		104			41			—			145
Accrued interest	30		136		—			—			—			166
Current portion of deferred revenue	—		—		120			138			—			258
Due to affiliates	—		—		—			—			—			—
Other	—		2		71			66			—			139
Total Current Liabilities	504		139		581			600			—			1,824
Long-Term Debt, less current portion	898		6,906		16			35			—			7,855
Deferred Revenue, less current portion	—		—		573			312			—			885
Other Liabilities	15		29		125			616			—			785
Commitments and Contingencies	—		—		—			—			—			—
Stockholders' Equity (Deficit)	24,765		19,594		(26,481		)	6,593			(22,792		)	1,679
Total Liabilities and Stockholders' Equity (Deficit)	$	26,182	$	26,668	$	(25,186	)	$	8,156		$	(22,792	)	$	13,028

Condensed Consolidating Balance Sheets

December 31, 2013



	Level 3 Communications, Inc.		Level 3 Financing, Inc.		Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries		Eliminations			Total
	(dollars in millions)
Assets
Current Assets:
Cash and cash equivalents	$	8	$	6	$	347		$	270	$	—		$	631
Restricted cash and securities	—		—		1			6		—			7
Receivables, less allowances for doubtful accounts	—		—		79			594		—			673
Due from affiliates	15,507		16,886		—			—		(32,393		)	—
Other	2		15		47			79		—			143
Total Current Assets	15,517		16,907		474			949		(32,393		)	1,454
Property, Plant, and Equipment, net	—		—		3,028			5,212		—			8,240
Restricted Cash and Securities	3		—		18			2		—			23
Goodwill and Other Intangibles, net	—		—		395			2,387		—			2,782
Investment in Subsidiaries	10,039		27,014		3,735			—		(40,788		)	—
Other Assets, net	10		113		11			241		—			375
Total Assets	$	25,569	$	44,034	$	7,661		$	8,791	$	(73,181	)	$	12,874

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	2	$	42		$	581	$	—		$	625
Current portion of long-term debt	—		—		3			28		—			31
Accrued payroll and employee benefits	—		—		171			38		—			209
Accrued interest	30		129		—			1		—			160
Current portion of deferred revenue	—		—		131			122		—			253
Due to affiliates	—		—		32,165			228		(32,393		)	—
Other	—		13		74			81		—			168
Total Current Liabilities	30		144		32,586			1,079		(32,393		)	1,446
Long-Term Debt, less current portion	1,370		6,905		17			39		—			8,331
Deferred Revenue, less current portion	—		—		603			303		—			906
Other Liabilities	15		27		135			603		—			780
Commitments and Contingencies	—		—		—			—		—			—
Stockholders' Equity (Deficit)	24,154		36,958		(25,680		)	6,767		(40,788		)	1,411
Total Liabilities and Stockholders' Equity (Deficit)	$	25,569	$	44,034	$	7,661		$	8,791	$	(73,181	)	$	12,874

Condensed Consolidating Statements of Cash Flows

Six Months Ended June 30, 2014



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations		Total
	(dollars in millions)
Net Cash Provided by (Used in) Operating Activities	$	(66	)	$	(222	)	$	370		$	362		$	—	$	444
Cash Flows from Investing Activities:
Capital Expenditures	—			—			(192		)	(212		)	—		(404		)
Decrease in restricted cash and securities, net	—			—			—			2			—		2
Net Cash Provided by (Used in) Investing Activities	—			—			(192		)	(210		)	—		(402		)
Cash Flows from Financing Activities:
Payments on and repurchases of long-term debt, including current portion and refinancing costs	—			—			—			(6		)	—		(6		)
Increase (decrease) due from/to affiliates, net	66			222			(111		)	(177		)	—		—
Net Cash Provided by (Used in) Financing Activities	66			222			(111		)	(183		)	—		(6		)
Effect of Exchange Rates on Cash and Cash Equivalents	—			—			—			(30		)	—		(30		)
Net Change in Cash and Cash Equivalents	—			—			67			(61		)	—		6
Cash and Cash Equivalents at Beginning of Period	8			6			347			270			—		631
Cash and Cash Equivalents at End of Period	$	8		$	6		$	414		$	209		$	—	$	637

Condensed Consolidating Statements of Cash Flows

Six Months Ended June 30, 2013



	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations		Total
	(dollars in millions)
Net Cash Provided by (Used in) Operating Activities	$	(86	)	$	(269	)	$	74		$	504		$	—	$	223
Cash Flows from Investing Activities:
Capital Expenditures	—			—			(159		)	(218		)	—		(377		)
Decrease in restricted cash and securities, net	5			—			—			3			—		8
Other	—			—			—			(14		)	—		(14		)
Net Cash Provided by (Used in) Investing Activities	5			—			(159		)	(229		)	—		(383		)
Cash Flows from Financing Activities:
Payments on and repurchases of long-term debt, including current portion and refinancing costs	(172		)	(3		)	(4		)	(20		)	—		(199		)
Increase (decrease) due from/to affiliates, net	9			272			60			(341		)	—		—
Net Cash Provided by (Used in) Financing Activities	(163		)	269			56			(361		)	—		(199		)
Effect of Exchange Rates on Cash and Cash Equivalents	—			—			—			(24		)	—		(24		)
Net Change in Cash and Cash Equivalents	(244		)	—			(29		)	(110		)	—		(383		)
Cash and Cash Equivalents at Beginning of Period	253			5			386			335			—		979
Cash and Cash Equivalents at End of Period	$	9		$	5		$	357		$	225		$	—	$	596