Condensed Consolidating Financial Information (Notes)

3 Months Ended

Mar. 31, 2017

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

(11) 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 Communications, Inc. 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, 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 Communications, Inc. These transactions are eliminated in our consolidated results.

Condensed Consolidating Statements of Comprehensive Income (Loss)

Three Months Ended March 31, 2017

	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	920		$	1,157		$	(29	)	$	2,048
Costs and Expense:
Network Access Costs	—			—			323			397			(29		)	691
Network Related Expenses	—			—			243			93			—			336
Depreciation and Amortization	—			—			104			216			—			320
Selling, General and Administrative Expenses	1			1			277			85			—			364
Total Costs 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 expense	(9		)	(120		)	(1		)	(4		)	—			(134		)
Interest income (expense) affiliates, net	377			574			(869		)	(82		)	—			—
Equity in net earnings (losses) of subsidiaries	(275		)	(646		)	203			—			718			—
Other, net	—			(44		)	5			(1		)	—			(40		)
Total Other Income (Expense)	93			(236		)	(660		)	(87		)	718			(172		)
Income (Loss) before Income Taxes	92			(237		)	(687		)	279			718			165
Income Tax Benefit (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 Statements of Comprehensive Income (Loss)

Three Months Ended March 31, 2016

	Level 3 Communications, Inc.			Level 3 Financing, Inc.			Level 3 Communications, LLC			Other Non-Guarantor Subsidiaries			Eliminations			Total
	(dollars in millions)
Revenue	$	—		$	—		$	866		$	1,219		$	(34	)	$	2,051
Costs and Expense:
Network access costs	—			—			320			408			(34		)	694
Network related expenses	—			—			237			101			—			338
Depreciation and amortization	—			—			88			213			—			301
Selling, general and administrative expenses	1			1			250			104			—			356
Total Costs and Expenses	1			1			895			826			(34		)	1,689
Operating (Loss) Income	(1		)	(1		)	(29		)	393			—			362
Other Income (Expense):
Interest income	—			—			—			1			—			1
Interest expense	(9		)	(128		)	(1		)	3			—			(135		)
Interest income (expense) affiliates, net	342			531			(801		)	(72		)	—			—
Equity in net earnings (losses) of subsidiaries	(212		)	(541		)	199			—			554			—
Other, net	—			—			2			(12		)	—			(10		)
Total Other Income (Expense)	121			(138		)	(601		)	(80		)	554			(144		)
Income (Loss) before Income Taxes	120			(139		)	(630		)	313			554			218
Income Tax Expense	4			(69		)	(1		)	(24		)	—			(90		)
Net Income (Loss)	124			(208		)	(631		)	289			554			128
Other Comprehensive Income (Loss), Net of Income Taxes	45			—			—			45			(45		)	45
Comprehensive Income (Loss)	$	169		$	(208	)	$	(631	)	$	334		$	509		$	173

Condensed Consolidating Balance Sheets

March 31, 2017

	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	$	15	$	—	$	1,838		$	94	$	—		$	1,947
Restricted cash and securities	—		—		1			6		—			7
Receivables, less allowances for doubtful accounts	—		—		18			694		—			712
Due from affiliates	17,415		22,142		—			2,531		(42,088		)	—
Other	—		—		111			30		—			141
Total Current Assets	17,430		22,142		1,968			3,355		(42,088		)	2,807
Property, Plant, and Equipment, net	—		—		4,012			6,273		—			10,285
Restricted Cash and Securities	22		—		9			—		—			31
Goodwill and Other Intangibles, net	—		—		352			8,240		—			8,592
Investment in Subsidiaries	16,899		17,610		3,655			—		(38,164		)	—
Deferred Tax Assets	53		2,650		(1		)	603		—			3,305
Other Assets, net	—		—		15			36		—			51
Total Assets	$	34,404	$	42,402	$	10,010		$	18,507	$	(80,252	)	$	25,071
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	3	$	346		$	401	$	—		$	750
Current portion of long-term debt	—		299		2			6		—			307
Accrued payroll and employee benefits	—		—		112			36		—			148
Accrued interest	3		91		—			7		—			101
Current portion of deferred revenue	—		—		114			161		—			275
Due to affiliates	—		—		42,088			—		(42,088		)	—
Other	—		1		125			27		—			153
Total Current Liabilities	3		394		42,787			638		(42,088		)	1,734
Long-Term Debt, less current portion	592		9,813		12			164		—			10,581
Deferred Revenue, less current portion	—		—		760			284		—			1,044
Other Liabilities	16		—		160			455		—			631
Commitments and Contingencies
Stockholders' Equity (Deficit)	33,793		32,195		(33,709		)	16,966		(38,164		)	11,081
Total Liabilities and Stockholders' Equity (Deficit)	$	34,404	$	42,402	$	10,010		$	18,507	$	(80,252	)	$	25,071

Condensed Consolidating Balance Sheets

December 31, 2016

	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	$	15	$	—	$	1,700		$	104	$	—		$	1,819
Restricted cash and securities	—		—		1			6		—			7
Receivables, less allowances for doubtful accounts	—		—		26			686		—			712
Due from affiliates	17,032		21,715		—			2,180		(40,927		)	—
Other	—		—		87			28		—			115
Total Current Assets	17,047		21,715		1,814			3,004		(40,927		)	2,653
Property, Plant, and Equipment, net	—		—		3,869			6,270		—			10,139
Restricted Cash and Securities	22		—		9			—		—			31
Goodwill and Other Intangibles, net	—		—		353			8,291		—			8,644
Investment in Subsidiaries	16,869		17,599		3,674			—		(38,142		)	—
Deferred Tax Assets	51		2,687		—			632		—			3,370
Other Assets, net	—		—		16			35		—			51
Total Assets	$	33,989	$	42,001	$	9,735		$	18,232	$	(79,069	)	$	24,888
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	—	$	—	$	307		$	399	$	—		$	706
Current portion of long-term debt	—		—		2			5		—			7
Accrued payroll and employee benefits	—		—		160			35		—			195
Accrued interest	11		110		—			8		—			129
Current portion of deferred revenue	—		—		116			150		—			266
Due to affiliates	—		—		40,927			—		(40,927		)	—
Other	—		—		127			41		—			168
Total Current Liabilities	11		110		41,639			638		(40,927		)	1,471
Long-Term Debt, less current portion	592		10,108		13			164		—			10,877
Deferred Revenue, less current portion	—		—		719			282		—			1,001
Other Liabilities	16		—		155			451		—			622
Commitments and Contingencies
Stockholders' Equity (Deficit)	33,370		31,783		(32,791		)	16,697		(38,142		)	10,917
Total Liabilities and Stockholders' Equity (Deficit)	$	33,989	$	42,001	$	9,735		$	18,232	$	(79,069	)	$	24,888

Condensed Consolidating Statements of Cash Flows

Three Months EndedMarch 31, 2017

	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	$	(16	)	$	(135	)	$	109		$	581		$	—	$	539
Cash Flows from Investing Activities:
Capital expenditures	—			—			(233		)	(135		)	—		(368		)
Decrease in restricted cash and securities, net	—			—			—			—			—		—
Proceeds from the sale of property, plant and equipment and other assets	—			—			—			—			—		—
Net Cash Provided by (Used in) Investing Activities	—			—			(233		)	(135		)	—		(368		)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs	—			4,569			—			—			—		4,569
Payments on and repurchases of long-term debt and capital leases	—			(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 and Cash Equivalents	—			—			—			1			—		1
Net Change in Cash and Cash Equivalents	—			—			138			(10		)	—		128
Cash and Cash Equivalents at Beginning of Period	15			—			1,700			104			—		1,819
Cash and Cash Equivalents at End of Period	$	15		$	—		$	1,838		$	94		$	—	$	1,947

Condensed Consolidating Statements of Cash Flows

Three Months EndedMarch 31, 2016

	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	$	(17	)	$	(92	)	$	130		$	489		$	—	$	510
Cash Flows from Investing Activities:
Capital expenditures	—			—			(159		)	(138		)	—		(297		)
(Increase) decrease in restricted cash and securities, net	—			(829		)	1			—			—		(828		)
Net Cash Used in Investing Activities	—			(829		)	(158		)	(138		)	—		(1,125		)
Cash Flows from Financing Activities:
Long-term debt borrowings, net of issuance costs	—			765			—			—			—		765
Payments on and repurchases of long-term debt and capital leases	—			—			—			(1		)	—		(1		)
Increase (decrease) due from/to affiliates, net	17			156			187			(360		)	—		—
Net Cash Provided by (Used in) Financing Activities	17			921			187			(361		)	—		764
Effect of Exchange Rates on Cash and Cash Equivalents	—			—			—			1			—		1
Net Change in Cash and Cash Equivalents	—			—			159			(9		)	—		150
Cash and Cash Equivalents at Beginning of Period	12			6			727			109			—		854
Cash and Cash Equivalents at End of Period	$	12		$	6		$	886		$	100		$	—	$	1,004