ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State of Incorporation) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | Smaller reporting company | ||||||||||||||||||
Emerging growth company |
Years Ended December 31, | |||||||||||||||||
2023(1) | 2022(1) | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Operating revenue | $ | 7,037 | 7,493 | 7,952 | |||||||||||||
Operating expenses | 8,662 | 11,741 | 6,920 | ||||||||||||||
Operating (loss) income | $ | (1,625) | (4,248) | 1,032 | |||||||||||||
Net (loss) income | $ | (2,004) | (4,793) | 586 |
As of December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Total assets | $ | 17,253 | 19,759 | ||||||||
Total long-term debt (1) | 8,983 | 8,096 | |||||||||
Total member's equity | 3,616 | 6,775 |
As of December 31, | |||||||||||
2023 | 2022(5) | ||||||||||
Land | 2 | % | 2 | % | |||||||
Fiber, conduit and other outside plant (1) | 40 | % | 41 | % | |||||||
Central office and other network electronics (2) | 31 | % | 29 | % | |||||||
Support assets (3) | 20 | % | 21 | % | |||||||
Construction in progress (4) | 7 | % | 7 | % | |||||||
Gross property, plant and equipment | 100 | % | 100 | % |
Years Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Operating revenue | $ | 7,037 | 7,493 | ||||||||
Operating expenses | 8,662 | 11,741 | |||||||||
Operating loss | (1,625) | (4,248) | |||||||||
Other expense, net | (381) | (289) | |||||||||
Loss before income taxes | (2,006) | (4,537) | |||||||||
Income tax expense | (2) | 256 | |||||||||
Net loss | $ | (2,004) | (4,793) |
Years Ended December 31, | % Change | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Grow | $ | 3,890 | 3,960 | (2) | % | ||||||||||||
Nurture | 1,704 | 1,905 | (11) | % | |||||||||||||
Harvest | 1,068 | 1,283 | (17) | % | |||||||||||||
Other | 151 | 118 | 28 | % | |||||||||||||
Affiliate Services | 224 | 227 | (1) | % | |||||||||||||
Total operating revenue | $ | 7,037 | 7,493 | (6) | % |
Years Ended December 31, | % Change | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Cost of services and products (exclusive of depreciation and amortization) | $ | 3,028 | 3,229 | (6) | % | ||||||||||||
Selling, general and administrative | 1,360 | 1,188 | 14 | % | |||||||||||||
Net loss on sale of businesses | 123 | 493 | (75) | % | |||||||||||||
Operating expenses - affiliates | 781 | 659 | 19 | % | |||||||||||||
Depreciation and amortization | 1,400 | 1,534 | (9) | % | |||||||||||||
Goodwill impairment | 1,970 | 4,638 | (58) | % | |||||||||||||
Total operating expenses | $ | 8,662 | 11,741 | (26) | % |
Years Ended December 31, | % Change | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Depreciation | $ | 686 | 790 | (13) | % | ||||||||||||
Amortization | 714 | 744 | (4) | % | |||||||||||||
Total depreciation and amortization | $ | 1,400 | 1,534 | (9) | % |
Years Ended December 31, | % Change | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Interest expense | $ | (458) | (374) | 22 | % | ||||||||||||
Interest income - affiliate | 62 | 62 | — | % | |||||||||||||
Other income, net | 15 | 23 | (35) | % | |||||||||||||
Total other expense, net | $ | (381) | (289) | 32 | % | ||||||||||||
Income tax (benefit) expense | $ | (2) | 256 | (101) | % |
Years Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Gain on extinguishment of debt | $ | — | 8 | ||||||||
Foreign currency (loss) gain | (8) | 13 | |||||||||
Interest income | 22 | 6 | |||||||||
Other | 1 | (4) | |||||||||
Total other income, net | $ | 15 | 23 |
Borrower | Moody's Investors Service, Inc. | Standard & Poor's | Fitch Ratings | |||||||||||||||||
Level 3 Financing, Inc. | ||||||||||||||||||||
Unsecured | Caa2 | CC | CCC+ | |||||||||||||||||
Secured | B3 | B | B- |
Years Ended December 31, | Increase/(Decrease) | ||||||||||||||||
2023 | 2022 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Net cash provided by operating activities | $ | 1,621 | 2,251 | (630) | |||||||||||||
Net cash provided by investing activities | 872 | 1,536 | 664 | ||||||||||||||
Net cash used in financing activities | (637) | (3,814) | (3,177) |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
OPERATING REVENUE | |||||||||||||||||
Operating revenue | $ | ||||||||||||||||
Operating revenue - affiliates | |||||||||||||||||
Total operating revenue | |||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||
Cost of services and products (exclusive of depreciation and amortization) | |||||||||||||||||
Selling, general and administrative | |||||||||||||||||
Net loss on sale of businesses | |||||||||||||||||
Operating expenses - affiliates | |||||||||||||||||
Depreciation and amortization | |||||||||||||||||
Goodwill impairment | |||||||||||||||||
Total operating expenses | |||||||||||||||||
OPERATING (LOSS) INCOME | ( | ( | |||||||||||||||
OTHER (EXPENSE) INCOME | |||||||||||||||||
Interest expense | ( | ( | ( | ||||||||||||||
Interest income - affiliate | |||||||||||||||||
Other income, net | |||||||||||||||||
Total other expense, net | ( | ( | ( | ||||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | ( | ( | |||||||||||||||
Income tax (benefit) expense | ( | ||||||||||||||||
NET (LOSS) INCOME | $ | ( | ( |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
NET (LOSS) INCOME | $ | ( | ( | ||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||
Reclassification of realized loss on foreign currency translation to net loss on sale of businesses, net of $ | |||||||||||||||||
Defined benefit pension plan adjustment, net of $ | |||||||||||||||||
Reclassification of net actuarial loss to net loss on the sale of businesses, net of $ | ( | ||||||||||||||||
Foreign currency translation adjustment, net of $( | ( | ( | ( | ||||||||||||||
Other comprehensive income (loss), net of tax | ( | ||||||||||||||||
COMPREHENSIVE (LOSS) INCOME | $ | ( | ( |
As of December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | ||||||||||
Accounts receivable, less allowance of $ | |||||||||||
Note receivable - affiliate | |||||||||||
Assets held for sale | |||||||||||
Other | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation $ | |||||||||||
GOODWILL AND OTHER ASSETS | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Other, net | |||||||||||
Total goodwill and other assets | |||||||||||
TOTAL ASSETS | $ | ||||||||||
LIABILITIES AND MEMBER'S EQUITY | |||||||||||
CURRENT LIABILITIES | |||||||||||
Current maturities of long-term debt | $ | ||||||||||
Accounts payable | |||||||||||
Accounts payable - affiliates | |||||||||||
Accrued expenses and other liabilities | |||||||||||
Salaries and benefits | |||||||||||
Income and other taxes | |||||||||||
Current operating lease liabilities | |||||||||||
Interest | |||||||||||
Other | |||||||||||
Liabilities held for sale | |||||||||||
Current portion of deferred revenue | |||||||||||
Total current liabilities | |||||||||||
LONG-TERM DEBT | |||||||||||
DEFERRED REVENUE AND OTHER LIABILITIES | |||||||||||
Deferred revenue | |||||||||||
Operating lease liabilities | |||||||||||
Other | |||||||||||
Total deferred revenue and other liabilities | |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 16) | |||||||||||
MEMBER'S EQUITY | |||||||||||
Member's equity | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total member's equity | |||||||||||
TOTAL LIABILITIES AND MEMBER'S EQUITY | $ |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
OPERATING ACTIVITIES | |||||||||||||||||
NET (LOSS) INCOME | $ | ( | ( | ||||||||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | |||||||||||||||||
Net loss on sale of businesses | |||||||||||||||||
Goodwill impairment | |||||||||||||||||
Deferred income taxes | ( | ||||||||||||||||
Changes in current assets and liabilities: | |||||||||||||||||
Accounts receivable | ( | ( | |||||||||||||||
Accounts payable | ( | ( | |||||||||||||||
Other assets and liabilities, net | ( | ( | ( | ||||||||||||||
Other assets and liabilities, affiliate | ( | ( | |||||||||||||||
Changes in other noncurrent assets and liabilities, net | |||||||||||||||||
Other, net | ( | ||||||||||||||||
Net cash provided by operating activities | |||||||||||||||||
INVESTING ACTIVITIES | |||||||||||||||||
Capital expenditures | ( | ( | ( | ||||||||||||||
Proceeds from sale of business | |||||||||||||||||
Proceeds from sale of property, plant and equipment and other assets | |||||||||||||||||
Other, net | ( | ||||||||||||||||
Net cash provided by (used in) investing activities | ( | ||||||||||||||||
FINANCING ACTIVITIES | |||||||||||||||||
Net proceeds from issuance of long-term debt | |||||||||||||||||
Distributions | ( | ( | ( | ||||||||||||||
Payments of long-term debt | ( | ( | ( | ||||||||||||||
Other | ( | ( | ( | ||||||||||||||
Net cash used in financing activities | ( | ( | ( | ||||||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ( | |||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | ||||||||||||||||
Supplemental cash flow information: | |||||||||||||||||
Income taxes paid, net | $ | ( | ( | ( | |||||||||||||
Interest paid (net of capitalized interest of $ | ( | ( | ( | ||||||||||||||
Supplemental non-cash information regarding financing activities: | |||||||||||||||||
Issuance of senior secured notes as part of exchange offers (Note 7) | $ | ||||||||||||||||
Cash, cash equivalents and restricted cash: | |||||||||||||||||
Cash and cash equivalents | $ | ||||||||||||||||
Cash and cash equivalents, and restricted cash included in assets held for sale | |||||||||||||||||
Restricted cash included in Other current assets | |||||||||||||||||
Restricted cash included in Other, net noncurrent assets | |||||||||||||||||
Total | $ |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
MEMBER'S EQUITY | |||||||||||||||||
Balance at beginning of period | $ | ||||||||||||||||
Net (loss) income | ( | ( | |||||||||||||||
Distributions | ( | ( | ( | ||||||||||||||
Other | |||||||||||||||||
Balance at end of period | |||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | |||||||||||||||||
Balance at beginning of period | ( | ( | ( | ||||||||||||||
Other comprehensive income (loss) | ( | ||||||||||||||||
Balance at end of period | ( | ( | ( | ||||||||||||||
TOTAL MEMBER'S EQUITY | $ |
Years Ended December 31, | ||||||||
2022(1) | 2021 | |||||||
(Dollars in millions) | ||||||||
Latin American business pre-tax net income | $ |
August 1, 2022 | |||||
(Dollars in millions) | |||||
Assets held for sale | |||||
Cash and cash equivalents | $ | ||||
Accounts receivable, less allowance of $ | |||||
Other current assets | |||||
Property, plant and equipment, net accumulated depreciation of $ | |||||
Goodwill (1) | |||||
Customer relationships and other intangibles, net | |||||
Other non-current assets | |||||
Total assets held for sale | $ | ||||
Liabilities held for sale | |||||
Accounts payable | $ | ||||
Income and other taxes | |||||
Other current liabilities | |||||
Deferred income taxes | |||||
Other non-current liabilities | |||||
Total liabilities held for sale | $ |
Years Ended December 31, | |||||||||||
2023(1) | 2022 | 2021 | |||||||||
(Dollars in millions) | |||||||||||
EMEA business pre-tax net income (loss) | $ | ( | ( |
November 1, 2023 | |||||
EMEA Business | |||||
(Dollars in millions) | |||||
Assets held for sale | |||||
Cash and cash equivalents | $ | ||||
Accounts receivable, less allowance of $ | |||||
Other current assets | |||||
Property, plant and equipment, net accumulated depreciation of $ | |||||
Customer relationships and other intangible assets, net | |||||
Operating lease assets | |||||
Valuation allowance on assets held for sale(1) | ( | ||||
Deferred tax assets | |||||
Other non-current assets | |||||
Total assets held for sale | $ | ||||
Liabilities held for sale | |||||
Accounts payable | $ | ||||
Salaries and benefits | |||||
Current portion of deferred revenue | |||||
Current operating lease liabilities | |||||
Other current liabilities | |||||
Deferred income taxes | |||||
Asset retirement obligations | |||||
Deferred revenue, non-current | |||||
Operating lease liabilities, non-current | |||||
Total liabilities held for sale | $ |
As of December 31, | |||||||||||
2023 | 2022(1) | ||||||||||
(Dollars in millions) | |||||||||||
Goodwill(2) | $ | ||||||||||
Customer relationships(3), less accumulated amortization of $ | $ | ||||||||||
Capitalized software, less accumulated amortization of $ | |||||||||||
Trade names, less accumulated amortization of | |||||||||||
Total other intangible assets, net | $ |
(Dollars in millions) | |||||
As of December 31, 2021 (1) | $ | ||||
Effect of foreign currency exchange rate changes and other | ( | ||||
Impairment | ( | ||||
As of December 31, 2022 (1) | |||||
Impairment | ( | ||||
As of December 31, 2023 (1) | $ |
(Dollars in millions) | |||||
2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 |
Year Ended December 31, 2023 | |||||||||||||||||
Total Revenue | Adjustments for Non-ASC 606 Revenue (1) | Total Revenue from Contracts with Customers | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Grow | $ | ( | |||||||||||||||
Nurture | ( | ||||||||||||||||
Harvest | |||||||||||||||||
Other | |||||||||||||||||
Affiliate Services | ( | ||||||||||||||||
Total Revenue | $ | ( | |||||||||||||||
Timing of revenue: | |||||||||||||||||
Goods transferred at a point in time | $ | ||||||||||||||||
Services performed over time | |||||||||||||||||
Total revenue from contracts with customers | $ |
Year Ended December 31, 2022 | |||||||||||||||||
Total Revenue | Adjustments for Non-ASC 606 Revenue (1) | Total Revenue from Contracts with Customers | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Grow | $ | ( | |||||||||||||||
Nurture | ( | ||||||||||||||||
Harvest | |||||||||||||||||
Other | |||||||||||||||||
Affiliate Services | ( | ||||||||||||||||
Total Revenue | $ | ( | |||||||||||||||
Timing of revenue: | |||||||||||||||||
Goods transferred at a point in time | $ | ||||||||||||||||
Services performed over time | |||||||||||||||||
Total revenue from contracts with customers | $ |
Year Ended December 31, 2021 | |||||||||||||||||
Total Revenue | Adjustments for Non-ASC 606 Revenue (1) | Total Revenue from Contracts with Customers | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Grow | $ | ( | |||||||||||||||
Nurture | ( | ||||||||||||||||
Harvest | |||||||||||||||||
Other | |||||||||||||||||
Affiliate Services | ( | ||||||||||||||||
Total Revenue | $ | ( | |||||||||||||||
Timing of revenue: | |||||||||||||||||
Goods transferred at a point in time | $ | ||||||||||||||||
Services performed over time | |||||||||||||||||
Total revenue from contracts with customers | $ |
December 31, 2023 | December 31, 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Customer receivables (1) | $ | ||||||||||
Contract assets (2) | |||||||||||
Contract liabilities (3) |
Year Ended December 31, 2023 | |||||||||||
Acquisition Costs | Fulfillment Costs | ||||||||||
(Dollars in millions) | |||||||||||
Beginning of period balance | $ | ||||||||||
Costs incurred | |||||||||||
Amortization | ( | ( | |||||||||
Change in contract costs held for sale | ( | ( | |||||||||
End of period balance | $ |
Year Ended December 31, 2022 | |||||||||||
Acquisition Costs | Fulfillment Costs | ||||||||||
(Dollars in millions) | |||||||||||
Beginning of period balance | $ | ||||||||||
Costs incurred | |||||||||||
Amortization | ( | ( | |||||||||
Classified as held for sale(1) | ( | ||||||||||
End of period balance | $ |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Operating and short-term lease cost | $ | ||||||||||||||||
Finance lease cost: | |||||||||||||||||
Amortization of right-of-use assets | |||||||||||||||||
Interest on lease liability | |||||||||||||||||
Total finance lease cost | |||||||||||||||||
Total lease cost | $ |
Years Ended December 31, | ||||||||||||||
Leases | Classification on the Balance Sheet | 2023 | 2022 | |||||||||||
(Dollars in millions) | ||||||||||||||
Assets | ||||||||||||||
Operating lease assets | $ | |||||||||||||
Finance lease assets | ||||||||||||||
Total leased assets | $ | |||||||||||||
Liabilities | ||||||||||||||
Current | ||||||||||||||
Operating | Current operating lease liabilities(2) | $ | ||||||||||||
Finance | ||||||||||||||
Noncurrent | ||||||||||||||
Operating | Operating lease liabilities(3) | |||||||||||||
Finance | ||||||||||||||
Total lease liabilities | $ | |||||||||||||
Weighted-average remaining lease term (years) | ||||||||||||||
Operating leases | ||||||||||||||
Finance leases | ||||||||||||||
Weighted-average discount rate | ||||||||||||||
Operating leases | % | % | ||||||||||||
Finance leases | % | % |
Years Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows for operating leases | $ | ||||||||||
Operating cash flows for finance leases | |||||||||||
Financing cash flows for finance leases | |||||||||||
Supplemental lease cash flow disclosures: | |||||||||||
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | $ | ||||||||||
Right-of-use assets obtained in exchange for new finance lease liabilities |
Operating Leases | Finance Leases | ||||||||||
(Dollars in millions) | |||||||||||
2024 | $ | ||||||||||
2025 | |||||||||||
2026 | |||||||||||
2027 | |||||||||||
2028 | |||||||||||
Thereafter | |||||||||||
Total lease payments | |||||||||||
Less: interest | ( | ( | |||||||||
Total | |||||||||||
Less: current portion | ( | ( | |||||||||
Long-term portion | $ |
Years Ended December 31, | |||||||||||
2023 | 2022 | 2021 | |||||||||
(Dollars in millions) | |||||||||||
Balance at beginning of period | $ | ||||||||||
Provision for expected losses | |||||||||||
Write-offs charged against the allowance | ( | ( | ( | ||||||||
Recoveries collected | |||||||||||
Change in allowance in assets held for sale(1) | ( | ( | |||||||||
Balance at end of period | $ |
Interest Rates (1) | Maturities (1) | December 31, 2023 | December 31, 2022 | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||
Level 3 Financing, Inc. | |||||||||||||||||||||||
Senior Secured Debt: (2) | |||||||||||||||||||||||
Senior notes | 2027 - 2030 | $ | |||||||||||||||||||||
Tranche B 2027 Term Loan (3) | SOFR + | 2027 | |||||||||||||||||||||
Senior Notes and Other Debt: | |||||||||||||||||||||||
Senior notes (4) | 2027 - 2029 | ||||||||||||||||||||||
Finance leases and other obligations | Various | Various | |||||||||||||||||||||
Unamortized premiums, net | |||||||||||||||||||||||
Unamortized debt issuance costs | ( | ( | |||||||||||||||||||||
Total long-term debt | |||||||||||||||||||||||
Less current maturities | ( | ( | |||||||||||||||||||||
Long-term debt, excluding current maturities | $ |
Debt | Period of Repayment | (Dollars in millions) | ||||||
Tranche B 2027 Term Loan | Q3 2022 | $ | ||||||
Q3 2022 | ||||||||
Q3 2022 | ||||||||
Total debt repayments | $ |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Interest expense: | |||||||||||||||||
Gross interest expense | $ | ||||||||||||||||
Capitalized interest | ( | ( | ( | ||||||||||||||
Total interest expense | $ |
(Dollars in millions) | |||||
2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
2029 and thereafter | |||||
Total long-term debt | $ |
Years Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Trade receivables | $ | ||||||||||
Earned and unbilled receivables | |||||||||||
Other | |||||||||||
Total accounts receivable | |||||||||||
Less: allowance for credit losses | ( | ( | |||||||||
Accounts receivable, less allowance | $ |
Depreciable Lives | As of December 31, | ||||||||||||||||
2023 | 2022(5) | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Land | N/A | $ | |||||||||||||||
Fiber conduit and other outside plant (1) | |||||||||||||||||
Central office and other network electronics (2) | |||||||||||||||||
Support assets (3) | |||||||||||||||||
Construction-in-progress (4) | N/A | ||||||||||||||||
Gross property, plant and equipment | |||||||||||||||||
Accumulated depreciation | ( | ( | |||||||||||||||
Net property, plant and equipment | $ |
Years Ended December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Balance at beginning of period | $ | ||||||||||
Accretion expense | |||||||||||
Liabilities settled | ( | ( | |||||||||
Change in estimate | ( | ||||||||||
Classified as held for sale (1) | ( | ||||||||||
Balance at end of period | $ |
Input Level | Description of Input | |||||||
Level 1 | Observable inputs such as quoted market prices in active markets. | |||||||
Level 2 | Inputs other than quoted prices in active markets that are either directly or indirectly observable. | |||||||
Level 3 | Unobservable inputs in which little or no market data exists. |
As of December 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
Input Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
(Dollars in million) | |||||||||||||||||||||||
Liabilities-Long-term debt, excluding finance leases and other obligations | 2 | $ | |||||||||||||||||||||
Indemnifications related to the sale of the Latin American business(1) | 3 |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Federal | |||||||||||||||||
Current | $ | ( | |||||||||||||||
Deferred | ( | ||||||||||||||||
State and local | |||||||||||||||||
Current | |||||||||||||||||
Deferred | ( | ||||||||||||||||
Foreign | |||||||||||||||||
Current | |||||||||||||||||
Deferred | ( | ||||||||||||||||
Total income tax (benefit) expense | $ | ( |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Income tax (benefit) expense was allocated as follows: | |||||||||||||||||
Income tax (benefit) expense in the consolidated statements of operations: | |||||||||||||||||
Attributable to income | $ | ( | |||||||||||||||
Member's equity: | |||||||||||||||||
Tax effect of the change in accumulated other comprehensive loss | $ | ( | ( |
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Percentage of pre-tax income) | |||||||||||||||||
Statutory federal income tax rate | % | % | % | ||||||||||||||
State income taxes, net of federal income tax benefit | % | ( | % | % | |||||||||||||
Goodwill impairment | ( | % | ( | % | % | ||||||||||||
Divestiture of business(1) | ( | % | ( | % | % | ||||||||||||
Net foreign income tax | % | % | % | ||||||||||||||
Research and development credits | % | % | ( | % | |||||||||||||
Other, net | % | ( | % | ( | % | ||||||||||||
Effective income tax rate | % | ( | % | % |
As of December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Deferred tax assets | |||||||||||
Deferred revenue | $ | ||||||||||
Net operating loss carry forwards | |||||||||||
Property, plant and equipment | |||||||||||
Other | |||||||||||
Gross deferred tax assets | |||||||||||
Less valuation allowance | ( | ( | |||||||||
Net deferred tax assets | |||||||||||
Deferred tax liabilities | |||||||||||
Deferred revenue | ( | ||||||||||
Property, plant and equipment | ( | ( | |||||||||
Intangible assets | ( | ( | |||||||||
Other | ( | ( | |||||||||
Gross deferred tax liabilities | ( | ( | |||||||||
Net deferred tax liabilities | $ | ( | ( |
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
Unrecognized tax benefits at beginning of period | $ | ||||||||||
Decrease in tax positions of current year netted against deferred tax assets | ( | ( | |||||||||
Increase in tax positions of prior periods netted against deferred tax assets | |||||||||||
Decrease in tax positions taken in the prior period | ( | ||||||||||
Increase in tax positions taken in the current period | |||||||||||
Decreases related to divestitures of businesses | ( | ( | |||||||||
Decrease from the lapse of statute of limitations | ( | ||||||||||
Unrecognized tax benefits at end of period | $ |
Total Assets | |||||||||||
As of December 31, | |||||||||||
2023 | 2022 | ||||||||||
(Dollars in millions) | |||||||||||
North America | $ | ||||||||||
Europe, Middle East and Africa | |||||||||||
Total | $ |
Revenue | |||||||||||||||||
Years Ended December 31, | |||||||||||||||||
2023 | 2022 | 2021 | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
North America | $ | ||||||||||||||||
Europe, Middle East and Africa(2) | |||||||||||||||||
Latin America(1) | |||||||||||||||||
Total | $ |
Future Rental Commitments and ROW Agreements | |||||
(Dollars in millions) | |||||
2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
2029 and thereafter | |||||
Total future minimum payments | $ |
Pension Plans | Foreign Currency Translation Adjustments and Other | Total | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Balance at December 31, 2021 | $ | ( | ( | ||||||||||||||
Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | |||||||||||||||||
Net other comprehensive income (loss) | ( | ||||||||||||||||
Balance at December 31, 2022 | $ | ( | ( | ||||||||||||||
Other comprehensive loss, net of tax | ( | ( | |||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ||||||||||||||||
Net other comprehensive (loss) income | ( | ||||||||||||||||
Balance at December 31, 2023 | $ | ( | ( | ( |
Year Ended December 31, 2023 | Reclassification out of Accumulated Other Comprehensive Loss | Affected line item in Consolidated Balance Sheets and Consolidated Statement of Operations | ||||||||||||
(Dollars in millions) | ||||||||||||||
Reclassification of realized loss on foreign currency translation to valuation allowance within assets held for sale(2) | $ | Assets held for sale | ||||||||||||
Reclassification of realized loss on foreign currency translation to loss on sale of business(3) | ( | Net loss (gain) on sale of businesses | ||||||||||||
Subtotal reclassification of realized loss on foreign currency | ||||||||||||||
Reclassification of net actuarial loss to valuation allowance within assets held for sale(2) | ( | Assets held for sale | ||||||||||||
Reclassification of net actuarial gain to loss on sale of business(3) | Net loss (gain) on sale of businesses | |||||||||||||
Subtotal reclassification of net actuarial loss | ( | |||||||||||||
Income tax benefit | Income tax expense | |||||||||||||
Net of tax | $ |
Year Ended December 31, 2022 | Decrease (Increase) in Net Income | Affected Line Item in Consolidated Statement of Operations | ||||||||||||
(Dollars in millions) | ||||||||||||||
Reclassification of realized loss on foreign currency translation to net loss on sale of businesses | $ | Net loss on sale of businesses | ||||||||||||
Income tax benefit | Income tax expense | |||||||||||||
Net of tax | $ |
As of December 31, | |||||||||||
2023 | 2022(1) | ||||||||||
(Dollars in millions) | |||||||||||
Prepaid expenses | $ | ||||||||||
Contract fulfillment costs | |||||||||||
Contract acquisition costs | |||||||||||
Contract assets | |||||||||||
Other | |||||||||||
Total other current assets | $ |
Exhibit Number | Description | ||||
3.1 | |||||
3.2 | |||||
4.1(i) | |||||
4.1(ii) | |||||
4.1(iii) | |||||
4.2(i) | |||||
4.2(ii) | |||||
4.2(iii) | |||||
4.2(iv)* | |||||
4.3(i) |
4.3(ii) | |||||
4.3(iii) | |||||
4.3(iv)* | |||||
4.4(i) | |||||
4.4(ii) | |||||
4.4(iii) | |||||
4.5(i) | |||||
4.5(ii) | |||||
4.5(iii) | |||||
4.6(i) |
4.6(ii) | |||||
4.6(iii) | |||||
4.7(i) | |||||
4.7(ii) | |||||
4.7(iii)* | |||||
10.1 | |||||
10.2 | |||||
10.3 | |||||
10.4 | |||||
10.5 | |||||
10.6 | |||||
10.7 |
10.8 | |||||
10.9 | |||||
10.10 | |||||
31.1* | |||||
31.2* | |||||
32.1* | |||||
32.2* | |||||
101* | The following materials from the Annual Report on Form 10-K of Level 3 Parent, LLC for the year ended December 31, 2023, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements Of Comprehensive (Loss) Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Member's Equity and (vi) Notes to Consolidated Financial Statements. | ||||
104* | Cover page formatted as Inline XBRL and contained in Exhibit 101. |
LEVEL 3 PARENT, LLC | ||||||||||||||
Date: February 22, 2024 | By: | /s/ Andrea Genschaw | ||||||||||||
Andrea Genschaw | ||||||||||||||
Senior Vice President, Controller (Principal Accounting Officer) and Director |
Signature | Title | Date | ||||||||||||
/s/ Kate Johnson | President and Chief Executive Officer (Principal Executive Officer) | February 22, 2024 | ||||||||||||
Kate Johnson | ||||||||||||||
/s/ Chris Stansbury | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | February 22, 2024 | ||||||||||||
Chris Stansbury | ||||||||||||||
/s/ Stacey W. Goff | Executive Vice President, General Counsel and Director | February 22, 2024 | ||||||||||||
Stacey W. Goff | ||||||||||||||
/s/ Andrea Genschaw | Senior Vice President, Controller (Principal Accounting Officer) and Director | February 22, 2024 | ||||||||||||
Andrea Genschaw |
GLOBAL CROSSING NORTH AMERICA, INC. GLOBAL CROSSING NORTH AMERICAN HOLDINGS, INC. LEVEL 3 TELECOM HOLDINGS II, LLC LEVEL 3 TELECOM MANAGEMENT CO. LLC LEVEL 3 TELECOM OF ALABAMA, LLC LEVEL 3 TELECOM OF ARKANSAS, LLC LEVEL 3 TELECOM OF CALIFORNIA, LP LEVEL 3 TELECOM OF D.C., LLC LEVEL 3 TELECOM OF IDAHO, LLC LEVEL 3 TELECOM OF ILLINOIS, LLC LEVEL 3 TELECOM OF IOWA, LLC LEVEL 3 TELECOM OF LOUISIANA, LLC LEVEL 3 TELECOM OF MISSISSIPPI, LLC LEVEL 3 TELECOM OF NEW MEXICO, LLC LEVEL 3 TELECOM OF NORTH CAROLINA, LP LEVEL 3 TELECOM OF OHIO, LLC LEVEL 3 TELECOM OF OKLAHOMA, LLC LEVEL 3 TELECOM OF OREGON, LLC LEVEL 3 TELECOM OF SOUTH CAROLINA, LLC LEVEL 3 TELECOM OF TEXAS, LLC LEVEL 3 TELECOM OF UTAH, LLC LEVEL 3 TELECOM OF VIRGINIA, LLC LEVEL 3 TELECOM OF WASHINGTON, LLC LEVEL 3 TELECOM OF WISCONSIN, LP VYVX, LLC | |||||
By: | /s/ Stacey W. Goff | ||||
Name: Stacey W. Goff | |||||
Title: Executive Vice President & General Counsel |
GLOBAL CROSSING NORTH AMERICA, INC. GLOBAL CROSSING NORTH AMERICAN HOLDINGS, INC. LEVEL 3 TELECOM HOLDINGS II, LLC LEVEL 3 TELECOM MANAGEMENT CO. LLC LEVEL 3 TELECOM OF ALABAMA, LLC LEVEL 3 TELECOM OF ARKANSAS, LLC LEVEL 3 TELECOM OF CALIFORNIA, LP LEVEL 3 TELECOM OF D.C., LLC LEVEL 3 TELECOM OF IDAHO, LLC LEVEL 3 TELECOM OF ILLINOIS, LLC LEVEL 3 TELECOM OF IOWA, LLC LEVEL 3 TELECOM OF LOUISIANA, LLC LEVEL 3 TELECOM OF MISSISSIPPI, LLC LEVEL 3 TELECOM OF NEW MEXICO, LLC LEVEL 3 TELECOM OF NORTH CAROLINA, LP LEVEL 3 TELECOM OF OHIO, LLC LEVEL 3 TELECOM OF OKLAHOMA, LLC LEVEL 3 TELECOM OF OREGON, LLC LEVEL 3 TELECOM OF SOUTH CAROLINA, LLC LEVEL 3 TELECOM OF TEXAS, LLC LEVEL 3 TELECOM OF UTAH, LLC LEVEL 3 TELECOM OF VIRGINIA, LLC LEVEL 3 TELECOM OF WASHINGTON, LLC LEVEL 3 TELECOM OF WISCONSIN, LP VYVX, LLC | |||||
By: | /s/ Stacey W. Goff | ||||
Name: Stacey W. Goff | |||||
Title: Executive Vice President & General Counsel |
GLOBAL CROSSING NORTH AMERICA, INC. GLOBAL CROSSING NORTH AMERICAN HOLDINGS, INC. LEVEL 3 TELECOM HOLDINGS II, LLC LEVEL 3 TELECOM MANAGEMENT CO. LLC LEVEL 3 TELECOM OF ALABAMA, LLC LEVEL 3 TELECOM OF ARKANSAS, LLC LEVEL 3 TELECOM OF CALIFORNIA, LP LEVEL 3 TELECOM OF D.C., LLC LEVEL 3 TELECOM OF IDAHO, LLC LEVEL 3 TELECOM OF ILLINOIS, LLC LEVEL 3 TELECOM OF IOWA, LLC LEVEL 3 TELECOM OF LOUISIANA, LLC LEVEL 3 TELECOM OF MISSISSIPPI, LLC LEVEL 3 TELECOM OF NEW MEXICO, LLC LEVEL 3 TELECOM OF NORTH CAROLINA, LP LEVEL 3 TELECOM OF OHIO, LLC LEVEL 3 TELECOM OF OKLAHOMA, LLC LEVEL 3 TELECOM OF OREGON, LLC LEVEL 3 TELECOM OF SOUTH CAROLINA, LLC LEVEL 3 TELECOM OF TEXAS, LLC LEVEL 3 TELECOM OF UTAH, LLC LEVEL 3 TELECOM OF VIRGINIA, LLC LEVEL 3 TELECOM OF WASHINGTON, LLC LEVEL 3 TELECOM OF WISCONSIN, LP VYVX, LLC | |||||
By: | /s/ Stacey W. Goff | ||||
Name: Stacey W. Goff | |||||
Title: Executive Vice President & General Counsel |
Date: February 22, 2024 | /s/ Kate Johnson | |||||||
Kate Johnson Chief Executive Officer |
Date: February 22, 2024 | /s/ Chris Stansbury | |||||||
Chris Stansbury Executive Vice President and Chief Financial Officer |
Date: February 22, 2024 | /s/ Kate Johnson | |||||||
Kate Johnson Chief Executive Officer |
Date: February 22, 2024 | /s/ Chris Stansbury | |||||||
Chris Stansbury Executive Vice President and Chief Financial Officer |
Audit Information |
12 Months Ended |
---|---|
Dec. 31, 2023 | |
Audit Information [Abstract] | |
Auditor Name | KPMG LLP |
Auditor Location | Denver, Colorado |
Auditor Firm ID | 185 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Statement of Comprehensive Income [Abstract] | |||
NET (LOSS) INCOME | $ (2,004) | $ (4,793) | $ 586 |
OTHER COMPREHENSIVE INCOME (LOSS) | |||
Reclassification of realized loss on foreign currency translation to net loss on sale of businesses, net of $—, $—, and $— tax | 350 | 112 | 0 |
Defined benefit pension plan adjustment, net of $—, $— and $— tax | 0 | 18 | 16 |
Reclassification of net actuarial loss to net loss on the sale of businesses, net of $—, $— and $— tax | (22) | 0 | 0 |
Foreign currency translation adjustment, net of $(3), $58 and $30 tax | (12) | (123) | (133) |
Other comprehensive income (loss), net of tax | 316 | 7 | (117) |
COMPREHENSIVE (LOSS) INCOME | $ (1,688) | $ (4,786) | $ 469 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Parenthetical) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Statement of Comprehensive Income [Abstract] | |||
Reclassification of realized loss on foreign currency translation to gain on sale of business, tax | $ 0 | $ 0 | $ 0 |
Defined benefit pension plan adjustment, tax effect | 0 | 0 | 0 |
Reclassification of net actuarial loss to net loss on the sale of businesses, tax | 0 | 0 | 0 |
Foreign currency translation adjustment, tax | $ (3) | $ 58 | $ 30 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 13 | $ 19 |
Accumulated depreciation | $ 3,665 | $ 2,875 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Statement of Cash Flows [Abstract] | |||
Capitalized interest | $ 22 | $ 16 | $ 15 |
CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY - USD ($) $ in Millions |
Total |
MEMBER'S EQUITY |
ACCUMULATED OTHER COMPREHENSIVE LOSS |
---|---|---|---|
Balance at beginning of period at Dec. 31, 2020 | $ 13,116 | $ (234) | |
MEMBER'S EQUITY | |||
NET (LOSS) INCOME | $ 586 | 586 | |
Other comprehensive income (loss) | (117) | ||
Distributions | (365) | ||
Other | 0 | ||
Balance at end of period at Dec. 31, 2021 | 13,337 | (351) | |
MEMBER'S EQUITY | |||
Total member's equity | 12,986 | (351) | |
NET (LOSS) INCOME | (4,793) | (4,793) | |
Other comprehensive income (loss) | 7 | ||
Distributions | (1,425) | ||
Other | 0 | ||
Balance at end of period at Dec. 31, 2022 | 7,119 | (344) | |
MEMBER'S EQUITY | |||
Total member's equity | 6,775 | (344) | |
NET (LOSS) INCOME | (2,004) | (2,004) | |
Other comprehensive income (loss) | 316 | ||
Distributions | (1,510) | ||
Other | 39 | ||
Balance at end of period at Dec. 31, 2023 | $ 3,644 | (28) | |
MEMBER'S EQUITY | |||
Total member's equity | $ 3,616 | $ (28) |
Background and Summary of Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Background and Summary of Significant Accounting Policies | Background and Summary of Significant Accounting Policies General We are a facilities-based technology and communications company that provides a broad array of integrated products and services to our domestic and global business customers. We operate one of the world’s most interconnected networks. Our platform empowers our customers to swiftly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access and reduce costs, which allows our customers to rapidly evolve their IT programs to address dynamic changes. Our specific products and services are detailed in Note 4—Revenue Recognition. Basis of Presentation The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (Lumen Technologies and its other subsidiaries, referred to herein as affiliates) have not been eliminated. We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories. See Note 4—Revenue Recognition for additional information. These changes had no impact on total operating revenue, total operating expenses or net (loss) income for any period. Segments Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. Operating Expenses Our current definitions of operating expenses 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 include third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); rents and utilities expenses; equipment sales expenses; and other expenses directly related to our operations; and •Selling, general and administrative expenses are 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; property and other operating taxes and fees; external commissions; legal expenses associated with general matters; bad debt expense; and other selling, general and administrative expenses. These expense classifications may not be comparable to those of other companies. Summary of Significant Accounting Policies Use of Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we make when accounting for specific items and matters are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can materially affect the reported amounts of assets, liabilities and components of member's equity as of the dates of the consolidated balance sheets, as well as the reported amounts of revenue, expenses and components of cash flows during the periods presented in our other consolidated financial statements. We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note 13—Income Taxes and Note 16—Commitments, Contingencies and Other Items for additional information. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable. For matters related to income taxes, if we determine the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. We do not recognize any portion of an uncertain tax position if the position has less than a 50% likelihood of being sustained. We recognize interest is recognized on the amount of unrecognized benefit from uncertain tax positions. For all of these and other matters, actual results could differ materially from our estimates. Revenue Recognition We earn most of our consolidated revenue from contracts with customers, primarily through the provision of communications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606. We also earn revenue from leasing arrangements (primarily fiber capacity and colocation agreements) which are not accounted for under ASC 606. Revenue is 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 to receive in exchange for those goods or services. Revenue is recognized based on the following five-step model: •Identification of the contract 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, VPN, Ethernet, data, broadband, private line (including special access), network access, transport, voice, information technology ("IT"), video and other ancillary services. We provide these services to a wide range of businesses, including global, enterprise, wholesale, government, and small and medium business customers. Certain contracts also include the sale of equipment, which is not significant to our business. We recognize revenue for services when we provide the applicable service or when control of a product is transferred. Recognition of certain payments received in advance of services being provided is deferred. These advance payments may include certain activation and certain installation charges. If the activation and installation charges are not separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which typically ranges from to five years depending on the service. 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. For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage 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. Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price that we expect to receive with the customer is allocated to each performance obligation based on its relative standalone selling price. The revenue associated with each performance obligation is then recognized as earned. We periodically sell transmission capacity on our network. These transactions are generally 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 20 years. In most cases, we account for the cash consideration received on transfers of transmission capacity as ASC 606 revenue, which is adjusted for the time value of money and is recognized ratably over the term of the agreement. Cash consideration received on transfers of dark fiber is accounted for as non-ASC 606 lease revenue, which we also recognize ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our transmission capacity assets for other non-owned optical capacity assets. In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user 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 and services used to fulfill the performance obligations associated with the transaction. We have service level commitments pursuant to contracts with certain of our customers. To the extent that we determine such service levels were not achieved or may not have been achieved, we estimate the amount of credits to be issued and record a corresponding reduction to revenue in the period that the service level commitment was not met or may not be met. Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis. We defer (or capitalize) incremental contract acquisition and fulfillment costs and recognize (or amortize) such costs over the average contract life. Our deferred contract costs for our customers have average amortization periods of approximately 35 months. These deferred costs are periodically monitored to reflect any significant change in assumptions. See Note 4—Revenue Recognition for additional information. Affiliate Transactions We provide services to our affiliates that we also provide to external customers. These services are recognized as operating revenue-affiliates in our consolidated statements of operations. Services provided to us from our affiliates are recognized as operating expenses-affiliates on our consolidated statements of operations. Because of the significance of the services we provide to our affiliates and our affiliates provide to us, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented. We recognize intercompany charges at the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates. The resulting net balance for transactions between us and our affiliates at the end of each period is reported as accounts receivables - affiliates or accounts payable - affiliates on the accompanying consolidated balance sheets. From time to time we make distributions to our parent, which reduce our capital resources for debt repayments or other purposes. Distributions are reflected on our consolidated statements of member's equity and our consolidated statements of cash flows reflects distributions made as financing activities. Our ultimate parent company, Lumen Technologies, is currently indebted to us under a revolving credit facility. For additional information, see Note 15—Affiliate Transactions. Legal Costs In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. Subject to certain exceptions, we expense these costs as the related services are received. Income Taxes Lumen Technologies treats our consolidated results as if we were a separate taxpayer. Our reported deferred tax assets and liabilities, as discussed below and in Note 13—Income Taxes, are primarily determined as a result of the application of the separate return method and therefore the settlement of these amounts is dependent upon our parent, Lumen Technologies, rather than tax authorities. We are required to pay our tax liabilities based upon our separate return taxable income. We are also included in the combined state tax returns filed by Lumen Technologies. The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities. Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income. The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered. Each quarter we evaluate the need to retain all or a portion of the valuation allowance on our deferred tax assets. See Note 13—Income Taxes for additional information. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the value at which cash and cash equivalents are reported in our consolidated financial statements approximates their fair value. In evaluating investments for classification as cash equivalents, we require that individual securities have original maturities of ninety days or less and that individual investment funds have dollar-weighted average maturities of ninety days or less. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of sound financial condition and in high quality and relatively risk-free investment products. Our cash investment policy limits the concentration of investments with specific financial institutions or among certain products and includes criteria related to credit worthiness of any particular financial institution. Book overdrafts occur when we have issued checks but they have not yet been presented to our controlled disbursement bank accounts for payment. Disbursement bank accounts allow us to delay funding of issued checks until the checks are presented for payment. Until the issued checks are presented for payment, the book overdrafts are included in accounts payable on our consolidated balance sheet. This activity is included in the operating activities section in our consolidated statements of cash flows. There were no book overdrafts included in accounts payable at December 31, 2023 or 2022. Restricted Cash Restricted cash and securities consist primarily of cash and investments that serve to collateralize our outstanding letters of credit and certain performance and operating obligations. Restricted cash and securities are recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Restricted securities are stated at cost which approximates fair value as of December 31, 2023 and 2022. Accounts Receivable and Allowance for Credit Losses Accounts receivable are recognized based upon the amount due from customers for the services provided or at cost for other receivables, less an allowance for credit losses. We use a loss rate method to estimate our allowance for credit losses. For more information on our methodology for estimating our allowance for credit losses, see Note 6—Credit Losses on Financial Instruments. We generally consider our accounts past due if they are outstanding over 30 days. Our past due accounts are written off against our allowance for credit losses when collection is considered to be not probable. Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received. The carrying value of accounts receivable net of the allowance for credit losses approximates fair value. Concentration of Credit Risk We provide communications services to a wide range of wholesale and enterprise customers, ranging from well capitalized global enterprises to small early stage companies primarily in the United States. Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographical regions. We perform ongoing credit evaluations of our customers' financial condition and generally require no collateral from our customers, although letters of credit and deposits are required in certain limited circumstances. We have, from time to time, entered into agreements with value added resellers and other channel partners to reach enterprise markets for voice services. We have policies and procedures in place to evaluate the financial condition of these resellers prior to initiating service to the final customer. We are not able to predict changes in the financial stability of our customers. Any material changes in the financial status of any one or a particular group of customers may cause us to adjust our estimate of the recoverability of receivables and could have a material effect on our results of operation. Assets Held for Sale We classify assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the net assets is probable within one year. Assets and liabilities held for sale are presented separately on our consolidated balance sheets with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. Depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale. For each period that assets are classified as being held for sale, they are tested for recoverability. Unless otherwise specified, the amounts and information in the notes presented do not include assets and liabilities that were classified as held for sale as of December 31, 2023. See Note 2—Divestitures of the Latin American and EMEA Businesses for additional information. Property, Plant and Equipment We record purchased and constructed property, plant and equipment at cost, plus the estimated value of any associated legally or contractually required retirement obligations. We depreciate our property, plant and equipment using the straight-line method. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the expected lease term. Expenditures for maintenance and repairs are expensed as incurred. During the construction phase of network and other internal-use capital projects, we capitalize related employee and interest costs. Property, plant and equipment supplies used internally are carried at average cost, except for significant individual items which are carried at actual cost. We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews take into account actual usage, the physical condition of our property, plant, and equipment, industry data, and other relevant factors. Our remaining useful life assessments evaluate the possible loss in service value of assets that may precede the physical retirement. Assets shared among many customers may lose service value as those customers reduce their use of the asset. However, the asset is not retired until all customers no longer utilize the asset and we determine there is not alternative use for the asset. We have asset retirement obligations associated with the legally or contractually required removal of a limited group of property, plant and equipment assets from leased properties and the disposal of certain hazardous materials present in our owned properties. When an asset retirement obligation is identified, usually in association with the acquisition of the asset, we record the fair value of the obligation as a liability. The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset. Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred. We review long-lived tangible assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. For assessment purposes, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, absent a material change in operations. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its estimated fair value. Recoverability of the asset group to be held and used is assessed by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, we recognize an impairment charge for the amount by which the carrying amount of the asset group exceeds its estimated fair value. Goodwill, Customer Relationships and Other Intangible Assets Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, are initially recorded at estimated fair value. We amortize customer relationships primarily over an estimated life of 7 to 14 years, using the straight-line method, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to 7 years. We amortized our other intangible assets over an estimated life of 5 years prior to becoming fully amortized in the fourth quarter of 2022. Other intangible assets not arising from business combinations are initially recorded at cost. Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify the intangible asset as indefinite-lived and such intangible assets are not amortized. Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line method over its estimated useful life. We have capitalized certain costs associated with software such as costs of employees devoted to software development and external direct costs for materials and services. Costs associated with software to be used for internal purposes are expensed until the point at which the project has reached the development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred. We review the remaining economic lives of our capitalized software annually. Capitalized software is included in other intangible assets, net, in our consolidated balance sheets. Prior to becoming fully impaired in the second quarter of 2023, we were required to assess our goodwill for impairment annually, or more frequently if an event occurred or circumstances changed that would indicate it was more likely than not the fair value of our reporting unit was less than the carrying value. The impairment assessment was performed at the reporting unit level. We have determined that our operations consist of one reporting unit, consistent with our determination that our business consists of one operating segment. We were required to write-down the value of goodwill in periods in which the carrying amount of our reporting unit's equity exceeded the estimated fair value of the equity of the reporting unit, limited to the goodwill balance. For more information, see Note 3—Goodwill, Customer Relationships and Other Intangible Assets. Foreign Currency Local currencies of our foreign subsidiaries are the functional currencies for financial reporting purposes except for certain foreign subsidiaries, primarily in Latin America prior to the August 1, 2022 sale of our Latin American business. For operations outside the United States that have functional currencies other than the U.S. dollar, assets and liabilities are translated to U.S. dollars at period-end exchange rates, and revenue, expenses and cash flows are translated using average monthly exchange rates. Prior to the November 1, 2023 sale of our EMEA business and the August 1, 2022 sale of our Latin American business, a significant portion of our non-United States subsidiaries used the British pound, the Euro or the Brazilian Real, as their functional currency, each of which experienced significant fluctuations against the U.S. dollar during the years ended December 31, 2023, December 31, 2022 and December 31, 2021. We recognize foreign currency translation gains and losses as a component of accumulated other comprehensive loss in member's equity in our consolidated balance sheet and in our consolidated statements of comprehensive (loss) income in accordance with accounting guidance for foreign currency translation. We consider the majority of our investments in our foreign subsidiaries to be long-term in nature. Our foreign currency transaction gains (losses), including where transactions with our non-United States subsidiaries are not considered to be long-term in nature, are included within other income (expense) in "Other, net" on our consolidated statements of operations. Correction of Immaterial Errors During 2023, we identified errors in our previously reported consolidated financial statements related to accounts receivable and accounts payable. The errors are the result of understated network expenses for periods prior to 2021. We have completed a quantitative and qualitative evaluation of the errors individually and in aggregate, and concluded the errors are immaterial to our previously issued consolidated financial statements. Notwithstanding this evaluation, we have revised certain line items on our December 31, 2022 consolidated balance sheet for these errors. The net effect of these adjustments was an increase of accounts payable and total liabilities of $23 million on our December 31, 2022 consolidated balance sheet. In addition, we recorded an adjustment to increase our January 1, 2021 member's equity by $23 million, which represents the cumulative correction of the immaterial errors prior to January 1, 2021. The errors did not have an impact on our previously issued consolidated statements of operations, comprehensive (loss) income, or cash flows for the years ended December 31, 2022 or 2021, and did not, and are not expected to, have an impact on the economics of the Company's existing or future commercial arrangements. Recently Adopted Accounting Pronouncements Supplier Finance Programs On January 1, 2023, we adopted Accounting Standards Update ("ASU") 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”). These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions. The adoption of ASU 2022-04 did not have a material impact to our consolidated financial statements. Credit Losses On January 1, 2023, we adopted ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures” (“ASU 2022-02”). The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The adoption of ASU 2022-02 did not have a material impact to our consolidated financial statements. Leases On January 1, 2022, we adopted ASU 2021-05, "Leases (Topic 842)" Lessors - Certain Leases with Variable Lease Payments" ("ASU 2021-05"). This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease; and (iii) provides guidance with respect to net investments by lessors under operating leases and other related topics. The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements. Debt On January 1, 2021, we adopted ASU 2020-09, Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762" ("ASU 2020-09"). This ASU amends and supersedes various SEC guidance to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements. Investments On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01"). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of December 31, 2023, we determined there was no application or discontinuation of the equity method during the reporting periods covered in this report. The adoption of ASU 2020-01 did not have an impact to our consolidated financial statements. Income Taxes On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). This ASU requires that public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).” ASU 2023-09 will become effective for us in the annual period of fiscal 2025 and early adoption is permitted. We have chosen not to early adopt this ASU. In December 2023, the FASB issued ASU 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets” (“ASU 2023-08”). This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. This ASU will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted. As of December 31, 2023, we do not hold crypto assets and do not expect ASU 2023-08 will have any impact to our consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU will become effective for us in annual period fiscal 2024 and early adoption is permitted. As of December 31, 2023, we are evaluating its impact on our consolidated financial statements. In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes. As of December 31, 2023, we do not expect ASU 2023-06 will have any impact to our consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and initial Measurement” (“ASU 2023-05”). This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture). The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. ASU 2023-05 will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-05 will have any impact to our consolidated financial statements. In August 2023, the FASB issued ASU 2023-04, “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121” (“ASU 2023-04”). This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users. This ASU does not provide any new guidance. ASU 2023-04 became effective for us once the addition to the FASB Codification was made available. As of December 31, 2023, we do not expect ASU 2023-04 will have any impact to our consolidated financial statements. In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock” (“ASU 2023-03”). This ASU amends or supersedes various SEC paragraphs within the applicable codification to conform to past SEC staff announcements. This ASU does not provide any new guidance. ASU 2023-03 became effective for us once the addition to the FASB Codification was made available. As of December 31, 2023, we do not expect ASU 2023-03 will have any impact to our consolidated financial statements. In March 2023, the FASB issued ASU 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. ASU 2023-02 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-02 will have any impact to our consolidated financial statements. In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” (“ASU 2023-01”). These amendments require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-01 will have any impact to our consolidated financial statements. In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848" ("ASU 2022-06"). These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848, which defers the sunset date from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. ASU 2022-06 is effective upon issuance. Based on our review of our key material contracts through December 31, 2023, ASU 2022-06 does not have a material impact to our consolidated financial statements. In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). These amendments clarify that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. ASU 2022-03 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2022-03 will have any impact to our consolidated financial statements. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope" ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2021-01 provides optional expedients for a limited time to ease the potential burden in accounting for reference rate reform. Based on our review of our key material contracts through December 31, 2023, ASU 2021-01 will not have a material impact to our consolidated financial statements.
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Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business |
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Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business | Divestitures of the Latin American and EMEA Businesses Latin American Business On August 1, 2022, affiliates of Level 3 Parent, LLC sold its Latin American business pursuant to a definitive agreement dated July 25, 2021 for pre-tax cash proceeds of approximately $2.7 billion. For the year ended December 31, 2022, we recorded a $123 million net pre-tax gain on disposal associated with the sale of our Latin American business. This gain is reflected as operating income within the consolidated statements of operations. In connection with the sale, Lumen entered into a transition services agreement under which it provides to the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services. Lumen also agreed to indemnify the purchaser for certain matters for which future cash payments by Lumen could be required. Lumen has estimated the fair value of these indemnifications to be $86 million, which is included in other long-term liabilities in our consolidated balance sheet and has reduced our gain on the sale accordingly. The pre-tax net income of the Latin American business is estimated to be and reported as follows in the table below:
_______________________________________________________________________________ (1)The pre-tax net income includes operating results prior to the close of the sale of the Latin American business on August 1, 2022 The Latin American business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on August 1, 2022. As a result of closing the transaction, we derecognized $2.4 billion of net assets, the principal components of which were as follows:
(1) The assignment of goodwill was based on the relative fair value of the disposal group and the portion of the remaining reporting unit. EMEA Business On November 1, 2023, affiliates of Level 3 Parent, LLC completed the sale of its operations in EMEA business to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, for pre-tax cash proceeds of $1.7 billion after certain closing adjustments and transaction costs. This consideration is further subject to other post-closing adjustments and indemnities set forth in the Purchase Agreement, as amended and supplemented to date. In connection with the sale, we entered into a transition services agreement under which we provide the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services. The pre-tax net income (loss) of the EMEA business is reported as follows in the table below:
_______________________________________________________________________________ (1)The pre-tax net income includes operating results prior to the close of the sale of the EMEA business on November 1, 2023 The classification of the EMEA business as held for sale was considered an event or change in circumstance which required an assessment of our goodwill for impairment. We performed a pre-classification and post-classification goodwill impairment test as described further in Note 3—Goodwill, Customer Relationships and Other Intangible Assets. As a result of our impairment tests, we determined the EMEA business disposal group was impaired resulting in a non-cash, non-tax-deductible goodwill impairment charge of $224 million in the fourth quarter of 2022. As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, we recorded an estimated loss on disposal of $616 million during the year ended December 31, 2022 in the consolidated statement of operations and a valuation allowance included in assets held for sale on the consolidated balance sheet. For the year ended December 31, 2023, we recorded a $104 million net loss on disposal associated with the sale of our EMEA business. This loss is reflected as within the consolidated statements of operations. The EMEA business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on November 1, 2023. As a result of closing the transaction, we derecognized $1.4 billion of net assets, the principal components of which were as follows:
______________________________________________________________________ (1) Includes the impact of $350 million realized loss on foreign currency translation, net of tax, reclassified out of accumulated other comprehensive loss as of December 31, 2023 to the valuation allowance and loss on sale of the EMEA business. We do not believe these divestitures represent a strategic shift for us. Therefore, the divested Latin American and EMEA businesses did not meet the criteria to be classified as discontinued operations. As a result, we continued to report our operating results for the Latin American and EMEA businesses in our consolidated operating results through the disposal dates of August 1, 2022 and November 1, 2023, respectively.
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Goodwill, Customer Relationships and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Customer Relationships and Other Intangible Assets | Goodwill, Customer Relationships and Other Intangible Assets Goodwill, customer relationships and other intangible assets consisted of the following:
______________________________________________________________________ (1)These values exclude assets classified as held for sale. (2)We recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.0 billion during the second quarter of 2023. (3)For the year ended December 31, 2023, customer relationships decreased $121 million in conjunction with the sale of select CDN customer contracts in the fourth quarter of 2023 that resulted in a net loss of $73 million included in selling, general and administrative expenses in our consolidated statement of operations. (4)Trade names with a gross carrying value of $130 million became fully amortized during 2022 and were retired during the first quarter of 2023. As of December 31, 2023, the gross carrying amount of customer relationships, capitalized software and other intangible assets was $8.6 billion. Our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired. Prior to becoming fully impaired in the second quarter of 2023, we were required to assess our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We were required to write down the value of goodwill only when our assessment determines the carrying value of equity of our reporting unit exceeds its fair value. Our annual impairment assessment date for goodwill was October 31, at which date we assessed goodwill at our reporting unit. In reviewing the criteria for reporting units, we determined that our operations consisted of one reporting unit. Second Quarter 2023 Goodwill Impairment Analysis During the second quarter of 2023, the Company determined circumstances existed indicating it was more likely than not that the carrying value of our reporting unit exceeded its fair value. Given the continued erosion in Lumen's market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") multiples between 1.5x and 4.3x and 4.6x and 10.5x, respectively. The revenue and EBITDA multiples were below these comparable market multiples. For the three months ended June 30, 2023, based on our assessment performed as described above, we concluded the estimated fair value was less than our carrying value of equity. As a result, our goodwill became fully impaired and we recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.0 billion for the three months ended June 30, 2023. The market approach that we used in the quarter ended June 30, 2023 incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives. In developing the market multiples, we considered observed trends of our industry participants. Our assessment included many factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments. 2022 Goodwill Impairment Analyses As of October 31, 2022, we estimated the fair value of equity of our reporting unit by considering both a market approach and a discounted cash flow method. We discounted the projected cash flows using a rate that represented weighted average cost of capital of 9.4% as of the assessment date, which comprised an after-tax cost of debt of 4.8% and a cost of equity of 14.0%. We utilized company comparisons and analyst reports within the telecommunications industry which at the time of assessment supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.8x and 4.6x and 4.7x and 10.8x, respectively, resulting in an overall company revenue and EBITDA multiple of 2.5x and 7.1x, respectively. The market approach method includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value equal to the present value of all normalized cash flows after the projection period. As of October 31, 2022, based on our assessment performed, the carrying value of our equity exceeded our fair value of equity and as a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of approximately $4.4 billion at October 31, 2022. The classification of held for sale related to the EMEA business as described in Note 2—Divestitures of the Latin American and EMEA Businesses, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of October 31, 2022. We performed a pre-announcement goodwill impairment test described above to determine whether there was an impairment prior to the classification of these assets as held for sale and to determine the November 2, 2022 fair values to be utilized for goodwill allocation regarding the disposal group to be classified as assets held for sale. We also performed a post-announcement goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to evaluate whether the fair value that will remain following the divestiture exceeds the carrying value of the equity after classification of assets held for sale. We concluded no impairment existed following the divestiture. Separate from the annual, pre-announcement and post-announcement goodwill assessments discussed above, we performed an assessment of our EMEA business disposal group for impairment using the purchase price compared to the carrying value of the EMEA business net assets. As a result, we concluded the EMEA business disposal group was impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $224 million. See Note 2—Divestitures of the Latin American and EMEA Businesses for additional information regarding the purchase price, carrying value, and impairment for goodwill of the EMEA business. 2021 Goodwill Impairment Analyses At October 31, 2021, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method. As of October 31, 2021, based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 14%. We concluded the goodwill was not impaired as of October 31, 2021. The classification of held for sale assets, as described in Note 2—Divestitures of the Latin American and EMEA Businesses, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of July 31, 2021. We performed a pre-classification goodwill impairment test to determine whether there was an impairment prior to the reclassification and to determine the July 31, 2021 fair values to be utilized for goodwill allocation to the Latin American business to be reclassified as assets held for sale. We concluded it is more likely than not that the fair value of our reporting unit exceeded the carrying value of equity of our reporting unit at July 31, 2021. We also performed a post-reclassification goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to evaluate whether the fair value of our reporting unit that will remain following the divestiture exceeds the carrying value of the equity of the reporting unit after reclassification of assets held for sale. At July 31, 2021, we estimated the fair value of equity by considering both a market approach and a discounted cash flow methodology. The market approach includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow methodology is based on the present value of projected cash flows and a terminal value equal to the present value of all normalized cash flows after the projection period. As of July 31, 2021, based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 17%. We concluded we did not have any impairment as of July 31, 2021. The following table shows the rollforward of goodwill from December 31, 2021 through December 31, 2023:
_______________________________________________________________________________ (1)Goodwill at December 31, 2023, December 31, 2022, December 31, 2021 is net of accumulated impairment loss of $10.2 billion, $8.2 billion and $3.6 billion, respectively. Total amortization expense for finite-lived intangible assets for the years ended December 31, 2023, 2022 and 2021 was $714 million, $744 million and $843 million, respectively. As of December 31, 2023, the weighted average remaining useful lives of our finite-lived intangible assets was approximately 7 years in total; 7 years for customer relationships, and 4 years for capitalized software. We estimate that total amortization expense for intangible assets for the years ending 2024 through 2028 will be as provided in the table below.
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition We categorize our products and services and related revenue among the following categories: •Grow, which includes products and services that we anticipate will grow, including our colocation, dark fiber, Edge Cloud services, IP, managed security, Unified Communications and Collaboration ("UC&C") and wavelengths services; •Nurture, which includes our more mature offerings, including ethernet and VPN data network services; •Harvest, which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services; •Other, which includes primarily IT solutions; and •Affiliate Services, which include communications services provided to our affiliates that we also provide to our external customers. From time to time, we may change the categorization of our products and services. Disaggregated Revenue by Service Offering The following tables provide disaggregation of revenue from contracts with customers based on service offering for the years ended December 31, 2023, 2022 and 2021. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards. The amounts in the tables below include the Latin American and EMEA businesses revenues prior to being sold on August 1, 2022 and November 1, 2023, respectively:
_______________________________________________________________ (1) Includes lease revenue which is not within the scope of ASC 606. We do not have any single external customer that comprises more than 10% of our total consolidated operating revenue. Substantially all of our consolidated revenue comes from customers located in the United States. Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts classified as held for sale as of December 31, 2023 and 2022:
_______________________________________________________________________________ (1)Reflects gross customer receivables of $557 million and $534 million, net of allowance for credit losses of $13 million and $19 million, as of December 31, 2023 and 2022, respectively. At December 31, 2022 amounts exclude customer receivables, net, classified as held for sale of $76 million related to the EMEA business which was sold November 1, 2023. (2)At December 31, 2022 these amounts exclude contract assets classified as held for sale of $16 million at related to the EMEA business which was sold November 1, 2023. (3)At December 31, 2022 these amounts exclude contract liabilities classified as held for sale of $59 million related to the EMEA business which was sold November 1, 2023. Contract liabilities are consideration we have received from our customers or billed in advance of providing the goods or services promised in the future. We defer recognizing 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 typically ranges from to five years depending on the service. Contract liabilities are included within deferred revenue and liabilities held for sale in our consolidated balance sheets. During the years ended December 31, 2023 and 2022, we recognized $139 million and $148 million, respectively, of revenue that was included in contract liabilities of $281 million and $305 million as of January 1, 2023 and 2022, respectively, including contract liabilities that were classified as held for sale. Performance Obligations As of December 31, 2023, we expect to recognize approximately $4.0 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of December 31, 2023, the transaction price related to unsatisfied performance obligation that are expected to be recognized in 2024, 2025 and thereafter was $1.8 billion, $1.2 billion and $1.0 billion, respectively. These amounts exclude (i) 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) and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606. Contract Costs The following tables provide changes in our contract acquisition costs and fulfillment costs for the years ended:
_____________________________________________________________________ (1) Represents the amounts classified as held for sale related to the divestiture of our Latin American and EMEA businesses on August 1, 2022 and November 1, 2023, respectively. See Note 2—Divestitures of the Latin American and EMEA Businesses. 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 services to customers, including labor and materials consumed for these activities. We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average expected contract life of approximately 35 months for our business customers. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs in selling, general and administrative expenses in our consolidated statements of operations. We include the amount of deferred costs that are anticipated to be amortized in the next 12 months in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond 12 months is included in other non-current assets on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We primarily lease to or from third parties various office facilities, colocation facilities, equipment and transmission capacity. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Operating lease assets are included in other, net under goodwill and other assets on our consolidated balance sheets. Some of our lease arrangements contain lease components, non-lease components (including common-area maintenance costs) and executory costs (including real estate taxes and insurance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not generally contain any material residual value guarantees or material restrictive covenants. Lease expense consisted of the following:
We lease various equipment, office facilities, retail outlets, switching facilities and other network sites or components. These leases, with few exceptions, provide for renewal options and rent escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. Beginning in the second half of 2020 and continuing into 2023, we rationalized our leased footprint and ceased using 13 leased property locations that were underutilized. We determined that we no longer needed the leased space and, due to the limited remaining term on the contracts, concluded that we had neither the intent nor ability to sublease the properties. For the year ended December 31, 2021 we incurred accelerated lease costs of approximately $15 million. We did not further rationalize our lease footprint or incur material accelerated lease costs during the years ended December 31, 2022 and December 31, 2023. However, in conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated lease costs in future periods. For the years ended December 31, 2023, 2022 and 2021, our gross rental expense, including the accelerated lease costs discussed above, was $417 million, $384 million and $404 million, respectively. We also received sublease rental income for the years ended December 31, 2023, 2022 and 2021 of $14 million, $14 million and $12 million, respectively. Supplemental consolidated balance sheet information and other information related to leases:
(1) Includes affiliate operating lease assets of $311 million and $391 million as of December 31, 2023 and 2022, respectively. (2) Includes current portion of affiliate operating lease liabilities of $129 million and $125 million as of December 31, 2023 and 2022, respectively. (3) Includes noncurrent portion of affiliate operating lease liabilities of $201 million and $286 million as of December 31, 2023 and 2022, respectively. At December 31, 2022, we classified certain operating and finance lease assets and liabilities related to the EMEA business, which was sold as of November 1, 2023, as held for sale and discontinued recording amortization on the related right-of-use assets upon this classification. These operating and finance lease assets and liabilities held for sale are not reflected in the above or throughout the disclosures within this note. See Note 2—Divestitures of the Latin American and EMEA Businesses for more information. Supplemental unaudited consolidated cash flow statement information related to leases:
As of December 31, 2023, maturities of lease liabilities were as follows:
As of December 31, 2023, we had no material operating or finance leases that had not yet commenced. Operating Lease Income We lease various office facilities, colocation facilities and dark fiber to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations. See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies. For the years ended December 31, 2023, 2022 and 2021 our was $676 million, $746 million and $802 million, respectively, which represents 10% of our operating revenue for each of the years ended December 31, 2023, 2022 and 2021.
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Leases | Leases We primarily lease to or from third parties various office facilities, colocation facilities, equipment and transmission capacity. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Operating lease assets are included in other, net under goodwill and other assets on our consolidated balance sheets. Some of our lease arrangements contain lease components, non-lease components (including common-area maintenance costs) and executory costs (including real estate taxes and insurance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not generally contain any material residual value guarantees or material restrictive covenants. Lease expense consisted of the following:
We lease various equipment, office facilities, retail outlets, switching facilities and other network sites or components. These leases, with few exceptions, provide for renewal options and rent escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. Beginning in the second half of 2020 and continuing into 2023, we rationalized our leased footprint and ceased using 13 leased property locations that were underutilized. We determined that we no longer needed the leased space and, due to the limited remaining term on the contracts, concluded that we had neither the intent nor ability to sublease the properties. For the year ended December 31, 2021 we incurred accelerated lease costs of approximately $15 million. We did not further rationalize our lease footprint or incur material accelerated lease costs during the years ended December 31, 2022 and December 31, 2023. However, in conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated lease costs in future periods. For the years ended December 31, 2023, 2022 and 2021, our gross rental expense, including the accelerated lease costs discussed above, was $417 million, $384 million and $404 million, respectively. We also received sublease rental income for the years ended December 31, 2023, 2022 and 2021 of $14 million, $14 million and $12 million, respectively. Supplemental consolidated balance sheet information and other information related to leases:
(1) Includes affiliate operating lease assets of $311 million and $391 million as of December 31, 2023 and 2022, respectively. (2) Includes current portion of affiliate operating lease liabilities of $129 million and $125 million as of December 31, 2023 and 2022, respectively. (3) Includes noncurrent portion of affiliate operating lease liabilities of $201 million and $286 million as of December 31, 2023 and 2022, respectively. At December 31, 2022, we classified certain operating and finance lease assets and liabilities related to the EMEA business, which was sold as of November 1, 2023, as held for sale and discontinued recording amortization on the related right-of-use assets upon this classification. These operating and finance lease assets and liabilities held for sale are not reflected in the above or throughout the disclosures within this note. See Note 2—Divestitures of the Latin American and EMEA Businesses for more information. Supplemental unaudited consolidated cash flow statement information related to leases:
As of December 31, 2023, maturities of lease liabilities were as follows:
As of December 31, 2023, we had no material operating or finance leases that had not yet commenced. Operating Lease Income We lease various office facilities, colocation facilities and dark fiber to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations. See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies. For the years ended December 31, 2023, 2022 and 2021 our was $676 million, $746 million and $802 million, respectively, which represents 10% of our operating revenue for each of the years ended December 31, 2023, 2022 and 2021.
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Leases | Leases We primarily lease to or from third parties various office facilities, colocation facilities, equipment and transmission capacity. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Operating lease assets are included in other, net under goodwill and other assets on our consolidated balance sheets. Some of our lease arrangements contain lease components, non-lease components (including common-area maintenance costs) and executory costs (including real estate taxes and insurance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not generally contain any material residual value guarantees or material restrictive covenants. Lease expense consisted of the following:
We lease various equipment, office facilities, retail outlets, switching facilities and other network sites or components. These leases, with few exceptions, provide for renewal options and rent escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. Beginning in the second half of 2020 and continuing into 2023, we rationalized our leased footprint and ceased using 13 leased property locations that were underutilized. We determined that we no longer needed the leased space and, due to the limited remaining term on the contracts, concluded that we had neither the intent nor ability to sublease the properties. For the year ended December 31, 2021 we incurred accelerated lease costs of approximately $15 million. We did not further rationalize our lease footprint or incur material accelerated lease costs during the years ended December 31, 2022 and December 31, 2023. However, in conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated lease costs in future periods. For the years ended December 31, 2023, 2022 and 2021, our gross rental expense, including the accelerated lease costs discussed above, was $417 million, $384 million and $404 million, respectively. We also received sublease rental income for the years ended December 31, 2023, 2022 and 2021 of $14 million, $14 million and $12 million, respectively. Supplemental consolidated balance sheet information and other information related to leases:
(1) Includes affiliate operating lease assets of $311 million and $391 million as of December 31, 2023 and 2022, respectively. (2) Includes current portion of affiliate operating lease liabilities of $129 million and $125 million as of December 31, 2023 and 2022, respectively. (3) Includes noncurrent portion of affiliate operating lease liabilities of $201 million and $286 million as of December 31, 2023 and 2022, respectively. At December 31, 2022, we classified certain operating and finance lease assets and liabilities related to the EMEA business, which was sold as of November 1, 2023, as held for sale and discontinued recording amortization on the related right-of-use assets upon this classification. These operating and finance lease assets and liabilities held for sale are not reflected in the above or throughout the disclosures within this note. See Note 2—Divestitures of the Latin American and EMEA Businesses for more information. Supplemental unaudited consolidated cash flow statement information related to leases:
As of December 31, 2023, maturities of lease liabilities were as follows:
As of December 31, 2023, we had no material operating or finance leases that had not yet commenced. Operating Lease Income We lease various office facilities, colocation facilities and dark fiber to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations. See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies. For the years ended December 31, 2023, 2022 and 2021 our was $676 million, $746 million and $802 million, respectively, which represents 10% of our operating revenue for each of the years ended December 31, 2023, 2022 and 2021.
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Credit Losses on Financial Instruments |
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Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Losses on Financial Instruments | Credit Losses on Financial Instruments To assess our expected credit losses on financial instruments, we aggregate financial assets with similar risk characteristics to monitor their credit quality or deterioration over the life of such assets. We periodically monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change. We separately evaluate financial assets that do not share risk characteristics with other financial assets. Our financial assets measured at amortized cost primarily consist of accounts receivable. We use a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our review of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to recognize accounts receivable as credit losses. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, certain classes of aged balances, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to adjust our historical loss rate. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. To determine our current allowance for credit losses, we combine the historical and expected credit loss rates and apply them to our period end accounts receivable. If there is an unexpected deterioration of a customer's financial condition or an unexpected change in economic conditions, including macroeconomic events, we assess the need to adjust the allowance for credit losses. Any such resulting adjustments would affect earnings in the period that adjustments are made. The assessment of the correlation between historical observed default rates, current conditions and forecasted economic conditions requires judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding our allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions and forecast of economic conditions may also not be representative of the customers' actual default experience in the future and we may use methodologies that differ from those used by other companies. The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:
______________________________________________________________________ (1) Represents the amounts classified as held for sale related to the divestitures of our Latin American and EMEA businesses prior to the divestitures on August 1, 2022 and November 1, 2023, respectively. See Note 2—Divestitures of the Latin American and EMEA Businesses. For the year ended December 31, 2023 and the year ended December 31, 2022, we decreased our allowance for credit losses primarily due to higher write-off activity.
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Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt The following table reflects our consolidated long-term debt, including finance leases and other obligations, unamortized discounts and premiums, net and unamortized debt issuance costs, but excluding intercompany debt:
_______________________________________________________________________________ (1)As of December 31, 2023. (2)See the remainder of this Note for a description of certain affiliate guarantees and liens securing this debt. (3)The Tranche B 2027 Term Loan had an interest rate of 7.220% and 6.134% as of December 31, 2023 and December 31, 2022, respectively. (4)See the remainder of this Note for a description of guarantees provided by certain affiliates of Level 3 Financing, Inc. New Issuances On January 13, 2021, Level 3 Financing, Inc. issued $900 million aggregate principal amount of its 3.750% Sustainability-Linked Senior Notes due 2029 (the "Sustainability-Linked Notes"). The net proceeds were used, together with cash on hand, to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The Sustainability-Linked Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC. Pursuant to exchange offers commenced on March 16, 2023 (the “Exchange Offers”), on March 31, 2023, Level 3 Financing, Inc. issued $915 million of its 10.500% Senior Secured Notes due 2030 (the “Initial Notes”) in exchange for $1.535 billion of Lumen’s outstanding senior unsecured notes. On April 17, 2023, in connection with the Exchange Offers, Level 3 Financing, Inc. issued an additional $9 million of its 10.500% Senior Secured Notes due 2030 in exchange for $19 million aggregate principal amount of Lumen’s senior unsecured notes. Repayments 2022 During 2022, we used available cash to repay the following aggregate principal amounts of indebtedness through a combination of tender offers, redemptions and repayments. These transactions resulted in a net gain of $8 million.
Interest Expense Interest expense includes interest on total long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest:
Senior Secured Term Loan As of December 31, 2023, Level 3 Financing, Inc. owed $2.4 billion under a senior secured Tranche B 2027 Term Loan, which matures on March 1, 2027. The Tranche B 2027 Term Loan carries an interest rate, in the case of base rate borrowings, equal to (i) the greater of the Prime Rate, the Federal Funds Effective Rate plus 50 basis points, or SOFR plus 100 basis points (with all such terms and calculations as defined or further specified in the credit agreement) plus (ii) 0.75% per annum. Any Eurodollar borrowings under the Tranche B 2027 Term Loan bear interest at SOFR plus 1.75% per annum. The Tranche B 2027 Term Loan requires certain specified mandatory prepayments in connection with certain asset sales and other transactions, subject to certain significant exceptions. The obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan were, subject to certain exceptions, secured by certain assets of Level 3 Parent, LLC and certain of its material domestic subsidiaries. Also, Level 3 Parent, LLC and certain of its subsidiaries have guaranteed the obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan. Additional secured term loans or revolving credit may in the future be extended to Level 3 Financing, Inc. under its credit agreement dated as of March 13, 2007, as amended on November 29, 2019. Senior Notes All of the notes of Level 3 Financing, Inc. reflected in the table above pay interest at fixed rates semiannually and allow for the redemption of the notes at the option of the issuer, in whole or in part, (i) pursuant to a fixed schedule of pre-established redemption prices, (ii) pursuant to a “make whole” redemption price or (iii) under certain other specified limited circumstances in connection with certain sales of equity securities. For purposes of early redemption, all of the notes reflected in the table above allow for the redemption of the notes at the option of the issuer upon not less than 10 or more than 60 days prior notice. For specific details of these features and requirements, including the applicable premiums and timing, refer to the indentures setting forth the specific terms of each respective series of the senior notes of Level 3 Financing, Inc. The Level 3 Financing, Inc. secured senior notes are secured by a pledge of substantially all of its assets and guaranteed on a secured basis by the same domestic subsidiaries that guarantee its Term B 2027 Term Loan. The remaining senior notes issued by Level 3 Financing, Inc. are guaranteed on an unsecured basis by its parent, Level 3 Parent, LLC, and one of its subsidiaries. Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2023 (excluding unamortized premiums, net, unamortized debt issuance costs and intercompany debt) maturing during the following years:
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 December 31, 2023 and 2022, we had outstanding letters of credit or other similar obligations of approximately $2 million and $3 million, respectively, of which $2 million and $3 million were collateralized by restricted cash. None of our conditional commitments under our outstanding letters of credit are reflected as debt on our balance sheets. Supplier Finance Program Pursuant to our purchase of network equipment under a supplier finance program implemented in 2021 with one of our key equipment vendors, we are obligated to make quarterly installment payments over a 5-year period and pay annual interest of 1.25% on unpaid balances. The first unsecured quarterly payment was due April 27, 2022, with remaining quarterly payments due through the end of the term on July 1, 2026. The supplier also agreed to certain milestone performance and other provisions that could result in us earning credits to be applied by us towards future equipment purchases. During 2023 , we have received approximately $15 million of credits. We received no significant credits during 2022. Our outstanding obligations under the plan were $55 million and $67 million, respectively, of which $16 million and $12 million were included in and the remaining balances were reflected as the long-term debt. Covenants The 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, dispose of assets and merge or consolidate with any other person. Also, in connection with a "change of control" of Level 3 Parent, LLC, or Level 3 Financing, Inc., Level 3 Financing will be required to offer to repurchase or repay certain of its long-term debt at a price of 101% of the principal amount of debt repurchased or repaid, plus accrued and unpaid interest. The debt covenants applicable to us and our subsidiaries could have a material adverse effect on their ability to operate or expand their respective businesses, to pursue strategic transactions, to transfer cash to or engage in transactions with their unconsolidated affiliates, or to otherwise pursue their plans and strategies. Certain of Lumen'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. Our ability to comply with the financial covenants in our debt instruments could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond our control. Compliance As of December 31, 2023 and December 31, 2022, we believe we were in compliance with the provisions and financial covenants contained in our debt agreements in all material respects. Subsequent Event See Note 19—Subsequent Event for information regarding certain debt restructuring transactions contemplated under our amended and restated transaction support agreement dated as of January 22, 2024.
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Accounts Receivable |
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Accounts Receivable | Accounts Receivable The following table presents details of our accounts receivable balances:
We are exposed to concentrations of credit risk from our customers and other telecommunications service providers. We generally do not require collateral to secure our receivable balances.
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Property, Plant and Equipment |
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Property, Plant and Equipment | Property, Plant and Equipment Net property, plant and equipment is composed of the following:
_______________________________________________________________________________ (1)Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures. (2)Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers. (3)Support assets consist of buildings, data centers, computers and other administrative and support equipment. (4)Construction in progress includes construction and property of the aforementioned categories that has not been placed in service as it is still under construction. (5)At December 31, 2022, we had $1.9 billion of certain property, plant and equipment, net related to our EMEA business which was classified as held for sale at this date and which was sold on November 1, 2023. See Note 2—Divestitures of the Latin American and EMEA Businesses for more information. Depreciation expense was $686 million, $790 million and $874 million for the years ended December 31, 2023, 2022 and 2021, respectively. Asset Retirement Obligations As of December 31, 2023 and 2022, our asset retirement obligations consisted primarily of restoration requirements for leased facilities. We recognize our estimate of the fair value of our asset retirement obligations in the period incurred in other long-term liabilities. The fair value of the asset retirement obligation is also capitalized as property, plant and equipment and then depreciated over the estimated remaining useful life of the associated asset. The following table provides asset retirement obligation activity:
_______________________________________________________________________________ (1)Represents the amounts classified as held for sale related to our EMEA business as of December 31, 2022. See Note 2—Divestitures of the Latin American and EMEA Businesses. The changes in estimate referred to in the table above was offset against gross property, plant and equipment.
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Employee Benefits |
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Dec. 31, 2023 | |
Retirement Benefits [Abstract] | |
Employee Benefits | Employee Benefits Defined Contribution Plans Lumen Technologies sponsors a qualified defined contribution plan covering substantially all of our employees. Under this plan, employees may contribute a percentage of their annual compensation up to certain maximums, as defined by the plan and by the Internal Revenue Service ("IRS"). Currently, we match a percentage of our employee's contributions in cash. We recognized $32 million in expense related to this plan for the year ended December 31, 2023 and $31 million for each of the years ended December 31, 2022 and 2021. Other defined contribution plans we sponsored were individually and in aggregate not material. Defined Benefit Plans We have certain contributory and non-contributory employee pension plans, which are not significant to our financial position or operating results. We recognize in our balance sheet the funded status of our defined benefit post-retirement plans, which is measured as the difference between the fair value of the plan assets and the plan benefit obligations. We are also required to recognize changes in the funded status within accumulated other comprehensive income, net of tax, to the extent such changes are not recognized in earnings as components of periodic net benefit cost. The fair value of the plan assets was $40 million and $112 million as of December 31, 2023 and 2022, respectively. The total plan benefit obligations were $39 million and $102 million as of December 31, 2023 and 2022, respectively. Therefore, the plans were fully funded as of December 31, 2023 and December 31, 2022. The decrease in these balances is primarily the result of the sale of our EMEA business.
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Share-based Compensation |
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Share-Based Payment Arrangement [Abstract] | |
Share-based Compensation | Stock-based Compensation Stock-based compensation expenses are included in cost of services and products, and selling, general, and administrative expenses in our consolidated statements of operations. For the years ended December 31, 2023, 2022 and 2021, we recorded stock-based compensation expense of approximately $22 million, $43 million and $47 million, respectively.
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, note receivable-affiliate and long-term debt (excluding finance leases and other obligations) and certain indemnification obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, note receivable-affiliate and accounts payable approximate their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy. We determined the fair values of our long-term debt, including the current portion, based primarily on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates. The three input levels in the hierarchy of fair value measurements are defined by the FASB are generally as follows:
The following table presents the carrying amounts and estimated fair values of our financial liabilities as of December 31, 2023 and 2022, as well as the input level used to determine the fair values indicated below:
_______________________________________________________________________________ (1)Nonrecurring fair value is measured as of August 1, 2022.
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of the income tax expense are as follows:
The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:
_______________________________________________________________________________ (1)Includes Global Intangible Low-Taxes Income ("GILTI") incurred as a result of the sale of our Latin American business. For the year ended December 31, 2023, the effective tax rate is 0.1% compared to (5.6)% and 25.2% for the years ended December 31, 2022 and 2021, respectively. The effective tax rate for the year ended December 31, 2023 includes a $389 million unfavorable impact of a non-deductible goodwill impairment charge recorded in the second quarter of 2023.The effective tax rate for the year ended December 31, 2022 includes a $969 million unfavorable impact of non-deductible goodwill impairment and a $256 million unfavorable impact related to incurring GILTI as a result of the sale of our Latin American business. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
Of the $336 million and $355 million net deferred tax liabilities as of December 31, 2023 and 2022, respectively, $375 million and $387 million is reflected as a long-term liability, in other on our consolidated balance sheets and $39 million and $32 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets. As of December 31, 2023, we had gross federal NOLs net of uncertain tax positions of $6.3 billion, which will expire between 2026 and 2037 if unused, and state NOLs net of uncertain tax positions of $6.1 billion. Our deferred tax asset balance is based on our historical balance and subsequent standalone activity since we were acquired by Lumen in 2017 and does not correspond to the amount of NOLs that are available for use by Lumen. We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, 2023, a valuation allowance of $248 million was recorded as it is more likely than not that this amount of net operating loss and tax credit carryforwards will not be utilized prior to expiration. Our valuation allowance as of December 31, 2023 and 2022 is primarily related to federal capital loss carry forwards and state NOL carryforwards. A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 is as follows:
As of December 31, 2023 the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $3 million. The unrecognized tax benefits also includes tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, that would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities. Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $1 million as of both December 31, 2023 and 2022. We, or at least one of our affiliates, file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carry forwards are available. Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may increase by up to $174 million within the next 12 months. The actual amount of such increase, if any, will depend on several future developments and events, many of which are outside our control. In August 2022, the Inflation Reduction Act was signed into law and which, among other things, implemented a corporate alternative minimum tax (“CAMT”) on adjusted financial statement income effective for tax periods occurring after December 31, 2022. The CAMT had no material impact on our financial results as of December 31, 2023. In addition, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the US has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation, some of which are effective for tax periods after December 31, 2023. While the global minimum tax will increase our administrative and compliance burdens, it is expected to have an immaterial impact to our financial statements.
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Geographic and Customer Concentrations |
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Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Geographic and Customer Concentrations | Geographic and Customer Concentrations The following tables present total assets as of the years ended December 31, 2023 and 2022 as well as operating revenue for the years ended December 31, 2023, 2022 and 2021 by geographic region:
_______________________________________________________________________________ (1)Includes revenue prior to closing the sale of the Latin American business on August 1, 2022, revenue recognized through post-closing commercial agreements subsequent to the sale and revenue related to servicing our customers in those regions. (2)Includes revenue prior to closing the sale of the EMEA business on November 1, 2023. A relatively small number of customers account for a significant percentage of our revenue. Our top ten customers accounted for approximately 18%, 15% and 17% of our total operating revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
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Affiliate Transactions |
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Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
Affiliate Transactions | Affiliate Transactions We provide competitive local exchange carrier telecommunications services to our affiliates that we also provide to external customers. We believe these services are priced consistent with non-regulated rates charged to external customers. These services are billed directly to our affiliates and recognized as affiliate revenue on our consolidated statements of operations. Costs are incurred directly by our affiliates for the services they use whenever possible. When such costs are not directly incurred, they are allocated among all affiliates based upon the most reasonable method, first using cost causative measures, or, if no cost causative measure is available, using a general allocator. Unlike other affiliates of Lumen, we do not operate as a service company to our affiliates and therefore any allocated affiliate revenue we earn reduces the affiliate charges incurred by us and is presented on a net basis within Operating expenses – affiliates on our consolidated statements of operations. From time to time, we may adjust the basis for allocating the costs of a shared service among affiliates. Any such changes in allocation methodologies are generally applied prospectively. We also purchase services from our affiliates, including telecommunication services, insurance, flight services and other support services such as legal, regulatory, finance, administration and executive support. Our affiliates charge us for those services using the allocation methodology described above. We have a revolving credit facility that we extended to Lumen Technologies, Inc. under which we had $1.5 billion of outstanding affiliate notes receivable as of December 31, 2023 and 2022. As of December 31, 2023, the interest rate for this facility was 4.250% per annum and is subject to certain adjustments as set forth in the facility. The principal amount is payable upon demand by us and prepayable by Lumen Technologies at any time, but no later than October 15, 2025, which maturity date may be extended for two additional one-year periods. The facility has covenants, including a maximum total leverage ratio, and is subject to other limitations.
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Commitments, Contingencies and Other Items |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments, Contingencies and Other Items | Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Subject to these limitations, at December 31, 2023 and December 31, 2022, we had accrued $38 million and $40 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which is included in other current liabilities or other liabilities in our consolidated balance sheet as of such date. We cannot at this time estimate the reasonably possible loss or range of loss in excess of this $38 million accrual due to the inherent uncertainties and speculative nature of contested proceedings. 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 could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows. Latin American Tax Litigation and Claims In connection with the 2022 divestiture of our Latin American business, the purchaser assumed responsibility for the Peruvian tax litigation and Brazilian tax claims described in our prior periodic reports filed with the SEC. We agreed to indemnify the purchaser for amounts paid in respect to the Brazilian tax claims. The value of this indemnification is included in the indemnification amount as disclosed in Note 12—Fair Value of Financial Instruments. Huawei Network Deployment Investigations Lumen has received requests from the following federal agencies for information relating to the use of equipment manufactured by Huawei Technologies Company ("Huawei") in Lumen’s networks. •DOJ. Lumen has received a civil investigative demand from the U.S. Department of Justice in the course of a False Claims Act investigation alleging that Lumen Technologies, Inc. and Lumen Technologies Government Solutions, Inc. failed to comply with the requirements in federal contracts concerning their use of Huawei equipment. •FCC. The FCC’s Enforcement Bureau issued a Letter of Inquiry to Lumen Technologies, Inc. regarding its written certifications to the FCC that Lumen has complied with FCC rules governing the use of resources derived from the High Cost Program, Lifeline Program, Rural Health Care Program, E-Rate Program, Emergency Broadband Benefit Program, and the Affordable Connectivity Program. Under these programs, federal funds may not be used to facilitate the deployment or maintenance of equipment or services provided by Huawei, a company that the FCC has determined poses a national security threat to the integrity of communications networks or the communications supply chain. •Team Telecom. The Committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector (comprised of the U.S. Attorney General, and the Secretaries of the Department of Homeland Security, and the Department of Defense), commonly referred to as Team Telecom, issued questions and requests for information relating to Lumen’s FCC licenses and its use of Huawei equipment. We are cooperating with the investigations. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, regulatory hearings relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial within the next twelve months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $300,000 in fines and penalties. In addition, in the past we acquired companies that operated certain manufacturing companies in the first part of the 1900s. Under applicable environmental laws, we could be named as a potentially responsible party for a share of the remediation of environmental conditions arising from the historical operations of our predecessors. The outcome of these other proceedings described under this heading is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us. The matters listed in this Note do not reflect all of our contingencies. The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us. Right-of-Way As of December 31, 2023, our future rental commitments and right-of-way ("ROW") agreements were as follows:
Purchase Commitments We have several commitments primarily for marketing activities and support services from a variety of vendors to be used in the ordinary course of business totaling $220 million as of December 31, 2023. Of this amount, we expect to purchase $76 million in 2024, $70 million in 2025 through 2026, $28 million in 2027 through 2028 and $46 million in 2029 and thereafter. These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we were contractually committed as of December 31, 2023.
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Accumulated Other Comprehensive Loss |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheet by component for the years ended December 31, 2022 and December 31, 2023:
The table below present further information about our reclassifications out of accumulated other comprehensive (loss) income by component for the year ended December 31, 2023:
The table below present further information about our reclassifications out of accumulated other comprehensive (loss) income by component for the year ended December 31, 2022:
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Other Financial Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Financial Information | Other Financial Information Other Current Assets The following table presents details of other current assets reflected in our consolidated balance sheets:
_______________________________________________________________________________ (1)Excludes $56 million of other current assets related to the EMEA business sold on November 1, 2023 that were classified as held for sale as of December 31, 2022
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Subsequent Event |
12 Months Ended |
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Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On January 22, 2024, the Lumen, Level 3 Financing, Qwest and a group of creditors holding a majority of Lumen's consolidated debt (the "TSA Parties") amended and restated the transaction support agreement that we originally entered into with a subset of the TSA Parties on October 31, 2023 (as amended and restated, the "Transaction Support Agreement"). The Transaction Support Agreement defines the parties’ commitments to effect a series of transactions (the “TSA Transactions”) set forth in the term sheet attached thereto (the “Term Sheet”). Among other things and subject to the terms and conditions set forth therein, the Transaction Support Agreement, including the Term Sheet, contemplates: •the incurrence by Level 3 Financing of $1.325 billion in new money long term senior secured first lien indebtedness, which indebtedness will be backstopped by certain of the consenting lenders; •a new Lumen revolving credit facility in an amount expected to be approximately $1 billion; •the extension of maturities, covenant modifications and rate increases of certain secured and unsecured indebtedness at Lumen and Level 3 Financing through a series of exchanges and other debt transactions with certain consenting lenders as set forth in the Term Sheet; and •the repayment of certain indebtedness of the Company and Qwest. The outside date for completion of the TSA Transactions under the Transaction Support Agreement is February 29, 2024, which Lumen may unilaterally extend at its discretion to March 31, 2024. The Company expects to consummate the TSA Transactions in the first quarter of 2024, subject to the satisfaction of remaining closing conditions. Following consummation of the TSA Transactions, Level 3 Financing and our other affiliates may assess potential follow-on transactions with respect to non-participating creditors. Additional information about the Transaction Support Agreement and the TSA Transactions is available in our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024, and Exhibit 10.10 to this annual report.
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Background and Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
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Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
General | General We are a facilities-based technology and communications company that provides a broad array of integrated products and services to our domestic and global business customers. We operate one of the world’s most interconnected networks. Our platform empowers our customers to swiftly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access and reduce costs, which allows our customers to rapidly evolve their IT programs to address dynamic changes. Our specific products and services are detailed in Note 4—Revenue Recognition.
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Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (Lumen Technologies and its other subsidiaries, referred to herein as affiliates) have not been eliminated. We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories.
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Segments | Segments Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis.
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Use of Estimates | Use of Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we make when accounting for specific items and matters are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can materially affect the reported amounts of assets, liabilities and components of member's equity as of the dates of the consolidated balance sheets, as well as the reported amounts of revenue, expenses and components of cash flows during the periods presented in our other consolidated financial statements. We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note 13—Income Taxes and Note 16—Commitments, Contingencies and Other Items for additional information. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable. For matters related to income taxes, if we determine the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. We do not recognize any portion of an uncertain tax position if the position has less than a 50% likelihood of being sustained. We recognize interest is recognized on the amount of unrecognized benefit from uncertain tax positions. For all of these and other matters, actual results could differ materially from our estimates.
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Revenue Recognition | Revenue Recognition We earn most of our consolidated revenue from contracts with customers, primarily through the provision of communications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606. We also earn revenue from leasing arrangements (primarily fiber capacity and colocation agreements) which are not accounted for under ASC 606. Revenue is 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 to receive in exchange for those goods or services. Revenue is recognized based on the following five-step model: •Identification of the contract 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, VPN, Ethernet, data, broadband, private line (including special access), network access, transport, voice, information technology ("IT"), video and other ancillary services. We provide these services to a wide range of businesses, including global, enterprise, wholesale, government, and small and medium business customers. Certain contracts also include the sale of equipment, which is not significant to our business. We recognize revenue for services when we provide the applicable service or when control of a product is transferred. Recognition of certain payments received in advance of services being provided is deferred. These advance payments may include certain activation and certain installation charges. If the activation and installation charges are not separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which typically ranges from to five years depending on the service. 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. For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage 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. Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price that we expect to receive with the customer is allocated to each performance obligation based on its relative standalone selling price. The revenue associated with each performance obligation is then recognized as earned. We periodically sell transmission capacity on our network. These transactions are generally 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 20 years. In most cases, we account for the cash consideration received on transfers of transmission capacity as ASC 606 revenue, which is adjusted for the time value of money and is recognized ratably over the term of the agreement. Cash consideration received on transfers of dark fiber is accounted for as non-ASC 606 lease revenue, which we also recognize ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our transmission capacity assets for other non-owned optical capacity assets. In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user 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 and services used to fulfill the performance obligations associated with the transaction. We have service level commitments pursuant to contracts with certain of our customers. To the extent that we determine such service levels were not achieved or may not have been achieved, we estimate the amount of credits to be issued and record a corresponding reduction to revenue in the period that the service level commitment was not met or may not be met. Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis. We defer (or capitalize) incremental contract acquisition and fulfillment costs and recognize (or amortize) such costs over the average contract life. Our deferred contract costs for our customers have average amortization periods of approximately 35 months. These deferred costs are periodically monitored to reflect any significant change in assumptions.
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Affiliate Transactions | Affiliate Transactions We provide services to our affiliates that we also provide to external customers. These services are recognized as operating revenue-affiliates in our consolidated statements of operations. Services provided to us from our affiliates are recognized as operating expenses-affiliates on our consolidated statements of operations. Because of the significance of the services we provide to our affiliates and our affiliates provide to us, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented. We recognize intercompany charges at the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates. The resulting net balance for transactions between us and our affiliates at the end of each period is reported as accounts receivables - affiliates or accounts payable - affiliates on the accompanying consolidated balance sheets. From time to time we make distributions to our parent, which reduce our capital resources for debt repayments or other purposes. Distributions are reflected on our consolidated statements of member's equity and our consolidated statements of cash flows reflects distributions made as financing activities. Our ultimate parent company, Lumen Technologies, is currently indebted to us under a revolving credit facility. For additional information, see Note 15—Affiliate Transactions.
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Legal Costs | Legal Costs In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. Subject to certain exceptions, we expense these costs as the related services are received.
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Income Taxes | Income Taxes Lumen Technologies treats our consolidated results as if we were a separate taxpayer. Our reported deferred tax assets and liabilities, as discussed below and in Note 13—Income Taxes, are primarily determined as a result of the application of the separate return method and therefore the settlement of these amounts is dependent upon our parent, Lumen Technologies, rather than tax authorities. We are required to pay our tax liabilities based upon our separate return taxable income. We are also included in the combined state tax returns filed by Lumen Technologies. The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities. Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income. The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered. Each quarter we evaluate the need to retain all or a portion of the valuation allowance on our deferred tax assets.
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Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the value at which cash and cash equivalents are reported in our consolidated financial statements approximates their fair value. In evaluating investments for classification as cash equivalents, we require that individual securities have original maturities of ninety days or less and that individual investment funds have dollar-weighted average maturities of ninety days or less. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of sound financial condition and in high quality and relatively risk-free investment products. Our cash investment policy limits the concentration of investments with specific financial institutions or among certain products and includes criteria related to credit worthiness of any particular financial institution. Book overdrafts occur when we have issued checks but they have not yet been presented to our controlled disbursement bank accounts for payment. Disbursement bank accounts allow us to delay funding of issued checks until the checks are presented for payment. Until the issued checks are presented for payment, the book overdrafts are included in accounts payable on our consolidated balance sheet. This activity is included in the operating activities section in our consolidated statements of cash flows.
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Restricted Cash | Restricted Cash Restricted cash and securities consist primarily of cash and investments that serve to collateralize our outstanding letters of credit and certain performance and operating obligations. Restricted cash and securities are recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Restricted securities are stated at cost which approximates fair value as of December 31, 2023 and 2022.
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Accounts Receivable and Allowance for Credit Losses | Accounts Receivable and Allowance for Credit Losses Accounts receivable are recognized based upon the amount due from customers for the services provided or at cost for other receivables, less an allowance for credit losses. We use a loss rate method to estimate our allowance for credit losses. For more information on our methodology for estimating our allowance for credit losses, see Note 6—Credit Losses on Financial Instruments. We generally consider our accounts past due if they are outstanding over 30 days. Our past due accounts are written off against our allowance for credit losses when collection is considered to be not probable. Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received. The carrying value of accounts receivable net of the allowance for credit losses approximates fair value.
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Concentration of Credit Risk | Concentration of Credit Risk We provide communications services to a wide range of wholesale and enterprise customers, ranging from well capitalized global enterprises to small early stage companies primarily in the United States. Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographical regions. We perform ongoing credit evaluations of our customers' financial condition and generally require no collateral from our customers, although letters of credit and deposits are required in certain limited circumstances. We have, from time to time, entered into agreements with value added resellers and other channel partners to reach enterprise markets for voice services. We have policies and procedures in place to evaluate the financial condition of these resellers prior to initiating service to the final customer. We are not able to predict changes in the financial stability of our customers. Any material changes in the financial status of any one or a particular group of customers may cause us to adjust our estimate of the recoverability of receivables and could have a material effect on our results of operation.
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Assets Held for Sale | Assets Held for Sale We classify assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the net assets is probable within one year. Assets and liabilities held for sale are presented separately on our consolidated balance sheets with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. Depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale. For each period that assets are classified as being held for sale, they are tested for recoverability. Unless otherwise specified, the amounts and information in the notes presented do not include assets and liabilities that were classified as held for sale as of December 31, 2023.
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Property, Plant and Equipment | Property, Plant and Equipment We record purchased and constructed property, plant and equipment at cost, plus the estimated value of any associated legally or contractually required retirement obligations. We depreciate our property, plant and equipment using the straight-line method. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the expected lease term. Expenditures for maintenance and repairs are expensed as incurred. During the construction phase of network and other internal-use capital projects, we capitalize related employee and interest costs. Property, plant and equipment supplies used internally are carried at average cost, except for significant individual items which are carried at actual cost. We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews take into account actual usage, the physical condition of our property, plant, and equipment, industry data, and other relevant factors. Our remaining useful life assessments evaluate the possible loss in service value of assets that may precede the physical retirement. Assets shared among many customers may lose service value as those customers reduce their use of the asset. However, the asset is not retired until all customers no longer utilize the asset and we determine there is not alternative use for the asset. We have asset retirement obligations associated with the legally or contractually required removal of a limited group of property, plant and equipment assets from leased properties and the disposal of certain hazardous materials present in our owned properties. When an asset retirement obligation is identified, usually in association with the acquisition of the asset, we record the fair value of the obligation as a liability. The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset. Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred. We review long-lived tangible assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. For assessment purposes, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, absent a material change in operations. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its estimated fair value. Recoverability of the asset group to be held and used is assessed by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, we recognize an impairment charge for the amount by which the carrying amount of the asset group exceeds its estimated fair value.
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Goodwill, Customer Relationships and Other Intangible Assets | Goodwill, Customer Relationships and Other Intangible Assets Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, are initially recorded at estimated fair value. We amortize customer relationships primarily over an estimated life of 7 to 14 years, using the straight-line method, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to 7 years. We amortized our other intangible assets over an estimated life of 5 years prior to becoming fully amortized in the fourth quarter of 2022. Other intangible assets not arising from business combinations are initially recorded at cost. Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify the intangible asset as indefinite-lived and such intangible assets are not amortized. Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line method over its estimated useful life. We have capitalized certain costs associated with software such as costs of employees devoted to software development and external direct costs for materials and services. Costs associated with software to be used for internal purposes are expensed until the point at which the project has reached the development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred. We review the remaining economic lives of our capitalized software annually. Capitalized software is included in other intangible assets, net, in our consolidated balance sheets. Prior to becoming fully impaired in the second quarter of 2023, we were required to assess our goodwill for impairment annually, or more frequently if an event occurred or circumstances changed that would indicate it was more likely than not the fair value of our reporting unit was less than the carrying value. The impairment assessment was performed at the reporting unit level. We have determined that our operations consist of one reporting unit, consistent with our determination that our business consists of one operating segment. We were required to write-down the value of goodwill in periods in which the carrying amount of our reporting unit's equity exceeded the estimated fair value of the equity of the reporting unit, limited to the goodwill balance.
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Foreign Currency | Foreign Currency Local currencies of our foreign subsidiaries are the functional currencies for financial reporting purposes except for certain foreign subsidiaries, primarily in Latin America prior to the August 1, 2022 sale of our Latin American business. For operations outside the United States that have functional currencies other than the U.S. dollar, assets and liabilities are translated to U.S. dollars at period-end exchange rates, and revenue, expenses and cash flows are translated using average monthly exchange rates. Prior to the November 1, 2023 sale of our EMEA business and the August 1, 2022 sale of our Latin American business, a significant portion of our non-United States subsidiaries used the British pound, the Euro or the Brazilian Real, as their functional currency, each of which experienced significant fluctuations against the U.S. dollar during the years ended December 31, 2023, December 31, 2022 and December 31, 2021. We recognize foreign currency translation gains and losses as a component of accumulated other comprehensive loss in member's equity in our consolidated balance sheet and in our consolidated statements of comprehensive (loss) income in accordance with accounting guidance for foreign currency translation. We consider the majority of our investments in our foreign subsidiaries to be long-term in nature. Our foreign currency transaction gains (losses), including where transactions with our non-United States subsidiaries are not considered to be long-term in nature, are included within other income (expense) in "Other, net" on our consolidated statements of operations.
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Recently Adopted and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements Supplier Finance Programs On January 1, 2023, we adopted Accounting Standards Update ("ASU") 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”). These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions. The adoption of ASU 2022-04 did not have a material impact to our consolidated financial statements. Credit Losses On January 1, 2023, we adopted ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures” (“ASU 2022-02”). The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The adoption of ASU 2022-02 did not have a material impact to our consolidated financial statements. Leases On January 1, 2022, we adopted ASU 2021-05, "Leases (Topic 842)" Lessors - Certain Leases with Variable Lease Payments" ("ASU 2021-05"). This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease; and (iii) provides guidance with respect to net investments by lessors under operating leases and other related topics. The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements. Debt On January 1, 2021, we adopted ASU 2020-09, Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762" ("ASU 2020-09"). This ASU amends and supersedes various SEC guidance to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements. Investments On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01"). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of December 31, 2023, we determined there was no application or discontinuation of the equity method during the reporting periods covered in this report. The adoption of ASU 2020-01 did not have an impact to our consolidated financial statements. Income Taxes On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). This ASU requires that public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).” ASU 2023-09 will become effective for us in the annual period of fiscal 2025 and early adoption is permitted. We have chosen not to early adopt this ASU. In December 2023, the FASB issued ASU 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets” (“ASU 2023-08”). This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. This ASU will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted. As of December 31, 2023, we do not hold crypto assets and do not expect ASU 2023-08 will have any impact to our consolidated financial statements. In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU will become effective for us in annual period fiscal 2024 and early adoption is permitted. As of December 31, 2023, we are evaluating its impact on our consolidated financial statements. In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes. As of December 31, 2023, we do not expect ASU 2023-06 will have any impact to our consolidated financial statements. In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and initial Measurement” (“ASU 2023-05”). This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture). The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. ASU 2023-05 will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-05 will have any impact to our consolidated financial statements. In August 2023, the FASB issued ASU 2023-04, “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121” (“ASU 2023-04”). This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users. This ASU does not provide any new guidance. ASU 2023-04 became effective for us once the addition to the FASB Codification was made available. As of December 31, 2023, we do not expect ASU 2023-04 will have any impact to our consolidated financial statements. In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock” (“ASU 2023-03”). This ASU amends or supersedes various SEC paragraphs within the applicable codification to conform to past SEC staff announcements. This ASU does not provide any new guidance. ASU 2023-03 became effective for us once the addition to the FASB Codification was made available. As of December 31, 2023, we do not expect ASU 2023-03 will have any impact to our consolidated financial statements. In March 2023, the FASB issued ASU 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. ASU 2023-02 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-02 will have any impact to our consolidated financial statements. In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” (“ASU 2023-01”). These amendments require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2023-01 will have any impact to our consolidated financial statements. In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848" ("ASU 2022-06"). These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848, which defers the sunset date from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. ASU 2022-06 is effective upon issuance. Based on our review of our key material contracts through December 31, 2023, ASU 2022-06 does not have a material impact to our consolidated financial statements. In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). These amendments clarify that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. ASU 2022-03 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of December 31, 2023, we do not expect ASU 2022-03 will have any impact to our consolidated financial statements. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope" ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2021-01 provides optional expedients for a limited time to ease the potential burden in accounting for reference rate reform. Based on our review of our key material contracts through December 31, 2023, ASU 2021-01 will not have a material impact to our consolidated financial statements.
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Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of pre-tax net income and held for sale assets and liabilities | The pre-tax net income of the Latin American business is estimated to be and reported as follows in the table below:
_______________________________________________________________________________ (1)The pre-tax net income includes operating results prior to the close of the sale of the Latin American business on August 1, 2022
(1) The assignment of goodwill was based on the relative fair value of the disposal group and the portion of the remaining reporting unit. The pre-tax net income (loss) of the EMEA business is reported as follows in the table below:
_______________________________________________________________________________ (1)The pre-tax net income includes operating results prior to the close of the sale of the EMEA business on November 1, 2023
______________________________________________________________________ (1) Includes the impact of $350 million realized loss on foreign currency translation, net of tax, reclassified out of accumulated other comprehensive loss as of December 31, 2023 to the valuation allowance and loss on sale of the EMEA business.
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Goodwill, Customer Relationships and Other Intangible Assets (Tables) |
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill, customer relationships and other intangible assets | Goodwill, customer relationships and other intangible assets consisted of the following:
______________________________________________________________________ (1)These values exclude assets classified as held for sale. (2)We recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.0 billion during the second quarter of 2023. (3)For the year ended December 31, 2023, customer relationships decreased $121 million in conjunction with the sale of select CDN customer contracts in the fourth quarter of 2023 that resulted in a net loss of $73 million included in selling, general and administrative expenses in our consolidated statement of operations. (4)Trade names with a gross carrying value of $130 million became fully amortized during 2022 and were retired during the first quarter of 2023.
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Schedule of goodwill | The following table shows the rollforward of goodwill from December 31, 2021 through December 31, 2023:
_______________________________________________________________________________ (1)Goodwill at December 31, 2023, December 31, 2022, December 31, 2021 is net of accumulated impairment loss of $10.2 billion, $8.2 billion and $3.6 billion, respectively.
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Schedule of estimated amortization expense of intangible asset | We estimate that total amortization expense for intangible assets for the years ending 2024 through 2028 will be as provided in the table below.
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Revenue Recognition (Tables) |
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | The following tables provide disaggregation of revenue from contracts with customers based on service offering for the years ended December 31, 2023, 2022 and 2021. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards. The amounts in the tables below include the Latin American and EMEA businesses revenues prior to being sold on August 1, 2022 and November 1, 2023, respectively:
_______________________________________________________________ (1) Includes lease revenue which is not within the scope of ASC 606.
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Contract with customer, asset and liability | The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts classified as held for sale as of December 31, 2023 and 2022:
_______________________________________________________________________________ (1)Reflects gross customer receivables of $557 million and $534 million, net of allowance for credit losses of $13 million and $19 million, as of December 31, 2023 and 2022, respectively. At December 31, 2022 amounts exclude customer receivables, net, classified as held for sale of $76 million related to the EMEA business which was sold November 1, 2023. (2)At December 31, 2022 these amounts exclude contract assets classified as held for sale of $16 million at related to the EMEA business which was sold November 1, 2023. (3)At December 31, 2022 these amounts exclude contract liabilities classified as held for sale of $59 million related to the EMEA business which was sold November 1, 2023.
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Capitalized contract cost | The following tables provide changes in our contract acquisition costs and fulfillment costs for the years ended:
_____________________________________________________________________ (1) Represents the amounts classified as held for sale related to the divestiture of our Latin American and EMEA businesses on August 1, 2022 and November 1, 2023, respectively. See Note 2—Divestitures of the Latin American and EMEA Businesses.
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, cost | Lease expense consisted of the following:
Supplemental unaudited consolidated cash flow statement information related to leases:
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Assets and liabilities | Supplemental consolidated balance sheet information and other information related to leases:
(1) Includes affiliate operating lease assets of $311 million and $391 million as of December 31, 2023 and 2022, respectively. (2) Includes current portion of affiliate operating lease liabilities of $129 million and $125 million as of December 31, 2023 and 2022, respectively. (3) Includes noncurrent portion of affiliate operating lease liabilities of $201 million and $286 million as of December 31, 2023 and 2022, respectively.
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Lessee, operating lease, liability, maturity | As of December 31, 2023, maturities of lease liabilities were as follows:
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Finance lease, liability, maturity | As of December 31, 2023, maturities of lease liabilities were as follows:
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Credit Losses on Financial Instruments (Tables) |
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Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses on financing receivables | The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:
______________________________________________________________________ (1) Represents the amounts classified as held for sale related to the divestitures of our Latin American and EMEA businesses prior to the divestitures on August 1, 2022 and November 1, 2023, respectively. See Note 2—Divestitures of the Latin American and EMEA Businesses.
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Long-Term Debt (Tables) |
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | The following table reflects our consolidated long-term debt, including finance leases and other obligations, unamortized discounts and premiums, net and unamortized debt issuance costs, but excluding intercompany debt:
_______________________________________________________________________________ (1)As of December 31, 2023. (2)See the remainder of this Note for a description of certain affiliate guarantees and liens securing this debt. (3)The Tranche B 2027 Term Loan had an interest rate of 7.220% and 6.134% as of December 31, 2023 and December 31, 2022, respectively. (4)See the remainder of this Note for a description of guarantees provided by certain affiliates of Level 3 Financing, Inc.
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Schedule of debt repayments | During 2022, we used available cash to repay the following aggregate principal amounts of indebtedness through a combination of tender offers, redemptions and repayments. These transactions resulted in a net gain of $8 million.
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Schedule of amount of gross interest expense, net of capitalized interest | The following table presents the amount of gross interest expense, net of capitalized interest:
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Schedule of aggregate future contractual maturities of long-term debt and capital leases (excluding unamortized premiums) | Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2023 (excluding unamortized premiums, net, unamortized debt issuance costs and intercompany debt) maturing during the following years:
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Accounts Receivable (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts receivable | The following table presents details of our accounts receivable balances:
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Allowance for credit losses on financing receivables | The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:
______________________________________________________________________ (1) Represents the amounts classified as held for sale related to the divestitures of our Latin American and EMEA businesses prior to the divestitures on August 1, 2022 and November 1, 2023, respectively. See Note 2—Divestitures of the Latin American and EMEA Businesses.
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Property, Plant and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment | Net property, plant and equipment is composed of the following:
_______________________________________________________________________________ (1)Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures. (2)Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers. (3)Support assets consist of buildings, data centers, computers and other administrative and support equipment. (4)Construction in progress includes construction and property of the aforementioned categories that has not been placed in service as it is still under construction. (5)At December 31, 2022, we had $1.9 billion of certain property, plant and equipment, net related to our EMEA business which was classified as held for sale at this date and which was sold on November 1, 2023. See Note 2—Divestitures of the Latin American and EMEA Businesses for more information.
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Schedule of change in asset retirement obligation | The following table provides asset retirement obligation activity:
_______________________________________________________________________________ (1)Represents the amounts classified as held for sale related to our EMEA business as of December 31, 2022. See Note 2—Divestitures of the Latin American and EMEA Businesses.
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Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurement inputs and valuation techniques | The three input levels in the hierarchy of fair value measurements are defined by the FASB are generally as follows:
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Schedule of fair value of liabilities measured on a recurring basis | The following table presents the carrying amounts and estimated fair values of our financial liabilities as of December 31, 2023 and 2022, as well as the input level used to determine the fair values indicated below:
_______________________________________________________________________________ (1)Nonrecurring fair value is measured as of August 1, 2022.
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of income tax expense (benefit) | The components of the income tax expense are as follows:
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Schedule of income before income tax, domestic and foreign |
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Schedule of effective income tax rate reconciliation | The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:
_______________________________________________________________________________ (1)Includes Global Intangible Low-Taxes Income ("GILTI") incurred as a result of the sale of our Latin American business.
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Deferred tax assets and liabilities | The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
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Schedule of unrecognized tax benefits | A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 is as follows:
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Geographic and Customer Concentrations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of operating revenues by geographic region | The following tables present total assets as of the years ended December 31, 2023 and 2022 as well as operating revenue for the years ended December 31, 2023, 2022 and 2021 by geographic region:
_______________________________________________________________________________ (1)Includes revenue prior to closing the sale of the Latin American business on August 1, 2022, revenue recognized through post-closing commercial agreements subsequent to the sale and revenue related to servicing our customers in those regions. (2)Includes revenue prior to closing the sale of the EMEA business on November 1, 2023.
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Commitments, Contingencies and Other Items (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future rental commitments for right-of-way agreements | As of December 31, 2023, our future rental commitments and right-of-way ("ROW") agreements were as follows:
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Accumulated Other Comprehensive Loss (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) | The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheet by component for the years ended December 31, 2022 and December 31, 2023:
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Reclassification out of accumulated other comprehensive (loss) income | The table below present further information about our reclassifications out of accumulated other comprehensive (loss) income by component for the year ended December 31, 2023:
The table below present further information about our reclassifications out of accumulated other comprehensive (loss) income by component for the year ended December 31, 2022:
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Other Financial Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Current Assets | The following table presents details of other current assets reflected in our consolidated balance sheets:
_______________________________________________________________________________ (1)Excludes $56 million of other current assets related to the EMEA business sold on November 1, 2023 that were classified as held for sale as of December 31, 2022
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Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business - Pre-tax Net Income (Loss) (Details) - Disposal Group, Held-for-sale - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
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Latin American Business | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Pre-tax net income (loss) | $ 197 | $ 214 | |
EMEA Business | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Pre-tax net income (loss) | $ 145 | $ (226) | $ (98) |
Goodwill, Customer Relationships and Other Intangible Assets - Goodwill Activity (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||
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Jun. 30, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
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Goodwill [Roll Forward] | ||||
Goodwill, beginning balance | $ 1,970 | $ 6,666 | ||
Reclassified as held for sale | (58) | |||
Effect of foreign currency exchange rate changes and other | (4,638) | |||
Goodwill impairment | $ (2,000) | (1,970) | (4,638) | $ 0 |
Goodwill, ending balance | 0 | 1,970 | 6,666 | |
Goodwill, accumulated impairment loss | $ 10,200 | $ 8,200 | $ 3,600 |
Goodwill, Customer Relationships and Other Intangible Assets - Future Amortization Expense (Details) $ in Millions |
Dec. 31, 2023
USD ($)
|
---|---|
Estimated amortization expense of acquired finite-lived intangible asset | |
2024 | $ 669 |
2025 | 650 |
2026 | 637 |
2027 | 596 |
2028 | $ 553 |
Revenue Recognition - Customer Receivables and Contract Balances (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Capitalized Contract Cost [Line Items] | ||
Customer receivables | $ 544 | $ 515 |
Contract assets | 8 | 13 |
Contract liabilities | 222 | 222 |
Accounts receivable, gross | 557 | 534 |
Allowance for credit loss | $ 13 | 19 |
Disposal Group, Held-for-sale | EMEA Business | ||
Capitalized Contract Cost [Line Items] | ||
Contract assets | 16 | |
Disposal Group, Held-for-sale | Latin American Business | ||
Capitalized Contract Cost [Line Items] | ||
Customer receivables | 76 | |
Contract liabilities | $ 59 |
Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Jan. 01, 2022 |
Jan. 01, 2021 |
|
Disaggregation of Revenue [Line Items] | ||||
Amounts included in contract liability | $ 139 | $ 148 | ||
Contract liabilities | $ 281 | $ 305 | ||
Minimum | ||||
Disaggregation of Revenue [Line Items] | ||||
Contract term | 1 year | |||
Maximum | ||||
Disaggregation of Revenue [Line Items] | ||||
Contract term | 5 years | |||
Weighted Average | Business Customers | ||||
Disaggregation of Revenue [Line Items] | ||||
Length of customer life | 35 months |
Revenue Recognition - Contract Costs (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Acquisition Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | $ 76 | $ 76 |
Costs incurred | 55 | 61 |
Amortization | (57) | (55) |
Change in contract costs held for sale | (4) | |
Classified as held for sale | (6) | |
End of period balance | 70 | 76 |
Fulfillment Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | 106 | 99 |
Costs incurred | 87 | 83 |
Amortization | (69) | (76) |
Change in contract costs held for sale | (27) | |
Classified as held for sale | 0 | |
End of period balance | $ 97 | $ 106 |
Leases - Lease Expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Leases [Abstract] | |||
Operating and short-term lease cost | $ 384 | $ 348 | $ 368 |
Finance lease cost: | |||
Amortization of right-of-use assets | 23 | 25 | 24 |
Interest on lease liability | 10 | 11 | 12 |
Total finance lease cost | 33 | 36 | 36 |
Total lease cost | $ 417 | $ 384 | $ 404 |
Leases - Additional Information (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023
USD ($)
property
|
Dec. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
|
Leases [Abstract] | |||
Number of properties ceased | property | 13 | ||
Accelerated lease cost | $ 15 | ||
Gross rental expense | 417 | $ 384 | $ 404 |
Sublease rental income | 14 | 14 | 12 |
Gross rental income | $ 676 | $ 746 | $ 802 |
Rental income as percentage of operating revenue | 10.00% | ||
Operating Lease, Lease Income, Statement of Income or Comprehensive Income [Extensible Enumeration] | Total operating revenue | Total operating revenue | Total operating revenue |
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Leases [Abstract] | ||
Operating cash flows for operating leases | $ 384 | $ 346 |
Operating cash flows for finance leases | 10 | 11 |
Financing cash flows for finance leases | 23 | 84 |
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | 104 | 381 |
Right-of-use assets obtained in exchange for new finance lease liabilities | $ 8 | $ 70 |
Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Operating Leases | ||
2024 | $ 348 | |
2025 | 258 | |
2026 | 197 | |
2027 | 124 | |
2028 | 86 | |
Thereafter | 454 | |
Total lease payments | 1,467 | |
Less: interest | (334) | |
Total | 1,133 | |
Less: current portion | (288) | $ (326) |
Operating lease liabilities | 845 | 922 |
Finance Leases | ||
2024 | 24 | |
2025 | 25 | |
2026 | 25 | |
2027 | 26 | |
2028 | 26 | |
Thereafter | 135 | |
Total lease payments | 261 | |
Less: interest | (57) | |
Total | 204 | |
Less: current portion | (14) | (14) |
Long-term portion | $ 190 | $ 210 |
Credit Losses on Financial Instruments (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |||
Balance at beginning of period | $ 19 | $ 39 | $ 45 |
Provision for expected losses | 8 | 4 | 19 |
Write-offs charged against the allowance | (19) | (22) | (27) |
Recoveries collected | 4 | 3 | 5 |
Classified as held for sale | 1 | (5) | (3) |
Balance at end of period | $ 13 | $ 19 | $ 39 |
Long-Term Debt - New Issuances (Details) - Senior Notes - USD ($) |
Apr. 17, 2023 |
Mar. 31, 2023 |
Jan. 13, 2021 |
---|---|---|---|
Lumen Technologies, Inc. | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 19,000,000 | $ 1,535,000,000 | |
3.750% Senior Notes Due 2029 | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 900,000,000 | ||
Stated interest rate | 3.75% | ||
10.500% Senior Notes Due 2030 | |||
Debt Instrument [Line Items] | |||
Aggregate principal amount | $ 9,000,000 | $ 915,000,000 | |
Stated interest rate | 10.50% |
Long-Term Debt - Repayments (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2023 |
Dec. 31, 2023 |
|
Extinguishment of Debt [Line Items] | ||
Repayments of debt | $ 2,275 | |
Term loan | Tranche B 2027 Term Loan | ||
Extinguishment of Debt [Line Items] | ||
Repayments of debt | $ 700 | |
Senior Notes | 5.375% Senior Notes due 2025 | ||
Extinguishment of Debt [Line Items] | ||
Stated interest rate | 5.375% | |
Repayments of debt | $ 800 | |
Senior Notes | 5.250% Senior Notes due 2026 | ||
Extinguishment of Debt [Line Items] | ||
Stated interest rate | 5.25% | |
Repayments of debt | $ 775 |
Long-Term Debt - Redemption of Senior Notes (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2023
USD ($)
| |
Debt Instrument [Line Items] | |
Gain from extinguishment of debt | $ 8 |
Long-Term Debt - Interest Expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Debt Disclosure [Abstract] | |||
Gross interest expense | $ 480 | $ 390 | $ 376 |
Capitalized interest | (22) | (16) | (15) |
Total interest expense | $ 458 | $ 374 | $ 361 |
Long-Term Debt - Senior Secured Term Loan (Details) - Term Loan - Tranche B 2027 Term Loan - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Nov. 27, 2019 |
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Debt Instrument [Line Items] | |||
Outstanding debt | $ 2,411 | $ 2,411 | |
Federal Funds Effective Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 0.50% | ||
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 1.00% | 1.75% | |
Base Rate | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 0.75% | ||
Eurodollar | |||
Debt Instrument [Line Items] | |||
Basis spread on variable rate (as a percent) | 1.75% |
Long-Term Debt - Senior Notes (Details) - Senior Notes |
12 Months Ended |
---|---|
Dec. 31, 2023 | |
Minimum | |
Debt Instrument [Line Items] | |
Redemption period | 10 days |
Senior Notes Due 2025 and Senior Notes Due 2026 | Maximum | |
Debt Instrument [Line Items] | |
Redemption period | 60 days |
Long-Term Debt - Maturities of Debt (Details) $ in Millions |
Dec. 31, 2023
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2024 | $ 31 |
2025 | 36 |
2026 | 35 |
2027 | 4,180 |
2028 | 1,219 |
2029 and thereafter | 3,534 |
Total long-term debt | $ 9,035 |
Long-Term Debt - Letters of Credit (Details) - Letter of credit - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Instrument [Line Items] | ||
Letters of credit outstanding | $ 2 | $ 3 |
Collateralized debt obligations | ||
Debt Instrument [Line Items] | ||
Letters of credit outstanding | $ 2 | $ 3 |
Long-Term Debt - Supplier Finance Program (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Disclosure [Abstract] | ||
Period of installment payments | 5 years | |
Annual interest on unpaid balances (as a percent) | 1.25% | |
Credits | $ 15 | $ 0 |
Outstanding obligations | 55 | 67 |
Current obligations | $ 16 | $ 12 |
Supplier Finance Program, Obligation, Statement of Financial Position [Extensible Enumeration] | LONG-TERM DEBT, Current maturities of long-term debt | LONG-TERM DEBT, Current maturities of long-term debt |
Long-Term Debt - Covenants (Details) |
12 Months Ended |
---|---|
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Redemption price, percentage | 101.00% |
Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 558 | $ 536 |
Other receivables | 1 | 2 |
Less: allowance for credit losses | (13) | (19) |
Accounts receivable, less allowance | 545 | 517 |
Trade receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | 435 | 440 |
Earned and unbilled receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 122 | $ 94 |
Property, Plant, and Equipment - Additional information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Property, Plant and Equipment [Line Items] | |||
Depreciation expense | $ 686 | $ 790 | $ 874 |
Disposal Group, Held-for-sale | Latin American Business | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment classified as held for sale | $ 1,900 |
Property, Plant and Equipment - Asset Retirement Obligations (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | ||
Balance at beginning of period | $ 85 | $ 121 |
Accretion expense | 4 | 5 |
Liabilities settled | (6) | (7) |
Change in estimate | 11 | (4) |
Classified as held for sale | 0 | (30) |
Balance at end of period | $ 94 | $ 85 |
Employee Benefits - Defined Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Retirement Benefits [Abstract] | ||
Defined contribution plan, cost | $ 32 | $ 31 |
Plan assets | 40 | 112 |
Benefit obligation | $ 39 | $ 102 |
Share-based Compensation (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Share-Based Payment Arrangement [Abstract] | |||
Share-based compensation expense | $ 22 | $ 43 | $ 47 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Level 2 | Carrying Amount | ||
Liabilities measured on a recurring basis | ||
Liabilities-Long-term debt, excluding finance leases and other obligations | $ 8,724 | $ 7,805 |
Level 2 | Fair Value | ||
Liabilities measured on a recurring basis | ||
Liabilities-Long-term debt, excluding finance leases and other obligations | 6,418 | 6,581 |
Level 3 | Carrying Amount | ||
Liabilities measured on a recurring basis | ||
Indemnifications related to the sale of the Latin American business(1) | 86 | 86 |
Level 3 | Fair Value | ||
Liabilities measured on a recurring basis | ||
Indemnifications related to the sale of the Latin American business(1) | $ 86 | $ 86 |
Income Taxes - Components of Income Tax Expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Federal | |||
Current | $ (1) | $ 0 | $ 0 |
Deferred | (9) | 271 | 125 |
State and local | |||
Current | 8 | 21 | 12 |
Deferred | (11) | 4 | 28 |
Foreign | |||
Current | 1 | 26 | 16 |
Deferred | 10 | (66) | 16 |
Total income tax (benefit) expense | $ (2) | $ 256 | $ 197 |
Income Taxes - Allocation of Income Tax Expense (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Income tax (benefit) expense in the consolidated statements of operations: | |||
Attributable to income | $ (2) | $ 256 | $ 197 |
Member's equity: | |||
Tax effect of the change in accumulated other comprehensive loss | $ 3 | $ (58) | $ (30) |
Income Taxes - Reconciliation of Statutory Federal Income Tax Rate (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Income Tax Disclosure [Abstract] | |||
Statutory federal income tax rate | 21.00% | 21.00% | 21.00% |
State income taxes, net of federal income tax benefit | 0.30% | (0.30%) | 4.10% |
Goodwill impairment | (19.40%) | (21.40%) | 0.00% |
Divestiture of business | (2.50%) | (5.10%) | 0.00% |
Net foreign income tax | 0.00% | 0.20% | 1.60% |
Research and development credits | 0.10% | 0.10% | (0.40%) |
Other, net | 0.60% | (0.10%) | (1.10%) |
Effective income tax rate | 0.10% | (5.60%) | 25.20% |
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Deferred tax assets | ||
Deferred revenue | $ 0 | $ 261 |
Net operating loss carry forwards | 1,598 | 1,680 |
Property, plant and equipment | 0 | 92 |
Other | 575 | 448 |
Gross deferred tax assets | 2,173 | 2,481 |
Less valuation allowance | (248) | (303) |
Net deferred tax assets | 1,925 | 2,178 |
Deferred tax liabilities | ||
Deferred revenue | 0 | (5) |
Property, plant and equipment | (1,189) | (1,142) |
Intangible assets | (1,063) | (1,328) |
Other | (9) | (58) |
Gross deferred tax liabilities | (2,261) | (2,533) |
Net deferred tax liabilities | $ (336) | $ (355) |
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Unrecognized tax benefits at beginning of period | $ 813 | $ 876 |
Decrease in tax positions of current year netted against deferred tax assets | (50) | (34) |
Increase in tax positions of prior periods netted against deferred tax assets | 43 | 0 |
Decrease in tax positions taken in the prior period | 0 | (2) |
Increase in tax positions taken in the current period | 0 | 3 |
Decreases related to divestitures of businesses | (2) | (30) |
Decrease from the lapse of statute of limitations | (5) | 0 |
Unrecognized tax benefits at end of period | $ 799 | $ 813 |
Geographic and Customer Concentrations - Assets from Geographic Region (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Assets | $ 17,253 | $ 19,759 |
North America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Assets | 17,253 | 18,061 |
Europe, Middle East and Africa | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Assets | $ 0 | $ 1,698 |
Geographic and Customer Concentrations - Revenue from Geographical Region (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Disaggregation of Revenue [Line Items] | |||
Total operating revenue | $ 7,037 | $ 7,493 | $ 7,952 |
North America | |||
Disaggregation of Revenue [Line Items] | |||
Total operating revenue | 6,345 | 6,256 | 6,365 |
Europe, Middle East and Africa | |||
Disaggregation of Revenue [Line Items] | |||
Total operating revenue | 628 | 734 | 805 |
Latin America | |||
Disaggregation of Revenue [Line Items] | |||
Total operating revenue | $ 64 | $ 503 | $ 782 |
Geographic and Customer Concentrations - Additional Information (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Revenue Benchmark | Customer Concentration Risk | Top 10 Customers | |||
Disaggregation of Revenue [Line Items] | |||
Concentration risk, percentage | 18.00% | 15.00% | 17.00% |
Affiliate Transactions (Details) - Affiliated Entity $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2023
USD ($)
Number_of_extensions
|
Dec. 31, 2022
USD ($)
|
|
Related Party Transaction [Line Items] | ||
Note receivable - affiliate | $ 1,466 | $ 1,468 |
Lumen Technologies | ||
Related Party Transaction [Line Items] | ||
Note receivable - affiliate | $ 1,500 | $ 1,500 |
Interest rate | 4.25% | |
Number of allowed extensions of maturity date | Number_of_extensions | 2 | |
Extension period | 1 year |
Commitments, Contingencies and Other Items - Additional Information (Details) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2023
USD ($)
patent
|
Dec. 31, 2022
USD ($)
|
|
Loss Contingencies | ||
Estimated tax and litigation liability | $ 38,000 | $ 40,000 |
Patents allegedly infringed | patent | 1 | |
Purchase commitment | $ 220,000 | |
Purchase obligation, due in 2023 | 76,000 | |
Purchase obligation, due in 2024 through 2025 | 70,000 | |
Purchase obligation, due in 2026 through 2027 | 28,000 | |
Purchase obligation, due in 2028 and thereafter | 46,000 | |
Unfavorable Regulatory Action | ||
Loss Contingencies | ||
Estimate of possible loss | $ 300 |
Commitments, Contingencies and Other Items - Right-of-Way Agreements (Details) - Future Rental Commitments and ROW Agreements $ in Millions |
Dec. 31, 2023
USD ($)
|
---|---|
Other Commitments [Line Items] | |
2024 | $ 104 |
2025 | 36 |
2026 | 34 |
2027 | 33 |
2028 | 28 |
2029 and thereafter | 277 |
Total future minimum payments | $ 512 |
Other Financial Information (Details) - USD ($) $ in Millions |
Dec. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 123 | $ 99 |
Contract assets | 6 | 10 |
Other | 13 | 2 |
Total other current assets | 232 | 197 |
Other current assets reclassified as held for sale | 56 | |
Fulfillment Costs | ||
Prepaid Expense and Other Assets, Current [Abstract] | ||
Contract costs | 50 | 44 |
Acquisition Costs | ||
Prepaid Expense and Other Assets, Current [Abstract] | ||
Contract costs | $ 40 | $ 42 |
Subsequent Event (Details) - Transaction Support Agreement - Subsequent event |
Jan. 22, 2024
USD ($)
|
---|---|
Senior Secured First Lien Debt | |
Subsequent Event [Line Items] | |
Aggregate principal amount | $ 1,325,000,000 |
Revolving Credit Facility | Lumen Technologies, Inc. | |
Subsequent Event [Line Items] | |
Revolving credit facility capacity | $ 1,000,000,000 |