LEVEL 3 COMMUNICATIONS INC, 10-Q filed on 8/6/2013
Quarterly Report
Document and Entity Information Document
6 Months Ended
Jun. 30, 2013
Aug. 2, 2013
Entity Information [Line Items]
 
 
Entity Registrant Name
LEVEL 3 COMMUNICATIONS INC 
 
Entity Central Index Key
0000794323 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2013 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
222,653,024 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Consolidated Statements of Operations (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Revenue
$ 1,565 
$ 1,586 
$ 3,142 
$ 3,172 
Costs and Expenses Exclusive of Depreciation and Amortization shown separately below:
 
 
 
 
Cost of Revenue
616 
648 
1,245 
1,305 
Depreciation and Amortization
199 
191 
393 
378 
Selling, General and Administrative
610 
614 
1,209 
1,240 
Total Costs and Expenses
1,425 
1,453 
2,847 
2,923 
Operating Income
140 
133 
295 
249 
Other Income (Expense):
 
 
 
 
Interest income
0 
1 
0 
2 
Interest expense
(167)
(181)
(336)
(370)
Loss on extinguishment of debt, net
0 
0 
0 
(61)
Other, net
14 
(7)
(36)
2 
Total Other Expense
(153)
(187)
(372)
(427)
Loss Before Income Taxes
(13)
(54)
(77)
(178)
Income Tax Expense
(11)
(8)
(25)
(22)
Net Loss
$ (24)
$ (62)
$ (102)
$ (200)
Net Loss per Share (Basic and Diluted)
$ (0.11)
$ (0.29)
$ (0.46)
$ (0.94)
Shares Used to Compute Basic and Diluted Net Loss per Share (in thousands)
221,609 
216,399 
220,445 
213,081 
Consolidated Statements of Comprehensive Loss (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Net Loss
$ (24)
$ (62)
$ (102)
$ (200)
Other Comprehensive Loss Before Income Taxes:
 
 
 
 
Foreign Currency Translation Adjustment
(12)
(66)
(56)
(32)
Holding Gain on Interest Rate Swaps
0 
9 
0 
16 
Other, net
1 
1 
(7)
2 
Other Comprehensive Loss, Before Income Taxes
(11)
(56)
(63)
(14)
Income Tax Related to Items of Other Comprehensive Loss
0 
0 
0 
0 
Other Comprehensive Loss, Net of Income Taxes
(11)
(56)
(63)
(14)
Comprehensive Loss
$ (35)
$ (118)
$ (165)
$ (214)
Supplementary Stockholders' Equity Information, Changes in Accumulated Other Comprehensive Income (Loss) (USD $)
In Millions, unless otherwise specified
Total
Net Foreign Currency Translation Adjustment
Defined Benefit Pension Plans
Balance at Dec. 31, 2012
$ 26 
$ 56 
$ (30)
Change In Accumulated Other Comprehensive Income (Loss)
 
 
 
Other comprehensive loss before reclassifications
(53)
(44)
(9)
Amounts reclassified from accumulated other comprehensive loss
1 
0 
1 
Balance at Mar. 31, 2013
(26)
12 
(38)
Change In Accumulated Other Comprehensive Income (Loss)
 
 
 
Other comprehensive loss before reclassifications
(12)
(12)
0 
Amounts reclassified from accumulated other comprehensive loss
1 
0 
1 
Balance at Jun. 30, 2013
$ (37)
$ 0 
$ (37)
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Assets:
 
 
Cash and cash equivalents
$ 596 
$ 979 
Restricted cash and securities
7 
8 
Receivables, less allowances for doubtful accounts of $32 and $31, respectively
721 
714 
Other
179 
141 
Total Current Assets
1,503 
1,842 
Property, Plant and Equipment, net of accumulated depreciation of $8,671 and $8,359, respectively
8,171 
8,199 
Restricted Cash and Securities
27 
35 
Goodwill
2,565 
2,565 
Other Intangibles, net
232 
268 
Other Assets, net
367 
398 
Total Assets
12,865 
13,307 
Liabilities and Stockholders' Equity:
 
 
Accounts payable
688 
779 
Current portion of long-term debt
30 
216 
Accrued payroll and employee benefits
177 
211 
Accrued interest
192 
209 
Current portion of deferred revenue
226 
251 
Other
190 
136 
Total Current Liabilities
1,503 
1,802 
Long-Term Debt, less current portion
8,506 
8,516 
Deferred Revenue, less current portion
906 
887 
Other Liabilities
842 
931 
Total Liabilities
11,757 
12,136 
Commitments and Contingencies
0 
0 
Stockholders’ Equity:
 
 
Preferred stock, $.01 par value, authorized 10,000,000 shares: no shares issued or outstanding
0 
0 
Common stock, $.01 par value, authorized 343,333,333 shares in both periods; 221,915,741 issued and outstanding at June 30, 2013 and 218,380,070 issued and outstanding at December 31, 2012
2 
2 
Additional paid-in capital
14,102 
14,000 
Accumulated other comprehensive income (loss)
(37)
26 
Accumulated deficit
(12,959)
(12,857)
Total Stockholders’ Equity
1,108 
1,171 
Total Liabilities and Stockholders’ Equity
$ 12,865 
$ 13,307 
Consolidated Balance Sheets Parentheticals (Parentheticals) (USD $)
In Millions, except Share data, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Allowance for doubtful accounts
$ 32 
$ 31 
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment
$ 8,671 
$ 8,359 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
343,333,333 
343,333,333 
Common stock, shares issued
221,915,741 
218,380,070 
Common stock, shares outstanding
221,915,741 
218,380,070 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Cash Flows from Operating Activities:
 
 
Net Loss
$ (102)
$ (200)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
393 
378 
Non-cash compensation expense attributable to stock awards
85 
53 
Loss on extinguishment of debt, net
0 
61 
Accretion of debt discount and amortization of debt issuance costs
18 
21 
Accrued interest on long-term debt, net
(17)
11 
Deferred income taxes
(7)
3 
Gain on sale of property, plant and equipment and other assets
(1)
0 
Other, net
(2)
12 
Changes in working capital items:
 
 
Receivables
(25)
(43)
Other current assets
(33)
(32)
Payables
(93)
(56)
Deferred revenue
4 
(23)
Other current liabilities
3 
(77)
Net Cash Provided by Operating Activities
223 
108 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(377)
(318)
Decrease in restricted cash and securities, net
8 
4 
Proceeds from the sale of property, plant and equipment and other assets
0 
5 
Other
(14)
0 
Net Cash Used in Investing Activities
(383)
(309)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
880 
Payments on and repurchases of long-term debt, including current portion and refinancing costs
(199)
(863)
Proceeds from stock options exercised
0 
1 
Net Cash Provided by (Used in) Financing Activities
(199)
18 
Effect of Exchange Rates on Cash and Cash Equivalents
(24)
(2)
Net Change in Cash and Cash Equivalents
(383)
(185)
Cash and Cash Equivalents at Beginning of Period
979 
918 
Cash and Cash Equivalents at End of Period
596 
733 
Supplemental Disclosure of Cash Flow Information:
 
 
Cash interest paid
335 
338 
Income taxes paid, net of refunds
20 
19 
Non-cash Financing Activities:
 
 
Long-term debt conversion into equity
0 
100 
Premium on long-term debt conversion into equity
0 
39 
Accrued interest conversion into equity
$ 0 
$ 2 
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
Description of Business
Level 3 Communications, Inc. and subsidiaries (the "Company" or "Level 3") is a facilities-based provider (that is, a provider that owns or leases a substantial portion of the plant, property and equipment necessary to provide its services) of a broad range of integrated communications services. The Company created its communications network by constructing its own assets and through a combination of purchasing other companies and purchasing or leasing facilities from others. Level 3's network is an international, facilities-based communications network. The Company designed its network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Level 3 Communications, Inc. and subsidiaries in which it has a controlling interest. All significant intercompany accounts and transactions have been eliminated. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").
As part of its consolidation policy, the Company considers its controlled subsidiaries, investments in businesses in which the Company is not the primary beneficiary or does not have effective control but has the ability to significantly influence operating and financial policies, and variable interests resulting from economic arrangements that give the Company rights to economic risks or rewards of a legal entity. The Company does not have variable interests in a variable interest entity.
The accompanying consolidated balance sheet as of December 31, 2012, which was derived from audited consolidated financial statements, and the unaudited interim consolidated financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP for complete financial statements. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2012. In the opinion of the Company’s management, these financial statements contain all adjustments necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the interim periods presented herein. The results of operations for an interim period are not necessarily indicative of the results of operations expected for a full fiscal year.
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates under different assumptions or conditions and such differences could be material.
Reclassifications
Certain amounts in the prior period consolidated financial statements and accompanying footnotes have been reclassified to conform to the current year's presentation.
Goodwill and Acquired Indefinite-Lived Intangible Assets
Accounting guidance prohibits the amortization of goodwill and purchased intangible assets with indefinite useful lives. The Company reviews goodwill and purchased intangible assets with indefinite lives for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.
In the second quarter of 2013, the Company changed the date of its annual assessment of goodwill impairment from December 31 to October 1. This is a change in method of applying an accounting principle which management believes is a preferable alternative as the new date of the assessment provides additional time prior to the Company’s year-end to complete the goodwill impairment testing and report the results in the Company's Annual Report on Form 10-K, and is more closely aligned with the Company’s strategic planning process. The change in the assessment date does not delay, accelerate or avoid a potential impairment charge.
For a more detailed description of the Company's goodwill impairment assessment process, please see Note 1 of the Company's Form 10-K for the year ended December 31, 2012, filed with the SEC.
Recently Issued Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The guidance in this ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. Public companies are required to comply with the requirements of this ASU for all reporting periods (interim and annual) beginning after December 15, 2012. The Company adopted this amendment in the first quarter of 2013. The impact of its adoption was limited to disclosure requirements.

In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. Under current GAAP, there is no explicit guidance on presentation of unrecognized tax benefits when such carryforwards exist, which has led to diversity in practice. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. The ASU is effective for fiscal years beginning after December 15, 2013, and interim periods within those years. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated results of operations or financial condition.
Loss Per Share
Loss Per Share
Loss Per Share

The Company computes basic net loss per share by dividing net loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss for the period by the weighted average number of shares of common stock outstanding during the period and including the dilutive effect of common stock that would be issued assuming conversion or exercise of outstanding convertible notes, stock based compensation awards and other dilutive securities.

The effect of approximately 28 million and 35 million shares issuable pursuant to the various series of convertible notes outstanding at June 30, 2013 and June 30, 2012, respectively, have not been included in the computation of diluted loss per share because their inclusion would have been anti-dilutive to the computation. In addition, the effect of the approximately 6 million stock options, outperform stock appreciation rights ("OSOs"), restricted stock units and warrants outstanding at both June 30, 2013 and June 30, 2012, have not been included in the computation of diluted loss per share because their inclusion would have been anti-dilutive to the computation.
Acquired Intangible Assets
Acquired Intangible Assets
Acquired Intangible Assets

Identifiable acquisition-related intangible assets as of June 30, 2013 and December 31, 2012, were as follows (dollars in millions):

 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
June 30, 2013
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
776

 
$
(655
)
 
$
121

Trademarks
55

 
(24
)
 
31

Patents and Developed Technology
158

 
(110
)
 
48

 
989

 
(789
)
 
200

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,021

 
$
(789
)
 
$
232

December 31, 2012
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
776

 
$
(633
)
 
$
143

Trademarks
55

 
(17
)
 
38

Patents and Developed Technology
158

 
(103
)
 
55

 
989

 
(753
)
 
236

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,021

 
$
(753
)
 
$
268



Acquired finite-lived intangible asset amortization expense was $18 million and $36 million for the three and six months ended June 30, 2013 and $25 million and $50 million for the three and six months ended June 30, 2012.

At June 30, 2013, the weighted average remaining useful lives of the Company's acquired finite-lived intangible assets was 2.7 years for customer contracts and relationships, 2.3 years for trademarks and 3.5 years for patents and developed technology.

As of June 30, 2013, estimated amortization expense for the Company’s finite-lived acquisition-related intangible assets over the next five years and thereafter is as follows (dollars in millions):

2013 (remaining six months)
$
37

2014
61

2015
45

2016
28

2017
13

2018
13

Thereafter
3

 
$
200




Fair Value of Financial Instruments
Fair Value of Financial Instruments
Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, restricted cash and securities, accounts receivable, accounts payable, capital leases, other liabilities, interest rate swaps and long-term debt (including the current portion). The carrying values of cash and cash equivalents, restricted cash and securities, accounts receivable, accounts payable, capital leases and other liabilities approximated their fair values at June 30, 2013 and December 31, 2012. The interest rate swaps are recorded in the consolidated balance sheets at fair value (see Note 5 - Derivative Financial Instruments).

GAAP defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements and disclosures for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as interest and foreign exchange rates, transfer restrictions, and risk of nonperformance.

Fair Value Hierarchy

GAAP establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value measurement of each class of assets and liabilities is dependent upon its categorization within the fair value hierarchy, based upon the lowest level of input that is significant to the fair value measurement of each class of asset and liability. GAAP establishes three levels of inputs that may be used to measure fair value:

Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2— Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3— Unobservable inputs for the asset or liability.

The table below presents the fair values for the Company’s interest rate swaps and long-term debt as well as the input levels used to determine these fair values as of June 30, 2013 and December 31, 2012:

 
 
 
 
 
 
Fair Value Measurement Using
 
 
Total Carrying Value in Consolidated Balance Sheet
 
Unadjusted Quoted Prices in Active
Markets for Identical Assets or Liabilities (Level 1)
 
Significant Other Observable Inputs (Level 2)
(dollars in millions)
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
December 31,
2012
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swap Liabilities (included in other current and non-current liabilities)
 
$
34

 
$
56

 
$
—

 
$
—

 
$
34

 
$
56

Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
 
$
34

 
$
56

 
$
—

 
$
—

 
$
34

 
$
56

Liabilities Not Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt, including the current portion:
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans
 
$
2,602

 
$
2,603

 
$
2,617

 
$
2,631

 
$
—

 
$
—

Senior Notes
 
5,186

 
5,185

 
5,504

 
5,712

 
—

 
—

Convertible Notes
 
675

 
846

 
274

 
286

 
558

 
748

Capital Leases and Other
 
73

 
98

 
—

 
—

 
73

 
98

Total Long-term Debt, including the current portion:
 
$
8,536

 
$
8,732

 
$
8,395

 
$
8,629

 
$
631

 
$
846



The Company does not have any assets or liabilities where the fair value is measured using significant unobservable inputs (Level 3).

Derivatives

The fair value of interest rate swaps are estimated using discounted cash flow techniques that use observable market inputs, such as LIBOR-based forward yield curves, forward rates, non-performance risk adjustment and the specific swap rate stated in each of the swap agreements.

Term Loans

The fair value of the Term Loans referenced above was approximately $2.6 billion at both June 30, 2013 and December 31, 2012. The fair value of each loan is based on quoted prices for identical terms and maturities. Each loan tranche is actively traded.

The Term Loans are secured by a pledge of the equity interests in certain U.S.-based subsidiaries of Level 3 Financing, Inc.; 65% of the equity interests in each of Level 3 Financing, Inc.’s Canadian subsidiary and its Bermuda subsidiary that indirectly owns Global Crossing's non-U.S. subsidiaries; and liens on the assets of Level 3 Communications, Inc. and certain U.S.-based subsidiaries of Level 3 Financing, Inc. In addition, Level 3 Communications, Inc. and certain U.S.-based subsidiaries of Level 3 Financing, Inc. have provided full and unconditional guarantees of the obligations under the Term Loans.

Senior Notes

The fair value of the Senior Notes referenced above was approximately $5.5 billion and $5.7 billion at June 30, 2013 and December 31, 2012, respectively, based on quoted prices for identical terms and maturities. Each series of notes is actively traded.

The 11.875% Senior Notes due 2019 and the 8.875% Senior Notes due 2019 were issued by Level 3 Communications, Inc. and are not guaranteed by any of the Company's subsidiaries. The remaining Senior Notes are obligations of Level 3 Financing, Inc. and are all fully and unconditionally guaranteed by Level 3 Communications, Inc. and by Level 3 Communications, LLC.

Convertible Notes

The fair value of the Company’s actively traded 6.5% Convertible Senior Notes due 2016 was approximately $274 million and $286 million at June 30, 2013 and December 31, 2012, respectively. The fair value of the Company’s actively traded Convertible Notes referenced above is based on the trading quotes for identical notes. The fair value of the Company’s Convertible Notes that are not actively traded, such as the 7% Convertible Senior Notes due 2015, the 7% Convertible Senior Notes due 2015, Series B, and the 15% Convertible Senior Notes due 2013 which were repaid in full at maturity during the quarter ended March 31, 2013, was approximately $558 million and $748 million at June 30, 2013 and December 31, 2012, respectively. The estimated fair value of the Convertible Notes that are not actively traded are based on a Black-Scholes valuation model and an income approach using discounted cash flows. The most significant inputs affecting the valuation are the pricing quotes provided by market participants that incorporate spreads to the Treasury curve, security coupon (ranging from 7% to 15%), convertible optionality, corporate and security credit ratings, maturity date (ranging from 2013 to 2015), liquidity, and other equity option inputs, such as the risk-free rate, underlying stock price, strike price of the embedded derivative, estimated volatility and maturity inputs for the option component and for the bond component, among other security characteristics and relative value at both the borrower entity level and across other securities with similar terms. The fair value of each instrument is obtained by adding together the value derived by discounting the security’s coupon or interest payment using a risk-adjusted discount rate and the value calculated from the embedded equity option based on the estimated volatility of the Company’s stock price, conversion rate of the particular Convertible Note, remaining time to maturity, and risk-free rate. The Convertible Notes are unsecured obligations of Level 3 Communications, Inc. No subsidiary of Level 3 Communications, Inc. has provided a guarantee of the Convertible Notes.
Derivative Financial Instruments
Derivative Financial Instruments
Derivative Financial Instruments

The Company has floating rate long-term debt (see Note 6 - Long-Term Debt). Such debt exposes the Company to variability in interest payments due to changes in interest rates. If interest rates increase, interest expense increases. Conversely, if interest rates decrease, interest expense also generally decreases. The Company uses interest rate swaps in an attempt to manage its exposure to fluctuations in interest rate movements. The Company’s primary objective in managing interest rate risk is to decrease the volatility of its earnings and cash flows affected by changes in the underlying rates. The Company does not use derivative financial instruments for speculative purposes.

In March 2007, Level 3 Financing, Inc. entered into two interest rate swap agreements to hedge the interest payments on $1 billion notional amount of floating rate debt. The Company had designated these interest rate swap agreements as cash flow hedges. The two interest rate swap agreements are with different counterparties and are for $500 million each. The arrangements began in April 2007 and mature in January 2014. Under the terms of these arrangements, the Company receives interest payments based on rolling three month LIBOR terms and pays interest at the fixed rate of 4.93% under one arrangement and approximately 4.92% under the other.

Interest Rate Derivative
 
Number of
Instruments
 
Notional
(dollars in millions)
Interest rate swaps
 
Two
 
$
1,000



On a quarterly basis through August 6, 2012, the Company evaluated the effectiveness of the hedges by measuring the extent to which the change in the variable portion of the interest rate swaps offset the changes in interest expense paid due to fluctuations in the LIBOR-based interest rate. Prior to August 6, 2012, these derivatives were deemed effective cash flow hedges and hedge ineffectiveness was not material in any periods presented. As a result, the change in the fair value of the interest rate swap agreements was reflected in Accumulated Other Comprehensive Income ("AOCI") and was subsequently reclassified into earnings through an interest expense yield adjustment, as interest expense on the hedged debt obligation was incurred.

As a result of the refinancing of the Tranche A Term Loan on August 6, 2012, the two interest rate swap agreements maturing in early 2014 that had effectively hedged changes in the interest rate on a portion of the Tranche A Term Loan were deemed "ineffective" under GAAP and cash flow hedge accounting was discontinued. After August 6, 2012, the Company has recorded the change in the fair value of the swaps in Other Income in its Consolidated Statement of Operations until maturity of the swaps in early 2014. For the three and six months ended June 30, 2013, the Company recognized a loss of $1 million, in Other, net in the Company's Consolidated Statement of Operations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets (dollars in millions):

 
 
Liability Derivatives
 
 
June 30, 2013
 
December 31, 2012
Derivatives not designated as
hedging instruments
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Interest rate swap agreements
 
Other current liabilities
 
$
34

 
Other non-current liabilities
 
$
56



The amount of net gains (losses) recognized in Accumulated Other Comprehensive Income (Loss), including reclassification gains (losses) consists of the following (dollars in millions):

Derivatives designated as hedging instruments
 
2013
 
2012
Cash flow hedging contracts
 
 
 
 
Three Months Ended June 30,
 
$
—

 
$
9

Six Months Ended June 30,
 
$
—

 
$
16



The amount of gains (losses) reclassified from Accumulated Other Comprehensive Income (Loss) to earnings (effective portions) consists of the following (dollars in millions):

Derivatives designated as hedging instruments
 
Statement of Operations Location
 
2013
 
2012
Cash flow hedging contracts
 
 
 
 
 
 
Three Months Ended June 30,
 
Interest Expense
 
$
—

 
$
(11
)
Six Months Ended June 30,
 
Interest Expense
 
$
—

 
$
(22
)


The Company is exposed to credit related losses in the event of non-performance by counterparties. The counterparties to the financial derivatives the Company has entered into are major institutions with investment grade credit ratings. The Company evaluates counterparty credit risk before entering into any hedge transaction and continues to closely monitor the financial market and the risk that its counterparties will default on their obligations. This credit risk is generally limited to the unrealized gains in such contracts, should any of these counterparties fail to perform as contracted.
Long-Term Debt
Long-Term Debt
Long-Term Debt

As of June 30, 2013 and December 31, 2012, long-term debt was as follows:
(dollars in millions)
 
June 30,
2013
 
December 31,
2012
Senior Secured Term Loan*
 
$
2,611

 
$
2,614

Floating Rate Senior Notes due 2015 (4.215% as of June 30, 2013 and 4.469% as of December 31, 2012)
 
300

 
300

10% Senior Notes due 2018
 
640

 
640

11.875% Senior Notes due 2019
 
605

 
605

9.375% Senior Notes due 2019
 
500

 
500

8.125% Senior Notes due 2019
 
1,200

 
1,200

8.875% Senior Notes due 2019
 
300

 
300

8.625% Senior Notes due 2020
 
900

 
900

7% Senior Notes due 2020
 
775

 
775

15% Convertible Senior Notes due 2013
 
—

 
172

7% Convertible Senior Notes due 2015
 
200

 
200

7% Convertible Senior Notes due 2015 Series B
 
275

 
275

6.5% Convertible Senior Notes due 2016
 
201

 
201

Capital Leases
 
71

 
86

Other
 
2

 
12

Total Debt Obligations
 
8,580

 
8,780

Unamortized Discount:
 
 
 
 
Discount on Senior Secured Term Loan
 
(9
)
 
(11
)
Discount on 10% Senior Notes due 2018
 
(9
)
 
(10
)
Discount on 11.875% Senior Notes due 2019
 
(9
)
 
(9
)
Discount on 9.375% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 8.125% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 7% Convertible Senior Notes due 2015
 
(1
)
 
(2
)
Total Unamortized Discount
 
(44
)
 
(48
)
Carrying Value of Debt
 
8,536

 
8,732

Less current portion
 
(30
)
 
(216
)
Long-term Debt, less current portion
 
$
8,506

 
$
8,516


* The $596 million Tranche B 2016 Term Loan due 2016, the $815 million Tranche B 2019 Term Loan due 2019 and the $1.2 billion Tranche B-II 2019 Term Loan due 2019 had interest rates of 4.75%, 5.25% and 4.75%, respectively, as of June 30, 2013. The $599 million Tranche B 2016 Term Loan due 2016, the $815 million Tranche B 2019 Term Loan due 2019 and the $1.2 billion Tranche B-II 2019 Term Loan due 2019 had interest rates of 4.75%, 5.25% and 4.75%, respectively, as of December 31, 2012. The Tranche B 2016 Term Loan requires repayment of 0.25% of the original $600 million aggregate principal amount on the last day of each March, June, September and December, beginning with December 31, 2012 and ending with such last day to occur prior to maturity.

2013 Debt Redemptions and Registrations

15% Convertible Senior Notes due 2013

On January 15, 2013, the Company repaid at maturity approximately $172 million of its 15% Convertible Senior Notes due 2013.

8.875% Senior Notes due 2019

The 8.875% Senior Notes due 2019 issued by Level 3 Communications, Inc. were not originally registered under the Securities Act of 1933, as amended. During the second quarter of 2013, all of the originally placed notes were exchanged for a new issue of 8.875% Senior Notes due 2019 with identical terms and conditions, other than those related to registration rights, in a registered exchange offer and are now freely tradeable.

7% Senior Notes due 2020

The 7% Senior Notes due 2020 issued by Level 3 Financing, Inc. were not originally registered under the Securities Act of 1933, as amended. During the second quarter of 2013, all of the originally placed notes were exchanged for a new issue of 7% Senior Notes due 2020 with identical terms and conditions, other than those related to registration rights, in a registered exchange offer and are now freely tradeable. The 7% Senior Notes due 2020 are guaranteed by Level 3 Communications, Inc. and Level 3 Communications, LLC.

Long-Term Debt Maturities

Aggregate future contractual maturities of long-term debt and capital leases (excluding discounts) were as follows as of June 30, 2013 (dollars in millions):

2013 (remaining six months)
$
18

2014
22

2015
788

2016
788

2017
5

2018
645

Thereafter
6,314

 
$
8,580

Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three and six months ended June 30, 2013 and 2012 (dollars in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
OSO
$
11

 
$
4

 
$
16

 
$
6

Restricted Stock Units and Shares
14

 
14

 
21

 
18

401(k) Match Expense
5

 
6

 
13

 
13

Restricted Stock Unit Bonus Grant
14

 
5

 
29

 
16

Management Incentive and Retention Plan
4

 
—

 
6

 
—

 
48

 
29

 
85

 
53

Capitalized Non-Cash Compensation
—

 
—

 
—

 
—

 
$
48

 
$
29

 
$
85

 
$
53



The Company capitalizes non-cash compensation for those employees directly involved in the construction of the network, installation of services for customers or the development of business support systems. As of June 30, 2013, there were approximately 2 million OSOs outstanding. As of June 30, 2013, there were approximately 4 million nonvested restricted stock and restricted stock units (“RSUs”) outstanding (including those related to the Management Incentive and Retention Plan). In addition, as of June 30, 2013, there were approximately 55 thousand non-qualified stock options outstanding.
Commitments, Contingencies and Other Items
Commitments, Contingencies and Other Items
Commitments, Contingencies and Other Items

The Company is subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect its financial condition, future results of operations or cash flows. Amounts accrued for such contingencies aggregate to $259 million and are included in “Other” current liabilities and “Other Liabilities” in the Company's consolidated balance sheet as at June 30, 2013. 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 may have no effect on the Company's results of operations but could materially adversely affect its cash flows for the affected period.

In accordance with the accounting guidance for contingencies, the Company accrues its estimate of a contingent liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

Below is a description of material legal proceedings and other contingencies pending at June 30, 2013. Although the Company believes it has accrued for these matters in accordance with the accounting guidance for contingencies, contingencies are inherently unpredictable and it is possible that results of operations or cash flows could be materially and adversely affected in any particular period by unfavorable developments in, or resolution or disposition of, one or more of these matters. For those contingencies in respect of which the Company believes that it is reasonably possible that a loss may result that is materially in excess of the accrual (if any) established for the matter, the Company has below either provided an estimate of such possible loss or range of loss or included a statement that such an estimate cannot be made. In addition to the contingencies described below, the Company is party to many other legal proceedings and contingencies the resolution of which is not expected to materially affect its financial condition or future results of operations beyond the amounts accrued.

Rights-of-Way Litigation

The Company is party to a number of purported class action lawsuits involving its right to install fiber optic cable network in railroad right-of-ways adjacent to plaintiffs' land. In general, the Company obtained the rights to construct its networks from railroads, utilities, and others, and has installed its networks along the rights-of-way so granted. Plaintiffs in the purported class actions assert that they are the owners of lands over which the fiber optic cable networks pass, and that the railroads, utilities, and others who granted the Company the right to construct and maintain its network did not have the legal authority to do so. The complaints seek damages on theories of trespass, unjust enrichment and slander of title and property, as well as punitive damages. The Company has also received, and may in the future receive, claims and demands related to rights-of-way issues similar to the issues in these cases that may be based on similar or different legal theories. The Company has defeated motions for class certification in a number of these actions but expects that, absent settlement of these actions, plaintiffs in the pending lawsuits will continue to seek certification of statewide or multi-state classes. The only lawsuit in which a class was certified against the Company, absent an agreed upon settlement, occurred in Koyle, et. al. v. Level 3 Communications, Inc., et. al., a purported two state class action filed in the United States District Court for the District of Idaho. The Koyle lawsuit has been dismissed pursuant to a settlement reached in November 2010 as described further below.

The Company negotiated a series of class settlements affecting all persons who own or owned land next to or near railroad rights of way in which it has installed its fiber optic cable networks. The United States District Court for the District of Massachusetts in  Kingsborough v. Sprint Communications Co. L.P. granted preliminary approval of the proposed settlement; however, on September 10, 2009, the court denied a motion for final approval of the settlement on the basis that the court lacked subject matter jurisdiction and dismissed the case.

In November 2010, the Company negotiated revised settlement terms for a series of state class settlements affecting all persons who own or owned land next to or near railroad rights of way in which the Company has installed its fiber optic cable networks. The Company is currently pursuing presentment of the settlement in applicable jurisdictions. The settlements, affecting current and former landowners, have received final federal court approval in multiple states and the parties are engaged in the claims process for those states. The settlement has also been presented to federal courts in additional states and approval is pending.

Management believes that the Company has substantial defenses to the claims asserted in all of these actions and intends to defend them vigorously if a satisfactory settlement is not ultimately approved for all affected landowners.

Peruvian Tax Litigation

Beginning in 2005, one of the Company's Peruvian subsidiaries received a number of assessments for tax, penalties and interest for calendar years 2001 and 2002. Peruvian tax authorities (SUNAT) took the position that the Peruvian subsidiary incorrectly documented its importations resulting in additional income tax withholding and value-added taxes (VAT). The total amount of the asserted claims, including potential interest and penalties, was $26 million, consisting of $3 million for income tax withholding in connection with the import of services for calendar years 2001 and 2002, $7 million for VAT in connection with the import of services for calendar years 2001 and 2002, and $16 million in connection with the disallowance of VAT credits for periods beginning in 2005. Due to accrued interest and foreign exchange effects, and taking into account the developments described below, the total amount of exposure has increased to $92 million at June 30, 2013.

The Company challenged the tax assessments during 2005 by filing administrative claims before SUNAT. During August 2006 and June 2007, SUNAT rejected the Company's administrative claims, thereby confirming the assessments. Appeals were filed in September 2006 and July 2007 in the Tax Court, which is the highest administrative authority. In October 2011, the Tax Court issued a ruling regarding VAT, associated penalties and penalties associated with withholding taxes, adjudicating the central issue underlying the assessments in the government's favor, while confirming the assessment in part and denying a portion of the assessment on procedural grounds. Other than an immaterial amount, all assessed items dismissed by the Tax Court in this ruling remain open for reassessment by SUNAT. While this Tax Court ruling applies only to 2002, the Company believes the Tax Court will issue a similar ruling with respect to 2001, and all material amounts likely to be waived due to procedural defects similarly remain open for reassessment.

In November 2011, the Tax Court issued a ruling with respect to assessed 2001 withholding tax, holding that the statute of limitations had run prior to assessment by SUNAT. The Company believes that this adjudication of the withholding tax issue is likely to be final, and the Company expects to win a similar verdict with respect to assessed 2002 withholding tax. However, penalties with respect to withholding tax are not time-barred, and were confirmed in the Tax Court's October 2011 ruling.

The Company has appealed the Tax Court's October 2011 decision to the judicial court in Peru. The Company has not received Tax Court rulings for all periods, but it has received adjudications of each substantive issue for at least one period. As a result, the Company expects decisions for the remaining open periods to be consistent with decisions already rendered. The Company intends to appeal any Tax Court verdict with respect to 2001 to the extent consistent with the October 2011 decision in the government's favor and will protest any reassessment of amounts dismissed by the Tax Court on procedural grounds.


Employee Severance and Contractor Termination Disputes

A number of former employees and third-party contractors have asserted a variety of claims in litigation against certain Latin American subsidiaries of the Company for separation pay, severance, commissions, pension benefits, unpaid vacation pay, breach of employment contracts, unpaid performance bonuses, property damages, moral damages and related statutory penalties, fines, costs and expenses (including accrued interest, attorneys fees and statutorily mandated inflation adjustments) as a result of their separation from the Company or termination of service relationships. The Company is vigorously defending itself against the asserted claims, which aggregate to approximately $40 million.

Brazilian Tax Claims

In December 2004, March 2009 and April 2009, the São Paulo state tax authorities issued tax assessments against one of the Company's Brazilian subsidiaries for the Tax on Distribution of Goods and Services (“ICMS”) with respect to revenue from leasing movable properties (in the case of the December 2004 and March 2009 assessments) and revenue from the provision of Internet access services (in the case of the April 2009 assessment), by treating such activities as the provision of communications services, to which the ICMS tax applies. In September 2002, July 2009 and May 2012, the Rio de Janeiro state tax authorities issued tax assessments to the same Brazilian subsidiary on similar issues. The Company has filed objections to these assessments, arguing that the lease of assets and the provision of Internet access are not communication services subject to ICMS. The objections to the December 2004 and September 2002 assessments were rejected by the respective state administrative courts, and the Company has appealed those decisions to the judicial courts. In October 2012, the Company received a favorable ruling from the lower court on the December 2004 assessment regarding equipment leasing, but that ruling is subject to appeal by the state. No ruling has been obtained with respect to the September 2002 assessment. The objections to the March, April and July 2009 and May 2012 assessments are still pending final administrative decisions.

The Company is vigorously contesting all such assessments in both states, and in particular, views the assessment of ICMS on revenue from leasing movable properties to be without merit. Nevertheless, the Company believes that it is reasonably possible that these assessments could result in a loss of up to $59 million in excess of the accruals established for these matters.




Letters of Credit

It is customary for Level 3 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 behalf of Level 3 in accordance with specified terms and conditions. As of June 30, 2013 and December 31, 2012, Level 3 had outstanding letters of credit or other similar obligations of approximately $27 million and $31 million, respectively, of which $25 million and $29 million, are collateralized by cash, that is reflected on the consolidated balance sheets as restricted cash. The Company does not believe exposure to loss related to its letters of credit is material.
Condensed Consolidating Financial Information
Condensed Consolidating Financial Information
Condensed Consolidating Financial Information

Level 3 Financing, Inc., a wholly owned subsidiary of the Company, has issued senior notes that are unsecured obligations of Level 3 Financing, Inc.; however, they are also fully and unconditionally and jointly and severally guaranteed on an unsecured senior basis by Level 3 Communications, Inc. and Level 3 Communications, LLC.

In conjunction with the registration of the senior notes, the accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 “Financial statements of guarantors and affiliates whose securities collateralize an issue registered or being registered.”

The operating activities of the separate legal entities included in the Company’s consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the results of operations, financial position and cash flows of each legal entity and, on an aggregate basis, the other non-guarantor subsidiaries based on amounts incurred by such entities, and is not intended to present the operating results of those legal entities on a stand-alone basis. Level 3 Communications, LLC leases equipment and certain facilities from other wholly owned subsidiaries of Level 3 Communications, Inc. These transactions are eliminated in the consolidated results of the Company.
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
694

 
$
928

 
$
(57
)
 
$
1,565

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
256

 
417

 
(57
)
 
616

Depreciation and Amortization
—

 
—

 
71

 
128

 
—

 
199

Selling, General and Administrative
—

 
—

 
412

 
198

 
—

 
610

Total Costs and Expenses
—

 
—

 
739

 
743

 
(57
)
 
1,425

Operating Income (Loss)
—

 
—

 
(45
)
 
185

 
—

 
140

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(37
)
 
(125
)
 
—

 
(5
)
 
—

 
(167
)
Interest income (expense) affiliates, net
272

 
425

 
(669
)
 
(28
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(259
)
 
(559
)
 
130

 
—

 
688

 
—

Other, net
—

 
—

 
1

 
13

 
—

 
14

Total Other Expense
(24
)
 
(259
)
 
(538
)
 
(20
)
 
688

 
(153
)
Income (Loss) before Income Taxes
(24
)
 
(259
)
 
(583
)
 
165

 
688

 
(13
)
Income Tax Expense
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net Income (Loss)
(24
)
 
(259
)
 
(583
)
 
154

 
688

 
(24
)
Other Comprehensive Loss, Net of Income Taxes
(11
)
 
(11
)
 
—

 
(11
)
 
22

 
(11
)
Comprehensive Income (Loss)
$
(35
)
 
$
(270
)
 
$
(583
)
 
$
143

 
$
710

 
$
(35
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,379

 
$
1,884

 
$
(121
)
 
$
3,142

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
517

 
849

 
(121
)
 
1,245

Depreciation and Amortization
—

 
—

 
142

 
251

 
—

 
393

Selling, General and Administrative
1

 
—

 
793

 
415

 
—

 
1,209

Total Costs and Expenses
1

 
—

 
1,452

 
1,515

 
(121
)
 
2,847

Operating Income (Loss)
(1
)
 
—

 
(73
)
 
369

 
—

 
295

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(76
)
 
(251
)
 
(1
)
 
(8
)
 
—

 
(336
)
Interest income (expense) affiliates, net
545

 
855

 
(1,338
)
 
(62
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,173
)
 
276

 
—

 
1,467

 
—

Other, net
—

 
(1
)
 
2

 
(37
)
 
—

 
(36
)
Total Other Expense
(101
)
 
(570
)
 
(1,061
)
 
(107
)
 
1,467

 
(372
)
Income (Loss) before Income Taxes
(102
)
 
(570
)
 
(1,134
)
 
262

 
1,467

 
(77
)
Income Tax Expense
—

 
—

 
(1
)
 
(24
)
 
—

 
(25
)
Net Income (Loss)
(102
)
 
(570
)
 
(1,135
)
 
238

 
1,467

 
(102
)
Other Comprehensive Loss, Net of Income Taxes
(63
)
 
(63
)
 
—

 
(63
)
 
126

 
(63
)
Comprehensive Income (Loss)
$
(165
)
 
$
(633
)
 
$
(1,135
)
 
$
175

 
$
1,593

 
$
(165
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
659

 
$
991

 
$
(64
)
 
$
1,586

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
244

 
465

 
(61
)
 
648

Depreciation and Amortization
—

 
—

 
66

 
125

 
—

 
191

Selling, General and Administrative
—

 
—

 
396

 
221

 
(3
)
 
614

Total Costs and Expenses
—

 
—

 
706

 
811

 
(64
)
 
1,453

Operating Income (Loss)
—

 
—

 
(47
)
 
180

 
—

 
133

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
—

 
1

 
—

 
1

Interest expense
(38
)
 
(134
)
 
(1
)
 
(8
)
 
—

 
(181
)
Interest income (expense) affiliates, net
245

 
403

 
(558
)
 
(90
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(269
)
 
(538
)
 
25

 
—

 
782

 
—

Other, net
—

 
—

 
2

 
(9
)
 
—

 
(7
)
Total Other Expense
(62
)
 
(269
)
 
(532
)
 
(106
)
 
782

 
(187
)
Income (Loss) before Income Taxes
(62
)
 
(269
)
 
(579
)
 
74

 
782

 
(54
)
Income Tax Expense
—

 
—

 
(1
)
 
(7
)
 
—

 
(8
)
Net Income (Loss)
(62
)
 
(269
)
 
(580
)
 
67

 
782

 
(62
)
Other Comprehensive Loss, Net of Income Taxes
(56
)
 
(56
)
 
—

 
(65
)
 
121

 
(56
)
Comprehensive Income (Loss)
$
(118
)
 
$
(325
)
 
$
(580
)
 
$
2

 
$
903

 
$
(118
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,285

 
$
2,014

 
$
(127
)
 
$
3,172

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
480

 
946

 
(121
)
 
1,305

Depreciation and Amortization
—

 
—

 
133

 
245

 
—

 
378

Selling, General and Administrative
1

 
—

 
797

 
448

 
(6
)
 
1,240

Total Costs and Expenses
1

 
—

 
1,410

 
1,639

 
(127
)
 
2,923

Operating Income (Loss)
(1
)
 
—

 
(125
)
 
375

 
—

 
249

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
1

 
1

 
—

 
2

Interest expense
(80
)
 
(273
)
 
(1
)
 
(16
)
 
—

 
(370
)
Interest income (expense) affiliates, net
490

 
802

 
(1,117
)
 
(175
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,077
)
 
61

 
—

 
1,586

 
—

Other, net
(39
)
 
(22
)
 
3

 
(1
)
 
—

 
(59
)
Total Other Expense
(199
)
 
(570
)
 
(1,053
)
 
(191
)
 
1,586

 
(427
)
Income (Loss) before Income Taxes
(200
)
 
(570
)
 
(1,178
)
 
184

 
1,586

 
(178
)
Income Tax Expense
—

 
—

 
(2
)
 
(20
)
 
—

 
(22
)
Net Income (Loss)
(200
)
 
(570
)
 
(1,180
)
 
164

 
1,586

 
(200
)
Other Comprehensive Loss, Net of Income Taxes
(14
)
 
(14
)
 
—

 
(30
)
 
44

 
(14
)
Comprehensive Income (Loss)
$
(214
)
 
$
(584
)
 
$
(1,180
)
 
$
134

 
$
1,630

 
$
(214
)
Condensed Consolidating Balance Sheets
June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
103

 
618

 
—

 
721

Due from affiliates
15,017

 
16,312

 
—

 
—

 
(31,329
)
 
—

Other
4

 
16

 
67

 
92

 
—

 
179

Total Current Assets
15,030

 
16,333

 
528

 
941

 
(31,329
)
 
1,503

Property, Plant, and Equipment, net
—

 
—

 
2,970

 
5,201

 
—

 
8,171

Restricted Cash and Securities
7

 
—

 
17

 
3

 
—

 
27

Goodwill and Other Intangibles, net
—

 
—

 
412

 
2,385

 
—

 
2,797

Investment in Subsidiaries
(12,322
)
 
(21,656
)
 
4,358

 
—

 
29,620

 
—

Other Assets, net
14

 
110

 
11

 
232

 
—

 
367

Total Assets
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
1

 
$
42

 
$
644

 
$
—

 
$
688

Current portion of long-term debt
—

 
6

 
3

 
21

 
—

 
30

Accrued payroll and employee benefits
—

 
—

 
131

 
46

 
—

 
177

Accrued interest
33

 
158

 
—

 
1

 
—

 
192

Current portion of deferred revenue
—

 
—

 
106

 
120

 
—

 
226

Due to affiliates
—

 
—

 
31,035

 
294

 
(31,329
)
 
—

Other
1

 
36

 
48

 
105

 
—

 
190

Total Current Liabilities
35

 
201

 
31,365

 
1,231

 
(31,329
)
 
1,503

Long-Term Debt, less current portion
1,571

 
6,886

 
18

 
31

 
—

 
8,506

Deferred Revenue, less current portion
—

 
—

 
593

 
313

 
—

 
906

Other Liabilities
15

 
26

 
23

 
778

 
—

 
842

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,108

 
(12,326
)
 
(23,703
)
 
6,409

 
29,620

 
1,108

Total Liabilities and Stockholders' Equity (Deficit)
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

Condensed Consolidating Balance Sheets
December 31, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
253

 
$
5

 
$
386

 
$
335

 
$
—

 
$
979

Restricted cash and securities
—

 
—

 
1

 
7

 
—

 
8

Receivables, less allowances for doubtful accounts
—

 
—

 
93

 
621

 
—

 
714

Due from affiliates
14,446

 
15,709

 
—

 
7

 
(30,162
)
 
—

Other
3

 
16

 
49

 
73

 
—

 
141

Total Current Assets
14,702

 
15,730

 
529

 
1,043

 
(30,162
)
 
1,842

Property, Plant, and Equipment, net
—

 
—

 
2,926

 
5,273

 
—

 
8,199

Restricted Cash and Securities
12

 
—

 
17

 
6

 
—

 
35

Goodwill and Other Intangibles, net
—

 
—

 
429

 
2,404

 
—

 
2,833

Investment in Subsidiaries
(11,756
)
 
(20,470
)
 
3,242

 
—

 
28,984

 
—

Other Assets, net
16

 
119

 
11

 
252

 
—

 
398

Total Assets
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
2

 
$
53

 
$
723

 
$
—

 
$
779

Current portion of long-term debt
172

 
6

 
6

 
32

 
—

 
216

Accrued payroll and employee benefits
—

 
—

 
161

 
50

 
—

 
211

Accrued interest
45

 
163

 
—

 
1

 
—

 
209

Current portion of deferred revenue
—

 
—

 
109

 
142

 
—

 
251

Due to affiliates
—

 
—

 
30,162

 
—

 
(30,162
)
 
—

Other
1

 
1

 
29

 
105

 
—

 
136

Total Current Liabilities
219

 
172

 
30,520

 
1,053

 
(30,162
)
 
1,802

Long-Term Debt, less current portion
1,570

 
6,886

 
20

 
40

 
—

 
8,516

Deferred Revenue, less current portion
—

 
—

 
602

 
285

 
—

 
887

Other Liabilities
14

 
81

 
75

 
761

 
—

 
931

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,171

 
(11,760
)
 
(24,063
)
 
6,839

 
28,984

 
1,171

Total Liabilities and Stockholders' Equity (Deficit)
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(86
)
 
$
(269
)
 
$
74

 
$
504

 
$
—

 
$
223

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(159
)
 
(218
)
 
—

 
(377
)
Decrease in restricted cash and securities, net
5

 
—

 
—

 
3

 
—

 
8

Other
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Net Cash Provided by (Used in) Investing Activities
5

 
—

 
(159
)
 
(229
)
 
—

 
(383
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(3
)
 
(4
)
 
(20
)
 
—

 
(199
)
Increase (decrease) due from/to affiliates, net
9

 
272

 
60

 
(341
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(163
)
 
269

 
56

 
(361
)
 
—

 
(199
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(244
)
 
—

 
(29
)
 
(110
)
 
—

 
(383
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(144
)
 
$
(245
)
 
$
(66
)
 
$
563

 
$
—

 
$
108

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(123
)
 
(195
)
 
—

 
(318
)
Decrease in restricted cash and securities, net
3

 
—

 
—

 
1

 
—

 
4

Proceeds from sale of property, plant and equipment and other assets
—

 
—

 
—

 
5

 
—

 
5

Net Cash Provided by (Used in) Investing Activities
3

 
—

 
(123
)
 
(189
)
 
—

 
(309
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
880

 
—

 
—

 
—

 
880

Payments on and repurchases of long-term debt, including current portion and refinancing costs
—

 
(825
)
 
—

 
(38
)
 
—

 
(863
)
Proceeds from stock options exercised
1

 
—

 
—

 
—

 
—

 
1

Increase (decrease) due from/to affiliates, net
140

 
190

 
(13
)
 
(317
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
141

 
245

 
(13
)
 
(355
)
 
—

 
18

Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net Change in Cash and Cash Equivalents
—

 
—

 
(202
)
 
17

 
—

 
(185
)
Cash and Cash Equivalents at Beginning of Period
2

 
6

 
618

 
292

 
—

 
918

Cash and Cash Equivalents at End of Period
$
2

 
$
6

 
$
416

 
$
309

 
$
—

 
$
733

Organization and Summary of Significant Accounting Policies (Policies)
Principles of Consolidation and Basis of Presentation
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Level 3 Communications, Inc. and subsidiaries in which it has a controlling interest. All significant intercompany accounts and transactions have been eliminated. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").
As part of its consolidation policy, the Company considers its controlled subsidiaries, investments in businesses in which the Company is not the primary beneficiary or does not have effective control but has the ability to significantly influence operating and financial policies, and variable interests resulting from economic arrangements that give the Company rights to economic risks or rewards of a legal entity. The Company does not have variable interests in a variable interest entity.
Acquired Intangible Assets (Tables)
Schedule of acquisition-related intangible assets 
Identifiable acquisition-related intangible assets as of June 30, 2013 and December 31, 2012, were as follows (dollars in millions):

 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
June 30, 2013
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
776

 
$
(655
)
 
$
121

Trademarks
55

 
(24
)
 
31

Patents and Developed Technology
158

 
(110
)
 
48

 
989

 
(789
)
 
200

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,021

 
$
(789
)
 
$
232

December 31, 2012
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
776

 
$
(633
)
 
$
143

Trademarks
55

 
(17
)
 
38

Patents and Developed Technology
158

 
(103
)
 
55

 
989

 
(753
)
 
236

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,021

 
$
(753
)
 
$
268

Schedule of estimated amortization expense of finite-lived acquisition-related intangible assets 
As of June 30, 2013, estimated amortization expense for the Company’s finite-lived acquisition-related intangible assets over the next five years and thereafter is as follows (dollars in millions):

2013 (remaining six months)
$
37

2014
61

2015
45

2016
28

2017
13

2018
13

Thereafter
3

 
$
200

Fair Value of Financial Instruments (Tables)
Schedule of fair value of liabilities measured on a recurring basis
The table below presents the fair values for the Company’s interest rate swaps and long-term debt as well as the input levels used to determine these fair values as of June 30, 2013 and December 31, 2012:

 
 
 
 
 
 
Fair Value Measurement Using
 
 
Total Carrying Value in Consolidated Balance Sheet
 
Unadjusted Quoted Prices in Active
Markets for Identical Assets or Liabilities (Level 1)
 
Significant Other Observable Inputs (Level 2)
(dollars in millions)
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
December 31,
2012
 
June 30,
2013
 
December 31,
2012
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swap Liabilities (included in other current and non-current liabilities)
 
$
34

 
$
56

 
$
—

 
$
—

 
$
34

 
$
56

Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
 
$
34

 
$
56

 
$
—

 
$
—

 
$
34

 
$
56

Liabilities Not Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt, including the current portion:
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans
 
$
2,602

 
$
2,603

 
$
2,617

 
$
2,631

 
$
—

 
$
—

Senior Notes
 
5,186

 
5,185

 
5,504

 
5,712

 
—

 
—

Convertible Notes
 
675

 
846

 
274

 
286

 
558

 
748

Capital Leases and Other
 
73

 
98

 
—

 
—

 
73

 
98

Total Long-term Debt, including the current portion:
 
$
8,536

 
$
8,732

 
$
8,395

 
$
8,629

 
$
631

 
$
846



The Company does not have any assets or liabilities where the fair value is measured using significant unobservable inputs (Level 3).
Derivative Financial Instruments (Tables)
Schedule of outstanding interest rate derivatives designated as cash flow hedges 
In March 2007, Level 3 Financing, Inc. entered into two interest rate swap agreements to hedge the interest payments on $1 billion notional amount of floating rate debt. The Company had designated these interest rate swap agreements as cash flow hedges. The two interest rate swap agreements are with different counterparties and are for $500 million each. The arrangements began in April 2007 and mature in January 2014. Under the terms of these arrangements, the Company receives interest payments based on rolling three month LIBOR terms and pays interest at the fixed rate of 4.93% under one arrangement and approximately 4.92% under the other.

Interest Rate Derivative
 
Number of
Instruments
 
Notional
(dollars in millions)
Interest rate swaps
 
Two
 
$
1,000

Schedule of fair value of derivative financial instruments 
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets (dollars in millions):

 
 
Liability Derivatives
 
 
June 30, 2013
 
December 31, 2012
Derivatives not designated as
hedging instruments
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair
Value
Interest rate swap agreements
 
Other current liabilities
 
$
34

 
Other non-current liabilities
 
$
56

Schedule of the amount of net gains (losses) recognized in Accumulated Other Comprehensive Income (Loss) 
The amount of net gains (losses) recognized in Accumulated Other Comprehensive Income (Loss), including reclassification gains (losses) consists of the following (dollars in millions):

Derivatives designated as hedging instruments
 
2013
 
2012
Cash flow hedging contracts
 
 
 
 
Three Months Ended June 30,
 
$
—

 
$
9

Six Months Ended June 30,
 
$
—

 
$
16

Schedule of the amount of gains (losses) reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense 
The amount of gains (losses) reclassified from Accumulated Other Comprehensive Income (Loss) to earnings (effective portions) consists of the following (dollars in millions):

Derivatives designated as hedging instruments
 
Statement of Operations Location
 
2013
 
2012
Cash flow hedging contracts
 
 
 
 
 
 
Three Months Ended June 30,
 
Interest Expense
 
$
—

 
$
(11
)
Six Months Ended June 30,
 
Interest Expense
 
$
—

 
$
(22
)
Long-Term Debt (Tables)
Schedule of long-term debt 
As of June 30, 2013 and December 31, 2012, long-term debt was as follows:
(dollars in millions)
 
June 30,
2013
 
December 31,
2012
Senior Secured Term Loan*
 
$
2,611

 
$
2,614

Floating Rate Senior Notes due 2015 (4.215% as of June 30, 2013 and 4.469% as of December 31, 2012)
 
300

 
300

10% Senior Notes due 2018
 
640

 
640

11.875% Senior Notes due 2019
 
605

 
605

9.375% Senior Notes due 2019
 
500

 
500

8.125% Senior Notes due 2019
 
1,200

 
1,200

8.875% Senior Notes due 2019
 
300

 
300

8.625% Senior Notes due 2020
 
900

 
900

7% Senior Notes due 2020
 
775

 
775

15% Convertible Senior Notes due 2013
 
—

 
172

7% Convertible Senior Notes due 2015
 
200

 
200

7% Convertible Senior Notes due 2015 Series B
 
275

 
275

6.5% Convertible Senior Notes due 2016
 
201

 
201

Capital Leases
 
71

 
86

Other
 
2

 
12

Total Debt Obligations
 
8,580

 
8,780

Unamortized Discount:
 
 
 
 
Discount on Senior Secured Term Loan
 
(9
)
 
(11
)
Discount on 10% Senior Notes due 2018
 
(9
)
 
(10
)
Discount on 11.875% Senior Notes due 2019
 
(9
)
 
(9
)
Discount on 9.375% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 8.125% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 7% Convertible Senior Notes due 2015
 
(1
)
 
(2
)
Total Unamortized Discount
 
(44
)
 
(48
)
Carrying Value of Debt
 
8,536

 
8,732

Less current portion
 
(30
)
 
(216
)
Long-term Debt, less current portion
 
$
8,506

 
$
8,516


* The $596 million Tranche B 2016 Term Loan due 2016, the $815 million Tranche B 2019 Term Loan due 2019 and the $1.2 billion Tranche B-II 2019 Term Loan due 2019 had interest rates of 4.75%, 5.25% and 4.75%, respectively, as of June 30, 2013. The $599 million Tranche B 2016 Term Loan due 2016, the $815 million Tranche B 2019 Term Loan due 2019 and the $1.2 billion Tranche B-II 2019 Term Loan due 2019 had interest rates of 4.75%, 5.25% and 4.75%, respectively, as of December 31, 2012. The Tranche B 2016 Term Loan requires repayment of 0.25% of the original $600 million aggregate principal amount on the last day of each March, June, September and December, beginning with December 31, 2012 and ending with such last day to occur prior to maturity.

Schedule of aggregate future contractual maturities of long-term debt and capital leases (excluding discounts) 
Long-Term Debt Maturities

Aggregate future contractual maturities of long-term debt and capital leases (excluding discounts) were as follows as of June 30, 2013 (dollars in millions):

2013 (remaining six months)
$
18

2014
22

2015
788

2016
788

2017
5

2018
645

Thereafter
6,314

 
$
8,580

Stock-Based Compensation (Tables)
Schedule of non-cash compensation expense and capitalized non-cash compensation
The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three and six months ended June 30, 2013 and 2012 (dollars in millions):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
OSO
$
11

 
$
4

 
$
16

 
$
6

Restricted Stock Units and Shares
14

 
14

 
21

 
18

401(k) Match Expense
5

 
6

 
13

 
13

Restricted Stock Unit Bonus Grant
14

 
5

 
29

 
16

Management Incentive and Retention Plan
4

 
—

 
6

 
—

 
48

 
29

 
85

 
53

Capitalized Non-Cash Compensation
—

 
—

 
—

 
—

 
$
48

 
$
29

 
$
85

 
$
53

Condensed Consolidating Financial Information (Tables)
Condensed Consolidating Financial Information 
Condensed Consolidating Financial Information

Level 3 Financing, Inc., a wholly owned subsidiary of the Company, has issued senior notes that are unsecured obligations of Level 3 Financing, Inc.; however, they are also fully and unconditionally and jointly and severally guaranteed on an unsecured senior basis by Level 3 Communications, Inc. and Level 3 Communications, LLC.

In conjunction with the registration of the senior notes, the accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 “Financial statements of guarantors and affiliates whose securities collateralize an issue registered or being registered.”

The operating activities of the separate legal entities included in the Company’s consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the results of operations, financial position and cash flows of each legal entity and, on an aggregate basis, the other non-guarantor subsidiaries based on amounts incurred by such entities, and is not intended to present the operating results of those legal entities on a stand-alone basis. Level 3 Communications, LLC leases equipment and certain facilities from other wholly owned subsidiaries of Level 3 Communications, Inc. These transactions are eliminated in the consolidated results of the Company.
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
694

 
$
928

 
$
(57
)
 
$
1,565

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
256

 
417

 
(57
)
 
616

Depreciation and Amortization
—

 
—

 
71

 
128

 
—

 
199

Selling, General and Administrative
—

 
—

 
412

 
198

 
—

 
610

Total Costs and Expenses
—

 
—

 
739

 
743

 
(57
)
 
1,425

Operating Income (Loss)
—

 
—

 
(45
)
 
185

 
—

 
140

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(37
)
 
(125
)
 
—

 
(5
)
 
—

 
(167
)
Interest income (expense) affiliates, net
272

 
425

 
(669
)
 
(28
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(259
)
 
(559
)
 
130

 
—

 
688

 
—

Other, net
—

 
—

 
1

 
13

 
—

 
14

Total Other Expense
(24
)
 
(259
)
 
(538
)
 
(20
)
 
688

 
(153
)
Income (Loss) before Income Taxes
(24
)
 
(259
)
 
(583
)
 
165

 
688

 
(13
)
Income Tax Expense
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net Income (Loss)
(24
)
 
(259
)
 
(583
)
 
154

 
688

 
(24
)
Other Comprehensive Loss, Net of Income Taxes
(11
)
 
(11
)
 
—

 
(11
)
 
22

 
(11
)
Comprehensive Income (Loss)
$
(35
)
 
$
(270
)
 
$
(583
)
 
$
143

 
$
710

 
$
(35
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,379

 
$
1,884

 
$
(121
)
 
$
3,142

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
517

 
849

 
(121
)
 
1,245

Depreciation and Amortization
—

 
—

 
142

 
251

 
—

 
393

Selling, General and Administrative
1

 
—

 
793

 
415

 
—

 
1,209

Total Costs and Expenses
1

 
—

 
1,452

 
1,515

 
(121
)
 
2,847

Operating Income (Loss)
(1
)
 
—

 
(73
)
 
369

 
—

 
295

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(76
)
 
(251
)
 
(1
)
 
(8
)
 
—

 
(336
)
Interest income (expense) affiliates, net
545

 
855

 
(1,338
)
 
(62
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,173
)
 
276

 
—

 
1,467

 
—

Other, net
—

 
(1
)
 
2

 
(37
)
 
—

 
(36
)
Total Other Expense
(101
)
 
(570
)
 
(1,061
)
 
(107
)
 
1,467

 
(372
)
Income (Loss) before Income Taxes
(102
)
 
(570
)
 
(1,134
)
 
262

 
1,467

 
(77
)
Income Tax Expense
—

 
—

 
(1
)
 
(24
)
 
—

 
(25
)
Net Income (Loss)
(102
)
 
(570
)
 
(1,135
)
 
238

 
1,467

 
(102
)
Other Comprehensive Loss, Net of Income Taxes
(63
)
 
(63
)
 
—

 
(63
)
 
126

 
(63
)
Comprehensive Income (Loss)
$
(165
)
 
$
(633
)
 
$
(1,135
)
 
$
175

 
$
1,593

 
$
(165
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
659

 
$
991

 
$
(64
)
 
$
1,586

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
244

 
465

 
(61
)
 
648

Depreciation and Amortization
—

 
—

 
66

 
125

 
—

 
191

Selling, General and Administrative
—

 
—

 
396

 
221

 
(3
)
 
614

Total Costs and Expenses
—

 
—

 
706

 
811

 
(64
)
 
1,453

Operating Income (Loss)
—

 
—

 
(47
)
 
180

 
—

 
133

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
—

 
1

 
—

 
1

Interest expense
(38
)
 
(134
)
 
(1
)
 
(8
)
 
—

 
(181
)
Interest income (expense) affiliates, net
245

 
403

 
(558
)
 
(90
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(269
)
 
(538
)
 
25

 
—

 
782

 
—

Other, net
—

 
—

 
2

 
(9
)
 
—

 
(7
)
Total Other Expense
(62
)
 
(269
)
 
(532
)
 
(106
)
 
782

 
(187
)
Income (Loss) before Income Taxes
(62
)
 
(269
)
 
(579
)
 
74

 
782

 
(54
)
Income Tax Expense
—

 
—

 
(1
)
 
(7
)
 
—

 
(8
)
Net Income (Loss)
(62
)
 
(269
)
 
(580
)
 
67

 
782

 
(62
)
Other Comprehensive Loss, Net of Income Taxes
(56
)
 
(56
)
 
—

 
(65
)
 
121

 
(56
)
Comprehensive Income (Loss)
$
(118
)
 
$
(325
)
 
$
(580
)
 
$
2

 
$
903

 
$
(118
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,285

 
$
2,014

 
$
(127
)
 
$
3,172

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
480

 
946

 
(121
)
 
1,305

Depreciation and Amortization
—

 
—

 
133

 
245

 
—

 
378

Selling, General and Administrative
1

 
—

 
797

 
448

 
(6
)
 
1,240

Total Costs and Expenses
1

 
—

 
1,410

 
1,639

 
(127
)
 
2,923

Operating Income (Loss)
(1
)
 
—

 
(125
)
 
375

 
—

 
249

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
1

 
1

 
—

 
2

Interest expense
(80
)
 
(273
)
 
(1
)
 
(16
)
 
—

 
(370
)
Interest income (expense) affiliates, net
490

 
802

 
(1,117
)
 
(175
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,077
)
 
61

 
—

 
1,586

 
—

Other, net
(39
)
 
(22
)
 
3

 
(1
)
 
—

 
(59
)
Total Other Expense
(199
)
 
(570
)
 
(1,053
)
 
(191
)
 
1,586

 
(427
)
Income (Loss) before Income Taxes
(200
)
 
(570
)
 
(1,178
)
 
184

 
1,586

 
(178
)
Income Tax Expense
—

 
—

 
(2
)
 
(20
)
 
—

 
(22
)
Net Income (Loss)
(200
)
 
(570
)
 
(1,180
)
 
164

 
1,586

 
(200
)
Other Comprehensive Loss, Net of Income Taxes
(14
)
 
(14
)
 
—

 
(30
)
 
44

 
(14
)
Comprehensive Income (Loss)
$
(214
)
 
$
(584
)
 
$
(1,180
)
 
$
134

 
$
1,630

 
$
(214
)
Condensed Consolidating Balance Sheets
June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
103

 
618

 
—

 
721

Due from affiliates
15,017

 
16,312

 
—

 
—

 
(31,329
)
 
—

Other
4

 
16

 
67

 
92

 
—

 
179

Total Current Assets
15,030

 
16,333

 
528

 
941

 
(31,329
)
 
1,503

Property, Plant, and Equipment, net
—

 
—

 
2,970

 
5,201

 
—

 
8,171

Restricted Cash and Securities
7

 
—

 
17

 
3

 
—

 
27

Goodwill and Other Intangibles, net
—

 
—

 
412

 
2,385

 
—

 
2,797

Investment in Subsidiaries
(12,322
)
 
(21,656
)
 
4,358

 
—

 
29,620

 
—

Other Assets, net
14

 
110

 
11

 
232

 
—

 
367

Total Assets
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
1

 
$
42

 
$
644

 
$
—

 
$
688

Current portion of long-term debt
—

 
6

 
3

 
21

 
—

 
30

Accrued payroll and employee benefits
—

 
—

 
131

 
46

 
—

 
177

Accrued interest
33

 
158

 
—

 
1

 
—

 
192

Current portion of deferred revenue
—

 
—

 
106

 
120

 
—

 
226

Due to affiliates
—

 
—

 
31,035

 
294

 
(31,329
)
 
—

Other
1

 
36

 
48

 
105

 
—

 
190

Total Current Liabilities
35

 
201

 
31,365

 
1,231

 
(31,329
)
 
1,503

Long-Term Debt, less current portion
1,571

 
6,886

 
18

 
31

 
—

 
8,506

Deferred Revenue, less current portion
—

 
—

 
593

 
313

 
—

 
906

Other Liabilities
15

 
26

 
23

 
778

 
—

 
842

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,108

 
(12,326
)
 
(23,703
)
 
6,409

 
29,620

 
1,108

Total Liabilities and Stockholders' Equity (Deficit)
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

Condensed Consolidating Balance Sheets
December 31, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
253

 
$
5

 
$
386

 
$
335

 
$
—

 
$
979

Restricted cash and securities
—

 
—

 
1

 
7

 
—

 
8

Receivables, less allowances for doubtful accounts
—

 
—

 
93

 
621

 
—

 
714

Due from affiliates
14,446

 
15,709

 
—

 
7

 
(30,162
)
 
—

Other
3

 
16

 
49

 
73

 
—

 
141

Total Current Assets
14,702

 
15,730

 
529

 
1,043

 
(30,162
)
 
1,842

Property, Plant, and Equipment, net
—

 
—

 
2,926

 
5,273

 
—

 
8,199

Restricted Cash and Securities
12

 
—

 
17

 
6

 
—

 
35

Goodwill and Other Intangibles, net
—

 
—

 
429

 
2,404

 
—

 
2,833

Investment in Subsidiaries
(11,756
)
 
(20,470
)
 
3,242

 
—

 
28,984

 
—

Other Assets, net
16

 
119

 
11

 
252

 
—

 
398

Total Assets
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
2

 
$
53

 
$
723

 
$
—

 
$
779

Current portion of long-term debt
172

 
6

 
6

 
32

 
—

 
216

Accrued payroll and employee benefits
—

 
—

 
161

 
50

 
—

 
211

Accrued interest
45

 
163

 
—

 
1

 
—

 
209

Current portion of deferred revenue
—

 
—

 
109

 
142

 
—

 
251

Due to affiliates
—

 
—

 
30,162

 
—

 
(30,162
)
 
—

Other
1

 
1

 
29

 
105

 
—

 
136

Total Current Liabilities
219

 
172

 
30,520

 
1,053

 
(30,162
)
 
1,802

Long-Term Debt, less current portion
1,570

 
6,886

 
20

 
40

 
—

 
8,516

Deferred Revenue, less current portion
—

 
—

 
602

 
285

 
—

 
887

Other Liabilities
14

 
81

 
75

 
761

 
—

 
931

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,171

 
(11,760
)
 
(24,063
)
 
6,839

 
28,984

 
1,171

Total Liabilities and Stockholders' Equity (Deficit)
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(86
)
 
$
(269
)
 
$
74

 
$
504

 
$
—

 
$
223

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(159
)
 
(218
)
 
—

 
(377
)
Decrease in restricted cash and securities, net
5

 
—

 
—

 
3

 
—

 
8

Other
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Net Cash Provided by (Used in) Investing Activities
5

 
—

 
(159
)
 
(229
)
 
—

 
(383
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(3
)
 
(4
)
 
(20
)
 
—

 
(199
)
Increase (decrease) due from/to affiliates, net
9

 
272

 
60

 
(341
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(163
)
 
269

 
56

 
(361
)
 
—

 
(199
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(244
)
 
—

 
(29
)
 
(110
)
 
—

 
(383
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(144
)
 
$
(245
)
 
$
(66
)
 
$
563

 
$
—

 
$
108

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(123
)
 
(195
)
 
—

 
(318
)
Decrease in restricted cash and securities, net
3

 
—

 
—

 
1

 
—

 
4

Proceeds from sale of property, plant and equipment and other assets
—

 
—

 
—

 
5

 
—

 
5

Net Cash Provided by (Used in) Investing Activities
3

 
—

 
(123
)
 
(189
)
 
—

 
(309
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
880

 
—

 
—

 
—

 
880

Payments on and repurchases of long-term debt, including current portion and refinancing costs
—

 
(825
)
 
—

 
(38
)
 
—

 
(863
)
Proceeds from stock options exercised
1

 
—

 
—

 
—

 
—

 
1

Increase (decrease) due from/to affiliates, net
140

 
190

 
(13
)
 
(317
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
141

 
245

 
(13
)
 
(355
)
 
—

 
18

Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net Change in Cash and Cash Equivalents
—

 
—

 
(202
)
 
17

 
—

 
(185
)
Cash and Cash Equivalents at Beginning of Period
2

 
6

 
618

 
292

 
—

 
918

Cash and Cash Equivalents at End of Period
$
2

 
$
6

 
$
416

 
$
309

 
$
—

 
$
733

Schedule of Condensed Consolidating Statements of Operations 
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
694

 
$
928

 
$
(57
)
 
$
1,565

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
256

 
417

 
(57
)
 
616

Depreciation and Amortization
—

 
—

 
71

 
128

 
—

 
199

Selling, General and Administrative
—

 
—

 
412

 
198

 
—

 
610

Total Costs and Expenses
—

 
—

 
739

 
743

 
(57
)
 
1,425

Operating Income (Loss)
—

 
—

 
(45
)
 
185

 
—

 
140

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(37
)
 
(125
)
 
—

 
(5
)
 
—

 
(167
)
Interest income (expense) affiliates, net
272

 
425

 
(669
)
 
(28
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(259
)
 
(559
)
 
130

 
—

 
688

 
—

Other, net
—

 
—

 
1

 
13

 
—

 
14

Total Other Expense
(24
)
 
(259
)
 
(538
)
 
(20
)
 
688

 
(153
)
Income (Loss) before Income Taxes
(24
)
 
(259
)
 
(583
)
 
165

 
688

 
(13
)
Income Tax Expense
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net Income (Loss)
(24
)
 
(259
)
 
(583
)
 
154

 
688

 
(24
)
Other Comprehensive Loss, Net of Income Taxes
(11
)
 
(11
)
 
—

 
(11
)
 
22

 
(11
)
Comprehensive Income (Loss)
$
(35
)
 
$
(270
)
 
$
(583
)
 
$
143

 
$
710

 
$
(35
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,379

 
$
1,884

 
$
(121
)
 
$
3,142

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
517

 
849

 
(121
)
 
1,245

Depreciation and Amortization
—

 
—

 
142

 
251

 
—

 
393

Selling, General and Administrative
1

 
—

 
793

 
415

 
—

 
1,209

Total Costs and Expenses
1

 
—

 
1,452

 
1,515

 
(121
)
 
2,847

Operating Income (Loss)
(1
)
 
—

 
(73
)
 
369

 
—

 
295

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(76
)
 
(251
)
 
(1
)
 
(8
)
 
—

 
(336
)
Interest income (expense) affiliates, net
545

 
855

 
(1,338
)
 
(62
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,173
)
 
276

 
—

 
1,467

 
—

Other, net
—

 
(1
)
 
2

 
(37
)
 
—

 
(36
)
Total Other Expense
(101
)
 
(570
)
 
(1,061
)
 
(107
)
 
1,467

 
(372
)
Income (Loss) before Income Taxes
(102
)
 
(570
)
 
(1,134
)
 
262

 
1,467

 
(77
)
Income Tax Expense
—

 
—

 
(1
)
 
(24
)
 
—

 
(25
)
Net Income (Loss)
(102
)
 
(570
)
 
(1,135
)
 
238

 
1,467

 
(102
)
Other Comprehensive Loss, Net of Income Taxes
(63
)
 
(63
)
 
—

 
(63
)
 
126

 
(63
)
Comprehensive Income (Loss)
$
(165
)
 
$
(633
)
 
$
(1,135
)
 
$
175

 
$
1,593

 
$
(165
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
659

 
$
991

 
$
(64
)
 
$
1,586

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
244

 
465

 
(61
)
 
648

Depreciation and Amortization
—

 
—

 
66

 
125

 
—

 
191

Selling, General and Administrative
—

 
—

 
396

 
221

 
(3
)
 
614

Total Costs and Expenses
—

 
—

 
706

 
811

 
(64
)
 
1,453

Operating Income (Loss)
—

 
—

 
(47
)
 
180

 
—

 
133

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
—

 
1

 
—

 
1

Interest expense
(38
)
 
(134
)
 
(1
)
 
(8
)
 
—

 
(181
)
Interest income (expense) affiliates, net
245

 
403

 
(558
)
 
(90
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(269
)
 
(538
)
 
25

 
—

 
782

 
—

Other, net
—

 
—

 
2

 
(9
)
 
—

 
(7
)
Total Other Expense
(62
)
 
(269
)
 
(532
)
 
(106
)
 
782

 
(187
)
Income (Loss) before Income Taxes
(62
)
 
(269
)
 
(579
)
 
74

 
782

 
(54
)
Income Tax Expense
—

 
—

 
(1
)
 
(7
)
 
—

 
(8
)
Net Income (Loss)
(62
)
 
(269
)
 
(580
)
 
67

 
782

 
(62
)
Other Comprehensive Loss, Net of Income Taxes
(56
)
 
(56
)
 
—

 
(65
)
 
121

 
(56
)
Comprehensive Income (Loss)
$
(118
)
 
$
(325
)
 
$
(580
)
 
$
2

 
$
903

 
$
(118
)
Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Revenue
$
—

 
$
—

 
$
1,285

 
$
2,014

 
$
(127
)
 
$
3,172

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
480

 
946

 
(121
)
 
1,305

Depreciation and Amortization
—

 
—

 
133

 
245

 
—

 
378

Selling, General and Administrative
1

 
—

 
797

 
448

 
(6
)
 
1,240

Total Costs and Expenses
1

 
—

 
1,410

 
1,639

 
(127
)
 
2,923

Operating Income (Loss)
(1
)
 
—

 
(125
)
 
375

 
—

 
249

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest income
—

 
—

 
1

 
1

 
—

 
2

Interest expense
(80
)
 
(273
)
 
(1
)
 
(16
)
 
—

 
(370
)
Interest income (expense) affiliates, net
490

 
802

 
(1,117
)
 
(175
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(570
)
 
(1,077
)
 
61

 
—

 
1,586

 
—

Other, net
(39
)
 
(22
)
 
3

 
(1
)
 
—

 
(59
)
Total Other Expense
(199
)
 
(570
)
 
(1,053
)
 
(191
)
 
1,586

 
(427
)
Income (Loss) before Income Taxes
(200
)
 
(570
)
 
(1,178
)
 
184

 
1,586

 
(178
)
Income Tax Expense
—

 
—

 
(2
)
 
(20
)
 
—

 
(22
)
Net Income (Loss)
(200
)
 
(570
)
 
(1,180
)
 
164

 
1,586

 
(200
)
Other Comprehensive Loss, Net of Income Taxes
(14
)
 
(14
)
 
—

 
(30
)
 
44

 
(14
)
Comprehensive Income (Loss)
$
(214
)
 
$
(584
)
 
$
(1,180
)
 
$
134

 
$
1,630

 
$
(214
)
Schedule of Condensed Consolidating Balance Sheets 
Condensed Consolidating Balance Sheets
June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
103

 
618

 
—

 
721

Due from affiliates
15,017

 
16,312

 
—

 
—

 
(31,329
)
 
—

Other
4

 
16

 
67

 
92

 
—

 
179

Total Current Assets
15,030

 
16,333

 
528

 
941

 
(31,329
)
 
1,503

Property, Plant, and Equipment, net
—

 
—

 
2,970

 
5,201

 
—

 
8,171

Restricted Cash and Securities
7

 
—

 
17

 
3

 
—

 
27

Goodwill and Other Intangibles, net
—

 
—

 
412

 
2,385

 
—

 
2,797

Investment in Subsidiaries
(12,322
)
 
(21,656
)
 
4,358

 
—

 
29,620

 
—

Other Assets, net
14

 
110

 
11

 
232

 
—

 
367

Total Assets
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
1

 
$
42

 
$
644

 
$
—

 
$
688

Current portion of long-term debt
—

 
6

 
3

 
21

 
—

 
30

Accrued payroll and employee benefits
—

 
—

 
131

 
46

 
—

 
177

Accrued interest
33

 
158

 
—

 
1

 
—

 
192

Current portion of deferred revenue
—

 
—

 
106

 
120

 
—

 
226

Due to affiliates
—

 
—

 
31,035

 
294

 
(31,329
)
 
—

Other
1

 
36

 
48

 
105

 
—

 
190

Total Current Liabilities
35

 
201

 
31,365

 
1,231

 
(31,329
)
 
1,503

Long-Term Debt, less current portion
1,571

 
6,886

 
18

 
31

 
—

 
8,506

Deferred Revenue, less current portion
—

 
—

 
593

 
313

 
—

 
906

Other Liabilities
15

 
26

 
23

 
778

 
—

 
842

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,108

 
(12,326
)
 
(23,703
)
 
6,409

 
29,620

 
1,108

Total Liabilities and Stockholders' Equity (Deficit)
$
2,729

 
$
(5,213
)
 
$
8,296

 
$
8,762

 
$
(1,709
)
 
$
12,865

Condensed Consolidating Balance Sheets
December 31, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
253

 
$
5

 
$
386

 
$
335

 
$
—

 
$
979

Restricted cash and securities
—

 
—

 
1

 
7

 
—

 
8

Receivables, less allowances for doubtful accounts
—

 
—

 
93

 
621

 
—

 
714

Due from affiliates
14,446

 
15,709

 
—

 
7

 
(30,162
)
 
—

Other
3

 
16

 
49

 
73

 
—

 
141

Total Current Assets
14,702

 
15,730

 
529

 
1,043

 
(30,162
)
 
1,842

Property, Plant, and Equipment, net
—

 
—

 
2,926

 
5,273

 
—

 
8,199

Restricted Cash and Securities
12

 
—

 
17

 
6

 
—

 
35

Goodwill and Other Intangibles, net
—

 
—

 
429

 
2,404

 
—

 
2,833

Investment in Subsidiaries
(11,756
)
 
(20,470
)
 
3,242

 
—

 
28,984

 
—

Other Assets, net
16

 
119

 
11

 
252

 
—

 
398

Total Assets
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders' Equity (Deficit)
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 Accounts payable
$
1

 
$
2

 
$
53

 
$
723

 
$
—

 
$
779

Current portion of long-term debt
172

 
6

 
6

 
32

 
—

 
216

Accrued payroll and employee benefits
—

 
—

 
161

 
50

 
—

 
211

Accrued interest
45

 
163

 
—

 
1

 
—

 
209

Current portion of deferred revenue
—

 
—

 
109

 
142

 
—

 
251

Due to affiliates
—

 
—

 
30,162

 
—

 
(30,162
)
 
—

Other
1

 
1

 
29

 
105

 
—

 
136

Total Current Liabilities
219

 
172

 
30,520

 
1,053

 
(30,162
)
 
1,802

Long-Term Debt, less current portion
1,570

 
6,886

 
20

 
40

 
—

 
8,516

Deferred Revenue, less current portion
—

 
—

 
602

 
285

 
—

 
887

Other Liabilities
14

 
81

 
75

 
761

 
—

 
931

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
1,171

 
(11,760
)
 
(24,063
)
 
6,839

 
28,984

 
1,171

Total Liabilities and Stockholders' Equity (Deficit)
$
2,974

 
$
(4,621
)
 
$
7,154

 
$
8,978

 
$
(1,178
)
 
$
13,307

Schedule of Condensed Consolidating Statements of Cash Flows 
Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(86
)
 
$
(269
)
 
$
74

 
$
504

 
$
—

 
$
223

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(159
)
 
(218
)
 
—

 
(377
)
Decrease in restricted cash and securities, net
5

 
—

 
—

 
3

 
—

 
8

Other
—

 
—

 
—

 
(14
)
 
—

 
(14
)
Net Cash Provided by (Used in) Investing Activities
5

 
—

 
(159
)
 
(229
)
 
—

 
(383
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(3
)
 
(4
)
 
(20
)
 
—

 
(199
)
Increase (decrease) due from/to affiliates, net
9

 
272

 
60

 
(341
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(163
)
 
269

 
56

 
(361
)
 
—

 
(199
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(244
)
 
—

 
(29
)
 
(110
)
 
—

 
(383
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
9

 
$
5

 
$
357

 
$
225

 
$
—

 
$
596



Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2012

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(144
)
 
$
(245
)
 
$
(66
)
 
$
563

 
$
—

 
$
108

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(123
)
 
(195
)
 
—

 
(318
)
Decrease in restricted cash and securities, net
3

 
—

 
—

 
1

 
—

 
4

Proceeds from sale of property, plant and equipment and other assets
—

 
—

 
—

 
5

 
—

 
5

Net Cash Provided by (Used in) Investing Activities
3

 
—

 
(123
)
 
(189
)
 
—

 
(309
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
880

 
—

 
—

 
—

 
880

Payments on and repurchases of long-term debt, including current portion and refinancing costs
—

 
(825
)
 
—

 
(38
)
 
—

 
(863
)
Proceeds from stock options exercised
1

 
—

 
—

 
—

 
—

 
1

Increase (decrease) due from/to affiliates, net
140

 
190

 
(13
)
 
(317
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
141

 
245

 
(13
)
 
(355
)
 
—

 
18

Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net Change in Cash and Cash Equivalents
—

 
—

 
(202
)
 
17

 
—

 
(185
)
Cash and Cash Equivalents at Beginning of Period
2

 
6

 
618

 
292

 
—

 
918

Cash and Cash Equivalents at End of Period
$
2

 
$
6

 
$
416

 
$
309

 
$
—

 
$
733

Loss Per Share (Details)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Convertible Senior Notes
 
 
Loss per share
 
 
Securities not included in computation of diluted loss per share (in millions of shares)
28 
35 
Stock options, outperform stock appreciation rights (OSOs), restricted stock units and warrants
 
 
Loss per share
 
 
Securities not included in computation of diluted loss per share (in millions of shares)
6 
6 
Acquired Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Dec. 31, 2012
Finite-Lived Intangible Assets:
 
 
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
$ 989 
 
$ 989 
 
$ 989 
Finite-Lived Intangible Assets, Accumulated Amortization
(789)
 
(789)
 
(753)
Finite-Lived Intangible Assets, Net
200 
 
200 
 
236 
Acquired finite-lived intangible asset amortization expense
18 
25 
36 
50 
 
Indefinite-Lived Intangible Assets:
 
 
 
 
 
Total identifiable acquisition-related intangible assets, Gross Carrying Amount
1,021 
 
1,021 
 
1,021 
Total identifiable acquisition-related intangible assets, Net
232 
 
232 
 
268 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
 
 
2013 (remaining six months)
37 
 
37 
 
 
2014
61 
 
61 
 
 
2015
45 
 
45 
 
 
2016
28 
 
28 
 
 
2017
13 
 
13 
 
 
2018
13 
 
13 
 
 
Thereafter
3 
 
3 
 
 
Finite-Lived Intangible Assets, Net
200 
 
200 
 
236 
Vyvx Trade Name
 
 
 
 
 
Indefinite-Lived Intangible Assets:
 
 
 
 
 
Indefinite-Lived Intangible Assets
32 
 
32 
 
32 
Customer Contracts And Relationships
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
776 
 
776 
 
776 
Finite-Lived Intangible Assets, Accumulated Amortization
(655)
 
(655)
 
(633)
Finite-Lived Intangible Assets, Net
121 
 
121 
 
143 
Acquired finite-lived intangible assets weighted average remaining useful lives (in years)
2 years 8 months 
 
 
 
 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
 
 
Finite-Lived Intangible Assets, Net
121 
 
121 
 
143 
Trademarks
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
55 
 
55 
 
55 
Finite-Lived Intangible Assets, Accumulated Amortization
(24)
 
(24)
 
(17)
Finite-Lived Intangible Assets, Net
31 
 
31 
 
38 
Acquired finite-lived intangible assets weighted average remaining useful lives (in years)
2 years 3 months 
 
 
 
 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
 
 
Finite-Lived Intangible Assets, Net
31 
 
31 
 
38 
Patents and Developed Technology
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
158 
 
158 
 
158 
Finite-Lived Intangible Assets, Accumulated Amortization
(110)
 
(110)
 
(103)
Finite-Lived Intangible Assets, Net
48 
 
48 
 
55 
Acquired finite-lived intangible assets weighted average remaining useful lives (in years)
3 years 6 months 
 
 
 
 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
 
 
Finite-Lived Intangible Assets, Net
$ 48 
 
$ 48 
 
$ 55 
Fair Value of Financial Instruments - Liabilities, Recurring (Details) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Total Carrying Value in Consolidated Balance Sheet
 
 
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
Interest Rate Swap Liabilities (included in other current and non-current liabilities)
$ 34 
$ 56 
Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
34 
56 
Long-term Debt, including the current portion:
 
 
Term Loans
2,602 
2,603 
Senior Notes
5,186 
5,185 
Convertible Notes
675 
846 
Capital Leases and Other
73 
98 
Total Long-term Debt, including the current portion:
8,536 
8,732 
Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
 
 
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
Interest Rate Swap Liabilities (included in other current and non-current liabilities)
0 
0 
Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
0 
0 
Long-term Debt, including the current portion:
 
 
Term Loans
2,617 
2,631 
Senior Notes
5,504 
5,712 
Convertible Notes
274 
286 
Capital Leases and Other
0 
0 
Total Long-term Debt, including the current portion:
8,395 
8,629 
Significant Other Observable Inputs (Level 2)
 
 
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
Interest Rate Swap Liabilities (included in other current and non-current liabilities)
34 
56 
Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
34 
56 
Long-term Debt, including the current portion:
 
 
Term Loans
0 
0 
Senior Notes
0 
0 
Convertible Notes
558 
748 
Capital Leases and Other
73 
98 
Total Long-term Debt, including the current portion:
$ 631 
$ 846 
Fair Value of Financial Instruments - Liabilities, Additional Information (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Term Loans
Jun. 30, 2013
Senior Notes due 2019 (11.875%)
Dec. 31, 2012
Senior Notes due 2019 (11.875%)
Jun. 30, 2013
Senior Notes due 2019 (8.875%)
Dec. 31, 2012
Senior Notes due 2019 (8.875%)
Jun. 30, 2013
Convertible Senior Notes due 2016 (6.5%)
Dec. 31, 2012
Convertible Senior Notes due 2016 (6.5%)
Jun. 30, 2013
Not actively traded convertible notes
Jun. 30, 2013
Convertible Senior Notes due 2015 (7.0%)
Dec. 31, 2012
Convertible Senior Notes due 2015 (7.0%)
Jun. 30, 2013
Convertible Senior Notes due 2015 Series B (7.0%)
Dec. 31, 2012
Convertible Senior Notes due 2015 Series B (7.0%)
Jun. 30, 2013
Convertible Senior Notes due 2013 (15.0%)
Dec. 31, 2012
Convertible Senior Notes due 2013 (15.0%)
Jun. 30, 2013
Estimate of Fair Value, Fair Value Disclosure
Term Loans
Dec. 31, 2012
Estimate of Fair Value, Fair Value Disclosure
Term Loans
Jun. 30, 2013
Estimate of Fair Value, Fair Value Disclosure
Actively traded convertible notes
Dec. 31, 2012
Estimate of Fair Value, Fair Value Disclosure
Actively traded convertible notes
Jun. 30, 2013
Estimate of Fair Value, Fair Value Disclosure
Not actively traded convertible notes
Dec. 31, 2012
Estimate of Fair Value, Fair Value Disclosure
Not actively traded convertible notes
Jun. 30, 2013
Fair Value, Measurements, Recurring
Estimate of Fair Value, Fair Value Disclosure
Senior Notes
Dec. 31, 2012
Fair Value, Measurements, Recurring
Estimate of Fair Value, Fair Value Disclosure
Senior Notes
Liabilities measured on a recurring basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,600 
$ 2,600 
 
 
 
 
 
 
Collateral for debt, Equity interest in Level 3 Financing, Inc's Canadian subsidiary (as a percent)
65.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior Notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,500 
5,700 
Convertible Notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 274 
$ 286 
$ 558 
$ 748 
 
 
Debt instrument, stated interest rate (as a percent)
 
11.875% 
11.875% 
8.875% 
8.875% 
6.50% 
6.50% 
 
7.00% 
7.00% 
7.00% 
7.00% 
15.00% 
15.00% 
 
 
 
 
 
 
 
 
Security coupon rates used for valuation, lowest interest rate
 
 
 
 
 
 
 
7.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Security coupon rates used for valuation, highest interest rate
 
 
 
 
 
 
 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Financial Instruments (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended 1 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Mar. 31, 2007
Level 3 Financing Inc.
derivatives
Jun. 30, 2013
Level 3 Financing Inc.
derivatives
Mar. 31, 2007
Level 3 Financing Inc.
Interest Rate Swap, Agreement One
Mar. 31, 2007
Level 3 Financing Inc.
Interest Rate Swap, Agreement Two
Jun. 30, 2013
Interest Expense
Jun. 30, 2012
Interest Expense
Jun. 30, 2013
Interest Expense
Jun. 30, 2012
Interest Expense
Jun. 30, 2013
Other current liabilities
Dec. 31, 2012
Other non-current liabilities
Derivative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
$ 34 
$ 56 
Interest rate swaps, number of instruments
 
 
 
 
2 
2 
 
 
 
 
 
 
 
 
Interest rate swaps, notional amount
 
 
 
 
1,000 
1,000 
500 
500 
 
 
 
 
 
 
Basis of interest payment
 
 
 
 
three month LIBOR 
three month LIBOR 
three month LIBOR 
three month LIBOR 
 
 
 
 
 
 
Fixed interest rate paid under agreement (as a percent)
 
 
 
 
 
 
4.93% 
4.92% 
 
 
 
 
 
 
Cash flow hedging contracts, net gains (losses) recognized in Accumulated Other Comprehensive Income (Loss)
0 
9 
0 
16 
 
 
 
 
 
 
 
 
 
 
Cash flow hedging contracts, amount of gains (losses) reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense
 
 
 
 
 
 
 
 
0 
(11)
0 
(22)
 
 
Loss on interest rate derivative instruments not designated as hedging instruments recognized in Other, net in the Consolidated Statement of Operations
$ (1)
 
$ (1)
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt - Schedule of Long Term Debt (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Long-term debt
 
 
Total Debt Obligations
$ 8,580 
$ 8,780 
Total Unamortized Discount
(44)
(48)
Carrying Value of Debt
8,536 
8,732 
Less current portion
(30)
(216)
Long-Term Debt, less current portion
8,506 
8,516 
Term Loans
 
 
Long-term debt
 
 
Total Debt Obligations
2,611 1
2,614 1
Total Unamortized Discount
(9)
(11)
Floating Rate Senior Notes due 2015
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
4.215% 
4.469% 
Total Debt Obligations
300 
300 
Senior Notes due 2018 (10.0%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
10.00% 
10.00% 
Total Debt Obligations
640 
640 
Total Unamortized Discount
(9)
(10)
Senior Notes due 2019 (11.875%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
11.875% 
11.875% 
Total Debt Obligations
605 
605 
Total Unamortized Discount
(9)
(9)
Senior Notes due 2019 (9.375%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
9.375% 
9.375% 
Total Debt Obligations
500 
500 
Total Unamortized Discount
(8)
(8)
Senior Notes due 2019 (8.125%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
8.125% 
8.125% 
Total Debt Obligations
1,200 
1,200 
Total Unamortized Discount
(8)
(8)
Senior Notes due 2019 (8.875%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
8.875% 
8.875% 
Total Debt Obligations
300 
300 
Senior Notes due 2020 (8.625%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
8.625% 
8.625% 
Total Debt Obligations
900 
900 
Senior Notes due 2020 (7.0%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
7.00% 
7.00% 
Total Debt Obligations
775 
775 
Convertible Senior Notes due 2013 (15.0%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
15.00% 
15.00% 
Total Debt Obligations
0 
172 
Convertible Senior Notes due 2015 (7.0%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
7.00% 
7.00% 
Total Debt Obligations
200 
200 
Total Unamortized Discount
(1)
(2)
Convertible Senior Notes due 2015 Series B (7.0%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
7.00% 
7.00% 
Total Debt Obligations
275 
275 
Convertible Senior Notes due 2016 (6.5%)
 
 
Long-term debt
 
 
Debt instrument, stated interest rate (as a percent)
6.50% 
6.50% 
Total Debt Obligations
201 
201 
Capital Leases
 
 
Long-term debt
 
 
Total Debt Obligations
71 
86 
Other
 
 
Long-term debt
 
 
Total Debt Obligations
$ 2 
$ 12 
Long-Term Debt - Textuals (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Jun. 30, 2013
Jun. 30, 2013
Tranche B 2016 Term Loan
Dec. 31, 2012
Tranche B 2016 Term Loan
Aug. 6, 2012
Tranche B 2016 Term Loan
Level 3 Financing Inc.
Jun. 30, 2013
Tranche B 2019 Term Loan
Dec. 31, 2012
Tranche B 2019 Term Loan
Jun. 30, 2013
Tranche B-II 2019 Term Loan
Dec. 31, 2012
Tranche B-II 2019 Term Loan
Jun. 30, 2013
Convertible Senior Notes due 2013 (15.0%)
Dec. 31, 2012
Convertible Senior Notes due 2013 (15.0%)
Mar. 31, 2013
Convertible Senior Notes due 2013 (15.0%)
Level 3 Communications, Inc.
Jan. 15, 2013
Convertible Senior Notes due 2013 (15.0%)
Level 3 Communications, Inc.
Jun. 30, 2013
Senior Notes due 2019 (8.875%)
Dec. 31, 2012
Senior Notes due 2019 (8.875%)
Jun. 30, 2013
Senior Notes due 2019 (8.875%)
Level 3 Communications, Inc.
Jun. 30, 2013
Senior Notes due 2020 (7.0%)
Dec. 31, 2012
Senior Notes due 2020 (7.0%)
Jun. 30, 2013
Senior Notes due 2020 (7.0%)
Level 3 Financing Inc.
Long-term debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, stated interest rate (as a percent)
 
 
 
 
 
 
 
 
15.00% 
15.00% 
 
15.00% 
8.875% 
8.875% 
8.875% 
7.00% 
7.00% 
7.00% 
Extinguishment of Debt, Amount
 
 
 
 
 
 
 
 
 
 
$ 172 
 
 
 
 
 
 
 
Debt instrument, effective interest rate at end of period (as a percent)
 
4.75% 
4.75% 
 
5.25% 
5.25% 
4.75% 
4.75% 
 
 
 
 
 
 
 
 
 
 
Tranche B 2016 Term Loan repayment of 0.25% of the original $600 million principal amount
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future contractual maturities of long-term debt and capital leases (excluding discounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (remaining six months)
18 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014
22 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
788 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
788 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
645 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thereafter
6,314 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt Obligations
8,580 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Face Amount
 
$ 596 
$ 599 
$ 600 
$ 815 
$ 815 
$ 1,200 
$ 1,200 
 
 
 
 
 
 
 
 
 
 
Stock-Based Compensation - Non-cash compensation expense and capitalized non-cash compensation (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Nonvested restricted stock and restricted stock units (RSUs)
4,000,000 
 
4,000,000 
 
OSOs outstanding
2,000,000 
 
2,000,000 
 
Stock-based compensation expense
$ 48 
$ 29 
$ 85 
$ 53 
Capitalized Non-cash Compensation
0 
0 
0 
0 
Non-cash compensation expense and capitalized non-cash compensation
48 
29 
85 
53 
Outperform Stock Options
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Stock-based compensation expense
11 
4 
16 
6 
Restricted Stock Units and Shares
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Stock-based compensation expense
14 
14 
21 
18 
401(k) Match Expense
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Stock-based compensation expense
5 
6 
13 
13 
Restricted Stock Unit Bonus Grant
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Stock-based compensation expense
14 
5 
29 
16 
Management Incentive and Retention Plan
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
Stock-based compensation expense
$ 4 
$ 0 
$ 6 
$ 0 
Non-qualified stock options
 
 
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
 
 
OSOs outstanding
55,000 
 
55,000 
 
Commitments, Contingencies and Other Items - Lawsuits (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Loss Contingencies
 
Estimated Litigation Liability
$ 259 
Peruvian Tax Litigation |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
92 
Peruvian Tax Litigation, Before Interest |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
26 
Peruvian Tax Litigation, Income Tax witholding 2001 and 2002 |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
3 
Peruvian Tax Litigation, VAT for 2001 and 2002 |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
7 
Peruvian Tax Litigation, Disallowance of VAT in 2005 |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
16 
Employee Severance and Contractor Termination Disputes |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Asserted Claim
40 
up to |
Brazilian Tax Claims |
Pending Litigation
 
Loss Contingencies
 
Loss Contingency, Range of Possible Loss, Portion Not Accrued
$ 59 
Commitments, Contingencies and Other Items - Other Commitments (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
 
 
Amount outstanding under letters of credit or other similar obligations
$ 27 
$ 31 
Collateralized by cash, that is reflected on the consolidated balance sheets as restricted cash
$ 25 
$ 29 
Condensed Consolidating Financial Information - Statements of Operations (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Jun. 30, 2013
Jun. 30, 2012
Condensed Consolidating Financial Information
 
 
 
 
Revenue
$ 1,565 
$ 1,586 
$ 3,142 
$ 3,172 
Costs and Expenses:
 
 
 
 
Cost of Revenue
616 
648 
1,245 
1,305 
Depreciation and Amortization
199 
191 
393 
378 
Selling, General and Administrative
610 
614 
1,209 
1,240 
Total Costs and Expenses
1,425 
1,453 
2,847 
2,923 
Operating Income (Loss)
140 
133 
295 
249 
Other Income (Expense):
 
 
 
 
Interest income
0 
1 
0 
2 
Interest expense
(167)
(181)
(336)
(370)
Interest income (expense) affiliates, net
0 
0 
0 
0 
Equity in net earnings (losses) of subsidiaries
0 
0 
0 
0 
Other, net
14 
(7)
(36)
(59)
Total Other Expense
(153)
(187)
(372)
(427)
Income (Loss) Before Income Taxes
(13)
(54)
(77)
(178)
Income Tax Expense
(11)
(8)
(25)
(22)
Net Income (Loss)
(24)
(62)
(102)
(200)
Other Comprehensive Loss, Net of Income Taxes
(11)
(56)
(63)
(14)
Comprehensive Income (Loss)
(35)
(118)
(165)
(214)
Level 3 Communications, Inc.
 
 
 
 
Condensed Consolidating Financial Information
 
 
 
 
Revenue
0 
0 
0 
0 
Costs and Expenses:
 
 
 
 
Cost of Revenue
0 
0 
0 
0 
Depreciation and Amortization
0 
0 
0 
0 
Selling, General and Administrative
0 
0 
1 
1 
Total Costs and Expenses
0 
0 
1 
1 
Operating Income (Loss)
0 
0 
(1)
(1)
Other Income (Expense):
 
 
 
 
Interest income
 
0 
 
0 
Interest expense
(37)
(38)
(76)
(80)
Interest income (expense) affiliates, net
272 
245 
545 
490 
Equity in net earnings (losses) of subsidiaries
(259)
(269)
(570)
(570)
Other, net
0 
0 
0 
(39)
Total Other Expense
(24)
(62)
(101)
(199)
Income (Loss) Before Income Taxes
(24)
(62)
(102)
(200)
Income Tax Expense
0 
0 
0 
0 
Net Income (Loss)
(24)
(62)
(102)
(200)
Other Comprehensive Loss, Net of Income Taxes
(11)
(56)
(63)
(14)
Comprehensive Income (Loss)
(35)
(118)
(165)
(214)
Level 3 Financing, Inc.
 
 
 
 
Condensed Consolidating Financial Information
 
 
 
 
Revenue
0 
0 
0 
0 
Costs and Expenses:
 
 
 
 
Cost of Revenue
0 
0 
0 
0 
Depreciation and Amortization
0 
0 
0 
0 
Selling, General and Administrative
0 
0 
0 
0 
Total Costs and Expenses
0 
0 
0 
0 
Operating Income (Loss)
0 
0 
0 
0 
Other Income (Expense):
 
 
 
 
Interest income
 
0 
 
0 
Interest expense
(125)
(134)
(251)
(273)
Interest income (expense) affiliates, net
425 
403 
855 
802 
Equity in net earnings (losses) of subsidiaries
(559)
(538)
(1,173)
(1,077)
Other, net
0 
0 
(1)
(22)
Total Other Expense
(259)
(269)
(570)
(570)
Income (Loss) Before Income Taxes
(259)
(269)
(570)
(570)
Income Tax Expense
0 
0 
0 
0 
Net Income (Loss)
(259)
(269)
(570)
(570)
Other Comprehensive Loss, Net of Income Taxes
(11)
(56)
(63)
(14)
Comprehensive Income (Loss)
(270)
(325)
(633)
(584)
Level 3 Communications, LLC
 
 
 
 
Condensed Consolidating Financial Information
 
 
 
 
Revenue
694 
659 
1,379 
1,285 
Costs and Expenses:
 
 
 
 
Cost of Revenue
256 
244 
517 
480 
Depreciation and Amortization
71 
66 
142 
133 
Selling, General and Administrative
412 
396 
793 
797 
Total Costs and Expenses
739 
706 
1,452 
1,410 
Operating Income (Loss)
(45)
(47)
(73)
(125)
Other Income (Expense):
 
 
 
 
Interest income
 
0 
 
1 
Interest expense
0 
(1)
(1)
(1)
Interest income (expense) affiliates, net
(669)
(558)
(1,338)
(1,117)
Equity in net earnings (losses) of subsidiaries
130 
25 
276 
61 
Other, net
1 
2 
2 
3 
Total Other Expense
(538)
(532)
(1,061)
(1,053)
Income (Loss) Before Income Taxes
(583)
(579)
(1,134)
(1,178)
Income Tax Expense
0 
(1)
(1)
(2)
Net Income (Loss)
(583)
(580)
(1,135)
(1,180)
Other Comprehensive Loss, Net of Income Taxes
0 
0 
0 
0 
Comprehensive Income (Loss)
(583)
(580)
(1,135)
(1,180)
Other Non-Guarantor Subsidiaries
 
 
 
 
Condensed Consolidating Financial Information
 
 
 
 
Revenue
928 
991 
1,884 
2,014 
Costs and Expenses:
 
 
 
 
Cost of Revenue
417 
465 
849 
946 
Depreciation and Amortization
128 
125 
251 
245 
Selling, General and Administrative
198 
221 
415 
448 
Total Costs and Expenses
743 
811 
1,515 
1,639 
Operating Income (Loss)
185 
180 
369 
375 
Other Income (Expense):
 
 
 
 
Interest income
 
1 
 
1 
Interest expense
(5)
(8)
(8)
(16)
Interest income (expense) affiliates, net
(28)
(90)
(62)
(175)
Equity in net earnings (losses) of subsidiaries
0 
0 
0 
0 
Other, net
13 
(9)
(37)
(1)
Total Other Expense
(20)
(106)
(107)
(191)
Income (Loss) Before Income Taxes
165 
74 
262 
184 
Income Tax Expense
(11)
(7)
(24)
(20)
Net Income (Loss)
154 
67 
238 
164 
Other Comprehensive Loss, Net of Income Taxes
(11)
(65)
(63)
(30)
Comprehensive Income (Loss)
143 
2 
175 
134 
Eliminations
 
 
 
 
Condensed Consolidating Financial Information
 
 
 
 
Revenue
(57)
(64)
(121)
(127)
Costs and Expenses:
 
 
 
 
Cost of Revenue
(57)
(61)
(121)
(121)
Depreciation and Amortization
0 
0 
0 
0 
Selling, General and Administrative
0 
(3)
0 
(6)
Total Costs and Expenses
(57)
(64)
(121)
(127)
Operating Income (Loss)
0 
0 
0 
0 
Other Income (Expense):
 
 
 
 
Interest income
 
0 
 
0 
Interest expense
0 
0 
0 
0 
Interest income (expense) affiliates, net
0 
0 
0 
0 
Equity in net earnings (losses) of subsidiaries
688 
782 
1,467 
1,586 
Other, net
0 
0 
0 
0 
Total Other Expense
688 
782 
1,467 
1,586 
Income (Loss) Before Income Taxes
688 
782 
1,467 
1,586 
Income Tax Expense
0 
0 
0 
0 
Net Income (Loss)
688 
782 
1,467 
1,586 
Other Comprehensive Loss, Net of Income Taxes
22 
121 
126 
44 
Comprehensive Income (Loss)
$ 710 
$ 903 
$ 1,593 
$ 1,630 
Condensed Consolidating Financial Information - Balance Sheets (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2013
Dec. 31, 2012
Jun. 30, 2012
Dec. 31, 2011
Current Assets:
 
 
 
 
Cash and cash equivalents
$ 596 
$ 979 
$ 733 
$ 918 
Restricted cash and securities
7 
8 
 
 
Receivables, less allowances for doubtful accounts
721 
714 
 
 
Due from affiliates
0 
0 
 
 
Other
179 
141 
 
 
Total Current Assets
1,503 
1,842 
 
 
Property, Plant and Equipment, net
8,171 
8,199 
 
 
Restricted Cash and Securities
27 
35 
 
 
Goodwill and Other Intangibles Assets, net
2,797 
2,833 
 
 
Investment in Subsidiaries
0 
0 
 
 
Other Assets, net
367 
398 
 
 
Total Assets
12,865 
13,307 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
688 
779 
 
 
Current portion of long-term debt
30 
216 
 
 
Accrued payroll and employee benefits
177 
211 
 
 
Accrued interest
192 
209 
 
 
Current portion of deferred revenue
226 
251 
 
 
Due to affiliates
0 
0 
 
 
Other
190 
136 
 
 
Total Current Liabilities
1,503 
1,802 
 
 
Long-Term Debt, less current portion
8,506 
8,516 
 
 
Deferred Revenue, less current portion
906 
887 
 
 
Other Liabilities
842 
931 
 
 
Commitments and Contingencies
0 
0 
 
 
Stockholders' Equity (Deficit)
1,108 
1,171 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
12,865 
13,307 
 
 
Level 3 Communications, Inc.
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
9 
253 
2 
2 
Restricted cash and securities
0 
0 
 
 
Receivables, less allowances for doubtful accounts
0 
0 
 
 
Due from affiliates
15,017 
14,446 
 
 
Other
4 
3 
 
 
Total Current Assets
15,030 
14,702 
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
7 
12 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
(12,322)
(11,756)
 
 
Other Assets, net
14 
16 
 
 
Total Assets
2,729 
2,974 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
1 
1 
 
 
Current portion of long-term debt
0 
172 
 
 
Accrued payroll and employee benefits
0 
0 
 
 
Accrued interest
33 
45 
 
 
Current portion of deferred revenue
0 
0 
 
 
Due to affiliates
0 
0 
 
 
Other
1 
1 
 
 
Total Current Liabilities
35 
219 
 
 
Long-Term Debt, less current portion
1,571 
1,570 
 
 
Deferred Revenue, less current portion
0 
0 
 
 
Other Liabilities
15 
14 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
1,108 
1,171 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
2,729 
2,974 
 
 
Level 3 Financing, Inc.
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
5 
5 
6 
6 
Restricted cash and securities
0 
0 
 
 
Receivables, less allowances for doubtful accounts
0 
0 
 
 
Due from affiliates
16,312 
15,709 
 
 
Other
16 
16 
 
 
Total Current Assets
16,333 
15,730 
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
0 
0 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
(21,656)
(20,470)
 
 
Other Assets, net
110 
119 
 
 
Total Assets
(5,213)
(4,621)
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
1 
2 
 
 
Current portion of long-term debt
6 
6 
 
 
Accrued payroll and employee benefits
0 
0 
 
 
Accrued interest
158 
163 
 
 
Current portion of deferred revenue
0 
0 
 
 
Due to affiliates
0 
0 
 
 
Other
36 
1 
 
 
Total Current Liabilities
201 
172 
 
 
Long-Term Debt, less current portion
6,886 
6,886 
 
 
Deferred Revenue, less current portion
0 
0 
 
 
Other Liabilities
26 
81 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
(12,326)
(11,760)
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
(5,213)
(4,621)
 
 
Level 3 Communications, LLC
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
357 
386 
416 
618 
Restricted cash and securities
1 
1 
 
 
Receivables, less allowances for doubtful accounts
103 
93 
 
 
Due from affiliates
0 
0 
 
 
Other
67 
49 
 
 
Total Current Assets
528 
529 
 
 
Property, Plant and Equipment, net
2,970 
2,926 
 
 
Restricted Cash and Securities
17 
17 
 
 
Goodwill and Other Intangibles Assets, net
412 
429 
 
 
Investment in Subsidiaries
4,358 
3,242 
 
 
Other Assets, net
11 
11 
 
 
Total Assets
8,296 
7,154 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
42 
53 
 
 
Current portion of long-term debt
3 
6 
 
 
Accrued payroll and employee benefits
131 
161 
 
 
Accrued interest
0 
0 
 
 
Current portion of deferred revenue
106 
109 
 
 
Due to affiliates
31,035 
30,162 
 
 
Other
48 
29 
 
 
Total Current Liabilities
31,365 
30,520 
 
 
Long-Term Debt, less current portion
18 
20 
 
 
Deferred Revenue, less current portion
593 
602 
 
 
Other Liabilities
23 
75 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
(23,703)
(24,063)
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
8,296 
7,154 
 
 
Other Non-Guarantor Subsidiaries
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
225 
335 
309 
292 
Restricted cash and securities
6 
7 
 
 
Receivables, less allowances for doubtful accounts
618 
621 
 
 
Due from affiliates
0 
7 
 
 
Other
92 
73 
 
 
Total Current Assets
941 
1,043 
 
 
Property, Plant and Equipment, net
5,201 
5,273 
 
 
Restricted Cash and Securities
3 
6 
 
 
Goodwill and Other Intangibles Assets, net
2,385 
2,404 
 
 
Investment in Subsidiaries
0 
0 
 
 
Other Assets, net
232 
252 
 
 
Total Assets
8,762 
8,978 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
644 
723 
 
 
Current portion of long-term debt
21 
32 
 
 
Accrued payroll and employee benefits
46 
50 
 
 
Accrued interest
1 
1 
 
 
Current portion of deferred revenue
120 
142 
 
 
Due to affiliates
294 
0 
 
 
Other
105 
105 
 
 
Total Current Liabilities
1,231 
1,053 
 
 
Long-Term Debt, less current portion
31 
40 
 
 
Deferred Revenue, less current portion
313 
285 
 
 
Other Liabilities
778 
761 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
6,409 
6,839 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
8,762 
8,978 
 
 
Eliminations
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
0 
0 
0 
0 
Restricted cash and securities
0 
0 
 
 
Receivables, less allowances for doubtful accounts
0 
0 
 
 
Due from affiliates
(31,329)
(30,162)
 
 
Other
0 
0 
 
 
Total Current Assets
(31,329)
(30,162)
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
0 
0 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
29,620 
28,984 
 
 
Other Assets, net
0 
0 
 
 
Total Assets
(1,709)
(1,178)
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
0 
0 
 
 
Current portion of long-term debt
0 
0 
 
 
Accrued payroll and employee benefits
0 
0 
 
 
Accrued interest
0 
0 
 
 
Current portion of deferred revenue
0 
0 
 
 
Due to affiliates
(31,329)
(30,162)
 
 
Other
0 
0 
 
 
Total Current Liabilities
(31,329)
(30,162)
 
 
Long-Term Debt, less current portion
0 
0 
 
 
Deferred Revenue, less current portion
0 
0 
 
 
Other Liabilities
0 
0 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
29,620 
28,984 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
$ (1,709)
$ (1,178)
 
 
Condensed Consolidating Financial Information - Statements of Cash Flows (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2013
Jun. 30, 2012
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
$ 223 
$ 108 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(377)
(318)
Decrease in restricted cash and securities, net
8 
4 
Other
(14)
0 
Proceeds from the sale of property, plant and equipment and other assets
0 
5 
Net Cash Provided by (Used in) Investing Activities
(383)
(309)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
880 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(199)
(863)
Proceeds from stock options exercised
0 
1 
Increase (decrease) due from-to affiliates, net
0 
0 
Net Cash Provided by (Used in) Financing Activities
(199)
18 
Effect of Exchange Rates on Cash and Cash Equivalents
(24)
(2)
Net Change in Cash and Cash Equivalents
(383)
(185)
Cash and Cash Equivalents at Beginning of Period
979 
918 
Cash and Cash Equivalents at End of Period
596 
733 
Level 3 Communications, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
(86)
(144)
Cash Flows from Investing Activities:
 
 
Capital expenditures
0 
0 
Decrease in restricted cash and securities, net
5 
3 
Other
0 
 
Proceeds from the sale of property, plant and equipment and other assets
 
0 
Net Cash Provided by (Used in) Investing Activities
5 
3 
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(172)
0 
Proceeds from stock options exercised
 
1 
Increase (decrease) due from-to affiliates, net
9 
140 
Net Cash Provided by (Used in) Financing Activities
(163)
141 
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
(244)
0 
Cash and Cash Equivalents at Beginning of Period
253 
2 
Cash and Cash Equivalents at End of Period
9 
2 
Level 3 Financing, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
(269)
(245)
Cash Flows from Investing Activities:
 
 
Capital expenditures
0 
0 
Decrease in restricted cash and securities, net
0 
0 
Other
0 
 
Proceeds from the sale of property, plant and equipment and other assets
 
0 
Net Cash Provided by (Used in) Investing Activities
0 
0 
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
 
880 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(3)
(825)
Proceeds from stock options exercised
 
0 
Increase (decrease) due from-to affiliates, net
272 
190 
Net Cash Provided by (Used in) Financing Activities
269 
245 
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
0 
0 
Cash and Cash Equivalents at Beginning of Period
5 
6 
Cash and Cash Equivalents at End of Period
5 
6 
Level 3 Communications, LLC
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
74 
(66)
Cash Flows from Investing Activities:
 
 
Capital expenditures
(159)
(123)
Decrease in restricted cash and securities, net
0 
0 
Other
0 
 
Proceeds from the sale of property, plant and equipment and other assets
 
0 
Net Cash Provided by (Used in) Investing Activities
(159)
(123)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(4)
0 
Proceeds from stock options exercised
 
0 
Increase (decrease) due from-to affiliates, net
60 
(13)
Net Cash Provided by (Used in) Financing Activities
56 
(13)
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
(29)
(202)
Cash and Cash Equivalents at Beginning of Period
386 
618 
Cash and Cash Equivalents at End of Period
357 
416 
Other Non-Guarantor Subsidiaries
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
504 
563 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(218)
(195)
Decrease in restricted cash and securities, net
3 
1 
Other
(14)
 
Proceeds from the sale of property, plant and equipment and other assets
 
5 
Net Cash Provided by (Used in) Investing Activities
(229)
(189)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(20)
(38)
Proceeds from stock options exercised
 
0 
Increase (decrease) due from-to affiliates, net
(341)
(317)
Net Cash Provided by (Used in) Financing Activities
(361)
(355)
Effect of Exchange Rates on Cash and Cash Equivalents
(24)
(2)
Net Change in Cash and Cash Equivalents
(110)
17 
Cash and Cash Equivalents at Beginning of Period
335 
292 
Cash and Cash Equivalents at End of Period
225 
309 
Eliminations
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
0 
0 
Cash Flows from Investing Activities:
 
 
Capital expenditures
0 
0 
Decrease in restricted cash and securities, net
0 
0 
Other
0 
 
Proceeds from the sale of property, plant and equipment and other assets
 
0 
Net Cash Provided by (Used in) Investing Activities
0 
0 
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
0 
0 
Proceeds from stock options exercised
 
0 
Increase (decrease) due from-to affiliates, net
0 
0 
Net Cash Provided by (Used in) Financing Activities
0 
0 
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
0 
0 
Cash and Cash Equivalents at Beginning of Period
0 
0 
Cash and Cash Equivalents at End of Period
$ 0 
$ 0