LEVEL 3 COMMUNICATIONS INC, 10-Q filed on 5/8/2014
Quarterly Report
Document and Entity Information Document
3 Months Ended
Mar. 31, 2014
May 1, 2014
Entity Information [Line Items]
 
 
Entity Registrant Name
LEVEL 3 COMMUNICATIONS INC 
 
Entity Central Index Key
0000794323 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2014 
 
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
 
237,364,387 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q1 
 
Consolidated Statements of Operations (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Revenue
$ 1,609 
$ 1,577 
Costs and Expenses Exclusive of Depreciation and Amortization shown separately below:
 
 
Cost of Revenue
614 
629 
Depreciation and Amortization
184 
194 
Selling, General and Administrative
547 
599 
Total Costs and Expenses
1,345 
1,422 
Operating Income
264 
155 
Other Income (Expense):
 
 
Interest income
 
0 
Interest expense
(151)
(169)
Other, net
6 
(50)
Total Other Expense
(145)
(219)
Loss Before Income Taxes
119 
(64)
Income Tax Expense
(7)
(14)
Net Loss
$ 112 
$ (78)
Earnings Per Share, Basic
$ 0.48 
$ (0.36)
Weighted Average Number of Shares Outstanding, Basic
235,635 
219,268 
Earnings Per Share, Diluted
$ 0.47 
$ (0.36)
Weighted Average Number of Shares Outstanding, Diluted
239,294 
219,268 
Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Net Loss
$ 112 
$ (78)
Other Comprehensive Income (Loss) Before Income Taxes:
 
 
Foreign Currency Translation Adjustment
5 
(44)
Other, net
1 
(8)
Other Comprehensive Income (Loss), Before Income Taxes
6 
(52)
Income Tax Related to Items of Other Comprehensive Income (Loss)
0 
0 
Other Comprehensive Income (Loss), Net of Income Taxes
6 
(52)
Comprehensive Income (Loss)
$ 118 
$ (130)
Supplementary Stockholders' Equity Information, Changes in Accumulated Other Comprehensive Income (Loss) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Mar. 31, 2013
Dec. 31, 2012
Change In Accumulated Other Comprehensive Income (Loss)
 
 
 
 
Balance
$ 42 
$ 36 
$ (26)
$ 26 
Balance
$ 42 
$ 36 
$ (26)
$ 26 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Assets:
 
 
Cash and cash equivalents
$ 607 
$ 631 
Restricted cash and securities
7 
7 
Receivables, less allowances for doubtful accounts of $33 and $31, respectively
699 
673 
Other
159 
143 
Total Current Assets
1,472 
1,454 
Property, Plant and Equipment, net of accumulated depreciation of $8,894 and $8,359, respectively
8,260 
8,240 
Restricted Cash and Securities
22 
23 
Goodwill
2,575 
2,577 
Other Intangibles, net
186 
205 
Other Assets, net
374 
375 
Total Assets
12,889 
12,874 
Liabilities and Stockholders' Equity:
 
 
Accounts payable
561 
625 
Current portion of long-term debt
503 
31 
Accrued payroll and employee benefits
114 
209 
Accrued interest
174 
160 
Current portion of deferred revenue
262 
253 
Other
142 
168 
Total Current Liabilities
1,756 
1,446 
Long-Term Debt, less current portion
7,856 
8,331 
Deferred Revenue, less current portion
901 
906 
Other Liabilities
778 
780 
Total Liabilities
11,291 
11,463 
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; 222,838,992 issued and outstanding at September 30, 2013 and 218,380,070 issued and outstanding at December 31, 2012
2 
2 
Additional paid-in capital
14,408 
14,339 
Accumulated other comprehensive income
42 
36 
Accumulated deficit
(12,854)
(12,966)
Total Stockholders’ Equity
1,598 
1,411 
Total Liabilities and Stockholders’ Equity
$ 12,889 
$ 12,874 
Consolidated Balance Sheets Parentheticals (Parentheticals) (USD $)
In Millions, except Share data, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Allowance for doubtful accounts
$ 36 
$ 32 
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment
$ 9,243 
$ 9,089 
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
237,171,332 
234,688,063 
Common stock, shares outstanding
237,171,332 
234,688,063 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash Flows from Operating Activities:
 
 
Net Loss
$ 112 
$ (78)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
184 
194 
Non-cash compensation expense attributable to stock awards
10 
37 
Accretion of debt discount and amortization of debt issuance costs
9 
9 
Accrued interest on long-term debt, net
14 
(30)
Non-cash tax adjustment
(5)
0 
Deferred income taxes
7 
9 
Gain on sale of property, plant and equipment and other assets
(1)
0 
Other, net
(12)
17 
Changes in working capital items:
 
 
Receivables
(26)
(29)
Other current assets
(18)
(25)
Payables
(69)
(45)
Deferred revenue
1 
(3)
Other current liabilities
(65)
(49)
Net Cash Provided by Operating Activities
141 
7 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(163)
(169)
Decrease in restricted cash and securities, net
1 
3 
Net Cash Used in Investing Activities
(162)
(166)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
0 
Payments on and repurchases of long-term debt, including current portion and refinancing costs
(3)
(186)
Net Cash Provided by (Used in) Financing Activities
(3)
(186)
Effect of Exchange Rates on Cash and Cash Equivalents
0 
(24)
Net Change in Cash and Cash Equivalents
(24)
(369)
Cash and Cash Equivalents at Beginning of Period
631 
979 
Cash and Cash Equivalents at End of Period
607 
610 
Supplemental Disclosure of Cash Flow Information:
 
 
Cash interest paid
128 
190 
Income taxes paid, net of refunds
$ 11 
$ 9 
Organization and Summary of Significant Accounting Policies (Notes)
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 an international 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. 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, 2013, which was derived from audited consolidated financial statements, and the unaudited interim consolidated financial statements as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 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, 2013. 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.

Property, Plant and Equipment

In connection with its periodic review of the estimated useful lives of property, plant and equipment, the Company determined that the period it expects to use certain assets is longer than the remaining originally estimated useful lives. The Company completed its evaluation in the first quarter 2014 and revised its estimated useful lives for: IP equipment from its historical estimate of four years to a revised estimate of seven years; racks and cabinets from its historical estimate of seven years to a revised estimate of 15 years; and facility equipment from its historical estimate of 10 years to its revised estimate of 15 years. In determining the change in estimated useful lives, the Company, with input from its engineering team, considered its historical usage patterns and retirements, estimates of technological obsolescence and expected usage and maintenance. The change in the estimated useful lives of certain of the Company’s property, plant and equipment was accounted for as a change in accounting estimate on a prospective basis effective January 1, 2014 under the accounting standard related to changes in accounting estimates. The change in estimated useful lives of certain of the Company’s property, plant and equipment resulted in less depreciation expense than would have otherwise been recorded and in the following increase in net income for the three months ended March 31, 2014 (in millions, except per share amounts):

Net Income
$
24

Basic and Diluted Net Income per Share
$
0.10

 
Recently Issued Accounting Pronouncements

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which amends the definition of a discontinued operation and requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The revised guidance will affect the way entities identify and disclose information about disposal transactions and is effective prospectively for fiscal years beginning after December 15, 2014, 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.
Earnings Per Share (Notes)
Earnings Per Share
Per Share

The Company computes basic earnings per share by dividing net income or loss for the period by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing the net income or 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 and stock-based compensation awards.

The effect of approximately 18 million and 28 million shares issuable pursuant to the various series of convertible notes outstanding at March 31, 2014 and March 31, 2013, respectively, have not been included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive to the computation. The effect of approximately 5 million stock options, outperform stock appreciation rights ("OSOs") and restricted stock units ("RSUs") outstanding at March 31, 2014 have been included in the computation of diluted earnings per share.
Acquired Intangible Assets (Notes)
Acquired Intangible Assets
Acquired Intangible Assets

Identifiable acquisition-related intangible assets as of March 31, 2014 and December 31, 2013 were as follows (dollars in millions):

 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
March 31, 2014
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
786

 
$
(690
)
 
$
96

Trademarks
55

 
(34
)
 
21

Patents and Developed Technology
158

 
(121
)
 
37

 
999

 
(845
)
 
154

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,031

 
$
(845
)
 
$
186

December 31, 2013
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
786

 
$
(678
)
 
$
108

Trademarks
55

 
(31
)
 
24

Patents and Developed Technology
158

 
(117
)
 
41

 
999

 
(826
)
 
173

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,031

 
$
(826
)
 
$
205



Acquired finite-lived intangible asset amortization expense was $19 million for the three months ended March 31, 2014 and $18 million for the three months ended March 31, 2013.

At March 31, 2014, the weighted average remaining useful lives of the Company's acquired finite-lived intangible assets was 2.0 years for customer contracts and relationships, 1.5 years for trademarks and 2.7 years for patents and developed technology.

As of March 31, 2014, 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):

2014 (remaining nine months)
$
45

2015
48

2016
31

2017
14

2018
13

2019
3

Thereafter
—

 
$
154




Fair Value of Financial Instruments (Notes)
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 March 31, 2014 and December 31, 2013. The Company's interest rate swaps, which were extinguished in the first quarter of 2014, were previously recorded in the consolidated balance sheets at fair value.

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 non-performance.

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 Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period. There were no transfers within the fair value hierarchy during each of the three months ended March 31, 2014 and March 31, 2013.

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 March 31, 2014 and December 31, 2013:

 
 
 
 
 
 
Fair Value Measurement Using
 
 
Total Carrying Value in Consolidated Balance Sheets
 
Unadjusted Quoted Prices in Active
Markets for Identical Assets or Liabilities (Level 1)
 
Significant Other Observable Inputs (Level 2)
(dollars in millions)
 
March 31,
2014
 
December 31,
2013
 
March 31,
2014
 
December 31,
2013
 
March 31,
2014
 
December 31,
2013
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swap Liabilities (included in other current liabilities)
 
$
—

 
$
12

 
$
—

 
$
—

 
$
—

 
$
12

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

 
$
12

 
$
—

 
$
—

 
$
—

 
$
12

Liabilities Not Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt, including the current portion:
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans
 
$
2,605

 
$
2,604

 
$
2,617

 
$
2,633

 
$
—

 
$
—

Senior Notes
 
5,198

 
5,198

 
5,711

 
5,673

 
—

 
—

Convertible Notes
 
474

 
474

 
—

 
—

 
724

 
647

Capital Leases and Other
 
82

 
86

 
—

 
—

 
82

 
86

Total Long-term Debt, including the current portion:
 
$
8,359

 
$
8,362

 
$
8,328

 
$
8,306

 
$
806

 
$
733



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 was 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 March 31, 2014 and December 31, 2013. The fair value of each loan is based on quoted prices for identical terms and maturities. Each loan tranche is actively traded.

Senior Notes

The fair value of the Senior Notes referenced above was approximately $5.7 billion at both March 31, 2014 and December 31, 2013, based on quoted prices for identical terms and maturities. Each series of notes is actively traded.

Convertible Notes

The fair value of the Company’s Convertible Notes was approximately $724 million and $647 million at March 31, 2014 and December 31, 2013, respectively. The estimated fair value of the Convertible Notes is 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, convertible optionality, corporate and security credit ratings, maturity date, 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.

Capital Leases

The fair value of the Company's capital leases are determined by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates.
Long-Term Debt (Notes)
Long-term Debt
Long-Term Debt

As of March 31, 2014 and December 31, 2013, long-term debt was as follows:
(dollars in millions)
 
March 31,
2014
 
December 31,
2013
Senior Secured Term Loan*
 
$
2,611

 
$
2,611

Floating Rate Senior Notes due 2018 (3.846% as of March 31, 2014 and December 31, 2013)
 
300

 
300

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

6.125% Senior Notes due 2021
 
640

 
640

7% Convertible Senior Notes due 2015
 
200

 
200

7% Convertible Senior Notes due 2015 Series B
 
275

 
275

Capital Leases
 
70

 
73

Other
 
12

 
13

Total Debt Obligations
 
8,388

 
8,392

Unamortized Discount:
 
 
 
 
Discount on Senior Secured Term Loan
 
(6
)
 
(7
)
Discount on 11.875% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 9.375% Senior Notes due 2019
 
(7
)
 
(7
)
Discount on 8.125% Senior Notes due 2019
 
(7
)
 
(7
)
Discount on 7% Convertible Senior Notes due 2015
 
(1
)
 
(1
)
Total Unamortized Discount
 
(29
)
 
(30
)
Carrying Value of Debt
 
8,359

 
8,362

Less current portion
 
(503
)
 
(31
)
Long-term Debt, less current portion
 
$
7,856

 
$
8,331


* The $815 million Tranche B-III 2019 Term Loan due 2019 and the $1.796 billion Tranche B 2020 Term Loan due 2020 each had an interest rate of 4.00% as of March 31, 2014 and December 31, 2013, respectively.

Long-Term Debt Maturities

Aggregate future contractual maturities of long-term debt and capital leases (excluding discounts) were as follows as of March 31, 2014 (dollars in millions):

2014 (remaining nine months)
$
27

2015
483

2016
7

2017
6

2018
306

2019
3,426

Thereafter
4,133

 
$
8,388

Accumulated Other Comprehensive Income (Notes)
Comprehensive Income (Loss) Note [Text Block]
Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each classification of other comprehensive income (loss) were as follows:

(dollars in millions)
 
Net Foreign Currency Translation Adjustment
 
Defined Benefit Pension Plans
 
Total
Balance at December 31, 2012
 
$
56

 
$
(30
)
 
$
26

Other comprehensive income (loss) before reclassifications
 
(44
)
 
(9
)
 
(53
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
1

 
1

Balance at March 31, 2013
 
$
12

 
$
(38
)
 
$
(26
)

Balance at December 31, 2013
 
$
67

 
$
(31
)
 
$
36

Other comprehensive income (loss) before reclassifications
 
5
 
(2
)
 
3

Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
3
 
3

Balance at March 31, 2014
 
$
72

 
$
(30
)
 
$
42

Stock-Based Compensation (Notes)
Stock-Based Compensation
Stock-Based Compensation
The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three months ended March 31, 2014 and 2013 (dollars in millions):
 
Three Months Ended March 31,
 
2014
 
2013
OSO
$
2

 
$
5

Restricted Stock Units and Shares
6

 
7

401(k) Match Expense
7

 
8

Restricted Stock Unit Bonus Grant
(5
)
 
15

Management Incentive and Retention Plan
—

 
2

 
10

 
37

Capitalized Non-Cash Compensation
—

 
—

 
$
10

 
$
37



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 March 31, 2014, there were approximately 2 million OSOs outstanding. As of March 31, 2014, there were approximately 3 million non-vested restricted stock and RSUs outstanding. The Company's Management Incentive and Retention Plan was completed in the first quarter 2014. In addition, as of March 31, 2014, there were approximately 11 thousand non-qualified stock options outstanding.
Commitments, Contingencies and Other Items (Notes)
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 $214 million and are included in “Other” current liabilities and “Other Liabilities” in the Company's consolidated balance sheet at March 31, 2014. 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 March 31, 2014. 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 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 $59 million at March 31, 2014.

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 with the Tribunal Fiscal, the highest level of administrative review, which is not part of the Peru judiciary (the "Tribunal"). In October 2011, the Tribunal issued its administrative resolution with respect to the calendar year 2002 tax period 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. During the fourth quarter of 2013, the Company released a reserve of $28 million for tax, penalty and associated interest related to calendar year 2002 due to the expiration of the statute of limitations. In October 2013, the Tribunal notified the Company of its July 2013 administrative resolution with respect to the calendar year 2001 tax period, determining 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 Tribunal in this administrative resolution remain open for reassessment by SUNAT. In December 2013, SUNAT initiated an audit in order to reassess the 2001 amounts declared null by the Tribunal. The Company is contesting SUNAT's authority to conduct an audit of these amounts.

In November 2011, the Tribunal issued an administrative resolution 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 administrative resolution of the withholding tax issue is likely to be final, and the Company expects to win a similar administrative resolution with respect to assessed 2002 withholding tax. However, penalties with respect to withholding tax are not time-barred, and were confirmed in the Tribunal's October 2011 administrative resolution.

The Company has appealed the Tribunal's October 2011 decision to the judicial court in Peru and intends to file an appeal of the Tribunal's July 2013 decision to the judicial court as well.

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 $39 million at March 31, 2014.

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 $65 million in excess of the accruals established for these matters as of March 31, 2014.

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 March 31, 2014 and December 31, 2013, Level 3 had outstanding letters of credit or other similar obligations of approximately $28 million and $29 million, respectively, of which $25 million and $25 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 (Notes)
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 March 31, 2014

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

 
$
—

 
$
737

 
$
931

 
$
(59
)
 
$
1,609

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
290

 
383

 
(59
)
 
614

Depreciation and Amortization
—

 
—

 
70

 
114

 
—

 
184

Selling, General and Administrative
—

 
—

 
325

 
222

 
—

 
547

Total Costs and Expenses
—

 
—

 
685

 
719

 
(59
)
 
1,345

Operating Income (Loss)
—

 
—

 
52

 
212

 
—

 
264

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(34
)
 
(112
)
 
(1
)
 
(4
)
 
—

 
(151
)
Interest income (expense) affiliates, net
288

 
459

 
(712
)
 
(35
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(142
)
 
(488
)
 
178

 
—

 
452

 
—

Other, net


 


 
3

 
3

 
—

 
6

Total Other Income (Expense)
112

 
(141
)
 
(532
)
 
(36
)
 
452

 
(145
)
Income (Loss) before Income Taxes
112

 
(141
)
 
(480
)
 
176

 
452

 
119

Income Tax Expense
—

 
(1
)
 
(1
)
 
(5
)
 
—

 
(7
)
Net Income (Loss)
112

 
(142
)
 
(481
)
 
171

 
452

 
112

Other Comprehensive Income, Net of Income Taxes
6

 
—

 
—

 
6

 
(6
)
 
6

Comprehensive Income (Loss)
$
118

 
$
(142
)
 
$
(481
)
 
$
177

 
$
446

 
$
118

Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended March 31, 2013

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

 
$
—

 
$
685

 
$
956

 
$
(64
)
 
$
1,577

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
261

 
432

 
(64
)
 
629

Depreciation and Amortization
—

 
—

 
71

 
123

 
—

 
194

Selling, General and Administrative
1

 
—

 
381

 
217

 
—

 
599

Total Costs and Expenses
1

 
—

 
713

 
772

 
(64
)
 
1,422

Operating Income (Loss)
(1
)
 
—

 
(28
)
 
184

 
—

 
155

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(39
)
 
(126
)
 
(1
)
 
(3
)
 
—

 
(169
)
Interest income (expense) affiliates, net
273

 
430

 
(669
)
 
(34
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(311
)
 
(614
)
 
146

 
—

 
779

 
—

Other, net
—

 
(1
)
 
1

 
(50
)
 
—

 
(50
)
Total Other Expense
(77
)
 
(311
)
 
(523
)
 
(87
)
 
779

 
(219
)
Income (Loss) before Income Taxes
(78
)
 
(311
)
 
(551
)
 
97

 
779

 
(64
)
Income Tax Expense
—

 
—

 
(1
)
 
(13
)
 
—

 
(14
)
Net Income (Loss)
(78
)
 
(311
)
 
(552
)
 
84

 
779

 
(78
)
Other Comprehensive Income, Net of Income Taxes
(52
)
 
(52
)
 
—

 
(52
)
 
104

 
(52
)
Comprehensive Income (Loss)
$
(130
)
 
$
(363
)
 
$
(552
)
 
$
32

 
$
883

 
$
(130
)
Condensed Consolidating Balance Sheets
March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
70

 
629

 
—

 
699

Due from affiliates
15,798

 
17,223

 
—

 
—

 
(33,021
)
 
—

Other
3

 
17

 
59

 
80

 
—

 
159

Total Current Assets
15,809

 
17,246

 
486

 
952

 
(33,021
)
 
1,472

Property, Plant, and Equipment, net
—

 
—

 
3,055

 
5,205

 
—

 
8,260

Restricted Cash and Securities
3

 
—

 
18

 
1

 
—

 
22

Goodwill and Other Intangibles, net
—

 
—

 
387

 
2,374

 
—

 
2,761

Investment in Subsidiaries
10,090

 
8,956

 
3,738

 
—

 
(22,784
)
 
—

Other Assets, net
9

 
108

 
10

 
247

 
—

 
374

Total Assets
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

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

 
$
1

 
$
246

 
$
314

 
$
—

 
$
561

Current portion of long-term debt
474

 
—

 
3

 
26

 
—

 
503

Accrued payroll and employee benefits
—

 
—

 
71

 
43

 
—

 
114

Accrued interest
46

 
126

 
—

 
2

 
—

 
174

Current portion of deferred revenue
—

 
—

 
123

 
139

 
—

 
262

Due to affiliates
—

 
—

 
32,229

 
792

 
(33,021
)
 
—

Other
—

 
3

 
70

 
69

 
—

 
142

Total Current Liabilities
520

 
130

 
32,742

 
1,385

 
(33,021
)
 
1,756

Long-Term Debt, less current portion
897

 
6,905

 
17

 
37

 
—

 
7,856

Deferred Revenue, less current portion
—

 
—

 
588

 
313

 
—

 
901

Other Liabilities
15

 
29

 
132

 
602

 
—

 
778

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,479

 
19,246

 
(25,785
)
 
6,442

 
(22,784
)
 
1,598

Total Liabilities and Stockholders' Equity (Deficit)
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

Condensed Consolidating Balance Sheets
December 31, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
347

 
$
270

 
$
—

 
$
631

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
79

 
594

 
—

 
673

Due from affiliates
15,507

 
16,886

 
—

 
—

 
(32,393
)
 
—

Other
2

 
15

 
47

 
79

 
—

 
143

Total Current Assets
15,517

 
16,907

 
474

 
949

 
(32,393
)
 
1,454

Property, Plant, and Equipment, net
—

 
—

 
3,028

 
5,212

 
—

 
8,240

Restricted Cash and Securities
3

 
—

 
18

 
2

 
—

 
23

Goodwill and Other Intangibles, net
—

 
—

 
395

 
2,387

 
—

 
2,782

Investment in Subsidiaries
10,039

 
27,014

 
3,735

 
—

 
(40,788
)
 
—

Other Assets, net
10

 
113

 
11

 
241

 
—

 
375

Total Assets
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

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

 
$
2

 
$
42

 
$
581

 
$
—

 
$
625

Current portion of long-term debt
—

 
—

 
3

 
28

 
—

 
31

Accrued payroll and employee benefits
—

 
—

 
171

 
38

 
—

 
209

Accrued interest
30

 
129

 
—

 
1

 
—

 
160

Current portion of deferred revenue
—

 
—

 
131

 
122

 
—

 
253

Due to affiliates
—

 
—

 
32,165

 
228

 
(32,393
)
 
—

Other
—

 
13

 
74

 
81

 
—

 
168

Total Current Liabilities
30

 
144

 
32,586

 
1,079

 
(32,393
)
 
1,446

Long-Term Debt, less current portion
1,370

 
6,905

 
17

 
39

 
—

 
8,331

Deferred Revenue, less current portion
—

 
—

 
603

 
303

 
—

 
906

Other Liabilities
15

 
27

 
135

 
603

 
—

 
780

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,154

 
36,958

 
(25,680
)
 
6,767

 
(40,788
)
 
1,411

Total Liabilities and Stockholders' Equity (Deficit)
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(16
)
 
$
(125
)
 
$
183

 
$
99

 
$
—

 
$
141

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(89
)
 
—

 
(163
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
1

 
—

 
1

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(88
)
 
—

 
(162
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
(3
)
 
—

 
(3
)
Increase (decrease) due from/to affiliates, net
16

 
125

 
(100
)
 
(41
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
16

 
125

 
(100
)
 
(44
)
 
—

 
(3
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
—

 
—

 
—

Net Change in Cash and Cash Equivalents
—

 
—

 
9

 
(33
)
 
—

 
(24
)
Cash and Cash Equivalents at Beginning of Period
8

 
6

 
347

 
270

 
—

 
631

Cash and Cash Equivalents at End of Period
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607

Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 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
$
(30
)
 
$
(169
)
 
$
(15
)
 
$
221

 
$
—

 
$
7

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(95
)
 
—

 
(169
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
3

 
—

 
3

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(92
)
 
—

 
(166
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(2
)
 
(4
)
 
(8
)
 
—

 
(186
)
Increase (decrease) due from/to affiliates, net
1

 
171

 
35

 
(207
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(171
)
 
169

 
31

 
(215
)
 
—

 
(186
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(201
)
 
—

 
(58
)
 
(110
)
 
—

 
(369
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
52

 
$
5

 
$
328

 
$
225

 
$
—

 
$
610

Segment Information (Notes)
Segment Reporting Disclosure [Text Block]
The following table presents total assets by segment:

(dollars in millions)
 
March 31, 2014
 
December 31, 2013
Assets:
 
 
 
 
North America
 
$
8,151

 
$
8,133

EMEA
 
1,990

 
2,030

Latin America
 
2,488

 
2,445

Other
 
260

 
266

Total Consolidated Assets
 
$
12,889

 
$
12,874

Segment Information

Operating segments are defined under GAAP as components of an enterprise for which separate financial information is available and evaluated regularly by the Company's chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance. Through the end of the third quarter of 2013, the Company was comprised of one reportable segment representing its communications services business, which was consistent with how the Company’s previous CODM, James Q. Crowe, evaluated results and allocated resources. Effective April 11, 2013, the Company announced that Jeff K. Storey had been appointed by the Board of Directors to be the Company's president and Chief Executive Officer. As a result, during the fourth quarter of 2013, the Company realigned its segment reporting structure to reflect how its new CODM, Mr. Storey, monitors performance and allocates resources based on the three separate geographic regions in which the Company operates. Accordingly, the Company's reportable segments consist of 1) North America, 2) Europe, the Middle East and Africa (EMEA), 3) and Latin America. Other separate business interests that are not segments include interest, certain corporate assets and overhead costs, and certain other general and administrative costs that are not allocated to any of the operating segments. Historical presentation of segment information has been retrospectively reclassified to conform to the new geographical presentation.

The CODM measures and evaluates segment performance primarily based upon revenue, revenue growth and Adjusted EBITDA. Adjusted EBITDA, as defined by the Company, is equal to net income (loss) from the consolidated statements of operations before (1) income tax benefit (expense), (2) total other income (expense), (3) non-cash impairment charges included within selling, general and administrative expenses, (4) depreciation and amortization expense, and (5) non-cash stock compensation expense included within selling, general and administrative expenses.

Adjusted EBITDA is not a measurement under GAAP and may not be used in the same way by other companies. Management believes that Adjusted EBITDA is an important part of the Company's internal reporting and is a key measure used by management to evaluate profitability and operating performance of the Company and to make resource allocation decisions. Management believes such measurement is especially important in a capital-intensive industry such as telecommunications. Management also uses Adjusted EBITDA to compare the Company's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses.

Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income tax benefit (expense) because these items are associated with the Company's capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the effect of capital investments which management believes are better evaluated through cash flow measures. Adjusted EBITDA excludes net other income (expense) because these items are not related to the primary operations of the Company.

There are limitations to using non-GAAP financial measures such as Adjusted EBITDA, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from the Company's calculations. Additionally, this financial measure does not include certain significant items such as interest income, interest expense, income tax benefit (expense), depreciation and amortization expense, non-cash impairment charges, non-cash stock compensation expense, and net other income (expense). Adjusted EBITDA should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Revenue and the related expenses are attributed to regions based on where services are provided. Revenue and costs for services provided in more than one region are allocated equally between the regions, and the Company does not otherwise charge for services between reportable segments. Therefore, segment results do not include any intercompany revenue. The operating activities of the separate regions along with the activities that are not attributable to a segment are interdependent, and the regional results in the tables below do not include all intercompany charges and allocations that would be necessary to report the regional results on a standalone basis.

Total revenue consists of:

•
Core Network Services revenue from colocation and data center services; transport and fiber; IP and data services; and local and enterprise voice services.

•
Wholesale Voice Services and Other revenue from sales to other carriers of long distance voice services, revenue from managed modem and its related intercarrier compensation services and revenue from the SBC Master Services Agreement, which was obtained through an acquisition in 2005.

Core Network Services revenue represents higher margin services and Wholesale Voice Services and Other revenue represents lower margin services. Core Network Services revenue requires different levels of investment and focus and provides different contributions to the Company's operating results than Wholesale Voice Services and Other revenue. Management of the Company believes that growth in revenue from its Core Network Services is critical to the long-term success of its business. The Company also believes it must continue to effectively manage gross margin contribution from the Wholesale Voice Services component and the positive cash flows from the Other revenue component. The Company believes that trends in its communications business are best gauged by analyzing revenue changes in Core Network Services.

The following table presents revenue by segment:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Core Network Services Revenue:
 
 
 
 
North America
 
$
1,043

 
$
967

EMEA
 
225

 
223

Latin America
 
189

 
182

Total Core Network Services Revenue
 
$
1,457

 
$
1,372

 
 
 
 
 
Wholesale Voice Services and Other Revenue:
 
 
 
 
North America
 
$
145

 
$
193

EMEA
 
5

 
9

Latin America
 
2

 
3

Total Wholesale Voice Services and Other Revenue
 
$
152

 
$
205

 
 
 
 
 
Total Consolidated Revenue
 
$
1,609

 
$
1,577



The following table presents Adjusted EBITDA by segment and reconciles Adjusted EBITDA to net income (loss):

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Adjusted EBITDA:
 
 
 
 
North America
 
$
488

 
$
428

EMEA
 
54

 
57

Latin America
 
82

 
73

Unallocated Corporate Expenses
 
(166
)
 
(172
)
Consolidated Adjusted EBITDA
 
458

 
386

Income Tax Expense
 
(7
)
 
(14
)
Total Other Expense
 
(145
)
 
(219
)
Depreciation and Amortization
 
(184
)
 
(194
)
Non-Cash Stock Compensation
 
(10
)
 
(37
)
Total Consolidated Net Income (Loss)
 
$
112

 
$
(78
)


The following table presents capital expenditures by segment and reconciles capital expenditures to consolidated capital expenditures:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Capital Expenditures:
 
 
 
 
North America
 
$
97

 
$
99

EMEA
 
19

 
26

Latin America
 
28

 
23

Unallocated Corporate Capital Expenditures
 
19

 
21

Consolidated Capital Expenditures
 
$
163

 
$
169



The following table presents total assets by segment:

(dollars in millions)
 
March 31, 2014
 
December 31, 2013
Assets:
 
 
 
 
North America
 
$
8,151

 
$
8,133

EMEA
 
1,990

 
2,030

Latin America
 
2,488

 
2,445

Other
 
260

 
266

Total Consolidated Assets
 
$
12,889

 
$
12,874

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 March 31, 2014 and December 31, 2013 were as follows (dollars in millions):

 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
March 31, 2014
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
786

 
$
(690
)
 
$
96

Trademarks
55

 
(34
)
 
21

Patents and Developed Technology
158

 
(121
)
 
37

 
999

 
(845
)
 
154

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,031

 
$
(845
)
 
$
186

December 31, 2013
 
 
 
 
 
Finite-Lived Intangible Assets:
 
 
 
 
 
Customer Contracts and Relationships
$
786

 
$
(678
)
 
$
108

Trademarks
55

 
(31
)
 
24

Patents and Developed Technology
158

 
(117
)
 
41

 
999

 
(826
)
 
173

Indefinite-Lived Intangible Assets:
 
 
 
 
 
Vyvx Trade Name
32

 
—

 
32

 
$
1,031

 
$
(826
)
 
$
205

Schedule of estimated amortization expense of finite-lived acquisition-related intangible assets 
As of March 31, 2014, 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):

2014 (remaining nine months)
$
45

2015
48

2016
31

2017
14

2018
13

2019
3

Thereafter
—

 
$
154

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 March 31, 2014 and December 31, 2013:

 
 
 
 
 
 
Fair Value Measurement Using
 
 
Total Carrying Value in Consolidated Balance Sheets
 
Unadjusted Quoted Prices in Active
Markets for Identical Assets or Liabilities (Level 1)
 
Significant Other Observable Inputs (Level 2)
(dollars in millions)
 
March 31,
2014
 
December 31,
2013
 
March 31,
2014
 
December 31,
2013
 
March 31,
2014
 
December 31,
2013
Liabilities Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swap Liabilities (included in other current liabilities)
 
$
—

 
$
12

 
$
—

 
$
—

 
$
—

 
$
12

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

 
$
12

 
$
—

 
$
—

 
$
—

 
$
12

Liabilities Not Recorded at Fair Value in the Financial Statements:
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt, including the current portion:
 
 
 
 
 
 
 
 
 
 
 
 
Term Loans
 
$
2,605

 
$
2,604

 
$
2,617

 
$
2,633

 
$
—

 
$
—

Senior Notes
 
5,198

 
5,198

 
5,711

 
5,673

 
—

 
—

Convertible Notes
 
474

 
474

 
—

 
—

 
724

 
647

Capital Leases and Other
 
82

 
86

 
—

 
—

 
82

 
86

Total Long-term Debt, including the current portion:
 
$
8,359

 
$
8,362

 
$
8,328

 
$
8,306

 
$
806

 
$
733



The Company does not have any assets or liabilities where the fair value is measured using significant unobservable inputs (Level 3).
Long-Term Debt (Tables)
Schedule of long-term debt 
As of March 31, 2014 and December 31, 2013, long-term debt was as follows:
(dollars in millions)
 
March 31,
2014
 
December 31,
2013
Senior Secured Term Loan*
 
$
2,611

 
$
2,611

Floating Rate Senior Notes due 2018 (3.846% as of March 31, 2014 and December 31, 2013)
 
300

 
300

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

6.125% Senior Notes due 2021
 
640

 
640

7% Convertible Senior Notes due 2015
 
200

 
200

7% Convertible Senior Notes due 2015 Series B
 
275

 
275

Capital Leases
 
70

 
73

Other
 
12

 
13

Total Debt Obligations
 
8,388

 
8,392

Unamortized Discount:
 
 
 
 
Discount on Senior Secured Term Loan
 
(6
)
 
(7
)
Discount on 11.875% Senior Notes due 2019
 
(8
)
 
(8
)
Discount on 9.375% Senior Notes due 2019
 
(7
)
 
(7
)
Discount on 8.125% Senior Notes due 2019
 
(7
)
 
(7
)
Discount on 7% Convertible Senior Notes due 2015
 
(1
)
 
(1
)
Total Unamortized Discount
 
(29
)
 
(30
)
Carrying Value of Debt
 
8,359

 
8,362

Less current portion
 
(503
)
 
(31
)
Long-term Debt, less current portion
 
$
7,856

 
$
8,331


* The $815 million Tranche B-III 2019 Term Loan due 2019 and the $1.796 billion Tranche B 2020 Term Loan due 2020 each had an interest rate of 4.00% as of March 31, 2014 and December 31, 2013, respectively.

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 March 31, 2014 (dollars in millions):

2014 (remaining nine months)
$
27

2015
483

2016
7

2017
6

2018
306

2019
3,426

Thereafter
4,133

 
$
8,388

Accumulated Other Comprehensive Income (Tables)
Comprehensive Income (Loss) Note [Text Block] 
Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each classification of other comprehensive income (loss) were as follows:

(dollars in millions)
 
Net Foreign Currency Translation Adjustment
 
Defined Benefit Pension Plans
 
Total
Balance at December 31, 2012
 
$
56

 
$
(30
)
 
$
26

Other comprehensive income (loss) before reclassifications
 
(44
)
 
(9
)
 
(53
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
1

 
1

Balance at March 31, 2013
 
$
12

 
$
(38
)
 
$
(26
)

Balance at December 31, 2013
 
$
67

 
$
(31
)
 
$
36

Other comprehensive income (loss) before reclassifications
 
5
 
(2
)
 
3

Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
3
 
3

Balance at March 31, 2014
 
$
72

 
$
(30
)
 
$
42

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] 
The accumulated balances for each classification of other comprehensive income (loss) were as follows:

(dollars in millions)
 
Net Foreign Currency Translation Adjustment
 
Defined Benefit Pension Plans
 
Total
Balance at December 31, 2012
 
$
56

 
$
(30
)
 
$
26

Other comprehensive income (loss) before reclassifications
 
(44
)
 
(9
)
 
(53
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
1

 
1

Balance at March 31, 2013
 
$
12

 
$
(38
)
 
$
(26
)

Balance at December 31, 2013
 
$
67

 
$
(31
)
 
$
36

Other comprehensive income (loss) before reclassifications
 
5
 
(2
)
 
3

Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
3
 
3

Balance at March 31, 2014
 
$
72

 
$
(30
)
 
$
42

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 months ended March 31, 2014 and 2013 (dollars in millions):
 
Three Months Ended March 31,
 
2014
 
2013
OSO
$
2

 
$
5

Restricted Stock Units and Shares
6

 
7

401(k) Match Expense
7

 
8

Restricted Stock Unit Bonus Grant
(5
)
 
15

Management Incentive and Retention Plan
—

 
2

 
10

 
37

Capitalized Non-Cash Compensation
—

 
—

 
$
10

 
$
37

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 March 31, 2014

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

 
$
—

 
$
737

 
$
931

 
$
(59
)
 
$
1,609

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
290

 
383

 
(59
)
 
614

Depreciation and Amortization
—

 
—

 
70

 
114

 
—

 
184

Selling, General and Administrative
—

 
—

 
325

 
222

 
—

 
547

Total Costs and Expenses
—

 
—

 
685

 
719

 
(59
)
 
1,345

Operating Income (Loss)
—

 
—

 
52

 
212

 
—

 
264

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(34
)
 
(112
)
 
(1
)
 
(4
)
 
—

 
(151
)
Interest income (expense) affiliates, net
288

 
459

 
(712
)
 
(35
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(142
)
 
(488
)
 
178

 
—

 
452

 
—

Other, net


 


 
3

 
3

 
—

 
6

Total Other Income (Expense)
112

 
(141
)
 
(532
)
 
(36
)
 
452

 
(145
)
Income (Loss) before Income Taxes
112

 
(141
)
 
(480
)
 
176

 
452

 
119

Income Tax Expense
—

 
(1
)
 
(1
)
 
(5
)
 
—

 
(7
)
Net Income (Loss)
112

 
(142
)
 
(481
)
 
171

 
452

 
112

Other Comprehensive Income, Net of Income Taxes
6

 
—

 
—

 
6

 
(6
)
 
6

Comprehensive Income (Loss)
$
118

 
$
(142
)
 
$
(481
)
 
$
177

 
$
446

 
$
118

Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended March 31, 2013

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

 
$
—

 
$
685

 
$
956

 
$
(64
)
 
$
1,577

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
261

 
432

 
(64
)
 
629

Depreciation and Amortization
—

 
—

 
71

 
123

 
—

 
194

Selling, General and Administrative
1

 
—

 
381

 
217

 
—

 
599

Total Costs and Expenses
1

 
—

 
713

 
772

 
(64
)
 
1,422

Operating Income (Loss)
(1
)
 
—

 
(28
)
 
184

 
—

 
155

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(39
)
 
(126
)
 
(1
)
 
(3
)
 
—

 
(169
)
Interest income (expense) affiliates, net
273

 
430

 
(669
)
 
(34
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(311
)
 
(614
)
 
146

 
—

 
779

 
—

Other, net
—

 
(1
)
 
1

 
(50
)
 
—

 
(50
)
Total Other Expense
(77
)
 
(311
)
 
(523
)
 
(87
)
 
779

 
(219
)
Income (Loss) before Income Taxes
(78
)
 
(311
)
 
(551
)
 
97

 
779

 
(64
)
Income Tax Expense
—

 
—

 
(1
)
 
(13
)
 
—

 
(14
)
Net Income (Loss)
(78
)
 
(311
)
 
(552
)
 
84

 
779

 
(78
)
Other Comprehensive Income, Net of Income Taxes
(52
)
 
(52
)
 
—

 
(52
)
 
104

 
(52
)
Comprehensive Income (Loss)
$
(130
)
 
$
(363
)
 
$
(552
)
 
$
32

 
$
883

 
$
(130
)
Condensed Consolidating Balance Sheets
March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
70

 
629

 
—

 
699

Due from affiliates
15,798

 
17,223

 
—

 
—

 
(33,021
)
 
—

Other
3

 
17

 
59

 
80

 
—

 
159

Total Current Assets
15,809

 
17,246

 
486

 
952

 
(33,021
)
 
1,472

Property, Plant, and Equipment, net
—

 
—

 
3,055

 
5,205

 
—

 
8,260

Restricted Cash and Securities
3

 
—

 
18

 
1

 
—

 
22

Goodwill and Other Intangibles, net
—

 
—

 
387

 
2,374

 
—

 
2,761

Investment in Subsidiaries
10,090

 
8,956

 
3,738

 
—

 
(22,784
)
 
—

Other Assets, net
9

 
108

 
10

 
247

 
—

 
374

Total Assets
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

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

 
$
1

 
$
246

 
$
314

 
$
—

 
$
561

Current portion of long-term debt
474

 
—

 
3

 
26

 
—

 
503

Accrued payroll and employee benefits
—

 
—

 
71

 
43

 
—

 
114

Accrued interest
46

 
126

 
—

 
2

 
—

 
174

Current portion of deferred revenue
—

 
—

 
123

 
139

 
—

 
262

Due to affiliates
—

 
—

 
32,229

 
792

 
(33,021
)
 
—

Other
—

 
3

 
70

 
69

 
—

 
142

Total Current Liabilities
520

 
130

 
32,742

 
1,385

 
(33,021
)
 
1,756

Long-Term Debt, less current portion
897

 
6,905

 
17

 
37

 
—

 
7,856

Deferred Revenue, less current portion
—

 
—

 
588

 
313

 
—

 
901

Other Liabilities
15

 
29

 
132

 
602

 
—

 
778

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,479

 
19,246

 
(25,785
)
 
6,442

 
(22,784
)
 
1,598

Total Liabilities and Stockholders' Equity (Deficit)
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

Condensed Consolidating Balance Sheets
December 31, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
347

 
$
270

 
$
—

 
$
631

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
79

 
594

 
—

 
673

Due from affiliates
15,507

 
16,886

 
—

 
—

 
(32,393
)
 
—

Other
2

 
15

 
47

 
79

 
—

 
143

Total Current Assets
15,517

 
16,907

 
474

 
949

 
(32,393
)
 
1,454

Property, Plant, and Equipment, net
—

 
—

 
3,028

 
5,212

 
—

 
8,240

Restricted Cash and Securities
3

 
—

 
18

 
2

 
—

 
23

Goodwill and Other Intangibles, net
—

 
—

 
395

 
2,387

 
—

 
2,782

Investment in Subsidiaries
10,039

 
27,014

 
3,735

 
—

 
(40,788
)
 
—

Other Assets, net
10

 
113

 
11

 
241

 
—

 
375

Total Assets
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

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

 
$
2

 
$
42

 
$
581

 
$
—

 
$
625

Current portion of long-term debt
—

 
—

 
3

 
28

 
—

 
31

Accrued payroll and employee benefits
—

 
—

 
171

 
38

 
—

 
209

Accrued interest
30

 
129

 
—

 
1

 
—

 
160

Current portion of deferred revenue
—

 
—

 
131

 
122

 
—

 
253

Due to affiliates
—

 
—

 
32,165

 
228

 
(32,393
)
 
—

Other
—

 
13

 
74

 
81

 
—

 
168

Total Current Liabilities
30

 
144

 
32,586

 
1,079

 
(32,393
)
 
1,446

Long-Term Debt, less current portion
1,370

 
6,905

 
17

 
39

 
—

 
8,331

Deferred Revenue, less current portion
—

 
—

 
603

 
303

 
—

 
906

Other Liabilities
15

 
27

 
135

 
603

 
—

 
780

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,154

 
36,958

 
(25,680
)
 
6,767

 
(40,788
)
 
1,411

Total Liabilities and Stockholders' Equity (Deficit)
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(16
)
 
$
(125
)
 
$
183

 
$
99

 
$
—

 
$
141

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(89
)
 
—

 
(163
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
1

 
—

 
1

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(88
)
 
—

 
(162
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
(3
)
 
—

 
(3
)
Increase (decrease) due from/to affiliates, net
16

 
125

 
(100
)
 
(41
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
16

 
125

 
(100
)
 
(44
)
 
—

 
(3
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
—

 
—

 
—

Net Change in Cash and Cash Equivalents
—

 
—

 
9

 
(33
)
 
—

 
(24
)
Cash and Cash Equivalents at Beginning of Period
8

 
6

 
347

 
270

 
—

 
631

Cash and Cash Equivalents at End of Period
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607

Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 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
$
(30
)
 
$
(169
)
 
$
(15
)
 
$
221

 
$
—

 
$
7

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(95
)
 
—

 
(169
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
3

 
—

 
3

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(92
)
 
—

 
(166
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(2
)
 
(4
)
 
(8
)
 
—

 
(186
)
Increase (decrease) due from/to affiliates, net
1

 
171

 
35

 
(207
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(171
)
 
169

 
31

 
(215
)
 
—

 
(186
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(201
)
 
—

 
(58
)
 
(110
)
 
—

 
(369
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
52

 
$
5

 
$
328

 
$
225

 
$
—

 
$
610

Schedule of Condensed Consolidating Statements of Operations 
Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended March 31, 2014

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

 
$
—

 
$
737

 
$
931

 
$
(59
)
 
$
1,609

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
290

 
383

 
(59
)
 
614

Depreciation and Amortization
—

 
—

 
70

 
114

 
—

 
184

Selling, General and Administrative
—

 
—

 
325

 
222

 
—

 
547

Total Costs and Expenses
—

 
—

 
685

 
719

 
(59
)
 
1,345

Operating Income (Loss)
—

 
—

 
52

 
212

 
—

 
264

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(34
)
 
(112
)
 
(1
)
 
(4
)
 
—

 
(151
)
Interest income (expense) affiliates, net
288

 
459

 
(712
)
 
(35
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(142
)
 
(488
)
 
178

 
—

 
452

 
—

Other, net


 


 
3

 
3

 
—

 
6

Total Other Income (Expense)
112

 
(141
)
 
(532
)
 
(36
)
 
452

 
(145
)
Income (Loss) before Income Taxes
112

 
(141
)
 
(480
)
 
176

 
452

 
119

Income Tax Expense
—

 
(1
)
 
(1
)
 
(5
)
 
—

 
(7
)
Net Income (Loss)
112

 
(142
)
 
(481
)
 
171

 
452

 
112

Other Comprehensive Income, Net of Income Taxes
6

 
—

 
—

 
6

 
(6
)
 
6

Comprehensive Income (Loss)
$
118

 
$
(142
)
 
$
(481
)
 
$
177

 
$
446

 
$
118

Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended March 31, 2013

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

 
$
—

 
$
685

 
$
956

 
$
(64
)
 
$
1,577

Costs and Expense:
 
 
 
 
 
 
 
 
 
 
 
Cost of Revenue
—

 
—

 
261

 
432

 
(64
)
 
629

Depreciation and Amortization
—

 
—

 
71

 
123

 
—

 
194

Selling, General and Administrative
1

 
—

 
381

 
217

 
—

 
599

Total Costs and Expenses
1

 
—

 
713

 
772

 
(64
)
 
1,422

Operating Income (Loss)
(1
)
 
—

 
(28
)
 
184

 
—

 
155

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(39
)
 
(126
)
 
(1
)
 
(3
)
 
—

 
(169
)
Interest income (expense) affiliates, net
273

 
430

 
(669
)
 
(34
)
 
—

 
—

Equity in net earnings (losses) of subsidiaries
(311
)
 
(614
)
 
146

 
—

 
779

 
—

Other, net
—

 
(1
)
 
1

 
(50
)
 
—

 
(50
)
Total Other Expense
(77
)
 
(311
)
 
(523
)
 
(87
)
 
779

 
(219
)
Income (Loss) before Income Taxes
(78
)
 
(311
)
 
(551
)
 
97

 
779

 
(64
)
Income Tax Expense
—

 
—

 
(1
)
 
(13
)
 
—

 
(14
)
Net Income (Loss)
(78
)
 
(311
)
 
(552
)
 
84

 
779

 
(78
)
Other Comprehensive Income, Net of Income Taxes
(52
)
 
(52
)
 
—

 
(52
)
 
104

 
(52
)
Comprehensive Income (Loss)
$
(130
)
 
$
(363
)
 
$
(552
)
 
$
32

 
$
883

 
$
(130
)
Schedule of Condensed Consolidating Balance Sheets 
Condensed Consolidating Balance Sheets
March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
70

 
629

 
—

 
699

Due from affiliates
15,798

 
17,223

 
—

 
—

 
(33,021
)
 
—

Other
3

 
17

 
59

 
80

 
—

 
159

Total Current Assets
15,809

 
17,246

 
486

 
952

 
(33,021
)
 
1,472

Property, Plant, and Equipment, net
—

 
—

 
3,055

 
5,205

 
—

 
8,260

Restricted Cash and Securities
3

 
—

 
18

 
1

 
—

 
22

Goodwill and Other Intangibles, net
—

 
—

 
387

 
2,374

 
—

 
2,761

Investment in Subsidiaries
10,090

 
8,956

 
3,738

 
—

 
(22,784
)
 
—

Other Assets, net
9

 
108

 
10

 
247

 
—

 
374

Total Assets
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

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

 
$
1

 
$
246

 
$
314

 
$
—

 
$
561

Current portion of long-term debt
474

 
—

 
3

 
26

 
—

 
503

Accrued payroll and employee benefits
—

 
—

 
71

 
43

 
—

 
114

Accrued interest
46

 
126

 
—

 
2

 
—

 
174

Current portion of deferred revenue
—

 
—

 
123

 
139

 
—

 
262

Due to affiliates
—

 
—

 
32,229

 
792

 
(33,021
)
 
—

Other
—

 
3

 
70

 
69

 
—

 
142

Total Current Liabilities
520

 
130

 
32,742

 
1,385

 
(33,021
)
 
1,756

Long-Term Debt, less current portion
897

 
6,905

 
17

 
37

 
—

 
7,856

Deferred Revenue, less current portion
—

 
—

 
588

 
313

 
—

 
901

Other Liabilities
15

 
29

 
132

 
602

 
—

 
778

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,479

 
19,246

 
(25,785
)
 
6,442

 
(22,784
)
 
1,598

Total Liabilities and Stockholders' Equity (Deficit)
$
25,911

 
$
26,310

 
$
7,694

 
$
8,779

 
$
(55,805
)
 
$
12,889

Condensed Consolidating Balance Sheets
December 31, 2013

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
8

 
$
6

 
$
347

 
$
270

 
$
—

 
$
631

Restricted cash and securities
—

 
—

 
1

 
6

 
—

 
7

Receivables, less allowances for doubtful accounts
—

 
—

 
79

 
594

 
—

 
673

Due from affiliates
15,507

 
16,886

 
—

 
—

 
(32,393
)
 
—

Other
2

 
15

 
47

 
79

 
—

 
143

Total Current Assets
15,517

 
16,907

 
474

 
949

 
(32,393
)
 
1,454

Property, Plant, and Equipment, net
—

 
—

 
3,028

 
5,212

 
—

 
8,240

Restricted Cash and Securities
3

 
—

 
18

 
2

 
—

 
23

Goodwill and Other Intangibles, net
—

 
—

 
395

 
2,387

 
—

 
2,782

Investment in Subsidiaries
10,039

 
27,014

 
3,735

 
—

 
(40,788
)
 
—

Other Assets, net
10

 
113

 
11

 
241

 
—

 
375

Total Assets
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

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

 
$
2

 
$
42

 
$
581

 
$
—

 
$
625

Current portion of long-term debt
—

 
—

 
3

 
28

 
—

 
31

Accrued payroll and employee benefits
—

 
—

 
171

 
38

 
—

 
209

Accrued interest
30

 
129

 
—

 
1

 
—

 
160

Current portion of deferred revenue
—

 
—

 
131

 
122

 
—

 
253

Due to affiliates
—

 
—

 
32,165

 
228

 
(32,393
)
 
—

Other
—

 
13

 
74

 
81

 
—

 
168

Total Current Liabilities
30

 
144

 
32,586

 
1,079

 
(32,393
)
 
1,446

Long-Term Debt, less current portion
1,370

 
6,905

 
17

 
39

 
—

 
8,331

Deferred Revenue, less current portion
—

 
—

 
603

 
303

 
—

 
906

Other Liabilities
15

 
27

 
135

 
603

 
—

 
780

Commitments and Contingencies
—

 
—

 
—

 
—

 
—

 
—

Stockholders' Equity (Deficit)
24,154

 
36,958

 
(25,680
)
 
6,767

 
(40,788
)
 
1,411

Total Liabilities and Stockholders' Equity (Deficit)
$
25,569

 
$
44,034

 
$
7,661

 
$
8,791

 
$
(73,181
)
 
$
12,874

Schedule of Condensed Consolidating Statements of Cash Flows 
Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2014

 
Level 3 Communications, Inc.
 
Level 3 Financing, Inc.
 
Level 3 Communications, LLC
 
Other Non-Guarantor Subsidiaries
 
Eliminations
 
Total
 
(dollars in millions)
Net Cash Provided by (Used in) Operating Activities
$
(16
)
 
$
(125
)
 
$
183

 
$
99

 
$
—

 
$
141

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(89
)
 
—

 
(163
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
1

 
—

 
1

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(88
)
 
—

 
(162
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
(3
)
 
—

 
(3
)
Increase (decrease) due from/to affiliates, net
16

 
125

 
(100
)
 
(41
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
16

 
125

 
(100
)
 
(44
)
 
—

 
(3
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
—

 
—

 
—

Net Change in Cash and Cash Equivalents
—

 
—

 
9

 
(33
)
 
—

 
(24
)
Cash and Cash Equivalents at Beginning of Period
8

 
6

 
347

 
270

 
—

 
631

Cash and Cash Equivalents at End of Period
$
8

 
$
6

 
$
356

 
$
237

 
$
—

 
$
607



Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 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
$
(30
)
 
$
(169
)
 
$
(15
)
 
$
221

 
$
—

 
$
7

Cash Flows from Investing Activities:
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
—

 
—

 
(74
)
 
(95
)
 
—

 
(169
)
Decrease in restricted cash and securities, net
—

 
—

 
—

 
3

 
—

 
3

Net Cash Provided by (Used in) Investing Activities
—

 
—

 
(74
)
 
(92
)
 
—

 
(166
)
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt borrowings, net of issuance costs
—

 
—

 
—

 
—

 
—

 
—

Payments on and repurchases of long-term debt, including current portion and refinancing costs
(172
)
 
(2
)
 
(4
)
 
(8
)
 
—

 
(186
)
Increase (decrease) due from/to affiliates, net
1

 
171

 
35

 
(207
)
 
—

 
—

Net Cash Provided by (Used in) Financing Activities
(171
)
 
169

 
31

 
(215
)
 
—

 
(186
)
Effect of Exchange Rates on Cash and Cash Equivalents
—

 
—

 
—

 
(24
)
 
—

 
(24
)
Net Change in Cash and Cash Equivalents
(201
)
 
—

 
(58
)
 
(110
)
 
—

 
(369
)
Cash and Cash Equivalents at Beginning of Period
253

 
5

 
386

 
335

 
—

 
979

Cash and Cash Equivalents at End of Period
$
52

 
$
5

 
$
328

 
$
225

 
$
—

 
$
610

Segment Information (Tables)
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block] 
The following table presents Adjusted EBITDA by segment and reconciles Adjusted EBITDA to net income (loss):

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Adjusted EBITDA:
 
 
 
 
North America
 
$
488

 
$
428

EMEA
 
54

 
57

Latin America
 
82

 
73

Unallocated Corporate Expenses
 
(166
)
 
(172
)
Consolidated Adjusted EBITDA
 
458

 
386

Income Tax Expense
 
(7
)
 
(14
)
Total Other Expense
 
(145
)
 
(219
)
Depreciation and Amortization
 
(184
)
 
(194
)
Non-Cash Stock Compensation
 
(10
)
 
(37
)
Total Consolidated Net Income (Loss)
 
$
112

 
$
(78
)
Schedule of Segment Reporting Information, by Segment [Table Text Block] 
The following table presents capital expenditures by segment and reconciles capital expenditures to consolidated capital expenditures:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Capital Expenditures:
 
 
 
 
North America
 
$
97

 
$
99

EMEA
 
19

 
26

Latin America
 
28

 
23

Unallocated Corporate Capital Expenditures
 
19

 
21

Consolidated Capital Expenditures
 
$
163

 
$
169

Segment Reporting Disclosure [Text Block] 
The following table presents total assets by segment:

(dollars in millions)
 
March 31, 2014
 
December 31, 2013
Assets:
 
 
 
 
North America
 
$
8,151

 
$
8,133

EMEA
 
1,990

 
2,030

Latin America
 
2,488

 
2,445

Other
 
260

 
266

Total Consolidated Assets
 
$
12,889

 
$
12,874

Segment Information

Operating segments are defined under GAAP as components of an enterprise for which separate financial information is available and evaluated regularly by the Company's chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance. Through the end of the third quarter of 2013, the Company was comprised of one reportable segment representing its communications services business, which was consistent with how the Company’s previous CODM, James Q. Crowe, evaluated results and allocated resources. Effective April 11, 2013, the Company announced that Jeff K. Storey had been appointed by the Board of Directors to be the Company's president and Chief Executive Officer. As a result, during the fourth quarter of 2013, the Company realigned its segment reporting structure to reflect how its new CODM, Mr. Storey, monitors performance and allocates resources based on the three separate geographic regions in which the Company operates. Accordingly, the Company's reportable segments consist of 1) North America, 2) Europe, the Middle East and Africa (EMEA), 3) and Latin America. Other separate business interests that are not segments include interest, certain corporate assets and overhead costs, and certain other general and administrative costs that are not allocated to any of the operating segments. Historical presentation of segment information has been retrospectively reclassified to conform to the new geographical presentation.

The CODM measures and evaluates segment performance primarily based upon revenue, revenue growth and Adjusted EBITDA. Adjusted EBITDA, as defined by the Company, is equal to net income (loss) from the consolidated statements of operations before (1) income tax benefit (expense), (2) total other income (expense), (3) non-cash impairment charges included within selling, general and administrative expenses, (4) depreciation and amortization expense, and (5) non-cash stock compensation expense included within selling, general and administrative expenses.

Adjusted EBITDA is not a measurement under GAAP and may not be used in the same way by other companies. Management believes that Adjusted EBITDA is an important part of the Company's internal reporting and is a key measure used by management to evaluate profitability and operating performance of the Company and to make resource allocation decisions. Management believes such measurement is especially important in a capital-intensive industry such as telecommunications. Management also uses Adjusted EBITDA to compare the Company's performance to that of its competitors and to eliminate certain non-cash and non-operating items in order to consistently measure from period to period its ability to fund capital expenditures, fund growth, service debt and determine bonuses.

Adjusted EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense and income tax benefit (expense) because these items are associated with the Company's capitalization and tax structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the effect of capital investments which management believes are better evaluated through cash flow measures. Adjusted EBITDA excludes net other income (expense) because these items are not related to the primary operations of the Company.

There are limitations to using non-GAAP financial measures such as Adjusted EBITDA, including the difficulty associated with comparing companies that use similar performance measures whose calculations may differ from the Company's calculations. Additionally, this financial measure does not include certain significant items such as interest income, interest expense, income tax benefit (expense), depreciation and amortization expense, non-cash impairment charges, non-cash stock compensation expense, and net other income (expense). Adjusted EBITDA should not be considered a substitute for other measures of financial performance reported in accordance with GAAP.

Revenue and the related expenses are attributed to regions based on where services are provided. Revenue and costs for services provided in more than one region are allocated equally between the regions, and the Company does not otherwise charge for services between reportable segments. Therefore, segment results do not include any intercompany revenue. The operating activities of the separate regions along with the activities that are not attributable to a segment are interdependent, and the regional results in the tables below do not include all intercompany charges and allocations that would be necessary to report the regional results on a standalone basis.

Total revenue consists of:

•
Core Network Services revenue from colocation and data center services; transport and fiber; IP and data services; and local and enterprise voice services.

•
Wholesale Voice Services and Other revenue from sales to other carriers of long distance voice services, revenue from managed modem and its related intercarrier compensation services and revenue from the SBC Master Services Agreement, which was obtained through an acquisition in 2005.

Core Network Services revenue represents higher margin services and Wholesale Voice Services and Other revenue represents lower margin services. Core Network Services revenue requires different levels of investment and focus and provides different contributions to the Company's operating results than Wholesale Voice Services and Other revenue. Management of the Company believes that growth in revenue from its Core Network Services is critical to the long-term success of its business. The Company also believes it must continue to effectively manage gross margin contribution from the Wholesale Voice Services component and the positive cash flows from the Other revenue component. The Company believes that trends in its communications business are best gauged by analyzing revenue changes in Core Network Services.

The following table presents revenue by segment:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Core Network Services Revenue:
 
 
 
 
North America
 
$
1,043

 
$
967

EMEA
 
225

 
223

Latin America
 
189

 
182

Total Core Network Services Revenue
 
$
1,457

 
$
1,372

 
 
 
 
 
Wholesale Voice Services and Other Revenue:
 
 
 
 
North America
 
$
145

 
$
193

EMEA
 
5

 
9

Latin America
 
2

 
3

Total Wholesale Voice Services and Other Revenue
 
$
152

 
$
205

 
 
 
 
 
Total Consolidated Revenue
 
$
1,609

 
$
1,577



The following table presents Adjusted EBITDA by segment and reconciles Adjusted EBITDA to net income (loss):

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Adjusted EBITDA:
 
 
 
 
North America
 
$
488

 
$
428

EMEA
 
54

 
57

Latin America
 
82

 
73

Unallocated Corporate Expenses
 
(166
)
 
(172
)
Consolidated Adjusted EBITDA
 
458

 
386

Income Tax Expense
 
(7
)
 
(14
)
Total Other Expense
 
(145
)
 
(219
)
Depreciation and Amortization
 
(184
)
 
(194
)
Non-Cash Stock Compensation
 
(10
)
 
(37
)
Total Consolidated Net Income (Loss)
 
$
112

 
$
(78
)


The following table presents capital expenditures by segment and reconciles capital expenditures to consolidated capital expenditures:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Capital Expenditures:
 
 
 
 
North America
 
$
97

 
$
99

EMEA
 
19

 
26

Latin America
 
28

 
23

Unallocated Corporate Capital Expenditures
 
19

 
21

Consolidated Capital Expenditures
 
$
163

 
$
169



The following table presents total assets by segment:

(dollars in millions)
 
March 31, 2014
 
December 31, 2013
Assets:
 
 
 
 
North America
 
$
8,151

 
$
8,133

EMEA
 
1,990

 
2,030

Latin America
 
2,488

 
2,445

Other
 
260

 
266

Total Consolidated Assets
 
$
12,889

 
$
12,874

Reconciliation of Revenue from Segments to Consolidated [Table Text Block] 
The following table presents revenue by segment:

 
 
Three Months Ended
(dollars in millions)
 
March 31, 2014
 
March 31, 2013
Core Network Services Revenue:
 
 
 
 
North America
 
$
1,043

 
$
967

EMEA
 
225

 
223

Latin America
 
189

 
182

Total Core Network Services Revenue
 
$
1,457

 
$
1,372

 
 
 
 
 
Wholesale Voice Services and Other Revenue:
 
 
 
 
North America
 
$
145

 
$
193

EMEA
 
5

 
9

Latin America
 
2

 
3

Total Wholesale Voice Services and Other Revenue
 
$
152

 
$
205

 
 
 
 
 
Total Consolidated Revenue
 
$
1,609

 
$
1,577

Organization and Summary of Significant Accounting Policies Property Plant and Equipment (Details)
3 Months Ended
Mar. 31, 2014
Property, Plant and Equipment [Line Items]
 
Property, Plant and Equipment, Estimated Useful Lives
24 
Change in Accounting Estimate, Effect of Change on Basic and Diluted Earnings Per Share
$ 0.10 
Earnings Per Share (Details)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Convertible Senior Notes
 
 
Earnings per share
 
 
Securities not included in computation of diluted loss per share (in millions of shares)
18 
28 
Stock options, outperform stock appreciation rights (OSOs), restricted stock units and warrants
 
 
Earnings per share
 
 
Securities not included in computation of diluted loss per share (in millions of shares)
5 
6 
Acquired Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Finite-Lived Intangible Assets:
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
$ 999 
 
$ 999 
Finite-Lived Intangible Assets, Accumulated Amortization
(845)
 
(826)
Finite-Lived Intangible Assets, Net
154 
 
173 
Acquired finite-lived intangible asset amortization expense
19 
18 
 
Indefinite-Lived Intangible Assets:
 
 
 
Total identifiable acquisition-related intangible assets, Gross Carrying Amount
1,031 
 
1,031 
Total identifiable acquisition-related intangible assets, Net
186 
 
205 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
2013 (remaining three months)
45 
 
 
2014
48 
 
 
2015
31 
 
 
2016
14 
 
 
2017
13 
 
 
2018
3 
 
 
Thereafter
0 
 
 
Finite-Lived Intangible Assets, Net
154 
 
173 
Vyvx Trade Name
 
 
 
Indefinite-Lived Intangible Assets:
 
 
 
Indefinite-Lived Intangible Assets
32 
 
32 
Customer Contracts And Relationships
 
 
 
Finite-Lived Intangible Assets:
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
786 
 
786 
Finite-Lived Intangible Assets, Accumulated Amortization
(690)
 
(678)
Finite-Lived Intangible Assets, Net
96 
 
108 
Acquired finite-lived intangible assets weighted average remaining useful lives (in years)
2 years 0 months 
 
 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
Finite-Lived Intangible Assets, Net
96 
 
108 
Trademarks
 
 
 
Finite-Lived Intangible Assets:
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
55 
 
55 
Finite-Lived Intangible Assets, Accumulated Amortization
(34)
 
(31)
Finite-Lived Intangible Assets, Net
21 
 
24 
Acquired finite-lived intangible assets weighted average remaining useful lives (in years)
1 year 6 months 
 
 
Estimated amortization expense of finite-lived acquisition-related intangible assets
 
 
 
Finite-Lived Intangible Assets, Net
21 
 
24 
Patents and Developed Technology
 
 
 
Finite-Lived Intangible Assets:
 
 
 
Finite-Lived Intangible Assets, Gross Carrying Amount
158 
 
158 
Finite-Lived Intangible Assets, Accumulated Amortization
(121)
 
(117)
Finite-Lived Intangible Assets, Net
37 
 
41 
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
$ 37 
 
$ 41 
Fair Value of Financial Instruments - Liabilities, Recurring (Details) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
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)
$ 0 
$ 12 
Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
0 
12 
Long-term Debt, including the current portion:
 
 
Term Loans
2,605 
2,604 
Senior Notes
5,198 
5,198 
Convertible Notes
474 
474 
Capital Leases and Other
82 
86 
Total Long-term Debt, including the current portion:
8,359 
8,362 
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 
2,633 
Senior Notes
5,711 
5,673 
Convertible Notes
0 
0 
Capital Leases and Other
0 
0 
Total Long-term Debt, including the current portion:
8,328 
8,306 
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)
0 
12 
Total Derivative Liabilities Recorded at Fair Value in the Financial Statements
0 
12 
Long-term Debt, including the current portion:
 
 
Term Loans
0 
0 
Senior Notes
0 
0 
Convertible Notes
724 
647 
Capital Leases and Other
82 
86 
Total Long-term Debt, including the current portion:
$ 806 
$ 733 
Fair Value of Financial Instruments - Liabilities, Additional Information (Details) (Estimate of Fair Value, Fair Value Disclosure, Not actively traded convertible notes, USD $)
Dec. 31, 2013
Estimate of Fair Value, Fair Value Disclosure |
Not actively traded convertible notes
 
Liabilities measured on a recurring basis
 
Convertible Notes
   
Long-Term Debt - Schedule of Long Term Debt (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Long-term debt
 
 
Total Debt Obligations
$ 8,388 
$ 8,392 
Total Unamortized Discount
(29)
(30)
Carrying Value of Debt
8,359 
8,362 
Less current portion
(503)
(31)
Long-Term Debt, less current portion
7,856 
8,331 
Senior Secured Term Loan
 
 
Long-term debt
 
 
Total Debt Obligations
2,611 1
2,611 1
Total Unamortized Discount
(6)
(7)
Tranche B-III 2019 Term Loan
 
 
Long-term debt
 
 
Total Debt Obligations
815 
 
Tranche B 2020 Term Loan
 
 
Long-term debt
 
 
Stated interest rate (as a percent)
4.00% 
 
Total Debt Obligations
1,796 
 
Floating Rate Senior Notes due 2018 [Member]
 
 
Long-term debt
 
 
Total Debt Obligations
300 
300 
11.875% Senior Notes due 2019
 
 
Long-term debt
 
 
Total Debt Obligations
605 
605 
Total Unamortized Discount
(8)
(8)
9.375% Senior Notes due 2019
 
 
Long-term debt
 
 
Total Debt Obligations
500 
500 
Total Unamortized Discount
(7)
(7)
8.125% Senior Notes due 2019
 
 
Long-term debt
 
 
Total Debt Obligations
1,200 
1,200 
Total Unamortized Discount
(7)
(7)
8.875% Senior Notes due 2019
 
 
Long-term debt
 
 
Total Debt Obligations
300 
300 
8.625% Senior Notes due 2020
 
 
Long-term debt
 
 
Total Debt Obligations
900 
900 
7.0% Senior Notes due 2020
 
 
Long-term debt
 
 
Total Debt Obligations
775 
775 
SeniorNotes6Point125PercentDue2021 [Member]
 
 
Long-term debt
 
 
Total Debt Obligations
640 
640 
7.0% Convertible Senior Notes due 2015
 
 
Long-term debt
 
 
Total Debt Obligations
200 
200 
Total Unamortized Discount
(1)
(1)
7.0% Convertible Senior Notes due 2015 Series B
 
 
Long-term debt
 
 
Total Debt Obligations
275 
275 
Capital Leases
 
 
Long-term debt
 
 
Total Debt Obligations
70 
73 
Other
 
 
Long-term debt
 
 
Total Debt Obligations
$ 12 
$ 13 
Long-Term Debt - Textuals (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Long-term debt
 
 
Total Debt Obligations
$ 8,388 
$ 8,392 
2013 (remaining three months)
27 
 
2014
483 
 
2015
7 
 
2016
6 
 
2017
306 
 
2018
3,426 
 
Thereafter
4,133 
 
Tranche B 2020 Term Loan
 
 
Long-term debt
 
 
Stated interest rate (as a percent)
4.00% 
 
Total Debt Obligations
1,796 
 
Tranche B-III 2019 Term Loan
 
 
Long-term debt
 
 
Total Debt Obligations
815 
 
8.875% Senior Notes due 2019
 
 
Long-term debt
 
 
Total Debt Obligations
300 
300 
7.0% Senior Notes due 2020
 
 
Long-term debt
 
 
Total Debt Obligations
$ 775 
$ 775 
Accumulated Other Comprehensive Income (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Dec. 31, 2012
Accumulated Other Comprehensive Income (Loss) [Line Items]
 
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax
$ 42 
$ (26)
$ 36 
$ 26 
Other comprehensive income before reclassifications
3 
(53)
 
 
Amounts reclassified from accumulated other comprehensive income
3 
1 
 
 
Accumulated Translation Adjustment [Member]
 
 
 
 
Accumulated Other Comprehensive Income (Loss) [Line Items]
 
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax
72 
12 
67 
56 
Other comprehensive income before reclassifications
5 
(44)
 
 
Amounts reclassified from accumulated other comprehensive income
0 
0 
 
 
Accumulated Defined Benefit Plans Adjustment [Member]
 
 
 
 
Accumulated Other Comprehensive Income (Loss) [Line Items]
 
 
 
 
Accumulated Other Comprehensive Income (Loss), Net of Tax
(30)
(38)
(31)
(30)
Other comprehensive income before reclassifications
(2)
(9)
 
 
Amounts reclassified from accumulated other comprehensive income
$ 3 
$ 1 
 
 
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
Mar. 31, 2014
Mar. 31, 2013
Non-cash compensation expense and capitalized non-cash compensation
 
 
Nonvested restricted stock and restricted stock units (RSUs)
3,000,000 
 
OSOs outstanding
2,000,000 
 
Stock-based compensation expense
$ 10 
$ 37 
Capitalized Non-cash Compensation
0 
0 
Non-cash compensation expense and capitalized non-cash compensation
10 
37 
Outperform Stock Options
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
Stock-based compensation expense
2 
5 
Restricted Stock Units and Shares
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
Stock-based compensation expense
6 
7 
401(k) Match Expense
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
Stock-based compensation expense
7 
8 
Restricted Stock Unit Bonus Grant
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
Stock-based compensation expense
(5)
15 
Management Incentive and Retention Plan
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
Stock-based compensation expense
$ 0 
$ 2 
Non-qualified stock options
 
 
Non-cash compensation expense and capitalized non-cash compensation
 
 
OSOs outstanding
11,000 
 
Commitments, Contingencies and Other Items - Lawsuits (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Mar. 31, 2014
Loss Contingencies
 
 
Estimated Litigation Liability
 
$ 214 
Peruvian Tax Litigation |
Pending Litigation
 
 
Loss Contingencies
 
 
Loss Contingency, Asserted Claim
 
59 
Loss Contingency Accrual, Period Increase (Decrease)
28 
 
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
 
39 
up to |
Brazilian Tax Claims |
Pending Litigation
 
 
Loss Contingencies
 
 
Loss Contingency, Range of Possible Loss, Portion Not Accrued
 
$ 65 
Commitments, Contingencies and Other Items - Other Commitments (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
 
 
Amount outstanding under letters of credit or other similar obligations
$ 28 
$ 29 
Collateralized by cash, that is reflected on the consolidated balance sheets as restricted cash
$ 25 
$ 25 
Condensed Consolidating Financial Information - Statements of Operations (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Condensed Consolidating Financial Information
 
 
Revenue
$ 1,609 
$ 1,577 
Costs and Expenses:
 
 
Cost of Revenue
614 
629 
Depreciation and Amortization
184 
194 
Selling, General and Administrative
547 
599 
Total Costs and Expenses
1,345 
1,422 
Operating Income (Loss)
264 
155 
Other Income (Expense):
 
 
Interest income
 
0 
Interest expense
(151)
(169)
Interest income (expense) affiliates, net
0 
0 
Equity in net earnings (losses) of subsidiaries
0 
0 
Other, net
6 
(50)
Total Other Expense
(145)
(219)
Income (Loss) before Income Taxes
119 
(64)
Income Tax Expense
(7)
(14)
Net Income (Loss)
112 
(78)
Other Comprehensive Income (Loss), Net of Income Taxes
6 
(52)
Comprehensive Income (Loss)
118 
(130)
Level 3 Communications, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Revenue
0 
0 
Costs and Expenses:
 
 
Cost of Revenue
0 
0 
Depreciation and Amortization
0 
0 
Selling, General and Administrative
0 
1 
Total Costs and Expenses
0 
1 
Operating Income (Loss)
0 
(1)
Other Income (Expense):
 
 
Interest income
 
   
Interest expense
(34)
(39)
Interest income (expense) affiliates, net
288 
273 
Equity in net earnings (losses) of subsidiaries
(142)
(311)
Other, net
   
0 
Total Other Expense
112 
(77)
Income (Loss) before Income Taxes
112 
(78)
Income Tax Expense
0 
0 
Net Income (Loss)
112 
(78)
Other Comprehensive Income (Loss), Net of Income Taxes
6 
(52)
Comprehensive Income (Loss)
118 
(130)
Level 3 Financing, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Revenue
0 
0 
Costs and Expenses:
 
 
Cost of Revenue
0 
0 
Depreciation and Amortization
0 
0 
Selling, General and Administrative
0 
0 
Total Costs and Expenses
0 
0 
Operating Income (Loss)
0 
0 
Other Income (Expense):
 
 
Interest income
 
   
Interest expense
(112)
(126)
Interest income (expense) affiliates, net
459 
430 
Equity in net earnings (losses) of subsidiaries
(488)
(614)
Other, net
   
(1)
Total Other Expense
(141)
(311)
Income (Loss) before Income Taxes
(141)
(311)
Income Tax Expense
(1)
0 
Net Income (Loss)
(142)
(311)
Other Comprehensive Income (Loss), Net of Income Taxes
0 
(52)
Comprehensive Income (Loss)
(142)
(363)
Level 3 Communications, LLC
 
 
Condensed Consolidating Financial Information
 
 
Revenue
737 
685 
Costs and Expenses:
 
 
Cost of Revenue
290 
261 
Depreciation and Amortization
70 
71 
Selling, General and Administrative
325 
381 
Total Costs and Expenses
685 
713 
Operating Income (Loss)
52 
(28)
Other Income (Expense):
 
 
Interest income
 
   
Interest expense
(1)
(1)
Interest income (expense) affiliates, net
(712)
(669)
Equity in net earnings (losses) of subsidiaries
178 
146 
Other, net
3 
1 
Total Other Expense
(532)
(523)
Income (Loss) before Income Taxes
(480)
(551)
Income Tax Expense
(1)
(1)
Net Income (Loss)
(481)
(552)
Other Comprehensive Income (Loss), Net of Income Taxes
0 
0 
Comprehensive Income (Loss)
(481)
(552)
Other Non-Guarantor Subsidiaries
 
 
Condensed Consolidating Financial Information
 
 
Revenue
931 
956 
Costs and Expenses:
 
 
Cost of Revenue
383 
432 
Depreciation and Amortization
114 
123 
Selling, General and Administrative
222 
217 
Total Costs and Expenses
719 
772 
Operating Income (Loss)
212 
184 
Other Income (Expense):
 
 
Interest income
 
   
Interest expense
(4)
(3)
Interest income (expense) affiliates, net
(35)
(34)
Equity in net earnings (losses) of subsidiaries
0 
0 
Other, net
3 
(50)
Total Other Expense
(36)
(87)
Income (Loss) before Income Taxes
176 
97 
Income Tax Expense
(5)
(13)
Net Income (Loss)
171 
84 
Other Comprehensive Income (Loss), Net of Income Taxes
6 
(52)
Comprehensive Income (Loss)
177 
32 
Eliminations
 
 
Condensed Consolidating Financial Information
 
 
Revenue
(59)
(64)
Costs and Expenses:
 
 
Cost of Revenue
(59)
(64)
Depreciation and Amortization
0 
0 
Selling, General and Administrative
0 
0 
Total Costs and Expenses
(59)
(64)
Operating Income (Loss)
0 
0 
Other Income (Expense):
 
 
Interest income
 
   
Interest expense
0 
0 
Interest income (expense) affiliates, net
0 
0 
Equity in net earnings (losses) of subsidiaries
452 
779 
Other, net
0 
0 
Total Other Expense
452 
779 
Income (Loss) before Income Taxes
452 
779 
Income Tax Expense
0 
0 
Net Income (Loss)
452 
779 
Other Comprehensive Income (Loss), Net of Income Taxes
(6)
104 
Comprehensive Income (Loss)
$ 446 
$ 883 
Condensed Consolidating Financial Information - Balance Sheets (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Mar. 31, 2013
Dec. 31, 2012
Current Assets:
 
 
 
 
Cash and cash equivalents
$ 607 
$ 631 
$ 610 
$ 979 
Restricted cash and securities
7 
7 
 
 
Receivables, less allowances for doubtful accounts
699 
673 
 
 
Due from affiliates
0 
0 
 
 
Other
159 
143 
 
 
Total Current Assets
1,472 
1,454 
 
 
Property, Plant and Equipment, net
8,260 
8,240 
 
 
Restricted Cash and Securities
22 
23 
 
 
Goodwill and Other Intangibles Assets, net
2,761 
2,782 
 
 
Investment in Subsidiaries
0 
0 
 
 
Other Assets, net
374 
375 
 
 
Total Assets
12,889 
12,874 
12,874 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
561 
625 
 
 
Current portion of long-term debt
503 
31 
 
 
Accrued payroll and employee benefits
114 
209 
 
 
Accrued interest
174 
160 
 
 
Current portion of deferred revenue
262 
253 
 
 
Due to affiliates
0 
0 
 
 
Other
142 
168 
 
 
Total Current Liabilities
1,756 
1,446 
 
 
Long-Term Debt, less current portion
7,856 
8,331 
 
 
Deferred Revenue, less current portion
901 
906 
 
 
Other Liabilities
778 
780 
 
 
Commitments and Contingencies
0 
0 
 
 
Stockholders' Equity (Deficit)
1,598 
1,411 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
12,889 
12,874 
 
 
Level 3 Communications, Inc.
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
8 
8 
52 
253 
Restricted cash and securities
0 
0 
 
 
Receivables, less allowances for doubtful accounts
0 
0 
 
 
Due from affiliates
15,798 
15,507 
 
 
Other
3 
2 
 
 
Total Current Assets
15,809 
15,517 
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
3 
3 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
10,090 
10,039 
 
 
Other Assets, net
9 
10 
 
 
Total Assets
25,911 
25,569 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
0 
0 
 
 
Current portion of long-term debt
474 
0 
 
 
Accrued payroll and employee benefits
0 
0 
 
 
Accrued interest
46 
30 
 
 
Current portion of deferred revenue
0 
0 
 
 
Due to affiliates
0 
0 
 
 
Other
0 
0 
 
 
Total Current Liabilities
520 
30 
 
 
Long-Term Debt, less current portion
897 
1,370 
 
 
Deferred Revenue, less current portion
0 
0 
 
 
Other Liabilities
15 
15 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
24,479 
24,154 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
25,911 
25,569 
 
 
Level 3 Financing, Inc.
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
6 
6 
5 
5 
Restricted cash and securities
0 
0 
 
 
Receivables, less allowances for doubtful accounts
0 
0 
 
 
Due from affiliates
17,223 
16,886 
 
 
Other
17 
15 
 
 
Total Current Assets
17,246 
16,907 
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
0 
0 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
8,956 
27,014 
 
 
Other Assets, net
108 
113 
 
 
Total Assets
26,310 
44,034 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
1 
2 
 
 
Current portion of long-term debt
0 
0 
 
 
Accrued payroll and employee benefits
0 
0 
 
 
Accrued interest
126 
129 
 
 
Current portion of deferred revenue
0 
0 
 
 
Due to affiliates
0 
0 
 
 
Other
3 
13 
 
 
Total Current Liabilities
130 
144 
 
 
Long-Term Debt, less current portion
6,905 
6,905 
 
 
Deferred Revenue, less current portion
0 
0 
 
 
Other Liabilities
29 
27 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
19,246 
36,958 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
26,310 
44,034 
 
 
Level 3 Communications, LLC
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
356 
347 
328 
386 
Restricted cash and securities
1 
1 
 
 
Receivables, less allowances for doubtful accounts
70 
79 
 
 
Due from affiliates
0 
0 
 
 
Other
59 
47 
 
 
Total Current Assets
486 
474 
 
 
Property, Plant and Equipment, net
3,055 
3,028 
 
 
Restricted Cash and Securities
18 
18 
 
 
Goodwill and Other Intangibles Assets, net
387 
395 
 
 
Investment in Subsidiaries
3,738 
3,735 
 
 
Other Assets, net
10 
11 
 
 
Total Assets
7,694 
7,661 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
246 
42 
 
 
Current portion of long-term debt
3 
3 
 
 
Accrued payroll and employee benefits
71 
171 
 
 
Accrued interest
0 
0 
 
 
Current portion of deferred revenue
123 
131 
 
 
Due to affiliates
32,229 
32,165 
 
 
Other
70 
74 
 
 
Total Current Liabilities
32,742 
32,586 
 
 
Long-Term Debt, less current portion
17 
17 
 
 
Deferred Revenue, less current portion
588 
603 
 
 
Other Liabilities
132 
135 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
(25,785)
(25,680)
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
7,694 
7,661 
 
 
Other Non-Guarantor Subsidiaries
 
 
 
 
Current Assets:
 
 
 
 
Cash and cash equivalents
237 
270 
225 
335 
Restricted cash and securities
6 
6 
 
 
Receivables, less allowances for doubtful accounts
629 
594 
 
 
Due from affiliates
0 
0 
 
 
Other
80 
79 
 
 
Total Current Assets
952 
949 
 
 
Property, Plant and Equipment, net
5,205 
5,212 
 
 
Restricted Cash and Securities
1 
2 
 
 
Goodwill and Other Intangibles Assets, net
2,374 
2,387 
 
 
Investment in Subsidiaries
0 
0 
 
 
Other Assets, net
247 
241 
 
 
Total Assets
8,779 
8,791 
 
 
Liabilities and Stockholders' Equity:
 
 
 
 
Accounts payable
314 
581 
 
 
Current portion of long-term debt
26 
28 
 
 
Accrued payroll and employee benefits
43 
38 
 
 
Accrued interest
2 
1 
 
 
Current portion of deferred revenue
139 
122 
 
 
Due to affiliates
792 
228 
 
 
Other
69 
81 
 
 
Total Current Liabilities
1,385 
1,079 
 
 
Long-Term Debt, less current portion
37 
39 
 
 
Deferred Revenue, less current portion
313 
303 
 
 
Other Liabilities
602 
603 
 
 
Commitments and Contingencies
0 
 
 
 
Stockholders' Equity (Deficit)
6,442 
6,767 
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
8,779 
8,791 
 
 
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
(33,021)
(32,393)
 
 
Other
0 
0 
 
 
Total Current Assets
(33,021)
(32,393)
 
 
Property, Plant and Equipment, net
0 
0 
 
 
Restricted Cash and Securities
0 
0 
 
 
Goodwill and Other Intangibles Assets, net
0 
0 
 
 
Investment in Subsidiaries
(22,784)
(40,788)
 
 
Other Assets, net
0 
0 
 
 
Total Assets
(55,805)
(73,181)
 
 
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
(33,021)
(32,393)
 
 
Other
0 
0 
 
 
Total Current Liabilities
(33,021)
(32,393)
 
 
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)
(22,784)
(40,788)
 
 
Total Liabilities and Stockholders’ Equity (Deficit)
$ (55,805)
$ (73,181)
 
 
Condensed Consolidating Financial Information - Statements of Cash Flows (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
$ 141 
$ 7 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(163)
(169)
Decrease in restricted cash and securities, net
1 
3 
Net Cash Provided by (Used in) Investing Activities
(162)
(166)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(3)
(186)
Increase (decrease) due from-to affiliates, net
0 
0 
Net Cash Provided by (Used in) Financing Activities
(3)
(186)
Effect of Exchange Rates on Cash and Cash Equivalents
0 
(24)
Net Change in Cash and Cash Equivalents
(24)
(369)
Cash and Cash Equivalents at Beginning of Period
631 
979 
Cash and Cash Equivalents at End of Period
607 
610 
Level 3 Communications, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
(16)
(30)
Cash Flows from Investing Activities:
 
 
Capital expenditures
0 
0 
Decrease in restricted cash and securities, net
0 
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 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
0 
(172)
Increase (decrease) due from-to affiliates, net
16 
1 
Net Cash Provided by (Used in) Financing Activities
16 
(171)
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
0 
(201)
Cash and Cash Equivalents at Beginning of Period
8 
253 
Cash and Cash Equivalents at End of Period
8 
52 
Level 3 Financing, Inc.
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
(125)
(169)
Cash Flows from Investing Activities:
 
 
Capital expenditures
0 
0 
Decrease in restricted cash and securities, net
0 
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 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
0 
(2)
Increase (decrease) due from-to affiliates, net
125 
171 
Net Cash Provided by (Used in) Financing Activities
125 
169 
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
6 
5 
Cash and Cash Equivalents at End of Period
6 
5 
Level 3 Communications, LLC
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
183 
(15)
Cash Flows from Investing Activities:
 
 
Capital expenditures
(74)
(74)
Decrease in restricted cash and securities, net
0 
0 
Net Cash Provided by (Used in) Investing Activities
(74)
(74)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
0 
(4)
Increase (decrease) due from-to affiliates, net
(100)
35 
Net Cash Provided by (Used in) Financing Activities
(100)
31 
Effect of Exchange Rates on Cash and Cash Equivalents
0 
0 
Net Change in Cash and Cash Equivalents
9 
(58)
Cash and Cash Equivalents at Beginning of Period
347 
386 
Cash and Cash Equivalents at End of Period
356 
328 
Other Non-Guarantor Subsidiaries
 
 
Condensed Consolidating Financial Information
 
 
Net Cash Provided by (Used in) Operating Activities
99 
221 
Cash Flows from Investing Activities:
 
 
Capital expenditures
(89)
(95)
Decrease in restricted cash and securities, net
1 
3 
Net Cash Provided by (Used in) Investing Activities
(88)
(92)
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
(3)
(8)
Increase (decrease) due from-to affiliates, net
(41)
(207)
Net Cash Provided by (Used in) Financing Activities
(44)
(215)
Effect of Exchange Rates on Cash and Cash Equivalents
0 
(24)
Net Change in Cash and Cash Equivalents
(33)
(110)
Cash and Cash Equivalents at Beginning of Period
270 
335 
Cash and Cash Equivalents at End of Period
237 
225 
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 
Net Cash Provided by (Used in) Investing Activities
0 
0 
Cash Flows from Financing Activities:
 
 
Long-term debt borrowings, net of issuance costs
0 
0 
Payments on and repurchases of long-term debt, including current portions and refinancing costs
0 
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 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Dec. 31, 2013
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Assets
$ 12,889 
$ 12,874 
$ 12,874 
Payments to Acquire Productive Assets
163 
169 
 
Adjusted EBITDA by Segment
458 
386 
 
Revenue
1,609 
1,577 
 
Income Tax Expense (Benefit)
(7)
(14)
 
Other Income
(145)
(219)
 
Depreciation, Depletion and Amortization
(184)
(194)
 
Share-based Compensation
(10)
(37)
 
Net Income (Loss) Available to Common Stockholders, Basic
112 
(78)
 
Corporate and Other [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Assets
260 
266 
 
Payments to Acquire Productive Assets
19 
21 
 
Adjusted EBITDA by Segment
(166)
(172)
 
North America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Assets
8,151 
8,133 
 
Payments to Acquire Productive Assets
97 
99 
 
Adjusted EBITDA by Segment
488 
428 
 
Europe [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Assets
1,990 
2,030 
 
Payments to Acquire Productive Assets
19 
26 
 
Adjusted EBITDA by Segment
54 
57 
 
Latin America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Assets
2,488 
2,445 
 
Payments to Acquire Productive Assets
28 
23 
 
Adjusted EBITDA by Segment
82 
73 
 
Core Network Service [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
1,457 
1,372 
 
Core Network Service [Member] |
North America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
1,043 
967 
 
Core Network Service [Member] |
Europe [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
225 
223 
 
Core Network Service [Member] |
Latin America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
189 
182 
 
Wholesale Voice Services and Other [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
152 
205 
 
Wholesale Voice Services and Other [Member] |
North America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
145 
193 
 
Wholesale Voice Services and Other [Member] |
Europe [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
5 
9 
 
Wholesale Voice Services and Other [Member] |
Latin America [Member]
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Revenue
$ 2 
$ 3