LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
OPERATING REVENUE
Operating revenue $ 8,005
8,113
1,391
6,870
Operating revenue - affiliates 180
107
16
—
Total operating revenue 8,185
8,220
1,407

6,870
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization) 3,799
3,937
690
3,493
Selling, general and administrative 1,258
1,354
253
1,208
Operating expenses - affiliates 334
257
24
—
Depreciation and amortization 1,613
1,704
282
1,018
Goodwill impairment 3,708
—
—
—
Total operating expenses 10,712
7,252
1,249
5,719
OPERATING (LOSS) INCOME (2,527 ) 968
158
1,151
OTHER (EXPENSE) INCOME
Interest income 9
4
1
13
Interest income - affiliate 61
63
11
—
Interest expense (502 ) (509 ) (80 ) (441 )
Gain (loss) on modification and extinguishment of debt 5
—
—
(44 )
Other income, net 8
11
3
14
Total other expense, net (419 ) (431 ) (65 ) (458 )
(LOSS) INCOME BEFORE INCOME TAXES (2,946 ) 537
93
693
Income tax expense (255 ) (196 ) (234 ) (268 )
NET (LOSS) INCOME $ (3,201 ) 341
(141 ) 425


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
OPERATING REVENUE
Operating revenue	$	7,725	7,593	7,732
Operating revenue - affiliates	208		180	107
Total operating revenue	7,933		7,773	7,839
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	3,486		3,387	3,556
Selling, general and administrative	1,226		1,258	1,354
Operating expenses - affiliates	368		334	257
Depreciation and amortization	1,689		1,613	1,704
Goodwill impairment	0		3,708	0
Total operating expenses	6,769		10,300	6,871
OPERATING INCOME (LOSS)	1,164		(2,527)	968
OTHER (EXPENSE) INCOME
Interest income - affiliate	51		61	63
Interest expense	(393)		(502)	(509)
Other income, net	50		22	15
Total other expense, net	(292)		(419)	(431)
INCOME (LOSS) BEFORE INCOME TAXES	872		(2,946)	537
Income tax expense	221		255	196
NET INCOME (LOSS)	$	651	(3,201)	341

See accompanying notes to consolidated financial statements.

LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
NET (LOSS) INCOME $ (3,201 ) 341
(141 ) 425
OTHER COMPREHENSIVE (LOSS) INCOME:
Defined benefit pension plan adjustment, net of $1, ($1), $— and ($3) tax (3 ) 5
—
(1 )
Foreign currency translation adjustment, net of ($6), $50, ($17) and ($46) tax (5 ) (200 ) 18
81
Other comprehensive (loss) income (8 ) (195 ) 18
80
COMPREHENSIVE (LOSS) INCOME $ (3,209 ) 146
(123 ) 505


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
NET INCOME (LOSS)	$	651	(3,201)	341
OTHER COMPREHENSIVE LOSS
Defined benefit pension plan adjustment, net of $0, 1 and (1) tax	(15)		(3)	5
Foreign currency translation adjustment, net of $(43), (6) and 50 tax	(40)		(5)	(200)
Other comprehensive loss, net of tax	(55)		(8)	(195)
COMPREHENSIVE INCOME (LOSS)	$	596	(3,209)	146

See accompanying notes to consolidated financial statements.

LEVEL 3 PARENT, LLC

CONSOLIDATED BALANCE SHEETS

As of December 31,
2019 2018
(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 316
243
Restricted cash - current 3
4
Accounts receivable, less allowance of $13 and $11 667
712
Note receivable - affiliate 1,590
1,825
Other 266
234
Total current assets 2,842
3,018
Property, plant and equipment, net of accumulated depreciation of $1,825 and $1,021 9,936
9,453
GOODWILL AND OTHER ASSETS
Goodwill 7,415
11,119
Operating lease assets 1,060
—
Restricted cash 19
25
Customer relationships, net 6,865
7,567
Other intangible assets, net 469
410
Other, net 492
699
Total goodwill and other assets 16,320
19,820
TOTAL ASSETS $ 29,098
32,291
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 11
6
Accounts payable 654
726
Accounts payable - affiliates 669
246
Accrued expenses and other liabilities
Salaries and benefits 240
233
Income and other taxes 152
130
Current operating lease liabilities 249
—
Interest 85
95
Other 77
78
Current portion of deferred revenue 309
310
Total current liabilities 2,446
1,824
LONG-TERM DEBT 10,356
10,838
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue 1,343
1,181
Deferred income taxes, net 241
202
Noncurrent operating lease liabilities 854
—
Other 313
369
Total deferred revenue and other liabilities 2,751
1,752
COMMITMENTS AND CONTINGENCIES (Note 17)

MEMBER'S EQUITY
Member's equity 13,724
18,048
Accumulated other comprehensive loss (179 ) (171 )
Total member's equity 13,545
17,877
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 29,098
32,291


	As of December 31,
	2020		2019
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	190	316
Accounts receivable, less allowance of $45 and $13	683		667
Note receivable - affiliate	1,468		1,590
Other	297		269
Total current assets	2,638		2,842
Property, plant and equipment, net of accumulated depreciation $2,818 and $1,825	10,518		9,936
GOODWILL AND OTHER ASSETS
Goodwill	7,405		7,415
Other intangible assets, net	6,605		7,334
Other, net	1,410		1,571
Total goodwill and other assets	15,420		16,320
TOTAL ASSETS	$	28,576	29,098
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	14	11
Accounts payable	495		654
Accounts payable - affiliates	869		669
Accrued expenses and other liabilities
Salaries and benefits	220		240
Income and other taxes	111		152
Current operating lease liabilities	241		249
Other	159		162
Current portion of deferred revenue	315		309
Total current liabilities	2,424		2,446
LONG-TERM DEBT	10,373		10,356
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue	1,396		1,343
Operating lease liabilities	903		854
Other	575		554
Total deferred revenue and other liabilities	2,874		2,751
COMMITMENTS AND CONTINGENCIES (Note 16)	0		0
MEMBER'S EQUITY
Member's equity	13,139		13,724
Accumulated other comprehensive loss	(234)		(179)
Total member's equity	12,905		13,545
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	28,576	29,098

See accompanying notes to consolidated financial statements.

LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
OPERATING ACTIVITIES
Net (loss) income $ (3,201 ) 341
(141 ) 425
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,613
1,704
282
1,018
Goodwill impairment 3,708
—
—
—
Deferred income taxes 219
175
270
217
Changes in current assets and liabilities:
Accounts receivable 21
46
(1 ) (16 )
Accounts payable (134 ) (37 ) 35
(102 )
Other current assets and liabilities (6 ) 4
(100 ) 70
Other current assets and liabilities, affiliates 423
216
(17 ) —
Changes in other noncurrent assets and liabilities, net 120
(22 ) (53 ) 154
Other, net (80 ) (30 ) 33
148
Net cash provided by operating activities 2,683
2,397
308
1,914
INVESTING ACTIVITIES
Capital expenditures (1,341 ) (1,038 ) (207 ) (1,119 )
Purchase of marketable securities —
—
—
(1,127 )
Maturity of marketable securities —
—
—
1,127
Proceeds from sale of property, plant and equipment and other assets 28
134
—
1
Note receivable - affiliate 235
—
(1,825 ) —
Net cash used in investing activities (1,078 ) (904 ) (2,032 ) (1,118 )
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 2,479
—
—
4,569
Payments of long-term debt (2,906 ) (7 ) (1 ) (4,917 )
Distributions (1,084 ) (1,545 ) (250 ) —
Other (28 ) —
(2 ) 3
Net cash used in financing activities (1,539 ) (1,552 ) (253 ) (345 )
Net increase (decrease) in cash, cash equivalents, restricted cash and securities 66
(59 ) (1,977 ) 451
Cash, cash equivalents, restricted cash and securities at beginning of period 272
331
2,308
1,857
Cash, cash equivalents, restricted cash and securities at end of period $ 338
$ 272
331
2,308

Supplemental cash flow information:
Income taxes paid, net $ (23 ) (33 ) (10 ) (49 )
Interest paid (net of capitalized interest of $15, $1, — and —) $ 531
542
56
468

Cash, cash equivalents, restricted cash and securities:
Cash and cash equivalents $ 316
243
297
2,274
Restricted cash and securities - current 3
4
5
5
Restricted cash and securities - noncurrent 19
25
29
29
Total $ 338
272
331
2,308


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
OPERATING ACTIVITIES
Net income (loss)	$	651	(3,201)	341
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,689		1,613	1,704
Goodwill impairment	0		3,708	0
Deferred income taxes	175		219	175
Changes in current assets and liabilities:
Accounts receivable	(63)		21	46
Accounts payable	(218)		(134)	(37)
Other assets and liabilities, net	(159)		(6)	4
Other assets and liabilities, affiliate	108		423	216
Changes in other noncurrent assets and liabilities, net	71		120	(22)
Other, net	30		(80)	(30)
Net cash provided by operating activities	2,284		2,683	2,397
INVESTING ACTIVITIES
Capital expenditures	(1,432)		(1,341)	(1,038)
Proceeds from notes receivable - affiliates	122		235	0
Proceeds from sale of property, plant and equipment and other assets	137		28	134
Net cash used in investing activities	(1,173)		(1,078)	(904)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	2,020		2,479	0
Distributions	(1,200)		(1,084)	(1,545)
Payments of long-term debt	(2,060)		(2,906)	(7)
Other	(4)		(28)	0
Net cash used in financing activities	(1,244)		(1,539)	(1,552)
Net (decrease) increase in cash, cash equivalents and restricted cash	(133)		66	(59)
Cash, cash equivalents and restricted cash at beginning of period	338		272	331
Cash, cash equivalents and restricted cash at end of period	$	205	338	272
Supplemental cash flow information:
Income taxes paid, net	$	(24)	(23)	(33)
Interest paid (net of capitalized interest of $23, $15 and $1)	(382)		(531)	(542)

Cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	190	316	243
Restricted cash included in Other current assets	3		3	4
Restricted cash included in Other, net noncurrent assets	12		19	25
Total	$	205	338	272

See accompanying notes to consolidated financial statements.

LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF ~~MEMBER'S/STOCKHOLDERS'~~MEMBER'S EQUITY

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
MEMBER'S EQUITY
Balance at beginning of period $ 18,048
19,254
19,617
—
Net (loss) income (3,201 ) 341
(141 ) —
Cumulative effect of adoption of ASU 2016-02, Leases (39 ) —
—
—
Cumulative net effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of $—, $3, $—, $— tax
—
9
—
—
Cumulative effect of adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
—
(6 ) —
—
Contributions —
—
28
—
Purchase price accounting adjustments —
(5 ) —
—
Distributions (1,084 ) (1,545 ) (250 ) —
Balance at end of period 13,724
18,048
19,254
—
COMMON STOCK
Balance at beginning of period —
—
—
4
Balance at end of period —
—
—
4
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period —
—
—
19,800
Common stock issued under employee stock benefit plans and other —
—
—
30
Share-based compensation —
—
—
102
Balance at end of period —
—
—
19,932
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Balance at beginning of period (171 ) 18
—
(387 )
Other comprehensive (loss) income (8 ) (195 ) 18
80
Cumulative effect of adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
—
6
—
—
Balance at end of period (179 ) (171 ) 18
(307 )

ACCUMULATED DEFICIT
Balance at beginning of period —
—
—
(8,500 )
Net income —
—
—
425
Balance at end of period —
—
—
(8,075 )
TOTAL MEMBER'S/STOCKHOLDERS' EQUITY $ 13,545
17,877
19,272
11,554


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
MEMBER'S EQUITY
Balance at beginning of period	$	13,724	18,048	19,254
Cumulative effect of adoption of ASU 2016-13, Credit losses, net of $2 tax	(3)		—	—
Cumulative effect of adoption of ASU 2016-02, Leases	—		(39)	—
Cumulative net effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of $(3) tax	—		—	9
Cumulative effect of adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	—		—	(6)
Net income (loss)	651		(3,201)	341
Purchase price accounting adjustments	—		—	(5)
Distributions	(1,243)		(1,084)	(1,545)
Other	10		0	0
Balance at end of period	13,139		13,724	18,048
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of period	(179)		(171)	18
Other comprehensive loss	(55)		(8)	(195)
Cumulative effect of adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	—		—	6
Balance at end of period	(234)		(179)	(171)
TOTAL MEMBER'S EQUITY	$	12,905	13,545	17,877

See accompanying notes to consolidated financial statements.

LEVEL 3 PARENT, LLC

Notes to Consolidated Financial Statements

Effective November 1,2017, Level 3 Communications, Inc. became a wholly owned subsidiary of CenturyLink, Inc. Upon completion of the acquisition, Level 3 Communications, Inc. was merged into an acquisition subsidiary, which survived the merger under the name Level 3 Parent, LLC. Unless the context requires otherwise, references in this report to ~~“Level 3 Communications, Inc.,”~~ "Level 3," “we,” “us,” "its," the “Company” and “our”, refer to Level 3 Parent, LLC and its predecessor, Level 3 Communications, Inc. and their respective subsidiaries. References to "Lumen Technologies" or "Lumen" refer to our ultimate parent company, Lumen Technologies, Inc. and its consolidated ~~subsidiaries.~~subsidiaries including Qwest Corporation, referred to as "Qwest".

Unless context requires otherwise, references to the period ended October 31, 2017 covers the predecessor period from January 1, 2017 through October 31, 2017, and the period ended December 31, 2017 covers the successor period from November 1, 2017 through December 31, 2017.

(1) Background and Summary of Significant Accounting Policies

General

We are an international facilities-based technology communications provider (that is, a provider that owns or leases a substantial portion of the property, plant and equipment necessary to provide our services) of a broad range of integrated communications services. We created our communications network by constructing our own assets and through a combination of purchasing other companies and purchasing or leasing facilities from others. We designed our network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.

~~Effective November 1, 2017, we were acquired by CenturyLink in a cash and stock transaction, including the assumption of our debt (the "CenturyLink Merger"). See Note 2—CenturyLink Merger.~~

Basis of Presentation

On November 1, 2017, we became a wholly owned subsidiary of CenturyLink. On the date of the acquisition, our assets and liabilities were recognized at fair value. This revaluation has been reflected in our financial statements and, therefore, has resulted in a new basis of accounting for the successor period beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods will not be comparable to our previously reported financial statements, including the predecessor period financial statements in this report.

The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates ~~(CenturyLink~~(Lumen Technologies and its other subsidiaries, referred to herein as affiliates) have not been eliminated. Due to exchange restrictions and other conditions, effective at the end of the third quarter of 2015 we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the end of ~~2019.~~2020.

We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenue for 2019, 2018 and 2017. Although we continued as a surviving corporation and legal entity after the acquisition of us by CenturyLink, the accompanying consolidated statements of operations, comprehensive (loss) income, cash flows and member's/stockholders' equity (deficit) are presented for two periods: predecessor and successor, which relates to the period preceding the acquisition and the period succeeding the acquisition.

Summary of Significant Accounting Policies

Use of Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we make when accounting for specific items and matters including, but not limited to, revenue recognition, revenue reserves, network access costs, network access cost dispute reserves, investments, long-term contracts, customer retention patterns, allowance for doubtful accounts, depreciation, amortization, asset valuations, internal labor capitalization rates, recoverability of assets (including deferred tax assets), impairment assessments, taxes, certain liabilities and other provisions and contingencies, are reasonable, based on information available at the time they are made. These estimates, judgments and assumptions can materially affect the reported amounts of assets, liabilities and components of member's equity as of the dates of the consolidated balance sheets, as well as the reported amounts of revenue, expenses and components of cash flows during the periods presented in our other consolidated financial statements. We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note 13—Income Taxes and Note ~~17—~~16—Commitments, Contingencies and Other Items for additional information.

For matters not related to income taxes, if a loss contingency is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable.

For matters related to income taxes, if we determine that the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Interest is recognized on the amount of unrecognized benefit from uncertain tax positions.

For all of these and other matters, actual results could differ materially from our estimates.

Revenue Recognition

We earn most of our consolidated revenue from contracts with customers, primarily through the provision of telecommunications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606. We also earn revenue from leasing arrangements (primarily fiber capacity agreements) which are not accounted for under ASC 606.

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. Revenue is recognized based on the following five-step model:

•Identification of the contract with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when, or as, we satisfy a performance obligation.

We provide an array of communications services, including local voice, VPN, Ethernet, data, private line (including special access), network access, transport, voice, information technology ("IT"), video and other ancillary services. We provide these services to a wide range of businesses, including ~~global/international,~~global, enterprise, wholesale, government, small and medium business customers. Certain contracts also include the sale of equipment, which is not significant to our business.

We recognize revenue for services when we provide the applicable service or when control of a product is transferred. Recognition of certain payments received in advance of services being provided is deferred. These advance payments include certain activation and certain installation charges. If the activation and installation charges are not separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which ranges from one ~~year~~ to five years depending on the service. In most cases, termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term.

For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage and other ancillary services, we generally bill in arrears and recognize revenue as usage or delivery occurs. In most cases, the amount invoiced for our service offerings constitutes the price that would be billed on a standalone basis.

Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price that we expect to receive with the customer is allocated to each performance obligation based on its relative standalone selling price. The revenue associated with each performance obligation is then recognized as earned.

We periodically sell optical capacity on our network. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 10 - 20 years. In most cases, we account for the cash consideration received on transfers of optical capacity as ASC 606 revenue which is adjusted for the time value of money and is recognized ratably over the term of the agreement. Cash consideration received on transfers of dark fiber is accounted for as non-ASC 606 lease revenue, which we also recognize ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other non-owned optical capacity assets.

In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligations associated with the transaction.

We have service level commitments pursuant to contracts with certain of our customers. To the extent that such service levels are not achieved or are otherwise disputed due to performance or service issues or other service interruptions or conditions, we will estimate the amount of credits to be issued and record a corresponding reduction to revenue in the period that the service level commitment was not met.

Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis.

We defer (or capitalize) incremental contract acquisition and fulfillment costs and recognize (or amortize) such costs over the average contract life. Our deferred contract costs for our customers have average amortization periods of approximately 30 months. These deferred costs are monitored every period to reflect any significant change in assumptions.

See Note 4—3—Revenue Recognition for additional information.

Affiliate Transactions

We provide services to our affiliates ~~telecommunications services~~ that we also provide to external customers. ~~Services provided by us to our affiliates~~These services are recognized as operating revenue-affiliates in our consolidated statements of operations. Services provided to us from our affiliates are recognized as operating expenses-affiliates on our consolidated statements of operations. Because of the significance of the services we provide to our affiliates and our affiliates provide to us, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented.

We recognize intercompany charges at the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates. The resulting net balance for transactions between us and our affiliates at the end of each period is reported as accounts receivables - affiliates or accounts payable - affiliates on the accompanying consolidated balance sheets.

From time to time we make distributions to our ~~parent.~~parent, which reduce our capital resources for debt repayments or other purposes. Distributions are reflected on our consolidated statements of ~~member's/stockholders'~~member's equity and ~~the~~our consolidated statements of cash flows reflects distributions made as financing activities.

~~USF Surcharges, Gross Receipts Taxes and Other Surcharges~~Our ultimate parent company, Lumen Technologies, is currently indebted to us under a revolving credit facility.

In determining whether to include in our revenue and expenses the taxes and surcharges collected from customers and remitted to government authorities, including USF surcharges, sales, use, value added and some excise taxes, we assess, among other things, whether we are the primary obligor or principal taxpayer for the taxes assessed in each jurisdiction where we do business. In jurisdictions where we determine that we are the principal taxpayer, we record the surcharges on a gross basis and include them in our revenue and costs of services and products. In jurisdictions where we determine that we are merely a collection agent for the government authority, we record the taxes on a net basis and do not include them in our revenue and costs of services and products.

Legal Costs

In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters. WeSubject to certain exceptions, we expense these costs as the related services are received.

Income Taxes

~~Since CenturyLink's acquisition of us on November 1, 2017, we have been included in the consolidated federal income tax return of CenturyLink.~~ Under ~~CenturyLink's~~Lumen's tax allocation policy, ~~CenturyLink~~Lumen Technologies treats our consolidated results as if we were a separate taxpayer. Our reported deferred tax assets and liabilities, as discussed below and in Note 13—Income Taxes, are primarily determined as a result of the application of the separate return allocation method and therefore the settlement of these amounts is dependent upon our parent, ~~CenturyLink,~~Lumen Technologies, rather than tax authorities. The policy requires us to pay our tax liabilities in cash based upon our separate return taxable income. We are also included in the combined state tax returns filed by ~~CenturyLink~~Lumen Technologies and the same payment and allocation policy applies. The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions. We record

deferred income tax assets and liabilities reflecting future tax consequences attributable to tax ~~net operating loss carryforwards ("NOLs"),~~NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities. Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income. The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date.

We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered. Each quarter we evaluate the need to retain all or a portion of the valuation allowance on our deferred tax assets. See Note 13—Income Taxes for additional information.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the value at which cash and cash equivalents are reported in our consolidated financial statements approximates their fair value. In evaluating investments for classification as cash equivalents, we require that individual securities have original maturities of ninety days or less and that individual investment funds have dollar-weighted average maturities of ninety days or less. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of sound financial condition and in high quality and relatively risk-free investment products. Our cash investment policy limits the concentration of investments with specific financial institutions or among certain products and includes criteria related to credit worthiness of any particular financial institution.

Book overdrafts occur when we have issued checks ~~have been issued~~ but they have not yet been presented to our controlled disbursement bank accounts for payment. Disbursement bank accounts allow us to delay funding of issued checks until the checks are presented for payment. Until the issued checks are presented for payment, the book overdrafts are included in accounts payable on our consolidated balance sheet. This activity is included in the operating activities section in our consolidated statements of cash flows.

Restricted Cash ~~and Securities~~

Restricted cash and securities consist primarily of cash and investments that serve to collateralize our outstanding letters of credit and certain performance and operating obligations. Restricted cash and securities are recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Restricted securities are stated at cost which approximates fair value as of December 31, ~~2019~~2020 and ~~2018.~~2019.

Accounts Receivable and Allowance for ~~Doubtful Accounts~~Credit Losses

Accounts receivable are recognized based upon the amount due from customers for the services provided or at cost for other receivables, less an allowance for ~~doubtful accounts. The~~credit losses. Prior to the adoption of ASU 2016-13, the allowance for ~~doubtful accounts~~credit losses receivable reflects our best estimate of probable losses inherent in our receivable portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available evidence. We implemented the new standard effective January 1, 2020, as discussed in the Recently Adopted Accounting Pronouncements - "Measurement of Credit Losses on Financial Instruments", below. For more information, see Note 5—Credit Losses on Financial Instruments.

We generally consider our accounts past due if they are outstanding over 30 days. Our past due accounts are written off against our allowance for ~~doubtful accounts~~credit losses when collection is considered to be not probable. Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received. The carrying value of accounts receivable net of the allowance for ~~doubtful accounts~~credit losses approximates fair value.

Concentration of Credit Risk

We provide communications services to a wide range of wholesale and enterprise customers, ranging from well capitalized ~~national carriers~~global enterprises to small early stage companies primarily in the United States, Europe and Latin America. Credit risk with respect to accounts receivable is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographical regions. We perform ongoing credit evaluations of our customers' financial condition and generally require no collateral from our customers, although letters of credit and deposits are required in certain limited circumstances. We have, from time to time, entered into agreements with value added resellers and other channel partners to reach ~~consumer and~~ enterprise markets for voice services. We have policies and procedures in place to evaluate the financial condition of these resellers prior to initiating service to the final customer. We are not able to predict changes in the financial stability of our customers. Any material changes in the financial status of any one or a particular group of customers may cause us to adjust our estimate of the recoverability of receivables and could have a material effect on our results of operation.

Property, Plant and Equipment

As a result of CenturyLink's acquisition of us, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition plus the estimated value of any associated legally or contractually required retirement obligations. Therefore, the allocated fair values of the assets represent their new basis of accounting in our consolidated financial statements. This resulted in adjustments to our property, plant and equipment accounts, including accumulated depreciation at the acquisition date. The adjustments related to CenturyLink's acquisition of us are described in Note 2—CenturyLink Merger and Note 8— Property, Plant and Equipment.

We record purchased and constructed property, plant and equipment at cost, plus the estimated value of any associated legally or contractually required retirement obligations. ~~Property,~~We depreciate our property, plant and equipment ~~is depreciated~~ using the straight-line method. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the expected lease term. Expenditures for maintenance and repairs are expensed as incurred. Interest is capitalized during the construction phase of network and other internal-use capital projects. Employee-related costs for construction of network and other internal use assets are also capitalized during the construction phase. Property, plant and equipment supplies used internally are carried at average cost, except for significant individual items ~~for~~ which ~~cost is based on specific identification.~~are carried at actual cost.

We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews take into account actual usage, the physical condition of our property, plant, and equipment, industry data, and other relevant factors. Our remaining useful life assessments ~~assess~~evaluate the possible loss in service value of assets that may precede the physical retirement. Assets shared among many customers may lose service value as those customers reduce their use of the asset. However, the asset is not retired until all customers no longer utilize the asset and we determine there is not alternative use for the asset.

We have asset retirement obligations associated with the legally or contractually required removal of a limited group of property, plant and equipment assets from leased properties and the disposal of certain hazardous materials present in our owned properties. When an asset retirement obligation is identified, usually in association with the acquisition of the asset, we record the fair value of the obligation as a liability. The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset. Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred.

We review long-lived tangible assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. For assessment purposes, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, absent a material change in operations. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its estimated fair value. Recoverability of the asset group to be held and used is assessed by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, we recognize an impairment charge for the amount by which the carrying amount of the asset group exceeds its estimated fair value.

Goodwill, Customer Relationships and Other Intangible Assets

Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, are initially recorded at estimated fair value. We amortize customer relationships primarily over an estimated life of 7 to 14 years, using straight-line methods, depending on the type of customer. We amortize capitalized software using the straight-line method over estimated lives ranging up to ~~seven~~7 years. We amortize our other intangible assets over an estimated life of ~~five~~5 years. Other intangible assets not arising from business combinations are initially recorded at cost. Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify the intangible asset as indefinite-lived and such intangible assets are not amortized.

Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line method over its estimated useful life. We have capitalized certain costs associated with software such as costs of employees ~~devoting time~~devoted to ~~the projects~~software development and external direct costs for materials and services. Costs associated with software to be used for internal purposes are expensed until the point at which the project has reached the development stage. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred. We review the remaining economic lives of our capitalized software annually. Capitalized software is included in other intangible assets, net, in our consolidated balance sheets.

We are required to assess goodwill for impairment at least annually, or more frequently, if an event occurs or circumstances change that would indicate an impairment may have occurred. We are required to write-down the value of goodwill in periods in which the carrying amount of the reporting unit equity exceeds the estimated fair value of the equity of the reporting unit, limited to the goodwill balance. The impairment assessment is performed at the reporting unit level. We have determined that our operations consist of 1 reporting unit, consistent with our determination that our business consists of 1 operating segment.

For more information, see Note 3—2—Goodwill, Customer Relationships and Other Intangible Assets.

Foreign Currency

Local currencies of foreign subsidiaries are the functional currencies for financial reporting purposes except for certain foreign subsidiaries, primarily in Latin America. For operations outside the United States that have functional currencies other than the U.S. dollar, assets and liabilities are translated to U.S. dollars at period-end exchange rates, and revenue, expenses and cash flows are translated using average monthly exchange rates. A significant portion of our ~~non-United States~~non-U.S. subsidiaries have either the British pound, the euro or the Brazilian real as the functional currency, each of which experienced significant fluctuations against the U.S. dollar during the years ended December 31, 2020, December 31, 2019 and December 31, ~~2018, the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017. Foreign~~2018. We recognize foreign currency translation gains and losses ~~are recognized~~ as a component of accumulated other comprehensive income (loss) in member's/stockholders' equity and in ~~the~~our consolidated statements of comprehensive income (loss) in accordance with accounting guidance for foreign currency translation. We consider the majority of our investments in our foreign subsidiaries to be long-term in nature. Our foreign currency transaction gains (losses), including where transactions with our non-United States subsidiaries are not considered to be long-term in nature, are included within other income (expense) in "Other, net" on ~~the~~our consolidated statements of operations.

Change in Accounting Policy

During the first quarter of 2020, we elected to change the presentation for taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, including federal and certain state Universal Service Fund (USF) regulatory fees, to present all such taxes on a net basis in our consolidated statements of operations. Prior to the first quarter of 2020, we assessed whether we were the primary obligor or principal taxpayer for the taxes assessed in each jurisdiction where we do business. The previous policy resulted in presenting such USF fees on a gross basis within operating revenue and cost of services and products, and all other significant taxes on a net basis. We applied this change in accounting policy retrospectively during the first quarter of 2020. As a result, we have decreased both operating revenue and cost of services and products by $398 million, $412 million and $381 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The change has no impact on operating income (loss) or net income (loss) in our consolidated statements of operations. Refer to our Form 8-K filing dated May 7, 2020 for further information.

We changed our policy to present such taxes on the net basis and believe the new policy is preferable because of the historical and potential future regulatory rate changes outside of our control resulting in significant variability in tax and fee revenue that are not indicative of our operating performance. We believe the net presentation provides the most useful and transparent financial information and improves comparability and consistency of financial results.

Recently Adopted Accounting Pronouncements

~~Leases~~

WeDuring 2020, we adopted Accounting Standards Update ~~("ASU"~~(“ASU”) 2016-13, "Measurement of Credit Losses on Financial Instruments.” During 2019, we adopted ASU 2016-02, "Leases (ASC 842)". During 2018, we adopted ASU 2018-02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” and ASU 2014-09, “Revenue from Contracts with Customers”.

Each of these is described further below.

Measurement of Credit Losses on Financial Instruments

We adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $3 million, net of tax effect of $2 million. Please refer to Note 5—Credit Losses on Financial Instruments for more information.

Leases

We adopted ASU 2016-02, "Leases (ASC 842)", as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842, and we ~~will~~have not ~~make~~made the new required lease disclosures for comparative periods beginning before January 1, 2019. Instead, we ~~have~~ recognized ASC 842's cumulative effect transition adjustment (discussed below) as of January 1, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things (i) allowed us to carry forward the historical lease classification; (ii) did not require us to reassess whether any expired or existing contracts are or contain leases under the new definition of a lease; and (iii) did not require us to reassess whether previously capitalized initial direct costs for any existing leases would qualify for capitalization under ASC 842. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We did not elect the hindsight practical expedient regarding the likelihood of exercising a lessee purchase option or assessing any impairment of right-of-use assets for existing leases.

On March 5, 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-01, ~~"Leases~~"Leases (ASC 842): Codification Improvements" ("ASU 2019-01"), effective for public companies for fiscal years beginning after December 15, 2019. The new ASU aligns the guidance in ASC 842 for determining fair value of the underlying asset by lessors that are not manufacturers or dealers, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in ASC 820, ~~"Fair~~"Fair ValueMeasurement") should be applied. More importantly, the ASU also exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. Early adoption permits public companies to adopt concurrent with the transition to ASC 842 on leases. We adopted ASU 2019-01 as of January 1, 2019.

Adoption of the new standards resulted in the recording of operating lease assets and operating lease liabilities of approximately $1.3 billion and $1.4 billion, respectively, as of January 1, 2019. The ~~standards did not materially~~difference is driven principally by the netting of our existing real estate restructure reserve against the corresponding operating lease right of use asset. In addition, we recorded a $39 million cumulative adjustment to accumulated deficit as of January 1, 2019, for the impact ~~our consolidated net earnings and had no impact on cash flows.~~of the new accounting standards. Our financial position for reporting periods beginning on or after January 1, 2019 is presented under the new guidance, as discussed above, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09 which replaces virtually all existing generally accepted accounting principles on revenue recognition with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the

entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs.

We adopted the new revenue recognition standard under the modified retrospective transition method. During the year ended December 31, 2018, we recorded a cumulative catch-up adjustment that increased our member's equity by $9 million, net of $3 million of income taxes.

See Note 4—3—Revenue Recognition for additional information.

Comprehensive Income (Loss)

In February 2018, the FASB issued ASU 2018-02, which provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (the "Act") (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. We early adopted and applied ASU 2018-02 in the first quarter of 2018. The adoption of ASU 2018-02 resulted in a $6 million decrease to member's equity and increase to accumulated other comprehensive income. See Note ~~18—~~17—Accumulated Other Comprehensive ~~Income (Loss)~~Loss for additional information.

~~Income Taxes~~

Recently Issued Accounting Pronouncements

In October ~~2016,~~2020, the FASB issued ASU ~~2016-16, “Intra-Entity Transfers~~2020-09, "Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762” (“ASU 2020-09”). This ASU amends and supersedes various SEC paragraphs to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The cumulative effect of ~~Assets Other Than Inventory” ("~~initially applying ASU ~~2016-16")~~. ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. After adoption of ASU 2016-16, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. We adopted ASU 2016-162020-09 on January ~~1, 2018. The adoption of ASU 2016-16 did~~4, 2021 will not have a material impact to our consolidated financial statements.

~~Goodwill Impairment~~

In ~~January 2017,~~March 2020, the FASB issued ASU ~~2017-04, “Simplifying the Test for Goodwill Impairment~~” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under prior rules, we were required to compute the fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge equals the excess2020-04, "Reference Rate Reform (Topic 848): Facilitation of the ~~reporting unit carrying value above its fair value, limited~~Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), designed to ease the burden of accounting for contract modifications related to the ~~amount~~global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. In January 2021, the FASB issued ASC 2021-01, “Reference Rate Reform (Topic 848): Scope” (“ASC 2021-01”). This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the transition. The ASU also amends the expedients and expectations in Topic 848 to capture the incremental consequences of ~~goodwill assigned~~the scope clarification and to tailor the ~~reporting unit.~~existing guidance to derivative instruments affected by the transition. As of December 31, 2020, we are evaluating the optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued and the related impact on our consolidated financial statements.

We elected to early adopt the provisions of ASU 2017-04 as of October 1, 2018. We applied ASU 2017-04 to determine the impairment of $3.7 billion recorded during the first quarter of 2019. See Note 3 - Goodwill, Customer Relationships and Other Intangible Assets for additional information.

~~Recently Issued Accounting Pronouncements~~

~~Financial Instruments~~

In ~~June 2016,~~January 2020, the FASB issued ASU ~~2016-13, "Measurement~~2020-01, "Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815" (“ASU 2020-01”). This ASU among other things clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of ~~Credit Losses on Financial Instruments". The primary impact of ASU 2016-13 for us is a change in the model~~accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the ~~recognition~~purposes of ~~credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it~~applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of December 31, 2020, we determined there was ~~probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments.~~

~~We are in the process of implementing the model for the recognition of credit losses related to our financial instruments, new processes and internal controls to assist us in the~~no application or discontinuation of the ~~new standard.~~equity method during the reporting periods. The cumulative effect of initially applying ~~the new standard~~ASU 2020-01 on January 1, ~~2020~~2021 will ~~not be material.~~

~~(2) CenturyLink Merger~~

On November 1, 2017, CenturyLink acquired Level 3 through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as CenturyLink's indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC. CenturyLink entered into this acquisitionhave no material impact to among other things, realize certain strategic benefits, including enhanced financial and operational scale, market diversification and an enhanced combined network. As a result of the acquisition, Level 3 shareholders received $26.50 per share in cash and 1.4286 shares of CenturyLink common stock, with cash paid in lieu of fractional shares, for each outstanding share of Level 3 common stock they owned at closing, subject to certain limited exceptions. CenturyLink issued this consideration with respect to all of the outstanding common stock of Level 3, with the exception of shares held by the dissenting common shareholders. CenturyLink shareholders owned approximately 51% and former Level 3 shareholders owned approximately 49% of the combined company.

In addition, each outstanding Level 3 restricted stock unit award granted prior to April 1, 2014 or granted to an outside director of Level 3 was converted into $26.50 in cash and 1.4286 shares of CenturyLink common stock (and cash in lieu of fractional shares) with respect to each Level 3 share covered by such award (the "Converted RSU Awards"). Each outstanding Level 3 restricted stock unit award granted on or after April 1, 2014 (other than those granted to outside directors of Level 3) was converted into a CenturyLink restricted stock unit award using a conversion ratio of 2.8386 to 1 as determined in accordance with a formula set forth in the merger agreement (“the Continuing RSU Awards”).

In connection with the closing of the Merger Agreement, we loaned $1.825 billion to CenturyLink in exchange for an unsecured demand note that bears interest at 3.5% per annum. The principal amount of such note is payable upon demand by Level 3 Parent but no later than November 1, 2020 and may be prepaid by CenturyLink at any time.

In connection with receiving approval from the U.S. Department of Justice to complete the Level 3 acquisition CenturyLink agreed to divest certain Level 3 network assets. All of those assets were sold by December 31, 2018. The proceeds from the sale of the metro network assets were included in the proceeds from sale of property, plant and equipment in our consolidated statements of cash flows. No gain or loss was recognized with these transactions.

CenturyLink recognized the assets and liabilities of Level 3 based on the fair value of the acquired tangible and intangible assets and assumed liabilities of Level 3 as of November 1, 2017, the consummation date of the acquisition, with the excess aggregate consideration recorded as goodwill. The estimation of such fair values and the estimation of lives of depreciable tangible assets and amortizable intangible assets required significant judgment. CenturyLink completed their final fair value determination during the fourth quarter of 2018. The final fair value determinations were different than those reflected in our consolidated financial ~~statements at~~statements.

In December ~~31, 2017.~~

~~As of October 31, 2018,~~2019, the ~~aggregate consideration exceeded~~FASB issued ASU 2019-12, "Simplifying the ~~aggregate estimated fair value of the acquired assets~~Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and ~~assumed liabilities by $11.2 billion, which we have recognized as goodwill. The goodwill is attributable~~interim calculations, and adds guidance to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. None of the goodwill associated with this acquisition is deductiblereduce complexity in accounting for income ~~tax purposes.~~taxes. ASU 2019-12 will become effective for us in the first quarter of fiscal 2021 and early adoption is permitted. We do not believe the adoption will have a significant impact on our consolidated financial statements.

~~The following is our assignment of the aggregate consideration:~~

Adjusted November 1, 2017
Balance as of December 31, 2017
Purchase Price Adjustments
Adjusted November 1, 2017
Balance as of October 31, 2018
(Dollars in millions)
Cash, accounts receivable and other current assets ⁽¹⁾
$ 3,317
(26 ) 3,291
Property, plant and equipment 9,311
157
9,468
Identifiable intangible assets ⁽²⁾

Customer relationships 8,964
(533 ) 8,431
Other 391
(13 ) 378
Other noncurrent assets 782
216
998
Current liabilities, excluding current maturities of long-term debt (1,461 ) (32 ) (1,493 )
Current maturities of long-term debt (7 ) —
(7 )
Long-term debt (10,888 ) —
(10,888 )
Deferred revenue and other liabilities (1,613 ) (114 ) (1,727 )
Goodwill 10,837
340
11,177
Total estimated aggregate consideration $ 19,633
(5 ) 19,628

~~_______________________________________________________________________________~~



~~(1)~~	~~Includes accounts receivable, which had a gross contractual value of $884 million on November 1, 2017.~~
~~(2)~~	~~The weighted-average amortization period for the acquired intangible assets is approximately 12.0 years.~~

~~Acquisition-Related Expenses~~

We have incurred acquisition-related expenses related to our activities surrounding the CenturyLink Merger. The table below summarizes our acquisition-related expenses, which consist of integration and transformation-related expenses, including severance and retention compensation expenses, and transaction-related expenses:

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
Transaction-related expenses —
1
—
18
Integration and transformation-related expenses 82
120
28
67
Total acquisition-related expenses $ 82
121
28
85

As part of the acquisition accounting on November 1, 2017, we also included in our goodwill approximately $1 million for certain restricted stock awards and $47 million related to transaction costs, all of which were contingent on the completion of the acquisition and had no benefit to CenturyLink after the acquisition.

~~(3)~~(2) Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, customer relationships and other intangible assets consisted of the following:


	As of December 31,
	2020		2019
	(Dollars in millions)
Goodwill	$	7,405	7,415
Customer relationships, less accumulated amortization of $2,246 and $1,538	$	6,156	6,865
Capitalized software, less accumulated amortization of $256 and $146	401		395
Trade names, less accumulated amortization of $83 and $57	48		74
Total other intangible assets, net	$	6,605	7,334

December 31,
2019 2018
(Dollars in millions)
Goodwill 7,415
11,119
Customer relationships, less accumulated amortization of $1,538 and $833 6,865
7,567
Other intangible assets subject to amortization:
Trade names, less accumulated amortization of $57 and $30 74
100
Capitalized software, less accumulated amortization of $146 and $67 395
310
Total other intangible assets, net 469
410

Our goodwill was derived from ~~CenturyLink's~~Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.

We assess our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to ~~write-down~~write down the value of goodwill ~~in periods in which~~only when our assessment determines the carrying value of equity of our reporting unit exceeds ~~the estimated~~its fair ~~value of equity, limited to the amount of goodwill.~~value. Our annual impairment assessment date for goodwill is October 31, at which date we ~~assessed~~assess goodwill at our reporting unit. In reviewing the criteria for reporting units, we have determined that we are 1 reporting unit.

At October 31, ~~2019,~~2020, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method. The market approach method includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value equal to the present value of all normalized cash flows after the projection period. As of October 31, ~~2019,~~2020, based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately ~~26%~~17%. We concluded that the goodwill was not impaired as of October 31, ~~2019.~~2020.

Because ~~CenturyLink's~~Lumen's low stock price was a trigger for impairment testing, we estimated the fair value of our operations using only the market approach in the quarter ended March 31, 2019. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry, which have historically supported a range of fair values of annualized revenue and EBITDA multiples between 2.1x and 4.9x and 4.9x and 9.8x, respectively. We selected a revenue and EBITDA multiple within this range. As of March 31, 2019, based on our assessments performed as described above, we concluded that the estimated fair value of equity was less than our carrying value of equity as of the date of our triggering event during the first quarter. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $3.7 billion in the quarter ended March 31, 2019.

The market multiples approach that we used in the quarter ended March 31, 2019 incorporated significant estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain cost synergies. In developing the market multiple, we also considered observed trends of our industry participants. Our assessment included many qualitative factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments.

At October 31, ~~2018,~~2019, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method. As of October 31, ~~2018,~~2019, based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately ~~16%~~26%. We concluded that the goodwill was not impaired as of October 31, ~~2018.~~

2019.

The following table shows the rollforward of goodwill from December 31, ~~2017~~2018 through December 31, ~~2019:~~2020:


	(Dollars in millions)
As of December 31, 2018	$	11,119
Goodwill Impairment	(3,708)
Effect of foreign currency exchange rate changes and other	4
As of December 31, 2019 (1)	7,415
Effect of foreign currency exchange rate changes and other	(10)
As of December 31, 2020 (1)	$	7,405

(1)Goodwill at December 31, 2020 and December 31, 2019 is net of accumulated impairment loss of $3.7 billion.

(Dollars in millions)
As of December 31, 2017 $ 10,837
Purchase accounting and other adjustments 340
Effect of foreign currency rate change (58 )
As of December 31, 2018 $ 11,119
Impairment (3,708 )
Effect of foreign currency rate change and other 4
As of December 31, 2019 $ 7,415

Our goodwill balance includes $16 million of goodwill that was allocated to us from CenturyLink associated with differences in the deferred state income taxes that CenturyLink expects to realize due to its consolidation of our results of operations into its state tax returns.

Total amortization expense for intangible assets for the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018 ~~the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017~~ was $838 million, $809 million ~~$798 million, $139 million~~ and ~~$168~~$798 million, respectively. As of December 31, ~~2019,~~2020, the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was ~~$16~~$16.6 billion. As of December 31, ~~2019,~~2020, the weighted average remaining useful lives of our finite-lived intangible assets was approximately 9 years in total; 109 years for customer relationships, 32 years for trade names, and 4 years for developed technology.

We estimate that total amortization expense for intangible assets for the ~~successor~~ years ending ~~2020~~2021 through ~~2024~~2025 will be as follows:


				(Dollars in millions)
	(Dollars in millions)
2020	$	833
2021	833		2021	$	843
2022	773		2022	783
2023	744		2023	755
2024	732		2024	743
2025			2025	679

~~(4)~~(3) Revenue Recognition

~~The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method:~~

Successor
Reported Balances as of December 31, 2018 Impact of ASC 606
ASC 605
Historical Adjusted Balances
(Dollars in millions)
Operating revenue $ 8,220
(5 ) 8,215
Cost of services and products (exclusive of depreciation and amortization) 3,937
—
3,937
Selling, general and administrative 1,354
52
1,406
Interest expense 509
(9 ) 500
Income tax expense 196
(12 ) 184
Net income 341
(36 ) 305

Disaggregated Revenue by Service Offering

The following ~~tabled~~tables provide disaggregation of revenue from contracts with customers based on service offering for the years ended December 31, 2020, 2019 and 2018. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards.


	Year Ended December 31, 2020
	Total Revenue		Adjustments for Non-ASC 606 Revenue (6)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and Data Services (1)	$	3,587	0	3,587
Transport and Infrastructure (2)	2,615		(703)	1,912
Voice and Collaboration (3)	1,423		0	1,423
Other (4)	100		(8)	92
Affiliate Services (5)	208		(208)	0
Total Revenue	$	7,933	(919)	7,014

Timing of revenue:
Goods transferred at a point in time				$	15
Services performed over time				6,999
Total revenue from contracts with customers				$	7,014

Year Ended December 31, 2019
Total Revenue
Adjustments for Non-ASC 606 Revenue⁽⁶⁾
Total Revenue from Contracts with Customers
(Dollars in millions)
IP and Data Services ⁽¹⁾
$ 3,888
—
3,888
Transport and Infrastructure ⁽²⁾
2,662
(704 ) 1,958
Voice and Collaboration ⁽³⁾
1,443
—
1,443
Other Revenue ⁽⁴⁾
12
(9 ) 3
Affiliate Revenue ⁽⁵⁾
180
(180 ) —
Total Revenue $ 8,185
(893 ) 7,292

Timing of revenue
  Goods transferred at a point in time $ —
  Services performed over time 7,292
  Total revenue from contracts with customers $ 7,292

Year Ended December 31, 2018
(Dollars in millions)
Total Revenue
Adjustments for Non-ASC 606 Revenue⁽⁶⁾
Total Revenue from Contracts with Customers
IP and Data Services ⁽¹⁾
$ 3,945
—
3,945
Transport and Infrastructure ⁽²⁾
2,701
(189 ) 2,512
Voice and Collaboration ⁽³⁾
1,464
—
1,464
Other Revenue ⁽⁴⁾
3
(3 ) —
Affiliate Revenue ⁽⁵⁾
107
(107 ) —
Total Revenue $ 8,220
(299 ) 7,921

Timing of revenue
  Goods transferred at a point in time $ —
  Services performed over time 7,921
  Total revenue from contracts with customers $ 7,921



~~(1)~~	~~Includes primarily VPN data network, IP, Ethernet, video and ancillary revenue.~~
~~(2)~~	~~Includes primarily wavelength, colocation and data center services, dark fiber, private line and professional services revenue.~~
~~(3)~~	~~Includes voice, Voice Over IP ("VoIP"), Collaboration.~~
~~(4)~~	~~Includes sublease rental income and IT services and managed services revenue.~~
~~(5)~~	~~Includes telecommunications and data services we bill to our affiliates.~~
~~(6)~~	~~Includes sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606.~~


	Year Ended December 31, 2019
	Total Revenue		Adjustments for Non-ASC 606 Revenue (6)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and Data Services (1)	$	3,655	0	3,655
Transport and Infrastructure (2)	2,544		(704)	1,840
Voice and Collaboration (3)	1,385		0	1,385
Other (4)	9		(9)	0
Affiliate Services (5)	180		(180)	0
Total Revenue	$	7,773	(893)	6,880

Timing of revenue:
Goods transferred at a point in time				$	0
Services performed over time				6,880
Total revenue from contracts with customers				$	6,880


	Year Ended December 31, 2018
	Total Revenue		Adjustments for Non-ASC 606 Revenue (6)	Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and Data Services (1)	$	3,728	0	3,728
Transport and Infrastructure (2)	2,591		(189)	2,402
Voice and Collaboration (3)	1,413		0	1,413
Other (4)	0		(3)	(3)
Affiliate Services (5)	107		(107)	0
Total Revenue	$	7,839	(299)	7,540

Timing of revenue:
Goods transferred at a point in time				$	0
Services performed over time				7,540
Total revenue from contracts with customers				$	7,540

(1)Includes primarily VPN data network, IP, Ethernet, video and ancillary revenue.

(2)Includes primarily wavelength, colocation and data center services, dark fiber, private line and professional services revenue.

(3)Includes voice, Voice Over IP ("VoIP"), Collaboration.

(4)Includes sublease rental income and IT services and managed services revenue.

(5)Includes telecommunications and data services we bill to our affiliates.

(6)Includes lease revenue which is not within the scope of ASC 606.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, ~~2019~~2020 and 2019:


	December 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables (1)	$	683	678
Contract assets	38		32
Contract liabilities	385		423

(1)Gross customer receivables of $728 million and $691 million, net of allowance for credit losses of $45 million and $13 million, as of December 31, ~~2018:~~

December 31, 2019 December 31, 2018
(Dollars in millions)
Customer receivables ⁽¹⁾
$ 678
712
Contract assets 32
19
Contract liabilities 423
393

~~_______________________________________________________________________________~~2020 and 2019, respectively.



~~(1)~~	~~Gross customer receivables of $691 million and $723 million, net of allowance for doubtful accounts of $13 million and $11 million, at December 31, 2019 and December 31, 2018, respectively.~~

Contract liabilities are consideration we have received from our customers in advance of providing the goods or services promised in the future. We defer recognizing this consideration until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the years ended December 31, ~~2019~~2020 and ~~December 31, 2018,~~2019, we recognized ~~$175~~$188 million and ~~$158~~$175 million, respectively, of revenue that was included in contract liabilities as of January 1, ~~2019~~2020 and January 1, ~~2018,~~2019, respectively.

Performance Obligations

As of December 31, ~~2019,~~2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are ~~unsatisfied (or~~ partially ~~satisfied)~~or wholly unsatisfied is approximately ~~$3.9~~$4.0 billion. We expect to recognize approximately 91% of this revenue through ~~2022,~~2023, with the balance recognized thereafter.

We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), or contracts that are classified as leasing arrangements that are not subject to ASC 606.

Contract Costs

The following tables provide changes in our contract acquisition costs and fulfillment costs for the years ended:

Year Ended December 31, 2019
Acquisition Costs Fulfillment Costs
(Dollars in millions)
Beginning of period balance $ 64
84
Costs incurred 60
103
Amortization (45 ) (66 )
End of period balance $ 79
121


	Year Ended December 31, 2020
	Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	79	121
Costs incurred	61		88
Amortization	(62)		(87)
End of period balance	$	78	122

Year Ended December 31, 2018
Acquisition Costs Fulfillment Costs
(Dollars in millions)
Beginning of period balance $ 13
14
Costs incurred 68
99
Amortization (17 ) (29 )
End of period balance $ 64
84


	Year Ended December 31, 2019
	Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	64	84
Costs incurred	60		103
Amortization	(45)		(66)
End of period balance	$	79	121

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of telecommunications services to customers, including labor and materials consumed for these activities.

Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average expected contract term of ~~12 to 60~~approximately 30 months for our business ~~customers and amortized~~customers. Amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond twelve months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.

~~(5)~~(4) Leases

~~Financial~~Our financial position for reporting periods beginning on or after January 1, 2019 ~~are~~is presented under the new accounting guidance, while prior ~~periods~~period amounts are not adjusted and continue to be reported in accordance with previous guidance, as discussed in Note 1—Background and Summary of Significant Accounting Policies.

We primarily lease to or from third parties various office facilities, ~~switching and~~ colocation facilities, ~~equipment~~dark fiber and ~~dark fiber.~~equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which

the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.

Some of our lease arrangements contain lease components, non-lease components (including ~~fixed payments, such as rent,~~common-area maintenance costs) and executory costs (including real estate taxes and insurance ~~costs) and non-lease components (including common-area maintenance~~ costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component.

Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease expense consisted of the following:


	Years Ended December 31,
	2020		2019
	(Dollars in millions)
Operating and short-term lease cost	$	440	388
Finance lease cost:
Amortization of right-of-use assets	19		14
Interest on lease liability	11		10
Total finance lease cost	30		24
Total lease cost	$	470	412



	~~Year Ended December 31, 2019~~
	~~(Dollars in millions)~~
~~Operating and short-term lease cost~~	~~388~~
~~Finance lease cost:~~
~~Amortization of right-of-use assets~~	14
~~Interest on lease liability~~	10
~~Total finance lease cost~~	24
~~Total lease cost~~	~~412~~

We lease various equipment, office facilities, retail outlets, switching facilities and other network sites. These leases, with few exceptions, provide for renewal options and escalations that are either fixed or based on the consumer price index. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. For the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018, ~~the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017,~~ our gross rental expense was $470 million, $412 million ~~$524 million, $95 million~~ and ~~$447~~$524 million, respectively. We also received sublease rental income for the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018 ~~the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017~~ of $9$8 million, $9 million ~~$2 million~~ and $7$9 million, respectively.

Supplemental consolidated balance sheet information and other information related to leases:

December 31
Leases (millions) Classification on the Balance Sheet 2019
Assets
Operating lease assets Operating lease assets $ 1,060
Finance lease assets Property, plant and equipment, net of accumulated depreciation 154
Total leased assets $ 1,214

Liabilities
Current
   Operating Current operating lease liabilities $ 249
   Finance Current portion of long-term debt 11
Noncurrent
   Operating Noncurrent operating lease liabilities 854
   Finance Long-term debt 160
Total lease liabilities $ 1,274

Weighted-average remaining lease term (years)
   Operating leases 7.5
   Finance leases 13.1
Weighted-average discount rate
   Operating leases 6.19 %
   Finance leases 5.60 %


		Years Ended December 31,
Leases	Classification on the Balance Sheet	2020			2019
		(Dollars in millions)
Assets
Operating lease assets	Other, net	$	1,091		1,060
Finance lease assets	Property, plant and equipment, net of accumulated depreciation	235			154
Total leased assets		$	1,326		1,214

Liabilities
Current
Operating	Current operating lease liabilities	$	241		249
Finance	Current maturities of long-term debt	14			11
Noncurrent
Operating	Operating lease liabilities	903			854
Finance	Long-term debt	241			160
Total lease liabilities		$	1,399		1,274

Weighted-average remaining lease term (years)
Operating leases		7.2			7.5
Finance leases		12.5			13.1
Weighted-average discount rate
Operating leases		5.85		%	6.19	%
Finance leases		5.01		%	5.60	%

Supplemental unaudited consolidated cash flow statement information related to leases:


	Years Ended December 31,
	2020		2019
	(Dollars in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	350	387
Operating cash flows for finance leases	13		11
Financing cash flows for finance leases	18		5
Supplemental lease cash flow disclosures:
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	151	206
Right-of-use assets obtained in exchange for new finance lease liabilities	100		12



	~~Year Ended December 31, 2019~~
	~~(Dollars in millions)~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows from operating leases~~	~~387~~
~~Operating cash flows from finance leases~~	11
~~Financing cash flows from finance leases~~	5
~~Supplemental lease cash flow disclosures~~
~~Operating lease right-of-use assets obtained in exchange for new operating lease liabilities~~	~~206~~
~~Right-of-use assets obtained in exchange for new finance lease liabilities~~	12

As of December 31, ~~2019,~~2020, maturities of lease liabilities were as follows:


	Operating Leases		Finance Leases
	(Dollars in millions)
2021	$	297	26
2022	249		25
2023	213		26
2024	154		26
2025	107		27
Thereafter	410		218
Total lease payments	1,430		348
Less: interest	(286)		(93)
Total	1,144		255
Less: current portion	(241)		(14)
Long-term portion	$	903	241

Operating Leases Finance Leases
(Dollars in millions)
2020 $ 276
21
2021 231
17
2022 199
18
2023 166
18
2024 113
18
Thereafter 437
154
Total lease payments 1,422
246
Less: interest (319 ) (75 )
Total 1,103

$ 171
Less: current portion (249 ) (11 )
Long-term portion $ 854
$ 160

As of December 31, ~~2019,~~2020, we had no material operating or finance leases that had not yet commenced.

Operating Lease Income

We lease various ~~IRUs,~~ office facilities, ~~switching~~colocation facilities and ~~other network sites~~dark fiber to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations.

For the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018 ~~the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017,~~ our gross rental income was $760 million or 10%, $798 million or 10%, ~~$192 million or 2%, $28 million or 2%,~~ and ~~$138~~$192 million or 2% respectively, of our operating revenue.

~~Disclosures under ASC 840~~

~~We adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption.~~

~~The future annual minimum payments under capital lease agreements as of December 31, 2018 were as follows:~~

Future Minimum Payments
(Dollars in millions)
Capital lease obligations:
2019 $ 16
2020 15
2021 16
2022 16
2023 17
2024 and thereafter 164
Total minimum payments 244
Less: amount representing interest and executory costs (81 )
Present value of minimum payments 163
Less: current portion (6 )
Long-term portion $ 157

~~At December 31, 2018,~~(5) Credit Losses on Financial Instruments

In accordance with ASC 326, "Financial Instruments - Credit Losses", we aggregate financial assets with similar risk characteristics to align our ~~future rental commitments~~expected credit losses with the credit quality or deterioration over the life of the asset. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized cost primarily consist of accounts receivable.

In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms, and their historical and expected credit loss patterns.

Prior to the adoption of the new credit loss standard, the allowance for ~~operating leases were~~doubtful accounts receivable reflected our best estimate of probable losses inherent in our receivable portfolio determined based on historical experience, specific allowances for known troubled accounts, and other currently available evidence.

We implemented the new standard effective January 1, 2020, using a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our use of historical loss experience as ~~follows:~~a percentage of accounts receivable. We measure our historical loss period based on the average days to move accounts receivable to credit loss. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to update our current loss rate, which as noted below has increased due to an increase in historic loss experience and weakening economic forecasts. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. To determine our allowance for credit losses, we combine the historical, current, and expected credit loss rates and apply them to our period end accounts receivable.

Operating Leases
(Dollars in millions)
2019 $ 396
2020 259
2021 219
2022 164
2023 137
2024 and thereafter 613
Total future minimum payments ⁽¹⁾
$ 1,788
If there is a deterioration of a customer's financial condition or if future default rates in general differ from currently anticipated default rates (including changes caused by COVID-19), we may need to adjust the allowance for credit losses, which would affect earnings in the period that adjustments are made.

The assessment of the correlation between historical observed default rates, current conditions, and forecasted economic conditions requires substantial judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions, and forecast of economic conditions may also not be representative of the customers' actual default experience in the future.

The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:


~~(1)~~	~~Minimum payments have not been reduced by minimum sublease rentals of $29 million due~~(Dollars in millions)
Beginning balance at January 1, 2020 (1)	$	18
Provision for expected losses	41
Write-offs charged against the ~~future under non-cancelable subleases.~~allowance	(23)
Recoveries collected	11
Foreign currency exchange rate changes adjustment	(2)
Ending balance at December 31, 2020	$	45

______________________________________________________________________

(1)The beginning balance includes the cumulative effect of the adoption of the new credit loss standard.

For the year ended December 31, 2020, we increased our allowance for credit losses for our accounts receivable portfolio due to an increase in historical and expected loss experience in certain classes of aged balances, which we believe are predominantly attributable to the current COVID-19 induced economic slowdown. The increases were partially offset by recoveries of amounts previously written off.

(6) Long-Term Debt

The following chart reflects our consolidated long-term debt, including finance leases, unamortized discounts and premiums, net and unamortized debt issuance costs, but excluding intercompany debt:

Interest Rates Maturities December 31,
2019 December 31,
2018
(Dollars in millions)
Level 3 Parent, LLC
Senior Notes 5.750% 2022 $ —
600
Subsidiaries
Level 3 Financing, Inc.
Senior Secured Debt:⁽¹⁾

Senior Notes ⁽²⁾
3.400% - 3.875% 2027 - 2029 1,500
—
Tranche B 2024 Term Loan ⁽³⁾
LIBOR + 2.25% 2024 —
4,611
Tranche B 2027 Term Loan ⁽⁴⁾
LIBOR + 1.75% 2027 3,111
—
Senior Notes and other debt:
Senior Notes ⁽²⁾
4.625% - 6.125% 2021 - 2027 5,515
5,315
Finance Leases Various Various 171
163
Unamortized premiums, net 104
155
Unamortized debt issuance costs (34 ) —
Total long-term debt 10,367
10,844
Less current maturities (11 ) (6 )
Long-term debt, excluding current maturities $ 10,356
10,838


	Interest Rates (1)	Maturities (1)	December 31, 2020		December 31, 2019
			(Dollars in millions)
Level 3 Financing, Inc.
Senior Secured Debt: (2)
Senior notes	3.400% - 3.875%	2027 - 2029	$	1,500	1,500
Tranche B 2027 Term Loan (3)	LIBOR + 1.750%	2027	3,111		3,111
Senior Notes and Other Debt:
Senior notes (4)	3.625% - 5.375%	2024 - 2029	5,515		5,515
Finance leases	Various	Various	255		171
Unamortized premiums, net			60		104
Unamortized debt issuance costs			(54)		(34)
Total long-term debt			10,387		10,367
Less current maturities			(14)		(11)
Long-term debt, excluding current maturities			$	10,373	10,356

(1)As of December 31, 2020



~~(1)~~	~~See the remainder of this Note for a description of certain parent and subsidiary guarantees and liens securing this debt.~~
~~(2)~~	As described further below, the notes are fully and unconditionally guaranteed by certain affiliates of Level 3 Financing, Inc., including Level 3 Parent, LLC and Level 3 Communications, LLC. (subject in certain cases to pending regulatory approvals).
~~(3)~~	~~The Tranche B 2024 Term Loan had an interest rate of 4.754% as of December 31, 2018.~~
~~(4)~~	~~The Tranche B 2027 Term Loan had an interest rate of 3.549% as of December 31, 2019.~~

(2)See the remainder of this Note for a description of certain parent and subsidiary guarantees and liens securing this debt.

(3)The Tranche B 2027 Term Loan had an interest rate of 1.897% as of December 31, 2020 and 3.549% as of December 31, 2019.

(4)This debt is guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

New Issuances

On August 12, 2020, Level 3 Financing, Inc. issued $840 million aggregate principal amount of its 3.625% Senior Notes due 2029 (the "2029 Notes"). The net proceeds from the offering were used to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The 2029 Notes are guaranteed by Level 3 Parent, LLC and ~~Repayments~~Level 3 Communications, LLC.

On June 15, 2020, Level 3 Financing, Inc. issued $1.2 billion aggregate principal amount of its 4.250% Senior Notes due 2028 (the "2028 Notes"). The net proceeds from the offering were used to redeem certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. The 2028 Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

On November 29, 2019, Level 3 Financing, Inc. issued $750 million of ~~3.4%~~its 3.400% Senior Secured Notes due 2027 and $750 million of its 3.875% Senior Secured Notes due 2029. The net proceeds from the offering ~~together with cash on hand~~ were used to redeem ~~$1.5 billion~~certain of ~~the $4.611 billion Tranche B 2024~~its outstanding Term Loan ~~that was repaid on November 29, 2019. On November 29, 2019~~indebtedness. See "—Senior Secured Term Loan" below. These notes are guaranteed by Level 3 ~~Financing, Inc. entered into an amendment to~~Parent, LLC and several of its credit agreement to incur $3.111 billion in aggregate borrowing under the agreement through a new Tranche B 2027 Term Loan. The net proceeds of the Tranche B 2027 Term Loan, together with the proceeds of the Senior Secured Notes and cash on hand, were used to pre-pay in full the Tranche B 2024 Term Loan.material domestic subsidiaries.

On September 25, 2019, Level 3 Financing, Inc. issued $1.0 billion aggregate principal amount of its 4.625% Senior Notes due 2027. The net proceeds from the offering ~~together with cash on hand~~ were used to redeem ~~during~~certain of its outstanding senior note indebtedness. See "—Redemption of Senior Notes" below. These notes are guaranteed by Level 3 Parent, LLC and several of its material domestic subsidiaries.

Redemption of Senior Notes

On September 11, 2020, Level 3 Financing, Inc. redeemed the remaining $140 million aggregate principal amount of its outstanding 5.625% Senior Notes due 2023 and all $700 million aggregate principal amount of its 5.125% Senior Notes due 2023.

On July 15, 2020, Level 3 Financing, Inc. redeemed the remaining $840 million aggregate principal amount of its outstanding 5.375% Senior Notes due 2022 and $360 million aggregate principal amount of its outstanding 5.625% Senior Notes due 2023.

During the fourth quarter of 2019, ~~all of~~ Level 3 Financing, Inc.'s redeemed the remaining $240 million ~~outstanding~~aggregate principal amount of its outstanding 6.125% Senior Notes due 2021, all $600 million aggregate principal amount of Level 3 Parent, LLC's ~~$600 million~~ outstanding ~~principal amount of 5.75%~~5.750% Senior Notes due 2022 and $160 million ~~of Level 3 Financing, Inc.'s $1 billion in outstanding~~aggregate principal amount of its outstanding 5.375% Senior Notes due 2022.

On August 25, 2019, Level 3 Financing, Inc. redeemed $400 million aggregate principal amount of its outstanding 6.125% Senior Notes due 2021.

For the year ended December 31, 2020 and 2019, redemptions of senior notes resulted in a gain of $27 million and $5 million, respectively.

Interest Expense

Interest expense includes interest on total long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest:


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
Interest expense:
Gross interest expense	$	416	517	510
Capitalized interest	(23)		(15)	(1)
Total interest expense	$	393	502	509

Senior Secured Term Loan

AtAs of December 31, ~~2019,~~2020, Level 3 Financing, Inc. owed ~~$3.111~~$3.1 billion under ~~the~~a senior secured Tranche B 2027 Term Loan, which matures on March 1, 2027. The Tranche B 2027 Term Loan carries an interest rate, in the case of base rate borrowings, equal to (i) the greater of the Prime Rate, the Federal Funds Effective Rate plus 50 basis points, or LIBOR plus 100 basis points (with all such terms and calculations as defined or further specified in the credit agreement) plus (ii) 0.75% per annum. Any Eurodollar borrowings under the Tranche B 2027 Term Loan bear interest at LIBOR plus 1.75% per annum.

The Tranche B 2027 Term Loan requires certain specified mandatory prepayments in connection with certain asset sales and other transactions, subject to certain significant exceptions. The obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan were, subject to certain exceptions, secured by certain assets of Level 3 Parent, LLC and certain of its material domestic ~~telecommunication~~ subsidiaries. Also, Level 3 Parent, LLC and certain of its subsidiaries have guaranteed the obligations of Level 3 Financing, Inc. under the Tranche B 2027 Term Loan. Additional secured term loans or revolving credit may in the future be extended to Level 3 Financing, Inc. under its credit agreement dated as of March 13, 2007, as amended through November 29, 2019.

On November 29, 2019, the proceeds from the Senior Secured Notes due 2027 and Senior Secured Notes due 2029 together with cash on hand were used to redeem $1.5 billion of the $4.6 billion Tranche B 2024 Term Loan that was repaid on November 29, 2019. On November 29, 2019 Level 3 Financing, Inc. entered into an amendment to its credit agreement to incur $3.1 billion in aggregate borrowing under the agreement through a new Tranche B 2027 Term Loan. The net proceeds of the Tranche B 2027 Term Loan, together with the proceeds of the Senior Secured Notes and cash on hand, were used to redeem in full the Tranche B 2024 Term Loan.

Senior Notes

All of the notes of Level 3 Financing, Inc. reflected in the table above pay interest semiannually and allow for the redemption of the notes at the option of the issuer, in whole or in part, (i) pursuant to a fixed schedule of pre-established redemption prices, (ii) pursuant to a “make whole” redemption price or (iii) under certain other specified limited circumstances in connection with certain sales of equity securities. For purposes of early redemption, all of the notes reflected in the table above, excluding the Senior Notes due 2025 and Senior Notes due 2026, allow for the redemption of the notes at the option of the issuer upon not less than 10 or more than 60 ~~days’~~days prior notice. For purposes of early redemption, the Senior Notes due 2025 and Senior Notes due 2026, allow for the redemption of the notes at the option of the issuer upon not less than 30 or more than 60 days prior notice. For specific details of these features and requirements, including the applicable premiums and timing, refer to the indentures ~~for~~setting forth the specific terms of each respective series of the senior notes ~~in connection with the original issuances.~~of Level 3 Financing, Inc.

~~Debt Issuance Costs~~

~~In connection with debt issuances, we deferred costs of $34 million for the year ended December 31, 2019. For the year ended December 31, 2018 we deferred 0 costs in connection with debt issuances.~~

~~Aggregate Maturities of~~ Long-Term Debt

Maturities

Set forth below is the aggregate principal amount of our long-term debt ~~and finance leases~~as of December 31, 2020 (excluding unamortized premiums, net and unamortized debt issuance costs) maturing during the following years:

(Dollars in millions)⁽¹⁾
2020 $ 11
2021 8
2022 850
2023 1,210
2024 911
2024 and thereafter 7,307
Total long-term debt $ 10,297


	(Dollars in millions)
2021	$	14
2022	14
2023	15
2024	916
2025	817
2026 and thereafter	8,605
Total long-term debt	$	10,381



~~(1)~~	~~Actual principal paid in any year may differ due to the possible future refinancing of outstanding debt or the issuance of new debt.~~

Letters of Credit

It is customary for us to use various financial instruments in the normal course of business. These instruments include letters of credit. Letters of credit are conditional commitments issued on our behalf in accordance with specified terms and conditions. As of December 31, ~~2019~~2020 and ~~2018,~~2019, we had outstanding letters of credit or other similar obligations of approximately ~~$23~~$18 million and ~~$30~~$23 million, respectively, of which $11 million and $18 million ~~and $24 million are~~were collateralized by ~~cash that is reflected on the consolidated balance sheets as~~ restricted ~~cash and securities.~~cash. We do not believe exposure to loss related to our letters of credit is material.

Covenants

The term loan and senior notes of Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with their affiliates including ~~CenturyLink~~Lumen Technologies and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, in connection with a "change of control" of Level 3 Parent, LLC, or Level 3 Financing, Inc., Level 3 Financing will be required to offer to repurchase or repay certain of its long-term debt at a price of 101% of the principal amount of debt repurchased or repaid, plus accrued and unpaid interest.

The debt covenants applicable to us and our subsidiaries could materially adversely affect their ability to operate or expand their respective businesses, to pursue strategic transactions, to transfer cash to or engage in transactions with their unconsolidated affiliates, or to otherwise pursue their plans and strategies.

Certain of ~~CenturyLink's~~Lumen's and our debt instruments contain cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.

Our ability to comply with the financial covenants in our debt instruments could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond our control.

Compliance

AtAs of December 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we believe we were in compliance with the financial covenants contained in our debt agreements in all material respects.

Subsequent Event

On January 13, 2021, Level 3 Financing, Inc. issued $900 million aggregate principal amounts of its 3.750% Sustainability-Linked Senior Notes due 2029 (the "Sustainability-Linked Notes"). The net proceeds were used, together with cash on hand, to redeem all $900 million aggregate principal amount of Level 3 Financing, Inc.'s outstanding 5.375% Senior Notes due 2024 (the "5.375% Notes") on February 12, 2021. Following this redemption, there were no bonds outstanding for the 5.375% Notes. The Sustainability-Linked Notes are (i) guaranteed by Level 3 Parent, LLC and (ii) expected to be guaranteed by Level 3 Communications, LLC, upon the receipt of all requisite material governmental authorizations.

(7) Accounts Receivable

The following table presents details of our accounts receivable balances:


	Years Ended December 31,
	2020		2019
	(Dollars in millions)
Trade receivables	$	570	529
Earned and unbilled receivables	158		151
Total accounts receivable	728		680
Less: allowance for credit losses	(45)		(13)
Accounts receivable, less allowance	$	683	667

December 31,
2019 2018
(Dollars in millions)
Trade receivables 529
533
Earned and unbilled receivables 151
177
Other —
13
Total accounts receivable 680
723
Less: allowance for doubtful accounts ⁽¹⁾
(13 ) (11 )
Accounts receivable, less allowance 667
712



~~(1)~~	~~CenturyLink's acquisition of us caused our assets and liabilities to be recognized at fair value and resulted in the allowance for doubtful accounts being reset as of the date of acquisition.~~

We are exposed to concentrations of credit risk from our customers and other telecommunications service providers. We generally do not require collateral to secure our receivable balances.

The following table presents details of our allowance for ~~doubtful accounts:~~credit losses:


	Beginning Balance		Additions	Deductions	Ending Balance
	(Dollars in millions)
2020 (1)	$	13	41	(9)	45
2019	11		24	(22)	13
2018	3		18	(10)	11

Beginning Balance Additions Deductions Ending Balance
(Dollars in millions)
2019 11
24
(22 ) 13
2018 3
18
(10 ) 11
December 31, 2017 (Successor) —
3
—
3
October 31, 2017 (Predecessor) 29
16
(12 ) 33
(1)On January 1, 2020, we adopted ASU 2016-13 "Measurement of Credit Losses on Financial Instruments" and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $3 million, net of $2 million tax effect. This adjustment is included within "Deductions". Please refer to Note 5—Credit Losses on Financial Instruments for more information.

(8) Property, Plant and Equipment

Net property, plant and equipment is composed of the following:

Depreciable Lives As of December 31,
2019 2018
(Dollars in millions)
Land N/A 336
339
Fiber conduit and other outside plant⁽¹⁾
15-45 years 5,226
5,262
Central office and other network electronics⁽²⁾
7-10 years 2,687
1,986
Support assets⁽³⁾
3-30 years 2,419
2,327
Construction-in-progress⁽⁴⁾
N/A 1,093
560
Gross property, plant and equipment 11,761
10,474
Accumulated depreciation⁽⁵⁾
(1,825 ) (1,021 )
Net property, plant and equipment 9,936
9,453


	Depreciable Lives	As of December 31,
		2020		2019
		(Dollars in millions)
Land	N/A	$	320	336
Fiber conduit and other outside plant (1)	15-45 years	6,186		5,226
Central office and other network electronics (2)	7-10 years	3,388		2,687
Support assets (3)	3-30 years	2,722		2,419
Construction-in-progress (4)	N/A	720		1,093
Gross property, plant and equipment		13,336		11,761
Accumulated depreciation		(2,818)		(1,825)
Net property, plant and equipment		$	10,518	9,936

(1)Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.



~~(1)~~	~~Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.~~
~~(2)~~	~~Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.~~
~~(3)~~	~~Support assets consist of buildings, data centers, computers and other administrative and support equipment.~~
~~(4)~~	~~Construction in progress includes construction and property of the aforementioned categories that has not been placed in service as it is still under construction.~~
~~(5)~~	~~CenturyLink's acquisition of us caused our assets and liabilities to be recognized at fair value and resulted in accumulated depreciation being reset as of the date of acquisition.~~

(2)Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.

(3)Support assets consist of buildings, data centers, computers and other administrative and support equipment.

(4)Construction in progress includes construction and property of the aforementioned categories that has not been placed in service as it is still under construction.

Depreciation expense was $851 million, $804 million and $906 million for the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018, ~~respectively, $143 million for the successor period ended December 31, 2017and$850 million for the predecessor period ended October 31, 2017.~~respectively.

Asset Retirement Obligations

AtAs of December 31, ~~2019~~2020 and ~~2018,~~2019, our asset retirement obligations consisted primarily of restoration requirements for leased facilities. We recognize our estimate of the fair value of our asset retirement obligations in the period incurred in other long-term liabilities. The fair value of the asset retirement obligation is also capitalized as property, plant and equipment and then depreciated over the estimated remaining useful life of the associated asset.

The following table provides asset retirement obligation activity:


	Successor							Predecessor			Years Ended December 31,
	Year Ended December 31, 2019			Year Ended December 31, 2018		Period Ended December 31, 2017		Period Ended October 31, 2017			2020		2019	2018
	(Dollars in millions)										(Dollars in millions)
Balance at beginning of period	$	105		45		45		89		Balance at beginning of period	$	113	105	45
Accretion expense	5			5		1		12		Accretion expense	6		5	5
Purchase price adjustments ⁽¹⁾	—			58		—		—		Purchase price adjustments (1)	0		0	58
Liabilities settled	(12		)	(13	)	(1	)	(7	)	Liabilities settled	(7)		(12)	(13)
Revision in estimated cash flows	15			10		—		—		Revision in estimated cash flows	10		15	10
Balance at end of period	$	113		105		45		94		Balance at end of period	$	122	113	105

(1)These liabilities relate to purchase price adjustments that occurred during 2018 from Lumen's acquisition of us.



~~(1)~~	~~These liabilities relate to purchase price adjustments that occurred during 2018 from CenturyLink's acquisition of us.~~

(9) Severance ~~and Leased Real Estate~~

Periodically, we reduce our workforce and accrue liabilities for the related severance costs. These workforce reductions result primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workload demands due to the loss of customers purchasing certain services.

We report severance liabilities within accrued expenses and other liabilities - salaries and benefits in our consolidated balance sheets and report severance expenses in selling, general and administrative expenses in our consolidated statements of operations.

Changes in our accrued liabilities for severance expenses were as follows:


	Severance
	(Dollars in millions)
Balance at December 31, 2018	$	19
Accrued to expense	6
Payments, net	(16)
Balance at December 31, 2019	9
Accrued to expense	37
Payments, net	(23)
Balance at December 31, 2020	$	23

Severance
(Dollars in millions)
Balance at December 31, 2017 (Successor) $ 5
Accrued to expense 33
Payments, net (19 )
Balance at December 31, 2018 $ 19
Accrued to expense 6
Payments, net (16 )
Balance at December 31, 2019 $ 9

We recognized liabilities to reflect our estimates of the fair values of the existing lease obligations for real estate which we have ceased using, net of estimated sublease rentals. In accordance with transitional guidance under the new lease standard (ASC 842), the existing lease obligation of $47 million as of January 1, 2019 has been netted against the operating lease right of use assets at adoption. For additional information, see Note 5—Leases to our consolidated financial statements in Item 8 of Part II of this report.

(10) Employee Benefits

Defined Contribution Plans

~~We offer eligible employees the opportunity to participate in~~Lumen Technologies sponsors a qualified defined contribution ~~retirement~~ plan ~~subject~~covering substantially all of our employees. Under this plan, employees may contribute a percentage of their annual compensation up to certain maximums, as defined by the ~~provisions of Section 401(k) of~~plan and by the Internal Revenue ~~Code, as amended~~Service ("~~401(k) Plan"~~IRS"). ~~Each employee is eligible to contribute, on~~Currently, we match a ~~tax deferred basis, a portion~~percentage of ~~annual earnings generally not to exceed $19,000 in 2019, $18,500 in 2018 and $18,000 in 2017. We match 100% of a participant’s pre-tax and/or Roth~~our employee's contributions ~~of the first 1% of the participant’s eligible compensation plus 60% of the same contributions that exceed 1% up to a maximum of 6% of the participant’s eligible compensation.~~

Effective December 31, 2017, the Level 3 Communications, Inc. 401(k) Profit Sharing Plan and Trust assets merged with the CenturyLink, Inc. Dollars & Sense 401(k) Plan. Those employees eligible to contribute to the Level 3 Plan at December 31, 2017 were automatically enrolled in the CenturyLink Plan at January 1, 2018. Provisions of the Level 3 Plan document regarding eligibility, participant and employer contributions, vesting, and benefit payments did not materially change and protected provisions applicable to Level 3 and its predecessor Plans remained grandfathered as required by law.

Prior to the CenturyLink acquisition on November 1, 2017, our matching contributions were made with Level 3 common stock based on the closing stock price on each pay date. After our acquisition, matching contributions were made in cash. We ~~made 401(k) Plan matching contributions of $7~~recognized $29 million, $29 million and $26 million in expense related to this plan for the ~~successor period~~years ended December 31, ~~2017~~2020, 2019, and $30 million for the predecessor period ended October 31, 2017. Matching contributions recorded as compensation expense in cost of services totaled $1 million for the successor period ended December 31, 2017 and $4 million for the predecessor period ended October 31, 2017. Matching contributions included in selling, general and administrative expenses totaled $5 million for the successor period ended December 31, 2017~~and $26 million for the predecessor period ended October 31, 2017.~~2018, respectively.

Matching contributions for the year ended December 31, 2019 were $29 million, of which $11 million was recognized in cost of sales and $18 million in selling, general and administrative costs. Matching contributions for the year ended December 31, 2018 were $26 million, of which $10 million was recognized in cost of sales and $16 million in selling, general and administrative costs.

Other defined contribution plans we sponsored are individually not significant. On an aggregate basis, the expense we recorded relating to these plans was approximately $8 million, $6 million and $5 million for the years ended December 31, 2020, 2019, and 2018, ~~respectively, $1 million for the successor period ended December 31, 2017 and $5 million for the predecessor period ended October 31, 2017.~~respectively.

Defined Benefit Plans

We have certain contributory and non-contributory employee pension plans, which are not significant to our financial position or operating results. We recognize in our balance sheet the funded status of our defined benefit post-retirement plans, which is measured as the difference between the fair value of the plan assets and the plan benefit obligations. We are also required to recognize changes in the funded status within accumulated other comprehensive income, net of tax, to the extent such changes are not recognized in earnings as components of periodic net benefit cost. The fair value of the plan assets was ~~$122~~$128 million and ~~$133~~$122 million as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The total plan benefit obligations were ~~$140~~$161 million and ~~$144~~$140 million as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively. Therefore, the net unfunded status was ~~$18~~$33 million and ~~$11~~$18 million as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

(11) ~~Share-Based~~Share-based Compensation

Prior to our acquisition by CenturyLink on November 1, 2017, we recorded share-based compensation expense for our performance restricted stock units, restricted stock units, 401(k) matching contributions. Due to CenturyLink's acquisition of us, we now record share-based compensation expense that is allocated to us from CenturyLink. Based on many factors that affect the allocation, the amount of share-based compensation expense recorded at CenturyLink and ultimately allocated to us may fluctuate.

Share-based compensation expenses ~~were~~are included in cost of services and products, and selling, general, and administrative expenses in our consolidated statements of operations. ~~During our predecessor period~~

For the years ended December 31, 2020, 2019 and ~~years,~~2018, we recognized compensation expense relating to awards granted to our employees under the Level 3 Communications, Inc. Stock Incentive Plan, as amended (the "Stock Plan"). The Stock Plan provided for accelerated vesting of stock awards upon retirement if an employee met certain age and years of service requirements and certain other requirements. Under the Stock Compensation guidance, if an employee meets the age and years of service requirements under the accelerated vesting provision, the award would be expensed at grant or expensed over the period from the grant date to the date the employee meets the requirements, even if the employee has not actually retired.

~~Our total~~recorded share-based compensation expense ~~was~~of approximately $78 million, $85 million and $105 million, ~~for the years ended December 31, 2019 and 2018, respectively, $26 million for the successor period ended December 31, 2017~~respectively.

~~and $132 million for the predecessor period ended October 31, 2017.~~

(12) Fair Value ~~Disclosure~~of Financial Instruments

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, note receivable-affiliate and long-term debt, excluding finance lease and other obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their fair values.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB.

We determined the fair values of our long-term debt, including the current portion, based primarily on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates.

The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows:



Input Level						Description of Input
Level 1						Observable inputs such as quoted market prices in active markets.
Level 2						Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3						Unobservable inputs in which little or no market data exists.

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance leases, as well as the input level used to determine the fair values indicated below:


		As of December 31,
		2020			2019
	Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value
		(Dollars in million)
Liabilities-Long-term debt, excluding finance leases	2	$	10,132	10,340	10,196	10,244

As of December 31,
2019 2018
Input Level Carrying Amount Fair Value Carrying Amount Fair Value
(Dollars in million)
Liabilities-Long-term debt, excluding finance leases 2 10,196
10,244
10,681
10,089

(13) Income Taxes

~~On December 22, 2017,~~The components of the ~~Tax Cuts and Jobs Act (the "Tax Act") was signed into law. The Tax Act reduces the U.S. corporate~~ income tax ~~rate from a maximum of 35% to 21% for all corporations, effective January 1, 2018, and makes certain changes to U.S. taxation of income earned by foreign subsidiaries, capital expenditures, interest~~ expense ~~and various other items.~~are as follows:


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
Income tax expense was as follows:
Federal
Current	$	0	12	0
Deferred	162		186	199
State and local
Current	22		4	(9)
Deferred	42		41	28
Foreign
Current	19		17	30
Deferred	(24)		(5)	(52)
Total income tax expense	$	221	255	196

As a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, we revalued our net deferred tax assets at December 31, 2017 and recognized a provisional $195 million tax expense in our consolidated statement of operations for the successor period ended December 31, 2017. As a result of finalizing our provisional amount recorded in 2017, we recorded an increase to this amount of $92 million in 2018.

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
Income tax expense was as follows:
Federal
Current $ 12
—
—
—
Deferred 186
199
231
193
State
Current 4
(9 ) 2
7
Deferred 41
28
6
16
Foreign
Current 17
30
4
39
Deferred (5 ) (52 ) (9 ) 13
Total income tax expense $ 255
196
234
268


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
Income tax expense was allocated as follows:
Income tax expense in the consolidated statements of operations:
Attributable to income	$	221	255	196
Member's equity:
Tax effect of the change in accumulated other comprehensive loss	$	43	5	(49)

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
Income tax expense was allocated as follows:
Income tax expense in the consolidated statements of operations:
Attributable to income 255
196
234
268
Member's/Stockholders' equity:
Tax effect of the change in accumulated other comprehensive loss 5
(49 ) 17
49

The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:


	Years Ended December 31,
	2020		2019		2018
	(Percentage of pre-tax income)
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	5.8	%	(1.2)	%	2.8	%
Goodwill impairment	0	%	(26.4)	%	0	%
Tax law changes	(1.5)	%	(0.2)	%	17.2	%
Global intangible low-taxed income	0	%	(0.4)	%	1.8	%
Net foreign income tax	0.9	%	(0.8)	%	(4.8)	%
Executive compensation limitation	0	%	(0.2)	%	1.2	%
Research and development credits	(0.6)	%	0.1	%	(1.3)	%
Other, net	(0.3)	%	(0.5)	%	(1.4)	%
Effective income tax rate	25.3	%	(8.6)	%	36.5	%

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Percentage of pre-tax income)
Statutory federal income tax rate 21.0 % 21.0 % 35.0 % 35.0 %
State income taxes, net of federal income tax benefit (1.2 )% 2.8 % 3.6 % 2.9 %
Goodwill impairment (26.4 )% — % — % — %
Tax Reform (0.2 )% 17.2 % 210.6 % — %
Global intangible low-taxed income (0.4 )% 1.8 % — % — %
CenturyLink acquisition transaction costs — % — % 11.3 % — %
Uncertain tax positions — % 0.5 % 1.2 % 0.1 %
Base erosion and anti-abuse tax (0.4 )% — % — % — %
Net foreign income tax (0.8 )% (4.8 )% (19.3 )% 0.9 %
Executive compensation limitation (0.2 )% 1.2 % 5.4 % 0.9 %
Research and development credits 0.1 % (1.3 )% (0.9 )% (1.2 )%
Other, net (0.1 )% (1.9 )% 4.7 % 0.1 %
Effective income tax rate (8.6 )% 36.5 % 251.6 % 38.7 %

For the year ended December 31, 2020, the effective tax rate is 25.3% compared to (8.6)% and 36.5% for the years ended December 31, 2019 and ~~December 31,~~ 2018, ~~the~~respectively. The effective tax rate ~~is (8.6)% and 36.5% compared to 251.6%~~ for the ~~successor period~~year ended December 31, ~~2017 and 38.7% for the predecessor period ended October 31, 2017, respectively.~~2020 includes a $13 million favorable impact from U.S. tax law changes regarding Global Intangible Low Taxed Income regulations. The effective tax rate for the year ended December 31, 2019 includes a $779 million unfavorable impact of a non-deductible goodwill impairment. The effective tax rate for the year ended December 31, 2018 reflects $92 million of an estimated one-time income tax expense related to income tax law changes under the Tax Act enacted in 2017. The effective tax rate for the successor period ended December 31, 2017 reflects $195 million of an estimated one-time income tax expense related to income tax law changes under the Tax Act enacted in 2017.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:


	As of December 31,
	2020		2019
	(Dollars in millions)
Deferred tax assets
Deferred revenue	$	277	306
Net operating loss carry forwards	3,503		3,233
Property, plant and equipment	65		58
Other	343		326
Gross deferred tax assets	4,188		3,923
Less valuation allowance	(1,170)		(892)
Net deferred tax assets	3,018		3,031
Deferred tax liabilities
Deferred revenue	(34)		(41)
Property, plant and equipment	(1,264)		(974)
Intangible assets	(1,773)		(1,898)
Other	(33)		(29)
Gross deferred tax liabilities	(3,104)		(2,942)
Net deferred tax (liabilities) assets	$	(86)	89

December 31,
2019 2018
(Dollars in millions)
Deferred tax assets
Deferred revenue $ 306
298
Net operating loss carry forwards 3,233
3,494
Property, plant and equipment 58
57
Other 326
309
Gross deferred tax assets 3,923
4,158
Less valuation allowance (892 ) (931 )
Net deferred tax assets 3,031
3,227
Deferred tax liabilities
Deferred revenue (41 ) (45 )
Property, plant and equipment (974 ) (853 )
Intangible assets (1,898 ) (1,998 )
Other (29 ) (25 )
Gross deferred tax liabilities (2,942 ) (2,921 )
Net deferred tax assets 89
306

Of the ~~$89 million and $306~~$86 million net deferred tax ~~assets at~~liabilities as of December 31, ~~2019 and 2018, respectively, $241 million and $202~~2020, $247 million is reflected as a long-term liability, in other on our consolidated balance sheets and ~~$330 million and $508~~$161 million is reflected as a net noncurrent deferred tax asset, ~~at December 31, 2019 and 2018, respectively.~~

~~During~~in other, net on our consolidated balance sheets. Of the ~~twelve months ended December 31, 2017, we completed an extensive analysis of our Internal Revenue Code ("IRC") Section 382 limitation that resulted in an increase of the amount of~~$89 million net ~~operating loss carry forwards~~deferred tax assets as of December 31, ~~2017 by approximately $1.0 billion~~2019, $241 million is reflected as a long-term liability, in other on our consolidated balance sheets and $330 million is reflected as a ~~pre-tax basis that was recorded~~noncurrent deferred tax asset, in ~~purchase accounting. At~~other, net on our consolidated balance sheets.

As of December 31, ~~2019,~~2020, we had federal NOLs of $12.9 billion before uncertain tax positions of ~~$4.3~~$4.1 billion, which will expire between 2024 and 2037 if unused, and state NOLs of ~~$9.2 billion. If unused, the NOLs will expire between 2022 and 2037. At~~$8.3 billion before uncertain tax positions of $618 million. As of December 31, ~~2019,~~2020, we had foreign NOLs of ~~$6.0~~$7.2 billion.

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, ~~2019,~~2020, a valuation allowance of ~~$892 million~~$1.2 billion was recorded as it is more likely than not that this amount of net operating loss and tax credit carryforwards will not be utilized prior to expiration. Our valuation allowance atas of December 31, ~~2019~~2020 and ~~2018~~2019 is primarily related to foreign and state NOL carryforwards.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for ~~2019~~2020 and ~~2018~~2019 is as follows:


	2020		2019
	(Dollars in millions)
Unrecognized tax benefits at beginning of period	$	952	970
Tax positions of prior periods netted against deferred tax assets	(32)		(24)
Increase in tax positions taken in the prior period	0		1
Increase in tax positions taken in the current period	4		5
Decrease due to settlement/payments	(1)		0
Decrease from the lapse of statute of limitations	0		0
Unrecognized tax benefits at end of period	$	923	952

2019 2018
(Dollars in millions)
Unrecognized tax benefits at beginning of period $ 970
21
Tax positions of prior periods netted against deferred tax assets (24 ) 950
(Decrease) increase in tax positions taken in the prior period 1
(1 )
Increase in tax positions taken in the current period 5
3
Decrease due to settlement/payments —
(1 )
Decrease from the lapse of statute of limitations —
(2 )
Unrecognized tax benefits at end of period 952
970

The total amount (including interest and any related federal benefit) of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was ~~$30~~$33 million and ~~$23~~$30 million for the years ended December 31, ~~2019~~2020 and ~~December 31, 2018,~~2019, respectively.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $9 million and $8 million ~~and $6 million at~~as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

We, or at least one of our affiliates, file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2002. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carry forwards are available.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by up to $3$2 million within the next 12 months. The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.

(14) Products and Services ~~Revenue~~Revenues

~~We categorize~~At December 31, 2020, we categorized our products, services and revenue among the following ~~five~~5 categories:

•

•IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;

•Transport and Infrastructure,which includes private line (including business data services), wavelength, colocation and data center services, including cloud, hosting and application management solutions, professional services, network security services, dark fiber services and other ancillary services;

•Voice and Collaboration, which includes primarily TDM voice services, VoIP and other ancillary services;

•Other, which includes sublease rental income and IT services and managed services, which may be purchased in conjunction with our other network services; and

•Affiliate Services,~~, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;~~


•	~~Transport and Infrastructure~~,which includes private line (including business data services), wavelength, colocation and data center services, including cloud, hosting and application management solutions, professional services, network security services, dark fiber services and other ancillary services;


•	~~Voice and Collaboration, which includes primarily TDM voice services, VoIP and other ancillary services;~~


•	~~Other, which includes sublease rental income and information technology services and managed services, which may be purchased in conjunction with our other network services; and~~


•	~~Affiliate services,~~ which includes telecommunication services provided to our affiliates that we also provide to our external customers.

From time to time, we may change the categorization of our products and services.

Our operating revenue for our products and services consisted of the following categories:


	Successor				Predecessor		Years Ended December 31,
	Year Ended December 31, 2019		Year Ended December 31, 2018	Period Ended December 31, 2017	Period Ended October 31, 2017		2020		2019	2018
	(Dollars in millions)						(Dollars in millions)
IP and Data Services	$	3,888	3,945	668	3,284	IP and Data Services	$	3,587	3,655	3,728
Transport and Infrastructure	2,662		2,701	464	2,272	Transport and Infrastructure	2,615		2,544	2,591
Voice and Collaboration	1,443		1,464	258	1,308	Voice and Collaboration	1,423		1,385	1,413
Other revenue	12		3	1	6
Affiliate revenue	180		107	16	—
Total revenue	$	8,185	8,220	1,407	6,870
Other						Other	100		9	0
Affiliate Services						Affiliate Services	208		180	107
Total operating revenue						Total operating revenue	$	7,933	7,773	7,839

We recognize revenue in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. The USF surcharges are assigned to the products and services categories based on the underlying revenue. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent.

Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
USF surcharges and transaction taxes

$ 428
415
71
331

The following tables present total assets as of the years ended December 31, ~~2019~~2020 and ~~December 31, 2018~~2019 as well as operating revenue for the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018 ~~the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017~~ by geographic region:


	Total Assets				Total Assets
	December 31,				As of December 31,
	2019		2018		2020		2019
	(Dollars in millions)				(Dollars in millions)
North America	$	24,144	27,520	North America	$	23,511	24,144
Europe, Middle East and Africa	2,842		2,765	Europe, Middle East and Africa	3,059		2,842
Latin America	2,112		2,006	Latin America	2,006		2,112
Total	$	29,098	32,291	Total	$	28,576	29,098

Revenue
Successor Predecessor
Year Ended December 31, 2019 Year Ended December 31, 2018 Period Ended December 31, 2017 Period Ended October 31, 2017
(Dollars in millions)
North America $ 6,719
6,739
1,155
5,651
Europe, Middle East and Africa 719
744
128
607
Latin America 747
737
124
612
Total $ 8,185
8,220
1,407
6,870


	Revenue
	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
North America	$	6,411	6,307	6,358
Europe, Middle East and Africa	785		719	744
Latin America	737		747	737
Total	$	7,933	7,773	7,839

Our operations are integrated into and reported as part of the consolidated segment data of ~~CenturyLink. CenturyLink's~~Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we believe we have 1 reportable segment.

A relatively small number of customers account for a significant percentage of our revenue. Our top ten customers accounted for approximately 16%, 16% and 20% of our revenue for the years ended December 31, 2020, 2019 and ~~December 31,~~ 2018, ~~respectively, 19% for the successor period ended December 31, 2017 and 18% for the predecessor period ended October 31, 2017,~~ respectively.

(15) Affiliate Transactions

We provide telecommunications services to our affiliates ~~telecommunications services~~ that we also provide to external customers.

Whenever possible, costs are directly assigned to our affiliates for the services they use. If costs cannot be directly assigned, they are allocated among all affiliates based upon cost causative measures; or if no cost causative measure is available, these costs are allocated based on a general allocator. These cost allocation methodologies are reasonable. From time to time, we adjust the basis for allocating the costs of a shared service among affiliates. Such changes in allocation methodologies are generally billed prospectively.

We also purchase services from our affiliates including telecommunication services, insurance, flight services and other support services such as legal, regulatory, finance and accounting, tax, human resources and executive support.

~~Subsequent Event~~

~~As of the date of this report, $225 million of distributions were made to our parent in the first quarter of 2020.~~

~~(16) Quarterly Financial Data (Unaudited)~~

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter
Total
(Dollars in millions)
2019
Operating revenue $ 2,046
2,014
2,064
2,061
8,185
Operating (loss) income (3,393 ) 272
309
285
(2,527 )
Net (loss) income (3,585 ) 110
114
160
(3,201 )

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter
Total
(Dollars in millions)
2018
Operating revenue $ 2,087
2,052
2,010
2,071
8,220
Operating income 261
196
227
284
968
Net income 62
40
88
151
341

Our ultimate parent company, Lumen Technologies, is currently indebted to us under a revolving credit facility. On October 15, 2020, we agreed to refinance our notes receivable - affiliate due to mature on November 1, 2020 via a revolving credit facility that we extended to Lumen Technologies. The principal amount outstanding under such facility initially bears interest at 4.250% per annum, subject to certain adjustments as set forth in the facility. This principal amount is payable upon demand by us and prepayable by Lumen Technologies at any time, but no later than October 15, 2025, which maturity date may be extended for two additional one-year periods. The facility has covenants, including a maximum total leverage ratio, and is subject to other limitations. During 2020, Lumen Technologies repaid $122 million of the ~~first quarter~~amount owed to us under our notes receivable - affiliate. As of ~~2019, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $3.7 billion for goodwill. See Note 3—Goodwill, Customer Relationships and Other Intangible Assets for further details.~~

~~In the twelve months ended~~ December 31, ~~2018, we recognized a $92 million income tax expense related~~2020, $1.5 billion aggregate principal amount of our loan to ~~the Tax Act.~~Lumen Technologies was outstanding.

~~(17)~~(16) Commitments, Contingencies and Other Items

We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities.

Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously-established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation and non-income tax contingencies atas of December 31, ~~2019~~2020 aggregated to approximately ~~$69~~$59 million and are included in other current liabilities and other liabilities in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows.

Peruvian Tax Litigation

In 2005, the Peruvian tax authorities ("SUNAT") issued tax assessments against ~~one~~1 of our Peruvian subsidiaries asserting $26 million of additional income tax withholding and value-added taxes ("VAT"), penalties and interest for calendar years 2001 and 2002 on the basis that the Peruvian subsidiary incorrectly documented its importations. After taking into account the developments described below, as well as the accrued interest and foreign exchange effects, we believe the total amount of our exposure is $7$2 million at December 31, ~~2019.~~2020.

We challenged the assessments via administrative and then judicial review processes. In October 2011, the highest administrative review tribunal (the ~~"Tribunal")~~Tribunal) decided the central issue underlying the 2002 assessments in SUNAT's favor. We appealed the Tribunal's decision to the first judicial level, which decided the central issue in favor of Level 3. SUNAT and we filed cross-appeals with the court of appeal. In May 2017, the court of appeal issued a decision reversing the first judicial level. In June 2017, we filed an appeal of the decision to the Supreme

Court of Justice, the final judicial level. Oral argument was held before the Supreme Court of Justice in October 2018. A decision on this case is pending.

In October 2013, the Tribunal decided the central issue underlying the 2001 assessments in SUNAT’s favor. We appealed that decision to the first judicial level in Peru, which decided the central issue in favor of SUNAT. In June 2017, we filed an appeal with the court of appeal. In November 2017, the court of appeals issued a decision affirming the first judicial level and we filed an appeal of the decision to the Supreme Court of Justice. Oral argument was held before the Supreme Court of Justice in June 2019. A decision on this case is pending.

Brazilian Tax Claims

~~In December 2004, March 2009, April 2009 and July 2014, the~~The São Paulo and Rio de Janeiro state tax authorities have issued tax assessments against ~~one of~~ our Brazilian subsidiaries for the Tax on Distribution of Goods and Services (“ICMS”), mainly with respect to revenue from leasing certain assets ~~(in the case of the December 2004, March 2009 and July 2014 assessments)~~ and revenue from the provision of Internet access services ~~(in the case of the April 2009 and July 2014 assessments),~~ 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.~~

We ~~have~~ filed objections to these assessments in both states, arguing among other things that neither the lease of assets ~~and~~nor the provision of Internet access ~~are not communication services~~qualifies as "communication services" subject to ICMS. ~~The objections~~

We have appealed to the ~~September 2002, December 2004 and March 2009 assessments were rejected~~respective state judicial courts the decisions by the respective state administrative courts ~~and we have~~that rejected our objections to these assessments. In cases in which state lower courts ruled partially in our favor finding that the lease assets are not subject to ICMS, the State appealed those ~~decisions to~~rulings. In other cases, the judicial courts. In October 2012 and June 2014, we received favorable rulings from the lower court on the December 2004 and March 2009 assessments regarding equipment leasing, but those rulings are subject to appeal by the state. No ruling has been obtained with respect to the September 2002 assessment. The objections to the April and July 2009 and May 2012 assessments are still pending final administrative decisions. The July 2014 assessment was ~~confirmed during the fourth quarter of 2014~~affirmed at the first administrative level and we have appealed ~~this decision~~ to the second administrative level. Other assessments are still pending state judicial decisions.

We are vigorously contesting all such assessments in both states and ~~in particular,~~ view the assessment of ICMS on revenue from equipment leasing and Internet access to be without merit. ~~These~~We estimate that these assessments, if upheld, could result in a loss of up$17 million to ~~$37~~as high as $49 million atas of December 31, ~~2019~~2020, in excess of the reserved accruals established for these matters.

Qui Tam Action

We were notified in late 2017 of a qui tam action pending against Level 3 Communications, Inc. and others in the ~~United States~~U.S. District Court for the Eastern District of Virginia, captioned United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al. The original qui tam complaint ~~was~~and an amended complaint were filed under seal on November 26, 2013 and ~~an amended complaint was filed under seal on~~ June 16, ~~2014.~~2014, respectively. The court unsealed the complaints on October 26, 2017.

The amended complaint alleges that we, principally through ~~two~~2 former employees, submitted false claims and made false statements to the government in connection with ~~two~~2 government contracts. The relator seeks damages in this lawsuit of approximately $50 million, subject to trebling, plus statutory penalties, pre-and-post judgment interest, and attorney’s fees. The case is currently stayed.

We are evaluating our defenses to the claims. At this time, we do not believe it is probable we will incur a material loss. If, contrary to our expectations, the plaintiff prevails in this matter and proves damages at or near $50 million, and is successful in having those damages trebled, the outcome could have a material adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid.

Several people, including ~~two~~2 former Level 3 employees, were indicted in the ~~United States~~U.S. District Court for the Eastern District of Virginia on October 3, 2017, and charged with, among other things, accepting kickbacks from a subcontractor, who was also indicted, for work to be performed under a prime government contract. Of the ~~two~~2 former employees, ~~one~~1 entered into a plea agreement, and the other is deceased. We are fully cooperating in the government’s investigations in this matter.

Other Proceedings, Disputes and Contingencies

From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, ~~administrative~~regulatory hearings ~~of state public utility commissions~~ relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions.

We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and 1 or more may go to trial during ~~2020~~2021 if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities.

We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none individually is reasonably expected to exceed ~~$100,000~~$300,000 in fines and penalties.

The outcome of these other proceedings described under this heading is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us.

The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us.

Environmental Contingencies

In connection with largely historical operations, we have responded to or been notified of potential environmental liability at 175 properties. We are engaged in addressing or have litigated environmental liabilities at many of those properties. We could potentially be held liable, jointly, or severally, and without regard to fault, for the costs of investigation and remediation of these sites. The discovery of additional environmental liabilities or changes in existing environmental requirements could have a material adverse effect on our business.

Right-of-Way

AtAs of December 31, ~~2019,~~2020, our future rental commitments for right-of-way agreements were as follows:


	Right-of-Way Agreements
	(Dollars in millions)
2021	$	109
2022	63
2023	62
2024	51
2025	44
2026 and thereafter	284
Total future minimum payments	$	613

Right-of-Way
Agreements
(Dollars in millions)
2020 $ 83
2021 58
2022 55
2023 53
2024 44
2025 and thereafter 276
Total future minimum payments⁽¹⁾
$ 569

Purchase Commitments

We have several commitments primarily for marketing activities and support services from a variety of vendors to be used in the ordinary course of business totaling ~~$333~~$335 million atas of December 31, ~~2019.~~2020. Of this amount, we expect to purchase ~~$119 million in 2020, $131~~$120 million in 2021, ~~through 2022, $42~~$116 million in 2022 through 2023, ~~through 2024 and $41~~$36 million in 2024 through 2025 and $63 million in 2026 and thereafter. These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we were contractually committed as of December 31, ~~2019.~~2020.

~~(18)~~(17) Accumulated Other Comprehensive ~~(Loss) Income~~Loss

The table below summarizes changes in accumulated other comprehensive (loss) ~~income~~ recorded on our consolidated balance sheet by component for the years ended December 31, ~~2018~~2019 and December 31, ~~2019:~~2020:


	Pension Plans		Foreign Currency Translation Adjustments and Other	Total
	(Dollars in millions)
Balance at December 31, 2018	$	5	(176)	(171)
Other comprehensive loss before reclassifications	0		(5)	(5)
Amounts reclassified from accumulated other comprehensive loss	(3)		0	(3)
Net other comprehensive loss	(3)		(5)	(8)
Balance at December 31, 2019	$	2	(181)	(179)

Balance at December 31, 2019	$	2	(181)	(179)
Other comprehensive loss, net of tax	(15)		(40)	(55)
Net other comprehensive loss	(15)		(40)	(55)
Balance at December 31, 2020	$	(13)	(221)	(234)

Pension Plans Foreign Currency Translation Adjustments and Other Total
(Dollars in millions)
Balance at December 31, 2017 (successor) $ —
18
18
Other comprehensive loss before reclassifications —
(200 ) (200 )
Amounts reclassified from accumulated other comprehensive income 5
—
5
Net current-period other comprehensive income (loss) 5
(200 ) (195 )
Cumulative effect of adoption of ASU 2018-02, Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated other Comprehensive Income
—
6
6
Balance at December 31, 2018 $ 5
(176 ) (171 )

Balance at December 31, 2018 $ 5
(176 ) (171 )
Other comprehensive loss before reclassifications —
(5 ) (5 )
Amounts reclassified from accumulated other comprehensive loss (3 ) —
(3 )
Net current-period other comprehensive loss (3 ) (5 ) (8 )
Balance at December 31, 2019 $ 2
(181 ) (179 )

~~(19) Condensed Consolidating Financial Information~~

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

In conjunction with the registration of certain of Level 3 Financing, Inc.'s Senior Notes, the accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10 "Financial statements of guarantors and affiliates whose securities collateralize an issue registered or being registered."

The operating activities of the separate legal entities included in our consolidated financial statements are interdependent. The accompanying condensed consolidating financial information presents the statements of comprehensive income (loss), balance sheets and statements of cash flows of each legal entity and, on an aggregate basis, the other non-guarantor subsidiaries based on amounts incurred by such entities, and is not intended to present the operating results of those legal entities on a stand-alone basis. Level 3 Communications, LLC leases equipment and certain facilities from other wholly owned subsidiaries of Level 3 Parent, LLC. These transactions are eliminated in our consolidated results.

~~Condensed Consolidating Statements of Comprehensive Income (Loss)~~

~~For the year ended December 31, 2019~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING REVENUE
Operating revenue $ —
—
3,912
4,093
—
8,005
Operating revenue - affiliates —
—
226
801
(847 ) 180
Total operating revenue —
—
4,138
4,894
(847 ) 8,185
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization) —
—
1,987
1,812
—
3,799
Selling, general and administrative (50 ) 5
1,438
710
(845 ) 1,258
Operating expenses - affiliates —
—
241
93
—
334
Depreciation and amortization —
—
652
961
—
1,613
Goodwill impairment —
—
1,369
2,339
—
3,708
Total operating expenses (50 ) 5
5,687
5,915
(845 ) 10,712
OPERATING (LOSS) INCOME 50
(5 ) (1,549 ) (1,021 ) (2 ) (2,527 )
OTHER INCOME (EXPENSE)
Interest income —
—
7
2
—
9
Interest income (expense) - affiliates, net 3,888
658
(5,829 ) 1,343
1
61
Interest expense (29 ) (468 ) 13
(18 ) —
(502 )
Equity in net (losses) earnings of subsidiaries (7,109 ) (7,352 ) 570
—
13,891
—
Gain (loss) on modification and extinguishment of debt 10
(5 ) —
—
—
5
Other (expense) income, net (8 ) —
8
8
—
8
Total other income (expense), net (3,248 ) (7,167 ) (5,231 ) 1,335
13,892
(419 )
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE) (3,198 ) (7,172 ) (6,780 ) 314
13,890
(2,946 )
Income tax benefit (expense) (3 ) 63
30
(345 ) —
(255 )
NET INCOME (LOSS) (3,201 ) (7,109 ) (6,750 ) (31 ) 13,890
(3,201 )
Other comprehensive loss, net of income taxes (8 ) —
—
(8 ) 8
(8 )
COMPREHENSIVE INCOME (LOSS) $ (3,209 ) (7,109 ) (6,750 ) (39 ) 13,898
(3,209 )

~~Condensed Consolidating Statements of Comprehensive Income (Loss)~~

~~For the year ended December 31, 2018~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING REVENUE

Operating revenue $ —
—
3,884
4,229
—
8,113
Operating revenue - affiliates —
—
130
285
(308 ) 107
Total operating revenue —
—
4,014
4,514
(308 ) 8,220
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization) —
—
2,209
1,728
—
3,937
Selling, general and administrative 12
3
392
1,255
(308 ) 1,354
Operating expenses - affiliates —
—
176
81
—
257
Depreciation and amortization —
—
688
1,016
—
1,704
Total operating expenses 12
3
3,465
4,080
(308 ) 7,252
OPERATING (LOSS) INCOME (12 ) (3 ) 549
434
—
968
OTHER INCOME (EXPENSE)
Interest income —
—
3
1
—
4
Interest income (expense) - affiliates, net 2,430
1,562
(3,803 ) (126 ) —
63
Interest expense (33 ) (457 ) (3 ) (16 ) —
(509 )
Equity in net (losses) earnings of subsidiaries (2,044 ) (3,257 ) 254
—
5,047
—
Other (expense) income, net (9 ) —
1
19
—
11
Total other income (expense), net 344
(2,152 ) (3,548 ) (122 ) 5,047
(431 )
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE) 332
(2,155 ) (2,999 ) 312
5,047
537
Income tax benefit (expense) 10
111
(232 ) (85 ) —
(196 )
NET INCOME (LOSS) 342
(2,044 ) (3,231 ) 227
5,047
341
Other comprehensive loss, net of income taxes (195 ) —
—
(195 ) 195
(195 )
COMPREHENSIVE INCOME (LOSS) $ 147
(2,044 ) (3,231 ) 32
5,242
146

~~Condensed Consolidating Statements of Comprehensive Income (Loss)~~

~~For the period ended December 31, 2017 (Successor)~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING REVENUE
Operating revenue $ —
—
748
671
(28 ) 1,391
Operating revenue - affiliates —
—
16
—
—
16
Total operating revenue —
—
764
671
(28 ) 1,407
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization) —
—
418
300
(28 ) 690
Selling, general and administrative 1
3
179
70
—
253
Operating expenses - affiliates —
—
24
—
—
24
Depreciation and amortization —
—
117
165
—
282
Total operating expenses 1
3
738
535
(28 ) 1,249
OPERATING (LOSS) INCOME (1 ) (3 ) 26
136
—
158
OTHER (EXPENSE) INCOME
Interest income —
—
1
—
—
1
Interest income (expense) affiliates, net 262
368
(578 ) (41 ) —
11
Interest expense (5 ) (72 ) —
(3 ) —
(80 )
Equity in net (losses) earnings of subsidiaries (827 ) (15 ) 71
—
771
—
Other income 1
—
2
—
—
3
Total other (expense) income, net (569 ) 281
(504 ) (44 ) 771
(65 )
(LOSS) INCOME BEFORE INCOME TAX (EXPENSE) BENEFIT (570 ) 278
(478 ) 92
771
93
Income tax benefit (expense) 429
(1,105 ) 433
9
—
(234 )
NET (LOSS) INCOME (141 ) (827 ) (45 ) 101
771
(141 )
Other comprehensive income, net of income taxes 18
—
—
18
(18 ) 18
COMPREHENSIVE (LOSS) INCOME $ (123 ) (827 ) (45 ) 119
753
(123 )

~~Condensed Consolidating Statements of Comprehensive Income (Loss)~~

~~For the period ended October 31, 2017 (Predecessor)~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING REVENUE
Operating revenue $ —
—
3,108
3,891
(129 ) 6,870
Total operating revenue —
—
3,108
3,891
(129 ) 6,870
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization) —
—
1,942
1,680
(129 ) 3,493
Selling, general and administrative 4
3
942
259
—
1,208
Depreciation and amortization —
—
356
662
—
1,018
Total operating expenses 4
3
3,240
2,601
(129 ) 5,719
OPERATING (LOSS) INCOME (4 ) (3 ) (132 ) 1,290
—
1,151
OTHER INCOME (EXPENSE)
Interest income —
—
12
1
—
13
Interest income (expense) - affiliates, net 1,260
1,890
(2,896 ) (254 ) —
—
Interest expense (30 ) (397 ) (2 ) (12 ) —
(441 )
Loss on modification and extinguishment of debt —
(44 ) —
—
—
(44 )
Equity in net (losses) earnings of subsidiaries (815 ) (2,138 ) 692
—
2,261
—
Other (expense) income, net 3
—
15
(4 ) —
14
Total other income (expense), net 418
(689 ) (2,179 ) (269 ) 2,261
(458 )
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE) 414
(692 ) (2,311 ) 1,021
2,261
693
Income tax benefit (expense) 11
(123 ) (2 ) (154 ) —
(268 )
NET INCOME (LOSS) 425
(815 ) (2,313 ) 867
2,261
425
Other comprehensive income, net of income taxes 80
—
—
—
—
80
COMPREHENSIVE INCOME (LOSS) $ 505
(815 ) (2,313 ) 867
2,261
505

~~Condensed Consolidating Balance Sheets~~

~~December 31, 2019~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3
—
231
82
—
316
Restricted cash - current —
—
—
3
—
3
Accounts receivable —
—
44
623
—
667
Advances to affiliates 19,302
24,293
7,634
2,830
(54,059 ) —
Note receivable - affiliate 1,590
—
—
—
—
1,590
Other 1
—
105
160
—
266
Total current assets 20,896
24,293
8,014
3,698
(54,059 ) 2,842
NET PROPERTY, PLANT AND EQUIPMENT —
—
3,688
6,248
—
9,936
GOODWILL AND OTHER ASSETS
Goodwill —
—
252
7,163
—
7,415
Operating lease assets —
—
1,210
324
(474 ) 1,060
Restricted cash 12
—
5
2
—
19
Customer relationships, net —
—
3,383
3,482
—
6,865
Other intangible assets, net —
—
447
22
—
469
Investment in subsidiaries 8,432
10,564
4,431
—
(23,427 ) —
Other, net 272
1,485
88
201
(1,554 ) 492
Total goodwill and other assets 8,716
12,049
9,816
11,194
(25,455 ) 16,320
TOTAL ASSETS $ 29,612
36,342
21,518
21,140
(79,514 ) 29,098

LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt —
—
3
8
—
11
Accounts payable —
15
350
289
—
654
Accounts payable - affiliates 80
17
569
3
—
669
Accrued expenses and other liabilities
Salaries and benefits —
—
192
48
—
240
Income and other taxes —
7
95
50
—
152
Current operating lease liabilities —
—
254
89
(94 ) 249
Interest —
81
1
3
—
85
Other 1
1
22
53
—
77
Advance billings and customer deposits —
—
169
140
—
309

Due to affiliates —
—
50,865
3,194
(54,059 ) —
Total current liabilities 81
121
52,520
3,877
(54,153 ) 2,446
LONG-TERM DEBT —
10,196
15
145
—
10,356
DEFERRED REVENUE AND OTHER LIABILITES
Deferred revenue —
—
1,137
206
—
1,343
Deferred tax liability 56
—
739
1,000
(1,554 ) 241
Noncurrent operating lease liabilities —
—
986
248
(380 ) 854
Other 1
—
154
158
—
313
Total deferred revenue and other liabilities 57
—
3,016
1,612
(1,934 ) 2,751
COMMITMENTS AND CONTINGENCIES
MEMBER'S EQUITY (DEFICIT) 29,474
26,025
(34,033 ) 15,506
(23,427 ) 13,545
TOTAL LIABILITIES AND MEMBER'S EQUITY (DEFICIT) $ 29,612
36,342
21,518
21,140
(79,514 ) 29,098

~~Condensed Consolidating Balance Sheets~~

~~December 31, 2018~~

LIABILITIES AND MEMBER'S EQUITY (DEFICIT)

CURRENT LIABILITIES
Current maturities of long-term debt $ —
—
1
5
—
6
Accounts payable —
—
380
346
—
726
Accounts payable - affiliates 62
11
162
11
—
246
Accrued expenses and other liabilities

Salaries and benefits —
—
189
44
—
233
Income and other taxes —
4
72
54
—
130
Interest 11
78
1
5
—
95
Other 3
1
8
66
—
78
Current portion of deferred revenue —
—
168
142
—
310
Due to affiliates —
—
45,347
5,913
(51,260 ) —
Total current liabilities 76
94
46,328
6,586
(51,260 ) 1,824
LONG-TERM DEBT 613
10,068
7
150
—
10,838
DEFERRED REVENUE AND OTHER LIABILITES

Deferred revenue —
—
971
210
—
1,181
Deferred tax liability 56
—
841
637
(1,332 ) 202
Other —
—
197
172
—
369
Total deferred revenue and other liabilities 56
—
2,009
1,019
(1,332 ) 1,752
COMMITMENTS AND CONTINGENCIES

MEMBER'S EQUITY (DEFICIT) 33,766
33,134
(27,256 ) 15,550
(37,317 ) 17,877
TOTAL LIABILITIES AND MEMBER'S EQUITY (DEFICIT) $ 34,511
43,296
21,088
23,305
(89,909 ) 32,291

~~102~~

~~Condensed Consolidating Statements of Cash Flows~~

~~For the year ended December 31, 2019~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities $ 313
(151 ) 1,952
569
—
2,683
INVESTING ACTIVITIES
Capital expenditures —
—
(782 ) (559 ) —
(1,341 )
Proceeds from the sale of property, plant and equipment and other assets 50
—
(23 ) 1
—
28
Note receivable - affiliate 235
—
—
—
—
235
Net cash provided by (used in) investing activities 285
—
(805 ) (558 ) —
(1,078 )
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt —
2,479
—
—
—
2,479
Payments of long-term debt (600 ) (2,300 ) —
(6 ) —
(2,906 )
Distributions (1,084 ) —
—
—
—
(1,084 )
Increase (decrease) due to from affiliates, net 1,084
—
(1,084 ) —
—
—
Other —
(28 ) —
—
—
(28 )
Net cash used in financing activities (600 ) 151
(1,084 ) (6 ) —
(1,539 )
Net decrease in cash, cash equivalents and restricted cash and securities (2 ) —
63
5
—
66
Cash, cash equivalents and restricted cash and securities at beginning of period 17
—
173
82
—
272
Cash, cash equivalents and restricted cash and securities at end of period $ 15
$ —
236
87
$ —
338

~~103~~

~~Condensed Consolidating Statements of Cash Flows~~

~~For the year ended December 31, 2018~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities $ (98 ) —
2,059
436
—
2,397
INVESTING ACTIVITIES
Capital expenditures —
—
(527 ) (511 ) —
(1,038 )
Proceeds from the sale of property, plant and equipment and other assets 83
—
—
51
—
134
Net cash provided by (used in) investing activities 83
—
(527 ) (460 ) —
(904 )
FINANCING ACTIVITIES
Payments of long-term debt —
—
—
(7 ) —
(7 )
Distributions (1,545 ) —
—
—
—
(1,545 )
Increase (decrease) due to from affiliates, net 1,545
—
(1,545 ) —
—
—
Net cash used in financing activities —
—
(1,545 ) (7 ) —
(1,552 )
Net decrease in cash, cash equivalents and restricted cash and securities (15 ) —
(13 ) (31 ) —
(59 )
Cash, cash equivalents and restricted cash and securities at beginning of period 32
—
186
113
—
331
Cash, cash equivalents and restricted cash and securities at end of period $ 17
—
173
82
—
272

~~104~~

~~Condensed Consolidating Statements of Cash Flows~~

~~For the period ended December 31, 2017 (Successor)~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities $ (1 ) —
172
137
—
308
INVESTING ACTIVITIES
Capital expenditures —
—
(110 ) (97 ) —
(207 )
Note receivable - affiliate —
—
(1,825 ) —
—
(1,825 )
Net cash used in investing activities —
—
(1,935 ) (97 ) —
(2,032 )
FINANCING ACTIVITIES
Payments of long-term debt —
—
—
(1 ) —
(1 )
Distributions (250 ) —
—
—
—
(250 )
Increase (decrease) due from/to affiliates, net 250
—
(250 ) —
—
—
Other —
—
—
(2 ) —
(2 )
Net cash used in financing activities —
—
(250 ) (3 ) —
(253 )
Net increase (decrease) in cash, cash equivalents, and restricted cash and securities (1 ) —
(2,013 ) 37
—
(1,977 )
Cash, cash equivalents and restricted cash and securities at beginning of period 33
—
2,199
76
—
2,308
Cash, cash equivalents and restricted cash and securities at end of period $ 32
—
186
113
—
331

~~105~~

~~Condensed Consolidating Statements of Cash Flows~~

~~For the period ended October 31, 2017 (Predecessor)~~

Level 3 Parent, LLC Level 3 Financing, Inc. Level 3 Communications, LLC Other Non-Guarantor Subsidiaries Eliminations Total
(Dollars in millions)
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities $ (61 ) (401 ) 1,615
761
—
1,914
INVESTING ACTIVITIES
Capital expenditures —
—
(667 ) (452 ) —
(1,119 )
Purchase of marketable securities —
—
(1,127 ) —
—
(1,127 )
Maturity of marketable securities —
—
1,127
—
—
1,127
Proceeds from sale of property, plant and equipment and other assets —
—
1
—
—
1
Net cash used in investing activities —
—
(666 ) (452 ) —
(1,118 )
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt —
4,569
—
—
—
4,569
Payments of long-term debt —
(4,911 ) 1
(7 ) —
(4,917 )
Increase (decrease) due from/to affiliates, net 57
743
(460 ) (340 ) —
—
Other —
—
—
3
—
3
Net cash provided by (used in) financing activities 57
401
(459 ) (344 ) —
(345 )
Net (decrease) increase in cash, cash equivalents, and restricted cash and securities (4 ) —
490
(35 ) —
451
Cash, cash equivalents and restricted cash and securities at beginning of period 37
—
1,710
110
—
1,857
Cash, cash equivalents and restricted cash and securities at end of period $ 33
—
2,200
75
—
2,308

~~106~~

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be disclosed by ~~the Company~~us in the reports ~~that it files~~we file or ~~furnishes~~furnish under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure ~~that~~ this information is accumulated and communicated to ~~the Company’s~~our senior management, including ~~its~~our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer, Jeff K. Storey, and our Executive Vice President and Chief Financial Officer, Indraneel Dev, evaluated the effectiveness of ~~the Company’s~~our disclosure controls and procedures as of December 31, ~~2019.~~2020. Based on this evaluation, ~~the Company’s~~our Chief Executive Officer and Chief Financial Officer concluded ~~that the Company’s~~our disclosure controls and procedures were effective, as of December 31, ~~2019,~~2020, in providing reasonable assurance ~~that~~ the information required to be disclosed by us in this report was accumulated and communicated in the manner provided above.

~~Remediation Actions~~

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, we (i) had two material weaknesses as of December 31, 2018 and (ii) promptly began implementing remediation plans in early 2019 to address both of those material weaknesses. During the second quarter of 2019, we remediated our material weakness related to the ineffective design and operation of process level internal controls over the fair value measurement of certain assets acquired and liabilities assumed in CenturyLink’s acquisition of us in late 2017. Additionally, during the fourth quarter of 2019, we remediated our material weakness related to the ineffective design and operation of certain process level internal controls over the existence and accuracy of revenue transactions. The measures taken to remediate the material weakness associated with revenue transactions are described in further detail in the “Changes in Internal Control Over Financial Reporting” section immediately below.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2019, we concluded the design and implementation of new internal controls, and strengthened existing process level internal controls, in response to the material weakness identified in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 related to the ineffective design and operation of certain process level internal controls over the existence and accuracy of revenue transactions, as described below:

We conducted a risk assessment to identify and assess changes needed to our financial reporting and process level controls related to the existence and accuracy of revenue transactions. Based on the results of that assessment, we designed, documented and implemented new process level internal controls and strengthened existing process level internal controls over the existence and accuracy of revenue transactions for areas in which we deemed there was a reasonable possibility of material misstatement of financial statement items related to revenue transactions.

We expanded the scope of our existing internal controls over revenue transactions to include “upstream” controls in the areas of contract quoting, order entry, provisioning, mediation, rating, and pricing, as well as the underlying applications that support these processes and internal controls.

~~We strengthened existing internal controls in our billing and revenue reporting processes to reduce the risk of failure in the effectiveness of upstream controls.~~

We completed an evaluation of the operating effectiveness of our newly-designed or strengthened internal controls over the existence and accuracy of revenue transactions, including an assessment of potential financial and reporting impacts, and concluded the deficiencies of such controls would not result in a reasonable possibility of material misstatement of financial statement items related to revenue transactions.

Based on these activities, management has concluded that these remediation activities have addressed the material weakness related to the existence and accuracy of revenue transactions and believes that the design and operation of these controls address the related risks of material misstatement to revenue and related financial statement line items and disclosures.

~~Other than the remediation efforts described above, there~~There have been no changes in ~~the Company’s~~our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Inherent Limitations of Internal Controls

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely. As a result, there can be no assurance that our disclosure controls and procedures will detect all errors or fraud. By their nature, our or any system of disclosure controls and procedures can provide only reasonable assurance regarding management's control objectives.

Internal Control Over Financial Reporting

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act), a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the framework of COSO, management concluded that our internal control over financial reporting was effective atas of December 31, ~~2019.~~2020.

Management’s Report on the Consolidated Financial Statements

Management has prepared and is responsible for the integrity and objectivity of our consolidated financial statements for the year ended December 31, ~~2019.~~2020. The consolidated financial statements included in this report have been prepared in accordance with accounting principles generally accepted in the United States and necessarily include amounts determined using our best judgments and estimates.

Our consolidated financial statements have been audited by KPMG LLP, an independent registered public accounting firm, who have expressed ~~their~~an unqualified opinion ~~with respect to the fairness of~~on the consolidated financial statements. Their audit was conducted in accordance with standards of the Public Company Accounting Oversight Board (United States).

ITEM 9B. OTHER INFORMATION

None.

Part III

Effective November 1,2017, Level 3 Communications, Inc. became a wholly owned subsidiary of CenturyLink, Inc. As part of the completion of the acquisition, Level 3 Communications, Inc. was merged into an acquisition subsidiary, which survived the merger under the name Level 3 Parent, LLC. Unless the context requires otherwise, references in this report to “Level 3 Communications, Inc.,” "Level 3," “we,” “us,” the “Company” and “our” refer to Level 3 Parent, LLC and its consolidated subsidiaries.

Unless context requires otherwise, references to the period ended October 31, 2017, covers the predecessor period from January 1, 2017 through October 31, 2017, and the period ended December 31, 2017, covers the successor period from November 1, 2017, through December 31, 2017.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We have omitted this information pursuant to General Instruction I.

ITEM 11. EXECUTIVE COMPENSATION

We have omitted this information pursuant to General Instruction I.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

We have omitted this information pursuant to General Instruction I.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We have omitted this information pursuant to General Instruction I.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Pre-Approval Policies and Procedures

The Audit Committee of ~~CenturyLink's~~Lumen's Board of Directors is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. Under the Audit Committee's charter, the Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. The approval may be given as part of the Audit Committee's approval of the scope of the engagement of our independent registered public accounting firm or on an individual basis. The pre-approval of non-audit services may be delegated to one or more of the Audit Committee's members, but the decision must be reported to the full Audit Committee. Our independent registered public accounting firm may not be retained to perform the non-audit services specified in Section 10A(g) of the Exchange Act.

Fees Paid to the Independent Registered Public Accounting Firm

Level 3 Parent, LLC first engaged KPMG LLP to be our independent registered public accounting firm in 2002. The aggregate fees billed or allocated to us was ~~$3.3~~$2.9 million and ~~$3.1~~$3.3 million for the years ended December 31, ~~2019~~2020 and ~~2018,~~2019, respectively, for professional accounting services, including KPMG's audit of our annual consolidated financial statements.

Audit fees are fees billed for the year shown for professional services performed for the audit of the consolidated financial statements included in our Form 10-K filing for that year, the review of condensed consolidated financial statements included in our Form 10-Q filings made during that year, comfort letters, consents and assistance with and review of documents filed with the SEC. Audit fees for each year shown include amounts that have been billed through the date of this filing and any additional amounts that are expected to be billed thereafter.

The Audit Committee of ~~CenturyLink,~~Lumen Technologies, Inc. approved in advance all of the services performed by KPMG described above.

Part IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference. All other exhibits are provided as part of this electronic submission.



3.1			Certificate of Formation of Level 3 Parent, LLC (formerly named WWG Merger Sub LLC) (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (file No. 001-35134) dated November 1, 2017).
3.2			Amended and Restated Limited Liability Company Agreement of Level 3 Parent, LLC, effective as of November 1, 2017 (formerly named WWG Merger Sub LLC) (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (file No. 001-35134) dated November 1, 2017).
4.1.1			Indenture, dated as of ~~August 12, 2014, between~~April 28 , 201 5 , among Level 3 ~~Escrow II,~~ Communications , Inc., as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 5.375% Senior Notes due ~~2022~~202 5 of Level 3 ~~Escrow II,~~ Financing , Inc. (incorporated by reference to Exhibit ~~4.1~~4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~August 12, 2014)~~April 30 , 201 5 ).
4.1.2			~~Securities Assumption~~ Supplemental Indenture, dated as of ~~October 31, 2014, by and~~ September 1, 2015 , among Level 3 ~~Escrow II,~~Communications , LLC , as guarantor, Level 3 Commu nications, Inc., as guarantor, Level 3 Financing, Inc., ~~Level 3 Communications, Inc.~~ as issuer,and The Bank of New York Mellon Trust Company, N.A., as trustee , relating to Level 3 Commu nications, L LC's unconditioned, unsecured guarantee of the 5.375% Senior Notes due 2025 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~November 5, 2014)~~September 2, 2015 ).
4.1.3			Supplemental Indenture, dated as of ~~October 31, 2014, by and~~ September 1, 2015 , among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 5.375% Senior Notes due ~~2022~~202 5 of Level 3 Financing, Inc. (incorporated by reference to Exhibit ~~4.3~~4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~November 5, 2014)~~September 2, 2015 ).
4.1.4			Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of ~~August 12, 2014,~~April 28, 2015 , governing the 5.375% Senior Notes due ~~2022~~202 5 (incorporated by reference to Exhibit ~~4.6~~4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).



4.1.5	Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of ~~August 12, 2014,~~April 28, 2015 , governing the 5.375% Senior Notes due ~~2022~~202 5 (incorporated by ~~referenced~~ reference to Exhibit ~~4.6~~4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
4.2.1		Indenture, dated as of ~~January 29, 2015,~~March 22, 2016 , among Level 3 Communications, Inc., as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the ~~5.625%~~5.2 5% Senior Notes due ~~2023~~202 6 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~January 30, 2015)~~March 22, 2016 ).
4.2.2		Supplemental Indenture, dated as of ~~June 3, 2015,~~September 16, 2016 , among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unconditioned, unsecured guarantee of the ~~5.625%~~5.25% Senior Notes due ~~2023~~202 6 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~June 4, 2015)~~September 16, 2016 ).
4.2.3		Supplemental Indenture, dated as of ~~June 3, 2015,~~September 16, 2016 , among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the ~~5.625%~~5.25% Senior Notes due ~~2023~~202 6 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~June 4, 2015)~~September 16, 2016 ).


4.2.4		Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of ~~January 29, 2015,~~March 22, 2016 , governing the ~~5.625%~~5.25% Senior Notes due ~~2023~~202 6 (incorporated by reference to Exhibit ~~4.5~~4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).
4.2.5		Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc. as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of ~~January 29, 2015~~March 22, 2016 governing the ~~5.625%~~5.25% Senior Notes due ~~2023~~202 6 (incorporated by reference to Exhibit ~~4.5 of~~ 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
4.3.1		Indenture, dated as of ~~April 28, 2015,~~September 25, 2019 , among Level 3 ~~Communications, Inc.~~ Parent, LLC , as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the ~~5.375%~~4 .62 5% Senior Notes due ~~2025~~202 7 of Level 3 Financing, Inc. (incorporated by reference to Exhibit ~~4.2~~99.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated ~~April 30, 2015)~~September 2 5 , 2019 ).
~~4.3.2~~4.3.2*		First Supplemental Indenture, dated as of ~~September 1, 2015,~~March 2, 2020, among Level 3 ~~Communications,~~Parent, LLC, as guarantor, Level 3 Communications, ~~Inc.,~~LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s ~~unconditioned,~~ unsecured guarantee of the ~~5.375%~~4.625% Senior Notes due ~~2025~~2027 of Level 3 Financing, Inc. ~~(incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 2, 2015).~~
~~4.3.3~~4.3.3*		Second Supplemental Indenture, dated as of ~~September 1, 2015,~~March 2, 2020, among Level 3 ~~Communications,~~Parent, LLC, as guarantor, Level 3 Communications, ~~Inc.,~~LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the ~~5.375% Senior Notes due 2025 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 2, 2015).~~
~~4.3.4~~	Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of April 28, 2015, governing the 5.375% Senior Notes due 2025 (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).



~~4.3.5~~	Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc. as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of April 28, 2015 governing the 5.375% Senior Notes due 2025 (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
~~4.4.1~~	Indenture, dated as of April 28, 2015, among Level 3 Communications, Inc., as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 5.125% Senior Notes due 2023 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated April 30, 2015).
~~4.4.2~~	Supplemental Indenture, dated as of September 1, 2015, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unconditioned, unsecured guarantee of the 5.125% Senior Notes due 2023 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 2, 2015).
~~4.4.3~~	Supplemental Indenture, dated as of September 1, 2015, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 5.125% Senior Notes due 2023 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 2, 2015).
~~4.4.4~~	Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of April 28, 2015, governing the 5.125% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).
~~4.4.5~~	Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc. as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of April 28, 2015 governing the 5.125% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
~~4.5.1~~	Indenture, dated as of November 13, 2015, among Level 3 Communications, Inc., as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 5.375% Senior Notes due 2024 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 13, 2015).
~~4.5.2~~	Supplemental Indenture, dated as of February 8, 2016, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unconditioned, unsecured guarantee of the 5.375% Senior Notes due 2024 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated February 8, 2016).
~~4.5.3~~	Supplemental Indenture, dated as of February 8, 2016, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 5.375% Senior Notes due 2024 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated February 8, 2016).
~~4.5.4~~	Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of November 13, 2015, governing the 5.375% Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).



~~4.5.5~~	Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc. as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of November 13, 2015 governing the 5.375% Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
~~4.6.1~~	Indenture, dated as of March 22, 2016, among Level 3 Communications, Inc., as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 5.25% Senior Notes due 2026 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated March 22, 2016).
~~4.6.2~~	Supplemental Indenture, dated as of September 16, 2016, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unconditioned, unsecured guarantee of the 5.25% Senior Notes due 2026 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 16, 2016).
~~4.6.3~~	Supplemental Indenture, dated as of September 16, 2016, among Level 3 Communications, LLC, as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 5.25% Senior Notes due 2026 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 16, 2016).
~~4.6.4~~	Supplemental Indenture, dated as of November 22, 2016, among Level 3 Communications, LLC as guarantor, Level 3 Communications, Inc., as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of March 22, 2016 governing the 5.25% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 28, 2016).
~~4.6.5~~	Supplemental Indenture, dated as of November 1, 2017, among Level 3 Communications, Inc. as guarantor, Level 3 Financing, Inc., as issuer, Level 3 Parent, LLC (f/k/a WWG Merger Sub LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee, amending the Indenture dated as of March 22, 2016 governing the 5.25% Senior Notes due 2026 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
~~4.7~~	~~Indenture, dated as of September 25, 2019, among Level 3 Parent, LLC, as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the~~ 4.625% Senior Notes due 2027 of Level 3 Financing, Inc. ~~(incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated September 25, 2019).~~
~~4.8~~4.4.1		Indenture, dated as of November 29, 2019, among Level 3 Parent, LLC and the other guarantors party thereto, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee and Notes Collateral Agent, relating to the 3.400% Senior Secured Notes due 2027 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 29, 2019).
~~4.9~~4.4.2*		Supplemental Indenture, dated as of April 15, 2020, among Level 3 Financing, Inc., as issuer, The Bank of New York Mellon Trust Company, N.A., as trustee, and Level 3 Parent, LLC and several of its subsidiaries, as guarantors, designating and outlining the terms and conditions of the secured guarantees of the 3.400% Senior Secured Notes due 2027 of Level 3 Financing, Inc.
4.5.1		Indenture, dated as of November 29, 2019, among Level 3 Parent, LLC and the other guarantors party thereto, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee and Notes Collateral Agent, relating to the 3.875% Senior Secured Notes due 2029 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 29, 2019).
~~10.1~~4.5.2*		Supplemental Indenture, dated as of April 15, 2020, among Level 3 Financing, Inc., as issuer, The Bank of New York Mellon Trust Company, N.A., as trustee, and Level 3 Parent, LLC and several of its subsidiaries, as guarantors, designating and outlining the terms and conditions of the secured guarantees of the 3.875% Senior Secured Notes due 2029 of Level 3 Financing, Inc.
4.6.1		Indenture, dated as of June 15, 2020, among Level 3 Parent, LLC, as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 4.250% Senior Notes due 2028 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated June 15, 2020).
4.6.2*		First Supplemental Indenture, dated as of December 21, 2020, among Level 3 Parent LLC, as guarantor, Level 3 Communications, LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unsecured guarantee of the 4.250% Senior Notes due 2028 of Level 3 Financing, Inc.
4.6.3*		Second Supplemental Indenture, dated as of December 21, 2020, among Level 3 Parent LLC, as guarantor, Level 3 Communications, LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 4.250% Senior Notes due 2028 of Level 3 Financing, Inc.
4.7.1		Indenture, dated as of August 12, 2020, among Level 3 Parent, LLC, as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 3.625% Senior Notes due 2029 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated August 12, 2020).


4.7.2*			First Supplemental Indenture, dated as of December 21, 2020, among Level 3 Parent LLC, as guarantor, Level 3 Communications, LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to Level 3 Communications, LLC’s unsecured guarantee of the 3.625% Senior Notes due 2029 of Level 3 Financing, Inc.
4.7.3*			Second Supplemental Indenture, dated as of December 21, 2020, among Level 3 Parent LLC, as guarantor, Level 3 Communications, LLC, as guarantor, Level 3 Financing, Inc., as issuer, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the subordination in any bankruptcy, liquidation or winding up proceeding of the guarantee by Level 3 Communications, LLC of the 3.625% Senior Notes due 2029 of Level 3 Financing, Inc.
4.8.1			Indenture, dated as of January 13, 2021, among Level 3 Parent, LLC, as Guarantor, Level 3 Financing, Inc., as Issuer, and The Bank of New York Mellon Trust Company, N.A., as Trustee, relating to the 3.750% Sustainability-Linked Senior Notes due 2029 of Level 3 Financing, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated January 13, 2021).
10.1			Credit Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., Level 3 Financing, Inc. and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).
10.2			Guarantee Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., the Subsidiaries of Level 3 Communications, Inc. and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).
10.3			Collateral Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Subsidiaries of Level 3 Communications, Inc. and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).



10.4	Indemnity, Subrogation and Contribution Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Subsidiaries of Level 3 Communications, Inc. and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).
10.5		Omnibus Offering Proceeds Note Subordination Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., Level 3 Financing, Inc., Level 3 Communications, LLC and the Subsidiaries party thereto (incorporated by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).
10.6		Supplement No. 1 to Omnibus Offering Proceeds Note Subordination Agreement, dated as of March 13, 2007, among Level 3 Communications, Inc., Level 3 Communications, LLC, Level 3 Financing, Inc. and the Subsidiaries party thereto (incorporated by reference to Exhibit 10.6 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated March 16, 2007).
10.7		Amendment Agreement to the March 13, 2007 Credit Agreement, dated April 16, 2009, among Level 3 Communications, Inc., Level 3 Financing, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Citigroup Global Markets, Inc., Credit Suisse Securities (USA) LLC, Wachovia Bank, N.A., and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated April 17, 2009).
10.8		Amended and Restated Loan Proceeds Note Collateral Agreement, dated as of March 13, 2007, as amended and restated as of April 16, 2009, among Level 3 Financing, Inc., Level 3 Communications, LLC and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated April 17, 2009).
10.9		First Amendment, dated as of May 15, 2009, to the Amended and Restated Credit Agreement dated as of April 16, 2009, among Level 3 Communications, Inc., Level 3 Financing, Inc. and Merrill Lynch Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Citigroup Global Markets, Inc., Credit Suisse Securities (USA) LLC, Wachovia Bank, N.A., and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 000-15658) dated May 15, 2009).
10.10		Second Amendment Agreement to the Amended and Restated Credit Agreement, dated as of October 4, 2011, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 001-35134) dated October 6, 2011).
10.11		Third Amendment Agreement to the Amended and Restated Credit Agreement, dated as of November 10, 2011, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 001-35134) dated November 17, 2011).


10.12			Fourth Amendment Agreement to Amended and Restated Credit Agreement, dated as of August 6, 2012, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 001-35134) dated August 9, 2012).
10.13			Fifth Amendment Agreement to Amended and Restated Credit Agreement dated October 4, 2012 among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (file no. 001-35134) dated October 5, 2012).
10.14			Sixth Amendment Agreement to Amended and Restated Credit Agreement, dated as of August 12, 2013, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated August 12, 2013).
10.15			Seventh Amendment Agreement to Amended and Restated Credit Agreement, dated as of August 16, 2013, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated August 16, 2013).
10.16			Eighth Amendment Agreement to Amended and Restated Credit Agreement, dated as of October 4, 2013, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated October 4, 2013).
10.17			Ninth Amendment Agreement to Amended and Restated Credit Agreement, dated as of October 31, 2014, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated October 30, 2014).



10.18	Tenth Amendment Agreement to the Amended and Restated Credit Agreement, dated as of May 8, 2015, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated May 15, 2015).
10.19		Eleventh Amendment Agreement to the Amended and Restated Credit Agreement, dated as of November 22, 2016, among Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 22, 2016).
10.20		Twelfth Amendment Agreement to the Amended and Restated Credit Agreement, dated as of February 22, 2017, by and between Level 3 Communications, Inc., Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file No. 001-35134) dated February 22, 2017), including the Amended and Restated Loan Proceeds Notes issued on the same date by Level 3 Communications, LLC to Level 3 Financing, Inc. (incorporated by reference to Exhibit 10.2 and Exhibit 10.3 to the Registrant's Current Report on Form 8-K (file No. 001-35134) dated February 22, 2017).
10.21		Thirteenth Amendment Agreement to the Amended and Restated Credit Agreement, dated as of November 29, 2019, among Level 3 Parent, LLC, Level 3 Financing, Inc., the Lenders party thereto and Merrill Lynch Capital Corporation (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 29, 2019).
10.22		Assumption Agreement, dated as of November 1, 2017, between Level 3 Parents, LLC (f/k/a WWG Merger Sub LLC) and Merrill Lynch Capital Corporation, as administrative agent and collateral agent, with respect to the Amended and Restated Credit Agreement, amended as of February 22, 2017, among Level 3 Communications, Inc., Level 3 Financing, Inc., as borrower, the lenders party thereto and Merrill Lynch Capital Corporation, as administrative agent and collateral agent (incorporated by reference to Exhibit 4.9 to the Registrant’s Current Report on Form 8-K (file no. 001-35134) dated November 1, 2017).
31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.
31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.
32.1*		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following materials from the Annual Report on Form 10-K of Level 3 Parent, LLC for the year ended December 31, ~~2019,~~2020, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in ~~Member's/Stockholders'~~Member's Equity and (vi) Notes to Consolidated Financial Statements.

104*
104*			Cover page formatted as Inline XBRL and contained in Exhibit 101.

~~_______________________________________________________________________________~~


*	* Exhibit filed herewith.

~~115~~

ITEM 16. SUMMARY OF BUSINESS AND FINANCIAL INFORMATION

Not Applicable

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this March ~~5, 2020~~

3, 2021.

LEVEL 3 PARENT, LLC

Date: March 3, 2021

By:

/s/ Eric J. Mortensen

Eric J. Mortensen

Senior Vice President - Controller (Principal Accounting Officer) and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Jeff K. Storey

Chief Executive Officer and President (Principal Executive Officer)

March 3, 2021

Jeff K. Storey

~~Signature~~

~~Title~~

~~Date~~

~~/s/ Jeff K. Storey~~

~~Chief Executive Officer and President (Principal Executive Officer)~~

~~March 5, 2020~~

~~Jeff K. Storey~~

/s/ Indraneel Dev

Executive Vice President and Chief Financial Officer (Principal Financial Officer)

March ~~5, 2020~~3, 2021

Indraneel Dev

/s/ Stacey W. Goff

Executive Vice President, General Counsel and Director

March ~~5, 2020~~3, 2021

Stacey W. Goff

/s/ Eric J. Mortensen

Senior Vice President - Controller (Principal Accounting Officer) and Director

March ~~5, 2020~~3, 2021

Eric J. Mortensen

~~116~~88



Delaware									47-0210602
(State of Incorporation)									(I.R.S. Employer Identification No.)
1025 Eldorado Blvd.,
Broomfield, CO									80021-8869
(Address of principal executive offices)									(Zip Code)

~~Delaware~~		~~47-0210602~~
~~(State of Incorporation)~~			~~(I.R.S. Employer~~
			~~Identification No.)~~

~~1025 Eldorado Blvd.,~~	~~Broomfield,~~	CO	~~80021-8869~~
~~(Address of principal executive offices)~~			~~(Zip Code)~~



PART I
~~PART I~~Special Note Regarding Controlling M ember
~~Item 1. Business~~	53
Special Note Regarding Forward-Looking Statements		3
Item 1. Business		5
Item 1A. Risk Factors		1314
Item 1B. Unresolved Staff Comments		3525
Item 2. Properties		3625
Item 3. Legal Proceedings		3625
Item 4. Mining and Safety Disclosures		3626
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		3727
Item 6. Selected Financial Data		3827
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations		3927
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		5139
Item 8. Consolidated Financial Statements and Supplementary Data		5140
Consolidated Statements of Operations		5342
Consolidated Statements of Comprehensive Income (Loss)		5443
Consolidated Balance Sheets		5544
Consolidated Statements of Cash Flows		5645
Consolidated Statements of ~~Changes in Member's/Stockholders'~~ Member's Equity		5746
Notes to Consolidated Financial Statements		5947
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~107~~79
Item 9A. Controls and Procedures		~~107~~79
Item 9B. Other Information		~~108~~80
PART III
Item 10. Directors, Executive Officers and Corporate Governance		~~109~~81
Item 11. Executive Compensation		~~109~~81
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~109~~81
Item 13. Certain Relationships and Related Transactions, and Director Independence		~~109~~81
Item 14. Principal Accounting Fees and Services		~~109~~81
PART IV
Item 15. Exhibits and Financial Statements Schedules		~~110~~82
Item 16. Summary of Business and Financial Information		~~116~~87
Signatures		~~116~~88



☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Years Ended December 31,
	2020 (1)		2019 (1)(2)(3)	2018 (1)(3)
	(Dollars in millions)
Operating revenue	$	7,933	7,773	7,839
Operating expenses	6,769		10,300	6,871
Operating income (loss)	$	1,164	(2,527)	968
Net income (loss)	$	651	(3,201)	341



	Successor						Predecessor	Combined
	Year Ended December 31, 2019⁽¹⁾⁽²⁾			Year Ended December 31, 2018⁽¹⁾⁽³⁾	Period Ended December 31, 2017⁽¹⁾⁽³⁾		Period Ended October 31, 2017⁽¹⁾	Year Ended December 31, 2017
	(Dollars in millions)
Operating revenue	$	8,185		8,220	1,407		6,870	8,277
Operating expenses	10,712			7,252	1,249		5,719	6,968
Operating (loss) income	$	(2,527	)	968	158		1,151	1,309
Net income (loss)	$	(3,201	)	341	(141	)	425	284



~~(1)~~	During the years ended December 31, 2019 and 2018, the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017, we incurred CenturyLink acquisition-related expenses of $82 million, $121 million, $28 million and $85 million, respectively. For additional information, see "Acquisition of Level 3 by CenturyLink" above and Note 2 - CenturyLink Merger to our consolidated financial statements in Item 8 of Part II of this report.
~~(2)~~	During 2019, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $3.7 billion. For additional information, see Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in Item 8 of Part II of this report.
~~(3)~~	The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a re-measurement of our deferred tax assets and liabilities at the new federal corporate tax rate of 21%. The re-measurement resulted in a tax expense of $92 million and $195 million for 2018 and 2017, respectively.



~~(1)~~	For additional information on our long-term debt, see Note 6 - Long-Term Debt to our consolidated financial statements in Item 8 of Part II of this report. For information on our total obligations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital resources - Future Contractual Obligations" in Item 7 of Part II of this report.


•	~~Internet Protocol ("IP").~~ ~~Our Internet Services provide global internet access over a high performance, diverse network with connectivity in more than 60 countries with approximately 129 Tbps of global throughput.~~


•	~~Wavelength.~~ We deliver high bandwidth optical networks to firms requiring an end-to-end transport solution with Ethernet technology by contracting for a scalable amount of bandwidth connecting sites or providing high-speed access to cloud computing resources;


•	~~Colocation and Data Center Services~~. We provide different options for organizations’ data center needs. Our data center services range from dedicated hosting and cloud services to more complex managed solutions, including disaster recovery, business continuity, applications management support and security services to manage mission critical applications;


•	~~Dark Fiber~~. We possess an extensive array of unlit optical fiber, known as “dark fiber.” Many large enterprises are interested in building their networks with this high-bandwidth, highly secure optical technology and the dark fiber option gives them exclusive access to the technology. We provide professional services to engineer these networks and manage them for many customers;


•	~~Private Line.~~ We deliver a private line (including business data services), a direct circuit or channel specifically dedicated for connecting two or more organizational sites. Private line service offers a high-speed, secure solution for frequent transmission of large amounts of data between sites, including wireless backhaul transmissions;


•	•Other. Other revenue includes sublease rental income, information technology (IT) services and managed services, which may be purchased in conjunction with our other network services. ~~. Other revenue includes sublease rental income and information technology services and managed services, which may be purchased in conjunction with our other network services.~~



	Successor
	December 31, 2019		December 31, 2018
Land	3	%	4	%
Fiber, conduit and other outside plant ⁽¹⁾	44	%	50	%
Central office and other network electronics ⁽²⁾	23	%	19	%
Support assets ⁽³⁾	21	%	22	%
Construction in progress ⁽⁴⁾	9	%	5	%
Gross property, plant and equipment	100	%	100	%


•	~~Transport and Infrastructure~~, which includes private line (including business data services), wavelength, colocation and data center facilities and services, including cloud, hosting and application management solutions, professional services, dark fiber services and other ancillary services;


•	~~Affiliate Services,~~ ~~which includestelecommunication services that we also provide to our external customers.~~


	Years Ended December 31,			% Change
	2020		2019
	(Dollars in millions)
IP and Data Services	$	3,587	3,655	(2)	%
Transport and Infrastructure	2,615		2,544	3	%
Voice and Collaboration	1,423		1,385	3	%
Other	100		9	nm
Affiliate Services	208		180	16	%
Total operating revenue	$	7,933	7,773	2	%



nm	~~Percentages greater than 200% and comparison between positive and negative values or to/from zero values are considered not meaningful.~~



~~(1)~~	~~Includes current maturities and finance lease obligations, but excludes unamortized premium, net, unamortized debt issuance costs and intercompany debt.~~
~~(2)~~	~~Actual principal and interest paid in all years may differ due to future refinancing of outstanding debt or issuance of new debt.~~
~~(3)~~	Represent purchase commitments with third-party vendors for operating, installation and maintenance services for facilities. In addition, we have service-related commitments with various vendors for data processing, technical and software support services. Future payments under certain service contracts will vary depending on our actual usage. In the table above, we estimated payments for these service contracts based on estimates of the level of services we expect to receive.
~~(4)~~	~~The table is limited solely to contractual payment obligations and does not include:~~


	Years Ended December 31,					Increase / (Decrease)			Years Ended December 31,			Change
	2019			2018					2020		2019
	(Dollars in millions)								(Dollars in millions)
Net cash provided by operating activities	$	2,683		2,397		286		Net cash provided by operating activities	$	2,284	2,683	(399)
Net cash used in investing activities	(1,078		)	(904	)	174		Net cash used in investing activities	(1,173)		(1,078)	95
Net cash used in financing activities	(1,539		)	(1,552	)	(13	)	Net cash used in financing activities	(1,244)		(1,539)	(295)



Cash, cash equivalents, restricted cash and securities:
Cash and cash equivalents	$	316	243	297	2,274
Restricted cash and securities - current	3		4	5	5
Restricted cash and securities - noncurrent	19		25	29	29
Total	$	338	272	331	2,308




ACCUMULATED DEFICIT
Balance at beginning of period	—		—	—	(8,500	)
Net income	—		—	—	425
Balance at end of period	—		—	—	(8,075	)
TOTAL MEMBER'S/STOCKHOLDERS' EQUITY	$	13,545	17,877	19,272	11,554



	Adjusted November 1, 2017 Balance as of December 31, 2017			Purchase Price Adjustments		Adjusted November 1, 2017 Balance as of October 31, 2018
	(Dollars in millions)
Cash, accounts receivable and other current assets ⁽¹⁾	$	3,317		(26	)	3,291
Property, plant and equipment	9,311			157		9,468
Identifiable intangible assets ⁽²⁾
Customer relationships	8,964			(533	)	8,431
Other	391			(13	)	378
Other noncurrent assets	782			216		998
Current liabilities, excluding current maturities of long-term debt	(1,461		)	(32	)	(1,493	)
Current maturities of long-term debt	(7		)	—		(7	)
Long-term debt	(10,888		)	—		(10,888	)
Deferred revenue and other liabilities	(1,613		)	(114	)	(1,727	)
Goodwill	10,837			340		11,177
Total estimated aggregate consideration	$	19,633		(5	)	19,628



	(Dollars in millions)
As of December 31, 2017	$	10,837
Purchase accounting and other adjustments	340
Effect of foreign currency rate change	(58		)
As of December 31, 2018	$	11,119
Impairment	(3,708		)
Effect of foreign currency rate change and other	4
As of December 31, 2019	$	7,415



	Successor
	Reported Balances as of December 31, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Balances
	(Dollars in millions)
Operating revenue	$	8,220	(5	)	8,215
Cost of services and products (exclusive of depreciation and amortization)	3,937		—		3,937
Selling, general and administrative	1,354		52		1,406
Interest expense	509		(9	)	500
Income tax expense	196		(12	)	184
Net income	341		(36	)	305



	Year Ended December 31, 2019
	Total Revenue		Adjustments for Non-ASC 606 Revenue⁽⁶⁾		Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and Data Services ⁽¹⁾	$	3,888	—		3,888
Transport and Infrastructure ⁽²⁾	2,662		(704	)	1,958
Voice and Collaboration ⁽³⁾	1,443		—		1,443
Other Revenue ⁽⁴⁾	12		(9	)	3
Affiliate Revenue ⁽⁵⁾	180		(180	)	—
Total Revenue	$	8,185	(893	)	7,292

Timing of revenue
Goods transferred at a point in time					$	—
Services performed over time					7,292
Total revenue from contracts with customers					$	7,292



		December 31
Leases (millions)	Classification on the Balance Sheet	2019
Assets
Operating lease assets	Operating lease assets	$	1,060
Finance lease assets	Property, plant and equipment, net of accumulated depreciation	154
Total leased assets		$	1,214

Liabilities
Current
Operating	Current operating lease liabilities	$	249
Finance	Current portion of long-term debt	11
Noncurrent
Operating	Noncurrent operating lease liabilities	854
Finance	Long-term debt	160
Total lease liabilities		$	1,274

Weighted-average remaining lease term (years)
Operating leases		7.5
Finance leases		13.1
Weighted-average discount rate
Operating leases		6.19		%
Finance leases		5.60		%



	Future Minimum Payments
	(Dollars in millions)
Capital lease obligations:
2019	$	16
2020	15
2021	16
2022	16
2023	17
2024 and thereafter	164
Total minimum payments	244
Less: amount representing interest and executory costs	(81		)
Present value of minimum payments	163
Less: current portion	(6		)
Long-term portion	$	157



	Interest Rates	Maturities	December 31, 2019			December 31, 2018
			(Dollars in millions)
Level 3 Parent, LLC
Senior Notes	5.750%	2022	$	—		600
Subsidiaries
Level 3 Financing, Inc.
Senior Secured Debt:⁽¹⁾
Senior Notes ⁽²⁾	3.400% - 3.875%	2027 - 2029	1,500			—
Tranche B 2024 Term Loan ⁽³⁾	LIBOR + 2.25%	2024	—			4,611
Tranche B 2027 Term Loan ⁽⁴⁾	LIBOR + 1.75%	2027	3,111			—
Senior Notes and other debt:
Senior Notes ⁽²⁾	4.625% - 6.125%	2021 - 2027	5,515			5,315
Finance Leases	Various	Various	171			163
Unamortized premiums, net			104			155
Unamortized debt issuance costs			(34		)	—
Total long-term debt			10,367			10,844
Less current maturities			(11		)	(6	)
Long-term debt, excluding current maturities			$	10,356		10,838



	(Dollars in millions)⁽¹⁾
2020	$	11
2021	8
2022	850
2023	1,210
2024	911
2024 and thereafter	7,307
Total long-term debt	$	10,297



	Severance
	(Dollars in millions)
Balance at December 31, 2017 (Successor)	$	5
Accrued to expense	33
Payments, net	(19		)
Balance at December 31, 2018	$	19
Accrued to expense	6
Payments, net	(16		)
Balance at December 31, 2019	$	9