UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended September 30, ~~2022~~2023


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

For the transition period from to

Commission file number 001-35134

LEVEL 3 PARENT, LLC

(Exact name of registrant as specified in its charter)



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)

(720) 888-1000

(Registrant’s telephone number,

including area code)

Securities registered pursuant to Section 12(b) of the Act: None

THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF LUMEN TECHNOLOGIES, INC., MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE PURSUANT TO GENERAL INSTRUCTION H(2).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☐ No ☐☒ Although the registrant is no longer required to file reports under Section 13 or 15(d) of such Act, it has filed all such reports for the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

All of the limited liability company interest in the registrant is held by an affiliate of the registrant. None of the interest is publicly traded.

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TABLE OF CONTENTS



	Special Note Regarding Forward-Looking Statements	3
Part I	Financial Information
Item 1.	Financial Statements	6
	Consolidated Statements of Operations (Unaudited)	6
	Consolidated Statements of Comprehensive (~~Loss)~~ (Loss) Income (Unaudited)	7
	Consolidated Balance Sheets (Unaudited)	8
	Consolidated Statements of Cash Flows (Unaudited)	9
	Consolidated Statements of Member's Equity (Unaudited)	10
	Notes to Consolidated Financial Statements (Unaudited)*	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2628
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3638
Item 4.	Controls and Procedures	3739
Part II	Other Information
Item 1.	Legal Proceedings	3840
Item 1A.	Risk Factors	~~Risk Factors~~40	38

Item 6.	Exhibits	3941
Signature		4042

* All references to "Notes" in this quarterly report refer to these Notes to Consolidated Financial Statements.

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Unless the context requires otherwise, references in this report to "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 consolidated subsidiaries. References to "Lumen Technologies" or "Lumen" refer to our ultimate parent company, Lumen Technologies, Inc. and its consolidated subsidiaries.

Special Note Regarding Forward-Looking Statements

This report and other documents filed by us under the federal securities law include, and future oral or written statements or press releases by us and our management may include, forward-looking statements about our business, financial condition, operating results or prospects. These "forward-looking" statements are defined by, and are subject to the "safe harbor" protections under, the federal securities laws. These statements include, among others:

•forecasts of our anticipated future results of operations, cash flows or financial position;

•statements concerning the anticipated impact of our completed, pending or proposed transactions, investments, product development, buildout plans, and other initiatives, including synergies or costs associated with these initiatives;

•statements about our liquidity, profitability, profit margins, tax position, tax assets, tax rates, asset values, contingent liabilities, growth opportunities, growth rates, acquisition and divestiture opportunities, business prospects, regulatory and competitive outlook, market share, product capabilities, investment and expenditure plans, business strategies, distribution and securities repurchase plans, leverage, capital allocation plans, financing or refinancing alternatives and sources, and pricing plans;

•statements regarding how the ~~health~~COVID-19 pandemic and ~~economic challenges raised by the COVID-19 pandemic~~its aftermath may impact our business, financial position, operating results or prospects; and

•other similar statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts, many of which are highlighted by words such as “may,” “will,” “would,” “could,” “should,” “plans,” “believes,” “expects,” “anticipates,” “estimates,” "forecasts," “projects,” "proposes," "targets," “intends,” “likely,” “seeks,” “hopes,” or variations or similar expressions with respect to the future.

These forward-looking statements are based upon our judgment and assumptions as of the date such statements are made concerning future developments and events, many of which are beyond our control. These forward-looking statements, and the assumptions upon which they are based, (i) are not guarantees of future results, (ii) are inherently speculative and (iii) are subject to a number of risks and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. All of our forward-looking statements are qualified in their entirety by reference below to factors that could cause our actual results to differ materially from those anticipated, estimated, projected or implied by us in those forward-looking statements. These factors include but are not limited to:

•the effects of intense competition from a wide variety of competitive providers, including decreased demand for our more mature service offerings and increased pricing pressures;

•the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete;

•our ability to successfully and timely attain our key operating imperatives, including simplifying and consolidating our network, simplifying and automating our service support systems, strengthening our relationships with customers and attaining projected cost savings;

•our ability to safeguard our network, and to avoid the adverse impact of ~~possible~~ cyber-attacks, security breaches, service outages, system failures, or similar events impacting our network or the availability and quality of our services;

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•the effects of ongoing changes in the regulation of the communications industry, including the outcome of legislative, regulatory or judicial proceedings relating to content liability standards, intercarrier compensation, broadband deployment, data protection, privacy and net neutrality;

•our ability to generate cash flows sufficient to fund our financial commitments and objectives, including our capital expenditures, operating costs, debt repayments, taxes and benefits payments;

•our ability to effectively retain and hire key personnel;

•our ability to successfully adjust to changes in customer demand for our products and services, including increased demand for high-speed data transmission services;

•our ability to successfully maintain the quality and profitability of our existing product and service offerings, ~~and~~ to introduce profitable new offerings on a timely and cost-effective ~~basis;~~

•basis and to transition customers from our ~~ability~~legacy products to ~~generate cash flows sufficient to fund~~ our ~~financial commitments and objectives, including our capital expenditures, operating costs, debt repayments and distributions;~~newer offerings;

•our ability to successfully and timely implement our corporate strategies, including our deleveraging ~~strategy;~~and buildout strategies;

•our ability to successfully and timely consummate the ~~pending~~planned divestiture of our European, Middle Eastern and African business, to successfully and timely realize the anticipated benefits from that divestiture and our divestiture completed in 2022, and to successfully operate and transform our ~~retained business after such divestitures;~~remaining business;

•changes in our operating plans, corporate strategies and capital allocation plans, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market or regulatory conditions, or otherwise;

•the impact of any future material acquisitions or divestitures that we may transact;

•the negative impact of increases in the costs of Lumen’s pension, healthcare and post-employment benefits, including those caused by changes in markets, interest rates, mortality rates, demographics or regulations;

•the potential negative impact of customer complaints, government investigations, security breaches or service outages impacting us or our industry;

•adverse changes in our access to credit markets on favorable terms, whether caused by changes in our financial position, lower credit ratings, unstable markets, debt covenant restrictions or otherwise;

•the ability of us and our ~~ability~~affiliates to meet the terms and conditions of our respective debt obligations and covenants, including our ability to make transfers of cash in compliance therewith;

•the impact of any purported notice of default or notice of acceleration arising from alleged breach of covenants under our credit documents;

•our ability to consummate the transactions contemplated by the transaction support agreement on the timeline currently expected or at all, including the ability of the parties to negotiate definitive agreements with respect to the matters covered by the term sheet included in the transaction support agreement. The occurrence of events may give rise to failure to satisfy any of the conditions to the closing of the transactions contemplated by, or a right of any of the parties to terminate, the transaction support agreement;

•our ability to maintain favorable relations with our security holders, key business partners, suppliers, vendors, landlords and financial ~~institutions;~~lenders;

•our ability to timely obtain necessary hardware, software, equipment, services, governmental permits and other items on favorable terms;

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•Lumen's ability to meet evolving environmental, social and governance ("ESG") expectations and benchmarks, and effectively communicate its ESG strategies;

•our ability to collect our receivables from, or continue to do business with, financially-troubled customers;

•~~Lumen's ability to use its net operating loss carryforwards in the amounts projected;~~

•our ability to continue to use or renew intellectual property used to conduct our operations;

•any adverse developments in legal or regulatory proceedings involving us or our affiliates, including Lumen Technologies;

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•changes in tax, pension, healthcare or other laws or regulations, or in general government funding levels, including those arising from ~~recently-enacted federal legislation~~governmental programs promoting increased broadband development;

•our ability to use our net operating loss carryforwards in the amounts projected;

•the effects of changes in accounting policies, practices or assumptions, including changes that could potentially require additional future impairment charges;

•continuing uncertainties regarding the impact that COVID-19 ~~disruptions~~and its aftermath could have on our business, operations, cash flows and corporate initiatives;

•the effects of adverse weather, terrorism, epidemics, pandemics, rioting, vandalism, societal unrest, or other natural or man-made disasters or disturbances;

•the potential adverse effects if our internal controls over financial reporting have weaknesses or deficiencies, or otherwise fail to operate as intended;

•the effects of changes in interest rates ~~and~~or inflation;

•the effects of more general factors such as changes in exchange rates, in operating costs, in public policy, in the views of financial analysts, or in general market, labor, economic or ~~geo-political~~geopolitical conditions; and

•other risks referenced in the "Risk Factors" section or other portions of this report or other of our filings with the U.S. Securities and Exchange Commission (the "SEC").

Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned not to unduly rely upon our forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Furthermore, any information about our intentions contained in any of our forward-looking statements reflects our intentions as of the date of such forward-looking statement, and is based upon, among other things, existing regulatory, technological, industry, competitive, economic and market conditions, and our assumptions as of such date. We may change our intentions, strategies or plans (including our distribution or other capital allocation plans) at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

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PART I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended September 30,			Nine Months Ended September 30,
		2022		2021	2022		2021		2023		2022	2023	2022
		(Dollars in millions)							(Dollars in millions)
OPERATING REVENUE	OPERATING REVENUE							OPERATING REVENUE
Operating revenue	Operating revenue	$	1,762	1,934	$	5,548	5,797	Operating revenue	$	1,706	1,762	5,144	5,548
Operating revenue - affiliates	Operating revenue - affiliates	57		56	170		167	Operating revenue - affiliates	57		57	167	170
Total operating revenue	Total operating revenue	1,819		1,990	5,718		5,964	Total operating revenue	1,763		1,819	5,311	5,718
OPERATING EXPENSES	OPERATING EXPENSES							OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	Cost of services and products (exclusive of depreciation and amortization)	785		897	2,472		2,643	Cost of services and products (exclusive of depreciation and amortization)	779		785	2,281	2,472
Selling, general and administrative	Selling, general and administrative	269		305	901		872	Selling, general and administrative	342		269	946	901
Gain on sale of business	Gain on sale of business	(119)		—	(119)		—	Gain on sale of business	—		(119)	—	(119)
Loss on disposal group held for sale								Loss on disposal group held for sale	28		—	113	—
Operating expenses - affiliates	Operating expenses - affiliates	173		116	481		354	Operating expenses - affiliates	172		173	571	481
Depreciation and amortization	Depreciation and amortization	377		431	1,178		1,304	Depreciation and amortization	354		377	1,056	1,178
Goodwill impairment								Goodwill impairment	—		—	1,970	—
Total operating expenses	Total operating expenses	1,485		1,749	4,913		5,173	Total operating expenses	1,675		1,485	6,937	4,913
OPERATING INCOME		334		241	805		791
OPERATING INCOME (LOSS)								OPERATING INCOME (LOSS)	88		334	(1,626)	805
OTHER (EXPENSE) INCOME	OTHER (EXPENSE) INCOME							OTHER (EXPENSE) INCOME
Interest expense								Interest expense	(123)		(99)	(336)	(284)
Interest income - affiliate	Interest income - affiliate	19		16	50		49	Interest income - affiliate	16		19	47	50
Interest expense		(99)		(90)	(284)		(272)
Other (expense) income, net		(4)		(9)	(25)		1
Other expense, net								Other expense, net	(39)		(4)	(27)	(25)
Total other expense, net	Total other expense, net	(84)		(83)	(259)		(222)	Total other expense, net	(146)		(84)	(316)	(259)
INCOME BEFORE INCOME TAXES		250		158	546		569
Income tax expense		312		37	397		150
(LOSS) INCOME BEFORE INCOME TAXES								(LOSS) INCOME BEFORE INCOME TAXES	(58)		250	(1,942)	546
Income tax (benefit) expense								Income tax (benefit) expense	(13)		312	(14)	397
NET (LOSS) INCOME	NET (LOSS) INCOME	$	(62)	121	$	149	419	NET (LOSS) INCOME	$	(45)	(62)	(1,928)	149

See accompanying notes to consolidated financial statements.

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LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended September 30,			Nine Months Ended September 30,
		2022		2021	2022		2021		2023		2022	2023	2022
		(Dollars in millions)							(Dollars in millions)
NET (LOSS) INCOME	NET (LOSS) INCOME	$	(62)	121	$	149	419	NET (LOSS) INCOME	$	(45)	(62)	(1,928)	149
OTHER COMPREHENSIVE LOSS	OTHER COMPREHENSIVE LOSS							OTHER COMPREHENSIVE LOSS
Reclassification of realized loss on foreign currency translation to gain on sale of business, net of $—, $—, $—, and $— tax		112		—	112		—
Foreign currency translation adjustments, net of $28, $13, $70, and $16 tax		(114)		(93)	(229)		(101)
Reclassification of realized loss on foreign currency translation to gain on sale of business, net of $—, $—, $— and $— tax								Reclassification of realized loss on foreign currency translation to gain on sale of business, net of $—, $—, $— and $— tax	—		112	—	112
Foreign currency translation adjustments, net of $5, $28, $(3) and $70 tax								Foreign currency translation adjustments, net of $5, $28, $(3) and $70 tax	(14)		(114)	(2)	(229)
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	(2)		(93)	(117)		(101)	Other comprehensive loss, net of tax	(14)		(2)	(2)	(117)
COMPREHENSIVE (LOSS) INCOME	COMPREHENSIVE (LOSS) INCOME	$	(64)	28	$	32	318	COMPREHENSIVE (LOSS) INCOME	$	(59)	(64)	(1,930)	32

See accompanying notes to consolidated financial statements.

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LEVEL 3 PARENT, LLC

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September 30, 2022 December 31, 2021
(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 130 146
Accounts receivable, less allowance of $27 and $39 596 642
Note receivable - affiliate 1,468 1,468
Assets held for sale 10 2,708
Other 251 239
Total current assets 2,455 5,203
Property, plant and equipment, net of accumulated depreciation of $3,649 and $3,202 8,918 9,042
GOODWILL AND OTHER ASSETS
Goodwill 6,598 6,666
Other intangible assets, net 5,218 5,725
Other, net 1,614 1,459
Total goodwill and other assets 13,430 13,850
TOTAL ASSETS $ 24,803 28,095
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 26 26
Accounts payable 431 381
Accounts payable - affiliates 46 18
Accrued expenses and other liabilities
Salaries and benefits 161 176
Income and other taxes 98 83
Current operating lease liabilities 358 299
Other 94 150
Liabilities held for sale — 435
Current portion of deferred revenue 307 291
Total current liabilities 1,521 1,859
LONG-TERM DEBT 8,079 10,396
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue 1,489 1,404
Operating lease liabilities 1,077 953
Other 807 474
Total deferred revenue and other liabilities 3,373 2,831
COMMITMENTS AND CONTINGENCIES (Note 8)
MEMBER'S EQUITY
Member's equity 12,298 13,360
Accumulated other comprehensive loss (468) (351)
Total member's equity 11,830 13,009
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 24,803 28,095


	September 30, 2023		December 31, 2022
	(Dollars in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	146	118
Accounts receivable, less allowance of $13 and $19	567		517

Note receivable - affiliate	1,466		1,468
Assets held for sale	1,885		1,853
Other	220		197
Total current assets	4,284		4,153
Property, plant and equipment, net of accumulated depreciation of $3,521 and $2,875	7,384		7,303
GOODWILL AND OTHER ASSETS
Goodwill	—		1,970
Other intangible assets, net	4,516		4,973
Other, net	1,320		1,360
Total goodwill and other assets	5,836		8,303
TOTAL ASSETS	$	17,504	19,759
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	29	26
Accounts payable	340		365
Accounts payable - affiliates	48		70
Accrued expenses and other liabilities
Salaries and benefits	177		146
Income and other taxes	106		86
Current operating lease liabilities	310		326
Other	145		109
Liabilities held for sale	474		446
Current portion of deferred revenue	292		274
Total current liabilities	1,921		1,848
LONG-TERM DEBT	8,960		8,070
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue	1,554		1,420
Operating lease liabilities	840		922
Other	657		701
Total deferred revenue and other liabilities	3,051		3,043
COMMITMENTS AND CONTINGENCIES (Note 9)
MEMBER'S EQUITY
Member's equity	3,918		7,142
Accumulated other comprehensive loss	(346)		(344)
Total member's equity	3,572		6,798
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	17,504	19,759

See accompanying notes to consolidated financial statements.

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LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2023		2022
		(Dollars in millions)				(Dollars in millions)
OPERATING ACTIVITIES	OPERATING ACTIVITIES				OPERATING ACTIVITIES
Net income		$	149	419
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income					Net (loss) income	$	(1,928)	149
Adjustments to reconcile net (loss) income to net cash provided by operating activities:					Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	1,178		1,304	Depreciation and amortization	1,056		1,178
Loss on disposal group held for sale					Loss on disposal group held for sale	113		—
Goodwill impairment					Goodwill impairment	1,970		—
Gain on sale of business	Gain on sale of business	(119)		—	Gain on sale of business	—		(119)
Deferred income taxes	Deferred income taxes	367		122	Deferred income taxes	(20)		367
Net gain on early retirement of debt		(9)		—
Changes in current assets and liabilities:	Changes in current assets and liabilities:				Changes in current assets and liabilities:
Accounts receivable	Accounts receivable	2		(41)	Accounts receivable	(41)		2
Accounts payable	Accounts payable	(37)		(34)	Accounts payable	(30)		(37)
Other assets and liabilities, net	Other assets and liabilities, net	(141)		(74)	Other assets and liabilities, net	12		(141)
Other assets and liabilities, affiliate	Other assets and liabilities, affiliate	81		(780)	Other assets and liabilities, affiliate	(5)		81
Changes in other noncurrent assets and liabilities, net	Changes in other noncurrent assets and liabilities, net	117		33	Changes in other noncurrent assets and liabilities, net	101		117
Other, net	Other, net	99		(8)	Other, net	5		90
Net cash provided by operating activities	Net cash provided by operating activities	1,687		941	Net cash provided by operating activities	1,233		1,687
INVESTING ACTIVITIES	INVESTING ACTIVITIES				INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(877)		(874)	Capital expenditures	(785)		(877)
Proceeds from sale of business	Proceeds from sale of business	2,707		—	Proceeds from sale of business	3		2,707
Proceeds from sale of property, plant and equipment and other assets	Proceeds from sale of property, plant and equipment and other assets	2		52	Proceeds from sale of property, plant and equipment and other assets	25		2
Net cash provided by (used in) investing activities		1,832		(822)
Other, net					Other, net	(12)		—
Net cash (used in) provided by investing activities					Net cash (used in) provided by investing activities	(769)		1,832
FINANCING ACTIVITIES	FINANCING ACTIVITIES				FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		—		891

Distributions	Distributions	(1,210)		(25)	Distributions	(411)		(1,210)
Payments of long-term debt	Payments of long-term debt	(2,367)		(932)	Payments of long-term debt	(28)		(2,367)
Other	Other	—		(1)	Other	(13)		—
Net cash used in financing activities	Net cash used in financing activities	(3,577)		(67)	Net cash used in financing activities	(452)		(3,577)
Net (decrease) increase in cash, cash equivalents and restricted cash		(58)		52
Net increase (decrease) in cash, cash equivalents and restricted cash					Net increase (decrease) in cash, cash equivalents and restricted cash	12		(58)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	191		205	Cash, cash equivalents and restricted cash at beginning of period	164		191
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	133	257	Cash, cash equivalents and restricted cash at end of period	$	176	133
Supplemental cash flow information:	Supplemental cash flow information:				Supplemental cash flow information:
Income taxes paid, net	Income taxes paid, net	$	(4)	(23)	Income taxes paid, net	$	(7)	(4)
Interest paid (net of capitalized interest of $12 and $11)		$	(326)	(304)

Interest paid (net of capitalized interest of $15 and $12)					Interest paid (net of capitalized interest of $15 and $12)	$	(302)	(326)
Supplemental non-cash information regarding financing activities:					Supplemental non-cash information regarding financing activities:
Issuance of senior secured notes as part of exchange offers (Note 6)					Issuance of senior secured notes as part of exchange offers (Note 6)	$	924	—
Cash, cash equivalents and restricted cash:	Cash, cash equivalents and restricted cash:				Cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	130	215	Cash and cash equivalents	$	146	130
Cash and cash equivalents included in assets held for sale		—		36
Cash and cash equivalents and restricted cash included in assets held for sale					Cash and cash equivalents and restricted cash included in assets held for sale	28		—
Restricted cash included in Other current assets	Restricted cash included in Other current assets	1		2	Restricted cash included in Other current assets	—		1
Restricted cash included in Other, net noncurrent assets	Restricted cash included in Other, net noncurrent assets	2		4	Restricted cash included in Other, net noncurrent assets	2		2
Total	Total	$	133	257	Total	$	176	133

See accompanying notes to consolidated financial statements.

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LEVEL 3 PARENT, LLC

CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY

(UNAUDITED)


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended September 30,			Nine Months Ended September 30,
		2022		2021	2022		2021		2023		2022	2023	2022
		(Dollars in millions)							(Dollars in millions)
MEMBER'S EQUITY	MEMBER'S EQUITY							MEMBER'S EQUITY
Balance at beginning of period	Balance at beginning of period	$	13,018	13,412	13,360		13,139	Balance at beginning of period	$	4,215	13,018	7,142	13,360
Net (loss) income	Net (loss) income	(62)		121	149		419	Net (loss) income	(45)		(62)	(1,928)	149
Distributions	Distributions	(657)		—	(1,210)		(25)	Distributions	(250)		(657)	(1,335)	(1,210)
Other	Other	(1)		(1)	(1)		(1)	Other	(2)		(1)	39	(1)
Balance at end of period	Balance at end of period	12,298		13,532	12,298		13,532	Balance at end of period	3,918		12,298	3,918	12,298
ACCUMULATED OTHER COMPREHENSIVE LOSS	ACCUMULATED OTHER COMPREHENSIVE LOSS							ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of period	Balance at beginning of period	(466)		(242)	(351)		(234)	Balance at beginning of period	(332)		(466)	(344)	(351)
Other comprehensive loss	Other comprehensive loss	(2)		(93)	(117)		(101)	Other comprehensive loss	(14)		(2)	(2)	(117)
Balance at end of period	Balance at end of period	(468)		(335)	(468)		(335)	Balance at end of period	(346)		(468)	(346)	(468)
TOTAL MEMBER'S EQUITY	TOTAL MEMBER'S EQUITY	$	11,830	13,197	$	11,830	13,197	TOTAL MEMBER'S EQUITY	$	3,572	11,830	3,572	11,830

See accompanying notes to consolidated financial statements.

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LEVEL 3 PARENT, LLC

Notes To Consolidated Financial Statements

(UNAUDITED)

Unless the context requires otherwise, references in this report to "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.

(1) Background

General

We are an international facilities-based technology and communications ~~provider (that is,~~company focused on providing our customers with a ~~provider that owns or leases a substantial portion~~broad array of integrated products and services necessary to fully participate in our ever-evolving digital world. We operate one of the ~~property, plant~~world’s most interconnected networks. Our platform empowers our customers to swiftly adjust digital programs securely to meet immediate demands, create efficiencies, accelerate market access and ~~equipment necessary~~reduce costs - allowing customers to ~~provide our services) of a broad range of integrated communications services. We created our communications network by constructing our own assets~~rapidly evolve their IT programs to address dynamic changes. Our specific products 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.~~are detailed in Note 4—Revenue Recognition.

Basis of Presentation

Our consolidated balance sheet as of December 31, ~~2021,~~2022, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). However, in our opinion, the disclosures made therein are adequate to make the information presented not misleading. We believe these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first nine months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (Lumen Technologies and its other subsidiaries, referred to herein as affiliates) have not been eliminated.

Operating lease assets are included in other, net under goodwill and other assets on our consolidated balance sheets. Other, net included affiliate operating lease assets of ~~$411~~$335 million and ~~$294~~$391 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Additionally, current operating lease liabilities included the current portion of affiliate operating lease liabilities of ~~$116~~$131 million and ~~$82~~$125 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and operating lease liabilities included the noncurrent portion of affiliate operating lease liabilities of ~~$307~~$224 million and ~~$224~~$286 million as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories. See Note 4—Revenue Recognition for additional information. These changes had no impact on total operating revenue, total operating expenses or net (loss) income for any period.

Segments

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

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Summary of Significant Accounting Policies

Refer to the significant accounting policies described in Note 1 — Background and Summary of Significant Accounting Policies to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Recently Adopted Accounting Pronouncements

Supplier Finance Programs

On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”). These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions. The adoption of ASU 2022-04 did not have a material impact to our consolidated financial statements.

Credit Losses

On January 1, 2023, we adopted ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures” (“ASU 2022-02”). The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. The adoption of ASU 2022-02 did not have any impact to our consolidated financial statements.

Derivatives and Hedging

On January 1, 2023, we adopted ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method” ("ASU 2022-01"). The ASU expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. The adoption of ASU 2022-01 did not have any impact to our consolidated financial statements.

Business Combinations

On January 1, 2023, we adopted ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The adoption of ASU 2021-08 did not have any impact to our consolidated financial statements.

Government Assistance

On January 1, 2022, we adopted ~~Accounting Standards Update ("ASU")~~ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU ~~2020-10”~~2021-10”). This ASU ~~increases transparency in financial reporting by requiring~~requires business entities to disclose information about certain types of government assistance they receive. The ASU only impacts annual financial statement note disclosures. ~~Therefore, the~~The adoption of ASU 2021-10 did not have a material impact to our consolidated financial statements.

Leases

On January 1, 2022, we adopted ASU 2021-05, “Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments” (“ASU 2021-05”). This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease; and (iii) provides guidance with respect to net investments by lessors under operating leases and other related topics. The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements.

~~Debt~~

~~On January 1, 2021, we adopted ASU 2020-09, “Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762~~” (“ASU 2020-09”). This ASU amends and supersedes various SEC guidance to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements.

~~Investments~~

~~On January 1, 2021, we adopted ASU 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)~~” ("ASU 2020-01”). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, ~~Investments - Equity Method and Joint Ventures~~, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of September 30, 2022, we determined there was no application or discontinuation of the equity method during the reporting periods covered by this report. The adoption of ASU 2020-01 did not have a material impact to our consolidated financial statements.

~~Income Taxes~~

~~On January 1, 2021, we adopted ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”~~ (“ASU 2019-12”). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”). These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and potential magnitude of program transactions. ASU 2022-04 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we are reviewing our supplier finance agreements to determine the impact to disclosures in our consolidated financial statements.

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Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes. As of September 30, 2023, we do not expect ASU 2023-06 will have any impact to our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and initial Measurement” (“ASU 2023-05”). This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture). The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation. ASU 2023-05 will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted. As of September 30, 2023, we do not expect ASU 2023-05 will have any impact to our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-04, “Liabilities (Topic 405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121” (“ASU 2023-04”). This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users. The ASU does not provide any new guidance. ASU 2023-04 will become effective for us once the addition to the FASB Codification is made available. As of September 30, 2023, we do not expect ASU 2023-04 will have any impact to our consolidated financial statements.

In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock” (“ASU 2023-03”). This ASU amends or superseded various SEC paragraphs within the applicable codification to conform to past SEC staff Announcements. This ASU does not provide any new guidance. ASU 023-03 will become effective for us once the addition to the FASB Codification is made available. As of September 30, 2023, we do not expect ASU 2023-03 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-02, “Investments-Equity method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”). These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. ASU 2023-02 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of September 30, 2023, we do not expect ASU 2023-02 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements” (“ASU 2023-01”). These amendments require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. ASU 2023-01 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted. As of September 30, 2023, we do not expect ASU 2023-01 will have any impact to our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). These amendments clarify that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. ASU 2022-03 will become effective for us in the first quarter of fiscal ~~2023~~2024 and early adoption is permitted. As of September 30, ~~2022,~~2023, we do not expect ASU 2022-03 towill have ~~an impact to our consolidated financial statements.~~

~~In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures~~” (“ASU 2022-02”). These amendments eliminate the TDR recognition and measurement guidance, enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. ASU 2022-02 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2022-02 to have anany impact to our consolidated financial statements.

~~In March 2022, the FASB issued ASU 2022-01, “~~

~~Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method” (ASU 2022-01). The ASU expands the current single-layer method to allow multiple hedged layers~~Table of a single closed portfolio under the method. ASU 2022-01 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2022-01 to have an impact to our consolidated financial statements.Contents

~~In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers~~” (“ASU 2021-08”), which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2021-08 to have an impact to our consolidated financial statements.

~~In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope"~~ ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2021-01 provides optional expedients for a limited time to ease the potential burden in accounting for reference rate reform. Based on our review of our key material contracts through September 30, 2022, ASU 2021-01 does not have a material impact to our consolidated financial statements.

(2) ~~Recently Completed~~Planned Divestiture of the ~~Latin American~~EMEA Business

On ~~August 1,~~November 2, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen Technologies, Inc., ~~sold Lumen's Latin American business pursuant~~granted an option to Colt Technology Services Group Limited, a ~~definitive agreement dated July 25, 2021~~portfolio company of Fidelity Investments, to purchase certain of their operations in Europe, the Middle East and Africa (the "EMEA business"), in exchange for ~~pre-tax~~$1.8 billion in cash, ~~proceeds of approximately $2.7 billion,~~ subject to certain ~~post-closing~~working capital and other purchase price adjustments. Following the completion of a French consultative process, Colt exercised its option and on February 8, 2023, the parties entered into a definitive purchase agreement, which contains various customary covenants for transactions of this type, including various indemnities. Subject to satisfaction of customary closing conditions, Level 3 Parent, LLC expects to close the transaction November 1, 2023, although it can provide no assurance to this effect.

~~During both the three and nine months ended September 30, 2022, we recorded a $119 million pre-tax gain on disposal associated with the sale~~The actual amount of our ~~Latin American business. This gain is reflected as operating income within~~net after-tax proceeds from this divestiture could vary substantially from the ~~consolidated statements~~amounts we currently estimate, particularly if we experience delays in completing the transaction or if any of ~~operations.~~

In connection with the sale, Lumen has entered into a transition services agreement under which it will provide to the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they will provide eachour other various network and other commercial services. Lumen also agreed to indemnify the purchaser for certain matters for which future cash payments by Lumen could be required. Lumen has estimated the fair value of these indemnificationsassumptions prove to be ~~$86 million, which is included in other long-term liabilities in our consolidated balance sheet and has reduced our gain on the sale accordingly.~~incorrect.

We do not believe this divestiture ~~represented~~represents a strategic shift for ~~Level 3.~~us. Therefore, the ~~Latin American~~planned divestiture of the EMEA business ~~did~~does not meet the criteria to be classified as a discontinued ~~operation.~~operations. As a result, we ~~continued~~will continue to report our operating results for the ~~Latin American~~EMEA business (the "disposal group") in our consolidated operating results ~~through~~until the ~~disposal date.~~ transaction is closed.

The pre-tax net income of the ~~Latin American business~~disposal group is estimated to be and reported as follows in the table below:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2023		2022	2023	2022
	(Dollars in millions)
EMEA business pre-tax net income (loss)	$	32	(21)	131	(55)

As of September 30, 2023 in the accompanying consolidated balance sheet, the assets and liabilities of our EMEA business are classified as held for sale and measured at the lower of (i) the carrying value when we classified the disposal group as held for sale and (ii) the fair value of the disposal group as of such date, less costs to sell. Effective with the designation of the disposal group as held for sale on November 2, 2022, we suspended recording depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets while these assets are classified as held for sale. We estimate that we would have recorded an additional $90 million and $232 million of depreciation, intangible amortization, and amortization of right-of-use assets for the three and nine months ended September 30, 2023, respectively, if the EMEA business did not meet the held for sale criteria.

The classification of the EMEA business as held for sale was considered an event or change in circumstance which requires an assessment of the goodwill of the disposal group for impairment each reporting period until disposal. We performed a pre-classification and post-classification goodwill impairment test of the disposal group as described further in Note 3—Goodwill, Customer Relationships and Other Intangible Assets, in our Annual Report on Form 10-K for the year ended December 31, 2022. As a result of our impairment tests, we determined the EMEA business disposal group was impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $224 million in the fourth quarter of 2022. We evaluated the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, and recorded an estimated loss on disposal of $616 million during the year ended December 31, 2022 in the consolidated statement of operations and a valuation allowance included in assets held for sale on the consolidated balance sheet. As a result of our evaluation of the recoverability of the carrying value of the EMEA assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, as of September 30, 2023, we recorded a $28 million and $113 million estimated loss on disposal during the three and nine months ended September 30, 2023, respectively, and adjusted the valuation allowance by the same amounts. For each reporting period through the closing date, we will conduct similar evaluations and adjust the valuation allowance for the EMEA assets held for sale as necessary.

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Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(Dollars in millions)
Pre-tax net income (1)
$ 19 62 197 137

~~(1)~~The ~~pre-tax net income includes operating results prior to the close~~principal components of the held for sale ~~of the business on August 1, 2022~~

~~The Latin American business was included in our continuing operations and classified as~~ assets and liabilities ~~held for sale on our consolidated balance sheets through the closing~~ of the ~~transaction on August 1, 2022. As a result~~EMEA business as of ~~closing~~ the ~~transaction, we derecognized $2.4 billion of net assets, the principal components of which were~~dates below are as follows:


	~~August 1, 2022~~
	~~(Dollars in millions)~~
~~Assets~~
~~Cash and cash equivalents~~	$	40
~~Accounts receivable, less allowance of $3~~	~~105~~
~~Other current assets~~	86
~~Property, plant and equipment, net accumulated depreciation of $447~~	~~1,703~~
~~Goodwill(1)~~	~~719~~
~~Customer relationships and other intangibles, net~~	~~140~~
~~Other non-current assets~~	70
~~Total assets~~	$	~~2,863~~

~~Liabilities~~
~~Accounts payable~~	$	~~105~~
~~Income and other taxes~~	42
~~Other current liabilities~~	59
~~Deferred income taxes, net~~	~~154~~
~~Other non-current liabilities~~	~~122~~
~~Total liabilities~~	$	~~482~~


	September 30, 2023		December 31, 2022
	(Dollars in millions)
Assets held for sale
Cash and cash equivalents	$	27	43
Accounts receivable, less allowance of $4 and $5	70		76
Other current assets	54		56
Property, plant and equipment, net accumulated depreciation of $1,013 and $998	1,954		1,864
Customer relationships and other intangibles, net	103		100
Operating lease assets	215		156
Valuation allowance on assets held for sale (1)	(729)		(616)
Deferred tax assets	145		131
Other non-current assets	34		32
Total assets held for sale	$	1,873	1,842

Liabilities held for sale
Accounts payable	$	56	78
Salaries and benefits	20		23
Current portion of deferred revenue	28		28
Current operating lease liabilities	41		33
Other current liabilities	33		28
Deferred income taxes	60		38
Asset retirement obligations	31		30
Deferred revenue, non-current	99		85
Operating lease liabilities, non-current	106		103
Total liabilities held for sale	$	474	446

(1) ~~The assignment~~Includes the impact of ~~goodwill was based~~$341 million and $353 million as of September 30, 2023 and December 31, 2022, respectively, primarily related to loss on ~~the relative fair value~~foreign currency translation, expected to be reclassified out of ~~the disposal group and the portion~~accumulated other comprehensive loss upon close of the ~~remaining reporting unit prior to the disposal group being classified as held for~~ sale.

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(3) Goodwill, Customer Relationships and Other Intangible Assets

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

September 30, 2022 December 31, 2021
(Dollars in millions)
Goodwill $ 6,598 6,666
Customer relationships, less accumulated amortization of $3,245 and $2,779 $ 4,804 5,325
Capitalized software, less accumulated amortization of $380 and $349 412 378
Trade names, less accumulated amortization of $129 and $109 2 22
Total other intangible assets, net $ 5,218 5,725


	September 30, 2023(1)		December 31, 2022(1)
	(Dollars in millions)
Goodwill(2)	$	—	1,970
Customer relationships, less accumulated amortization of $3,735 and $3,265	$	4,088	4,563
Capitalized software, less accumulated amortization of $401 and $387	428		410
Trade names, less accumulated amortization of $— and $130 (3)	—		—
Total other intangible assets, net	$	4,516	4,973

(1)These values exclude assets classified as held for sale.

(2)We recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.0 billion during the second quarter of 2023.

(3)Trade names with a gross carrying value of $130 million became fully amortized during 2022 and were retired during the first quarter of 2023.

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Our goodwill at December 31, 2022was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.

~~We assess~~Second Quarter 2023 Goodwill Impairment Analysis

When we performed our ~~goodwill for~~October 31, 2022 annual 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~~test, we estimated the fair value ~~of goodwill only when our assessment determines the carrying value of equity~~ of our reporting unit ~~exceeds its~~by considering both a market approach and a discounted cash flow method.

The sustained decline in Lumen's share price during the second quarter of 2023 was considered a triggering event requiring evaluation of goodwill impairment; as such, we estimated the fair ~~value. Our annual~~value using only the market approach. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.5x and 4.3x and 4.6x and 10.5x, respectively. The revenue and EBITDA multiples were below these comparable market multiples. For the three months ended June 30, 2023, based on our assessment performed as described above, we concluded the estimated fair value was less than our carrying value of equity. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment ~~assessment date~~charge of $2.0 billion for ~~goodwill is October 31, at which date we assess goodwill at our reporting unit. In reviewing~~ the ~~criteria for reporting units, we have determined~~three months ended June 30, 2023.

The market approach that we ~~are one reporting unit.~~used in the quarter ended June 30, 2023 incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives. In developing the market multiples, we considered observed trends of our industry participants. Our assessment included many factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments.

The following table shows the rollforward of goodwill assigned to our reportable segment from December 31, ~~2021~~2022 through September 30, ~~2022:~~2023:


	(Dollars in ~~millions)~~Millions)
As of December 31, ~~2021~~ 2022(1)	$	~~6,666~~1,970
~~Effect of foreign currency exchange rate changes~~Impairment	~~(68)~~(1,970)
As of September 30, ~~2022~~2023(1)	$	~~6,598~~—

______________________________________________________________________

(1)Goodwill at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 is net of accumulated impairment ~~loss~~losses of ~~$3.6 billion.~~$10.2 billion and $8.2 billion, respectively.

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Total amortization expense for finite-lived intangible assets for the three months ended September 30, 2023 and 2022 ~~and 2021~~ totaled ~~$187~~$184 million and ~~$210~~$187 million, respectively, and for the nine months ended September 30, 2023 and 2022 ~~and 2021,~~ totaled ~~$565~~$540 million and ~~$637~~$565 million, respectively. As of September 30, ~~2022,~~2023, the gross carrying amount of ~~goodwill,~~ customer relationships, capitalized software, indefinite-life and other intangible assets was ~~$15.6~~$8.7 billion.

We estimate that ~~total~~ amortization expense for intangible assets for the years ending December 31, ~~2022~~2023 through ~~2026~~2027 will be as provided in the table below. As a result of classifying our EMEA business as being held for sale on our September 30, 2023 consolidated balance sheet, the amounts presented below do not include the future amortization of the intangible assets for the business to be divested. See Note 2—Planned Divestiture of the EMEA Business for more information.

(Dollars in millions)
2022 (remaining three months) $ 182
2023 718
2024 714
2025 689
2026 646


	(Dollars in millions)
2023 (remaining three months)	$	172
2024	682
2025	663
2026	651
2027	609

(4) Revenue Recognition

We categorize our products and services and related revenue among the following categories:

•~~Compute and Application Services~~Grow, which ~~include~~includes products and services that we anticipate will grow, including our colocation, dark fiber, Edge Cloud services, ~~IT solutions,~~IP, managed security, software-defined wide area networks ("SD WAN"), secure access service edge ("SASE"), Unified Communications and Collaboration ("UC&C")~~, data center, content delivery network ("CDN")~~ and ~~managed security~~wavelengths services;

•~~IP and Data Services~~Nurture, which ~~include Ethernet, IP,~~includes our more mature offerings, including ethernet and VPN data ~~networks, including software-defined wide area networks ("SD WAN") based services, Dynamic Connections and Hyper WAN;~~network services;

•~~Fiber Infrastructure Services~~,~~which include dark fiber, optical services and equipment;~~

•~~Voice and Other~~Harvest, which ~~include~~includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services;

•Other,which includes equipment sales, IT solutions and other services; and

•Affiliate Services, which include communications services provided to our affiliates that we also provide to our external customers.

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

Disaggregated Revenue by Service Offering

The following ~~table provides~~tables provide disaggregation of revenue from contracts with customers based on service offering for the three and nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards. The amounts in the tables below include revenue for the Latin American business ~~revenues~~ prior to it being sold on August 1, 2022.: See Note 2—Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on these divestitures.

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Total Revenue
Adjustments for Non-ASC 606 Revenue(1)
Total Revenue from Contracts with Customers Total Revenue
Adjustments for Non-ASC 606 Revenue(1)
Total Revenue from Contracts with Customers
(Dollars in millions)
Compute and Application Services $ 235 (100) 135 287 (126) 161
IP and Data Services 831 — 831 890 — 890
Fiber Infrastructure Services 381 (54) 327 412 (56) 356
Voice and Other 315 (3) 312 345 (3) 342
Affiliate Services 57 (57) — 56 (56) —
Total revenue $ 1,819 (214) 1,605 1,990 (241) 1,749


	Three Months Ended September 30, 2023				Three Months Ended September 30, 2022
	Total Revenue		Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Grow	$	988	(151)	837	956	(153)	803
Nurture	428		(3)	425	464	(4)	460
Harvest	264		—	264	316	—	316
Other	26		—	26	26	—	26
Affiliate Services	57		(57)	—	57	(57)	—
Total revenue	$	1,763	(211)	1,552	1,819	(214)	1,605

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
Total Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with Customers Total Revenue
Adjustments for Non-ASC 606 Revenue (1)
Total Revenue from Contracts with Customers
(Dollars in millions)
Compute and Application Services $ 795 (354) 441 850 (380) 470
IP and Data Services 2,600 — 2,600 2,659 — 2,659
Fiber Infrastructure Services 1,175 (165) 1,010 1,210 (164) 1,046
Voice and Other 978 (11) 967 1,078 (8) 1,070
Affiliate Services 170 (170) — 167 (167) —
Total revenue $ 5,718 (700) 5,018 5,964 (719) 5,245


	Nine Months Ended September 30, 2023				Nine Months Ended September 30, 2022
	Total Revenue		Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Grow	$	2,947	(465)	2,482	3,022	(518)	2,504
Nurture	1,296		(11)	1,285	1,462	(12)	1,450
Harvest	825		—	825	982	—	982
Other	76		—	76	82	—	82
Affiliate Services	167		(167)	—	170	(170)	—
Total revenue	$	5,311	(643)	4,668	5,718	(700)	5,018

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

Operating Lease Income

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

For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, our gross rental income was ~~$175~~$170 million and ~~$202~~$175 million, which represents approximately 10% of our operating revenue for both periods. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, our gross rental income was ~~$581~~$525 million and ~~$601~~$581 million, which represents approximately 10% of our operating revenue for both periods.

1618

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts ~~reclassified~~classified as held for sale as of September 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
		(Dollars in millions)				(Dollars in millions)
Customer receivables (1)	Customer receivables (1)	$	593	640	Customer receivables (1)	$	567	515
Contract assets (2)	Contract assets (2)	30		35	Contract assets (2)	9		13
Contract liabilities (3)	Contract liabilities (3)	287		247	Contract liabilities (3)	239		222

(1)Reflects gross customer receivables of ~~$620~~$580 million and ~~$679~~$534 million, net of allowance for credit losses of ~~$27~~$13 million and ~~$39~~$19 million, at both September 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. As of September 30, 2023 and December 31, ~~2021,~~2022, this amount excludes customer receivables classified as held for sale of ~~$83 million.~~$70 million and $76 million, respectively.

(2)As of September 30, 2023 and December 31, ~~2021, no amounts have been~~2022, amount excludes contract assets classified as held for ~~sale.~~sale of $11 million and $16 million, respectively.

(3)As of September 30, 2023 and December 31, ~~2021,~~2022, amount excludes contract liabilities classified as held for sale of ~~$58 million.~~$47 million and $59 million, respectively.

Contract liabilities are consideration we have received from our customers or billed in advance of providing the goods or services promised in the future. We defer recognizing this consideration until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue and liabilities held for sale in our consolidated balance sheets. During the three and nine months ended September 30, 2023, we recognized $21 million and $119 million, respectively, of revenue that was included in contract liabilities of $281 million as of January 1, 2023, including contract liabilities that were classified as held for sale. During the three and nine months ended September 30, 2022, we recognized $20 million and $128 million, respectively, of revenue that was included in contract liabilities of $305 million as of January 1, 2022, including contract liabilities that were classified as held for sale. During the three and nine months ended September 30, 2021, we recognized $30 million and $151 million, respectively, of revenue that was included in contract liabilities of $385 million as of January 1, 2021.

Performance Obligations

As of September 30, ~~2022,~~2023, we expect to recognize approximately ~~$3.8~~$3.9 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. ~~We expect~~As of September 30, 2023, the transaction price related to ~~recognize approximately 80%~~unsatisfied performance obligations that are expected to be recognized for the remainder of ~~this revenue through~~2023, 2024 ~~with the balance recognized thereafter.~~and thereafter was $517 million, $1.6 billion and $1.8 billion, respectively.

These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606 and (iii) the value of unsatisfied performance obligations for contracts which relate to our ~~recently completed divestiture.~~EMEA business classified as held for sale.

1719

Contract Costs

The following ~~table provides~~tables provide changes in our contract acquisition costs and fulfillment costs:

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Acquisition Costs
Fulfillment Costs (1)
Acquisition Costs Fulfillment Costs
(Dollars in millions)
Beginning of period balance $ 78 101 75 124
Costs incurred 16 20 15 22
Amortization (14) (17) (14) (21)
Change in contract costs held for sale (1)
— 1 — (27)
End of period balance $ 80 105 76 98


	Three Months Ended September 30, 2023			Three Months Ended September 30, 2022
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Beginning of period balance(1)(2)	$	69	102	78	101
Costs incurred	12		24	16	20
Amortization	(14)		(18)	(14)	(17)
Change in contract costs held for sale	—		—	—	1
End of period balance(5)(6)	$	67	108	80	105


	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Beginning of period balance(3)(4)	$	76	106	76	99
Costs incurred	39		68	45	63
Amortization	(44)		(52)	(41)	(57)
Change in contract costs held for sale	(4)		(14)	—	—
End of period balance(5)(6)	$	67	108	80	105

Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021
Acquisition Costs
Fulfillment Costs (1)
Acquisition Costs Fulfillment Costs
(Dollars in millions)
Beginning of period balance $ 76 99 78 122
Costs incurred 45 63 44 68
Amortization (41) (57) (46) (65)
Change in contract costs held for sale (1)
— — — (27)
End of period balance $ 80 105 76 98

(1)~~The beginning~~Beginning of period balance for the three months ended September 30, 2023 excludes $10 million of acquisition costs and $14 million of fulfillment costs classified as held for sale related to the EMEA business.

(2)Beginning of period balance for the three months ended September 30, 2022 excludes no acquisition costs and $28 million of fulfillment costs classified as held for sale (related to the Latin American business, sold in the third quarter of 2022).

(3)Beginning of period balance for the nine months ended September 30, 2023 excludes $6 million of acquisition costs and no fulfillment costs classified as held for sale related to the EMEA business.

(4)Beginning of period balance for the nine months ended September 30, 2022 excludes no acquisition costs and $27 million of fulfillment costs classified as held for sale (related to the Latin American business, sold in the third quarter of 2022).

(5)End of period balance for the three and nine months ended September 30, 2023 excludes $10 million of acquisition costs and $14 million of fulfillment costs classified as held for sale related to the EMEA business.

(6)End of period balance for the three and nine months ended September 30, 2022 ~~excluded~~excludes no acquisition costs and no of fulfillment costs classified as held for sale (related to the Latin American business, sold in the third quarter of ~~$28 million and $27 million, respectively.~~2022).

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

~~Deferred~~We amortize deferred acquisition and fulfillment costs ~~are amortized~~ based on the transfer of services on a straight-line basis over the average expected contract life of approximately 3435 months for our business customers. ~~Amortized~~We include 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~~We include the amount of ~~these~~ deferred costs that are anticipated to be amortized in the next 12 months ~~are included~~ in other current assets on our consolidated balance sheets. ~~The~~We include the amount of deferred costs expected to be amortized beyond 12 months ~~is included~~ in other non-current assets on our consolidated balance sheets. ~~Deferred~~We assess deferred acquisition and fulfillment costs ~~are assessed~~ for impairment on a quarterly basis.

1820

(5) Credit Losses on Financial Instruments

To assess our expected credit losses on financial instruments, we aggregate financial assets with similar risk characteristics to monitor their credit quality or deterioration over the life of such assets. We periodically monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change. We separately evaluate financial assets that do not share risk characteristics with other financial assets. Our financial assets measured at amortized cost primarily consist of accounts receivable.

We use a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our review of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to recognize accounts receivable as credit losses. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, certain classes of aged balances, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to adjust our historical loss rate. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. To determine our current allowance for credit losses, we combine the historical and expected credit loss rates and apply them to our period end accounts receivable.

If there is an unexpected deterioration of a customer's financial condition or an unexpected change in economic conditions, including macroeconomic events, we assess the need to adjust the allowance for credit losses. Any such resulting adjustments would affect earnings in the period that adjustments are made.

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

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


	(Dollars in millions)
Beginning balance at December 31, ~~2021~~2022(1)	$	3919
Provision for expected losses	25
Write-offs charged against the allowance	~~(17)~~(15)
Recoveries collected	23
~~Foreign currency exchange rate change adjustment~~Change in allowance in assets held for sale	1

Ending balance at September 30, ~~2022~~2023(1)	$	2713

(1)As of September 30, 2023 and December 31, ~~2021, amount excludes~~2022, amounts exclude a $4 million and $5 million allowance for credit losses classified as held for ~~sale of $3 million.~~sale. See Note 2—~~Recently Completed~~Planned Divestiture of the ~~Latin American~~EMEA Business.

1921

(6) Long-Term Debt

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


		Interest Rates (1)	Maturities (1)	September 30, 2022		December 31, 2021		Interest Rates (1)	Maturities (1)	September 30, 2023		December 31, 2022
				(Dollars in millions)						(Dollars in millions)
Level 3 Financing, Inc.	Level 3 Financing, Inc.						Level 3 Financing, Inc.
Senior Secured Debt: (2)	Senior Secured Debt: (2)						Senior Secured Debt: (2)
Senior notes	Senior notes	3.400% - 3.875%	2027 - 2029	$	1,500	1,500	Senior notes	3.400% - 10.500%	2027 - 2030	$	2,425	1,500
Tranche B 2027 Term Loan (3)	Tranche B 2027 Term Loan (3)	LIBOR + 1.75%	2027	2,411		3,111	Tranche B 2027 Term Loan (3)	SOFR + 1.75%	2027	2,411		2,411
Senior Notes and other debt:	Senior Notes and other debt:						Senior Notes and other debt:
Senior notes (4)	Senior notes (4)	3.625% - 4.625%	2027 - 2029	3,940		5,515	Senior notes (4)	3.625% - 4.625%	2027 - 2029	3,940		3,940
Finance leases and other obligations(5)	Finance leases and other obligations(5)	Various	Various	301		319	Finance leases and other obligations(5)	Various	Various	266		291
Unamortized premiums, net	Unamortized premiums, net			3		34	Unamortized premiums, net			3		3
Unamortized debt issuance costs	Unamortized debt issuance costs			(50)		(57)	Unamortized debt issuance costs			(56)		(49)
Total long-term debt	Total long-term debt			8,105		10,422	Total long-term debt			8,989		8,096
Less current maturities	Less current maturities			(26)		(26)	Less current maturities			(29)		(26)
Long-term debt, excluding current maturities	Long-term debt, excluding current maturities			$	8,079	10,396	Long-term debt, excluding current maturities			$	8,960	8,070

(1)As of September 30, ~~2022.~~2023.

(2)See Note 7—Long-Term Debt in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for a description of certain affiliate guarantees and liens securing this debt.

(3)The Tranche B 2027 Term Loan had an interest rate of ~~4.865%~~7.181% and ~~1.854%~~6.134% as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

(4)See Note 7—Long-Term Debt in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for a description of guarantees provided by certain affiliates of Level 3 Financing, Inc.

(5)Excludes finance lease obligations of our EMEA business classified as held for sale.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of September 30, ~~2022~~2023 (excluding unamortized premiums, net, unamortized debt issuance costs, and intercompany debt), maturing during the following years:


		(Dollars in millions)			(Dollars in millions)
2022 (remaining three months)		$	8
2023		27
2023 (remaining three months)				2023 (remaining three months)	$	9
2024	2024	32		2024	30
2025	2025	38		2025	37
2026	2026	36		2026	35
2027 and thereafter		8,011
2027				2027	4,180
2028 and thereafter				2028 and thereafter	4,751
Total long-term debt	Total long-term debt	$	8,152	Total long-term debt	$	9,042

2022

~~Debt Repayment~~New Issuances

~~During~~Pursuant to exchange offers commenced on March 16, 2023 (the “Exchange Offers”), on March 31, 2023, Level 3 Financing, Inc. issued $915 million of its 10.500% Senior Secured Notes due 2030 (the “Initial Notes”) in exchange for $1.535 billion of Lumen’s outstanding senior unsecured notes.

On April 17, 2023, in connection with the ~~nine months ended September 30, 2022, we repaid the following~~Exchange Offers, Level 3 Financing, Inc. issued an additional $9 million of its 10.500% Senior Secured Notes due 2030 in exchange for $19 million aggregate principal amount of ~~indebtedness through a combination of tender offers, redemptions, and repayments. These transactions resulted in a net gain of $9 million.~~Lumen’s senior unsecured notes.

Supplier Finance Program


~~Debt~~	~~Period of Repayment~~	~~(Dollars in millions)~~
~~Tranche B 2027 Term Loan~~	~~Q3 2022~~	$	~~700~~
~~5.375% Senior Notes due 2025~~	~~Q3 2022~~	~~800~~
~~5.250% Senior Notes due 2026~~	~~Q3 2022~~	~~775~~
~~Total Debt Repayments~~		$	~~2,275~~

Pursuant to our purchase of network equipment under a supplier finance program implemented in 2021 with one of our key equipment vendors, we are obligated to make quarterly installment payments over a 5-year period and pay annual interest of 1.25% on unpaid balances. The first unsecured quarterly payment was due April 27, 2022, with remaining quarterly payments due through the end of the term on July 1, 2026. The supplier also agreed to certain milestone performance and other provisions that could result in us earning credits to be applied by us towards future equipment purchases. As of September 30, 2023 and December 31, 2022, we have not received significant credits and our outstanding obligations under the plan were $59 million and $67 million, respectively, of which $15 million and $12 million were included in current maturities of long-term debt and the remaining balances were reflected as the long-term debt.

Covenants

The term loan and senior notes of Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, ~~engage in transactions with their affiliates including 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.

Certain of Lumen's and our debt instruments contain cross-acceleration provisions.

Compliance

As of September 30, ~~2022,~~2023, we believe we were in compliance with the provisions and financial covenants contained in our debt agreements in all material respects.

(7) Fair Value of Financial Instruments

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

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

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

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

Table of Contents


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.

~~Table of Contents~~

The following table presents the carrying amounts and estimated fair values of our following financial liabilities as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, as well as the input level used to determine the fair values indicated below:


			September 30, 2022			December 31, 2021				September 30, 2023			December 31, 2022
		Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value		Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value
			(Dollars in millions)							(Dollars in millions)
Liabilities-Long-term debt, excluding finance leases	Liabilities-Long-term debt, excluding finance leases	2	$	7,804	6,572	10,103	10,090	Liabilities-Long-term debt, excluding finance leases	2	$	8,723	7,002	7,805	6,581
Indemnifications related to the sale of the Latin American business(1)	Indemnifications related to the sale of the Latin American business(1)	3	$	86	86	—	—	Indemnifications related to the sale of the Latin American business(1)	3	86		86	86	86

_____________________________________________________________________

(1)Nonrecurring fair value is measured as of August 1, 2022.

(8) Affiliate Transactions

We provide competitive local exchange carrier telecommunications services to our affiliates that we also provide to external customers. We believe these services are priced consistent with non-regulated rates charged to external customers. These services are billed directly to our affiliates and recognized as affiliate revenue on our consolidated statements of operations.

Costs are incurred directly by our affiliates for the services they use whenever possible. When such costs are not directly incurred, they are allocated among all affiliates based upon the most reasonable method, first using cost causative measures, or, if no cost causative measure is available, using a general allocator. Unlike other affiliates of Lumen, we do not operate as a service company to our affiliates and therefore any allocated affiliate revenue we earn reduces the affiliate charges incurred by us and is presented on a net basis within Operating expenses – affiliates on our consolidated statements of operations. From time to time, we may adjust the basis for allocating the costs of a shared service among affiliates. Any such changes in allocation methodologies are generally applied prospectively.

We also purchase services from our affiliates, including telecommunication services, insurance, flight services, and other support services such as legal, regulatory, finance, administration and executive support. Our affiliates charge us for those services using the allocation methodology described above.

(9) 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~~

Table of ~~its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention.~~ Contents

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~~Subject to these limitations, at September 30, 2023, we had accrued $39 million in the aggregate for our litigation and non-income tax contingencies ~~at September 30, 2022 aggregated to approximately $24 million and are~~which is included in other current liabilities, other liabilities, or liabilities held for sale inon our consolidated balance sheet as of such date. We cannot at this time estimate the reasonably possible loss or range of loss in excess of this $39 million accrual due to the inherent uncertainties and speculative nature of contested proceedings. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows.

Latin American Tax Litigation and Claims

In connection with the ~~recent~~2022 divestiture of our Latin American business, the purchaser assumed responsibility for the Peruvian tax litigation and Brazilian tax claims described in our prior periodic reports filed with the SEC. We ~~have~~ agreed to indemnify the purchaser for amounts paid in respect to the Brazilian tax claims. The value of this indemnification is included in the indemnification amount as disclosed in Note 7—Fair Value of Financial Instruments.

Other Proceedings, Disputes and Contingencies

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

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

~~Table of Contents~~

We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $300,000 in fines and penalties. In addition, in the past we acquired companies that operated certain manufacturing companies in the first part of the 1900s. Under applicable environmental laws, we could be named as a potentially responsible party for a share of the remediation of environmental conditions arising from the historical operations of our predecessors.

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

The matters listed in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note 16—Commitments, Contingencies and Other Items to the consolidated financial statements included in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. 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.

~~(9)~~

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(10) Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The table below summarizes changes in accumulated other comprehensive ~~loss~~income (loss) recorded on our consolidated balance sheets by component for the nine months ended September 30, 2023:


	Pension Plans		Foreign Currency Translation Adjustment and Other	Total
	(Dollars in millions)
Balance at December 31, 2022	$	21	(365)	(344)
Other comprehensive loss, net of tax	—		(2)	(2)
Net other comprehensive loss	—		(2)	(2)
Balance at September 30, 2023	$	21	(367)	(346)

The table below summarizes changes in accumulated other comprehensive income (loss) recorded on our consolidated balance sheets by component for the nine months ended September 30, 2022:

Pension Plans Foreign Currency Translation Adjustment and Other Total
(Dollars in millions)
Balance at December 31, 2021 $ 3 (354) (351)
Other comprehensive loss, net of tax — (229) (229)
Amounts reclassified from accumulated other comprehensive (loss) income $ — 112 112
Net other comprehensive loss — (117) (117)
Balance at September 30, 2022 $ 3 (471) (468)


	Pension Plans		Foreign Currency Translation Adjustment and Other	Total
	(Dollars in millions)
Balance at December 31, 2021	$	3	(354)	(351)
Other comprehensive loss, net of tax	—		(229)	(229)
Amounts reclassified from accumulated other comprehensive income (loss)	—		112	112
Net other comprehensive loss	—		(117)	(117)
Balance at September 30, 2022	$	3	(471)	(468)

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The tables below present further information about our reclassifications out of accumulated other comprehensive income (loss) ~~income~~ by component for the three and nine months ended September 30, 2022:

Three and Nine Months Ended September 30, 2022

Decrease (Increase)
in Net Income

Affected Line Item in Consolidated Statement of Operations

(Dollars in millions)

Reclassification of realized loss on foreign currency translation to gain on sale of business

112

Gain on sale of business

Income tax benefit

—

Income tax expense

Net of tax

112

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~~The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the nine months ended September 30, 2021:~~

Pension Plans Foreign Currency Translation Adjustment and Other Total
(Dollars in millions)
Balance at December 31, 2020 $ (13) (221) (234)
Other comprehensive loss, net of tax — (101) (101)
Net other comprehensive loss — (101) (101)
Balance at September 30, 2021 $ (13) (322) (335)

~~(10)~~(11) Other Financial Information

Other Current Assets

The following table presents details of other current assets reflected inon our consolidated balance sheets:


		September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
		(Dollars in millions)				(Dollars in millions)
Prepaid expenses	Prepaid expenses	$	127	109	Prepaid expenses	$	110	99
Contract fulfillment costs	Contract fulfillment costs	48		48	Contract fulfillment costs	47		44
Contract acquisition costs	Contract acquisition costs	47		45	Contract acquisition costs	39		42
Contract assets	Contract assets	23		28	Contract assets	7		10
Other	Other	6		9	Other	17		2
Total other current assets(1)	Total other current assets(1)	$	251	239	Total other current assets(1)	$	220	197

_______________________________________________________________________________

(1)AsExcludes $54 million and $56 million of ~~December 31, 2021,~~ other current assets ~~excluded $81 million~~related to EMEA business that ~~had been~~were classified as held for ~~sale.~~sale as of September 30, 2023 and December 31, 2022, respectively.

(12) Subsequent Events

Distributions to Parent

As of the date of this report, $50 million of distributions were made to our ultimateparent in the fourth quarter of 2023.

Sale of Select Content Delivery Network ("CDN") Customer Contracts

On October 10, 2023, Lumen announced the sale of substantially all of our CDN service contracts. We will provide certain transition services to the purchaser for 90 days, following which we plan to wind down the remaining portion of our remaining CDN contracts in 2024.

Workforce Reduction

On October 31, 2023, Lumen announced a plan to reduce its global workforce as part of its ongoing efforts to reorganize it for growth by right-sizing its operations to improve its profitability. The workforce reduction is expected to be substantially completed by the end of the fourth quarter of 2023. As a result of this plan, we expect to incur severance and related costs in the range of approximately $17 to $27 million. The Company does not expect to incur any material impairment or exit costs related to this plan. The workforce reduction is considered a subsequent event for the purposes of these financial statements, and therefore, no accrual for severance and related costs has been recorded as of September 30, 2023.

Debt Transaction Support Agreement

On October 31, 2023, Lumen announced that it has entered into a transaction support agreement with a group of creditors representing over $7 billion of the outstanding indebtedness of Lumen and its subsidiaries to, among other things, extend maturities of the debt instruments of Lumen and Level 3 Financing, Inc. In addition, the creditors have committed to provide $1.2 billion of financing to Lumen through new long-term debt. The consummation of the transactions contemplated by the transaction support agreement is subject to the satisfaction of various closing conditions.

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~~(11) Subsequent Events~~

~~Pending Divestiture of our European, Middle Eastern and African Business~~

On November 2, 2022, affiliates of Level 3 Parent, LLC entered into an exclusive arrangement to divest our operations in Europe, the Middle East and Africa (the “EMEA business”) to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, in exchange for $1.8 billion in cash, subject to certain working capital and other purchase price adjustments. We expect to close the transaction as early as late 2023, following completion of a consultation process under French law required prior to execution of the purchase agreement and receipt of all requisite regulatory approvals in the U.S. and certain countries where the EMEA business operates, as well as the satisfaction of other customary conditions. Upon being executed following the French consultation process, the purchase agreement will contain various customary covenants for transactions of this type, including various indemnities.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 consolidated subsidiaries. References to "Lumen Technologies" or "Lumen" refer to our ultimate parent company, Lumen Technologies, Inc. and its consolidated subsidiaries.

All references to "Notes" in this Item 2 of Part I refer to the Notes to Consolidated Financial Statements included in Item 1 of Part I of this report.

Certain statements in this report constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" appearing at the beginning of this report for factors relating to these statements and "Risk Factors" referenced in Item 1A of Part II of this report or other of our filings with the SEC for a discussion of certain risk factors ~~that could cause our actual results~~applicable to ~~differ from our anticipated results or otherwise impact~~ our business, financial condition, results of operations, liquidity or prospects.

Overview

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") included herein should be read in conjunction with MD&A and the other information included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, and with the consolidated financial statements and related notes in Item 1 of Part I of this report. The results of operations and cash flows for the first nine months of the year are not necessarily indicative of the results of operations and cash flows that might be expected for the entire year.

We are an international facilities-based technology and communications company engaged in providing a broad array of integrated communication services to our business customers.

On August 1, 2022, ~~affiliates of Level 3 Parent, LLC~~we sold our Latin American ~~business to an affiliate of a fund advised by Stonepeak Partners LP in exchange for pre-tax cash proceeds of approximately $2.7 billion, subject to certain post-closing adjustments. See~~business. For additional information regarding this divestiture, see Note 2—~~Recently~~ Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business to the audited financial statements included within our Annual Report on Form 10-K for ~~additional details.~~the year ended December 31, 2022.

Pending Divestiture of our European, Middle Eastern and African Business

OnUnder agreements entered into on November 2, 2022 and February 8, 2023, affiliates of Level 3 Parent, LLC ~~entered into an exclusive arrangement~~have agreed to divest ~~our~~certain operations in ~~Europe, the Middle East and Africa~~EMEA to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, in exchange for $1.8 billion in cash, subject to certain ~~working capital and~~post-closing adjustments. Subject to the satisfaction of customary closing conditions, Level 3 Parent LLC expects to close the transaction November 1, 2023, although it can provide no assurances to this effect. The actual amount of our net after-tax proceeds from this divestiture could vary substantially from the amounts we currently estimate, particularly if we experience delays in completing the transaction or any of our other ~~purchase price adjustments. For more information, see Note 11—Subsequent Events~~assumptions prove to ~~our consolidated financial statements in Item 1 of Part I of this report.~~be incorrect.

~~Impact of COVID-19 Pandemic and~~Changes in the Macroeconomic, ~~Environment~~Industry and Work Environments

As previously described in greater detail in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2021, in response to the safety and economic challenges arising out of the COVID-19 pandemic and in a continued attempt to mitigate the negative impact on our stakeholders, we have taken a variety of steps to ensure the availability of our network infrastructure, to promote the safety of our employees and customers, to enable us to continue to adapt and provide our products and services worldwide to our customers, and to strengthen our communities. We expect to continue revising our responses to the pandemic or take additional steps necessary to adjust to changed circumstances.

~~Social distancing, business and school closures, travel restrictions,~~Societal, governmental, and macroeconomic changes ~~arising out of the pandemic~~ have impacted us, our customers and our business in several ways since the onset of the COVID-19 pandemic in the U.S. in March 2020. Beginning in the second half of 2020 and continuing into 2023, we rationalized our leased footprint and ceased using 13 leased property locations that were underutilized. These lease cancellations resulted in accelerated lease costs, but will lower our future operating costs. In conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated real estate costs in future periods. Additionally, as discussed in further ~~detail in our prior reports,~~elsewhere herein, the pandemic and macroeconomic changes arising therefrom have resulted in (i) increases in certain revenue streams and decreases in others, (ii) ~~increases in overtime expenses, (iii)~~ operational challenges resulting from inflation and, to a lesser extent, shortages of certain components and other supplies that we use in our business, ~~and (iv)~~(iii) delays in our cost transformation ~~initiatives. We have also experienced~~initiatives, and (iv) delayed decision-making by certain of our customers. ~~Thus far,~~None of these ~~changes~~effects, individually or in the aggregate, have ~~not~~to date materially impacted our financial performance or financial position. ~~However, we continue to monitor global disruptions and work with our vendors to mitigate supply chain risks.~~

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~~We reopened our offices in April 2022 under a "hybrid" working environment, which will permit some of our employees the flexibility to work remotely at least some~~If any of the ~~time for~~above-listed factors intensify, our financial results could be materially impacted in a variety of ways, including by increasing our expenses, decreasing our revenues, further delaying our network expansion plans or otherwise interfering with our ability to deliver products and services. For additional information on the ~~foreseeable future.~~impacts of the pandemic and the macroeconomic changes arising therefrom, see (i) the remainder of this item, including "—Liquidity and Capital Resources—Overview" and (ii) Item 1A of Part II of this report.

Products, Services and Revenue

We categorize our products and services and related revenue among the following categories:

•~~Fiber Infrastructure Services~~,~~which include dark fiber, optical services and equipment;~~

•~~Voice and Other~~Harvest, which ~~include~~includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services;

•Other,which includes equipment sales, IT solutions and other services; and

•Affiliate Services, which include communications services provided to our affiliates that we also provide to our external customers.

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

Results of Operations

Results in this section include the results of our Latin American business prior to it being sold on August 1, 2022.

The following table summarizes the results of our consolidated operations for the three and nine months ended September 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2022		2021	2022	2021		2023		2022	2023	2022
		(Dollars in millions)						(Dollars in millions)
Operating revenue	Operating revenue	$	1,819	1,990	5,718	5,964	Operating revenue	$	1,763	1,819	5,311	5,718
Operating expenses	Operating expenses	1,485		1,749	4,913	5,173	Operating expenses	1,675		1,485	6,937	4,913
Operating income		334		241	805	791
Operating income (loss)							Operating income (loss)	88		334	(1,626)	805
Other expense, net	Other expense, net	(84)		(83)	(259)	(222)	Other expense, net	(146)		(84)	(316)	(259)
Income before income taxes		250		158	546	569
Income tax expense		312		37	397	150
(Loss) income before income taxes							(Loss) income before income taxes	(58)		250	(1,942)	546
Income tax (benefit) expense							Income tax (benefit) expense	(13)		312	(14)	397
Net (loss) income	Net (loss) income	$	(62)	121	149	419	Net (loss) income	$	(45)	(62)	(1,928)	149

For a discussion of certain trends that impact our business, see the MD&A discussion of trends impacting Lumen’s non-mass markets business included in Lumen’s reports filed with the SEC, including its Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2022.~~2023.

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Operating Revenue

The following table summarizes our consolidated operating revenue recorded under our revenue categories described above:

Three Months Ended September 30,
2022 2021 % Change
(Dollars in millions)
Compute and Application Services $ 235 287 (18) %
IP and Data Services 831 890 (7) %
Fiber Infrastructure Services 381 412 (8) %
Voice and Other 315 345 (9) %
Affiliate Services 57 56 2 %
Total operating revenue $ 1,819 1,990 (9) %


	Three Months Ended September 30,
	2023		2022	% Change
	(Dollars in millions)
Grow	$	988	956	3	%
Nurture	428		464	(8)	%
Harvest	264		316	(16)	%
Other	26		26	—	%
Affiliate Services	57		57	—	%
Total operating revenue	$	1,763	1,819	(3)	%

Nine Months Ended September 30,
2022 2021 % Change
(Dollars in millions)
Compute and Application Services $ 795 850 (6) %
IP and Data Services 2,600 2,659 (2) %
Fiber Infrastructure Services 1,175 1,210 (3) %
Voice and Other 978 1,078 (9) %
Affiliate Services 170 167 2 %
Total operating revenue $ 5,718 5,964 (4) %


	Nine Months Ended September 30,
	2023		2022	% Change
	(Dollars in millions)
Grow	$	2,947	3,022	(2)	%
Nurture	1,296		1,462	(11)	%
Harvest	825		982	(16)	%
Other	76		82	(7)	%
Affiliate Services	167		170	(2)	%
Total operating revenue	$	5,311	5,718	(7)	%

Our total operating revenue decreased by ~~$171~~$56 million and ~~$246~~$407 million for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022. Approximately $58 million and $418 million, respectively, of these decreases were due to the sale of the Latin American business in the second half of 2022. More specifically, within each revenue category:

•Grow increased by $32 million and decreased by $75 million for the three and nine months ended September 30, 2023, respectively, compared to September 30, 2022. The three and nine months ended September 30, 2022 included approximately $41 million and $305 million, respectively, of Grow revenue associated with the sale of the Latin American business. For the three months ended September 30, 2023, these declines were fully offset and for the nine months ended September 30, 2023, these declines were partially offset by growth in most products, primarily due to an increase of $64 million and $220 million, respectively, in products such as IP, dark fiber, wavelengths and colocation for the three and nine months ended September 30, 2023.

•Nurture decreased by $36 million and $166 million for the three and nine months ended September 30, 2023, respectively, compared to September 30, 2022 due primarily to a decrease of approximately $14 million and $99 million, respectively, associated with the sale of the Latin American business for the three and nine months ended September 30, 2023. The remainder of the decline is principally attributable to declines in Ethernet services of $13 million and $49 million, respectively, and declines in VPN data network services of $11 million and $25 million, respectively, for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021 primarily due to the sale of the Latin American business, as well as overall decreases in IT Solutions, Ethernet services, VPN data networks, voice and private line and ready access revenue. For the nine months ended September 30, 2022, the decrease was partially offset growth in IP, cloud services and managed security revenue.2023;

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•Harvest decreased by $52 million and $157 million for the three and nine months ended September 30, 2023 compared to September 30, 2022 due primarily to the decline in legacy voice services of $34 million and $123 million, respectively, for the three and nine months ended September 30, 2023. The decrease in Harvest revenue additionally includes a decrease of approximately $3 million and $14 million associated with the sale of the Latin American business for the three and nine months ended September 30, 2023. ;

•Other decreased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to a decrease in IT solutions revenue.

Operating Expenses

The following table summarizes our consolidated operating expenses:


		Three Months Ended September 30,						Three Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Cost of services and products (exclusive of depreciation and amortization)	Cost of services and products (exclusive of depreciation and amortization)	$	785	897	(12)	%	Cost of services and products (exclusive of depreciation and amortization)	$	779	785	(1)	%
Selling, general and administrative	Selling, general and administrative	269		305	(12)	%	Selling, general and administrative	342		269	27	%
Gain on sale of business	Gain on sale of business	(119)		—	nm		Gain on sale of business	—		(119)	nm
Loss on disposal group held for sale							Loss on disposal group held for sale	28		—	nm
Operating expenses - affiliates	Operating expenses - affiliates	173		116	49	%	Operating expenses - affiliates	172		173	(1)	%
Depreciation and amortization	Depreciation and amortization	377		431	(13)	%	Depreciation and amortization	354		377	(6)	%

Total operating expenses	Total operating expenses	$	1,485	1,749	(15)	%	Total operating expenses	$	1,675	1,485	13	%


		Nine Months Ended September 30,						Nine Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Cost of services and products (exclusive of depreciation and amortization)	Cost of services and products (exclusive of depreciation and amortization)	$	2,472	2,643	(6)	%	Cost of services and products (exclusive of depreciation and amortization)	$	2,281	2,472	(8)	%
Selling, general and administrative	Selling, general and administrative	901		872	3	%	Selling, general and administrative	946		901	5	%
Gain on sale of business	Gain on sale of business	(119)		—	nm		Gain on sale of business	—		(119)	nm
Loss on disposal group held for sale							Loss on disposal group held for sale	113		—	nm
Operating expenses - affiliates	Operating expenses - affiliates	481		354	36	%	Operating expenses - affiliates	571		481	19	%
Depreciation and amortization	Depreciation and amortization	1,178		1,304	(10)	%	Depreciation and amortization	1,056		1,178	(10)	%
Goodwill impairment							Goodwill impairment	1,970		—	nm
Total operating expenses	Total operating expenses	$	4,913	5,173	(5)	%	Total operating expenses	$	6,937	4,913	41	%

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

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Cost of Services and Products (Exclusive of depreciation and amortization)

Cost of services and products (exclusive of depreciation and amortization) decreased by ~~$112~~$6 million and ~~$171~~$191 million, respectively, for the three and nine months ended September 30, ~~2022,~~2023, as compared to the three and nine months ended September 30, ~~2021,~~2022, primarily due to a decrease of $35 million and $214 million for the three and nine months ended September 30, 2023, respectively, associated with the sale of the Latin American business in the second half of 2022, partially offset by increases of $8 million and ~~decreases~~$25 million, respectively, in ~~facility costs and lower~~ real estate and power costs. Cost of services and products (exclusive of depreciation and amortization) for the three months ended September 30, 2023 also increased from the three months ended September 30, 2022 due to an increase in facilities costs of $10 million and an increase in employee related expenses of $9 million.

Selling, General and Administrative

Selling, general and administrative ~~decreased~~increased by ~~$36~~$73 million and $45 million, respectively, for the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022 primarily due to an increase of $50 million and $98 million, respectively, in direct employee-related expenses and an increase of $4 million and $19 million, respectively, in marketing and advertising expenses for the three and nine months ended September 30, 2023. Additionally, for the three months ended September 30, ~~2022~~2023, allocated employee related costs increased $11 million as compared to the three months ended September 30, ~~2021 primarily due to lower non-employee related expenses~~2022. These increases were partially offset by a decrease of $8 million and ~~lower bad debt expense, as well as~~$73 million for the three and nine months ended September 30, 2023, respectively, associated with the sale of our Latin American business. Selling, general and administrative increased $29 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021 primarily due to higher employee related expenses as well as a gain on sale of assetsbusiness in the ~~nine months ended September 30, 2021, which was partially offset by the sale~~second half of ~~our Latin American business.~~2022.

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~~Gain~~Loss on Disposal Group Held for Sale ~~of Business~~

For a discussion of the ~~gain~~loss on the disposal group held for sale ~~of the Latin American business~~ that we ~~recorded in~~recognized for the ~~third quarter of 2022,~~three and nine months ended September 30, 2023, see Note 2—~~Recently Completed~~Planned Divestiture of the ~~Latin American~~EMEA Business.

Operating Expenses - Affiliates

Operating expenses - affiliates decreased by $1 million and increased by ~~$57 million and $127~~$90 million, respectively, for the three and nine months ended September 30, ~~2022,~~2023, as compared to the three and nine months ended September 30, ~~2021, primarily~~2022. The three and nine months ended September 30, 2023 as compared to the comparable periods for September 30, 2022 decreased due to a $29 million reduction in allocated affiliate costs due to lower operating expenses in 2023. This decrease was partially offset for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and fully offset for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 by $15 million and $87 million higher ~~affiliate lease~~utilization of affiliates' sales and operational employee services, increased allocated corporate expense ~~for circuits~~due to Lumen's 2022 ILEC divestiture and ~~colocation facilities.~~$13 million and $32 million higher pricing and utilization of direct access and government services provided by affiliates, respectively.

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Depreciation and Amortization

The following table provides detail regarding depreciation and amortization expense:


		Three Months Ended September 30,						Three Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Depreciation	Depreciation	$	190	221	(14)	%	Depreciation	$	170	190	(11)	%
Amortization	Amortization	187		210	(11)	%	Amortization	184		187	(2)	%
Total depreciation and amortization	Total depreciation and amortization	$	377	431	(13)	%	Total depreciation and amortization	$	354	377	(6)	%


		Nine Months Ended September 30,						Nine Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Depreciation	Depreciation	$	613	667	(8)	%	Depreciation	$	516	613	(16)	%
Amortization	Amortization	565		637	(11)	%	Amortization	540		565	(4)	%
Total depreciation and amortization	Total depreciation and amortization	$	1,178	1,304	(10)	%	Total depreciation and amortization	$	1,056	1,178	(10)	%

Depreciation expense decreased by ~~$31~~$20 million and ~~$54~~$97 million, respectively, for the three and nine months ended September 30, ~~2022,~~2023, as compared to the three and nine months ended September 30, ~~2021,~~2022, primarily due to ~~discontinuing~~the discontinuation during the fourth quarter of 2022 of the depreciation of the tangible EMEA assets ~~of our recently divested Latin American business during their classification as assets held for sale,~~that we plan to divest, resulting in a decrease of $9$47 million and ~~$61~~$136 million, respectively, of depreciation expense during the three and nine months ended September 30, ~~2022~~2023 compared to the three and nine months ended September 30, ~~2021.~~2022. The decrease for the three months ended September 30, 2022 was also due to a decrease of $9 million resulting from the net decrease in depreciable assets. The decrease during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021 wasdecreases were partially offset by ~~a $13~~higher depreciation expense of $16 million ~~increase~~and $34 million, respectively, associated with net growth in ~~net~~ depreciable assets.

Amortization expense decreased by ~~$23~~$3 million and ~~$72~~$25 million, respectively, for the three and nine months ended September 30, ~~2022,~~2023, as compared to the three and nine months ended September 30, ~~2021. For~~2022, primarily due to a decrease of $10 million and $26 million, respectively, due to the discontinuation during the fourth quarter of 2022 of the amortization of the intangible EMEA assets that we plan to divest and a decrease of $7 million in amortizable assets for the nine months ended September 30, 2023. The decreases were partially offset by accelerated amortization of decommissioned applications of $8 million and $10 million, respectively, for the three and nine months ended September 30, ~~2022, amortization expense decreased by $19 million and $44 million, respectively, associated with~~2023.

Goodwill Impairment

We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs. The sustained decline in Lumen's share price during the ~~net reduction in amortizable assets and by $3 million and $25 million, respectively, due to discontinuing~~second quarter of 2023 was considered a triggering event requiring evaluation of goodwill impairment.

When we performed an impairment test during the ~~amortization~~second quarter of 2023, we concluded that the ~~intangible assets~~estimated fair value of our ~~recently divested Latin American business during their classification~~reporting unit was less than our carrying value of equity as ~~assets held~~of our testing date. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge aggregating to $2.0 billion in the second quarter of 2023.

See Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in this report for ~~sale.~~further details on these tests and impairment charges.

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Other Consolidated Results

The following table summarizes other expense, net and income tax expense:


		Three Months Ended September 30,						Three Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Interest expense							Interest expense	(123)		(99)	24	%
Interest income - affiliate	Interest income - affiliate	$	19	16	19	%	Interest income - affiliate	16		19	(16)	%
Interest expense		(99)		(90)	10	%
Other expense, net	Other expense, net	(4)		(9)	nm		Other expense, net	(39)		(4)	nm
Total other expense, net	Total other expense, net	$	(84)	(83)	1	%	Total other expense, net	$	(146)	(84)	74	%
Income tax expense		$	312	37	nm
Income tax (benefit) expense							Income tax (benefit) expense	$	(13)	312	nm


		Nine Months Ended September 30,						Nine Months Ended September 30,
		2022		2021	% Change			2023		2022	% Change
		(Dollars in millions)						(Dollars in millions)
Interest expense							Interest expense	$	(336)	(284)	18	%
Interest income - affiliate	Interest income - affiliate	$	50	49	2	%	Interest income - affiliate	47		50	(6)	%
Interest expense		(284)		(272)	4	%
Other (expense) income, net		(25)		1	nm
Other expense, net							Other expense, net	(27)		(25)	8	%
Total other expense, net	Total other expense, net	$	(259)	(222)	17	%	Total other expense, net	$	(316)	(259)	22	%
Income tax expense		$	397	150	165	%
Income tax (benefit) expense							Income tax (benefit) expense	$	(14)	397	nm

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

Interest ~~Income - Affiliate~~Expense

Interest ~~income - affiliate~~expense increased by $3$24 million and $1$52 million for the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, 2022. The increase was due to the increase in the average interest rates from 4.13% to 5.20% and from 3.89% to 4.78% respectively, for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2023, which was partially offset by the decrease in average outstanding long-term debt of $0.3 billion and $0.8 billion for the three and nine months ended September 30, 2023, respectively.

Interest Income - Affiliate

Interest income - affiliate decreased by $3 million for both the three and nine months ended September 30, 2023, as compared to the three and nine months ended September 30, ~~2021. The increase was driven by increases in affiliate note balances and an increase in interest rates.~~

~~Interest Expense~~

Interest expense increased by $9 million and $12 million for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021. The increase was due to an increase in average interest rates from 3.53% to 4.13% and 3.60% to 3.89%, respectively, for the three and nine months ended September 30, 2022. This was partially offset by the decrease in average outstanding long-term debt from $10.4 billion to $9.3 billion, for both the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021.

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Other ~~(Expense) Income,~~Expense, Net

The following table summarizes our total other ~~(expense) income,~~expense, net:


		Three Months Ended September 30,			% Change			Three Months Ended September 30,
		2022		2021				2023		2022
		(Dollars in millions)						(Dollars in millions)
Gain on extinguishment of debt	Gain on extinguishment of debt	$	9	—	nm		Gain on extinguishment of debt	$	—	9
Foreign currency loss	Foreign currency loss	(21)		(11)	(91)	%	Foreign currency loss	(43)		(21)
Interest income	Interest income	5		—	nm		Interest income	2		5
Other	Other	3		2	50	%	Other	2		3
Total other expense, net	Total other expense, net	$	(4)	(9)	nm		Total other expense, net	$	(39)	(4)

Nine Months Ended September 30, % Change
2022 2021
(Dollars in millions)
Gain on extinguishment of debt $ 9 16 (44) %
Foreign currency gain (41) (14) (193) %
Interest income 5 — nm
Other 2 (1) nm
Total other income, net $ (25) 1 nm

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


	Nine Months Ended September 30,
	2023		2022
	(Dollars in millions)
Gain on extinguishment of debt	$	—	9
Foreign currency loss	(29)		(41)
Interest income	5		5
Other	(3)		2
Total other expense, net	$	(27)	(25)

Income Tax (Benefit) Expense

For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, our effective income tax rate was ~~124.8%~~22.4% and ~~23.4%~~124.8%, respectively. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, our effective income tax rate was ~~72.7%~~0.7% and ~~26.4%~~72.7%, respectively. The effective tax rate for the three and nine months ended September 30, 2022 was significantly impacted by the gain on the sale of our Latin American business. Without the gain on the sale of our Latin American business, our effective tax would have been 28.0% and 28.5%, respectively, for the three and nine months ended September 30, ~~2022.~~2022.The effective tax rate for the nine months ended September 30, 2023 includes a $389 million unfavorable impact of a non-deductible goodwill impairment charge recorded in the second quarter of 2023.

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Liquidity and Capital Resources

Overview

As of September 30, ~~2022,~~2023, we held cash and cash equivalents of ~~$130~~$173 million, $27 million of which ~~$68~~is classified as held for sale. As of such date, we had approximately $50 million ~~were~~of cash and cash equivalents held in foreign bank accounts for funding our foreign operations. Due to various factors, our access to foreign cash is generally more restricted than our access to domestic cash.

We anticipate that any future liquidity needs will be met through (i) our cash provided by operating activities, (ii) amounts due to us from Lumen Technologies, (iii) proceeds from the recently completed divestiture of our Latin American business, (iv) our ability to refinance our debt obligations and (v) capital contributions, advances or loans from Lumen Technologies or its affiliates if and to the extent they have available funds or access to funds that they are willing and able to contribute, advance or loan.

We are currently experiencing competitive, macroeconomic and financial pressures, including operational challenges resulting from inflation, dis-synergies resulting from our 2022 divestiture and, to a lesser extent, shortages of certain components and other supplies that we use in our business. These and other factors contributed to us recognizing a goodwill impairment in the fourth quarter of 2022, and, coupled with the sustained decline in Lumen's share price during the second quarter of 2023 contributed to us recognizing an additional goodwill impairment for the three months ended June 30, 2023.

Impact of ~~Recently Completed~~Planned Divestiture of ~~our Latin American~~the EMEA Business

~~As discussed in~~During 2022, we agreed to divest our EMEA business subject to the receipt of various approvals and the satisfaction of other customary conditions. See Note 2—~~Recently Completed~~Planned Divestiture of the ~~Latin American Business, we sold our Latin American business on August 1, 2022.~~EMEA Business. As further described ~~elsewhere herein, this transaction~~in previous reports, these transactions have provided or are expected to provide us with a substantial amount of cash proceeds, but ultimately will reduce our base of income-generating assets that generate our recurring cash from operating activities.

Debt Instruments and ~~Other~~ Financing Arrangements

As of September 30, ~~2022,~~2023, our long-term debt (including current maturities and finance leases) outstanding totaled ~~$8.1~~$9.0 billion. See Note 6—Long-Term Debt.

Pursuant to exchange offers commenced on March 16, 2023 (the “Exchange Offers”), on March 31, 2023, Level 3 Financing, Inc. issued $915 million of its 10.500% Senior Secured Notes due 2030 in exchange for $1.535 billion of Lumen’s outstanding senior unsecured notes. On April 17, 2023, Level 3 Financing, Inc. issued an additional $9 million of its 10.500% Senior Secured Notes due 2030 in exchange for $19 million aggregate principal amount of Lumen’s senior unsecured notes.

Subject to market conditions and to the extent permitted under applicable debt covenants, from time to time we ~~expect~~plan to continue to issue term debt or senior notes to refinance our maturing debt. The availability, interest rate and other terms of any new borrowings will be impacted by the ratings assigned us by the three major credit rating agencies, among other factors. As of the filing date of this report, the credit ratings for the senior secured and unsecured debt of Level 3 Financing, Inc. were as follows:

Borrower

Moody's Investor Services, Inc.

Standard & Poor's

Fitch Ratings

Level 3 Financing, Inc.

Unsecured

~~Ba3~~B3

~~BB-~~CCC+

BBB

Secured

~~Ba1~~B1

~~BB+~~B

~~BBB-~~BB-

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Our credit ratings are reviewed and adjusted from time to time by the rating agencies. Any future changes in the senior unsecured or secured debt ratings of ~~Level 3 Financing, Inc.~~us or our subsidiaries could impact our access to ~~debt~~ capital or ~~adjust our~~ borrowing costs. With the recent ~~downgrade of certain~~downgrades of our credit ratings, we may ~~experience increased borrowing costs.~~find it more difficult to borrow on favorable terms, or at all. See "Risk Factors—Financial Risks" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

From time to time over the past couple of years, we have engaged in various refinancings, redemptions, tender offers, open market purchases and other transactions designed to reduce our consolidated indebtedness, lower our aggregate interest costs, improve our financial flexibility or otherwise enhance our debt profile. We plan to continue to pursue similar transactions in the ~~future.~~future to the extent feasible. Whether and when we implement any additional such transactions depends on a wide variety of factors, including without limitation market conditions, our upcoming debt maturities, ~~and~~ our cash ~~requirements.~~requirements and limitations under our debt covenants. There is no guarantee that we will be successful in implementing any such transactions or attaining our stated objectives. We may not disclose these transactions in advance, unless required by applicable law or material in nature or amount. See Note 6—Long-Term Debt for additional information.

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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 September 30, ~~2022,~~2023, we had outstanding letters of credit or other similar obligations of approximately $3 million, all of which ~~was~~were collateralized by restricted cash.

Future Contractual Obligations

For information regarding our estimated future contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Cash Flow Activities

The following table summarizes our consolidated cash flow activities:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021	$ Change		2023		2022	$ Change
		(Dollars in millions)					(Dollars in millions)
Net cash provided by operating activities	Net cash provided by operating activities	$	1,687	941	746	Net cash provided by operating activities	$	1,233	1,687	(454)
Net cash provided by (used in) investing activities		$	1,832	(822)	2,654
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(769)		1,832	2,601
Net cash used in financing activities	Net cash used in financing activities	$	(3,577)	(67)	3,510	Net cash used in financing activities	(452)		(3,577)	(3,125)

Operating Activities

Net cash provided by operating activities ~~increased~~decreased by ~~$746~~$454 million for the nine months ended September 30, ~~2022,~~2023, as compared to the nine months ended September 30, ~~2021,~~2022, primarily due ~~payments on accounts payable - affiliate during~~to lower net income adjusted for non-cash expenses and gains, partially driven by the ~~nine months ended September 30, 2021, as well as foreign currency adjustments.~~sale of the Latin American business in the second half of 2022. Cash provided by operating activities is subject to variability period over period as a result of timing, including the collection of receivables and payments of interest, accounts payable and bonuses.

Investing Activities

Net cash (used in) provided by ~~(used in)~~ investing activities ~~increased~~changed by ~~$2.7~~$2.6 billion for the nine months ended September 30, ~~2022,~~2023, as compared to the nine months ended September 30, ~~2021.~~2022. The ~~increase~~change was primarily due to the receipt of pre-tax cash proceeds of $2.7 billion from the sale of the Latin American ~~business.~~business in the prior year period and a decrease in capital expenditures in the current year period.

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Financing Activities

Net cash used in financing activities ~~increased~~decreased by ~~$3.5~~$3.1 billion for the nine months ended September 30, ~~2022,~~2023, as compared to the nine months ended September 30, ~~2021~~2022 primarily due ~~an increase~~to a decrease in distributions paid to our parent ~~as well as due to~~and a decrease in debt repayments from the prior ~~period repayment of accounts payable - affiliate, as discussed in Operating Activities above, and an increase in payments of long-term debt.~~year period.

Other Matters

We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. See Note 8—9—Commitments, Contingencies and Other Items for additional information.

Lumen Technologies is involved in several legal proceedings to which we are not a party that, if resolved against it, could have a material adverse effect on its business and financial condition. As a wholly owned subsidiary of Lumen Technologies, our business and financial condition could be similarly affected. You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the matters, we have not accrued any liabilities for these matters.

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Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted under the Obama Administration. In ~~November~~late 2021, the U.S. Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants. As of the date of this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us. It remains premature to speculate on the potential impact of this legislation on us.

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Market Risk

At September 30, ~~2022,~~2023, we were exposed to market risk from changes in interest rates on our variable rate long-term debt obligations.

As of September 30, ~~2022,~~2023, we had approximately ~~$7.9~~$8.8 billion (excluding unamortized premiums, net, unamortized debt issuance costs and finance leases) of long-term debt outstanding, ~~69%~~73% of which bears interest at fixed rates and is therefore not exposed to interest rate risk. We also held approximately $2.4 billion of unhedged floating rate debt ~~exposed to changes in~~based on the ~~London InterBank Offered Rate~~secured overnight financing rate ("~~LIBOR"~~SOFR"). A hypothetical increase of 100 basis points in ~~LIBOR~~SOFR relative to this debt would decrease our annual pre-tax earnings by approximately $24 million. ~~Additionally, our credit agreements contain language about a possible change from LIBOR to an alternative index.~~

~~By operating internationally, we~~We conduct a portion of our business in currencies other than the U.S. dollar, the currency in which our consolidated financial statements are ~~exposed~~reported. Our European subsidiaries use, and prior to the ~~risk~~August 1, 2022 divestiture of our Latin American business, certain of our former Latin American subsidiaries used the local currency as their functional currency, as the majority of their sales and purchases are or were transacted in their local currencies. Although we continue to evaluate strategies to mitigate risks related to the effect of fluctuations in the foreign currencies used by our international subsidiaries, including the British Pound and the Euro. Although the percentages of our consolidated revenue and costs that are denominated in these currencies are immaterial, our consolidated results of operations could be adversely impacted by volatility incurrency exchange rates, we will likely recognize gains or ~~an increase~~losses from international transactions. Accordingly, changes in ~~the number of~~ foreign currency ~~transactions.~~rates relative to the U.S. dollar could positively or negatively impact our operating results.

Certain shortcomings are inherent in the method of analysis presented in the computation of exposures to market risks. Actual values may differ materially from those ~~presented above~~disclosed by us from time to time if market conditions vary from the assumptions used in the analyses performed. These analyses only incorporate the risk exposures that existed at September 30, ~~2022.~~2023.

~~Other Information~~

Lumen's and our website is www.lumen.com. We routinely post important investor information in the "Investor Relations" section of our website at ir.lumen.com. The information contained on, or that may be accessed through, our website is not part of this quarterly report. You may obtain free electronic copies of annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed by us or our ultimate controlling member Lumen Technologies, Inc., and all amendments to those reports, in the "Investor Relations" section of our website (ir.lumen.com) under the heading "SEC Filings." These reports are available on our website as soon as reasonably practicable after they are electronically filed with the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted pursuant to General Instruction H(2).

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Other Information

ITEM 4. 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 us in the reports we file or 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 this information is accumulated and communicated to our senior management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of our President and Chief Executive Officer, ~~Jeff K. Storey,~~Kate Johnson, and our Executive Vice President and Chief Financial Officer, Chris Stansbury, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2022.~~2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were effective, as of September 30, ~~2022,~~2023, in providing reasonable assurance the information required to be disclosed by us in this report was accumulated and communicated in the manner provided above.

Changes in Internal Control Over Financial Reporting

~~Other than the implementation of controls over accounting for the divestiture of our Latin American business and the calculation of the resulting gain therefrom, there~~There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the third quarter of ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, 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.

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PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information contained in Note 8—9—Commitments, Contingencies and Other Items, included in Item 1 of Part I of this quarterly report on Form 10-Q is incorporated herein by reference. The ultimate outcome of the matters described in Note 89 may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing in such Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us. For more information, see “Risk Factors—Legal and Regulatory Risks—Our pending legal proceedings could have a material adverse impact on ~~us”~~our financial condition and operating results and on our ability to access the capital markets” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition or future results. We ~~urge~~recommend that you to carefully consider (i) the other information set forth in this report and (ii) the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

2022, as supplemented by the disclosures included in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023.

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ITEM 6. EXHIBITS

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.


Exhibit Number			Description
~~2.1~~4.1*			~~Put Option Agreement,~~Supplement, dated as of ~~November 2, 2022 by~~October 26, 2023, to the 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 ~~among certain affiliate~~s ~~of Level~~Notes Collateral Agent, and Level 3 Parent, LLC . and ~~Colt Technology Services Group Limited (incorporated by reference~~several of its subsidiaries, as guarantors, clarifying which subsidiaries are guarantors of the 3.400% Senior Secured Notes due 2027 of Level 3 Financing, Inc.
4.2*			Supplement, dated as of October 26, 2023, to ~~Exhibit 2.1 to~~ L ~~evel~~the 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 Notes Collateral Agent, and Level 3 Parent, ~~LLC's~~ ~~Current Report on Form 8-K filed with~~LLC and several of its subsidiaries, as guarantors, clarifying which subsidiaries are guarantors of the ~~SEC on November 2, 2022).~~3.875% Senior Secured Notes due 2029 of Level 3 Financing, Inc.
4.3*			Supplemental Indenture, dated as of October 23, 2023, among Level 3 Financing, Inc., as Issuer, The Bank of New York Mellon Trust Company, N.A., as Trustee and Notes Collateral Agent, and Level 3 Parent, LLC and several of its subsidiaries, as guarantors, designating and outlining the terms and conditions of certain specified secured guarantees of the 10.500% Senior Secured Notes due 2030 of Level 3 Financing, Inc.
31.1*			Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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 Quarterly Report on Form 10-Q of Level 3 Parent, LLC for the quarter ended September 30, ~~2022,~~2023, formatted in Inline XBRL (eXtensible Business Reporting Language); (i) Consolidated Statements of Operations, (ii) Consolidated Statements Of Comprehensive (Loss) Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Member's Equity and (vi) Notes to Consolidated Financial Statements.
104*			Cover page formatted as Inline XBRL and contained in Exhibit 101.

* Exhibit filed herewith.

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SIGNATURE

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 on ~~November 3, 2022.~~October 31, 2023.


			LEVEL 3 PARENT, LLC
			By:			/s/ Andrea Genschaw
						Andrea Genschaw Senior Vice President, Controller (Principal Accounting Officer)

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	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
	Total Revenue		Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue(1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Compute and Application Services	$	235	(100)	135	287	(126)	161
IP and Data Services	831		—	831	890	—	890
Fiber Infrastructure Services	381		(54)	327	412	(56)	356
Voice and Other	315		(3)	312	345	(3)	342
Affiliate Services	57		(57)	—	56	(56)	—
Total revenue	$	1,819	(214)	1,605	1,990	(241)	1,749


	Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021
	Total Revenue		Adjustments for Non-ASC 606 Revenue (1)	Total Revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 Revenue (1)	Total Revenue from Contracts with Customers
	(Dollars in millions)
Compute and Application Services	$	795	(354)	441	850	(380)	470
IP and Data Services	2,600		—	2,600	2,659	—	2,659
Fiber Infrastructure Services	1,175		(165)	1,010	1,210	(164)	1,046
Voice and Other	978		(11)	967	1,078	(8)	1,070
Affiliate Services	170		(170)	—	167	(167)	—
Total revenue	$	5,718	(700)	5,018	5,964	(719)	5,245


	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
	Acquisition Costs		Fulfillment Costs (1)	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	76	99	78	122
Costs incurred	45		63	44	68
Amortization	(41)		(57)	(46)	(65)
Change in contract costs held for sale (1)	—		—	—	(27)
End of period balance	$	80	105	76	98