Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 28, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | CENTURYLINK, INC | |
Entity Central Index Key | 18,926 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 546,051,961 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
OPERATING REVENUES | $ 4,401 | $ 4,451 |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 1,900 | 1,911 |
Selling, general and administrative | 831 | 851 |
Depreciation and amortization | 976 | 1,040 |
Total operating expenses | 3,707 | 3,802 |
OPERATING INCOME | 694 | 649 |
OTHER (EXPENSE) INCOME | ||
Interest expense | (331) | (328) |
Other income, net | 17 | 2 |
Total other expense, net | (314) | (326) |
INCOME BEFORE INCOME TAX EXPENSE | 380 | 323 |
Income tax expense | 144 | 131 |
Net income | $ 236 | $ 192 |
BASIC AND DILUTED EARNINGS PER COMMON SHARE | ||
BASIC (in dollars per share) | $ 0.44 | $ 0.34 |
DILUTED (in dollars per share) | 0.44 | 0.34 |
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.54 | $ 0.54 |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||
BASIC (in shares) | 538,799 | 561,969 |
DILUTED (in shares) | 540,187 | 563,505 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 236 | $ 192 |
Items related to employee benefit plans: | ||
Change in net actuarial loss, net of $(16) and $(15) tax | 26 | 23 |
Change in net prior service costs, net of $(1) and $(2) tax | 2 | 4 |
Foreign currency translation adjustment and other, net of $- and $- tax | (1) | (11) |
Other comprehensive income | 27 | 16 |
COMPREHENSIVE INCOME | $ 263 | $ 208 |
CONSOLIDATED STATEMENTS OF COM4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Change in net actuarial loss, tax | $ (16) | $ (15) |
Change in net prior service costs, tax | $ (1) | $ (2) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 438 | $ 126 |
Accounts receivable, less allowance of $149 and $152 | 1,871 | 1,943 |
Other | 617 | 581 |
Total current assets | 2,926 | 2,650 |
NET PROPERTY, PLANT AND EQUIPMENT | ||
Property, plant and equipment | 39,229 | 38,785 |
Accumulated depreciation | (21,266) | (20,716) |
Net property, plant and equipment | 17,963 | 18,069 |
GOODWILL AND OTHER ASSETS | ||
Goodwill | 20,743 | 20,742 |
Other intangible assets, less accumulated amortization of $1,878 and $1,798 | 1,525 | 1,555 |
Other, net | 662 | 660 |
Total goodwill and other assets | 26,628 | 26,885 |
TOTAL ASSETS | 47,517 | 47,604 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 517 | 1,503 |
Accounts payable | 1,039 | 968 |
Accrued expenses and other liabilities | ||
Salaries and benefits | 462 | 602 |
Income and other taxes | 458 | 318 |
Interest | 318 | 250 |
Other | 302 | 220 |
Advance billings and customer deposits | 730 | 743 |
Total current liabilities | 3,826 | 4,604 |
LONG-TERM DEBT | 19,508 | 18,722 |
DEFERRED CREDITS AND OTHER LIABILITIES | ||
Deferred income taxes, net | 3,596 | 3,569 |
Benefit plan obligations, net | 5,445 | 5,511 |
Other | 1,106 | 1,138 |
Total deferred credits and other liabilities | $ 10,147 | $ 10,218 |
COMMITMENTS AND CONTINGENCIES (Note 8) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 shares, issued and outstanding 7 and 7 shares | $ 0 | $ 0 |
Common stock, $1.00 par value, authorized 1,600,000 and 1,600,000 shares, issued and outstanding 546,164 and 543,800 shares | 546 | 544 |
Additional paid-in capital | 15,184 | 15,178 |
Accumulated other comprehensive loss | (1,907) | (1,934) |
Retained earnings | 213 | 272 |
Total stockholders' equity | 14,036 | 14,060 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 47,517 | 47,604 |
Customer relationships | ||
Customer relationships, less accumulated amortization of $5,878 and $5,648 | $ 3,698 | $ 3,928 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
Accounts receivable, allowance | $ 149 | $ 152 |
Preferred stock-non-redeemable, par value (in dollars per share) | $ 25 | $ 25 |
Preferred stock-non-redeemable, authorized shares (shares) | 2,000 | 2,000 |
Preferred stock-non-redeemable, issued shares (shares) | 7 | 7 |
Preferred stock-non-redeemable, outstanding shares (shares) | 7 | 7 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, authorized shares (shares) | 1,600,000 | 1,600,000 |
Common stock, issued shares (shares) | 546,164 | 543,800 |
Common stock, outstanding shares (shares) | 546,164 | 543,800 |
Customer relationships | ||
Finite-lived intangible assets, accumulated amortization | $ 5,878 | $ 5,648 |
Other intangible assets | ||
Finite-lived intangible assets, accumulated amortization | $ 1,879 | $ 1,798 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
OPERATING ACTIVITIES | ||
Net income | $ 236 | $ 192 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 976 | 1,040 |
Impairment of assets | 0 | 8 |
Deferred income taxes | 11 | 37 |
Provision for uncollectible accounts | 46 | 42 |
Net long-term debt issuance costs and premium amortization | (1) | (2) |
Share-based compensation | 18 | 18 |
Changes in current assets and liabilities: | ||
Accounts receivable | 26 | (27) |
Accounts payable | 78 | (80) |
Accrued income and other taxes | 160 | 136 |
Other current assets and liabilities, net | (72) | (16) |
Retirement benefits | (21) | (9) |
Changes in other noncurrent assets and liabilities, net | (35) | (10) |
Other, net | 1 | 7 |
Net cash provided by operating activities | 1,423 | 1,336 |
INVESTING ACTIVITIES | ||
Payments for property, plant and equipment and capitalized software | (611) | (616) |
Proceeds from sale of property | 7 | 14 |
Other, net | (1) | (8) |
Net cash used in investing activities | (605) | (610) |
FINANCING ACTIVITIES | ||
Net proceeds from issuance of long-term debt | 227 | 594 |
Payments of long-term debt | (25) | (386) |
Net payments on credit facility and revolving line of credit | (410) | (425) |
Dividends paid | (290) | (304) |
Net proceeds from issuance of common stock | 4 | 8 |
Repurchase of common stock | (12) | (185) |
Other, net | 0 | (1) |
Net cash used in financing activities | (506) | (699) |
Net increase in cash and cash equivalents | 312 | 27 |
Cash and cash equivalents at beginning of period | 126 | 128 |
Cash and cash equivalents at end of period | 438 | 155 |
Supplemental cash flow information: | ||
Income taxes paid, net | (11) | (5) |
Interest paid (net of capitalized interest of $12 and $13) | $ (262) | $ (270) |
CONSOLIDATED STATEMENTS OF CAS8
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Cash Flows [Abstract] | ||
Interest paid, capitalized interest | $ 12 | $ 13 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED OTHER COMPREHENSIVE LOSS | RETAINED EARNINGS |
Balance at beginning of period at Dec. 31, 2014 | $ 569 | $ 16,324 | $ (2,017) | $ 147 | |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 2 | 6 | |||
Repurchase of common stock | (5) | (168) | |||
Shares withheld to satisfy tax withholdings | (15) | ||||
Share-based compensation and other, net | 17 | ||||
Other comprehensive income | $ 16 | 16 | |||
Net income | 192 | 192 | |||
Dividends declared | 105 | 198 | |||
Balance at end of period at Mar. 31, 2015 | 14,765 | 566 | 16,059 | (2,001) | 141 |
Balance at beginning of period at Dec. 31, 2015 | 14,060 | 544 | 15,178 | (1,934) | 272 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 2 | 2 | |||
Repurchase of common stock | 0 | 0 | |||
Shares withheld to satisfy tax withholdings | (12) | ||||
Share-based compensation and other, net | 16 | ||||
Other comprehensive income | 27 | 27 | |||
Net income | 236 | 236 | |||
Dividends declared | 0 | 295 | |||
Balance at end of period at Mar. 31, 2016 | $ 14,036 | $ 546 | $ 15,184 | $ (1,907) | $ 213 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | Basis of Presentation General We are an integrated communications company engaged primarily in providing an array of communications services to our residential and business customers. Our communications services include local and long-distance voice, high-speed Internet, Multi-Protocol Label Switching ("MPLS"), private line (including special access), data integration, Ethernet, colocation, managed hosting (including cloud hosting), network, public access, video, wireless and other ancillary services. Our consolidated balance sheet as of December 31, 2015 , 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 footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations for the first three months of the year are not necessarily indicative of the consolidated results of operations that might be expected for the entire year. These consolidated financial statements 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, 2015 . The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income, net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities. We pay dividends out of retained earnings to the extent we have retained earnings on the date the dividend is declared. If the dividend is in excess of our retained earnings on the declaration date, then the excess is drawn from our additional paid-in capital. We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 7—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. Connect America Fund In 2015, we accepted funding from the Federal Communications Commission's ("FCC") Connect America Fund ("CAF") of approximately $500 million per year for six years to fund the deployment of voice and high-speed Internet capable infrastructure for approximately 1.2 million rural households and businesses in 33 states under the CAF Phase 2 high-cost support program. The funding from the CAF Phase 2 support program in these 33 states will substantially supplant funding from the interstate Universal Service Fund ("USF") high-cost program that we previously utilized to support voice services in high-cost rural markets. In late 2015, we began receiving these support payments from the FCC under the new CAF Phase 2 support program, which included monthly support payments at a higher rate than under the interstate USF support program. During the first quarter of 2016 , we recorded $52 million more revenue than in the first quarter of 2015 for the 33 states. We received a substantial one-time cumulative catch-up payment from the FCC in the third quarter of 2015, and, as a result, we do not expect funding from the CAF Phase 2 support program to materially change our operating revenues for the full year 2016 when compared to the full year 2015. Recent Accounting Pronouncements Share-based Compensation On March 30, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, “Improvement to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 modifies the accounting and associated income tax accounting for share-based compensation in order to reduce the cost and complexity associated with current generally accepted accounting principles. ASU 2016-09 is effective for us as of January 1, 2017, but early adoption may be elected. ASU 2016-09 includes different transition requirements for the different changes implemented, including some provisions which allow retrospective application. We have not determined when we will implement this standard or if we will retrospectively apply the requirements when allowed. The primary provisions of ASU 2016-09 that we expect will affect our financial statements are: 1) a reclassification of the tax effect associated with the difference between the expense recognized for share-based payment and the associated tax deduction from additional paid-in capital to income tax expense; 2) a reclassification of the tax effect associated with the difference between compensation expense and associated deduction from financing cash flow to operating cash flow; and 3) an optional accounting policy election to account for forfeitures of share-based payment grants as they occur as opposed to our current policy of estimating the forfeitures on the grant date. These provisions would not have had a material impact on our previously issued financial statements; however, this is not necessarily representative of future impacts. Adoption of ASU 2016-09 may increase the volatility of income tax expense and cash flow from operating activities. Leases On February 25, 2016, the FASB issued ASU 2016-02, “ Leases ” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which are currently not reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply. We have not yet decided when we will adopt ASU 2016-02 or which practical expedient options we will elect. We are currently evaluating and assessing the impact ASU 2016-02 will have on us and our consolidated financial statements. As of the date of this report, we cannot provide any estimate of the impact of adopting ASU 2016-02. Revenue Recognition On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 replaces virtually all existing generally accepted accounting principles (“GAAP”) on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We currently do not defer any contract acquisition costs and we defer contract fulfillment costs only up to the extent of any revenue deferred. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year until January 1, 2018. Early adoption is permitted as of January 1, 2017. ASU 2014-09 may be adopted by applying the provisions of this standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2017, if adopting early, otherwise in the first quarter of 2018. We have not yet decided which implementation method we will adopt. We are studying ASU 2014-09 and are assessing the impact this standard will have on us and our consolidated financial statements. We cannot at this time, however, provide any estimate of the impact of adopting ASU 2014-09. |
Long-Term Debt and Credit Facil
Long-Term Debt and Credit Facilities | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt and Credit Facilities | Long-Term Debt and Credit Facilities Long-term debt, including unamortized discounts and premiums and unamortized debt issuance costs, consisted of borrowings by CenturyLink, Inc. and certain of its subsidiaries, including Qwest Corporation, Qwest Capital Funding, Inc. and Embarq Corporation and subsidiaries ("Embarq"), were as follows: Interest Rates Maturities As of March 31, 2016 As of December 31, 2015 (Dollars in millions) CenturyLink, Inc. Senior notes 5.150% - 7.650% 2017 - 2042 $ 7,975 7,975 Credit facility and revolving line of credit (1) —% 2019 — 410 Term loan 2.190% 2019 352 358 Subsidiaries Qwest Corporation Senior notes 6.125% - 8.375% 2016 - 2056 7,464 7,229 Term loan 2.190% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 981 981 Embarq Corporation and subsidiaries Senior notes 7.082% - 7.995% 2016 - 2036 2,669 2,669 First mortgage bonds 7.125% - 8.770% 2017 - 2025 232 232 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 415 425 Unamortized discounts, net (128 ) (125 ) Unamortized debt issuance costs (185 ) (179 ) Total long-term debt 20,025 20,225 Less current maturities (517 ) (1,503 ) Long-term debt, excluding current maturities $ 19,508 18,722 ______________________________________________________________________ (1) The aggregate amount outstanding on our Credit Facility and revolving line of credit borrowings at December 31, 2015 was $410 million with a weighted-average interest rate of 2.756% . At March 31, 2016 , we had no borrowings outstanding under our Credit Facility or revolving line of credit. These amounts change on a regular basis. New Issuance In January 2016, Qwest Corporation issued $235 million aggregate principal amount of 7% Notes due 2056, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of approximately $227 million . All of the 7% Notes are unsecured obligations and may be redeemed by Qwest Corporation, in whole or in part, on or after February 1, 2021, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date. Covenants As of March 31, 2016 , we believe we were in compliance with the provisions and covenants contained in our Credit Facility and other material debt agreements. Subsequent Events On May 2, 2016, Qwest Corporation paid at maturity the $235 million principal amount and accrued and unpaid interest due under its 8.375% Notes. On April 6, 2016 , CenturyLink, Inc. issued $1 billion aggregate principal amount of 7.5% Notes due in 2024, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of approximately $988 million . All of the 7.5% Notes are unsecured obligations and may be redeemed by CenturyLink, Inc., in whole or in part, on or after January 1, 2024, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date. At any time before January 1, 2024, the Notes are redeemable, in whole or in part, at CenturyLink, Inc.'s option, at a redemption price equal to the greater of 100% of the principal amount of the Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed, discounted to the redemption date in the manner described in the Notes , plus accrued and unpaid interest to the redemption date. In addition, at any time on or prior to April 1, 2019, CenturyLink, Inc. may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 107.5% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of certain equity offerings. Under certain circumstances, CenturyLink, Inc. will be required to make an offer to repurchase the Notes at a price of 101% of the aggregate principal amount plus accrued and unpaid interest to the repurchase date. We plan to use the net proceeds from this debt offering, along with other available funds, to pay at maturity the $1.184 billion aggregate principal amount of Embarq Corporation's 7.082% Notes due on June 1, 2016 . Consequently, we have classified $990 million of these Notes as long-term debt and the remaining $194 million of these Notes as current maturities of long-term debt on our consolidated balance sheet as of March 31, 2016. |
Severance and Leased Real Estat
Severance and Leased Real Estate | 3 Months Ended |
Mar. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Severance and Leased Real Estate | Severance and Leased Real Estate Periodically, we have reductions in our workforce and have accrued liabilities for the related severance costs. These workforce reductions resulted primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workload demands due to the loss of customers purchasing certain services. We report severance liabilities within accrued expenses and other liabilities - salaries and benefits in our consolidated balance sheets and report severance expenses in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations. As noted in Note 7—Segment Information, we do not allocate these severance expenses to our segments. We have recognized liabilities to reflect our estimates of the fair values of the existing lease obligations for real estate which we have ceased using, net of estimated sublease rentals. Our fair value estimates were determined using discounted cash flow methods. We recognize expense to reflect accretion of the discounted liabilities and periodically we adjust the expense when our actual subleasing experience differs from our initial estimates. We report the current portion of liabilities for ceased-use real estate leases in accrued expenses and other liabilities - other and report the noncurrent portion in deferred credits and other liabilities in our consolidated balance sheets. We report the related expenses in selling, general and administrative expenses in our consolidated statements of operations. At March 31, 2016 , the current and noncurrent portions of our leased real estate accrual were $8 million and $65 million , respectively. The remaining lease terms range from 0.3 to 9.7 years , with a weighted-average of 8.3 years . Changes in our accrued liabilities for severance expenses and leased real estate were as follows: Severance Real Estate (Dollars in millions) Balance at December 31, 2015 $ 14 80 Accrued to expense 15 1 Payments, net (12 ) (10 ) Reversals and adjustments — 2 Balance at March 31, 2016 $ 17 73 |
Employee Benefits
Employee Benefits | 3 Months Ended |
Mar. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefits | Employee Benefits Net periodic (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended March 31, 2016 2015 (Dollars in millions) Service cost $ 17 22 Interest cost 107 141 Expected return on plan assets (184 ) (226 ) Recognition of prior service (credit) cost (2 ) 1 Recognition of actuarial loss 42 38 Net periodic pension benefit income $ (20 ) (24 ) Net periodic expense (income) for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended March 31, 2016 2015 (Dollars in millions) Service cost $ 5 6 Interest cost 28 35 Expected return on plan assets (2 ) (5 ) Recognition of prior service cost 5 5 Net periodic post-retirement benefit expense $ 36 41 We report net periodic benefit (income) expense for our qualified pension, non-qualified pension and post-retirement benefit plans in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations. |
Earnings per Common Share
Earnings per Common Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Common Share | Earnings Per Common Share Basic and diluted earnings per common share for the three months ended March 31, 2016 and 2015 were calculated as follows: Three Months Ended March 31, 2016 2015 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 236 192 Earnings applicable to non-vested restricted stock — — Net income applicable to common stock for computing basic earnings per common share 236 192 Net income as adjusted for purposes of computing diluted earnings per common share $ 236 192 Shares (Denominator): Weighted-average number of shares: Outstanding during period 544,845 566,687 Non-vested restricted stock (6,046 ) (4,718 ) Weighted-average shares outstanding for computing basic earnings per common share 538,799 561,969 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 Shares issuable under incentive compensation plans 1,378 1,526 Number of shares as adjusted for purposes of computing diluted earnings per common share 540,187 563,505 Basic earnings per common share $ 0.44 0.34 Diluted earnings per common share $ 0.44 0.34 Our calculation of diluted earnings per common share excludes shares of common stock that are issuable upon exercise of stock options when the exercise price is greater than the average market price of our common stock. We also exclude unvested restricted stock awards that are antidilutive as a result of unrecognized compensation cost. Such shares averaged 3.1 million and 2.2 million for the three months ended March 31, 2016 and 2015 , respectively. |
Fair Value Disclosure
Fair Value Disclosure | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosure | Fair Value Disclosure Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt, excluding capital lease and other obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB. We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on discounted future cash flows using current market interest rates. The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows: Input Level Description of Input Level 1 Observable inputs such as quoted market prices in active markets. Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 Unobservable inputs in which little or no market data exists. The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: As of March 31, 2016 As of December 31, 2015 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 19,610 19,561 19,800 19,473 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Segment Data We are organized into operating segments based on customer type, business and consumer. These operating segments are our two reportable segments in our consolidated financial statements: • Business Segment. Consists generally of providing strategic, legacy and data integration products and services to small, medium and enterprise business, wholesale and governmental customers, including other communication providers. Our strategic products and services offered to these customers include our MPLS, private line (including special access), Ethernet, high-speed Internet, colocation, managed hosting and other ancillary services. Our legacy services offered to these customers primarily include switched access and local and long-distance voice services, including the sale of unbundled network elements ("UNEs") which allow our wholesale customers to use all or part of our network to provide voice and data services to their customers. Our data integration offerings include the sale of telecommunications equipment located on customers' premises and related professional services, all of which are described further below under the heading "Product and Service Categories"; and • Consumer Segment. Consists generally of providing strategic and legacy products and services to residential customers. Our strategic products and services offered to these customers include our high-speed Internet, video (including our Prism TV services) and wireless services. Our legacy services offered to these customers include local and long-distance voice services. The results of our business and consumer segments are summarized below: Three Months Ended March 31, 2016 2015 (1) (Dollars in millions) Total segment revenues $ 4,093 4,194 Total segment expenses 2,051 2,071 Total segment income $ 2,042 2,123 Total margin percentage 50 % 51 % Business segment: Revenues $ 2,604 2,697 Expenses 1,427 1,463 Income $ 1,177 1,234 Margin percentage 45 % 46 % Consumer segment: Revenues $ 1,489 1,497 Expenses 624 608 Income $ 865 889 Margin percentage 58 % 59 % ______________________________________________________________________ (1) Reflects the recasting of segment results discussed in the next section entitled "Changes in Segment Reporting." Changes in Segment Reporting We continually review, evaluate and refine our expense allocations to better reflect how we view and manage our operations, and as a result, during the first quarter of 2016, we implemented several changes with respect to the assignment of certain expenses to our reportable segments. We have recast our previously-reported segment results for the three months ended March 31, 2015, to conform to the current presentation. The nature of the most significant changes to segment expenses are as follows: • Certain marketing and advertising expenses were reassigned from the business segment to the consumer segment; • Certain service delivery costs were reassigned from the consumer segment to the business segment; • Centralized human resources training costs were reassigned from the business and consumer segments to corporate overhead; and • Marketing direct mail costs and certain printing expenses were reassigned from corporate overhead to the business and consumer segments. For the three months ended March 31, 2015 , the segment expense recast resulted in an increase in consumer expenses of $19 million and a decrease in business expenses of $21 million . Product and Service Categories We categorize our products, services and revenues among the following four categories: • Strategic services , which include primarily high-speed Internet, MPLS (which is a data networking technology that can deliver the quality of service required to support real-time voice and video), private line (including special access), Ethernet, colocation, hosting (including cloud hosting and managed hosting), video (including our facilities-based video services, which we now offer in 16 markets), Voice over Internet Protocol ("VoIP"), Verizon Wireless and other ancillary services; • Legacy services , which include primarily local and long-distance voice services, including the sale of UNEs, switched access and Integrated Services Digital Network ("ISDN") services (which use regular telephone lines to support voice, video and data applications); • Data integration , which includes the sale of telecommunications equipment located on customers' premises and related professional services, such as network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our governmental and business customers; and • Other operating revenues, which consist primarily of CAF support payments, USF support payments and USF surcharges. We receive federal support payments from both CAF Phase 1 and CAF Phase 2 programs, and support payments from both federal and state USF programs. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services, including the costs of deploying, maintaining and operating voice and high-speed Internet infrastructure in high-cost rural areas where we are not able to recover our costs from our customers. USF surcharges are the amounts we collect based on specific items we list on our customers' invoices to fund the FCC's universal service programs. We also generate other operating revenues from leasing and subleasing of space in our office buildings, warehouses and other properties. Because we centrally manage the activities that generate these other operating revenues, these revenues are not included in our segment revenues. From time to time, we may change the categorization of our products and services. Our operating revenue detail for our products and services consisted of the following categories: Three Months Ended March 31, 2016 2015 (Dollars in millions) Strategic services Business high-bandwidth data services (1) $ 738 687 Business low-bandwidth data services (2) 481 532 Business hosting services (3) 307 318 Other business strategic services (4) 54 45 Consumer high-speed Internet services (5) 667 635 Other consumer strategic services (6) 107 103 Total strategic services revenues 2,354 2,320 Legacy services Business legacy voice services (7) 622 670 Other business legacy services (8) 287 306 Consumer legacy voice services (7) 634 688 Other consumer legacy services (9) 80 70 Total legacy services revenues 1,623 1,734 Data integration Business data integration 115 139 Consumer data integration 1 1 Total data integration revenues 116 140 Other revenues High-cost support revenue (10) 174 134 Other revenue (11) 134 123 Total other revenues 308 257 Total revenues $ 4,401 4,451 ______________________________________________________________________ (1) Includes MPLS and Ethernet revenue (2) Includes private line and high-speed Internet revenue (3) Includes colocation, hosting (including cloud hosting and managed hosting) and hosting area network revenue (4) Includes primarily VoIP, video and IT services revenue (5) Includes high-speed Internet and related services revenue (6) Includes video and Verizon wireless revenue (7) Includes local and long-distance voice revenue (8) Includes UNEs, public access, switched access and other ancillary revenue (9) Includes other ancillary revenue (10) Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue (11) Includes USF surcharges We recognize revenues in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the related expense for the amounts we remit to the government agencies. The total amount of such surcharges and transaction taxes that we included in revenues aggregated approximately $146 million and $135 million for the three months ended March 31, 2016 and 2015 , respectively. These USF surcharges, where we record revenue, are included in "other" operating revenues and these transaction tax surcharges are included in "legacy services" revenues. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent. Allocations of Revenues and Expenses Our segment revenues include all revenues from our strategic, legacy and data integration operations as described in more detail above. Segment revenues are based upon each customer's classification as either business or consumer. We report our segment revenues based upon all services provided to that segment's customers. Our segment expenses for our two reportable segments include specific expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are (i) directly associated with specific segment customers or activities and (ii) allocated expenses, which include network expenses, facilities expenses and other expenses such as fleet and real estate expenses. We do not assign depreciation and amortization expense or impairments to our segments, as the related assets and capital expenditures are centrally managed and are not monitored by or reported to the chief operating decision maker ("CODM") by segment. Generally speaking, severance expenses, restructuring expenses and certain centrally managed administrative functions (such as finance, information technology, legal and human resources) are not assigned to our segments. Interest expense is also excluded from segment results because we manage our financing on a consolidated basis and have not allocated assets or debt to specific segments. Other income and expense items are not monitored as a part of our segment operations and are therefore excluded from our segment results. The following table reconciles segment income to net income: Three Months Ended March 31, 2016 2015 (Dollars in millions) Total segment income $ 2,042 2,123 Other operating revenues 308 257 Depreciation and amortization (976 ) (1,040 ) Other unassigned operating expenses (680 ) (691 ) Other expense, net (314 ) (326 ) Income tax expense (144 ) (131 ) Net income $ 236 192 We do not have any single customer that provides more than 10% of our total consolidated operating revenues. Substantially all of our consolidated revenues come from customers located in the United States. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are vigorously defending against all of the matters described below under the headings "Pending Matters" and "Other Proceedings and Disputes." As a matter of course, we are prepared both to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter. We have established accrued liabilities for these matters described below where losses are deemed probable and reasonably estimable. Pending Matters In William Douglas Fulghum, et al. v. Embarq Corporation, et al., filed on December 28, 2007 in the United States District Court for the District of Kansas, a group of retirees filed a class action lawsuit challenging the decision to make certain modifications in retiree benefits programs relating to life insurance, medical insurance and prescription drug benefits, generally effective January 1, 2006 and January 1, 2008 (which, at the time of the modifications, was expected to reduce estimated future expenses for the subject benefits by more than $300 million ). Defendants include Embarq, certain of its benefit plans, its Employee Benefits Committee and the individual plan administrator of certain of its benefits plans. Additional defendants include Sprint Nextel and certain of its benefit plans. The Court certified a class on certain of plaintiffs' claims, but rejected class certification as to other claims. On October 14, 2011, the Fulghum lawyers filed a new, related lawsuit, Abbott et al. v. Sprint Nextel et al. In Abbott, approximately 1,500 plaintiffs allege breach of fiduciary duty in connection with the changes in retiree benefits that also are at issue in the Fulghum case. The Abbott plaintiffs are all members of the class that was certified in Fulghum on claims for allegedly vested benefits (Counts I and III), and the Abbott claims are similar to the Fulghum breach of fiduciary duty claim (Count II), on which the Fulghum court denied class certification. The Court has stayed proceedings in Abbott indefinitely, except for limited discovery and motion practice as to approximately 80 of the plaintiffs. On February 14, 2013, the Fulghum court dismissed the majority of the plaintiffs' claims in the case. On interlocutory appeal, the United States Court of Appeals for the Tenth Circuit ruled on February 24, 2015, that the plan documents reviewed do not support any claim for vested benefits, and affirmed the district court's dismissal of claims based on those documents. The Tenth Circuit decision allowed a subset of claims for vested benefits to return to the district court for further proceedings. The Tenth Circuit also affirmed the district court's dismissal of all age discrimination claims. The Tenth Circuit reversed the district court's determination that the statute of repose under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), is a time bar to the breach of fiduciary duty claims of fifteen named plaintiffs. On June 10, 2015, the district court in Fulghum granted summary judgment to defendants on an additional group of claims for vested benefits. On July 27, 2015, pursuant to the terms of a stipulation by the parties, the district court in Fulghum granted judgment in favor of defendants on all remaining and unadjudicated vested benefits claims. This judgment is without prejudice to any rights the parties may have to pursue any additional appellate relief. As to any further proceedings that may occur in the district court, defendants will continue to vigorously contest any remaining claims in Fulghum and Abbott. We have not accrued a liability for these matters because we believe it is premature (i) to determine whether an accrual is warranted and (ii) if so, to determine a reasonable estimate of probable liability. On July 16, 2013, Comcast MO Group, Inc. ("Comcast") filed a lawsuit in Colorado state court against Qwest Communications International, Inc. ("Qwest"). Comcast alleges Qwest breached the parties' 1998 tax sharing agreement ("TSA") when it refused to partially indemnify Comcast for a tax liability settlement Comcast reached with the Commonwealth of Massachusetts in a dispute to which we were not a party. Comcast seeks approximately $80 million in damages, excluding interest. Qwest and Comcast are parties to the TSA in their capacities as successors to the TSA's original parties, U S WEST, Inc., a telecommunications company, and MediaOne Group, Inc., a cable television company, respectively. In October 2014, the state court granted summary judgment in Qwest's favor. In December 2015, the Colorado Court of Appeals affirmed the judgment. Comcast has filed a petition with the Colorado Supreme Court to review the Court of Appeals judgment, which remains pending. We have not accrued a liability for this matter because we do not believe that liability is probable. The local exchange carrier subsidiaries of CenturyLink are among hundreds of defendants nationwide in dozens of lawsuits filed by Sprint Communications Company and affiliates of Verizon Communications Inc. The plaintiffs in these suits have challenged the right of local exchange carriers to bill interexchange carriers for switched access charges for certain calls between mobile and wireline devices that are routed through an interexchange carrier. In the lawsuits, the plaintiffs are seeking refunds of access charges previously paid and relief from future access charges. In addition, these and some other interexchange carriers have ceased paying switched access charges on these calls. These lawsuits involving our local exchange carriers and many other carriers have been consolidated for pretrial purposes in the United States District Court for the District of Northern Texas. In November 2015, the Court dismissed the plaintiffs' federal law claims and granted them leave to file state law claims, if any. Some of the defendants, including our affiliated carriers, have petitioned the Federal Communications Commission to address these issues on an industry-wide basis. As both an interexchange carrier and a local exchange carrier, we both pay and assess significant amounts of the access charges in question. The outcome of these disputes and suits, as well as any related regulatory proceedings that could ensue, are currently not predictable. If we are required to stop assessing these charges or to pay refunds of any such charges, our financial results could be negatively affected. CenturyLink and several of its subsidiaries are defendants in lawsuits filed over the past few years in the Circuit Court of St. Louis County, Missouri by numerous Missouri municipalities alleging underpayment of taxes. These municipalities are seeking, among other things, (i) a declaratory judgment regarding the extent of our obligations to pay certain business license and gross receipts taxes and (ii) a monetary award of back taxes covering 2007 to the present, plus penalties and interest. In an April 2016 ruling in connection with one of these pending cases, the court made findings which, if not overturned, will result in tax liability to us well in excess of the contingent liability we have established. Following further proceedings at the district court, we plan to file an appeal and continue to vigorously defend against these claims. For a variety of reasons, we expect the outcome of our appeal to significantly reduce our ultimate exposure, although we can provide no assurances to this effect. Other Proceedings and Disputes From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies, and miscellaneous third party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of whom are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial in the coming 24 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 the matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $100,000 in fines and penalties. The outcome of these other proceedings 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 our financial position, results of operations or cash flows. |
Other Financial Information
Other Financial Information | 3 Months Ended |
Mar. 31, 2016 | |
Additional Financial Information Disclosure [Abstract] | |
Other financial information | Other Financial Information Other Current Assets The following table presents details of other current assets in our consolidated balance sheets: As of March 31, 2016 As of December 31, 2015 (Dollars in millions) Prepaid expenses $ 276 238 Materials, supplies and inventory 136 144 Assets held for sale 2 8 Deferred activation and installation charges 106 105 Other 97 86 Total other current assets $ 617 581 Selected Current Liabilities Current liabilities reflected in our consolidated balance sheets include accounts payable and other current liabilities as follows: As of March 31, 2016 As of December 31, 2015 (Dollars in millions) Accounts payable $ 1,039 968 Other current liabilities: Accrued rent $ 28 32 Legal contingencies 41 20 Other 233 168 Total other current liabilities $ 302 220 Included in accounts payable at March 31, 2016 and December 31, 2015 , were (i) $50 million and $68 million , respectively, representing book overdrafts and (ii) $87 million and $94 million , respectively, associated with capital expenditures. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2016 and 2015 : Pension Plans Post-Retirement Benefit Plans Foreign Currency Translation Adjustment and Other Total (Dollars in millions) Balance at December 31, 2015 $ (1,715 ) (180 ) (39 ) (1,934 ) Other comprehensive income (loss) before reclassifications — — (1 ) (1 ) Amounts reclassified from accumulated other comprehensive income 25 3 — 28 Net current-period other comprehensive income 25 3 (1 ) 27 Balance at March 31, 2016 $ (1,690 ) (177 ) (40 ) (1,907 ) Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2014 $ (1,720 ) (272 ) (25 ) (2,017 ) Other comprehensive income (loss) before reclassifications — — (11 ) (11 ) Amounts reclassified from accumulated other comprehensive income 24 3 — 27 Net current-period other comprehensive income 24 3 (11 ) 16 Balance at March 31, 2015 $ (1,696 ) (269 ) (36 ) (2,001 ) The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, 2016 (Decrease) Increase Affected Line Item in Consolidated Statement of Operations or Footnote Where Additional Information is Presented If The Amount is not Recognized in Net Income in Total (Dollars in millions) Amortization of pension & post-retirement plans Net actuarial loss $ (42 ) See Note 4-Employee Benefits Prior service cost (3 ) See Note 4-Employee Benefits Total before tax (45 ) Income tax expense 17 Income tax expense Net of tax $ (28 ) Three Months Ended March 31, 2015 (Decrease) Increase Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans Net actuarial loss $ (38 ) See Note 4-Employee Benefits Prior service cost (6 ) See Note 4-Employee Benefits Total before tax (44 ) Income tax expense 17 Income tax expense Net of tax $ (27 ) |
Basis of Presentation Basis of
Basis of Presentation Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation [Abstract] | |
Consolidation policy | The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income, net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities. |
Dividends | We pay dividends out of retained earnings to the extent we have retained earnings on the date the dividend is declared. If the dividend is in excess of our retained earnings on the declaration date, then the excess is drawn from our additional paid-in capital. |
Reclassification policy | We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 7—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. |
Recent accounting pronouncements | Recent Accounting Pronouncements Share-based Compensation On March 30, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, “Improvement to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 modifies the accounting and associated income tax accounting for share-based compensation in order to reduce the cost and complexity associated with current generally accepted accounting principles. ASU 2016-09 is effective for us as of January 1, 2017, but early adoption may be elected. ASU 2016-09 includes different transition requirements for the different changes implemented, including some provisions which allow retrospective application. We have not determined when we will implement this standard or if we will retrospectively apply the requirements when allowed. The primary provisions of ASU 2016-09 that we expect will affect our financial statements are: 1) a reclassification of the tax effect associated with the difference between the expense recognized for share-based payment and the associated tax deduction from additional paid-in capital to income tax expense; 2) a reclassification of the tax effect associated with the difference between compensation expense and associated deduction from financing cash flow to operating cash flow; and 3) an optional accounting policy election to account for forfeitures of share-based payment grants as they occur as opposed to our current policy of estimating the forfeitures on the grant date. These provisions would not have had a material impact on our previously issued financial statements; however, this is not necessarily representative of future impacts. Adoption of ASU 2016-09 may increase the volatility of income tax expense and cash flow from operating activities. Leases On February 25, 2016, the FASB issued ASU 2016-02, “ Leases ” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which are currently not reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply. We have not yet decided when we will adopt ASU 2016-02 or which practical expedient options we will elect. We are currently evaluating and assessing the impact ASU 2016-02 will have on us and our consolidated financial statements. As of the date of this report, we cannot provide any estimate of the impact of adopting ASU 2016-02. Revenue Recognition On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 replaces virtually all existing generally accepted accounting principles (“GAAP”) on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We currently do not defer any contract acquisition costs and we defer contract fulfillment costs only up to the extent of any revenue deferred. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year until January 1, 2018. Early adoption is permitted as of January 1, 2017. ASU 2014-09 may be adopted by applying the provisions of this standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2017, if adopting early, otherwise in the first quarter of 2018. We have not yet decided which implementation method we will adopt. We are studying ASU 2014-09 and are assessing the impact this standard will have on us and our consolidated financial statements. We cannot at this time, however, provide any estimate of the impact of adopting ASU 2014-09. |
Long-Term Debt and Credit Fac21
Long-Term Debt and Credit Facilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt including unamortized discounts and premiums | Long-term debt, including unamortized discounts and premiums and unamortized debt issuance costs, consisted of borrowings by CenturyLink, Inc. and certain of its subsidiaries, including Qwest Corporation, Qwest Capital Funding, Inc. and Embarq Corporation and subsidiaries ("Embarq"), were as follows: Interest Rates Maturities As of March 31, 2016 As of December 31, 2015 (Dollars in millions) CenturyLink, Inc. Senior notes 5.150% - 7.650% 2017 - 2042 $ 7,975 7,975 Credit facility and revolving line of credit (1) —% 2019 — 410 Term loan 2.190% 2019 352 358 Subsidiaries Qwest Corporation Senior notes 6.125% - 8.375% 2016 - 2056 7,464 7,229 Term loan 2.190% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 981 981 Embarq Corporation and subsidiaries Senior notes 7.082% - 7.995% 2016 - 2036 2,669 2,669 First mortgage bonds 7.125% - 8.770% 2017 - 2025 232 232 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 415 425 Unamortized discounts, net (128 ) (125 ) Unamortized debt issuance costs (185 ) (179 ) Total long-term debt 20,025 20,225 Less current maturities (517 ) (1,503 ) Long-term debt, excluding current maturities $ 19,508 18,722 ______________________________________________________________________ (1) The aggregate amount outstanding on our Credit Facility and revolving line of credit borrowings at December 31, 2015 was $410 million with a weighted-average interest rate of 2.756% . At March 31, 2016 , we had no borrowings outstanding under our Credit Facility or revolving line of credit. These amounts change on a regular basis. |
Severance and Leased Real Est22
Severance and Leased Real Estate (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Restructuring and Related Activities [Abstract] | |
Schedule of changes in accrued liabilities for severance expenses and leased real estate | Changes in our accrued liabilities for severance expenses and leased real estate were as follows: Severance Real Estate (Dollars in millions) Balance at December 31, 2015 $ 14 80 Accrued to expense 15 1 Payments, net (12 ) (10 ) Reversals and adjustments — 2 Balance at March 31, 2016 $ 17 73 |
Employee Benefits (Tables)
Employee Benefits (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Schedule of components of net periodic pension benefit (income) expense and post-retirement benefit expense | Net periodic (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended March 31, 2016 2015 (Dollars in millions) Service cost $ 17 22 Interest cost 107 141 Expected return on plan assets (184 ) (226 ) Recognition of prior service (credit) cost (2 ) 1 Recognition of actuarial loss 42 38 Net periodic pension benefit income $ (20 ) (24 ) Net periodic expense (income) for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended March 31, 2016 2015 (Dollars in millions) Service cost $ 5 6 Interest cost 28 35 Expected return on plan assets (2 ) (5 ) Recognition of prior service cost 5 5 Net periodic post-retirement benefit expense $ 36 41 |
Earnings per Common Share (Tabl
Earnings per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted earnings per common share | Basic and diluted earnings per common share for the three months ended March 31, 2016 and 2015 were calculated as follows: Three Months Ended March 31, 2016 2015 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 236 192 Earnings applicable to non-vested restricted stock — — Net income applicable to common stock for computing basic earnings per common share 236 192 Net income as adjusted for purposes of computing diluted earnings per common share $ 236 192 Shares (Denominator): Weighted-average number of shares: Outstanding during period 544,845 566,687 Non-vested restricted stock (6,046 ) (4,718 ) Weighted-average shares outstanding for computing basic earnings per common share 538,799 561,969 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 Shares issuable under incentive compensation plans 1,378 1,526 Number of shares as adjusted for purposes of computing diluted earnings per common share 540,187 563,505 Basic earnings per common share $ 0.44 0.34 Diluted earnings per common share $ 0.44 0.34 |
Fair Value Disclosure (Tables)
Fair Value Disclosure (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of the three input levels in the hierarchy of fair value measurements | The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows: Input Level Description of Input Level 1 Observable inputs such as quoted market prices in active markets. Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 Unobservable inputs in which little or no market data exists. |
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values | The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: As of March 31, 2016 As of December 31, 2015 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 19,610 19,561 19,800 19,473 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Schedule of segment results | The results of our business and consumer segments are summarized below: Three Months Ended March 31, 2016 2015 (1) (Dollars in millions) Total segment revenues $ 4,093 4,194 Total segment expenses 2,051 2,071 Total segment income $ 2,042 2,123 Total margin percentage 50 % 51 % Business segment: Revenues $ 2,604 2,697 Expenses 1,427 1,463 Income $ 1,177 1,234 Margin percentage 45 % 46 % Consumer segment: Revenues $ 1,489 1,497 Expenses 624 608 Income $ 865 889 Margin percentage 58 % 59 % ______________________________________________________________________ (1) Reflects the recasting of segment results discussed in the next section entitled "Changes in Segment Reporting." |
Schedule of operating revenues by products and services | Our operating revenue detail for our products and services consisted of the following categories: Three Months Ended March 31, 2016 2015 (Dollars in millions) Strategic services Business high-bandwidth data services (1) $ 738 687 Business low-bandwidth data services (2) 481 532 Business hosting services (3) 307 318 Other business strategic services (4) 54 45 Consumer high-speed Internet services (5) 667 635 Other consumer strategic services (6) 107 103 Total strategic services revenues 2,354 2,320 Legacy services Business legacy voice services (7) 622 670 Other business legacy services (8) 287 306 Consumer legacy voice services (7) 634 688 Other consumer legacy services (9) 80 70 Total legacy services revenues 1,623 1,734 Data integration Business data integration 115 139 Consumer data integration 1 1 Total data integration revenues 116 140 Other revenues High-cost support revenue (10) 174 134 Other revenue (11) 134 123 Total other revenues 308 257 Total revenues $ 4,401 4,451 ______________________________________________________________________ (1) Includes MPLS and Ethernet revenue (2) Includes private line and high-speed Internet revenue (3) Includes colocation, hosting (including cloud hosting and managed hosting) and hosting area network revenue (4) Includes primarily VoIP, video and IT services revenue (5) Includes high-speed Internet and related services revenue (6) Includes video and Verizon wireless revenue (7) Includes local and long-distance voice revenue (8) Includes UNEs, public access, switched access and other ancillary revenue (9) Includes other ancillary revenue (10) Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue (11) Includes USF surcharges |
Reconciliation of operating profit (loss) from segments to consolidated net income | The following table reconciles segment income to net income: Three Months Ended March 31, 2016 2015 (Dollars in millions) Total segment income $ 2,042 2,123 Other operating revenues 308 257 Depreciation and amortization (976 ) (1,040 ) Other unassigned operating expenses (680 ) (691 ) Other expense, net (314 ) (326 ) Income tax expense (144 ) (131 ) Net income $ 236 192 |
Other Financial Information (Ta
Other Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Additional Financial Information Disclosure [Abstract] | |
Schedule of components of other current assets | The following table presents details of other current assets in our consolidated balance sheets: As of March 31, 2016 As of December 31, 2015 (Dollars in millions) Prepaid expenses $ 276 238 Materials, supplies and inventory 136 144 Assets held for sale 2 8 Deferred activation and installation charges 106 105 Other 97 86 Total other current assets $ 617 581 |
Schedule of current liabilities including accounts payable and other current liabilities | Current liabilities reflected in our consolidated balance sheets include accounts payable and other current liabilities as follows: As of March 31, 2016 As of December 31, 2015 (Dollars in millions) Accounts payable $ 1,039 968 Other current liabilities: Accrued rent $ 28 32 Legal contingencies 41 20 Other 233 168 Total other current liabilities $ 302 220 |
Accumulated Other Comprehensi28
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Summary of the entity's accumulated other comprehensive income (loss) by component | The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2016 and 2015 : Pension Plans Post-Retirement Benefit Plans Foreign Currency Translation Adjustment and Other Total (Dollars in millions) Balance at December 31, 2015 $ (1,715 ) (180 ) (39 ) (1,934 ) Other comprehensive income (loss) before reclassifications — — (1 ) (1 ) Amounts reclassified from accumulated other comprehensive income 25 3 — 28 Net current-period other comprehensive income 25 3 (1 ) 27 Balance at March 31, 2016 $ (1,690 ) (177 ) (40 ) (1,907 ) | Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2014 $ (1,720 ) (272 ) (25 ) (2,017 ) Other comprehensive income (loss) before reclassifications — — (11 ) (11 ) Amounts reclassified from accumulated other comprehensive income 24 3 — 27 Net current-period other comprehensive income 24 3 (11 ) 16 Balance at March 31, 2015 $ (1,696 ) (269 ) (36 ) (2,001 ) |
Schedule of reclassifications out of accumulated other comprehensive income (loss) by component | The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, 2016 (Decrease) Increase Affected Line Item in Consolidated Statement of Operations or Footnote Where Additional Information is Presented If The Amount is not Recognized in Net Income in Total (Dollars in millions) Amortization of pension & post-retirement plans Net actuarial loss $ (42 ) See Note 4-Employee Benefits Prior service cost (3 ) See Note 4-Employee Benefits Total before tax (45 ) Income tax expense 17 Income tax expense Net of tax $ (28 ) | Three Months Ended March 31, 2015 (Decrease) Increase Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans Net actuarial loss $ (38 ) See Note 4-Employee Benefits Prior service cost (6 ) See Note 4-Employee Benefits Total before tax (44 ) Income tax expense 17 Income tax expense Net of tax $ (27 ) |
Basis of Presentation Basis o29
Basis of Presentation Basis of Presentation (Details) - CAF Phase 2 Support number in Millions, $ in Millions | Aug. 27, 2015USD ($) | Mar. 31, 2016USD ($)state |
Operating revenues by products and services | ||
Federal support, total amount per agreement | $ 500 | |
Contract or agreement term | 6 years | |
Number of rural households and businesses | 1.2 | |
Number of states in which service is provided (states) | state | 33 | |
Incremental increase in revenues | $ 52 |
Long-Term Debt and Credit Fac30
Long-Term Debt and Credit Facilities (Details) - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
Long-term Debt and Credit Facilities | ||
Capital lease and other obligations | $ 415 | $ 425 |
Unamortized discounts, net | (128) | (125) |
Unamortized debt issuance costs | (185) | (179) |
Total long-term debt | 20,025 | 20,225 |
Less current maturities | (517) | (1,503) |
Long-term debt, excluding current maturities | 19,508 | 18,722 |
CenturyLink, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | 7,975 | 7,975 |
CenturyLink, Inc. | Line of credit | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 0 | $ 410 |
Interest rate at period end - Credit facility and revolving line of credit (percent) | 0.00% | |
Long-term debt, weighted average interest rate (percent) | 2.756% | |
CenturyLink, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 352 | $ 358 |
Interest rate at period end - Term loan (percent) | 2.19% | |
CenturyLink, Inc. | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 5.15% | |
CenturyLink, Inc. | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.65% | |
Qwest Corporation | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 7,464 | 7,229 |
Qwest Corporation | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 100 | 100 |
Interest rate at period end - Term loan (percent) | 2.19% | |
Qwest Corporation | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 6.125% | |
Qwest Corporation | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 8.375% | |
Qwest Capital Funding, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 981 | 981 |
Qwest Capital Funding, Inc. | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 6.50% | |
Qwest Capital Funding, Inc. | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.75% | |
Embarq | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 2,669 | 2,669 |
Embarq | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | 232 | 232 |
Embarq | Other | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 150 | $ 150 |
Stated interest rate (percent) | 9.00% | |
Embarq | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.082% | |
Embarq | Minimum | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.125% | |
Embarq | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.995% | |
Embarq | Maximum | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 8.77% |
Long-Term Debt and Credit Fac31
Long-Term Debt and Credit Facilities Long-Term Debt and Credit Facilities (Details 2) - Senior notes - USD ($) $ in Millions | Apr. 06, 2016 | Jan. 31, 2016 | May. 02, 2016 | Mar. 31, 2016 |
Qwest Corporation | 7.00% Notes due 2056 | ||||
Long-term Debt and Credit Facilities | ||||
Debt instrument, face amount | $ 235 | |||
Stated interest rate (percent) | 7.00% | |||
Proceeds from debt, net of issuance costs | $ 227 | |||
Embarq | 7.082% Notes due 2016 | ||||
Long-term Debt and Credit Facilities | ||||
Debt instrument, face amount | $ 1,184 | |||
Stated interest rate (percent) | 7.082% | |||
Long-term debt, excluding current maturities | $ 990 | |||
Long-term debt, current maturities | $ 194 | |||
Subsequent event | CenturyLink, Inc. | 7.5% Notes due 2024 | ||||
Long-term Debt and Credit Facilities | ||||
Debt instrument, face amount | $ 1,000 | |||
Stated interest rate (percent) | 7.50% | |||
Proceeds from debt, net of issuance costs | $ 988 | |||
Subsequent event | Qwest Corporation | 8.375% Notes due 2016 | ||||
Long-term Debt and Credit Facilities | ||||
Debt instrument, repurchased face amount | $ 235 | |||
Stated interest rate (percent) | 8.375% |
Long-Term Debt and Credit Fac32
Long-Term Debt and Credit Facilities Long-Term Debt and Credit Facilities (Details 3) - Senior notes | Apr. 06, 2016 | Jan. 31, 2016 |
Qwest Corporation | 7.00% Notes due 2056 | Debt instrument, redemption, period one | ||
Debt Instrument, Redemption [Line Items] | ||
Debt Instrument, redemption, description | on or after February 1, 2021, at a redemption price equal to 100% of the principal amount redeemed | |
Subsequent event | CenturyLink, Inc. | 7.5% Notes due 2024 | Debt instrument, redemption, period one | ||
Debt Instrument, Redemption [Line Items] | ||
Debt Instrument, redemption, description | on or after January 1, 2024, at a redemption price equal to 100% of the principal amount redeemed | |
Subsequent event | CenturyLink, Inc. | 7.5% Notes due 2024 | Debt instrument, redemption, period two | ||
Debt Instrument, Redemption [Line Items] | ||
Debt Instrument, redemption, description | before January 1, 2024, the Notes are redeemable, in whole or in part, at CenturyLink, Inc.'s option, at a redemption price equal to the greater of 100% of the principal amount of the Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed, discounted to the redemption date in the manner described in the Notes | |
Subsequent event | CenturyLink, Inc. | 7.5% Notes due 2024 | Debt instrument, redemption, period three | ||
Debt Instrument, Redemption [Line Items] | ||
Debt Instrument, redemption, description | on or prior to April 1, 2019, CenturyLink, Inc. may redeem up to 35% of the aggregate principal amount of the Notes at a redemption price of 107.5% of the principal amount | |
Subsequent event | CenturyLink, Inc. | 7.5% Notes due 2024 | Debt instrument, redemption, period four | ||
Debt Instrument, Redemption [Line Items] | ||
Debt Instrument, redemption, description | Under certain circumstances, CenturyLink, Inc. will be required to make an offer to repurchase the Notes at a price of 101% of the aggregate principal amount |
Severance and Leased Real Est33
Severance and Leased Real Estate (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Employee severance | |
Restructuring reserve | |
Balance at the beginning of the period | $ 14 |
Accrued to expense | 15 |
Payments, net | (12) |
Reversals and adjustments | 0 |
Balance at the end of the period | 17 |
Qwest Communications International Inc. | Leased real estate | |
Leased Real Estate | |
Current portion of leased real estate accrual | 8 |
Noncurrent portion of leased real estate accrual | $ 65 |
Weighted average lease terms | 8 years 4 months |
Restructuring reserve | |
Balance at the beginning of the period | $ 80 |
Accrued to expense | 1 |
Payments, net | (10) |
Reversals and adjustments | 2 |
Balance at the end of the period | $ 73 |
Qwest Communications International Inc. | Leased real estate | Minimum | |
Leased Real Estate | |
Remaining lease terms | 4 months |
Qwest Communications International Inc. | Leased real estate | Maximum | |
Leased Real Estate | |
Remaining lease terms | 9 years 8 months |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Pension plans | ||
Components of net periodic (benefit) expense | ||
Service cost | $ 17 | $ 22 |
Interest cost | 107 | 141 |
Expected return on plan assets | (184) | (226) |
Recognition of prior service (credit) cost | (2) | 1 |
Recognition of actuarial loss | 42 | 38 |
Net periodic benefit (income) expense | (20) | (24) |
Post-retirement benefit plans | ||
Components of net periodic (benefit) expense | ||
Service cost | 5 | 6 |
Interest cost | 28 | 35 |
Expected return on plan assets | (2) | (5) |
Recognition of prior service (credit) cost | 5 | 5 |
Net periodic benefit (income) expense | $ 36 | $ 41 |
Earnings per Common Share (Deta
Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income (Numerator): | ||
Net income | $ 236 | $ 192 |
Earnings applicable to non-vested restricted stock | 0 | 0 |
Net income applicable to common stock for computing basic earnings per common share | 236 | 192 |
Net income as adjusted for purposes of computing diluted earnings per common share | $ 236 | $ 192 |
Weighted average number of shares: | ||
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 538,799 | 561,969 |
Incremental common shares attributable to dilutive securities: | ||
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 540,187 | 563,505 |
Basic earnings per common share (in dollars per share) | $ 0.44 | $ 0.34 |
Diluted earnings per common share (in dollars per share) | $ 0.44 | $ 0.34 |
Common Class A | ||
Weighted average number of shares: | ||
Outstanding during period (in shares) | 544,845 | 566,687 |
Non-vested restricted stock (in shares) | (6,046) | (4,718) |
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 538,799 | 561,969 |
Incremental common shares attributable to dilutive securities: | ||
Shares issuable under convertible securities (in shares) | 10 | 10 |
Shares issuable under incentive compensation plans (in shares) | 1,378 | 1,526 |
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 540,187 | 563,505 |
Basic earnings per common share (in dollars per share) | $ 0.44 | $ 0.34 |
Diluted earnings per common share (in dollars per share) | $ 0.44 | $ 0.34 |
Number of shares of common stock excluded from the computation of diluted earnings per share (in shares) | 3,100 | 2,200 |
Fair Value Disclosure (Details)
Fair Value Disclosure (Details) - Fair value measurements valued on a nonrecurring basis - Fair value inputs, Level 2 - USD ($) $ in Millions | Mar. 31, 2016 | Dec. 31, 2015 |
Carrying amount | ||
Liabilities | ||
Liabilities - Long-term debt, excluding capital lease and other obligations | $ 19,610 | $ 19,800 |
Fair value | ||
Liabilities | ||
Liabilities - Long-term debt, excluding capital lease and other obligations | $ 19,561 | $ 19,473 |
Segment Information (Details)
Segment Information (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2016USD ($)segment | Mar. 31, 2015USD ($) | |
Segment information | ||
Revenues | $ 4,401 | $ 4,451 |
Expenses | 3,707 | 3,802 |
OPERATING INCOME | $ 694 | 649 |
Number of reportable segments (segments) | segment | 2 | |
Operating segments | ||
Segment information | ||
Revenues | $ 4,093 | 4,194 |
Expenses | 2,051 | 2,071 |
OPERATING INCOME | $ 2,042 | $ 2,123 |
Margin percentage (percent) | 50.00% | 51.00% |
Business | ||
Segment information | ||
Revenues | $ 2,604 | $ 2,697 |
Expenses | 1,427 | 1,463 |
OPERATING INCOME | $ 1,177 | $ 1,234 |
Margin percentage (percent) | 45.00% | 46.00% |
Business | Operating expense | Restatement adjustment | ||
Segment information | ||
Expenses | $ (21) | |
Consumer | ||
Segment information | ||
Revenues | $ 1,489 | 1,497 |
Expenses | 624 | 608 |
OPERATING INCOME | $ 865 | $ 889 |
Margin percentage (percent) | 58.00% | 59.00% |
Consumer | Operating expense | Restatement adjustment | ||
Segment information | ||
Expenses | $ 19 |
Segment Information (Details 2)
Segment Information (Details 2) $ in Millions | 3 Months Ended | |
Mar. 31, 2016USD ($)category | Mar. 31, 2015USD ($) | |
Operating revenues by products and services | ||
Number of categories of products and services (categories) | category | 4 | |
OPERATING REVENUES | $ 4,401 | $ 4,451 |
Surcharge amount on customers' bills | 146 | 135 |
Strategic services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | $ 2,354 | 2,320 |
Facilities-based video services | ||
Operating revenues by products and services | ||
Number of markets | 16 | |
Legacy services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | $ 1,623 | 1,734 |
Data integration | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 116 | 140 |
Other revenues | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 308 | 257 |
High cost support revenue | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 174 | 134 |
Other revenue | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 134 | 123 |
Business | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 2,604 | 2,697 |
Business | Business high-bandwidth data services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 738 | 687 |
Business | Business low-bandwidth data services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 481 | 532 |
Business | Business hosting services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 307 | 318 |
Business | Other business strategic services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 54 | 45 |
Business | Voice services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 622 | 670 |
Business | Other business legacy services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 287 | 306 |
Business | Data integration | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 115 | 139 |
Consumer | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 1,489 | 1,497 |
Consumer | Consumer high-speed Internet services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 667 | 635 |
Consumer | Other consumer strategic services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 107 | 103 |
Consumer | Voice services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 634 | 688 |
Consumer | Other consumer legacy services | ||
Operating revenues by products and services | ||
OPERATING REVENUES | 80 | 70 |
Consumer | Data integration | ||
Operating revenues by products and services | ||
OPERATING REVENUES | $ 1 | $ 1 |
Segment Information (Details 3)
Segment Information (Details 3) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Total segment income | $ 694 | $ 649 |
Depreciation and amortization | (976) | (1,040) |
Other unassigned operating expenses | (831) | (851) |
Other income (expense), net | (314) | (326) |
Income tax expense | (144) | (131) |
Net income | 236 | 192 |
Operating segments | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Total segment income | 2,042 | 2,123 |
Segment reconciling items | ||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||
Other operating revenues | 308 | 257 |
Depreciation and amortization | (976) | (1,040) |
Other unassigned operating expenses | 680 | (691) |
Other income (expense), net | (314) | (326) |
Income tax expense | $ (144) | $ (131) |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Apr. 30, 2016 | Jul. 17, 2013USD ($) | Oct. 14, 2011plaintiff | Mar. 31, 2016USD ($)plaintiff | Dec. 31, 2007USD ($) |
Loss Contingencies | |||||
Patents allegedly infringed, minimum number | 1 | ||||
William Douglas Fulghum, et al. v. Embarq Corporation | |||||
Loss Contingencies | |||||
Effect of modifications made to Embarq's benefits program, greater than | $ | $ 300,000,000 | ||||
Breach of fiduciary duty claims | plaintiff | 15 | ||||
Abbott et al. v. Sprint Nextel et al. | |||||
Loss Contingencies | |||||
Number of plaintiffs have alleged breach of fiduciary duty (plaintiffs) | plaintiff | 1,500 | ||||
Number of plaintiffs, limited discovery (plaintiffs) | plaintiff | 80 | ||||
Unfavorable regulatory action | |||||
Loss Contingencies | |||||
Estimate of possible loss per proceeding | $ | $ 100,000 | ||||
Qwest Communications International Inc. | Comcast | |||||
Loss Contingencies | |||||
Damages sought by plaintiff | $ | $ 80,000,000 | ||||
Subsequent event | Missouri municipalities | |||||
Loss Contingencies | |||||
Opinion of counsel on ruling on one pending case | In an April 2016 ruling in connection with one of these pending cases, the court made findings which, if not overturned, will result in tax liability to us well in excess of the contingent liability we have established. Following further proceedings at the district court, we plan to file an appeal and continue to vigorously defend against these claims. For a variety of reasons, we expect the outcome of our appeal to significantly reduce our ultimate exposure, although we can provide no assurances to this effect. |
Other Financial Information (De
Other Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Prepaid Expenses and Other Current Assets [Abstract] | |||
Prepaid expenses | $ 276 | $ 238 | |
Materials, supplies and inventory | 136 | 144 | |
Assets held for sale | 2 | 8 | |
Deferred activation and installation charges | 106 | 105 | |
Other | 97 | 86 | |
Total other current assets | 617 | 581 | |
Accounts Payable, Current [Abstract] | |||
Accounts payable | 1,039 | 968 | |
Book overdraft balance | 50 | 68 | |
Capital expenditures incurred but not yet paid | 87 | $ 94 | |
Other Current Liabilities | |||
Accrued rent | 28 | 32 | |
Legal contingencies | 41 | 20 | |
Other | 233 | 168 | |
Total other current liabilities | $ 302 | $ 220 |
Accumulated Other Comprehensi42
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Accumulated other comprehensive income (loss) by component | ||
Balance at the beginning of the period | $ (1,934) | $ (2,017) |
Other comprehensive income (loss) before reclassifications | (1) | (11) |
Amounts reclassified from accumulated other comprehensive income | 28 | 27 |
Net current-period other comprehensive income | 27 | 16 |
Balance at the end of the period | (1,907) | (2,001) |
Defined benefit plan | Pension plans | ||
Accumulated other comprehensive income (loss) by component | ||
Balance at the beginning of the period | (1,715) | (1,720) |
Other comprehensive income (loss) before reclassifications | 0 | 0 |
Amounts reclassified from accumulated other comprehensive income | 25 | 24 |
Net current-period other comprehensive income | 25 | 24 |
Balance at the end of the period | (1,690) | (1,696) |
Defined benefit plan | Post-retirement benefit plans | ||
Accumulated other comprehensive income (loss) by component | ||
Balance at the beginning of the period | (180) | (272) |
Other comprehensive income (loss) before reclassifications | 0 | 0 |
Amounts reclassified from accumulated other comprehensive income | 3 | 3 |
Net current-period other comprehensive income | 3 | 3 |
Balance at the end of the period | (177) | (269) |
Foreign currency translation adjustment and other | ||
Accumulated other comprehensive income (loss) by component | ||
Balance at the beginning of the period | (39) | (25) |
Other comprehensive income (loss) before reclassifications | (1) | (11) |
Amounts reclassified from accumulated other comprehensive income | 0 | 0 |
Net current-period other comprehensive income | (1) | (11) |
Balance at the end of the period | $ (40) | $ (36) |
Accumulated Other Comprehensi43
Accumulated Other Comprehensive Loss (Details 2) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Reclassifications out of accumulated other comprehensive income loss by component | ||
INCOME BEFORE INCOME TAX EXPENSE | $ 380 | $ 323 |
Income tax expense | (144) | (131) |
Net income | 236 | 192 |
Amount reclassified from accumulated other comprehensive loss | ||
Reclassifications out of accumulated other comprehensive income loss by component | ||
Net actuarial loss | (42) | (38) |
Prior service cost | (3) | (6) |
INCOME BEFORE INCOME TAX EXPENSE | (45) | (44) |
Income tax expense | 17 | 17 |
Net income | $ (28) | $ (27) |