Document and Entity Information
Document and Entity Information Document - shares | 3 Months Ended | |
Mar. 31, 2018 | May 04, 2018 | |
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, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,078,846,346 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
OPERATING REVENUES | $ 5,945 | $ 4,209 |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 2,803 | 1,888 |
Selling, general and administrative | 1,109 | 810 |
Depreciation and amortization | 1,283 | 880 |
Total operating expenses | 5,195 | 3,578 |
OPERATING INCOME | 750 | 631 |
OTHER (EXPENSE) INCOME | ||
Interest expense | (535) | (318) |
Other income (expense), net | 21 | (6) |
Total other expense, net | (514) | (324) |
INCOME BEFORE INCOME TAX EXPENSE | 236 | 307 |
Income tax expense | 121 | 144 |
NET INCOME | $ 115 | $ 163 |
BASIC AND DILUTED EARNINGS PER COMMON SHARE | ||
BASIC (in dollars per share) | $ 0.11 | $ 0.30 |
DILUTED (in dollars per share) | 0.11 | 0.30 |
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share) | $ 0.54 | $ 0.54 |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||
BASIC (in shares) | 1,065,796 | 540,458 |
DILUTED (in shares) | 1,069,183 | 541,522 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
NET INCOME | $ 115 | $ 163 |
Items related to employee benefit plans: | ||
Change in net actuarial loss, net of $(11) and $(20) tax | 33 | 31 |
Change in net prior service costs, net of $(1) and $(1) tax | 2 | 2 |
Foreign currency translation adjustment and other, net of $(14) and $— tax | 79 | (2) |
Other comprehensive income | 114 | 31 |
COMPREHENSIVE INCOME | $ 229 | $ 194 |
CONSOLIDATED STATEMENTS OF COM4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||
Change in net actuarial loss, tax | $ (11) | $ (20) |
Change in net prior service costs, tax | (1) | (1) |
Foreign currency translation adjustment and other, tax | $ (14) | $ 0 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 501 | $ 551 |
Restricted cash - current | 5 | 5 |
Accounts receivable, less allowance of $168 and $164 | 2,432 | 2,557 |
Assets held for sale | 140 | 140 |
Other | 1,105 | 941 |
Total current assets | 4,183 | 4,194 |
Property, plant and equipment, net of accumulated depreciation of $25,116 and $24,352 | 26,826 | 26,852 |
GOODWILL AND OTHER ASSETS | ||
Goodwill | 30,778 | 30,475 |
Restricted cash | 31 | 31 |
Other intangible assets, less accumulated amortization of $2,412 and $2,325 | 1,870 | 1,897 |
Other, net | 1,047 | 1,286 |
Total goodwill and other assets | 43,784 | 44,565 |
TOTAL ASSETS | 74,793 | 75,611 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 437 | 443 |
Accounts payable | 1,508 | 1,555 |
Accrued expenses and other liabilities | ||
Salaries and benefits | 798 | 890 |
Income and other taxes | 390 | 370 |
Interest | 386 | 363 |
Other | 428 | 344 |
Advance billings and customer deposits | 820 | 892 |
Total current liabilities | 4,767 | 4,857 |
LONG-TERM DEBT | 36,940 | 37,283 |
DEFERRED CREDITS AND OTHER LIABILITIES | ||
Deferred income taxes, net | 2,196 | 2,413 |
Benefit plan obligations, net | 5,085 | 5,178 |
Other | 2,362 | 2,389 |
Total deferred credits and other liabilities | 9,643 | 9,980 |
COMMITMENTS AND CONTINGENCIES (Note 11) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 and 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 1,078,632 and 1,069,169 shares | 1,079 | 1,069 |
Additional paid-in capital | 23,316 | 23,314 |
Accumulated other comprehensive loss | (2,288) | (1,995) |
Retained earnings | 1,336 | 1,103 |
Total stockholders' equity | 23,443 | 23,491 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 74,793 | 75,611 |
Customer relationships | ||
GOODWILL AND OTHER ASSETS | ||
Customer relationships, less accumulated amortization of $7,450 and $7,096 | $ 10,058 | $ 10,876 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Accounts receivable, allowance | $ 168 | $ 164 |
PP&E, accumulated depreciation | $ 25,116 | $ 24,352 |
Preferred stock-non-redeemable, par value (in dollars per share) | $ 25 | $ 25 |
Preferred stock-non-redeemable, shares authorized (in shares) | 2,000 | 2,000 |
Preferred stock-non-redeemable, shares issued (in shares) | 7 | 7 |
Preferred stock-non-redeemable, shares outstanding (in shares) | 7 | 7 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 1,600,000 | 1,600,000 |
Common stock, shares issued (in shares) | 1,078,632 | 1,069,169 |
Common stock, shares outstanding (in shares) | 1,078,632 | 1,069,169 |
Customer relationships | ||
Finite-lived intangible assets, accumulated amortization | $ 7,450 | $ 7,096 |
Other intangible assets | ||
Finite-lived intangible assets, accumulated amortization | $ 2,412 | $ 2,325 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 115 | $ 163 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,283 | 880 |
Deferred income taxes | 123 | (37) |
Impairment of assets | 27 | 0 |
Provision for uncollectible accounts | 47 | 47 |
Share-based compensation | 41 | 21 |
Changes in current assets and liabilities: | ||
Accounts receivable | 117 | 116 |
Accounts payable | (14) | (81) |
Accrued income and other taxes | 20 | 206 |
Other current assets and liabilities, net | (262) | (266) |
Retirement benefits | (49) | (25) |
Changes in other noncurrent assets and liabilities, net | 145 | 12 |
Other, net | 74 | 21 |
Net cash provided by operating activities | 1,667 | 1,057 |
INVESTING ACTIVITIES | ||
Payments for property, plant and equipment and capitalized software | (805) | (780) |
Proceeds from sale of property | 3 | 45 |
Deposits received from assets held for sale | 34 | 0 |
Other, net | 0 | 3 |
Net cash used in investing activities | (768) | (732) |
FINANCING ACTIVITIES | ||
Net proceeds from issuance of long-term debt | 130 | 0 |
Payments of long-term debt | (68) | (31) |
Net (payments) proceeds on revolving line of credit | (405) | 5 |
Dividends paid | (580) | (296) |
Proceeds from issuance of common stock | 0 | 3 |
Shares withheld to satisfy tax withholdings | (25) | (14) |
Net cash used in financing activities | (948) | (333) |
Effect of exchange rate changes on cash and cash equivalents | (1) | 0 |
Net decrease in cash, cash equivalents and restricted cash | (50) | (8) |
Cash, cash equivalents and restricted cash at beginning of period | 587 | 224 |
Cash, cash equivalents and restricted cash at end of period | 537 | 216 |
Supplemental cash flow information: | ||
Income taxes (paid) refunded, net | (2) | 5 |
Interest paid (net of capitalized interest of $15 and $20) | $ (491) | $ (255) |
CONSOLIDATED STATEMENTS OF CAS8
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Cash Flows [Abstract] | ||
Capitalized interest | $ 15 | $ 20 |
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 |
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | $ 0 | $ 0 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 0 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 3 | ||||
Balance at beginning of period at Dec. 31, 2016 | $ 547 | $ 14,970 | (2,117) | (1) | |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 2 | 2 | |||
Shares withheld to satisfy tax withholdings | (14) | ||||
Share-based compensation and other, net | 15 | ||||
Dividends declared | (240) | (55) | |||
Other comprehensive income | $ 31 | 31 | |||
Net income | 163 | 163 | |||
Balance at end of period at Mar. 31, 2017 | 13,306 | 549 | 14,733 | (2,086) | 110 |
Increase (Decrease) in Stockholders' Equity | |||||
Cumulative effect of adoption of ASU | (407) | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2018-02 | (407) | 407 | |||
Cumulative effect of adoption of ASU | Accounting Standards Update 2014-09 | 297 | ||||
Cumulative effect of adoption of ASU | Accounting Standards Update 2016-09 | 0 | ||||
Balance at beginning of period at Dec. 31, 2017 | 23,491 | 1,069 | 23,314 | (1,995) | 1,103 |
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock through dividend reinvestment, incentive and benefit plans | 10 | (6) | |||
Shares withheld to satisfy tax withholdings | (25) | ||||
Share-based compensation and other, net | 33 | ||||
Dividends declared | 0 | (586) | |||
Other comprehensive income | 114 | 114 | |||
Net income | 115 | 115 | |||
Balance at end of period at Mar. 31, 2018 | $ 23,443 | $ 1,079 | $ 23,316 | $ (2,288) | $ 1,336 |
Background
Background | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Background General We are an international facilities-based communications company engaged primarily in providing an integrated array of services to our residential and business customers. Our communications services include local and long-distance voice, virtual private network ("VPN") data network, private line (including business data services), Ethernet, information technology services, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services. On November 1, 2017, we acquired Level 3 in a cash and stock transaction. See Note 2—Acquisition of Level 3 for additional information. On May 1, 2017, we sold our data centers and colocation business to a consortium led by BC Partners, Inc. and Medina Capital for a combination of cash and equity. See Note 3—Sale of Data Centers and Colocation Business for additional information. Basis of Presentation Our consolidated balance sheet as of December 31, 2017 , 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 ("GAAP") 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 and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements 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, 2017 . The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. These subsidiaries include Level 3 on and after November 1, 2017. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. In connection with our acquisition of Level 3, we acquired its deconsolidated Venezuela subsidiary and due to exchange restrictions and other conditions we have assigned no value to this subsidiary's assets. Additionally, we have excluded this subsidiary from our consolidated financial statements. 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 (expense), 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 reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 10—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law and in December 2017, the SEC staff issued Staff Accounting Bulletin (SAB) 118 to provide guidance for companies that have not completed their accounting for the income tax effects of the Act. As of March 31, 2018, we have not completed our accounting for the tax effects of the Act. In order to complete our accounting for the impact of the Act, we continue to obtain, analyze and interpret additional guidance as such guidance becomes available from the U.S. Treasury Department, the Internal Revenue Service (“IRS”), state taxing jurisdictions, the FASB, and other standard-setting and regulatory bodies. New guidance or interpretations may materially impact our provision for income taxes in future periods. Additional information that is needed to complete the analysis but is currently unavailable includes, but is not limited to, the amount of earnings of foreign subsidiaries, the final determination of certain net deferred tax assets subject to remeasurement due to purchase accounting adjustments and other matters, and the tax treatment of such provisions of the Act by various state tax authorities. We have provisionally recognized the tax impacts related to the re-measurement of deferred tax assets and liabilities. The ultimate impact may differ from our provisional amount due to additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the Act. The change from our current provisional estimates will be reflected in our future statements of operations and could be material. We expect to complete the accounting by the time we file our 2017 U.S. corporate income tax return in the fourth quarter of 2018, although we cannot assure you of this. The Act reduced the U.S. corporate income tax rate from a maximum of 35% to 21% for all C corporations, effective January 1, 2018, and made certain changes to U.S. taxation of income earned by foreign subsidiaries, capital expenditures and various other items. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, we provisionally re-measured our net deferred tax liabilities at December 31, 2017 and recognized a tax benefit of approximately $1.1 billion in our consolidated statement of operations for the year ended December 31, 2017. During the first three months of 2018, we reduced this $1.1 billion tax benefit of tax reform by $64 million due to changes in certain purchase accounting adjustments related to the Level 3 acquisition, which was reflected in income tax expense. The Act imposed a one-time repatriation tax on certain earnings of foreign subsidiaries. Although we have not determined a reasonable estimate of the impact of the one-time repatriation tax, we do not expect this one-time tax to materially impact us, but we cannot provide any assurance that upon completion of the analysis the amount will not be material. Because of our net operating loss carryforwards, we do not expect to experience a further material immediate reduction in the amount of cash income taxes paid by us. However, we anticipate that the provisions of the Act may reduce our cash income taxes in future years. Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, and ASU 2018-02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Each of these is described further below. Revenue Recognition ASU 2014-09 ("ASC 606") replaces virtually all existing GAAP on revenue recognition with a principles-based approach for determining revenue recognition using a new five step model. We adopted the new revenue recognition standard under the modified retrospective transition method and recorded a cumulative catch-up as of January 1, 2018, which resulted in an increase to retained earnings of $297 million . Upon adoption, we deferred (or capitalized) incremental customer contract acquisition costs and plan to recognize such costs over the average customer life, which approximates the initial contract term and anticipated renewals for contracts to which such costs relate. Our deferred contract costs for our business and consumer customers have average amortization periods of approximately 49 months and 30 months, respectively, and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we intend to assess our deferred contract cost asset for impairment on a periodic basis. Promotional bill credits, discounts and prepaid cards offered to customers as part of renewing services or entering into a new services arrangement that are paid over time and are contingent on the customer maintaining a service contract results in an extended service contract term with multiple performance obligations, which impacts the allocation and timing of revenue recognition between service revenue and revenue assigned to the customer credits. The contract asset is subsequently amortized as a reduction to service revenue over the extended contract term. Most of our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, are accounted for as operating leases. See Note 4—Revenue Recognition for additional information. Comprehensive Income ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We early adopted and applied ASU 2018-02 in the first quarter of 2018. The adoption of ASU 2018-02 resulted in a $407 million increase to retained earnings and in accumulated other comprehensive loss. See Note 13 — Accumulated Other Comprehensive Loss for additional information. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. Our adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recent Accounting Pronouncements Goodwill Impairment On January 26, 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above its fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt it for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. Financial Instruments On June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. 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 under GAAP are currently not required to be 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. On January 25, 2018, the FASB issued ASU 2018-01, “Leases: Land Easement Practical Expedient for Transition to ASU 2016-02. ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Additionally, upon implementing ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3 — Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation described therein will be derecognized from our consolidated balance sheet. |
Acquisition of Level 3
Acquisition of Level 3 | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisition of Level 3 | Acquisition of Level 3 On November 1, 2017, CenturyLink acquired Level 3 through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as our indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC. We entered into this acquisition to, among other things, realize certain strategic benefits, including enhanced financial and operational scale, market diversification and an enhanced combined network. As a result of the acquisition, Level 3 shareholders received $26.50 per share in cash and 1.4286 shares of CenturyLink common stock, with cash paid in lieu of fractional shares, for each outstanding share of Level 3 common stock they owned at closing, subject to certain limited exceptions. We issued this consideration with respect to all of the outstanding common stock of Level 3, with the exception of shares held by the dissenting common shareholders. Upon closing, CenturyLink shareholders owned approximately 51% and former Level 3 shareholders owned approximately 49% of the combined company. In addition, each outstanding Level 3 restricted stock unit award granted prior to April 1, 2014 or granted to an outside director of Level 3 was converted into the right to receive $26.50 in cash and 1.4286 shares of CenturyLink common stock (and cash in lieu of fractional shares) with respect to each Level 3 share covered by such award (the "Converted RSU Awards"). Each outstanding Level 3 restricted stock unit award granted on or after April 1, 2014 (other than those granted to outside directors of Level 3) was converted into a CenturyLink restricted stock unit award using a conversion ratio of 2.8386 to 1 as determined in accordance with a formula set forth in the merger agreement (“the Continuing RSU Awards”). As of March 31, 2018, our preliminary estimated amount of aggregate consideration of $19.612 billion is based on: • the 517.3 million shares of CenturyLink’s common stock (including those issued in connection with the Converted RSU Awards) issued to consummate the acquisition and the closing stock price of CenturyLink common stock at October 31, 2017 of $18.99 ; • the cash consideration of $26.50 per share on the 362.2 million common shares of Level 3 issued and outstanding as of October 31, 2017, and the cash consideration of $1 million paid on the Converted RSUs awards; • the estimated value of $131 million for the Continuing RSU Awards, which represents the pre-combination portion of Level 3’s share-based compensation awards replaced by CenturyLink share based awards; and • the approximately $58.0 million of cash paid to settle claims of former holders of dissenting shares. At closing, CenturyLink assumed Level 3's long-term debt of approximately $10.6 billion . The aggregate cash payments paid on or about the closing date were funded with the proceeds of $7.945 billion of term loans and $400 million of funds borrowed under our new revolving credit facility together with other available funds, which included $1.825 billion borrowed from Level 3 Parent, LLC. For additional information regarding CenturyLink’s financing of the Level 3 acquisition see Note 5—Long-Term Debt and Credit Facilities. We have recognized the assets and liabilities of Level 3 based on CenturyLink’s preliminary estimates of the fair value of the acquired tangible and intangible assets and assumed liabilities of Level 3 as of November 1, 2017, the consummation date of the acquisition, with the excess aggregate consideration recorded as goodwill. The final determination of the allocation of the aggregate consideration paid by CenturyLink in the combination will be based on the fair value of such assets and liabilities as of the acquisition date with any excess aggregate consideration to be recorded as goodwill. The estimation of such fair values and the estimation of lives of depreciable tangible assets and amortizable intangible assets require significant judgment. As such, we have not completed our valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of Level 3’s assets acquired and liabilities assumed, along with the related allocation to goodwill. The fair values of certain tangible assets, intangible assets, certain liabilities and residual goodwill are the most significant areas not yet finalized and therefore are subject to change. We expect to complete our final fair value determinations prior to the anniversary date of the acquisition. Our final fair value determinations may be significantly different than those reflected in our consolidated financial statements at March 31, 2018. The U.S. Department of Justice approved the acquisition subject to conditions of a consent decree on October 2, 2017, which requires us to divest (i) certain metro network assets in the markets located in Albuquerque, New Mexico; Boise, Idaho; and Tucson, Arizona and (ii) 24 strands of dark fiber connecting 30 specified city-pairs across the United States in the form of an indefeasible right of use agreement. The metro network assets are classified as assets held for sale on the consolidated balance sheets as of March 31, 2018 and December 31, 2017. For additional information on the status of these divestiture proceedings, see "Subsequent Events" below in this Note 2. Based solely on our preliminary estimates through March 31, 2018, the aggregate consideration exceeds the aggregate estimated fair value of the acquired assets and assumed liabilities by $11.141 billion , which we have recognized as goodwill. The goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that we expect to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes. As of March 31, 2018, the following is our updated assignment of the preliminary estimated aggregate consideration: Adjusted November 1, 2017 Balance as of December 31, 2017 Purchase Price Adjustments Adjusted November 1, 2017 Balance as of March 31, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (3 ) 3,314 Property, plant and equipment 9,311 92 9,403 Identifiable intangible assets (2) Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 156 938 Current liabilities, excluding current maturities of long-term debt (1,461 ) — (1,461 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,629 ) (65 ) (1,694 ) Goodwill 10,837 304 11,141 Total estimated aggregate consideration $ 19,617 (5 ) 19,612 ____________________________________________________________________________________________________________ (1) Includes a preliminary estimated fair value of $866 million for accounts receivable, which had a gross contractual value of $884 million on November 1, 2017. The $18 million difference between the gross contractual value and the preliminary estimated fair value assigned represents our best estimate as of November 1, 2017 of contractual cash flows that will not be collected. (2) The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately 12.0 years . Based upon the changes in the purchase price allocation as of March 31, 2018, our revised estimated amortization expense for intangible assets for the years ending December 31, 2018 through 2022 is as follows: (Dollars in millions) Remainder of 2018 $ 1,313 2019 1,677 2020 1,575 2021 1,143 2022 957 On the acquisition date, we assumed Level 3’s contingencies. For more information on our contingencies, see Note 11—Commitments and Contingencies. Acquisition-Related Expenses We have incurred acquisition-related expenses related to our acquisition of Level 3. The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses: Three Months Ended March 31, 2018 2017 (Dollars in millions) Transaction-related expenses $ 1 10 Integration-related expenses 70 — Total acquisition-related expenses $ 71 10 Through March 31, 2018 , we had incurred cumulative acquisition-related expenses of $393 million for Level 3. The total amounts of these expenses have been included in our selling, general and administrative expenses beginning in the fourth quarter of 2016. Level 3 incurred transaction-related expenses of $47 million on the date of acquisition. This amount is not included in our results of operations. References to Acquired Businesses In the discussion that follows, we refer to the incremental business activities that we now operate as a result of the Level 3 acquisition as “Legacy Level 3”. References to “Legacy CenturyLink”, when used to compare our consolidated results for the three months ended March 31, 2018 and 2017, mean the business we operated prior to the Level 3 acquisition. As a result of the acquisition of Level 3's net operating losses ("NOLs"), we expect to significantly reduce our federal cash taxes for the next several years. Combined Pro Forma Operating Results (Unaudited) For the three months ended March 31, 2018, CenturyLink's results of operations included operating revenues (net of intercompany eliminations) attributable to Level 3 of $2.062 billion . The following unaudited pro forma financial information presents the combined results of CenturyLink as if the Level 3 acquisition had been consummated as of January 1, 2017. Three Months Ended March 31, 2017 Operating revenues 6,194 Net income 172 Basic earnings per common share 0.16 Diluted earnings per common share 0.16 This pro forma information reflects certain adjustments to previously-reported operating results, consisting primarily but not exclusively of: • decreased operating revenues and expenses due to the elimination of deferred revenues associated with installation activities that were preliminarily assigned no value at the acquisition date (excluding certain deferred revenue associated with certain long-term prepaid customer capacity arrangements, which have been included at its current carrying value) and the elimination of transactions among CenturyLink and Level 3 that are now subject to intercompany elimination; • increased amortization expense related to identifiable intangible assets, net of decreased depreciation expense to reflect the preliminary fair value of property, plant and equipment; • increased interest expense resulting from (i) interest on the new debt to finance the combination and amortization of the related debt discount and debt issuance costs, (ii) the elimination of Level 3’s historical amortization of debt discount and debt issuance costs and (iii) a reduction in interest expense due to the accretion of an adjustment to reflect the increased preliminary fair value of the long-term debt of Level 3 recognized on the acquisition date; and • the related income tax effects. The pro forma information is presented for illustrative purposes only and does not necessarily reflect the actual results of operations had the Level 3 acquisition been consummated at January 1, 2017, nor is it necessarily indicative of future operating results. The pro forma information excludes transaction costs incurred by us and Level 3 during the quarterly periods presented above (which are further described above in this note) and does not reflect integration costs to be incurred by us in future periods. In addition, the pro forma information does not give effect to any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisitions (other than those actually realized in our historical consolidated financial statements after November 1, 2017). As a result of the acquisition of Level 3's net operating losses ("NOLs"), we expect to significantly reduce our federal cash taxes for the next several years. Subsequent Events On May 4, 2018, we sold Level 3 network assets in Boise that we were required to divest as a condition to the merger. These assets were classified as assets held for sale on our March 31, 2018 and December 31, 2017 consolidated balance sheets and no gain or loss was recognized on this transaction. On January 22, 2018, we entered an agreement to sell certain Level 3 intangible assets for $68 million . We received a deposit of $34 million in the first quarter of 2018 and it is recorded in other current liabilities on our March 31, 2018 consolidated balance sheet. The receipt of this $34 million is reflected in our cash flows from investing activities on our March 31, 2018 statement of cash flows. The remaining $34 million was collected in the second quarter of 2018. |
Sale of Data Centers and Coloca
Sale of Data Centers and Colocation Business | 3 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Sale of Data Centers and Colocation Business | Sale of Data Centers and Colocation Business On May 1, 2017, we sold our data centers and colocation business to a consortium led by BC Partners, Inc. and Medina Capital in exchange for cash and a minority stake in the limited partnership that owns the consortium's newly-formed global secure infrastructure company, Cyxtera Technologies ("Cyxtera"). We received pre-tax cash proceeds of $1.8 billion , and we have valued our minority stake at $150 million , which was based upon the total equity contribution to the limited partnership on the date made. In connection with our sale of the data centers and colocation business to Cyxtera, we agreed to lease back from Cyxtera a portion of the data center space to provide data hosting services to our customers. Because we have continuing involvement in the business through our minority stake in Cyxtera's parent, we do not meet the requirements for a sale-leaseback transaction as described in ASC 840-40, Leases - Sale-Leaseback Transactions . Under the failed-sale-leaseback accounting model, we are deemed under GAAP to still own certain real estate assets sold to Cyxtera, which we must continue to reflect on our consolidated balance sheet and depreciate over the assets' remaining useful life. We must also treat a certain amount of the pre-tax cash proceeds from the sale of the assets as though it were the result of a financing obligation on our consolidated balance sheet, and our consolidated results of operations must include imputed revenue associated with the portion of the real estate assets that we have not leased back and imputed interest expense on the financing obligation. A portion of the rent payments required under our leaseback arrangement with Cyxtera are recognized as reductions of the financing obligation, resulting in lower recognized rent expense than the amounts actually paid each period. At the end of the lease term, the remaining imputed financing obligation and the remaining net book value of the real estate assets will be derecognized. Please see "Leases" (ASU 2016-02) in Note 1—Background for additional information on the impact the new lease standard will have on the accounting for the failed-sale-leaseback. The following table reflects the assets sold to and the liabilities assumed by Cyxtera on May 1, 2017, including our most current estimates of the impact of failed-sale-leaseback: Dollars in millions Goodwill $ 1,142 Property, plant and equipment 1,051 Other intangible assets 249 Other assets 66 Less assets recorded as part of the failed-sale-leaseback (526 ) Total net amount of assets derecognized $ 1,982 Capital lease obligations $ 294 Other liabilities 274 Less imputed financing obligations from the failed-sale-leaseback (628 ) Total net imputed liabilities recognized $ (60 ) We evaluated our minority stake in the limited partnership and determined that we were not the primary beneficiary of the entity. As a result, we classified our $150 million investment in the limited partnership in other assets on our consolidated balance sheet as of March 31, 2018 . |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The following table presents our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 5,945 15 $ 5,960 Cost of services and products (exclusive of depreciation and amortization) 2,803 (4 ) 2,799 Selling, general and administrative 1,109 13 1,122 Income tax expense 121 2 123 Net income $ 115 4 $ 119 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.11 — $ 0.11 DILUTED $ 0.11 — $ 0.11 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,065,796 — 1,065,796 DILUTED 1,069,183 — 1,069,183 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 1,105 (171 ) $ 934 Other long-term assets, net 1,047 (79 ) 968 Advance billing and customer deposits 820 75 895 Deferred income taxes, net 2,196 (2 ) 2,194 Other long-term liabilities 2,362 82 2,444 Retained earnings 1,336 (293 ) 1,043 Pursuant to ASU 2014-09 discussed in Note 1 above, the following table provides disaggregation of revenue from contracts with customers: Three Months Ended March 31, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 1,748 — $ 1,748 Transport & Infrastructure (2) 1,362 (67 ) 1,295 Voice & Collaboration (3) 1,111 — 1,111 IT & Managed Services (4) 162 — 162 Total business segment revenues 4,383 (67 ) 4,316 Consumer segment Voice & Collaboration (3) 526 — 526 IP & Data Services (5) 97 (9 ) 88 Transport & Infrastructure (6) 756 (53 ) 703 Total consumer segment revenues 1,379 (62 ) 1,317 Non-segment revenues Regulatory revenues (7) 183 (183 ) — Total non-segment revenues 183 (183 ) — Total revenues $ 5,945 (312 ) $ 5,633 Timing of Revenue Goods transferred at a point in time $ 39 Services performed over time 5,594 Total revenues from contracts with customers $ 5,633 (1 ) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3 ) Includes local, long-distance and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes retail video revenues (including our facilities-based video revenues). (6 ) Includes primarily broadband and equipment sales and professional services revenues. (7 ) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. (8 ) Includes regulatory revenues, lease revenues, sublease rental income and failed sale leaseback income, which are not within the scope of ASC 606. The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2018 and January 1, 2018: March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 2,378 $ 2,504 Contract liabilities 572 623 Contract assets 188 255 (1) Gross customer receivables of $2.537 million and $2.659 million , net of allowance for doubtful accounts of $159 million and $155 million , at March 31, 2018 and January 1, 2018, respectively. Contract liabilities constitute consideration we have received from our customers in exchange for services or products to be delivered by us in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. We recognize revenue for services when we provide the applicable service or when control is transferred. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include certain activation and certain installation charges, which we recognize as revenue over the expected contract term, which ranges from one year to over seven years depending on the service. In most cases, termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term. We offer bundle discounts to our customers who receive certain groupings of services. These bundle discounts are included in our calculation of the total transaction price with the customer which is allocated to the various services in the bundled offering based on the standalone selling price of services included in each bundled combination. Customer contracts that include both equipment and services are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price with the customer is allocated to each performance obligation based on the relative standalone selling price of the separate performance obligation. The standalone selling price is the price we sell to similar customers. The total transaction price is the total consideration that we expect to be entitled to (excluding amounts subject to revenue constraints) in exchange for transferring the equipment and services to the customer under the existing contract. The revenue associated with each performance obligation is then recognized as earned. For example, if we receive an advance payment when we sell equipment and continuing service together, we immediately recognize as revenue the amount of the total transaction price allocated to the equipment at the time title or control is transferred to the customer. The portion of the advance payment allocated to the service based upon its relative selling price is recognized ratably over the contract term. We periodically permit other telecommunications carriers to use optical capacity on our network. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 20 years. We account for the cash consideration received on transfers of optical capacity and fiber assets and on all of the other elements deliverable under an IRU, as lease revenue, non ASC 606, ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other optical capacity assets. In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction. Based on our agreement with DIRECTV, we offer this service through a sales agency relationship which we report on a net basis. We have service level commitments pursuant to contracts with certain of our customers. To the extent that such service levels are not achieved or are otherwise disputed due to performance or service issues or other service interruptions or conditions, we will estimate the amount of credits to be issued and record a reduction to revenues in the period that the service level commitment was not met. As of March 31, 2018, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $15.5 billion . We expect to recognize approximately 50% of this revenue through 2020, with the balance recognized thereafter. The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended March 31, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Beginning of period balance $ 254 73 Costs incurred 37 6 Amortization (37 ) (10 ) Impairments — — End of period balance $ 254 69 We expect that incremental commissions paid as a result of obtaining contracts and costs incurred to fulfill customer contracts are recoverable and therefore capitalized them as acquisition and fulfillment costs in the amount of $323 million at March 31, 2018. The amount of these capitalized costs that are anticipated to be amortized in the next twelve months are included in other current assets on the consolidated balance sheet. The amount of capitalized costs expected to be amortized beyond the next twelve months is included in other assets on our consolidated balance. Capitalized commissions and fulfillment costs are amortized based on the transfer of services to which the assets relate to which typically range from 30 months to 49 months. The amortization of capitalized commissions are included in selling, general and administrative expenses and the amortization of capitalized fulfillment costs are included in cost of services and products (exclusive of depreciation and amortization) in our consolidated statement of operations. We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is less than one year. |
Long-Term Debt and Credit Facil
Long-Term Debt and Credit Facilities | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt and Credit Facilities | Long-Term Debt and Credit Facilities The following chart reflects the consolidated long-term debt of CenturyLink, Inc. and its subsidiaries, including unamortized discounts and premiums and unamortized debt issuance costs, but excluding intercompany debt: Interest Rates (1) Maturities As of March 31, 2018 As of (Dollars in millions) Senior Secured Debt: CenturyLink, Inc. 2017 Revolving Credit Facility (2) N/A 2022 $ — 405 Term Loan A 4.627% 2022 1,686 1,575 Term Loan A-1 4.627% 2022 365 370 Term Loan B 4.627% 2025 5,985 6,000 Subsidiaries: Level 3 Financing, Inc. Tranche B 2024 Term Loan 4.111% 2024 4,611 4,611 Embarq Corporation subsidiaries First mortgage bonds 7.125% - 8.375% 2023 - 2025 138 151 Senior Notes and Other Debt: CenturyLink, Inc. Senior notes 5.625% - 7.650% 2019 - 2042 8,125 8,125 Subsidiaries: Level 3 Financing, Inc. Senior notes 5.125% - 6.125% 2021 - 2026 5,315 5,315 Level 3 Parent, LLC Senior notes 5.750% 2022 600 600 Qwest Corporation Senior notes 6.125% - 7.750% 2021 - 2057 7,294 7,294 Term loan 3.890% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 981 981 Embarq Corporation and subsidiary Senior note 7.995% 2036 1,485 1,485 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 868 891 Unamortized premiums and other, net 17 23 Unamortized debt issuance costs (343 ) (350 ) Total long-term debt 37,377 37,726 Less current maturities (437 ) (443 ) Long-term debt, excluding current maturities $ 36,940 37,283 ______________________________________________________________________ (1) As of March 31, 2018 . (2) The aggregate amount outstanding on our revolving line of credit borrowings at December 31, 2017 was $405 million , with a weighted-average interest rate of 4.186% . At March 31, 2018, we had no borrowings outstanding under our 2017 credit facility or revolving line of credit. These amounts change on a regular basis. Repayments On January 21, 2018, a subsidiary of Embarq Corporation redeemed all $13 million of its 8.77% Notes due 2019, which resulted in an immaterial loss. 2017 CenturyLink Credit Agreement On January 29, 2018, the 2017 CenturyLink Credit Agreement was amended to: • Add a lender to the 2017 Revolving Credit Facility and to increase CenturyLink, Inc.’s borrowing capacity thereunder to approximately $2.168 billion ; and • Add a lender to the Term Loan A credit facility and to increase CenturyLink, Inc.’s borrowing capacity thereunder to approximately $1.707 billion . In connection with this amendment, the new lender provided approximately $132 million of Term Loan A loan proceeds, which CenturyLink used, together with available cash, to reduce its borrowings under the 2017 Revolving Credit Facility. Covenants As of March 31, 2018 , CenturyLink, Inc. believes it and its subsidiaries were in compliance with the provisions and covenants in their material debt agreements. For additional information on our long-term debt and credit facilities, see Note 5 — Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2017. |
Severance and Leased Real Estat
Severance and Leased Real Estate | 3 Months Ended |
Mar. 31, 2018 | |
Restructuring and Related Activities [Abstract] | |
Severance and Leased Real Estate | Severance and Leased Real Estate At March 31, 2018 , the current and noncurrent portions of our leased real estate accrual were $11 million and $51 million , respectively. The remaining lease terms range from 0.16 years to 7.7 years , with a weighted-average of 6.5 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, 2017 $ 33 64 Accrued to expense 45 2 Payments, net (47 ) (4 ) Balance at March 31, 2018 $ 31 62 |
Employee Benefits
Employee Benefits | 3 Months Ended |
Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |
Employee Benefits | Employee Benefits Net periodic benefit (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended March 31, 2018 2017 (Dollars in millions) Service cost $ 16 17 Interest cost 100 101 Expected return on plan assets (173 ) (166 ) Recognition of prior service credit (2 ) (2 ) Recognition of actuarial loss 44 51 Net periodic pension benefit (income) expense $ (15 ) 1 Net periodic benefit expense for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended March 31, 2018 2017 (Dollars in millions) Service cost $ 4 4 Interest cost 24 25 Expected return on plan assets — — Recognition of prior service cost 5 5 Net periodic post-retirement benefit expense $ 33 34 Benefits paid by our qualified pension plan are paid through a trust that holds all plan assets. Based on current laws and circumstances, we do not expect any contributions to be required for our qualified pension plan during the remainder of 2018. However, we currently expect to make a voluntary contribution of $100 million to the trust for our qualified pension plan during the remaining nine months of 2018 . |
Earnings Per Common Share
Earnings Per Common Share | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings per Common Share | Earnings Per Common Share Basic and diluted earnings per common share were calculated as follows: Three Months Ended March 31, 2018 2017 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 115 163 Earnings applicable to non-vested restricted stock — — Net income applicable to common stock for computing basic earnings per common share 115 163 Net income as adjusted for purposes of computing diluted earnings per common share $ 115 163 Shares (Denominator): Weighted-average number of shares: Outstanding during period 1,073,560 547,618 Non-vested restricted stock (7,764 ) (7,160 ) Weighted-average shares outstanding for computing basic earnings per common share 1,065,796 540,458 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 Shares issuable under incentive compensation plans 3,377 1,054 Number of shares as adjusted for purposes of computing diluted earnings per common share 1,069,183 541,522 Basic earnings per common share $ 0.11 0.30 Diluted earnings per common share $ 0.11 0.30 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 4.3 million and 4.3 million for the three months ended March 31, 2018 and 2017 , respectively. |
Fair Value Disclosure
Fair Value Disclosure | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosure | Fair Value Disclosure 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, 2018 As of December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 36,509 35,677 36,835 36,402 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Segment Data In connection with our acquisition of Level 3 (discussed further in Note 2—Acquisition of Level 3), effective November 1, 2017, we implemented a new organization structure and began managing our operations in two segments: business and consumer. Our consumer segment remains substantially unchanged under this reorganization, and our newly reorganized business segment includes the Legacy CenturyLink enterprise segment operations and the Legacy Level 3 operations. In addition, we reassigned our information technology, managed hosting, cloud hosting and hosting area network operations back into the business segment from the former non-reportable operating segment. At March 31, 2018 , we had the following two reportable segments: • Business Segment. This segment consists generally of providing products and services to small, medium and enterprise business, wholesale and government customers, including other communication providers. Our products and services offered to these customers include our local and long-distance voice, VPN data network, private line (including business data services), Ethernet, information technology, wavelength, broadband, colocation and data center services, managed services, professional and other services provided in connection with selling equipment, network security and various other ancillary services, all of which are described further under "Products and Services Categories"; and • Consumer Segment. This segment consists generally of providing products and services to residential customers. Our products and services offered to these customers include our broadband, local and long-distance voice, video and other ancillary services. The results of our two reportable segments, business and consumer, are summarized below: Three Months Ended March 31, 2018 2017 (Dollars in millions) Total reportable segment revenues $ 5,762 4,037 Total reportable segment expenses 3,226 2,206 Total reportable segment adjusted EBITDA $ 2,536 1,831 Total margin percentage 44 % 45 % Business segment: Revenues $ 4,383 2,590 Expenses 2,613 1,566 Adjusted EBITDA $ 1,770 1,024 Margin percentage 40 % 40 % Consumer segment: Revenues $ 1,379 1,447 Expenses 613 640 Adjusted EBITDA $ 766 807 Margin percentage 56 % 56 % Product and Service Categories We categorize our products, services and revenues among the following five categories: • IP and data services , which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services and Vyvx broadcast services) and other ancillary services; • Transport and infrastructure , which include broadband, private line (including business data services), data center facilities and services, including cloud, hosting and application management solutions, wavelength, equipment sales and professional services, network security services and other ancillary services; • Voice and collaboration , which includes primarily local and long-distance voice, including wholesale voice, and other ancillary service; • IT and managed services , which include information technology services and managed services, which may be purchased in conjunction with our other network services; and • Regulatory revenues, which consists of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues. We receive federal support payments from both federal and state USF programs and from the federal CAF program. The USF and CAF support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services. We generate other operating revenues from the leasing and subleasing of space in our office buildings, warehouses and other properties and from rental income associated with the failed-sale-leaseback. Because we centrally manage the activities that generate these regulatory revenues, these revenues are not included in our segment revenues. Our operating revenue detail for our products and services consisted of the following categories: Three Months Ended March 31, 2018 2017 (Dollars in millions) Business segment IP & Data Services (1) $ 1,748 744 Transport & Infrastructure (2) 1,362 906 Voice & Collaboration (3) 1,111 788 IT & Managed Services (4) 162 152 Total business segment revenues 4,383 2,590 Consumer segment IP & Data Services (5) 97 120 Transport & Infrastructure (6) 756 701 Voice & Collaboration (3) 526 626 Total consumer segment revenues 1,379 1,447 Non-segment revenues Regulatory revenues (7) 183 172 Total non-segment revenues 183 172 Total revenues $ 5,945 4,209 ______________________________________________________________________ (1) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3) Includes local, long-distance and other ancillary revenues. (4) Includes IT services and managed services revenues. (5) Includes retail video revenues (including our facilities-based video revenues). (6) Includes primarily broadband and equipment sales and professional services revenues. (7) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. 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 offsetting 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 $246 million and $130 million for the three months ended March 31, 2018 and 2017 , respectively. These USF surcharges, where we record revenue, and transaction taxes are assigned to the products and services categories of each segments based on the underlying 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 business and consumer segments as described in more detail above. Our segment revenues are based upon each customer's classification. We report our segment revenues based upon all services provided to that segment's customers. Our segment expenses 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 total reportable segment adjusted EBITDA to net income: Three Months Ended March 31, 2018 2017 (Dollars in millions) Total reportable segment adjusted EBITDA $ 2,536 1,831 Regulatory revenues 183 172 Depreciation and amortization (1,283 ) (880 ) Other operating expenses (686 ) (492 ) Total other expense, net (514 ) (324 ) Income before income tax expense 236 307 Income tax expense (121 ) (144 ) Net income $ 115 163 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are currently a party to various claims and legal proceedings, including the matters described below. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. 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 accrued liabilities for these matters described below where losses are deemed probable and reasonably estimable. Shareholder Class Action Suit CenturyLink and certain members of the CenturyLink Board of Directors have been named as defendants in a putative shareholder class action lawsuit filed on January 11, 2017 in the 4th Judicial District Court of the State of Louisiana, Ouachita Parish, captioned Jeffery Tomasulo v. CenturyLink, Inc., et al. The complaint asserts, among other things, that the members of CenturyLink’s Board allegedly breached their fiduciary duties to the CenturyLink shareholders in approving the Level 3 merger agreement and, more particularly, that: the consideration that CenturyLink agreed to pay to Level 3 stockholders in the transaction is allegedly unfairly high; the CenturyLink directors allegedly had conflicts of interest in negotiating and approving the transaction; and the disclosures set forth in our preliminary joint proxy statement/prospectus filed in December 2016 are insufficient in that they allegedly fail to contain material information concerning the transaction. The complaint seeks, among other things, a declaration that the members of the CenturyLink Board have breached their fiduciary duties, corrective disclosure, rescissory or other damages and equitable relief, including rescission of the transaction. On February 13, 2017, the parties entered into a memorandum of understanding providing for the settlement of the lawsuit. The proposed settlement is subject to court approval, among other conditions, and the amount of the settlement is not material to our consolidated financial statements. Switched Access Disputes Subsidiaries of CenturyLink, Inc. are among hundreds of companies involved in an industry-wide dispute, raised in nearly 100 federal lawsuits (filed between 2014 and 2016) that have been consolidated as In Re: IntraMTA Switched Access Charges Litigation, in the United States District Court for the Northern District of Texas for pretrial procedures. The disputes relate to switched access charges that local exchange carriers ("LECs") collect from interexchange carriers ("IXCs") for IXCs' use of LEC's access services. In the lawsuits, various IXCs assert that LECs are prohibited from collecting access charges when IXCs exchange certain types of calls between mobile and wireline devices. Some of these IXCs seek refunds for access charges previously paid and declaratory relief from future access charges. In November 2015, the court rejected some of the IXCs' claims, and allowed the IXCs to refile state-law claims. Many of the parties filed revised pleadings and additional motions, which remain pending. Separately, some of the defendants have petitioned the FCC to address these issues on an industry-wide basis. As both an IXC and a LEC, we both pay and assess significant amounts of the charges in question. The outcome of these disputes and lawsuits, as well as any related regulatory proceedings that could ensue, could affect our financial results and are currently not predictable. State Tax Suits Several Missouri municipalities have, beginning in May 2012, asserted claims alleging underpayment of taxes against CenturyLink, Inc. and several of its subsidiaries in a number of proceedings filed in the Circuit Court of St. Louis County, Missouri. These municipalities are seeking, among other things, declaratory relief regarding the application of business license and gross receipts taxes and back taxes from 2007 to the present, plus penalties and interest. In a February 2017 ruling in connection with one of these pending cases, the court entered an order awarding plaintiffs $4 million and broadening the tax base on a going-forward basis. We have appealed that ruling. In a June 2017 ruling in connection with another one of these pending cases, the court made findings which, if not overturned, will result in a tax liability to us well in excess of the contingent liability we have established. In due course, we plan to appeal that decision. We continue to vigorously defend against these claims. Billing Practices Suits In June 2017, a former employee filed an employment lawsuit against us claiming that she was wrongfully terminated for alleging that we charged some of our retail customers for products and services they did not authorize. Starting shortly thereafter and continuing since then, and based in part on the allegations made by the former employee, several legal proceedings have been filed. In June 2017, McLeod v. CenturyLink, a putative consumer class action, was filed against us in the U.S. District Court for the Central District of California alleging that we charged some of our retail customers for products and services they did not authorize. A number of other complaints asserting similar claims have been filed in other federal courts, as well. The lawsuits assert claims including fraud, unfair competition, and unjust enrichment. Also in June 2017, Craig. v. CenturyLink, Inc., et al., a putative securities investor class action, was filed in U.S. District Court for the Southern District of New York, alleging that we failed to disclose material information regarding improper sales practices, and asserting federal securities law claims. A number of other cases asserting similar claims have also been filed. Both the putative consumer class actions and the putative securities investor class actions have been transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. In June 2017, we also received several shareholder derivative demands addressing related topics. In August 2017, the Board of Directors formed a special litigation committee of outside directors to address the allegations of impropriety contained in the shareholder derivative demands. In April 2018, the special litigation committee concluded its review of the derivative demands and declined to take further action. Despite the special litigation committee’s decision, it is possible that one or more of the shareholders that submitted the demands could attempt to file derivative lawsuits. In July 2017, the Minnesota state attorney general filed State of Minnesota v. CenturyTel Broadband Services LLC, et al. in the Asoka County Minnesota District Court, alleging claims of fraud and deceptive trade practices relating to improper consumer sales practices. The suit seeks an order of restitution on behalf of all CenturyLink customers, civil penalties, injunctive relief, and costs and fees. Additionally, we have received and responded to information requests and inquiries from other states. Pending Litigation Matters Assumed in Level 3 Acquisition Peruvian Tax Litigation In 2005, the Peruvian tax authorities ("SUNAT") issued tax assessments against one of our Peruvian subsidiaries asserting $26 million , of additional income tax withholding and value-added taxes ("VAT"), penalties and interest for calendar years 2001 and 2002 on the basis that the Peruvian subsidiary incorrectly documented its importations. After taking into account the developments described below, as well as the accrued interest and foreign exchange effects, the total amount of exposure is $15 million at March 31, 2018. We challenged the assessments via administrative and then judicial review processes. In October 2011, the highest administrative review tribunal (the Tribunal) decided the central issue underlying the 2002 assessments in SUNAT's favor. We appealed the Tribunal's decision to the first judicial level, which decided the central issue in favor of Level 3. SUNAT and we filed cross-appeals with the court of appeal. In May 2017, the court of appeal issued a decision reversing the first judicial level. In June 2017, we filed an appeal of the decision to the Supreme Court of Justice, the final judicial level. That appeal is pending. In October 2013, the Tribunal decided the central issue underlying the 2001 assessments in SUNAT’s favor. We appealed that decision to the first judicial level in Peru, which decided the central issue in favor of SUNAT. In June 2017, we filed an appeal with the court of appeal. In November 2017, the court of appeals issued a decision affirming the first judicial level and we filed an appeal of the decision to the Supreme Court of Justice. That appeal is pending. Employee Severance and Contractor Termination Disputes A number of former employees and third-party contractors have asserted a variety of claims in litigation against certain of Level 3’s Latin American subsidiaries for separation pay, severance, commissions, pension benefits, unpaid vacation pay, breach of employment contracts, unpaid performance bonuses, property damages, moral damages and related statutory penalties, fines, costs and expenses (including accrued interest, attorneys' fees and statutorily mandated inflation adjustments) as a result of their separation from Level 3 or termination of service relationships. Level 3 is vigorously defending itself against the asserted claims, which aggregate to approximately $32 million at March 31, 2018. Brazilian Tax Claims In December 2004, March 2009, April 2009 and July 2014, the São Paulo state tax authorities issued tax assessments against one of our Brazilian subsidiaries for the Tax on Distribution of Goods and Services (“ICMS”) with respect to revenue from leasing certain assets (in the case of the December 2004, March 2009 and July 2014 assessments) and revenue from the provision of Internet access services (in the case of the April 2009 and July 2014 assessments), by treating such activities as the provision of communications services, to which the ICMS tax applies. In September 2002, July 2009 and May 2012, the Rio de Janeiro state tax authorities issued tax assessments to the same Brazilian subsidiary on similar issues. We have filed objections to these assessments, arguing that the lease of assets and the provision of Internet access are not communication services subject to ICMS. The objections to the September 2002, December 2004 and March 2009 assessments were rejected by the respective state administrative courts, and we have appealed those decisions to the judicial courts. In October 2012 and June 2014, we received favorable rulings from the lower court on the December 2004 and March 2009 assessments regarding equipment leasing, but those rulings are subject to appeal by the state. No ruling has been obtained with respect to the September 2002 assessment. The objections to the April and July 2009 and May 2012 assessments are still pending final administrative decisions. The July 2014 assessment was confirmed during the fourth quarter of 2014 at the first administrative level, and we appealed this decision to the second administrative level. We are vigorously contesting all such assessments in both states and, in particular, view the assessment of ICMS on revenue from equipment leasing to be without merit. These assessments, if upheld, could result in a loss of up to $54 million at March 31, 2018 in excess of the accruals established for these matters. We are vigorously contesting all such assessments in both states and, in particular, view the assessment of ICMS on revenue from leasing movable properties to be without merit. Other Level 3 Matters Level 3 was notified in late 2017 of a qui tam action pending against Level 3 Communications, Inc., certain former employees and others in the United States District Court for the Eastern District of Virginia, captioned United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al. The original qui tam complaint was filed under seal on November 26, 2013, and an amended complaint was filed under seal on June 16, 2014. The court unsealed the complaints on October 26, 2017. The amended complaint alleges that Level 3, principally through two former employees, submitted false claims and made false statements to the government in connection with two government contracts. The relator seeks damages in this lawsuit of approximately $50 million , subject to trebling, plus statutory penalties, pre-and-post judgment interest, and attorney’s fees. The case is currently stayed. Level 3 is evaluating its defenses to the claims. At this time, Level 3 does not believe it is probable Level 3 will incur a material loss. If, contrary to its expectations, the plaintiff prevails in this matter and proves damages at or near $50 million , and is successful in having those damages trebled, the outcome could have a material adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid. The two former Level 3 employees named in the qui tam amended complaint and others were also indicted in the United States District Court for the Eastern District of Virginia on October 3, 2017, and charged with, among other things, accepting kickbacks from a subcontractor, who was also indicted, for work to be performed under a prime government contract. Level 3 is fully cooperating in the government’s investigations in this matter. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and 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 these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none 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. The matters listed above in this Note do not reflect all of our contingencies. For additional information on our contingencies , See Note 16 to the financial statements included in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2017. _____________ The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our forward-looking statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us. For more information, see “Risk Factors—Risks Relating to Legal and Regulatory Matters—Our pending legal proceedings could have a material adverse impact on our financial condition and operating results, on the trading price of our securities and on our ability to access the capital markets” in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2017 . |
Other Financial Information
Other Financial Information | 3 Months Ended |
Mar. 31, 2018 | |
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 As of (Dollars in millions) Prepaid expenses $ 353 294 Income tax receivable 256 258 Materials, supplies and inventory 111 128 Deferred activation and installation charges 157 128 Deferred commissions 134 — Other 94 133 Total other current assets $ 1,105 941 Selected Current Liabilities Current liabilities reflected in our consolidated balance sheets include other current liabilities as follows: As of As of (Dollars in millions) Other current liabilities: Accrued rent $ 28 34 Legal contingencies 46 45 Other 354 265 Total other current liabilities $ 428 344 Included in accounts payable at March 31, 2018 and December 31, 2017 , were (i) $24 million and $36 million , respectively, representing book overdrafts and (ii) $186 million and $225 million , respectively, associated with capital expenditures. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Mar. 31, 2018 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Information Relating to 2018 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, 2018 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2017 $ (1,731 ) (235 ) (29 ) (1,995 ) Other comprehensive income before reclassifications — — 79 79 Amounts reclassified from accumulated other comprehensive income 31 4 — 35 Net current-period other comprehensive income 31 4 79 114 Cumulative effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (375 ) (32 ) — (407 ) Balance at March 31, 2018 $ (2,075 ) (263 ) 50 (2,288 ) The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three months ended March 31, 2018 : Three Months Ended March 31, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 44 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 47 Income tax benefit (12 ) Income tax expense Net of tax $ 35 ________________________________________________________________________ (1) See Note 7—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. Information Relating to 2017 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, 2017 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2016 $ (1,895 ) (162 ) (60 ) (2,117 ) Other comprehensive income (loss) before reclassifications — — (2 ) (2 ) Amounts reclassified from accumulated other comprehensive income 30 3 — 33 Net current-period other comprehensive income 30 3 (2 ) 31 Balance at March 31, 2017 $ (1,865 ) (159 ) (62 ) (2,086 ) The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three months ended March 31, 2017 : Three Months Ended March 31, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 51 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 54 Income tax benefit (21 ) Income tax expense Net of tax $ 33 (1) See Note 7—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. |
Labor Union Contracts
Labor Union Contracts | 3 Months Ended |
Mar. 31, 2018 | |
Labor Union Contracts [Abstract] | |
Labor Union Contracts | Labor Union Contracts As of March 31, 2018, approximately 26% of our employees were members of various bargaining units represented by the Communication Workers of America ("CWA") and the International Brotherhood of Electrical Workers ("IBEW"). We believe that relations with our employees continue to be generally good. Less than 1,000 of our employees were subject to collective bargaining agreements that have expired as of March 31, 2018, and are being renegotiated. |
Background (Policies)
Background (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation policy | 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 (expense), 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. |
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 10—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period. |
Recently adopted accounting pronouncements and recent accounting pronouncements | Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory”, and ASU 2018-02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. Each of these is described further below. Revenue Recognition ASU 2014-09 ("ASC 606") replaces virtually all existing GAAP on revenue recognition with a principles-based approach for determining revenue recognition using a new five step model. We adopted the new revenue recognition standard under the modified retrospective transition method and recorded a cumulative catch-up as of January 1, 2018, which resulted in an increase to retained earnings of $297 million . Upon adoption, we deferred (or capitalized) incremental customer contract acquisition costs and plan to recognize such costs over the average customer life, which approximates the initial contract term and anticipated renewals for contracts to which such costs relate. Our deferred contract costs for our business and consumer customers have average amortization periods of approximately 49 months and 30 months, respectively, and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we intend to assess our deferred contract cost asset for impairment on a periodic basis. Promotional bill credits, discounts and prepaid cards offered to customers as part of renewing services or entering into a new services arrangement that are paid over time and are contingent on the customer maintaining a service contract results in an extended service contract term with multiple performance obligations, which impacts the allocation and timing of revenue recognition between service revenue and revenue assigned to the customer credits. The contract asset is subsequently amortized as a reduction to service revenue over the extended contract term. Most of our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, are accounted for as operating leases. See Note 4—Revenue Recognition for additional information. Comprehensive Income ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We early adopted and applied ASU 2018-02 in the first quarter of 2018. The adoption of ASU 2018-02 resulted in a $407 million increase to retained earnings and in accumulated other comprehensive loss. See Note 13 — Accumulated Other Comprehensive Loss for additional information. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. Our adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recent Accounting Pronouncements Goodwill Impairment On January 26, 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above its fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt it for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. Financial Instruments On June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. 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 under GAAP are currently not required to be 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. On January 25, 2018, the FASB issued ASU 2018-01, “Leases: Land Easement Practical Expedient for Transition to ASU 2016-02. ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Additionally, upon implementing ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3 — Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation described therein will be derecognized from our consolidated balance sheet. |
Acquisition of Level 3 (Tables)
Acquisition of Level 3 (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | As of March 31, 2018, the following is our updated assignment of the preliminary estimated aggregate consideration: Adjusted November 1, 2017 Balance as of December 31, 2017 Purchase Price Adjustments Adjusted November 1, 2017 Balance as of March 31, 2018 (Dollars in millions) Cash, accounts receivable and other current assets (1) $ 3,317 (3 ) 3,314 Property, plant and equipment 9,311 92 9,403 Identifiable intangible assets (2) Customer relationships 8,964 (476 ) 8,488 Other 391 (13 ) 378 Other noncurrent assets 782 156 938 Current liabilities, excluding current maturities of long-term debt (1,461 ) — (1,461 ) Current maturities of long-term debt (7 ) — (7 ) Long-term debt (10,888 ) — (10,888 ) Deferred revenue and other liabilities (1,629 ) (65 ) (1,694 ) Goodwill 10,837 304 11,141 Total estimated aggregate consideration $ 19,617 (5 ) 19,612 ____________________________________________________________________________________________________________ (1) Includes a preliminary estimated fair value of $866 million for accounts receivable, which had a gross contractual value of $884 million on November 1, 2017. The $18 million difference between the gross contractual value and the preliminary estimated fair value assigned represents our best estimate as of November 1, 2017 of contractual cash flows that will not be collected. (2) The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately 12.0 years . |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Based upon the changes in the purchase price allocation as of March 31, 2018, our revised estimated amortization expense for intangible assets for the years ending December 31, 2018 through 2022 is as follows: (Dollars in millions) Remainder of 2018 $ 1,313 2019 1,677 2020 1,575 2021 1,143 2022 957 |
Summary of Acquisition Related Expenses | The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses: Three Months Ended March 31, 2018 2017 (Dollars in millions) Transaction-related expenses $ 1 10 Integration-related expenses 70 — Total acquisition-related expenses $ 71 10 |
Summary of Pro Forma Information | The following unaudited pro forma financial information presents the combined results of CenturyLink as if the Level 3 acquisition had been consummated as of January 1, 2017. Three Months Ended March 31, 2017 Operating revenues 6,194 Net income 172 Basic earnings per common share 0.16 Diluted earnings per common share 0.16 |
Sale of Data Centers and Colo26
Sale of Data Centers and Colocation Business (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of disposal assets held-for-sale and liabilities attributable to disposal assets held-for-sale | The following table reflects the assets sold to and the liabilities assumed by Cyxtera on May 1, 2017, including our most current estimates of the impact of failed-sale-leaseback: Dollars in millions Goodwill $ 1,142 Property, plant and equipment 1,051 Other intangible assets 249 Other assets 66 Less assets recorded as part of the failed-sale-leaseback (526 ) Total net amount of assets derecognized $ 1,982 Capital lease obligations $ 294 Other liabilities 274 Less imputed financing obligations from the failed-sale-leaseback (628 ) Total net imputed liabilities recognized $ (60 ) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Effect of New Accounting Pronouncements | The following table presents our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 5,945 15 $ 5,960 Cost of services and products (exclusive of depreciation and amortization) 2,803 (4 ) 2,799 Selling, general and administrative 1,109 13 1,122 Income tax expense 121 2 123 Net income $ 115 4 $ 119 BASIC AND DILUTED EARNINGS PER COMMON SHARE BASIC $ 0.11 — $ 0.11 DILUTED $ 0.11 — $ 0.11 WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC 1,065,796 — 1,065,796 DILUTED 1,069,183 — 1,069,183 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 1,105 (171 ) $ 934 Other long-term assets, net 1,047 (79 ) 968 Advance billing and customer deposits 820 75 895 Deferred income taxes, net 2,196 (2 ) 2,194 Other long-term liabilities 2,362 82 2,444 Retained earnings 1,336 (293 ) 1,043 |
Disaggregation of Revenue | Pursuant to ASU 2014-09 discussed in Note 1 above, the following table provides disaggregation of revenue from contracts with customers: Three Months Ended March 31, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (8) Total Revenue from Contracts with Customers Business segment IP & Data Services (1) $ 1,748 — $ 1,748 Transport & Infrastructure (2) 1,362 (67 ) 1,295 Voice & Collaboration (3) 1,111 — 1,111 IT & Managed Services (4) 162 — 162 Total business segment revenues 4,383 (67 ) 4,316 Consumer segment Voice & Collaboration (3) 526 — 526 IP & Data Services (5) 97 (9 ) 88 Transport & Infrastructure (6) 756 (53 ) 703 Total consumer segment revenues 1,379 (62 ) 1,317 Non-segment revenues Regulatory revenues (7) 183 (183 ) — Total non-segment revenues 183 (183 ) — Total revenues $ 5,945 (312 ) $ 5,633 Timing of Revenue Goods transferred at a point in time $ 39 Services performed over time 5,594 Total revenues from contracts with customers $ 5,633 (1 ) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3 ) Includes local, long-distance and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes retail video revenues (including our facilities-based video revenues). (6 ) Includes primarily broadband and equipment sales and professional services revenues. (7 ) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. (8 ) Includes regulatory revenues, lease revenues, sublease rental income and failed sale leaseback income, which are not within the scope of ASC 606. |
Contract with Customer, Asset and Liability | The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2018 and January 1, 2018: March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 2,378 $ 2,504 Contract liabilities 572 623 Contract assets 188 255 (1) Gross customer receivables of $2.537 million and $2.659 million , net of allowance for doubtful accounts of $159 million and $155 million , at March 31, 2018 and January 1, 2018, respectively. |
Capitalized Contract Cost | The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended March 31, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Beginning of period balance $ 254 73 Costs incurred 37 6 Amortization (37 ) (10 ) Impairments — — End of period balance $ 254 69 |
Long-Term Debt and Credit Fac28
Long-Term Debt and Credit Facilities (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt including unamortized discounts and premiums | The following chart reflects the consolidated long-term debt of CenturyLink, Inc. and its subsidiaries, including unamortized discounts and premiums and unamortized debt issuance costs, but excluding intercompany debt: Interest Rates (1) Maturities As of March 31, 2018 As of (Dollars in millions) Senior Secured Debt: CenturyLink, Inc. 2017 Revolving Credit Facility (2) N/A 2022 $ — 405 Term Loan A 4.627% 2022 1,686 1,575 Term Loan A-1 4.627% 2022 365 370 Term Loan B 4.627% 2025 5,985 6,000 Subsidiaries: Level 3 Financing, Inc. Tranche B 2024 Term Loan 4.111% 2024 4,611 4,611 Embarq Corporation subsidiaries First mortgage bonds 7.125% - 8.375% 2023 - 2025 138 151 Senior Notes and Other Debt: CenturyLink, Inc. Senior notes 5.625% - 7.650% 2019 - 2042 8,125 8,125 Subsidiaries: Level 3 Financing, Inc. Senior notes 5.125% - 6.125% 2021 - 2026 5,315 5,315 Level 3 Parent, LLC Senior notes 5.750% 2022 600 600 Qwest Corporation Senior notes 6.125% - 7.750% 2021 - 2057 7,294 7,294 Term loan 3.890% 2025 100 100 Qwest Capital Funding, Inc. Senior notes 6.500% - 7.750% 2018 - 2031 981 981 Embarq Corporation and subsidiary Senior note 7.995% 2036 1,485 1,485 Other 9.000% 2019 150 150 Capital lease and other obligations Various Various 868 891 Unamortized premiums and other, net 17 23 Unamortized debt issuance costs (343 ) (350 ) Total long-term debt 37,377 37,726 Less current maturities (437 ) (443 ) Long-term debt, excluding current maturities $ 36,940 37,283 ______________________________________________________________________ (1) As of March 31, 2018 . (2) The aggregate amount outstanding on our revolving line of credit borrowings at December 31, 2017 was $405 million , with a weighted-average interest rate of 4.186% . At March 31, 2018, we had no borrowings outstanding under our 2017 credit facility or revolving line of credit. These amounts change on a regular basis. |
Severance and Leased Real Est29
Severance and Leased Real Estate (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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, 2017 $ 33 64 Accrued to expense 45 2 Payments, net (47 ) (4 ) Balance at March 31, 2018 $ 31 62 |
Employee Benefits (Tables)
Employee Benefits (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Retirement Benefits [Abstract] | |
Schedule of components of net periodic pension benefit (income) expense and post-retirement benefit expense | Net periodic benefit (income) expense for our qualified and non-qualified pension plans included the following components: Pension Plans Three Months Ended March 31, 2018 2017 (Dollars in millions) Service cost $ 16 17 Interest cost 100 101 Expected return on plan assets (173 ) (166 ) Recognition of prior service credit (2 ) (2 ) Recognition of actuarial loss 44 51 Net periodic pension benefit (income) expense $ (15 ) 1 Net periodic benefit expense for our post-retirement benefit plans included the following components: Post-Retirement Benefit Plans Three Months Ended March 31, 2018 2017 (Dollars in millions) Service cost $ 4 4 Interest cost 24 25 Expected return on plan assets — — Recognition of prior service cost 5 5 Net periodic post-retirement benefit expense $ 33 34 |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted earnings per common share | Basic and diluted earnings per common share were calculated as follows: Three Months Ended March 31, 2018 2017 (Dollars in millions, except per share amounts, shares in thousands) Income (Numerator): Net income $ 115 163 Earnings applicable to non-vested restricted stock — — Net income applicable to common stock for computing basic earnings per common share 115 163 Net income as adjusted for purposes of computing diluted earnings per common share $ 115 163 Shares (Denominator): Weighted-average number of shares: Outstanding during period 1,073,560 547,618 Non-vested restricted stock (7,764 ) (7,160 ) Weighted-average shares outstanding for computing basic earnings per common share 1,065,796 540,458 Incremental common shares attributable to dilutive securities: Shares issuable under convertible securities 10 10 Shares issuable under incentive compensation plans 3,377 1,054 Number of shares as adjusted for purposes of computing diluted earnings per common share 1,069,183 541,522 Basic earnings per common share $ 0.11 0.30 Diluted earnings per common share $ 0.11 0.30 |
Fair Value Disclosure (Tables)
Fair Value Disclosure (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
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, 2018 As of December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 36,509 35,677 36,835 36,402 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of segment results | The results of our two reportable segments, business and consumer, are summarized below: Three Months Ended March 31, 2018 2017 (Dollars in millions) Total reportable segment revenues $ 5,762 4,037 Total reportable segment expenses 3,226 2,206 Total reportable segment adjusted EBITDA $ 2,536 1,831 Total margin percentage 44 % 45 % Business segment: Revenues $ 4,383 2,590 Expenses 2,613 1,566 Adjusted EBITDA $ 1,770 1,024 Margin percentage 40 % 40 % Consumer segment: Revenues $ 1,379 1,447 Expenses 613 640 Adjusted EBITDA $ 766 807 Margin percentage 56 % 56 % |
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, 2018 2017 (Dollars in millions) Business segment IP & Data Services (1) $ 1,748 744 Transport & Infrastructure (2) 1,362 906 Voice & Collaboration (3) 1,111 788 IT & Managed Services (4) 162 152 Total business segment revenues 4,383 2,590 Consumer segment IP & Data Services (5) 97 120 Transport & Infrastructure (6) 756 701 Voice & Collaboration (3) 526 626 Total consumer segment revenues 1,379 1,447 Non-segment revenues Regulatory revenues (7) 183 172 Total non-segment revenues 183 172 Total revenues $ 5,945 4,209 ______________________________________________________________________ (1) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues. (2) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues. (3) Includes local, long-distance and other ancillary revenues. (4) Includes IT services and managed services revenues. (5) Includes retail video revenues (including our facilities-based video revenues). (6) Includes primarily broadband and equipment sales and professional services revenues. (7) Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income. |
Reconciliation of operating profit (loss) from segments to consolidated net income | The following table reconciles total reportable segment adjusted EBITDA to net income: Three Months Ended March 31, 2018 2017 (Dollars in millions) Total reportable segment adjusted EBITDA $ 2,536 1,831 Regulatory revenues 183 172 Depreciation and amortization (1,283 ) (880 ) Other operating expenses (686 ) (492 ) Total other expense, net (514 ) (324 ) Income before income tax expense 236 307 Income tax expense (121 ) (144 ) Net income $ 115 163 |
Other Financial Information (Ta
Other Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 As of (Dollars in millions) Prepaid expenses $ 353 294 Income tax receivable 256 258 Materials, supplies and inventory 111 128 Deferred activation and installation charges 157 128 Deferred commissions 134 — Other 94 133 Total other current assets $ 1,105 941 |
Schedule of current liabilities including accounts payable and other current liabilities | Current liabilities reflected in our consolidated balance sheets include other current liabilities as follows: As of As of (Dollars in millions) Other current liabilities: Accrued rent $ 28 34 Legal contingencies 46 45 Other 354 265 Total other current liabilities $ 428 344 |
Accumulated Other Comprehensi35
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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, 2018 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2017 $ (1,731 ) (235 ) (29 ) (1,995 ) Other comprehensive income before reclassifications — — 79 79 Amounts reclassified from accumulated other comprehensive income 31 4 — 35 Net current-period other comprehensive income 31 4 79 114 Cumulative effect of adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (375 ) (32 ) — (407 ) Balance at March 31, 2018 $ (2,075 ) (263 ) 50 (2,288 ) 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, 2017 : Pension Plans Post-Retirement Foreign Currency Total (Dollars in millions) Balance at December 31, 2016 $ (1,895 ) (162 ) (60 ) (2,117 ) Other comprehensive income (loss) before reclassifications — — (2 ) (2 ) Amounts reclassified from accumulated other comprehensive income 30 3 — 33 Net current-period other comprehensive income 30 3 (2 ) 31 Balance at March 31, 2017 $ (1,865 ) (159 ) (62 ) (2,086 ) |
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, 2018 : Three Months Ended March 31, 2018 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 44 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 47 Income tax benefit (12 ) Income tax expense Net of tax $ 35 ________________________________________________________________________ (1) See Note 7—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three months ended March 31, 2017 : Three Months Ended March 31, 2017 Decrease (Increase) Affected Line Item in Consolidated Statement of (Dollars in millions) Amortization of pension & post-retirement plans (1) Net actuarial loss $ 51 Other income (expense), net Prior service cost 3 Other income (expense), net Total before tax 54 Income tax benefit (21 ) Income tax expense Net of tax $ 33 (1) See Note 7—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans. |
Background (Details)
Background (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle | |||
Retained earnings | $ 1,336 | $ 1,103 | |
Reclassification from AOCI to retained earnings, tax effect | 407 | ||
Provisional income tax expense (benefit) | (1,100) | ||
Purchase accounting adjustment | 64 | ||
Business Customer | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Deferred customer contract, amortization period | 49 months | ||
Consumer Customers | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Deferred customer contract, amortization period | 30 months | ||
Accounting Standards Update 2014-09 | Impact of 606 | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Retained earnings | $ (293) | $ 297 |
Acquisition of Level 3 - Additi
Acquisition of Level 3 - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Millions | Jan. 22, 2018USD ($) | Nov. 01, 2017USD ($)citydark_fiber$ / sharesshares | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($)shares | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($)shares | Oct. 31, 2017$ / sharesshares |
Business Acquisition [Line Items] | |||||||
Common stock, shares outstanding (in shares) | shares | 1,078,632 | 1,069,169 | |||||
Goodwill | $ 30,778 | $ 30,475 | |||||
Assets held for sale, selling price | $ 68 | ||||||
Deposits received from assets held for sale | 34 | $ 0 | |||||
CenturyLink Escrow, LLC | Medium-term notes | |||||||
Business Acquisition [Line Items] | |||||||
Long-term debt, gross | $ 7,945 | ||||||
CenturyLink Escrow, LLC | Revolving credit facility | New Revolving Credit Facility | |||||||
Business Acquisition [Line Items] | |||||||
Long-term debt, gross | 400 | ||||||
CenturyLink, Inc. | Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Note payable to Level 3 Parent, LLC | $ 1,825 | ||||||
Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Share price (in dollars per share) | $ / shares | $ 26.50 | ||||||
Stock conversion ratio | 1.4286 | ||||||
RSU conversion ratio | 2.8386 | ||||||
Consideration transferred | $ 19,612 | ||||||
Equity interest issued or issuable (in shares) | shares | 517,300 | ||||||
Share price (in dollars per share) | $ / shares | $ 18.99 | ||||||
Common stock, shares outstanding (in shares) | shares | 362,200 | ||||||
Payment for RSU conversion | $ 1 | ||||||
Equity interests issued and issuable | 131 | ||||||
Payment to settle claims | 58 | ||||||
Long-term debt assumed | $ 10,600 | 10,888 | 10,888 | ||||
Number of strands of dark fiber divested | dark_fiber | 24 | ||||||
Number of cities connected by dark fiber | city | 30 | ||||||
Goodwill | 11,141 | 10,837 | |||||
Transaction costs and integration-related costs | $ 393 | ||||||
Transaction costs | $ 47 | ||||||
Revenue of acquiree since acquisition date, actual | $ 2,062 | ||||||
Level 3 Parent, LLC | Level 3 Parent, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Ownership percent by parent | 51.00% | ||||||
Ownership percent by noncontrolling owners | 49.00% | ||||||
Scenario, Forecast [Member] | |||||||
Business Acquisition [Line Items] | |||||||
Proceeds from sale of intangible assets | $ 34 |
Acquisition of Level 3 - Prelim
Acquisition of Level 3 - Preliminary Estimated Aggregate Consideration (Details) - USD ($) $ in Millions | Nov. 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 |
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Goodwill | $ 30,778 | $ 30,475 | |
Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Cash, accounts receivable and other current assets | 3,314 | 3,317 | |
Property, plant and equipment | 9,403 | 9,311 | |
Other noncurrent assets | 938 | 782 | |
Current liabilities, excluding current maturities of long-term debt | (1,461) | (1,461) | |
Current maturities of long-term debt | (7) | (7) | |
Long-term debt | $ (10,600) | (10,888) | (10,888) |
Deferred revenue and other liabilities | (1,694) | (1,629) | |
Goodwill | 11,141 | 10,837 | |
Total estimated aggregate consideration | 19,612 | 19,617 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Cash, accounts receivable and other current assets | (3) | ||
Property, plant and equipment | 92 | ||
Other noncurrent assets | 156 | ||
Current liabilities, excluding current maturities of long-term debt | 0 | ||
Current maturities of long-term debt | 0 | ||
Long-term debt | 0 | ||
Deferred revenue and other liabilities | (65) | ||
Goodwill | 304 | ||
Total estimated aggregate consideration | (5) | ||
Accounts receivable | 866 | ||
Accounts receivable contractual value | 884 | ||
Accounts receivable, uncollectible | $ 18 | ||
Weighted average useful life | 12 years | ||
Customer relationships | Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 8,488 | 8,964 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Identifiable intangible assets | (476) | ||
Other intangible assets | Level 3 Parent, LLC | |||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract] | |||
Identifiable intangible assets | 378 | $ 391 | |
Business Combination, Provisional Information, Initial Accounting Incomplete, Adjustments [Abstract] | |||
Identifiable intangible assets | $ (13) |
Acquisition of Level 3 - Future
Acquisition of Level 3 - Future Amortization Expense (Details) - Level 3 Parent, LLC $ in Millions | Mar. 31, 2018USD ($) |
Business Acquisition [Line Items] | |
Remainder of 2018 | $ 1,313 |
2,019 | 1,677 |
2,020 | 1,575 |
2,021 | 1,143 |
2,022 | $ 957 |
Acquisition of Level 3 - Acquis
Acquisition of Level 3 - Acquisition Related Expenses (Details) - Level 3 Parent, LLC - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Business Acquisition [Line Items] | ||
Transaction-related expenses | $ 1 | $ 10 |
Integration-related expenses | 70 | 0 |
Total acquisition-related expenses | $ 71 | $ 10 |
Acquisition of Level 3 - Pro Fo
Acquisition of Level 3 - Pro Forma Information (Details) - Level 3 Parent, LLC $ / shares in Units, $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($)$ / shares | |
Business Acquisition [Line Items] | |
Operating revenues | $ | $ 6,194 |
Net income | $ | $ 172 |
Basic earnings per common share (in dollars per share) | $ / shares | $ 0.16 |
Diluted earnings per common share (in dollars per share) | $ / shares | $ 0.16 |
Sale of Data Centers and Colo42
Sale of Data Centers and Colocation Business (Details) - USD ($) $ in Millions | May 01, 2017 | Mar. 31, 2018 | Dec. 31, 2017 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Total net amount of assets derecognized | $ 140 | $ 140 | |
Colocation Business and Data Centers | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Net proceeds from sales of data centers and colocation business | $ 1,800 | ||
Colocation Business and Data Centers | Disposal group disposed of by sale, not discontinued operations | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Goodwill | 1,142 | ||
Property, plant and equipment | 1,051 | ||
Other intangible assets | 249 | ||
Other assets | 66 | ||
Total net amount of assets derecognized | 1,982 | ||
Capital lease obligations | 294 | ||
Other liabilities | 274 | ||
Total net imputed liabilities recognized | (60) | ||
SIS Holdings, LP | CenturyLink, Inc. | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
CenturyLink, Inc.'s value of minority stake | $ 150 | ||
Cyxtera Technologies | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Less assets recorded as part of the failed-sale-leaseback | (526) | ||
Less imputed financing obligations from the failed-sale-leaseback | $ (628) |
Revenue Recognition - Reported
Revenue Recognition - Reported Results Under ASC 606 (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenues | $ 5,945 | $ 4,209 | |
Cost of services and products (exclusive of depreciation and amortization) | 2,803 | 1,888 | |
Selling, general and administrative | 1,109 | 810 | |
Income tax expense | 121 | 144 | |
Net income | $ 115 | $ 163 | |
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||
BASIC (in dollars per share) | $ 0.11 | $ 0.30 | |
DILUTED (in dollars per share) | $ 0.11 | $ 0.30 | |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||
BASIC (in shares) | 1,065,796 | 540,458 | |
DILUTED (in shares) | 1,069,183 | 541,522 | |
Other current assets | $ 1,105 | $ 941 | |
Other long-term assets, net | 1,047 | 1,286 | |
Advance billings and customer deposits | 820 | 892 | |
Deferred income taxes, net | 2,196 | 2,413 | |
Other long-term liabilities | 2,362 | 2,389 | |
Retained earnings | 1,336 | 1,103 | |
Impact of 606 | Accounting Standards Update 2014-09 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenues | 15 | ||
Cost of services and products (exclusive of depreciation and amortization) | (4) | ||
Selling, general and administrative | 13 | ||
Income tax expense | 2 | ||
Net income | $ 4 | ||
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||
BASIC (in dollars per share) | $ 0 | ||
DILUTED (in dollars per share) | $ 0 | ||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||
BASIC (in shares) | 0 | ||
DILUTED (in shares) | 0 | ||
Other current assets | $ (171) | ||
Other long-term assets, net | (79) | ||
Advance billings and customer deposits | 75 | ||
Deferred income taxes, net | (2) | ||
Other long-term liabilities | 82 | ||
Retained earnings | (293) | $ 297 | |
ASC 605 Historical Adjusted Balances | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Revenues | 5,960 | ||
Cost of services and products (exclusive of depreciation and amortization) | 2,799 | ||
Selling, general and administrative | 1,122 | ||
Income tax expense | 123 | ||
Net income | $ 119 | ||
BASIC AND DILUTED EARNINGS PER COMMON SHARE | |||
BASIC (in dollars per share) | $ 0.11 | ||
DILUTED (in dollars per share) | $ 0.11 | ||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | |||
BASIC (in shares) | 1,065,796 | ||
DILUTED (in shares) | 1,069,183 | ||
Other current assets | $ 934 | ||
Other long-term assets, net | 968 | ||
Advance billings and customer deposits | 895 | ||
Deferred income taxes, net | 2,194 | ||
Other long-term liabilities | 2,444 | ||
Retained earnings | $ 1,043 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | $ 5,945 | $ 4,209 |
Adjustments | (312) | |
Total Revenue from Contracts with Customers | 5,633 | |
Transferred at Point in Time | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Total Revenue from Contracts with Customers | 39 | |
Transferred over Time | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Total Revenue from Contracts with Customers | 5,594 | |
Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 4,383 | 2,590 |
Consumer | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 1,379 | 1,447 |
Operating segments | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 5,762 | 4,037 |
Operating segments | Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 4,383 | 2,590 |
Adjustments | (67) | |
Total Revenue from Contracts with Customers | 4,316 | |
Operating segments | Consumer | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 1,379 | 1,447 |
Adjustments | (62) | |
Total Revenue from Contracts with Customers | 1,317 | |
Operating segments | IP & Data Services | Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 1,748 | 744 |
Adjustments | 0 | |
Total Revenue from Contracts with Customers | 1,748 | |
Operating segments | IP & Data Services | Consumer | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 97 | 120 |
Adjustments | (9) | |
Total Revenue from Contracts with Customers | 88 | |
Operating segments | Transport & Infrastructure | Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 1,362 | 906 |
Adjustments | (67) | |
Total Revenue from Contracts with Customers | 1,295 | |
Operating segments | Transport & Infrastructure | Consumer | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 756 | 701 |
Adjustments | (53) | |
Total Revenue from Contracts with Customers | 703 | |
Operating segments | Voice & Collaboration | Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 1,111 | 788 |
Adjustments | 0 | |
Total Revenue from Contracts with Customers | 1,111 | |
Operating segments | Voice & Collaboration | Consumer | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 526 | 626 |
Adjustments | 0 | |
Total Revenue from Contracts with Customers | 526 | |
Operating segments | IT & Managed Services | Business | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 162 | 152 |
Adjustments | 0 | |
Total Revenue from Contracts with Customers | 162 | |
Corporate, Non-Segment | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 183 | 172 |
Adjustments | (183) | |
Total Revenue from Contracts with Customers | 0 | |
Corporate, Non-Segment | Regulatory Revenue | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenues | 183 | $ 172 |
Adjustments | (183) | |
Total Revenue from Contracts with Customers | $ 0 |
Revenue Recognition - Contract
Revenue Recognition - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 |
Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 2,378,000 | $ 2,504,000 |
Contract liabilities | 572,000 | 623,000 |
Contract assets | 188,000 | 255,000 |
Accounts receivable, gross | 2,537 | 2,659 |
Allowance for doubtful accounts receivable | $ 159,000 | $ 155,000 |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Customer relationship period | 20 years |
Remaining performance obligation | $ 15,500 |
Contract acquisition costs and fulfillment costs | $ 323 |
Minimum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 1 year |
Maximum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 7 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percent | 50.00% |
Remaining performance obligation, satisfaction period | 2 years 9 months |
Contract Acquisition and Fulfillment Costs | Minimum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Amortization period | 30 months |
Contract Acquisition and Fulfillment Costs | Maximum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Amortization period | 49 months |
Revenue Recognition - Capitaliz
Revenue Recognition - Capitalized Contract Costs (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Capitalized Contract Cost [Roll Forward] | |
End of period balance | $ 323 |
Contract Acquisition Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | 254 |
Costs incurred | 37 |
Amortization | (37) |
Impairments | 0 |
End of period balance | 254 |
Contract Fulfillment Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | 73 |
Costs incurred | 6 |
Amortization | (10) |
Impairments | 0 |
End of period balance | $ 69 |
Long-Term Debt and Credit Fac48
Long-Term Debt and Credit Facilities - Schedule of Long Term Debt (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Long-term Debt and Credit Facilities | ||
Capital lease and other obligations | $ 868 | $ 891 |
Unamortized premiums and other, net | 17 | 23 |
Unamortized debt issuance costs | (343) | (350) |
Total long-term debt | 37,377 | 37,726 |
Less current maturities | (437) | (443) |
Long-term debt, excluding current maturities | 36,940 | $ 37,283 |
CenturyLink, Inc. | Line of credit | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, weighted average interest rate (percent) | 4.186% | |
CenturyLink, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 8,125 | $ 8,125 |
CenturyLink, Inc. | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 5.625% | |
CenturyLink, Inc. | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.65% | |
Level 3 Financing, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 4,611 | 4,611 |
Stated interest rate (percent) | 4.111% | |
Level 3 Financing, Inc. | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 5,315 | 5,315 |
Level 3 Financing, Inc. | Minimum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 5.125% | |
Level 3 Financing, Inc. | Maximum | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 6.125% | |
Level 3 Parent, LLC | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 600 | 600 |
Stated interest rate (percent) | 5.75% | |
Qwest Corporation | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 100 | 100 |
Stated interest rate (percent) | 3.89% | |
Qwest Corporation | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 7,294 | 7,294 |
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) | 7.75% | |
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 Corporation | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 138 | 151 |
Embarq Corporation | Senior notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 1,485 | 1,485 |
Stated interest rate (percent) | 7.995% | |
Embarq Corporation | Other | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 150 | 150 |
Stated interest rate (percent) | 9.00% | |
Embarq Corporation | Minimum | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 7.125% | |
Embarq Corporation | Maximum | First mortgage bonds | ||
Long-term Debt and Credit Facilities | ||
Stated interest rate (percent) | 8.375% | |
New Revolving Credit Facility | CenturyLink, Inc. | Line of credit | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 0 | 405 |
Term Loan A | CenturyLink, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 1,686 | 1,575 |
Stated interest rate (percent) | 4.627% | |
Term Loan A-1 | CenturyLink, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 365 | 370 |
Stated interest rate (percent) | 4.627% | |
Term Loan B | CenturyLink, Inc. | Medium-term notes | ||
Long-term Debt and Credit Facilities | ||
Long-term debt, gross | $ 5,985 | $ 6,000 |
Stated interest rate (percent) | 4.627% |
Long-Term Debt and Credit Fac49
Long-Term Debt and Credit Facilities - Additional Information (Details) - USD ($) $ in Millions | Jan. 29, 2018 | Mar. 31, 2018 | Jan. 21, 2018 | Dec. 31, 2017 |
CenturyLink, Inc. | Line of credit | ||||
Long-term Debt and Credit Facilities | ||||
Long-term debt, weighted average interest rate (percent) | 4.186% | |||
CenturyLink, Inc. | Line of credit | New Revolving Credit Facility | ||||
Long-term Debt and Credit Facilities | ||||
Long-term debt, gross | $ 0 | $ 405 | ||
CenturyLink, Inc. | Revolving credit facility | New Revolving Credit Facility | ||||
Long-term Debt and Credit Facilities | ||||
Line of credit facility, maximum borrowing capacity | $ 2,168 | |||
CenturyLink, Inc. | Medium-term notes | ||||
Long-term Debt and Credit Facilities | ||||
Proceeds from debt, net of issuance costs | 132 | |||
CenturyLink, Inc. | Medium-term notes | Term Loan A | ||||
Long-term Debt and Credit Facilities | ||||
Long-term debt, gross | $ 1,686 | 1,575 | ||
Stated interest rate (percent) | 4.627% | |||
Debt instrument, face amount | $ 1,707 | |||
Embarq Corporation | First mortgage bonds | ||||
Long-term Debt and Credit Facilities | ||||
Long-term debt, gross | $ 138 | $ 151 | ||
Embarq Corporation | First mortgage bonds | 8.77% Notes due 2017 | ||||
Long-term Debt and Credit Facilities | ||||
Debt instrument, repurchased face amount | $ 13 | |||
Stated interest rate (percent) | 8.77% |
Severance and Leased Real Est50
Severance and Leased Real Estate (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Leased real estate | |
Leased Real Estate | |
Current portion of leased real estate accrual | $ 11 |
Noncurrent portion of leased real estate accrual | $ 51 |
Weighted average lease terms | 6 years 6 months |
Restructuring reserve | |
Balance at the beginning of the period | $ 64 |
Accrued to expense | 2 |
Payments, net | (4) |
Balance at the end of the period | $ 62 |
Leased real estate | Minimum | |
Leased Real Estate | |
Remaining lease terms | 1 month 27 days |
Leased real estate | Maximum | |
Leased Real Estate | |
Remaining lease terms | 7 years 8 months 7 days |
Employee severance | |
Restructuring reserve | |
Balance at the beginning of the period | $ 33 |
Accrued to expense | 45 |
Payments, net | (47) |
Balance at the end of the period | $ 31 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Pension plans | ||
Components of net periodic (benefit) expense | ||
Service cost | $ 16 | $ 17 |
Interest cost | 100 | 101 |
Expected return on plan assets | (173) | (166) |
Recognition of prior service (credit) cost | (2) | (2) |
Recognition of actuarial loss | 44 | 51 |
Net periodic benefit (income) expense | (15) | 1 |
Voluntary contributions to plan by employer | 100 | |
Post-retirement benefit plans | ||
Components of net periodic (benefit) expense | ||
Service cost | 4 | 4 |
Interest cost | 24 | 25 |
Expected return on plan assets | 0 | 0 |
Recognition of prior service (credit) cost | 5 | 5 |
Net periodic benefit (income) expense | $ 33 | $ 34 |
Earnings Per Common Share (Deta
Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income (Numerator): | ||
Net income | $ 115 | $ 163 |
Weighted average number of shares: | ||
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 1,065,796 | 540,458 |
Incremental common shares attributable to dilutive securities: | ||
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 1,069,183 | 541,522 |
Basic earnings per common share (in dollars per share) | $ 0.11 | $ 0.30 |
Diluted earnings per common share (in dollars per share) | $ 0.11 | $ 0.30 |
Common Class A | ||
Income (Numerator): | ||
Net income | $ 115 | $ 163 |
Earnings applicable to non-vested restricted stock | 0 | 0 |
Net income applicable to common stock for computing basic earnings per common share | 115 | 163 |
Net income as adjusted for purposes of computing diluted earnings per common share | $ 115 | $ 163 |
Weighted average number of shares: | ||
Outstanding during period (in shares) | 1,073,560 | 547,618 |
Non-vested restricted stock (in shares) | (7,764) | (7,160) |
Weighted average shares outstanding for computing basic earnings per common share (in shares) | 1,065,796 | 540,458 |
Incremental common shares attributable to dilutive securities: | ||
Shares issuable under convertible securities (in shares) | 10 | 10 |
Shares issuable under incentive compensation plans (in shares) | 3,377 | 1,054 |
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares) | 1,069,183 | 541,522 |
Basic earnings per common share (in dollars per share) | $ 0.11 | $ 0.30 |
Diluted earnings per common share (in dollars per share) | $ 0.11 | $ 0.30 |
Number of shares of common stock excluded from the computation of diluted earnings per share (in shares) | 4,300 | 4,300 |
Fair Value Disclosure (Details)
Fair Value Disclosure (Details) - Fair value measurements determined on a nonrecurring basis - Fair value inputs, Level 2 - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Carrying amount | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 36,509 | $ 36,835 |
Fair value | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 35,677 | $ 36,402 |
Segment Information - Results (
Segment Information - Results (Details) $ in Millions | Nov. 01, 2017segment | Mar. 31, 2018USD ($)categorysegment | Mar. 31, 2017USD ($) |
Segment Reporting Information [Line Items] | |||
Number of reportable segments | segment | 2 | 2 | |
Revenues | $ 5,945 | $ 4,209 | |
Expenses | 5,195 | 3,578 | |
OPERATING INCOME | $ 750 | 631 | |
Number of categories of products and services | category | 5 | ||
Business | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 4,383 | 2,590 | |
Expenses | 2,613 | 1,566 | |
OPERATING INCOME | $ 1,770 | $ 1,024 | |
Margin percentage | 40.00% | 40.00% | |
Consumer | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 1,379 | $ 1,447 | |
Expenses | 613 | 640 | |
OPERATING INCOME | $ 766 | $ 807 | |
Margin percentage | 56.00% | 56.00% | |
Operating segments | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 5,762 | $ 4,037 | |
Expenses | 3,226 | 2,206 | |
OPERATING INCOME | $ 2,536 | $ 1,831 | |
Margin percentage | 44.00% | 45.00% | |
Operating segments | Business | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 4,383 | $ 2,590 | |
Operating segments | Consumer | |||
Segment Reporting Information [Line Items] | |||
Revenues | $ 1,379 | $ 1,447 |
Segment Information - Operating
Segment Information - Operating Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating revenues by products and services | ||
Revenues | $ 5,945 | $ 4,209 |
Surcharge amount on customers' bills | 246 | 130 |
Business | ||
Operating revenues by products and services | ||
Revenues | 4,383 | 2,590 |
Consumer | ||
Operating revenues by products and services | ||
Revenues | 1,379 | 1,447 |
Operating segments | ||
Operating revenues by products and services | ||
Revenues | 5,762 | 4,037 |
Operating segments | Business | ||
Operating revenues by products and services | ||
Revenues | 4,383 | 2,590 |
Operating segments | Business | IP & Data Services | ||
Operating revenues by products and services | ||
Revenues | 1,748 | 744 |
Operating segments | Business | Transport & Infrastructure | ||
Operating revenues by products and services | ||
Revenues | 1,362 | 906 |
Operating segments | Business | Voice & Collaboration | ||
Operating revenues by products and services | ||
Revenues | 1,111 | 788 |
Operating segments | Business | IT & Managed Services | ||
Operating revenues by products and services | ||
Revenues | 162 | 152 |
Operating segments | Consumer | ||
Operating revenues by products and services | ||
Revenues | 1,379 | 1,447 |
Operating segments | Consumer | IP & Data Services | ||
Operating revenues by products and services | ||
Revenues | 97 | 120 |
Operating segments | Consumer | Transport & Infrastructure | ||
Operating revenues by products and services | ||
Revenues | 756 | 701 |
Operating segments | Consumer | Voice & Collaboration | ||
Operating revenues by products and services | ||
Revenues | 526 | 626 |
Corporate, Non-Segment | ||
Operating revenues by products and services | ||
Revenues | 183 | 172 |
Corporate, Non-Segment | Regulatory Revenue | ||
Operating revenues by products and services | ||
Revenues | $ 183 | $ 172 |
Segment Information - Reconcili
Segment Information - Reconciliation (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Segment Reporting Information [Line Items] | ||
Total reportable segment adjusted EBITDA | $ 750 | $ 631 |
Depreciation and amortization | (1,283) | (880) |
Total other expense, net | (514) | (324) |
INCOME BEFORE INCOME TAX EXPENSE | 236 | 307 |
Income tax expense | (121) | (144) |
NET INCOME | 115 | 163 |
Operating segments | ||
Segment Reporting Information [Line Items] | ||
Total reportable segment adjusted EBITDA | 2,536 | 1,831 |
Segment Reconciling Items | ||
Segment Reporting Information [Line Items] | ||
Regulatory revenues | 183 | 172 |
Depreciation and amortization | (1,283) | (880) |
Other operating expenses | (686) | (492) |
Total other expense, net | $ (514) | $ (324) |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Thousands | 1 Months Ended | 3 Months Ended |
Feb. 28, 2017USD ($) | Mar. 31, 2018USD ($)lawsuit | |
Loss Contingencies | ||
Patents allegedly infringed (at least) | 1 | |
Unfavorable regulatory action | ||
Loss Contingencies | ||
Estimate of possible loss (per proceeding) | $ 100 | |
Missouri municipalities | Judicial ruling | ||
Loss Contingencies | ||
Number of cases, final court order | 1 | |
Litigation settlement amount | $ 4,000 | |
CenturyLink, Inc. | Interexchange Carriers | ||
Loss Contingencies | ||
Number of lawsuits (approximately) | lawsuit | 100 | |
Level 3 Parent, LLC | ||
Loss Contingencies | ||
Loss contingency, damages sought, value, | $ 50,000 | |
Level 3 Parent, LLC | Pending litigation | Peruvian Tax Litigation, Before Interest | ||
Loss Contingencies | ||
Loss contingency, asserted claim | 26,000 | |
Level 3 Parent, LLC | Pending litigation | Peruvian Tax Litigation | ||
Loss Contingencies | ||
Loss contingency, asserted claim | 15,000 | |
Level 3 Parent, LLC | Pending litigation | Brazilian Tax Claims | Maximum | ||
Loss Contingencies | ||
Loss contingency, range of possible loss, portion not accrued | $ 54,000 |
Other Financial Information (De
Other Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Prepaid Expenses and Other Current Assets [Abstract] | |||
Prepaid expenses | $ 353 | $ 294 | |
Income tax receivable | 256 | 258 | |
Materials, supplies and inventory | 111 | 128 | |
Deferred activation and installation charges | 157 | 128 | |
Deferred commissions | 134 | 0 | |
Other | 94 | 133 | |
Total other current assets | 1,105 | 941 | |
Other Current Liabilities | |||
Accrued rent | 28 | 34 | |
Legal contingencies | 46 | 45 | |
Other | 354 | 265 | |
Total other current liabilities | 428 | 344 | |
Accounts Payable, Current [Abstract] | |||
Book overdraft balance | 24 | $ 36 | |
Capital expenditures incurred but not yet paid | $ 186 | $ 225 |
Accumulated Other Comprehensi59
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Accumulated other comprehensive loss | |||
Balance at beginning of period | $ 23,491 | ||
Accumulated other comprehensive income (loss) by component | |||
Other comprehensive income (loss) before reclassifications | 79 | $ (2) | |
Amounts reclassified from accumulated other comprehensive income | 35 | 33 | |
Other comprehensive income | 114 | 31 | |
Cumulative effect of adoption of ASU | $ (407) | ||
Balance at end of period | 23,443 | 13,306 | |
Defined benefit plan | Pension plans | |||
Accumulated other comprehensive loss | |||
Balance at beginning of period | (1,731) | (1,895) | |
Accumulated other comprehensive income (loss) by component | |||
Other comprehensive income (loss) before reclassifications | 0 | 0 | |
Amounts reclassified from accumulated other comprehensive income | 31 | 30 | |
Other comprehensive income | 31 | 30 | |
Cumulative effect of adoption of ASU | (375) | ||
Balance at end of period | (2,075) | (1,865) | |
Defined benefit plan | Post-retirement benefit plans | |||
Accumulated other comprehensive loss | |||
Balance at beginning of period | (235) | (162) | |
Accumulated other comprehensive income (loss) by component | |||
Other comprehensive income (loss) before reclassifications | 0 | 0 | |
Amounts reclassified from accumulated other comprehensive income | 4 | 3 | |
Other comprehensive income | 4 | 3 | |
Cumulative effect of adoption of ASU | (32) | ||
Balance at end of period | (263) | (159) | |
Foreign currency translation adjustment and other | |||
Accumulated other comprehensive loss | |||
Balance at beginning of period | (29) | (60) | |
Accumulated other comprehensive income (loss) by component | |||
Other comprehensive income (loss) before reclassifications | 79 | (2) | |
Amounts reclassified from accumulated other comprehensive income | 0 | 0 | |
Other comprehensive income | 79 | (2) | |
Cumulative effect of adoption of ASU | $ 0 | ||
Balance at end of period | 50 | (62) | |
Accumulated other comprehensive income | |||
Accumulated other comprehensive loss | |||
Balance at beginning of period | (1,995) | (2,117) | |
Accumulated other comprehensive income (loss) by component | |||
Other comprehensive income | 114 | 31 | |
Balance at end of period | $ (2,288) | $ (2,086) |
Accumulated Other Comprehensi60
Accumulated Other Comprehensive Loss - Reclassifications (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Reclassifications out of accumulated other comprehensive income loss by component | ||
Other income (expense), net | $ (21) | $ 6 |
Total before tax | (236) | (307) |
Income tax expense | 121 | 144 |
Net of tax | (115) | (163) |
Reclassification out of Accumulated Other Comprehensive Income | Net actuarial loss | ||
Reclassifications out of accumulated other comprehensive income loss by component | ||
Other income (expense), net | 44 | 51 |
Reclassification out of Accumulated Other Comprehensive Income | Prior service cost | ||
Reclassifications out of accumulated other comprehensive income loss by component | ||
Other income (expense), net | 3 | 3 |
Reclassification out of Accumulated Other Comprehensive Income | Defined benefit plan | ||
Reclassifications out of accumulated other comprehensive income loss by component | ||
Total before tax | 47 | 54 |
Income tax expense | (12) | (21) |
Net of tax | $ 35 | $ 33 |
Labor Union Contracts (Details)
Labor Union Contracts (Details) | 3 Months Ended |
Mar. 31, 2018 | |
Concentration risk | |
Number of unionized employees | 1,000 |
Total number of employees | Unionized employees concentration risk | |
Concentration risk | |
Concentration risk, percent | 26.00% |