CENTURYLINK, INC, 10-Q filed on 11/8/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2013
Oct. 31, 2013
Document and Entity Information
 
 
Entity Registrant Name
CENTURYLINK, INC 
 
Entity Central Index Key
0000018926 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2013 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
591,070,797 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Income Statement [Abstract]
 
 
 
 
OPERATING REVENUES
$ 4,515 
$ 4,571 
$ 13,553 
$ 13,793 
OPERATING EXPENSES
 
 
 
 
Cost of services and products (exclusive of depreciation and amortization)
1,918 
1,943 
5,587 
5,732 
Selling, general and administrative
1,047 
748 
2,679 
2,454 
Depreciation and amortization
1,135 
1,144 
3,375 
3,560 
Impairment of goodwill (Note 2)
1,100 
0 
1,100 
0 
Total operating expenses
5,200 
3,835 
12,741 
11,746 
OPERATING (LOSS) INCOME
(685)
736 
812 
2,047 
OTHER INCOME (EXPENSE)
 
 
 
 
Interest expense
(329)
(326)
(970)
(1,004)
Net loss on early retirement of debt
0 
0 
0 
(194)
Other income
9 
12 
52 
27 
Total other income (expense)
(320)
(314)
(918)
(1,171)
(LOSS) INCOME BEFORE INCOME TAX EXPENSE
(1,005)
422 
(106)
876 
Income tax expense
40 
152 
372 
332 
NET (LOSS) INCOME
$ (1,045)
$ 270 
$ (478)
$ 544 
BASIC AND DILUTED (LOSS) EARNINGS PER COMMON SHARE
 
 
 
 
BASIC (in dollars per share)
$ (1.76)
$ 0.43 
$ (0.79)
$ 0.88 
DILUTED (in dollars per share)
$ (1.76)
$ 0.43 
$ (0.79)
$ 0.87 
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)
$ 0.54 
$ 0.725 
$ 1.62 
$ 2.175 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
 
 
 
BASIC (in shares)
594,587 
621,148 
606,104 
619,748 
DILUTED (in shares)
594,587 
623,296 
606,104 
621,828 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
NET (LOSS) INCOME
$ (1,045)
$ 270 
$ (478)
$ 544 
Net (loss) income
(1,045)
270 
(478)
544 
Items related to employee benefit plans:
 
 
 
 
Change in net actuarial loss, net of $(8), $(3), $(25), and $(9) tax
13 
4 
40 
14 
Change in net prior service credit, net of $–, $(1), $(1), and $(1) tax
1 
2 
2 
2 
Auction rate securities marked to market, net of $–, $–, $–, and $(2) tax
0 
0 
0 
3 
Foreign currency translation adjustment and other, net of $–, $–, $–, and $– tax
13 
8 
(1)
9 
Other comprehensive income
27 
14 
41 
28 
COMPREHENSIVE (LOSS) INCOME
$ (1,018)
$ 284 
$ (437)
$ 572 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
 
 
Change in net actuarial loss, tax
$ (8)
$ (3)
$ (25)
$ (9)
Change in net prior service credit, tax
 
 
(1)
 
Auction rate securities marked to market, tax
 
 
 
(2)
Foreign currency translation adjustment and other, tax
$ 0 
 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 266 
$ 211 
Allowance for Doubtful Accounts Receivable, Current
151 
158 
Accounts receivable, less allowance of $151 and $158
1,911 
1,917 
Income tax receivable
68 
42 
Deferred income taxes, net
1,004 
891 
Other
563 
552 
Total current assets
3,812 
3,613 
NET PROPERTY, PLANT AND EQUIPMENT
 
 
Property, plant and equipment
33,724 
31,933 
Accumulated depreciation
(15,059)
(13,024)
Net property, plant and equipment
18,665 
18,909 
GOODWILL AND OTHER ASSETS
 
 
Goodwill
20,637 
21,732 
Customer relationships, less accumulated amortization of $3,370 and $2,524
6,206 
7,052 
Other intangible assets, less accumulated amortization of $1290 and $986
1,842 
1,918 
Other
822 
796 
Total goodwill and other assets
29,507 
31,498 
TOTAL ASSETS
51,984 
54,020 
CURRENT LIABILITIES
 
 
Current maturities of long-term debt
191 
1,205 
Accounts payable
1,158 
1,207 
Accrued expenses and other liabilities
 
 
Salaries and benefits
679 
683 
Income and other taxes
397 
356 
Interest
355 
268 
Other
498 
234 
Advance billings and customer deposits
700 
642 
Total current liabilities
3,978 
4,595 
LONG-TERM DEBT
20,391 
19,400 
DEFERRED CREDITS AND OTHER LIABILITIES
 
 
Deferred income taxes, net
4,125 
3,644 
Benefit plan obligations, net
5,488 
5,844 
Other
1,288 
1,248 
Total deferred credits and other liabilities
10,901 
10,736 
COMMITMENTS AND CONTINGENCIES (Note 9)
   
   
STOCKHOLDERS' EQUITY
 
 
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 shares, issued and outstanding 7 and 7 shares
0 
0 
Common stock, $1.00 par value, authorized 1,600,000 and 1,600,000 shares, issued and outstanding 593,497 and 625,658 shares
593 
626 
Additional paid-in capital
17,954 
19,079 
Accumulated other comprehensive loss
(1,660)
(1,701)
(Accumulated Deficit) Retained earnings
(173)
1,285 
Total stockholders' equity
16,714 
19,289 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 51,984 
$ 54,020 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]
 
 
Allowance for Doubtful Accounts Receivable, Current
$ 151,000,000 
$ 158,000,000 
Customer relationships, accumulated amortization (in dollars)
3,370,000,000 
2,524,000,000 
Other intangible assets, accumulated amortization (in dollars)
$ 1,290,000,000 
$ 986,000,000 
Preferred stock-non-redeemable, par value (in dollars per share)
$ 25 
$ 25 
Preferred stock-non-redeemable, authorized shares (shares)
2,000 
2,000 
Preferred stock-non-redeemable, issued shares (shares)
7 
7 
Preferred stock-non-redeemable, outstanding shares (shares)
7 
7 
Common stock, par value (in dollars per share)
$ 1.00 
$ 1.00 
Common stock, authorized shares (shares)
1,600,000 
1,600,000 
Common stock, shares, issued (shares)
593,497 
625,658 
Common Stock, Shares, Outstanding
593,497 
625,658 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
OPERATING ACTIVITIES
 
 
NET (LOSS) INCOME
$ (478)
$ 544 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
Depreciation and amortization
3,375 
3,560 
Impairment of goodwill (Note 2)
1,100 
0 
Deferred income taxes
349 
260 
Provision for uncollectible accounts
111 
144 
Gain on sale of intangible assets
(32)
0 
Long-term debt premium amortization
(45)
(71)
Net loss on early retirement of debt
0 
194 
Changes in current assets and current liabilities:
 
 
Accounts receivable
(105)
(136)
Accounts payable
0 
48 
Accrued income and other taxes
30 
65 
Other current assets and other current liabilities, net
303 
134 
Retirement benefits
(288)
(179)
Changes in other noncurrent assets and liabilities, net
61 
91 
Other, net
27 
32 
Net cash provided by operating activities
4,408 
4,686 
INVESTING ACTIVITIES
 
 
Payments for property, plant and equipment and capitalized software
(2,211)
(2,024)
Proceeds from sale of intangible assets or property
75 
133 
Other, net
19 
28 
Net cash used in investing activities
(2,117)
(1,863)
FINANCING ACTIVITIES
 
 
Net proceeds from issuance of long-term debt
1,740 
3,363 
Payments of long-term debt
(1,169)
(4,529)
Early retirement of debt costs
0 
(324)
Net payments on credit facility
(620)
3 
Dividends paid
(986)
(1,357)
Net proceeds from issuance of common stock
54 
91 
Repurchase of common stock
(1,252)
(20)
Other, net
(3)
14 
Net cash used in financing activities
(2,236)
(2,759)
Effect of exchange rate changes on cash and cash equivalents
0 
2 
Net increase in cash and cash equivalents
55 
66 
Cash and cash equivalents at beginning of period
211 
128 
Cash and cash equivalents at end of period
266 
194 
Supplemental cash flow information:
 
 
Income taxes (paid), net
(45)
(59)
Interest (paid) (net of capitalized interest of $30 and $33)
$ (915)
$ (997)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Statement of Cash Flows [Abstract]
 
 
Interest (paid), capitalized interest
$ 30 
$ 33 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Total
COMMON STOCK
ADDITIONAL PAID-IN CAPITAL
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
RETAINED EARNINGS
Balance at Dec. 31, 2011
 
$ 619 
$ 18,901 
$ (1,012)
$ 2,319 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Issuance of common stock through dividend reinvestment, incentive and benefit plans
 
5 
86 
 
 
Repurchase of common stock
 
0 
0 
 
 
Shares withheld to satisfy tax withholdings
 
(1)
(17)
 
 
Share-based compensation and other, net
 
 
82 
 
 
Other comprehensive income
28 
 
 
 
 
Net income
544 
 
 
 
544 
Dividends declared
 
 
 
 
(1,357)
Balance at Sep. 30, 2012
20,197 
623 
19,052 
(984)
1,506 
Balance at Dec. 31, 2012
19,289 
626 
19,079 
(1,701)
1,285 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Issuance of common stock through dividend reinvestment, incentive and benefit plans
 
2 
50 
 
 
Repurchase of common stock
(1,240)
(35)
(1,219)
 
 
Shares withheld to satisfy tax withholdings
 
0 
(16)
 
 
Share-based compensation and other, net
 
 
60 
 
 
Other comprehensive income
41 
 
 
41 
 
Net income
(478)
 
 
 
(478)
Dividends declared
 
 
 
 
(980)
Balance at Sep. 30, 2013
$ 16,714 
$ 593 
$ 17,954 
$ (1,660)
$ (173)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical)
Sep. 30, 2013
Dec. 31, 2012
Sep. 30, 2012
Dec. 31, 2011
Statement of Stockholders' Equity [Abstract]
 
 
 
 
Common stock, par value (in dollars per share)
$ 1.00 
$ 1.00 
$ 1.00 
$ 1.00 
Basis of Presentation
Basis of Presentation
Basis of Presentation
We are an integrated communications company engaged primarily in providing an array of communications services to our residential, business, governmental and wholesale customers. Our communications services include local and long-distance, network access, private line (including special access), public access, broadband, data, managed hosting (including cloud hosting), colocation, wireless and video services. In certain local and regional markets, we also provide local access and fiber transport services to competitive local exchange carriers and security monitoring.
Our consolidated balance sheet as of December 31, 2012, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations for the first nine months of the year are not necessarily indicative of the consolidated results of operations that might be expected for the entire year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012.
The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries over which we exercise control. All intercompany amounts and transactions with our consolidated subsidiaries have been eliminated.
To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income (expense), (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other financing activities.
We have reclassified certain prior year balance sheet amounts presented in our Annual Report on Form 10-K for the year ended December 31, 2012 to conform to the current period presentation. Specifically, we have reclassified $123 million in software development costs, net of $30 million in accumulated amortization, from property, plant and equipment to other intangibles assets on our consolidated balance sheet as of December 31, 2012.
We also have reclassified certain other prior period amounts to conform to the current period presentation, including the categorization of our segment reporting. See Note 8—Segment Information for additional information. These changes had no impact on total revenues, total operating expenses or net (loss) income for any period.
Goodwill
Goodwill
Goodwill
During the first quarter of 2013, we reorganized our operating segments to support our new operating structure. As a result, we reassigned goodwill to our segments using a relative fair value allocation approach. In the table below we have reclassified $170 million from our data hosting segment to our business segment compared to the amounts disclosed in our prior 2013 quarterly reports. We determined that there was an error in the calculation used to reallocate goodwill related to our January 3, 2013 segment reorganization and we have revised our goodwill allocation relative to the fair values reflective of the segment changes at that date. This revision does not change the total amount of goodwill recorded on our consolidated balance sheet as of any prior period and would not have resulted in an impairment in a prior period.
 
 
As of
January 3, 2013
 
 
(Dollars in millions)
Consumer
 
$
10,379

Business
 
6,413

Wholesale
 
3,283

Data hosting
 
1,657

Total goodwill
 
$
21,732

For additional information on the reorganization of our segments, see Note 8—Segment Information.
We test our goodwill and other indefinite-lived intangible assets for impairment annually, or, under certain circumstances, more frequently, such as when events or circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our testing determines the recorded amount of goodwill exceeds the fair value. Our annual measurement date for testing goodwill impairment is September 30, at which date we test our reporting units, which are our four operating segments (consumer, business, wholesale and data hosting).
Our reporting units, which we refer to as our segments, are not discrete legal entities with discrete financial statements. Our assets and liabilities are employed in and relate to the operations of multiple reporting units. For each segment, we compare its estimated fair value to the carrying value of the assets that we attribute to the segment. If the estimated fair value of the segment is greater than the carrying value, we conclude that no impairment exists. If the estimated fair value of the segment is less than the carrying value, a second calculation is required in which the implied fair value of goodwill is compared to the carrying value of goodwill that we attribute to the segment. If the implied fair value of goodwill is less than its carrying value, goodwill must be written down to its implied fair value.
At September 30, 2013, as a result of the January 2013 internal reorganization of our four segments, we did not have a baseline valuation upon which to perform a qualitative assessment. Additionally, our stock price and total company forecasted cash flows declined since our previous quantitative assessment. Therefore, we are in the process of completing our goodwill impairment testing by considering both a market approach and a discounted cash flow method. The market approach method includes the use of comparable multiples of publicly traded companies whose services are comparable to ours. The discounted cash flow method is based on the present value of projected cash flows and a terminal value, which represents the expected normalized cash flows of the segments beyond the cash flows from the discrete projection period.
We have not yet completed our impairment testing. However, based on our analysis performed thus far with respect to these segments as described above, we believe that the goodwill related to the wholesale, consumer and business segments was not impaired as of September 30, 2013, but we believe that the goodwill for the data hosting segment was impaired as of September 30, 2013. The data hosting segment is experiencing slower than previously projected revenue and margin growth and greater than anticipated competitive pressures. As a result, we have estimated that the fair value of our data hosting segment is less than its carrying value.
We have not finalized our impairment estimate for the data hosting segment due to the limited time period from the testing date to the filing date for this report, as well as the time required to estimate the fair values of certain assets and liabilities for this segment. Although our analysis is incomplete, we recorded our best estimate of a non-cash, non-tax-deductible goodwill impairment charge of $1.1 billion during the third quarter of 2013 for goodwill attributed to our data hosting segment. We expect to complete our impairment analysis prior to reporting our financial results for the fourth quarter of 2013 and will record an adjustment, which could be material, to our preliminary estimate at that time.
As of September 30, 2013, we attributed our aggregate goodwill balance, after recording the above-described impairment to our data hosting segment, to our four segments as follows:
 
 
As of
September 30, 2013
 
 
(Dollars in millions)
Consumer
 
$
10,379

Business
 
6,413

Wholesale
 
3,283

Data hosting (1)
 
562

Total goodwill
 
$
20,637


_______________________________________________________________________________
(1) Data hosting includes an adjustment to goodwill for an immaterial acquisition in the second quarter of 2013.
Long-Term Debt and Credit Facilities
Long-Term Debt and Credit Facilities
Long-Term Debt and Credit Facilities
Long-term debt, including unamortized discounts and premiums, is as follows:
 
Interest Rates
 
Maturities
 
September 30, 2013
 
December 31, 2012
 
 
 
 
 
(Dollars in millions)
CenturyLink, Inc.
 
 
 
 
 
 
 
Senior notes
5.000% - 7.650%
 
2015 - 2042
 
$
7,075

 
6,250

Credit facility(1)
4.250%
 
2017
 
200

 
820

Term loan
2.430%
 
2019
 
407

 
424

Subsidiaries
 
 
 
 
 
 
 
Qwest
 
 
 
 
 
 
 
Senior notes
6.125% - 8.375%
 
2014 - 2053
 
9,192

 
9,168

Embarq
 
 
 
 
 
 
 
Senior notes
7.082% - 7.995%
 
2016 - 2036
 
2,669

 
2,669

First mortgage bonds
7.125% - 8.770%
 
2014 - 2025
 
262

 
322

Other
9.000%
 
2019
 
150

 
200

Capital lease and other obligations
Various
 
Various
 
653

 
734

Unamortized (discounts) premiums and other, net
 
 
 
 
(26
)
 
18

Total long-term debt
 
 
 
 
20,582

 
20,605

Less current maturities
 
 
 
 
(191
)
 
(1,205
)
Long-term debt, excluding current maturities
 
 
 
 
$
20,391

 
19,400

______________________________________________________________________________ 
(1) 
The outstanding amount of our Credit Facility borrowings at September 30, 2013 was $200 million with an interest rate of 4.250%. These amounts change on a regular basis.
New Issuances
On May 23, 2013, Qwest Corporation ("QC") issued $775 million aggregate principal amount of 6.125% Notes due 2053, including $25 million principal amount that was sold pursuant to an over-allotment option granted to the underwriters for the offering, in exchange for net proceeds, after deducting underwriting discounts and expenses, of approximately $752 million. The Notes are unsecured obligations and may be redeemed, in whole or in part, on or after June 1, 2018 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.
On March 21, 2013, CenturyLink, Inc. issued $1 billion aggregate principal amount of 5.625% Notes due 2020 in exchange for net proceeds, after deducting underwriting discounts and expenses, of approximately $988 million. The Notes are unsecured obligations and may be redeemed, in whole or in part, at any time at a redemption price equal to the greater of par or a "make-whole" rate specified in the Notes, plus accrued and unpaid interest to the redemption date. In addition, at any time on or prior to April 1, 2016, we may redeem up to 35% of the principal amount of the Notes at a redemption price equal to 105.625% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of certain equity offerings. Under certain circumstances, we will be required to make an offer to repurchase the Notes at a price of 101% of their aggregate principal amount plus accrued and unpaid interest to the repurchase date.
Repayments
On August 15, 2013, a subsidiary of Embarq Corporation ("Embarq") paid at maturity the $50 million principal amount of its 6.75% Notes.
On July 15, 2013, a subsidiary of Embarq paid at maturity the $59 million principal amount of its 6.875% Notes.
On June 17, 2013, QC paid at maturity the $750 million principal amount of its floating rate Notes.
On April 1, 2013, CenturyLink, Inc. paid at maturity the $176 million principal amount of its 5.50% Notes.
Covenants
As of September 30, 2013, we believe we were in compliance with the provisions and covenants contained in our Credit Facility and other debt agreements.
Severance and Leased Real Estate
Severance and Leased Real Estate
Severance and Leased Real Estate
Periodically, we have reductions in our workforce and have accrued liabilities for the related severance costs. These workforce reductions resulted primarily from the progression or completion of our integration plans, increased competitive pressures and reduced workload demands due to the loss of access lines.
We report severance liabilities within accrued expenses and other liabilities-salaries and benefits in our consolidated balance sheets and report severance expenses in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations. We have not allocated any severance expense to our consumer, business and wholesale segments.
We report the current portion of liabilities for real estate leases that we have ceased using in accrued expenses and other liabilities and report the noncurrent portion in other noncurrent liabilities under deferred credits and other liabilities in our consolidated balance sheets. We report the related expenses in selling, general and administrative expenses in our consolidated statements of operations. At September 30, 2013, the current and noncurrent portions of our leased real estate accrual were $18 million and $99 million, respectively. The remaining lease terms range from 0.3 to 12.3 years, with a weighted average of 8.7 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, 2012
$
17

 
131

Accrued to expense
17

 
—

Payments, net
(23
)
 
(12
)
Reversals and adjustments
—

 
(2
)
Balance at September 30, 2013
$
11

 
117

Employee Benefits
Employee Benefits
Employee Benefits
Net periodic pension benefit expense (income) included the following components:
 
Pension Plans
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Service cost
$
22

 
23

 
70

 
68

Interest cost
137

 
156

 
407

 
468

Expected return on plan assets
(224
)
 
(212
)
 
(672
)
 
(636
)
Recognition of prior service cost
1

 
1

 
4

 
3

Recognition of actuarial loss
20

 
7

 
61

 
22

Net periodic pension benefit expense (income)
$
(44
)
 
(25
)
 
(130
)
 
(75
)

Net periodic post-retirement benefit expense (income) included the following components:
 
Post-Retirement Benefit Plans
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Service cost
$
6

 
5

 
18

 
16

Interest cost
35

 
44

 
105

 
131

Expected return on plan assets
(10
)
 
(11
)
 
(30
)
 
(33
)
Recognition of actuarial loss
1

 
—

 
3

 
—

Net periodic post-retirement benefit expense (income)
$
32

 
38

 
96

 
114


We report net periodic benefit expense (income) for our qualified pension, non-qualified pension and post-retirement benefit plans in cost of services and products and selling, general and administrative expenses on our consolidated statements of operations.
(Loss) Earnings per Common Share
Earnings per Common Share
arnings per Common Share
Basic and diluted (loss) earnings per common share for the three and nine months ended September 30, 2013 and 2012 were calculated as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions, except per share amounts, shares in thousands)
(Loss) Income (Numerator):
 
 
 
 
 
 
 
Net (loss) income
$
(1,045
)
 
270

 
(478
)
 
544

Earnings applicable to non-vested restricted stock
—

 
—

 
—

 
(1
)
Net (loss) income applicable to common stock for computing basic (loss) earnings per common share
(1,045
)
 
270

 
(478
)
 
543

Net (loss) income as adjusted for purposes of computing diluted (loss) earnings per common share
$
(1,045
)
 
270

 
(478
)
 
543

Shares (Denominator):
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Outstanding during period
598,350

 
622,769

 
609,542

 
621,370

Non-vested restricted stock
(3,763
)
 
(2,541
)
 
(3,438
)
 
(2,582
)
Non-vested restricted stock units
—

 
920

 
—

 
960

Weighted average shares outstanding for computing basic (loss) earnings per common share
594,587

 
621,148

 
606,104

 
619,748

Incremental common shares attributable to dilutive securities:
 
 
 
 
 
 
 
Shares issuable under convertible securities
—

 
13

 
—

 
13

Shares issuable under incentive compensation plans
—

 
2,135

 
—

 
2,067

Number of shares as adjusted for purposes of computing diluted (loss) earnings per common share
594,587

 
623,296

 
606,104

 
621,828

Basic (loss) earnings per common share
$
(1.76
)
 
0.43

 
(0.79
)
 
0.88

Diluted (loss) earnings per common share (1)
$
(1.76
)
 
0.43

 
(0.79
)
 
0.87


______________________________________________________________________ 
(1) For the three and nine months ended September 30, 2013, we excluded from the calculation of diluted loss per share 1.16 million shares and 1.37 million shares, respectively, potentially issuable under incentive compensation plans or convertible securities, as their effect, if included, would have been anti-dilutive.
Our calculation of diluted (loss) 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 during the period. Such potentially issuable shares totaled 2.7 million and 2.0 million for the three months ended September 30, 2013 and 2012, respectively, and 2.5 million and 2.2 million for the nine months ended September 30, 2013 and 2012.
Fair Value Disclosure
Fair Value Disclosure
Fair Value Disclosure
Our financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and long-term debt, excluding capital lease obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate their fair values.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the Financial Accounting Standards Board ("FASB").
We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on discounted future cash flows using current market interest rates.
The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows:
Input Level
 
    Description of Input
Level 1
 
Observable inputs such as quoted market prices in active markets.
Level 2
 
Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3
 
Unobservable inputs in which little or no market data exists.

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease obligations, as well as the input level used to determine the fair values:
 
 
 
September 30, 2013
 
December 31, 2012
 
Input
Level
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
(Dollars in millions)
 
 
Liabilities—Long-term debt, excluding capital lease obligations
2
 
$
19,929

 
20,124

 
19,871

 
21,457

Segment Information
Segment Information
Segment Information
During the first quarter of 2013, we announced a reorganization of our operating segments. Consequently, since the first quarter of 2013, we have reported the following four segments in our consolidated financial statements: consumer, business, wholesale and data hosting. The primary purpose of the reorganization was to strengthen our focus on the business market while continuing our commitment to our wholesale, hosting and consumer customers. The reorganization combined business sales and operations functions that formerly resided in the enterprise markets—network segment and the regional markets segment into the new unified business segment. The remaining customers formerly serviced by the regional markets segment became the new consumer segment. Each of the current segments are described further below:
•
Consumer. Consists generally of providing strategic and legacy products and services to residential consumers. Our strategic products and services offered to these customers include our broadband, wireless and video services, including our Prism TV services. Our legacy services offered to these customers include local and long-distance service.
•
Business. Consists generally of providing strategic and legacy products and services to commercial, enterprise, global and governmental customers. Our strategic products and services offered to these customers include our private line, broadband, Ethernet, Multiprotocol Label Switching ("MPLS"), Voice over Internet Protocol ("VoIP"), and network management services. Our legacy services offered to these customers include local and long-distance service.
•
Wholesale. Consists generally of providing strategic and legacy products and services to other communications providers. Our strategic products and services offered to these customers are mainly private line (including special access), dedicated internet access, digital subscriber line ("DSL") and MPLS. Our legacy services offered to these customers include resale of our services, unbundled network elements ("UNEs") which allow our wholesale customers the use of our network or a combination of our network and their own networks to provide voice and data services to their customers, long-distance and switched access services and other services, including billing and collection, pole rental, floor space and database services.
•
Data hosting. Consists primarily of providing colocation, managed hosting and cloud hosting services to commercial, enterprise, global and governmental customers.
We have restated previously reported segment results for the three and nine months ended September 30, 2012, due to the above-described restructuring of our business. Segment results are summarized below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Total segment revenues
$
4,267

 
4,314

 
12,799

 
13,004

Total segment expenses
2,105

 
2,071

 
6,112

 
6,154

Total segment income
$
2,162

 
2,243

 
6,687

 
6,850

Total margin percentage
50.7
%
 
52.0
%
 
52.2
%
 
52.7
%
Consumer:
 
 
 
 
 
 
 
Revenues
$
1,503

 
1,536

 
4,508

 
4,640

Expenses
580

 
585

 
1,657

 
1,720

Income
$
923

 
951

 
2,851

 
2,920

Margin percentage
61.4
%
 
61.9
%
 
63.2
%
 
62.9
%
Business:
 
 
 
 
 
 
 
Revenues
$
1,544

 
1,541

 
4,573

 
4,586

Expenses
958

 
936

 
2,776

 
2,789

Income
$
586

 
605

 
1,797

 
1,797

Margin percentage
38.0
%
 
39.3
%
 
39.3
%
 
39.2
%
Wholesale:
 
 
 
 
 
 
 
Revenues
$
878

 
910

 
2,695

 
2,818

Expenses
293

 
304

 
868

 
929

Income
$
585

 
606

 
1,827

 
1,889

Margin percentage
66.6
%
 
66.6
%
 
67.8
%
 
67.0
%
Data hosting:
 
 
 
 
 
 
 
Revenues
$
342

 
327

 
1,023

 
960

Expenses
274

 
246

 
811

 
716

Income
$
68

 
81

 
212

 
244

Margin percentage
19.9
%
 
24.8
%
 
20.7
%
 
25.4
%

We categorize our products and services into the following four categories:
•
Strategic services, which include primarily broadband, private line (including special access which we market to wholesale and business customers), MPLS (which is a data networking technology that can deliver the quality of service required to support real-time voice and video), hosting (including cloud hosting and managed hosting), colocation, Ethernet, video (including resold satellite and our facilities-based video services), VoIP and Verizon Wireless services;
•
Legacy services, which include primarily local, long-distance, switched access, Integrated Services Digital Network ("ISDN") (which uses regular telephone lines to support voice, video and data applications), and traditional wide area network ("WAN") services (which allows a local communications network to link to networks in remote locations);
•
Data integration, which includes the sale of telecommunications equipment located on customers' premises and related professional services, such as network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our government and business customers; and
•
Other revenues, which consist primarily of Universal Service Fund ("USF") revenue and surcharges. Unlike the first three revenue categories, other revenues are not included in our segment revenues.
Our operating revenues for our products and services consisted of the following categories:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Strategic services
$
2,189

 
2,101

 
6,495

 
6,237

Legacy services
1,915

 
2,045

 
5,834

 
6,284

Data integration
163

 
168

 
470

 
483

Other
248

 
257

 
754

 
789

Total operating revenues
$
4,515

 
4,571

 
13,553

 
13,793


Other operating revenues include revenues from universal service funds which allow us to recover a portion of our costs under federal and state cost recovery mechanisms and certain surcharges to our customers, including billings for our required contributions to several USF programs. These surcharge billings to our customers are reflected on a gross basis in our statements of operations (included in equal amounts in both operating revenues and expenses) and aggregated approximately $368 million and $398 million for the nine months ended September 30, 2013 and 2012, respectively. We also generate other operating revenues from leasing and subleasing of space in our office buildings, warehouses and other properties. We centrally manage the activities that generate these other operating revenues and consequently these revenues are not included in any of our four segments presented in the segment results table above.
Our segment revenues include all revenues from our strategic, legacy and data integration operations as described in more detail above. Segment revenues are based upon each customer's classification to an individual segment. We report our segment revenues based upon all services provided to that segment's customers, with the exception of data hosting revenue generated from business and wholesale customers, which is reported as data hosting segment revenues. We report our segment expenses for our four segments as follows:
•
Direct expenses, which primarily are specific expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are directly associated with specific segment customers or activities; and
•
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. Similarly, severance expenses, restructuring expenses and, subject to an exception for our data hosting segment, 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 total company basis and have not allocated assets or debt to specific segments. Other income (expense) does not relate to our segment operations and is therefore excluded from our segment results. In addition, our assets and capital expenditures are not monitored by or reported to the chief operating decision maker ("CODM") by segment.
The following table reconciles segment income to net (loss) income:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Total segment income
$
2,162

 
2,243

 
6,687

 
6,850

Other operating revenues
248

 
257

 
754

 
789

Depreciation and amortization
(1,135
)
 
(1,144
)
 
(3,375
)
 
(3,560
)
Impairment of goodwill (Note 2)
(1,100
)
 
—

 
(1,100
)
 
—

Other unassigned operating expenses
(860
)
 
(620
)
 
(2,154
)
 
(2,032
)
Other income (expense), net
(320
)
 
(314
)
 
(918
)
 
(1,171
)
Income tax expense
(40
)
 
(152
)
 
(372
)
 
(332
)
Net (loss) income
$
(1,045
)
 
270

 
(478
)
 
544

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
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. Until and unless a class has been certified by the court, it has not been established that the named plaintiffs represent the class of plaintiffs they purport to represent.
We have established accrued liabilities only for the matters described below where losses are deemed probable and reasonably estimable.
We are vigorously defending against all of the matters described below. As a matter of course, we are prepared both to litigate the matters to judgment, as well as to evaluate and consider all settlement opportunities.
Litigation Matters Relating to CenturyLink and Embarq
In December 2009, subsidiaries of CenturyLink filed two lawsuits against subsidiaries of Sprint Nextel to recover terminating access charges for VoIP traffic owed under various interconnection agreements and tariffs which presently approximate $34 million in the aggregate. The lawsuits allege that Sprint Nextel has breached contracts, violated tariffs, and violated the Federal Communications Act by failing to pay these charges. One lawsuit, filed on behalf of all legacy Embarq operating entities, was tried in federal court in Virginia in August 2010 and, in March 2011, a ruling was issued in our favor and against Sprint Nextel. That ruling was affirmed on appeal, and Sprint's petition for further review by the U.S. Supreme Court has been denied. As a result, this lawsuit is concluded and, as of September 30, 2013, Sprint has paid us approximately $24 million in connection with this lawsuit. The other lawsuit, filed on behalf of all Legacy CenturyLink operating entities, is pending in federal court in Louisiana. In that case, in early 2011 the Court dismissed certain of CenturyLink's claims, referred other claims to the FCC, and stayed the litigation. In April 2012, Sprint Nextel filed a petition with the FCC, seeking a declaratory ruling that CenturyLink's access charges do not apply to VoIP originated calls. We have not deferred revenue related to these matters because we do not believe an adverse outcome is probable based upon current circumstances.
In William Douglas Fulghum, et al. v. Embarq Corporation, et al., filed on December 28, 2007 in the United States District Court for the District of Kansas, a group of retirees filed a putative class action lawsuit challenging the decision to make certain modifications in retiree benefits programs relating to life insurance, medical insurance and prescription drug benefits, generally effective January 1, 2006 and January 1, 2008 (which, at the time of the modifications, was expected to reduce estimated future expenses for the subject benefits by more than $300 million). Defendants include Embarq, certain of its benefit plans, its Employee Benefits Committee and the individual plan administrator of certain of its benefits plans. Additional defendants include Sprint Nextel and certain of its benefit plans. The Court certified a class on certain of plaintiffs' claims, but rejected class certification as to other claims. Embarq and other defendants continue to vigorously contest these claims and charges. On October 14, 2011, the Fulghum lawyers filed a new, related lawsuit, Abbott et al. v. Sprint Nextel et al. CenturyLink/Embarq is not named a defendant in the lawsuit. In Abbott, approximately 1,500 plaintiffs allege breach of fiduciary duty in connection with the changes in retiree benefits that also are at issue in the Fulghum case. The Abbott plaintiffs are all members of the class that was certified in Fulghum on claims for allegedly vested benefits (Counts I and III), and the Abbott claims are similar to the Fulghum breach of fiduciary duty claim (Count II), on which the Fulghum court denied class certification. The Court has stayed proceedings in Abbott indefinitely. On February 14, 2013, the Fulghum court dismissed the majority of the plaintiffs' claims in that case. On July 16, 2013, the Fulghum court granted plaintiffs' request to seek interlocutory review by the United States Court of Appeals for the Tenth Circuit. Embarq and the other defendants will defend the appeal, continue to vigorously contest any remaining claims in Fulghum and seek to have the claims in the Abbott case dismissed on similar grounds. We have not accrued a liability for these matters because we believe it is premature (i) to determine whether an accrual is warranted and, (ii) if so, to determine a reasonable estimate of probable liability.
Litigation Matters Relating to Qwest
On July 16, 2013, Comcast MO Group, Inc. ("Comcast") filed a lawsuit in Colorado state court against Qwest Communications International, Inc. ("Qwest"). Comcast alleges Qwest breached the parties' 1998 tax sharing agreement ("TSA") when it refused to partially indemnify Comcast for a tax liability settlement Comcast reached with the Commonwealth of Massachusetts in a dispute to which we were not a party. Comcast seeks approximately $80 million in damages, excluding interest. Qwest and Comcast are parties to the TSA in their capacities as successors to the TSA's original parties, U S WEST, Inc., a telecommunications company, and MediaOne Group, Inc., a cable television company, respectively. We have not accrued a liability for this matter because we do not believe that liability is probable.
On September 29, 2010, the trustees in the Dutch bankruptcy proceeding for KPNQwest, N.V. (of which Qwest was a major shareholder) filed a lawsuit in the District Court of Haarlem, the Netherlands, alleging tort and mismanagement claims under Dutch law. Qwest and Koninklijke KPN N.V. ("KPN") are defendants in this lawsuit along with a number of former KPNQwest supervisory board members and a former officer of KPNQwest, some of whom were formerly affiliated with Qwest. Plaintiffs allege, among other things, that defendants' actions were a cause of the bankruptcy of KPNQwest, and they seek damages for the bankruptcy deficit of KPNQwest, which is claimed to be approximately €4.2 billion (or approximately $5.7 billion based on the exchange rate on September 30, 2013), plus statutory interest. Two lawsuits asserting similar claims were previously filed against Qwest and others in federal courts in New Jersey in 2004 and Colorado in 2009; those courts dismissed the lawsuits without prejudice on the grounds that the claims should not be litigated in the United States.
In October 2013 following a confidential mediation, Qwest, KPN, and the trustees reached a tentative oral agreement on the principal financial terms of a potential settlement. The potential settlement terms include Qwest's payment of €172 million (or approximately $233 million based on the exchange rate on September 30, 2013) to the KPNQwest bankruptcy estate pursuant to its indemnification obligations, discussed below. The tentative settlement is subject to several conditions, including the negotiation and execution of a definitive settlement agreement acceptable to the plaintiffs and various other defendants and the approval of the Dutch bankruptcy court.
On September 13, 2006, Cargill Financial Markets, Plc and Citibank, N.A. filed a lawsuit in the District Court of Amsterdam, the Netherlands, against Qwest, KPN, KPN Telecom B.V., and other former officers, employees or supervisory board members of KPNQwest, some of whom were formerly affiliated with Qwest. The lawsuit alleges that defendants misrepresented KPNQwest's financial and business condition in connection with the origination of a credit facility and wrongfully allowed KPNQwest to borrow funds under that facility. Plaintiffs allege damages of approximately €219 million (or approximately $296 million based on the exchange rate on September 30, 2013). The value of this claim will be reduced to the degree plaintiffs receive recovery from the tentative trustee settlement described above. While we expect the plaintiffs would receive proceeds from any such trustee settlement, the amounts of such expected recovery are not yet known. On April 25, 2012, the court issued its judgment denying the claims asserted by Cargill and Citibank in their lawsuit. Cargill and Citibank are appealing that decision.
Regarding the 2010 proceeding filed by the trustees, we have accrued a liability in the third quarter of 2013 in the pre-tax amount of €172 million (or approximately $233 million reflected in our accompanying consolidated financial statements based on the exchange rate on September 30, 2013) which equals Qwest's proposed contribution under the terms of the tentative settlement. In the event that a settlement is not finalized, we will continue to defend against the matter vigorously. Regarding the 2006 suit brought by Cargill Financial Markets, Plc and Citibank. N.A., we do not believe that liability is probable and will continue to defend against the matter vigorously.
The terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate Qwest to indemnify its former directors, officers or employees with respect to certain of the matters described above, and Qwest has been advancing legal fees and costs to certain former directors, officers or employees in connection with certain matters described above.
Several putative class actions relating to the installation of fiber optic cable in certain rights-of-way were filed against Qwest on behalf of landowners on various dates and in courts located in 34 states in which Qwest has such cable (Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin.) For the most part, the complaints challenge our right to install our fiber optic cable in railroad rights-of-way. The complaints allege that the railroads own the right-of-way as an easement that did not include the right to permit us to install our cable in the right-of-way without the plaintiffs' consent. Most of the currently pending actions purport to be brought on behalf of state-wide classes in the named plaintiffs' respective states, although one action pending before the Illinois Court of Appeals purports to be brought on behalf of landowners in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin. In general, the complaints seek damages on theories of trespass and unjust enrichment, as well as punitive damages. After previous attempts to enter into a single nationwide settlement in a single court proved unsuccessful, the parties proceeded to seek court approval of settlements on a state-by-state basis. To date, the parties have received final approval of such settlements in 29 states (Alabama, California, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia and Wisconsin), have received only preliminary approval of the settlement in one state (Kentucky), and have not yet received either preliminary or final approval in one state where an action is pending (Texas) and three states where actions were at one time, but are not currently, pending (Arizona, Massachusetts, and New Mexico). We have accrued an amount that we believe is probable for these matters; however, the amount is not material to our consolidated financial statements.
Securities Actions
CenturyLink and certain of its affiliates are defendants in two securities and four shareholder derivative actions. The securities actions are pending in federal court in the Southern District of New York and the derivative actions are pending in federal court in the Eastern and Western Districts of Louisiana, and Louisiana state court. Plaintiffs in these actions have variously alleged, among other things, that CenturyLink and certain of its current and former officers and directors violated federal securities laws and/or breached fiduciary duties owed to the Company and its shareholders. Plaintiffs' complaints focus on alleged material misstatements or omissions concerning CenturyLink's financial condition and changes in CenturyLink's capital allocation strategy in early 2013.
The matters are in preliminary phases and the Company intends to defend against the filed actions vigorously. We have not accrued a liability for these matters as it is premature (i) to determine whether an accrual is warranted and (ii) if so, to determine a reasonable estimate of probable liability.
Other Matters
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 rate making, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies, and miscellaneous third party tort actions. 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 insurance coverage, will have a material adverse effect on our financial position, results of operations or cash flows.
Other Financial Information
Other Financial Information
Other Financial Information
Other Current Assets
Other current assets reflected on our consolidated balance sheets consisted of the following:
 
September 30, 2013
 
December 31, 2012
 
(Dollars in millions)
Prepaid expenses
$
277

 
257

Materials, supplies and inventory
172

 
125

Assets held for sale
—

 
96

Deferred activation and installation charges
69

 
53

Other
45

 
21

Total other current assets
$
563

 
552


In January 2013, we sold $43 million of our wireless spectrum assets held for sale. The sale resulted in a gain of $32 million, which is recorded as other income on our consolidated statements of operations. During the quarter ended June 30, 2013, we reclassified our remaining $53 million of wireless spectrum assets from held for sale to other intangible assets on our consolidated balance sheet. Although we continue to pursue selling our remaining spectrum assets, we no longer expect to reach agreements with purchasers within the coming twelve months.
Selected Current Liabilities
Current liabilities reflected in our consolidated balance sheets include accounts payable and other current liabilities as follows:
 
September 30, 2013
 
December 31, 2012
 
(Dollars in millions)
Accounts payable
$
1,158

 
1,207

Other current liabilities:
 
 
 
Accrued rent
$
46

 
48

Legal reserves
266

 
39

Unsettled repurchased common shares
18

 
—

Other
168

 
147

Total other current liabilities
$
498

 
234


We had approximately $132 million and $132 million in book overdrafts included in accounts payable at September 30, 2013 and December 31, 2012, respectively.
Labor Union Contracts
Labor Union Contracts
Labor Union Contracts
Approximately 37% of our employees are members of various bargaining units represented by the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW"). Approximately 12,000, or 26%, of our employees are subject to collective bargaining agreements that expired October 6, 2012, and an additional 1,600 or 4% of our employees are subject to additional collective bargaining agreement that have expired since then. Since the expirations, we have been negotiating the terms of new agreements. Recently, we reached conditional agreements with CWA District 7 and IBEW Local 206 for a four-year collective bargaining agreement covering approximately 12,000 of our employees. After rejecting the initial agreements, the CWA and IBEW members approved the second agreements, and they became effective on October 25, 2013. The new agreements will expire on October 7, 2017.
Repurchase of CenturyLink Common Stock
Repurchase of CenturyLink Common Stock
Repurchase of CenturyLink Common Stock
In February 2013, the board of directors authorized us to repurchase up to $2 billion of our outstanding common stock. During the nine months ended September 30, 2013, we repurchased 35.2 million shares of our outstanding common stock in the open market. These shares were repurchased for an aggregate market price of $1.24 billion, or an average purchase price of $35.09 per share. The repurchased common stock has been retired. As of September 30, 2013, we had approximately $764 million in stock remaining available for repurchase under the Stock Repurchase Program. The figures set forth above exclude shares that, as of September 30, 2013, we had agreed to purchase under the program for $18 million, or an average purchase price of $31.76 per share, in transactions that settled early in the fourth quarter of 2013.
Other Comprehensive Earnings
Other Comprehensive Earnings
Other Comprehensive Earnings
The tables below summarize changes in our accumulated other comprehensive income (loss) recorded on our consolidated balance sheet by component for the three and nine months ended September 30, 2013, respectively:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at June 30, 2013
$
(1,372
)
 
(288
)
 
(27
)
 
(1,687
)
Other comprehensive (loss) income before reclassifications
—

 
—

 
13

 
13

Amounts reclassified from accumulated other comprehensive income
13

 
1

 
—

 
14

Net current-period other comprehensive income (loss)
13

 
1

 
13

 
27

Balance at September 30, 2013
$
(1,359
)
 
(287
)
 
(14
)
 
(1,660
)

 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at December 31, 2012
$
(1,399
)
 
(289
)
 
(13
)
 
(1,701
)
Other comprehensive (loss) income before reclassifications
—

 
—

 
(1
)
 
(1
)
Amounts reclassified from accumulated other comprehensive income
40

 
2

 
—

 
42

Net current-period other comprehensive income (loss)
40

 
2

 
(1
)
 
41

Balance at September 30, 2013
$
(1,359
)
 
(287
)
 
(14
)
 
(1,660
)
The tables below present information about our reclassifications out of accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2013, respectively:
Three Months Ended September 30, 2013
 
Decrease (Increase)
in Net Loss
 
Affected Line Item in Consolidated Statement of
Operations or Footnote Where Additional
Information is Presented If The Amount is not
Recognized in Net Income in Total
 
 
(Dollars in millions)
 
 
Amortization of pension & post-retirement plans
 
 
 
 
Net actuarial loss
 
$
(21
)
 
See Note 5-Employee Benefits
Prior service cost
 
(1
)
 
See Note 5-Employee Benefits
Total before tax
 
(22
)
 
 
Income tax expense (benefit)
 
8

 
Income tax expense
Net of tax
 
$
(14
)
 
 


Nine Months Ended September 30, 2013
 
Decrease (Increase)
in Net Loss
 
Affected Line Item in Consolidated Statement of
Operations or Footnote Where Additional
Information is Presented If The Amount is not
Recognized in Net Income in Total
 
 
(Dollars in millions)
 
 
Amortization of pension & post-retirement plans
 
 
 
 
Net actuarial loss
 
$
(64
)
 
See Note 5-Employee Benefits
Prior service cost
 
(4
)
 
See Note 5-Employee Benefits
Total before tax
 
(68
)
 
 
Income tax expense (benefit)
 
26

 
Income tax expense
Net of tax
 
$
(42
)
 
 
Goodwill (Tables)
Schedule of goodwill attributable to segments
As of September 30, 2013, we attributed our aggregate goodwill balance, after recording the above-described impairment to our data hosting segment, to our four segments as follows:
 
 
As of
September 30, 2013
 
 
(Dollars in millions)
Consumer
 
$
10,379

Business
 
6,413

Wholesale
 
3,283

Data hosting (1)
 
562

Total goodwill
 
$
20,637

Long-Term Debt and Credit Facilities (Tables)
Schedule of long-term debt including unamortized discounts and premiums
Long-term debt, including unamortized discounts and premiums, is as follows:
 
Interest Rates
 
Maturities
 
September 30, 2013
 
December 31, 2012
 
 
 
 
 
(Dollars in millions)
CenturyLink, Inc.
 
 
 
 
 
 
 
Senior notes
5.000% - 7.650%
 
2015 - 2042
 
$
7,075

 
6,250

Credit facility(1)
4.250%
 
2017
 
200

 
820

Term loan
2.430%
 
2019
 
407

 
424

Subsidiaries
 
 
 
 
 
 
 
Qwest
 
 
 
 
 
 
 
Senior notes
6.125% - 8.375%
 
2014 - 2053
 
9,192

 
9,168

Embarq
 
 
 
 
 
 
 
Senior notes
7.082% - 7.995%
 
2016 - 2036
 
2,669

 
2,669

First mortgage bonds
7.125% - 8.770%
 
2014 - 2025
 
262

 
322

Other
9.000%
 
2019
 
150

 
200

Capital lease and other obligations
Various
 
Various
 
653

 
734

Unamortized (discounts) premiums and other, net
 
 
 
 
(26
)
 
18

Total long-term debt
 
 
 
 
20,582

 
20,605

Less current maturities
 
 
 
 
(191
)
 
(1,205
)
Long-term debt, excluding current maturities
 
 
 
 
$
20,391

 
19,400

______________________________________________________________________________ 
(1) 
The outstanding amount of our Credit Facility borrowings at September 30, 2013 was $200 million with an interest rate of 4.250%. These amounts change on a regular basis.
Severance and Leased Real Estate (Tables)
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, 2012
$
17

 
131

Accrued to expense
17

 
—

Payments, net
(23
)
 
(12
)
Reversals and adjustments
—

 
(2
)
Balance at September 30, 2013
$
11

 
117

Employee Benefits (Tables)
Schedule of components of net periodic pension benefit (income) expense and post-retirement benefit expense
 
Pension Plans
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Service cost
$
22

 
23

 
70

 
68

Interest cost
137

 
156

 
407

 
468

Expected return on plan assets
(224
)
 
(212
)
 
(672
)
 
(636
)
Recognition of prior service cost
1

 
1

 
4

 
3

Recognition of actuarial loss
20

 
7

 
61

 
22

Net periodic pension benefit expense (income)
$
(44
)
 
(25
)
 
(130
)
 
(75
)

Net periodic post-retirement benefit expense (income) included the following components:
 
Post-Retirement Benefit Plans
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Service cost
$
6

 
5

 
18

 
16

Interest cost
35

 
44

 
105

 
131

Expected return on plan assets
(10
)
 
(11
)
 
(30
)
 
(33
)
Recognition of actuarial loss
1

 
—

 
3

 
—

Net periodic post-retirement benefit expense (income)
$
32

 
38

 
96

 
114

Net periodic pension benefit expense (income) included the following components:
 
Pension Plans
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Service cost
$
22

 
23

 
70

 
68

Interest cost
137

 
156

 
407

 
468

Expected return on plan assets
(224
)
 
(212
)
 
(672
)
 
(636
)
Recognition of prior service cost
1

 
1

 
4

 
3

Recognition of actuarial loss
20

 
7

 
61

 
22

Net periodic pension benefit expense (income)
$
(44
)
 
(25
)
 
(130
)
 
(75
)
(Loss) Earnings per Common Share (Tables)
Schedule of basic and diluted earnings per common share
Basic and diluted (loss) earnings per common share for the three and nine months ended September 30, 2013 and 2012 were calculated as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions, except per share amounts, shares in thousands)
(Loss) Income (Numerator):
 
 
 
 
 
 
 
Net (loss) income
$
(1,045
)
 
270

 
(478
)
 
544

Earnings applicable to non-vested restricted stock
—

 
—

 
—

 
(1
)
Net (loss) income applicable to common stock for computing basic (loss) earnings per common share
(1,045
)
 
270

 
(478
)
 
543

Net (loss) income as adjusted for purposes of computing diluted (loss) earnings per common share
$
(1,045
)
 
270

 
(478
)
 
543

Shares (Denominator):
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Outstanding during period
598,350

 
622,769

 
609,542

 
621,370

Non-vested restricted stock
(3,763
)
 
(2,541
)
 
(3,438
)
 
(2,582
)
Non-vested restricted stock units
—

 
920

 
—

 
960

Weighted average shares outstanding for computing basic (loss) earnings per common share
594,587

 
621,148

 
606,104

 
619,748

Incremental common shares attributable to dilutive securities:
 
 
 
 
 
 
 
Shares issuable under convertible securities
—

 
13

 
—

 
13

Shares issuable under incentive compensation plans
—

 
2,135

 
—

 
2,067

Number of shares as adjusted for purposes of computing diluted (loss) earnings per common share
594,587

 
623,296

 
606,104

 
621,828

Basic (loss) earnings per common share
$
(1.76
)
 
0.43

 
(0.79
)
 
0.88

Diluted (loss) earnings per common share (1)
$
(1.76
)
 
0.43

 
(0.79
)
 
0.87

Fair Value Disclosure (Tables)
Schedule of the three input levels in the hierarchy of fair value measurements 
The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows:
Input Level
 
    Description of Input
Level 1
 
Observable inputs such as quoted market prices in active markets.
Level 2
 
Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3
 
Unobservable inputs in which little or no market data exists.
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values 
The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease obligations, as well as the input level used to determine the fair values:
 
 
 
September 30, 2013
 
December 31, 2012
 
Input
Level
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
(Dollars in millions)
 
 
Liabilities—Long-term debt, excluding capital lease obligations
2
 
$
19,929

 
20,124

 
19,871

 
21,457

Segment Information (Tables)
Schedule of segment results 
We have restated previously reported segment results for the three and nine months ended September 30, 2012, due to the above-described restructuring of our business. Segment results are summarized below:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Total segment revenues
$
4,267

 
4,314

 
12,799

 
13,004

Total segment expenses
2,105

 
2,071

 
6,112

 
6,154

Total segment income
$
2,162

 
2,243

 
6,687

 
6,850

Total margin percentage
50.7
%
 
52.0
%
 
52.2
%
 
52.7
%
Consumer:
 
 
 
 
 
 
 
Revenues
$
1,503

 
1,536

 
4,508

 
4,640

Expenses
580

 
585

 
1,657

 
1,720

Income
$
923

 
951

 
2,851

 
2,920

Margin percentage
61.4
%
 
61.9
%
 
63.2
%
 
62.9
%
Business:
 
 
 
 
 
 
 
Revenues
$
1,544

 
1,541

 
4,573

 
4,586

Expenses
958

 
936

 
2,776

 
2,789

Income
$
586

 
605

 
1,797

 
1,797

Margin percentage
38.0
%
 
39.3
%
 
39.3
%
 
39.2
%
Wholesale:
 
 
 
 
 
 
 
Revenues
$
878

 
910

 
2,695

 
2,818

Expenses
293

 
304

 
868

 
929

Income
$
585

 
606

 
1,827

 
1,889

Margin percentage
66.6
%
 
66.6
%
 
67.8
%
 
67.0
%
Data hosting:
 
 
 
 
 
 
 
Revenues
$
342

 
327

 
1,023

 
960

Expenses
274

 
246

 
811

 
716

Income
$
68

 
81

 
212

 
244

Margin percentage
19.9
%
 
24.8
%
 
20.7
%
 
25.4
%
Schedule of operating revenues by products and services 
Our operating revenues for our products and services consisted of the following categories:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Strategic services
$
2,189

 
2,101

 
6,495

 
6,237

Legacy services
1,915

 
2,045

 
5,834

 
6,284

Data integration
163

 
168

 
470

 
483

Other
248

 
257

 
754

 
789

Total operating revenues
$
4,515

 
4,571

 
13,553

 
13,793

Schedule of reconciliation of segment income to net income 
The following table reconciles segment income to net (loss) income:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
 
(Dollars in millions)
Total segment income
$
2,162

 
2,243

 
6,687

 
6,850

Other operating revenues
248

 
257

 
754

 
789

Depreciation and amortization
(1,135
)
 
(1,144
)
 
(3,375
)
 
(3,560
)
Impairment of goodwill (Note 2)
(1,100
)
 
—

 
(1,100
)
 
—

Other unassigned operating expenses
(860
)
 
(620
)
 
(2,154
)
 
(2,032
)
Other income (expense), net
(320
)
 
(314
)
 
(918
)
 
(1,171
)
Income tax expense
(40
)
 
(152
)
 
(372
)
 
(332
)
Net (loss) income
$
(1,045
)
 
270

 
(478
)
 
544

Other Financial Information (Tables)
Schedule of components of other current assets 
Other current assets reflected on our consolidated balance sheets consisted of the following:
 
September 30, 2013
 
December 31, 2012
 
(Dollars in millions)
Prepaid expenses
$
277

 
257

Materials, supplies and inventory
172

 
125

Assets held for sale
—

 
96

Deferred activation and installation charges
69

 
53

Other
45

 
21

Total other current assets
$
563

 
552

Schedule of current liabilities included accounts payable and other current liabilities 
Current liabilities reflected in our consolidated balance sheets include accounts payable and other current liabilities as follows:
 
September 30, 2013
 
December 31, 2012
 
(Dollars in millions)
Accounts payable
$
1,158

 
1,207

Other current liabilities:
 
 
 
Accrued rent
$
46

 
48

Legal reserves
266

 
39

Unsettled repurchased common shares
18

 
—

Other
168

 
147

Total other current liabilities
$
498

 
234

Other Comprehensive Earnings (Tables)
Summary of the entity's accumulated other comprehensive income (loss) by component 
The tables below summarize changes in our accumulated other comprehensive income (loss) recorded on our consolidated balance sheet by component for the three and nine months ended September 30, 2013, respectively:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at June 30, 2013
$
(1,372
)
 
(288
)
 
(27
)
 
(1,687
)
Other comprehensive (loss) income before reclassifications
—

 
—

 
13

 
13

Amounts reclassified from accumulated other comprehensive income
13

 
1

 
—

 
14

Net current-period other comprehensive income (loss)
13

 
1

 
13

 
27

Balance at September 30, 2013
$
(1,359
)
 
(287
)
 
(14
)
 
(1,660
)
Schedule of reclassifications out of accumulated other comprehensive income (loss) by component 
The tables below present information about our reclassifications out of accumulated other comprehensive income (loss) by component for the three and nine months ended September 30, 2013, respectively:
Three Months Ended September 30, 2013
 
Decrease (Increase)
in Net Loss
 
Affected Line Item in Consolidated Statement of
Operations or Footnote Where Additional
Information is Presented If The Amount is not
Recognized in Net Income in Total
 
 
(Dollars in millions)
 
 
Amortization of pension & post-retirement plans
 
 
 
 
Net actuarial loss
 
$
(21
)
 
See Note 5-Employee Benefits
Prior service cost
 
(1
)
 
See Note 5-Employee Benefits
Total before tax
 
(22
)
 
 
Income tax expense (benefit)
 
8

 
Income tax expense
Net of tax
 
$
(14
)
 
 

Basis of Presentation Basis of Presentation (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2013
Dec. 31, 2012
Software and Software Development Costs [Member]
Dec. 31, 2012
Accumulated amortization [Member]
Prior Period Reclassification Adjustment
$ 170 
$ 123 
$ 30 
Goodwill (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Mar. 31, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Jan. 3, 2013
Dec. 31, 2012
Goodwill
 
 
 
 
 
 
 
Prior Period Reclassification Adjustment
 
$ 170 
 
 
 
 
 
Impairment of goodwill (Note 2)
(1,100)
 
0 
(1,100)
0 
 
 
Goodwill
20,637 
 
 
20,637 
 
21,732 
21,732 
Consumer
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
Goodwill
10,379 
 
 
10,379 
 
10,379 
 
Business
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
Goodwill
6,413 
 
 
6,413 
 
6,413 
 
Wholesale
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
Goodwill
3,283 
 
 
3,283 
 
3,283 
 
Data hosting
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
 
 
Goodwill
$ 562 
 
 
$ 562 
 
$ 1,657 
 
Long-Term Debt and Credit Facilities (Details) (USD $)
0 Months Ended 9 Months Ended 0 Months Ended
Sep. 30, 2013
Dec. 31, 2012
Sep. 30, 2013
CenturyLink, Inc.
Senior notes
Dec. 31, 2012
CenturyLink, Inc.
Senior notes
Sep. 30, 2013
CenturyLink, Inc.
Senior notes
Minimum
Sep. 30, 2013
CenturyLink, Inc.
Senior notes
Maximum
Apr. 2, 2013
CenturyLink, Inc.
5.50% Notes
Sep. 30, 2013
CenturyLink, Inc.
Credit facility
Dec. 31, 2012
CenturyLink, Inc.
Credit facility
Sep. 30, 2013
CenturyLink, Inc.
Term loan
Dec. 31, 2012
CenturyLink, Inc.
Term loan
Mar. 21, 2013
CenturyLink, Inc.
5.625% Notes due 2020
Sep. 30, 2013
CenturyLink, Inc.
5.625% Notes due 2020
Sep. 30, 2013
CenturyLink, Inc.
5.625% Notes due 2020
Maximum
Sep. 30, 2013
Qwest Communications International Inc.
Senior notes
Dec. 31, 2012
Qwest Communications International Inc.
Senior notes
Sep. 30, 2013
Qwest Corporation
Senior notes
Minimum
Sep. 30, 2013
Qwest Corporation
Senior notes
Maximum
Jun. 17, 2013
Qwest Corporation
Notes Bearing Floating Interest Rate Due 2013
May 23, 2013
Qwest Corporation
6.125% Notes due 2053
Sep. 30, 2013
Embarq
Senior notes
Dec. 31, 2012
Embarq
Senior notes
Sep. 30, 2013
Embarq
Senior notes
Minimum
Sep. 30, 2013
Embarq
Senior notes
Maximum
Sep. 30, 2013
Embarq
First mortgage bonds
Jul. 15, 2013
Embarq
First mortgage bonds
Dec. 31, 2012
Embarq
First mortgage bonds
Sep. 30, 2013
Embarq
First mortgage bonds
Minimum
Sep. 30, 2013
Embarq
First mortgage bonds
Maximum
Sep. 30, 2013
Embarq
Other
Dec. 31, 2012
Embarq
Other
Long-term Debt and Credit Facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt
 
 
$ 7,075,000,000 
$ 6,250,000,000 
 
 
 
$ 200,000,000 
$ 820,000,000 
$ 407,000,000 
$ 424,000,000 
 
 
 
$ 9,192,000,000 
$ 9,168,000,000 
 
 
 
 
$ 2,669,000,000 
$ 2,669,000,000 
 
 
$ 262,000,000 
 
$ 322,000,000 
 
 
$ 150,000,000 
$ 200,000,000 
Capital lease and other obligations
653,000,000 
734,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized (discounts) premiums and other, net
26,000,000 
(18,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total long-term debt
20,582,000,000 
20,605,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less current maturities
(191,000,000)
(1,205,000,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, excluding current maturities
20,391,000,000 
19,400,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stated interest rate (as a percent)
 
 
 
 
5.00% 
7.65% 
5.50% 
4.25% 
 
2.43% 
 
5.625% 
 
 
 
 
6.125% 
8.375% 
 
6.125% 
 
 
7.082% 
7.995% 
 
6.875% 
 
7.125% 
8.77% 
9.00% 
 
Aggregate principal amount of debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
775,000,000 
 
 
 
 
 
 
 
 
 
 
 
Principal amount of debt that was sold pursuant to an over-allotment option granted to the underwriters
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25,000,000 
 
 
 
 
 
 
 
 
 
 
 
Net proceeds from issuance of debt
 
 
 
 
 
 
 
 
 
 
 
988,000,000 
 
 
 
 
 
 
 
752,000,000 
 
 
 
 
 
 
 
 
 
 
 
Redemption price of debt instrument that may be redeemed (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
105.625% 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
Principal amount of notes issued
 
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of the principal amounts of the debt instrument, which the entity may redeem (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
35.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amount of debt repaid
 
 
 
 
 
 
$ 176,000,000 
 
 
 
 
 
 
 
 
 
 
 
$ 750,000,000 
 
 
 
 
 
 
$ 59,000,000 
 
 
 
 
 
Redemption price as a percentage of principal amount (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
101.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Severance and Leased Real Estate (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2013
Severance
 
Restructuring reserve
 
Balance at the beginning of the period
$ 17 
Accrued to expense
17 
Payments, net
(23)
Reversals and adjustments
0 
Balance at the end of the period
11 
Leased real estate
 
Severance and Leased Real Estate
 
Current portion of leased real estate accrual
18 
Noncurrent portion of leased real estate accrual
99 
Restructuring reserve
 
Balance at the beginning of the period
131 
Accrued to expense
0 
Payments, net
(12)
Reversals and adjustments
(2)
Balance at the end of the period
$ 117 
Ceased-use leased real estate accrual |
Leased real estate |
Minimum
 
Severance and Leased Real Estate
 
Remaining lease terms
0 years 3 months 30 days 
Ceased-use leased real estate accrual |
Leased real estate |
Maximum
 
Severance and Leased Real Estate
 
Remaining lease terms
12 years 3 months 4 days 
Ceased-use leased real estate accrual |
Leased real estate |
Weighted average
 
Severance and Leased Real Estate
 
Weighted average lease terms
8 years 8 months 29 days 
Employee Benefits (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Pension Plans
 
 
 
 
Components of net periodic (benefit) expense
 
 
 
 
Service cost
$ 22 
$ 23 
$ 70 
$ 68 
Interest cost
137 
156 
407 
468 
Expected return on plan assets
(224)
(212)
(672)
(636)
Recognition of prior service cost
1 
1 
4 
3 
Recognition of actuarial loss
20 
7 
61 
22 
Net periodic benefit (income) expense
(44)
(25)
(130)
(75)
Post-Retirement Benefit Plans
 
 
 
 
Components of net periodic (benefit) expense
 
 
 
 
Service cost
6 
5 
18 
16 
Interest cost
35 
44 
105 
131 
Expected return on plan assets
(10)
(11)
(30)
(33)
Recognition of actuarial loss
1 
0 
3 
0 
Net periodic benefit (income) expense
$ 32 
$ 38 
$ 96 
$ 114 
(Loss) Earnings per Common Share (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Income (Numerator):
 
 
 
 
NET (LOSS) INCOME
$ (1,045)
$ 270 
$ (478)
$ 544 
Earnings applicable to non-vested restricted stock
0 
0 
0 
(1)
Net (loss) income applicable to common stock for computing basic (loss) earnings per common share
(1,045)
270 
(478)
543 
Net (loss) income as adjusted for purposes of computing diluted (loss) earnings per common share
$ (1,045)
$ 270 
$ (478)
$ 543 
Weighted average number of shares:
 
 
 
 
Outstanding during period (in shares)
598,350,000 
622,769,000 
609,542,000 
621,370,000 
Non-vested restricted stock (in shares)
(3,763,000)
(2,541,000)
(3,438,000)
(2,582,000)
Non-vested restricted stock units (in shares)
0 
920,000 
0 
960,000 
Weighted average shares outstanding for computing basic (loss) earnings per common share (in shares)
594,587,000 
621,148,000 
606,104,000 
619,748,000 
Incremental common shares attributable to dilutive securities:
 
 
 
 
Shares issuable under convertible securities (in shares)
0 
13,000 
0 
13,000 
Shares issuable under incentive compensation plans (in shares)
0 
2,135,000 
0 
2,067,000 
Number of shares as adjusted for purposes of computing diluted (loss) earnings per common share (in shares)
594,587,000 
623,296,000 
606,104,000 
621,828,000 
Basic earnings per common share:
 
 
 
 
Basic (loss) earnings per common share (in dollars per share)
$ (1.76)
$ 0.43 
$ (0.79)
$ 0.88 
Diluted earnings per common share:
 
 
 
 
Diluted (loss) earnings per common share (in dollars per share)
$ (1.76)
$ 0.43 
$ (0.79)
$ 0.87 
Number of shares of common stock excluded from the computation of diluted earnings per share (in shares)
1,160,000 
 
1,370,000 
 
Stock option awards
 
 
 
 
Diluted earnings per common share:
 
 
 
 
Number of shares of common stock excluded from the computation of diluted earnings per share (in shares)
2,700,000 
2,000,000 
2,500,000 
2,200,000 
Fair Value Disclosure (Details) (Fair value, Level 2, USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Dec. 31, 2012
Carrying Amount
 
 
Liabilities
 
 
Liabilities - Long-term debt, excluding capital lease obligations
$ 19,929 
$ 19,871 
Fair Value
 
 
Liabilities
 
 
Liabilities - Long-term debt, excluding capital lease obligations
$ 20,124 
$ 21,457 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
segment
Sep. 30, 2012
Segment information
 
 
 
 
Number of operating segments (segments)
 
 
4 
 
Expenses
$ 5,200 
$ 3,835 
$ 12,741 
$ 11,746 
OPERATING (LOSS) INCOME
(685)
736 
812 
2,047 
Operating segments
 
 
 
 
Segment information
 
 
 
 
Revenues
4,267 
4,314 
12,799 
13,004 
Expenses
2,105 
2,071 
6,112 
6,154 
OPERATING (LOSS) INCOME
2,162 
2,243 
6,687 
6,850 
Margin percentage (percent)
50.70% 
52.00% 
52.20% 
52.70% 
Consumer
 
 
 
 
Segment information
 
 
 
 
Revenues
1,503 
1,536 
4,508 
4,640 
Expenses
580 
585 
1,657 
1,720 
OPERATING (LOSS) INCOME
923 
951 
2,851 
2,920 
Margin percentage (percent)
61.40% 
61.90% 
63.20% 
62.90% 
Business
 
 
 
 
Segment information
 
 
 
 
Revenues
1,544 
1,541 
4,573 
4,586 
Expenses
958 
936 
2,776 
2,789 
OPERATING (LOSS) INCOME
586 
605 
1,797 
1,797 
Margin percentage (percent)
38.00% 
39.30% 
39.30% 
39.20% 
Wholesale
 
 
 
 
Segment information
 
 
 
 
Revenues
878 
910 
2,695 
2,818 
Expenses
293 
304 
868 
929 
OPERATING (LOSS) INCOME
585 
606 
1,827 
1,889 
Margin percentage (percent)
66.60% 
66.60% 
67.80% 
67.00% 
Data Hosting
 
 
 
 
Segment information
 
 
 
 
Revenues
342 
327 
1,023 
960 
Expenses
274 
246 
811 
716 
OPERATING (LOSS) INCOME
$ 68 
$ 81 
$ 212 
$ 244 
Margin percentage (percent)
19.90% 
24.80% 
20.70% 
25.40% 
Segment Information (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
category
Sep. 30, 2012
Operating revenues by products and services
 
 
 
 
Number of groups of products and services (categories)
 
 
4 
 
Number of groups of products and services included in segment revenue (categories)
 
 
3 
 
Other operating revenue
$ 4,515 
$ 4,571 
$ 13,553 
$ 13,793 
Surcharge amount on customers' bills
 
 
368 
398 
Strategic services
 
 
 
 
Operating revenues by products and services
 
 
 
 
Other operating revenue
2,189 
2,101 
6,495 
6,237 
Legacy services
 
 
 
 
Operating revenues by products and services
 
 
 
 
Other operating revenue
1,915 
2,045 
5,834 
6,284 
Data integration
 
 
 
 
Operating revenues by products and services
 
 
 
 
Other operating revenue
163 
168 
470 
483 
Other
 
 
 
 
Operating revenues by products and services
 
 
 
 
Other operating revenue
$ 248 
$ 257 
$ 754 
$ 789 
Segment Information (Details 3) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Reconciliation from segment income to net income
 
 
 
 
Total segment income
$ (685)
$ 736 
$ 812 
$ 2,047 
Other operating revenue
4,515 
4,571 
13,553 
13,793 
Depreciation and amortization
(1,135)
(1,144)
(3,375)
(3,560)
Impairment of goodwill (Note 2)
1,100 
0 
1,100 
0 
Other unassigned operating expenses
(1,047)
(748)
(2,679)
(2,454)
Other income (expense), net
(320)
(314)
(918)
(1,171)
Income tax expense
(40)
(152)
(372)
(332)
Net (loss) income
(1,045)
270 
(478)
544 
Operating segments
 
 
 
 
Reconciliation from segment income to net income
 
 
 
 
Total segment income
2,162 
2,243 
6,687 
6,850 
Unallocated amount to segment
 
 
 
 
Reconciliation from segment income to net income
 
 
 
 
Other operating revenue
248 
257 
754 
789 
Depreciation and amortization
1,135 
1,144 
3,375 
3,560 
Impairment of goodwill (Note 2)
(1,100)
0 
(1,100)
0 
Other unassigned operating expenses
860 
620 
2,154 
2,032 
Other income (expense), net
(320)
(314)
(918)
(1,171)
Income tax expense
$ 40 
$ 152 
$ 372 
$ 332 
Commitments and Contingencies (Details)
In Millions, unless otherwise specified
1 Months Ended 24 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended
Aug. 31, 2010
Pending litigation related to Federal Communications Act
lawsuit
Sep. 30, 2013
Pending litigation related to Federal Communications Act
USD ($)
Dec. 31, 2009
Pending litigation related to Federal Communications Act
USD ($)
Dec. 31, 2007
William Douglas Fulghum, et al. v. Embarq Corporation
USD ($)
Sep. 30, 2013
Abbott et al. v. Sprint Nextel et al.
plaintiff
Jul. 17, 2013
Comcast
Qwest
USD ($)
Sep. 30, 2013
KPNQwest
USD ($)
Sep. 30, 2013
KPNQwest
EUR (€)
Dec. 31, 2009
KPNQwest
lawsuit
Sep. 30, 2013
Cargill Financial Markets, Plc and Citibank, N.A.
USD ($)
Sep. 30, 2013
Cargill Financial Markets, Plc and Citibank, N.A.
EUR (€)
Sep. 30, 2013
Fiber-optic cable installation
Qwest
state
lawsuit
Sep. 30, 2013
Securities Actions
lawsuit
Sep. 30, 2013
Derivative actions
lawsuit
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of lawsuits filed (lawsuits)
 
 
 
 
 
 
 
 
2 
 
 
 
 
 
Charges claimed against Sprint Nextel
 
 
$ 34 
 
 
 
 
 
 
 
 
 
 
 
Number of claims with favorable ruling (lawsuits)
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charges received from Sprint Nextel
 
24 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of modifications made to Embarq's benefits program, greater than
 
 
 
300 
 
 
 
 
 
 
 
 
 
 
Number of plaintiffs have alleged breach of fiduciary duty (plaintiffs)
 
 
 
 
1,500 
 
 
 
 
 
 
 
 
 
Litigation Matters Assumed in Qwest Acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Damages sought by plaintiff
 
 
 
 
 
$ 80 
$ 5,700 
€ 4,200 
 
$ 296 
€ 219 
 
 
 
Number of states in which service is provided (states)
 
 
 
 
 
 
 
 
 
 
 
34 
 
 
Number of action pending before the Illinois Court of Appeals to be brought on behalf of landowner in Illinois, Iowa, Kentucky, Michigan, Minnesota, Nebraska, Ohio and Wisconsin (lawsuit)
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
Number of states in which final approval of settlements received (states)
 
 
 
 
 
 
 
 
 
 
 
29 
 
 
Number of states in which preliminary approval of settlements were received (states)
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
Number of states in which preliminary or final approval of settlements have not yet been received (states)
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
Number of actions (lawsuits)
 
 
 
 
 
 
 
 
 
 
 
 
2 
4 
Other Financial Information (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended
Jan. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Dec. 31, 2012
Other Current Assets
 
 
 
 
Prepaid expenses
 
$ 277 
 
$ 257 
Materials, supplies and inventory
 
172 
 
125 
Assets held for sale
 
0 
 
96 
Deferred activation and installation charges
 
69 
 
53 
Other
 
45 
 
21 
Total other current assets
 
563 
 
552 
Sale of wireless spectrum assets
43 
 
 
 
Gain on sale of wireless spectrum assets
32 
 
 
 
Reclassification of assets from held for sale to other intangible assets
 
 
53 
 
Current liabilities
 
 
 
 
Accounts payable
 
1,158 
 
1,207 
Other current liabilities:
 
 
 
 
Accrued rent
 
46 
 
48 
Legal reserves
 
266 
 
39 
Unsettled repurchased common shares
 
18 
 
0 
Other
 
168 
 
147 
Total other current liabilities
 
498 
 
234 
Book overdraft balance
 
$ 132 
 
$ 132 
Labor Union Contracts (Details)
9 Months Ended 0 Months Ended
Sep. 30, 2013
Sep. 30, 2013
Collective bargaining agreements that expired on October 6, 2012
Employee
Sep. 30, 2013
Collective bargaining agreements that expired after October 6, 2012
Employee
Jul. 30, 2013
Employees covered under collective bargaining agreements
Employee
Labor Union Contracts
 
 
 
 
Percentage of employees who are members of bargaining units (as a percent)
37.00% 
 
 
 
Number of employees covered under the agreement (employees)
 
12,000 
1,600 
12,000 
Percentage of concentration risk (as a percent)
 
26.00% 
4.00% 
 
Period of labor contract
 
 
 
4 years 
Repurchase of CenturyLink Common Stock (Details) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
1 Months Ended 9 Months Ended
Feb. 28, 2013
Sep. 30, 2013
Equity [Abstract]
 
 
Stock repurchases, aggregate authorized amount
$ 2,000,000,000 
 
Number of shares repurchased (shares)
 
35.2 
Aggregate market price of shares repurchased
 
1,240,000,000 
Average purchase price at which shares were repurchased (in dollars per share)
 
$ 35.09 
Stock repurchases, remaining authorized amount
 
764,000,000 
Aggregate market value of shares agreed to be repurchased, in transactions that will settle early in the fourth quarter of 2013
 
$ 18,000,000 
Average purchase price of shares agreed to be repurchased, in transactions that will settle early in the fourth quarter of 2013 (in dollars per share)
 
$ 31.76 
Other Comprehensive Earnings (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
$ (1,687)
 
$ (1,701)
 
Other comprehensive (loss) income before reclassifications
13 
 
(1)
 
Amounts reclassified from accumulated other comprehensive income
14 
 
42 
 
Other comprehensive income
27 
14 
41 
28 
Balance at the end of the period
(1,660)
 
(1,660)
 
Defined benefit plan |
Pension Plans
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(1,372)
 
(1,399)
 
Other comprehensive (loss) income before reclassifications
0 
 
0 
 
Amounts reclassified from accumulated other comprehensive income
13 
 
40 
 
Other comprehensive income
13 
 
40 
 
Balance at the end of the period
(1,359)
 
(1,359)
 
Defined benefit plan |
Post-Retirement Benefit Plans
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(288)
 
(289)
 
Other comprehensive (loss) income before reclassifications
0 
 
0 
 
Amounts reclassified from accumulated other comprehensive income
1 
 
2 
 
Other comprehensive income
1 
 
2 
 
Balance at the end of the period
(287)
 
(287)
 
Foreign Currency Translation Adjustment and Other
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(27)
 
(13)
 
Other comprehensive (loss) income before reclassifications
13 
 
(1)
 
Amounts reclassified from accumulated other comprehensive income
0 
 
0 
 
Other comprehensive income
13 
 
(1)
 
Balance at the end of the period
$ (14)
 
$ (14)
 
Other Comprehensive Earnings (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Reclassifications out of accumulated other comprehensive income (loss) by component
 
 
 
 
Total before tax
$ 1,005 
$ (422)
$ 106 
$ (876)
Income tax expense (benefit)
(40)
(152)
(372)
(332)
NET INCOME
(1,045)
270 
(478)
544 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
 
 
 
Reclassifications out of accumulated other comprehensive income (loss) by component
 
 
 
 
Net actuarial loss
21 
 
64 
 
Prior service cost
(1)
 
(4)
 
Total before tax
22 
 
68 
 
Income tax expense (benefit)
8 
 
26 
 
NET INCOME
$ (14)
 
$ (42)