CENTURYLINK, INC, 10-Q filed on 8/6/2015
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2015
Jul. 31, 2015
Document and Entity Information
 
 
Entity Registrant Name
CENTURYLINK, INC 
 
Entity Central Index Key
0000018926 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2015 
 
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
 
562,985,838 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q2 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Income Statement [Abstract]
 
 
 
 
OPERATING REVENUES
$ 4,419 
$ 4,541 
$ 8,870 
$ 9,079 
OPERATING EXPENSES
 
 
 
 
Cost of services and products (exclusive of depreciation and amortization)
1,959 
1,962 
3,870 
3,897 
Selling, general and administrative
863 
831 
1,714 
1,674 
Depreciation and amortization
1,048 
1,093 
2,088 
2,200 
Total operating expenses
3,870 
3,886 
7,672 
7,771 
OPERATING INCOME
549 
655 
1,198 
1,308 
OTHER (EXPENSE) INCOME
 
 
 
 
Interest expense
(327)
(325)
(655)
(656)
Other income (expense), net
12 
(7)
14 
2 
Total other expense, net
(315)
(332)
(641)
(654)
INCOME BEFORE INCOME TAX EXPENSE
234 
323 
557 
654 
Income tax expense
91 
130 
222 
258 
Net income
$ 143 
$ 193 
$ 335 
$ 396 
BASIC AND DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
BASIC (in dollars per share)
$ 0.26 
$ 0.34 
$ 0.60 
$ 0.69 
DILUTED (in dollars per share)
$ 0.26 
$ 0.34 
$ 0.60 
$ 0.69 
DIVIDENDS DECLARED PER COMMON SHARE (in dollars per share)
$ 0.54 
$ 0.54 
$ 1.08 
$ 1.08 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
 
 
 
BASIC (in shares)
558,640 
567,915 
560,304 
571,225 
DILUTED (in shares)
559,220 
569,032 
561,362 
572,244 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 143 
$ 193 
$ 335 
$ 396 
Items related to employee benefit plans:
 
 
 
 
Change in net actuarial loss, net of $(15), $(2), $(30) and $(4) tax
27 
3 
50 
6 
Change in net prior service costs, net of $(3), $(3), $(5) and $(5) tax
4 
5 
8 
8 
Foreign currency translation adjustment and other, net of $-, $-, $- and $- tax
11 
8 
0 
9 
Other comprehensive income
42 
16 
58 
23 
COMPREHENSIVE INCOME
$ 185 
$ 209 
$ 393 
$ 419 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
 
Change in net actuarial loss, tax
$ 15 
$ 2 
$ 30 
$ 4 
Change in net prior service credit, tax
3 
3 
5 
5 
Foreign currency translation adjustment and other, tax
$ 0 
$ 0 
$ 0 
$ 0 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
CURRENT ASSETS
 
 
Cash and cash equivalents
$ 155 
$ 128 
Accounts receivable, less allowance of $155 and $162
1,955 
1,988 
Deferred income taxes, net
596 
880 
Other
599 
580 
Total current assets
3,305 
3,576 
NET PROPERTY, PLANT AND EQUIPMENT
 
 
Property, plant and equipment
37,642 
36,718 
Accumulated depreciation
(19,553)
(18,285)
Net property, plant and equipment
18,089 
18,433 
GOODWILL AND OTHER ASSETS
 
 
Goodwill
20,758 
20,755 
Customer relationships, less accumulated amortization of $5,177 and $4,682
4,399 
4,893 
Other intangible assets, less accumulated amortization of $1,714 and $1,729
1,586 
1,647 
Other, net
840 
843 
Total goodwill and other assets
27,583 
28,138 
TOTAL ASSETS
48,977 
50,147 
CURRENT LIABILITIES
 
 
Current maturities of long-term debt
1,519 
550 
Accounts payable
1,049 
1,226 
Accrued expenses and other liabilities
 
 
Salaries and benefits
576 
641 
Income and other taxes
423 
309 
Interest
260 
256 
Other
225 
210 
Advance billings and customer deposits
745 
726 
Total current liabilities
4,797 
3,918 
LONG-TERM DEBT
18,834 
20,121 
DEFERRED CREDITS AND OTHER LIABILITIES
 
 
Deferred income taxes, net
3,834 
4,030 
Benefit plan obligations, net
5,696 
5,808 
Other
1,229 
1,247 
Total deferred credits and other liabilities
10,759 
11,085 
COMMITMENTS AND CONTINGENCIES (Note 8)
   
   
STOCKHOLDERS' EQUITY
 
 
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 shares, issued and outstanding 7 and 7 shares
0 
0 
Common stock, $1.00 par value, authorized 1,600,000 and 1,600,000 shares, issued and outstanding 562,999 and 568,517 shares
563 
569 
Additional paid-in capital
15,896 
16,324 
Accumulated other comprehensive loss
(1,959)
(2,017)
Retained earnings
87 
147 
Total stockholders' equity
14,587 
15,023 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 48,977 
$ 50,147 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
 
 
Accounts receivable, allowance
$ 155 
$ 162 
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)
562,999 
568,517 
Common stock, outstanding shares (shares)
562,999 
568,517 
Customer relationships, accumulated amortization
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-lived intangible assets, accumulated amortization
5,177 
4,682 
Other intangible assets, accumulated amortization
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Finite-lived intangible assets, accumulated amortization
$ 1,714 
$ 1,729 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
OPERATING ACTIVITIES
 
 
Net income
$ 335 
$ 396 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
2,088 
2,200 
Impairment of assets
8 
32 
Deferred income taxes
53 
208 
Provision for uncollectible accounts
84 
63 
Net long-term debt premium amortization
(8)
(21)
Share-based compensation
38 
42 
Changes in current assets and liabilities:
 
 
Accounts receivable
(51)
(72)
Accounts payable
(112)
75 
Accrued income and other taxes
120 
(11)
Other current assets and liabilities, net
(50)
(356)
Retirement benefits
(19)
(102)
Changes in other noncurrent assets and liabilities, net
(11)
66 
Other, net
6 
(11)
Net cash provided by operating activities
2,481 
2,509 
INVESTING ACTIVITIES
 
 
Payments for property, plant and equipment and capitalized software
(1,272)
(1,401)
Proceeds from sale of intangible assets or property
26 
0 
Other, net
(12)
(18)
Net cash used in investing activities
(1,258)
(1,419)
FINANCING ACTIVITIES
 
 
Net proceeds from issuance of long-term debt
594 
0 
Payments of long-term debt
(506)
(121)
Net (payments) borrowings on credit facility and revolving line of credit
(405)
120 
Dividends paid
(609)
(616)
Net proceeds from issuance of common stock
9 
32 
Repurchase of common stock
(277)
(493)
Other, net
(2)
1 
Net cash used in financing activities
(1,196)
(1,077)
Net increase in cash and cash equivalents
27 
13 
Cash and cash equivalents at beginning of period
128 
168 
Cash and cash equivalents at end of period
155 
181 
Supplemental cash flow information:
 
 
Income taxes paid, net
(41)
(23)
Interest paid (net of capitalized interest of $29 and $22)
$ (654)
$ (672)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Statement of Cash Flows [Abstract]
 
 
Interest paid, capitalized interest
$ 29 
$ 22 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Total
COMMON STOCK
ADDITIONAL PAID-IN CAPITAL
ACCUMULATED OTHER COMPREHENSIVE LOSS
RETAINED EARNINGS
Balance at beginning of period at Dec. 31, 2013
 
$ 584 
$ 17,343 
$ (802)
$ 66 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Issuance of common stock through dividend reinvestment, incentive and benefit plans
 
2 
30 
 
 
Repurchase of common stock
 
(15)
(441)
 
 
Shares withheld to satisfy tax withholdings
 
 
(14)
 
 
Other comprehensive income
23 
 
 
23 
 
Net income
396 
 
 
 
396 
Dividends declared
 
 
(289)
 
(327)
Share-based compensation and other, net
 
 
42 
 
 
Balance at end of period at Jun. 30, 2014
16,598 
571 
16,671 
(779)
135 
Balance at beginning of period at Dec. 31, 2014
15,023 
569 
16,324 
(2,017)
147 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
Issuance of common stock through dividend reinvestment, incentive and benefit plans
 
1 
7 
 
 
Repurchase of common stock
 
(7)
(247)
 
 
Shares withheld to satisfy tax withholdings
 
 
(17)
 
 
Other comprehensive income
58 
 
 
58 
 
Net income
335 
 
 
 
335 
Dividends declared
 
 
(211)
 
(395)
Share-based compensation and other, net
 
 
40 
 
 
Balance at end of period at Jun. 30, 2015
$ 14,587 
$ 563 
$ 15,896 
$ (1,959)
$ 87 
Basis of Presentation
Basis of Presentation
Basis of Presentation
General
We are an integrated communications company engaged primarily in providing an array of communications services to our residential and business customers. Our communications services include local and long-distance, broadband, private line (including special access), Multi-Protocol Label Switching ("MPLS"), data integration, managed hosting (including cloud hosting), colocation, Ethernet, network and public access, wireless, video and other ancillary services.
Our consolidated balance sheet as of December 31, 2014, 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 six 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, 2014.
The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated.
To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other income, net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities.
We pay dividends out of retained earnings to the extent we have retained earnings on the date the dividend is declared. If the dividend is in excess of our retained earnings on the declaration date, then the excess is drawn from our additional paid-in capital.
We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenues and our segment reporting. See Note 7—Segment Information for additional information. These changes had no impact on total operating revenues, total operating expenses or net income for any period.
Changes in Estimates
During the third quarter of 2014, we developed a plan to migrate customers from one of our networks to another over a one-year period beginning in the fourth quarter of 2014. As a result, we implemented changes in estimates that reduced the remaining economic lives of certain network assets. The increase in depreciation expense from the changes in estimates is expected to be more than fully offset by decreases in depreciation expense resulting from normal aging of our property, plant and equipment. These changes in the estimated remaining economic lives resulted in an increase in depreciation expense of approximately $12 million and $24 million for the three and six months ended June 30, 2015, respectively, and are expected to increase depreciation expense by approximately $48 million for the year ending December 31, 2015. This increase in depreciation expense, net of tax, reduced consolidated net income by approximately $7 million and $15 million, or $0.01 and $0.03 per basic and diluted common share, for the three and six months ended June 30, 2015, respectively, and is expected to reduce consolidated net income by approximately $30 million, or $0.05 per basic and diluted common share, for the year ending December 31, 2015.
Recent Accounting Pronouncements
Debt Issuance Costs
On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 is effective for annual and interim periods beginning after December 15, 2015, and must be adopted by retrospectively applying the new standard to all periods presented in the financial statements. ASU 2015-03 may be adopted early for any financial statements that have not been issued.
ASU 2015-03 requires that the deferred costs associated with a debt issuance be recognized as a reduction in the carrying amount of the related debt rather than presented as a deferred charge included in other assets in our financial statements. ASU 2015-03 does not change the standards for recognizing deferred debt issuance costs. As of June 30, 2015, we had approximately $170 million of unamortized debt issuance costs that upon adoption of ASU 2015-03 will be reclassified from other assets and recognized as a reduction in the carrying value of our long-term debt.
Revenue Recognition
On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09” or “new standard”). The new standard replaces virtually all existing generally accepted accounting principles (“GAAP”) on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We currently do not defer any contract acquisition costs and defer contract fulfillment costs only up to the extent of any revenue deferred.
On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year until January 1, 2018. Early adoption is permitted as of January 1, 2017. ASU 2014-09 may be adopted by applying the provisions of the new standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2017, if adopting early, otherwise in the first quarter of 2018. We have not yet decided which implementation method we will adopt. We are studying the new standard and are in the early stages of assessing the impact the new standard will have on us and our consolidated financial statements. We cannot, however, provide any estimate of the impact of adopting the new standard at this time.
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, consisted of borrowings by CenturyLink, Inc. and certain of its subsidiaries, including Qwest Corporation ("QC"), Qwest Capital Funding, Inc. and Embarq Corporation and subsidiaries ("Embarq") and is summarized as follows:
 
Interest Rates
 
Maturities
 
As of June 30,   2015
 
As of December 31, 2014
 
 
 
 
 
(Dollars in millions)
CenturyLink, Inc.
 
 
 
 
 
 
 
Senior notes
5.150% - 7.650%
 
2017 - 2042
 
$
7,975

 
7,825

Credit facility and revolving line of credit(1)
1.937% - 4.000%
 
2019
 
320

 
725

Term loan
1.940%
 
2019
 
369

 
380

Subsidiaries
 
 
 
 
 
 
 
Qwest Corporation
 
 
 
 
 
 
 
Senior notes
6.125% - 8.375%
 
2016 - 2054
 
7,219

 
7,311

Term loan
1.940%
 
2025
 
100

 
—

Qwest Capital Funding, Inc.
 
 
 
 
 
 
 
Senior notes
6.500% - 7.750%
 
2018 - 2031
 
981

 
981

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

 
2,669

First mortgage bonds
7.125% - 8.770%
 
2017 - 2025
 
232

 
232

Other
9.000%
 
2019
 
150

 
150

Capital lease and other obligations
Various
 
Various
 
457

 
509

Unamortized discounts, net
 
 
 
 
(119
)
 
(111
)
Total long-term debt
 
 
 
 
20,353

 
20,671

Less current maturities
 
 
 
 
(1,519
)
 
(550
)
Long-term debt, excluding current maturities
 
 
 
 
$
18,834

 
20,121

______________________________________________________________________ 
(1) 
The total outstanding amount of our credit facility ("Credit Facility") and revolving line of credit borrowings at June 30, 2015 and December 31, 2014, were $320 million and $725 million, respectively, with weighted average interest rates of 2.000% and 2.270%, respectively. These amounts change on a regular basis.
New Issuances
On March 19, 2015, we issued $500 million aggregate principal amount of 5.625% Notes due 2025, in exchange for net proceeds, after deducting underwriting discounts and other expenses, of approximately $494 million. The Notes are senior unsecured obligations and may be redeemed, in whole or in part, at any time before January 1, 2025 at a redemption price equal to the greater of 100% of the principal amount of the Notes or the sum of the present value of the remaining scheduled payments of principal and interest on the Notes, discounted to the redemption date in the manner described in the Notes, plus accrued and unpaid interest to the redemption date. At any time on or after January 1, 2025, we may redeem the Notes at par plus accrued and unpaid interest to the redemption date. In addition, at any time on or prior to April 1, 2018, 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 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 the aggregate principal amount plus accrued and unpaid interest to the repurchase date.
Repayments
On June 15, 2015, QC paid at maturity the $92 million principal amount of their 7.625% Notes.
On February 17, 2015, we paid at maturity the $350 million principal and accrued and unpaid interest due under our Series M 5.000% Notes.
Term Loans and Revolving Line of Credit
On March 13, 2015, we amended our term loan agreement to reduce the interest rate payable by us thereunder and to modify some covenants to provide additional flexibility.
On February 20, 2015, QC entered into a term loan in the amount of $100 million with CoBank, ACB. The outstanding unpaid principal amount of this term loan plus any accrued and unpaid interest is due on February 20, 2025, the maturity date of the loan. Interest is paid monthly based upon either the London Interbank Offered Rate (“LIBOR”) or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50% to 2.50% per annum for LIBOR loans and 0.50% to 1.50% per annum for base rate loans depending on QC's then current senior unsecured long-term debt rating. As of June 30, 2015, the outstanding principal balance on this term loan was $100 million.
In January 2015, we entered into a $100 million uncommitted revolving line of credit with one of the lenders under the Credit Facility. The amount available under this uncommitted revolving line of credit is reduced by any amount outstanding under the Credit Facility with the same lender. Interest is paid monthly based upon the LIBOR plus an applicable margin between 1.00% and 2.25% per annum.
Covenants
As of June 30, 2015, we believe we were in compliance with the provisions and covenants contained in our Credit Facility and other material 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 post-acquisition integration plans, increased competitive pressures, cost reduction initiatives and reduced workload demands due to the loss of customers purchasing certain legacy services.
We report severance liabilities within accrued expenses and other liabilities - salaries and benefits in our consolidated balance sheets and report severance expenses in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations. As noted in Note 7—Segment Information, we do not allocate these severance expenses to our segments.
We have recognized liabilities to reflect our estimates of the fair values of the existing lease obligations for real estate which we have ceased using, net of estimated sublease rentals. Our fair value estimates were determined using discounted cash flow methods. We recognize expense to reflect accretion of the discounted liabilities and periodically we adjust the expense when our actual subleasing experience differs from our initial estimates. We report the current portion of liabilities for ceased-use real estate leases in accrued expenses and other liabilities - other and report the noncurrent portion in deferred credits and other liabilities in our consolidated balance sheets. We report the related expenses in selling, general and administrative expenses in our consolidated statements of operations. At June 30, 2015, the current and noncurrent portions of our leased real estate accrual were $10 million and $76 million, respectively. The remaining lease terms range from 0.2 to 10.5 years, with a weighted average of 8.5 years.
Changes in our accrued liabilities for severance expenses and leased real estate during the first six months of 2015 were as follows:
 
Severance
 
Real Estate
 
(Dollars in millions)
Balance at December 31, 2014
$
26

 
96

Accrued to expense
32

 
—

Payments, net
(36
)
 
(7
)
Reversals and adjustments
—

 
(3
)
Balance at June 30, 2015
$
22

 
86

Employee Benefits
Employee Benefits
Employee Benefits
Net periodic (income) expense for our qualified and non-qualified pension plans included the following components:
 
Pension Plans
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Service cost
$
20

 
19

 
42

 
39

Interest cost
142

 
151

 
283

 
302

Expected return on plan assets
(223
)
 
(223
)
 
(449
)
 
(446
)
Recognition of prior service cost
2

 
3

 
3

 
4

Recognition of actuarial loss
42

 
5

 
80

 
10

Net periodic pension benefit income
$
(17
)
 
(45
)
 
(41
)
 
(91
)

Net periodic expense (income) for our post-retirement benefit plans included the following components:
 
Post-Retirement Benefit Plans
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Service cost
$
6

 
5

 
12

 
11

Interest cost
35

 
40

 
70

 
79

Expected return on plan assets
(5
)
 
(8
)
 
(10
)
 
(16
)
Recognition of prior service cost
5

 
5

 
10

 
9

Net periodic post-retirement benefit expense
$
41

 
42

 
82

 
83


We report net periodic benefit (income) expense for our qualified pension, non-qualified pension and post-retirement benefit plans in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations.
Earnings per Common Share
Earnings per Common Share
Earnings Per Common Share
Basic and diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 were calculated as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions, except per share amounts, shares in thousands)
Income (Numerator):
 
 
 
 
 
 
 
Net income
$
143

 
193

 
335

 
396

Earnings applicable to non-vested restricted stock
—

 
—

 
—

 
—

Net income applicable to common stock for computing basic earnings per common share
143

 
193

 
335

 
396

Net income as adjusted for purposes of computing diluted earnings per common share
$
143

 
193

 
335

 
396

Shares (Denominator):
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Outstanding during period
563,495

 
572,240

 
565,091

 
575,218

Non-vested restricted stock
(4,855
)
 
(4,325
)
 
(4,787
)
 
(3,993
)
Weighted average shares outstanding for computing basic earnings per common share
558,640

 
567,915

 
560,304

 
571,225

Incremental common shares attributable to dilutive securities:
 
 
 
 
 
 
 
Shares issuable under convertible securities
10

 
10

 
10

 
10

Shares issuable under incentive compensation plans
570

 
1,107

 
1,048

 
1,009

Number of shares as adjusted for purposes of computing diluted earnings per common share
559,220

 
569,032

 
561,362

 
572,244

Basic earnings per common share
$
0.26

 
0.34

 
0.60

 
0.69

Diluted earnings per common share
$
0.26

 
0.34

 
0.60

 
0.69


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 during the periods reflected in the table above. Such potentially issuable shares averaged 2.4 million for both the three months ended June 30, 2015 and 2014, respectively, and averaged 2.3 million and 2.8 million for the six months ended June 30, 2015 and 2014, respectively.
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 and other obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate their fair values.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB.
We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on discounted future cash flows using current market interest rates.
The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows:
Input Level
 
Description of Input
Level 1
 
Observable inputs such as quoted market prices in active markets.
Level 2
 
Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3
 
Unobservable inputs in which little or no market data exists.

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below:
 
 
 
As of June 30, 2015
 
As of December 31, 2014
 
Input
Level
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
 
 
(Dollars in millions)
Liabilities—Long-term debt, excluding capital lease and other obligations
2
 
$
19,896

 
20,370

 
20,162

 
21,255

Segment Information
Segment Information
Segment Information
Segment Data
During the fourth quarter of 2014, we implemented a new organizational structure designed to strengthen our ability to attain our operational, strategic and financial goals. As a result of this reorganization, we now operate and report the following two segments in our consolidated financial statements:
•
Business. Consists generally of providing strategic, legacy and data integration products and services to enterprise, wholesale and governmental customers, including other communication providers. Our strategic products and services offered to these customers include our private line (including special access), broadband, Ethernet, MPLS, Voice over Internet Protocol ("VoIP"), network management services, colocation, managed hosting and cloud hosting services. Our legacy services offered to these customers primarily include switched access and local and long-distance voice services, including the sale of unbundled network elements ("UNEs") which allow our wholesale customers to use our network or a combination of our network and their own networks to provide voice and data services to their customers; and
•
Consumer. Consists generally of providing strategic and legacy products and services to residential customers. 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 voice services.
The results of our business and consumer segments are summarized below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015

2014 (1)
 
2015
 
2014 (1)
 
(Dollars in millions)
Total segment revenues
$
4,161

 
4,288

 
8,355

 
8,572

Total segment expenses
2,142

 
2,117

 
4,215

 
4,213

Total segment income
$
2,019

 
2,171

 
4,140

 
4,359

Total margin percentage
49
%
 
51
%
 
50
%
 
51
%
Business:
 
 
 
 
 
 
 
Revenues
2,659

 
2,788

 
5,356

 
5,563

Expenses
1,525

 
1,516

 
3,009

 
3,019

Income
$
1,134

 
1,272

 
2,347

 
2,544

Margin percentage
43
%
 
46
%
 
44
%
 
46
%
Consumer:
 
 
 
 
 
 
 
Revenues
$
1,502

 
1,500

 
2,999

 
3,009

Expenses
617

 
601

 
1,206

 
1,194

Income
$
885

 
899

 
1,793

 
1,815

Margin percentage
59
%
 
60
%
 
60
%
 
60
%

______________________________________________________________________
(1) 
Reflects the recasting of segment results discussed in the next section entitled "Recent Changes in Segment Reporting."
Recent Changes in Segment Reporting
We have recast our previously reported segment results due to the reorganization of our management structure in the fourth quarter of 2014. Consequently, we have adopted several changes with respect to the assignment of certain expenses to our segments and have restated our previously-reported segment results to conform to the current presentation. The nature of the most significant changes to segment expenses are as follows:
•
Certain business segment expenses were reassigned to consumer segment expense; and
•
Certain business segment expenses were reassigned to corporate overhead.
For the three months ended June 30, 2014, the segment recast resulted in an increase in consumer expenses of $2 million, and a decrease in business expenses of $3 million. For the six months ended June 30, 2014, the segment recast resulted in an increase in consumer expenses of $12 million, and a decrease in business expenses of $16 million.
Product and Service Categories
We currently categorize our products, services and revenues among the following four categories:
•
Strategic services, which include primarily broadband, private line (including special access), 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 our facilities-based video services, which we now offer in fourteen markets), 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 allow 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 governmental and business customers; and
•
Other revenues, which consist primarily of Universal Service Fund ("USF") support and USF surcharges. We receive both federal and state USF support, which are government subsidies designed to reimburse us for the portion of the cost of providing certain telecommunications services, such as in high-cost rural areas that we are not able to recover from our customers. USF surcharges are the amounts we collect based on specific items we list on our customers' invoices to fund the Federal Communications Commission's ("FCC") universal service programs. We also generate other operating revenues from leasing and subleasing of space in our office buildings, warehouses and other properties. Because we centrally manage the activities that generate these other operating revenues, these revenues are not included in our segment revenues.
Our operating revenues for our products and services consisted of the following categories:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Strategic services
$
2,332

 
2,289

 
4,652

 
4,560

Legacy services
1,687

 
1,812

 
3,422

 
3,651

Data integration
142

 
187

 
281

 
361

Other
258

 
253

 
515

 
507

Total operating revenues
$
4,419

 
4,541

 
8,870

 
9,079


During the first quarter of 2015, we determined that certain products and services associated with our acquisition of SAVVIS, Inc. are more closely aligned to legacy services than to strategic services. As a result, these operating revenues are now reflected as legacy services. The revision resulted in a reduction of revenue from strategic services of $9 million and $19 million and a corresponding increase in revenue from legacy services for the three and six months ended June 30, 2014.
We recognize revenues in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the related expense for the amounts we remit to the government agencies. The total amount of such surcharges that we included in revenues aggregated approximately $139 million and $136 million for the three months ended June 30, 2015 and 2014, respectively, and approximately $274 million and $267 million for the six months ended June 30, 2015 and 2014, respectively. Those USF surcharges, where we record revenue, are included in "other" operating revenues and transaction tax surcharges are included in "legacy services" revenues. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to include in our bills to customers, for which we do not record any revenue or expense because we only act as a pass-through agent.
Allocations of Revenues and Expenses
Our segment revenues include all revenues from our strategic, legacy and data integration operations as described in more detail above. Segment revenues are based upon each customer's classification as either business or consumer. We report our segment revenues based upon all services provided to that segment's customers. Our segment expenses for our two segments include specific expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are 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 and are not monitored by or reported to the chief operating decision maker ("CODM") by segment. Similarly, 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 (expense) is not monitored as a part of our segment operations and is therefore excluded from our segment results.
The following table reconciles segment income to net income:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Total segment income
$
2,019

 
2,171

 
4,140

 
4,359

Other operating revenues
258

 
253

 
515

 
507

Depreciation and amortization
(1,048
)
 
(1,093
)
 
(2,088
)
 
(2,200
)
Other unassigned operating expenses
(680
)
 
(676
)
 
(1,369
)
 
(1,358
)
Other expense, net
(315
)
 
(332
)
 
(641
)
 
(654
)
Income tax expense
(91
)
 
(130
)
 
(222
)
 
(258
)
Net income
$
143

 
193

 
335

 
396


We do not have any single customer that provides more than 10% of our total consolidated operating revenues. Substantially all of our consolidated revenues come from customers located in the United States.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
We are vigorously defending against all of the matters described below. As a matter of course, we are prepared to litigate the matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter. We have established accrued liabilities for the matters described below where losses are deemed probable and reasonably estimable.
Pending Matters
In William Douglas Fulghum, et al. v. Embarq Corporation, et al., filed on December 28, 2007 in the United States District Court for the District of Kansas, a group of retirees filed a class action lawsuit challenging the decision to make certain modifications in retiree benefits programs relating to life insurance, medical insurance and prescription drug benefits, generally effective January 1, 2006 and January 1, 2008 (which, at the time of the modifications, was expected to reduce estimated future expenses for the subject benefits by more than $300 million). Defendants include Embarq, certain of its benefit plans, its Employee Benefits Committee and the individual plan administrator of certain of its benefits plans. Additional defendants include Sprint Nextel and certain of its benefit plans. The Court certified a class on certain of plaintiffs' claims, but rejected class certification as to other claims. On October 14, 2011, the Fulghum lawyers filed a new, related lawsuit, Abbott et al. v. Sprint Nextel et al. In Abbott, approximately 1,500 plaintiffs allege breach of fiduciary duty in connection with the changes in retiree benefits that also are at issue in the Fulghum case. The Abbott plaintiffs are all members of the class that was certified in Fulghum on claims for allegedly vested benefits (Counts I and III), and the Abbott claims are similar to the Fulghum breach of fiduciary duty claim (Count II), on which the Fulghum court denied class certification. The Court has stayed proceedings in Abbott indefinitely, except for limited discovery and motion practice as to approximately 80 of the plaintiffs. On February 14, 2013, the Fulghum court dismissed the majority of the plaintiffs' claims in the case. On interlocutory appeal, the United States Court of Appeals for the Tenth Circuit ruled on February 24, 2015, that the plan documents reviewed do not support any claim for vested benefits, and affirmed the district court's dismissal of claims based on those documents. The Tenth Circuit decision allowed a subset of claims for vested benefits to return to the district court for further proceedings. The Tenth Circuit also affirmed the district court's dismissal of all age discrimination claims. The Tenth Circuit reversed the district court's determination that ERISA's statute of repose is a time bar to the breach of fiduciary duty claims of fifteen named plaintiffs. Plaintiffs petitioned for further Tenth Circuit review on their claims for vested benefits. We petitioned for further Tenth Circuit review regarding the ERISA statute of repose. On April 27, 2015, a revised Tenth Circuit panel opinion was issued with no material change in the outcome. On June 10, 2015, the district court in Fulghum granted summary judgment to defendants on an additional group of claims for vested benefits.  On July 27, 2015, pursuant to the terms of a stipulation by the parties, the district court in Fulghum granted judgment in favor of defendants on all remaining and unadjudicated vested benefits claims. This judgment is without prejudice to any rights the parties may have to pursue any additional appellate relief. As to any further proceedings that may occur in the district court, defendants will continue to vigorously contest any remaining claims in Fulghum and Abbott. We have not accrued a liability for these matters because we believe it is premature (i) to determine whether an accrual is warranted and (ii) if so, to determine a reasonable estimate of probable liability.
On July 16, 2013, Comcast MO Group, Inc. ("Comcast") filed a lawsuit in Colorado state court against Qwest Communications International, Inc. ("Qwest"). Comcast alleges Qwest breached the parties' 1998 tax sharing agreement ("TSA") when it refused to partially indemnify Comcast for a tax liability settlement Comcast reached with the Commonwealth of Massachusetts in a dispute to which we were not a party. Comcast seeks approximately $80 million in damages, excluding interest. Qwest and Comcast are parties to the TSA in their capacities as successors to the TSA's original parties, U S WEST, Inc., a telecommunications company, and MediaOne Group, Inc., a cable television company, respectively. In October 2014, the state court granted summary judgment in Qwest's favor. In November 2014, Comcast filed a Notice of Appeal. We have not accrued a liability for this matter because we do not believe that liability is probable.
On September 13, 2006, Cargill Financial Markets, Plc ("Cargill") and Citibank, N.A. ("Citibank") filed a lawsuit in the District Court of Amsterdam, the Netherlands, against Qwest, Koninklijke KPN N.V., KPN Telecom B.V., and other former officers, employees or supervisory board members of KPNQwest N.V. ("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 $243 million based on the exchange rate on June 30, 2015). The value of this claim will be reduced to the degree plaintiffs receive recovery from a distribution of assets from the bankruptcy estate of KPNQwest. The extent of such expected recovery is 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 have appealed that decision. We do not believe that liability is probable in this matter.
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 the Cargill matter described above, and Qwest has been advancing legal fees and costs to certain former directors, officers or employees in connection with that matter.
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. 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 32 states. The settlement administration process, including claim submission and evaluation, is continuing in relation to a number of these settlements. The parties have not yet received final approval in one state (New Mexico). There is one state where an action was at one time, but is not currently, pending (Arizona). We have accrued an amount that we believe is probable for resolving these matters; however, the amount is not material to our consolidated financial statements.
CenturyLink and certain of its affiliates were defendants in one consolidated securities and four shareholder derivative actions. The actions were pending in federal court in the Western District of Louisiana. Plaintiffs in these actions had 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. On April 21, 2015, the district court dismissed the consolidated securities class actions with prejudice. The time for appealing the decision has expired. On June 16, 2015, the district court, pursuant to the parties' stipulation, dismissed the derivative actions without prejudice. These matters are now resolved.
The local exchange carrier subsidiaries of CenturyLink are among hundreds of defendants nationwide in dozens of lawsuits filed over the past year by Sprint Communications Company and affiliates of Verizon Communications Inc. The plaintiffs in these suits have challenged the right of local exchange carriers to bill interexchange carriers for switched access charges for certain calls between mobile and wireline devices that are routed through an interexchange carrier. In the lawsuits, the plaintiffs are seeking refunds of access charges previously paid and relief from future access charges. In addition, these and some other interexchange carriers have ceased paying switched access charges on these calls. Recently the lawsuits involving our local exchange carriers and many other carriers have been consolidated for pretrial purposes in the United States District Court for the District of Northern Texas. Some of the defendants, including our affiliated carriers, have petitioned the Federal Communications Commission to address these issues on an industry-wide basis.
As both an interexchange carrier and a local exchange carrier, we both pay and assess significant amounts of the access charges in question. The outcome of these disputes and suits, as well as any related regulatory proceedings that could ensue, are currently not predictable. If we are required to stop assessing these charges or to pay refunds of any such charges, our financial results could be negatively affected.
Other Proceedings and Disputes
From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies, and miscellaneous third party tort actions. 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.
We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities. These cases have progressed to various stages and one or more may go to trial in the coming 24 months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate the matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities.
Other Financial Information
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 June 30,   2015
 
As of December 31, 2014
 
(Dollars in millions)
Prepaid expenses
$
286

 
260

Materials, supplies and inventory
124

 
132

Assets held for sale
10

 
14

Deferred activation and installation charges
105

 
103

Other
74

 
71

Total other current assets
$
599

 
580


During the first quarter of 2015, we recorded impairment charges of $8 million in connection with pending negotiations involving several office buildings which we expect to sell within the next twelve months.
Selected Current Liabilities
The following table presents current liabilities reflected in our consolidated balance sheets, which include accounts payable and other current liabilities:
 
As of June 30,   2015
 
As of December 31, 2014
 
(Dollars in millions)
Accounts payable
$
1,049

 
1,226

Other current liabilities:
 
 
 
Accrued rent
$
31

 
34

Legal contingencies
24

 
27

Other
170

 
149

Total other current liabilities
$
225

 
210


Included in accounts payable at June 30, 2015 and December 31, 2014, were $65 million and $80 million, respectively, representing book overdrafts and $120 million and $185 million, respectively, associated with capital expenditures.
Repurchase of CenturyLink Common Stock
Repurchase of CenturyLink Common Stock
Repurchase of CenturyLink Common Stock
In the first quarter of 2014, our Board of Directors authorized a 24-month program to repurchase up to an aggregate of $1 billion of our outstanding common stock. This 2014 stock repurchase program took effect on May 29, 2014, immediately upon the completion of our predecessor 2013 stock repurchase program. During the six months ended June 30, 2015, we repurchased 7 million shares of our outstanding common stock in the open market under our 2014 stock repurchase program. These shares were repurchased for an aggregate market price of approximately $260 million, or an average purchase price of $36.83 per share. The repurchased common stock has been retired. As of June 30, 2015, we had approximately $540 million remaining available for stock repurchases under the 2014 stock repurchase program.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Information Relating to 2015
The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three and six months ended June 30, 2015:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at March 31, 2015
$
(1,696
)
 
(269
)
 
(36
)
 
(2,001
)
Other comprehensive income (loss) before reclassifications
—

 
—

 
11

 
11

Amounts reclassified from accumulated other comprehensive income
28

 
3

 
—

 
31

Net current-period other comprehensive income
28

 
3

 
11

 
42

Balance at June 30, 2015
$
(1,668
)
 
(266
)
 
(25
)
 
(1,959
)

 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at December 31, 2014
$
(1,720
)
 
(272
)
 
(25
)
 
(2,017
)
Other comprehensive income (loss) before reclassifications
—

 
—

 
—

 
—

Amounts reclassified from accumulated other comprehensive income
52

 
6

 
—

 
58

Net current-period other comprehensive income
52

 
6

 
—

 
58

Balance at June 30, 2015
$
(1,668
)
 
(266
)
 
(25
)
 
(1,959
)

The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and six months ended June 30, 2015:
Three Months Ended June 30, 2015
 
(Decrease) Increase
in Net Income
 
Affected Line Item in Consolidated Statement of
Operations or Footnote Where Additional
Information is Presented If The Amount is not
Recognized in Net Income in Total
 
 
(Dollars in millions)
 
 
Amortization of pension & post-retirement plans
 
 
 
 
Net actuarial loss
 
$
(42
)
 
See Note 4-Employee Benefits
Prior service cost
 
(7
)
 
See Note 4-Employee Benefits
Total before tax
 
(49
)
 
 
Income tax expense
 
18

 
Income tax expense
Net of tax
 
$
(31
)
 
 

Six Months Ended June 30, 2015
 
(Decrease) Increase
in Net Income
 
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
 
$
(80
)
 
See Note 4-Employee Benefits
Prior service cost
 
(13
)
 
See Note 4-Employee Benefits
Total before tax
 
(93
)
 
 
Income tax expense
 
35

 
Income tax expense
Net of tax
 
$
(58
)
 
 

Information Relating to 2014
The tables below summarize changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three and six months ended June 30, 2014:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at March 31, 2014
$
(666
)
 
(119
)
 
(10
)
 
(795
)
Other comprehensive income before reclassifications
—

 
—

 
8

 
8

Amounts reclassified from accumulated other comprehensive income
5

 
3

 
—

 
8

Net current-period other comprehensive income
5

 
3

 
8

 
16

Balance at June 30, 2014
$
(661
)
 
(116
)
 
(2
)
 
(779
)

 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at December 31, 2013
$
(669
)
 
(122
)
 
(11
)
 
(802
)
Other comprehensive income before reclassifications
—

 
—

 
9

 
9

Amounts reclassified from accumulated other comprehensive income
8

 
6

 
—

 
14

Net current-period other comprehensive income
8

 
6

 
9

 
23

Balance at June 30, 2014
$
(661
)
 
(116
)
 
(2
)
 
(779
)

The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and six months ended June 30, 2014:
Three Months Ended June 30, 2014
 
(Decrease) Increase
in Net Income
 
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
 
$
(5
)
 
See Note 4-Employee Benefits
Prior service cost
 
(8
)
 
See Note 4-Employee Benefits
Total before tax
 
(13
)
 
 
Income tax expense
 
5

 
Income tax expense
Net of tax
 
$
(8
)
 
 
Six Months Ended June 30, 2014
 
(Decrease) Increase
in Net Income
 
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
 
$
(10
)
 
See Note 4-Employee Benefits
Prior service cost
 
(13
)
 
See Note 4-Employee Benefits
Total before tax
 
(23
)
 
 
Income tax expense
 
9

 
Income tax expense
Net of tax
 
$
(14
)
 
 
Basis of Presentation Basis of Presentation (Policies)
Recent Accounting Pronouncements
Recent Accounting Pronouncements
Debt Issuance Costs
On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, “Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 is effective for annual and interim periods beginning after December 15, 2015, and must be adopted by retrospectively applying the new standard to all periods presented in the financial statements. ASU 2015-03 may be adopted early for any financial statements that have not been issued.
ASU 2015-03 requires that the deferred costs associated with a debt issuance be recognized as a reduction in the carrying amount of the related debt rather than presented as a deferred charge included in other assets in our financial statements. ASU 2015-03 does not change the standards for recognizing deferred debt issuance costs. As of June 30, 2015, we had approximately $170 million of unamortized debt issuance costs that upon adoption of ASU 2015-03 will be reclassified from other assets and recognized as a reduction in the carrying value of our long-term debt.
Revenue Recognition
On May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09” or “new standard”). The new standard replaces virtually all existing generally accepted accounting principles (“GAAP”) on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. We currently do not defer any contract acquisition costs and defer contract fulfillment costs only up to the extent of any revenue deferred.
On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year until January 1, 2018. Early adoption is permitted as of January 1, 2017. ASU 2014-09 may be adopted by applying the provisions of the new standard on a retrospective basis to the periods included in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect of adopting ASU 2014-09 in the first quarter of 2017, if adopting early, otherwise in the first quarter of 2018. We have not yet decided which implementation method we will adopt. We are studying the new standard and are in the early stages of assessing the impact the new standard will have on us and our consolidated financial statements. We cannot, however, provide any estimate of the impact of adopting the new standard at this time.
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, consisted of borrowings by CenturyLink, Inc. and certain of its subsidiaries, including Qwest Corporation ("QC"), Qwest Capital Funding, Inc. and Embarq Corporation and subsidiaries ("Embarq") and is summarized as follows:
 
Interest Rates
 
Maturities
 
As of June 30,   2015
 
As of December 31, 2014
 
 
 
 
 
(Dollars in millions)
CenturyLink, Inc.
 
 
 
 
 
 
 
Senior notes
5.150% - 7.650%
 
2017 - 2042
 
$
7,975

 
7,825

Credit facility and revolving line of credit(1)
1.937% - 4.000%
 
2019
 
320

 
725

Term loan
1.940%
 
2019
 
369

 
380

Subsidiaries
 
 
 
 
 
 
 
Qwest Corporation
 
 
 
 
 
 
 
Senior notes
6.125% - 8.375%
 
2016 - 2054
 
7,219

 
7,311

Term loan
1.940%
 
2025
 
100

 
—

Qwest Capital Funding, Inc.
 
 
 
 
 
 
 
Senior notes
6.500% - 7.750%
 
2018 - 2031
 
981

 
981

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

 
2,669

First mortgage bonds
7.125% - 8.770%
 
2017 - 2025
 
232

 
232

Other
9.000%
 
2019
 
150

 
150

Capital lease and other obligations
Various
 
Various
 
457

 
509

Unamortized discounts, net
 
 
 
 
(119
)
 
(111
)
Total long-term debt
 
 
 
 
20,353

 
20,671

Less current maturities
 
 
 
 
(1,519
)
 
(550
)
Long-term debt, excluding current maturities
 
 
 
 
$
18,834

 
20,121

______________________________________________________________________ 
(1) 
The total outstanding amount of our credit facility ("Credit Facility") and revolving line of credit borrowings at June 30, 2015 and December 31, 2014, were $320 million and $725 million, respectively, with weighted average interest rates of 2.000% and 2.270%, respectively. 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 during the first six months of 2015 were as follows:
 
Severance
 
Real Estate
 
(Dollars in millions)
Balance at December 31, 2014
$
26

 
96

Accrued to expense
32

 
—

Payments, net
(36
)
 
(7
)
Reversals and adjustments
—

 
(3
)
Balance at June 30, 2015
$
22

 
86

Employee Benefits (Tables)
Schedule of components of net periodic pension benefit (income) expense and post-retirement benefit expense
Net periodic (income) expense for our qualified and non-qualified pension plans included the following components:
 
Pension Plans
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Service cost
$
20

 
19

 
42

 
39

Interest cost
142

 
151

 
283

 
302

Expected return on plan assets
(223
)
 
(223
)
 
(449
)
 
(446
)
Recognition of prior service cost
2

 
3

 
3

 
4

Recognition of actuarial loss
42

 
5

 
80

 
10

Net periodic pension benefit income
$
(17
)
 
(45
)
 
(41
)
 
(91
)

Net periodic expense (income) for our post-retirement benefit plans included the following components:
 
Post-Retirement Benefit Plans
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Service cost
$
6

 
5

 
12

 
11

Interest cost
35

 
40

 
70

 
79

Expected return on plan assets
(5
)
 
(8
)
 
(10
)
 
(16
)
Recognition of prior service cost
5

 
5

 
10

 
9

Net periodic post-retirement benefit expense
$
41

 
42

 
82

 
83

Earnings per Common Share (Tables)
Schedule of basic and diluted earnings per common share
Basic and diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 were calculated as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions, except per share amounts, shares in thousands)
Income (Numerator):
 
 
 
 
 
 
 
Net income
$
143

 
193

 
335

 
396

Earnings applicable to non-vested restricted stock
—

 
—

 
—

 
—

Net income applicable to common stock for computing basic earnings per common share
143

 
193

 
335

 
396

Net income as adjusted for purposes of computing diluted earnings per common share
$
143

 
193

 
335

 
396

Shares (Denominator):
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Outstanding during period
563,495

 
572,240

 
565,091

 
575,218

Non-vested restricted stock
(4,855
)
 
(4,325
)
 
(4,787
)
 
(3,993
)
Weighted average shares outstanding for computing basic earnings per common share
558,640

 
567,915

 
560,304

 
571,225

Incremental common shares attributable to dilutive securities:
 
 
 
 
 
 
 
Shares issuable under convertible securities
10

 
10

 
10

 
10

Shares issuable under incentive compensation plans
570

 
1,107

 
1,048

 
1,009

Number of shares as adjusted for purposes of computing diluted earnings per common share
559,220

 
569,032

 
561,362

 
572,244

Basic earnings per common share
$
0.26

 
0.34

 
0.60

 
0.69

Diluted earnings per common share
$
0.26

 
0.34

 
0.60

 
0.69

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 and other obligations, as well as the input level used to determine the fair values indicated below:
 
 
 
As of June 30, 2015
 
As of December 31, 2014
 
Input
Level
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
 
 
(Dollars in millions)
Liabilities—Long-term debt, excluding capital lease and other obligations
2
 
$
19,896

 
20,370

 
20,162

 
21,255

Segment Information (Tables)
Schedule of segment results 
The results of our business and consumer segments are summarized below:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015

2014 (1)
 
2015
 
2014 (1)
 
(Dollars in millions)
Total segment revenues
$
4,161

 
4,288

 
8,355

 
8,572

Total segment expenses
2,142

 
2,117

 
4,215

 
4,213

Total segment income
$
2,019

 
2,171

 
4,140

 
4,359

Total margin percentage
49
%
 
51
%
 
50
%
 
51
%
Business:
 
 
 
 
 
 
 
Revenues
2,659

 
2,788

 
5,356

 
5,563

Expenses
1,525

 
1,516

 
3,009

 
3,019

Income
$
1,134

 
1,272

 
2,347

 
2,544

Margin percentage
43
%
 
46
%
 
44
%
 
46
%
Consumer:
 
 
 
 
 
 
 
Revenues
$
1,502

 
1,500

 
2,999

 
3,009

Expenses
617

 
601

 
1,206

 
1,194

Income
$
885

 
899

 
1,793

 
1,815

Margin percentage
59
%
 
60
%
 
60
%
 
60
%

______________________________________________________________________
(1) 
Reflects the recasting of segment results discussed in the next section entitled "Recent Changes in Segment Reporting."
Schedule of operating revenues by products and services 
Our operating revenues for our products and services consisted of the following categories:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Strategic services
$
2,332

 
2,289

 
4,652

 
4,560

Legacy services
1,687

 
1,812

 
3,422

 
3,651

Data integration
142

 
187

 
281

 
361

Other
258

 
253

 
515

 
507

Total operating revenues
$
4,419

 
4,541

 
8,870

 
9,079

Reconciliation of operating profit (loss) from segments to consolidated net income 
The following table reconciles segment income to net income:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in millions)
Total segment income
$
2,019

 
2,171

 
4,140

 
4,359

Other operating revenues
258

 
253

 
515

 
507

Depreciation and amortization
(1,048
)
 
(1,093
)
 
(2,088
)
 
(2,200
)
Other unassigned operating expenses
(680
)
 
(676
)
 
(1,369
)
 
(1,358
)
Other expense, net
(315
)
 
(332
)
 
(641
)
 
(654
)
Income tax expense
(91
)
 
(130
)
 
(222
)
 
(258
)
Net income
$
143

 
193

 
335

 
396

Other Financial Information (Tables)
Schedule of components of other current assets 
The following table presents details of other current assets in our consolidated balance sheets:
 
As of June 30,   2015
 
As of December 31, 2014
 
(Dollars in millions)
Prepaid expenses
$
286

 
260

Materials, supplies and inventory
124

 
132

Assets held for sale
10

 
14

Deferred activation and installation charges
105

 
103

Other
74

 
71

Total other current assets
$
599

 
580

Schedule of current liabilities including accounts payable and other current liabilities 
The following table presents current liabilities reflected in our consolidated balance sheets, which include accounts payable and other current liabilities:
 
As of June 30,   2015
 
As of December 31, 2014
 
(Dollars in millions)
Accounts payable
$
1,049

 
1,226

Other current liabilities:
 
 
 
Accrued rent
$
31

 
34

Legal contingencies
24

 
27

Other
170

 
149

Total other current liabilities
$
225

 
210

Accumulated Other Comprehensive Loss (Tables)
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
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 and six months ended June 30, 2015:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at March 31, 2015
$
(1,696
)
 
(269
)
 
(36
)
 
(2,001
)
Other comprehensive income (loss) before reclassifications
—

 
—

 
11

 
11

Amounts reclassified from accumulated other comprehensive income
28

 
3

 
—

 
31

Net current-period other comprehensive income
28

 
3

 
11

 
42

Balance at June 30, 2015
$
(1,668
)
 
(266
)
 
(25
)
 
(1,959
)

 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at December 31, 2014
$
(1,720
)
 
(272
)
 
(25
)
 
(2,017
)
Other comprehensive income (loss) before reclassifications
—

 
—

 
—

 
—

Amounts reclassified from accumulated other comprehensive income
52

 
6

 
—

 
58

Net current-period other comprehensive income
52

 
6

 
—

 
58

Balance at June 30, 2015
$
(1,668
)
 
(266
)
 
(25
)
 
(1,959
)
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 and six months ended June 30, 2014:
 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at March 31, 2014
$
(666
)
 
(119
)
 
(10
)
 
(795
)
Other comprehensive income before reclassifications
—

 
—

 
8

 
8

Amounts reclassified from accumulated other comprehensive income
5

 
3

 
—

 
8

Net current-period other comprehensive income
5

 
3

 
8

 
16

Balance at June 30, 2014
$
(661
)
 
(116
)
 
(2
)
 
(779
)

 
Pension Plans
 
Post-Retirement
Benefit Plans
 
Foreign Currency
Translation
Adjustment
and Other
 
Total
 
(Dollars in millions)
Balance at December 31, 2013
$
(669
)
 
(122
)
 
(11
)
 
(802
)
Other comprehensive income before reclassifications
—

 
—

 
9

 
9

Amounts reclassified from accumulated other comprehensive income
8

 
6

 
—

 
14

Net current-period other comprehensive income
8

 
6

 
9

 
23

Balance at June 30, 2014
$
(661
)
 
(116
)
 
(2
)
 
(779
)
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 and six months ended June 30, 2015:
Three Months Ended June 30, 2015
 
(Decrease) Increase
in Net Income
 
Affected Line Item in Consolidated Statement of
Operations or Footnote Where Additional
Information is Presented If The Amount is not
Recognized in Net Income in Total
 
 
(Dollars in millions)
 
 
Amortization of pension & post-retirement plans
 
 
 
 
Net actuarial loss
 
$
(42
)
 
See Note 4-Employee Benefits
Prior service cost
 
(7
)
 
See Note 4-Employee Benefits
Total before tax
 
(49
)
 
 
Income tax expense
 
18

 
Income tax expense
Net of tax
 
$
(31
)
 
 

Six Months Ended June 30, 2015
 
(Decrease) Increase
in Net Income
 
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
 
$
(80
)
 
See Note 4-Employee Benefits
Prior service cost
 
(13
)
 
See Note 4-Employee Benefits
Total before tax
 
(93
)
 
 
Income tax expense
 
35

 
Income tax expense
Net of tax
 
$
(58
)
 
 
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 and six months ended June 30, 2014:
Three Months Ended June 30, 2014
 
(Decrease) Increase
in Net Income
 
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
 
$
(5
)
 
See Note 4-Employee Benefits
Prior service cost
 
(8
)
 
See Note 4-Employee Benefits
Total before tax
 
(13
)
 
 
Income tax expense
 
5

 
Income tax expense
Net of tax
 
$
(8
)
 
 
Six Months Ended June 30, 2014
 
(Decrease) Increase
in Net Income
 
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
 
$
(10
)
 
See Note 4-Employee Benefits
Prior service cost
 
(13
)
 
See Note 4-Employee Benefits
Total before tax
 
(23
)
 
 
Income tax expense
 
9

 
Income tax expense
Net of tax
 
$
(14
)
 
 
Basis of Presentation Basis of Presentation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Network assets, future abandonment
Service life
Jun. 30, 2015
Network assets, future abandonment
Service life
Dec. 31, 2015
Network assets, future abandonment
Forecast
Service life
Change in Accounting Estimate [Line Items]
 
 
 
 
 
 
 
Depreciation
 
 
 
 
$ 12 
$ 24 
$ 48 
Change in net income for change in accounting estimate
(143)
(193)
(335)
(396)
(7)
(15)
(30)
Earnings per share, basic and diluted
 
 
 
 
$ (0.01)
$ (0.03)
$ (0.05)
Unamortized debt issuance costs
$ 170 
 
$ 170 
 
 
 
 
Long-Term Debt and Credit Facilities (Details) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Long-term Debt and Credit Facilities
 
 
Capital lease and other obligations
$ 457 
$ 509 
Unamortized discounts, net
(119)
(111)
Total long-term debt
20,353 
20,671 
Less current maturities
(1,519)
(550)
Long-term debt, excluding current maturities
18,834 
20,121 
CenturyLink, Inc. |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
7,975 
7,825 
CenturyLink, Inc. |
Line of credit
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
320 
725 
Long-term debt, weighted average interest rate (percent)
2.00% 
2.27% 
CenturyLink, Inc. |
Medium-term notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
369 
380 
Interest rate at period end - Term loan (percent)
1.94% 
 
CenturyLink, Inc. |
Minimum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
5.15% 
 
CenturyLink, Inc. |
Minimum |
Line of credit
 
 
Long-term Debt and Credit Facilities
 
 
Interest rate at period end - Credit facility and revolving line of credit (percent)
1.937% 
 
CenturyLink, Inc. |
Maximum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
7.65% 
 
CenturyLink, Inc. |
Maximum |
Line of credit
 
 
Long-term Debt and Credit Facilities
 
 
Interest rate at period end - Credit facility and revolving line of credit (percent)
4.00% 
 
Qwest Corporation |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
7,219 
7,311 
Qwest Corporation |
Medium-term notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
100 
0 
Interest rate at period end - Term loan (percent)
1.94% 
 
Qwest Corporation |
Minimum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
6.125% 
 
Qwest Corporation |
Maximum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
8.375% 
 
Qwest Capital Funding, Inc. |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
981 
981 
Qwest Capital Funding, Inc. |
Minimum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
6.50% 
 
Qwest Capital Funding, Inc. |
Maximum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
7.75% 
 
Embarq |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
2,669 
2,669 
Embarq |
First mortgage bonds
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
232 
232 
Embarq |
Other
 
 
Long-term Debt and Credit Facilities
 
 
Long-term debt, gross
$ 150 
$ 150 
Stated interest rate (percent)
9.00% 
 
Embarq |
Minimum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
7.082% 
 
Embarq |
Minimum |
First mortgage bonds
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
7.125% 
 
Embarq |
Maximum |
Senior notes
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
7.995% 
 
Embarq |
Maximum |
First mortgage bonds
 
 
Long-term Debt and Credit Facilities
 
 
Stated interest rate (percent)
8.77% 
 
Long-Term Debt and Credit Facilities Long-Term Debt and Credit Facilities (Details 2) (USD $)
In Millions, unless otherwise specified
6 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
CenturyLink, Inc.
Senior notes
Dec. 31, 2014
CenturyLink, Inc.
Senior notes
Mar. 19, 2015
CenturyLink, Inc.
Senior notes
5.625% Notes due 2025
Feb. 17, 2015
CenturyLink, Inc.
Senior notes
Series M 5.00% Notes
Feb. 15, 2015
CenturyLink, Inc.
Senior notes
Series M 5.00% Notes
Jun. 30, 2015
CenturyLink, Inc.
Medium-term notes
Dec. 31, 2014
CenturyLink, Inc.
Medium-term notes
Jun. 30, 2015
CenturyLink, Inc.
Line of credit
Jan. 31, 2015
CenturyLink, Inc.
Line of credit
Dec. 31, 2014
CenturyLink, Inc.
Line of credit
Jun. 30, 2015
Qwest Corporation
Senior notes
Dec. 31, 2014
Qwest Corporation
Senior notes
Jun. 15, 2015
Qwest Corporation
Senior notes
7.625% Notes due 2015
Jun. 30, 2015
Qwest Corporation
Medium-term notes
Dec. 31, 2014
Qwest Corporation
Medium-term notes
Jun. 30, 2015
Qwest Corporation
Medium-term notes
Term Loan
Feb. 20, 2015
Qwest Corporation
Medium-term notes
Term Loan
Jun. 30, 2015
Minimum
CenturyLink, Inc.
Senior notes
Jun. 30, 2015
Minimum
Qwest Corporation
Senior notes
Feb. 20, 2015
Minimum
London Interbank Offered Rate (LIBOR)
Qwest Corporation
Medium-term notes
Term Loan
Feb. 20, 2015
Minimum
Base Rate
Qwest Corporation
Medium-term notes
Term Loan
Jun. 30, 2015
Maximum
CenturyLink, Inc.
Senior notes
Jun. 30, 2015
Maximum
Qwest Corporation
Senior notes
Feb. 20, 2015
Maximum
London Interbank Offered Rate (LIBOR)
Qwest Corporation
Medium-term notes
Term Loan
Feb. 20, 2015
Maximum
Base Rate
Qwest Corporation
Medium-term notes
Term Loan
Long-term Debt and Credit Facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repayments of debt
$ 506 
$ 121 
 
 
 
$ 350 
 
 
 
 
 
 
 
 
$ 92 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, face amount
 
 
 
 
500 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 
 
 
 
 
 
 
 
 
Stated interest rate (percent)
 
 
 
 
5.625% 
 
5.00% 
 
 
 
 
 
 
 
7.625% 
 
 
 
 
5.15% 
6.125% 
 
 
7.65% 
8.375% 
 
 
Proceeds from debt, net of issuance costs
 
 
 
 
494 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basis spread on variable rate (percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.50% 
0.50% 
 
 
2.50% 
1.50% 
Long-term debt, gross
 
 
7,975 
7,825 
 
 
 
369 
380 
320 
 
725 
7,219 
7,311 
 
100 
0 
100 
 
 
 
 
 
 
 
 
 
Line of credit facility, maximum borrowing capacity
 
 
 
 
 
 
 
 
 
 
$ 100 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lenders of revolving line of credit, number
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt and Credit Facilities Long-Term Debt and Credit Facilities (Details 3) (CenturyLink, Inc., Senior notes, 5.625% Notes due 2025)
0 Months Ended
Mar. 19, 2015
Debt instrument, redemption, period one
 
Debt Instrument, Redemption [Line Items]
 
Debt Instrument, redemption, description
greater of 100% of the principal amount of the Notes or the sum of the present value of the remaining scheduled payments of principal and interest on the Notes, discounted to the redemption date in the manner described in the Notes 
Debt instrument, redemption, period two
 
Debt Instrument, Redemption [Line Items]
 
Debt Instrument, redemption, description
redeem the Notes at par 
Debt instrument, redemption, period three
 
Debt Instrument, Redemption [Line Items]
 
Debt instrument, redemption price, percentage of principal amount (percent)
35.00% 
Debt instrument, redemption price, percentage (percent)
105.625% 
Debt instrument, redemption, period four
 
Debt Instrument, Redemption [Line Items]
 
Debt instrument, redemption price, percentage (percent)
101.00% 
Severance and Leased Real Estate (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Severance
 
Restructuring reserve
 
Balance at the beginning of the period
$ 26 
Accrued to expense
32 
Payments, net
(36)
Reversals and adjustments
0 
Balance at the end of the period
22 
Qwest Communications International Inc. |
Leased real estate |
Leased real estate
 
Leased Real Estate
 
Current portion of leased real estate accrual
10 
Noncurrent portion of leased real estate accrual
76 
Weighted average lease terms
8 years 6 months 
Restructuring reserve
 
Balance at the beginning of the period
96 
Accrued to expense
0 
Payments, net
(7)
Reversals and adjustments
(3)
Balance at the end of the period
$ 86 
Qwest Communications International Inc. |
Leased real estate |
Leased real estate |
Minimum
 
Leased Real Estate
 
Remaining lease terms
2 months 
Qwest Communications International Inc. |
Leased real estate |
Leased real estate |
Maximum
 
Leased Real Estate
 
Remaining lease terms
10 years 6 months 
Employee Benefits (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Pension plans
 
 
 
 
Components of net periodic (benefit) expense
 
 
 
 
Service cost
$ 20 
$ 19 
$ 42 
$ 39 
Interest cost
142 
151 
283 
302 
Expected return on plan assets
(223)
(223)
(449)
(446)
Recognition of prior service cost
2 
3 
3 
4 
Recognition of actuarial loss
42 
5 
80 
10 
Net periodic benefit (income) expense
(17)
(45)
(41)
(91)
Post-retirement benefit plans
 
 
 
 
Components of net periodic (benefit) expense
 
 
 
 
Service cost
6 
5 
12 
11 
Interest cost
35 
40 
70 
79 
Expected return on plan assets
(5)
(8)
(10)
(16)
Recognition of prior service cost
5 
5 
10 
9 
Net periodic benefit (income) expense
$ 41 
$ 42 
$ 82 
$ 83 
Earnings per Common Share (Details) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Income (Numerator):
 
 
 
 
Net income
$ 143 
$ 193 
$ 335 
$ 396 
Earnings applicable to non-vested restricted stock
0 
0 
0 
0 
Net income applicable to common stock for computing basic earnings per common share
143 
193 
335 
396 
Net income as adjusted for purposes of computing diluted earnings per common share
$ 143 
$ 193 
$ 335 
$ 396 
Weighted average number of shares:
 
 
 
 
Outstanding during period (in shares)
563,495,000 
572,240,000 
565,091,000 
575,218,000 
Non-vested restricted stock (in shares)
(4,855,000)
(4,325,000)
(4,787,000)
(3,993,000)
Weighted average shares outstanding for computing basic earnings per common share (in shares)
558,640,000 
567,915,000 
560,304,000 
571,225,000 
Incremental common shares attributable to dilutive securities:
 
 
 
 
Shares issuable under convertible securities (in shares)
10,000 
10,000 
10,000 
10,000 
Shares issuable under incentive compensation plans (in shares)
570,000 
1,107,000 
1,048,000 
1,009,000 
Number of shares as adjusted for purposes of computing diluted earnings per common share (in shares)
559,220,000 
569,032,000 
561,362,000 
572,244,000 
Basic earnings per common share:
 
 
 
 
Basic earnings per common share (in dollars per share)
$ 0.26 
$ 0.34 
$ 0.60 
$ 0.69 
Diluted earnings per common share:
 
 
 
 
Diluted earnings per common share (in dollars per share)
$ 0.26 
$ 0.34 
$ 0.60 
$ 0.69 
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)
2,400,000 
2,400,000 
2,300,000 
2,800,000 
Fair Value Disclosure (Details) (Fair value measurements valued on a recurring basis, Fair value inputs, Level 2, USD $)
In Millions, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Carrying amount
 
 
Liabilities
 
 
Liabilities - Long-term debt, excluding capital lease and other obligations
$ 19,896 
$ 20,162 
Fair value
 
 
Liabilities
 
 
Liabilities - Long-term debt, excluding capital lease and other obligations
$ 20,370 
$ 21,255 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
segment
Jun. 30, 2014
Segment information
 
 
 
 
Revenues
$ 4,419 
$ 4,541 
$ 8,870 
$ 9,079 
Expenses
3,870 
3,886 
7,672 
7,771 
OPERATING INCOME
549 
655 
1,198 
1,308 
Number of reportable segments (segments)
 
 
2 
 
Operating segments (segments)
 
 
 
 
Segment information
 
 
 
 
Revenues
4,161 
4,288 
8,355 
8,572 
Expenses
2,142 
2,117 
4,215 
4,213 
OPERATING INCOME
2,019 
2,171 
4,140 
4,359 
Margin percentage (percent)
49.00% 
51.00% 
50.00% 
51.00% 
Business
 
 
 
 
Segment information
 
 
 
 
Revenues
2,659 
2,788 
5,356 
5,563 
Expenses
1,525 
1,516 
3,009 
3,019 
OPERATING INCOME
1,134 
1,272 
2,347 
2,544 
Margin percentage (percent)
43.00% 
46.00% 
44.00% 
46.00% 
Consumer
 
 
 
 
Segment information
 
 
 
 
Revenues
1,502 
1,500 
2,999 
3,009 
Expenses
617 
601 
1,206 
1,194 
OPERATING INCOME
885 
899 
1,793 
1,815 
Margin percentage (percent)
59.00% 
60.00% 
60.00% 
60.00% 
Structural Reorganization [Member] |
Business
 
 
 
 
Segment information
 
 
 
 
Prior period reclassification adjustment segment expenses
 
(3)
 
(16)
Structural Reorganization [Member] |
Consumer
 
 
 
 
Segment information
 
 
 
 
Prior period reclassification adjustment segment expenses
 
$ 2 
 
$ 12 
Segment Information (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
category
Jun. 30, 2014
Operating revenues by products and services
 
 
 
 
Number of categories of products and services (categories)
 
 
4 
 
OPERATING REVENUES
$ 4,419 
$ 4,541 
$ 8,870 
$ 9,079 
Surcharge amount on customers' bills
139 
136 
274 
267 
Strategic services
 
 
 
 
Operating revenues by products and services
 
 
 
 
Products and services categories reclassification adjustment
 
(9)
 
(19)
OPERATING REVENUES
2,332 
2,289 
4,652 
4,560 
Legacy services
 
 
 
 
Operating revenues by products and services
 
 
 
 
Products and services categories reclassification adjustment
 
9 
 
19 
OPERATING REVENUES
1,687 
1,812 
3,422 
3,651 
Data integration
 
 
 
 
Operating revenues by products and services
 
 
 
 
OPERATING REVENUES
142 
187 
281 
361 
Other
 
 
 
 
Operating revenues by products and services
 
 
 
 
OPERATING REVENUES
$ 258 
$ 253 
$ 515 
$ 507 
Segment Information (Details 3) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
 
 
 
 
Total segment income
$ 549 
$ 655 
$ 1,198 
$ 1,308 
Depreciation and amortization
(1,048)
(1,093)
(2,088)
(2,200)
Other unassigned operating expenses
(863)
(831)
(1,714)
(1,674)
Other income (expense), net
(315)
(332)
(641)
(654)
Income tax expense
(91)
(130)
(222)
(258)
Net income
143 
193 
335 
396 
Operating segments
 
 
 
 
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
 
 
 
 
Total segment income
2,019 
2,171 
4,140 
4,359 
Segment reconciling items
 
 
 
 
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
 
 
 
 
Other operating revenues
258 
253 
515 
507 
Depreciation and amortization
(1,048)
(1,093)
(2,088)
(2,200)
Other unassigned operating expenses
(680)
(676)
(1,369)
(1,358)
Other income (expense), net
(315)
(332)
(641)
(654)
Income tax expense
$ (91)
$ (130)
$ (222)
$ (258)
Commitments and Contingencies (Details)
In Millions, unless otherwise specified
6 Months Ended 24 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended
Jun. 30, 2015
William Douglas Fulghum, et al. v. Embarq Corporation
plaintiff
Dec. 31, 2007
William Douglas Fulghum, et al. v. Embarq Corporation
USD ($)
Oct. 14, 2011
Abbott et al. v. Sprint Nextel et al.
plaintiff
Jun. 30, 2015
Abbott et al. v. Sprint Nextel et al.
plaintiff
Jul. 17, 2013
Comcast
USD ($)
Sep. 13, 2006
Cargill Financial Markets, Plc and Citibank, N.A.
EUR (€)
Jun. 30, 2015
Cargill Financial Markets, Plc and Citibank, N.A.
USD ($)
Jun. 30, 2015
Fiber-optic cable installation
state
Jun. 30, 2015
Securities actions
lawsuit
Jun. 30, 2015
Derivative actions
shareholder_derivative_action
Loss Contingencies
 
 
 
 
 
 
 
 
 
 
Effect of modifications made to Embarq's benefits program, greater than
 
$ 300 
 
 
 
 
 
 
 
 
Number of plaintiffs have alleged breach of fiduciary duty (plaintiffs)
 
 
1,500 
 
 
 
 
 
 
 
Number of plaintiffs, limited discovery
 
 
 
80 
 
 
 
 
 
 
Breach of fiduciary duty claims
15 
 
 
 
 
 
 
 
 
 
Damages sought by plaintiff
 
 
 
 
$ 80 
€ 219 
$ 243 
 
 
 
Number of states in which service is provided (states)
 
 
 
 
 
 
 
34 
 
 
Number of states in which final approval of settlements received (states)
 
 
 
 
 
 
 
32 
 
 
Number of states where an action is pending
 
 
 
 
 
 
 
1 
 
 
Number of states in which actions are not currently pending
 
 
 
 
 
 
 
1 
 
 
Number of securities actions
 
 
 
 
 
 
 
 
1 
 
Number of shareholder derivative actions
 
 
 
 
 
 
 
 
 
4 
Other Financial Information (Details) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Dec. 31, 2014
Other Current Assets
 
 
 
Prepaid expenses
$ 286 
 
$ 260 
Materials, supplies and inventory
124 
 
132 
Assets held for sale
10 
 
14 
Deferred activation and installation charges
105 
 
103 
Other
74 
 
71 
Total other current assets
599 
 
580 
Impairment of long-lived assets
8 
32 
 
Selected Current Liabilities
 
 
 
Accounts payable
1,049 
 
1,226 
Other Current Liabilities
 
 
 
Accrued rent
31 
 
34 
Legal contingencies
24 
 
27 
Other
170 
 
149 
Total other current liabilities
225 
 
210 
Current Liabilities
 
 
 
Book overdraft balance
65 
 
80 
Capital expenditures incurred but not yet paid
120 
 
185 
Building
 
 
 
Other Current Assets
 
 
 
Impairment of long-lived assets
$ 8 
 
 
Repurchase of CenturyLink Common Stock (Details) (Share repurchase program authorized February 2014, USD $)
Share data in Millions, except Per Share data, unless otherwise specified
1 Months Ended 6 Months Ended
Feb. 27, 2014
Jun. 30, 2015
Feb. 28, 2014
Share repurchase program authorized February 2014
 
 
 
Schedule of Stock Repurchases
 
 
 
Stock repurchase program, period in force
24 months 
 
 
Stock repurchases, aggregate authorized amount
 
 
$ 1,000,000,000 
Number of shares repurchased and retired (shares)
 
7 
 
Aggregate market price of shares repurchased
 
260,000,000 
 
Average purchase price at which shares were repurchased (in dollars per share)
 
$ 36.83 
 
Stock repurchases, remaining authorized amount
 
$ 540,000,000 
 
Accumulated Other Comprehensive Loss (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
$ (2,001)
$ (795)
$ (2,017)
$ (802)
Other comprehensive income (loss) before reclassifications
11 
8 
0 
9 
Amounts reclassified from accumulated other comprehensive income
31 
8 
58 
14 
Other comprehensive income
42 
16 
58 
23 
Balance at the end of the period
(1,959)
(779)
(1,959)
(779)
Defined benefit plan |
Pension plans
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(1,696)
(666)
(1,720)
(669)
Other comprehensive income (loss) before reclassifications
0 
0 
0 
0 
Amounts reclassified from accumulated other comprehensive income
28 
5 
52 
8 
Other comprehensive income
28 
5 
52 
8 
Balance at the end of the period
(1,668)
(661)
(1,668)
(661)
Defined benefit plan |
Post-retirement benefit plans
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(269)
(119)
(272)
(122)
Other comprehensive income (loss) before reclassifications
0 
0 
0 
0 
Amounts reclassified from accumulated other comprehensive income
3 
3 
6 
6 
Other comprehensive income
3 
3 
6 
6 
Balance at the end of the period
(266)
(116)
(266)
(116)
Foreign currency translation adjustment and other
 
 
 
 
Accumulated other comprehensive income (loss) by component
 
 
 
 
Balance at the beginning of the period
(36)
(10)
(25)
(11)
Other comprehensive income (loss) before reclassifications
11 
8 
0 
9 
Amounts reclassified from accumulated other comprehensive income
0 
0 
0 
0 
Other comprehensive income
11 
8 
0 
9 
Balance at the end of the period
$ (25)
$ (2)
$ (25)
$ (2)
Accumulated Other Comprehensive Loss (Details 2) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Reclassifications out of accumulated other comprehensive income loss by component
 
 
 
 
INCOME BEFORE INCOME TAX EXPENSE
$ 234 
$ 323 
$ 557 
$ 654 
Income tax expense
(91)
(130)
(222)
(258)
Net income
143 
193 
335 
396 
Amount reclassified from accumulated other comprehensive loss
 
 
 
 
Reclassifications out of accumulated other comprehensive income loss by component
 
 
 
 
Net actuarial loss
(42)
(5)
(80)
(10)
Prior service cost
(7)
(8)
(13)
(13)
INCOME BEFORE INCOME TAX EXPENSE
(49)
(13)
(93)
(23)
Income tax expense
18 
5 
35 
9 
Net income
$ (31)
$ (8)
$ (58)
$ (14)