(1)

On November 1, 2017, CenturyLink acquired Level 3 Communications, Inc. through successive merger transactions, including a merger of Level 3 into its successor-in-interest, Level 3 Parent, LLC.

(2)

See attachments for reconciliations of non-GAAP figures used by CenturyLink and Level 3 to comparable GAAP figures. As illustrated in these attached reconciliation statements, CenturyLink and Level 3 have historically defined their respective non-GAAP measures differently.

(3)

Core revenues is a non-GAAP measure defined as strategic revenues plus legacy revenues (excludes data integration and other revenues) as described further in the attached schedules.  Strategic revenues primarily include broadband, Multiprotocol Label Switching (MPLS), Ethernet, colocation, hosting, cloud, video, VoIP and IT services.  Legacy revenues primarily include voice, private line (including special access), switched access and other ancillary services.

(4)

Beginning second quarter 2017, certain legacy services, specifically dark fiber network leasing, were reclassified from legacy services to strategic services. Beginning second quarter 2016, private line (including special access) revenues were reclassified from strategic services to legacy services. All historical periods have been restated to reflect this change.

(5)

All references to segment data herein reflect certain adjustments described in the attached schedules.

(6)

In first quarter 2017, CenturyLink elected to adopt the accounting rules (ASU 2017-07) which modified the presentation of net periodic pension and postretirement benefit costs. All historical periods have been restated to reflect this change.

CenturyLink, Inc.

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)

Three months ended
September 30,

Increase /
(decrease)

Nine months ended
September 30,

Increase /
(decrease)

2017

2016

2017

2016

OPERATING REVENUES *

Strategic

$

1,892

2,027

(7)

%

5,820

6,070

(4)

%

Legacy

1,705

1,888

(10)

%

5,235

5,790

(10)

%

Data integration

134

163

(18)

%

385

402

(4)

%

Other

303

304

—

%

893

919

(3)

%

Total operating revenues

4,034

4,382

(8)

%

12,333

13,181

(6)

%

OPERATING EXPENSES

Cost of services and products

1,927

1,996

(3)

%

5,705

5,845

(2)

%

Selling, general and administrative **

710

798

(11)

%

2,404

2,450

(2)

%

Depreciation and amortization

910

995

(9)

%

2,739

2,958

(7)

%

Total operating expenses

3,547

3,789

(6)

%

10,848

11,253

(4)

%

OPERATING INCOME

487

593

(18)

%

1,485

1,928

(23)

%

OTHER (EXPENSE) INCOME

Interest expense

(362)

(327)

11

%

(1,000)

(998)

—

%

Other income (expense), net **

14

(17)

(182)

%

1

16

(94)

%

Income tax expense

(47)

(97)

(52)

%

(214)

(362)

(41)

%

NET INCOME

$

92

152

(39)

%

272

584

(53)

%

BASIC EARNINGS PER SHARE

$

0.17

0.28

(39)

%

0.50

1.08

(54)

%

DILUTED EARNINGS PER SHARE

$

0.17

0.28

(39)

%

0.50

1.08

(54)

%

AVERAGE SHARES OUTSTANDING

Basic

541,521

539,806

—

%

541,113

539,411

—

%

Diluted

541,963

540,917

—

%

541,879

540,493

—

%

DIVIDENDS PER COMMON SHARE

$

0.54

0.54

—

%

1.62

1.62

—

%

____________________________________

*

During the second quarter of 2017, CenturyLink  determined that certain of its legacy services, specifically its dark fiber network leasing, are more closely aligned with CenturyLink's strategic services than with its legacy services. As a result, CenturyLink now reflects these operating revenues as strategic services, and CenturyLink has reclassified certain prior period amounts to conform to this change. The revision resulted in an increase of revenue from strategic services and a corresponding decrease in revenue from legacy services of $12 million and $36 million for the three and nine months ended September 30, 2016, respectively.

**

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $2 million and $11 million reduction in operating income and a corresponding decrease in other (expense) income, net for the three and nine months ended September 30, 2016, respectively.

CenturyLink, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(UNAUDITED)

(Dollars in millions)

As of
September 30, 2017

As of
December 31, 2016

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

160

222

Other current assets

2,534

4,940

   Total current assets

2,694

5,162

NET PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment

41,352

39,194

Accumulated depreciation

(23,718)

(22,155)

   Net property, plant and equipment

17,634

17,039

GOODWILL AND OTHER ASSETS

Goodwill

19,638

19,650

Restricted cash

6,004

2

Other, net

4,566

5,164

    Total goodwill and other assets

30,208

24,816

TOTAL ASSETS

$

50,536

47,017

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Current maturities of long-term debt

$

124

1,503

Other current liabilities

3,142

3,846

    Total current liabilities

3,266

5,349

LONG-TERM DEBT

24,854

18,185

DEFERRED CREDITS AND OTHER LIABILITIES

9,456

10,084

STOCKHOLDERS' EQUITY

12,960

13,399

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

50,536

47,017

CenturyLink, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

(Dollars in millions)

Nine months ended

September 30, 2017 *

September 30, 2016 *

OPERATING ACTIVITIES

Net income

$

272

584

Adjustments to reconcile net income to net cash provided by operating activities:

 Depreciation and amortization

2,739

2,958

 Deferred income taxes

(243)

32

 Loss on the sale of data centers and colocation business

82

—

 Impairment of assets held for sale

11

1

 Provision for uncollectible accounts

127

144

 Net loss on early retirement of debt

5

27

 Share-based compensation

64

60

 Changes in current assets and liabilities, net

(209)

(129)

 Retirement benefits

(181)

(143)

 Changes in other noncurrent assets and liabilities, net

(54)

(41)

 Other, net

87

19

Net cash provided by operating activities

2,700

3,512

INVESTING ACTIVITIES

Payments for property, plant and equipment and capitalized software

(2,363)

(2,010)

Cash paid for acquisitions

(5)

(24)

Proceeds from the sale of data centers and colocation business, less cash sold

1,467

—

Proceeds from sale of property

51

22

Net cash used in investing activities

(850)

(2,012)

FINANCING ACTIVITIES

Net proceeds from issuance of long-term debt

6,608

2,161

Proceeds from financing obligation

356

—

Payments of long-term debt

(1,612)

(2,436)

Net payments on 2012 credit facility and revolving line of credit

(370)

(325)

Dividends paid

(881)

(876)

Proceeds from issuance of common stock

5

5

Shares withheld to satisfy tax withholdings

(16)

(15)

Net cash provided by (used in) financing activities

4,090

(1,486)

Net increase in cash, cash equivalents and restricted cash

5,940

14

*

Cash, cash equivalents and restricted cash at beginning of period

224

128

*

Cash, cash equivalents and restricted cash at end of period

$

6,164

142

*

In the second quarter of 2017, CenturyLink adopted Accounting Standards Update ("ASU") 2016-18, "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2016-18"), which requires that a statement of cash flows explain the change in the total of cash, cash equivalents and amounts generally described as restricted cash and restricted cash equivalents as compared to the prior presentation, which explained only the change in cash and cash equivalents. ASU 2016-18 is effective January 1, 2018, but early adoption is permitted and requires retrospective application of the requirements to all previous periods presented.  This change was applied on a retrospective basis to all previous periods to match the current period presentation with immaterial impact.

CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

Three months ended September 30, 2017

Three months ended September 30, 2016

As adjusted

As adjusted

Less

excluding

Less

excluding

As

special

special

As

special

special

reported

items

items

reported

items

items

Adjusted EBITDA and adjusted EBITDA margin

Operating income *

$

487

—

(1)

487

593

(8)

(2)

601

Add: Depreciation and amortization

910

—

910

995

—

995

Adjusted EBITDA

$

1,397

—

1,397

1,588

(8)

1,596

Revenues

$

4,034

—

4,034

4,382

—

4,382

Operating income margin (operating income divided by revenues)

12.1

%

12.1

%

13.5

%

13.7

%

Adjusted EBITDA margin (adjusted EBITDA divided by revenues)

34.6

%

34.6

%

36.2

%

36.4

%

Adjusted free cash flow

Adjusted EBITDA

$

1,397

1,596

Less: Capital expenditures (3)

(749)

(740)

Less: Cash paid for interest, net of amounts capitalized

(293)

(262)

Less: Pension and postretirement impacts (4)

(125)

(115)

Less: Cash paid for income taxes, net

(118)

(323)

Less: Ongoing EBITDA impacts of ASC 840-40 on sale of data centers

(25)

—

Add: Share-based compensation

21

20

Add:  Other (expense) income, net *

1

10

Adjusted free cash flow (5)

$

109

186

____________________________________________

SPECIAL ITEMS

(1) -

Costs related to CenturyLink's acquisition of Level 3 ($37 million) offset by a favorable adjustment to the loss associated with the sale of CenturyLink's data centers and colocation business $37 million.

(2) -

Includes severance costs associated with reduction in force initiatives ($4 million), integration costs associated with CenturyLink's acquisition of Qwest ($1 million), costs associated with a large billing system integration project ($7 million), less an offsetting gain on the sale of a building $4 million.

ADJUSTED FREE CASH FLOW

(3) -

Excludes $4 million in third quarter 2017 and $6 million in third quarter 2016 of capital expenditures related to the integration of Qwest and Savvis.

(4) -

2017 includes net periodic pension benefit expense of $1 million, net periodic postretirement benefit expense of $34 million, contributions to our qualified pension plan trust of ($100 million) and ($1 million) of benefits paid to participants of CenturyLink's non-qualified pension plans.  Postretirement contributions included benefits paid by company ($74 million) offset by participant contributions $13 million and direct subsidy receipts $2 million.

-

2016 includes net periodic pension benefit income of ($18 million), net periodic postretirement benefit expense of $36 million, contributions to our qualified pension plan trust of ($100 million) and ($2 million) of benefits paid to participants of CenturyLink's non-qualified pension plans.  Postretirement contributions included benefits paid by company ($47 million) offset by participant contributions $14 million and direct subsidy receipts $2 million.

(5) -

Excludes special items identified in items (1) and (2).

*

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized below operating income in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $2 million reduction in operating income and a corresponding decrease in total other expense, net for the three months ended September 30, 2016.

CenturyLink, Inc.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

(Dollars in millions)

Nine months ended September 30, 2017

Nine months ended September 30, 2016

As adjusted

As adjusted

Less

excluding

Less

excluding

As

special

special

As

special

special

reported

items

items

reported

items

items

Adjusted EBITDA and adjusted EBITDA margin

Operating income *

$

1,485

(141)

(1)

1,626

1,928

(42)

(3)

1,970

Add: Depreciation and amortization

2,739

(6)

(2)

2,745

2,958

—

2,958

Adjusted EBITDA

$

4,224

(147)

4,371

4,886

(42)

4,928

Revenues

$

12,333

—

12,333

13,181

—

13,181

Operating income margin (operating income divided by revenues)

12.0

%

13.2

%

14.6

%

14.9

%

Adjusted EBITDA margin (adjusted EBITDA divided by revenues)

34.2

%

35.4

%

37.1

%

37.4

%

Adjusted free cash flow

Adjusted EBITDA

$

4,371

4,928

Less: Capital expenditures (4)

(2,358)

(1,995)

Less: Cash paid for interest, net of amounts capitalized

(917)

(922)

Less: Pension and postretirement impacts (5)

(181)

(143)

Less: Cash paid for income taxes, net

(378)

(344)

Less: Ongoing EBITDA impacts of ASC 840-40 on sale of data centers

(40)

—

Add: Share-based compensation

64

60

Add:  Other (expense) income, net *

(12)

43

Adjusted free cash flow (6)

$

549

1,627

________________________________________________

SPECIAL ITEMS

(1) -

Costs related to CenturyLink's acquisition of Level 3 ($65 million), a loss associated with the sale of CenturyLink's data centers and colocation business ($82 million), partially offset by the termination of depreciation and amortization expense related to CenturyLink's sale of the data centers and colocation business $50 million, which were substantially offset by additional depreciation expense adjustment recorded on real estate assets CenturyLink was required to reflect on its balance sheet as a result of not meeting the requirement of sale leaseback accounting ($44 million).

(2) -

Termination of depreciation and amortization expense related to CenturyLink's sale of the data centers and colocation business ($50 million), which were substantially offset by additional depreciation expense adjustment recorded of $44 million on real estate assets CenturyLink was required to reflect on its balance sheet as a result of not meeting the requirement of sale leaseback accounting.

(3) -

Includes severance costs associated with reduction in force initiatives ($25 million), integration costs associated with CenturyLink's acquisition of Qwest ($8 million) and costs associated with a large billing system integration project ($13 million), less an offsetting gain on the sale of a building $4 million.

ADJUSTED FREE CASH FLOW

(4) -

Excludes $5 million in 2017 and $15 million in 2016 of capital expenditures related to the integration of Qwest and Savvis.

(5) -

2017 includes net periodic pension benefit expense of $4 million, net periodic postretirement benefit expense of $102 million, contributions to our pension plan trust of ($100 million) and ($4 million) of benefits paid to participants of CenturyLink's non-qualified pension plans.  Postretirement contributions included benefits paid by company ($231 million) offset by participant contributions $41 million and direct subsidy receipts $7 million.

-

2016 includes net periodic pension benefit income of ($56 million), net periodic postretirement benefit expense of $107 million, contributions to our pension plan trust of ($100 million) and ($5 million) of benefits paid to participants of CenturyLink's non-qualified pension plans.  Postretirement contributions included benefits paid by company ($136 million) offset by participant contributions $43 million and direct subsidy receipts $4 million.

(6) -

Excludes special items identified in items (1), (2) and (3).

*

In the first quarter of 2017, CenturyLink adopted ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"). ASU 2017-07 modified the presentation of net periodic pension and postretirement benefit costs and requires the service cost component to be reported separately from the other components in order to provide more useful information. Under ASU 2017-07, the service cost component of net periodic pension and postretirement benefit costs is required to be presented in the same expense category as the related salary and wages for the employee. The other components of the net periodic pension and postretirement benefit costs are required to be recognized in other (expense) income, net in CenturyLink's consolidated statements of operations. This change was applied on a retrospective basis to all previous periods to match the current period presentation. This retrospective application resulted in a $11 million reduction in operating income and a corresponding decrease in total other expense, net for the nine months ended September 30, 2016.

CenturyLink, Inc.

SUPPLEMENTAL NON-GAAP INFORMATION - ADJUSTED DILUTED EPS

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

(Dollars and shares in millions, except per share amounts)

Three months ended

Nine months ended

September
30, 2017

September
30, 2016

September
30, 2017

September
30, 2016

Net Income

$

92

152

272

584

Less Special Items:

Special items (excluding tax items)

(31)

(1)

(35)

(3)

(172)

(5)

(69)

(7)

Special income tax items and income tax effect of other special items

9

(2)

13

(4)

35

(6)

26

(8)

Total impact of special items

(22)

(22)

(137)

(43)

Net income, excluding special items

114

174

409

627

Add back certain items arising from purchase accounting:

Amortization of customer base intangibles:

Qwest

167

183

513

561

Embarq

10

15

40

55

Savvis

7

15

22

46

Amortization of fair value adjustment of long-term debt:

Embarq

—

—

1

3

Qwest

—

(3)

(5)

(12)

Subtotal

184

210

571

653

Tax effect of items arising from purchasing accounting

(70)

(79)

(217)

(247)

Net adjustment, after taxes

114

131

354

406

Net income, as adjusted for above items

$

228

305

763

1,033

Weighted average diluted shares outstanding

542.0

540.9

541.9

540.5

Diluted EPS
(excluding special items)

$

0.21

0.32

0.75

1.16

Adjusted diluted EPS as adjusted for the above-listed purchase accounting intangible and interest amortizations (excluding special items)

$

0.42

0.56

1.41

1.91

The above non-GAAP schedule presents adjusted net income and adjusted diluted earnings per share (both excluding special items) by adding back to net income and diluted earnings per share certain non-cash expense items that arise as a result of the application of business combination accounting rules to CenturyLink's major acquisitions since mid-2009. Such presentation is not in accordance with generally accepted accounting principles but CenturyLink's management believes the presentation is useful to analysts and investors to understand the impacts of growing CenturyLink's business through acquisitions.

(1)

Costs related to CenturyLink's acquisition of Level 3 ($37million) offset by a favorable adjustment to the loss associated with the sale of CenturyLink's data centers and colocation business $37 million, interest expense ($44 million) related to CenturyLink's $6 billion term loan secured financing for the acquisition of Level 3 and interest income $13 million earned from the pre-funded escrow established with the term loan proceeds.

(2)

Income tax benefit of Items (1).

(3)

Includes severance costs associated with reduction in force initiatives ($4 million), integration costs associated with CenturyLink's acquisition of Qwest ($1 million), costs associated with a large billing system integration project ($7 million) and a net loss associated with early retirement of debt ($27 million), less an offsetting gain on the sale of a building $4 million.

(4)

Income tax benefit of Item (3).

(5)

Costs related to CenturyLink's acquisition of Level 3 ($65 million), interest expense ($44 million) related to CenturyLink's $6 billion term loan secured financing for the acquisition of Level 3 and interest income $13 million earned from the pre-funded escrow, a loss associated with the sale of CenturyLink's data centers and colocation business ($82 million), partially offset by the termination of depreciation and amortization expense related to CenturyLink's sale of the data centers and colocation business $50 million, which were substantially offset by additional depreciation expense adjustment recorded on real estate assets CenturyLink was required to reflect on its balance sheet as a result of not meeting the requirement of sale leaseback accounting ($44 million).

(6)

Income tax benefit of Item (5) $73 million, net of a tax benefit related to the sale of CenturyLink's data centers and colocation business ($38 million).

(7)

Includes severance costs associated with reduction in force initiatives ($25 million), integration costs associated with CenturyLink's acquisition of Qwest ($8 million) and costs associated with a large billing system integration project ($13 million) and a net loss associated with early retirement of debt ($27 million), less an offsetting gain on the sale of a building $4 million.

(8)

Income tax benefit of Item (7).

CenturyLink, Inc.

SELECTED SEGMENT FINANCIAL INFORMATION

THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

(Dollars in millions)

Three months ended
September 30,

Nine months ended
September 30,

2017

2016

2017

2016

Total reportable segment revenues

$

3,558

3,916

10,943

11,776

Total reportable segment expenses

1,913

2,068

5,720

6,009

Total reportable segment income

$

1,645

1,848

5,223

5,767

Total segment income margin (segment income divided by segment revenues)

46.2

%

47.2

%

47.7

%

49.0

%

Enterprise

Revenues

Strategic services *

$

949

1,078

3,031

3,224

Legacy services *

1,092

1,205

3,341

3,699

Data integration

130

161

370

398

Total revenues

2,171

2,444

6,742

7,321

Expenses

Total expenses

1,292

1,425

3,907

4,116

Segment income

$

879

1,019

2,835

3,205

Segment income margin

40.5

%

41.7

%

42.0

%

43.8

%

Consumer

Revenues

Strategic services

$

774

789

2,306

2,363

Legacy services

613

683

1,894

2,091

Data integration

—

—

1

1

Total revenues

1,387

1,472

4,201

4,455

Expenses

Total expenses

621

643

1,813

1,893

Segment income

$

766

829

2,388

2,562

Segment income margin

55.2

%

56.3

%

56.8

%

57.5

%

*

During the second quarter of 2017, CenturyLink  determined that certain of its legacy services, specifically its dark fiber network leasing, are more closely aligned with CenturyLink's strategic services than with its legacy services. As a result, CenturyLink now reflects these operating revenues as strategic services, and CenturyLink has reclassified certain prior period amounts to conform to this change. The revision resulted in an increase of revenue from strategic services and a corresponding decrease in revenue from legacy services of $12 million and $36 million for the three and nine months ended September 30, 2016, respectively.

In January 2017, CenturyLink implemented a new organizational structure designed to further strengthen its ability to attain its operational, strategic and financial goals. Prior to this reorganization, CenturyLink operated and reported as two segments, business and consumer. As a result of this reorganization, CenturyLink reassigned its information technology, managed hosting, cloud hosting and hosting area network services from its former business segment to a new non-reportable operating segment. In addition, CenturyLink changed the name of the predecessor business segment to enterprise segment. As of September 30, 2017 CenturyLink had the following two reportable segments: enterprise and consumer.

CenturyLink, Inc.

REVENUES

(UNAUDITED)

(Dollars in millions)

Three months ended

Nine months ended

September 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Strategic services *

Enterprise high-bandwidth data services (1)

$

767

744

2,296

2,235

Other enterprise strategic services (2)

182

334

735

989

IT and managed services (3)

169

160

483

483

Consumer broadband services (4)

673

674

1,995

2,023

Other consumer strategic services (5)

101

115

311

340

 Total strategic services revenues

1,892

2,027

5,820

6,070

Legacy services *

Enterprise voice services (6)

551

601

1,682

1,834

Enterprise low-bandwidth data services (7)

289

339

905

1,056

Other enterprise legacy services (8)

252

265

754

809

Consumer voice services (6)

541

605

1,678

1,854

Other consumer legacy services (9)

72

78

216

237

 Total legacy services revenues

1,705

1,888

5,235

5,790

Data integration

  Enterprise data integration

130

161

370

398

  IT and managed services data integration

4

2

14

3

  Consumer data integration

—

—

1

1

Total data integration revenues

134

163

385

402

Other revenues

  High-cost support revenue (10)

165

171

501

518

  Other revenue (11)

138

133

392

401

Total other revenues

303

304

893

919

$

4,034

4,382

12,333

13,181

____________________

(1)

Includes MPLS, Ethernet and wavelength revenue

(2)

Includes primarily colocation, broadband, VOIP, video and fiber lease revenue

(3)

Includes primarily IT services, managed hosting, cloud hosting and hosting area network revenue

(4)

Includes broadband and related services revenue

(5)

Includes video and other revenue

(6)

Includes local and long-distance voice revenue

(7)

Includes private line (including special access) revenue

(8)

Includes UNEs, public access, switched access and other ancillary revenue

(9)

Includes other ancillary revenue

(10)

Includes CAF Phase 1, CAF Phase 2 and federal and state USF support revenue

(11)

Includes USF surcharges

*

During the second quarter of 2017, CenturyLink  determined that certain of its legacy services, specifically its dark fiber network leasing, are more closely aligned with CenturyLink's strategic services than with its legacy services. As a result, CenturyLink now reflects these operating revenues as strategic services, and CenturyLink has reclassified certain prior period amounts to conform to this change. The revision resulted in an increase of revenue from strategic services and a corresponding decrease in revenue from legacy services of $12 million and $36 million for the three and nine months ended September 30, 2016, respectively.

CenturyLink, Inc.

OPERATING METRICS

(UNAUDITED)

As of

As of

As of

September 30, 2017

June 30, 2017

September 30, 2016

(In thousands)

Operating Metrics

Broadband subscribers

5,767

5,868

5,950

Access lines

10,506

10,733

11,231

CenturyLink's methodology for counting broadband subscribers and access lines may not be comparable to those of other companies.

Level 3 Parent, LLC

FINANCIAL RESULTS

THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)

Three months ended September 30,

2017

2016 ⁽¹⁾

Core Network Services Revenue

$

1,963

1,929

Wholesale Voice Services Revenue

96

104

Total Revenue

2,059

2,033

Network Access Costs

678

675

Network Access Margin

67.1

%

66.8

%

Network Related Expenses (NRE) ⁽²⁾

340

331

Selling, General & Administrative Expenses (SG&A) ⁽²⁾

320

311

Non-cash Compensation Expense

33

43

Adjusted EBITDA ⁽³⁾

721

716

Adjusted EBITDA, excluding acquisition-related expenses ^{(3) (4)}

752

716

Adjusted EBITDA Margin ⁽³⁾

35.0

%

35.2

%

Adjusted EBITDA Margin, excluding acquisition-related expenses ^{(3) (4)}

36.5

%

35.2

%

Cash Flows from Operating Activities ⁽⁵⁾

691

645

Capital Expenditures

322

364

Capital Expenditures, excluding acquisition-related capital expenditures ⁽⁶⁾

318

364

Unlevered Cash Flow ⁽³⁾

493

407

Unlevered Cash Flow, excluding acquisition-related expenses ^{(3) (5)}

503

407

Free Cash Flow ⁽³⁾

369

281

Free Cash Flow, excluding acquisition-related expenses ^{(3) (5)}

379

281

Net Income

$

157

143

Net Income per Common Share - Basic

$

0.43

0.40

Weighted Average Shares Outstanding - Basic

363,471

359,561

(1) -

The reported third quarter 2016 results have been adjusted to reflect changes made to customer assignments between the wholesale and enterprise channels as of the beginning of 2017.

(2) -

Excludes non-cash compensation expense.

(3) -

See schedule of non-GAAP metrics for definitions and reconciliation to GAAP measures.

(4) -

In the third quarter 2017, acquisition-related expenses were $31 million.

(5) -

In the third quarter 2017, cash paid for acquisition-related expenses was $10 million.

(6) -

In the third quarter 2017, acquisition-related capital expenditures were $4 million.

Level 3 Parent, LLC

CORE NETWORK SERVICE REVENUE

(UNAUDITED)

(Dollars in millions)

3Q17 /
3Q16
Percent
Change

3Q17 /
3Q16
Percent
Change,
Constant
Currency

3Q17

3Q16 ⁽¹⁾

North America

$

1,597

$

1,573

2

%

2

%

Wholesale

404

412

(2)

%

(2)

%

Enterprise

1,193

1,161

3

%

3

%

EMEA

$

184

$

180

2

%

1

%

Wholesale

57

58

(2)

%

(5)

%

Enterprise

113

105

8

%

6

%

UK Government

14

17

(18)

%

(14)

%

Latin America

$

182

$

176

3

%

3

%

Wholesale

35

37

(5)

%

(8)

%

Enterprise

147

139

6

%

6

%

Total CNS Revenue

$

1,963

$

1,929

2

%

2

%

Wholesale CNS

496

507

(2)

%

(3)

%

Enterprise CNS

1,467

1,422

3

%

3

%

(1) -

The reported third quarter 2016 results have been adjusted to reflect changes made to customer assignments between the wholesale and enterprise channels as of the beginning of 2017.

Level 3 Parent, LLC and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(Dollars in millions, except per share amounts; shares in thousands)

Three Months Ended

September 30,
2017

June 30,
2017

September 30,
2016

Revenue

$

2,059

2,061

2,033

Costs and Expenses

Network access costs

678

675

675

Network related expenses

345

337

337

Depreciation and amortization

333

330

319

Selling, general and administrative expenses

348

366

348

Total Costs and Expenses

1,704

1,708

1,679

Operating Income

355

353

354

Other Income (Expense):

Interest income

6

3

1

Interest expense

(134)

(132)

(139)

Other, net

6

(1)

1

Total Other Expense

(122)

(130)

(137)

Income Before Income Taxes

233

223

217

Income Tax Expense

(76)

(69)

(74)

Net Income

$

157

154

143

Basic Earnings per Common Share:

Net Income per Share

$

0.43

0.42

0.40

Weighted-Average Shares Outstanding (in thousands)

363,471

362,385

359,561

Diluted Earnings per Common Share:

Net Income per Share

$

0.43

0.42

0.39

Weighted-Average Shares Outstanding (in thousands)

365,323

365,002

361,907

Level 3 Parent, LLC and Subsidiaries

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(Dollars in millions)

September 30,
2017

June 30,
2017

September 30,
2016

Assets

Current Assets:

Cash and cash equivalents

$

2,252

1,056

1,569

Marketable securities

—

1,127

—

Restricted cash and securities

5

5

8

Receivables, less allowances for doubtful accounts

750

707

749

Other

136

141

131

Total Current Assets

3,143

3,036

2,457

Property, Plant and Equipment, net

10,485

10,392

10,167

Restricted Cash and Securities

29

29

31

Goodwill

7,741

7,737

7,736

Other Intangibles, net

761

809

967

Deferred Tax Assets

3,162

3,235

3,339

Other Assets

52

49

49

Total Assets

$

25,373

25,287

24,746

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable

$

704