QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| ||||||||||||||
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | Smaller reporting company | ||||||||||||||||||
Emerging growth company |
* All references to "Notes" in this quarterly report refer to these Notes to Consolidated Financial Statements, unless otherwise specified. |
Three Months Ended March 31, | ||||||||||||||
2021 | 2020 | |||||||||||||
OPERATING REVENUE | ||||||||||||||
Operating revenue | $ | |||||||||||||
Operating revenue - affiliates | ||||||||||||||
Total operating revenue | ||||||||||||||
OPERATING EXPENSES | ||||||||||||||
Cost of services and products (exclusive of depreciation and amortization) | ||||||||||||||
Selling, general and administrative | ||||||||||||||
Operating expenses - affiliates | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Total operating expenses | ||||||||||||||
OPERATING INCOME | ||||||||||||||
OTHER (EXPENSE) INCOME | ||||||||||||||
Interest expense | ( | ( | ||||||||||||
Interest expense - affiliates, net | ( | ( | ||||||||||||
Other expense, net | ( | ( | ||||||||||||
Total other expense, net | ( | ( | ||||||||||||
INCOME BEFORE INCOME TAXES | ||||||||||||||
Income tax expense | ||||||||||||||
NET INCOME | $ |
March 31, 2021 (Unaudited) | December 31, 2020 | ||||||||||
(Dollars in millions) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | ||||||||||
Accounts receivable, less allowance of $ | |||||||||||
Other | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $ | |||||||||||
GOODWILL AND OTHER ASSETS | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Other, net | |||||||||||
Total goodwill and other assets | |||||||||||
TOTAL ASSETS | $ | ||||||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||||
CURRENT LIABILITIES | |||||||||||
Current maturities of long-term debt | $ | ||||||||||
Accounts payable | |||||||||||
Advances from affiliates | |||||||||||
Note payable - affiliate | |||||||||||
Accrued expenses and other liabilities | |||||||||||
Salaries and benefits | |||||||||||
Income and other taxes | |||||||||||
Other | |||||||||||
Current portion of deferred revenue | |||||||||||
Total current liabilities | |||||||||||
LONG-TERM DEBT | |||||||||||
DEFERRED CREDITS AND OTHER LIABILITIES | |||||||||||
Deferred income taxes, net | |||||||||||
Affiliate obligations, net | |||||||||||
Other | |||||||||||
Total deferred credits and other liabilities | |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 7) | |||||||||||
STOCKHOLDER'S EQUITY | |||||||||||
Common stock - | |||||||||||
Retained earnings | |||||||||||
Total stockholder's equity | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
(Dollars in millions) | |||||||||||
OPERATING ACTIVITIES | |||||||||||
Net income | $ | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Deferred income taxes | ( | ( | |||||||||
Provision for uncollectible accounts | |||||||||||
Accrued interest on affiliate note | |||||||||||
Net loss on early retirement of debt | |||||||||||
Changes in current assets and liabilities: | |||||||||||
Accounts receivable | |||||||||||
Accounts payable | ( | ( | |||||||||
Accrued income and other taxes | |||||||||||
Other current assets and liabilities, net | ( | ( | |||||||||
Other current assets and liabilities - affiliates, net | ( | ||||||||||
Changes in other noncurrent assets and liabilities, net | ( | ||||||||||
Changes in affiliate obligations, net | ( | ||||||||||
Other, net | |||||||||||
Net cash provided by operating activities | |||||||||||
INVESTING ACTIVITIES | |||||||||||
Capital expenditures | ( | ( | |||||||||
Changes in advances to affiliates | |||||||||||
Proceeds from sale of property, plant and equipment and other assets | |||||||||||
Net cash (used in) provided by investing activities | ( | ||||||||||
FINANCING ACTIVITIES | |||||||||||
Payments of long-term debt | ( | ( | |||||||||
Dividends paid | ( | ( | |||||||||
Changes in advances from affiliates | ( | ||||||||||
Net cash used in financing activities | ( | ( | |||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | ||||||||||
Supplemental cash flow information: | |||||||||||
Income taxes paid, net | $ | ( | ( | ||||||||
Interest paid (net of capitalized interest of $ | $ | ( | ( | ||||||||
Cash, cash equivalents and restricted cash: | |||||||||||
Cash and cash equivalents | $ | ||||||||||
Restricted cash - noncurrent | |||||||||||
Total | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
(Dollars in millions) | |||||||||||
COMMON STOCK | |||||||||||
Balance at beginning of period | $ | ||||||||||
Balance at end of period | |||||||||||
RETAINED EARNINGS (ACCUMULATED DEFICIT) | |||||||||||
Balance at beginning of period | |||||||||||
Net income | |||||||||||
, net $( | — | ||||||||||
Dividends declared and paid to Qwest Services Corporation | ( | ( | |||||||||
Other | ( | ||||||||||
Balance at end of period | |||||||||||
TOTAL STOCKHOLDER'S EQUITY | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
(Dollars in millions) | |||||||||||
Goodwill | $ | ||||||||||
Customer relationships, less accumulated amortization of $ | $ | ||||||||||
Other intangible assets, less accumulated amortization of $ | |||||||||||
Total other intangible assets, net | $ |
(Dollars in millions) | |||||
2021 (remaining nine months) | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 |
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | ||||||||||||||||||||||
Total Revenue | Adjustments for Non-ASC 606 Revenue (1) | Total Revenue from Contracts with Customers | Total Revenue | Adjustments for Non-ASC 606 Revenue (1) | Total Revenue from Contracts with Customers | ||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||
Voice and other | $ | ( | ( | ||||||||||||||||||||
Fiber Infrastructure | ( | ( | |||||||||||||||||||||
IP and Data Services | |||||||||||||||||||||||
Affiliate Services | ( | ( | |||||||||||||||||||||
Total revenue | $ | ( | ( |
March 31, 2021 | December 31, 2020 | ||||||||||
(Dollars in millions) | |||||||||||
Customer receivables (1) | $ | ||||||||||
Contract assets | |||||||||||
Contract liabilities |
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | ||||||||||||||||||||||
Acquisition Costs | Fulfillment Costs | Acquisition Costs | Fulfillment Costs | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||
Beginning of period balance | $ | ||||||||||||||||||||||
Costs incurred | |||||||||||||||||||||||
Amortization | ( | ( | ( | ( | |||||||||||||||||||
End of period balance | $ |
Business | Mass Markets | Total | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Beginning balance at January 1, 2021 (1) | $ | ||||||||||||||||
Provision for expected losses | |||||||||||||||||
Write-offs charged against the allowance | ( | ( | ( | ||||||||||||||
Recoveries collected | |||||||||||||||||
Ending balance at March 31, 2021 | $ |
Interest Rates (1) | Maturities (1) | March 31, 2021 | December 31, 2020 | ||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||
Senior notes | 2021 - 2057 | $ | |||||||||||||||||||||
Term loan (2) | LIBOR + | 2027 | |||||||||||||||||||||
Finance lease and other obligations | Various | Various | |||||||||||||||||||||
Unamortized premiums, net | |||||||||||||||||||||||
Unamortized debt issuance costs | ( | ( | |||||||||||||||||||||
Total long-term debt | |||||||||||||||||||||||
Less current maturities | ( | ( | |||||||||||||||||||||
Long-term debt, excluding current maturities | $ | ||||||||||||||||||||||
Note payable - affiliate | 2022 | $ |
(Dollars in millions) | |||||
2021 (remaining nine months) | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 and thereafter | |||||
Total long-term debt | $ |
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. |
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||
Input Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||
Liabilities—Long-term debt (excluding finance lease and other obligations) | 2 | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
(Dollars in millions) | |||||||||||
Prepaid expenses | $ | ||||||||||
Contract acquisition costs | |||||||||||
Contract fulfillment costs | |||||||||||
Other | |||||||||||
Total other current assets | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
(Dollars in millions) | |||||||||||
Unrecognized tax benefits | $ | ||||||||||
Deferred revenue | |||||||||||
Noncurrent operating lease liability | |||||||||||
Other | |||||||||||
Total other noncurrent liabilities | $ |
Three Months Ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Operating revenue | $ | 1,792 | 1,918 | ||||||||
Operating expenses | 1,057 | 1,139 | |||||||||
Operating income | 735 | 779 | |||||||||
Total other expense, net | (85) | (99) | |||||||||
Income before income taxes | 650 | 680 | |||||||||
Income tax expense | 168 | 177 | |||||||||
Net income | $ | 482 | 503 |
Three Months Ended March 31, | % Change | ||||||||||||||||
2021 | 2020 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Voice and other | $ | 543 | 590 | (8) | % | ||||||||||||
Fiber Infrastructure | 504 | 513 | (2) | % | |||||||||||||
IP and Data Services | 123 | 132 | (7) | % | |||||||||||||
Affiliate Services | 622 | 683 | (9) | % | |||||||||||||
Total operating revenue | $ | 1,792 | 1,918 | (7) | % |
Three Months Ended March 31, | % Change | ||||||||||||||||
2021 | 2020 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Cost of services and products (exclusive of depreciation and amortization) | $ | 439 | 473 | (7) | % | ||||||||||||
Selling, general and administrative | 107 | 143 | (25) | % | |||||||||||||
Operating expenses - affiliates | 194 | 195 | (1) | % | |||||||||||||
Depreciation and amortization | 317 | 328 | (3) | % | |||||||||||||
Total operating expenses | $ | 1,057 | 1,139 | (7) | % |
Three Months Ended March 31, | % Change | ||||||||||||||||
2021 | 2020 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Depreciation | $ | 207 | 204 | 1 | % | ||||||||||||
Amortization | 110 | 124 | (11) | % | |||||||||||||
Total depreciation and amortization | $ | 317 | 328 | (3) | % |
Three Months Ended March 31, | % Change | ||||||||||||||||
2021 | 2020 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Interest expense | $ | (48) | (75) | (36) | % | ||||||||||||
Interest expense - affiliates, net | (31) | (16) | 94 | % | |||||||||||||
Other (expense) income, net | (6) | (8) | (25) | % | |||||||||||||
Total other expense, net | $ | (85) | (99) | (14) | % | ||||||||||||
Income tax expense | $ | 168 | 177 | (5) | % |
Three Months Ended March 31, | |||||||||||||||||
2021 | 2020 | % Change | |||||||||||||||
(Dollars in millions) | |||||||||||||||||
Loss on extinguishment of debt | $ | (8) | (12) | (33) | % | ||||||||||||
Interest income | — | 1 | (100) | % | |||||||||||||
Other income, net | 2 | 3 | (33) | % | |||||||||||||
Total other expense, net | $ | (6) | (8) | (25) | % |
Agency | Credit Ratings | ||||
Standard & Poor's | BBB- | ||||
Moody's Investors Service, Inc. | Ba2 | ||||
Fitch Ratings | BB+ |
Three Months Ended March 31, | $ Change | ||||||||||||||||
2021 | 2020 | ||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Net cash provided by operating activities | $ | 814 | 785 | 29 | |||||||||||||
Net cash (used in) provided by investing activities | $ | (211) | 830 | (1,041) | |||||||||||||
Net cash used in financing activities | $ | (607) | (1,609) | (1,002) |
Exhibit Number | Description | |||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
101* | Financial statements from the Quarterly Report on Form 10-Q of Qwest Corporation for the period ended March 31, 2021, formatted in Inline XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholder's Equity and (v) the Notes to the Consolidated Financial Statements. | |||||||
104* | Cover page formatted as Inline XBRL and contained in Exhibit 101. |
QWEST CORPORATION | ||||||||
By: | /s/ Eric J. Mortensen | |||||||
Eric J. Mortensen Senior Vice President - Controller (Principal Accounting Officer) |
Date: May 5, 2021 | /s/ Jeff K. Storey | |||||||
Jeff K. Storey Chief Executive Officer |
Date: May 5, 2021 | /s/ Indraneel Dev | |||||||
Indraneel Dev Executive Vice President and Chief Financial Officer |
Date: | May 5, 2021 | /s/ Jeff K. Storey | |||||||||
Jeff K. Storey | |||||||||||
Chief Executive Officer |
Date: | May 5, 2021 | /s/ Indraneel Dev | |||||||||
Indraneel Dev | |||||||||||
Executive Vice President and Chief Financial Officer |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
OPERATING REVENUE | ||
Total operating revenue | $ 1,792 | $ 1,918 |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 439 | 473 |
Selling, general and administrative | 107 | 143 |
Operating expenses - affiliates | 194 | 195 |
Depreciation and amortization | 317 | 328 |
Total operating expenses | 1,057 | 1,139 |
OPERATING INCOME | 735 | 779 |
OTHER (EXPENSE) INCOME | ||
Interest expense | (48) | (75) |
Interest expense - affiliates, net | (31) | (16) |
Other expense, net | (6) | (8) |
Total other expense, net | (85) | (99) |
INCOME BEFORE INCOME TAXES | 650 | 680 |
Income tax expense | 168 | 177 |
NET INCOME | 482 | 503 |
Non-affiliate services | ||
OPERATING REVENUE | ||
Total operating revenue | 1,170 | 1,235 |
Affiliate Services [Member] | ||
OPERATING REVENUE | ||
Total operating revenue | $ 622 | $ 683 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 53 | $ 61 |
PP&E, accumulated depreciation | $ 8,522 | $ 8,347 |
Common stock, share issued (in shares) | 1 | 1 |
Common stock, share outstanding (in shares) | 1 | 1 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Statement of Cash Flows [Abstract] | ||
Interest paid, capitalized interest | $ 5 | $ 10 |
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY - USD ($) $ in Millions |
Total |
COMMON STOCK |
RETAINED EARNINGS (ACCUMULATED DEFICIT) |
RETAINED EARNINGS (ACCUMULATED DEFICIT)
Cumulative Effect, Period of Adoption, Adjustment
|
---|---|---|---|---|
Balance at beginning of period at Dec. 31, 2019 | $ 10,050 | $ 67 | $ 3 | |
Increase (Decrease) in Stockholder's Equity | ||||
Net income | $ 503 | 503 | ||
Dividends declared and paid to Qwest Services Corporation | (500) | (500) | ||
Other | (5) | |||
Balance at end of period at Mar. 31, 2020 | 10,118 | 10,050 | 68 | |
Balance at beginning of period at Dec. 31, 2020 | 10,098 | 10,050 | 48 | |
Increase (Decrease) in Stockholder's Equity | ||||
Net income | 482 | 482 | ||
Dividends declared and paid to Qwest Services Corporation | (300) | (300) | ||
Other | 0 | |||
Balance at end of period at Mar. 31, 2021 | $ 10,280 | $ 10,050 | $ 230 |
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (parenthetical) - USD ($) $ in Millions |
Jan. 01, 2020 |
Dec. 31, 2019 |
---|---|---|
RETAINED EARNINGS (ACCUMULATED DEFICIT) | ||
Cumulative effect of new accounting principle in period of adoption, tax | $ 1 | $ 1 |
Background |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Background | Background General We are an integrated communications company engaged primarily in providing a broad array of communications services to our mass markets and business customers. Our specific products and services are detailed in Note 3—Revenue Recognition of this report. We generate the majority of our total consolidated operating revenue from services provided in the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We refer to this region as our local service area. Basis of Presentation Our consolidated balance sheet as of December 31, 2020, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the SEC; however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes 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, 2020. 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. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated. We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories. See Note 3—Revenue Recognition for additional information. These changes had no impact on total operating revenue, total operating expenses or net income (loss) for any period. Operating lease assets are included in Other, net under goodwill and other assets on our consolidated balance sheets. Current operating lease liabilities are included in Other under accrued expenses and other liabilities on our consolidated balance sheets. Noncurrent operating lease liabilities are included in Other under deferred credits and other liabilities on our consolidated balance sheets. Segments Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. Summary of Significant Accounting Policies The significant accounting policy below is in addition to the significant accounting policies described in Note 1—Background and Summary of Significant Accounting Policies to the consolidated financial statements and accompanying notes in Part II Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020. Operating Lease Income Qwest leases various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations. For both the three months ended March 31, 2021 and 2020, our gross rental income was $79 million, which represents approximately 4% of our operating revenue for the each period. Recently Adopted Accounting Pronouncements Debt On January 1, 2021, we adopted ASU 2020-09, "Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762" ("ASU 2020-09"). This ASU amends and supersedes various SEC paragraphs to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have an impact to our consolidated financial statements. Investments On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01"). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of March 31, 2021, we determined there was no application or discontinuation of the equity method during the reporting periods. The adoption of ASU 2020-01 did not have an impact to our consolidated financial statements. Income taxes On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements. Measurement of Credit Losses on Financial Instruments We adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020 and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $3 million, net of tax effect of $1 million. Please refer to Note 4—Credit Losses on Financial Instruments for more information. Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), designed to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2020-04 provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. As of March 31, 2021, we are evaluating the existing contracts and the impact on consolidated financial statements.
|
Goodwill, Customer Relationships and Other Intangible Assets |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill, Customer Relationships and Other Intangible Assets | Goodwill, Customer Relationships and Other Intangible Assets Goodwill, customer relationships and other intangible assets consisted of the following:
Substantially all of our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired. We assess our goodwill for impairment annually as of October 31, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write-down the value of goodwill in periods in which the carrying value of equity exceeds the estimated fair value of equity, limited to the amount of goodwill. Goodwill is evaluated for impairment at the reporting unit level, and we have determined that we have one reporting unit. As of March 31, 2021, the gross carrying amount of goodwill, customer relationships and other intangible assets was $17.2 billion. The total amortization expense for intangible assets for the three months ended March 31, 2021 and 2020 totaled $110 million and $124 million, respectively. We estimate that total amortization expense for intangible assets for the years ending December 31, 2021 through 2025 will be as follows:
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition Beginning in the first quarter of 2021, we categorize our products, services and revenue among the following four categories: •Voice and Other, which includes primarily local voice services, private line and other legacy services. This category also includes Universal Service Fund ("USF") and Connect America Fund Phase II ("CAF II") support payments and other operating revenue. We receive support payments from state USF programs and from the federal CAF II program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services. During the three months ended March 31, 2021, we recorded approximately $36 million of revenue from the CAF II program that will end as of December 31, 2021. •Fiber Infrastructure Services, which includes high speed, fiber-based and lower speed DSL-based broadband services, and optical network services; •IP and Data Services, which consists primarily of Ethernet services; •Affiliate Services, which are telecommunication services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services. From time to time, we may change the categorization of our products and services. Reconciliation of Total Revenue to Revenue from Contracts with Customers The following table provides our total revenue by product and service category as well as the amount of revenue that is not subject to ASC 606, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards:
____________________________________________________________________ (1)Includes regulatory revenue and lease revenue not within the scope of ASC 606. Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2021 and December 31, 2020:
______________________________________________________________________ (1)Gross customer receivables, including gross affiliate receivables, of $387 million and $396 million, net of allowance for doubtful accounts of $45 million and $50 million, at March 31, 2021 and December 31, 2020, respectively. Contract liabilities consist of consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the three months ended March 31, 2021 and March 31, 2020, we recognized $163 million and $184 million, respectively, of revenue that was included in contract liabilities as of January 1, 2021 and January 1, 2020, respectively. Performance Obligations As of March 31, 2021, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $167 million. We expect to recognize approximately 99% of this revenue through 2023, with the balance recognized thereafter. These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), and (ii) contracts that are classified as leasing arrangements that are not subject to ASC 606. Contract Costs The following table provides changes in our contract acquisition costs and fulfillment costs:
Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of communications services to customers, including labor and materials consumed for these activities. Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average customer life of 30 months for mass markets customers and average contract life of 29 months for business customers. Amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next 12 months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next 12 months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.
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Credit Losses on Financial Instruments |
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Credit Losses on Financial Instruments | Credit Losses on Financial Instruments In accordance with ASC 326, "Financial Instruments - Credit Losses" ("ASC 326") we aggregate financial assets with similar risk characteristics to align our expected credit losses with the credit quality or deterioration over the life of such assets. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized cost primarily consist of accounts receivable. In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms and their historical and expected credit loss patterns. Prior to the adoption of the new credit loss standard, the allowance for doubtful accounts receivable reflected our best estimate of probable losses inherent in our receivable portfolio determined based on historical experience, specific allowances for known troubled accounts, and other currently available evidence. We implemented the new standard effective January 1, 2020, using a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our use of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to recognize accounts receivable as credit losses. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, certain classes of aged balances, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to update our current loss rate, which as noted below has increased due to an increase in historic loss experience and weakening economic forecasts. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. The historical, current, and expected credit loss rates are combined and applied to period end accounts receivable, which results in our allowance for credit losses. If there is a deterioration of a customer's financial condition or if future default rates in general differ from currently anticipated default rates (including changes caused by COVID-19), we may need to adjust the allowance for credit losses, which would affect earnings in the period that adjustments are made. The assessment of the correlation between historical observed default rates, current conditions and forecasted economic conditions requires judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions and forecast of economic conditions may also not be representative of the customers' actual default experience in the future. The following table presents the activity of our allowance for credit losses by accounts receivable portfolio for the three months ended March 31, 2021:
(1) Due to an internal reorganization of our reporting categories on January 1, 2021, our accounts receivable portfolios were changed to align with changes to how we manage our customers. Allowance for credit losses previously included in the Consumer and Business portfolio of $32 million and $4 million, respectively, were reclassified to the Mass Markets allowance for credit losses on January 1, 2021, as a result of this change. For the three months ended March 31, 2021, we decreased our allowance for credit losses for our business and mass markets accounts receivable portfolios primarily due to higher write-off activity in the quarter with the easing of prior delays due to COVID-19 related restrictions in 2020.
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Long-Term Debt and Note Payable - Affiliate |
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Long-Term Debt and Note Payable - Affiliate | Long-Term Debt and Note Payable - Affiliate The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance lease and other obligations, unamortized premiums, net, unamortized debt issuance costs and (ii) note payable - affiliate:
_______________________________________________________________________________ (1)As of March 31, 2021. (2)Qwest Corporation's Term Loan had interest rates of 2.110% as of March 31, 2021 and 2.150% as of December 31, 2020. Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt as of March 31, 2021 (excluding unamortized premiums, net and unamortized debt issuance costs and note payable-affiliate) maturing during the following years:
Redemption of Senior Notes On February 16, 2021, we fully redeemed all $235 million aggregate principal amount of our outstanding 7.000% Senior Notes due 2056. The redemption of the Senior Notes resulted in a loss of $8 million for the three months ended March 31, 2021. Note Payable - Affiliate Qwest Corporation is currently indebted to an affiliate of our ultimate parent company, Lumen Technologies, Inc., under a revolving promissory note that provides Qwest Corporation with a funding commitment of up to $965 million in aggregate principal amount (the "Intercompany Note"). The outstanding principal balance owed by Qwest Corporation under the Intercompany Note and the accrued interest thereon is due and payable on demand, but if no demand is made, then on June 30, 2022. Interest is accrued on the outstanding principal balance during the respective interest period using a weighted average per annum interest rate on the consolidated outstanding debt of Lumen Technologies, Inc. and its subsidiaries. As of March 31, 2021 and December 31, 2020, the Intercompany Note is reflected on our consolidated balance sheets as a current liability under "Note payable - affiliate". In accordance with the terms of the Intercompany Note, interest shall be assessed on June 30th and December 31st (an "Interest Period"). Any assessed interest for an Interest Period that remains unpaid on the last day of the subsequent Interest Period is capitalized to the outstanding principal balance on such date. Due to the amount the unpaid interest capitalized since inception of the Intercompany Note, the outstanding principal balance at March 31, 2021 is approximately $1.2 billion. Additionally, as of March 31, 2021, $14 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. Compliance As of March 31, 2021, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects. Other For additional information on our long-term debt and credit facilities, see Note 6—Long-Term Debt and Note Payable - Affiliate to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020.
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Fair Value Disclosure |
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Fair Value Disclosure | Fair Value DisclosureOur financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, advances to affiliates, accounts payable, note payable-affiliate and long-term debt, excluding finance lease and other obligations. Due to their short-term nature, the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, advances to affiliates, accounts payable and note payable-affiliate approximate their fair values. The three input levels in the hierarchy of fair value measurements are defined by the Fair Value Measurement and Disclosure framework generally as follows:
The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance lease and other obligations, as well as the input level used to determine the fair values indicated below:
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Commitments, Contingencies and Other Items |
3 Months Ended |
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Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments, Contingencies and Other Items | Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously-established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation and non-income tax contingencies at March 31, 2021, aggregated to approximately $19 million and are included in “Other” current liabilities and “Other Liabilities” in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows. Principal Proceedings Billing Practices Suits In June 2017, a former employee of a Lumen Technologies subsidiary filed an employment lawsuit against Lumen Technologies (at the time known as CenturyLink, Inc.) claiming that she was wrongfully terminated for alleging that Lumen charged some of its retail customers for products and services they did not authorize. Thereafter, based in part on the allegations made by the former employee, several legal proceedings were filed, including consumer class actions in federal and state courts, a series of securities investor class actions in federal courts, and several shareholder derivative actions in federal and Louisiana state courts. The derivative cases were brought on behalf of CenturyLink, Inc. against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties. The consumer class actions, the securities investor class actions, and the federal derivative actions were transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. Lumen Technologies has settled the consumer and securities investor class actions. The consumer class settlement was approved by the Court and is final. Approximately 12,000 potential class members elected to opt out of the consumer class settlement, and Lumen Technologies has settled the claims of approximately 11,000 such class members asserted by one law firm subject to certain conditions. The securities investors class settlement entails a payment of $55 million, which Lumen expects to be paid by its insurers. That settlement has received preliminary court approval and is subject to certain conditions including final approval by the Court. The derivative actions remain pending. Lumen has engaged in discussions regarding related claims with a number of state attorneys general, and has entered into agreements settling certain of the consumer practices claims asserted by state attorneys general. While Lumen Technologies does not agree with allegations raised in these matters, it has been willing to consider reasonable settlements where appropriate. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial during 2020 if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $300,000 in fines and penalties. The outcome of these other proceedings described under this heading 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 us. The matters listed above in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note 16—Commitments, Contingencies and Other Items to the financial statements included in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020. The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us.
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Dividends |
3 Months Ended |
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Mar. 31, 2021 | |
Dividends [Abstract] | |
Dividends | Dividends From time to time we may declare and pay dividends to our direct parent company, QSC, sometimes in excess of our earnings to the extent permitted by applicable law. Our debt covenants do not currently limit the amount of dividends we can pay to QSC. During the three months ended March 31, 2021 and 2020, we declared and paid dividends to QSC of $300 million and $500 million, respectively. Dividends paid are reflected on our consolidated statements of cash flows as financing activities.
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Other Financial Information |
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Other Financial Information | Other Financial Information Other Current Assets The following table presents details of other currents assets in our consolidated balance sheets:
Other Noncurrent Liabilities The following table presents details of other noncurrent liabilities in our consolidated balance sheets:
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Labor Union Contracts |
3 Months Ended |
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Mar. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
Labor Union Contracts | Labor Union Contracts As of March 31, 2021, approximately 46% of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW"). During the third quarter of 2019, we reached new agreements with each of the CWA and IBEW, which represented all of the above noted represented employees. Therefore, there are no collective bargaining agreements that are scheduled to expire over the 12 month period ending March 31, 2022. We believe relations with our employees continue to be generally good.
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Background (Policies) |
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Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of presentation | Our consolidated balance sheet as of December 31, 2020, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the SEC; however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes 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, 2020. 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. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated.
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Reclassification | We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories. |
Segments | Our operations are integrated into and reported as part of Lumen Technologies. Lumen's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. |
Operating lease income | Qwest leases various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations. |
Recently adopted and issued accounting pronouncements | Debt On January 1, 2021, we adopted ASU 2020-09, "Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762" ("ASU 2020-09"). This ASU amends and supersedes various SEC paragraphs to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have an impact to our consolidated financial statements. Investments On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01"). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of March 31, 2021, we determined there was no application or discontinuation of the equity method during the reporting periods. The adoption of ASU 2020-01 did not have an impact to our consolidated financial statements. Income taxes On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12"). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements. Measurement of Credit Losses on Financial Instruments We adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020 and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $3 million, net of tax effect of $1 million. Please refer to Note 4—Credit Losses on Financial Instruments for more information. Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"), designed to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2020-04 provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. As of March 31, 2021, we are evaluating the existing contracts and the impact on consolidated financial statements.
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Goodwill and intangible assets, goodwill | We assess our goodwill for impairment annually as of October 31, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write-down the value of goodwill in periods in which the carrying value of equity exceeds the estimated fair value of equity, limited to the amount of goodwill. Goodwill is evaluated for impairment at the reporting unit level, and we have determined that we have one reporting unit. |
Credit losses on financial instruments | In accordance with ASC 326, "Financial Instruments - Credit Losses" ("ASC 326") we aggregate financial assets with similar risk characteristics to align our expected credit losses with the credit quality or deterioration over the life of such assets. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized cost primarily consist of accounts receivable. In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms and their historical and expected credit loss patterns. If there is a deterioration of a customer's financial condition or if future default rates in general differ from currently anticipated default rates (including changes caused by COVID-19), we may need to adjust the allowance for credit losses, which would affect earnings in the period that adjustments are made.
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Goodwill, Customer Relationships and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets and Goodwill | Goodwill, customer relationships and other intangible assets consisted of the following:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | We estimate that total amortization expense for intangible assets for the years ending December 31, 2021 through 2025 will be as follows:
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue | The following table provides our total revenue by product and service category as well as the amount of revenue that is not subject to ASC 606, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards:
____________________________________________________________________ (1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.
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Contract with customer, asset and liability | The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2021 and December 31, 2020:
______________________________________________________________________ (1)Gross customer receivables, including gross affiliate receivables, of $387 million and $396 million, net of allowance for doubtful accounts of $45 million and $50 million, at March 31, 2021 and December 31, 2020, respectively.
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Capitalized contract cost | The following table provides changes in our contract acquisition costs and fulfillment costs:
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Credit Losses on Financial Instruments (Tables) |
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Financing Receivable, Allowance for Credit Loss | The following table presents the activity of our allowance for credit losses by accounts receivable portfolio for the three months ended March 31, 2021:
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Long-Term Debt and Note Payable - Affiliate (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance lease and other obligations, unamortized premiums, net, unamortized debt issuance costs and (ii) note payable - affiliate:
_______________________________________________________________________________ (1)As of March 31, 2021. (2)Qwest Corporation's Term Loan had interest rates of 2.110% as of March 31, 2021 and 2.150% as of December 31, 2020.
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Schedule of maturities of long-term debt | Set forth below is the aggregate principal amount of our long-term debt as of March 31, 2021 (excluding unamortized premiums, net and unamortized debt issuance costs and note payable-affiliate) maturing during the following years:
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Fair Value Disclosure (Tables) |
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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 finance lease and other obligations, as well as the input level used to determine the fair values indicated below:
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Other Financial Information (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components other current assets | The following table presents details of other currents assets in our consolidated balance sheets:
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Other Noncurrent Liabilities | The following table presents details of other noncurrent liabilities in our consolidated balance sheets:
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Accounting Policies - General (Details) |
Mar. 31, 2021
state
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Accounting Policies [Abstract] | |
Number of states in which entity operates | 14 |
Accounting Policies- Segments (Details) |
3 Months Ended |
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Mar. 31, 2021
segment
| |
Accounting Policies [Abstract] | |
Number of reportable segments | 1 |
Accounting Policies- Lease Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
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Accounting Policies [Abstract] | ||
Lease income | $ 79 | $ 79 |
Percent of operating revenue | 4.00% | 4.00% |
Accounting Policies - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2020 |
Jan. 01, 2020 |
Dec. 31, 2019 |
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Accounting Policies [Abstract] | |||||
Cumulative effect of new accounting principle in period of adoption, net of tax | $ 10,280 | $ 10,098 | $ 10,118 | ||
RETAINED EARNINGS (ACCUMULATED DEFICIT) | |||||
Accounting Policies [Abstract] | |||||
Cumulative effect of new accounting principle in period of adoption, net of tax | $ 230 | $ 48 | $ 68 | $ 67 | |
Cumulative Effect Of New Accounting Principle In Period Of Adoption, Tax | $ (1) | (1) | |||
Cumulative Effect, Period of Adoption, Adjustment | RETAINED EARNINGS (ACCUMULATED DEFICIT) | |||||
Accounting Policies [Abstract] | |||||
Cumulative effect of new accounting principle in period of adoption, net of tax | $ 3 |
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
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Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 9,360 | $ 9,360 |
Finite-lived intangible assets, net | 245 | 343 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 0 | 88 |
Accumulated amortization | 5,699 | 5,611 |
Other Intangible Assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 245 | 255 |
Accumulated amortization | $ 1,850 | $ 1,831 |
Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021
USD ($)
reporting_unit
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Mar. 31, 2020
USD ($)
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Goodwill and Intangible Assets Disclosure [Abstract] | ||
Number of reporting units | reporting_unit | 1 | |
Intangible assets, gross (including goodwill) | $ 17,200 | |
Amortization of intangible assets | $ 110 | $ 124 |
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Future Amortization Expense (Details) $ in Millions |
Mar. 31, 2021
USD ($)
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Goodwill and Intangible Assets Disclosure [Abstract] | |
2021 (remaining nine months) | $ 64 |
2022 | 85 |
2023 | 60 |
2024 | 12 |
2025 | $ 10 |
Revenue Recognition - Additional Information - Overview (Details) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021
USD ($)
category
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Mar. 31, 2020
USD ($)
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Revenue from Contract with Customer [Abstract] | ||
Number of categories of products and services | category | 4 | |
Disaggregation of Revenue [Line Items] | ||
Total operating revenues | $ 1,792 | $ 1,918 |
Voice and Other - CAF Phase II [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total operating revenues | $ 36 |
Revenue Recognition - Customer Receivables and Contract Balances (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
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Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 342 | $ 346 |
Contract assets | 12 | 13 |
Contract liabilities | 301 | 300 |
Accounts receivable, gross | 387 | 396 |
Allowance for doubtful accounts | $ 45 | $ 50 |
Revenue Recognition - Additional Information - Customer Receivables and Contract Balances (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Customer Receivables and Contract Balances [Line Items] | ||
Revenue recognized from prior year contract liability | $ 163 | $ 184 |
Minimum | ||
Customer Receivables and Contract Balances [Line Items] | ||
Contract term | 1 year | |
Maximum | ||
Customer Receivables and Contract Balances [Line Items] | ||
Contract term | 5 years |
Revenue Recognition - Additional Information, Performance Obligation (Details) $ in Millions |
Mar. 31, 2021
USD ($)
|
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Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 167 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 99.00% |
Expected timing of satisfaction, period | 2 years 9 months |
Revenue Recognition - Contract Costs (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Acquisition Costs | ||
Capitalized Contract Cost | ||
Beginning of period balance | $ 73 | $ 86 |
Costs incurred | 11 | 14 |
Amortization | (15) | (16) |
End of period balance | 69 | 84 |
Fulfillment Costs | ||
Capitalized Contract Cost | ||
Beginning of period balance | 54 | 64 |
Costs incurred | 6 | 6 |
Amortization | (8) | (9) |
End of period balance | $ 52 | $ 61 |
Revenue Recognition - Additional Information - Contract Costs (Details) - Weighted Average |
3 Months Ended |
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Mar. 31, 2021 | |
Mass Markets Customers, Average Contract Life | |
Contract Costs [Line Items] | |
Length of customer life | 30 months |
Business Customer, Average Contract Life | |
Contract Costs [Line Items] | |
Length of customer life | 29 months |
Long-Term Debt and Note Payable - Affiliate - Schedule of Debt Maturity (Details) $ in Millions |
Mar. 31, 2021
USD ($)
|
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Debt Disclosure [Abstract] | |
2021 (remaining nine months) | $ 951 |
2022 | 1 |
2023 | 0 |
2024 | 0 |
2025 | 250 |
2026 and thereafter | 1,951 |
Total long-term debt | $ 3,153 |
Long-Term Debt and Note Payable - Affiliate - Additional Information (Details) - USD ($) |
3 Months Ended | ||||
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Mar. 31, 2021 |
Mar. 31, 2020 |
Feb. 16, 2021 |
Dec. 31, 2020 |
Sep. 30, 2017 |
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Long-term debt | |||||
Net loss on early retirement of debt | $ 8,000,000 | $ 12,000,000 | |||
Note payable - affiliate | 1,158,000,000 | $ 1,130,000,000 | |||
Senior notes | |||||
Long-term debt | |||||
Net loss on early retirement of debt | 8,000,000 | ||||
Note payable - affiliate | Affiliated entity | |||||
Long-term debt | |||||
Note payable - affiliate | 1,158,000,000 | $ 1,130,000,000 | |||
Note payable - affiliate | Affiliated entity | Qwest Corporation | |||||
Long-term debt | |||||
Note payable - affiliate funding commitment | $ 965,000,000 | ||||
Note payable - affiliate | 1,200,000,000 | ||||
Accrued interest on note payable - affiliate | $ 14,000,000 | ||||
7.000% Notes Due 2056 | Senior notes | |||||
Long-term debt | |||||
Repurchased face amount | $ 235,000,000 | ||||
Stated interest rate | 7.00% |
Fair Value Disclosure (Details) - Fair value measurements, nonrecurring - Fair value inputs, Level 2 - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
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Carrying Amount | ||
Liabilities | ||
Liabilities—Long-term debt (excluding finance lease and other obligations) | $ 3,101 | $ 3,328 |
Fair Value | ||
Liabilities | ||
Liabilities—Long-term debt (excluding finance lease and other obligations) | $ 3,305 | $ 3,532 |
Commitments, Contingencies and Other Items (Details) plaintiff in Thousands |
3 Months Ended |
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Mar. 31, 2021
USD ($)
plaintiff
patent
| |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 19,000,000 |
Loss Contingency, Patents Allegedly Infringed, Number | patent | 1 |
Unfavorable Regulatory Action | |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 300,000 |
Minnesota Consumer Class Actions | U.S. District Court for the District of Minnesota | |
Loss Contingencies [Line Items] | |
Loss Contingency, Number Of Plaintiffs Elected To Opt Out | plaintiff | 12 |
Number of potential class members | plaintiff | 11 |
Minnesota Securities Investor Class Actions | U.S. District Court for the District of Minnesota | |
Loss Contingencies [Line Items] | |
Amount awarded to other party | $ 55,000,000 |
Dividends (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
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Dividends [Abstract] | ||
Dividends declared and paid to Qwest Services Corporation | $ 300 | $ 500 |
Other Financial Information- Other Current Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 62 | $ 40 |
Contract acquisition costs | 45 | 47 |
Contract fulfillment costs | 29 | 28 |
Other | 7 | 7 |
Total other current assets | $ 143 | $ 122 |
Other Financial Information - Other Non-current Liabilities (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Credits and Other Liabilities [Abstract] | ||
Unrecognized tax benefits | $ 451 | $ 448 |
Deferred revenue | 109 | 108 |
Noncurrent operating lease liability | 70 | 76 |
Other | 54 | 53 |
Total other noncurrent liabilities | $ 684 | $ 685 |
Labor Union Contracts (Details) |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Union employees concentration risk | Employees covered under collective bargaining agreements | |
Labor Union Contracts | |
Concentration risk percentage | 46.00% |
Label | Element | Value |
---|---|---|
Accounting Standards Update [Extensible List] | us-gaap_AccountingStandardsUpdateExtensibleList | us-gaap:AccountingStandardsUpdate201613Member |
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | $ 2,000,000 |
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | $ 1,000,000 |
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