ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Colorado (State or other jurisdiction of incorporation or organization) | 84-0273800 (I.R.S. Employer Identification No.) | |
100 CenturyLink Drive, Monroe, Louisiana (Address of principal executive offices) | 71203 (Zip Code) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý | Smaller reporting company o | |||
Emerging growth company o |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
6.125% Notes Due 2053 | CTY | New York Stock Exchange | ||
6.875% Notes Due 2054 | CTV | New York Stock Exchange | ||
6.625% Notes Due 2055 | CTZ | New York Stock Exchange | ||
7.00% Notes Due 2056 | CTAA | New York Stock Exchange | ||
6.5% Notes Due 2056 | CTBB | New York Stock Exchange | ||
6.75% Notes Due 2057 | CTDD | New York Stock Exchange |
* All references to "Notes" in this quarterly report refer to these Notes to Consolidated Financial Statements. |
• | forecasts of our anticipated future results of operations, cash flows or financial position; |
• | statements concerning the anticipated impact of our transactions, investments, product development and other initiatives, including the impact of our participation in government programs; |
• | statements about our liquidity, profit margins, tax position, tax rates, asset values, contingent liabilities, growth opportunities and growth rates, business prospects, regulatory and competitive outlook, market share, product capabilities, investment and expenditure plans, business strategies, capital allocation plans, financing alternatives and sources, and pricing plans; and |
• | other similar statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts, many of which are highlighted by words such as “may,” “will,” “would,” “could,” “should,” “plan,” “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “likely,” “seeks,” “hopes,” or variations or similar expressions with respect to the future. |
• | the effects of competition from a wide variety of competitive providers, including decreased demand for our traditional wireline service offerings and increased pricing pressures; |
• | the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete; |
• | our ability to attain our key operating imperatives, including simplifying and consolidating our network, simplifying and automating our service support systems, strengthening our relationships with customers and attaining projected cost savings; |
• | our ability to safeguard our network, and to avoid the adverse impact on our business from possible security breaches, service outages, system failures, equipment breakage, or similar events impacting our network or the availability and quality of our services; |
• | the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, interconnection obligations, special access, universal service, broadband deployment, data protection and net neutrality; |
• | our ability to effectively adjust to changes in the communications industry and changes in the composition of our markets and product mix; |
• | possible changes in the demand for our products and services, including our ability to effectively respond to increased demand for high-speed data transmission services; |
• | our ability to successfully maintain the quality and profitability of our existing product and service offerings and to introduce profitable new offerings on a timely and cost-effective basis; |
• | our ability to generate cash flows sufficient to fund our financial commitments and objectives, including our capital expenditures, operating costs, debt repayments and dividends; |
• | changes in our operating plans, corporate strategies, or capital allocation plans, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market conditions or otherwise; |
• | our ability to effectively retain and hire key personnel and to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages; |
• | the negative impact of increases in the costs of CenturyLink’s pension, health, post-employment or other benefits, including those caused by changes in markets, interest rates, mortality rates, demographics or regulations, which could affect our business and liquidity; |
• | adverse changes in our access to credit markets on favorable terms, whether caused by changes in our financial position, lower debt credit ratings, unstable markets or otherwise; |
• | our ability to meet the terms and conditions of our debt obligations, including our ability to make transfers of cash in compliance therewith; |
• | our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords, lenders and financial institutions; |
• | our ability to collect our receivables from financially troubled customers; |
• | any adverse developments in legal or regulatory proceedings involving us or our affiliates, including CenturyLink; |
• | changes in tax, communications, healthcare or other laws or regulations, in governmental support programs, or in general government funding levels; |
• | the effects of changes in accounting policies, practices or assumptions, including changes that could potentially require future impairment charges; |
• | the effects of adverse weather, terrorism or other natural or man-made disasters; |
• | the effects of more general factors such as changes in interest rates, in exchange rates, in operating costs, in public policy, in the views of financial analysts, or in general market, labor, economic or geo-political conditions; |
• | adverse effects of material weaknesses or any other significant deficiencies identified in our internal controls over financial reporting; and |
• | other risks referenced in this report or other of our filings with the SEC. |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(Dollars in millions) | ||||||
OPERATING REVENUE | ||||||
Operating revenue | $ | 1,333 | 1,419 | |||
Operating revenue - affiliates | 722 | 711 | ||||
Total operating revenue | 2,055 | 2,130 | ||||
OPERATING EXPENSES | ||||||
Cost of services and products (exclusive of depreciation and amortization) | 607 | 707 | ||||
Selling, general and administrative | 157 | 215 | ||||
Operating expenses - affiliates | 195 | 216 | ||||
Depreciation and amortization | 336 | 360 | ||||
Total operating expenses | 1,295 | 1,498 | ||||
OPERATING INCOME | 760 | 632 | ||||
OTHER (EXPENSE) INCOME | ||||||
Interest expense | (95 | ) | (118 | ) | ||
Interest expense - affiliates, net | (16 | ) | (13 | ) | ||
Other income, net | 9 | 9 | ||||
Total other expense, net | (102 | ) | (122 | ) | ||
INCOME BEFORE INCOME TAX EXPENSE | 658 | 510 | ||||
Income tax expense | 171 | 130 | ||||
NET INCOME | $ | 487 | 380 |
March 31, 2019 (Unaudited) | December 31, 2018 | |||||
(Dollars in millions) | ||||||
ASSETS | ||||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | $ | 9 | 5 | |||
Accounts receivable, less allowance of $42 and $41 | 539 | 546 | ||||
Advances to affiliates | 1,258 | 1,148 | ||||
Other | 159 | 147 | ||||
Total current assets | 1,965 | 1,846 | ||||
Property, plant and equipment, net of accumulated depreciation of $7,131 and $6,951 | 8,007 | 8,077 | ||||
GOODWILL AND OTHER ASSETS | ||||||
Goodwill | 9,360 | 9,360 | ||||
Operating lease assets | 117 | — | ||||
Customer relationships, net | 783 | 893 | ||||
Other intangible assets, net | 355 | 311 | ||||
Other, net | 93 | 96 | ||||
Total goodwill and other assets | 10,708 | 10,660 | ||||
TOTAL ASSETS | $ | 20,680 | 20,583 | |||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||
CURRENT LIABILITIES | ||||||
Current maturities of long-term debt | $ | 9 | 11 | |||
Accounts payable | 366 | 441 | ||||
Note payable - affiliate | 1,038 | 1,008 | ||||
Accrued expenses and other liabilities | ||||||
Salaries and benefits | 162 | 251 | ||||
Income and other taxes | 170 | 140 | ||||
Interest | 58 | 55 | ||||
Other | 84 | 75 | ||||
Current affiliate obligations, net | 77 | 79 | ||||
Current portion of deferred revenue | 221 | 212 | ||||
Total current liabilities | 2,185 | 2,272 | ||||
LONG-TERM DEBT | 5,947 | 5,948 | ||||
DEFERRED CREDITS AND OTHER LIABILITIES | ||||||
Deferred revenue | 97 | 91 | ||||
Deferred income taxes, net | 1,065 | 1,098 | ||||
Noncurrent operating lease liabilities | 93 | — | ||||
Affiliate obligations, net | 738 | 759 | ||||
Other | 550 | 547 | ||||
Total deferred credits and other liabilities | 2,543 | 2,495 | ||||
COMMITMENTS AND CONTINGENCIES (Note 8) | ||||||
STOCKHOLDER'S EQUITY | ||||||
Common stock - one share without par value, owned by Qwest Services Corporation | 10,050 | 10,050 | ||||
Accumulated deficit | (45 | ) | (182 | ) | ||
Total stockholder's equity | 10,005 | 9,868 | ||||
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | $ | 20,680 | 20,583 |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(Dollars in millions) | ||||||
OPERATING ACTIVITIES | ||||||
Net income | $ | 487 | 380 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 336 | 360 | ||||
Deferred income taxes | (33 | ) | (41 | ) | ||
Provision for uncollectible accounts | 14 | 23 | ||||
Accrued interest on affiliate note | 30 | 16 | ||||
Changes in current assets and liabilities: | ||||||
Accounts receivable | (7 | ) | 95 | |||
Accounts payable | (2 | ) | 18 | |||
Accrued income and other taxes | 30 | 16 | ||||
Other current assets and liabilities, net | (95 | ) | (130 | ) | ||
Other current assets and liabilities - affiliates, net | (15 | ) | (9 | ) | ||
Changes in other noncurrent assets and liabilities, net | 15 | 1 | ||||
Changes in affiliate obligations, net | (23 | ) | (19 | ) | ||
Other, net | (5 | ) | (1 | ) | ||
Net cash provided by operating activities | 732 | 709 | ||||
INVESTING ACTIVITIES | ||||||
Capital expenditures | (288 | ) | (292 | ) | ||
Changes in advances to affiliates | (110 | ) | (109 | ) | ||
Proceeds from sale of property, plant and equipment | 23 | 1 | ||||
Net cash used in investing activities | (375 | ) | (400 | ) | ||
FINANCING ACTIVITIES | ||||||
Payments of long-term debt | (3 | ) | (4 | ) | ||
Dividends paid to Qwest Services Corporation | (350 | ) | (300 | ) | ||
Net cash used in financing activities | (353 | ) | (304 | ) | ||
Net increase in cash, cash equivalents and restricted cash | 4 | 5 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 7 | 3 | ||||
Cash, cash equivalents and restricted cash at end of period | $ | 11 | 8 | |||
Supplemental cash flow information: | ||||||
Restricted cash included in other noncurrent assets | $ | 2 | 2 | |||
Income taxes paid, net | $ | (197 | ) | (171 | ) | |
Interest paid (net of capitalized interest of $6 and $7) | $ | (92 | ) | (110 | ) |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(Dollars in millions) | ||||||
COMMON STOCK | ||||||
Balance at beginning of period | $ | 10,050 | 10,050 | |||
Balance at end of period | 10,050 | 10,050 | ||||
ACCUMULATED DEFICIT | ||||||
Balance at beginning of period | (182 | ) | (713 | ) | ||
Net income | 487 | 380 | ||||
Cumulative net effect of adoption of ASU 2014-09, Revenue from Contracts with Customers, net of ($43) taxes | — | 128 | ||||
Dividends declared to Qwest Services Corporation | (350 | ) | (300 | ) | ||
Balance at end of period | (45 | ) | (505 | ) | ||
TOTAL STOCKHOLDER'S EQUITY | $ | 10,005 | 9,545 |
March 31, 2019 | December 31, 2018 | |||||
(Dollars in millions) | ||||||
Goodwill | $ | 9,360 | 9,360 | |||
Customer relationships, less accumulated amortization of $4,916 and $4,806 | $ | 783 | 893 | |||
Other intangible assets, less accumulated amortization of $1,724 and $1,712 | $ | 355 | 311 |
(Dollars in millions) | |||
2019 (remaining nine months) | $ | 380 | |
2020 | 457 | ||
2021 | 149 | ||
2022 | 46 | ||
2023 | 34 |
Three Months Ended | ||||||
March 31, 2019 | March 31, 2018 | |||||
(Dollars in millions) | ||||||
Total revenue | $ | 2,055 | 2,130 | |||
Adjustments for non-ASC 606 revenue (1) | (127 | ) | (78 | ) | ||
Total revenue from contracts with customers | $ | 1,928 | 2,052 |
(1) | Includes regulatory revenue, lease revenue, sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606. |
March 31, 2019 | December 31, 2018 | |||||
(Dollars in millions) | ||||||
Customer receivables (1) | $ | 518 | 518 | |||
Contract liabilities | 282 | 207 | ||||
Contract assets | 55 | 64 |
(1) | Gross customer receivables of $560 million and $554 million, net of allowance for doubtful accounts of $42 million and $36 million, at March 31, 2019 and December 31, 2018, respectively. |
Three Months Ended | ||||||
March 31, 2019 | March 31, 2018 | |||||
(Dollars in millions) | ||||||
Revenue recognized in the period from: | ||||||
Amounts included in contract liability at the beginning of the period (January 1, 2019 and 2018, respectively) | $ | 261 | 269 | |||
Performance obligations satisfied in previous periods | — | — |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | |||||||||||
Acquisition Costs | Fulfillment Costs | Acquisition Costs | Fulfillment Costs | |||||||||
(Dollars in millions) | ||||||||||||
Beginning of period balance | $ | 90 | 57 | 91 | 61 | |||||||
Costs incurred | 16 | 4 | 14 | 4 | ||||||||
Amortization | (16 | ) | (4 | ) | (15 | ) | (5 | ) | ||||
End of period balance | $ | 90 | 57 | 90 | 60 |
Three Months Ended March 31, 2019 | |||
(Dollars in millions) | |||
Operating and short-term lease cost | $ | 8 | |
Finance lease cost: | |||
Amortization of right-of-use assets | 3 | ||
Total finance lease cost | 3 | ||
Total lease cost | $ | 11 |
Leases (millions) | Classification on the Balance Sheet | As of March 31, 2019 | |||
Assets | |||||
Operating lease assets | Operating lease assets | $ | 117 | ||
Finance lease assets | Property, plant and equipment, net of accumulated depreciation | 19 | |||
Total leased assets | $ | 136 | |||
Liabilities | |||||
Current | |||||
Operating | Other current liabilities | $ | 32 | ||
Finance | Current portion of long-term debt | 9 | |||
Non-current | |||||
Operating | Noncurrent operating lease liabilities | 93 | |||
Finance | Long-term debt | 8 | |||
Total lease liabilities | $ | 142 | |||
Weighted-average remaining lease term (years) | |||||
Operating leases | 5.8 | ||||
Finance leases | 4.4 | ||||
Weighted-average discount rate | |||||
Operating leases | 6.70 | % | |||
Finance leases | 4.85 | % |
Three Months Ended March 31, 2019 | |||
(Dollars in millions) | |||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | 9 | |
Financing cash flows from finance leases | 2 |
Operating Leases | Finance Leases | |||||
(Dollars in millions) | ||||||
2019 (remaining nine months) | $ | 26 | 7 | |||
2020 | 29 | 5 | ||||
2021 | 27 | 1 | ||||
2022 | 23 | 1 | ||||
2023 | 19 | 1 | ||||
Thereafter | 33 | 4 | ||||
Total lease payments | 157 | 19 | ||||
Less: interest | (32 | ) | (2 | ) | ||
Total | 125 | 17 | ||||
Less: current portion | (32 | ) | (9 | ) | ||
Long-term portion | $ | 93 | 8 |
Future Minimum Payments | |||
(Dollars in millions) | |||
Capital lease obligations: | |||
2019 | $ | 10 | |
2020 | 6 | ||
2021 | 2 | ||
2022 | 1 | ||
2023 | 1 | ||
2024 and thereafter | 4 | ||
Total minimum payments | 24 | ||
Less: amount representing interest and executory costs | (5 | ) | |
Present value of minimum payments | 19 | ||
Less: current portion | (12 | ) | |
Long-term portion | $ | 7 |
Operating Leases | |||
(Dollars in millions) | |||
2019 | $ | 35 | |
2020 | 28 | ||
2021 | 27 | ||
2022 | 23 | ||
2023 | 19 | ||
2024 and thereafter | 32 | ||
Total future minimum payments(1) | $ | 164 |
(1) | Minimum payments have not been reduced by minimum sublease rentals of $22 million due in the future under non-cancelable subleases. |
Interest Rates | Maturities | March 31, 2019 | December 31, 2018 | |||||||
(Dollars in millions) | ||||||||||
Senior notes | 6.125% - 7.750% | 2021 - 2057 | $ | 5,956 | 5,956 | |||||
Term loan | 4.500% | 2025 | 100 | 100 | ||||||
Finance lease and other obligations | Various | Various | 17 | 21 | ||||||
Unamortized (discounts) premiums, net | (1 | ) | (1 | ) | ||||||
Unamortized debt issuance costs | (116 | ) | (117 | ) | ||||||
Total long-term debt | 5,956 | 5,959 | ||||||||
Less current maturities | (9 | ) | (11 | ) | ||||||
Long-term debt, excluding current maturities | $ | 5,947 | 5,948 | |||||||
Note payable - affiliate | 5.945% | 2022 | $ | 1,038 | 1,008 |
(Dollars in millions) | |||
2019 (remaining nine months) | $ | 7 | |
2020 | 5 | ||
2021 | 951 | ||
2022 | — | ||
2023 | 1 | ||
2024 and thereafter | 5,109 | ||
Total long-term debt | $ | 6,073 |
March 31, 2019 | December 31, 2018 | |||||||||||||
Input Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||
(Dollars in millions) | ||||||||||||||
Liabilities—Long-term debt (excluding finance lease and other obligations) | 2 | $ | 5,939 | 5,885 | 5,938 | 5,118 |
• | IP and Data Services, which include primarily VPN data networks, Ethernet, IP and other ancillary services; |
• | Transport and Infrastructure, which include broadband, private line (including business data services) and other ancillary services; |
• | Voice and Collaboration, which includes primarily local voice, including wholesale voice, and other ancillary services; |
• | IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; |
• | Regulatory Revenue, which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenue. We receive federal support payments from both federal and state USF programs and from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and |
• | Affiliate Services, we provide to our affiliates, 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. |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(Dollars in millions) | ||||||
IP and Data Services | $ | 147 | 150 | |||
Transport and Infrastructure | 715 | 744 | ||||
Voice and Collaboration | 422 | 467 | ||||
IT and Managed Services | 1 | 2 | ||||
Regulatory Revenue | 48 | 56 | ||||
Affiliate Services | 722 | 711 | ||||
Total operating revenue | $ | 2,055 | 2,130 |
March 31, 2019 | December 31, 2018 | |||||
(Dollars in millions) | ||||||
Prepaid expenses | $ | 64 | 37 | |||
Contract acquisition costs | 52 | 52 | ||||
Contract fulfillment costs | 27 | 27 | ||||
Other | 16 | 31 | ||||
Total other current assets | $ | 159 | 147 |
• | IP and Data Services, which include primarily VPN data networks, Ethernet, IP and other ancillary services; |
• | Transport and Infrastructure, which include broadband, private line (including business data services) and other ancillary services; |
• | Voice and Collaboration, which includes primarily local voice, including wholesale voice, and other ancillary service; |
• | IT and Managed Services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; |
• | Regulatory Revenue, which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenue. We receive federal support payments from both federal and state USF programs and from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services, including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and |
• | Affiliate Services, we provide our affiliates 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. |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
(Dollars in millions) | ||||||
Operating revenue | $ | 2,055 | 2,130 | |||
Operating expenses | 1,295 | 1,498 | ||||
Operating income | 760 | 632 | ||||
Total other expense, net | (102 | ) | (122 | ) | ||
Income tax expense | 171 | 130 | ||||
Net income | $ | 487 | 380 |
Three Months Ended March 31, | Increase/ (Decrease) | % Change | ||||||||||
2019 | 2018 | |||||||||||
(Dollars in millions) | ||||||||||||
IP and Data Services | $ | 147 | 150 | (3 | ) | (2 | )% | |||||
Transport and Infrastructure | 715 | 744 | (29 | ) | (4 | )% | ||||||
Voice and Collaboration | 422 | 467 | (45 | ) | (10 | )% | ||||||
IT and Managed Services | 1 | 2 | (1 | ) | (50 | )% | ||||||
Regulatory Revenue | 48 | 56 | (8 | ) | (14 | )% | ||||||
Affiliate Services | 722 | 711 | 11 | 2 | % | |||||||
Total operating revenue | $ | 2,055 | 2,130 | (75 | ) | (4 | )% |
Three Months Ended March 31, | Increase/ (Decrease) | % Change | ||||||||||
2019 | 2018 | |||||||||||
(Dollars in millions) | ||||||||||||
Cost of services and products (exclusive of depreciation and amortization) | $ | 607 | 707 | (100 | ) | (14 | )% | |||||
Selling, general and administrative | 157 | 215 | (58 | ) | (27 | )% | ||||||
Operating expenses - affiliates | 195 | 216 | (21 | ) | (10 | )% | ||||||
Depreciation and amortization | 336 | 360 | (24 | ) | (7 | )% | ||||||
Total operating expenses | $ | 1,295 | 1,498 | (203 | ) | (14 | )% |
Three Months Ended March 31, | Increase/ (Decrease) | % Change | ||||||||||
2019 | 2018 | |||||||||||
(Dollars in millions) | ||||||||||||
Depreciation | $ | 199 | 211 | (12 | ) | (6 | )% | |||||
Amortization | 137 | 149 | (12 | ) | (8 | )% | ||||||
Total depreciation and amortization | $ | 336 | 360 | (24 | ) | (7 | )% |
Three Months Ended March 31, | Change | % Change | ||||||||||
2019 | 2018 | |||||||||||
(Dollars in millions) | ||||||||||||
Interest expense | $ | (95 | ) | (118 | ) | (23 | ) | (19 | )% | |||
Interest expense - affiliates, net | (16 | ) | (13 | ) | 3 | 23 | % | |||||
Other income, net | 9 | 9 | — | — | % | |||||||
Total other expense, net | $ | (102 | ) | (122 | ) | (20 | ) | (16 | )% | |||
Income tax expense | $ | 171 | 130 | 41 | 32 | % |
Agency | Credit Ratings |
Standard & Poor's | BBB- |
Moody's Investors Service, Inc. | Ba2 |
Fitch Ratings | BB+ |
Three Months Ended March 31, | Change | ||||||||
2019 | 2018 | ||||||||
(Dollars in millions) | |||||||||
Net cash provided by operating activities | $ | 732 | 709 | 23 | |||||
Net cash used in investing activities | (375 | ) | (400 | ) | (25 | ) | |||
Net cash used in financing activities | (353 | ) | (304 | ) | 49 |
Exhibit Number | Description | |
31.1* | ||
31.2* | ||
32* | ||
101* | Financial statements from the Quarterly Report on Form 10-Q of Qwest Corporation for the period ended March 31, 2019, formatted in 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. |
* | Exhibit filed herewith. |
QWEST CORPORATION | ||
By: | /s/ Eric J. Mortensen | |
Eric J. Mortensen Senior Vice President - Controller (Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Qwest Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 13, 2019 | /s/ Jeff K. Storey | |
Jeff K. Storey Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Qwest Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: May 13, 2019 | /s/ Indraneel Dev | |
Indraneel Dev Executive Vice President and Chief Financial Officer |
Date: | May 13, 2019 | ||
/s/ Jeff K. Storey | /s/ Indraneel Dev | ||
Jeff K. Storey | Indraneel Dev | ||
Chief Executive Officer | Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
May 13, 2019 |
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Document and Entity Information | ||
Entity Registrant Name | QWEST CORP | |
Entity Central Index Key | 0000068622 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Small Business | false | |
Entity Emerging Growth | false | |
Entity Common Stock, Shares Outstanding | 1 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
OPERATING REVENUE | ||
Total operating revenue | $ 2,055 | $ 2,130 |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 607 | 707 |
Selling, general and administrative | 157 | 215 |
Operating expenses - affiliates | 195 | 216 |
Depreciation and amortization | 336 | 360 |
Total operating expenses | 1,295 | 1,498 |
OPERATING INCOME | 760 | 632 |
OTHER (EXPENSE) INCOME | ||
Interest expense | (95) | (118) |
Interest expense - affiliates, net | (16) | (13) |
Other income, net | 9 | 9 |
Total other expense, net | (102) | (122) |
INCOME BEFORE INCOME TAX EXPENSE | 658 | 510 |
Income tax expense | 171 | 130 |
NET INCOME | 487 | 380 |
Non-affiliate services | ||
OPERATING REVENUE | ||
Total operating revenue | 1,333 | 1,419 |
Affiliate Services | ||
OPERATING REVENUE | ||
Total operating revenue | $ 722 | $ 711 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 42 | $ 41 |
PP&E, accumulated depreciation | $ 7,131 | $ 6,951 |
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 | |
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Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Cash Flows [Abstract] | ||
Interest paid, capitalized interest | $ 6 | $ 7 |
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (parenthetical) $ in Millions |
Mar. 31, 2019
USD ($)
|
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ACCUMULATED DEFICIT | Accounting Standards Update 2014-09 | |
Cumulative effect of new accounting principle in period of adoption, tax | $ (43) |
Background |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Background | Background General We are an integrated communications company engaged primarily in providing an array of communications services to our residential and business customers. Our specific products and services are detailed in Note 7—Products and Services Revenue 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, 2018, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements 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, 2018. 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. See Note 7—Products and Services Revenue for additional information. These changes had no impact on total operating revenue, total operating expenses or net income for any period. Segments Our operations are integrated into and reported as part of CenturyLink. CenturyLink'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 Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. Recently Adopted Accounting Pronouncements We adopted Accounting Standards Update ("ASU") 2016-02, Leases (ASC 842), as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842, and we will not make the new required lease disclosures for comparative periods beginning before January 1, 2019. Instead, we will recognize ASC 842's cumulative effect transition adjustment (discussed below) as of January 1, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things (i) allowed us to carry forward the historical lease classification; (ii) did not require us to reassess whether any expired or existing contracts are or contain leases under the new definition of a lease; and (iii) did not require us to reassess whether previously capitalized initial direct costs for any existing leases would qualify for capitalization under ASC 842. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We did not elect the hindsight practical expedient regarding the likelihood of exercising a lessee purchase option or assessing any impairment of right-of-use assets for existing leases. On March 5, 2019, the FASB issued ASU 2019-01 - Leases (ASC 842): Codification Improvements, effective for public companies for fiscal years beginning after December 15, 2019. The new ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in ASC 842, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. More importantly, the ASU also exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. Early adoption permits public companies to adopt concurrent with the transition to ASC 842 on leases. We adopted ASU 2019-01 as of January 1, 2019. Adoption of the new standard resulted in the recording of additional operating lease assets and operating lease liabilities of approximately $126 million and $133 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. Recently Issued Accounting Pronouncements Financial Instruments In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 no later than January 1, 2020. We expect to adopt ASU 2016-13 on January 1, 2020 and recognize the impacts through a cumulative adjustment to retained earnings as of the date of adoption. |
Goodwill, Customer Relationships and Other Intangible Assets |
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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:
As of March 31, 2019, the gross carrying amount of goodwill, customer relationships and other intangible assets was $17.1 billion. The total amortization expense for intangible assets for the three months ended March 31, 2019 totaled $137 million and for the three months ended March 31, 2018 totaled $149 million. We estimate that total amortization expense for intangible assets for the years ending December 31, 2019 through 2023 will be as follows:
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition Refer to the Revenue Recognition section of Note 1—Background and Summary of Significant Accounting Policies and Note 3—Revenue Recognition in our annual report on Form 10-K for the year ended December 31, 2018 for further information regarding our application of ASC 606, “Revenue from Contracts with Customers”, including practical expedients and judgments applied in determining the amounts and timing of revenue from contracts with customers. Reconciliation of Total Revenue to Revenue from Contracts with Customers The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:
Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2019 and December 31, 2018:
Contract liabilities are 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 one to seven years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. The following table provides information about revenue recognized for the three months ended March 31, 2019 and 2018:
Performance Obligations As of March 31, 2019, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $166 million. We expect to recognize approximately 100% of this revenue through 2021, with the balance recognized thereafter. We do not disclose 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), or 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 telecommunications 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 consumer customers and up to 49 months for business customers. Amortized fulfillment costs are included in cost of services 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 twelve months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next twelve 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. |
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Effective January 1, 2019, we adopted ASC 842 using the non-comparative transition option of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional operating lease assets and operating lease liabilities of approximately $126 million and $133 million, respectively, as of January 1, 2019. Financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. We primarily lease various office facilities, switching and colocation facilities, equipment and dark fiber. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Some of our lease arrangements contain lease components (including fixed payments including rent, real estate taxes and insurance costs) and non-lease components (including common-area maintenance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Lease expense consisted of the following:
Supplemental unaudited consolidated balance sheet information and other information related to leases:
Supplemental unaudited consolidated cash flow statement information related to leases:
As of March 31, 2019, maturities of lease liabilities were as follows:
As of March 31, 2019, we had no material operating or finance leases that had not yet commenced. Operating Lease Income Qwest leases various IRUs, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income is included in operating revenue in the consolidated statements of operations. For the three months ended March 31, 2019 and 2018, our gross rental income was $81 million and $85 million, respectively. We adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. The future annual minimum payments under capital lease agreements as of December 31, 2018 were as follows:
At December 31, 2018, our future rental commitments for operating leases were as follows:
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Leases | Leases Effective January 1, 2019, we adopted ASC 842 using the non-comparative transition option of applying the new standard at the adoption date. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional operating lease assets and operating lease liabilities of approximately $126 million and $133 million, respectively, as of January 1, 2019. Financial position for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts are not adjusted and continue to be reported in accordance with previous guidance. We primarily lease various office facilities, switching and colocation facilities, equipment and dark fiber. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Some of our lease arrangements contain lease components (including fixed payments including rent, real estate taxes and insurance costs) and non-lease components (including common-area maintenance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Lease expense consisted of the following:
Supplemental unaudited consolidated balance sheet information and other information related to leases:
Supplemental unaudited consolidated cash flow statement information related to leases:
As of March 31, 2019, maturities of lease liabilities were as follows:
As of March 31, 2019, we had no material operating or finance leases that had not yet commenced. Operating Lease Income Qwest leases various IRUs, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income is included in operating revenue in the consolidated statements of operations. For the three months ended March 31, 2019 and 2018, our gross rental income was $81 million and $85 million, respectively. We adopted ASU 2016-02 on January 1, 2019 as noted above, and as required, the following disclosure is provided for periods prior to adoption. The future annual minimum payments under capital lease agreements as of December 31, 2018 were as follows:
At December 31, 2018, our future rental commitments for operating leases were as follows:
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Long-Term Debt and Revolving Promissory Note |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt and Revolving Promissory Note | Long-Term Debt and Revolving Promissory Note The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including unamortized discounts and premiums, unamortized debt issuance costs and (ii) note payable - affiliate:
Note Payable - Affiliate On September 30, 2017, Qwest Corporation entered into an amended and restated revolving promissory note in the amount of $965 million with an affiliate of our ultimate parent company, CenturyLink, Inc. This note replaced and amended the original $1.0 billion revolving promissory note Qwest Corporation entered into on April 18, 2012 with the same affiliate. The outstanding principal balance owed by Qwest Corporation under this revolving promissory 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 balance during an interest period using a weighted average per annum interest rate on the consolidated outstanding debt of CenturyLink and its subsidiaries. As of March 31, 2019, the amended and restated revolving promissory note had an outstanding balance of $1.038 billion and bore interest at a weighted-average interest rate of 5.945%. As of March 31, 2019 and December 31, 2018, the amended and restated revolving promissory note is reflected on our consolidated balance sheets as a current liability under "Note payable - affiliate". In accordance with the terms of the amended and restated revolving promissory 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 to be capitalized on such date and is to begin accruing interest. Through March 31, 2019, $73 million of such interest has been capitalized. As of March 31, 2019, $15 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. Aggregate Maturities of Long-Term Debt Set forth below is the aggregate principal amount of our long-term debt (excluding unamortized premiums and discounts and unamortized debt issuance costs and excluding note payable-affiliate) maturing during the following years:
Compliance As of March 31, 2019, we believe we were in compliance with the financial covenants contained in our debt agreements in all material respects. Other For additional information on our long-term debt and credit facilities, see Note 4—Long-Term Debt and Revolving Promissory Note 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, 2018. |
Fair Value Disclosure |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosure | Fair Value Disclosure The Fair Value Measurement and Disclosure framework provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Input Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Input Level 2 refers to fair values estimated using significant other observable inputs and Input Level 3 includes fair values estimated using significant unobservable inputs. 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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Products and Services Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Products and Services Revenue | Products and Services Revenue We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary services. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services. We categorize our products, services and revenue among the following six categories:
From time to time, we may change the categorization of our products and services. Our operating revenue for our products and services consisted of the following categories:
We recognize revenue in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. The total amount of such surcharges and transaction taxes that we included in revenue aggregated $30 million and $34 million for the three months ended March 31, 2019 and 2018, respectively. These USF surcharges are assigned to the products and services categories based on the underlying revenue. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent. |
Commitments, Contingencies and Other Items |
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Mar. 31, 2019 | |
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, 2019 aggregated to approximately $22 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. In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter. Switched Access Disputes Subsidiaries of CenturyLink, Inc., including us, are among hundreds of companies involved in an industry-wide dispute, raised in nearly 100 federal lawsuits (filed between 2014 and 2016) that have been consolidated in the United States District Court for the Northern District of Texas for pretrial procedures. The disputes relate to switched access charges that local exchange carriers ("LECs") collect from interexchange carriers ("IXCs") for IXCs' use of LEC's access services. In the lawsuits, IXCs, including Sprint Communications Company L.P. ("Sprint") and various affiliates of Verizon Communications Inc. ("Verizon"), assert that federal and state laws bar LECs from collecting access charges when IXCs exchange certain types of calls between mobile and wireline devices that are routed through an IXC. Some of these IXCs have asserted claims seeking refunds of payments for access charges previously paid and relief from future access charges. In November 2015, the federal court agreed with the LECs and rejected the IXCs' contention that federal law prohibits these particular access charges, and also allowed the IXCs to refile state-law claims. Since then, many of the LECs and IXCs have filed revised pleadings and additional motions, which remain pending. Separately, some of the defendants, including us, have petitioned the FCC to address these issues on an industry-wide basis. The outcome of these disputes and lawsuits, as well as any related regulatory proceedings that could ensue, are currently not predictable. Billing Practices Suits In June 2017, a former employee of CenturyLink filed an employment lawsuit against CenturyLink claiming that she was wrongfully terminated for alleging that CenturyLink charged some of its retail customers for products and services they did not authorize. Starting shortly thereafter and continuing since then, and based in part on the allegations made by the former employee, several legal proceedings have been filed. In June 2017, McLeod v. CenturyLink, a putative consumer class action, was filed against CenturyLink in the U.S. District Court for the Central District of California alleging that it charged some of its retail customers for products and services they did not authorize. A number of other complaints asserting similar claims have been filed in other federal and state courts, as well. The lawsuits assert claims including fraud, unfair competition, and unjust enrichment. Also, in June 2017, Craig. v. CenturyLink, Inc., et al., a putative securities investor class action, was filed in U.S. District Court for the Southern District of New York, alleging that it failed to disclose material information regarding improper sales practices, and asserting federal securities law claims. A number of other cases asserting similar claims have also been filed. Beginning June 2017, CenturyLink received several shareholder derivative demands addressing related topics. In August 2017, CenturyLink's Board of Directors formed a special litigation committee of outside directors to address the allegations of impropriety contained in the shareholder derivative demands. In April 2018, the special litigation committee concluded its review of the derivative demands and declined to take further action. Since then, derivative cases were filed. Two of these cases, Castagna v. Post and Pinsly v. Post, were filed in Louisiana state court in the Fourth Judicial District Court for the Parish of Ouachita. The remaining derivative cases were filed in federal court in Louisiana and Minnesota. These cases have been brought on behalf of CenturyLink against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties. The consumer putative class actions, the securities investor putative class actions, and the federal derivative actions described above have been transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. In July 2017, the Minnesota state attorney general filed State of Minnesota v. CenturyTel Broadband Services LLC, et al. in the Anoka County Minnesota District Court, alleging claims of fraud and deceptive trade practices relating to improper consumer sales practices. The suit seeks an order of restitution on behalf of all CenturyLink customers, civil penalties, injunctive relief, and costs and fees. Additionally, CenturyLink has received and responded to information requests and inquiries from other states. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial in the coming 24 months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $100,000 in fines and penalties. The outcome of these other proceedings 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 15—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, 2018. 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. |
Dividends |
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Mar. 31, 2019 | |
Dividends [Abstract] | |
Dividends | Dividends From time to time we may declare and pay dividends to our direct parent company, Qwest Services Corporation ("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, 2019 and 2018, we declared and paid dividends of $350 million and $300 million, respectively, to QSC. Dividends paid are reflected on our consolidated statements of cash flows as financing activities. |
Other Financial Information |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Financial Information | Other Financial Information Other Current Assets The following table presents details of other current assets reflected in our consolidated balance sheets:
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Labor Union Contracts |
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Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Labor Union Contracts | Labor Union Contracts As of March 31, 2019, approximately 44% of our employees were members of various bargaining units represented by the Communication Workers of America and the International Brotherhood of Electrical Workers. We believe that relations with our employees continue to be generally good. |
Background (Policies) |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation policy | 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. |
Segments | Segments Our operations are integrated into and reported as part of CenturyLink. CenturyLink'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 Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. |
Recent accounting pronouncements | Recently Adopted Accounting Pronouncements We adopted Accounting Standards Update ("ASU") 2016-02, Leases (ASC 842), as of January 1, 2019, using the non-comparative transition option pursuant to ASU 2018-11. Therefore, we have not restated comparative period financial information for the effects of ASC 842, and we will not make the new required lease disclosures for comparative periods beginning before January 1, 2019. Instead, we will recognize ASC 842's cumulative effect transition adjustment (discussed below) as of January 1, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things (i) allowed us to carry forward the historical lease classification; (ii) did not require us to reassess whether any expired or existing contracts are or contain leases under the new definition of a lease; and (iii) did not require us to reassess whether previously capitalized initial direct costs for any existing leases would qualify for capitalization under ASC 842. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We did not elect the hindsight practical expedient regarding the likelihood of exercising a lessee purchase option or assessing any impairment of right-of-use assets for existing leases. On March 5, 2019, the FASB issued ASU 2019-01 - Leases (ASC 842): Codification Improvements, effective for public companies for fiscal years beginning after December 15, 2019. The new ASU aligns the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in ASC 842, with that of existing guidance. As a result, the fair value of the underlying asset at lease commencement is its cost, reflecting any volume or trade discounts that may apply. However, if there has been a significant lapse of time between when the underlying asset is acquired and when the lease commences, the definition of fair value (in Topic 820, Fair Value Measurement) should be applied. More importantly, the ASU also exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. Early adoption permits public companies to adopt concurrent with the transition to ASC 842 on leases. We adopted ASU 2019-01 as of January 1, 2019. Adoption of the new standard resulted in the recording of additional operating lease assets and operating lease liabilities of approximately $126 million and $133 million, respectively, as of January 1, 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. Recently Issued Accounting Pronouncements Financial Instruments In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 no later than January 1, 2020. We expect to adopt ASU 2016-13 on January 1, 2020 and recognize the impacts through a cumulative adjustment to retained earnings as of the date of adoption. |
Goodwill, Customer Relationships and Other Intangible Assets (Tables) |
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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, 2019 through 2023 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 the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:
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Contract with customer, asset and liability | The following table provides information about revenue recognized for the three months ended March 31, 2019 and 2018:
The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2019 and December 31, 2018:
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Capitalized contract cost | The following table provides changes in our contract acquisition costs and fulfillment costs:
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | Supplemental unaudited consolidated cash flow statement information related to leases:
Lease expense consisted of the following:
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Assets And Liabilities, Lessee | Supplemental unaudited consolidated balance sheet information and other information related to leases:
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Lessee, Operating Lease, Liability, Maturity | As of March 31, 2019, maturities of lease liabilities were as follows:
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Schedule of Future Minimum Lease Payments for Capital Leases | The future annual minimum payments under capital lease agreements as of December 31, 2018 were as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases | At December 31, 2018, our future rental commitments for operating leases were as follows:
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Long-Term Debt and Revolving Promissory Note (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 unamortized discounts and premiums, unamortized debt issuance costs and (ii) note payable - affiliate:
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Schedule of maturities of long-term debt | Set forth below is the aggregate principal amount of our long-term debt (excluding unamortized premiums and discounts and unamortized debt issuance costs and excluding note payable-affiliate) maturing during the following years:
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Fair Value Disclosure (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values | The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance lease and other obligations, as well as the input level used to determine the fair values indicated below:
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Products and Services Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | Our operating revenue for our products and services consisted of the following categories:
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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 current assets reflected in our consolidated balance sheets:
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Background (Details) $ in Millions |
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Mar. 31, 2019
state
segment
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Jan. 01, 2019
USD ($)
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Number of states in which entity operates | state | 14 | |
Number of reportable segments | segment | 1 | |
ACCUMULATED DEFICIT | Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cumulative net effect of adoption of ASU | $ 126 | |
Cumulative effect of new accounting principle in period of adoption, tax | $ 133 |
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Goodwill | $ 9,360 | $ 9,360 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 783 | 893 |
Accumulated amortization | 4,916 | 4,806 |
Other Intangible Assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible assets, net | 355 | 311 |
Accumulated amortization | $ 1,724 | $ 1,712 |
Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Future Amortization Expense (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 (remaining nine months) | $ 380 |
2020 | 457 |
2021 | 149 |
2022 | 46 |
2023 | $ 34 |
Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible assets, gross (including goodwill) | $ 17,100 | |
Amortization of intangible assets | $ 137 | $ 149 |
Revenue Recognition - Revenue not Under ASC 606 (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Total revenue | $ 2,055 | $ 2,130 |
Adjustments for non-ASC 606 revenue | (127) | (78) |
Total revenue from contracts with customers | $ 1,928 | $ 2,052 |
Revenue Recognition - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 518 | $ 518 |
Contract liabilities | 282 | 207 |
Contract assets | 55 | 64 |
Accounts receivable, gross | 560 | 554 |
Allowance for doubtful accounts | $ 42 | $ 36 |
Revenue Recognition - Additional Information (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Consumer Customers | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Length of customer life | 30 months |
Business Customer | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Length of customer life | 49 months |
Minimum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 1 year |
Maximum | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Contract term | 7 years |
Revenue Recognition - Revenue Recognized (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Amounts included in contract liability at the beginning of the period | $ 261 | $ 269 |
Performance obligations satisfied in previous periods | $ 0 | $ 0 |
Revenue Recognition - Additional Information, Performance Obligation (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 166 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 100.00% |
Expected timing of satisfaction, period | 2 years 9 months |
Revenue Recognition - Capitalized Contract Costs (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Contract Acquisition Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | $ 90 | $ 91 |
Costs incurred | 16 | 14 |
Amortization | (16) | (15) |
End of period balance | 90 | 90 |
Contract Fulfillment Costs | ||
Capitalized Contract Cost [Roll Forward] | ||
Beginning of period balance | 57 | 61 |
Costs incurred | 4 | 4 |
Amortization | (4) | (5) |
End of period balance | $ 57 | $ 60 |
Leases - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Jan. 01, 2019 |
|
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 117 | ||
Operating lease liability | 125 | ||
Lease income | $ 81 | $ 85 | |
Accounting Standards Update 2016-02 | |||
Lessee, Lease, Description [Line Items] | |||
Operating lease assets | $ 126 | ||
Operating lease liability | $ 133 |
Leases - Lease Expense (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating and short-term lease cost | $ 8 |
Finance lease cost: | |
Amortization of right-of-use assets | 3 |
Total finance lease cost | 3 |
Total lease cost | $ 11 |
Leases - Supplemental Balance Sheet (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Assets | |
Operating leases assets | $ 117 |
Finance lease assets | 19 |
Total leased assets | 136 |
Current | |
Operating | 32 |
Finance | 9 |
Non-current | |
Operating | 93 |
Finance | 8 |
Total lease liabilities | $ 142 |
Weighted-average remaining lease term (years) | |
Operating leases | 5 years 10 months |
Finance leases | 4 years 5 months |
Weighted-average discount rate | |
Operating leases | 6.70% |
Finance leases | 4.85% |
Leases - Supplemental Cash Flows (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 9 |
Finance cash flows from finance leases | $ 2 |
Leases - Maturities of Lease Liabilities (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Operating Leases | |
2019 (remaining nine months) | $ 26 |
2020 | 29 |
2021 | 27 |
2022 | 23 |
2023 | 19 |
Thereafter | 33 |
Total lease payments | 157 |
Less: interest | (32) |
Total | 125 |
Less: current portion | (32) |
Long-term portion | 93 |
Financing Leases | |
2019 (remaining nine months) | 7 |
2020 | 5 |
2021 | 1 |
2022 | 1 |
2023 | 1 |
Thereafter | 4 |
Total lease payments | 19 |
Less: interest | (2) |
Total | 17 |
Less: current portion | (9) |
Long-term portion | $ 8 |
Leases - Capital Lease Maturities Under Topic 840 (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 10 |
2020 | 6 |
2021 | 2 |
2022 | 1 |
2023 | 1 |
2024 and thereafter | 4 |
Total minimum payments | 24 |
Less: amount representing interest and executory costs | (5) |
Present value of minimum payments | 19 |
Less: current portion | (12) |
Long-term portion | $ 7 |
Leases - Right-of-Way and Operating Lease Maturities Under Topic 840 (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 35 |
2020 | 28 |
2021 | 27 |
2022 | 23 |
2023 | 19 |
2024 and thereafter | 32 |
Total future minimum payments | 164 |
Future minimum sublease rentals | $ 22 |
Long-Term Debt and Revolving Promissory Note - Additional Information (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2017 |
Apr. 18, 2012 |
|
Long-term debt | ||||
Note payable - affiliate | $ 1,038,000,000 | $ 1,008,000,000 | ||
Interest | 58,000,000 | 55,000,000 | ||
Loans payable | Qwest Corporation | Affiliated entity | ||||
Long-term debt | ||||
Debt instrument, face amount | $ 965,000,000 | $ 1,000,000,000 | ||
Note payable - affiliate | $ 1,038,000,000 | $ 1,008,000,000 | ||
Weighted average interest rate | 5.945% | |||
Interest costs capitalized | $ 73,000,000 | |||
Interest | $ 15,000,000 |
Long-Term Debt and Revolving Promissory Note - Schedule of Debt Maturity (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2019 (remaining nine months) | $ 7 |
2020 | 5 |
2021 | 951 |
2022 | 0 |
2023 | 1 |
2024 and thereafter | 5,109 |
Total long-term debt | $ 6,073 |
Fair Value Disclosure (Details) - Fair value measurements, nonrecurring - Fair value inputs, Level 2 - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Carrying Amount | ||
Liabilities | ||
Liabilities—Long-term debt (excluding finance lease and other obligations) | $ 5,939 | $ 5,938 |
Fair Value | ||
Liabilities | ||
Liabilities—Long-term debt (excluding finance lease and other obligations) | $ 5,885 | $ 5,118 |
Products and Services Revenue - Additional Information (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
category
|
Mar. 31, 2018
USD ($)
|
|
Revenue from Contract with Customer [Abstract] | ||
Number of categories of products and services | category | 6 | |
Universal service funds taxes and surcharges | $ | $ 30 | $ 34 |
Products and Services Revenue - Operating Revenues for Products and Services (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | ||
Operating revenues | $ 2,055 | $ 2,130 |
IP & Data Services | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 147 | 150 |
Transport & Infrastructure | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 715 | 744 |
Voice & Collaboration | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 422 | 467 |
IT & Managed Services | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 1 | 2 |
Regulatory Revenue | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | 48 | 56 |
Affiliate Services | ||
Disaggregation of Revenue [Line Items] | ||
Operating revenues | $ 722 | $ 711 |
Commitments, Contingencies and Other Items (Details) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019
USD ($)
patent
lawsuit
|
Mar. 31, 2019
USD ($)
lawsuit
|
|
Loss Contingencies [Line Items] | ||
Estimate of possible loss | $ | $ 22,000 | $ 22,000 |
Number of patents allegedly infringed (minimum) | patent | 1 | |
Louisiana State Court | ||
Loss Contingencies [Line Items] | ||
Number of claims | lawsuit | 2 | |
Interexchange carriers | Subsidiaries of CenturyLink, Inc. | ||
Loss Contingencies [Line Items] | ||
Number of lawsuits (approximately) | lawsuit | 100 | 100 |
Unfavorable Regulatory Action | ||
Loss Contingencies [Line Items] | ||
Estimate of possible loss | $ | $ 100 | $ 100 |
Dividends (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Dividends [Abstract] | ||
Dividends declared and paid to Qwest Services Corporation | $ 350 | $ 300 |
Other Financial Information (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 64 | $ 37 |
Contract acquisition costs | 52 | 52 |
Contract fulfillment costs | 27 | 27 |
Other | 16 | 31 |
Total other current assets | $ 159 | $ 147 |
Labor Union Contracts (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Unionized employees concentration risk | Total number of employees | |
Concentration Risk [Line Items] | |
Concentration risk percentage | 44.00% |
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