What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-03-03 · 83 added, 84 removed, 234 unchanged (42% of the section changed)

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See "Special Note Regarding Forward-Looking Statements" immediately prior to Item 1 of Part I of this report for factors relating to these statements and "Risk Factors" in Item 1A of Part I of this report for a discussion of certain risk factors applicable to our business, financial condition, results of operations, liquidity and prospects.

We are an integrated communications company engaged primarily in providing an array of communications services to our business and residential customers.

Our specific products and services are detailed below under the heading "Operations - Products and Services" in Item 1 of Part I of this report.

Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its income-generating subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends.

Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by an affiliate of Lumen and most affiliate transactions are deemed to be settled at the time the transactions are recorded.

The resulting net balance at the end of each period is reported as advances to affiliates or advances from affiliates on our consolidated balance sheets.

From time to time we may declare and pay dividends to our parent, QSC.

These dividends are settled in accordance with the cash management process described above, which has the net effect of reducing our advances to affiliates or increasing our advances from affiliates.

We are an integrated facilities-based communications company engaged primarily in providing an array of communications products and services to our business and mass markets customers.

Our specific products and services are detailed in Note 3—Revenue Recognition and below under the heading "Operations - Products and Services" in Item 1 of Part I of this report.

Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends.

As part of these cash management arrangements, affiliates provide lines of credit to certain other affiliates.

Amounts outstanding under these lines of credit and intercompany obligations vary from time to time.

Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.

From time to time we may declare and pay dividends to QSC, our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.

We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.

At December 31, 2021, we served approximately 2.7 million broadband subscribers.

Our methodology for counting broadband subscribers may not be comparable to those of other companies.

For the reasons noted in Note 1—Background And Summary Of Significant Accounting Policies and Note 14—Products and Services Revenue, we have determined that we have one reportable segment.

We categorize our products, services and revenue among the following six categories:

• IP and Data Services , which primarily consists of VPN data networks, Ethernet, retail video, IP and other ancillary services;

• Transport and Infrastructure , which includes 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 includes information technology services and managed services, which may be purchased in conjunction with our other network services;

• Regulatory Revenue, which consists of USF and CAF support payments and other operating revenue.

We receive federal support payments from both federal and state USF programs and from the federal CAF II program.

These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services 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;

• Affiliate Services, which are telecommunication services we provide to our affiliates that we also provide to our external customers.

In addition, we provide to our affiliates computer system development and support services, network support and technical services.

For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies we have determined that we have one reportable segment.

Products, Services and Revenue

We categorize our products, services and revenue among the following four categories:

• Voice and Other , which include primarily local voice services, private line and other legacy services.

This category also includes CAF II support payments and other operating revenue.

These support payments are government subsidies designed to compensate us for providing certain broadband and telecommunications services in high-cost areas or at discounts to low-income, educational, and healthcare customers.

During the twelve months ended December 31, 2021, we recorded approximately $145 million of revenue from the CAF II program that ended December 31, 2021.

• Fiber Infrastructure Services , which include high speed fiber-based and lower speed DSL-based broadband services, and optical network services;

• IP and Data Services , which consist primarily of Ethernet services;

• Affiliate Services, which are communications services that we also provide to external customers.

In addition, we provide to our affiliates application development and support services, network support and technical services.

From time to time, we change the categorization of our products and services, and we may make similar changes in the future.

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• Customers' demand for automated products and services and competitive pressures will require that we continue to invest in new technologies and automated processes to improve the customer experience and reduce our operating expenses.

• The increasingly digital environment and the growth in online video require robust, scalable network services.

• The increasingly digital environment and the growth in online video and gaming require robust, scalable network services.

We are continuing to enhance our product capabilities and simplify our product portfolio based on demand and profitability to enable customers to have access to greater bandwidth.

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• The operating margins of several of our newer, more technologically advanced services, some of which may connect to customers through other carriers, are lower than the operating margins on our traditional, on-net wireline services.

• Declines in our traditional wireline services and other more mature offerings have necessitated right-sizing our cost structures to remain competitive.

Impact of COVID-19 Pandemic

In response to the safety and economic challenges arising out of the COVID-19 pandemic, we have taken a variety of steps to ensure the availability of our network infrastructure, to promote the safety of our employees, to enable us to continue to provide our products and services worldwide to our customers, and to strengthen our communities.

These steps have included:

• Lumen Technologies taking the FCC’s “Keep Americans Connected Pledge,” under which we waived certain late fees and suspended the application of data caps and service terminations for non-payment by certain consumer and small business customers through the end of the second quarter of 2020;

To date, these steps have included:

• Lumen Technologies taking the FCC’s “Keep Americans Connected Pledge,” under which we waived certain late fees and suspended the application of data caps and service terminations for non-payment by certain mass markets customers through the end of the second quarter of 2020;

• establishing new protocols for the safety of our on-site technicians and customers, including our “Safe Connections” program;

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Social distancing, business and school closures, travel restrictions and other actions taken in response to the pandemic have impacted us, our customers and our business since March 2020.

In particular, during the second half of 2020, we rationalized our lease footprint and ceased the use of 5 leased property locations that were underutilized due to the COVID-19 pandemic.

We determined that we no longer needed the leased space and due to the limited remaining term on the contracts concluded that we had neither the intent nor the ability to sublease the properties.

As a result, we incurred accelerated lease costs of approximately $31 million.

In conjunction with our plans to improve long-term profitability, we expect to continue our real estate rationalization efforts and incur additional costs in 2021.

Additionally, as discussed further elsewhere herein, we are tracking pandemic impacts such as (i) increases in certain of our revenue streams and decreases in others (including late fee revenue), (ii) increases in our allowances for credit losses each quarter since the start of the pandemic, (iii) increases in overtime expenses, and (iv) delays in our cost transformation initiatives.

In particular, beginning in the second half of 2020 and continuing into early 2022, we have rationalized our leased footprint and ceased the use of 6 leased property locations that were underutilized due to the COVID-19 pandemic.

We determined that we no longer needed the leased space and due to the limited remaining term on the contracts concluded that we had neither the intent nor ability to sublease the properties.

As a result, we incurred accelerated lease costs of approximately $1 million and $31 million for the years ended December 31, 2021 and 2020, respectively.

In conjunction with our plans to improve long-term profitability, we expect to continue our real estate rationalization efforts and incur additional costs during 2022.

Additionally, as discussed further elsewhere herein, we are tracking pandemic impacts such as (i) increases in certain of our revenue streams and decreases in others (including late fee revenue), (ii) increases in our allowances for credit losses each quarter since the start of the pandemic, (iii) increases in overtime expenses, (iv) operational challenges resulting from shortages of semiconductors and certain other supplies that we use in our business, and (v) delays in our cost transformation initiatives.

We have also experienced delayed decision-making by certain of our customers.

Thus far, these changes have not materially impacted our financial performance or financial position.

This could change, however, if the pandemic intensifies or economic conditions further deteriorate.

The impact of the pandemic during 2021 will materially depend on additional steps that we may take in response to the pandemic and various events outside of our control, including the pace of vaccinations, the length and severity of the health crisis and economic slowdown, actions taken by governmental agencies or legislative bodies, and the impact of those events on our employees, suppliers and customers.

For additional information, see the risk factor disclosures set forth or referenced in Item 1A of Part II of this report.

For additional information on the impacts of the pandemic, see the remainder of this item, including "— Liquidity and Capital Resources — Pension and Post-retirement Benefit Obligations."

However, we continue to monitor global disruptions and work with our vendors to mitigate supply chain risks.

We intend to reopen our offices in 2022 under a "hybrid" working environment, which will permit some of our employees the flexibility to work remotely at least some of the time for the foreseeable future.

For additional information on the impacts of the pandemic, see Item 1A of this report.

Results of Operations

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Operating Revenue

The following table summarizes our consolidated operating revenue recorded under our six revenue categories:

The following table summarizes our consolidated operating revenue recorded under our four revenue categories:

Years Ended December 31, % Change

(Dollars in millions)

Voice and Other $ 2,099 2,281 (8) %

Fiber Infrastructure 1,990 2,033 (2) %

IP and Data Services 473 512 (8) %

Transport and Infrastructure 2,604 2,773 (6) %

Voice and Collaboration 1,517 1,618 (6) %

IT and Managed Services 2 4 (50) %

Regulatory Services 179 189 (5) %

Affiliate Services 2,389 2,487 (4) %

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Total operating revenue decreased by $362 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The decrease in operating revenue was primarily driven by lower affiliate service revenues due to the transfer of employees, and the revenues related to the services those employees provide, from us to an affiliate.

The remaining decline in revenue was primarily due to decreases in our voice, broadband, private line and Ethernet services.

The decrease in operating revenue was primarily driven by decreases in our voice, traditional broadband, Ethernet and private line services, slightly offset by growth in fiber broadband services.

Affiliate services revenue also decreased due to a reduction in the number of employees providing services to our affiliates.

Operating Expenses

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Operating expenses-affiliates

728 812 (10) %

Depreciation and amortization

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Cost of services and products (exclusive of depreciation and amortization) decreased by $273 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The decrease in our cost of services and products was primarily due to reductions in salaries and wages and employee-related expenses resulting from lower headcount.

These reductions were partially offset by higher network expenses from project impairments and higher customer premises equipment costs due to increased customer installations.

The decrease in our cost of services and products was primarily due to reductions in salaries and wages and employee-related expenses resulting from lower headcount, lower network expenses and lower real estate and accelerated lease expenses.

Selling, General and Administrative

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and other selling, general and administrative expenses.

Selling, general and administrative expenses decreased by $95 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to reductions in salaries and wages and employee-related expenses from lower headcount, commissions, professional fees, marketing and advertising expenses.

These reductions were partially offset by higher property and other taxes, insurance and fees and bad debt.

Selling, general and administrative expenses decreased by $210 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to a $75 million gain on the sale of land in the third quarter 2021.

Additionally, the decrease in expense was driven by lower bad debt expense, lower marketing and advertising costs and lower property taxes.

Operating Expenses-Affiliates

Since Lumen's acquisition of us, we have incurred affiliate expenses related to our use of telecommunication services, marketing and employee related support services provided by Lumen Technologies and its subsidiaries.

Operating expenses-affiliates decreased by $84 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to the decline in the level of services provided to us by our affiliates.

Operating expenses-affiliates increased by $30 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to an increase in the level of services provided to us by our affiliates.

Depreciation and Amortization

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Annual depreciation expense is impacted by several factors, including changes in our depreciable cost basis, changes in our estimates of the remaining economic life of certain network assets and the addition of new plant.

Depreciation expense increased by $3 million, for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Depreciation expense increased by $78 million due to the increase in depreciable assets which was offset primarily due to a decrease in depreciation expense of $72 million from annual rate depreciable life changes.

Amortization expense decreased by $52 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to a $45 million decrease from the effect of using an accelerated amortization method resulting in an incremental decline in expense each period as the intangible assets amortize and a $8 million decrease associated with annual rate amortizable life changes of software for the period.

Depreciation expense decreased by $1 million, for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

Depreciation expense decreased by $37 million from the impact of annual rate depreciable life changes, which were offset primarily due to an increase of $32 million due to net growth in depreciable assets.

Amortization expense decreased by $305 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to a decrease of $292 million as a result of certain customer relationship intangible assets becoming fully amortized at the end of the first quarter of 2021 and a $10 million decrease associated with annual rate amortizable life changes of software for the period.

Other Consolidated Results

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Interest expense - affiliates, net (105) (74) 42 %

Other (expense) income, net (56) 26 nm

Other (expense) income, net (6) (56) (89) %

Total other expense, net

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Income tax expense $ 709 595 19 %

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nm - Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Interest Expense

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Interest expense - affiliates, net increased by $31 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

The increase in interest expense - affiliates, net was primarily due to the increase in outstanding advances from our affiliates, which incur interest at the same rate as the note payable to our affiliate.

The increase in interest expense - affiliates, net was primarily due to increases in the average outstanding advances from our affiliates, which incur interest at the same rate as the note payable to our affiliate.

These outstanding advances from our affiliates were settled prior to the end of the third quarter 2021.

See Note 6—Long-Term Debt and Note Payable - Affiliate.

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(Dollars in millions)

Loss on debt extinguishment $ (63) — nm

Interest income, affiliate 1 21 (95) %

Loss on debt extinguishment $ (8) (63) (87) %

Interest income, affiliate — 1 nm

Other 2 6 (67) %

Total other (expense) income, net $ (56) 26 nm

Total other (expense) income, net $ (6) (56) (89) %

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nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

The loss on debt extinguishment relates to the senior note redemptions discussed in Note 6—Long-Term Debt and Note Payable - Affiliate.

The decrease in interest income, affiliate is due to the reduction of the advances to affiliates.

The loss on debt extinguishment in both periods relates to the senior note redemptions discussed in Note 6—Long-Term Debt and Note Payable - Affiliate.

Income Tax Expense

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The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue and expenses.

We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) property, plant and equipment;

(ii) affiliate transactions and (iii) income taxes.

We have identified certain policies and estimates as critical to our business operations and the understanding of our past or present results of operations related to (i) affiliate transactions and (ii) income taxes.

These policies and estimates are considered critical because they had a material impact, or they have the potential to have a material impact, on our consolidated financial statements and because they require us to make significant judgments, assumptions or estimates.

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We recognize intercompany charges at the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates.

Pricing between affiliates currently uses market based, volume discounted rates.

Because of the significance of the services we provide to our affiliates and our other affiliate transactions, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented.

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Liquidity and Capital Resources

Overview of Sources and Uses of Cash

We are an indirectly wholly-owned subsidiary of Lumen Technologies, Inc.

As such, factors relating to, or affecting, Lumen's liquidity and capital resources could have material impacts on us, including impacts on our credit ratings, our access to capital markets and changes in the financial market's perception of us.

Lumen Technologies has cash management arrangements with a majority of its subsidiaries that include lines of credit, affiliate advances and obligations, capital contributions and dividends.

As part of these cash management arrangements, affiliates provide lines of credit to certain other affiliates.

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Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.

From time to time we may declare and pay dividends to our stockholder, QSC, sometimes in excess of our earnings to the extent permitted by applicable law, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.

From time to time we may declare and pay dividends to QSC, our direct parent, sometimes in excess of our earnings to the extent permitted by applicable law, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.

Our debt covenants do not currently limit the amount of dividends we can pay to QSC.

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We incur capital expenditures on an ongoing basis in order to enhance and modernize our networks, compete effectively in our markets and expand and improve our service offerings.

Our parent, Lumen Technologies, and we evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and the expected return on investment.

Lumen Technologies evaluates capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and the expected return on investment.

The amount of Lumen’s consolidated capital investment, and our portion thereof, is influenced by, among other things, demand for Lumen’s services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations (such as Lumen's CAF Phase II or RDOF infrastructure buildout requirements).

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Debt and Other Financing Arrangements

As of December 31, 2020, we owed a face amount of approximately $3.4 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net and unamortized debt issuance costs), which includes our $215 million term loan.

Subject to market conditions, and to the extent feasible, we may issue debt securities, under Qwest Corporation, from time to time in the future primarily to refinance a portion of our maturing debt.

As of December 31, 2021, we owed a face amount of approximately $2.2 billion aggregate outstanding indebtedness, excluding (i) finance leases, unamortized premiums, net, and unamortized debt issuance costs, and (ii) our note payable-affiliate.

Subject to market conditions, and to the extent feasible, Qwest Corporation may issue debt securities, under Qwest Corporation, from time to time in the future primarily to refinance a portion of our maturing debt.

The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors.

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As of December 31, 2021 and 2020, $29 million and $28 million of accrued interest are reflected in other current liabilities on our consolidated balance sheets, respectively.

For additional information about our indebtedness, see Note 6—Long-Term Debt And Note Payable - Affiliate.

For additional information about this indebtedness, see Note 6—Long-Term Debt And Note Payable - Affiliate.

Future Contractual Obligations

Our estimated future obligations as of December 31, 2021 include both current and long term obligations.

Related to debt, as noted in Note 6—Long-Term Debt And Note Payable - Affiliate, we have current maturities of $951 million and a long-term obligation of $2.4 billion.

Related to debt, as noted in Note 6—Long-Term Debt And Note Payable - Affiliate, we have long-term obligation of $2.2 billion, with no current maturities and $1.2 billion of obligations related to note payable - affiliate, as discussed above, all of which is classified as current.

Under our operating leases as noted in Note 4—Leases, we have a current obligation of $36 million and a long-term obligation of $68 million.

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We periodically pay dividends to our direct parent company, which reduce our capital resources for debt repayments and other purposes.

See Note 19—Stockholder's Equity.

For additional information, see (i) our consolidated statements of cash flows and stockholder's equity and (ii) Note 17—Stockholder's Equity.

Pension and Post-retirement Benefit Obligations

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Based on current laws and circumstances, Lumen Technologies does not expect any contributions to be required for their qualified pension plan during 2022.

The amount of required contributions to Lumen's qualified pension plan will depend on a variety of factors, most of which are beyond their control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.

Lumen Technologies occasionally makes voluntary contributions in addition to required contributions.

Although Lumen Technologies believes it is not required to make contributions to the pension plan in 2021 based on current laws and circumstances, it could make voluntary contributions.

Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash, In the past Lumen Technologies has maintained several trusts that helped cover some of these costs, but the trust funds are almost completely depleted and currently cover an immaterial amount of Lumen's annual plan costs.

The amount of required contributions to Lumen's qualified pension plan in 2023 and beyond will depend on a variety of factors, most of which are beyond their control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations.

Lumen Technologies occasionally makes voluntary contributions in addition to required contributions and reserves the right to do so in the future.

Lumen Technologies has advised that it does not expect to make a voluntary contribution to the trust of the qualified pension plan in 2022.

Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash.

The affiliate obligations, net in current and noncurrent liabilities on our consolidated balance sheets primarily represents the cumulative allocation of expenses, net of payments, associated with QCII's pension plans and post-retirement benefits plans prior to the plan mergers.

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For the year ended 2022, we expect to make aggregate settlement payments of $61 million to QCII under the plan.

For 2020, Lumen's expected annual long-term rates of return were 6.0% and 4.0% for the pension plan trust assets and post-retirement plans' trust assets based on the assets held and net of expected fees and administrative costs.

For 2021, our expected annual long-term rates on these assets are 5.5% and 4.0%, respectively.

For 2021, Lumen's expected annual long-term rate of return on the pension plan assets, net of administrative expenses was 5.5%.

For 2022, Lumen's expected annual long-term rate of return on these assets are 5.5%.

However, actual returns could be substantially different.

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Connect America Fund & Rural Digital Opportunity Fund

Since 2015, Lumen has been receiving over $500 million annually through Phase II of the CAF, a program that will end this year.

In connection with CAF funding, we and Lumen must meet certain specified infrastructure buildout requirements in 13 states which requires substantial capital expenditures.

While we are on track to meet the requirement this year, we cannot provide any assurances that we will be able to timely meet our mandated buildout requirements.

In accordance with the FCC’s January 2020 order, we elected to receive an additional year of CAF Phase II funding in 2021.

Since 2015, Lumen has been receiving approximately $500 million annually through Phase II of the CAF, a program that ended for Lumen on December 31, 2021.

To receive this CAF funding, we were required to meet certain specified infrastructure buildout requirements in 13 states by the end of 2021 which required substantial capital expenditures.

In early 2020, the FCC created the RDOF which is a new federal support program designed to replace the CAF Phase II program.

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Lumen Technologies won bids for RDOF Phase I support payments of $26 million annually.

These RDOF Phase I support payments are expected to begin January 1, 2022.

We expect our support payments under the RDOF Phase I program will begin soon after receipt of the FCC's anticipated approval of our pending application.

Federal officials have proposed changes to the current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted under the Obama Administration.

In November of 2021, the U.S.

Congress enacted legislation that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants.

As of the date of this report, U.S.

Department of Commerce is still developing guidance regarding these grants, so it is premature to speculate on the potential impact of this legislation on us.

For additional information on these programs, see "Business—Regulation" in Item 1 of Part I of this report and see "Risk Factors—Financial Risks" in Item 1A of Part I of this report.

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$ 3,033 3,071 (38)

Net cash provided by (used in) investing activities 754 (1,723) 2,477

Net cash (used in) provided by investing activities (751) 754 (1,505)

Net cash used in financing activities

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Operating Activities

Net cash provided by operating activities decreased by $261 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to a decrease in other current liabilities and reductions of other noncurrent liabilities.

Net cash provided by operating activities decreased by $38 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to lower collections on accounts receivable.

Cash provided by operating activities is subject to variability period over period as a result of the timing of the collection of receivables and payments related to interest expense, accounts payable, and payroll and bonuses.

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Investing Activities

Net cash provided by (used in) investing activities changed by $2.5 billion for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to funds received from affiliates, used to repay our senior notes, which in turn reduced our advances to affiliates balance.

Net cash (used in) provided by investing activities changed by $1.5 billion for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to funds received from affiliates during 2020 that were used to repay a portion of our senior notes, which in turn reduced our advances to affiliates balance during 2020.

Additionally, an increase to our advances to affiliates balance in 2021 resulted in a further increase to net cash used in investing activities.

This activity was slightly offset by decreased capital expenditures.

Financing Activities

Net cash used in financing activities increased by $2.2 billion for the year ended December 31, 2020 as compared to the year ended December 31, 2019 primarily due to higher repayments of long-term debt partially offset by advances from affiliates.

Net cash used in financing activities decreased by $1.5 billion for the year ended December 31, 2021 as compared to the year ended December 31, 2020 primarily due to lower repayments of long-term debt and lower dividends paid to our parent, partially offset by an increase in net repayments of advances from affiliates.

See Note 6—Long-Term Debt and Note Payable - Affiliate for additional information on our outstanding debt securities and financing activities.

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As of December 31, 2021, we were exposed to market risk from changes in interest rates on our variable rate long-term debt obligations, amended and restated revolving promissory note and fluctuations in certain foreign currencies.

We seek to maintain a favorable mix of fixed and variable rate debt in an effort to limit interest costs and cash flow volatility resulting from changes in rates.

Management periodically reviews our exposure to interest rate fluctuations and periodically implements strategies to manage the exposure.

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The note payable-affiliate bears interest at a variable rate, which is based on a weighted average per annum interest rate of Lumen's outstanding borrowings for the interest period and therefore is exposed to potential interest rate risk.

Certain shortcomings are inherent in the method of analysis presented in the computation of exposures to market risks.

Certain shortcomings are inherent in the method of analysis in evaluating our market risks.

Actual values may differ materially from those disclosed by us from time to time if market conditions vary from the assumptions used in the analyses performed.

These analyses only incorporate the risk exposures that existed at December 31, 2020.

Our analyses only incorporate the risk exposures that existed at December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis