What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2025-02-20 compared with 2024-02-22 · 277 added, 306 removed, 905 unchanged (39% of the section changed)

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk" in Item 7 of Part II of this report is incorporated herein by reference.

As of December 31, 2024, we were not exposed to any significant market risk from changes in interest rates, as we did not have variable rate long-term debt obligations, and we have immaterial exposure to fluctuations in certain foreign currencies.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

20 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to those charged with governance and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to those charged with governance and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Testing of revenue

11 unchanged sentences

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the relevance and reliability of evidence obtained.

Goodwill impairment

As discussed in Note 2 to the consolidated financial statements, the Company recorded a non-cash impairment charge of $2.4 billion for the year ended December 31, 2023.

The Company assesses goodwill for impairment at least annually, or more frequently, if events or circumstances indicate the carrying value of a reporting unit likely exceeds its fair value.

On the annual goodwill impairment assessment date, the Company estimated the fair value of its reporting unit using a market approach.

The annual goodwill impairment test determined the carrying value of the Company’s reporting unit exceeded its estimated fair value.

We identified the assessment of the Company’s annual impairment testing of goodwill as a critical audit matter.

Subjective auditor judgment was required in evaluating the earnings before interest, taxes, depreciation, and amortization (“EBITDA”) market multiple assumption used to estimate the fair value of the reporting unit.

The evaluation of this assumption was challenging as differences in judgment used to determine this assumption could have had a significant effect on the reporting unit’s estimated fair value.

Specialized skills and knowledge were required in the assessment of the EBITDA market multiple assumption.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill impairment test.

This included controls related to the Company’s determination of the EBITDA market multiple assumption.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the EBITDA market multiple assumption by:

• comparing to an EBITDA market multiple range developed using publicly available market data for comparable entities

• performing sensitivity analysis that considered a range of EBITDA market multiples.

We have served as the Company’s auditor since 2002.

18 unchanged sentences

Total operating expenses 3,457 6,110 3,694

OPERATING (LOSS) INCOME

OPERATING INCOME (LOSS)

2,051 ( 195 ) 2,755

OTHER (EXPENSE) INCOME

OTHER EXPENSE

Interest expense ( 62 ) ( 95 ) ( 112 )

Interest income (expense) - affiliate, net

15 ( 60 ) ( 105 )

Other income (expense), net 5 7 ( 6 )

Other income, net

Total other expense, net ( 37 ) ( 75 ) ( 165 )

(LOSS) INCOME BEFORE INCOME TAXES

INCOME (LOSS) BEFORE INCOME TAXES

2,014 ( 270 ) 2,590

Income tax expense 527 561 671

NET (LOSS) INCOME

NET INCOME (LOSS)

$ 1,487 ( 831 ) 1,919

21 unchanged sentences

Advances from affiliates — 61

Note payable - affiliate — —

Accrued expenses and other liabilities

24 unchanged sentences

OPERATING ACTIVITIES

Net (loss) income

Net income (loss)

$ 1,487 ( 831 ) 1,919

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 753 823 860

3 unchanged sentences

Accrued interest on affiliate note — — 28

Net loss on early retirement of debt — — 8

Changes in current assets and liabilities:

23 unchanged sentences

Net cash used in financing activities ( 287 ) ( 1,921 ) ( 1,271 )

Net increase (decrease) in cash, cash equivalents and restricted cash 2 6 ( 11 )

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period 12 10 4

4 unchanged sentences

( 63 ) ( 97 ) ( 113 )

Supplemental noncash information of investing activities:

Sale of property, plant and equipment in exchange for receivable $ — — 56

Supplemental noncash information of financing activities:

15 unchanged sentences

Balance at beginning of period 706 3,517 1,598

Net (loss) income

Net income (loss)

1,487 ( 831 ) 1,919

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unless the context requires otherwise, references in this report to "QC" refer to Qwest Corporation, references to "Qwest," "we," "us," and "our" refer to Qwest Corporation and its consolidated subsidiaries, references to "QSC" refer to our direct parent company, Qwest Services Corporation, and its consolidated subsidiaries, and references to "Lumen Technologies" or "Lumen" refer to our ultimate parent company, Lumen Technologies, Inc., and its consolidated subsidiaries including Level 3 Parent, LLC, referred to as "Level 3".

(1) Background and Summary of Significant Accounting Policies

We are a facilities-based technology and communications company that provides a broad array of integrated communications products and services to our business and mass markets customers.

References in this report on Form 10-K, for all periods presented, to "QC," "Qwest," "we," "us," "the Company" and "our" refer to Qwest Corporation and its consolidated subsidiaries, unless the context otherwise requires.

References to "Lumen Technologies" or "Lumen" refer to our ultimate parent company, Lumen Technologies, Inc.

and its consolidated subsidiaries, including Level 3 Parent, LLC ("Level 3") and Level 3 Financing, Inc.

("Level 3 Financing").

Note 1—Background and Summary of Significant Accounting Policies

We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly.

We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.

Our specific products and services are detailed in Note 3—Revenue Recognition of this report.

4 unchanged sentences

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.

Transactions with our non-consolidated affiliates (Lumen Technologies and its other subsidiaries, referred to herein as affiliates) have not been eliminated.

We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories.

See Note 3—Revenue Recognition for additional information.

These changes had no impact on total operating revenue, total operating expenses or net (loss) income for any period.

These changes had no impact on total operating revenue, total operating expenses or net income (loss) for any period.

Operating Expenses

13 unchanged sentences

external commissions;

litigation expenses associated with general matters;

legal expenses associated with general matters;

bad debt expense;

2 unchanged sentences

Our operations are integrated into and reported as part of Lumen Technologies.

Lumen's chief operating decision maker ("CODM") is our CODM but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC.

Lumen's CEO is our chief operating decision maker ("CODM") and reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the SEC.

Our CODM assesses performance and allocates resources in conjunction with and based on the operations of Lumen Technologies.

Consequently, we do not provide our discrete financial information to the CODM on a regular basis.

27 unchanged sentences

We provide an array of communications services to business and residential customers, including local voice, VPN, Ethernet, data, broadband, private line (including special access), network access, transport, voice, information technology, video and other ancillary services.

We provide these services to a wide range of businesses, including global/international, enterprise, wholesale, government, and small and medium business customers.

We provide these services to a wide range of businesses, including global, enterprise, wholesale, government, and small and medium business customers.

Certain contracts also include the sale of equipment, which is not significant to our business.

1 unchanged sentence

Recognition of certain payments received in advance of services being provided is deferred.

These advance payments may include certain activation and certain installation charges.

If the activation and installation charges are not separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which typically ranges from one to five years depending on the service.

These advance payments may include design, planning, and engineering fees, as well as certain activation and installation charges.

If these advance payments are not separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which typically ranges from one to five years depending on the service.

In most cases, termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term.

49 unchanged sentences

For additional information, see "Note Payable - Affiliate" in Note 6—Long-Term Debt and Note Payable - Affiliate.

Advertising Costs

Costs related to advertising are expensed as incurred and recorded as selling, general and administrative expenses in our consolidated statements of operations.

Our advertising expense was $ 17 million, $ 26 million and $ 24 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on finance, regulatory, litigation and other matters.

17 unchanged sentences

has been reflected as advances to affiliates in our consolidated balance sheets.

Book overdrafts occur when we have issued checks but have not yet been presented to our controlled disbursement bank accounts for payment.

Book overdrafts occur when we have issued checks but they have not yet been presented to our controlled disbursement bank accounts for payment.

Disbursement bank accounts allow us to delay funding of issued checks until the checks are presented for payment.

1 unchanged sentence

This activity is included in the operating activities section in our consolidated statements of cash flows.

There were no book overdrafts included in accounts payable at December 31, 2023 or December 31, 2022.

There was less than $ 1 million and no book overdrafts included in accounts payable at December 31, 2024 or December 31, 2023, respectively.

Restricted Cash

6 unchanged sentences

We generally consider our accounts past due if they are outstanding over 30 days.

Our past due accounts are written off against our allowance for credit losses when collection is considered to be not probable.

Any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received.

Our past due accounts are written off against our allowance for credit losses and any recoveries of accounts previously written off are generally recognized as a reduction in bad debt expense in the period received.

The carrying value of accounts receivable, net of the allowance for credit losses, approximates fair value.

1 unchanged sentence

As a result of our indirect acquisition by Lumen Technologies, Inc., property, plant and equipment acquired at the time of acquisition was recorded based on its estimated fair value as of the acquisition date.

Subsequently purchased and constructed property, plant and equipment are recorded at cost.

Property, plant and equipment is depreciated primarily using the straight-line group method.

Subsequently purchased and constructed property, plant and equipment are recorded at cost, plus the estimated value of any associated legally or contractually required retirement obligations.

Prior to January 1, 2024, we depreciated the majority of our property, plant and equipment using the straight-line group method over the estimated useful lives of groups of assets.

Under the straight-line group method, assets dedicated to providing telecommunications services (which comprise the majority of our property, plant and equipment) that have similar physical characteristics, use and expected useful lives are pooled for purposes of depreciation and tracking.

We use the equal life group procedure to establish each pool's average remaining useful life.

We used the equal life group procedure to establish each pool's average remaining useful life.

Generally, under the straight-line group method, when an asset is sold or retired in the course of normal business activities, the cost is deducted from property, plant and equipment and charged to accumulated depreciation without recognition of a gain or loss.

Effective January 1, 2024, we re-established all of our assets individually, including accumulated depreciation, and began to depreciate all of our assets using the straight-line method over the estimated useful lives of the specific asset.

A gain or loss is recognized in our consolidated statements of operations only if a disposal is unusual.

38 unchanged sentences

For further information on qualified pension, post-retirement and other post-employment benefit plans, see Note 11—Employee Benefits to the consolidated financial statements in Item 8 of Part II of Lumen's annual report on Form 10-K for the year ended December 31, 2024.

Correction of Immaterial Errors

During 2023, we identified errors in our previously reported consolidated financial statements related to accounts receivable and accounts payable.

The errors are the result of understated revenues from one of our legacy mainframe billing systems and understated network expenses for periods prior to 2021.

We have completed a quantitative and qualitative evaluation of the errors individually and in aggregate, and concluded the errors are immaterial to our previously issued consolidated financial statements.

Notwithstanding this evaluation, we have revised certain line items on our December 31, 2022 consolidated balance sheet for these errors.

The net effect of these adjustments was an increase in accounts receivable of $ 38 million and a decrease in advances to affiliates of $ 7 million for a total increase in assets of $ 31 million, and an increase in accounts payable and total liabilities of $ 18 million on our December 31, 2022 consolidated balance sheet.

In addition, we recorded an adjustment to increase our January 1, 2021 retained earnings by $ 13 million, which represents the cumulative correction of the immaterial errors prior to January 1, 2021.

The errors did not have an impact on our previously issued consolidated statements of operations, comprehensive (loss) income, or cash flows for the years ended December 31, 2022 or 2021, and did not, and are not expected to, have an impact on the economics of the Company's existing or future commercial arrangements.

Change in Accounting Estimates

Effective January 1, 2024, we changed our method of depreciation and amortization for incumbent local exchange carriers ("ILEC") fixed assets from the group method of depreciation to straight line by individual asset method.

Historically, we have used the group method of depreciation for the property, plant and equipment and amortization of certain intangible capitalized software assets of our ILECs.

Under the group method, all like kind assets were combined into common pools and depreciated under composite depreciation rates.

We believe the straight-line depreciation method for individual assets is preferable to the group method as it will result in a more precise estimate of depreciation expense and will result in a consistent depreciation method for all our subsidiaries.

This change in the method of depreciation and amortization is considered a change in accounting estimate inseparable from a change in accounting principle.

The change in accounting estimate decreased depreciation and amortization expense $ 101 million, $ 77 million net of tax for the year ended December 31, 2024.

Additionally, during the first quarter of 2024, we updated our analysis of economic lives of owned fiber network assets.

As of January 1, 2024, we extended the estimated economic life and depreciation period of such assets from 25 years to 30 years to better reflect the physical life of the assets that we have experienced and absence of technological changes that would replace fiber.

The change in accounting estimate decreased depreciation expense by approximately $ 24 million, $ 18 million net of tax for the year ended December 31, 2024.

Recently Adopted Accounting Pronouncements

Supplier Finance Programs

On January 1, 2023, we adopted Accounting Standards Update ("ASU") 2022-04, “ Liabilities-Supplier Finance Program (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations ” (“ASU 2022-04”).

These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions.

The adoption of ASU 2022-04 did not have a material impact to our consolidated financial statements.

Credit Losses

On January 1, 2023, we adopted ASU 2022-02, " Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings (“TDR”) and Vintage Disclosures ” (“ASU 2022-02”).

The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

The adoption of ASU 2022-02 did not have any impact to our consolidated financial statements.

On January 1, 2024 we adopted Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

The ASU does not change how a public entity identifies its operating segments, aggregates them or applies quantitative thresholds to determine reportable segments.

Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280, "Segment Reporting." We did not early adopt this standard.

The adoption of this ASU did not have a material impact on our consolidated financial statements.

Government Assistance

On January 1, 2022, we adopted ASU 2021-10 "Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance" ("ASU 2021-10").

This ASU requires business entities to disclose information about certain types of government assistance they receive.

Please refer to Note 3—Revenue Recognition for more information.

Disclosures by Business Entities about Government Assistance." This ASU requires business entities to disclose information about certain types of government assistance they receive.

Refer to Note 3—Revenue Recognition for more information on the impact of this ASU on our consolidated financial statements.

On January 1, 2024, we adopted ASU 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

The adoption of this ASU did not have any impact on our consolidated financial statements.

On January 1, 2024, we adopted ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” This ASU clarifies that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value.

The adoption of this ASU did not have any impact on our consolidated financial statements.

On January 1, 2024, we adopted ASU 2023-01, “Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments” (“ASU 2021-05”).

This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease;

Common Control Arrangements.” This ASU requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

The adoption of this ASU did not have any impact on our consolidated financial statements.

On January 1, 2022, we adopted ASU 2021-05, “Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments.” This ASU (i) amends the lease classification requirements for lessors, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease;

and (iii) provides guidance with respect to net investments by lessors under operating leases and other related topics.

The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2020-09, "Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No.

33-10762" ("ASU 2020-09") .

This ASU amends and supersedes various SEC guidance to reflect SEC Release No.

33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees.

The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01") .

This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures , for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

As of December 31, 2023, we determined there was no application or discontinuation of the equity method during the reporting periods covered in this report.

The adoption of ASU 2020-01 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12") .

This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes.

The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements.

The adoption of this ASU did not have a material impact on our consolidated financial statements.

Reference Rate Reform

In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848." This ASU, which was effective upon issuance, extends the period of time preparers can utilize the reference rate reform relief guidance in Topic 848, by deferring the sunset date from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

Based on our review of our key material contracts through December 31, 2024, this ASU does not have a material impact on our consolidated financial statements.

Supplier Finance Programs

On January 1, 2023, we adopted ASU 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.” This ASU requires a company that uses a supplier finance program in connection with the purchase of goods or services to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions.

The adoption of this ASU did not have a material impact on our consolidated financial statements.

Credit Losses

On January 1, 2023, we adopted ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings (“TDR”) and Vintage Disclosures.” The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

The adoption of this ASU did not have a material impact on our consolidated financial statements.

Adoption of Other ASUs

In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.” This ASU became effective for us once the addition to the FASB Codification was made available in July 2023.

This ASU amends or supersedes various SEC paragraphs within the applicable codification to conform to past SEC staff announcements.

This ASU does not provide any new guidance.

The adoption of this ASU did not have any impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

This ASU requires that public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).” ASU 2023-09 will become effective for us in the annual period of fiscal 2025 and early adoption is permitted.

We have chosen not to early adopt this ASU.

In November 2024, the FASB issued ASU 2024-04, "Debt—Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments." This ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions rather than as debt extinguishments.

This standard is effective for the annual period of fiscal 2026, and early adoption is permitted.

As of December 31, 2024, we do not hold convertible debt instruments and do not expect this ASU will have any impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses." This ASU requires additional footnote disclosure of the details of certain income statement expense line items as well as additional disclosure about selling expenses.

This standard is effective for the annual period of fiscal 2027, and early adoption is permitted.

The guidance is to be applied prospectively, with the option for retrospective application.

We are currently evaluating the impact the adoption of this standard will have on our disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” This ASU requires that public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).

This ASU will become effective for us in the annual period of fiscal 2025 and early adoption is permitted.

We have chosen not to early adopt this ASU and are currently evaluating its impact on our consolidated financial statements, including our annual disclosure within our Income Taxes footnote.

In December 2023, the FASB issued ASU 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets” (“ASU 2023-08”).

This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income.

Accounting for and Disclosure of Crypto Assets.” This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income.

The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.

This ASU will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted.

As of December 31, 2023, we do not hold crypto assets and do not expect ASU 2023-08 will have any impact to our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

This ASU will become effective for us in annual period fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we are evaluating its impact on our consolidated financial statements.

As of December 31, 2024, we do not hold crypto assets and do not expect this ASU to have any impact on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative ” (“ASU 2023-06”).

This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”).

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations.

ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes.

As of December 31, 2023, we do not expect ASU 2023-06 will have any impact to our consolidated financial statements.

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU incorporates certain SEC disclosure requirements into the FASB Codification.

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of FASB Codification topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB Codification with the SEC’s regulations.

This ASU will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes.

As of December 31, 2024, we do not expect this ASU to have any impact on our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and initial Measurement ” (“ASU 2023-05”).

This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture).

Recognition and Initial Measurement.” This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture).

The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation.

ASU 2023-05 will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-05 will have any impact to our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-04, “ Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

121 ” (“ASU 2023-04”).

This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users.

This ASU does not provide any new guidance.

ASU 2023-04 became effective for us once the addition to the FASB Codification was made available.

As of December 31, 2023, we do not expect ASU 2023-04 will have any impact to our consolidated financial statements.

In July 2023, the FASB issued ASU 2023-03, “ Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock ” (“ASU 2023-03”).

This ASU amends or supersedes various SEC paragraphs within the applicable codification to conform to past SEC staff announcements.

This ASU does not provide any new guidance.

ASU 2023-03 became effective for us once the addition to the FASB Codification was made available.

As of December 31, 2023, we do not expect ASU 2023-03 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-02, “ Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ” (“ASU 2023-02”).

These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

ASU 2023-02 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-02 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-01, “ Leases (Topic 842):

Common Control Arrangements ” (“ASU 2023-01”).

These amendments require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

ASU 2023-01 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-01 will have any impact to our consolidated financial statements.

In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848" ("ASU 2022-06") .

These amendments extend the period of time preparers can utilize the reference rate reform relief guidance in Topic 848, which defers the sunset date from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

ASU 2022-06 is effective upon issuance.

Based on our review of our key material contracts through December 31, 2023, ASU 2022-06 does not have a material impact to our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”).

These amendments clarify that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value.

ASU 2022-03 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2022-03 will have any impact to our consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

Scope" ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

These amendments may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

ASU 2021-01 provides optional expedients for a limited time to ease the potential burden in accounting for reference rate reform.

Based on our review of our key material contracts through December 31, 2023, ASU 2021-01 will not have a material impact to our consolidated financial statements.

(2) Goodwill and Other Intangible Assets

This ASU will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted.

As of December 31, 2024, we do not expect this ASU to have any impact on our consolidated financial statements.

Note 2—Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:

1 unchanged sentence

(Dollars in millions)

Goodwill, less accumulated impairment losses of $ 2,405 and $ 2,405

$ 6,955 6,955

Other intangible assets, less accumulated amortization of $ 1,841 and $ 1,966

______________________________________________________________________

(1) We recorded a cumulative non-cash, non-tax-deductible goodwill impairment charge of $ 2.4 billion during the year ended December 31, 2023.

As of December 31, 2023, the gross carrying amount of goodwill and other intangible assets was $ 9.0 billion.

As of December 31, 2024 and 2023, the gross carrying amount of goodwill and other intangible assets was $ 8.9 billion and $ 9.0 billion, respectively.

Substantially all of our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.

3 unchanged sentences

In reviewing the criteria for reporting units, we have determined that we are one reporting unit.

2024 Goodwill Impairment Analysis

As of October 31, 2024, we performed our annual impairment analysis of the goodwill of our one above-mentioned reporting unit by using a qualitative assessment to determine whether it was more likely than not that the fair value of the reporting unit was less than its carrying value.

Factors considered in the qualitative assessment included, among other things, macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant reporting unit considerations.

We concluded the estimated fair value of our reporting unit was greater than our carrying value of equity as of our testing date.

Therefore, we concluded no impairment existed as of our annual assessment date in the fourth quarter of 2024.

2023 Goodwill Impairment Analyses

At October 31, 2023, we performed our annual impairment analysis of our reporting unit.

As of October 31, 2023, we performed our annual impairment analysis of our reporting unit.

Given the continued decline in Lumen's share price, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach.

13 unchanged sentences

Alternative interpretations of these factors could have resulted in different conclusions.

2022 and 2021 Goodwill Impairment Analysis

At October 31, 2022 and 2021, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method.

2022 Goodwill Impairment Analysis

At October 31, 2022, we estimated the fair value of equity by considering both a market approach and a discounted cash flow method.

The market approach method includes the use of comparable multiples of publicly traded companies whose services are comparable to ours.

The discounted cash flow method is based on the present value of projected cash flows and a terminal value, equal to the present value of all normalized cash flows after the projection period.

Based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 24 % and 42 % at October 31, 2022 and 2021, respectively.

We concluded that goodwill was not impaired as of October 31, 2022 and 2021.

Based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 24 % at October 31, 2022.

We concluded that goodwill was not impaired as of October 31, 2022.

Our fair value estimates for evaluating goodwill incorporated significant judgments and assumptions including forecast revenues and expenses, cost of capital, and control premiums.

4 unchanged sentences

As of December 31, 2022

Impairment ( 2,405 )

As of December 31, 2023 (1)

As of December 31, 2024 (1)

______________________________________________________________________

(1) Goodwill at December 31, 2023 is net of accumulated impairment losses of $ 2.4 billion.

(1) Goodwill at December 31, 2024 and December 31, 2023 is net of accumulated impairment losses of $ 2.4 billion.

We annually review the estimated lives and methods used to amortize our other intangible assets.

The actual amounts of amortization expense may differ materially from our estimates, depending on the results of our annual reviews.

As of December 31, 2023, the weighted average remaining useful life was 3 years for capitalized software.

As of December 31, 2024, the weighted average remaining useful life was three years for capitalized software.

Total amortization expense for intangible assets for the years ended December 31, 2024, 2023 and 2022 was $ 41 million, $ 67 million and $ 79 million, respectively.

We estimate that total amortization expense for intangible assets for the years ending December 31, 2024 through 2028 will be as follows:

We estimate that future total amortization expense for finite-lived intangible assets will be as follows:

(Dollars in millions)

Year ending December 31,

(3) Revenue Recognition

2030 and thereafter

Total finite-lived intangible assets future amortization expense

Note 3—Revenue Recognition

We categorize our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below:

• Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure;

• Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, (ii) federal broadband and state support programs, and (iii) equipment, IT solutions and other services;

• Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services;

• Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure;

• Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services;

• Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing voice and private line services;

• Nurture , which includes our more mature offerings, including primarily ethernet;

• Grow , which includes products and services marketed to our business customers that we anticipate will grow, including dark fiber and wavelengths services;

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

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

• Grow , which includes existing and emerging products and services in which we are significantly investing, including our dark fiber and wavelengths services;

• Affiliate Services , which are (i) communications services that we provide to our affiliates and also provide to external customers and (ii) application development and support services that we provide to our affiliates, as described further in Note 14—Affiliate Transactions.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

53 unchanged sentences

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, 2023 and 2022:

December 31, 2023 December 31, 2022

The following table provides balances of customer receivables, contract assets and contract liabilities:

As of December 31,

(Dollars in millions)

Customer receivables (1)

Customer receivables, less allowance of $ 23 million and $ 29 million

Contract assets — 7

Contract liabilities 244 269

_______________________________________________________________________________

(1) Reflects gross customer receivables, including gross affiliate receivables, of $ 239 million and $ 324 million, net of allowance for credit losses of $ 29 million and $ 27 million, at December 31, 2023 and December 31, 2022, respectively.

Contract liabilities consist of consideration we have received from our customers or billed in advance of providing goods or services promised in the future.

We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer.

Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from 1 to 5 years depending on the service.

Contract liabilities are included within deferred revenue in our consolidated balance sheets.

31 unchanged sentences

In certain instances, support payments are conditioned on specified infrastructure buildouts by milestone deadlines or provision of services at specified locations and speed requirements.

Commitments may be made annually, on a multi-year basis ranging from one to ten years or be on-going subject to periodic change or termination.

Commitments may be made annually, on a multi-year basis ranging from one to 10 years or be on-going subject to periodic change or termination.

Consistent with customary practice and as referenced in ASC 832 Government Assistance , Lumen applies a grant model of accounting by which it accounts for these transactions as non-ASC 606 revenue over the periods in which the costs for which the funding is intended to compensate are incurred.

9 unchanged sentences

In the first quarter of 2022, we recognized $ 13 million of previously deferred revenue related to the conclusion of the CAF II program based upon our final buildout and filing submissions.

The government has the right to audit our compliance with the CAF II program and the ultimate outcome of any remaining examinations is unknown, but could result in a liability to us in excess of our reserve accruals established for these matters.

In early 2020, the FCC created the Rural Digital Opportunity Fund (the “RDOF”) program, a federal support program designed to fund broadband deployment in rural America.

For the first phase of this program, RDOF Phase I, the FCC ultimately awarded $ 6.4 billion in support payments to be paid in equal monthly installments over 10 years.

Lumen Technologies was awarded RDOF funding in several of the states in which we operate and began receiving monthly support payments during the second quarter of 2022, our share of which is not material.

In the third quarter of 2024, we relinquished rights to develop certain RDOF census blocks in four states, which resulted in (i) a reduction of our anticipated RDOF Phase I support payments and (ii) an expectation of payment to the federal government.

These impacts are expected to be immaterial.

We participate in multiple state sponsored programs for broadband deployment in unserved and underserved areas for which the states have state universal service funds sourced from fees levied on telecommunications providers and passed on to consumers.

During the years ending December 31, 2023 and December 31, 2022, we participated in these types of programs primarily in the states of Nebraska, New Mexico, and Minnesota .

We primarily lease to or from third parties various office facilities, colocation facilities and equipment.

During the year ended December 31, 2024, we participated in these types of programs primarily in the states of Nebraska and New Mexico.

During the year ended December 31, 2023, we participated in these types of programs primarily in the states of Nebraska, New Mexico, and Minnesota .

Note 4—Leases

We primarily lease various office facilities, colocation facilities and equipment to or from third parties.

Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheets;

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.

We determine if an arrangement is a lease at inception and whether that lease meets the classification criteria of a finance or operating lease at the commencement date.

Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities.

24 unchanged sentences

Total lease cost $ 24 27 26

We lease various equipment, office facilities, retail outlets, and other network sites.

We lease various equipment, office facilities, retail outlets, and other network sites from third parties.

These leases, with few exceptions, provide for renewal options and escalations that are either fixed or based on the consumer price index.

25 unchanged sentences

Operating cash flows for operating leases $ 24 35

Operating cash flows for finance leases — —

Financing cash flows for finance leases 1 2

10 unchanged sentences

Long-term portion $ 49 3

Operating Lease Income

As of December 31, 2024, we had no material operating or finance leases that had not yet commenced.

Operating Lease Revenue

We lease various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases.

1 unchanged sentence

See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies.

For the years ended December 31, 2023 , 2022 and 2021, our gross rental income was $ 304 million, $ 346 million and $ 324 million, respectively which represents 5 % of our operating revenue for the years ended December 31, 2023, 2022 and 2021.

(5) Credit Losses on Financial Instruments

For the years ended December 31, 2024 , 2023 and 2022, our gross rental income was $ 273 million, $ 304 million and $ 346 million, respectively which represents 5 % of our operating revenue for each of the years ended December 31, 2024, 2023 and 2022, respectively.

Note 5—Credit Losses on Financial Instruments

To assess our expected credit losses on financial instruments, we aggregate financial assets with similar risk characteristics to monitor their credit quality or deterioration over the life of such assets.

15 unchanged sentences

Our historical credit loss experience, current conditions and forecast of economic conditions may also not be representative of the customers' actual default experience in the future, and we may use methodologies that differ from those used by other companies.

The following table presents the activity of our allowance for credit losses by accounts receivable portfolio from December 31, 2021 through December 31, 2023:

The following table presents the activity of our allowance for credit losses by accounts receivable portfolio:

Business Mass Markets Total

(Dollars in millions)

Balance at January 1, 2021 (1)

Balance at December 31, 2021

Provision for expected losses 13 47 60

10 unchanged sentences

Balance at December 31, 2024

(1) Due to an internal reorganization of our reporting categories on January 1, 2021, our accounts receivable portfolios were changed to align with changes to how we manage our customers.

Allowance for credit losses previously included in the Consumer and Business portfolio of $ 32 million and $ 4 million, respectively, were reclassified to the Mass Markets allowance for credit losses on January 1, 2021, as a result of this change.

For the year ended December 31, 2023, we decreased our allowance for credit losses for our Business accounts receivable portfolio primarily due to higher write-off activity.

For the year ended December 31, 2022, we decreased our allowance for credit losses for our Mass Markets accounts receivable portfolio primarily due to higher write-off activity.

(6) Long-Term Debt and Note Payable - Affiliate

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

The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including finance lease and other obligations, unamortized premiums, net, unamortized debt issuance costs and (ii) note payable-affiliate:

5 unchanged sentences

$ 1,973 1,986

Term loan (2)

SOFR + 2.50 %

Former term loan (2)

Finance lease and other Various Various 3 4

4 unchanged sentences

Long-term debt, excluding current maturities $ 1,688 2,156

Note payable-affiliate 6.210 %

_______________________________________________________________________________

N/A - Not applicable

(1) As of December 31, 2024.

(2) Qwest Corporation's Term Loan had interest rates of 7.970 % and 6.640 % as of December 31, 2023 and December 31, 2022.

In the fourth quarter of 2020, we borrowed $ 215 million under a variable-rate term loan with CoBank ACB.

The outstanding unpaid principal amount of this term loan plus any accrued and unpaid interest is due on October 23, 2027.

Interest is paid at least quarterly based upon either the Secured Overnight Financing Rate ("SOFR") or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50 % to 2.50 % per annum for SOFR loans and 0.50 % to 1.50 % per annum for base rate loans depending on Qwest Corporation's then current senior unsecured long-term debt rating.

(2) Qwest Corporation's Term Loan was due in 2027 and had an interest rate of 7.970 % as of December 31, 2023, prior to being cancelled on the TSA Effective Date (as defined below).

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2023 (excluding unamortized premiums, net, unamortized debt issuance costs and note payable-affiliate) maturing during the following years:

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2024 (excluding unamortized premiums, net, unamortized debt issuance costs) maturing during the following years:

(Dollars in millions)

1 unchanged sentence

Total long-term debt $ 1,976

2024 Debt Transactions

Transaction Support Agreement Transactions

On March 22, 2024 (the "TSA Effective Date"), Lumen Technologies, Level 3 Financing, Qwest Corporation and a group of creditors holding a majority of our consolidated debt completed transactions contemplated under the amended and restated transaction support agreement ("TSA") that such parties entered into on January 22, 2024 (the "TSA Transactions"), including (i) the repayment of our term loan maturing 2027 and (ii) the termination, repayment or exchange of previous commitments and debt of our affiliates and the issuance of new term loan facilities, notes, and revolving credit facilities by our affiliates.

Repurchases of Outstanding Notes

During 2024, we repurchased approximately $ 13 million aggregate principal amount of our senior notes maturing in 2025.

These transactions resulted in an immaterial net loss which was recognized in Other income, net in our consolidated statement of operations for the year ended December 31, 2024.

Qwest Guarantees of Lumen Debt

Lumen’s obligations under its new credit agreements entered into on March 22, 2024 and its new superpriority secured senior notes issued on and after March 22, 2024 are unsecured, but Qwest Corporation and certain of its subsidiaries have provided an unconditional unsecured guarantee of payment of Lumen’s obligations under these agreements and senior notes.

Note Payable - Affiliate

3 unchanged sentences

Any outstanding principal balance owed by Qwest Corporation under the Note Payable - Affiliate and the accrued interest thereon is due and payable on demand, but if no demand is made, then on the maturity date.

The Note Payable - Affiliate has an initial maturity date of June 30, 2027, but will automatically renew for an unlimited number of successive twelve -month periods unless the Lender provides notice of its intent not to renew at least 30 days prior to the initial maturity date or each subsequent maturity date.

The Note Payable - Affiliate has an initial maturity date of June 30, 2027, but will automatically renew for an unlimited number of successive 12 -month periods unless the Lender provides notice of its intent not to renew at least 30 days prior to the initial maturity date or each subsequent maturity date.

In accordance with the terms of the amended Note Payable - Affiliate, interest is assessed every six months ending on June 30 th and December 31 st (an "Interest Period") and is payable within 30 days of the end of the respective Interest Period.

15 unchanged sentences

$ ( 24 ) ( 15 ) 60

Our senior notes were issued under indentures dated April 15, 1990 and October 15, 1999.

These indentures contain certain covenants including, but not limited to:

(i) a prohibition on certain liens on our assets;

and (ii) a limitation on mergers or sales of all, or substantially all, of our assets, which limitation requires that a successor assume the obligation with regard to these notes.

These indentures do not contain any cross-default provisions.

These indentures do not contain any financial covenants or restrictions on our ability to issue new securities thereunder.

Except for our notes maturing in 2027 or before, we can redeem our senior notes, at our option, at par plus accrued and unpaid interest.

Under our term loan, we must maintain a debt to EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of not more than 2.85 :1.0, as determined and calculated in the manner described in the term loan documentation.

The term loan also contains a negative pledge covenant, which generally requires us to secure equally and ratably any advances under the term loan if we pledge assets or permit liens on our property for the benefit of other debtholders.

The term loan also has a cross payment default and cross acceleration provisions.

When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.

Our debt to EBITDA ratio could be adversely impacted by a wide variety of events, including unforeseen contingencies, many of which are beyond our control.

This could reduce our financing flexibility due to potential restrictions on incurring additional debt under certain provisions of our debt agreements or, in certain circumstances, could result in a default under certain provisions of such agreements.

The senior notes of Qwest Corporation were issued under indentures dated April 15, 1990 and October 15, 1999.

These indentures contain restrictions on the incurrence of liens and the consummation of certain transactions substantially similar to the above-described covenants in the indentures governing Lumen’s senior unsecured notes (but contain no mandatory repurchase provisions).

The senior notes of Qwest Capital Funding, Inc.

were issued under an indenture dated June 29, 1998 containing terms substantially similar to those set forth in Qwest Corporation's indentures.

None of our long-term debt is secured or guaranteed by other companies.

At December 31, 2023 and 2022, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects.

Subsequent Event

See Note 18—Subsequent Event, for information regarding certain debt restructuring transactions contemplated under our amended and restated transaction support agreement dated as of January 22, 2024.

(7) Accounts Receivable

As of December 31, 2024, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects.

Note 7—Accounts Receivable

The following table presents details of our accounts receivable balances:

As of December 31,

2023 2022 (1)

(Dollars in millions)

1 unchanged sentence

Earned and unbilled (credits) receivables

( 67 ) ( 15 )

Total accounts receivable 256 295

1 unchanged sentence

Accounts receivable, less allowance $ 227 261

______________________________________________________________________

(1) Amounts have been adjusted to reflect the immaterial correction of accounts receivable.

See Note 1—Background and Summary of Significant Accounting Policies under the header Correction of Immaterial Errors .

We are exposed to concentrations of credit risk from our customers.

3 unchanged sentences

We have not experienced any significant loss associated with these purchased receivables.

(8) Property, Plant and Equipment

Note 8—Property, Plant and Equipment

Net property, plant and equipment is composed of the following:

18 unchanged sentences

We recorded depreciation expense of $ 712 million, $ 756 million and $ 781 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(9) Employee Benefits

Note 9—Severance

Periodically, we reduce our workforce and accrue liabilities for the related severance costs.

These workforce reductions result primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workloads due to reduced demand for certain services.

During April 2024, we reduced our workforce by approximately 3 % as a part of our efforts to change our workforce composition to reflect our ongoing transformation and cost reduction opportunities that align with our shapeshifting and focus on our strategic priorities.

As a result of this plan, we incurred severance and related costs of approximately $ 25 million.

We have not incurred, and do not expect to incur, material impairment or exit costs related to this workforce reduction.

Changes in our accrued liabilities for severance expenses were as follows:

Years Ended December 31,

(Dollars in millions)

Balance at beginning of period $ 1 $ 3

Accrued to expense 32 17

Payments, net ( 29 ) ( 19 )

Balance at end of period $ 4 $ 1

Note 10—Employee Benefits

Pension and Post-Retirement Benefits

3 unchanged sentences

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

Lumen Technologies did no t make a voluntary contribution to the LCPP in 2023 or 2022.

Lumen Technologies made a voluntary contribution of $ 170 million to the LCPP in 2024.

Lumen Technologies did no t make a voluntary contribution to the LCPP in 2023.

The unfunded status of Lumen's qualified and non-qualified pension plans for accounting purposes was approximately $ 645 million and $ 769 million as of December 31, 2024 and 2023, which includes the merged QCII qualified pension plan.

The unfunded status of Lumen's post-retirement benefit plans for accounting purposes was $ 1.9 billion and $ 2.0 billion as of December 31, 2023 and 2022.

The unfunded status of Lumen's post-retirement benefit plans for accounting purposes was $ 1.7 billion and $ 1.9 billion as of December 31, 2024 and 2023, respectively.

Lumen Technologies allocates current service costs to subsidiaries relative to employees who are currently earning benefits under the pension and post-retirement benefit plans.

5 unchanged sentences

Changes in the affiliate obligations, net are reflected in operating activities on our consolidated statements of cash flows.

We were allocated $ 22 million of pension service costs and $ 4 million of post-retirement service costs during the year ended December 31, 2023, which represented 87 % of Lumen's total pension and post-retirement service costs for the year.

The combined net pension and post-retirement service costs is included in cost of services and products and selling, general and administrative expenses on our consolidated statement of operations for the year ended December 31, 2023.

We were allocated $ 31 million of pension service costs and $ 7 million of post-retirement service costs during the year ended December 31, 2022, which represented 72 % of Lumen's total pension and post-retirement service costs for the year.

We were allocated $ 38 million of pension service costs and $ 10 million of post-retirement service costs during the year ended December 31, 2021, which represented 69 % of Lumen's total pension and post-retirement service costs for the year.

Lumen Technologies sponsors a noncontributory qualified defined benefit pension plan that covers certain of our eligible employees.

The LCPP also provides survivor and disability benefits to certain employees.

We are allocated a portion of Lumen's pension and post-retirement services costs.

Years Ended December 31,

2024 2023 2022

(Dollars in millions)

Allocated pension service costs $ 20 22 31

Allocated post-retirement service costs 4 4 7

% of Lumen's total pension and post-retirement service costs 86 % 87 % 72 %

Lumen Technologies sponsors a noncontributory qualified defined benefit pension plan that covers certain participants.

The LCPP also provides survivor and disability benefits to certain participants.

In November 2009, and prior to the plan merger, the pension plan was amended to no longer provide pension benefit accruals for active non-represented employees after December 31, 2009.

27 unchanged sentences

We recognized $ 25 million, $ 27 million and $ 27 million in expense related to this plan for the years ended December 31, 2024, 2023 and 2022, respectively.

(10) Stock-based Compensation

Stock-based compensation expenses are included in cost of services and products, and selling, general, and administrative expenses in our consolidated statements of operations.

For the years ended December 31, 2023, 2022 and 2021, we recorded stock-based compensation expense of approximately $ 9 million, $ 13 million and $ 15 million, respectively.

We recognized an income tax benefit from our compensation expense of approximately $ 2 million, $ 3 million and $ 4 million during the years ended December 31, 2023, 2022 and 2021, respectively.

(11) Fair Value of Financial Instruments

Note 11—Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, advances to and from affiliates, accounts payable, note payable-affiliate and long-term debt, excluding finance lease and other obligations.

14 unchanged sentences

Liabilities-Long-term debt (excluding finance lease and other obligations) 2 $ 1,924 1,462 2,153 1,162

2 $ 2,153 1,162 2,154 1,691

(12) Income Taxes

Note 12—Income Taxes

The components of the income tax expense from continuing operations are as follows:

13 unchanged sentences

2024 2023 2022

(Percentage of pre-tax income (loss))

Effective income tax rate:

20 unchanged sentences

Gross deferred tax assets 313 292

Less valuation allowance on deferred tax assets — —

Net deferred tax assets 313 292

Net deferred tax liabilities $ ( 1,334 ) ( 1,317 )

At December 31, 2023, we had no established valuation allowance based on our assessment of whether it is not more likely than not that our deferred tax assets will be realized.

As of December 31, 2023 and 2022, the $ 1.3 billion and $ 1.3 billion net deferred tax liabilities are included in long-term liabilities on our consolidated balance sheet.

As of December 31, 2024 and 2023, we had no established valuation allowance based on our assessment of whether it is more likely than not that our deferred tax assets will be realized.

As of December 31, 2024 and 2023, the $ 1.3 billion net deferred tax liabilities are included in long-term liabilities on our consolidated balance sheet.

With few exceptions, we are no longer subject to U.S.

2 unchanged sentences

The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carryforwards are available.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 are as follows:

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) for the years ended December 31, 2024 and 2023 are as follows:

Years ended December 31,

13 unchanged sentences

The CAMT had no material impact on our financial results as of December 31, 2024.

In addition, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024.

While the US has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation, some of which are effective for tax periods after December 31, 2023.

While the global minimum tax will increase our administrative and compliance burdens, it is expected to have an immaterial impact to our financial statements.

(13) Affiliate Transactions

In addition, in 2021, the Organization for Economic Co-operation and Development (“OECD”) issued Pillar Two model rules introducing a new global minimum corporate tax of 15% and the OECD and the majority of its participating countries continue to work toward the enactment of such tax.

While the U.S.

has not adopted Pillar Two legislation, various other governments around the world have enacted such legislation that is effective for tax periods after December 31, 2023.

These global minimum tax rules have increased our administrative and compliance burdens, but the impact to our financial statements for the year ended December 31, 2024 was immaterial.

We anticipate further legislative activity and administrative guidance throughout 2025 and continue to monitor evolving global tax legislation.

Note 13—Affiliate Transactions

We provide incumbent local exchange carrier telecommunications services to our affiliates that we also provide to external customers.

These services are priced at regulated rates, where applicable, or otherwise at rates we believe are consistent with non-regulated market-based rates charged to external customers.

We periodically review and update our prices for affiliate network services to align with regulated rates, where applicable, or competitive market-based rates charged to external customers, taking into consideration the average third party customer contract term those affiliate services pertain to.

These services are billed directly to our affiliates and recognized as affiliate revenue on our consolidated statements of operations.

We also provide to our affiliates shared services in the form of application development and support services, as well as network support and technical services, and administrative and corporate support.

3 unchanged sentences

From time to time, we may adjust the basis for allocating the costs of a shared service among affiliates.

As applicable any such changes in allocation methodologies are applied prospectively.

For the years ended December 31, 2023, 2022, and 2021, direct affiliate revenue was $ 1.6 billion, $ 1.7 billion, and $ 1.7 billion, respectively, and allocated affiliate revenue was $ 537 million, $ 597 million, and $ 661 million, respectively.

Any such changes in allocation methodologies are applied prospectively.

The following table provides details of affiliate revenue:

Years Ended December 31,

(Dollars in millions)

Direct affiliate revenue

$ 1,665 1,622 1,697

Allocated affiliate revenue

Total affiliate revenue

$ 2,249 2,159 2,294

We also purchase services from our affiliates including telecommunication services, insurance, flight services and other support services such as legal, regulatory, finance administration and executive support.

Our affiliates charge us for these services using the allocation methodology described above.

(14) Commitments, Contingencies and Other Items

Note 14—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.

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.

Subject to these limitations, at December 31, 2023 and December 31, 2022, we had accrued $ 15 million and $ 19 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which is included in "Other" current liabilities and "Other Liabilities" in our consolidated balance sheet as of such date.

We cannot at this time estimate the reasonably possible loss or range of loss in excess of this $ 15 million accrual due to the inherent uncertainties and speculative nature of contested proceedings.

Subject to these limitations, at December 31, 2024 and December 31, 2023, we had accrued $ 17 million and $ 15 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which are included in Other under Current Liabilities or Other under Deferred Credits and Other Liabilities in our consolidated balance sheets as of such dates.

We cannot at this time estimate the reasonably possible loss or range of loss, if any in excess of this $ 17 million accrual due to the inherent uncertainties and speculative nature of contested proceedings.

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, a reference to a "putative" class action means a class has been alleged, but not certified, in that matter.

Principal Proceedings

Environmental Litigation

Parish of St.

On July 9, 2024, a putative class action complaint was filed in the 16th Judicial District Court for the Parish of St.

Mary, State of Louisiana, Case 138575 asserting claims on behalf of all parishes, municipalities, and citizens owning real properties in the State of Louisiana that have been affected by lead-sheathed telecommunications cables installed by AT&T and Lumen or their predecessors.

The complaint seeks damages and injunctive relief under Louisiana state law.

The case was removed to the United States District Court Western District of Louisiana Lafayette Division, Case 6:24-CV-01001-RRS-DJA.

On December 6, 2024, the plaintiffs voluntarily dismissed the class action complaint without prejudice.

On December 13, 2024, St.

Mary’s Parish along with other parishes, municipalities, and two individuals served a notice of intent to file citizen suit under the Louisiana Environmental Quality Act, asserting claims identical to the class action which the plaintiffs voluntarily dismissed.

On November 6, 2023, a putative class action complaint was filed in the 16th Judicial District Court for the Parish of St.

Mary, State of Louisiana, Case 137935 asserting claims on behalf of all citizens owning real properties in the State of Louisiana that have been affected by lead-sheathed telecommunications cables installed by AT&T, BellSouth, Verizon, and Lumen or their predecessors.

The complaint seeks damages and injunctive relief under Louisiana state law.

The case has been removed to Federal Court in the United States District Court Western District of Louisiana Lafayette Division, Case 6:23-CV-01748.

FCRA Litigation

In November 2014, a putative class action complaint captioned Bultemeyer v.

CenturyLink, Inc.

was filed in the United States District Court for the District of Arizona, Case CV-14-02530-PHX-SPL, alleging violations of the Fair Credit Reporting Act (the "FCRA").

In February 2017, the case was dismissed for lack of standing.

The plaintiff appealed and the 9th Circuit reversed and remanded.

Class certification was contested and ultimately granted in 2023.

The 9th Circuit denied Lumen’s request to appeal the class certification ruling.

A jury trial was conducted in September 2024.

The jury found that CenturyLink willfully violated the FCRA and awarded each class member $ 500 for statutory damages and $ 2,000 for punitive damages.

If the verdict is not set aside in connection with post-trial motion practice, Lumen will appeal to the 9th Circuit.

We have not accrued a contingent liability for this matter.

While liability is possible, we have not determined it to be probable, and damages exposure, if any, is uncertain.

Billing Practices Suits

3 unchanged sentences

against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties.

The consumer class actions, the securities investor class actions, and the federal derivative actions were transferred to the U.S.

District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re:

CenturyLink Sales Practices and Securities Litigation.

Lumen Technologies has settled the consumer and securities investor class actions, and the derivative actions.

Lumen has engaged in discussions regarding related claims with a number of state attorneys general, and has entered into agreements settling certain of the consumer practices claims asserted by state attorneys general.

While Lumen Technologies does not agree with allegations raised in these matters, it has been willing to consider reasonable settlements where appropriate.

We have settled the consumer and securities investor class actions, and the derivative actions.

Qwest has engaged in discussions regarding related claims with a number of state attorneys general, and has entered into agreements settling certain of the consumer practices claims asserted by several state attorneys general.

Huawei Network Deployment Investigations

Lumen has received requests from the following federal agencies for information relating to the use of equipment manufactured by Huawei Technologies Company ("Huawei") in Lumen’s networks.

Qwest has received requests from the following federal agencies for information relating to the use of equipment manufactured by Huawei Technologies Company ("Huawei") in networks operated by Lumen and Qwest.

Lumen has received a civil investigative demand from the U.S.

1 unchanged sentence

and Lumen Technologies Government Solutions, Inc.

failed to comply with the requirements in federal contracts concerning their use of Huawei equipment.

failed to comply with certain specified requirements in federal contracts concerning their use of Huawei equipment.

The FCC’s Enforcement Bureau issued a Letter of Inquiry to Lumen Technologies, Inc.

regarding its written certifications to the FCC that Lumen has complied with FCC rules governing the use of resources derived from the High Cost Program, Lifeline Program, Rural Health Care Program, E-Rate Program, Emergency Broadband Benefit Program, and the Affordable Connectivity Program.

Under these programs federal, funds may not be used to facilitate the deployment or maintenance of equipment or services provided by Huawei, a company the FCC has determined poses a national security threat to the integrity of communications networks or the communications supply chain.

communications networks or the communications supply chain.

• Team Telecom.

1 unchanged sentence

Attorney General, and the Secretaries of the Department of Homeland Security, and the Department of Defense), commonly referred to as Team Telecom, issued questions and requests for information relating to Lumen’s FCC licenses and its use of Huawei equipment.

We are cooperating with the investigations.

Marshall Fire Litigation.

2 unchanged sentences

Approximately 300 lawsuits naming various defendants and asserting various claims for relief have been filed.

To date, three of those name Qwest Corp.

To date, three of those name Qwest Corporation as being at fault:

Allstate Fire and Casualty Insurance Company, et al., v.

Qwest Corp., et al., Case No.

2023-cv-3048, and Wallace, et al.

v, Qwest Corp., et al, Case No.

2023-cv-30488, both of which have been consolidated with Kupfner et al v Public Service Company of Colorado, et al.

2022-cv-30195.

Qwest Corp., et al., Case 2023-cv-3048, and Wallace, et al., v, Qwest Corp., et al., Case 2023-cv-30488, both of which have been consolidated with Kupfner, et al., v.

Public Service Company of Colorado, et al.

Case 2022-cv-30195.

The consolidated proceeding is pending in Colorado District Court, Boulder, Colorado, Preliminary estimates of potential damage claims exceed $ 2 billion.

Qwest is vigorously defending the claims.

911 Surcharge

1 unchanged sentence

The complaint claims Qwest Corporation and CenturyTel of the Southwest have violated the New Mexico Fraud Against Taxpayers Act since 2004 by failing to bill, collect and remit certain 911 surcharges from customers.

Through pre-trial proceedings, the Court has narrowed the issues to be resolved by jury, ruling that Lumen bears the burden of proving that its actions were reasonable or known and approved by the State.

Qwest is defending the New Mexico claims vigorously, as it has done successfully with other 911 claims involving PRS in other states.

Through pre-trial proceedings, the Court has narrowed the issues to be resolved by jury.

On August 21, 2024, a jury decided the remaining issues, and consequently all claims asserted, in Lumen's favor.

The plaintiff has filed a Notice of Appeal and Lumen submitted a cross-appeal as to the original motion to dismiss and motion for summary judgment.

Other Proceedings, Disputes and Contingencies

From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, regulatory hearings 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 or commercial disputes.

We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries.

From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, regulatory hearings relating primarily to our rates or services, actions relating to employee claims, tax issues, or environmental law issues, grievance hearings before labor regulatory agencies, miscellaneous third-party tort actions or commercial disputes.

We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, which are seeking substantial recoveries.

These cases have progressed to various stages and one or more may go to trial within the next twelve 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.

3 unchanged sentences

Under applicable environmental laws, we could be named as a potentially responsible party for a share of the remediation of environmental conditions arising from the historical operations of our predecessors.

The outcome of these other proceedings described under this heading is not predictable.

The outcomes of these other proceedings described under this heading are 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 in this Note do not reflect all of our contingencies.

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.

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 we currently consider immaterial may ultimately affect us materially.

At December 31, 2024, our future rental commitments and Right-of-Way ("ROW") agreements were as follows:

Future Rental Commitments and ROW Agreements

(Dollars in millions)

2 unchanged sentences

Purchase Commitments

We have several commitments primarily for marketing activities and support services from a variety of vendors to be used in the ordinary course of business totaling $ 114 million at December 31, 2023.

We have several commitments to a variety of vendors for services to be used in the ordinary course of business totaling $ 87 million at December 31, 2024.

Of this amount, we expect to purchase $ 9 million in 2025, $ 18 million in 2026 through 2027, $ 19 million in 2028 through 2029 and $ 41 million in 2030 and thereafter.

These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we were contractually committed as of December 31, 2023.

(15) Other Financial Information

These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we are the contractually committed party as of December 31, 2024.

In addition to our above-described contractual obligations, our ultimate parent company Lumen Technologies is contractually committed to purchase additional services under arrangements from which we may purchase in the future.

Note 15—Other Financial Information

Other Current Assets

14 unchanged sentences

Total other current liabilities $ 117 121

Included in accounts payable at December 31, 2024 and 2023 were $ 57 million and $ 116 million, respectively, associated with capital expenditures.

Other Noncurrent Liabilities

3 unchanged sentences

Unrecognized tax benefits $ 453 442

Deferred revenue 97 109

Noncurrent operating lease liability 49 47

Other 190 169

Total other noncurrent liabilities $ 685 679

(16) Labor Union Contracts

Note 16—Labor Union Contracts

As of December 31, 2024, approximately 42 % of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").

None of our represented employees are subject to collective bargaining agreements that are scheduled to expire within the 12 month period ending December 31, 2024.

We believe relations with our employees continue to be generally good.

(17) Stockholder's Equity

We have one share of common stock (no par value) issued and outstanding, which is owned by QSC.

1 % of our represented employees are subject to collective bargaining agreements that are scheduled to expire within the 12 month period ending December 31, 2025.

Note 17—Stockholder's Equity

All of our outstanding capital stock is owned by QSC.

In addition, in the normal course of business, we transfer assets and liabilities to and from QSC and its affiliates, which are recorded through our equity.

12 unchanged sentences

Dividends paid are reflected on our consolidated statement of cash flows as financing activities.

(18) Subsequent Event

Transaction Support Agreement

On January 22, 2024, the Company, Lumen, Level 3, and a group of creditors holding a majority of Lumen's consolidated debt (the "TSA Parties") amended and restated the transaction support agreement that we originally entered into with a subset of the TSA Parties on October 31, 2023 (as amended and restated, the “Transaction Support Agreement”).

The Transaction Support Agreement defines the parties’ commitments to effect a series of transactions (the “TSA Transactions”) set forth in the term sheet attached thereto (the “Term Sheet”).

Among other things and subject to the terms and conditions set forth therein, the Transaction Support Agreement, including the Term Sheet, contemplates:

• the incurrence by Level 3 Financing of $ 1.325 billion in new money long term senior secured first lien indebtedness, which indebtedness will be backstopped by certain of the consenting lenders;

• a new revolving credit facility at Lumen in an amount expected to be approximately $ 1 billion;

• the extension of maturities, covenant modifications and rate increases of certain secured and unsecured indebtedness at Lumen and Level 3 through a series of exchanges and other debt transactions with certain consenting lenders as set forth in the Term Sheet;

• the repayment of certain indebtedness of Lumen and Qwest.

The outside date for completion of the TSA Transactions under the Transaction Support Agreement is February 29, 2024, which Lumen may unilaterally extend at its discretion to March 31, 2024.

The Company expects to consummate the TSA Transactions in the first quarter of 2024, subject to the satisfaction of remaining closing conditions.

Following consummation of the TSA Transactions, Level 3 Financing and our other affiliates may assess potential follow-on transactions with respect to non-participating creditors.

Additional information about the Transaction Support Agreement and the TSA Transactions is available in our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024, and Exhibit 10.10 to this annual report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 7A. Quantitative and Qualitative Disclosures About Market Risk