QWEST CORP 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2025, 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. 47 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholder Qwest Corporation: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Qwest Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, cash flows, and stockholder’s equity for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Testing of revenue As discussed in Note 4 to the consolidated financial statements, the Company recorded $4.7 billion of operating revenues for the year ended December 31, 2025. The processing and recording of revenue are reliant upon multiple information technology (IT) systems. We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. Complex auditor judgment was required in evaluating the sufficiency of audit evidence over revenue due to the large volume of data and the number and complexity of the revenue accounting systems. Specialized skills and knowledge were needed to test the IT systems used for the processing and recording of revenue. 48 The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of revenue, including the IT systems tested. We evaluated the design and tested the operating effectiveness of certain internal controls related to the processing and recording of revenue. This included manual and automated controls over the IT systems used for the processing and recording of revenue. For a selection of transactions, we compared the amount of revenue recorded to a combination of Company internal data, executed contracts, and other relevant third-party data. In addition, we involved IT professionals with specialized skills and knowledge who assisted in the design and performance of audit procedures related to certain IT systems used by the Company for the processing and recording of revenue. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the relevance and reliability of evidence obtained. Sufficiency of audit evidence over the implementation of enterprise resource planning system The Company implemented the first phase of a new enterprise resource planning system (the ERP implementation) during the fourth quarter of 2025. The ERP implementation impacted a high volume of transactions, substantially all financial statement account balances, and certain disclosures. We identified the evaluation of the sufficiency of audit evidence over the ERP implementation as a critical audit matter. Complex auditor judgment and the involvement of information technology (IT) professionals with specialized skills and knowledge were required to evaluate general IT controls and IT application controls of certain IT applications. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the ERP implementation. We involved IT professionals with specialized skills and knowledge, who assisted in: • obtaining an understanding of the relevant IT applications • evaluating the design and testing the operating effectiveness of certain general IT controls, including controls related to program development, change management, and logical access • evaluating the design and testing the operating effectiveness of certain IT application controls, including inspecting and evaluating configurations and interfaces. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of the audit effort. Goodwill Impairment As discussed in Notes 2 and 3 to the consolidated financial statements, the goodwill balance at December 31, 2025, was $3.6 billion. The Company assesses goodwill for impairment at least annually, or more frequently, if events or changes in circumstances indicate the carrying value of its reporting unit likely exceeds its fair value. On the annual goodwill impairment assessment date, the Company estimated the fair value of its reporting unit by considering both a discounted cash flow method and a market approach. The annual impairment test determined the carrying value of the Company’s reporting unit exceeded its estimated fair value. As a result, the Company recorded an impairment charge of $2.0 billion. We identified the assessment of the Company’s annual impairment testing related to the carrying value of goodwill as a critical audit matter. Subjective auditor judgment was required in evaluating certain assumptions used to estimate the fair value of the reporting unit. Those assumptions included: projected cash flows, the discount rate, and the earnings before interest, taxes, depreciation and amortization (EBITDA) market multiple. The evaluation of these assumptions was challenging due to their subjective nature. Additionally, differences in judgment used to determine these assumptions 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 discount rate and the EBITDA market multiple. 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 annual impairment testing of goodwill. This included controls related to the Company’s development of projected cash flows and the determination of the discount rate and EBITDA market multiple. We assessed the Company’s ability to accurately project cash flows by comparing the Company’s historical projected cash flows to actual results. We 49 also evaluated the Company’s projected cash flows by comparing them to the Company’s underlying business strategies, historic trends and publicly available industry and analyst reports. We involved valuation professionals with specialized skills and knowledge, who assisted in: • evaluating the discount rate by independently developing a discount rate range using publicly available market data for comparable entities • evaluating the EBITDA market multiple by comparing to EBITDA market multiple range developed using publicly available market data for comparable entities /s/ KPMG LLP We have served as the Company’s auditor since 2002. Denver, Colorado February 20, 2026 50 QWEST CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2025 2024 2023 (Dollars in millions) OPERATING REVENUE Operating revenue $ 2,813 3,259 3,756 Operating revenue - affiliates 1,935 2,249 2,159 Total operating revenue 4,748 5,508 5,915 OPERATING EXPENSES Cost of services and products (exclusive of depreciation and amortization) 1,449 1,505 1,608 Selling, general and administrative 456 438 478 Net loss on disposal group held for sale 235 — — Operating expenses - affiliates 920 761 796 Depreciation and amortization 685 753 823 Goodwill impairment 2,012 — 2,405 Total operating expenses 5,757 3,457 6,110 OPERATING (LOSS) INCOME ( 1,009 ) 2,051 ( 195 ) OTHER INCOME (EXPENSE) Interest expense ( 91 ) ( 62 ) ( 95 ) Interest income - affiliate, net 89 24 15 Other income, net 36 1 5 Total other income (expense), net 34 ( 37 ) ( 75 ) (LOSS) INCOME BEFORE INCOME TAXES ( 975 ) 2,014 ( 270 ) Income tax expense 352 527 561 NET (LOSS) INCOME $ ( 1,327 ) 1,487 ( 831 ) See accompanying notes to consolidated financial statements. 51 QWEST CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2025 2024 (Dollars in millions) ASSETS CURRENT ASSETS Cash and cash equivalents $ 39 26 Accounts receivable, less allowance of $ 37 and $ 29 199 227 Assets held for sale 2,587 — Advances to affiliates 666 902 Note receivable - affiliates 937 — Other current assets, net 77 152 Total current assets 4,505 1,307 Property, plant and equipment, net of accumulated depreciation of $ 8,910 and $ 8,910 7,446 8,865 GOODWILL AND OTHER ASSETS Goodwill 3,638 6,955 Intangible assets, net 111 84 Other assets, net 120 151 Total goodwill and other assets 3,869 7,190 TOTAL ASSETS $ 15,820 17,362 LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Current maturities of long-term debt $ — 239 Accounts payable 152 221 Accrued expenses and other liabilities Salaries and benefits 129 130 Income and other taxes 110 106 Other current liabilities 109 117 Liabilities held for sale 10 — Current portion of deferred revenue 143 153 Total current liabilities 653 966 LONG-TERM DEBT 1,688 1,688 DEFERRED CREDITS AND OTHER LIABILITIES Deferred income taxes, net 1,461 1,336 Affiliate obligations, net 399 444 Other liabilities 703 685 Total deferred credits and other liabilities 2,563 2,465 COMMITMENTS AND CONTINGENCIES (Note 15) STOCKHOLDER'S EQUITY Common stock - one share without par value, owned by Qwest Services Corporation 10,050 10,050 Retained earnings 866 2,193 Total stockholder's equity 10,916 12,243 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 15,820 17,362 See accompanying notes to consolidated financial statements. 52 QWEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2025 2024 2023 (Dollars in millions) OPERATING ACTIVITIES Net (loss) income $ ( 1,327 ) 1,487 ( 831 ) Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 685 753 823 Net loss on disposal group held for sale 235 — — Goodwill impairment 2,012 — 2,405 Deferred income taxes 125 37 22 Provision for uncollectible accounts 39 45 66 Changes in current assets and liabilities: Accounts receivable ( 23 ) ( 11 ) 20 Accounts payable ( 50 ) 14 14 Accrued income and other taxes 4 10 7 Other current assets and liabilities, net 57 ( 49 ) ( 97 ) Changes in other assets and liabilities, net 26 ( 8 ) 17 Changes in affiliate obligations, net ( 49 ) ( 55 ) ( 62 ) Other, net 28 ( 29 ) 5 Net cash provided by operating activities 1,762 2,194 2,389 INVESTING ACTIVITIES Capital expenditures ( 824 ) ( 1,047 ) ( 1,062 ) Changes in advances to affiliates 236 ( 902 ) 569 Net increase in note receivable - affiliates ( 937 ) — — Proceeds from sale of property, plant and equipment and other assets 13 58 27 Net cash used in investing activities ( 1,512 ) ( 1,891 ) ( 466 ) FINANCING ACTIVITIES Payments of long-term debt ( 238 ) ( 226 ) ( 2 ) Dividends paid — — ( 1,980 ) Changes in advances from affiliates — ( 61 ) 61 Net cash used in financing activities ( 238 ) ( 287 ) ( 1,921 ) Net increase in cash, cash equivalents and restricted cash 12 16 2 Cash, cash equivalents and restricted cash at beginning of period 28 12 10 Cash, cash equivalents and restricted cash at end of period $ 40 28 12 Supplemental cash flow information: Income taxes paid, net $ ( 199 ) ( 497 ) ( 509 ) Interest paid, including affiliate interest (net of capitalized interest of $ 35 , $ 75 and $ 54 ) ( 98 ) ( 63 ) ( 97 ) Supplemental noncash information of financing activities: Dividend to parent in exchange for advances to affiliates $ — — ( 1,980 ) Cash, cash equivalents and restricted cash: Cash and cash equivalents $ 39 26 10 Restricted cash - noncurrent 1 2 2 Total $ 40 28 12 See accompanying notes to consolidated financial statements. 53 QWEST CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY Years Ended December 31, 2025 2024 2023 (Dollars in millions) COMMON STOCK Balance at beginning of period $ 10,050 10,050 10,050 Balance at end of period 10,050 10,050 10,050 RETAINED EARNINGS Balance at beginning of period 2,193 706 3,517 Net (loss) income ( 1,327 ) 1,487 ( 831 ) Dividends declared and paid to Qwest Services Corporation — — ( 1,980 ) Balance at end of period 866 2,193 706 TOTAL STOCKHOLDER'S EQUITY $ 10,916 12,243 10,756 See accompanying notes to consolidated financial statements. 54 QWEST CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 General We are a leading digital networking services company empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace by 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 4—Revenue Recognition of this report. We generate the majority of our total consolidated operating revenue from services provided in the 14 -state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. We refer to this region as our local service area. Basis of Presentation The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (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 4—Revenue Recognition for additional information. These changes had no impact on total operating revenue, total operating expenses, or net income (loss) for any period. 55 Operating Expenses Our current definitions of operating expenses are as follows: Cost of services and products (exclusive of depreciation and amortization): Expenses incurred in providing products and services to our customers. These expenses include: • employee-related expenses directly attributable to operating and maintaining our network (e.g., salaries, wages, benefits and professional fees); • facilities expenses (e.g., third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); • rents and utilities expenses; • equipment sales expenses (e.g., modem expenses); and • other expenses directly related to our operations. Selling, general and administrative expenses: Corporate overhead and other operating expenses. These expenses include: • employee-related expenses directly attributable to selling products or services and employee-related expenses for administrative functions (e.g., salaries, wages, internal commissions, benefits and professional fees); • marketing and advertising; • property and other operating taxes and fees; • external commissions; • legal expenses associated with general matters; • bad debt expense; and • other selling, general and administrative expenses. These expense classifications may not be comparable to those of other companies. Segments Our operations are integrated into and reported as part of Lumen Technologies. Lumen's Chief Executive Officer 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 Securities and Exchange Commission. 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. As such, we have one reportable segment. Summary of Significant Accounting Policies Use of Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and require management to make estimates and assumptions that affect reported amounts of assets, liabilities, equity, revenue, expenses, and cash flows and related disclosures. These estimates are based on information available at the time, including historical and forward-looking factors, that we believe are reasonable; however, these estimates may differ materially from actual results. 56 We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note 13—Income Taxes and Note 15—Commitments, Contingencies and Other Items for additional information. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third-party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable. For matters related to income taxes, if we determine the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. We do not recognize any portion of an uncertain tax position if the position has less than a 50% likelihood of being sustained. We recognize interest on the amount of unrecognized benefit from uncertain tax positions. Assets Held for Sale Assets and related liabilities are classified as held for sale when: • management commits to a plan to sell the assets; • the assets are available for immediate sale; • an active program to locate a buyer is initiated; and • the sale is probable within one year. Assets and related liabilities held for sale are presented separately at the lower of (i) carrying amount or (ii) fair value less costs to sell. If the carrying amount exceeds fair value less cost to sell, a loss is recognized. Depreciation and amortization cease once assets are classified as held for sale. Assets classified as held for sale are remeasured each reporting period to ensure they are stated at the lower of (i) carrying amount or (ii) fair value less costs to sell. Unless otherwise specified, the amounts and information presented in the notes do not include assets and liabilities that were classified as held for sale. See Note 2—Divestiture for details on our recently completed divestiture. Revenue Recognition We recognize revenue primarily from contracts with customers for communications and related services in accordance with Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers" (“ASC 606”). Revenue is measured based on the consideration we expect to receive and is recognized when control of goods or services transfers to the customer. We also earn revenue from leasing arrangements (e.g., fiber capacity and conduit leases and colocation agreements) and governmental subsidies, which are outside the scope of ASC 606. Under ASC 606, revenue is recognized using the following five-step model: • identification of the contract with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation. 57 Service and Equipment Revenue We provide a broad range of communications services to business and residential customers. Certain contracts include equipment sales, which are not significant to our operations. We recognize revenue for services when we provide the applicable service or when control of a product is transferred. For arrangements using third-party vendors, we assess whether we act as a principal or agent to determine whether revenue is reported on a gross or net basis. Performance Obligations Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the transaction price is allocated to each performance obligation based on its relative standalone selling price. The revenue associated with each performance obligation is then recognized as when, or as, the performance obligation is satisfied. Deferred Revenue and Fees Payments received in advance — such as design, planning, engineering, activation, or installation fees — are deferred unless they represent separate performance obligations. When these payments are not separate obligations, we recognize them over the contract term or estimated useful life, typically one to five years , based on historical experience. Termination fees or other charges negotiated with new contracts are also deferred and recognized over the new contract term. Billing Practices For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage and other ancillary services, we generally bill in arrears and recognize revenue as usage or delivery occurs. In most cases, the amount invoiced for our service offerings constitutes the price that would be billed on a standalone basis. Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis. Contract Costs We defer (or capitalize) incremental contract acquisition and fulfillment costs and recognize (or amortize) such costs over the average contract life. Our deferred contract costs for our customers have average amortization periods of approximately 47 months for Mass Markets customers and 34 months for Business customers. These deferred costs are periodically monitored to reflect any significant change in assumptions. Contract Modifications In certain cases, customers may be permitted to modify their contracts. We evaluate the change in scope or price to identify whether the modification should be treated as a separate contract, as a termination of the existing contract and creation of a new contract, or as a change to the existing contract. Indefeasible Rights of Use and Leases We periodically sell transmission capacity on our network through indefeasible rights of use (“IRU”s), which grant the exclusive right to use a specified amount of capacity or fiber for a typical term of 20 years. Cash consideration received on transfers of transmission capacity is recognized as ASC 606 revenue, adjusted for time value of money and recognized ratably over the term. Cash consideration received on transfers of dark fiber is treated as non-ASC 606 lease revenue, which we also recognized ratably over the lease term. We treat contemporaneous exchanges of transmission capacity assets as non-revenue generating activities and therefore do not recognize revenue for these exchanges. 58 Service Level Commitments We have service level commitments pursuant to contracts with certain of our customers. To the extent that we determine that such service levels were not achieved or may not have been achieved, we estimate the amount of credits to be issued and record a corresponding reduction to revenue in the period that the service level commitment was not met or may not be met. See Note 4—Revenue Recognition for additional information. Affiliate Transactions We provide to our affiliates telecommunications services that we also provide to external customers. In addition, we provide to our affiliates application development and support services. Services provided by us to our affiliates are recognized as operating revenue-affiliates in our consolidated statements of operations. We also purchase services from our affiliates including telecommunications services, marketing and employee-related support services. Services provided to us from our affiliates are recognized as operating expenses-affiliates on our consolidated statements of operations. Because of the significance of the services we provide to our affiliates and our affiliates provide to us, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented. We recognize intercompany charges at the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates. For additional information, see Note 14—Affiliate Transactions. Our ultimate parent company, Lumen Technologies, Inc. has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management arrangements, affiliates provide lines of credit to certain other affiliates. Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is transferred on a daily basis for centralized management by Lumen's service company affiliate. From time to time, we may declare and pay dividends to QSC, our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates. Dividends paid are reflected on our consolidated statements of stockholder's equity and the consolidated statements of cash flows reflects the changes in advances to affiliates as investing activities and changes in advances from affiliates as financing activities. Interest is assessed on advances to and from affiliates using the current interest rate for our note payable-affiliate. In the normal course of business, we transfer assets to and from various affiliates through our parent, QSC, which are recorded through our equity. It is our policy to record asset transfers based on carrying values. These transactions may reduce our capital resources for debt repayments and other purposes. On September 30, 2022, Qwest Corporation repaid the outstanding principal and interest on the Note Payable - Affiliate to an affiliate of our ultimate parent company, Lumen Technologies, Inc., under a revolving promissory note. For additional information, see "Note Payable - Affiliate" in Note 7—Long-Term Debt and Note Payable - Affiliate. Legal Costs 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. Subject to certain exceptions, we expense these costs as the related services are received. 59 Income Taxes Our results are included in the Lumen Technologies consolidated federal income tax return and certain combined state income tax returns. Lumen Technologies allocates income tax expense to us based upon a separate return method which results in income tax expense that approximates the expense that would result if we were a stand-alone entity. Our reported deferred tax assets and liabilities, as discussed below and in Note 13—Income Taxes, are primarily determined as a result of the application of the separate return method and therefore the settlement of these amounts is dependent upon our parent, Lumen Technologies, Inc., rather than tax authorities. The provision for income taxes consists of an amount for taxes currently payable, an amount for tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions. We record deferred income tax assets and liabilities reflecting future tax consequences attributable to differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities. Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income. The effect on deferred income tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. We establish valuation allowances when necessary to reduce deferred income tax assets to the amounts that we believe are more likely than not to be recovered. Each quarter we evaluate the need to retain all or a portion of the valuation allowance on our deferred tax assets. See Note 13—Income Taxes for additional information. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments that are readily convertible into cash and are not subject to significant risk from fluctuations in interest rates. As a result, the value at which cash and cash equivalents are reported in our consolidated financial statements approximates their fair value. Our cash collections are transferred to Lumen Technologies, Inc. on a daily basis and our ultimate parent funds our cash disbursement needs. The net cash transferred to Lumen Technologies, Inc. has been reflected as advances to affiliates in our consolidated balance sheets. 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. Until the issued checks are presented for payment, the book overdrafts are included in accounts payable on our consolidated balance sheets. This activity is included in the operating activities section in our consolidated statements of cash flows. Restricted Cash Restricted cash consists primarily of cash and investments that collateralize certain performance and operating obligations. Restricted cash is recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Accounts Receivable and Allowance for Credit Losses Accounts receivable are recognized based upon the amount due from customers for the services provided or at cost for purchased and other receivables less an allowance for credit losses. We use a loss rate method to estimate our allowance for credit losses. For more information on our methodology for estimating our allowance for credit losses, see Note 6—Credit Losses on Financial Instruments. 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 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. 60 Property, Plant and Equipment Purchased and constructed property, plant, and equipment are recorded at cost and assets acquired through business combinations are recorded at their estimated fair value as of the acquisition date. In both instances we include the estimated value of any associated legally or contractually required retirement obligations. Expenditures for maintenance and repairs are expensed as incurred. Supplies used internally are carried at average cost, except for significant individual items which are carried at actual cost. Depreciation Methods • Prior to January 1, 2024: Most assets were depreciated using the straight-line group method. Under this approach, assets with similar characteristics and useful lives were pooled together and depreciated over the group’s average remaining useful life. When assets were sold or retired in the normal course of business, their cost was removed from both the asset and accumulated depreciation accounts, with no gain or loss recognized. • Effective January 1, 2024: We re-established all of our assets individually, including accumulated depreciation, and transitioned to depreciating all assets individually using the straight-line method over each asset’s estimated useful life. When assets are sold in the normal course of business, a gain or loss is recognized in our consolidated statements of operations. Leasehold Improvements and Capital Projects Leasehold improvements are amortized over the shorter of the assets’ useful lives or the expected lease term. During the construction phase of network and other internal-use capital projects, we capitalize related employee and interest costs. Useful Lives We perform annual internal reviews to evaluate the reasonableness of the depreciable lives for our property, plant and equipment. Our reviews utilize models that take into account actual usage, physical wear and tear, replacement history, and assumptions about technology evolution. Our remaining useful life assessments evaluate the possible loss in service value of assets that may precede the physical retirement. Assets shared among many customers may lose service value as those customers reduce their use of the asset. However, the asset is not retired until all customers no longer utilize the asset and we determine there is no alternative use for the asset. Impairment Testing We review long-lived tangible assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable. For assessment purposes, long-lived assets are grouped with other assets and liabilities at the lowest identifiable level for which we generate cash flows independently of other groups of assets and liabilities. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its estimated fair value. Recoverability of the asset group to be held and used is assessed by comparing the carrying amount of the asset group to the estimated undiscounted future net cash flows expected to be generated by the asset group. If the asset group's carrying value is not recoverable, we recognize an impairment charge for the amount by which the carrying amount of the asset group exceeds its estimated fair value. Goodwill and Other Intangible Assets We initially record intangible assets arising from business combinations, such as goodwill and capitalized software at estimated fair value. We amortize capitalized software using the straight-line method over estimated lives ranging from three to seven years . Other intangible assets not arising from business combinations are initially recorded at cost. 61 Internal Use Software Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line method over its estimated useful life. We capitalized costs of employees devoted to software development and external direct costs for materials and services. Costs are expensed until the project reaches the development stage. Subsequent additions, modifications, or upgrades are capitalized only if they add new functionality. Software maintenance, data conversion, and training costs are expensed as incurred. We review the remaining economic lives of our capitalized software annually. Capitalized software is included in other intangible assets, net, in our consolidated balance sheets. Impairment Testing We test goodwill for impairment annually as of October 31, or more frequently if events suggest a reporting unit’s fair value may fall below its carrying value. If the carrying value of a reporting unit exceeds its fair value of equity, we write-down goodwill. The impairment assessment is performed at the reporting unit level. We have determined that our operations consist of one reporting unit, consistent with our determination that our business consists of one operating segment. See Note 3—Goodwill and Intangible Assets for additional information. Pension and Post-Retirement Benefits A substantial portion of our active and retired employees participate in the Lumen Combined Pension Plan. On December 31, 2014, the QCII pension plan and a pension plan of an affiliate were merged into the CenturyLink Retirement Plan, and the CenturyLink Retirement Plan is now named the Lumen Combined Pension Plan. Prior to the pension plan merger, the above-noted employees participated in the QCII pension plan. In addition, certain of our employees participate in Lumen's post-retirement health care and life insurance benefit plans. Lumen Technologies allocates service costs relating to pension and post-retirement health care and life insurance benefits to us and its other affiliates. The amounts contributed by us through Lumen Technologies are not segregated or restricted to pay amounts due to our employees and may be used to provide benefits to other employees of Lumen Technologies. The allocation of the service costs to us is based upon our employees who are currently earning benefits under the plans. 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. Recently Adopted Accounting Pronouncements Segments 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. The adoption of this ASU did not have a material impact on our consolidated financial statements. Investments 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. 62 Leases On January 1, 2024, we adopted ASU 2023-01, “Leases (Topic 842): 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. Income Taxes 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 became effective for us in the annual period of fiscal 2025. Refer to Note 13—Income Taxes for more information. Business Combinations In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60): 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. This ASU became effective for us in the first quarter of fiscal 2025. The adoption of this ASU did not have any 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. Recently Issued Accounting Pronouncements In December 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-12 “Codification Improvements.” The ASU represents changes to the Codification that clarify, correct errors, or make minor improvements. The amendments make the Codification easier to understand and apply. The amendments in ASU 2025-12 are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. Except for the amendments to Topic 260, "Earnings Per Share" this ASU can be applied either prospectively or retrospectively with transition method elected on an issue-by-issue basis. The Company is currently evaluating ASU 2025-12 to determine the impact it may have on our consolidated financial statements. 63 In December 2025, the FASB issued ASU 2025-11, "Interim Reporting (Topic 270): Narrow-Scope Improvements." This ASU clarifies that the interim reporting requirements in Topic 270 apply to all entities that issue interim financial statements prepared in accordance with U.S. GAAP and consolidates such requirements within Topic 270. The amendments provide a comprehensive list within Topic 270 of required interim disclosures, establish a principle requiring disclosure of events or changes occurring after the end of the most recent annual reporting period that have a material impact on interim results and clarifies the form and content requirements applicable to interim financial statements. The amendments in ASU 2025-11 are effective for the interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. This ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating ASU 2025-11 to determine the impact it may have on our consolidated financial statements. In December 2025, the FASB issued ASU 2025-10, "Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities." This ASU establishes authoritative guidance on the accounting for government grants received by business entities. The amendments in ASU 2025-10 are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods, with early adoption permitted. This ASU can be applied using a modified prospective approach, a modified retrospective approach, or a retrospective approach. The Company is currently evaluating ASU 2025-10 to determine the impact it may have on our consolidated financial statements. In November 2025, the FASB issued ASU 2025-09, "Derivatives and Hedging (Topic 815): Hedge Accounting Improvements." This ASU introduces five targeted improvements to better align hedge accounting with entities’ risk management activities. The amendments in ASU 2025-09 are effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted and should be applied on a prospective basis for all hedging relationships. The Company intends to early adopt ASU 2025-09 prospectively, effective January 1, 2026. The adoption is not expected to have an impact on our consolidated financial statements. In November 2025, the FASB issued ASU 2025-08, "Financial Instruments — Credit Losses (Topic 326): Purchased Loans." This ASU requires that loans acquired without credit deterioration and deemed “seasoned” will be considered purchased seasoned loans and accounted for using the gross-up approach at acquisition (i.e., record the loan at its purchase price and separately record an allowance for expected credit losses). Seasoned loans include all loans acquired in a business combination, that do not have “more-than-insignificant” deterioration of credit quality since origination, as well as loans purchased at least 90 days after origination, where the purchaser was not involved in the origination of the loans. The amendments in ASU 2025-08 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. This ASU should be applied prospectively to loans that are acquired on or after the initial application date. The Company intends to early adopt ASU 2025-08 prospectively, effective January 1, 2026. The adoption is not expected to have an impact on our consolidated financial statements. In September 2025, the FASB issued ASU 2025-07, "Derivatives and Hedging (Topic 815)" and "Revenue from Contracts with Customers (Topic 606)." The guidance refines the scope of Topic 815 to clarify which contracts are subject to derivative accounting. This ASU also provides clarification under Topic 606 for share-based payments from a customer in a revenue contract. The amendments in ASU 2025-07 are effective for fiscal years beginning after December 15, 2026, and interim reporting periods, with early adoption permitted. This ASU is permitted to be applied either prospectively to new contracts entered into on or after the date of adoption or on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. The Company intends to early adopt ASU 2025-07 prospectively, effective January 1, 2026. The adoption is not expected to have an impact on our consolidated financial statements. In September 2025, the FASB issued ASU 2025-06, "Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software" which amends the guidance in ASC 350-40, "Intangibles — Goodwill and Other — Internal-Use Software." This ASU modernizes the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. This ASU is permitted to be applied prospectively, retrospectively or through a modified transition approach. The Company intends to early adopt ASU 2025-06 prospectively, effective January 1, 2026. The adoption is not expected to have an impact on our consolidated financial statements. 64 In July 2025, the FASB issued ASU 2025-05 "Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets." This ASU provides entities with a practical expedient to simplify the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606 by allowing the assumption that current conditions as of the balance sheet date will not change during the remaining life of the asset. The amendments in ASU 2025-05 are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early prospective adoption permitted. The Company is currently evaluating ASU 2025-05 to determine the impact it may have on our consolidated financial statements. In May 2025, the FASB issued ASU 2025-03 "Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity." This ASU revises current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity that meets the definition of a business. The amendments require an entity to consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions. The amendments in ASU 2025-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early prospective adoption permitted. The Company intends to early adopt ASU 2025-03 prospectively, effective January 1, 2026. The adoption is not expected to have an impact on our consolidated financial statements. 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. The amendments in ASU 2024-04 are effective for the annual period of fiscal 2026, and early adoption is permitted. This ASU is permitted to be applied on either a prospective or retrospective basis. As of December 31, 2025, 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. The amendments in ASU 2024-03 are 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. The Company is currently evaluating ASU 2024-03 and the impact the adoption of this standard will have on our disclosures. Note 2—Divestiture On May 21, 2025, we and certain of our affiliates entered into a definitive agreement to sell to AT&T the Lumen Mass Markets Fiber-to-the-Home business, operated by us and certain of our affiliates in 11 states (the "Territory") for $ 5.75 billion in cash, subject to working capital and other negotiated purchase price adjustments. The portion of this amount attributable to us cannot currently be calculated, and will be dependent upon several variables. The actual amount of our net after-tax proceeds from this divestiture could vary substantially from the amounts we currently estimate, including if there are changes in other assumptions that impact our estimates. We do not believe this divestiture transaction represents a strategic shift for us and therefore, does not meet the criteria to be classified as a discontinued operation. As a result, we continued to report our operating results for the Mass Markets Fiber-to-the-Home business in the Territory (the "disposal group") in our consolidated operating results through the disposal date. As of December 31, 2025 in the accompanying consolidated balance sheet, the assets and liabilities of the disposal group are classified as held for sale and measured at the lower of (i) the carrying value when we classified the disposal group as held for sale or (ii) the fair value of the disposal group, less costs to sell. Effective with the designation of the disposal group as held for sale on May 21, 2025, we suspended recording depreciation of property, plant and equipment while these assets are classified as held for sale. We estimate that we would have recorded an additional $ 69 million of depreciation for the year ended December 31, 2025, if the disposal group did not meet the held for sale criteria. 65 As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, we recorded a loss on disposal group held for sale of $ 235 million in our consolidated statement of operations during the year ended December 31, 2025. Under the terms of the purchase agreement related to the sale of the Mass Market Fiber-to-the-Home business in the Territory, Lumen agreed to grant the purchaser an IRU certain Lumen retained fiber assets following the closing of the transaction in order to service the transferred customer contracts. The value of these retained Lumen assets subject to the IRU is excluded from assets held for sale in the table below. The principal components of the held for sale assets and liabilities of the disposal group as of December 31, 2025 are as follows: December 31, 2025 (Dollars in millions) Assets held for sale Accounts receivable, less allowance of $ 1 $ 11 Other current assets, net 8 Property, plant and equipment, net of accumulated depreciation of $ 602 1,470 Goodwill, net of loss on disposal of $ 235 1,070 Other assets, net 28 Total Assets held for sale $ 2,587 Liabilities held for sale Other current liabilities $ 4 Current portion of deferred revenue 6 Total Liabilities held for sale $ 10 Subsequent Event On February 2, 2026, we and certain of our affiliates completed the sale of Lumen's Mass Markets Fiber-to-the-Home business in 11 states to AT&T in exchange for pre-tax cash proceeds of approximately $ 5.75 billion, subject to working capital and other negotiated post-closing adjustments. In connection with the sale, Lumen has entered into a transition services agreement under which it will provide to the purchaser various support services and certain long-term agreements under which Lumen and the purchaser will provide to each other various network and other commercial services. Note 3—Goodwill and Intangible Assets Goodwill and intangible assets, net on our consolidated balance sheets consisted of the following: December 31, 2025 2024 (Dollars in millions) Goodwill, less accumulated impairment losses of $ 4,417 and $ 2,405 (1) $ 3,638 6,955 Intangible assets, less accumulated amortization of $ 1,642 and $ 1,841 $ 111 84 _______________________________________________________________________________ (1) As of December 31, 2025, this amount excluded goodwill classified as held for sale of $ 1.1 billion; see Note 2—Divestiture. As of December 31, 2025 and 2024, the gross carrying amount of goodwill and other intangible assets was $ 5.4 billion and $ 8.9 billion, respectively, excluding the amounts classified as held for sale. 66 Goodwill Substantially all of our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired. We are required to assess our goodwill for impairment annually, or under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our assessment determines the carrying value of equity of our reporting unit exceeds its fair value. Our annual impairment assessment date for goodwill is October 31, at which date we assess goodwill at our reporting unit. In reviewing the criteria for reporting units, we have determined that we are one reporting unit. Goodwill Impairment Analysis 2025 Goodwill Impairment Analysis Fourth Quarter Analysis At October 31, 2025, we estimated the fair value 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. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and earnings before interest, tax, depreciation and amortization ("EBITDA") multiples between 1.6 x and 3.1 x and 5.1 x and 7.9 x, respectively. We selected a revenue multiple and an EBITDA multiple in line with these comparable market multiples. 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 was less than our carrying value of equity at October 31, 2025. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $ 2.0 billion on October 31, 2025. Second Quarter Analysis During the second quarter of 2025, we determined that the classification of the Lumen Mass Markets Fiber-to-the-Home business in the Territory as held for sale, as described in Note 2—Divestiture, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of April 30, 2025. We performed a pre-classification goodwill impairment test using the market approach to test for impairment prior to the classification of these assets as held for sale and to determine the April 30, 2025 fair values to be utilized for goodwill impairment testing. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.8 x and 3.1 x and 5.8 x and 8.0 x, respectively. As of April 30, 2025, based on our assessments performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 15 % and 14 % for the pre-classification and post-classification, respectively. We concluded that we had no impairment as of our April 30, 2025 assessment date. 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. 67 2023 Goodwill Impairment Analyses 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. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and earnings before interest, tax, depreciation and amortization ("EBITDA") multiples between 1.5 x and 3.5 x and 4.8 x and 8.4 x, respectively. We selected a revenue multiple within and an EBITDA multiple below these comparable market multiples. Based on our assessment performed, we concluded that the estimated fair value of our reporting unit was less than their carrying value of equity at October 31, 2023. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $ 2.4 billion on October 31, 2023. During the second quarter of 2023, the Company determined circumstances existed indicating it was more likely than not that the carrying value of our reporting unit exceeded its fair value. Given the continued erosion in Lumen's market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting unit using only the market approach. Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.5 x and 4.3 x and 4.6 x and 10.5 x, respectively. We selected a revenue multiple within and an EBITDA multiple below these comparable market multiples. Based on our assessment performed, the estimated fair value of our equity exceeded our carrying value of equity by approximately 11 % at June 30, 2023. We concluded that goodwill was not impaired as of June 30, 2023. The market approach that we used incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives. In developing the market multiples, we considered observed trends of our industry participants. Our assessment included many factors that required significant judgment. Alternative interpretations of these factors could have resulted in different conclusions. The following table shows the rollforward of goodwill from December 31, 2023 through December 31, 2025: (Dollars in millions) As of December 31, 2023 (1) $ 6,955 As of December 31, 2024 (1) 6,955 Impairment ( 2,012 ) Reclassified as held for sale (2) ( 1,305 ) As of December 31, 2025 (1) $ 3,638 ______________________________________________________________________ (1) Goodwill as of December 31, 2025, December 31, 2024 and December 31, 2023 is net of accumulated impairment losses of $ 4.4 billion, $ 2.4 billion and $ 2.4 billion, respectively. (2) Reflects initial goodwill reclassified as held for sale on May 21, 2025, related to our recently completed divestiture. See Note 2—Divestiture. Intangible Assets 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, 2025, the weighted average remaining useful life was four years for capitalized software, which is our primary intangible asset. Amortization Expense Total amortization expense for finite-lived intangible assets for the years ended December 31, 2025, 2024 and 2023 was $ 33 million, $ 41 million and $ 67 million, respectively. 68 We estimate that future total amortization expense for finite-lived intangible assets will be as follows: (Dollars in millions) 2026 $ 20 2027 17 2028 14 2029 11 2030 9 2031 and thereafter 40 Total finite-lived intangible assets future amortization expense $ 111 Note 4—Revenue Recognition As of December 31, 2025, we categorize our revenue derived from our operations based on the customers we serve, as follows: (i) revenue derived from serving our Mass Markets customers, are categorized primarily within the first three categories listed below, (ii) revenue derived from servicing our Business customers are categorized primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below, and (iii) revenue derived from servicing our affiliates are categorized in the 'Affiliate Services' category listed: • 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 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: Includes our legacy services managed for cash flow, including Time Division Multiplexing voice and private line services; • Nurture: Includes our more mature offerings, including primarily ethernet; • Grow: Includes existing and emerging products and services in which we are significantly investing, including our dark fiber and wavelengths services; and • Affiliate Service s: Includes (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. 69 Reconciliation of Total Revenue to Revenue from Contracts with Customers The following tables provide our total revenue by product and service category as well as the amount of revenue that is not subject to ASC 606, " Revenue from Contracts with Customers " ("ASC 606"), but is instead governed by other accounting standards: Year Ended December 31, 2025 Total Revenue Adjustments for Non-ASC 606 Revenue (1) Total Revenue from Contracts with Customers (Dollars in millions) Other Broadband $ 763 ( 68 ) 695 Voice and Other 442 ( 2 ) 440 Fiber Broadband 314 ( 12 ) 302 Harvest 834 ( 117 ) 717 Nurture 330 ( 9 ) 321 Grow 130 ( 8 ) 122 Affiliate Services 1,935 ( 47 ) 1,888 Total revenue $ 4,748 ( 263 ) 4,485 Timing of revenue Goods and services transferred at a point in time $ 10 Services performed over time 4,475 Total revenue from contracts with customers $ 4,485 Year Ended December 31, 2024 Total Revenue Adjustments for Non-ASC 606 Revenue (1) Total Revenue from Contracts with Customers (Dollars in millions) Other Broadband $ 933 ( 79 ) 854 Voice and Other 516 ( 14 ) 502 Fiber Broadband 377 ( 12 ) 365 Harvest 942 ( 118 ) 824 Nurture 357 ( 8 ) 349 Grow 134 ( 6 ) 128 Affiliate Services 2,249 ( 48 ) 2,201 Total revenue $ 5,508 ( 285 ) 5,223 Timing of revenue Goods and services transferred at a point in time $ 13 Services performed over time 5,210 Total revenue from contracts with customers $ 5,223 70 Year Ended December 31, 2023 Total Revenue Adjustments for Non-ASC 606 Revenue (1) Total Revenue from Contracts with Customers (Dollars in millions) Other Broadband $ 1,111 ( 95 ) 1,016 Voice and Other 587 ( 16 ) 571 Fiber Broadband 473 ( 12 ) 461 Harvest 1,049 ( 139 ) 910 Nurture 393 ( 8 ) 385 Grow 143 — 143 Affiliate Services 2,159 ( 45 ) 2,114 Total revenue $ 5,915 ( 315 ) 5,600 Timing of revenue Goods and services transferred at a point in time $ 23 Services performed over time 5,577 Total revenue from contracts with customers $ 5,600 _______________________________________________________________________________ (1) Includes regulatory revenue and lease revenue not within the scope of ASC 606. We do not have any single external customer that comprises more than 10% of our total consolidated operating revenue. Substantially all of our consolidated revenue comes from customers located in the United States. Customer Receivables and Contract Balances The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts classified as held for sale: December 31, 2025 2024 (Dollars in millions) Customer receivables, less allowance of $ 30 million and $ 23 million (1)(2) $ 221 205 Contract liabilities (3) 225 244 ______________________________________________________________________ (1) Customer receivables includes affiliate receivables. (2) As of December 31, 2025, this amount excluded $ 11 million of customer receivables, net associated with the disposal group classified as held for sale. (3) As of December 31, 2025, this amount excluded $ 6 million of contract liabilities associated with the disposal group classified as held for sale. 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 one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the years ended December 31, 2025 and December 31, 2024, we recognized $ 176 million and $ 175 million, respectively, of revenue that was included in contract liabilities of $ 244 million and $ 269 million as of January 1, 2025 and 2024, respectively. 71 Performance Obligations As of December 31, 2025, we expect to recognize approximately $ 1.7 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied. As of December 31, 2025, the transaction price related to unsatisfied performance obligations that are expected to be recognized in 2026, 2027, and thereafter was $ 752 million, $ 490 million, and $ 461 million, respectively. These amounts exclude: • the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed); • contracts that are classified as leasing arrangements that are not subject to ASC 606; and • the value of unsatisfied performance obligations for contracts which relate to the disposal group . Contract Costs The following tables provide changes in our contract acquisition costs and fulfillment costs: Year Ended December 31, 2025 Year Ended December 31, 2024 Acquisition Costs Fulfillment Costs Acquisition Costs Fulfillment Costs (Dollars in millions) (Dollars in millions) Beginning of period balance $ 51 46 58 46 Costs incurred 20 43 32 34 Amortization ( 30 ) ( 34 ) ( 39 ) ( 34 ) Change in contract costs held for sale ( 6 ) ( 7 ) — — End of period balance (1) $ 35 48 51 46 ______________________________________________________________________ (1) The ending balance for the year ended December 31, 2025 excluded acquisition costs and fulfillment costs associated with the disposal group classified as held for sale of $ 6 million and $ 7 million, respectively. Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third-party and internal costs associated with the provision, installation and activation of communications services to customers, including labor and materials consumed for these activities. We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average contract life of 47 months for Mass Markets customers and average contract life of 34 months for Business customers, respectively. We include amortized fulfillment costs in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. We include the amount of these deferred costs that are anticipated to be amortized in the next 12 months in Other current assets, net and the deferred costs expected to be amortized beyond the next 12 months in Other assets, net on our consolidated balance sheets. We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis. 72 Governmental Funding Lumen participates in various U.S. federal and state programs under which government support payments are received to offset costs associated with providing services in targeted locations such as unserved or underserved high-cost or rural areas, or for certain types of customers, including non-profit organizations, educational institutions and local governmental bodies. 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 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. This non-ASC 606 revenue is included in operating revenue in our consolidated statements of operations. Corresponding receivables are recorded when services have been provided to the customers and costs incurred, but the cash has not been received. These amounts are included in our accounts receivable, less allowance in our consolidated balance sheets. Certain programs are subject to audits of compliance with program commitments and, subject to the outcomes of those assessments, Lumen may be required to reimburse the government entity for cash previously received, or, in some cases, pay a penalty. Lumen evaluates each program and establishes a liability under the principles of ASC 450 if it is probable support payments will be recaptured or a penalty will be imposed. For the year ended December 31, 2025 and 2024, we recorded non-customer revenue of $ 28 million and $ 31 million, respectively, under government assistance programs , of which 44 % and 29 %, respectively, was associated with state universal service fund support programs. The federal government has introduced several programs to expand broadband access, including the Rural Digital Opportunity Fund (“RDOF”) program, an FCC initiative that provides federal financial support 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. 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. In the second quarter of 2025, we voluntarily relinquished the remainder of our RDOF awards. As a result, we will no longer receive funding through the RDOF program and recognized a reduction to revenue of $ 11 million in our consolidated statements of operations in the second quarter of 2025. We also incurred fees of $ 12 million which are reflected in our operating expenses within our consolidated statements of operations. In January 2026, we paid the $ 23 million of revenue and fees summarized above, along with an additional $ 3 million relating to our 2024 relinquishment as repayment of funds previously received and remittance of the fees incurred. We participate in two 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 year ended December 31, 2025 and 2024, we participated in these types of programs in the states of Nebraska and New Mexico . Note 5—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 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. Lease-related liabilities are recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rates. As part of the present value calculation for the lease liabilities, we use an incremental borrowing rate as the rates implicit in the leases are not readily determinable. The incremental borrowing rates used for lease accounting are based on our unsecured rates, adjusted to approximate the rates at which we could borrow on a collateralized basis over a term similar to the recognized lease term. We apply the incremental borrowing rates to lease components using a portfolio approach based upon the length of the lease term and the reporting entity in which the lease resides. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. 73 Some of our lease arrangements contain lease components, non-lease components (including common-area maintenance costs) and executory costs (including real estate taxes and insurance costs). We generally account for each component separately based on the estimated standalone price of each component. For colocation leases, we account for the lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless we determine that we are reasonably certain of renewing the lease. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain to be exercised. Our lease agreements do not generally contain any material residual value guarantees or material restrictive covenants. 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. Any rent abatements, along with rent escalations, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. Lessee Lease expense consisted of the following: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Operating and short-term lease cost $ 21 23 26 Finance lease cost: Amortization of right-of-use assets 1 1 1 Total finance lease cost 1 1 1 Total lease cost $ 22 24 27 74 Supplemental consolidated balance sheet information and other information related to leases is included below: December 31, Leases (Dollars in millions) Balance Sheet Classification 2025 2024 Assets Operating lease assets Other assets, net $ 65 64 Finance lease assets Property, plant and equipment, net of accumulated depreciation 5 6 Total leased assets $ 70 70 Liabilities Current Operating Other current liabilities $ 14 15 Noncurrent Operating Other liabilities 51 49 Finance Long-term debt 2 3 Total lease liabilities $ 67 67 Weighted-average remaining lease term (years) Operating leases 5.5 5.4 Finance leases 8.7 8.4 Weighted-average discount rate Operating leases 10.24 % 10.52 % Finance leases 4.90 % 5.05 % Supplemental consolidated cash flow statement information related to leases is included below: Years Ended December 31, 2025 2024 (Dollars in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 22 24 Financing cash flows for finance leases 1 1 Supplemental lease cash flow disclosures Operating lease right-of-use assets obtained in exchange for new operating lease liabilities $ 15 20 75 As of December 31, 2025, maturities of lease liabilities were as follows: Operating Leases Finance Leases (Dollars in millions) 2026 $ 19 1 2027 18 1 2028 15 — 2029 11 — 2030 7 — Thereafter 14 — Total lease payments 84 2 Less: interest ( 19 ) — Total 65 2 Less: current portion ( 14 ) — Long-term portion $ 51 2 As of December 31, 2025, we had no material operating or finance leases that had not yet commenced. Lessor We lease various data transmission capacity, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease revenue are included in operating revenue in the consolidated statements of operations. See "Revenue Recognition" in Note 1—Background and Summary of Significant Accounting Policies. For the years ended December 31, 2025, 2024 and 2023, our gross operating lease revenue was $ 262 million, $ 273 million and $ 304 million, respectively which represents 6 %, 5 %, and 5 % of our operating revenue for the years ended December 31, 2025, 2024 and 2023, respectively. Included in operating lease revenue is sublease revenue of $ 9 million, $ 9 million and $ 8 million for the years ended December 31, 2025, 2024 and 2023, respectively. Note 6—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. We periodically monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change. We separately evaluate financial assets that do not share risk characteristics with other financial assets. Our financial assets measured at amortized cost primarily consist of accounts receivable. We use a loss rate method to estimate our allowance for credit losses. Our determination of the current expected credit loss rate begins with our review of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to recognize accounts receivable as credit losses. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, certain classes of aged balances, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to adjust our historical loss rate. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. To determine our current allowance for credit losses, we combine the historical and expected credit loss rates and apply them to our period end accounts receivable. If there is an unexpected deterioration of a customer's financial condition or an unexpected change in economic conditions, including macroeconomic events, we assess the need to adjust the allowance for credit losses. Any such resulting adjustments would affect earnings in the period that adjustments are made. 76 The assessment of the correlation between historical observed default rates, current conditions and forecasted economic conditions requires judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding our allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions and forecast of economic conditions may also not be representative of the customers' actual default experience in the future, 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: Business Mass Markets Total (Dollars in millions) Balance as of December 31, 2022 $ 20 16 36 Provision for expected losses 20 46 66 Write-offs charged against the allowance ( 26 ) ( 43 ) ( 69 ) Recoveries collected — 1 1 Balance as of December 31, 2023 14 20 34 Provision for expected losses 9 36 45 Write-offs charged against the allowance ( 10 ) ( 42 ) ( 52 ) Recoveries collected — 2 2 Balance as of December 31, 2024 13 16 29 Provision for expected losses 9 30 39 Write-offs charged against the allowance ( 11 ) ( 21 ) ( 32 ) Recoveries collected — 2 2 Change in allowance in assets held for sale (1) — ( 1 ) ( 1 ) Balance as of December 31, 2025 $ 11 26 37 (1) Represents changes in amounts classified as held for sale associated with the disposal group related to the recently completed Mass Markets Fiber-to-the-Home business in the Territory. See Note 2—Divestiture. Note 7—Long-Term Debt and Note Payable - Affiliate The following table reflects our consolidated long-term debt as of the dates indicated below, including unamortized discounts and premiums and unamortized debt issuance costs: December 31, Interest Rates (1) Maturities (1) 2025 2024 (Dollars in millions) Senior notes 6.500 % - 7.750 % 2030 - 2057 $ 1,736 1,973 Finance lease and other Various Various 2 3 Unamortized premiums, net — 1 Unamortized debt issuance costs ( 50 ) ( 50 ) Total long-term debt 1,688 1,927 Less current maturities — ( 239 ) Long-term debt, excluding current maturities $ 1,688 1,688 _______________________________________________________________________________ (1) As of December 31, 2025. 77 Long-Term Debt Maturities Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2025 (excluding unamortized premiums, net, unamortized debt issuance costs) maturing during the following years: (Dollars in millions) 2026 $ — 2027 1 2028 — 2029 — 2030 98 2030 and thereafter 1,639 Total long-term debt $ 1,738 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 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 On June 30, 2022, Qwest Corporation entered into an amended and restated revolving promissory note ("Note Payable - Affiliate") with an affiliate of our ultimate parent company, Lumen Technologies, Inc. ("Lender"), that replaces the previous revolving promissory agreement that was scheduled to mature on June 30, 2022 ("Prior Note Payable - Affiliate"). The Note Payable - Affiliate, as amended, enables Qwest Corporation to borrow from Lumen up to $ 2.0 billion. 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 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. Interest is accrued on the outstanding principal balance during the respective Interest Period using a weighted average per annum interest rate on the consolidated outstanding debt of Lumen Technologies, Inc. and its subsidiaries. 78 On September 30, 2022, Qwest Corporation repaid the outstanding principal and interest on the Note Payable - Affiliate of approximately $ 1.2 billion and $ 43 million, respectively. Since such payment, Qwest Corporation has not owed any amounts under the Note Payable - Affiliate. Interest Expense Interest expense includes interest on total long-term debt. The following table presents the amount of gross interest expense, net of capitalized interest and interest expense-affiliates, net: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Interest expense: Gross interest expense $ 126 137 149 Capitalized interest ( 35 ) ( 75 ) ( 54 ) Total interest expense $ 91 62 95 Interest income-affiliates, net $ ( 89 ) ( 24 ) ( 15 ) Covenants 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, the consummation of certain transactions involving Qwest Corporation, and the transfer or lease of Qwest Corporation's property and assets substantially as an entity (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. Compliance As of December 31, 2025, we believe we were in compliance with the financial covenants contained in our material debt agreements in all material respects. Note 8—Accounts Receivable The following table presents details of our accounts receivable balances: December 31, 2025 (1) 2024 (Dollars in millions) Trade and purchased receivables $ 307 295 Earned and unbilled credits ( 100 ) ( 67 ) Other 29 28 Total accounts receivable 236 256 Less: allowance for credit losses ( 37 ) ( 29 ) Accounts receivable, less allowance $ 199 227 _______________________________________________________________________________ (1) These values exclude assets classified as held for sale as of December 31, 2025. 79 We are exposed to concentrations of credit risk from our customers. We generally do not require collateral to secure our receivable balances. We have agreements with other telecommunications service providers whereby we agree to bill and collect on their behalf for services rendered by those providers to our customers within our local service area. We purchase accounts receivable from other telecommunications service providers primarily on a recourse basis and include these amounts in our accounts receivable balance. We have not experienced any significant loss associated with these purchased receivables. Note 9—Property, Plant and Equipment Net property, plant and equipment is composed of the following: Depreciable Lives December 31, 2025 (5) 2024 (Dollars in millions) Property, plant and equipment: Land N/A $ 328 329 Fiber, conduit and other outside plant (1) 15 - 45 years 7,400 8,246 Central office and other network electronics (2) 7 - 10 years 5,487 5,792 Support assets (3) 3 - 30 years 2,902 2,878 Construction in progress (4) N/A 239 530 Gross property, plant and equipment 16,356 17,775 Accumulated depreciation ( 8,910 ) ( 8,910 ) Net property, plant and equipment $ 7,446 8,865 _______________________________________________________________________________ (1) Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures. (2) Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers. (3) Support assets consist of buildings, computers and other administrative and support equipment. (4) Construction in progress includes inventory held for construction and property of the aforementioned categories that has not been placed in service as it is still under construction. (5) These values exclude assets classified as held for sale as of December 31, 2025. As of December 31, 2025, we classified certain property, plant and equipment, net as held for sale and discontinued recording depreciation on the disposal group. See Note 2—Divestiture. We recorded depreciation expense of $ 652 million, $ 712 million and $ 756 million for the years ended December 31, 2025, 2024 and 2023, respectively. Note 10—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. 80 Changes in our accrued liabilities for severance expenses were as follows: Years Ended December 31, 2025 2024 (Dollars in millions) Balance at beginning of period $ 4 $ 1 Accrued to expense 14 32 Payments, net ( 7 ) ( 29 ) Balance at end of period $ 11 $ 4 Note 11—Employee Benefits Pension and Post-Retirement Benefits Pension Benefits QCII's post-retirement benefit plans were merged into Lumen's post-retirement benefit plans on January 1, 2012, and on December 31, 2014, QCII's qualified pension plan and a pension plan of an affiliate were merged into the CenturyLink Retirement Plan, which is now named the Lumen Combined Pension Plan (the "LCPP"). Based on current laws and circumstances, (i) Lumen Technologies was not required to make a cash contribution to the LCPP in 2025 and (ii) Lumen Technologies does not expect it will be required to make a contribution in 2026. The amount of required contributions to the LCPP in 2026 and beyond will depend on earnings on plan investments, prevailing discount rates, demographic experience, changes in plan benefits and changes in funding laws and regulations. Lumen Technologies occasionally makes voluntary contributions in addition to required contributions. Lumen Technologies did no t make a voluntary contribution to the LCPP in 2025. Lumen Technologies made a voluntary contribution of $ 170 million to the LCPP in 2024. The unfunded status of Lumen's qualified and non-qualified pension plans for accounting purposes was approximately $ 588 million and $ 645 million as of December 31, 2025 and 2024, which includes the merged QCII qualified pension plan. The unfunded status of Lumen's post-retirement benefit plans for accounting purposes was $ 1.7 billion and $ 1.7 billion as of December 31, 2025 and 2024, respectively. 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. In addition, non-represented employees hired after January 1, 2009 are not eligible to participate in the plans. Active non-represented employees who participate in these plans retain their accrued pension benefit earned as of December 31, 2009 and certain participants will continue to earn interest credits on their benefit after December 31, 2009. Employees are eligible to receive their vested accrued benefit when they separate from Lumen Technologies. The plans also provided a death benefit for eligible beneficiaries of certain retirees; however, the plan was amended to eliminate this benefit effective March 1, 2010 for retirees who retired prior to January 1, 2004 and whose deaths occur after February 28, 2010 and eliminate the death benefit for eligible beneficiaries of certain retirees who retired after December 31, 2003. Post-Retirement Benefits Lumen Technologies maintains post-retirement benefit plans that provide health care and life insurance benefits primarily for certain eligible retirees. The QCII post-retirement benefit plans were merged into Lumen's post-retirement benefit plans on January 1, 2012. The benefit obligation for the occupational health care and life insurance post-retirement plans is estimated based on the terms of benefit plans. In calculating this obligation, Lumen Technologies considers numerous assumptions, estimates and judgments, including but not limited to, discount rates, health care cost trend rates and plan amendments. Effective January 1, 2024, new represented employees are not eligible for benefits as a result of new collective bargaining agreements. New non-represented employees are also not eligible for benefits under the plan. 81 The terms of the post-retirement health care and life insurance plans between Lumen Technologies and its eligible non-represented employees and its eligible post-1990 non-represented retirees are established by Lumen Technologies and are subject to change at its discretion. Lumen Technologies has a practice of sharing some of the cost of providing health care benefits with its non-represented employees and post-1990 non-represented retirees. The benefit obligation for the non-represented post-retirement health care benefits is based on the terms of the current written plan documents and is adjusted for anticipated continued cost sharing with non-represented employees and post-1990 non-represented retirees. However, Lumen's contribution under its post-1990 non-represented retirees' health care plan is capped at a specific dollar amount. Cost Allocation Lumen Technologies allocates current service costs to subsidiaries relative to employees who are currently earning benefits under the pension and post-retirement benefit plans. The net cost allocated to us is paid on a monthly basis through Lumen's intercompany cash management process. The affiliate obligations, net in current and noncurrent liabilities on the consolidated balance sheets primarily represents the cumulative allocation of expense, net of payments, associated with QCII's pension plans and post-retirement benefits plans prior to the plan mergers. In 2015, we agreed to a plan to settle the outstanding pension and post-retirement affiliate obligations, net balance with QCII over a 30 year term. Under the plan, payments are scheduled to be made on a monthly basis. For the years ended December 31, 2025 and 2024, we made settlement payments in the aggregate of $ 48 million and $ 52 million, respectively, to QCII under the plan. Changes in the affiliate obligations, net are reflected in operating activities on our consolidated statements of cash flows. We are allocated a portion of Lumen's pension and post-retirement services costs. 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, in the amounts for the respective periods presented in the table below: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Allocated pension service costs $ 17 20 22 Allocated post-retirement service costs 3 4 4 % of Lumen's total pension and post-retirement service costs 79 % 86 % 87 % Other Benefit Plans Medicare Prescription Drug, Improvement and Modernization Act of 2003 Lumen Technologies sponsors post-retirement health care plans with several benefit options that provide prescription drug benefits that Lumen Technologies deems actuarially equivalent to or exceeding Medicare Part D. Lumen Technologies recognizes the impact of the federal subsidy received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in the calculation of its post-retirement benefit obligation and net periodic post-retirement benefit expense. Health Care and Life Insurance We provide health care and life insurance benefits to essentially all our active employees. We are largely self-funded for the cost of the health care plan. Our health care benefit expense for current employees was $ 94 million, $ 99 million and $ 101 million for the years ended December 31, 2025, 2024 and 2023, respectively. Employees' group basic life insurance plans are fully insured and the premiums are paid by Lumen Technologies. 82 401(k) Plans Lumen Technologies sponsors a qualified defined contribution plan covering substantially all our employees. Under this plan, employees may contribute a percentage of their annual compensation up to certain maximums, as defined by the plan and by the Internal Revenue Service ("IRS"). Currently, we match a percentage of our employees' contributions in cash. We recognized $ 24 million, $ 25 million and $ 27 million in expense related to this plan for the years ended December 31, 2025, 2024 and 2023, respectively. Subsequent Event In January 2026, Lumen made a voluntary contribution of $ 101 million to the trust for the Lumen Combined Pension Plan. Note 12—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). Due to their short-term nature, the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, advances to and from affiliates, accounts payable and note payable-affiliate approximate their fair values. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs using the below-described fair value hierarchy. We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates. The three input levels in the hierarchy of fair value measurements are defined by the FASB generally as follows: Input Level Description of Input Level 1 Observable inputs such as quoted market prices in active markets. Level 2 Inputs other than quoted prices in active markets that are either directly or indirectly observable. Level 3 Unobservable inputs in which little or no market data exists. The following table presents the carrying amounts and estimated fair values of our financial liabilities as of December 31, 2025 and 2024, as well as the input level used to determine the fair values indicated below: December 31, 2025 December 31, 2024 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities-Long-term debt (excluding finance lease and other obligations) 2 $ 1,686 1,261 1,924 1,462 83 Note 13—Income Taxes The components of the Income tax expense from continuing operations are as follows: Year Ended December 31, 2025 (Dollars in millions) Loss (income) before income taxes Domestic $ ( 987 ) Foreign 12 Total pre-tax book loss $ ( 975 ) Income tax expense Current tax expense Federal $ 181 State and Local 40 Foreign 6 Total current tax expense 227 Deferred tax expenses Federal 104 State and Local 21 Total deferred tax expense 125 Income tax expense Federal 285 State and Local 61 Foreign 6 Total income tax expense $ 352 Years Ended December 31, 2024 2023 (Dollars in millions) Income tax expense: Federal and foreign Current $ 396 432 Deferred 34 19 State and local Current 94 107 Deferred 3 3 Income tax expense $ 527 561 84 The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate: Year Ended December 31, 2025 (Dollars in millions) Percentage of pre-tax loss Statutory federal income tax rate $ ( 205 ) 21.0 % Federal Effect of cross-border tax laws Other ( 1 ) 0.1 % Tax Credits Other — — % Changes in valuation allowance — — % Nontaxable or nondeductible items Goodwill impairment 421 ( 43.2 ) % Loss on disposal group held for sale (Note 3) 50 ( 5.1 ) % Other ( 1 ) 0.1 % State income taxes, net of federal income tax benefit (1) 47 ( 4.8 ) % Change in liability for unrecognized tax position 25 ( 2.6 ) % Foreign tax effect India Deferred tax on unremitted earnings 13 ( 1.3 ) % Other 3 ( 0.3 ) % Effective income tax rate $ 352 ( 36.1 ) % _______________________________________________________________________________ (1) During the year ended December 31, 2025, state taxes in Minnesota, Colorado and Arizona comprised greater than 50% of the tax effect in this category. Years Ended December 31, 2024 2023 (Percentage of pre-tax income) Effective income tax rate: Federal statutory income tax rate 21.0 % 21.0 % State income taxes-net of federal effect 3.7 % ( 31.3 ) % Goodwill impairment — % ( 187.2 ) % Change in liability for unrecognized tax position 1.5 % ( 8.9 ) % Other — % ( 1.4 ) % Effective income tax rate 26.2 % ( 207.8 ) % The effective tax rate for 2025 and 2023 includes $ 421 million and $ 505 million, respectively, of unfavorable impact of non-deductible goodwill impairment. 85 The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows: December 31, 2025 2024 (Dollars in millions) Deferred tax liabilities: Property, plant and equipment $ ( 1,623 ) ( 1,524 ) Intangible assets ( 90 ) ( 83 ) Other ( 52 ) ( 40 ) Total deferred tax liabilities ( 1,765 ) ( 1,647 ) Deferred tax assets: Payable to affiliate due to post-retirement benefit plan participation 306 312 Other — 1 Gross deferred tax assets 306 313 Net deferred tax assets 306 313 Net deferred tax liabilities $ ( 1,459 ) ( 1,334 ) As of December 31, 2025, we have determined that a portion of our undistributed earnings in India are no longer permanently reinvested, resulting in the recognition of an immaterial deferred tax liability. We continue to assert that undistributed earnings of our subsidiaries in all other foreign jurisdictions are indefinitely reinvested. As of both December 31, 2025 and 2024, 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, 2025 and 2024, the $ 1.5 billion and $ 1.3 billion, respectively, net deferred tax liabilities are included in long-term liabilities on our consolidated balance sheet. Income taxes paid, net are as follows: Year Ended December 31, 2025 (Dollars in millions) Federal $ 154 State 39 Foreign 6 Total income taxes paid, net (1) $ 199 _______________________________________________________________________________ (1) During the year ended December 31, 2025, there were no individual jurisdictions with cash taxes paid that equaled or exceeded 5% of the total income taxes paid. With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2016. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carryforwards are available. 86 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, 2025 and 2024 are as follows: Years ended December 31, 2025 2024 (Dollars in millions) Unrecognized tax benefits at beginning of period $ 293 317 Increase (decrease) due to tax positions taken in a prior year 1 ( 11 ) Decrease due to tax positions taken in a current year ( 4 ) ( 13 ) Unrecognized tax benefits at end of period $ 290 293 As of December 31, 2025, the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is $ 5 million. The unrecognized tax benefits also includes tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, that would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities. Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $ 192 million and $ 160 million as of December 31, 2025 and 2024, respectively. Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may not change in the next 12 months. The actual amount of changes, if any, will depend on future developments and events, many of which are outside our control. We paid $ 199 million, $ 497 million, and $ 509 million related to income taxes for the years ended December 31, 2025, 2024, and 2023, respectively. The OECD has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% for tax years effective after December 31, 2023. While the U.S. has not adopted Pillar Two legislation, certain countries in which we operate have already adopted legislation to implement Pillar Two. On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package, implemented as administrative guidance modifying the operation of Pillar Two rules, which would fully exempt U.S.-parented groups from the application certain Pillar Two top-up taxes. The SbS package also extends the current Transitional Country-by-Country Reporting ("CbCR") Safe Harbor by one year, through the end of fiscal year of 2027. The Pillar Two rules have increased our compliance requirements but did not materially impact our 2025 results. We continue to monitor evolving global and domestic tax legislation and administrative guidance. Note 14—Affiliate Transactions We provide incumbent local exchange carrier telecommunications services to our affiliates that are similar to the services we provide 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 to which those affiliate services pertain. 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. In this regard, we function as a service company to other Lumen affiliates, and correspondingly recognize affiliate revenue based on the costs for the services that we provide to those affiliates. 87 Whenever possible, costs for shared services are incurred directly by our affiliates for the services they use. When these shared costs are not directly incurred, they are allocated among all affiliates based upon what we determine to be the most reasonable method, first using cost causative measures, or, if no cost causative measure is available, using a general allocator. From time to time, we may adjust the basis for allocating the costs of a shared service among affiliates. Any such changes in allocation methodologies are generally applied prospectively. On March 31, 2025, we entered into an unsecured revolving promissory note with our ultimate parent Lumen Technologies, under which Lumen Technologies is permitted to borrow up to $ 3.0 billion from us at an 8.3 % interest rate per annum. The principal amount is payable upon demand by us and prepayable by Lumen Technologies at any time, but no later than March 31, 2030, which will automatically renew on the maturity date for successive 12-month periods unless we elect otherwise. The facility has covenants and is subject to other limitations. As of December 31, 2025, we had $ 937 million of principal and capitalized interest due from Lumen Technologies under this promissory note. The following table provides details of our affiliate revenue: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Direct affiliate revenue $ 1,354 1,665 1,622 Allocated affiliate revenue 581 584 537 Total operating revenue - affiliate $ 1,935 2,249 2,159 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. Note 15—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. 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, as of December 31, 2025 and December 31, 2024, we had accrued $ 15 million and $ 17 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which are included in Other current liabilities or 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 our $ 15 million accrual as of December 31, 2025 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. 88 Principal Proceedings Environmental Litigation Parish of St. Mary 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. In April 2025, the Village of Parks (one of the municipalities which had served a notice of intent to file a citizen suit) served Lumen with a petition in an action captioned Village of Parks v. Lumen Technologies, Inc., Case 95026, in the 16th Judicial District Court for the Parish of St. Martin, State of Louisiana. The Village of Parks petition seeks damages and injunctive relief under Louisiana state law relating to the above-described allegations about lead-sheathed telecommunication cables. Blum 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. In December 2024, the plaintiffs filed an amended complaint and a motion for remand. In September 2025, the motion to remand was denied. 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 Ninth Circuit reversed and remanded. Class certification was contested and ultimately granted in 2023. The Ninth 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. The district court denied Lumen's post-trial motions for relief, and on October 16, 2024, Lumen filed an appeal which is captioned Bultemeyer v. CenturyLink, Inc., Case 24-6413, in the U.S. Court of Appeals for the Ninth 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. Huawei Network Deployment Investigations 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. • DOJ. Lumen has received a civil investigative demand from the U.S. Department of Justice in the course of a False Claims Act investigation alleging that Lumen Technologies, Inc. and Lumen Technologies Government Solutions, Inc. failed to comply with certain specified requirements in federal contracts concerning their use of Huawei equipment. 89 • FCC. 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 U.S. communications networks or the communications supply chain. • Team Telecom. The Committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector (comprised of the U.S. 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. Marshall Fire Litigation On December 30, 2021, a wildfire referred to as the Marshall Fire ignited near Boulder, Colorado. The Marshall Fire killed two people, and it burned thousands of acres, including entire neighborhoods. Approximately 300 lawsuits seeking substantial monetary relief have been filed naming as defendants Qwest Corporation, an additional telecommunications company, and certain power companies. The complaints involving Qwest have been consolidated with Kupfner et al., v. Public Service Company of Colorado, et al., Case 2022-cv-30195, pending in Colorado District Court, Boulder, Colorado. In September 2025, the court vacated the trial date because the defendants reached agreements in principle to settle with virtually all of the plaintiffs, subject to final documentation. The court has held periodic status conferences and set a further status conference for February 26, 2026. 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, 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 12 months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. We are subject to various federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $ 300,000 in fines and penalties. In addition, in the past we acquired companies that had installed lead-sheathed cables several decades earlier, or had operated certain manufacturing companies in the first part of the 1900s. 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 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 we currently consider insignificant may ultimately affect us materially. 90 Commitments Right-of-Way As of December 31, 2025, our future rental commitments and Right-of-Way ("ROW") agreements were as follows: (Dollars in millions) 2026 $ 31 2027 4 2028 4 2029 3 2030 3 2031 and thereafter 47 Total future minimum payments $ 92 Purchase Commitments We have several commitments to a variety of vendors for services to be used in the ordinary course of business. As of December 31, 2025, we expect to purchase the following amounts under these commitments: (Dollars in millions) 2026 $ 3 2027 through 2028 7 2029 through 2030 8 2031 and thereafter 14 Total purchase commitments $ 32 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, 2025. 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. Amounts included in the ROW and in the purchase commitments tables above are inclusive of contractual obligations related to our Mass Markets Fiber-to-the-Home business as of December 31, 2025 that were subsequently transferred to the buyer upon the close of the divestiture in February 2026. 91 Note 16—Other Financial Information Other Current Assets, net The following table presents details of Other current assets, net in our consolidated balance sheets: December 31, 2025 2024 (Dollars in millions) Prepaid expenses $ 30 98 Contract acquisition costs 21 26 Contract fulfillment costs 26 26 Other — 2 Total other current assets, net (1) $ 77 152 ______________________________________________________________________ (1) As of December 31, 2025, Other current assets, net excludes $ 8 million associated with the disposal group classified as held for sale. Current Liabilities Accounts Payable Included in accounts payable as of December 31, 2025 and 2024 were $ 37 million and $ 57 million, respectively, associated with capital expenditures. Other Current Liabilities The following table presents details of other current liabilities in our consolidated balance sheets: December 31, 2025 2024 (Dollars in millions) Current affiliate obligation $ 44 48 Current operating lease liability 14 15 Other 51 54 Total other current liabilities (1) $ 109 117 ______________________________________________________________________ (1) As of December 31, 2025, Other current liabilities excludes $ 4 million associated with the disposal group reclassified as held for sale. Other Liabilities The following table presents details of other noncurrent liabilities in our consolidated balance sheets: December 31, 2025 2024 (Dollars in millions) Unrecognized tax benefits $ 482 453 Deferred revenue 99 97 Noncurrent operating lease liability 51 49 Other 71 86 Total other liabilities $ 703 685 92 Note 17—Labor Union Contracts As of December 31, 2025, approximately 43 % of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW"). 99 % of our represented employees are subject to collective bargaining agreements that are scheduled to expire within the 12 month period ending December 31, 2026. Note 18—Stockholder's Equity Common Stock 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. It is our policy to record these asset transfers based on carrying values. Dividends We declared and paid the following cash dividend to QSC: Years Ended December 31, 2025 2024 2023 (Dollars in millions) Cash dividend declared to QSC $ — — 1,980 Cash dividend paid to QSC (1) — — 1,980 ______________________________________________________________________ (1) In 2023, we declared a dividend of advances to affiliate to our parent. The timing of cash payments for declared dividends to QSC is at our discretion in consultation with QSC. We may declare and pay dividends to QSC in excess of our earnings to the extent permitted by applicable law. Our debt covenants do not limit the amount of dividends we can pay to QSC. Dividends paid are reflected on our consolidated statement of cash flows as financing activities. 93 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.