Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 15, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | QWEST CORP | |
Entity Central Index Key | 68,622 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 1 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING REVENUES | ||
Operating revenues | $ 1,419 | $ 1,486 |
Operating revenues - affiliates | 711 | 676 |
Total operating revenues | 2,130 | 2,162 |
OPERATING EXPENSES | ||
Cost of services and products (exclusive of depreciation and amortization) | 707 | 720 |
Selling, general and administrative | 215 | 244 |
Operating expenses - affiliates | 216 | 227 |
Depreciation and amortization | 360 | 391 |
Total operating expenses | 1,498 | 1,582 |
OPERATING INCOME | 632 | 580 |
OTHER (EXPENSE) INCOME | ||
Interest expense | (118) | (114) |
Interest expense - affiliates, net | (13) | (15) |
Other income, net | 9 | 1 |
Total other expense, net | (122) | (128) |
INCOME BEFORE INCOME TAX EXPENSE | 510 | 452 |
Income tax expense | 130 | 174 |
NET INCOME | $ 380 | $ 278 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 6 | $ 1 |
Accounts receivable, less allowance of $49 and $47 | 577 | 646 |
Advances to affiliates | 1,138 | 1,024 |
Other | 217 | 98 |
Total current assets | 1,938 | 1,769 |
Property, plant and equipment, net of accumulated depreciation of $6,570 and $6,392 | 7,945 | 7,924 |
GOODWILL AND OTHER ASSETS | ||
Goodwill | 9,360 | 9,360 |
Other intangible assets, less accumulated amortization of $1,644 and $1,619 | 363 | 379 |
Other, net | 100 | 75 |
Total goodwill and other assets | 11,064 | 11,176 |
TOTAL ASSETS | 20,947 | 20,869 |
CURRENT LIABILITIES | ||
Current maturities of long-term debt | 17 | 17 |
Accounts payable | 300 | 317 |
Note payable - affiliate | 981 | 965 |
Accrued expenses and other liabilities | ||
Salaries and benefits | 152 | 238 |
Income and other taxes | 190 | 174 |
Other | 139 | 138 |
Current affiliate obligations, net | 81 | 82 |
Advance billings and customer deposits | 255 | 265 |
Total current liabilities | 2,115 | 2,196 |
LONG-TERM DEBT | 7,260 | 7,264 |
DEFERRED CREDITS AND OTHER LIABILITIES | ||
Deferred revenues | 101 | 128 |
Deferred income taxes, net | 1,003 | 1,001 |
Affiliate obligations, net | 843 | 861 |
Other | 80 | 82 |
Total deferred credits and other liabilities | 2,027 | 2,072 |
COMMITMENTS AND CONTINGENCIES (Note 5) | ||
STOCKHOLDER'S EQUITY | ||
Common stock - one share without par value, owned by Qwest Services Corporation | 10,050 | 10,050 |
Accumulated deficit | (505) | (713) |
Total stockholder's equity | 9,545 | 9,337 |
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | 20,947 | 20,869 |
Customer relationships | ||
Customer relationships, less accumulated amortization of $4,458 and $4,337 | $ 1,241 | $ 1,362 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Accounts receivable, allowance | $ 49 | $ 47 |
PP&E, accumulated depreciation | 6,570 | 6,392 |
Other intangible assets, accumulated amortization | $ 1,644 | $ 1,619 |
Common stock, share issued (in shares) | 1 | 1 |
Common stock, share outstanding (in shares) | 1 | 1 |
Common stock, value outstanding | $ 10,050 | $ 10,050 |
Customer relationships | ||
Customer relationships, accumulated amortization | $ 4,458 | $ 4,337 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
OPERATING ACTIVITIES | ||
Net income | $ 380 | $ 278 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 360 | 391 |
Deferred income taxes | (41) | (32) |
Provision for uncollectible accounts | 23 | 21 |
Accrued interest on affiliate note | 16 | 0 |
Changes in current assets and liabilities: | ||
Accounts receivable | 95 | 42 |
Accounts payable | 18 | 59 |
Accrued income and other taxes | 16 | 16 |
Other current assets and liabilities, net | (130) | (147) |
Other current assets and liabilities - affiliates, net | (9) | 15 |
Changes in other noncurrent assets and liabilities, net | 1 | 12 |
Changes in affiliate obligations, net | (19) | (21) |
Other, net | (1) | (10) |
Net cash provided by operating activities | 709 | 624 |
INVESTING ACTIVITIES | ||
Payments for property, plant and equipment and capitalized software | (292) | (318) |
Changes in advances to affiliates | (109) | (83) |
Proceeds from sale of property | 1 | 41 |
Net cash used in investing activities | (400) | (360) |
FINANCING ACTIVITIES | ||
Payments of long-term debt | (4) | (1) |
Dividends paid to Qwest Services Corporation | (300) | (250) |
Net cash used in financing activities | (304) | (251) |
Net increase in cash, cash equivalents and restricted cash | 5 | 13 |
Cash, cash equivalents and restricted cash at beginning of period | 3 | 7 |
Cash, cash equivalents and restricted cash at end of period | 8 | 20 |
Supplemental cash flow information: | ||
Income taxes paid, net | (171) | (205) |
Interest paid (net of capitalized interest of $7 and $7) | $ (110) | $ (101) |
CONSOLIDATED STATEMENTS OF CAS6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Statement of Cash Flows [Abstract] | ||
Interest paid, capitalized interest | $ 7 | $ 7 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY - USD ($) $ in Millions | Total | COMMON STOCK | ACCUMULATED DEFICIT |
Balance at beginning of period at Dec. 31, 2016 | $ 10,050 | $ (1,358) | |
Increase (Decrease) in Stockholder's Equity | |||
Net income | $ 278 | 278 | |
Dividends declared to Qwest Services Corporation | (250) | (250) | |
Dividend of equity interest in limited liability company to Qwest Services Corporation | (12) | ||
Balance at end of period at Mar. 31, 2017 | 8,708 | 10,050 | (1,342) |
Increase (Decrease) in Stockholder's Equity | |||
Cumulative effect of adoption of ASU 2014-09, Revenue from Contracts with Customers | Accounting Standards Update 2014-09 | 0 | ||
Balance at beginning of period at Dec. 31, 2017 | 9,337 | 10,050 | (713) |
Increase (Decrease) in Stockholder's Equity | |||
Net income | 380 | 380 | |
Dividends declared to Qwest Services Corporation | (300) | (300) | |
Dividend of equity interest in limited liability company to Qwest Services Corporation | 0 | ||
Balance at end of period at Mar. 31, 2018 | $ 9,545 | $ 10,050 | (505) |
Increase (Decrease) in Stockholder's Equity | |||
Cumulative effect of adoption of ASU 2014-09, Revenue from Contracts with Customers | Accounting Standards Update 2014-09 | $ 128 |
Background
Background | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Background General We are an integrated communications company engaged primarily in providing an array of communications services to our residential and business customers. Our communications services include local voice, broadband, private line (including special access), Ethernet, network access, information technology and other ancillary services. In certain local and regional markets, we also provide local access and fiber transport services to competitive local exchange carriers. We generate the majority of our total consolidated operating revenues from services provided in the 14 -state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming . We refer to this region as our local service area. Basis of Presentation Our consolidated balance sheet as of December 31, 2017 , which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations for the first three months of the year are not necessarily indicative of the consolidated results of operations that might be expected for the entire year. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017 . The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated. We reclassified certain prior period amounts to conform to the current period presentation. These changes had no impact on total operating revenues, total operating expenses or net income for any period. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law and in December 2017, the SEC staff issued Staff Accounting Bulletin ("SAB") 118 to provide guidance for companies that have not completed their accounting for the income tax effects of the Act. As of March 31, 2018, we have not completed our accounting for the tax effects of the Act. In order to complete our accounting for the impact of the Act, we continue to obtain, analyze and interpret additional guidance as such guidance becomes available from the U.S. Treasury Department, the Internal Revenue Service (“IRS”), state taxing jurisdictions, the Financial Accounting Standards Board (“FASB”) and other standard-setting and regulatory bodies. New guidance or interpretations may materially impact our provision for income taxes in future periods. Additional information that is needed to complete the analysis but is currently unavailable includes, but is not limited to, the amount of earnings of foreign subsidiaries, the final determination of certain net deferred tax assets subject to remeasurement and the tax treatment of such provisions of the Act by various state tax authorities. We have provisionally recognized the tax impacts related to the re-measurement of deferred tax assets and liabilities. The ultimate impact may differ from our provisional amount due to additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the Act. The change from our current provisional estimates will be reflected in our future statements of operations and could be material. We expect to complete the accounting by the time we file our 2017 U.S. corporate income tax return in the fourth quarter of 2018, although we cannot assure you of this. The Act reduced the U.S. corporate income tax rate from a maximum of 35% to 21% for all C corporations, effective January 1, 2018, and made certain changes to U.S. taxation of income earned by foreign subsidiaries, capital expenditures and various other items. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, we provisionally re-measured our net deferred tax liabilities at December 31, 2017 and recognized a tax benefit of approximately $555 million in our consolidated statement of operations for the year ended December 31, 2017. Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” . Each of these is described further below. Revenue Recognition ASU 2014-09 ("ASC 606") replaces virtually all existing GAAP on revenue recognition with a principles-based approach for determining revenue recognition using a new five step model. We adopted the new revenue recognition standard under the modified retrospective transition method and recorded a cumulative catch-up, which resulted in an increase to retained earnings of $128 million . See Note 4—Products and Services Revenues for additional information on revenue recognition. Upon adoption, we deferred (or capitalized) incremental customer contract acquisition costs and plan to recognize such costs over the average customer life, which approximates the initial contract term and anticipated renewals for contracts to which such costs relate. Our deferred contract costs for our business and consumer customers have average amortization periods of approximately 49 months and 30 months, respectively, and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we intend to assess our deferred contract cost asset for impairment on a periodic basis. Promotional bill credits, discounts and prepaid cards offered to customers as part of renewing services or entering into a new services arrangement that are paid over time and are contingent on the customer maintaining a service contract results in an extended service contract term with multiple performance obligations, which impacts the allocation and timing of revenue recognition between service revenue and revenue assigned to the customer credits. The contract asset is subsequently amortized as a reduction to service revenue over the extended contract term. Most of our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, are accounted for as operating leases. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. The adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recent Accounting Pronouncements Leases On February 25, 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which under GAAP are currently not required to be reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply. On January 25, 2018, the FASB issued ASU 2018-01, “ Leases: Land Easement Practical Expedient for Transition to ASU 2016-0 2" ("ASU 2018-01"). ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Financial Instruments On June 16, 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. Goodwill Impairment On January 26, 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment ” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. |
Long-Term Debt and Revolving Pr
Long-Term Debt and Revolving Promissory Note | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt and Revolving Promissory Note | Long-Term Debt and Revolving Promissory Note The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including unamortized discounts and premiums, unamortized debt issuance costs and (ii) note payable - affiliate: Interest Rates Maturities As of As of (Dollars in millions) Senior notes 6.125% - 7.750% 2021 - 2057 $ 7,294 7,294 Term loan 3.890% 2025 100 100 Capital lease and other obligations Various Various 32 36 Unamortized premiums, net 1 1 Unamortized debt issuance costs (150 ) (150 ) Total long-term debt 7,277 7,281 Less current maturities (17 ) (17 ) Long-term debt, excluding current maturities $ 7,260 7,264 Note payable - affiliate 5.466% 2022 $ 981 965 Note Payable - Affiliate On September 30, 2017, Qwest Corporation entered into an amended and restated revolving promissory note in the amount of $965 million with an affiliate of our ultimate parent company, CenturyLink, Inc. This note replaced and amended the original $1.0 billion revolving promissory note Qwest Corporation entered into on April 18, 2012 with the same affiliate. The outstanding principal balance owed by Qwest Corporation under this revolving promissory note and the accrued interest thereon is due and payable on demand, but if no demand is made, then on June 30, 2022. Interest is accrued on the outstanding balance during an interest period using a weighted average per annum interest rate on the consolidated outstanding debt of CenturyLink and its subsidiaries. As of March 31, 2018 , the amended and restated revolving promissory note had an outstanding balance of $981 million and bore interest at a weighted-average interest rate of 5.466% . As of March 31, 2018 and December 31, 2017 , the amended and restated revolving promissory note is reflected on our consolidated balance sheets as a current liability under "Note payable - affiliate". In accordance with the terms of the amended and restated revolving promissory note, interest shall be assessed on June 30th and December 31st (an "Interest Period"). Any assessed interest for an Interest Period that remains unpaid on the last day of the subsequent Interest Period is to be capitalized on such date and is to begin accruing interest. As of March 31, 2018 , $13 million of accrued interest is reflected in other current liabilities on our consolidated balance sheet. Covenants As of March 31, 2018 , we believe we were in compliance with the provisions and covenants of our debt agreements. |
Fair Value Disclosure
Fair Value Disclosure | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosure | Fair Value Disclosure The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: As of March 31, 2018 As of December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 7,245 6,871 7,245 7,080 |
Products and Services Revenues
Products and Services Revenues | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Products and Services Revenues | Products and Services Revenues We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary services. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services. We categorize our products, services and revenues among the following six categories: • IP and data services , which include primarily VPN data networks, Ethernet, IP and other ancillary services; • Transport and infrastructure , which include broadband, private line (including business data services) and other ancillary services; • Voice and collaboration , which includes primarily local voice, including wholesale voice, and other ancillary services; • IT and managed services, which include information technology services and managed services, which may be purchased in conjunction with our other network services; • Regulatory revenues, which consist of Universal Service Fund ("USF") and Connect America Fund ("CAF") support payments and other operating revenues. We receive federal support payments from both federal and state USF programs and from the federal CAF program. These support payments are government subsidies designed to reimburse us for various costs related to certain telecommunications services including the costs of deploying, maintaining and operating voice and broadband infrastructure in high-cost rural areas where we are not able to fully recover our costs from our customers; and • Affiliates services, we provide to our affiliates, telecommunication services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services. From time to time, we may change the categorization of our products and services. Our operating revenues for our products and services consisted of the following categories: Three Months Ended March 31, 2018 2017 (Dollars in millions) IP & Data Services $ 146 151 Transport & Infrastructure 759 769 Voice & Collaboration 460 511 IT & Managed Services 2 1 Regulatory 52 54 Affiliates services 711 676 Total operating revenues $ 2,130 2,162 We recognize revenues in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. The total amount of such surcharges and transaction taxes that we included in revenues aggregated $34 million and $33 million for the three months ended March 31, 2018 and 2017 , respectively. These USF surcharges are assigned to the products and services categories based on the underlying revenues. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent. Our operations are integrated into and reported as part of the consolidated segment data of CenturyLink. CenturyLink's chief operating decision maker ("CODM") is our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. Revenue Recognition The following table presents our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 2,130 (9 ) $ 2,121 Cost of services and products (exclusive of depreciation and amortization) 707 6 713 Selling, general and administrative 215 (1 ) 214 Income tax expense 130 (4 ) 126 Net income $ 380 (10 ) $ 370 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 217 (109 ) $ 108 Other long-term assets, net 100 (31 ) 69 Advance billing and customer deposits 255 1 256 Deferred income taxes, net 1,003 (41 ) 962 Other long-term liabilities 80 27 107 Accumulated deficit (505 ) (138 ) (643 ) Pursuant to ASU 2014-19 discussed in Note 1 above, the following table provides disaggregation of revenue from contracts with customers as of March 31, 2018 : Three Months Ended March 31, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (7) Total Revenue from Contracts with Customers IP & Data Services (1) $ 146 — 146 Transport & Infrastructure (2) 759 (26 ) 733 Voice & Collaboration (3) 460 — 460 IT & Managed Services (4) 2 — 2 Regulatory revenues (5) 52 (52 ) — Affiliate revenues (6) 711 — 711 Total revenues $ 2,130 (78 ) 2,052 Timing of Revenue Goods transferred at a point in time $ 11 Services performed over time 2,041 Total revenues from contracts with customers $ 2,052 (1 ) Includes primarily VPN data network, Ethernet, IP and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services) and ancillary revenues. (3 ) Includes local voice and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes CAF Phase I, CAF Phase 2 and federal and state USF support revenue. (6 ) Includes telecommunications and data services we bill to our affiliates. (7 ) Includes regulatory revenues, lease revenues and sublease rental income, which are not within the scope of ASC 606. The following table provides balances of customer receivables, contract assets and liabilities as of March 31, 2018 and January 1, 2018: March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 561 631 Contract liabilities 79 78 Contract assets $ 113 93 (1) Gross customer receivables of $602 million and $669 million , net of allowance for doubtful accounts of $41 million and $38 million , at March 31, 2018 and January 1, 2018, respectively. Contract liabilities constitute consideration we have received from our customers in exchange for services or products to be delivered by us in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. We recognize revenue for services when we provide the applicable service or when control is transferred. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include certain activation and certain installation charges, which we recognize as revenue over the expected contract term, which ranges from one year to over seven years depending on the service. In most cases, termination fees or other fees on existing contracts that are negotiated in conjunction with new contracts are deferred and recognized over the new contract term. We offer bundle discounts to our customers who receive certain groupings of services. These bundle discounts are included in our calculation of the total transaction price with the customer which is allocated to the various services in the bundled offering based on the standalone selling price of services included in each bundled combination. Customer contracts that include both equipment and services are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price with the customer is allocated to each performance obligation based on the relative standalone selling price of the separate performance obligation. The standalone selling price is the price we sell to similar customers. The total transaction price is the total consideration that we expect to be entitled to (excluding amounts subject to revenue constraints) in exchange for transferring the equipment and services to the customer under the existing contract. The revenue associated with each performance obligation is then recognized as earned. For example, if we receive an advance payment when we sell equipment and continuing service together, we immediately recognize as revenue the amount of the total transaction price allocated to the equipment at the time title or control is transferred to the customer. The portion of the advance payment allocated to the service based upon its relative selling price is recognized ratably over the contract term. We periodically permit other telecommunications carriers to use optical capacity on our network. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 20 years. We account for the cash consideration received on transfers of optical capacity and fiber assets and on all of the other elements deliverable under an IRU, as lease revenue, non ASC 606, ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other optical capacity assets. In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligation(s) associated with the transaction. Based on our agreement with DIRECTV, we offer this service through a sales agency relationship which we report on a net basis. We have service level commitments pursuant to contracts with certain of our customers. To the extent that such service levels are not achieved or are otherwise disputed due to performance or service issues or other service interruptions or conditions, we will estimate the amount of credits to be issued and record a reduction to revenues in the period that the service level commitment was not met. As of March 31, 2018, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $311 million . We expect to recognize approximately 98% of this revenue through 2020, with the balance recognized thereafter. The following table provides changes in our contract acquisition costs and fulfillment costs: Three Months Ended March 31, 2018 (Dollars in millions) Acquisition Costs Fulfillment Costs Beginning of period balance $ 91 37 Costs incurred 14 4 Amortization (15 ) (5 ) End of period balance $ 90 36 We expect that incremental commissions paid as a result of obtaining contracts and costs incurred to fulfill customer contracts are recoverable and therefore capitalized them as acquisition and fulfillment costs in the amount of $126 million at March 31, 2018. The amount of these capitalized costs that are anticipated to be amortized in the next twelve months are included in other current assets on the consolidated balance sheet. The amount of capitalized costs expected to be amortized beyond the next twelve months is included in other assets on our consolidated balance. Capitalized commissions and fulfillment costs are amortized based on the transfer of services to which the assets relate to which typically range from 30 months to 49 months. The amortization of capitalized commissions are included in selling, general and administrative expenses and the amortization of capitalized fulfillment costs are included in cost of services and products (exclusive of depreciation and amortization) in our consolidated statement of operations. We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is less than one year. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Pending Matters We are currently a party to various claims and legal proceedings, including the matters described below. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified in that matter. We have accrued liabilities for these matters described below where losses are deemed probable and reasonably estimable. Switched Access Disputes Subsidiaries of CenturyLink, Inc., including us, are among hundreds of companies involved in an industry-wide dispute, raised in nearly 100 federal lawsuits (filed between 2014 and 2016) that have been consolidated as In Re: IntraMTA Switched Access Charges Litigation, in the United States District Court for the Northern District of Texas for pretrial procedures. The disputes relate to switched access charges that local exchange carriers ("LECs") collect from interexchange carriers ("IXCs") for IXCs' use of LEC's access services. In the lawsuits, IXCs assert that LECs are prohibited from collecting access charges when IXCs exchange certain types of calls between mobile and wireline devices. Some of these IXCs seek refunds for access charges previously paid and declaratory relief from future access charges. In November 2015, the court rejected some of the IXCs' claims and allowed the IXCs to refile state-law claims. Many of the parties filed revised pleadings and additional motions, which remain pending. Separately, some of the defendants have petitioned the FCC to address these issues on an industry-wide basis. As both an IXC and a LEC, we both pay and assess significant amounts of the charges in question. The outcome of these disputes and lawsuits, as well as any related regulatory proceedings that could ensue, could affect our financial results and are currently not predictable. Billing Practices Suits In June 2017, a former employee filed an employment lawsuit against CenturyLink claiming that she was wrongfully terminated for alleging that CenturyLink charged some of our retail customers for products and services they did not authorize. Starting shortly thereafter and continuing since then, and based in part on the allegations made by the former employee, several legal proceedings have been filed. In June 2017, McLeod v. CenturyLink, a putative consumer class action, was filed against CenturyLink in the U.S. District Court for the Central District of California alleging that CenturyLink charged some of its retail customers for products and services they did not authorize. A number of other complaints asserting similar claims have been filed in other federal courts, as well. The lawsuits assert claims including fraud, unfair competition, and unjust enrichment. Also in June 2017, Craig. v. CenturyLink, Inc., et al., a putative securities investor class action, was filed in U.S. District Court for the Southern District of New York, alleging that CenturyLink failed to disclose material information regarding improper sales practices, and asserting federal securities law claims. A number of other cases asserting similar claims have also been filed. Both the putative consumer class actions and the putative securities investor class actions have been transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. In June 2017, CenturyLink also received several shareholder derivative demands addressing related topics. In August 2017, CenturyLink's Board of Directors formed a special litigation committee of outside directors to address the allegations of impropriety contained in the shareholder derivative demands. In April 2018, the special litigation committee concluded its review of the derivative demands and declined to take further action. Despite the special litigation committee’s decision, it is possible that one or more of the shareholders that submitted the demands could attempt to file derivative lawsuits. In July 2017, the Minnesota state attorney general filed State of Minnesota v. CenturyTel Broadband Services LLC, et al. in the Anoka County Minnesota District Court, alleging claims of fraud and deceptive trade practices relating to improper consumer sales practices. The suit seeks an order of restitution on behalf of CenturyLink customers, civil penalties, injunctive relief, and costs and fees. Additionally, we and other CenturyLink affiliates have received and responded to information requests and inquiries from other states. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings or proceedings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial in the coming 24 months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider reasonable settlement opportunities. We are subject to various federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none is reasonably expected to exceed $100,000 in fines and penalties. CenturyLink and its affiliates are involved in several legal proceedings to which we are not a party that, if resolved against them, could have a material adverse effect on their business and financial condition. As an indirect wholly-owned subsidiary of CenturyLink, Inc., our business and financial condition could be similarly affected. You can find descriptions of these legal proceedings in CenturyLink, Inc.'s quarterly and annual reports filed with the Securities and Exchange Commission. Because we are not a party to these, we have not accrued any liabilities for the matters. The matters listed above in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note 15 to the financial statements included in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2017. _____________ 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 forward-looking statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us. For more information, see “Risk Factors-Risks Relating to Legal and Regulatory Matters. Any adverse outcome of any material litigation of CenturyLink or its affiliates could have a material adverse impact on our financial condition and operating results, on the trading price of our debt securities and on our ability to access the capital markets” in Item 1A of Part I of our annual report on Form 10-K for the year ended December 31, 2017 . |
Dividends
Dividends | 3 Months Ended |
Mar. 31, 2018 | |
Dividends [Abstract] | |
Dividends | Dividends From time to time we may declare and pay dividends to our direct parent company, Qwest Services Corporation ("QSC"), sometimes in excess of our earnings to the extent permitted by applicable law. Our debt covenants do not currently limit the amount of dividends we can pay to QSC. During the three months ended March 31, 2018 and 2017 , we declared and paid dividends of $300 million and $250 million , respectively, to QSC. Dividends paid are reflected on our consolidated statements of cash flows as financing activities. On March 31, 2017, we distributed our equity interest valued at $12 million in a limited liability company to QSC. The limited liability company's sole asset was a building that was being utilized by an affiliate. |
Other Financial Information
Other Financial Information | 3 Months Ended |
Mar. 31, 2018 | |
Additional Financial Information Disclosure [Abstract] | |
Other financial information | Other Financial Information Other Current Assets The following table presents details of other current assets in our consolidated balance sheets: As of As of (Dollars in millions) Prepaid expenses $ 62 42 Deferred commissions 47 — Deferred activation and installation charges 104 49 Other 4 7 Total other current assets $ 217 98 Selected Current Liabilities Included in accounts payable at March 31, 2018 and December 31, 2017 , were $51 million and $86 million , respectively, associated with capital expenditures. |
Labor Union Contracts
Labor Union Contracts | 3 Months Ended |
Mar. 31, 2018 | |
Labor Union Contracts [Abstract] | |
Concentration risk disclosure | Labor Union Contracts As of March 31, 2018 , approximately 10,000 , or 44% , of our employees were members of various bargaining units represented by the Communication Workers of America ("CWA") and the International Brotherhood of Electrical Workers ("IBEW"). |
Background (Policies)
Background (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation policy | The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (referred to herein as affiliates) have not been eliminated. |
Recent accounting pronouncements | Recently Adopted Accounting Pronouncements In the first quarter of 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” . Each of these is described further below. Revenue Recognition ASU 2014-09 ("ASC 606") replaces virtually all existing GAAP on revenue recognition with a principles-based approach for determining revenue recognition using a new five step model. We adopted the new revenue recognition standard under the modified retrospective transition method and recorded a cumulative catch-up, which resulted in an increase to retained earnings of $128 million . See Note 4—Products and Services Revenues for additional information on revenue recognition. Upon adoption, we deferred (or capitalized) incremental customer contract acquisition costs and plan to recognize such costs over the average customer life, which approximates the initial contract term and anticipated renewals for contracts to which such costs relate. Our deferred contract costs for our business and consumer customers have average amortization periods of approximately 49 months and 30 months, respectively, and are subject to being monitored every period to reflect any significant change in assumptions. In addition, we intend to assess our deferred contract cost asset for impairment on a periodic basis. Promotional bill credits, discounts and prepaid cards offered to customers as part of renewing services or entering into a new services arrangement that are paid over time and are contingent on the customer maintaining a service contract results in an extended service contract term with multiple performance obligations, which impacts the allocation and timing of revenue recognition between service revenue and revenue assigned to the customer credits. The contract asset is subsequently amortized as a reduction to service revenue over the extended contract term. Most of our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements, are accounted for as operating leases. Income Taxes ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. Prospectively, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. The adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements. Recent Accounting Pronouncements Leases On February 25, 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which under GAAP are currently not required to be reflected on their balance sheets. ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply. On January 25, 2018, the FASB issued ASU 2018-01, “ Leases: Land Easement Practical Expedient for Transition to ASU 2016-0 2" ("ASU 2018-01"). ASU 2018-01 permits reporting companies to elect to forego reassessments of land easements that exist or expire before the entity’s adoption of ASU 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02. We are in the process of implementing a new lease administration and accounting system. We plan to adopt ASU 2016-02 and ASU 2018-01 effective January 1, 2019. The adoption of ASU 2016-02 will result in our recognition of right of use assets and lease liabilities that we have not previously recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements. Financial Instruments On June 16, 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements. We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020, but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13. Goodwill Impairment On January 26, 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment ” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above fair value, limited to the amount of goodwill assigned to the reporting unit. We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future. |
Long-Term Debt and Revolving 17
Long-Term Debt and Revolving Promissory Note (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | The following chart reflects (i) the consolidated long-term debt of Qwest Corporation and its subsidiaries, including unamortized discounts and premiums, unamortized debt issuance costs and (ii) note payable - affiliate: Interest Rates Maturities As of As of (Dollars in millions) Senior notes 6.125% - 7.750% 2021 - 2057 $ 7,294 7,294 Term loan 3.890% 2025 100 100 Capital lease and other obligations Various Various 32 36 Unamortized premiums, net 1 1 Unamortized debt issuance costs (150 ) (150 ) Total long-term debt 7,277 7,281 Less current maturities (17 ) (17 ) Long-term debt, excluding current maturities $ 7,260 7,264 Note payable - affiliate 5.466% 2022 $ 981 965 |
Fair Value Disclosure (Tables)
Fair Value Disclosure (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Schedule of carrying amounts and estimated fair values of long-term debt, excluding capital lease obligations, and input level to determine fair values | The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding capital lease and other obligations, as well as the input level used to determine the fair values indicated below: As of March 31, 2018 As of December 31, 2017 Input Level Carrying Amount Fair Value Carrying Amount Fair Value (Dollars in millions) Liabilities—Long-term debt, excluding capital lease and other obligations 2 $ 7,245 6,871 7,245 7,080 |
Products and Services Revenues
Products and Services Revenues (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of operating revenues by products and services | Our operating revenues for our products and services consisted of the following categories: Three Months Ended March 31, 2018 2017 (Dollars in millions) IP & Data Services $ 146 151 Transport & Infrastructure 759 769 Voice & Collaboration 460 511 IT & Managed Services 2 1 Regulatory 52 54 Affiliates services 711 676 Total operating revenues $ 2,130 2,162 |
Schedule of new accounting pronouncements and changes in accounting principles | The following table presents our reported results under ASC 606 and a reconciliation to results using the historical accounting method: Three Months Ended March 31, 2018 (Dollars in millions, except per share amounts and shares in thousands) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Operating revenues $ 2,130 (9 ) $ 2,121 Cost of services and products (exclusive of depreciation and amortization) 707 6 713 Selling, general and administrative 215 (1 ) 214 Income tax expense 130 (4 ) 126 Net income $ 380 (10 ) $ 370 The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method: As of March 31, 2018 (Dollars in millions) Reported Balances as of March 31, 2018 Impact of 606 ASC 605 Historical Adjusted Balances Other current assets $ 217 (109 ) $ 108 Other long-term assets, net 100 (31 ) 69 Advance billing and customer deposits 255 1 256 Deferred income taxes, net 1,003 (41 ) 962 Other long-term liabilities 80 27 107 Accumulated deficit (505 ) (138 ) (643 ) |
Disaggregation of revenue | Pursuant to ASU 2014-19 discussed in Note 1 above, the following table provides disaggregation of revenue from contracts with customers as of March 31, 2018 : Three Months Ended March 31, 2018 (Dollars in millions) Total Revenue Adjustments for Non-ASC 606 Revenue (7) Total Revenue from Contracts with Customers IP & Data Services (1) $ 146 — 146 Transport & Infrastructure (2) 759 (26 ) 733 Voice & Collaboration (3) 460 — 460 IT & Managed Services (4) 2 — 2 Regulatory revenues (5) 52 (52 ) — Affiliate revenues (6) 711 — 711 Total revenues $ 2,130 (78 ) 2,052 Timing of Revenue Goods transferred at a point in time $ 11 Services performed over time 2,041 Total revenues from contracts with customers $ 2,052 (1 ) Includes primarily VPN data network, Ethernet, IP and ancillary revenues. (2 ) Includes primarily broadband, private line (including business data services) and ancillary revenues. (3 ) Includes local voice and other ancillary revenues. (4 ) Includes IT services and managed services revenues. (5 ) Includes CAF Phase I, CAF Phase 2 and federal and state USF support revenue. (6 ) Includes telecommunications and data services we bill to our affiliates. (7 ) Includes regulatory revenues, lease revenues and sublease rental income, which are not within the scope of ASC 606. |
Contract with customer, asset and liability | The following table provides balances of customer receivables, contract assets and liabilities as of March 31, 2018 and January 1, 2018: March 31, 2018 January 1, 2018 (Dollars in millions) Customer receivables (1) $ 561 631 Contract liabilities 79 78 Contract assets $ 113 93 (1) Gross customer receivables of $602 million and $669 million , net of allowance for doubtful accounts of $41 million and $38 million , at March 31, 2018 and January 1, 2018, respectively. |
Other Financial Information (Ta
Other Financial Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Additional Financial Information Disclosure [Abstract] | |
Schedule of components other current assets | The following table presents details of other current assets in our consolidated balance sheets: As of As of (Dollars in millions) Prepaid expenses $ 62 42 Deferred commissions 47 — Deferred activation and installation charges 104 49 Other 4 7 Total other current assets $ 217 98 |
Background (Details)
Background (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2017USD ($) | Mar. 31, 2018USD ($) | |
Geographic Areas, Revenues from External Customers [Abstract] | |||
Number of states in which entity operates (states) | 14 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Provisional income tax expense (benefit) | $ (555) | ||
Accumulated deficit | (713) | $ (505) | |
Impact of 606 | Accounting Standards Update 2014-09 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Accumulated deficit | $ 128 | $ (138) | |
Business Customer | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Deferred Customer Contract, Amortization Period | 49 months | ||
Consumer Customers | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Deferred Customer Contract, Amortization Period | 30 months |
Long-Term Debt and Revolving 22
Long-Term Debt and Revolving Promissory Note (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Long-term debt | ||
Less current maturities | $ (17) | $ (17) |
Long-term debt, excluding current maturities | 7,260 | 7,264 |
Note payable - affiliate | 981 | 965 |
Qwest Corporation | ||
Long-term debt | ||
Capital lease and other obligations | 32 | 36 |
Unamortized premiums, net | 1 | 1 |
Unamortized debt issuance costs | (150) | (150) |
Total long-term debt | 7,277 | 7,281 |
Less current maturities | (17) | (17) |
Long-term debt, excluding current maturities | 7,260 | 7,264 |
Qwest Corporation | Senior notes | ||
Long-term debt | ||
Long-term debt, gross | $ 7,294 | 7,294 |
Qwest Corporation | Senior notes | Minimum | ||
Long-term debt | ||
Stated interest rate (percent) | 6.125% | |
Qwest Corporation | Senior notes | Maximum | ||
Long-term debt | ||
Stated interest rate (percent) | 7.75% | |
Qwest Corporation | Term loan | ||
Long-term debt | ||
Long-term debt, gross | $ 100 | 100 |
Stated interest rate (percent) | 3.89% | |
Qwest Corporation | Loans payable | Affiliated entity | ||
Long-term debt | ||
Weighted average interest rate (percent) | 5.466% | |
Note payable - affiliate | $ 981 | $ 965 |
Long-Term Debt and Revolving 23
Long-Term Debt and Revolving Promissory Note (Details 2) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 | Apr. 18, 2012 |
Long-term debt | |||
Note payable - affiliate | $ 981 | $ 965 | |
Qwest Corporation | Affiliated entity | Loans payable | |||
Long-term debt | |||
Debt instrument, face amount | 965 | $ 1,000 | |
Note payable - affiliate | $ 981 | $ 965 | |
Weighted average interest rate (percent) | 5.466% | ||
Interest payable, current | $ 13 |
Fair Value Disclosure (Details)
Fair Value Disclosure (Details) - Fair value measurements, nonrecurring - Fair value inputs, Level 2 - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Carrying Amount | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 7,245 | $ 7,245 |
Fair Value | ||
Liabilities | ||
Liabilities—Long-term debt, excluding capital lease and other obligations | $ 6,871 | $ 7,080 |
Products and Services Revenue25
Products and Services Revenues - Additional Information (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Number of categories of products and services | 6 | |
Universal service funds taxes and surcharges | $ 34 | $ 33 |
Number of reportable segments | 1 | |
Customer relationship period | 20 years | |
Remaining performance obligation | $ 311 | |
Capitalized contract cost, net | $ 126 | |
Minimum | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer, contract term | 1 year | |
Minimum | Contract Acquisition and Fulfillment Costs | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer, amortization period | 30 months | |
Maximum | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer, contract term | 7 years | |
Maximum | Contract Acquisition and Fulfillment Costs | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer, amortization period | 49 months |
Products and Services Revenue26
Products and Services Revenues - Operating Revenues by Category (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Products and Services Revenues | ||
Operating revenues | $ 2,130 | $ 2,162 |
IP & Data Services | ||
Products and Services Revenues | ||
Operating revenues | 146 | 151 |
Transport & Infrastructure | ||
Products and Services Revenues | ||
Operating revenues | 759 | 769 |
Voice & Collaboration | ||
Products and Services Revenues | ||
Operating revenues | 460 | 511 |
IT & Managed Services | ||
Products and Services Revenues | ||
Operating revenues | 2 | 1 |
Regulatory Revenue | ||
Products and Services Revenues | ||
Operating revenues | 52 | 54 |
Affiliate services | ||
Products and Services Revenues | ||
Operating revenues | $ 711 | $ 676 |
Products and Services Revenue27
Products and Services Revenues - Effects of ASC 606 (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Operating revenues | $ 2,130 | $ 2,162 | |
Cost of services and products (exclusive of depreciation and amortization) | 707 | 720 | |
Selling, general and administrative | 215 | 244 | |
Income tax expense | 130 | $ 174 | |
Net income | 380 | ||
Other | 217 | $ 98 | |
Other, net | 100 | 75 | |
Advance billings and customer deposits | 255 | 265 | |
Deferred income taxes, net | 1,003 | 1,001 | |
Other | 80 | 82 | |
Accumulated deficit | (505) | (713) | |
Impact of 606 | Accounting Standards Update 2014-09 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Operating revenues | (9) | ||
Cost of services and products (exclusive of depreciation and amortization) | 6 | ||
Selling, general and administrative | (1) | ||
Income tax expense | (4) | ||
Net income | (10) | ||
Other | (109) | ||
Other, net | (31) | ||
Advance billings and customer deposits | 1 | ||
Deferred income taxes, net | (41) | ||
Other | 27 | ||
Accumulated deficit | (138) | $ 128 | |
Calculated under Revenue Guidance in Effect before Topic 606 | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Operating revenues | 2,121 | ||
Cost of services and products (exclusive of depreciation and amortization) | 713 | ||
Selling, general and administrative | 214 | ||
Income tax expense | 126 | ||
Net income | 370 | ||
Other | 108 | ||
Other, net | 69 | ||
Advance billings and customer deposits | 256 | ||
Deferred income taxes, net | 962 | ||
Other | 107 | ||
Accumulated deficit | $ (643) |
Products and Services Revenue28
Products and Services Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | $ 2,130 | $ 2,162 |
Revenue Adjustments | (78) | |
Revenue from contract with customer | 2,052 | |
Transferred at Point in Time | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer | 11 | |
Transferred over Time | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Revenue from contract with customer | 2,041 | |
IP & Data Services | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 146 | 151 |
Revenue Adjustments | 0 | |
Revenue from contract with customer | 146 | |
Transport & Infrastructure | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 759 | 769 |
Revenue Adjustments | (26) | |
Revenue from contract with customer | 733 | |
Voice & Collaboration | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 460 | 511 |
Revenue Adjustments | 0 | |
Revenue from contract with customer | 460 | |
IT & Managed Services | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 2 | 1 |
Revenue Adjustments | 0 | |
Revenue from contract with customer | 2 | |
Regulatory Revenue | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 52 | 54 |
Revenue Adjustments | (52) | |
Revenue from contract with customer | 0 | |
Affiliate services | ||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||
Operating revenues | 711 | $ 676 |
Revenue Adjustments | 0 | |
Revenue from contract with customer | $ 711 |
Products and Services Revenue29
Products and Services Revenues - Contract with Customer, Asset and Liability (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Jan. 01, 2018 |
Revenue from Contract with Customer [Abstract] | ||
Customer receivables | $ 561 | $ 631 |
Contract liabilities | 79 | 78 |
Contract assets | 113 | 93 |
Accounts receivable, gross | 602 | 669 |
Allowance for doubtful accounts receivable | $ (41) | $ (38) |
Products and Services Revenue30
Products and Services Revenues - Additional Information, Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | 3 Months Ended |
Mar. 31, 2018 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 98.00% |
Expected timing of satisfaction, period | 2 years 9 months |
Products and Services Revenue31
Products and Services Revenues - Capitalized Contract Costs (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Capitalized Contract Cost [Roll Forward] | |
End of period balance | $ 126 |
Contract Acquisition Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | 91 |
Costs incurred | 14 |
Amortization | (15) |
End of period balance | 90 |
Contract Fulfillment Costs | |
Capitalized Contract Cost [Roll Forward] | |
Beginning of period balance | 37 |
Costs incurred | 4 |
Amortization | (5) |
End of period balance | $ 36 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Loss Contingencies [Line Items] | |
Number of patents allegedly infringed (minimum) | 1 |
Unfavorable regulatory action | |
Loss Contingencies [Line Items] | |
Estimate of possible loss (per proceeding) | $ 100,000 |
Subsidiaries of CenturyLink, Inc. | Interexchange carriers | |
Loss Contingencies [Line Items] | |
Number of lawsuits (approximately) | 100 |
Dividends (Details)
Dividends (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 |
Dividends [Abstract] | |||
Dividends declared and paid to Qwest Services Corporation | $ 300 | $ 250 | |
Dividend of equity interest in limited liability company to Qwest Services Corporation | $ 12 |
Other Financial Information (De
Other Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 62 | $ 42 |
Deferred commissions | 47 | 0 |
Deferred activation and installation charges | 104 | 49 |
Other | 4 | 7 |
Total other current assets | 217 | 98 |
Accounts Payable, Current [Abstract] | ||
Capital expenditures incurred and included in accounts payable | $ 51 | $ 86 |
Labor Union Contracts (Details)
Labor Union Contracts (Details) | 3 Months Ended |
Mar. 31, 2018 | |
Concentration Risk [Line Items] | |
Collective bargaining arrangement, number of unionized employees | 10,000 |
Total number of employees | Unionized employees concentration risk | |
Concentration Risk [Line Items] | |
Concentration risk percentage | 44.00% |