UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-7784

LUMEN TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)



Louisiana		72-0651161
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
100 CenturyLink Drive,
Monroe,	Louisiana	71203
(Address of principal executive offices)		(Zip Code)

(318) 388-9000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, par value $1.00 per share

LUMN

New York Stock Exchange

Preferred Stock Purchase Rights

N/A

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On October ~~29, 2021,~~31, 2022, there were ~~1,023,894,166~~1,034,582,843 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS



	Special Note Regarding Forward-Looking Statements	3
Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated Statements of Operations (Unaudited)	6
	Consolidated Statements of Comprehensive Income (Unaudited)	7
	Consolidated Balance Sheets (Unaudited)	8
	Consolidated Statements of Cash Flows (Unaudited)	9
	Consolidated Statements of Stockholders' Equity (Unaudited)	10
	Notes to Consolidated Financial Statements (Unaudited)*	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6263
Item 4.	Controls and Procedures	6263
Part II.	Other Information
Item 1.	Legal Proceedings	6364
Item 1A.	Risk Factors	6364
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6465
~~Item 5.~~	~~Other Information~~	64
Item 6.	Exhibits	6566
Signature		6667

* All references to "Notes" in this quarterly report refer to these Notes to Consolidated Financial Statements.

Table of Contents

Special Note Regarding Forward-Looking Statements

This report and other documents filed by us under the federal securities law include, and future oral or written statements or press releases by us and our management may include, forward-looking statements about our business, financial condition, operating results or prospects. These "forward-looking" statements are defined by, and are subject to the "safe harbor" protections under the federal securities laws. These statements include, among others:

•forecasts of our anticipated future results of operations, cash flows or financial position;

•statements concerning the anticipated impact of our transactions, investments, product development, participation in government programs, Quantum Fiber buildout plans, and other initiatives, including synergies or costs associated with these initiatives;

•statements about our liquidity, profitability, profit margins, tax position, tax assets, tax rates, asset values, contingent liabilities, growth opportunities, growth rates, acquisition and divestiture opportunities, business prospects, regulatory and competitive outlook, market share, product capabilities, investment and expenditure plans, business strategies, dividend and securities repurchase plans, leverage, capital allocation plans, financing alternatives and sources, and pricing plans;

•statements regarding how the health and economic challenges raised by the COVID-19 pandemic may impact our business, ~~operations, cash flows~~financial position, operating results or ~~financial position;~~prospects; and

•other similar statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts, many of which are highlighted by words such as “may,” “will,” “would,” “could,” “should,” ~~“plan,~~“plans,” “believes,” “expects,” “anticipates,” “estimates,” "forecasts," “projects,” "proposes," "targets," “intends,” “likely,” “seeks,” “hopes,” or variations or similar expressions with respect to the future.

These forward-looking statements are based upon our judgment and assumptions as of the date such statements are made concerning future developments and events, many of which are beyond our control. These forward-looking statements, and the assumptions upon which they are based, (i) are not guarantees of future results, (ii) are inherently speculative and (iii) are subject to a number of risks and uncertainties. Actual events and results may differ materially from those anticipated, estimated, projected or implied by us in those statements if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect. All of our forward-looking statements are qualified in their entirety by reference below to ~~our discussion of~~ factors that could cause our actual results to differ materially from those anticipated, estimated, projected or implied by us in those forward-looking statements. ~~Factors that could affect actual results~~These factors include but are not limited to:

•the effects of competition from a wide variety of competitive providers, including decreased demand for our more mature service offerings and increased pricing pressures;

•the effects of new, emerging or competing technologies, including those that could make our products less desirable or obsolete;

•our ability to successfully and timely attain our key operating imperatives, including simplifying and consolidating our network, simplifying and automating our service support systems, attaining our Quantum Fiber buildout plans, strengthening our relationships with customers and attaining projected cost savings;

•our ability to safeguard our network, and to avoid the adverse impact of possible cyber-attacks, security breaches, service outages, system failures, or similar events impacting our network or the availability and quality of our services;

•the effects of ongoing changes in the regulation of the communications industry, including the outcome of legislative, regulatory or judicial proceedings relating to content liability standards, intercarrier compensation, universal service, service ~~regulation,~~standards, broadband deployment, data protection, privacy and net neutrality;

Table of Contents

•our ability to effectively retain and hire key personnel and to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages;

•~~possible~~ changes in ~~the~~customer demand for our products and services, including increased demand for high-speed data transmission services;

•our ability to successfully maintain the quality and profitability of our existing product and service offerings and to introduce profitable new offerings on a timely and cost-effective basis;

•our ability to generate cash flows sufficient to fund our financial commitments and objectives, including our capital expenditures, operating costs, debt repayments, ~~dividends,~~ pension contributions and other benefits payments;

•our ability to successfully and timely implement our ~~operating plans and~~ corporate strategies, including our deleveraging strategy;

•our ability to successfully and timely consummate the pending divestiture of our ~~pending divestitures on the terms proposed,~~European, Middle Eastern and African business, to successfully and timely realize the anticipated benefits ~~therefrom~~from that divestiture and our divestitures completed in 2022, and to successfully operate our retained business ~~successfully thereafter;~~after such divestitures;

•changes in our operating plans, corporate strategies, ~~dividend payment plans~~ or ~~other~~ capital allocation plans, whether based upon changes in our cash flows, cash requirements, financial performance, financial position, market or regulatory conditions, or otherwise;

•the impact of any future material acquisitions or divestitures that we may transact;

•the negative impact of increases in the costs of our pension, healthcare, ~~for active and retired employees and~~ post-employment or other benefits, including those caused by changes in markets, interest rates, mortality rates, demographics or regulations;

•the potential negative impact of customer complaints, government investigations, security breaches or service outages impacting us or our industry;

•adverse changes in our access to credit markets on favorable terms, whether caused by changes in our financial position, lower credit ratings, unstable markets or otherwise;

•our ability to meet the terms and conditions of our debt obligations and covenants, including our ability to make transfers of cash in compliance therewith;

•our ability to maintain favorable relations with our security holders, key business partners, suppliers, vendors, landlords and financial institutions;

•our ability to meet evolving environmental, social and governance ("ESG") expectations and benchmarks, and effectively communicate and implement our ESG strategies;

•our ability to collect our receivables from, or continue to do business with, financially-troubled ~~customers, including, but not limited to, those adversely impacted by the economic dislocations caused by the COVID-19 pandemic;~~customers;

•our ability to use our net operating loss carryforwards in the amounts projected;

•our ability to continue to use or renew intellectual property used to conduct our operations;

•any adverse developments in legal or regulatory proceedings involving us;

•changes in tax, pension, healthcare or other laws or regulations, in governmental support programs, or in general government funding levels, including those arising from ~~pending proposals~~recently enacted legislation promoting broadband development;

Table of ~~the Biden Administration to increase infrastructure spending and federal income tax rates;~~Contents

•the effects of changes in accounting policies, practices or assumptions, including changes that could potentially require additional future impairment charges;

~~Table of Contents~~

•continuing uncertainties regarding the impact that COVID-19 disruptions ~~and vaccination policies~~ could have on our business, operations, cash flows and corporate initiatives;

•the effects of adverse weather, terrorism, epidemics, pandemics, rioting, vandalism, societal unrest, or other natural or man-made disasters or disturbances;

•the potential adverse effects if our internal controls over financial reporting have weaknesses or deficiencies, or otherwise fail to operate as intended;

•the effects of changes in interest rates and inflation;

•the effects of more general factors such as changes ~~in interest rates,~~ in exchange rates, in operating costs, in public policy, in the views of financial analysts, or in general market, labor, economic or ~~geo-political~~geopolitical conditions; and

•other risks referenced in the "Risk Factors" section or other portions of this report or other of our filings with the U.S. Securities and Exchange Commission (the "SEC").

Additional factors or risks that we currently deem immaterial, that are not presently known to us or that arise in the future could also cause our actual results to differ materially from our expected results. Given these uncertainties, investors are cautioned not to unduly rely upon our forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or developments, changed circumstances, or otherwise. Furthermore, any information about our intentions contained in any of our forward-looking statements reflects our intentions as of the date of such forward-looking statement, and is based upon, among other things, existing regulatory, technological, industry, competitive, economic and market conditions, and our assumptions as of such date. We may change our intentions, strategies or plans (including our ~~dividend or other~~ capital allocation plans) at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LUMEN TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions, except per share amounts, and shares in thousands)						(Dollars in millions, except per share amounts, and shares in thousands)
OPERATING REVENUE	OPERATING REVENUE	$	4,887	5,167	14,840	15,587	OPERATING REVENUE	$	4,390	4,887	13,678	14,840
OPERATING EXPENSES	OPERATING EXPENSES						OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	Cost of services and products (exclusive of depreciation and amortization)	2,151		2,236	6,402	6,703	Cost of services and products (exclusive of depreciation and amortization)	1,999		2,151	6,042	6,402
Selling, general and administrative	Selling, general and administrative	654		850	2,172	2,598	Selling, general and administrative	792		654	2,407	2,172
Gain on sale of business							Gain on sale of business	(593)		—	(593)	—
Depreciation and amortization	Depreciation and amortization	951		1,193	3,142	3,515	Depreciation and amortization	808		951	2,443	3,142
Total operating expenses	Total operating expenses	3,756		4,279	11,716	12,816	Total operating expenses	3,006		3,756	10,299	11,716
OPERATING INCOME	OPERATING INCOME	1,131		888	3,124	2,771	OPERATING INCOME	1,384		1,131	3,379	3,124
OTHER (EXPENSE) INCOME	OTHER (EXPENSE) INCOME						OTHER (EXPENSE) INCOME
Interest expense	Interest expense	(377)		(409)	(1,150)	(1,272)	Interest expense	(363)		(377)	(1,052)	(1,150)
Other (expense) income, net	Other (expense) income, net	(38)		1	48	(73)	Other (expense) income, net	(84)		(38)	(136)	48
Total other expense, net	Total other expense, net	(415)		(408)	(1,102)	(1,345)	Total other expense, net	(447)		(415)	(1,188)	(1,102)
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	716		480	2,022	1,426	INCOME BEFORE INCOME TAXES	937		716	2,191	2,022
Income tax expense	Income tax expense	172		114	497	369	Income tax expense	359		172	670	497
NET INCOME	NET INCOME	$	544	366	1,525	1,057	NET INCOME	$	578	544	1,521	1,525
BASIC AND DILUTED EARNINGS PER COMMON SHARE	BASIC AND DILUTED EARNINGS PER COMMON SHARE						BASIC AND DILUTED EARNINGS PER COMMON SHARE
BASIC	BASIC	$	0.51	0.34	1.42	0.98	BASIC	$	0.57	0.51	1.50	1.42
DILUTED	DILUTED	$	0.51	0.34	1.41	0.98	DILUTED	$	0.57	0.51	1.50	1.41
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING	WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING						WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC	BASIC	1,062,084		1,080,505	1,077,106	1,078,672	BASIC	1,013,124		1,062,084	1,011,498	1,077,106
DILUTED	DILUTED	1,069,157		1,085,666	1,083,879	1,083,368	DILUTED	1,017,013		1,069,157	1,016,281	1,083,879

See accompanying notes to consolidated financial statements.

Table of Contents

LUMEN TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Dollars in millions)
NET INCOME $ 544 366 1,525 1,057
OTHER COMPREHENSIVE INCOME (LOSS):
Items related to employee benefit plans:
Change in net actuarial loss, net of $(69), $(12), $(93) and $(37) tax 214 38 290 115
Change in net prior service cost, net of $—, $—, $(1) and $(1) tax 1 1 3 4
Curtailment loss, net of $—, $(1), $— and $(1) tax — 3 — 3
Reclassification of realized loss on interest rate swaps to net income, net of $(5), $(5), $(15) and $(10) tax 16 15 47 31
Unrealized holding (loss) gain on interest rate swaps, net of $—, $—, $— and $28 tax (1) 1 (1) (87)
Foreign currency translation adjustment, net of $13, $(21), $16 and $(2) tax (97) 49 (103) (181)
Other comprehensive income (loss) 133 107 236 (115)
COMPREHENSIVE INCOME $ 677 473 1,761 942


	Three Months Ended September 30,			Nine Months Ended September 30,
	2022		2021	2022	2021
	(Dollars in millions)
NET INCOME	$	578	544	1,521	1,525
OTHER COMPREHENSIVE INCOME (LOSS):
Items related to employee benefit plans:
Change in net actuarial loss, net of $(8), $(69), $(25) and $(93) tax	24		214	74	290
Change in net prior service cost, net of $1, $—, $1 and $(1) tax	(1)		1	(2)	3
Reclassification of realized loss on interest rate swaps to net income, net of $—, $(5), $(5) and $(15) tax	—		16	17	47
Unrealized holding gain (loss) on interest rate swaps, net of $—, $—, $—, and $— tax	—		(1)	—	(1)
Reclassification of realized loss on foreign currency translation to gain on sale of business, net of $—, $—, $—, and $— tax	112		—	112	—
Foreign currency translation adjustment, net of $28, $13, $70 and $16 tax	(120)		(97)	(245)	(103)
Other comprehensive income (loss)	15		133	(44)	236
COMPREHENSIVE INCOME	$	593	677	1,477	1,761

See accompanying notes to consolidated financial statements.

Table of Contents

LUMEN TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2021 (Unaudited) December 31, 2020
(Dollars in millions
and shares in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 635 406
Accounts receivable, less allowance of $117 and $191 1,541 1,962
Assets held for sale 8,682 —
Other 843 808
Total current assets 11,701 3,176
Property, plant and equipment, net of accumulated depreciation of $22,027 and $31,596 20,926 26,338
GOODWILL AND OTHER ASSETS
Goodwill 15,987 18,870
Other intangible assets, net 7,160 8,219
Other, net 2,534 2,791
Total goodwill and other assets 25,681 29,880
TOTAL ASSETS $ 58,308 59,394
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,501 2,427
Accounts payable 829 1,134
Accrued expenses and other liabilities
Salaries and benefits 873 1,008
Income and other taxes 280 314
Current operating lease liabilities 389 379
Interest 229 291
Other 284 328
Liabilities held for sale 2,291 —
Current portion of deferred revenue 624 753
Total current liabilities 8,300 6,634
LONG-TERM DEBT 27,260 29,410
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net 3,732 3,342
Benefit plan obligations, net 3,980 4,556
Other 3,853 4,290
Total deferred credits and other liabilities 11,565 12,188
COMMITMENTS AND CONTINGENCIES (Note 15) 0 0
STOCKHOLDERS' EQUITY
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 and 2,000 shares, issued and outstanding 7 and 7 shares — —
Common stock, $1.00 par value, authorized 2,200,000 and 2,200,000 shares, issued and outstanding 1,031,060 and 1,096,921 shares 1,031 1,097
Additional paid-in capital 19,235 20,909
Accumulated other comprehensive loss (2,577) (2,813)
Accumulated deficit (6,506) (8,031)
Total stockholders' equity 11,183 11,162
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,308 59,394
(UNAUDITED)


	September 30, 2022		December 31, 2021
	(Dollars in millions and shares in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	252	354
Accounts receivable, less allowance of $95 and $114	1,457		1,544
Assets held for sale	6,779		8,809
Other	894		829
Total current assets	9,382		11,536
Property, plant and equipment, net of accumulated depreciation of $20,391 and $19,271	20,713		20,895
GOODWILL AND OTHER ASSETS
Goodwill	15,918		15,986
Other intangible assets, net	6,436		6,970
Other, net	2,368		2,606
Total goodwill and other assets	24,722		25,562
TOTAL ASSETS	$	54,817	57,993
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	3,474	1,554
Accounts payable	1,009		758
Accrued expenses and other liabilities
Salaries and benefits	788		860
Income and other taxes	275		228
Current operating lease liabilities	396		385
Interest	184		278
Other	173		232
Liabilities held for sale	1,792		2,257
Current portion of deferred revenue	624		617
Total current liabilities	8,715		7,169
LONG-TERM DEBT	21,764		27,428
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net	4,595		4,049
Benefit plan obligations, net	3,192		3,710
Other	3,974		3,797
Total deferred credits and other liabilities	11,761		11,556
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 and 2,000 shares, issued and outstanding 7 and 7 shares	—		—
Common stock, $1.00 par value, authorized 2,200,000 and 2,200,000 shares, issued and outstanding 1,034,758 and 1,023,512 shares	1,035		1,024
Additional paid-in capital	18,221		18,972
Accumulated other comprehensive loss	(2,202)		(2,158)
Accumulated deficit	(4,477)		(5,998)
Total stockholders' equity	12,577		11,840
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	54,817	57,993

See accompanying notes to consolidated financial statements.

Table of Contents

LUMEN TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2022		2021
		(Dollars in millions)				(Dollars in millions)
OPERATING ACTIVITIES	OPERATING ACTIVITIES				OPERATING ACTIVITIES
Net income	Net income	$	1,525	1,057	Net income	$	1,521	1,525
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:				Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	3,142		3,515	Depreciation and amortization	2,443		3,142
Gain on sale of business					Gain on sale of business	(593)		—
Deferred income taxes	Deferred income taxes	431		315	Deferred income taxes	618		431
Provision for uncollectible accounts	Provision for uncollectible accounts	80		137	Provision for uncollectible accounts	99		80
Net (gain) loss on early retirement of debt		(8)		78
Share-based compensation		89		120
Net gain on early retirement of debt					Net gain on early retirement of debt	(9)		(8)
Unrealized loss on investments					Unrealized loss on investments	197		9
Stock-based compensation					Stock-based compensation	71		89
Changes in current assets and liabilities:	Changes in current assets and liabilities:				Changes in current assets and liabilities:
Accounts receivable	Accounts receivable	20		(34)	Accounts receivable	(27)		20
Accounts payable	Accounts payable	(240)		(325)	Accounts payable	45		(240)
Accrued income and other taxes	Accrued income and other taxes	7		90	Accrued income and other taxes	25		7
Other current assets and liabilities, net	Other current assets and liabilities, net	(263)		(408)	Other current assets and liabilities, net	(323)		(263)
Retirement benefits	Retirement benefits	(126)		(96)	Retirement benefits	(440)		(126)
Changes in other noncurrent assets and liabilities, net	Changes in other noncurrent assets and liabilities, net	207		287	Changes in other noncurrent assets and liabilities, net	141		207
Other, net	Other, net	30		106	Other, net	126		21
Net cash provided by operating activities	Net cash provided by operating activities	4,894		4,842	Net cash provided by operating activities	3,894		4,894
INVESTING ACTIVITIES	INVESTING ACTIVITIES				INVESTING ACTIVITIES
Capital expenditures	Capital expenditures	(2,052)		(2,971)	Capital expenditures	(2,183)		(2,052)
Proceeds from sale of property, plant and equipment and other assets		90		119
Proceeds from sale of business					Proceeds from sale of business	2,707		—
Proceeds from sale of property, plant and equipment, and other assets					Proceeds from sale of property, plant and equipment, and other assets	67		90
Other, net	Other, net	13		12	Other, net	3		13
Net cash used in investing activities		(1,949)		(2,840)
Net cash provided by (used in) investing activities					Net cash provided by (used in) investing activities	594		(1,949)
FINANCING ACTIVITIES	FINANCING ACTIVITIES				FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	Net proceeds from issuance of long-term debt	1,881		3,257	Net proceeds from issuance of long-term debt	—		1,881
Payments of long-term debt	Payments of long-term debt	(2,604)		(6,334)	Payments of long-term debt	(3,899)		(2,604)
Net (payments of) proceeds from revolving line of credit		(150)		825
Net proceeds from (payments on) revolving line of credit					Net proceeds from (payments on) revolving line of credit	80		(150)
Dividends paid	Dividends paid	(834)		(837)	Dividends paid	(780)		(834)
Repurchases of common stock	Repurchases of common stock	(909)		—	Repurchases of common stock	—		(909)
Other, net	Other, net	(52)		(83)	Other, net	(33)		(52)
Net cash used in financing activities	Net cash used in financing activities	(2,668)		(3,172)	Net cash used in financing activities	(4,632)		(2,668)
Net increase (decrease) in cash, cash equivalents and restricted cash		277		(1,170)
Net (decrease) increase in cash, cash equivalents and restricted cash					Net (decrease) increase in cash, cash equivalents and restricted cash	(144)		277
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	427		1,717	Cash, cash equivalents and restricted cash at beginning of period	409		427
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	704	547	Cash, cash equivalents and restricted cash at end of period	$	265	704
Supplemental cash flow information:	Supplemental cash flow information:				Supplemental cash flow information:
Income taxes (paid) refunded, net		$	(102)	51
Interest paid (net of capitalized interest of $39 and $60)		$	(1,144)	(1,254)
Income taxes paid, net					Income taxes paid, net	$	(58)	(102)
Interest paid (net of capitalized interest of $48 and $39)					Interest paid (net of capitalized interest of $48 and $39)	$	(1,092)	(1,144)
Supplemental noncash information regarding investing activities:	Supplemental noncash information regarding investing activities:				Supplemental noncash information regarding investing activities:
Sale of property, plant and equipment in exchange for note receivable	Sale of property, plant and equipment in exchange for note receivable	$	56	—	Sale of property, plant and equipment in exchange for note receivable	$	—	56
Cash, cash equivalents and restricted cash:	Cash, cash equivalents and restricted cash:				Cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	635	526	Cash and cash equivalents	$	252	635
Cash and cash equivalents included in Assets held for sale	Cash and cash equivalents included in Assets held for sale	39		—	Cash and cash equivalents included in Assets held for sale	—		39
Restricted cash included in Other current assets	Restricted cash included in Other current assets	2		3	Restricted cash included in Other current assets	1		2
Restricted cash included in Other, net noncurrent assets	Restricted cash included in Other, net noncurrent assets	28		18	Restricted cash included in Other, net noncurrent assets	12		28
Total	Total	$	704	547	Total	$	265	704

See accompanying notes to consolidated financial statements.

Table of Contents

LUMEN TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions except per share amounts)						(Dollars in millions except per share amounts)
COMMON STOCK	COMMON STOCK						COMMON STOCK
Balance at beginning of period	Balance at beginning of period	$	1,105	1,097	1,097	1,090	Balance at beginning of period	$	1,032	1,105	1,024	1,097
Issuance of common stock through incentive and benefit plans	Issuance of common stock through incentive and benefit plans	—		—	8	7	Issuance of common stock through incentive and benefit plans	3		—	11	8
Repurchases of common stock	Repurchases of common stock	(74)		—	(74)	—	Repurchases of common stock	—		(74)	—	(74)
Balance at end of period	Balance at end of period	1,031		1,097	1,031	1,097	Balance at end of period	1,035		1,031	1,035	1,031
ADDITIONAL PAID-IN CAPITAL	ADDITIONAL PAID-IN CAPITAL						ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period	Balance at beginning of period	20,361		21,376	20,909	21,874	Balance at beginning of period	18,459		20,361	18,972	20,909
Repurchases of common stock	Repurchases of common stock	(880)		—	(880)	—	Repurchases of common stock	—		(880)	—	(880)
Shares withheld to satisfy tax withholdings	Shares withheld to satisfy tax withholdings	(2)		(4)	(44)	(39)	Shares withheld to satisfy tax withholdings	(1)		(2)	(30)	(44)
Share-based compensation and other, net		25		33	89	132
Stock-based compensation							Stock-based compensation	23		25	71	89
Dividends declared	Dividends declared	(269)		(275)	(839)	(837)	Dividends declared	(260)		(269)	(792)	(839)
Balance at end of period	Balance at end of period	19,235		21,130	19,235	21,130	Balance at end of period	18,221		19,235	18,221	19,235
ACCUMULATED OTHER COMPREHENSIVE LOSS	ACCUMULATED OTHER COMPREHENSIVE LOSS						ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of period	Balance at beginning of period	(2,710)		(2,902)	(2,813)	(2,680)	Balance at beginning of period	(2,217)		(2,710)	(2,158)	(2,813)
Other comprehensive income (loss)	Other comprehensive income (loss)	133		107	236	(115)	Other comprehensive income (loss)	15		133	(44)	236
Balance at end of period	Balance at end of period	(2,577)		(2,795)	(2,577)	(2,795)	Balance at end of period	(2,202)		(2,577)	(2,202)	(2,577)
ACCUMULATED DEFICIT	ACCUMULATED DEFICIT						ACCUMULATED DEFICIT
Balance at beginning of period	Balance at beginning of period	(7,050)		(6,109)	(8,031)	(6,814)	Balance at beginning of period	(5,055)		(7,050)	(5,998)	(8,031)
Net income	Net income	544		366	1,525	1,057	Net income	578		544	1,521	1,525
Cumulative effect of adoption of ASU 2016-13, Measurement of Credit Losses, net of $(2) tax		—		—	—	9
Other		—		—	—	5

Balance at end of period	Balance at end of period	(6,506)		(5,743)	(6,506)	(5,743)	Balance at end of period	(4,477)		(6,506)	(4,477)	(6,506)
TOTAL STOCKHOLDERS' EQUITY	TOTAL STOCKHOLDERS' EQUITY	$	11,183	13,689	11,183	13,689	TOTAL STOCKHOLDERS' EQUITY	$	12,577	11,183	12,577	11,183
DIVIDENDS DECLARED PER COMMON SHARE	DIVIDENDS DECLARED PER COMMON SHARE	$	0.25	0.25	0.75	0.75	DIVIDENDS DECLARED PER COMMON SHARE	$	0.25	0.25	0.75	0.75

See accompanying notes to consolidated financial statements.

Table of Contents

LUMEN TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

References in the Notes to "Lumen Technologies" or "Lumen," "we," "us," the "Company," and "our" refer to Lumen Technologies, Inc. and its consolidated subsidiaries, unless the context otherwise requires. References in the Notes to "Level 3" refer to Level 3 Parent, LLC and its predecessor, Level 3 Communications, Inc., which we acquired on November 1, 2017.

(1) Background

General

We are an international facilities-based technology and communications company engaged primarily in providing a broad array of integrated products and services to our business and mass markets customers. Our specific products and services are detailed in Note 4—Revenue Recognition.

Basis of Presentation

Our consolidated balance sheet as of December 31, ~~2020,~~2021, 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~~note 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 U.S. Securities and Exchange Commission ("SEC"). However, in our opinion, the disclosures made therein are adequate to make the information presented not misleading. We believe these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first nine months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated.

To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to noncontrolling interests in other (expense) income, ~~(expense),~~ net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities.

We reclassified certain prior period amounts to conform to the current period presentation, including the ~~categorization~~recategorization of our Mass Markets revenue ~~and expenses~~by product category in our segment reporting. See Note ~~14—~~12—Segment Information for additional information. These changes had no impact on total operating revenue, total operating expenses or net income for any period.

Operating lease assets are included in other, net under goodwill and other assets on our consolidated balance sheets. Noncurrent operating lease liabilities are included in other under deferred credits and other liabilities on our consolidated balance sheets.

There were no book overdrafts included in accounts payable at September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Table of Contents

Summary of Significant Accounting Policies

Refer to the significant accounting policies described in Note 1— Background and Summary of Significant Accounting Policies to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

~~Assets Held for Sale~~

We classify assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the net assets is probable within one year. Assets and liabilities held for sale are presented separately on our consolidated balance sheets with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of cost or fair value, less costs to sell. Depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets are not recorded while these assets are classified as held for sale. For each period that assets are classified as being held for sale, they are tested for recoverability. Unless otherwise specified, the amounts and information presented in the notes do not include assets and liabilities that have been reclassified as held for sale as of September 30, 2021. ~~See Note 2—Planned Divestiture of the Latin American and ILEC Businesses for additional information.~~

Recently Adopted Accounting Pronouncements

Government Assistance

On January 1, 2022, we adopted Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2020-10”). This ASU increases transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance they receive. The ASU only impacts annual financial statement note disclosures. Therefore, the adoption of ASU 2021-10 did not have a material impact to our consolidated financial statements.

Leases

On January 1, 2022, we adopted ASU 2021-05, “Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments” (“ASU 2021-05”). This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease; and (iii) provides guidance with respect to net investments by lessors under operating leases and other related topics. The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements.

Debt

On January 1, 2021, we adopted ASU 2020-09, "“Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762~~" ("~~” (“ASU ~~2020-09"~~2020-09”). This ASU amends and supersedes various SEC ~~paragraphs~~guidance to reflect SEC Release No. 33-10762, which includes amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements.

Investments

On January 1, 2021, we adopted ASU 2020-01, "“~~Investments -~~ Investments—Equity Securities (Topic 321), ~~Investments -~~ Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) ~~- Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)~~"” ("ASU ~~2020-01"~~2020-01”). This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. As of September 30, ~~2021,~~2022, we determined there was no application or discontinuation of the equity method during the reporting ~~periods.~~periods covered by this report. The adoption of ASU 2020-01 did not have a material impact to our consolidated financial statements.

Income Taxes

On January 1, 2021, we adopted ASU 2019-12, "“Income Taxes (Topic 740): Simplifying the Accounting for Income ~~Taxes (Topic 740)~~Taxes”~~" ("~~ (“ASU ~~2019-12"~~2019-12”). This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements.

~~Measurement of Credit Losses on Financial Instruments~~Recently Issued Accounting Pronouncements

~~We adopted~~In September 2022, the Financial Accounting Standards Board (“FASB”) issued ASU ~~2016-13, "~~2022-04, ~~Measurement~~“Liabilities-Supplier Finance Program (Subtopic 405-50): Disclosure of ~~Credit Losses on Financial Instruments~~Supplier Finance Program Obligations~~" ("~~” (“ASU ~~2016-13"~~2022-04”) ~~on January 1, 2020~~. These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and ~~recognized a cumulative adjustment~~potential magnitude of program transactions. ASU 2022-04 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we are reviewing our supplier finance agreements to determine the impact to disclosures in our ~~accumulated deficit as of the date of adoption of $9 million, net of tax effect of $2 million. Please refer to Note 6—Credit Losses on Financial Instruments for more information.~~

consolidated financial statements.

Table of Contents

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”). These amendments clarify that a contractual restriction on the sales of an investment in equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2022-03 to have an impact to our consolidated financial statements.

~~Recently Issued~~

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings (“TDR”) and Vintage Disclosures” (“ASU 2022-02”). These amendments eliminate the TDR recognition and measurement guidance, enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. ASU 2022-02 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2022-02 to have an impact to our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging-Portfolio Layer Method” (ASU 2022-01). The ASU expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. ASU 2022-01 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2022-01 to have an impact to our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting ~~Pronouncements~~for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. ASU 2021-08 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted. As of September 30, 2022, we do not expect ASU 2021-08 to have an impact to our consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): ~~Scope~~Scope"" ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2021-01 also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. These amendments ~~are effective immediately and~~ may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2021-01 provides ~~option guidance~~optional expedients for a limited time to ease the potential burden in accounting for reference rate reform. Based on our review of our key material contracts through September 30, ~~2021, we do not expect~~2022, ASU 2021-01 todoes not have a material impact ~~on the consolidated financial statements.~~

~~In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04" or "Reference Rate Reform"), designed~~ to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period. Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. ASU 2020-04 provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. Based on our ~~review of our key material contracts through September 30, 2021, we do not expect ASU 2020-04 to have a material impact on the~~ consolidated financial statements.

(2) ~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses

Latin American Business

On ~~July 25, 2021,~~August 1, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen Technologies, Inc., ~~entered into a definitive agreement to divest~~sold Lumen’s Latin American business pursuant to ~~an affiliate~~a definitive agreement dated July 25, 2021 for pre-tax cash proceeds of ~~a fund advised by Stonepeak Partners LP in exchange for~~approximately $2.7 billion, ~~cash,~~ subject to certain working capital, other purchase price adjustments and related transaction expenses (estimated to be approximately $50 million). Level 3 Parent, LLC expects to close the transaction in the first half of 2022, upon receipt of all requisite regulatory approvals in the U.S. and certain countries where the Latin American business operates, as well as the satisfaction of other customary conditions.post-closing adjustments.

~~On August 3, 2021, Lumen Technologies, Inc.~~During both the three and ~~certain~~nine months ended September 30, 2022, we recorded a $593 million pre-tax gain on disposal associated with the sale of ~~its wholly-owned subsidiaries~~our Latin American business. This gain is reflected as operating income within the consolidated statements of operations.

In connection with the sale, we entered into a ~~definitive~~transition services agreement under which we will provide to ~~divest their incumbent local exchange ("ILEC") business conducted within 20 Midwestern and Southern states to an affiliate of funds advised by Apollo Global Management, Inc.~~the purchaser various support services. In ~~exchange,~~addition, Lumen and ~~its subsidiaries would receive $7.5 billion, subject~~the purchaser entered into commercial agreements whereby they will provide each other various network and other commercial services. In addition, we agreed to ~~(i) offsets~~indemnify the purchaser for ~~assumed indebtedness (expected~~certain matters for which future cash payments by Lumen could be required. Lumen has estimated the fair value of these indemnifications to be ~~approximately $1.4 billion)~~$86 million, which is included in other long-term liabilities in our consolidated balance sheet and (ii) certain purchaser’s transaction expenses along with working capital, tax, other customary purchase price adjustments and related transaction expenses (estimated to be approximately $1.7 billion). Lumen expects to closehas reduced our gain on the ~~transaction in the second half of 2022 upon receipt of all regulatory approvals and the satisfaction of other customary closing conditions.~~sale accordingly.

The ~~actual amount~~Latin American business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of ~~our~~the transaction on August 1, 2022. As a result of closing the transaction, we derecognized net after-tax proceeds from these divestitures could vary substantially from the amounts we currently estimate, particularly if we experience delays in completing the transactions or if there are changes inassets of $1.9 billion, primarily made up of property, plant and equipment, net of accumulated depreciation, of $1.7 billion, goodwill of $245 million, other ~~assumptions that impact our estimates.~~

intangible assets, net of accumulated amortization, of $140 million, and deferred income tax liabilities, net, of $154 million.

Table of Contents

We do not believe these divestiture transactions represent a strategic shift for Lumen. Therefore, neither divested business meets the criteria to be classified as a discontinued operation. As a result, we will continue to report our operating results for the Latin American and ILEC businesses (the "disposal groups") in our consolidated operating results until the transactions are closed. The pre-tax net income of the disposal groups is estimated to be as follows in the tables below:

Three Months Ended September 30,
2021 2020
Low High Low High
(Dollars in millions)
Latin American business pre-tax net income $ 59 72 36 45
ILEC business pre-tax net income 221 271 139 169
Total disposal groups pre-tax net income $ 280 343 175 214
ILEC Business

Nine Months Ended September 30,
2021 2020
Low High Low High
(Dollars in millions)
Latin American business pre-tax net income $ 131 160 108 131
ILEC business pre-tax net income 518 633 455 556
Total disposal groups pre-tax net income $ 649 793 563 687
On October 3, 2022, we and certain of our affiliates closed the sale of our incumbent local exchange ("ILEC") business primarily conducted within 20 Midwestern and Southeastern states pursuant to a definitive agreement dated August 3, 2021, as amended and supplemented to date. See Note 17—Subsequent Events for additional information regarding this divestiture.

~~As of September 30, 2021 in~~In the accompanying consolidated balance ~~sheets,~~sheet as of September 30, 2022, the assets and liabilities of our ~~Latin American and~~ ILEC ~~businesses~~business are classified as held for sale and are measured at the lower of (i) the carrying value ~~when we classified~~of the disposal ~~groups as held for sale~~group and (ii) the fair value of the disposal ~~groups,~~group, less costs to sell. Effective with the designation of ~~both disposal groups~~the ILEC business as held for sale on ~~July 25, 2021 and~~ August 3, 2021, ~~respectively,~~we suspended recording depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets ~~are not recorded~~ while these assets are classified as held for sale. We estimate that we would have recorded an additional ~~$107~~$114 million and $350 million of depreciation, intangible amortization, and amortization of right-of-use assets for the three and nine months ended September 30, 2022, respectively, and an additional $81 million of depreciation, intangible amortization, and amortization of right-of-use assets for the three and nine months ended September 30, 2021 if the ~~Latin American and~~ ILEC ~~businesses~~business did not meet the held for sale criteria.

The principal components of the held for sale assets and liabilities of the ILEC business as of the dates below are as follows:


	September 30, 2022		December 31, 2021
	ILEC Business
	(Dollars in millions)
Assets held for sale(1)
Cash and cash equivalents	$	—		1
Accounts receivable, less allowance of $19 and $21	195			227
Other current assets	52			45
Property, plant and equipment, net accumulated depreciation of $8,170 and $8,303	3,651			3,491
Goodwill(2)	2,581			2,615
Other intangible assets, net	158			158
Other non-current assets	38			38
Total assets held for sale	$	6,675		6,575

Liabilities held for sale(1)
Accounts payable	$	56		64
Salaries and benefits	32			25
Income and other taxes	30			24
Interest	38			10
Current portion of deferred revenue	87			90
Other current liabilities	47			35
Long-term debt, net of discounts(3)	1,400			1,377
Pension and other post-retirement benefits(4)	27			56
Other non-current liabilities	71			141
Total liabilities held for sale	$	1,788		1,822

______________________________________________________________________

(1)As a result of the above-described sale of our Latin American business on August 1, 2022, this table excludes $2.2 billion of assets and $435 million of liabilities relating to the Latin American business. The net assets of the Latin American business were classified as held for sale on our accompanying balance sheet as of December 31, 2021.

(2)The assignment of goodwill was based on the relative fair value of the applicable reporting units prior to being classified as held for sale.

Table of Contents

(3)Long-term debt, net of discounts, as of September 30, 2022 and December 31, 2021 includes (i) $1.4 billion aggregate principal amount of 7.995% Embarq senior notes maturing in 2036, (ii) $114 million and $117 million of related unamortized discounts, respectively, and (iii) $76 million and $57 million of long-term finance lease obligations, respectively.

(4)Excludes pension obligation of approximately $2.5 billion for the ILEC business as of both September 30, 2022 and December 31, 2021, which we transferred to the purchaser of the ILEC business upon closing. As of January 1, 2022, we spun off a new pension plan (the "Lumen Pension Plan") in anticipation of this transfer. Along with the transfer of the $2.5 billion pension benefit obligation, we allocated $2.2 billion of assets to the new plan in January 2022 and contributed $319 million of additional cash to the new plan's trust in September 2022 to fully fund the pension plan. See Note 8—Employee Benefits for additional information.

As a result of our evaluation of the recoverability of the carrying value of the ILEC assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, we did not record any estimated loss on disposal during the nine months ended September 30, ~~2021. The recoverability of each disposal group will be re-evaluated each reporting period until the closing of each transaction.~~

~~Table of Contents~~

~~The principal components of the held for sale assets and liabilities as of September 30, 2021 are as follows:~~

September 30, 2021
Latin American Business ILEC Business
Total (4)
(Dollars in millions)
Assets held for sale
Cash and cash equivalents $ 37 2 39
Accounts receivable, less allowance of $3, $21 and $24 83 230 313
Other current assets 75 46 121
Property, plant and equipment, net accumulated depreciation of $445, $10,976 and $11,421 1,545 3,386 4,931
Goodwill (1)
244 2,615 2,859
Other intangible assets, net 129 158 287
Other non-current assets 71 41 112
Total assets held for sale $ 2,184 6,478 8,662
Liabilities held for sale
Accounts payable $ 76 79 155
Salaries and benefits 22 28 50
Income and other taxes 32 31 63
Interest — 38 38
Current portion of deferred revenue 28 90 118
Other current liabilities 10 43 53
Long-term debt, net of discounts (2)
— 1,367 1,367
Deferred income taxes, net 116 — 116
Pension and other post-retirement benefits (3)
2 56 58
Other non-current liabilities 126 147 273
Total liabilities held for sale $ 412 1,879 2,291

~~______________________________________________________________________~~

~~(1)The assignment of goodwill was based~~2022. For information on the ~~relative fair values of the applicable reporting units prior to being reclassified as held for sale.~~

~~(2)Long-term debt, net of discounts includes $1.4 billion of Embarq Senior notes, $118 million of related unamortized discounts and $48 million of long-term finance lease obligations.~~

~~(3)Excludes pension obligation of approximately $2.5 billion for the ILEC business as of September 30, 2021, which will be transferred to the purchaser~~October 3, 2022 disposal of the ILEC business, upon closing. As of September 30, 2021, approximately $2.2 billion, or 89%, of this pension obligation is expected to be funded through the transfer of Lumen pension plan assets to the purchaser. The remaining portion of the obligation is expected to be separately funded with cash paid by Lumen at the time of closing.

~~(4)The totals shown here exclude $20 million of assets held for sale unrelated to these divestitures.~~see Note 17—Subsequent Events.

Other

We do not believe either of these divestitures represent a strategic shift for Lumen. Therefore, neither of the divested businesses meet the criteria to be classified as a discontinued operation. As a result, we continued to report our operating results for the Latin American and ILEC businesses (the "disposal groups") in our consolidated operating results through their disposal dates of August 1, 2022 and October 3, 2022, respectively (see Note 17—Subsequent Events for additional information regarding the close of the sale of the ILEC business). The pre-tax net income of the ILEC business is estimated to be as follows in the tables below:

~~Table of Contents~~


	ILEC business pre-tax net income
	2022		2021
	(Dollars in millions)
Three Months Ended September 30,	$	164	234
Nine Months Ended September 30,	$	576	528

(3) Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, customer relationships and other intangible assets consisted of the following:

September 30, 2021 December 31, 2020
(Dollars in millions)
Goodwill $ 15,987 18,870
Indefinite-life intangible assets $ 9 278
Other intangible assets subject to amortization:
Customer relationships, less accumulated amortization of $11,571 and $11,060 5,535 6,344
Capitalized software, less accumulated amortization of $3,537 and $3,279 1,464 1,520
Trade names, patents and other, less accumulated amortization of $156 and $120 152 77
Total other intangible assets, net $ 7,160 8,219


	September 30, 2022		December 31, 2021
	(Dollars in millions)
Goodwill	$	15,918	15,986
Indefinite-lived intangible assets	$	9	9
Other intangible assets subject to amortization:
Customer relationships, less accumulated amortization of $3,579 and $11,740(1)	4,822		5,365
Capitalized software, less accumulated amortization of $3,832 and $3,624	1,498		1,459
Trade names, patents and other, less accumulated amortization of $183 and $160	107		137
Total other intangible assets, net	$	6,436	6,970

(1)

~~When we acquired Embarq Corporation ("Embarq") in 2009, we acquired certain right-of-way assets~~Certain customer relationships with a gross carrying value of $8.7 billion became fully amortized during 2021 and ~~because there~~ were no legal, regulatory, contractual or other factors that would reasonably limit the useful life of these assets, we classified them as indefinite-lived and, as such, these assets were not amortized. However, as we leverage our fiber infrastructure assets, our reliance on the legacy infrastructure (largely copper-based) acquired from Embarq is diminishing. Our recent digital transformation efforts have prompted management to reassess and ultimately change the accounting treatment of these indefinite-lived assets to align with our focus on growth products versus our declining products. As a result,retired during the first quarter of ~~2021, we reclassified an indefinite-lived intangible asset to finite-lived intangible asset.~~ 2022.

As of ~~January 1, 2021 we began amortizing~~September 30, 2022, the ~~$268 million asset over its estimated nine-year remaining life. On August 3, 2021, upon entering into a definitive agreement to divest our ILEC business, we reclassified $158 million~~gross carrying amount of ~~the $268 million asset as held for sale. At this time, we discontinued recording amortization on the portion of the finite-lived~~goodwill, customer relationships, indefinite-lived and other intangible assets that had been reclassified as held for sale (see Note 2—Planned Divestiture of the Latin American and ILEC Businesses for more information). The above-described change in the estimated remaining economic life of these assets, as modified by the subsequent reclassification of a portion thereof, resulted in an increase in amortization expense of approximately $5 million and $20 million, respectively, for the three and nine months ended September 30, 2021, and is expected to increase amortization expense by approximately $23 million for the year ending December 31, 2021. The increase in amortization expense, net of tax, (i) reduced consolidated net income by approximately $4 million and $15 million, respectively, for the three and nine month periods ending September 30, 2021, with 0 impact per basic and diluted common share for the three months ended September 30, 2021 and a $0.01 reduction per basic and diluted common share for the nine months ended September 30, 2021 and (ii) is expected to reduce consolidated net income by approximately $17 million, or $0.02 per basic and diluted common share, for the year ending December 31, 2021.was $29.9 billion.

Our goodwill was derived from numerous acquisitions where the purchase price exceeded the fair value of the net assets acquired.

Table of Contents

We assess our goodwill and other indefinite-lived intangible assets 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 any of our reporting units exceeds its fair value. Our annual impairment assessment date for goodwill is October 31, at which date we assess our reporting units. Our annual impairment assessment date for indefinite-lived intangible assets other than goodwill is December 31.

~~Table of Contents~~

Our reporting units are not discrete legal entities with discrete full financial statements. Our assets and liabilities are employed in and relate to the operations of multiple reporting units. For each reporting unit, we compare its estimated fair value of equity to its carrying value of equity that we assign to the reporting unit. If the estimated fair value of the reporting unit is greater than the carrying value, we conclude that no impairment exists. If the estimated fair value of the reporting unit is less than the carrying value, we record ana non-cash impairment equal to the excess amount. Depending on the facts and circumstances, we typically estimate the fair value of our reporting units by considering either or both of (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which ~~represents~~is based on the ~~value of~~ expected normalized cash flows of the reporting units following the discrete projection period, and (ii) a market approach, which includes the use of market multiples of publicly-traded companies whose services are comparable to ours.

~~We completed an internal reorganization in January 2021. We now, as a result, report 2 segments: Business and Mass Markets.~~ The following table shows the rollforward of goodwill assigned to our reportable segments ~~including the reorganization,~~ from December 31, ~~2020~~2021 through September 30, ~~2021:~~2022:

International and Global Accounts Enterprise Small and Medium Business Wholesale Consumer Business Mass Markets Total
(Dollars in millions)
As of December 31, 2020(1)
$ 2,555 4,738 2,808 3,114 5,655 — — 18,870
January 2021 reorganization (2,555) (4,738) (2,808) (3,114) (5,655) 12,173 6,697 —
Reclassified as held for sale(2)
— — — — — (918) (1,946) (2,864)
Effect of foreign currency exchange rate change and other — — — — — (19) — (19)
As of September 30, 2021(1)
$ — — — — — 11,236 4,751 15,987


	Business		Mass Markets	Total
	(Dollars in millions)
As of December 31, 2021(1)(2)	$	11,235	4,751	15,986

Effect of foreign currency exchange rate change and other	(68)		—	(68)
As of September 30, 2022(1)(3)	$	11,167	4,751	15,918

(1)Goodwill at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is net of accumulated impairment losses of $7.7 billion.

(2)As of December 31, 2021 these amounts excluded $2.9 billion of goodwill classified as held for sale primarily related to the August 1, 2022 divestiture of the Latin American business and ~~$12.9 billion, respectively. The change in accumulated impairment losses at~~the October 3, 2022 divestiture of the ILEC business. See Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses for additional information.

(3)As of September 30, ~~2021 is a result~~2022 these amounts excluded $2.6 billion of ~~amounts reclassified~~goodwill classified as held for sale related to ~~our planned divestitures.~~

~~(2)Includes $2.9 billion~~the October 3, 2022 divestiture of ~~goodwill, net of accumulated impairment loss reclassified as held for sale related to our pending divestitures.~~the ILEC business. See Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC ~~Businesses.~~Businesses and Note 17—Subsequent Events for additional information.

~~In January 2021, we began reporting under 2~~

Table of Contents

We report our results within two segments: Business and Mass Markets. See Note ~~14—~~12—Segment Information for more information on these segments and the underlying sales channels. ~~Since effecting this reorganization,~~As of September 30, 2022, we have ~~used 5~~four reporting units for goodwill impairment testing, which are (i) Mass Markets, (ii) North America ~~("NA")~~ Business (iii) Europe, Middle East and Africa region, ~~("EMEA"),~~and (iv) Asia Pacific region ("APAC") and (v) Latin America region ("LATAM"). Our January 2021 reorganization was considered an event or change in circumstance which required an assessment of our goodwill for impairment. We performed a qualitative impairment assessment in the first quarter of 2021 and concluded it is more likely than not that the fair value of each of our reporting units exceeded the carrying value of equity of our reporting units at January 31, 2021. Therefore, we concluded no impairment existed as of our assessment date.

~~The reclassification of held for sale assets, as described in Note 2—Planned Divestiture of~~region. Prior to its August 1, 2022 divestiture, the Latin American ~~and ILEC Businesses,~~region was also considered an event or change in circumstance which required an assessment of our goodwill for impairment as of July 31, 2021. We performed a pre-reclassification goodwill impairment test to determine whether there was an impairment prior to the reclassification of these assets and to determine the July 31, 2021 fair values to be ~~utilized for goodwill allocation regarding the disposal groups to be reclassified as assets held for sale. We concluded it was more likely than not that the fair value of each of our~~a reporting units exceeded the carrying value of equity of our reporting units at July 31, 2021. We also performed a post-reclassification goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to evaluate whether the fair value of our reporting units that will remain following the divestitures exceeds the carrying value of the equity of such reporting units after reclassification of assets held for sale.

~~Table of Contents~~

At July 31, 2021, we estimated the fair value of our 5 above-mentioned reporting units by considering both a market approach and a discounted cash flow method. We discounted the projected cash flows of our Mass Markets and Business segments using a rate that represents our weighted average cost of capital, which we determined to be approximately 6.8% as of the assessment date (which comprised an after-tax cost of debt of 2.3% and a cost of equity of 9.7%). We discounted the projected cash flows of our EMEA, LATAM and APAC reporting units using a rate that represents their estimated weighted average cost of capital, which we determined to be approximately 7.2%, 11.2% and 8.6%, respectively, as of the measurement date (which was comprised of an after-tax cost of debt of 2.6%, 5.3% and 3.6% and a cost of equity of 10.1%, 15.0% and 11.9%, respectively). We utilized company comparisons and analyst reports within the telecommunications industry which have historically supported a range of fair values derived from annualized revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") multiples between 2.1x and 5.8x and 4.8x and 14.8x, respectively. We selected a revenue and EBITDA multiple for each of our reporting units resulting in an overall company revenue and EBITDA multiple of 2.8x and 6.3x, respectively. We also reconciled the estimated fair values of the reporting units to our market capitalization as of July 31, 2021 and concluded that the indicated implied control premium of approximately 32% was reasonable based on recent market transactions. As of July 31, 2021, we determined that the estimated fair value of equity exceeded the carrying value of equity for our Mass Markets, NA Business, EMEA, LATAM and APAC reporting units by 150%, 24%, 58%, 100% and 134%, respectively. Based on our assessments performed, we concluded it was more likely than not that the fair value of each of our reporting units exceeded the carrying value of equity of our reporting units at July 31, 2021. Therefore, we concluded no impairment existed as of our assessment date.unit.

Total amortization expense for finite-lived intangible assets for the three months ended September 30, 2022 and 2021 ~~and 2020~~ totaled ~~$306~~$279 million and ~~$443~~$306 million, respectively, and for the nine months ended September 30, 2022 and 2021, totaled $830 million and ~~2020 totaled~~ $1.0 billion, ~~and $1.3 billion,~~ respectively. ~~As of September 30, 2021, the gross carrying amount of goodwill, customer relationships, capitalized software, indefinite-life and other intangible assets was $38.4 billion.~~

We estimate that total amortization expense for finite-lived intangible assets for the years ending December 31, ~~2021~~2022 through ~~2025~~2026 will be as provided in the table below. ~~As a result of reclassifying our disposal groups as being held for sale on our September 30, 2021 consolidated balance sheet,~~The amounts presented in the ~~amounts presented~~table below do not include future amortization expense for intangible assets of ~~those disposal groups.~~the ILEC business that was classified as held for sale on September 30, 2022 and sold on October 3, 2022. See Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses for more information.


		(Dollars in millions)			(Dollars in millions)
2021 (remaining three months)		$	286
2022		1,027
2022 (remaining three months)				2022 (remaining three months)	$	261
2023	2023	932		2023	978
2024	2024	842		2024	906
2025	2025	801		2025	839
2026				2026	762

Table of Contents

(4) Revenue Recognition

Product and Service Categories

~~Since the first quarter of 2021, we have categorized~~We categorize our products and services revenue among the following categories for the Business segment:

•Compute and Application Services, which include our Edge Cloud services, IT solutions, Unified Communications and Collaboration ("UC&C"), data center, content delivery network ("CDN") and ~~Managed Security~~managed security services;

•IP and Data Services, which include Ethernet, IP, and VPN data networks, including software-defined wide area networks ("SD WAN") based services, Dynamic Connections and Hyper WAN;

•Fiber Infrastructure Services, which include dark fiber, optical services and equipment; and

~~Table of Contents~~

•Voice and Other, which include Time Division Multiplexing ("TDM") voice, private line and other legacy services.

Since the first quarter of ~~2021,~~2022, we have categorized our products and services revenue among the following categories for the Mass Markets segment:

•~~Consumer~~Fiber Broadband, which includes high speed fiber-based ~~and lower speed DSL-based~~ broadband services to residential and small business customers;

•~~Small Business Group ("SBG")~~Other Broadband, which primarily includes ~~high speed fiber-based and~~ lower speed ~~DSL-based~~copper-based broadband services to residential and small ~~businesses;~~business customers; and

•Voice and Other, which ~~include primarily~~includes revenues from (i) providing local and long-distance services, ~~retail video services (including our linear and TV services),~~ professional services, and other ancillary ~~services;~~services, and

•~~Connect America Fund ("CAF") II,~~ ~~which consists of Connect America Fund Phase II payments through the end of 2021 to~~ (ii) federal broadband and state support ~~voice and broadband in FCC-designated high-cost areas.~~payments.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following tables provide total revenue by segment, sales channel and product category. They also provide 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:~~standards. The amounts in the tables below include the Latin American business revenues prior to it being sold on August 1, 2022.

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
Total revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customers Total revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customers
(Dollars in millions)
Business Segment by Sales Channel and Product Category
International and Global Accounts ("IGAM")
Compute and Application Services $ 178 (71) 107 188 (66) 122
IP and Data Services 429 — 429 431 — 431
Fiber Infrastructure Services 230 (33) 197 206 (28) 178
Voice and Other 182 — 182 188 — 188
Total IGAM Revenue 1,019 (104) 915 1,013 (94) 919
Large Enterprise
Compute and Application Services 176 (16) 160 167 (22) 145
IP and Data Services 387 — 387 393 (1) 392
Fiber Infrastructure Services 137 (11) 126 162 (12) 150
Voice and Other 232 — 232 268 — 268
Total Large Enterprise Revenue 932 (27) 905 990 (35) 955
Mid-Market Enterprise
Compute and Application Services 31 (7) 24 32 (3) 29
IP and Data Services 432 (1) 431 460 (1) 459
Fiber Infrastructure Services 53 (2) 51 54 (1) 53
Voice and Other 150 — 150 191 — 191
Table of Contents


	Three Months Ended September 30, 2022				Three Months Ended September 30, 2021
	Total Revenue		Adjustments for Non-ASC 606 revenue (1)	Total revenue from Contracts with Customers	Total Revenue	Adjustments for Non-ASC 606 revenue (1)	Total revenue from Contracts with Customers
	(Dollars in millions)
Business Segment by Sales Channel and Product Category
International and Global Accounts ("IGAM")
Compute and Application Services	$	154	(47)	107	183	(71)	112
IP and Data Services	350		—	350	431	—	431
Fiber Infrastructure	199		(33)	166	231	(33)	198
Voice and Other	150		—	150	182	—	182
Total IGAM Revenue	853		(80)	773	1,027	(104)	923

Large Enterprise
Compute and Application Services	148		(16)	132	172	(15)	157
IP and Data Services	378		—	378	394	—	394
Fiber Infrastructure	117		(11)	106	143	(11)	132
Voice and Other	201		—	201	233	—	233
Total Large Enterprise Revenue	844		(27)	817	942	(26)	916

Mid-Market Enterprise
Compute and Application Services	35		(7)	28	30	(8)	22
IP and Data Services	406		(1)	405	421	(1)	420
Fiber Infrastructure	49		(2)	47	50	(2)	48
Voice and Other	128		—	128	147	—	147
Total Mid-Market Enterprise Revenue	618		(10)	608	648	(11)	637

Wholesale
Compute and Application Services	62		(39)	23	46	(39)	7
IP and Data Services	283		—	283	297	—	297
Fiber Infrastructure	165		(28)	137	154	(30)	124
Voice and Other	392		(62)	330	394	(63)	331
Total Wholesale Revenue	902		(129)	773	891	(132)	759

Business Segment by Product Category
Compute and Application Services	399		(109)	290	431	(133)	298
IP and Data Services	1,417		(1)	1,416	1,543	(1)	1,542
Fiber Infrastructure	530		(74)	456	578	(76)	502
Voice and Other	871		(62)	809	956	(63)	893
Total Business Segment Revenue	3,217		(246)	2,971	3,508	(273)	3,235

Mass Markets Segment by Product Category
Fiber Broadband	160		(4)	156	135	—	135
Other Broadband	580		(55)	525	619	(56)	563
Voice and Other	433		(26)	407	625	(143)	482
Total Mass Markets Revenue	1,173		(85)	1,088	1,379	(199)	1,180

Total Revenue	$	4,390	(331)	4,059	4,887	(472)	4,415

Table of Contents


		Three Months Ended September 30, 2021				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021
		Total revenue		Adjustments for non-ASC 606 revenue (1)	Total revenue from contracts with customers	Total revenue	Adjustments for non-ASC 606 revenue (1)	Total revenue from contracts with customers		Total revenue		Adjustments for non-ASC 606 revenue (1)	Total revenue from contracts with customers	Total revenue	Adjustments for non-ASC 606 revenue (1)	Total revenue from contracts with customers
		(Dollars in millions)								(Dollars in millions)
Business Segment by Sales Channel and Product Category									Business Segment by Sales Channel and Product Category
International and Global Accounts ("IGAM")									International and Global Accounts ("IGAM")
Compute and Application Services									Compute and Application Services	$	521	(191)	330	547	(210)	337
IP and Data Services									IP and Data Services	1,190		—	1,190	1,287	—	1,287
Fiber Infrastructure									Fiber Infrastructure	642		(102)	540	665	(95)	570
Voice and Other									Voice and Other	495		—	495	559	—	559
Total IGAM Revenue									Total IGAM Revenue	2,848		(293)	2,555	3,058	(305)	2,753

Large Enterprise									Large Enterprise
Compute and Application Services									Compute and Application Services	473		(45)	428	515	(45)	470
IP and Data Services									IP and Data Services	1,151		—	1,151	1,192	—	1,192
Fiber Infrastructure									Fiber Infrastructure	359		(35)	324	403	(38)	365
Voice and Other									Voice and Other	622		—	622	730	—	730
Total Large Enterprise Revenue									Total Large Enterprise Revenue	2,605		(80)	2,525	2,840	(83)	2,757

Mid-Market Enterprise									Mid-Market Enterprise
Compute and Application Services									Compute and Application Services	102		(21)	81	94	(25)	69
IP and Data Services									IP and Data Services	1,229		(3)	1,226	1,291	(4)	1,287
Fiber Infrastructure									Fiber Infrastructure	148		(6)	142	156	(6)	150
Voice and Other									Voice and Other	401		—	401	461	—	461
Total Mid-Market Enterprise Revenue	Total Mid-Market Enterprise Revenue	666		(10)	656	737	(5)	732	Total Mid-Market Enterprise Revenue	1,880		(30)	1,850	2,002	(35)	1,967

Wholesale	Wholesale								Wholesale
Compute and Application Services	Compute and Application Services	46		(39)	7	47	(41)	6	Compute and Application Services	183		(118)	65	141	(120)	21
IP and Data Services	IP and Data Services	297		—	297	311	—	311	IP and Data Services	864		—	864	900	—	900
Fiber Infrastructure Services		155		(30)	125	157	(33)	124
Fiber Infrastructure									Fiber Infrastructure	480		(84)	396	463	(89)	374
Voice and Other	Voice and Other	393		(63)	330	443	(64)	379	Voice and Other	1,174		(189)	985	1,221	(188)	1,033
Total Wholesale Revenue	Total Wholesale Revenue	891		(132)	759	958	(138)	820	Total Wholesale Revenue	2,701		(391)	2,310	2,725	(397)	2,328

Business Segment by Product Category	Business Segment by Product Category								Business Segment by Product Category
Compute and Application Services	Compute and Application Services	431		(133)	298	434	(132)	302	Compute and Application Services	1,279		(375)	904	1,297	(400)	897
IP and Data Services	IP and Data Services	1,545		(1)	1,544	1,595	(2)	1,593	IP and Data Services	4,434		(3)	4,431	4,670	(4)	4,666
Fiber Infrastructure Services		575		(76)	499	579	(74)	505
Fiber Infrastructure									Fiber Infrastructure	1,629		(227)	1,402	1,687	(228)	1,459
Voice and Other	Voice and Other	957		(63)	894	1,090	(64)	1,026	Voice and Other	2,692		(189)	2,503	2,971	(188)	2,783
Total Business Segment Revenue	Total Business Segment Revenue	$	3,508	(273)	3,235	3,698	(272)	3,426	Total Business Segment Revenue	10,034		(794)	9,240	10,625	(820)	9,805

Mass Markets Segment by Product Category	Mass Markets Segment by Product Category								Mass Markets Segment by Product Category
Consumer Broadband		$	715	(52)	663	730	(56)	674
SBG Broadband		39		(4)	35	38	(3)	35
Fiber Broadband									Fiber Broadband	456		(14)	442	387	—	387
Other Broadband									Other Broadband	1,786		(166)	1,620	1,899	(166)	1,733
Voice and Other	Voice and Other	502		(20)	482	578	(27)	551	Voice and Other	1,402		(125)	1,277	1,929	(431)	1,498
CAF II		123		(123)	—	123	(123)	—
Total Mass Markets Segment		$	1,379	(199)	1,180	1,469	(209)	1,260
Total Mass Markets Revenue									Total Mass Markets Revenue	3,644		(305)	3,339	4,215	(597)	3,618

Total Revenue	Total Revenue	$	4,887	(472)	4,415	5,167	(481)	4,686	Total Revenue	$	13,678	(1,099)	12,579	14,840	(1,417)	13,423

~~Table of Contents~~

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
Total revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customers Total revenue
Adjustments for non-ASC 606 revenue (1)
Total revenue from contracts with customers
(Dollars in millions)
Business Segment by Sales Channel and Product Category
International and Global Accounts ("IGAM")
Compute and Application Services $ 536 (210) 326 581 (199) 382
IP and Data Services 1,283 — 1,283 1,300 — 1,300
Fiber Infrastructure Services 662 (95) 567 610 (82) 528
Voice and Other 555 — 555 594 — 594
Total IGAM Revenue 3,036 (305) 2,731 3,085 (281) 2,804
Large Enterprise
Compute and Application Services 513 (47) 466 481 (61) 420
IP and Data Services 1,170 — 1,170 1,194 (2) 1,192
Fiber Infrastructure Services 388 (38) 350 436 (35) 401
Voice and Other 729 — 729 818 — 818
Total Large Enterprise Revenue 2,800 (85) 2,715 2,929 (98) 2,831
Mid-Market Enterprise
Compute and Application Services 103 (23) 80 101 (14) 87
IP and Data Services 1,323 (4) 1,319 1,389 (3) 1,386
Fiber Infrastructure Services 166 (6) 160 165 (8) 157
Voice and Other 472 — 472 598 — 598
Total Mid-Market Enterprise Revenue 2,064 (33) 2,031 2,253 (25) 2,228
Wholesale
Compute and Application Services 143 (120) 23 138 (120) 18
IP and Data Services 899 — 899 942 — 942
Fiber Infrastructure Services 464 (89) 375 462 (93) 369
Voice and Other 1,219 (188) 1,031 1,343 (197) 1,146
Total Wholesale Revenue 2,725 (397) 2,328 2,885 (410) 2,475
Business Segment by Product Category
Compute and Application Services 1,295 (400) 895 1,301 (394) 907
IP and Data Services 4,675 (4) 4,671 4,825 (5) 4,820
Fiber Infrastructure Services 1,680 (228) 1,452 1,673 (218) 1,455
Voice and Other 2,975 (188) 2,787 3,353 (197) 3,156
Total Business Segment Revenue $ 10,625 (820) 9,805 11,152 (814) 10,338
Mass Markets Segment by Product Category

~~Table of Contents~~

(1)Includes regulatory revenue and lease revenue not within the scope of ASC 606.

Table of Contents

Operating Lease ~~Revenue~~Income

Lumen Technologies leases various dark fiber, office facilities, colocation facilities, switching facilities, other network sites and service equipment to third parties under operating leases. Lease and sublease income are included in operating revenue in our consolidated statements of operations.

For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, our gross rental income was ~~$329~~$307 million and ~~$332~~$329 million, respectively, which represents approximately 7% ~~and 6%, respectively,~~ of our operating revenue for both the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021. For the nine months ended September 30, 2022, and 2021, ~~and2020,~~ our gross rental income was ~~$988~~$978 million and ~~$998~~$988 million, respectively, which represents approximately 7% ~~and 6%, respectively,~~ of our operating revenue for both the nine months ended September 30, ~~2021~~2022 and~~2020.~~ 2021.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities, net of amounts ~~reclassified~~classified as held for sale, as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
		(Dollars in millions)				(Dollars in millions)
Customer receivables~~(2)~~(1)	Customer receivables~~(2)~~(1)	$	1,491	1,889	Customer receivables~~(2)~~(1)	$	1,407	1,493
Contract assets~~(3)~~(2)	Contract assets~~(3)~~(2)	71		108	Contract assets~~(3)~~(2)	56		73
Contract liabilities~~(4)~~(3)	Contract liabilities~~(4)~~(3)	703		950	Contract liabilities~~(4)~~(3)	714		680

(1)Reflects gross customer receivables of ~~$1.6~~$1.5 billion and ~~$2.1~~$1.6 billion, net of allowance for credit losses of ~~$107~~$84 million and ~~$174~~$102 million, at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~(2)As of September 30, 2021, amount excludes~~ These amounts exclude customer receivables, net, ~~reclassified~~classified as held for sale of ~~$293 million.~~$175 million at September 30, 2022 (related to the ILEC business) and $288 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

~~(3)~~(2)~~As of September 30, 2021, amount excludes~~These amounts exclude contract assets ~~reclassified~~classified as held for sale of ~~$10 million.~~$7 million at September 30, 2022 (related to the ILEC business) and $9 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

~~(4)~~(3)~~As of September 30, 2021, amount excludes~~These amounts exclude contract liabilities ~~reclassified~~classified as held for sale of ~~$165 million.~~$76 million at September 30, 2022 (related to the ILEC business) and $161 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

~~Table of Contents~~

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue ~~and liabilities held for sale~~ in our consolidated balance sheets. During the three and nine months ended September 30, 2022, we recognized $47 million and $494 million, respectively, of revenue that was included in contract liabilities of $841 million as of January 1, 2022, including contract liabilities that were classified as held for sale. During the three and nine months ended September 30, 2021, we recognized $61 million and $544 million, respectively, of revenue that was included in contract liabilities of $950 million as of January 1, 2021. ~~During the three and nine months ended September 30, 2020, we recognized $58 million and $612 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020.~~

Performance Obligations

As of September 30, ~~2021, our estimated~~2022, we expect to recognize approximately $5.9 billion of revenue ~~expected to be recognized~~ in the future related to performance obligations associated with existing customer contracts that are partially or wholly ~~unsatisfied is approximately $6.4 billion.~~unsatisfied. We expect to recognize approximately ~~70%~~69% of this revenue through ~~2023,~~2024, with the balance recognized thereafter.

Table of Contents

These amounts exclude (i) 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), (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606, and (iii) the value of unsatisfied performance obligations for contracts which relate to our ~~planned~~recently completed divestitures.

Contract Costs

The following tables provide changes in our contract acquisition costs and fulfillment costs:


		Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			Three Months Ended September 30, 2022			Three Months Ended September 30, 2021
		Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs		Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
		(Dollars in millions)			(Dollars in millions)			(Dollars in millions)			(Dollars in millions)
Beginning of period balance(1)	Beginning of period balance(1)	$	271	217	300	219	Beginning of period balance(1)	$	208	188	271	217
Costs incurred	Costs incurred	43		37	45	35	Costs incurred	45		38	43	37
Amortization	Amortization	(51)		(37)	(53)	(37)	Amortization	(49)		(35)	(51)	(37)
Reclassified as held for sale(1)		(35)		(31)	—	—
Change in contract costs held for sale							Change in contract costs held for sale	3		(2)	(35)	(31)
End of period balance(2)	End of period balance(2)	$	228	186	292	217	End of period balance(2)	$	207	189	228	186


		Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
		Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs		Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
		(Dollars in millions)			(Dollars in millions)			(Dollars in millions)			(Dollars in millions)
Beginning of period balance(3)	Beginning of period balance(3)	$	289	216	326	221	Beginning of period balance(3)	$	222	186	289	216
Costs incurred	Costs incurred	132		112	130	105	Costs incurred	129		119	132	112
Amortization	Amortization	(158)		(111)	(164)	(109)	Amortization	(150)		(113)	(158)	(111)
Reclassified as held for sale(1)		(35)		(31)	—	—
Change in contract costs held for sale							Change in contract costs held for sale	6		(3)	(35)	(31)
End of period balance(2)	End of period balance(2)	$	228	186	292	217	End of period balance(2)	$	207	189	228	186

(1)~~Represents~~Beginning of period balance for the ~~amounts reclassified~~three months ended September 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale ~~related~~of $31 million and $33 million, respectively (related to ~~our planned divestitures. See Note 2—Planned Divestiture of~~both the Latin American business and the ILEC ~~Businesses.~~business).

(2)Ending of period balance for the three and nine months ended September 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $28 million and $35 million, respectively, related to the ILEC business. Ending of period balance for the three and nine months ended September 30, 2021 excludes acquisition costs and fulfillment costs classified as held for sale of $35 million and $31 million, respectively (related to both the Latin American business and the ILEC business).

(3)Beginning of period balance for the nine months ended September 30, 2022 excludes acquisition costs and fulfillment costs classified as held for sale of $34 million and $32 million, respectively (related to both the Latin American business and the ILEC business).

~~Table of Contents~~

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 services to customers, including labor and materials consumed for these activities.

Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average ~~customer~~contract life of approximately 3032 months for mass markets customers and 30 months for business customers. Amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next 12 months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next 12twelve months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on ~~an annual~~a quarterly basis.

~~(5) Leases~~

~~We primarily lease to or from third parties various office facilities and colocation facilities, equipment and dark fiber. Leases with an initial term~~Table of ~~12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.~~Contents

During the third quarter of 2021, we rationalized our lease footprint and ceased using 23 leased property locations that were underutilized. We determined that we no longer needed the leased space and, due to the limited remaining term on the contracts, concluded that we had neither the intent nor ability to sublease the properties. For the three and nine month periods ending September 30, 2021, we incurred accelerated lease costs of approximately $35 million. In conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and may incur additional costs in future periods.

~~(6)~~(5) Credit Losses on Financial Instruments

~~In accordance with ASC 326, "Financial Instruments - Credit Losses,~~"To assess our expected credit losses on financial instruments, we aggregate financial assets with similar risk characteristics to ~~align our expected credit losses with the~~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 each reporting period. Financial~~change. We separately evaluate financial assets that do not share risk characteristics with other financial ~~assets are evaluated separately.~~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 ~~use~~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.

In conjunction with our January 2021 internal reorganization, as referenced in Note 14—Segment Information, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms and their historical and expected credit loss patterns. Additionally, we reassessed our historical loss period for the segment portfolio reorganization.

If there is aan unexpected deterioration of a customer's financial condition or ~~if future default rates~~an unexpected change in ~~general differ from currently anticipated default rates (including changes caused by COVID-19),~~economic conditions, including macroeconomic events, we ~~may~~assess the need to adjust the allowance for credit ~~losses, which~~losses. Any such resulting adjustments would affect earnings in the period that adjustments are made.

~~Table of Contents~~

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 ~~the~~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.~~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 for the nine months ended September 30, ~~2021:~~2022:


		Business		Mass Markets	Total		Business		Mass Markets	Total
		(Dollars in millions)					(Dollars in millions)
Beginning balance at January 1, 2021(1)		$	109	82	191
As of December 31, 2021(1)						As of December 31, 2021(1)	$	88	26	114
Provision for expected losses	Provision for expected losses	36		44	80	Provision for expected losses	19		80	99
Write-offs charged against the allowance	Write-offs charged against the allowance	(58)		(94)	(152)	Write-offs charged against the allowance	(47)		(88)	(135)
Recoveries collected	Recoveries collected	11		11	22	Recoveries collected	9		5	14
Reclassified as held for sale(2)		(8)		(16)	(24)
Ending balance at September 30, 2021		$	90	27	117
Foreign currency exchange rate change adjustment						Foreign currency exchange rate change adjustment	1		—	1
Change in allowance in assets held for sale						Change in allowance in assets held for sale	(1)		3	2
Ending balance at September 30, 2022(2)						Ending balance at September 30, 2022(2)	$	69	26	95

~~______________________________________________________________________~~

(1)As ~~described in Note 14—Segment Information, we completed an internal reorganization in January 2021. As~~of December 31, 2021, these amounts excluded a ~~result of this change,~~$24 million allowance for credit losses previously included in the Consumer and Business portfolio of $70 million related to consumer and $12 million related to our small business group, respectively, were reclassified to the Mass Markets allowance for credit losses on January 1, 2021.

~~(2)Represents the amounts reclassified~~classified as held for sale related to ~~our pending divestitures.~~the August 1, 2022 divestiture of the Latin American business and the divestiture of the ILEC business. See Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses.

(2)As of September 30, 2022, these amounts excluded a $19 million allowance for credit losses classified as held for sale related to the divestiture of the ILEC business. See Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses.

For the nine months ended September 30, 2021, we decreased our allowance for credit losses for our business and mass markets accounts receivable portfolios primarily due to higher write-off activity year to date 2021 with the easing of prior delays due to COVID-19 related restrictions in 2020 and lower receivable balances.

2523

Table of Contents

~~(7)~~(6) Long-Term Debt and Credit Facilities

The following ~~chart~~table reflects the consolidated long-term debt of Lumen Technologies, Inc. and its subsidiaries as of the dates indicated below, including unamortized discounts and premiums ~~net and~~ unamortized debt issuance ~~costs, but excluding intercompany debt:~~costs:


		Interest Rates(1)	Maturities(1)	September 30, 2021		December 31, 2020		Interest Rates(1)	Maturities(1)	September 30, 2022		December 31, 2021
				(Dollars in millions)						(Dollars in millions)
Senior Secured Debt: (2)	Senior Secured Debt: (2)						Senior Secured Debt: (2)
Lumen Technologies, Inc.	Lumen Technologies, Inc.						Lumen Technologies, Inc.
Revolving Credit Facility~~(7)~~(3)	Revolving Credit Facility~~(7)~~(3)	LIBOR + 2.00%	2025	$	—	150	Revolving Credit Facility~~(7)~~(3)	LIBOR + 2.00%	2025	$	280	200
Term Loan A(3) (7)		LIBOR + 2.00%	2025	1,064		1,108
Term Loan A-1(3) (7)		LIBOR + 2.00%	2025	304		316
Term Loan B(4) (7)		LIBOR + 2.25%	2027	4,913		4,950
Term Loan A(4)							Term Loan A(4)	LIBOR + 2.00%	2025	1,006		1,050
Term Loan A-1(4)							Term Loan A-1(4)	LIBOR + 2.00%	2025	287		300
Term Loan B(5)							Term Loan B(5)	LIBOR + 2.25%	2027	4,863		4,900
Senior notes	Senior notes	4.000%	2027	1,250		1,250	Senior notes	4.000%	2027	1,250		1,250
Subsidiaries:	Subsidiaries:						Subsidiaries:
Level 3 Financing, Inc.	Level 3 Financing, Inc.						Level 3 Financing, Inc.
Tranche B 2027 Term Loan(5) (7)		LIBOR + 1.75%	2027	3,111		3,111
Tranche B 2027 Term Loan(6)							Tranche B 2027 Term Loan(6)	LIBOR + 1.75%	2027	2,411		3,111
Senior notes	Senior notes	3.400% - 3.875%	2027 - 2029	1,500		1,500	Senior notes	3.400% - 3.875%	2027 - 2029	1,500		1,500
Embarq Corporation subsidiaries	Embarq Corporation subsidiaries						Embarq Corporation subsidiaries
First mortgage bonds	First mortgage bonds	7.125% - 8.375%	2023 - 2025	138		138	First mortgage bonds	7.125% - 8.375%	2023 - 2025	137		138
Senior Notes and Other Debt:(7)	Senior Notes and Other Debt:(7)						Senior Notes and Other Debt:(7)
Lumen Technologies, Inc.	Lumen Technologies, Inc.						Lumen Technologies, Inc.
Senior notes	Senior notes	4.500% - 7.650%	2022 - 2042	8,414		8,645	Senior notes	4.500% - 7.650%	2023 - 2042	6,985		8,414
Subsidiaries:	Subsidiaries:						Subsidiaries:
Level 3 Financing, Inc.	Level 3 Financing, Inc.						Level 3 Financing, Inc.
Senior notes	Senior notes	3.625% - 5.375%	2025 - 2029	5,515		5,515	Senior notes	3.625% - 4.625%	2027 - 2029	3,940		5,515
Qwest Corporation	Qwest Corporation						Qwest Corporation
Senior notes	Senior notes	6.500% - 7.750%	2021 - 2057	2,935		3,170	Senior notes	6.500% - 7.750%	2025 - 2057	1,986		1,986
Term Loan(6) (7)		LIBOR + 2.00%	2027	215		215
Term loan(8)							Term loan(8)	LIBOR + 2.00%	2027	215		215
Qwest Capital Funding, Inc.	Qwest Capital Funding, Inc.						Qwest Capital Funding, Inc.
Senior notes	Senior notes	6.875% - 7.750%	2028 - 2031	255		352	Senior notes	6.875% - 7.750%	2028 - 2031	255		255
Embarq Corporation and subsidiary
Senior note(8)		7.995%	2036	—		1,437

Finance lease and other obligations	Finance lease and other obligations	Various	Various	352		295	Finance lease and other obligations	Various	Various	324		347
Unamortized premiums (discounts), net				23		(78)
Unamortized (discounts) premiums, net							Unamortized (discounts) premiums, net			(8)		21
Unamortized debt issuance costs	Unamortized debt issuance costs			(228)		(237)	Unamortized debt issuance costs			(193)		(220)
Total long-term debt	Total long-term debt			29,761		31,837	Total long-term debt			25,238		28,982
Less current maturities	Less current maturities			(2,501)		(2,427)	Less current maturities			(3,474)		(1,554)
Long-term debt, excluding current maturities	Long-term debt, excluding current maturities			$	27,260	29,410	Long-term debt, excluding current maturities			$	21,764	27,428

______________________________________________________________________

(1)As of September 30, ~~2021.~~2022.

(2)See Note 6—7—Long-Term Debt and Credit Facilities in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for a description of certain parent or subsidiary guarantees and liens securing this debt.

(3)The Revolving Credit Facility had interest rates of 5.080% and 2.103% as of September 30, 2022 and December 31, 2021, respectively.

(4)Term Loans A and A-1 had interest rates of ~~2.085%~~5.115% and ~~2.147%~~2.104% as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~(4)~~(5)Term Loan B had interest rates of ~~2.335%~~5.365% and ~~2.397%~~2.354% as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(6)The Level 3 Tranche B 2027 Term Loan had interest rates of 4.865% and 1.854% as of September 30, 2022 and December 31, 2021, respectively.

2624

Table of Contents

~~(5)~~(7)The ~~Tranche B 2027 Term Loan had interest rates~~table excludes $1.4 billion of ~~1.835% and 1.897%~~indebtedness under Embarq Corporation's 7.995% senior notes maturing in 2036 that was classified as held for sale as of September 30, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021, and was assumed by the third-party purchaser as of October 3, 2022 concurrent with the sale of the ILEC business. See Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses and Note 17—Subsequent Events.

~~(6)~~(8)The Qwest Corporation Term Loan had interest rates of ~~2.090%~~5.120% and ~~2.150%~~2.110% as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~(7)See Note 1— Background for our considerations of the impact of Reference Rate Reform on our debt subject to rate reference changes from LIBOR.~~

~~(8)As of September 30, 2021, the Embarq Senior notes have been reclassified as held for sale. See Note 2—Planned Divestiture of the Latin American and ILEC Businesses for more information.~~

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of September 30, ~~2021~~2022 (excluding unamortized (discounts) premiums, ~~(discounts),~~ net, and unamortized debt issuance costs), maturing during the following years. As a result of reclassifying our disposal groups as being held for sale on our September 30, 2021 consolidated balance sheet, the amounts presented below do not include maturities of the debt obligations of those disposal groups. See Note 2—Planned Divestiture of the Latin American and ILEC Businesses for more information.:


		(Dollars in millions) (1)			(Dollars in millions)(1)
2021 (remaining three months)		$	989
2022		1,551
2022 (remaining three months)(2)				2022 (remaining three months)(2)	$	1,908
2023	2023	977		2023	153
2024	2024	1,158		2024	158
2025	2025	2,927		2025	2,343
2026 and thereafter		22,364
2026				2026	1,276
2027 and thereafter				2027 and thereafter	19,601
Total long-term debt	Total long-term debt	$	29,966	Total long-term debt	$	25,439

______________________________________________________________________

(1)~~As of September 30, 2021, these~~These amounts exclude $1.5 billion of debt and finance lease obligations related to the ILEC business that ~~have been reclassified~~were classified as held for ~~sale.~~sale as of September 30, 2022. See Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses for more information.

(2)These amounts include $1.9 billion aggregate principal senior notes for which we issued redemption notices on September 26, 2022. See Note 17—Subsequent Events for information on additional debt repayments made since September 30, 2022 and the classification of the related aggregate principal as current maturities of long-term debt on our consolidated balance sheets as of September 30, 2022.

Borrowings and Repayments

During the nine months ended September 30, ~~2021,~~2022, Lumen ~~Technologies, Inc.~~borrowed $2.4 billion from, and made repayments of $2.3 billion to, its affiliates repaid or redeemed approximately $2.7 billion of their respective debt obligations, which primarily included a $97 million repayment at maturity of Qwest Capital Funding, Inc. senior notes, $150 million of payments onRevolving Credit Facility. We used our net revolving credit ~~facility,~~draws and available cash to repay the following aggregate principal amount of indebtedness through a ~~$1.2 billion repayment~~combination of tender offers, redemptions, prepayments and payments at maturity of Lumen senior unsecured notes, a $900 million redemption of Level 3 Financing, Inc. senior notes, a $235 million redemption of Qwest Corporation senior notes, and $94 million of year to date payments on our term loans.maturity. These transactions resulted in a net gain of $8$9 million.

~~New Issuances~~


Debt	Period of Repayment	(Dollars in millions)
Lumen Technologies, Inc.
5.800% Senior Notes due 2022 (at Maturity)	Q1 2022	$	1,400
Level 3 Financing, Inc.
Tranche B 2027 Term Loan	Q3 2022	700
5.375% Senior Notes due 2025	Q3 2022	800
5.250% Senior Notes due 2026	Q3 2022	775
Other	Q3 2022	30
Total Debt Repayments		$	3,705

~~On June 15, 2021, Lumen Technologies, Inc. issued $1.0 billion aggregate principal amount of 5.375% Senior Notes due 2029 (the "2029 Notes"). The net proceeds were used, together with cash~~For information on ~~hand, to repay at maturity our outstanding $1.2 billion 6.450% Senior Notes, Series S, due 2021.~~

On January 13, 2021, Level 3 Financing, Inc. issued $900 million aggregate principal amount of 3.750% Sustainability-Linked Senior Notes due 2029 (the "Sustainability-Linked Notes"). The net proceeds were used, together with cash on hand, to redeem $900 million of its outstanding senior note indebtedness. The Sustainability-Linked Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.additional debt repayment since September 30, 2022, see Note 17—Subsequent Events.

2725

Table of Contents

Covenants

Certain of our debt instruments contain affirmative and negative covenants. Debt at Lumen Technologies, Inc. and Level 3 Financing, Inc. contains more extensive covenants including, among other things and subject to certain exceptions, restrictions on the ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with affiliates, dispose of assets and merge or consolidate with any other person. Also, Lumen Technologies, Inc. and certain of its affiliates will be required to offer to purchase certain of their respective outstanding debt under defined circumstances in connection with specified "change of control" transactions.

Certain of our debt instruments contain cross-payment default or cross-acceleration provisions.

Compliance

As of September 30, ~~2021,~~2022, Lumen Technologies, Inc. believes it and its subsidiaries were in compliance with the provisions and financial covenants in their respective material debt agreements in all material respects.

~~(8) Property, Plant and Equipment~~

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

September 30, 2021 December 31, 2020
(Dollars in millions)
Land $ 751 848
Fiber, conduit and other outside plant(1)
18,500 26,522
Central office and other network electronics(2)
15,265 20,692
Support assets(3)
7,147 8,261
Construction in progress(4)
1,290 1,611
Gross property, plant and equipment 42,953 57,934
Accumulated depreciation (22,027) (31,596)
Net property, plant and equipment $ 20,926 26,338
~~_______________________________________________________________________________~~

~~(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, cable landing stations, data centers, 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.~~

As of September 30, 2021, we classified certain property, plant and equipment, net as held for sale and discontinued recording depreciation on these disposal groups. See Note 2—Planned Divestiture of the Latin American and ILEC Businesses for more information.

We recorded depreciation expense of $645 million and $2.1 billion for the three and nine months ended September 30, 2021 and $750 million and $2.2 billion for the three and nine months ended September 30, 2020.

~~(9)~~(7) 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 ~~workload demands~~workloads due to ~~the loss of customers purchasing~~reduced demand for certain services.

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


	Severance
	(Dollars in millions)
Balance at December 31, ~~2020~~2021	$	~~103~~36
Accrued to expense	—2
Payments, net	~~(64)~~(30)
Balance at September 30, ~~2021~~2022	$	398

~~(10)~~(8) Employee Benefits

For detailed description of the various defined benefit pension plans (qualified and non-qualified), post-retirement benefits plans and defined contribution plan we sponsor, see Note ~~10—~~11—Employee Benefits to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Net periodic~~As of January 1, 2022, we spun off a new pension ~~benefit expense (income) for~~plan (the "Lumen Pension Plan") from the Lumen Combined Pension Plan ("(the "Combined Pension Plan") in anticipation of the sale of the ILEC business, as described further in Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses. The Lumen Pension Plan covers approximately 2,500 active plan participants along with 19,000 other participants. At the time of the spin-off, the Lumen Pension Plan had a pension benefit obligation of $2.5 billion and assets of $2.2 billion. In addition, the December 31, 2021 actuarial (loss) gain and prior service cost included in accumulated other comprehensive loss was allocated between the Lumen Pension Plan and the Lumen Combined Pension ~~Plan" or~~Plan. Following a revaluation of the ~~"Plan"~~pension obligation and pension assets for the Lumen Pension Plan, in preparation for the closing of the sale of the ILEC business, we contributed approximately $319 million of cash to the Lumen Pension Plan trust to fully fund the pension plan in September 2022. The amounts allocated to the Lumen Pension Plan were subject to adjustment up to the closing of the sale of the ILEC business on October 3, 2022, at which time the plan was transferred along with the rest of the assets and liabilities of the ILEC business. We recognized pension costs related to both plans through the sale of the ILEC business, at which time balances related to the Lumen Pension Plan will be reflected in the calculation of our gain on the sale of the business.

Table of Contents

Net periodic benefit (income) expense for the Combined Pension Plan and the Lumen Pension Plan (together the "Pension Plans") includes the following components:


								Pension Plans
		Combined Pension Plan						Three Months Ended September 30,			Nine Months Ended September 30,
		Three Months Ended September 30,			Nine Months Ended September 30,			2022		2021	2022	2021
		2021		2020	2021	2020
		(Dollars in millions)						(Dollars in millions)
Service cost	Service cost	$	14	15	42	44	Service cost	$	11	14	34	42
Interest cost	Interest cost	49		81	148	243	Interest cost	53		49	155	148
Expected return on plan assets	Expected return on plan assets	(138)		(147)	(414)	(445)	Expected return on plan assets	(100)		(138)	(302)	(414)
Settlements		57		—	57	—
Settlement charges							Settlement charges	—		57	—	57

Recognition of prior service credit	Recognition of prior service credit	(2)		(3)	(7)	(7)	Recognition of prior service credit	(3)		(2)	(8)	(7)
Recognition of actuarial loss	Recognition of actuarial loss	49		50	147	152	Recognition of actuarial loss	32		49	99	147
Net periodic pension benefit expense (income)		$	29	(4)	(27)	(13)
Net periodic pension (income) expense							Net periodic pension (income) expense	$	(7)	29	(22)	(27)

Net periodic benefit expense for our post-retirement benefit plans includes the following components:


		Post-Retirement Benefit Plans						Post-Retirement Benefit Plans
		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions)						(Dollars in millions)
Service cost	Service cost	$	4	4	11	11	Service cost	$	3	4	8	11
Interest cost	Interest cost	12		17	35	57	Interest cost	15		12	45	35
Recognition of prior service cost	Recognition of prior service cost	3		4	11	12	Recognition of prior service cost	1		3	5	11
Recognition of actuarial loss	Recognition of actuarial loss	2		—	4	—	Recognition of actuarial loss	—		2	—	4
Curtailment loss		—		7	—	7

Net periodic post-retirement benefit expense	Net periodic post-retirement benefit expense	$	21	32	61	87	Net periodic post-retirement benefit expense	$	19	21	58	61

Service costs for our Pension Plans and post-retirement benefit plans are included in the cost of services and products and selling, general and administrative line items on our consolidated statements of operations and all other costs listed above are included in other (expense) income, net on our consolidated statements of ~~operations.~~operations for the three and nine months ended September 30, 2022 and 2021.

Our ~~pension plan contains~~Pension Plans contain provisions that allow us, from time to time, to offer lump sum payment options to certain former employees in settlement of their future retirement benefits. We record an accounting settlement charge, consisting of the recognition of certain deferred costs of the pension plan associated with these lump sum payments, only if, in the aggregate, they exceed or are probable to exceed the sum of the annual service and interest costs for the plan’s net periodic pension benefit cost, which represents the settlement accounting threshold. During the third quarter, we determined lump sum pension settlement payments for 2021 are expected to exceed the settlement threshold. As a result, in the third quarter of 2021 we recognized a non-cash settlement charge of $57 million to accelerate the recognition of a portion of the previously unrecognized actuarial losses in the qualified pension plan, which is reflected in other (expense) income, net in our consolidated statement of operations for the three and nine months ended September 30, 2021. This non-cash charge reduced our recorded net income and increased our recorded accumulated deficit, with an offset to accumulated other comprehensive loss in shareholders' equity. We expect to recognize an additional non-cash settlement charge in the fourth quarter of 2021, as further described in Note 20—Subsequent Events. The amount of any future non-cash settlement charges ~~after 2021~~ will be dependent on several factors, including the total amount of our future lump sum benefit payments.

As a result of our lump sum payments exceeding the settlement threshold, we also remeasured the Combined Pension Plan on September 30, 2021 using the same assumptions as of December 31, 2020, with the exception of increasing the discount rate to 2.79% from 2.43%. The remeasurement resulted in a decrease in the Plan's unfunded status, which we recognized with a corresponding decrease in our net actuarial loss recognized in accumulated other comprehensive loss of $133 million, net of tax effect of $43 million.

In 2020, we recognized a one-time curtailment accounting charge of $7 million upon remeasurement of our medical obligations under our post-retirement benefit plans for the three and nine months ended September 30, 2020.

Benefits paid by the Combined Pension Plan are paid through a trust that holds ~~all~~the plan's assets. Benefit payments for the Lumen Pension Plan were made from the Combined Pension Plan trust through May of 2022, and from the ~~Plan's assets.~~ Lumen Pension Plan trust starting in June of 2022.

The amount of required contributions to the Combined Pension Plan in 2022 and beyond will depend on a variety of factors, most of which are beyond our control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations. ~~We occasionally make voluntary contributions in addition to required contributions.~~ Based on current laws and circumstances, we do not believe we are required to make any additional contributions to the Combined Pension Plan in ~~2021, but~~2022, and we ~~could~~do not expect to make voluntary contributions to the trust for the Combined Pension Plan in ~~the upcoming years.~~2022.

3027

Table of Contents

~~(11)~~(9) Earnings Per Common Share

Basic and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021 were calculated as follows:


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions, except per share amounts, shares in thousands)						(Dollars in millions, except per share amounts, shares in thousands)
Income (Numerator):
Income (Numerator)							Income (Numerator)
Net income	Net income	$	544	366	1,525	1,057	Net income	$	578	544	1,521	1,525
Net income applicable to common stock for computing basic earnings per common share	Net income applicable to common stock for computing basic earnings per common share	544		366	1,525	1,057	Net income applicable to common stock for computing basic earnings per common share	578		544	1,521	1,525
Net income as adjusted for purposes of computing diluted earnings per common share	Net income as adjusted for purposes of computing diluted earnings per common share	$	544	366	1,525	1,057	Net income as adjusted for purposes of computing diluted earnings per common share	$	578	544	1,521	1,525
Shares (Denominator):	Shares (Denominator):						Shares (Denominator):
Weighted-average number of shares:	Weighted-average number of shares:						Weighted-average number of shares:
Outstanding during period	Outstanding during period	1,079,917		1,097,496	1,095,223	1,096,017	Outstanding during period	1,034,786		1,079,917	1,031,687	1,095,223
Non-vested restricted stock	Non-vested restricted stock	(17,833)		(16,991)	(18,117)	(17,345)	Non-vested restricted stock	(21,662)		(17,833)	(20,189)	(18,117)
Weighted-average shares outstanding for computing basic earnings per common share		1,062,084		1,080,505	1,077,106	1,078,672
Weighted average shares outstanding for computing basic earnings per common share							Weighted average shares outstanding for computing basic earnings per common share	1,013,124		1,062,084	1,011,498	1,077,106
Incremental common shares attributable to dilutive securities:	Incremental common shares attributable to dilutive securities:						Incremental common shares attributable to dilutive securities:
Shares issuable under convertible securities	Shares issuable under convertible securities	10		10	10	10	Shares issuable under convertible securities	10		10	10	10
Shares issuable under incentive compensation plans	Shares issuable under incentive compensation plans	7,063		5,151	6,763	4,686	Shares issuable under incentive compensation plans	3,879		7,063	4,773	6,763
Number of shares as adjusted for purposes of computing diluted earnings per common share	Number of shares as adjusted for purposes of computing diluted earnings per common share	1,069,157		1,085,666	1,083,879	1,083,368	Number of shares as adjusted for purposes of computing diluted earnings per common share	1,017,013		1,069,157	1,016,281	1,083,879
Basic earnings per common share	Basic earnings per common share	$	0.51	0.34	1.42	0.98	Basic earnings per common share	$	0.57	0.51	1.50	1.42
Diluted earnings per common share	Diluted earnings per common share	$	0.51	0.34	1.41	0.98	Diluted earnings per common share	$	0.57	0.51	1.50	1.41

Our calculation of diluted earnings per common share excludes unvested restricted stock awards that are antidilutive as a result of unrecognized compensation cost. Such shares were ~~3.9~~12.9 million and ~~0.4~~3.9 million for the three months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively,~~10.4 million and 3.0 million ~~and 4.0 million~~ for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~(12)~~(10) Fair Value of Financial Instruments

Our financial instruments consist of cash, cash equivalents, ~~and~~ restricted cash, accounts receivable, accounts payable, long-term debt ~~excluding~~(excluding finance lease and other ~~obligations, and~~obligations), interest rate swap ~~contracts.~~contracts, certain investments and certain indemnification obligations. Due primarily to their short-term nature, the carrying amounts of our cash, cash equivalents, ~~and~~ restricted cash, accounts receivable and accounts payable 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 used following the 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.

Table of Contents

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 assets and liabilities as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

September 30, 2021 December 31, 2020
Input
Level Carrying
Amount Fair
Value Carrying
Amount Fair
Value
(Dollars in millions)
Long-term debt, excluding finance lease and other obligations(1)
2 $ 29,409 30,309 31,542 33,217
Interest rate swap contracts (see Note 13) 2 $ 47 47 107 107


		September 30, 2022			December 31, 2021
	Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value
		(Dollars in millions)
Equity securities(1)	1	$	47	47	—	—
Long-term debt, excluding finance lease and other obligations(2)	2	$	24,914	21,934	28,635	29,221
Interest rate swap contracts (see Note 11)	2	$	—	—	25	25
Indemnifications related to the sale of the Latin American business	3	$	86	86	—	—

______________________________________________________________________

(1)For the three and nine months ended September 30, 2022, we recognized $83 million of loss on equity securities in other (expense) income, net in our consolidated statements of operations.

(2)As of September 30, 2022 and December 31, 2021, these amounts exclude $1.4 billion aggregate principal amount of ~~carrying amount~~debt for both periods and ~~$1.5~~$0.7 billion and $1.6 billion, respectively, of fair value of debt ~~that has been reclassified~~classified as held for ~~sale.~~sale related to the ILEC business. See Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses for more information.

Table of Contents

Investment Held at Net Asset Value

We hold an investment in a limited partnership created as a holding company for various investments, including a portion of the colocation and data center business that we divested in 2017. The limited partnership has sole discretion as to the amount and timing of distributions of the underlying assets. As of September 30, 2022, the underlying investments held by the limited partnership are traded in active markets and as such, we account for our investment in the limited partnership using net asset value ("NAV"). The investments held by the limited partnership were subject to lock-up agreements that restricted the sale or distribution of certain underlying assets prior to July 2022 and October 2022. The restrictions on one of the investments held by the limited partnership expired on July 29, 2022, and we received a distribution of 11.5 million shares of publicly-traded common stock, which were valued within our net asset value at $130 million at June 30, 2022 and are reflected in our fair value table as of September 30, 2022, as seen above. The restriction on the remaining underlying investment expired on October 12, 2022. However, no shares have been distributed to date. Subject to restrictions imposed by law and other provisions of the limited partnership agreement, the general partner has the sole discretion as to the amounts and timing of distributions to partners. The following table summarizes the net asset value of our investment in this limited partnership.


	As of September 30, 2022		As of December 31, 2021
	Net Asset Value
	(Dollars in millions)
Investment in limited partnership(1)	$	55	299

(1)For the three and nine months ended September 30, 2022, we recognized $43 million and $114 million, respectively, of loss on investment, reflected in other (expense) income, net in our consolidated statements of operations. For both the three and nine months ended September 30, 2021, we recognized $9 million of loss on investment, reflected in other (expense) income, net in our consolidated statements of operations.

~~(13)~~(11) Derivative Financial Instruments

From time to time, we use derivative financial instruments, primarily interest rate swaps, to manage our exposure to fluctuations in interest rates. Our primary objective in managing interest rate risk is to decrease the volatility of our earnings and cash flows affected by changes in the underlying rates. We have floating rate long-term debt (see Note 7—6—Long-Term Debt and Credit Facilities). These obligations expose us to variability in interest payments due to changes in interest rates. If interest rates increase, our interest expense increases. Conversely, if interest rates decrease, our interest expense also decreases. ~~We have~~Through their expiration on June 30, 2022, we designated ~~our currently outstanding~~the interest rate swap agreements described below as cash flow hedges. ~~As described further below, under~~Under these hedges, we ~~receive~~received variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the lives of the agreements without exchange of the underlying notional amount. The change in the fair value of the interest rate swap agreements iswas reflected in accumulated other comprehensive income ("AOCI") and ~~as described below, is~~was subsequently reclassified into earnings in the period that the hedged transaction ~~affects~~affected earnings by virtue of qualifying as effective cash flow hedges. We do not use derivative financial instruments for speculative purposes.

In 2019, we entered into variable-to-fixed interest rate swap agreements to hedge the interest on $4.0 billion notional amount of floating rate debt. As of ~~September 30, 2021 and~~ December 31, ~~2020,~~2021, we evaluated the effectiveness of our remaining hedges quantitatively and ~~any~~determined that hedges ~~we had entered into at the time~~in effect on such date qualified as effective hedge relationships. During the nine months ended September 30, 2022, all of these swap agreements expired.

We may be exposed to credit-related losses in the event of non-performance by counterparties. The counterparties to any of the financial derivatives we enter into are major institutions with investment grade credit ratings. We evaluate counterparty credit risk before entering into any hedge transaction and continue to closely monitor the financial market and the risk that our counterparties will default on their obligations as part of our quarterly qualitative effectiveness evaluation.

Amounts accumulated in AOCI related to derivatives are indirectly recognized in earnings as periodic settlement payments are made throughout the term of the swaps.

3230

Table of Contents

The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, as follows (in millions):

September 30, 2021 December 31, 2020
Derivatives designated as Balance Sheet Location Fair Value
Cash flow hedging contracts Other current and noncurrent liabilities $ 47 107

~~The amount of unrealized losses recognized in AOCI consists of the following (in millions):~~

Derivatives designated as hedging instruments 2021 2020
Cash flow hedging contracts
Three Months Ended September 30, $ 1 (1)
Nine Months Ended September 30, $ 1 115

September 30, 2022

December 31, 2021

Derivatives designated as

Balance Sheet Location

Fair Value

Cash flow hedging contracts

Other current and noncurrent liabilities

—

The amount of realized losses reclassified from AOCI to the statement of operations consists of the following

(in millions):


Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	2021		2020	Derivatives designated as hedging instruments	2022		2021
Cash flow hedging contracts	Cash flow hedging contracts				Cash flow hedging contracts
Three Months Ended September 30,	Three Months Ended September 30,	$	21	20	Three Months Ended September 30,	$	—	21
Nine Months Ended September 30,	Nine Months Ended September 30,	$	62	41	Nine Months Ended September 30,	$	22	62

Amounts ~~currently~~ included in AOCI ~~will be~~at the beginning of the period were reclassified into earnings ~~prior to~~upon the ~~ongoing settlements~~settlement of ~~these~~the cash flow hedging contracts ~~until~~during the nine months ended September 30, 2022. ~~We estimate that $47~~For the nine months ended September 30, 2022, $19 million of net losses on the interest rate swaps ~~(based on the estimated LIBOR curve as of September 30, 2021) will be~~have been reflected in our consolidated statements of operations ~~within~~upon settlement of the ~~next 12 months.~~agreements in the first half of 2022.

~~(14)~~

Table of Contents

(12) Segment Information

~~Jeff Storey,~~We report our chief operating decision maker ("CODM"), made changes to our segment and customer-facing sales channel reporting categories beginning in 2021 to align with operational changes designed to better support our customers. Following these changes, we now report 2results within two segments: Business and Mass Markets. ~~The~~

Under our Business segment ~~includes 4~~we provide products and services to meet the needs of our enterprise and wholesale customers under four distinct sales channels: International and Global Accounts, Large Enterprise, Mid-Market Enterprise and Wholesale. These changes also include both the creation of new product categories and the realignment of products and services within previously reported product categories to better reflect product life cycles and our go-to-market approach. For Business segment revenue, we report the following product categories: Compute and Application Services, IP and Data Services, Fiber Infrastructure Services and Voice and Other, in each case through the sales channels outlined above. ~~For~~The Business segment included the results of our Latin American business prior to the closing of its sale on August 1, 2022.

Under our Mass Markets Segment, we provide products and services to residential and small business customers. Following the completion of the FCC's Connect America Fund II ("CAF II") program at December 31, 2021, we recategorized our products used to report our Mass Markets segment revenue ~~we report~~and currently use the following ~~product~~ categories: ~~Consumer~~Fiber Broadband, ~~SBG~~Other Broadband and Voice and ~~Other and CAF II.~~Other. See detailed descriptions of these product and service categories in Note 4—Revenue Recognition.

As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and ~~the~~directly associated selling, general and administrative costs (primarily salaries and commissions). Shared costs are managed separately and included in "Operations and Other" in the tables below. As referenced above, we reclassified certain prior period amounts to conform to the current period presentation. See Note 1— Background for additional detail on these changes.

~~At September 30, 2021, we had the following 2 reportable segments:~~

•~~Business Segment:~~ ~~Under our Business segment, we provide our products and services under 4 distinct sales channels to meet the needs of our enterprise and commercial customers; and~~

•~~Mass Markets Segment:~~ ~~Under our Mass Markets segment, we provide products and services to consumer and small business customers.~~

The following tables summarize our segment results for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, based on the segment categorization we were operating under at September 30, ~~2021.~~2022.


		Three Months Ended September 30, 2021							Three Months Ended September 30, 2022
		Business		Mass Markets	Total Segments	Operations and Other	Total		Business		Mass Markets	Total Segments	Operations and Other	Total
		(Dollars in millions)							(Dollars in millions)
Revenue	Revenue	$	3,508	1,379	4,887	—	4,887	Revenue	$	3,217	1,173	4,390	—	4,390
Expenses:	Expenses:							Expenses:
Cost of services and products	Cost of services and products	868		36	904	1,247	2,151	Cost of services and products	792		25	817	1,182	1,999
Selling, general and administrative	Selling, general and administrative	296		125	421	233	654	Selling, general and administrative	263		169	432	360	792
Less: share-based compensation		—		—	—	(27)	(27)
Gain on sale of business								Gain on sale of business	—		—	—	(593)	(593)
Less: stock-based compensation								Less: stock-based compensation	—		—	—	(23)	(23)
Total expense	Total expense	1,164		161	1,325	1,453	2,778	Total expense	1,055		194	1,249	926	2,175
Total adjusted EBITDA	Total adjusted EBITDA	$	2,344	1,218	3,562	(1,453)	2,109	Total adjusted EBITDA	$	2,162	979	3,141	(926)	2,215

Three Months Ended September 30, 2020
Business Mass Markets Total Segments Operations and Other Total
(Dollars in millions)
Revenue $ 3,698 1,469 5,167 — 5,167
Expenses:
Cost of services and products 912 55 967 1,269 2,236
Selling, general and administrative 299 148 447 403 850
Less: share-based compensation — — — (31) (31)
Total expense 1,211 203 1,414 1,641 3,055
Total adjusted EBITDA $ 2,487 1,266 3,753 (1,641) 2,112

~~The following tables summarize our segment results for the nine months ended September 30, 2021 and 2020, based on the segment categorization we were operating under at September 30, 2021.~~

Nine Months Ended September 30, 2021
Business Mass Markets Total Segments Operations and Other Total
(Dollars in millions)
Revenue $ 10,625 4,215 14,840 — 14,840
Expenses:
Cost of services and products 2,611 118 2,729 3,673 6,402
Selling, general and administrative 900 408 1,308 864 2,172
Less: share-based compensation — — — (89) (89)
Total expense 3,511 526 4,037 4,448 8,485
Total adjusted EBITDA $ 7,114 3,689 10,803 (4,448) 6,355


	Three Months Ended September 30, 2021
	Business		Mass Markets	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue	$	3,508	1,379	4,887	—	4,887
Expenses:
Cost of services and products	867		36	903	1,248	2,151
Selling, general and administrative	293		128	421	233	654
Less: stock-based compensation	—		—	—	(27)	(27)
Total expense	1,160		164	1,324	1,454	2,778
Total adjusted EBITDA	$	2,348	1,215	3,563	(1,454)	2,109

3432

Table of Contents

Nine Months Ended September 30, 2020
Business Mass Markets Total Segments Operations and Other Total
(Dollars in millions)
Revenue $ 11,152 4,435 15,587 — 15,587
Expenses:
Cost of services and products 2,738 152 2,890 3,813 6,703
Selling, general and administrative 975 432 1,407 1,191 2,598
Less: share-based compensation — — — (120) (120)
Total expense 3,713 584 4,297 4,884 9,181
Total adjusted EBITDA $ 7,439 3,851 11,290 (4,884) 6,406


	Nine Months Ended September 30, 2022
	Business		Mass Markets	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue	$	10,034	3,644	13,678	—	13,678
Expenses:
Cost of services and products	2,452		91	2,543	3,499	6,042
Selling, general and administrative	845		439	1,284	1,123	2,407
Gain on sale of business	—		—	—	(593)	(593)
Less: stock-based compensation	—		—	—	(71)	(71)
Total expense	3,297		530	3,827	3,958	7,785
Total adjusted EBITDA	$	6,737	3,114	9,851	(3,958)	5,893


	Nine Months Ended September 30, 2021
	Business		Mass Markets	Total Segments	Operations and Other	Total
	(Dollars in millions)
Revenue	$	10,625	4,215	14,840	—	14,840
Expenses:
Cost of services and products	2,614		119	2,733	3,669	6,402
Selling, general and administrative	892		415	1,307	865	2,172
Less: stock-based compensation	—		—	—	(89)	(89)
Total expense	3,506		534	4,040	4,445	8,485
Total adjusted EBITDA	$	7,119	3,681	10,800	(4,445)	6,355

Revenue and Expenses

Our segment revenue includes all revenue from our 2two segments as described in more detail above. Our segment revenue is based upon each customer's classification. We report our segment revenue based upon all services provided to that segment's customers. Our segment expenses include specific cost of service expenses incurred as a direct result of providing services and products to segment customers, along with selling, general and administrative expenses that are directly associated with specific segment customers or activities. We have not allocated assets or debt to specific segments.

Table of Contents

The following items are excluded from our segment results, because they are centrally managed and not monitored by or reported to our ~~CODM~~chief operating decision maker by segment:

•network expenses not incurred as a direct result of providing services and products to segment ~~customers;~~

•customers and centrally managed expenses such as ~~Operations,~~ Finance, Human Resources, Legal, Marketing, Product Management and IT, all of which are reported as "Operations and Other"; in the tables above, and "Operations and other expenses" in the tables below;

•depreciation and amortization ~~expense~~expense;

•goodwill or other impairments;

•interest ~~expense, because we manage our financing on a consolidated basis and have not allocated assets or debt to specific segments;~~expense;

•stock-based compensation; and

•other income and expense ~~items are not monitored as a part of our segment operations.~~items.

The following table reconciles total segment adjusted EBITDA to net ~~income:~~income for the three and nine months ended September 30, 2022 and 2021:


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions)			(Dollars in millions)			(Dollars in millions)
Total segment adjusted EBITDA	Total segment adjusted EBITDA	$	3,562	3,753	10,803	11,290	Total segment adjusted EBITDA	$	3,141	3,563	9,851	10,800

Operations and other expenses							Operations and other expenses	(926)		(1,454)	(3,958)	(4,445)
Depreciation and amortization	Depreciation and amortization	(951)		(1,193)	(3,142)	(3,515)	Depreciation and amortization	(808)		(951)	(2,443)	(3,142)
Other operating expenses		(1,453)		(1,641)	(4,448)	(4,884)
Stock-based compensation	Stock-based compensation	(27)		(31)	(89)	(120)	Stock-based compensation	(23)		(27)	(71)	(89)
Operating income	Operating income	1,131		888	3,124	2,771	Operating income	1,384		1,131	3,379	3,124
Total other expense, net	Total other expense, net	(415)		(408)	(1,102)	(1,345)	Total other expense, net	(447)		(415)	(1,188)	(1,102)
Income before income taxes	Income before income taxes	716		480	2,022	1,426	Income before income taxes	937		716	2,191	2,022
Income tax expense	Income tax expense	172		114	497	369	Income tax expense	359		172	670	497
Net income	Net income	$	544	366	1,525	1,057	Net income	$	578	544	1,521	1,525

~~(15)~~

Table of Contents

(13) Commitments, Contingencies and Other Items

We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities.

Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation and non-income tax contingencies at September 30, ~~2021~~2022 aggregated to approximately ~~$104~~$78 million and are included in other current liabilities, other liabilities ~~and~~or liabilities held for sale in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows.

In this Note, when we refer to a class action as "putative" it is because a class has been alleged, but not certified, in that matter.

Principal Proceedings

Shareholder Class Action Suit

Lumen and certain Lumen Board of Directors members and officers were named as defendants in a putative shareholder class action lawsuit filed on June 12, 2018 in the Boulder County District Court of the state of Colorado, captioned Houser et al. v. CenturyLink, et al. The complaint ~~asserts~~asserted claims on behalf of a putative class of former Level 3 shareholders who became CenturyLink, Inc. shareholders as a result of our acquisition of Level 3. It ~~alleges~~alleged that the proxy statement provided to the Level 3 shareholders failed to disclose various material information of several kinds, including information about strategic revenue, customer loss rates, and customer account issues, among other items. The complaint seeks damages, costs and fees, rescission, rescissory damages, and other equitable relief. In May 2020, the court dismissed the complaint. Plaintiffs appealed that decision, and in March 2022, the ~~appeal is pending.~~appellate court affirmed the district court's order in part and reversed it in part. It then remanded the case to the district court for further proceedings.

State Tax Suits

Since 2012, a number of Missouri municipalities have asserted claims in the Circuit Court of St. Louis County, Missouri, alleging that we and several of our subsidiaries have underpaid taxes. These municipalities are seeking, among other things, declaratory relief regarding the application of business license and gross receipts taxes and back taxes from 2007 to the present, plus penalties and interest. In a February 2017 ruling in connection with 1one of these pending cases, the court entered an order awarding the plaintiffs $4 million and broadening the tax base on a going-forward basis. We appealed that decision to the Missouri Supreme Court. In December 2019, it affirmed the circuit court's order in some respects and reversed it in others, remanding the case to the circuit court for further proceedings. The Missouri Supreme Court's decision reduced our exposure in the case. In a June 2021 ruling in 1one of the pending cases, another trial court awarded the cities of Columbia and Joplin approximately $55 million, plus statutory interest. ~~We have appealed that decision to~~On appeal, the Missouri Court of ~~Appeals. That appeal is pending. If~~Appeals affirmed in part and reversed in part, vacated the judgment and remanded the case to the trial ~~court’s decision is not overturned or modified in light of~~court with instructions for further proceedings consistent with the Missouri Supreme ~~Court’s decision, it will result in a tax liability to us in excess of the reserved accruals established for these matters.~~Court's decision. We continue to vigorously defend against these claims.

Billing Practices Suits

Table of Contents

In June 2017, a former employee filed an employment lawsuit against us claiming that she was wrongfully terminated for alleging that we charged some of our retail customers for products and services they did not authorize. Thereafter, based in part on the allegations made by the former employee, several legal proceedings were filed, including consumer class actions in federal and state courts, a series of securities investor class actions in federal courts and several shareholder derivative actions in federal and Louisiana state courts. The derivative cases were brought on behalf of CenturyLink, Inc. against certain current and former officers and directors of the Company and seek damages for alleged breaches of fiduciary duties.

The consumer class actions, the securities investor class actions, and the federal derivative actions were transferred to the U.S. District Court for the District of Minnesota for coordinated and consolidated pretrial proceedings as In Re: CenturyLink Sales Practices and Securities Litigation. We have settled the consumer and securities investor class actions. Those settlements are final. The derivative actions remain pending.

We have engaged in discussions regarding related claims with a number of state attorneys general, and have entered into agreements settling certain of the consumer practices claims asserted by state attorneys general. While we do not agree with allegations raised in these matters, we have been willing to consider reasonable settlements where appropriate.

~~Peruvian Tax Litigation~~December 2018 Outage Proceedings

We experienced an outage on one of our transport networks that impacted voice, IP, 911, and transport services for some of our customers between the 27th and 29th of December 2018. We believe that the outage was caused by a faulty network management card from a third-party equipment vendor.

The FCC and four states (both Washington Utilities and Transportation Commission ("WUTC") and the Washington Attorney General; the Montana Public Service Commission; the Nebraska Public Service Commission; and the Wyoming Public Service Commission) initiated formal investigations. In November 2020, following the FCC's release of a public report on the outage, we negotiated a settlement which was released by the FCC in December 2020. The amount of the settlement was not material to our financial statements.

In ~~2005,~~December 2020, the ~~Peruvian tax authorities ("SUNAT") issued tax assessments~~Staff of the WUTC filed a complaint against ~~1 of our Peruvian subsidiaries asserting $26 million of additional income tax withholding and value-added taxes ("VAT"), penalties and interest for calendar years 2001 and 2002~~us based on the ~~basis that~~December 2018 outage, seeking penalties owed for alleged violations of Washington regulations and laws. We have denied the ~~Peruvian subsidiary incorrectly documented its importations. In May 2021,~~allegations and will defend the ~~Company paid the remaining amount on the fractioning regimes entered into by the Company to pay the amount assessed while it was appealed.~~claims asserted.

We challenged the assessments via administrative and then judicial review processes. In October 2011, the highest administrative review tribunal (the Tribunal) decided the central issue underlying the 2002 assessments in SUNAT's favor. We appealed the Tribunal's decision to the first judicial level, which decided the central issue in favor of Level 3. SUNAT and we filed cross-appeals with the court of appeal. In May 2017, the court of appeal issued a decision reversing the first judicial level. In June 2017, we filed an appeal of the decision to the Supreme Court of Justice, the final judicial level. Oral argument was held before the Supreme Court of Justice in October 2018. A decision on this case is pending.AT&T Proceedings

In ~~October 2013, the Tribunal decided the central issue underlying the 2001 assessments~~August 2022, certain of our subsidiaries filed a complaint in ~~SUNAT’s favor. We appealed that decision~~federal district court in Colorado captioned Central Telephone Company of Virginia, et al, v. AT&T Corp., et al. The suit seeks relief and damages for AT&T’s failure to ~~the first judicial level in Peru, which decided the central issue in favor~~pay amounts for services it receives. AT&T disputes those claims and has asserted counterclaims alleging breach of ~~SUNAT. In June 2017, we filed an appeal with~~contract and seeking declaratory relief. It has requested the court ~~of appeal. In November 2017,~~to enjoin the plaintiffs from terminating services for failure to pay, and it has requested the court transfer the case to federal court in the southern district of ~~appeals issued~~New York for further proceedings. Also in August 2022, AT&T filed a ~~decision affirming~~separate lawsuit in federal court in the ~~first judicial level~~western district of Louisiana, against Central Telephone Company of Virginia and ~~we filed an appeal~~other of ~~the decision~~our subsidiaries alleging, among other claims, breach of contract provisions pertaining to the Supreme Court of Justice. Oral argument was held before the Supreme Court of Justice in June 2019. In May 2021, the Company was served with a favorable and final decision from the Supreme Court of Justice.network architecture. The ~~Company expects an order for SUNAT to comply with the Supreme Court of Justice's decision.~~Lumen plaintiff entities dispute AT&T’s claims.

~~Brazilian~~Latin American Tax Litigation and Claims

~~The São Paulo and Rio de Janeiro state tax authorities have issued tax assessments against~~In connection with the recent divestiture of our ~~Brazilian subsidiaries~~Latin American business, the purchaser assumed responsibility for the ~~Tax on Distribution of Goods~~Peruvian tax litigation and ~~Services (“ICMS”), mainly~~Brazilian tax claims described in our prior periodic reports filed with ~~respect to revenue from leasing certain assets and revenue from~~ the provision of Internet access services by treating such activities as the provision of communications services, to which the ICMS tax applies. We filed objections to these assessments in both states, arguing, among other things that neither the lease of assets nor the provision of Internet access qualifies as “communication services” subject to ICMS.

SEC. We have ~~appealed~~agreed to indemnify the ~~respective state judicial courts the decisions by the respective state administrative courts that rejected our objections to these assessments. In cases~~purchaser for amounts paid in which state lower courts ruled partially in our favor finding that the lease assets are not subject to ICMS in connection, the State appealed those rulings. In other cases, the assessment was affirmed at the first administrative level and our appeal to the second administrative level is pending. Other assessments are still pending state judicial decisions.

We are vigorously contesting all such assessments in both states and view the assessment of ICMS on revenue from equipment leasing and Internet access to be without merit. These assessments, if upheld, could result in a loss of up to $47 million as of September 30, 2021, in excessrespect of the ~~reserved accruals established for these matters.~~Brazilian tax claims. The value of this indemnification is included in the indemnification amount as disclosed in Note 10—Fair Value of Financial Instruments.

Other Proceedings, Disputes and Contingencies

Table of Contents

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

We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and 1one or more may go to trial ~~during~~within the ~~fourth quarter of 2021 or during 2022~~next twelve months if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities.

We are subject to various foreign, 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.

The outcome of these other proceedings described under this heading is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us.

The matters listed ~~above~~ in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note ~~17—~~18—Commitments, Contingencies and Other Items to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us.

~~(16)~~(14) Other Financial Information

Other Current Assets

The following table presents details of other current assets reflected in our consolidated balance sheets:


		September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
		(Dollars in millions)				(Dollars in millions)
Prepaid expenses	Prepaid expenses	$	294	290	Prepaid expenses	$	371	295
Income tax receivable	Income tax receivable	15		7	Income tax receivable	60		22
Materials, supplies and inventory	Materials, supplies and inventory	103		105	Materials, supplies and inventory	179		96
Contract assets	Contract assets	49		66	Contract assets	35		45
Contract acquisition costs	Contract acquisition costs	144		173	Contract acquisition costs	131		142
Contract fulfillment costs	Contract fulfillment costs	104		114	Contract fulfillment costs	104		106
Note receivable	Note receivable	56		—	Note receivable	—		56
Receivable for sale of land	Receivable for sale of land	56		—	Receivable for sale of land	—		56
Other	Other	22		53	Other	14		11
Total other current assets(2)	Total other current assets(2)	$	843	808	Total other current assets(2)	$	894	829

(1)

~~(17) Repurchases~~Excludes $52 million of ~~Lumen Common Stock~~

~~Effective August 3, 2021, our Board of Directors authorized a 24-month program~~other current assets related to ~~repurchase up to an aggregate of $1.0 billion of our outstanding common stock (the "August 2021 stock repurchase program"). During~~ the ~~three and nine months ended September 30, 2021, we repurchased 73.8 million shares of our outstanding common stock in the open market. These shares~~ILEC business that were ~~repurchased~~classified as held for ~~an aggregate market price of $909 million. The figures set forth above exclude 3.5 million shares that,~~sale as of September 30, ~~2021, we had agreed~~2022.

(2)Excludes $126 million of other current assets related to ~~purchase under~~ the ~~program~~Latin American business sold on August 1, 2022 and the ILEC business sold on October 3, 2022 that were classified as held for ~~an additional $45 million in transactions that settled in October~~sale as of December 31, 2021. ~~All repurchased common stock has been retired.~~

~~(18)~~

Table of Contents

(15) Accumulated Other Comprehensive Loss

Information Relating to ~~2021~~2022

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheet by component for the nine months ended September 30, ~~2021:~~2022:


		Pension Plans		Post-Retirement Benefit Plans	Foreign Currency Translation Adjustment and Other	Interest Rate Swap	Total		Pension Plans		Post-Retirement Benefit Plans	Foreign Currency Translation Adjustment and Other	Interest Rate Swap	Total
		(Dollars in millions)							(Dollars in millions)
Balance at December 31, 2020		$	(2,197)	(272)	(265)	(79)	(2,813)
Balance at December 31, 2021								Balance at December 31, 2021	$	(1,577)	(164)	(400)	(17)	(2,158)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	133		—	(103)	(1)	29	Other comprehensive loss before reclassifications	—		—	(245)	—	(245)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	149		11	—	47	207	Amounts reclassified from accumulated other comprehensive loss	68		4	112	17	201
Net current-period other comprehensive income (loss)	Net current-period other comprehensive income (loss)	282		11	(103)	46	236	Net current-period other comprehensive income (loss)	68		4	(133)	17	(44)
Balance at September 30, 2021		$	(1,915)	(261)	(368)	(33)	(2,577)
Balance at September 30, 2022								Balance at September 30, 2022	$	(1,509)	(160)	(533)	—	(2,202)

Table of Contents

The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2022:


Three Months Ended September 30, 2022	Decrease (Increase) in Net Income		Affected Line Item in Consolidated Statement of Operations
	(Dollars in millions)
Interest rate swaps	$	—	Interest expense
Income tax benefit	—		Income tax expense
Net of tax	$	—

Amortization of pension & post-retirement plans(1)
Net actuarial loss	$	32	Other (expense) income, net
Prior service cost	(2)		Other (expense) income, net
Total before tax	30
Income tax benefit	(7)		Income tax expense
Net of tax	$	23

Reclassification of realized loss on foreign currency translation to gain on sale of business	$	112	Gain on sale of business
Income tax benefit	—		Income tax expense
Net of tax	$	112


Nine Months Ended September 30, 2022	Decrease (Increase) in Net Income		Affected Line Item in Consolidated Statement of Operations
	(Dollars in millions)
Interest rate swaps	$	22	Interest expense
Income tax benefit	(5)		Income tax expense
Net of tax	$	17

Amortization of pension & post-retirement plans(1)
Net actuarial loss	$	99	Other (expense) income, net
Prior service credit	(3)		Other (expense) income, net

Total before tax	96
Income tax benefit	(24)		Income tax expense
Net of tax	$	72

Reclassification of realized loss on foreign currency translation to gain on sale of business	$	112	Gain on sale of business
Income tax benefit	—		Income tax expense
Net of tax	$	112

(1)See Note 8—Employee Benefits for additional information on our net periodic benefit expense (income) related to our pension and post-retirement plans.

Table of Contents

Information Relating to 2021

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the nine months ended September 30, 2021:


	Pension Plans		Post-Retirement Benefit Plans	Foreign Currency Translation Adjustment and Other	Interest Rate Swap	Total
	(Dollars in millions)
Balance at December 31, 2020	$	(2,197)	(272)	(265)	(79)	(2,813)
Other comprehensive income (loss) before reclassifications	133		—	(103)	(1)	29
Amounts reclassified from accumulated other comprehensive loss	149		11	—	47	207
Net current-period other comprehensive income (loss)	282		11	(103)	46	236
Balance at September 30, 2021	$	(1,915)	(261)	(368)	(33)	(2,577)

The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the three and nine months ended September 30, 2021:


Three Months Ended September 30, 2021	Decrease (Increase) in Net Income		Affected Line Item in Consolidated Statement of Operations
	(Dollars in millions)
Interest rate swaps	$	21	Interest expense
Income tax ~~benefit~~expense	(5)		Income tax expense
Net of tax	$	16

Amortization of pension & post-retirement plans(1)
Net actuarial loss	$	108	Other (expense) income, net
Prior service cost	1		Other (expense) income, net
Total before tax	109
Income tax benefit	(27)		Income tax expense
Net of tax	$	82


Nine Months Ended September 30, 2021	Decrease (Increase) in Net Income		Affected Line Item in Consolidated Statement of Operations
	(Dollars in millions)
Interest rate swaps	$	62	Interest expense
Income tax benefit	(15)		Income tax expense
Net of tax	$	47

Amortization of pension & post-retirement plans(1)
Net actuarial loss	$	208	Other (expense) income, net
Prior service cost	4		Other (expense) income, net

Total before tax	212
Income tax benefit	(52)		Income tax expense
Net of tax	$	160

(1)See Note ~~10—~~8—Employee Benefits for additional information on our net periodic benefit ~~(income) expense related to our pension and post-retirement plans.~~

~~Information Relating to 2020~~

~~The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three and nine months ended September 30, 2020~~:

Pension Plans Post-Retirement
Benefit Plans Foreign Currency
Translation
Adjustment
and Other Interest Rate Swap Total
(Dollars in millions)
Balance at December 31, 2019 $ (2,229) (184) (228) (39) (2,680)
Other comprehensive loss before reclassifications — — (181) (87) (268)
Amounts reclassified from accumulated other comprehensive loss 110 12 — 31 153
Net current-period other comprehensive income (loss) 110 12 (181) (56) (115)
Balance at September 30, 2020 $ (2,119) (172) (409) (95) (2,795)

~~The tables below present further information about our reclassifications out of accumulated other comprehensive loss by component for the nine months ended September 30, 2020:~~

~~Three Months Ended September 30, 2020~~

Decrease (Increase)
in Net Income

~~Affected Line Item in Consolidated Statement of Operations~~

~~(Dollars in millions)~~

~~Interest rate swaps~~

~~Interest expense~~

~~Income tax expense~~

~~(5)~~

~~Income tax expense~~

~~Net of tax~~

~~Amortization of pension & post-retirement plans(1)~~

~~Net actuarial loss~~

~~Other (expense) income, net~~

~~Prior service cost~~

~~Other (expense) income, net~~

~~Curtailment loss~~

~~Other (expense) income, net~~

~~Total before tax~~

~~Income tax benefit~~

~~(13)~~

~~Income tax expense~~

~~Net of tax~~

~~Nine Months Ended September 30, 2020~~

Decrease (Increase)
in Net Income

~~Affected Line Item in Consolidated Statement of Operations~~

~~(Dollars in millions)~~

~~Interest rate swaps~~

~~Interest expense~~

~~Income tax expense~~

~~(10)~~

~~Income tax expense~~

~~Net of tax~~

~~Amortization of pension & post-retirement plans(1)~~

~~Net actuarial loss~~

~~152~~

~~Other (expense) income, net~~

~~Prior service cost~~

~~Other (expense) income, net~~

~~Curtailment loss~~

~~Other (expense) income, net~~

~~Total before tax~~

~~161~~

~~Income tax benefit~~

~~(39)~~

~~Income tax expense~~

~~Net of tax~~

~~122~~

~~(1)See Note 10—Employee Benefits for additional information on our net periodic benefit (expense)~~ income related to our pension and post-retirement plans.

~~(19)~~

Table of Contents

(16) Labor Union Contracts

As of September 30, ~~2021,~~2022, approximately 22% of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW"). None of our collective bargaining agreements were in expired status as of September 30, 2022. Approximately 9%10% of our represented employees are subject to collective bargaining agreements that are scheduled to expire over the 12 month period ending September 30, 2023.

As discussed in Note 17—Subsequent Events, we completed the sale of our ILEC business on October 3, 2022 and as a result of the transaction certain of our employees associated with such business were hired by the purchaser. As of October 3, 2022, 20% of our remaining employees were represented by CWA or IBEW and 9% of our remaining represented employees are subject to collective bargaining agreements that are scheduled to expire over the 12 month period ending September 30, 2023.

(17) Subsequent Events

Divestiture of the ILEC Business

On October 3, 2022, we closed the previously disclosed sale of our facilities-based incumbent local exchange business primarily conducted within 20 Midwestern and Southeastern states to affiliates of funds advised by Apollo Global Management, Inc. In exchange, we received $7.5 billion of consideration, which was reduced by approximately $0.4 billion of closing adjustments and partially paid through purchaser's assumption of approximately $1.5 billion of our long-term consolidated indebtedness, resulting in pre-tax cash proceeds of approximately $5.6 billion, subject to certain post-closing adjustments and indemnities. We expect to recognize a gain on the transaction in operating income during the fourth quarter of 2022.

In connection with the sale, we have entered into a transition services agreement under which we will provide to the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they will provide to each other various network and other commercial services. We also agreed to indemnify the purchaser for certain matters for which future cash payments by Lumen are expected.

Table of Contents

~~(20) Subsequent Events~~Debt Repayments

~~Pension Annuitization~~Since September 30, 2022, Lumen and its subsidiaries have used available cash to repay the following aggregate principal amount of indebtedness through a combination of tender offers and redemptions:


Debt	(Dollars in millions)
Lumen Technologies, Inc.
6.750% Senior Notes, Series W, due 2023	$	750
7.500% Senior Notes, Series Y, due 2024	982
5.625% Senior Notes, Series X, due 2025	270
7.200% Senior Notes, Series D, due 2025	34
5.125% Senior Notes due 2026	484
6.875% Debentures, Series G, due 2028	126
5.375% Senior Notes due 2029	490
Embarq Corporation Subsidiaries
First Mortgage Bonds	25
Qwest Capital Funding, Inc.
Senior Notes	63
Total Debt Repayments	$	3,224

We will additionally redeem $112 million aggregate principal of First Mortgage Bonds issued by a retained subsidiary of Embarq Corporation on November 4, 2022, in accordance with our redemption notice dated September 26, 2022. This amount along with the repayments in the table above are included in current maturities of long-term debt on our consolidated balance sheets.

Repurchase Plan

On October ~~19, 2021,~~31, 2022, our Board of Directors authorized a new two-year program to repurchase up to an aggregate of $1.5 billion of our outstanding common stock. This new stock repurchase program took effect on November 2, 2022, immediately upon the public announcement thereof. As of November 3, 2022, we ~~as sponsor~~had not repurchased any shares of ~~the Combined Pension Plan, along with the Plan’s independent fiduciary,~~common stock under this new program.

Pending Divestiture of our European, Middle Eastern and African Business

On November 2, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen Technologies, Inc., entered into an ~~agreement committing~~exclusive arrangement to divest Lumen’s operations in Europe, the ~~Plan to use a portion of its plan assets to purchase an annuity from an insurance company~~Middle East and Africa (the ~~"Insurer"~~“EMEA business”) to ~~transfer approximately $1.4~~Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, in exchange for $1.8 billion in cash, subject to certain working capital and other purchase price adjustments. Level 3 Parent, LLC expects to close the transaction as early as late 2023, following completion of a consultation process under French law required prior to execution of the ~~Plan’s pension liabilities. This~~purchase agreement and receipt of all requisite regulatory approvals in the U.S. and certain countries where the EMEA business operates, as well as the satisfaction of other customary conditions. Upon being executed following the French consultation process, the purchase agreement will ~~irrevocably transfer to the Insurer future Plan benefit obligations~~contain various customary covenants for ~~approximately 22,600 U.S. Lumen participants (“Transferred Participants”) effective on December 31, 2021. This annuity transaction will be funded entirely by existing Plan assets.~~transactions of this type, including various indemnities.

The Insurer is committed to assume responsibility for administrative and customer service support, including distribution of payments to the Transferred Participants. Transferred Participants’ benefits are not being reduced as a result of this transaction.Dividends

~~The transaction will result in Lumen recognizing a noncash settlement charge in the fourth quarter of 2021~~On November 2, 2022, we announced that our Board had terminated our quarterly cash dividend program, effective immediately, to accelerate recognition of a portion of the actuarial loss included in accumulated other comprehensive loss. We currently estimate that the pension settlement charges recognized in the fourth quarter will be approximately $350 million, dependent upon the completion of the annuity transaction discussed aboveenable us to allocate additional capital to growth initiatives, debt reduction and the amount of our lump sum pension payments as discussed in Note 10—Employee Benefits. The settlement charge will be recognized in other (expense) income, net in our consolidated statements of operations. The Plan will be remeasured for the annuity and lump sum payments in the fourth quarter of 2021.

~~For more information on our Combined Pension Plan, see Note 10—Employee Benefits.~~

~~Repurchases of Lumen Common Stock~~

As of October 5, 2021, we completed the August 2021 stock repurchase program, settling 3.5 million shares for $45 million that were previously executed and accrued as of September 30, 2021 and repurchasing an additional 3.6 million shares for $46 million subsequent to the end of the third quarter. Upon completion of the program, we repurchased a total of 80.9 million shares for an average purchase price of $12.36 per share.

~~For more information, see Note 17—Repurchases of Lumen Common Stock.~~share repurchases.

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, (i) references in this report to "Lumen Technologies" or "Lumen," "we," "us" and "our" refer to Lumen Technologies, Inc. and its consolidated subsidiaries and (ii) references in this report to "Level 3" refer to Level 3 Parent, LLC and its predecessor, Level 3 Communications, Inc., which we acquired on November 1, 2017.

All references to "Notes" in this Item 2 of Part I refer to the Notes to Consolidated Financial Statements included in Item 1 of Part I of this report.

Certain statements in this report constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements" appearing at the beginning of this report and "Risk Factors" referenced in Item 1A of Part II of this report or other of our filings with the SEC for a discussion of certain factors that could cause our actual results to differ from our anticipated results or otherwise impact our business, financial condition, results of operations, liquidity or prospects.

Overview

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") included herein should be read in conjunction with MD&A and the other information included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and with the consolidated financial statements and related notes in Item 1 of Part I of this report. The results of operations and cash flows for the first nine months of the year are not necessarily indicative of the results of operations and cash flows that might be expected for the entire year.

We are an international facilities-based technology and communications company focused on providing our business and mass markets customers with a broad array of integrated ~~services~~products and ~~solutions~~services necessary to fully participate in our rapidly evolving digital world. We ~~believe we are~~operate one of the world's most ~~inter-connected network and our~~interconnected networks. Our platform empowers our customers to rapidly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access, and reduce costs - allowing customers to rapidly evolve their IT programs to address dynamic ~~changes without distraction from their core competencies. With approximately 450,000 route miles of fiber optic cable globally, we~~changes. We are among the largest providers of communications services to domestic and global enterprise customers. Our terrestrial and subsea fiber optic long-haul network throughout North America, Europe, ~~Latin America~~ and Asia Pacific connects to metropolitan fiber networks that we operate. We provide services in over 60 countries, with most of our revenue being derived in the United States. As of ~~September 30, 2021,~~October 28, 2022, we had approximately ~~37,000~~29,000 employees.

~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses

On ~~July 25, 2021,~~August 1, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen, ~~agreed to divest their~~sold Lumen's Latin American business pursuant to a definitive agreement dated July 25, 2021 for pre-tax cash proceeds of approximately $2.7 billion, subject to certain post-closing adjustments. On October 3, 2022, we and certain of our affiliates closed the sale of our ILEC business primarily conducted within 20 Midwestern and Southeastern states pursuant to a definitive agreement dated August 3, 2021, as amended and supplemented to date, in exchange for ~~$2.7 billion~~the cash subject to certain working capital, other purchase price adjustments and related transaction expenses (estimated to be approximately $50 million). On August 3, 2021, Lumen and certain of its subsidiaries agreed to divest a substantial portion of their incumbent local exchange business in exchange for $7.5 billion, subject to offsets for (i) assumed indebtedness (expected to be approximately $1.4 billion) and (ii) our transaction expenses, certain of purchaser’s transaction expenses, income taxes and certain working capital and other customary purchase price adjustments (currently estimated to aggregate to approximately $1.7 billion). The actual amount of our net after-tax proceeds from these divestitures could vary substantially from the amounts we currently estimate, particularly if we experience delaysconsideration described in ~~completing the transactions or if there are changes in other assumptions that impact our estimates.~~Note 17—Subsequent Events. For more information, see (i) Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses and Note 17—Subsequent Events to our consolidated financial statements in Item 1 of Part I of this report and (ii) the risk factors ~~included~~referred to in Item 1A of Part II of this report.

Pending Divestiture of our European, Middle Eastern and African Business

On November 2, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen, entered into an exclusive arrangement to divest Lumen’s operations in Europe, the Middle East and Africa in exchange for $1.8 billion in cash, subject to certain working capital and other purchase price adjustments. For more information, see Note 17—Subsequent Events to our consolidated financial statements in Item 1 of Part I of this report.

Table of Contents

Impact of COVID-19 Pandemic and the Macroeconomic Environment

As previously ~~outlined~~described in greater detail in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, in response to the safety and economic challenges arising out of the COVID-19 pandemic and in a continued attempt to mitigate the negative impact on our stakeholders, we have taken a variety of steps to ensure the availability of our network infrastructure, to promote the safety of our employees and customers, to enable us to continue to adapt and provide our products and services worldwide to our customers, and to strengthen our communities. ~~As vaccination rates increase, we~~We expect to continue revising our responses to the pandemic or take additional steps necessary to adjust to changed circumstances.

AsSocial distancing, business and school closures, travel restrictions, and macroeconomic changes arising out of the pandemic have impacted us, our customers and our business since March 2020. Beginning the second half of 2020 and continuing into 2021, we rationalized our leased footprint and ceased using 39 leased property locations that were underutilized. In conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and incur additional costs through at least 2023. Additionally, as discussed in further ~~detail in our prior reports,~~elsewhere herein, the pandemic and macroeconomic changes arising therefrom have resulted in (i) increases in certain revenue streams and decreases in others, (ii) increases in ~~allowances for credit losses through the end~~overtime expenses, (iii) operational challenges resulting from shortages of ~~2020, (iii) increases~~certain components and other supplies that we use in ~~overtime expenses,~~our business, and (iv) delays in our cost transformation ~~initiatives and (v) an acceleration of our real estate rationalization efforts and the incurrence of related costs.~~initiatives. We ~~believe we are~~have also ~~experiencing~~experienced delayed decision-making by certain of our ~~customers in the current environment. These~~customers. Thus far, these changes ~~did~~have not materially ~~impact~~impacted our financial performance or financial ~~position during 2020,~~position. However, we continue to monitor global disruptions and ~~barring any substantial deterioration in prevailing health or economic conditions, are not expected~~work with our vendors to ~~materially impact us in the near term.~~mitigate supply chain risks.

~~Effective December 8, 2021, we plan~~We reopened our offices in April 2022 under a "hybrid" working environment, which will permit some of our employees the flexibility to ~~comply with President Biden's September 2021 Executive Order requiring covered employees~~work remotely at least some of ~~federal contractors to be vaccinated against COVID-19. For additional information, see "Risk Factors" in Item 1A of Part II of this report.~~the time for the foreseeable future.

Reporting Segments

~~As previously announced, we completed an internal reorganization of our reporting segments in January 2021.~~ Our reporting segments are currently organized as follows, by customer focus:

•Business Segment: Under our Business segment, we provide our products and services under four sales channels:

◦International and Global Accounts ("IGAM"): Our IGAM sales channel includes multinational and enterprise customers. We provide our products and services to ~~approximately 350 of our highest potential~~global enterprise customers and ~~to enterprises and carriers in three operating regions: Europe Middle East and Africa, Latin America and Asia Pacific.~~carriers.

◦Large Enterprise: Under our large enterprise sales channel, we provide our products and services to large enterprises and the public sector, including the U.S. Federal government, state and local governments and research and education institutions.

◦Mid-Market Enterprise: Under our mid-market enterprise sales channel, we provide our products and services to medium-sized enterprises directly and through our indirect channel partners.

◦Wholesale: Under our wholesale sales channel, we provide our products and services to a wide range of other communication providers across the wireline, wireless, cable, voice and data center sectors.

•Mass Markets Segment: Under our Mass Markets segment, we provide products and services to ~~consumer~~residential and small business customers. At September 30, ~~2021,~~2022, we served ~~4.6~~4.3 million broadband subscribers under our Mass Markets ~~segment.~~segment, prior to our divestiture of the 20-state ILEC business on October 3, 2022 as described in Note 17—Subsequent Events.

See Note ~~14—~~12—Segment Information to our consolidated financial statements in Item 1 of Part I of this report for additional information.

Table of Contents

We categorize our Business segment revenue among the following products and services categories:

•IP and Data Services, which include Ethernet, IP, and VPN data networks, including software-defined wide area networks ("SD WAN") based services, Dynamic Connections and Hyper WAN;

•Fiber Infrastructure Services, which include dark fiber, optical services and equipment; and

•Voice and Other, which include Time Division Multiplexing ("TDM") voice, private line and other legacy services.

~~Under~~Since the first quarter of 2022, we have categorized our Mass Markets ~~segment, we provide~~products and services revenue among the following ~~products and services:~~categories:

•~~Consumer~~Fiber Broadband, which includes high speed fiber-based ~~and lower speed DSL-based broadband~~ services to residential and small business customers;

•~~SBG~~Other Broadband, which primarily includes ~~high speed fiber-based and~~ lower speed ~~DSL-based~~copper-based broadband services to residential and small businesses; and

•Voice and Other, which ~~include~~includes revenues from (i) providing local and long-distance services, ~~retail video~~professional services, ~~(including our linear TV services), state support~~ and other ancillary ~~services;~~services, and

•~~CAF II, which consists of Connect America Fund Phase II payments through the end of 2021 to~~ (ii) federal broadband and state support ~~voice and broadband in FCC-designated high-cost areas.~~payments.

Trends Impacting Our Operations

In addition to the above-described impact of the pandemic, our consolidated operations have been, and are expected to continue to be, impacted by the following company-wide trends:

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

•The increasingly digital environment and the growth in online video and gaming require robust, scalable network services. We are continuing to enhance our product capabilities and simplify our product portfolio based on demand and profitability to enable customers to have access to greater bandwidth.

•Businesses continue to adopt distributed, global operating models. We are expanding and enhancing our fiber network, connecting more buildings to our network to generate revenue opportunities and reducing our reliance upon other carriers.

•Industry consolidation, coupled with changes in regulation, technology and customer preferences, are significantly reducing demand for our traditional voice services and are pressuring some other revenue streams through volume or rate reductions, while other advances, such as the need for lower latency provided by Edge computing or the implementation of 5G networks, are expected to create opportunities.

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

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

Table of Contents

The amount of support payments we receive from governmental agencies ~~will decrease~~has decreased substantially ~~after~~since December 31, 2021. This and other developments and trends impacting our operations are discussed elsewhere in this Item 2.

Results of Operations

In this section, we discuss our overall results of operations and highlight special items that are not included in our segment results. In "Segment ~~Results of Operations"~~Results" we review the performance of our two reporting segments in more detail. Results in this section include the results of our Latin American business prior to it being sold on August 1, 2022.

The following table summarizes the results of our consolidated operations for the three and nine months ended September 30, ~~2021~~2022 and September 30, ~~2020:~~2021:


		Three Months Ended September 30,			Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
		2021		2020	2021	2020		2022		2021	2022	2021
		(Dollars in millions, except per share amounts)						(Dollars in millions, except per share amounts)
Operating revenue	Operating revenue	$	4,887	5,167	14,840	15,587	Operating revenue	$	4,390	4,887	13,678	14,840
Operating expenses	Operating expenses	3,756		4,279	11,716	12,816	Operating expenses	3,006		3,756	10,299	11,716
Operating income	Operating income	1,131		888	3,124	2,771	Operating income	1,384		1,131	3,379	3,124
Total other expense, net	Total other expense, net	(415)		(408)	(1,102)	(1,345)	Total other expense, net	(447)		(415)	(1,188)	(1,102)
Income before income taxes	Income before income taxes	716		480	2,022	1,426	Income before income taxes	937		716	2,191	2,022
Income tax expense	Income tax expense	172		114	497	369	Income tax expense	359		172	670	497
Net income	Net income	$	544	366	1,525	1,057	Net income	$	578	544	1,521	1,525
Basic earnings per common share	Basic earnings per common share	$	0.51	0.34	1.42	0.98	Basic earnings per common share	$	0.57	0.51	1.50	1.42
Diluted earnings per common share	Diluted earnings per common share	$	0.51	0.34	1.41	0.98	Diluted earnings per common share	$	0.57	0.51	1.50	1.41

For years, we have experienced revenue declines, excluding the impact of acquisitions, primarily due to declines in voice and private line customers, switched access rates and minutes of use. More recently, we have experienced declines in revenue derived from the sale of certain of our other products and ~~services.~~services and a reduction in government support payments, in particular the cessation of the FCC's Connect America Fund II ("CAF II") program. To partially mitigate these revenue declines, we remain focused on efforts to, among other things:

•promote long-term relationships with our customers through bundling of integrated services;

•increase the size, capacity, speed and usage of our networks;

•~~provide a wide array of diverse services, including enhanced or additional services that may become available in the future due~~allocate capital to ~~among other things, advances in technology or improvements in~~ our ~~infrastructure;~~most promising products and services;

•provide our premium services to a higher percentage of our customers;

•pursue acquisitions of additional assets or divestitures of non-strategic assets, in each case if available at attractive prices;

•increase prices on our products and services if and when practicable; and

•market our products and services to new customers.

Table of Contents

~~Consolidated~~

Revenue

The following tables summarize our consolidated operating revenue recorded under each of our two segments and in our four ~~above-described~~ revenue sales channels within the Business ~~segment:~~segment described above:


		Three Months Ended September 30,			% Change			Three Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Business Segment:	Business Segment:						Business Segment:
International & Global Accounts	International & Global Accounts	$	1,019	1,013	1	%	International & Global Accounts	$	853	1,027	(17)	%
Large Enterprise	Large Enterprise	932		990	(6)	%	Large Enterprise	844		942	(10)	%
Mid-Market Enterprise	Mid-Market Enterprise	666		737	(10)	%	Mid-Market Enterprise	618		648	(5)	%
Wholesale	Wholesale	891		958	(7)	%	Wholesale	902		891	1	%
Business Segment Revenue	Business Segment Revenue	3,508		3,698	(5)	%	Business Segment Revenue	3,217		3,508	(8)	%
Mass Markets Segment Revenue	Mass Markets Segment Revenue	1,379		1,469	(6)	%	Mass Markets Segment Revenue	1,173		1,379	(15)	%
Total operating revenue		$	4,887	5,167	(5)	%
Total consolidated operating revenue							Total consolidated operating revenue	$	4,390	4,887	(10)	%


		Nine Months Ended September 30,			% Change			Nine Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Business Segment:	Business Segment:						Business Segment:
International & Global Accounts	International & Global Accounts	$	3,036	3,085	(2)	%	International & Global Accounts	$	2,848	3,058	(7)	%
Large Enterprise	Large Enterprise	2,800		2,929	(4)	%	Large Enterprise	2,605		2,840	(8)	%
Mid-Market Enterprise	Mid-Market Enterprise	2,064		2,253	(8)	%	Mid-Market Enterprise	1,880		2,002	(6)	%
Wholesale	Wholesale	2,725		2,885	(6)	%	Wholesale	2,701		2,725	(1)	%
Business Segment Revenue	Business Segment Revenue	10,625		11,152	(5)	%	Business Segment Revenue	10,034		10,625	(6)	%
Mass Markets Segment Revenue	Mass Markets Segment Revenue	4,215		4,435	(5)	%	Mass Markets Segment Revenue	3,644		4,215	(14)	%
Total operating revenue		$	14,840	15,587	(5)	%
Total consolidated operating revenue							Total consolidated operating revenue	$	13,678	14,840	(8)	%

Our ~~total~~consolidated operating revenue decreased by ~~$280~~$497 million and ~~$747 million~~$1.2 billion, respectively, for the three and nine months ended September 30, ~~2021~~2022 as compared to the three and nine months ended September 30, ~~2020, primarily~~2021, due to revenue declines in substantially all of our ~~above-listed~~ revenue ~~categories.~~categories listed above, in addition to the sale of our Latin American business as of August 1, 2022. See our segment results below for additional information.

Table of Contents

Operating Expenses

The following tables summarize our ~~consolidated~~ operating ~~expenses:~~expenses for the three and nine months ended September 30, 2022 and 2021:


		Three Months Ended September 30,			% Change			Three Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Cost of services and products (exclusive of depreciation and amortization)	Cost of services and products (exclusive of depreciation and amortization)	$	2,151	2,236	(4)	%	Cost of services and products (exclusive of depreciation and amortization)	$	1,999	2,151	(7)	%
Selling, general and administrative	Selling, general and administrative	654		850	(23)	%	Selling, general and administrative	792		654	21	%
Gain on sale of business							Gain on sale of business	(593)		—	nm
Depreciation and amortization	Depreciation and amortization	951		1,193	(20)	%	Depreciation and amortization	808		951	(15)	%

Total operating expenses	Total operating expenses	$	3,756	4,279	(12)	%	Total operating expenses	$	3,006	3,756	(20)	%


	Nine Months Ended September 30,			% Change
	2022		2021
	(Dollars in millions)
Cost of services and products (exclusive of depreciation and amortization)	$	6,042	6,402	(6)	%
Selling, general and administrative	2,407		2,172	11	%
Gain on sale of business	(593)		—	nm
Depreciation and amortization	2,443		3,142	(22)	%

Total operating expenses	$	10,299	11,716	(12)	%

Nine Months Ended September 30, % Change
2021 2020
(Dollars in millions)
Cost of services and products (exclusive of depreciation and amortization) $ 6,402 6,703 (4) %
Selling, general and administrative 2,172 2,598 (16) %
Depreciation and amortization 3,142 3,515 (11) %
Total operating expenses $ 11,716 12,816 (9) %
Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.

Cost of Services and Products (exclusive of depreciation and amortization)

Cost of services and products (exclusive of depreciation and amortization) decreased by ~~$85~~$152 million and ~~$301~~$360 million, respectively, for the three and nine months ended September 30, ~~2021~~2022 as compared to the three and nine months ended September 30, ~~2020. These decreases were~~2021. This decrease was primarily due to the sale of the Latin American business, reductions in ~~salaries and wages and~~ employee-related expense from lower headcount and lower facility ~~real estate~~costs and ~~power costs. These decreases were partially offset by a portion of accelerated lease costs as part of our real estate rationalization during the third quarter 2021.~~network expenses.

Selling, General and Administrative

Selling, general and administrative expenses ~~decreased~~increased by ~~$196~~$138 million and ~~$426~~$235 million, respectively, for the three and nine months ended September 30, ~~2021~~2022 as compared to the three and nine months ended September 30, ~~2020. These decreases were~~2021. The increase was primarily due to gains on sale of assets in the nine months ended September 30, 2021 as well as higher professional fees during the three and nine months ended September 30, 2022 associated with facilitating the divestitures of our Latin American and ILEC businesses. These increases were partially offset by the sale of the Latin American business and lower property and other taxes.

Gain on Sale of Business

For a ~~$75 million~~discussion of the gain on the sale of ~~land~~the Latin American business that we recorded in ~~August 2021, partially offset by a portion of accelerated lease costs as part of our real estate rationalization during~~ the third quarter ~~2021. These decreases were also attributable to reductions in salaries~~of 2022, see Note 2—Recently Completed Divestitures of the Latin American and ~~wages and employee-related expense from lower headcount, lower bad debt expense, and lower marketing and advertising costs.~~ILEC Businesses.

Table of Contents

Depreciation and Amortization

The following tables provide detail of our depreciation and amortization expense:


		Three Months Ended September 30,			% Change			Three Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Depreciation	Depreciation	$	645	750	(14)	%	Depreciation	$	529	645	(18)	%
Amortization	Amortization	306		443	(31)	%	Amortization	279		306	(9)	%
Total depreciation and amortization	Total depreciation and amortization	$	951	1,193	(20)	%	Total depreciation and amortization	$	808	951	(15)	%


		Nine Months Ended September 30,			% Change			Nine Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Depreciation	Depreciation	$	2,093	2,201	(5)	%	Depreciation	$	1,613	2,093	(23)	%
Amortization	Amortization	1,049		1,314	(20)	%	Amortization	830		1,049	(21)	%
Total depreciation and amortization	Total depreciation and amortization	$	3,142	3,515	(11)	%	Total depreciation and amortization	$	2,443	3,142	(22)	%

Depreciation expense decreased by ~~$105~~$116 million and ~~$108~~$480 million, respectively, for the three and nine months ended September 30, ~~2021,~~2022, as compared to the three and nine months ended September 30, ~~2020~~2021 primarily due to discontinuing the depreciation of the tangible assets ~~reclassified as held for sale~~ of our recently divested Latin American and ILEC businesses ~~upon entering into our divestiture agreements. We estimate we would have recorded an additional $98~~during their classification as assets held for sale, resulting in a decrease of $45 million and $324 million, respectively, of depreciation expense during the three and nine months ended September 30, ~~2021 if we had not agreed~~2022 compared to ~~sell these businesses.~~the three and nine months ended September 30, 2021. In addition, depreciation expense decreased ~~due to the impact of annual rate depreciable life changes of $38~~$48 million and ~~$113~~$144 million, respectively, ~~which were largely offset by higher depreciation expense of $27 million and $92 million, respectively, associated with net growth in depreciable assets.~~

~~Amortization expense decreased by $137 million and $265 million~~ for the three and nine months ended September 30, ~~2021,~~2022, as compared to the three and nine months ended September 30, ~~2020.~~2021, due to the early retirement of certain copper-based infrastructure during the fourth quarter of 2021, and decreased $9 million and $28 million, respectively, due to the impact of annual rate depreciable life changes. The decrease for ~~both periods~~the nine months ended September 30, 2022 was partially offset by higher depreciation expense of $25 million associated with net growth in depreciable assets.

Amortization expense decreased by $27 million and $219 million, respectively, for the three and nine months ended September 30, 2022, as compared to the three and nine months ended September 30, 2021. The decrease was primarily due to a decrease of ~~$126~~$118 million ~~and $273 million, respectively,~~for the nine months ended September 30, 2022 as ~~a result of~~compared to September 30, 2021 resulting from certain customer relationship intangible assets becoming fully amortized at the end of the first quarter 2021, ~~and decreases~~a decrease of ~~$14~~$5 million and ~~$20~~$36 million, respectively, ~~associated with net reductions in amortizable assets. In addition, the decrease for both periods was~~ due to discontinuing the amortization of the intangible assets ~~reclassified as held for sale~~ of our recently divested Latin American and ILEC businesses ~~upon entering into our divestiture agreements. We estimate we would have recorded an additional $8~~during their classification as assets held for sale, a decrease of $15 million and $40 million, respectively, associated with net reductions in amortizable assets and a decrease of ~~amortization expense during~~$2 million and $13 million, respectively, related to decommissioned applications for the three and nine months ended September 30, ~~2021 if we had not agreed~~2022, as compared to ~~sell these businesses. These decreases were partially offset by $5 million~~the three and $20 million, respectively, of additional amortization expense recognized as a result of reclassification of certain right-of-way assets, as discussed in Note 3—Goodwill, Customer Relationships and Other Intangible Assets to our consolidated financial statements in Item 1 of Part I of this report, and by accelerated amortization for decommissioned applications of $4 million and $18 million, respectively.nine months ended September 30, 2021.

Further analysis of our segment operating expenses by segment is provided below in "Segment Results."

~~Goodwill Impairments~~

~~We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs.~~

The January 2021 completion of our previously announced internal reorganization was considered an event or change in circumstance which required an assessment of our goodwill for impairment. We performed a qualitative impairment assessment in the first quarter of 2021 and concluded it is more likely than not that the fair value of each of our reporting units exceeded the carrying value of equity of our reporting units at January 31, 2021. Therefore, we did not have any impairment as of our assessment date.

The reclassification of held for sale assets, as described in Note 2—Planned Divestiture of the Latin American and ILEC Businesses, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of July 31, 2021. We performed a pre-reclassification goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to determine whether there was an impairment prior to the reclassification of these assets to held for sale and to determine the July 31, 2021 fair values to be utilized for goodwill allocation regarding the disposal groups to be reclassified as assets held for sale. We concluded it was more likely than not that the fair value of each of our reporting units exceeded the carrying value of equity of our reporting units at July 31, 2021.

We also performed a post-reclassification goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to determine whether the fair value of our reporting units that will remain following the divestitures exceeds the carrying value of the equity of such reporting units after reclassification of assets held for sale. At July 31, 2021, we estimated the fair value of our remaining reporting units by considering both a market approach and a discounted cash flow method. Based on our assessments performed, we concluded it was more likely than not that the fair value of each of our remaining reporting units exceeded the carrying value of equity of our remaining reporting units at July 31, 2021. Therefore, we concluded we did not have any impairment as of our assessment date.

~~See Note 3—Goodwill, Customer Relationships and Other Intangible Assets for further details on these tests and impairment charges.~~

Table of Contents

Other Consolidated Results

The following tables summarize our total other expense, net and income tax expense:


		Three Months Ended September 30,			% Change			Three Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Interest expense	Interest expense	$	(377)	(409)	(8)	%	Interest expense	$	(363)	(377)	(4)	%
Other (expense) income, net		(38)		1	nm
Other expense, net							Other expense, net	(84)		(38)	121	%
Total other expense, net	Total other expense, net	$	(415)	(408)	2	%	Total other expense, net	$	(447)	(415)	8	%
Income tax expense	Income tax expense	$	172	114	51	%	Income tax expense	$	359	172	109	%


		Nine Months Ended September 30,			% Change			Nine Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Interest expense	Interest expense	$	(1,150)	(1,272)	(10)	%	Interest expense	$	(1,052)	(1,150)	(9)	%
Other income (expense), net		48		(73)	nm
Other (expense) income, net							Other (expense) income, net	(136)		48	nm
Total other expense, net	Total other expense, net	$	(1,102)	(1,345)	(18)	%	Total other expense, net	$	(1,188)	(1,102)	8	%
Income tax expense	Income tax expense	$	497	369	35	%	Income tax expense	$	670	497	35	%

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

Interest Expense

Interest expense decreased by ~~$32~~$14 million and ~~$122~~$98 million, respectively, for the three and nine months ended September 30, ~~2021~~2022 as compared to the three and nine months ended September 30, ~~2020.~~2021. The decrease was primarily due to ~~(i)~~ the decrease in average outstanding long-term debt (inclusive of debt classified as held for sale) from ~~$33.5~~$31.2 billion to ~~$31.2~~$28.0 billion and from $31.5 billion to $28.4 billion, respectively, partially offset by the ~~decrease~~increase in the average interest rate of ~~4.93%~~4.81% to ~~4.81%~~5.14% and 4.85% to 5.08%, respectively, for the three ~~months ended September 30, 2020 compared to the three~~and nine months ended September 30, 2021 ~~and (ii) the decrease in average long-term debt from $33.6 billion to $31.5 billion and the decrease in our average interest rate from 5.22% to 4.85% for the nine months endedSeptember 30, 2020~~ compared to the three and nine months ended September 30, ~~2021.~~2022.

Table of Contents

Other (Expense) Income, Net

Other (expense) income, net reflects certain items not directly related to our core operations, including (i) gains and losses on extinguishments of debt, (ii) components of net periodic pension and post-retirement benefit costs, (iii) foreign currency gains and losses, ~~and~~ (iv) our share of income from partnerships we do not control, (v) interest income, (vi) gains and losses from non-operating asset dispositions, (vii) income from transition and separation services provided by us to the purchasers in connection with the Latin American business and ILEC business divestitures, and (viii) other non-core ~~items.~~items including income from transition and separation services provided by us to the purchasers of our divested businesses.

Three Months Ended September 30, % Change
2021 2020
(Dollars in millions)
Gain on extinguishment of debt $ — 8 nm
Pension and post-retirement net periodic expense (32) (9) nm
Foreign currency (loss) gain (16) 8 nm
Other 10 (6) nm
Total other (expense) income, net $ (38) 1 nm


	Three Months Ended September 30,			% Change
	2022		2021
	(Dollars in millions)
Gain on extinguishment of debt	$	9	—	nm
Pension and post-retirement net periodic income (expense)	2		(32)	nm
Foreign currency loss	(20)		(16)	25	%
Loss on investment in limited partnership	(43)		(9)	nm
Loss on investment in equity securities	(83)		—	nm
Transition and separation services	37		—	nm
Other	14		19	(26)	%
Total other expense, net	$	(84)	(38)	121	%

Nine Months Ended September 30, % Change
2021 2020
(Dollars in millions)
Gain (loss) on extinguishment of debt $ 8 (78) nm
Pension and post-retirement net periodic income (expense) 19 (19) nm
Foreign currency (loss) gain (24) 9 nm
Other 45 15 nm
Total other income (expense), net $ 48 (73) nm


	Nine Months Ended September 30,			% Change
	2022		2021
	(Dollars in millions)
Gain on extinguishment of debt	$	9	8	13	%
Pension and post-retirement net periodic income	6		19	(68)	%
Foreign currency loss	(49)		(24)	104	%
Loss on investment in limited partnership	(114)		(9)	nm
Loss on investment in equity securities	(83)		—	nm
Transition and separation services	70		—	nm
Other	25		54	(54)	%
Total other (expense) income, net	$	(136)	48	nm

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

~~The significant change~~See Note 10—Fair Value of Financial Instruments for more information regarding the losses recognized on our investments in ~~pension~~equity securities and ~~post retirement net periodic (expense) income for the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020 was driven by~~ a settlement charge associated with the acceleration of the recognition of a portion of previously-unrecognized actuarial losses in the qualified pension plan. Additionally, the increase in other income was due to use tax refunds.limited partnership.

Income Tax Expense

For the three and nine months ended September 30, ~~2021,~~2022, our effective income tax rate was ~~24.0%~~38.3% and ~~24.6%~~30.6%, respectively, and for the three and nine months ended September 30, ~~2020,~~2021, our effective income tax rate was ~~23.8%~~24.0% and ~~25.9%~~24.6%, respectively. The effective tax rate for the three and nine months ended September 30, 2022 was significantly impacted by the gain on the sale of our Latin American business. Without the gain on the sale of our Latin American business, our effective tax would have been 24.5% and 24.7%, respectively, for the three and nine months ended September 30, 2022.

Table of Contents

Segment Results

General

Reconciliation of segment revenue to total operating revenue is below:


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020		2022		2021
		(Dollars in millions)				(Dollars in millions)
Operating revenue	Operating revenue				Operating revenue
Business	Business	$	3,508	3,698	Business	$	3,217	3,508
Mass Markets	Mass Markets	1,379		1,469	Mass Markets	1,173		1,379
Total operating revenue	Total operating revenue	$	4,887	5,167	Total operating revenue	$	4,390	4,887

Nine Months Ended September 30,
2021 2020
(Dollars in millions)
Operating revenue
Business $ 10,625 11,152
Mass Markets 4,215 4,435
Total operating revenue $ 14,840 15,587


	Nine Months Ended September 30,
	2022		2021
	(Dollars in millions)
Operating revenue
Business	$	10,034	10,625
Mass Markets	3,644		4,215
Total operating revenue	$	13,678	14,840

Reconciliation of segment EBITDA to total adjusted EBITDA is below:


		Three Months Ended September 30,				Three Months Ended September 30,
		2021		2020		2022		2021
		(Dollars in millions)				(Dollars in millions)
Adjusted EBITDA	Adjusted EBITDA				Adjusted EBITDA
Business	Business	$	2,344	2,487	Business	$	2,162	2,348
Mass Markets	Mass Markets	1,218		1,266	Mass Markets	979		1,215
Total segment EBITDA	Total segment EBITDA	3,562		3,753	Total segment EBITDA	3,141		3,563
Operations and Other EBITDA	Operations and Other EBITDA	(1,453)		(1,641)	Operations and Other EBITDA	(926)		(1,454)
Total adjusted EBITDA	Total adjusted EBITDA	$	2,109	2,112	Total adjusted EBITDA	$	2,215	2,109


		Nine Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2022		2021
		(Dollars in millions)				(Dollars in millions)
Adjusted EBITDA	Adjusted EBITDA				Adjusted EBITDA
Business	Business	$	7,114	7,439	Business	$	6,737	7,119
Mass Markets	Mass Markets	3,689		3,851	Mass Markets	3,114		3,681
Total segment EBITDA	Total segment EBITDA	10,803		11,290	Total segment EBITDA	9,851		10,800
Operations and Other EBITDA	Operations and Other EBITDA	(4,448)		(4,884)	Operations and Other EBITDA	(3,958)		(4,445)
Total adjusted EBITDA	Total adjusted EBITDA	$	6,355	6,406	Total adjusted EBITDA	$	5,893	6,355

For additional information on our reportable segments and product and services categories, see Note 4—Revenue Recognition and Note ~~14—~~12—Segment Information to our consolidated financial statements in Item 1 of Part I of this report.

Table of Contents

Business Segment

Three Months Ended September 30, % Change
2021 2020
(Dollars in millions)
Business Segment Product Categories:
Compute and Application Services $ 431 434 (1) %
IP and Data Services 1,545 1,595 (3) %
Fiber Infrastructure Services 575 579 (1) %
Voice and Other 957 1,090 (12) %
Total Business Segment Revenue 3,508 3,698 (5) %
Expenses:
Total expense 1,164 1,211 (4) %
Total adjusted EBITDA $ 2,344 2,487 (6) %
The results presented in the section below include results of the Latin American business prior to it being sold on August 1, 2022.


	Three Months Ended September 30,			% Change
	2022		2021
	(Dollars in millions)
Business Segment Product Categories:
Compute and Application Services	$	399	431	(7)	%
IP and Data Services	1,417		1,543	(8)	%
Fiber Infrastructure Services	530		578	(8)	%
Voice and Other	871		956	(9)	%
Total Business Segment Revenue	3,217		3,508	(8)	%
Expenses:
Total expense	1,055		1,160	(9)	%
Total adjusted EBITDA	$	2,162	2,348	(8)	%


		Nine Months Ended September 30,			% Change			Nine Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Business Segment Product Categories:	Business Segment Product Categories:						Business Segment Product Categories:
Compute and Application Services	Compute and Application Services	$	1,295	1,301	—	%	Compute and Application Services	$	1,279	1,297	(1)	%
IP and Data Services	IP and Data Services	4,675		4,825	(3)	%	IP and Data Services	4,434		4,670	(5)	%
Fiber Infrastructure Services	Fiber Infrastructure Services	1,680		1,673	—	%	Fiber Infrastructure Services	1,629		1,687	(3)	%
Voice and Other	Voice and Other	2,975		3,353	(11)	%	Voice and Other	2,692		2,971	(9)	%
Total Business Segment Revenue	Total Business Segment Revenue	10,625		11,152	(5)	%	Total Business Segment Revenue	10,034		10,625	(6)	%
Expenses:	Expenses:						Expenses:
Total expense	Total expense	3,511		3,713	(5)	%	Total expense	3,297		3,506	(6)	%
Total adjusted EBITDA	Total adjusted EBITDA	$	7,114	7,439	(4)	%	Total adjusted EBITDA	$	6,737	7,119	(5)	%

Three and nine months ended September 30, ~~2021~~2022 compared to the same periods ended September 30, ~~2020~~2021

~~Segment~~Business segment revenue decreased ~~$190~~$291 million for the three months ended September 30, ~~2021~~2022 as compared to September 30, ~~2020,~~2021 and decreased ~~$527~~$591 million for the nine months ended September 30, ~~2021~~2022 as compared to September 30, ~~2020.~~2021. The revenue decrease was primarily due to the following factors:

•Compute and Application Services ~~declined for~~decreased in both ~~periods~~the three months and nine months ended September 30, 2022, with declines in colocation due to ~~an ongoing large customer disconnect for~~the sale of the Latin American business partially offset by increased revenue in cloud services in the IGAM sales channel, and declines due to a contract ending in the Public Sector within our Large Enterprise sales channel, which were partially offset with growth in IT Solutions ~~and lower rates for content delivery network services within our IGAM~~in the Wholesale sales ~~channel. Additionally,~~channel for the nine months ended September 30, 2021, declines were driven by declines in Cloud Services within our Large Enterprise and IGAM sales channels. These decreases were partially offset by growth in Managed Security and IT Solutions services to Federal Public Sector customers and an increase in colocation and data center services in our IGAM sales channel.2022;

•IP and Data Services decreased ~~during~~in both ~~periods~~the three months and nine months ended September 30, 2022 primarily due to declines in traditional VPN networks in part driven by the sale of the Latin American business, and continued declines in Ethernet ~~sales~~services across all ~~our~~ sales channels, partially offset by ~~an increase~~continued strength in IP services across our ~~IGAM~~Large and Mid-Market Enterprise and Wholesale sales channels;

Table of Contents

•Fiber Infrastructure Services ~~experienced growth in both periods in dark fiber and wavelengths demand, primarily from our large IGAM customers which was outpaced by lower equipment sales for~~decreased during the three months ended September 30, ~~2021, resulting~~2022 primarily due to lower equipment sales in our Large Enterprise sales channel, one-time revenue in our IGAM sales channel in the prior year period related to a ~~decrease during such period;~~major event, and declines related to the sale of the Latin American business, partially offset by wavelengths services growth in our Wholesale sales channel. During the nine months ended September 30, 2022, revenues decreased primarily due to lower equipment sales and lower dark fiber services in our Large Enterprise sales channel, partially offset by wavelengths services growth in our Wholesale sales channel and equipment and dark fiber growth due to demand in our IGAM sales channel;

•Voice and Other decreased ~~during both periods~~ due to continued decline of legacy voice, private line and other services to customers across all sales channels. ~~Additionally, voice services revenue in the three and nine month periods decreased compared to the prior periods which had benefited from higher COVID-related demand.~~

The decrease in Business segment revenue ~~was slightly offset due to $5 million of favorable foreign currency adjustments~~ for the three months ended September 30, ~~2021~~2022 includes $22 million of unfavorable foreign currency adjustments as compared to the three months ended September 30, ~~2020~~2021 and ~~by $20 million of favorable foreign currency adjustments for~~ the nine months ended September 30, ~~2021~~2022 includes $45 million of unfavorable foreign currency adjustments as compared to the nine months ended September 30, 2021.

Business segment expense decreased by $105 million for the three months ended September 30, 2022 as compared to the three months ended September 30, ~~2020.~~

~~Segment expense decreased $47 million for the three months ended September 30,~~ 2021 ~~as compared to September 30, 2020,~~ and decreased ~~$202~~by $209 million for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020,~~2021, primarily ~~due to~~driven by lower cost of sales due to the decline in revenue and lower ~~employee-related~~external commissions, employee costs ~~from lower headcount.~~and network related costs.

~~Segment~~Business segment adjusted EBITDA as a percentage of segment revenue was 67% for the three and nine months ended September 30, ~~2021~~2022 and 67% for ~~both~~ the three and nine months ended September 30, ~~2020.~~2021.

Mass Markets Segment


		Three Months Ended September 30,			% Change			Three Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Mass Markets Product Categories:	Mass Markets Product Categories:						Mass Markets Product Categories:
Consumer Broadband		$	715	730	(2)	%
SBG Broadband		39		38	3	%
Fiber Broadband							Fiber Broadband	$	160	135	19	%
Other Broadband							Other Broadband	580		619	(6)	%
Voice and Other	Voice and Other	502		578	(13)	%	Voice and Other	433		625	(31)	%
CAF II		123		123	—	%
Total Mass Markets Segment Revenue	Total Mass Markets Segment Revenue	1,379		1,469	(6)	%	Total Mass Markets Segment Revenue	1,173		1,379	(15)	%
Expenses:	Expenses:						Expenses:
Total expense	Total expense	161		203	(21)	%	Total expense	194		164	18	%
Total adjusted EBITDA	Total adjusted EBITDA	$	1,218	1,266	(4)	%	Total adjusted EBITDA	$	979	1,215	(19)	%


		Nine Months Ended September 30,			% Change			Nine Months Ended September 30,			% Change
		2021		2020				2022		2021
		(Dollars in millions)						(Dollars in millions)
Mass Markets Product Categories:	Mass Markets Product Categories:						Mass Markets Product Categories:
Consumer Broadband		$	2,169	2,178	—	%
SBG Broadband		117		116	1	%
Fiber Broadband							Fiber Broadband	$	456	387	18	%
Other Broadband							Other Broadband	1,786		1,899	(6)	%
Voice and Other	Voice and Other	1,561		1,772	(12)	%	Voice and Other	1,402		1,929	(27)	%
CAF II		368		369	—	%
Total Mass Markets Segment Revenue	Total Mass Markets Segment Revenue	4,215		4,435	(5)	%	Total Mass Markets Segment Revenue	3,644		4,215	(14)	%
Expenses:	Expenses:						Expenses:
Total expense	Total expense	526		584	(10)	%	Total expense	530		534	(1)	%
Total adjusted EBITDA	Total adjusted EBITDA	$	3,689	3,851	(4)	%	Total adjusted EBITDA	$	3,114	3,681	(15)	%

Table of Contents

Three and nine months ended September 30, ~~2021~~2022 compared to the same periods ended September 30, ~~2020~~2021

~~Segment~~Mass Markets segment revenue decreased ~~$90~~$206 million for the three months ended September 30, ~~2021~~2022 as compared to ~~the~~ September 30, ~~2020,~~2021 and decreased ~~$220~~$571 million for the nine months ended September 30, ~~2021~~2022 as compared to September 30, ~~2020,~~2021 primarily due to the following factors:

•Fiber Broadband revenue increased driven by growth in fiber customers associated with our continued increase in enabled locations from our Quantum Fiber buildout;

•Other Broadband revenue decreased ~~during each period~~ driven by ~~continued pressure on legacy infrastructure, which was partially offset by gains~~customer losses in our ~~fiber-based~~lower speed copper-based broadband ~~business.~~services;

•Voice and Other declined ~~during both periods~~primarily due to (i) a $123 million reduction in CAF II revenue during the three months ended September 30, 2022 compared to the same period in 2021 due to the conclusion of the CAF II program on December 31, 2021, (ii) a $309 million net reduction in CAF II revenue during the nine months ended September 30, 2022 compared to the same period in 2021, and (iii) the continued loss of legacy voice ~~customer losses and our exit of the Prism video product.~~customers.

~~Segment~~Mass Markets segment expense ~~decreased $42~~increased $30 million for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020,~~2021 and decreased ~~$58~~$4 million for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020, primarily~~2021, with the increase due to higher bad debt expense, and marketing and advertising related to Quantum Fiber. The decrease for the nine months ended September 30, 2022 is due to lower ~~employee-related costs from lower headcount~~network-related and ~~lower cost of sales driven by the decrease in Prism content~~employee costs, partially offset by ~~higher network expenses for~~ the ~~nine months ended.~~above items.

~~Segment~~Mass Markets segment adjusted EBITDA as a percentage of segment revenue was ~~88%~~83% and 85%, respectively, for ~~both~~ the three and nine months ended September 30, ~~2021~~2022 and ~~86%~~88% and 87%, respectively, for the three and nine months ended September 30, ~~2020.~~

2021.

5455

Table of Contents

Liquidity and Capital Resources

Overview of Sources and Uses of Cash

We are a holding company that is dependent on the capital resources of our subsidiaries to satisfy our parent company liquidity requirements. Several of our significant operating subsidiaries have borrowed funds either on a standalone basis or as part of a separate restricted group with certain of its subsidiaries or affiliates. The terms of the instruments governing the indebtedness of these borrowers or borrowing groups may restrict our ability to access their accumulated cash. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax, legal and other considerations.

At September 30, ~~2021,~~2022, we held cash and cash equivalents of ~~$674~~$252 million, ~~which includes cash and cash equivalents classified as held for sale,~~ and we also had ~~$2.2~~$1.9 billion of borrowing capacity available under our revolving credit facility. We typically use our revolving credit facility as a source of liquidity for operating activities and our other cash requirements. We had approximately ~~$91~~$95 million of cash and cash equivalents outside the United States at September 30, ~~2021.~~2022. We currently believe that there are no material restrictions on our ability to repatriate cash and cash equivalents into the United States, and that we may do so without paying or accruing U.S. taxes. ~~Other than transactions related to our Latin American disposal group, we~~We do not currently intend to repatriate to the United States any of our foreign cash and cash equivalents from operating entities.

Our executive officers and our Board of Directors ~~periodically~~ review our sources and potential uses of cash in connection with our annual budgeting ~~process.~~process and whenever circumstances warrant. Generally speaking, our principal funding source is cash from operating activities, and our principal cash requirements include operating expenses, capital expenditures, income taxes, debt repayments, ~~dividends,~~ periodic securities repurchases, periodic pension contributions and other benefits payments. The impact of the ~~sale~~recent sales of our Latin American and ILEC businesses ~~are~~is further described below.

Based on our current capital allocation objectives, for the full year ~~2021~~2022 we project expending approximately ~~$2.8~~$3.0 billion to ~~$3.0~~$3.2 billion of capital ~~expenditures and approximately $1.1 billion of cash dividends, or $1.00 per share, on our common stock (based on the assumptions described below under "Dividends").~~expenditures.

For the 12 month period ending September 30, ~~2022,~~2023, we project that our fixed commitments will include (i) $125 million of scheduled term loan amortization payments and (ii) ~~$29~~$27 million of finance lease and other fixed ~~payments (which includes $2 million~~payments. These amounts exclude the $3.3 billion aggregate principal amount of ~~finance lease obligations that have been reclassified~~indebtedness retired subsequent to September 30, 2022, as ~~held for sale) and (iii) $2.3 billion~~described further in Note 17—Subsequent Events. This aggregate principal was classified as current maturities of long-term debt ~~maturities.~~on our consolidated balance sheets as of September 30, 2022.

We will continue to monitor our future sources and uses of cash, and anticipate that we will make adjustments to our capital allocation strategies when, as and if determined by our Board of Directors. We may also draw on our revolving credit facility as a source of liquidity for operating activities and to give us additional flexibility to finance our capital investments, repayments of debt, pension contributions and other cash requirements.

For additional information, see "Risk Factors—Financial Risks" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Impact of the ~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses

As discussed in Note 2—~~Planned Divestiture~~Recently Completed Divestitures of the Latin American and ILEC Businesses to our consolidated financial statements in Item 1 of Part I of this report, we ~~entered into definitive agreements to divest~~sold our Latin American business on August 1, 2022 and sold a portion of our ILEC ~~businesses~~business on ~~July 25, 2021 and August~~October 3, ~~2021, respectively.~~2022. As further described elsewhere herein, these transactions in the aggregate provided us with a substantial amount of cash proceeds, but ultimately will reduce our base of income-generating assets that generate our recurring cash from operating activities. As a result of these divestitures, we expect to exhaust the majority of our net operating losses, thereby increasing our cash taxes beginning in 2023.

Table of Contents

Capital Expenditures

We incur capital expenditures on an ongoing basis to expand and improve our service offerings, enhance and modernize our networks and compete effectively in our markets. We evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and our expected return on investment. The amount of capital investment is influenced by, among other things, current and projected demand for our services and products, cash flow generated by operating activities, cash required for other purposes and regulatory considerations (such as ~~our CAF Phase II~~governmentally-mandated infrastructure buildout requirements).

Our capital expenditures continue to be focused on enhancing network operating efficiencies, ~~and~~ supporting new service ~~developments.~~developments, and expanding our fiber network, including our Quantum Fiber buildout plan. For more information on our capital spending, see (i) "—Overview of Sources and Uses of ~~Cash"~~Cash " above, (ii) ~~"Historical Information—~~"Cash Flow Activities—Investing Activities" below and (iii) Item 1 of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Debt and Other Financing Arrangements

Subject to market conditions, we expect to continue to issue debt securities from time to time in the future to refinance a substantial portion of our maturing debt, including issuing debt securities of certain of our subsidiaries to refinance their maturing debt to the extent feasible and consistent with our capital allocation strategies. The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned by credit rating agencies, among other factors.

As of the date of this report, the credit ratings for the senior secured and unsecured debt of Lumen Technologies, Inc., Level 3 Financing, Inc. and Qwest Corporation were as follows:

Borrower

Moody's Investors Service, Inc.

Standard & Poor's

Fitch Ratings

Lumen Technologies, Inc.:

Unsecured

BB-/Negative Watch

Secured

Ba3

~~BBB-~~BB+

BB+

Level 3 Financing, Inc.

Unsecured

Ba3

BBBB-

Secured

Ba1

~~BBB-~~BB+

BBB-

Qwest Corporation:

Unsecured

Ba2

~~BBB-~~BB+

Our credit ratings are reviewed and adjusted from time to time by the rating agencies. Any future changes in the senior unsecured or secured debt ratings of us or our subsidiaries could impact our access to capital or borrowing costs. With the recent downgrade of certain of our credit ratings we may experience increased borrowing costs. See "Risk Factors—Financial Risks" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

From time to time over the past couple of years, we have engaged in various refinancings, redemptions, tender offers, open market purchases and other transactions designed to reduce our consolidated indebtedness, lower our interest costs, improve our financial flexibility or otherwise enhance our debt profile. We plan to continue to pursue similar transactions in the future. Whether and when we implement any additional such transactions depends on a wide variety of factors, including without limitation market conditions, our upcoming debt maturities, and our cash requirements. There is no guarantee that we will be successful in implementing any such transactions or attaining our stated objectives.

Table of Contents

Net Operating Loss Carryforwards

As of December 31, ~~2020,~~2021, Lumen Technologies had approximately ~~$5.1~~$2.9 billion of federal net operating loss carryforwards ("NOLs"), which for U.S. federal income tax purposes can be used to offset future taxable income. These NOLs are primarily related to federal NOLs we acquired through the Level 3 acquisition on November 1, 2017 and are subject to limitations under Section 382 of the Internal Revenue Code and related U.S. Treasury Department regulations. We maintain a Section 382 rights agreement designed to safeguard through late 2023 our ability to use those NOLs. Assuming we can continue using these NOLs in the amounts projected, we expect to utilize ~~the~~a substantial portion of our NOLs ~~available for 2022~~ to offset taxable gains generated by the ~~completion~~divestiture of our ~~pending divestitures.~~Latin American and ILEC businesses. The amounts of our near-term future tax payments will depend upon many factors, including our future earnings and tax circumstances and the impact of any corporate tax reform or taxable transactions. Based on current laws and our current assumptions and projections, we estimate our cash income tax liability related to ~~2021~~2022 will be approximately $100 million. If, as expected, we use a substantial portion of our NOLs in 2022 to offset divestiture-related gains, we anticipate that our cash income tax liabilities will increase substantially in future periods.

We cannot assure you we will be able to use our NOL carryforwards fully. See "Risk Factors—Financial Risks—We may not be able to fully utilize our NOLs" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

Dividends

~~We currently expect to continue our current practice~~Between the first quarter of ~~paying quarterly cash dividends in respect~~2019 and the third quarter of our common stock subject to our Board of Directors' discretion to modify or terminate this practice at any time and for any reason without prior notice. Our current quarterly common stock dividend rate is $0.25 per share, as approved by2022, our Board of Directors which we believe is a dividend rate per share which enables us to balance our multiple objectives of managing and investing in our business, deleveraging our balance sheet and returning a substantial portion of ourdeclared quarterly cash ~~to our shareholders. Assuming continued authorization by our Board during 2021 at this rate~~dividends of $0.25 per share ~~our average total dividend paid each quarter would be approximately $252 million based on the number~~ of our ~~current~~ outstanding ~~shares (which figure (i) reflects shares repurchased through October 5, 2021 under~~common stock. On November 2, 2022, we announced that our ~~stock repurchase plan~~Board had terminated our quarterly cash dividend program, effective immediately, to enable us to allocate additional capital to growth initiatives, debt reduction and (ii) includes dividend payments in connection with the anticipated vesting of currently outstanding equity awards). Dividend payments upon the vesting of equity incentive awards was $28 million during nine months ended September 30, 2021. See Risk Factors—"Business Risks" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.share repurchases.

Stock Repurchases

~~Effective August 3, 2021,~~On October 31, 2022, our Board of Directors authorized a ~~24-month~~new two-year program to repurchase up to an aggregate of ~~$1.0~~$1.5 billion of our outstanding common stock (the "August 2021 stock repurchase program"). During the three and nine months ended September 30, 2021, we repurchased 73.8 million shares of our outstanding common stock in the open market. These shares were repurchased for an aggregate market price of $909 million. The figures set forth above exclude 3.5 million shares that, as of September 30, 2021, we had agreed to purchase under the program for an additional $45 million in transactions that settled in October of 2021.

~~As of October 5, 2021, we completed the August 2021~~stock. This new stock repurchase program ~~settling 3.5 million~~took effect on November 2, 2022, immediately upon the public announcement thereof. We expect to execute this share repurchase program through open market transactions, subject to market conditions and other factors. As of November 3, 2022, we had not repurchased any shares ~~for $45 million that were previously executed and accrued as~~ of September 30, 2021 and repurchasing an additional 3.6 million shares for $46 million subsequent to the end of the third quarter. Upon completion of the program, we repurchased a total of 80.9 million shares for an average purchase price of $12.36 per share. All repurchased common stock ~~has been retired.~~under this new program.

Revolving Facilities and Other Debt Instruments

OnAt September 30, 2022, we had $11.7 billion of outstanding consolidated secured indebtedness, $13.4 billion of outstanding consolidated unsecured indebtedness (excluding (i) long-term debt then classified as liabilities held for sale related to the ILEC business and subsequently transferred to the third-party purchaser upon close of the ILEC business divestiture on October 3, 2022, (ii) finance lease obligations, (iii) unamortized premiums, net and (iv) unamortized debt issuance costs) and $1.9 billion of unused borrowing capacity under our revolving credit facility, as discussed further below. For a discussion of debt repayments since September 30, 2022, see Note 17—Subsequent Events.

Under our amended and restated credit agreement dated as of January 31, 2020 (the "Amended Credit Agreement"), we ~~amended and restated our credit agreement dated June 19, 2017 to, among other things, extend the debt maturities of the~~maintained at September 30, 2022 (i) a $2.2 billion senior secured revolving credit facility, under which we owed $280 million as of such date, and (ii) $6.2 billion of senior secured term loan ~~facilities established thereunder, to lower interest rates payable thereunder, and to amend the amounts owed under each of the~~ facilities. For additional information, see (i) "—Overview of Sources and Uses of Cash," (ii) Note 7—6—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 1 of Part I of this report and (iii) Note 6—7—Long-Term Debt and Credit Facilities in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

At September 30, ~~2021,~~2022, we had ~~$65~~$44 million of letters of credit outstanding under our $225 million uncommitted letter of credit facility. Additionally, under a separate ~~facility,~~facilities maintained by one of our affiliates, we had outstanding letters of credit, or other similar obligations, of approximately ~~$24~~$62 million as of September 30, ~~2021,~~2022, of which $5$3 million was collateralized by cash that is reflected on our consolidated balance sheets as restricted cash.

Table of Contents

In addition to its indebtedness under ~~our~~the Amended Credit Agreement, Lumen Technologies is indebted under its outstanding senior notes, and several of its subsidiaries are indebted under separate credit facilities or senior notes. For information on the terms and conditions of other debt instruments of ours and our subsidiaries, including financial and operating covenants, see (i) Note 7—6—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 1 of Part I of this report and (ii) "—Other Matters" below.

Pension and Post-retirement Benefit Obligations

We are subject to material obligations under our existing defined benefit pension plans and post-retirement benefit plans. At December 31, ~~2020,~~2021, the accounting unfunded status of our qualified and non-qualified defined benefit pension plans and our qualified post-retirement benefit plans was ~~$1.7~~$1.2 billion and ~~$3.0~~$2.8 billion, respectively. For additional information about our pension and post-retirement benefit arrangements, see "Critical Accounting Policies and ~~Estimates -~~ Estimates—Pensions and Post-Retirement Benefits" in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and see Note ~~10—~~11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of the same report.

As of January 1, 2022, we spun off a new pension plan (the "Lumen Pension Plan") from the Lumen Combined Pension Plan ("Combined Pension Plan") in anticipation of the sale of the ILEC business, as described further in Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses to our consolidated financial statements in Item 1 of Part I of this report. At the time of the spin-off we transferred $2.5 billion of pension benefit obligation and $2.2 billion of plan assets to the Lumen Pension Plan. Following a revaluation of the pension obligation and pension assets for the Lumen Pension Plan in preparation for the closing of the ILEC business divestiture, we contributed approximately $319 million of cash in September 2022 to satisfy our contractual obligations to the purchaser of the divested business.

Benefits paid by our ~~qualified pension plan~~Combined Pension Plan and the Lumen Pension Plan are paid through athe trust that holds ~~all of~~ the ~~plan's~~Combined Pension Plan's assets. Based on current laws and circumstances, we do not expect any contributions to be required for our ~~qualified pension plan~~Combined Pension Plan during ~~2021.~~2022. The amount of required contributions to our ~~qualified pension plan~~Combined Pension Plan in ~~2022~~2023 and beyond will depend on a variety of factors, most of which are beyond our control, including earnings on plan investments, prevailing interest rates, demographic experience, changes in plan benefits and changes in funding laws and regulations. We occasionally make voluntary contributions to our plans in addition to required ~~contributions.~~contributions and reserve the right to do so in the future. We last made a voluntary contribution to the trust for our ~~qualified pension plan~~Combined Pension Plan during ~~2018. We could~~2018, and we currently do not expect to make a voluntary contribution ~~to the trust for our qualified pension plan~~ in ~~2021.~~2022.

Substantially all of our post-retirement health care and life insurance benefits plans are unfunded and are paid by us with available cash. ~~Aggregate~~Based on our most recent estimates, we expect to pay $217 million of post-retirement benefits, ~~paid by us under these plans (net~~net of participant contributions and direct ~~subsidy receipts) were $211 million, $241 million and $249 million~~subsidies, for the ~~years ended December 31, 2020, 2019 and 2018, respectively.~~full year 2022. For additional information on our expected future benefits payments for our post-retirement benefit plans, please see Note ~~10—~~11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of our Annual Report Form 10-K for the year ended December 31, ~~2020.~~

~~For 2021, our expected annual long-term rate of return on the pension plan assets is 5.5%. However, actual returns could be substantially different.~~2021.

Our pension plan contains provisions that allow us, from time to time, to offer lump sum payment options to certain former employees in settlement of their future retirement benefits. We record an accounting settlement charge, consisting of the recognition of certain deferred costs of the pension plan, associated with these lump sum payments only if, in the aggregate, they exceed the sum of the annual service and interest costs for the plan’s net periodic pension benefit cost, which represents the settlement accounting threshold. During ~~the third quarter of~~ 2021, ~~we determined that~~ lump sum pension settlement payments ~~for 2021 are expected to exceed~~exceeded the settlement threshold. As a result, in the third quarter of 2021 we recognized a non-cash settlement charge of $57 million to accelerate the recognition of a portion of the previously unrecognized actuarial losses in the qualified pension plan, which has been allocated and reflected in other (expense) income, net in our consolidated statement of operations for the three and nine months ended September 30, 2021. The amount of any future non-cash settlement charges after 2021 will be dependent on several factors, including the total amount of our future lump sum benefit payments.

On October 19, 2021, we, as sponsor of the Combined Pension Plan, along with the Plan’s independent fiduciary, entered into an agreement committing the Plan to use a portion of its plan assets to purchase an annuity from an insurance company (the "Insurer") to transfer approximately $1.4 billion of the Plan’s pension liabilities. This agreement will irrevocably transfer to the Insurer future Plan benefit obligations for approximately 22,600 U.S. Lumen participants ("Transferred Participants") effective on December 31, 2021. This annuity transaction will be funded entirely by existing Plan assets.

The transaction will result in Lumen recognizing a noncash settlement charge in the fourth quarter of 2021 to accelerate recognition of a portion of the actuarial loss included in accumulated other comprehensive loss. We currently estimate that the pension settlement charges recognized in the fourth quarter will be approximately $350 million, dependent upon the completion of the annuity transaction discussed above and the amount of lump sum pension payments made as discussed inPlease see Note ~~10—~~11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of ~~the same report. The settlement charge will be recognized in other (expense) income, net in~~ our ~~consolidated statements of operations. The Plan will be remeasured~~Annual Report Form 10-K for the ~~annuity and lump sum payments in~~year ended December 31, 2021 for additional information.

For 2022, our expected annual long-term rate of return on the ~~fourth quarter of 2021.~~pension plan assets is 5.5%. However, actual returns could be substantially different.

See Note ~~10—~~8—Employee Benefits to our consolidated financial statements in Item 81 of Part III of ~~the same~~this report for more information.

Table of Contents

Future Contractual Obligations

For information regarding our estimated future contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Federal Broadband Support Programs

~~Since~~Between 2015 and 2021, we ~~have been receiving over~~received approximately $500 million annually through Phase II of the CAF, a program that ~~will end this year.~~ended on December 31, 2021. In connection with the CAF funding, we ~~must~~were required to meet certain specified infrastructure buildout requirements in 33 states by the end of 2021, which ~~requires~~required substantial capital expenditures. ~~While~~In the first quarter of 2022, we ~~are on track~~recognized $59 million of previously deferred revenue related to ~~meet~~ the ~~requirements this year, we cannot provide~~conclusion of the CAF program based upon our final buildout and filing submissions. The government has the right to audit our compliance with the CAF program and the ultimate outcome of any ~~assurances that we will be able~~remaining examinations is unknown, but could result in a liability to ~~timely meet all~~us in excess of our ~~mandated buildout requirements. In accordance with the Federal Communications Commission's ("FCC") January 2020 order, we elected to receive an additional year of CAF Phase II funding in 2021.~~reserve accruals established for these matters.

In early 2020, the FCC created the Rural Digital Opportunity Fund (the “RDOF”), which is a new federal support program designed to replace the CAF Phase II program. On December 7, 2020, the FCC allocated in its RDOF Phase I auction $9.2 billion in support payments over 10 years to deploy high speed broadband to over 5.2 million unserved locations. We won bids ~~for~~to receive $26 million of annual RDOF Phase I support payments approximately 36% of ~~$26 million, annually. Support~~which is attributable to the ILEC business we divested on October 3, 2022 and will be payable to the purchaser of the business. See Note 2—Recently Completed Divestitures of the Latin American and ILEC Businesses to our consolidated financial statements in Item 1 of Part I of this report. Our support payments under the RDOF Phase I program ~~are expected to begin January 1, 2022, provided we receive regulatory approvals as anticipated. Assuming we timely complete our pending divestiture~~commenced during the second quarter of ILEC properties on the terms described herein, we expect a portion of these payments will accrue to the purchaser of those properties. See Note 2—Planned Divestiture of the Latin American and ILEC Businesses.2022.

For additional information on these programs, see (i) "Business—~~Regulation"~~Regulation of Our Business" in Item 1 of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and (ii) "Risk Factors—~~Risks Affecting Our Liquidity and Capital Resources"~~Financial Risks" in Item 1A of Part I of the same Annual Report.

~~As part of its~~Federal officials have proposed ~~infrastructure plan, the Biden Administration has proposed investing substantial sums~~changes to ~~expand internet access in the United States. The Administration seeks several other changes~~current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted under the Obama Administration. ~~Proposed~~In November 2021, the U.S. Congress enacted legislation ~~or regulations, if enacted or adopted, could impact us or~~that appropriated $65 billion to improve broadband affordability and access, primarily through federally funded state grants. As of the ~~scope~~date of ~~our services. Currently, we believe it is~~this report, various state and federal agencies are continuing to take steps to make this funding available to eligible applicants, including us. It remains premature to speculate on the potential impact of ~~these proposals~~this legislation on us.

5960

Table of Contents

~~Historical Information~~Cash Flow Activities

The following table summarizes our consolidated cash flow ~~activities:~~activities for the nine months ended September 30, 2022 and 2021.


		Nine Months Ended September 30,			$ Change		Nine Months Ended September 30,			$ Change
		2021		2020			2022		2021
		(Dollars in millions)					(Dollars in millions)
Net cash provided by operating activities	Net cash provided by operating activities	$	4,894	4,842	52	Net cash provided by operating activities	$	3,894	4,894	(1,000)
Net cash used in investing activities		$	(1,949)	(2,840)	(891)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	594		(1,949)	2,543
Net cash used in financing activities	Net cash used in financing activities	$	(2,668)	(3,172)	(504)	Net cash used in financing activities	(4,632)		(2,668)	(1,964)

Operating Activities

Net cash provided by operating activities ~~increased~~decreased by ~~$52 million~~$1.0 billion for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 primarily due to ~~higher~~lower net income ~~higher collections on accounts receivable~~adjusted for non-cash expenses and ~~lower payments on accounts payable, partially offset by decreased depreciation and amortization, gain on early retirement~~gains, as well as the pension contributions made in preparation for the closing the ILEC business divestiture as described in Note 8—Employee Benefits to our consolidated financial statements in Item 1 of ~~debt and increased cash payments for post-retirement benefits.~~Part I of this report. Cash provided by operating activities is subject to variability period over period as a result of timing differences, including with respect to the collection of receivables and payments of interest expense, accounts payable and bonuses.

For additional information about our operating results, see "Results of Operations" above.

Investing Activities

Net cash ~~used in our~~provided by (used in) investing activities ~~decreased~~increased by ~~$891 million~~$2.5 billion for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 primarily due to ~~a decrease in capital expenditures.~~pre-tax cash proceeds of $2.7 billion from the sale of the Latin American business.

Financing Activities

Net cash used in financing activities ~~decreased~~increased by ~~$504 million~~$2.0 billion for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 primarily due ~~to lower~~higher payments of long-term debt ~~partially offset by lower net~~in the current year and proceeds from issuance of long-term debt ~~increased payments on our revolving line of credit, and~~in the prior year, partially offset by repurchases of common ~~stock.~~stock in the prior year.

See Note 7—6—Long-Term Debt and Credit Facilities to our consolidated financial statements in Item 1 of Part I of this report for additional information on our outstanding debt securities.

Other Matters

We have cash management and loan arrangements with a majority of our income-generating subsidiaries, in which a substantial portion of the aggregate cash of those subsidiaries' is periodically advanced or loaned to us or our service company affiliate. Although we periodically repay these advances to fund the subsidiaries' cash requirements throughout the year, at any given point in time we may owe a substantial sum to our subsidiaries under these arrangements. In accordance with generally accepted accounting principles, these arrangements are reflected in the balance sheets of our subsidiaries but are eliminated in consolidation and therefore not recognized on our consolidated balance sheets.

We are also ~~are~~ involved in various legal proceedings that could substantially impact our financial position. See Note ~~15—~~13—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 1 of Part I of this report for additional information.

Table of Contents

Market Risk

As of September 30, ~~2021,~~2022, we are exposed to market risk from changes in interest rates on our variable rate long-term debt obligations and fluctuations in certain foreign currencies. ~~We seek to maintain a favorable mix of fixed and variable rate debt in an effort to limit interest costs and cash flow volatility resulting from changes in rates.~~

Management periodically reviews our exposure to interest rate fluctuations and periodically implements strategies to manage the exposure. From time to time, we have used derivative instruments to (i) swap our exposure to ~~changing~~ variable interest rates for fixed interest rates or (ii) to swap obligations to pay fixed interest rates for variable interest rates. We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative instrument activities. As of September 30, ~~2021,~~2022, we did not hold or issue derivative financial instruments for trading or speculative purposes.

~~In 2019,~~As of September 30, 2022, we ~~executed swap transactions that reduced our exposure to floating rates with respect to $4~~had approximately $9.1 billion ~~principal amount~~ of floating rate debt. ~~See Note 13—Derivative Financial Instruments to our consolidated financial statements in Item 1 of Part I of this report for additional disclosure regarding our hedging arrangements.~~

~~As of September 30, 2021, we had approximately $9.6 billion floating rate debt potentially subject to LIBOR, $4 billion of which was subject to the above-described hedging arrangements.~~ A hypothetical increase of 100 basis points in LIBOR relating to our ~~$5.6~~$9.1 billion of ~~unhedged~~ floating rate debt would, among other things, decrease our annual pre-tax earnings by approximately ~~$56~~$91 million. Additionally, our credit agreements contain language about a possible change from LIBOR to an alternative index.

We conduct a portion of our business in currencies other than the U.S. dollar, the currency in which our consolidated financial statements are reported. Our European subsidiaries use, and, prior to the recent divestiture of our Latin American Business on August 1, 2022, certain of our Latin American subsidiaries ~~use~~used the local currency as their functional currency, as the majority of their revenue and purchases are or were transacted in their local currencies. ~~Certain Latin American countries previously designated as highly inflationary economies use the U.S. dollar as their functional currency.~~ Although we continue to evaluate strategies to mitigate risks related to the effect of fluctuations in currency exchange rates, we will likely recognize gains or losses from international transactions. Accordingly, changes in foreign currency rates relative to the U.S. dollar could adversely impact our operating results.

Certain shortcomings are inherent in the method of analysis presented in the computation of exposures to market risks. Actual values may differ materially from those disclosed by us from time to time if market conditions vary from the assumptions used in the analyses performed. These analyses only incorporate the risk exposures that existed at September 30, ~~2021.~~2022.

Other Information

Our website is www.lumen.com. We routinely post important investor information in the "Investor Relations" section of our website at ir.lumen.com. The information contained on, or that may be accessed through, our website is not part of this quarterly report. You may obtain free electronic copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K filed by us or our affiliates Level 3 Parent, LLC and Qwest Corporation, and all amendments to those reports, in the "Investor Relations" section of our website (ir.lumen.com) under the headings "FINANCIALS" and "SEC Filings." These reports are available on our website as soon as reasonably practicable after they are electronically filed with the SEC. From time to time, we also use our website to webcast our earnings calls and certain of our meetings with investors or other members of the investment community.

6162

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Liquidity and Capital Resources—Market Risk" in Item 2 of Part I above.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be disclosed by us in the reports we file or furnish under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. These include controls and procedures designed to ensure this information is accumulated and communicated to our senior management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management, with the participation of our Chief Executive Officer, Jeff K. Storey, and our Executive Vice President and Chief Financial Officer, ~~Indraneel Dev,~~Chris Stansbury, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2021.~~2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were effective, as of September 30, ~~2021,~~2022, in providing reasonable assurance the information required to be disclosed by us in this report was accumulated and communicated in the manner provided above.

Changes in Internal Control Over Financial Reporting

Other than the implementation of controls over ~~reporting~~accounting for the ~~assets~~divestiture of our Latin American business and ~~liabilities to be sold through our two previously announced divestitures,~~the calculation of the resulting gain therefrom, there have been no changes in our internal control over financial reporting (as defined in ~~Rules~~Rule 13a-15(f) ~~or 15d-15(f)~~ of the Exchange Act) that occurred during the third quarter of ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Internal Controls

The effectiveness of our or any system of disclosure controls and procedures is subject to certain limitations, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the assumptions used in identifying the likelihood of future events and the inability to eliminate misconduct completely. As a result, there can be no assurance that our disclosure controls and procedures will detect all errors or fraud. By their nature, our or any system of disclosure controls and procedures can provide only reasonable assurance regarding management's control objectives.

6263

Table of Contents

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information contained in Note ~~15—~~13—Commitments, Contingencies and Other Items included in Item 1 of Part I of this quarterly report on Form 10-Q is incorporated herein by reference. The ultimate outcome of the matters described in Note 1513 may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing in such 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—Our pending legal proceedings could have a material adverse impact on our financial condition and operating results, on the trading price of our 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, ~~2020.~~2021.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition or future results. We urge you to carefully consider (i) the other information set forth in this report and (ii) the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020, as supplemented by the following additional risk factors.~~

~~We may not be able to complete our pending divestitures or realize the benefits of these transactions.~~

On July 25, 2021, certain of our affiliates agreed to sell our Latin American business and enter into various post-closing commercial agreements with the purchaser designed to ensure the continuity of services to customers, and on August 3, 2021, Lumen and certain of its subsidiaries agreed to sell a substantial portion of their incumbent local exchange business and to enter into several post-closing commercial agreements. The completion of both of these divestitures is subject to receipt of several regulatory approvals and other customary closing conditions, the satisfaction of which is not assured. The pendency of these divestitures could impact us in several ways, including impacting relationships with our customers, vendors and employees, restricting our operations and diverting management’s attention from operating our business in the ordinary course. Even if we successfully complete these divestitures, we may (i) incur greater tax or other costs or realize fewer benefits than anticipated under the purchase agreements and the post-closing commercial agreements that we plan to enter into with the purchasers and (ii) experience operational difficulties segregating the divested assets from our retained assets. Moreover, these divestitures will reduce our future cash flows.

~~COVID-19 vaccination requirements could potentially result in personnel shortages or disruptions.~~

Effective December 8, 2021, we plan to comply with President Biden’s September 2021 Executive Order requiring covered employees of federal contractors to be vaccinated against COVID-19. This mandate will require all of our domestic employees to be vaccinated against COVID-19 or face termination, unless a religious or medical exemption applies. This requirement could make it more difficult to retain or attract employees who oppose vaccination mandates and are ineligible for an exemption. In addition, certain of our contractors and vendors may also be subject to this Executive Order. It is possible that any resulting personnel shortages could have a material adverse impact on our operating results or financial condition.2021.

6364

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Issuer Purchases of Equity Securities~~

Effective August 3, 2021, our Board of Directors authorized a 24-month program to repurchase up to an aggregate of $1.0 billion of our outstanding common stock. During the three and nine months ended September 30, 2021, we repurchased 73.8 million shares of our outstanding common stock in the open market. These shares were repurchased for an aggregate market price of $909 million, or an average purchase price of $12.32 per share. The figures set forth above and displayed in the table below exclude 3.5 million shares that, as of September 30, 2021, we had agreed to purchase under the program for an additional $45 million in transactions that settled in October of 2021. All repurchased common stock has been retired. For additional information, see Note 17—Repurchases of Lumen Common Stock to our consolidated financial statements included in Item 1 of Part I of this report.

~~The following table contains information about shares of our previously-issued common stock that were repurchased under our above-described Stock Repurchase Program:~~

Total Number of Shares Purchased Average Price Paid
Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Period
Aug-21 34,520,166 $ 12.15 34,520,166 $ 580,738,105
Sep-21 39,285,699 $ 12.47 39,285,699 $ 90,779,031
Total 73,805,865 $ 12.32 73,805,865

The following table contains information about shares of our previously-issued common stock that we withheld from employees upon vesting of their stock-based awards during the third quarter of ~~2021~~2022 to satisfy the related tax withholding obligations:

Total Number of
Shares Withheld
for Taxes Average Price Paid
Per Share
Period
Jul-21 17,087 $ 13.20
Aug-21 182,296 $ 11.85
Sep-21 13,644 $ 12.42
Total 213,027

~~ITEM 5. OTHER INFORMATION~~

~~The following disclosure is being made under Section 13(r) of the Exchange Act out of an abundance of caution:~~

We are required to engage on a regular basis with the Russian Federal Security Service (“FSB”) in the FSB’s official capacity of regulating our use of technology in Russia in connection with providing commercial services therein through our local subsidiary. On March 2, 2021, the U.S. Secretary of State designated the FSB as a party subject to the provisions of U.S. Executive Order No. 13382 issued in 2005. We do not derive any gross revenues or net profits directly associated with any such dealings by us with the FSB and all such dealings are explicitly authorized by General License 1B issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control. We plan to continue these activities as required to continue to provide commercial services in Russia.


	Total Number of Shares Withheld for Taxes	Average Price Paid Per Share
Period
Jul-22	36,697	$	10.87
Aug-22	20,043	$	11.05
Sep-22	9,230	$	10.64
Total	65,970

6465

Table of Contents

ITEM 6. EXHIBITS

Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference. All other exhibits are provided as part of this electronic submission.


Exhibit Number			Description
2.1			Put Option Agreement, dated as of November 2, 2022 by and among certain affiliate s of Lumen Technologies, Inc. and Colt Technology Services Group Limited (incorporated by reference to Exhibit 2.1 to Lumen Technologies, Inc.’s Current Report on Form 8-K filed with the SEC on November 2, 2022).
10.1			Offer Letter dated September 12, 2022 between Lumen Technologies, Inc. and Kate Johnson (incorporated by reference to Exhibit 10.1 to Lumen Technologies, Inc.'s Current Report on Form 8-K filed with the SEC on September 13, 2022).
31.1*			Certification of the Chief Executive Officer of Lumen Technologies, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of the Chief Financial Officer of Lumen Technologies, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*			Certification of the Chief Executive Officer of Lumen Technologies, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*			Certification of the Chief Financial Officer of Lumen Technologies, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*			Financial statements from the Quarterly Report on Form 10-Q of Lumen Technologies, Inc. for the period ended September 30, ~~2021,~~2022, formatted in Inline XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders' Equity and (vi) the Notes to Consolidated Financial Statements.
104*			Cover page formatted as Inline XBRL and contained in Exhibit 101.

* Exhibit filed herewith.

6566

Table of Contents

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 3, ~~2021.~~2022.


			LUMEN TECHNOLOGIES, INC.
			By:			/s/ Andrea Genschaw
						Andrea Genschaw Senior Vice President, - Controller (Principal Accounting Officer)

6667


	September 30, 2021 (Unaudited)		December 31, 2020
	(Dollars in millions and shares in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	635	406
Accounts receivable, less allowance of $117 and $191	1,541		1,962
Assets held for sale	8,682		—
Other	843		808
Total current assets	11,701		3,176
Property, plant and equipment, net of accumulated depreciation of $22,027 and $31,596	20,926		26,338
GOODWILL AND OTHER ASSETS
Goodwill	15,987		18,870
Other intangible assets, net	7,160		8,219
Other, net	2,534		2,791
Total goodwill and other assets	25,681		29,880
TOTAL ASSETS	$	58,308	59,394
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	2,501	2,427
Accounts payable	829		1,134
Accrued expenses and other liabilities
Salaries and benefits	873		1,008
Income and other taxes	280		314
Current operating lease liabilities	389		379
Interest	229		291
Other	284		328
Liabilities held for sale	2,291		—
Current portion of deferred revenue	624		753
Total current liabilities	8,300		6,634
LONG-TERM DEBT	27,260		29,410
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net	3,732		3,342
Benefit plan obligations, net	3,980		4,556
Other	3,853		4,290
Total deferred credits and other liabilities	11,565		12,188
COMMITMENTS AND CONTINGENCIES (Note 15)	0		0
STOCKHOLDERS' EQUITY
Preferred stock—non-redeemable, $25.00 par value, authorized 2,000 and 2,000 shares, issued and outstanding 7 and 7 shares	—		—
Common stock, $1.00 par value, authorized 2,200,000 and 2,200,000 shares, issued and outstanding 1,031,060 and 1,096,921 shares	1,031		1,097
Additional paid-in capital	19,235		20,909
Accumulated other comprehensive loss	(2,577)		(2,813)
Accumulated deficit	(6,506)		(8,031)
Total stockholders' equity	11,183		11,162
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	58,308	59,394


	International and Global Accounts		Enterprise	Small and Medium Business	Wholesale	Consumer	Business	Mass Markets	Total
	(Dollars in millions)
As of December 31, 2020(1)	$	2,555	4,738	2,808	3,114	5,655	—	—	18,870
January 2021 reorganization	(2,555)		(4,738)	(2,808)	(3,114)	(5,655)	12,173	6,697	—
Reclassified as held for sale(2)	—		—	—	—	—	(918)	(1,946)	(2,864)
Effect of foreign currency exchange rate change and other	—		—	—	—	—	(19)	—	(19)
As of September 30, 2021(1)	$	—	—	—	—	—	11,236	4,751	15,987


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Period
Aug-21	34,520,166	$	12.15	34,520,166	$	580,738,105
Sep-21	39,285,699	$	12.47	39,285,699	$	90,779,031
Total	73,805,865	$	12.32	73,805,865