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FORM 10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Colorado
(State or other jurisdiction of
incorporation or organization)
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84-0273800
(I.R.S. Employer
Identification No.)
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100 CenturyLink Drive, Monroe, Louisiana
(Address of principal executive offices)
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71203
(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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6.5% Notes Due 2017
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New York Stock Exchange
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7.375% Notes Due 2051
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New York Stock Exchange
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7.5% Notes Due 2051
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New York Stock Exchange
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6.125% Notes Due 2053
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New York Stock Exchange
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6.875% Notes Due 2054
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New York Stock Exchange
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
x
(Do not check if a
smaller reporting company)
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Smaller reporting company
o
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Years Ended December 31,
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||||||||
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2014
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2013
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2012
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(Dollars in millions)
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||||||||
Consolidated statements of operations summary data:
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||||
Operating revenues
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$
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8,838
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8,753
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8,848
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Operating expenses
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6,726
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6,675
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6,943
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Operating income
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$
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2,112
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2,078
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1,905
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Net income
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$
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970
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964
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849
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As of December 31,
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|||||
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2014
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2013
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|||
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(Dollars in millions)
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|||||
Consolidated balance sheets summary data:
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Total assets
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$
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22,457
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23,218
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Total long-term debt
(1)
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7,379
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7,558
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Total stockholder's equity
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9,183
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9,613
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(1)
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Total long-term debt is the sum of current maturities of long-term debt and long-term debt (excluding note payable-affiliate of $796 million) on our consolidated balance sheets. For information on our total obligations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Future Contractual Obligations" in Item 7 of Part II of this Annual Report.
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As of December 31,
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|||||||
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2014
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2013
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2012
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(in thousands)
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|||||||
Operational metrics:
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|||
Total broadband subscribers
(1)
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3,528
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3,429
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3,318
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Total access lines
(1)
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7,334
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7,641
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8,058
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(1)
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Broadband subscribers are customers that purchase high-speed Internet connection service through their existing telephone lines, stand-alone telephone lines, or fiber-optic cables and access lines are lines reaching from the customers' premises to a connection with the public network. Our methodology for counting our broadband subscribers and access lines includes only those lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone broadband subscribers. We count lines when we install the service.
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Years Ended December 31,
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2014
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2013
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2012
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(Dollars in millions)
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||||||||
Strategic services
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$
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3,429
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3,342
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3,265
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Legacy services
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2,987
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3,208
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3,471
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Affiliates and other services
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2,422
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2,203
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2,112
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Total operating revenues
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$
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8,838
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8,753
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8,848
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•
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Broadband.
Our broadband services allow customers to connect to the Internet through their existing telephone lines or fiber-optic cables at high speeds. Substantially all of our broadband subscribers are located within the local service area of our wireline telephone operations;
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•
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Private Line.
A private line (including special access) is a direct circuit or channel specifically dedicated for the purpose of directly connecting two or more sites. Private line service offers a high-speed, secure solution for frequent transmission of large amounts of data between sites, including some wireless backhaul;
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•
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Ethernet.
Ethernet services include point-to-point and multi-point configurations that facilitate data transmissions across metropolitan areas and wide area networks. Ethernet services are also used to provide transmission services to wireless service providers that use our fiber-optic cables connected to their towers; and
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•
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Video.
Our video services include primarily satellite digital television under CenturyLink's arrangement with DIRECTV that allows us to market, sell and bill for its services under its brand name.
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•
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Local Voice Service.
We offer local calling services for our residential and business customers within the local service area of our wireline markets, generally for a fixed monthly charge. These services include a number of enhanced calling features and other services, such as call forwarding, caller identification, conference calling, voice mail, selective call ringing and call waiting, for which we generally charge an additional monthly fee. We also generate revenues from non-recurring services, such as inside wire installation, maintenance services, service activation and reactivation. For our wholesale customers, our local calling service offerings include primarily the resale of our voice services and the sale of unbundled network elements ("UNEs"), which allow our wholesale customers to use our network or a combination of our network and their own networks to provide voice and data services to their customers. Local calling services provided to our wholesale customers allow other telecommunications companies the ability to originate or terminate telecommunications services on our network. Local calling services also include network transport, billing services and access to our network by other telecommunications providers and wireless carriers;
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•
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ISDN.
We offer integrated services digital network ("ISDN") services, which uses regular telephone lines to support voice, video and data applications;
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•
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WAN.
We offer wide area network ("WAN") services, which allow a local communications network to link to networks in remote locations; and
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•
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Switched Access Services.
As part of our wholesale services, we provide various forms of switched access services to wireline and wireless service providers for the use of our facilities to originate and terminate their interstate and intrastate voice transmissions.
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•
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statements concerning the benefits that we expect will result from our operations, investments, transactions and other activities, such as increased revenues or decreased expenditures;
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•
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statements about our anticipated future operating and financial performance, financial position and liquidity, tax position, contingent liabilities, growth opportunities and growth rates, acquisition and divestiture opportunities, business prospects, regulatory and competitive outlook, investment and expenditure plans, capital allocation plans, investment results, financing alternatives and sources and pricing plans; and
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•
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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," "would," "could," "should," "plan," "believes," "expects," "anticipates," "estimates," "projects," "intends," "likely," "seeks," "hopes," or variations or similar expressions.
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•
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the timing, success and overall effects of competition from a wide variety of competitive providers;
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•
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the risks inherent in rapid technological change, including product displacement;
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•
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the effects of ongoing changes in the regulation of the communications industry, including the outcome of regulatory or judicial proceedings relating to intercarrier compensation, access charges, universal service, broadband deployment, data protection and net neutrality;
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•
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our ability to effectively adjust to changes in the communications industry and changes in our markets, product mix and network;
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•
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our ability to effectively manage our expansion opportunities, including retaining and hiring key personnel;
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•
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possible changes in the demand for, or pricing of, our products and services, including our ability to effectively respond to increased demand for high-speed broadband service;
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•
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our ability to successfully introduce new product or service offerings on a timely and cost-effective basis;
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•
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the adverse impact on our business and network from possible equipment failures, security breaches or similar attacks on our network;
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•
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our ability to successfully negotiate collective bargaining agreements on reasonable terms without work stoppages;
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•
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our continued access to credit markets on favorable terms;
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•
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our ability to collect our receivables from financially troubled customers;
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•
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our ability to maintain favorable relations with our key business partners, suppliers, vendors, landlords and financial institutions;
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•
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any adverse developments in legal or regulatory proceedings involving CenturyLink or QCII;
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•
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changes in our operating plans, corporate strategies, or other capital allocation plans, including those caused by changes in our cash requirements, capital expenditure needs, debt obligations, cash flows, or financial position, or other similar changes;
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•
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the effects of adverse weather;
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•
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other risks referenced in this Annual Report or other of our filings with the SEC; and
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•
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the effects of more general factors such as changes in interest rates, in tax laws, in accounting policies or practices, in operating, medical, pension or administrative costs, in general market, labor or economic conditions, or in legislation, regulation or public policy.
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•
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an increased focus on selling a broader range of higher-growth strategic services, which are described in detail elsewhere in this report;
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•
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an increased focus on serving a broader range of business, governmental and wholesale customers; and
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•
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greater use of service bundles.
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•
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power losses or physical damage, whether caused by fire, adverse weather conditions, terrorism or otherwise;
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•
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capacity or system configuration limitations;
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•
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software or hardware obsolescence, defects or malfunctions;
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•
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programming, processing and other human error; and
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•
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other disruptions that are beyond our control.
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•
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disrupt the proper functioning of these networks and systems and therefore our operations or those of certain of our customers;
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•
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result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours, our customers or our customers' end users, including trade secrets, which others could use for competitive, disruptive, destructive or otherwise harmful purposes and outcomes;
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•
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require significant management attention or financial resources to remedy the damages that result or to change our systems, including expenses to repair systems, add new personnel or develop additional protective systems;
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•
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require us to notify customers, regulatory agencies or the public of data breaches;
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•
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require us to offer expensive incentives to retain existing customers or subject us to claims for contract breach, damages, credits, fines, penalties, termination or other remedies, particularly with respect to service standards set by state regulatory commissions; or
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•
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result in a loss of business, damage our reputation among our customers and the public generally, subject us to additional regulatory scrutiny or expose us to litigation.
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•
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become bankrupt or experience substantial financial difficulties;
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•
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suffer work stoppages or other labor strife;
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•
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challenge our right to receive payments or services under applicable regulations or the terms of our existing contract arrangements; or
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•
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are otherwise unable or unwilling to make payments or provide services to us.
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•
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limiting our ability to access the capital markets;
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•
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exposing us to the risk of credit rating downgrades, which would raise our borrowing costs and could further limit our access to capital;
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•
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hindering our flexibility to plan for or react to changing market, industry or economic conditions;
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•
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limiting the amount of cash flow available for future operations, acquisitions, strategic initiatives, dividends, or other uses;
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•
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making us more vulnerable to economic or industry downturns, including interest rate increases;
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•
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placing us at a competitive disadvantage compared to less leveraged competitors;
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•
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increasing the risk that we will need to sell assets, possibly on unfavorable terms, or take other unfavorable actions to meet payment obligations; or
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•
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increasing the risk that we may not meet the financial covenants contained in our debt agreements or timely make all required debt payments.
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As of December 31,
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||||
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2014
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|
2013
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||
Land
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3
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%
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3
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%
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Fiber, conduit and other outside plant
(1)
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42
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%
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40
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%
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Central office and other network electronics
(2)
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30
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%
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30
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%
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Support assets
(3)
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22
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%
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24
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%
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Construction in progress
(4)
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3
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%
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3
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%
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Gross property, plant and equipment
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100
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%
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100
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%
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(1)
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Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
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(2)
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Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.
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(3)
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Support assets consist of buildings, computers and other administrative and support equipment.
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(4)
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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.
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Successor
(1)
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Predecessor
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|||||||||||||||
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Year
Ended December 31, 2014 |
|
Year
Ended December 31, 2013 |
|
Year
Ended December 31, 2012 |
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Nine Months
Ended December 31, 2011 |
|
|
Three Months
Ended March 31, 2011 |
|
Year
Ended
December 31,
2010
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|||||||
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(Dollars in millions)
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||||||||||||||||||
Operating revenues
|
$
|
8,838
|
|
|
8,753
|
|
|
8,848
|
|
|
6,635
|
|
|
|
2,268
|
|
|
9,271
|
|
Operating expenses
|
6,726
|
|
|
6,675
|
|
|
6,943
|
|
|
5,436
|
|
|
|
1,630
|
|
|
6,788
|
|
|
Operating income
|
$
|
2,112
|
|
|
2,078
|
|
|
1,905
|
|
|
1,199
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|
|
|
638
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|
|
2,483
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Income before income tax expense
|
$
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1,609
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|
|
1,566
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|
|
1,391
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|
|
892
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|
|
|
490
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|
|
1,873
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|
Net income
|
$
|
970
|
|
|
964
|
|
|
849
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|
|
543
|
|
|
|
299
|
|
|
1,082
|
|
(1)
|
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" in Item 7 of Part II of this Annual Report for a discussion of unusual items affecting the results for the successor years ended
December 31, 2014
,
2013
and
2012
.
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Successor
|
|
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Predecessor
|
||||||||||||
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December 31, 2014
|
|
December 31, 2013
|
|
December 31, 2012
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December 31, 2011
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|
December 31, 2010
|
||||||
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(Dollars in millions)
|
|||||||||||||||
Net property, plant and equipment
|
$
|
7,201
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|
|
7,208
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|
|
7,231
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|
|
7,506
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|
|
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10,160
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|
Goodwill
|
9,354
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|
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9,354
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|
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9,354
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|
|
9,354
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—
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Total assets
|
22,457
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|
|
23,218
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|
|
23,947
|
|
|
24,811
|
|
|
|
12,570
|
|
|
Total long-term debt
(1)
|
7,379
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|
|
7,558
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|
|
7,625
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|
|
8,325
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|
|
|
8,012
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|
|
Total stockholder's equity (deficit)
|
9,183
|
|
|
9,613
|
|
|
9,974
|
|
|
9,865
|
|
|
|
(831
|
)
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(1)
|
Total long-term debt is the sum of current maturities of long-term debt and long-term debt (excluding note payable-affiliate of $796 million) on our consolidated balance sheets. For total contractual obligations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Future Contractual Obligations" in Item 7 of Part II of this Annual Report.
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|
Successor
|
|
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Predecessor
|
|||||||||||||||
|
Year
Ended December 31, 2014 |
|
Year
Ended December 31, 2013 |
|
Year
Ended December 31, 2012 |
|
Nine Months
Ended December 31, 2011 |
|
|
Three Months
Ended March 31, 2011 |
|
Year
Ended
December 31,
2010
|
|||||||
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(Dollars in millions)
|
||||||||||||||||||
Other data:
|
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|
|
|
|
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|
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|
|||||||
Net cash provided by operating activities
|
$
|
2,801
|
|
|
2,713
|
|
|
2,774
|
|
|
2,201
|
|
|
|
869
|
|
|
3,235
|
|
Net cash used in investing activities
|
(1,251
|
)
|
|
(1,381
|
)
|
|
(1,528
|
)
|
|
(1,191
|
)
|
|
|
(335
|
)
|
|
(1,256
|
)
|
|
Net cash used in financing activities
|
(1,558
|
)
|
|
(1,326
|
)
|
|
(1,241
|
)
|
|
(1,208
|
)
|
|
|
(525
|
)
|
|
(2,801
|
)
|
|
Payments for property, plant and equipment and capitalized software
|
(1,165
|
)
|
|
(1,264
|
)
|
|
(1,266
|
)
|
|
(1,036
|
)
|
|
|
(341
|
)
|
|
(1,240
|
)
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|
2012
|
|
|
(in thousands)
|
|||||
Operational metrics:
|
|
|
|
|
|
|
Total broadband subscribers
(1)
|
3,528
|
|
|
3,429
|
|
3,318
|
Total access lines
(1)
|
7,334
|
|
|
7,641
|
|
8,058
|
(1)
|
Broadband subscribers are customers that purchase high-speed Internet connection service through their existing telephone lines, stand-alone telephone lines, or fiber-optic cables and access lines are lines reaching from the customers' premises to a connection with the public network. Our methodology for counting our broadband subscribers and access lines includes only those lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone broadband subscribers. We count lines when we install the service.
|
•
|
Strategic services
, which include primarily broadband, private line (including special access), Ethernet, our commissions on satellite video services and Verizon Wireless services;
|
•
|
Legacy services,
which include primarily local voice, Integrated Services Digital Network ("ISDN") (which uses regular telephone lines to support voice, video and data applications), switched access and traditional wide area network ("WAN") services (which allow a local communications network to link to networks in remote locations); and
|
•
|
Affiliates and other services
, which consist primarily of Universal Service Fund ("USF") support and USF surcharges and services we provide to our affiliates. We receive both federal and state USF support, which are government subsidies designed to reimburse us for the portion of the cost of providing certain telecommunications services, such as in high-cost rural areas, that we are not able to recover from our customers. USF surcharges are the amount that we collect based on specific items we list on our customers' invoices to fund the FCC's universal service programs. We provide to our affiliates, telecommunication services that we also provide to external customers. In addition, we provide to our affiliates, computer system development and support services, network support and technical services.
|
•
|
Strategic services.
We continue to see shifts in the makeup of our total revenues as customers move to lower margin strategic services, such as broadband and video services, from higher margin legacy services. Revenues from our strategic services represented
39%
,
38%
and
37%
of our total revenues for the years ended
December 31, 2014
,
2013
and
2012
, respectively. Although we are experiencing price compression due to competition, we expect these percentages to continue to grow. We continue to focus on increasing subscribers of our broadband services, particularly among consumer and small business customers. We believe that continually increasing our broadband's scope and connection speeds is important to remaining competitive in our industry. As a result, we continue to invest in our broadband network, which allows for the delivery of higher speed broadband services to a greater number of customers. We compete in a maturing broadband market in which most customers already have broadband services and growth rates in new subscribers have slowed. Moreover, as described further in "Risk Factors" in Item 1A of Part I of this Annual Report, demand for our broadband services could be adversely affected by competitors continuing to provide services at higher broadband speeds than ours or expanding their advanced wireless data service offerings. Another trend impacting our strategic services is the deployment of fiber-based special access services provided to wireline and wireless carriers, which in many cases replaces existing copper-based special access services. We believe the growth in fiber-based special access services provided to wireline and wireless carriers for backhaul will partially offset the decline in copper-based special access services provided to wireline and wireless carriers as they migrate to Ethernet services, although the timing and magnitude of this technological migration remain uncertain;
|
•
|
Legacy services.
Revenues from our legacy services represented
34%
,
37%
and
39%
of our total revenues for the years ended
December 31, 2014
,
2013
and
2012
, respectively. We expect these percentages to continue to decline. Our legacy services revenues have been and we expect they will continue to be adversely affected by access line losses. Intense competition and product substitution continue to drive our access line losses. For example, many consumers are replacing traditional voice telecommunications service with substitute services, including (i) cable and wireless voice services and (ii) electronic mail, texting and social networking services. We expect that these factors will continue to negatively impact our business. As a result of the expected loss of revenue associated with access lines, we continue to offer our customers service bundling and other product promotions to help mitigate this trend, as described below;
|
•
|
Service bundling and product promotions.
We offer our customers the ability to bundle multiple products and services. These customers can bundle local services with other services such as broadband, video and wireless. While we believe our bundled service offerings can help retain customers, they also tend to lower our profit margins;
|
•
|
Operating efficiencies.
We continue to evaluate our operating structure and focus. This involves balancing our workforce in response to our workload requirements, productivity improvements and changes in industry, competitive, technological and regulatory conditions;
|
•
|
Pension and post-retirement benefits expenses.
Our controlling parent companies, CenturyLink and QCII, are required to recognize in their consolidated financial statements certain income and expenses relating to their pension and post-retirement health care and life insurance benefits plans. These income and expenses are calculated based on several assumptions, including among other things, discount rates and expected rates of return on plan assets that are generally reset at December 31 of each year. Changes in CenturyLink's and QCII's assumptions can cause significant changes in the net periodic pension and post-retirement benefits income and expenses we recognize. CenturyLink and QCII allocate the income and expenses of these plans to us and certain of their other affiliates. The allocation of income and expenses to us is based upon the demographics of our employees and retirees. On December 31, 2014, the QCII pension plan and a pension plan of an affiliate were merged into the CenturyLink Combined Pension Plan; and
|
•
|
Disciplined capital expenditures.
Our capital expenditures continue to be focused on our strategic services such as broadband and the deployment of "fiber to the tower", which is a type of telecommunications network consisting of fiber-optic cables that run from a wireless carrier's mobile telephone switching office to cellular towers to enable the delivery of higher bandwidth services supporting mobile technologies than would otherwise generally be available through a more traditional copper-based telecommunications network.
|
|
As of December 31,
|
|||||||
|
2014
|
|
2013
|
|
2012
|
|||
|
(in thousands)
|
|||||||
Operational metrics:
|
|
|
|
|
|
|||
Total broadband subscribers
(1)
|
3,528
|
|
|
3,429
|
|
|
3,318
|
|
Total access lines
(1)
|
7,334
|
|
|
7,641
|
|
|
8,058
|
|
Total employees
|
23.0
|
|
|
22.8
|
|
|
22.7
|
|
(1)
|
Broadband subscribers are customers that purchase high-speed Internet connection service through their existing telephone lines, stand-alone telephone lines, or fiber-optic cables and access lines are lines reaching from the customers' premises to a connection with the public network. Our methodology for counting our broadband subscribers and access lines includes only those lines that we use to provide services to external customers and excludes lines used solely by us and our affiliates. It also excludes unbundled loops and includes stand-alone broadband subscribers. We count lines when we install the service.
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2014
|
|
2013
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Strategic services
|
$
|
3,429
|
|
|
3,342
|
|
|
87
|
|
|
3
|
%
|
Legacy services
|
2,987
|
|
|
3,208
|
|
|
(221
|
)
|
|
(7
|
)%
|
|
Affiliates and other services
|
2,422
|
|
|
2,203
|
|
|
219
|
|
|
10
|
%
|
|
Total operating revenues
|
$
|
8,838
|
|
|
8,753
|
|
|
85
|
|
|
1
|
%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2013
|
|
2012
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Strategic services
|
$
|
3,342
|
|
|
3,265
|
|
|
77
|
|
|
2
|
%
|
Legacy services
|
3,208
|
|
|
3,471
|
|
|
(263
|
)
|
|
(8
|
)%
|
|
Affiliates and other services
|
2,203
|
|
|
2,112
|
|
|
91
|
|
|
4
|
%
|
|
Total operating revenues
|
$
|
8,753
|
|
|
8,848
|
|
|
(95
|
)
|
|
(1
|
)%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2014
|
|
2013
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$
|
2,879
|
|
|
2,790
|
|
|
89
|
|
|
3
|
%
|
Selling, general and administrative
|
1,086
|
|
|
1,062
|
|
|
24
|
|
|
2
|
%
|
|
Operating expenses-affiliates
|
756
|
|
|
695
|
|
|
61
|
|
|
9
|
%
|
|
Depreciation and amortization
|
2,005
|
|
|
2,128
|
|
|
(123
|
)
|
|
(6
|
)%
|
|
Total operating expenses
|
$
|
6,726
|
|
|
6,675
|
|
|
51
|
|
|
1
|
%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2013
|
|
2012
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Cost of services and products (exclusive of depreciation and amortization)
|
$
|
2,790
|
|
|
2,868
|
|
|
(78
|
)
|
|
(3
|
)%
|
Selling, general and administrative
|
1,062
|
|
|
1,166
|
|
|
(104
|
)
|
|
(9
|
)%
|
|
Operating expenses-affiliates
|
695
|
|
|
619
|
|
|
76
|
|
|
12
|
%
|
|
Depreciation and amortization
|
2,128
|
|
|
2,290
|
|
|
(162
|
)
|
|
(7
|
)%
|
|
Total operating expenses
|
$
|
6,675
|
|
|
6,943
|
|
|
(268
|
)
|
|
(4
|
)%
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Acquisition-related expenses
|
$
|
13
|
|
|
24
|
|
|
39
|
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2014
|
|
2013
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Depreciation
|
$
|
1,048
|
|
|
1,099
|
|
|
(51
|
)
|
|
(5
|
)%
|
Amortization
|
957
|
|
|
1,029
|
|
|
(72
|
)
|
|
(7
|
)%
|
|
Total depreciation and amortization
|
$
|
2,005
|
|
|
2,128
|
|
|
(123
|
)
|
|
(6
|
)%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2013
|
|
2012
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Depreciation
|
$
|
1,099
|
|
|
1,175
|
|
|
(76
|
)
|
|
(6
|
)%
|
Amortization
|
1,029
|
|
|
1,115
|
|
|
(86
|
)
|
|
(8
|
)%
|
|
Total depreciation and amortization
|
$
|
2,128
|
|
|
2,290
|
|
|
(162
|
)
|
|
(7
|
)%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2014
|
|
2013
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Interest expense
|
$
|
(464
|
)
|
|
(450
|
)
|
|
14
|
|
|
3
|
%
|
Interest expense-affiliates
|
(40
|
)
|
|
(64
|
)
|
|
(24
|
)
|
|
(38
|
)%
|
|
Other income
|
1
|
|
|
2
|
|
|
(1
|
)
|
|
(50
|
)%
|
|
Total other expense, net
|
$
|
(503
|
)
|
|
(512
|
)
|
|
(9
|
)
|
|
(2
|
)%
|
Income tax expense
|
$
|
639
|
|
|
602
|
|
|
37
|
|
|
6
|
%
|
|
Years Ended December 31,
|
|
Increase / (Decrease)
|
|
% Change
|
|||||||
|
2013
|
|
2012
|
|
|
|||||||
|
(Dollars in millions)
|
|
|
|||||||||
Interest expense
|
$
|
(450
|
)
|
|
(443
|
)
|
|
7
|
|
|
2
|
%
|
Interest expense-affiliates
|
(64
|
)
|
|
(24
|
)
|
|
40
|
|
|
167
|
%
|
|
Net loss on early retirement of debt
|
—
|
|
|
(47
|
)
|
|
(47
|
)
|
|
nm
|
|
|
Other income
|
2
|
|
|
—
|
|
|
2
|
|
|
nm
|
|
|
Total other expense, net
|
$
|
(512
|
)
|
|
(514
|
)
|
|
(2
|
)
|
|
—
|
%
|
Income tax expense
|
$
|
602
|
|
|
542
|
|
|
60
|
|
|
11
|
%
|
Agency
|
QC
|
Standard & Poor's
|
BBB-
|
Moody's Investors Service, Inc.
|
Baa3
|
Fitch Ratings
|
BBB-
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020 and thereafter
|
|
Total
|
||||||||
|
(Dollars in millions)
|
||||||||||||||||||||
Long-term debt, including current maturities and capital lease obligations
(1)
|
$
|
117
|
|
|
237
|
|
|
500
|
|
|
—
|
|
|
—
|
|
|
6,489
|
|
|
7,343
|
|
Interest on long-term debt and capital leases
(2)
|
508
|
|
|
491
|
|
|
465
|
|
|
452
|
|
|
452
|
|
|
9,865
|
|
|
12,233
|
|
|
Note payable-affiliate
|
796
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
796
|
|
|
Interest on note payable-affiliate
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
Operating leases
|
56
|
|
|
50
|
|
|
44
|
|
|
38
|
|
|
27
|
|
|
36
|
|
|
251
|
|
|
Purchase commitments
(3)
|
50
|
|
|
43
|
|
|
29
|
|
|
10
|
|
|
6
|
|
|
1
|
|
|
139
|
|
|
Non-qualified pension obligations
(4)
|
3
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
1
|
|
|
5
|
|
|
15
|
|
|
Other
|
2
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
1
|
|
|
13
|
|
|
21
|
|
|
Total future contractual obligations
(5)
|
$
|
1,541
|
|
|
824
|
|
|
1,042
|
|
|
504
|
|
|
487
|
|
|
16,409
|
|
|
20,807
|
|
(1)
|
Long-term debt, including current maturities and capital lease obligation (excluding unamortized premiums, discounts and other, net and excluding note payable-affiliate).
|
(2)
|
Actual principal and interest paid in all years may differ due to future refinancing of outstanding debt or issuance of new debt.
|
(3)
|
We have various long-term, non-cancelable purchase commitments for advertising and promotion services, including advertising and marketing at sports arenas and other venues and events. We also have service related commitments with various vendors for data processing, technical and software support services. Future payments under certain service contracts will vary depending on our actual usage. In the table above, we estimated payments for these service contracts based on estimates of the level of services we expect to receive.
|
(4)
|
Reflects only the portion of total obligation that is contractual in nature. See Note 5 below.
|
(5)
|
The table is limited to contractual obligations only and does not include:
|
•
|
contingent liabilities;
|
•
|
our open purchase orders as of December 31,
2014
. These purchase orders are generally issued at fair value, and are generally cancelable without penalty;
|
•
|
other long-term liabilities, such as accruals for legal matters and other taxes that are not contractual obligations by nature. We cannot determine with any degree of reliability the years in which these liabilities might ultimately settle;
|
•
|
affiliate cash funding requirements for qualified pension benefits payable to certain eligible current and future retirees allocated to us by CenturyLink. Benefits paid by CenturyLink’s qualified pension plan are paid through a trust. Cash funding requirements for this trust are not included in this table as CenturyLink is not able to reliably estimate required contributions to the trust. CenturyLink's cash funding projections are discussed further below;
|
•
|
affiliate post-retirement benefits payable to certain eligible current and future retirees. Not all of CenturyLink’s post-retirement benefit obligation amount is a contractual obligation and are not contractual obligations of ours and therefore are not reported in the table. See additional information on CenturyLink’s benefits plans in Note 7—Employee Benefits to the consolidated financial statements in Item 8 of Part II of CenturyLink’s Annual Report on Form 10-K for the year ended December 31, 2014;
|
•
|
contract termination fees. These fees are non-recurring payments, the timing and payment of which, if any, is uncertain. In the ordinary course of business and to optimize our cost structure, we enter into contracts with terms greater than one year to purchase other goods and services. Assuming we terminate these contracts in 2015, termination fees for these contracts to purchase goods and services would be approximately
$111 million
. In the normal course of business, we do not believe payment of these fees is likely; and
|
•
|
potential indemnification obligations to counterparties in certain agreements entered into in the normal course of business. The nature and terms of these arrangements vary.
|
|
Years Ended December 31,
|
|
Increase /
(Decrease)
|
||||||
|
2014
|
|
2013
|
|
|||||
|
(Dollars in millions)
|
||||||||
Net cash provided by operating activities
|
$
|
2,801
|
|
|
2,713
|
|
|
88
|
|
Net cash used in investing activities
|
(1,251
|
)
|
|
(1,381
|
)
|
|
(130
|
)
|
|
Net cash used in financing activities
|
(1,558
|
)
|
|
(1,326
|
)
|
|
232
|
|
|
Years Ended December 31,
|
|
Increase /
(Decrease)
|
||||||
|
2013
|
|
2012
|
|
|||||
|
(Dollars in millions)
|
||||||||
Net cash provided by operating activities
|
$
|
2,713
|
|
|
2,774
|
|
|
(61
|
)
|
Net cash used in investing activities
|
(1,381
|
)
|
|
(1,528
|
)
|
|
(147
|
)
|
|
Net cash used in financing activities
|
(1,326
|
)
|
|
(1,241
|
)
|
|
85
|
|
|
Years Ended December 31,
|
|
From April 1, 2011
through December 31, 2012 |
|
Total Since
Acquisition
|
|||||||
|
2014
|
|
2013
|
|
|
|||||||
|
(Dollars in millions)
|
|||||||||||
Amortized
|
$
|
42
|
|
|
53
|
|
|
201
|
|
|
296
|
|
Extinguished
(1)
|
—
|
|
|
—
|
|
|
187
|
|
|
187
|
|
|
Total
|
$
|
42
|
|
|
53
|
|
|
388
|
|
|
483
|
|
(1)
|
Extinguished in connection with the payment of Qwest debt securities prior to maturity.
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
OPERATING REVENUES
|
|
|
|
|
|
||||
Operating revenues
|
$
|
6,676
|
|
|
6,818
|
|
|
7,031
|
|
Operating revenues-affiliates
|
2,162
|
|
|
1,935
|
|
|
1,817
|
|
|
Total operating revenues
|
8,838
|
|
|
8,753
|
|
|
8,848
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
||||
Cost of services and products (exclusive of depreciation and amortization)
|
2,879
|
|
|
2,790
|
|
|
2,868
|
|
|
Selling, general and administrative
|
1,086
|
|
|
1,062
|
|
|
1,166
|
|
|
Operating expenses-affiliates
|
756
|
|
|
695
|
|
|
619
|
|
|
Depreciation and amortization
|
2,005
|
|
|
2,128
|
|
|
2,290
|
|
|
Total operating expenses
|
6,726
|
|
|
6,675
|
|
|
6,943
|
|
|
OPERATING INCOME
|
2,112
|
|
|
2,078
|
|
|
1,905
|
|
|
OTHER (EXPENSE) INCOME
|
|
|
|
|
|
||||
Interest expense
|
(464
|
)
|
|
(450
|
)
|
|
(443
|
)
|
|
Interest expense-affiliates, net
|
(40
|
)
|
|
(64
|
)
|
|
(24
|
)
|
|
Net loss on early retirement of debt
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
Other income
|
1
|
|
|
2
|
|
|
—
|
|
|
Total other (expense) income
|
(503
|
)
|
|
(512
|
)
|
|
(514
|
)
|
|
INCOME BEFORE INCOME TAX EXPENSE
|
1,609
|
|
|
1,566
|
|
|
1,391
|
|
|
Income tax expense
|
639
|
|
|
602
|
|
|
542
|
|
|
NET INCOME
|
$
|
970
|
|
|
964
|
|
|
849
|
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
OPERATING ACTIVITIES
|
|
|
|
|
|
||||
Net income
|
$
|
970
|
|
|
964
|
|
|
849
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||
Depreciation and amortization
|
2,005
|
|
|
2,128
|
|
|
2,290
|
|
|
Deferred income taxes
|
(228
|
)
|
|
(152
|
)
|
|
(201
|
)
|
|
Provision for uncollectible accounts
|
64
|
|
|
65
|
|
|
74
|
|
|
Net long-term debt premium amortization
|
(39
|
)
|
|
(52
|
)
|
|
(65
|
)
|
|
Accrued interest on affiliate note
|
42
|
|
|
—
|
|
|
—
|
|
|
Net loss on early retirement of debt
|
—
|
|
|
—
|
|
|
47
|
|
|
Impairment of asset
|
17
|
|
|
—
|
|
|
—
|
|
|
Changes in current assets and liabilities:
|
|
|
|
|
|
||||
Accounts receivable
|
(66
|
)
|
|
(94
|
)
|
|
(76
|
)
|
|
Accounts payable
|
(9
|
)
|
|
(1
|
)
|
|
(58
|
)
|
|
Accrued income and other taxes
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|
Other current assets and liabilities, net
|
34
|
|
|
34
|
|
|
(17
|
)
|
|
Other current assets and liabilities-affiliates
|
9
|
|
|
—
|
|
|
—
|
|
|
Changes in other noncurrent assets and liabilities, net
|
1
|
|
|
—
|
|
|
61
|
|
|
Changes in affiliate obligations, net
|
8
|
|
|
(179
|
)
|
|
(130
|
)
|
|
Other, net
|
2
|
|
|
9
|
|
|
9
|
|
|
Net cash provided by operating activities
|
2,801
|
|
|
2,713
|
|
|
2,774
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
||||
Payments for property, plant and equipment and capitalized software
|
(1,165
|
)
|
|
(1,264
|
)
|
|
(1,266
|
)
|
|
Changes in advances to affiliates
|
(100
|
)
|
|
(119
|
)
|
|
(395
|
)
|
|
Proceeds from sale of property
|
14
|
|
|
2
|
|
|
133
|
|
|
Net cash used in investing activities
|
(1,251
|
)
|
|
(1,381
|
)
|
|
(1,528
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
||||
Net proceeds from issuance of long-term debt
|
483
|
|
|
752
|
|
|
896
|
|
|
Payments of long-term debt
|
(641
|
)
|
|
(806
|
)
|
|
(1,430
|
)
|
|
Early retirement of debt costs
|
—
|
|
|
—
|
|
|
(178
|
)
|
|
Dividends paid to Qwest Services Corporation
|
(1,400
|
)
|
|
(1,325
|
)
|
|
(1,150
|
)
|
|
Changes in note payable-affiliate
|
—
|
|
|
53
|
|
|
701
|
|
|
Changes in advances from affiliates
|
—
|
|
|
—
|
|
|
(80
|
)
|
|
Net cash used in financing activities
|
(1,558
|
)
|
|
(1,326
|
)
|
|
(1,241
|
)
|
|
Net (decrease) increase in cash and cash equivalents
|
(8
|
)
|
|
6
|
|
|
5
|
|
|
Cash and cash equivalents at beginning of period
|
14
|
|
|
8
|
|
|
3
|
|
|
Cash and cash equivalents at end of period
|
$
|
6
|
|
|
14
|
|
|
8
|
|
Supplemental cash flow information:
|
|
|
|
|
|
||||
Income taxes paid, net
|
$
|
(861
|
)
|
|
(750
|
)
|
|
(607
|
)
|
Interest paid (net of capitalized interest of $17, $17 and $18)
|
$
|
(505
|
)
|
|
(513
|
)
|
|
(513
|
)
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
COMMON STOCK
|
|
|
|
|
|
||||
Balance at beginning of period
|
$
|
10,050
|
|
|
10,050
|
|
|
9,950
|
|
Tax benefit of pension deduction
|
—
|
|
|
—
|
|
|
100
|
|
|
Balance at end of period
|
10,050
|
|
|
10,050
|
|
|
10,050
|
|
|
ACCUMULATED DEFICIT
|
|
|
|
|
|
||||
Balance at beginning of period
|
(437
|
)
|
|
(76
|
)
|
|
(85
|
)
|
|
Net income
|
970
|
|
|
964
|
|
|
849
|
|
|
Dividends declared to Qwest Services Corporation
|
(1,400
|
)
|
|
(1,325
|
)
|
|
(840
|
)
|
|
Balance at end of period
|
(867
|
)
|
|
(437
|
)
|
|
(76
|
)
|
|
TOTAL STOCKHOLDER'S EQUITY
|
$
|
9,183
|
|
|
9,613
|
|
|
9,974
|
|
(1)
|
Basis of Presentation and Summary of Significant Accounting Policies
|
(2)
|
Goodwill, Customer Relationships and Other Intangible Assets
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Goodwill
|
$
|
9,354
|
|
|
9,354
|
|
Customer relationships, less accumulated amortization of $2,660 and $2,012
|
3,039
|
|
|
3,687
|
|
|
Other intangible assets subject to amortization:
|
|
|
|
|||
Capitalized software, less accumulated amortization of $1,247 and $994
|
808
|
|
|
1,008
|
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Amortization expense for intangible assets
|
$
|
957
|
|
|
1,029
|
|
|
1,115
|
|
(3)
|
Long-Term Debt and Revolving Promissory Note
|
|
|
|
|
|
As of December 31,
|
|||||
|
Interest Rates
|
|
Maturities
|
|
2014
|
|
2013
|
|||
|
|
|
|
|
(Dollars in millions)
|
|||||
Senior notes
|
6.125% - 8.375%
|
|
2015 - 2054
|
|
$
|
7,311
|
|
|
7,411
|
|
Capital lease and other obligations
|
Various
|
|
Various
|
|
32
|
|
|
72
|
|
|
Unamortized premiums, net
|
|
|
|
|
36
|
|
|
75
|
|
|
Total long-term debt
|
|
|
|
|
7,379
|
|
|
7,558
|
|
|
Less current maturities
|
|
|
|
|
(117
|
)
|
|
(637
|
)
|
|
Long-term debt, excluding current maturities
|
|
|
|
|
$
|
7,262
|
|
|
6,921
|
|
Note payable-affiliate
|
6.657%
|
|
2022
|
|
$
|
796
|
|
|
754
|
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Interest expense:
|
|
|
|
|
|
||||
Gross interest expense
|
$
|
481
|
|
|
467
|
|
|
461
|
|
Capitalized interest
|
(17
|
)
|
|
(17
|
)
|
|
(18
|
)
|
|
Total interest expense
|
$
|
464
|
|
|
450
|
|
|
443
|
|
Interest expense-affiliates, net
|
$
|
40
|
|
|
64
|
|
|
24
|
|
(4)
|
Accounts Receivable
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Trade and purchased receivables
|
$
|
649
|
|
|
697
|
|
Earned and unbilled receivables
|
120
|
|
|
73
|
|
|
Other
|
9
|
|
|
11
|
|
|
Total accounts receivable
|
778
|
|
|
781
|
|
|
Less: allowance for doubtful accounts
|
(38
|
)
|
|
(43
|
)
|
|
Accounts receivable, less allowance
|
$
|
740
|
|
|
738
|
|
|
Beginning
Balance
|
|
Additions
|
|
Deductions
|
|
Ending
Balance
|
|||||
|
(Dollars in millions)
|
|||||||||||
2014
|
$
|
43
|
|
|
64
|
|
|
(69
|
)
|
|
38
|
|
2013
|
$
|
46
|
|
|
65
|
|
|
(68
|
)
|
|
43
|
|
2012
|
$
|
42
|
|
|
74
|
|
|
(70
|
)
|
|
46
|
|
(5)
|
Property, Plant and Equipment
|
|
Depreciable
Lives
|
|
As of December 31,
|
|||||
|
|
2014
|
|
2013
|
||||
|
|
|
(Dollars in millions)
|
|||||
Property, plant and equipment:
|
|
|
|
|
|
|||
Land
|
N/A
|
|
$
|
350
|
|
|
356
|
|
Fiber, conduit and other outside plant
(1)
|
15-45 years
|
|
4,640
|
|
|
4,033
|
|
|
Central office and other network electronics
(2)
|
4-10 years
|
|
3,362
|
|
|
3,026
|
|
|
Support assets
(3)
|
5-30 years
|
|
2,496
|
|
|
2,470
|
|
|
Construction in progress
(4)
|
N/A
|
|
309
|
|
|
308
|
|
|
Gross property, plant and equipment
|
|
|
11,157
|
|
|
10,193
|
|
|
Accumulated depreciation
|
|
|
(3,956
|
)
|
|
(2,985
|
)
|
|
Net property, plant and equipment
|
|
|
$
|
7,201
|
|
|
7,208
|
|
(1)
|
Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
|
(2)
|
Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.
|
(3)
|
Support assets consist of buildings, computers and other administrative and support equipment.
|
(4)
|
Construction in progress includes inventory held for construction and property of the aforementioned categories that has not been placed in service as it is still under construction.
|
(6)
|
Severance
|
|
Severance
|
||
|
(Dollars in millions)
|
||
Balance at December 31, 2012
|
$
|
7
|
|
Accrued to expense
|
10
|
|
|
Payments, net
|
(12
|
)
|
|
Balance at December 31, 2013
|
$
|
5
|
|
Accrued to expense
|
44
|
|
|
Payments, net
|
(39
|
)
|
|
Balance at December 31, 2014
|
$
|
10
|
|
(7)
|
Employee Benefits
|
(8)
|
Share-based Compensation
|
(9)
|
Products and Services Revenues
|
•
|
Strategic services
, which include primarily broadband, private line (including special access), Ethernet, video (including resold satellite video services) and Verizon Wireless services;
|
•
|
Legacy services,
which include primarily local voice, Integrated Services Digital Network ("ISDN") (which uses regular telephone lines to support voice, video and data applications), switched access and traditional wide area network ("WAN") services (which allows a local communications network to link to networks in remote locations); and
|
•
|
Affiliates and other services
, which consist primarily of Universal Service Fund ("USF") support and USF surcharges and services we provide to our affiliates. We receive both federal and state USF support, which are government subsidies designed to reimburse us for the portion of the cost of providing certain telecommunications services, such as in high-cost rural areas, that we are not able to recover from our customers. USF surcharges are the amount that we collect based on specific items we list on our customers' invoices to fund the FCC's universal service programs. We provide to our affiliates, telecommunication services that we also provide to external customers. In addition, we provide to our affiliates, computer system development and support services, network support and technical services.
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Strategic services
|
$
|
3,429
|
|
|
3,342
|
|
|
3,265
|
|
Legacy services
|
2,987
|
|
|
3,208
|
|
|
3,471
|
|
|
Affiliates and other services
|
2,422
|
|
|
2,203
|
|
|
2,112
|
|
|
Total operating revenues
|
$
|
8,838
|
|
|
8,753
|
|
|
8,848
|
|
(10)
|
Affiliate Transactions
|
•
|
Telecommunications services.
Data, Internet and voice services in support of our affiliates' service offerings;
|
•
|
Computer system development and support services.
Information technology services primarily include the labor cost of developing, testing and implementing the system changes necessary to support order entry, provisioning, billing, network and financial systems, as well as the cost of improving, maintaining and operating our operations support systems and shared internal communications networks; and
|
•
|
Network support and technical services.
Network support and technical services relate to forecasting demand volumes and developing plans around network utilization and optimization, developing and implementing plans for overall product development, provisioning and customer care.
|
(11)
|
Income Taxes
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Income tax expense:
|
|
|
|
|
|
||||
Current tax provision:
|
|
|
|
|
|
||||
Federal and foreign
|
$
|
738
|
|
|
653
|
|
|
638
|
|
State and local
|
129
|
|
|
101
|
|
|
105
|
|
|
Total current tax provision
|
867
|
|
|
754
|
|
|
743
|
|
|
Deferred tax expense:
|
|
|
|
|
|
||||
Federal and foreign
|
(209
|
)
|
|
(125
|
)
|
|
(175
|
)
|
|
State and local
|
(19
|
)
|
|
(27
|
)
|
|
(26
|
)
|
|
Total deferred tax expense
|
(228
|
)
|
|
(152
|
)
|
|
(201
|
)
|
|
Income tax expense
|
$
|
639
|
|
|
602
|
|
|
542
|
|
|
Years Ended December 31,
|
|||||||
|
2014
|
|
2013
|
|
2012
|
|||
|
(in percent)
|
|||||||
Effective income tax rate:
|
|
|
|
|
|
|||
Federal statutory income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes-net of federal effect
|
4.0
|
%
|
|
3.1
|
%
|
|
3.7
|
%
|
Other
|
0.7
|
%
|
|
0.3
|
%
|
|
0.3
|
%
|
Effective income tax rate
|
39.7
|
%
|
|
38.4
|
%
|
|
39.0
|
%
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Deferred tax assets and liabilities:
|
|
|
|
|||
Deferred tax liabilities:
|
|
|
|
|||
Property, plant and equipment
|
$
|
(1,380
|
)
|
|
(1,281
|
)
|
Intangibles assets
|
(1,449
|
)
|
|
(1,772
|
)
|
|
Receivable from an affiliate due to pension plan participation
|
(500
|
)
|
|
(462
|
)
|
|
Other
|
(52
|
)
|
|
(52
|
)
|
|
Total deferred tax liabilities
|
(3,381
|
)
|
|
(3,567
|
)
|
|
Deferred tax assets:
|
|
|
|
|||
Payable to affiliate due to post-retirement benefit plan participation
|
998
|
|
|
983
|
|
|
Debt premiums
|
36
|
|
|
55
|
|
|
Other
|
275
|
|
|
229
|
|
|
Total deferred tax assets
|
1,309
|
|
|
1,267
|
|
|
Valuation allowance on deferred tax assets
|
(12
|
)
|
|
(12
|
)
|
|
Net deferred tax assets
|
1,297
|
|
|
1,255
|
|
|
Net deferred tax liabilities
|
$
|
(2,084
|
)
|
|
(2,312
|
)
|
(12)
|
Fair Value Disclosure
|
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.
|
|
|
|
As of December 31, 2014
|
|
As of December 31, 2013
|
|||||||||
|
Input
Level
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|||||
|
|
|
(Dollars in millions)
|
|||||||||||
Liabilities-Long-term debt excluding capital lease and other obligations
|
2
|
|
$
|
7,347
|
|
|
7,702
|
|
|
7,486
|
|
|
7,226
|
|
(13)
|
Stockholder's Equity
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Cash dividend declared to QSC
|
$
|
1,400
|
|
|
1,325
|
|
|
840
|
|
Cash dividend paid to QSC
|
1,400
|
|
|
1,325
|
|
|
1,150
|
|
(14)
|
Quarterly Financial Data (Unaudited)
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
|
||||||
|
(Dollars in millions)
|
||||||||||||||
2014
|
|
|
|
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
2,211
|
|
|
2,206
|
|
|
2,198
|
|
|
2,223
|
|
|
8,838
|
|
Operating income
|
542
|
|
|
546
|
|
|
528
|
|
|
496
|
|
|
2,112
|
|
|
Income tax expense
|
160
|
|
|
162
|
|
|
156
|
|
|
161
|
|
|
639
|
|
|
Net income
|
253
|
|
|
256
|
|
|
245
|
|
|
216
|
|
|
970
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
|
||||||
|
(Dollars in millions)
|
||||||||||||||
2013
|
|
|
|
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
2,159
|
|
|
2,199
|
|
|
2,188
|
|
|
2,207
|
|
|
8,753
|
|
Operating income
|
553
|
|
|
525
|
|
|
493
|
|
|
507
|
|
|
2,078
|
|
|
Income tax expense
|
166
|
|
|
155
|
|
|
139
|
|
|
142
|
|
|
602
|
|
|
Net income
|
264
|
|
|
246
|
|
|
218
|
|
|
236
|
|
|
964
|
|
(15)
|
Commitments and Contingencies
|
|
Years Ended December 31,
|
||||||||
|
2014
|
|
2013
|
|
2012
|
||||
|
(Dollars in millions)
|
||||||||
Assets acquired through capital leases
|
$
|
3
|
|
|
—
|
|
|
—
|
|
Depreciation expense
|
32
|
|
|
42
|
|
|
50
|
|
|
Cash payments towards capital leases
|
32
|
|
|
40
|
|
|
41
|
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Assets included in property, plant and equipment
|
$
|
137
|
|
|
168
|
|
Accumulated depreciation
|
108
|
|
|
109
|
|
|
Future Minimum
Payments
|
||
|
(Dollars in millions)
|
||
Capital lease obligations:
|
|
||
2015
|
$
|
22
|
|
2016
|
2
|
|
|
2017
|
1
|
|
|
2018
|
1
|
|
|
2019
|
1
|
|
|
2020 and thereafter
|
7
|
|
|
Total minimum payments
|
34
|
|
|
Less: amount representing interest and executory costs
|
(8
|
)
|
|
Present value of minimum payments
|
26
|
|
|
Less: current portion
|
(20
|
)
|
|
Long-term portion
|
$
|
6
|
|
|
Future Minimum
Payments
|
||
|
(Dollars in millions)
|
||
Operating leases:
|
|
||
2015
|
$
|
56
|
|
2016
|
50
|
|
|
2017
|
44
|
|
|
2018
|
38
|
|
|
2019
|
27
|
|
|
2020 and thereafter
|
36
|
|
|
Total future minimum payments
(1)
|
$
|
251
|
|
(1)
|
Minimum payments have not been reduced by minimum sublease rentals of
$30 million
due in the future under non-cancelable subleases.
|
(16)
|
Other Financial Information
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Prepaid expenses
|
$
|
45
|
|
|
47
|
|
Other
|
80
|
|
|
79
|
|
|
Total other current assets
|
$
|
125
|
|
|
126
|
|
|
As of December 31,
|
|||||
|
2014
|
|
2013
|
|||
|
(Dollars in millions)
|
|||||
Accounts payable
|
$
|
464
|
|
|
440
|
|
(17)
|
Labor Union Contracts
|
Exhibit
Number
|
|
Description
|
|
3.1
|
|
|
Restated Articles of Incorporation of Qwest Corporation (incorporated by reference to Exhibit 3(a) of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 001-03040) filed with the Securities and Exchange Commission on March 25, 1998).
|
3.2
|
|
|
Articles of Amendment to the Articles of Incorporation of Qwest Corporation (incorporated by reference to Exhibit 3.1 of Qwest Corporation's Quarterly Report on Form 10-Q for the period ended June 30, 2000 (File No. 001-03040) filed with the Securities and Exchange Commission on August 11, 2000).
|
3.3
|
|
|
Amended and Restated Bylaws of Qwest Corporation (incorporated by reference to Exhibit 3.3 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
|
4.1
|
|
|
Indenture, dated as of April 15, 1990, by and between The Mountain States Telephone and Telegraph Company (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.2 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
|
|
|
a.
|
First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.3 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
|
4.2
|
|
|
Indenture, dated as of April 15, 1990, by and between Northwestern Bell Telephone Company (predecessor to Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.5(b) of CenturyLink, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 2012 (File No. 001-07784) filed with the Securities and Exchange Commission on May 10, 2012).
|
|
a.
|
First Supplemental Indenture, dated as of April 16, 1991, by and between U S WEST Communications, Inc. (currently named Qwest Corporation) and The First National Bank of Chicago (incorporated by reference to Exhibit 4.3 of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-03040) filed with the Securities and Exchange Commission on January 13, 2004).
|
|
4.3
|
|
|
Indenture, dated as of October 15, 1999, by and between U S West Communications, Inc. (currently named Qwest Corporation) and Bank One Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4(b) of Qwest Corporation's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-03040) filed with the Securities and Exchange Commission on March 3, 2000).
|
|
|
a.
|
First Supplemental Indenture, dated as of August 19, 2004, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.22 of Qwest Communications International Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 2004 (File No. 001-15577) filed with the Securities and Exchange Commission on November 5, 2004).
|
|
|
b.
|
Third Supplemental Indenture, dated as of June 17, 2005, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on June 23, 2005).
|
|
|
c.
|
Fourth Supplemental Indenture, dated as of August 8, 2006, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on August 8, 2006).
|
|
d.
|
Fifth Supplemental Indenture, dated as of May 16, 2007, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on May 18, 2007).
|
|
|
e.
|
Sixth Supplemental Indenture, dated as of April 13, 2009, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on April 13, 2009).
|
|
|
f.
|
Seventh Supplemental Indenture, dated as of June 8, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.8 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on June 7, 2011).
|
|
|
g.
|
Eighth Supplemental Indenture, dated as of September 21, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.9 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on September 20, 2011).
|
|
|
h.
|
Ninth Supplemental Indenture, dated as of October 4, 2011, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of Qwest Corporation's Current Report on Form 8-K (File No. 001-03040) filed with the Securities and Exchange Commission on October 4, 2011).
|
|
|
i.
|
Tenth Supplemental Indenture, dated as of April 2, 2012, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on March 30, 2012).
|
|
|
j.
|
Eleventh Supplemental Indenture, dated as of June 25, 2012, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on June 22, 2012).
|
(1)
|
Certain of the items in Sections 4.1 through 4.3 (i) omit supplemental indentures or other instruments governing debt that has been retired, or (ii) refer to trustees who may have been replaced, acquired or affected by similar changes. In accordance with Item 601(b) (4) (iii) (A) of Regulation S-K, copies of certain instruments defining the rights of holders of certain of our long-term debt are not filed herewith. Pursuant to this registration, we hereby agree to furnish a copy of any such instrument to the SEC upon request.
|
Exhibit
Number
|
|
Description
|
|
|
k.
|
Twelfth Supplemental Indenture, dated as of May 23, 2013, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.13 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on May 22, 2013).
|
|
|
l.
|
Thirteenth Supplemental Indenture, dated as of September 29, 2014, by and between Qwest Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.14 of Qwest Corporation's Form 8-A (File No. 001-03040) filed with the Securities and Exchange Commission on September 26, 2014).
|
|
4.4
|
|
|
Revolving Promissory Note, dated as of April 18, 2012, pursuant to which Qwest Corporation may borrow from an affiliate of CenturyLink, Inc. up to $1.0 billion on a revolving basis (incorporated by reference to Exhibit 4.7(b) of CenturyLink, Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2012 (File No 001-07784) filed with the Securities and Exchange Commission on August 9, 2012).
|
4.5*
|
|
|
Credit Agreement, dated as of February 20, 2015, by and among Qwest Corporation, the several lenders from time to time parties thereto, and CoBank, ACB, as administrative agent.*
|
12*
|
|
|
Calculation of Ratio of Earnings to Fixed Charges.
|
23*
|
|
|
Independent Registered Public Accounting Firm Consent.
|
31.1*
|
|
|
Certification of the Chief Executive Officer of CenturyLink, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2*
|
|
|
Certification of the Chief Financial Officer of CenturyLink, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32*
|
|
|
Certification of the Chief Executive Officer and Chief Financial Officer of CenturyLink, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101*
|
|
|
Financial statements from the Annual Report on Form 10-K of Qwest Corporation for the period ended December 31, 2014, formatted in XBRL: (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Stockholder's Equity (Deficit) and (v) the Notes to the Consolidated Financial Statements.
|
*
|
Exhibit filed herewith.
|
|
QWEST CORPORATION
|
|
|
By:
|
/s/ David D. Cole
|
|
|
David D. Cole
|
|
|
Executive Vice President-Controller and Operations Support
(Chief Accounting Officer and Duly Authorized Officer)
|
Signature
|
|
Title
|
|
|
|
/s/ Glen F. Post, III
|
|
Chief Executive Officer and President (Principal Executive Officer)
|
Glen F. Post, III
|
|
|
|
|
|
/s/ R. Stewart Ewing, Jr.
|
|
Director, Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
R. Stewart Ewing, Jr.
|
|
|
|
|
|
/s/ Stacey W. Goff
|
|
Director
|
Stacey W. Goff
|
|
SECTION 1
|
DEFINITIONS
|
1
|
|
|
1.1
|
|
Certain Defined Terms
|
1
|
|
1.2
|
|
Accounting Principles
|
23
|
|
1.3
|
|
Other Definitional Provisions
|
23
|
|
|
|
|
||
SECTION 2
|
FACILITIES
|
24
|
|
|
2.1
|
|
Commitments
|
24
|
|
2.2
|
|
Procedure For Loan Borrowing
|
24
|
|
2.3
|
|
Repayment of Term Loans
|
24
|
|
2.4
|
|
Conversion and Continuation Options
|
25
|
|
2.5
|
|
Fees
|
26
|
|
2.6
|
|
Limitations on Eurodollar Tranches
|
26
|
|
2.7
|
|
Interest Rates and Payment Dates
|
26
|
|
2.8
|
|
Alternate Rate of Interest for LIBOR Loans
|
27
|
|
2.9
|
|
Mandatory and Optional Prepayment of Loans
|
27
|
|
2.1
|
|
Reserve Requirements; Change in Circumstances
|
27
|
|
2.1
|
|
Change in Legality
|
29
|
|
2.1
|
|
Indemnity
|
29
|
|
2.1
|
|
Pro Rata Treatment
|
30
|
|
2.1
|
|
Sharing of Setoffs
|
30
|
|
2.2
|
|
Payments
|
31
|
|
2.2
|
|
Calculation of LIBOR Rate
|
32
|
|
2.2
|
|
Computation of Interest and Fees
|
32
|
|
2.2
|
|
Booking Loans
|
32
|
|
2.2
|
|
Taxes
|
32
|
|
2.2
|
|
Defaulting Lenders
|
35
|
|
2.2
|
|
Mitigation Obligations; Replacement of Lenders
|
35
|
|
2.2
|
|
Extensions of Loans
|
36
|
|
2.2
|
|
Change of Control
|
37
|
|
|
|
|
||
SECTION 3
|
REPRESENTATIONS AND WARRANTIES
|
38
|
|
|
3.1
|
|
Purpose of Credit Facility
|
39
|
|
3.2
|
|
Corporate Existence
|
39
|
|
3.3
|
|
Guarantor Significant Subsidiaries
|
39
|
|
3.4
|
|
Financial Statements; No Change
|
40
|
|
3.5
|
|
Compliance with Laws
|
40
|
|
3.6
|
|
Litigation
|
40
|
|
3.7
|
|
Taxes
|
40
|
|
3.8
|
|
Environmental Matters
|
41
|
|
3.9
|
|
Employee Benefit Plans
|
41
|
|
3.1
|
|
Properties; Liens
|
41
|
|
3.1
|
|
Investment Company Status
|
41
|
|
3.1
|
|
Transactions with Affiliates
|
42
|
|
3.1
|
|
Leases
|
42
|
|
3.1
|
|
Labor Matters
|
42
|
|
3.2
|
|
Insurance
|
42
|
|
3.2
|
|
Solvency
|
42
|
|
3.2
|
|
Business
|
42
|
|
3.2
|
|
General
|
43
|
|
3.2
|
|
No Default
|
43
|
|
3.2
|
|
OFAC
|
43
|
|
|
|
|
||
SECTION 4
|
CONDITIONS PRECEDENT
|
43
|
|
|
4.1
|
|
Closing Date
|
43
|
|
4.2
|
|
Conditions to Funding
|
45
|
|
4.3
|
|
Materiality of Conditions
|
45
|
|
4.4
|
|
Waiver of Conditions
|
45
|
|
|
|
|
||
SECTION 5
|
AFFIRMATIVE COVENANTS
|
45
|
|
|
5.1
|
|
Use of Proceeds
|
45
|
|
5.2
|
|
Books and Records
|
46
|
|
5.3
|
|
Items to be Furnished
|
46
|
|
5.4
|
|
Inspection
|
48
|
|
5.5
|
|
Taxes
|
48
|
|
5.6
|
|
Payment of Obligations
|
48
|
|
5.7
|
|
Expenses
|
49
|
|
5.8
|
|
Maintenance of Existence
|
49
|
|
5.9
|
|
Preservation and Protection of Rights
|
49
|
|
5.1
|
|
Environmental Laws
|
49
|
|
5.1
|
|
Environmental Indemnification
|
49
|
|
5.1
|
|
Designation of Unrestricted Subsidiaries
|
50
|
|
5.1
|
|
Additional Guarantors
|
50
|
|
5.1
|
|
Guarantor Release
|
51
|
|
5.2
|
|
CoBank Equity
|
51
|
|
|
|
|
||
SECTION 6
|
NEGATIVE COVENANTS
|
52
|
|
|
6.1
|
|
Employee Benefit Plans
|
52
|
|
6.2
|
|
Liens
|
52
|
|
6.3
|
|
Restricted Payments
|
52
|
|
6.4
|
|
Mergers and Consolidations
|
52
|
|
6.5
|
|
Loans, Advances, and Investments
|
53
|
|
6.6
|
|
Transactions with Affiliates
|
55
|
|
6.7
|
|
Sale of Assets
|
56
|
|
6.8
|
|
Compliance with Laws and Documents
|
57
|
|
6.9
|
|
New Businesses
|
57
|
|
6.1
|
|
Assignment
|
57
|
|
6.1
|
|
Fiscal Year
|
57
|
|
6.1
|
|
Investment Company Status
|
57
|
|
6.1
|
|
Reserved
|
57
|
|
6.1
|
|
Financial Covenants
|
57
|
|
6.2
|
|
Priority Debt
|
59
|
|
|
|
|
||
SECTION 7
|
DEFAULT
|
59
|
|
|
7.1
|
|
Payment of Obligation
|
59
|
|
7.2
|
|
Covenants
|
60
|
|
7.3
|
|
Debtor Relief
|
60
|
|
7.4
|
|
Attachment
|
60
|
|
7.5
|
|
Payment of Judgments
|
60
|
|
7.6
|
|
Default Under Other Agreements
|
60
|
|
7.7
|
|
Misrepresentation
|
61
|
|
7.8
|
|
ERISA
|
61
|
|
7.9
|
|
Validity and Enforceability of Loan Papers
|
61
|
|
|
|
|
||
SECTION 8
|
RIGHTS AND REMEDIES
|
62
|
|
|
8.1
|
|
Remedies Upon Event of Default
|
62
|
|
8.2
|
|
Waivers
|
62
|
|
8.3
|
|
Performance by Administrative Agent
|
62
|
|
8.4
|
|
Delegation of Duties and Rights
|
63
|
|
8.5
|
|
Lenders Not in Control
|
63
|
|
8.6
|
|
Waivers by Lenders
|
63
|
|
8.7
|
|
Cumulative Rights
|
63
|
|
8.8
|
|
Application of Proceeds
|
63
|
|
8.9
|
|
Certain Proceedings
|
63
|
|
8.1
|
|
Setoff
|
64
|
|
|
|
|
||
SECTION 9
|
THE ADMINISTRATIVE AGENT
|
64
|
|
|
9.1
|
|
Appointment
|
64
|
|
9.2
|
|
Delegation of Duties
|
64
|
|
9.3
|
|
Exculpatory Provisions
|
65
|
|
9.4
|
|
Reliance by Administrative Agent
|
65
|
|
9.5
|
|
Notice of Default
|
65
|
|
9.6
|
|
Non-Reliance on the Administrative Agent and Other Lenders
|
66
|
|
9.7
|
|
Indemnification
|
66
|
|
9.8
|
|
Administrative Agent in its Individual Capacity
|
67
|
|
9.9
|
|
Successor Administrative Agent
|
67
|
|
|
|
|
||
SECTION 10
|
MISCELLANEOUS
|
68
|
|
|
10.1
|
|
Reserved
|
68
|
|
10.2
|
|
Money and Interest
|
68
|
|
10.3
|
|
Number and Gender of Words
|
68
|
|
10.4
|
|
Headings
|
68
|
|
10.5
|
|
Exhibits
|
68
|
|
10.6
|
|
Notices
|
68
|
|
10.7
|
|
Exceptions to Covenants
|
69
|
|
10.8
|
|
Survival
|
69
|
|
10.9
|
|
Governing Law
|
70
|
|
10.1
|
|
Submission to Jurisdiction; Waivers
|
70
|
|
10.1
|
|
WAIVERS OF JURY TRIAL
|
70
|
|
10.1
|
|
Severability
|
70
|
|
10.1
|
|
Integration
|
71
|
|
10.1
|
|
Amendments
|
71
|
|
10.2
|
|
Waivers
|
72
|
|
10.2
|
|
Governmental Regulation
|
72
|
|
10.2
|
|
Multiple Counterparts
|
72
|
|
10.2
|
|
Successors and Assigns; Participations; Assignments
|
72
|
|
10.2
|
|
Confidentiality
|
77
|
|
10.2
|
|
Patriot Act
|
77
|
|
10.2
|
|
Conflicts and Ambiguities
|
78
|
|
10.2
|
|
GENERAL INDEMNIFICATION
|
78
|
|
SECTION 1
|
DEFINITIONS . |
1.1
|
Certain Defined Terms
.
|
(a)
|
Liens as of the Closing Date;
|
(b)
|
any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary (to the extent the acquisition is permitted by this Agreement), so long as such Lien was not incurred in contemplation of such acquisition;
|
(c)
|
any Lien securing Debt incurred for the purchase or capital lease of one or more assets (if such Lien encumbers only the assets so purchased or leased);
|
(d)
|
pledges or deposits made to secure payment of workers’ compensation, or to participate in any fund in connection with workers’ compensation, unemployment insurance, pensions, or other social security programs;
|
(e)
|
Liens or good-faith pledges or deposits made to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money), or leases, or to secure statutory obligations, surety or appeal bonds, or indemnity, performance, or similar bonds, government contracts or other similar obligations in the ordinary course of business;
|
(f)
|
easements, rights-of-way, zoning restrictions and other similar charges, encumbrances and restrictions in respect of real property or immaterial imperfections of title which do not, in the aggregate, materially impair the ordinary conduct of the Borrower and its Subsidiaries, taken as a whole;
|
(g)
|
(i) Liens for Taxes, (ii) Liens upon, and defects of title to, property, including any attachment of property or other legal process prior to adjudication of a dispute on the merits, (iii) Liens of mechanics, materialmen, warehousemen, carriers, and landlords, and similar Liens, and (iv) adverse judgments on appeal, in each case, with respect to this clause (g), if either (x) no amounts are due and payable and no Lien has been filed or agreed to or (y) the validity or amount thereof is being contested in good faith by lawful proceedings diligently conducted, reserve or other provision required by GAAP has been made, levy and execution thereon have been (and continue to be) stayed, and neither the value nor use of the property in question are materially affected;
|
(h)
|
Liens in favor of the United States Department of Agriculture, the Rural Electrification Administration, the Rural Utilities Service, the Rural Telephone Bank or similar lenders such as the Rural Telephone Finance Cooperative;
|
(i)
|
Liens on equity investments in a financial institution which requires any Company to make an equity investment in such institution in order to borrow money;
|
(j)
|
Liens existing on any property of a Subsidiary existing at the time it became a Subsidiary which were not created with view of becoming a Subsidiary,
provided
that the Debt secured by such Liens may not be increased, extended, renewed or continued beyond its original stated maturity if such increase, extension or renewal would result in a Default under Section 6.14;
|
(k)
|
Liens either on shares of stock or other equity interests of an entity which, when such Liens arise, concurrently becomes a Subsidiary or on assets of an entity arising in connection with acquisition thereof by the Borrower or a Subsidiary;
provided
, that the Debt secured by such Liens may not be increased or extended, renewed or continued beyond its original stated maturity if such increase, extension or renewal would result in a Default under Section 6.14;
|
(l)
|
Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;
|
(m)
|
Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Borrower or any Subsidiary, including rights of offset and setoff;
|
(n)
|
bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more of accounts maintained by the Borrower or any Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank or banks with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements;
provided
, that in no cease shall any such Liens secure (either directly or indirectly) the repayment of any Debt;
|
(o)
|
leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Borrower or any Subsidiary;
|
(p)
|
Liens arising from filing Uniform Commercial Code financing statements regarding leases:
|
(q)
|
Liens on Capital Stock owned by the Borrower or any Restricted Subsidiary in an Unrestricted Subsidiary or a Person that is not a Subsidiary to secure Debt or other obligations of the Unrestricted Subsidiary or Person that issued the Equity Interests;
|
(r)
|
Liens on property of a Subsidiary (other than on stock of a Subsidiary except to the extent permitted in clause (k) above) securing obligations owing to the Borrower or a Wholly Owned Subsidiary;
|
(s)
|
except as otherwise prohibited by clause (j) or (k) above, Liens securing extensions, renewals or refinancings of the Debt to replace Liens being released in connection with such transaction to the extent the Liens being released were permitted hereunder;
|
(t)
|
Liens on accounts receivable and related assets (including without limitation, all collateral, guaranties and contracts associated with such accounts receivable, all of the Receivables Entity’s interest in inventory and goods the sale of which gave rise to the accounts receivable, all lockbox or collection accounts related thereto, all records related thereto and all proceeds of the foregoing) securing indebtedness incurred pursuant to a Qualified Receivables Transaction;
|
(u)
|
Liens on assets subject to any sale and leaseback transaction consummated pursuant to Section 6.7(g);
|
(v)
|
(x) Liens arising in the ordinary course of business which (i) do not secure Funded Debt, (ii) do not in the aggregate materially detract from the value of the grantor’s assets or materially impair the use thereof in the operation of its business, and (iii) do not secure obligations in an amount exceeding, in the aggregate, $100,000,000 and (y) Liens not described in clause (x) on cash and Cash Equivalents and securities which Liens secure any obligation with respect to letters of credit and which do not secure obligations in an amount exceeding, in the aggregate, $100,000,000;
|
(w)
|
any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary (to the extent any such merger or consolidation is permitted under Section 6.4 and not created in contemplation of such event);
|
(x)
|
Liens securing Debt permitted to be secured by a Lien in accordance with Section 6.15;
|
(y)
|
Liens on property of a Subsidiary securing indebtedness of such Subsidiary created, assumed or incurred after the date hereof, the creation, assumption or incurrence of which would not create a Default under Section 6.14;
|
(z)
|
Liens on securities in connection with securities repurchase and reverse repurchase arrangements that bear only upon the securities involved in the repurchase or reverse repurchase transaction;
|
(aa)
|
replacements, extension and renewals of any Lien permitted by clause (b), (c), (j) or (k) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby);
|
(bb)
|
Liens securing Funded Debt referred to in clause (g) of the definition of Permitted Priority Debt;
|
(cc)
|
Liens on assets of an Excluded Specified Subsidiary securing the Excluded Specified Debt of such Excluded Specified Subsidiary.
|
(i)
|
is guaranteed by the Borrower or any Subsidiary (excluding guarantees of obligations (other than the principal of, and interest on, Debt) pursuant to Standard Securitization Undertakings);
|
(ii)
|
is recourse to or obligates the Borrower or any Subsidiary in any way other than pursuant to Standard Securitization Undertakings; or
|
(iii)
|
subjects any property or asset of the Borrower or any Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, oilier than pursuant to Standard Securitization Undertakings;
|
(b)
|
with which neither the Borrower nor any Subsidiary has any material contract, agreement, arrangement or understanding (except in connection with a Qualified Receivables Transaction) other than on terms no less favorable to the Borrower or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Borrower, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; and
|
(c)
|
to which neither the Borrower nor any Subsidiary has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results (except pursuant to Standard Securitization Undertakings).
|
1.2
|
Accounting Principles
.
|
1.3
|
Other Definitional Provisions
. As used herein and in the other Loan Papers, (i) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation,” (ii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iii) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, capital stock, securities, revenues, accounts, leasehold interests and contract rights, and (iv) references to agreements or other contractual obligations shall, unless otherwise specified, be deemed to refer to such agreements or contractual obligations as amended, supplemented, restated or otherwise modified from time to time.
|
SECTION 2
|
FACILITIES . |
2.1
|
Commitments
.
|
2.2
|
Procedure For Loan Borrowing
.
|
2.3
|
Repayment of Term Loans
.
|
2.4
|
Conversion and Continuation Options
.
|
(a)
|
The Borrower may elect from time to time to convert LIBOR Loans to Base Rate Loans by giving the Administrative Agent prior irrevocable notice of such election no later than 1:00 P.M., New York City time, on the Business Day preceding the proposed conversion date,
provided
, that any such conversion of LIBOR Loans may only be made on the last day of an Interest Period with respect thereto (unless the Borrower pays the amount owing pursuant to Section 2.12). The Borrower may elect from time to time to convert Base Rate Loans to LIBOR Loans by giving the Administrative Agent prior irrevocable notice of such election no later than 1:00 P.M., New York City time, on the third Business Day preceding the proposed conversion date (which notice shall specify the length of the initial Interest Period therefor;
provided
, that no Base Rate Loan may be converted into a LIBOR Loan when any Event of Default has occurred and is continuing and the Administrative Agent or the Majority Lenders have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
|
(b)
|
Any LIBOR Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans;
provided
, that no LIBOR Loan may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Lenders have determined in its or their sole discretion not to permit such continuations;
provided
,
further
, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
|
2.5
|
Fees
.
|
2.6
|
Limitations on Eurodollar Tranches
.
|
2.7
|
Interest Rates and Payment Dates
.
|
(a)
|
Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Rate determined for such day
plus
the Applicable Margin.
|
(b)
|
Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate
plus
the Applicable Margin.
|
(c)
|
(i) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), all outstanding Loans shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section
plus
2%, and (ii) if all or a portion of any interest payable on any Loan or any fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans
plus
2% in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment).
|
(d)
|
Interest shall be payable in arrears on each Interest Payment Date;
provided
, that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.
|
2.8
|
Alternate Rate of Interest for LIBOR Loans
.
|
2.9
|
Mandatory and Optional Prepayment of Loans
.
|
(a)
|
Prior to the Termination Date, the Borrower shall have the right at any time to prepay the Loans, in whole or in part, subject to the requirements of Sections 2.12 and 2.13 but otherwise without premium or penalty, but prepayment of LIBOR Loans shall require at least three Business Days prior written notice to the Administrative Agent;
provided
, however, that each such partial prepayment shall be in an integral multiple of $1,000,000 and in a minimum aggregate principal amount of $2,000,000;
provided
, further, that a failure to provide three (3) Business Days’ prior written notice in the case of a prepayment of a LIBOR Loan shall not constitute a Default but instead shall entitle the Lenders to remedies identified in Section 2.12. Each notice of prepayment, with respect to LIBOR Loans, shall specify the prepayment date and the aggregate principal amount of each Borrowing to be prepaid and may be revocable;
provided
, that (i) such notice is only revocable during the three Business Day period beginning on the date that such notice is given to the Administrative Agent and ending on the stated date of such prepayment and (ii) the Borrower shall indemnify the Lenders pursuant to Section 2.12 as a result of the Borrower’s revocation of such notice.
|
(b)
|
All Loans, together with accrued and unpaid interest thereon, shall be due and payable in full on the Termination Date.
|
(c)
|
All prepayments of Loans (other than optional prepayments of Base Rate Loans) under this Section 2.9 shall be accompanied by accrued interest on the principal amount being prepaid to the date of prepayment.
|
2.10
|
Reserve Requirements; Change in Circumstances
.
|
(a)
|
Notwithstanding any other provision herein, if after the Closing Date any Regulatory Change (i) subjects any Lender to any Taxes (other than (x) Non-Excluded Taxes or Taxes described in clause (i) or (ii) of the first sentence in Section 2.19(a) or (y) any Tax that would not have been imposed but for the failure of any Lender to comply with any certification, information, documentation, or other reporting requirement if such Lender could legally comply and such compliance would not materially prejudice such Lender’s legal or commercial position) on its loans, loan principal or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, (ii) shall impose, modify, or deem applicable any reserve, special deposit, or similar requirement with respect to any LIBOR Loan (or participating interest therein), against assets of, deposits with or for the account of, or credit extended by, such Lender under this Agreement, or (iii) with respect to any LIBOR Loan, shall impose on such Lender or the London interbank market any other condition affecting this Agreement or any LIBOR Loan made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBOR Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest, or otherwise) in respect thereof by an amount deemed in good faith by such Lender to be material, then the Borrower shall pay to the Administrative Agent for the account of such Lender such additional amount or amounts as will compensate such Lender for such increase or reduction to such Lender, to the extent such amounts have not been included in the calculation of the LIBOR Rate, upon demand by such Lender (through the Administrative Agent).
|
(b)
|
If any Lender shall have determined in good faith that any Regulatory Change regarding capital or liquidity requirements or compliance by any Lender (or its Parent or any lending office of such Lender) with any request or directive regarding capital or liquidity requirements (whether or not having the force of Law) of any Tribunal, monetary authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s (or its Parent’s) capital as a consequence of its obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such Regulatory Change, or compliance (taking into consideration such Lender’s policies with respect to capital and liquidity requirements) by an amount deemed in good faith by such Lender to be material, then from time to time, the Borrower shall pay to the Administrative Agent for the account of such Lender such additional amount or amounts as will compensate such Lender for such reduction upon demand by such Lender (through the Administrative Agent).
|
(c)
|
A certificate of a Lender setting forth in reasonable detail (i) the Regulatory Change or other event giving rise to such costs, (ii) such amount or amounts as shall be necessary to compensate such Lender as specified in paragraph (a) or (b) above, as the case may be, (iii) the calculation of such amount or amounts under clause (a) or (b) above, shall be delivered to the Borrower (with a copy to the Administrative Agent) promptly after such Lender determines it is entitled to compensation under this Section 2.10, and shall be conclusive and binding absent manifest error and (iv) confirmation from such Lender that such costs are also being assessed to other similarly situated borrowers. The Borrower shall pay to the Administrative Agent for the account of such Lender the amount shown as due on any such certificate within 15 days after its receipt of the same;
provided
that the Borrower shall not be required to pay the Administrative Agent for the account of such Lender pursuant to this Section 2.10 for any amount specified in clause (a) or (b) above in respect of a period occurring more than 180 days prior to the date on which such Lender notifies the Borrower of such Regulatory Change and such Lender’s intention to claim compensation therefor, except, if the Regulatory Change giving rise to any amount specified in clause (a) or (b) above is retroactive, no such time limitation shall apply so long as such Lender requests compensation within 180 days from the date on which the applicable Tribunal informed such Lender of such Regulatory Change. In preparing such certificate, such Lender may employ such assumptions and allocations of costs and expenses as it shall in good faith deem reasonable and may use any reasonable averaging and attribution method.
|
(d)
|
The protection of this Section 2.10 shall be available to each Lender regardless of any possible contention of invalidity or inapplicability of the law, regulation, or condition which shall have been imposed.
|
(e)
|
Without prejudice to the survival of any other obligations of the Borrower hereunder, the obligations of the Borrower under this Section 2.10 shall survive for one year after the termination of this Agreement and/or the payment or assignment of any of the Loans or Notes.
|
2.11
|
Change in Legality
.
|
(a)
|
Notwithstanding anything to the contrary herein contained, if any Regulatory Change shall make it unlawful for any Lender to make or maintain any LIBOR Loan or to give effect to its obligations as contemplated hereby, then, by written notice to the Borrower and to the Administrative Agent, such Lender may:
|
(i)
|
declare that LIBOR Loans will not thereafter be made by such Lender hereunder, whereupon the Borrower shall be prohibited from requesting LIBOR Loans from such Lender hereunder unless such declaration is subsequently withdrawn; and
|
(ii)
|
if such unlawfulness shall be effective prior to the end of any Interest Period of an outstanding LIBOR Loan, require that all outstanding LIBOR Loans with such Interest Periods made by it be converted to Base Rate Loans, in which event (A) all such LIBOR Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice as provided in paragraph (b) below and (B) all payments and prepayments of principal which would otherwise have been applied to repay the converted LIBOR Loans shall instead be applied to repay the Base Rate Loans resulting from the conversion of such LIBOR Loans.
|
(b)
|
For purposes of this Section 2.11. a notice to the Borrower (with a copy to the Administrative Agent) by any Lender pursuant to paragraph (a) above shall be effective on the date of receipt thereof by the Borrower.
|
2.12
|
Indemnity
.
|
2.13
|
Pro Rata Treatment
.
|
2.14
|
Sharing of Setoffs
.
|
2.15
|
Payments
.
|
(a)
|
All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 1:00 P.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to each relevant Lender promptly upon receipt in like funds as received, net of any amounts owing by such Lender pursuant to Section 9.7. If any payment hereunder (other than payments on the LIBOR Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a LIBOR Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the next preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
|
(b)
|
Unless the Administrative Agent shall have been notified in writing by any Lender prior to the borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Closing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon, at a rate equal to the greater of (i) the Federal Funds Effective Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender’s share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Closing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans, on demand, from the Borrower.
|
(c)
|
Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.
|
2.16
|
Calculation of LIBOR Rate
.
|
2.17
|
Computation of Interest and Fees
.
|
(a)
|
Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate, such calculations shall be made on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a LIBOR Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
|
(b)
|
Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.7(a).
|
2.18
|
Booking Loans
.
|
2.19
|
Taxes
.
|
(a)
|
All payments made by or on account of any obligation of any Loan Party under this Agreement or any other Loan Paper shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Tribunal, excluding (i) income or franchise taxes imposed on (or measured by) net income, in each case, imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Tribunal imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Paper) and
|
(b)
|
In addition, the Loan Party shall pay any Other Taxes to the relevant Tribunal in accordance with applicable Law.
|
(c)
|
Whenever any Non-Excluded Taxes or Other Taxes are payable by a Loan Party, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Loan Party showing payment thereof. If (i) a Loan Party fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority , (ii) a Loan Party fails to remit to the Administrative Agent the required receipts or other required documentary evidence, or (iii) any Non-Excluded Taxes or Other Taxes are imposed directly upon the Administrative Agent or any Lender, the Loan Parties shall jointly and severally indemnify the Administrative Agent and the Lenders for such amounts and any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure, in the case of (i) and (ii), or any such direct imposition, in the case of (iii).
|
(d)
|
Each Lender (or transferee) that is a “United States Person” as defined in Section 770l(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly executed copies of U.S. Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. federal backup withholding tax. Each Lender (or transferee) that is not a “United States Person” as defined in Section 770l(a)(30) of the Code (a “
Non-U.S. Lender
”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) (i) two copies of either U.S. Internal Revenue Service Form W-8BEN-E, Form W-8ECI, or Form W-8IMY (together with any applicable underlying IRS forms) properly completed and duly executed claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Papers, (ii) in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest,” a statement substantially in the form of Exhibit G and a Form W-8BEN-E, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of. U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Papers, or (iii) any other form prescribed by applicable requirements of U.S. federal income tax law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable requirements of Law to permit the Borrower and the Administrative Agent to determine the withholding or deduction required to be made. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower and the Administrative Agent at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this clause, a Non-U.S. Lender shall not be required to deliver any form pursuant to this clause that such Non-U.S. Lender is not legally able to deliver.
|
(e)
|
A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the Law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate;
provided
, that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s judgment such completion, execution or submission would not materially prejudice the legal or commercial position of such Lender.
|
(f)
|
To the extent required by any applicable Law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other Tribunal asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Paper or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (f).
|
(g)
|
If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 2.19, it shall pay over such refund to the applicable Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.19 with respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Tribunal with respect to such refund);
provided
, that the Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Tribunal) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Tribunal. This clause shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Loan Party or any other Person.
|
(h)
|
The agreements in this Section 2.19 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
|
2.20
|
Defaulting Lenders
. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then, for so long as such Lender is a Defaulting Lender, the Loan of such Defaulting Lender shall not be included in determining whether the Majority Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 10.14);
provided
, that (a) such Defaulting Lender’s outstanding Loans may not be increased or extended without its consent and (b) the principal amount of, or interest or fees payable on, Loans may not be reduced or excused or the scheduled date of payment may not be postponed as to such Defaulting Lender without such Defaulting Lender’s consent.
|
2.21
|
Mitigation Obligations; Replacement of Lenders
.
|
(a)
|
If any Lender requests compensation under Section 2.10 or gives notice regarding Regulatory Changes affecting LIBOR Loans under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Tribunal for the account of any Lender pursuant to Section 2.19, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder, assign its rights and obligations hereunder to another of its offices, branches or affiliates, or otherwise modify its practices relating to the Loans, if, in the reasonable judgment of such Lender, such designation, assignment or modification (i) would eliminate or reduce amounts payable pursuant to Section 2.10 or 2.19 or eliminate any unlawfulness contemplated by Section 2.11 with respect to LIBOR Loans, as the case may be, in the future and (ii) is not otherwise materially disadvantageous to such Lender.
|
(b)
|
If any Lender requests compensation under Section 2.10 or gives notice regarding Regulatory Changes affecting LIBOR Loans under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Tribunal for the account of any Lender pursuant to Section 2.19, or if any Lender becomes a Defaulting Lender or if any Lender does not consent to any proposed amendment, supplement, modification, consent or waiver of any provision of this Agreement or any other Loan Paper that requires the consent of each of the Lenders or each of the Lenders affected thereby (so long as the consent of the Majority Lenders has been obtained), then the Borrower may, at its sole expense and effort (except in the case of a Defaulting Lender), upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.18), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment);
provided
that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Section 2.19, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. Each party hereto agrees that an assignment required pursuant to this clause may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee and that the Lender required to make such assignment need not be a party thereto.
|
2.22
|
Extensions of Loans
.
|
(a)
|
Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an “
Extension Offer
”) made from time to time by the Borrower to all Lenders, in each case on a pro rata basis (based on the aggregate outstanding principal amounts of the Loans with a like maturity date) and on the same terms to each such Lender, the Borrower is hereby permitted to consummate from time to time transactions with individual Lenders that accept the terms contained in such Extension Offers to extend the maturity date of each such Lender’s Loans and otherwise modify the terms of such Loans pursuant to the terms of the relevant Extension Offer (including by increasing the interest rate payable in respect of such Loans) (each, an “
Extension
,” and each Loan, as so extended, as well as the original Loan (in each case not so extended), being a “tranche”; and any Extended Loans shall constitute a separate tranche of Loans from the tranche of Loans from which they were converted), so long as the following terms are satisfied:
|
(i)
|
no Default or Event of Default shall have occurred and be continuing at the time the offering document in respect of an Extension Offer is delivered to the Lenders.
|
(ii)
|
except as to interest rates, amortization, and final maturity (which shall be determined by the Borrower and set forth in the relevant Extension Offer), the Loans of any Lender that agrees to an Extension with respect to such Loans (“
Extended Loans
”), shall be a Loan with the same terms (or terms hot less favorable to existing Lenders) as the original Loans; provided that all repayments (except for (A) payments of interest at different rates on Extended Loans, (B) repayments required upon the maturity date of the non-extending Loans and (C) repayments made in connection with a prepayment) of Extended Loans after the applicable Extension date shall be made on a pro rata basis with all other Loans and (z) at no time shall there be Loans hereunder (including Extended Loans and any original Loans) that have more than two different maturity dates.
|
(iii)
|
all documentation in respect of such Extension shall be consistent with the foregoing and
|
(iv)
|
any applicable Minimum Extension Condition shall be satisfied.
|
(b)
|
With respect to all Extensions consummated by the Borrower pursuant to this Section 2.22, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments for purposes of Section 2.9 or 2.13 and (ii) the Borrower shall specify as a condition (a “
Minimum Extension Condition
”) to consummating any such Extension that a minimum amount (except as provided below, to be determined and specified in the relevant Extension Offer in the Borrower’s sole discretion and waivable by the Borrower) of Loans of any or all applicable tranches be tendered;
provided
, that, in any event, the Minimum Extension Condition shall require that, after giving effect to a particular Extension, a majority of the aggregate Loans outstanding shall constitute Extended Loans pursuant thereto, and such requirement may not be waived by the Borrower. The Administrative Agent and the Lenders hereby consent to the transactions contemplated by this Section 2.22 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Loans on such terms as may be set forth in the relevant Extension Offer) and hereby waive the requirements of any provision of this Agreement (including Sections 2.9 and 2.13) or any other Loan Paper that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.22.
|
(c)
|
No consent of any Lender or the Administrative Agent shall be required to effectuate any Extension, other than the consent of each Lender agreeing to such Extension with respect to its Loans (or a portion thereof). Notwithstanding anything to the contrary in this Agreement, the Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Papers with the Borrower as may be necessary in order to establish new tranches or sub-tranches in respect of Loans and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this Section 2.22.
|
(d)
|
In connection with any Extension, the Borrower shall provide the Administrative Agent at least five Business Days’ (or such shorter period as may be agreed by the Administrative Agent) prior written notice thereof, and shall agree to such procedures (including regarding timing, rounding and other adjustments and to ensure reasonable administrative management of the credit facilities hereunder after such Extension), if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably to accomplish the purposes of this Section 2.22.
|
2.23
|
Change of Control
. If a Change of Control shall occur, the Borrower shall, within ten days after the occurrence thereof, give each Lender notice thereof, which notice shall describe in reasonable detail the facts and circumstances giving rise thereto and shall specify an Optional Termination Date for purposes of this Section (the “
Optional Termination Date
”), which date shall not be less than 30 nor more than 60 days after the date of such notice. Each Lender may, by notice to the Borrower and the Administrative Agent given not less than three Business Days prior to the Optional Termination Date, declare the Loan held by it (together with accrued interest thereon) and any other amounts payable hereunder for its account to be, and such Loan and such other amounts shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, in each case effective on the Optional Termination Date (each Lender giving such notice, an “
Exiting Lender
”; each other Lender a “
Non-Exiting Lender
”). Notwithstanding the foregoing, if any condition specified in Section 4.2 cannot be satisfied on the Optional Termination Date such Change of Control shall be deemed to be an Event of Default.
|
(a)
|
a third person, including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 (as amended the “
Exchange Act
”), but excluding any employee benefit plan or plans of CenturyLink and its Subsidiaries and Affiliates, becomes the beneficial owner, directly or indirectly, of 30% or more of the combined voting power of the CenturyLink’s outstanding voting securities ordinarily having the right to vote for the election of directors of the CenturyLink;
|
(b)
|
the individuals who, as of December 31, 2014 constituted the Board of Directors of CenturyLink (the “
Board of Directors
” generally and as of December 31, 2014 the “
Incumbent Board
”) cease for any reason to constitute at least a majority of the Board of Directors, or in the case of a merger or consolidation of CenturyLink, do not constitute or cease to constitute at least a majority of the board of directors of the surviving company (or in a case where the surviving corporation is controlled, directly or indirectly, by another corporation or entity do not constitute or cease to constitute at least a majority of the board of such controlling corporation or do not have or cease to have at least a majority of voting seats on any body comparable to a board of directors of such controlling entity or, if there is no body comparable to a board of directors, at least a majority of voting control of such controlling entity);
provided
, that any person becoming a director (or, in the case of a controlling non-corporate entity, obtaining a position comparable to a director or obtaining a voting interest in such entity) subsequent to December 31, 2014 whose election, or nomination for election, was approved by a vote of the persons comprising at least a majority of the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or
|
(c)
|
CenturyLink shall fail to own, directly or indirectly, 100% of the outstanding voting securities ordinarily having the right to vote for the election of directors of the Borrower.
|
SECTION 3
|
REPRESENTATIONS AND WARRANTIES . |
3.1
|
Purpose of Credit Facility; Federal Regulation
.
|
3.2
|
Corporate Existence, Good Standing, and Authority
.
|
(a)
|
Each Company is, to the best of the Borrower’s knowledge, duly organized, validly existing, and in good standing under the Laws of its jurisdiction of organization (such jurisdictions with respect to existing Guarantor Significant Subsidiaries, being identified on Schedule 3.3 and, with respect to future Guarantor Significant Subsidiaries, being identified in the quarterly reporting as required by Section 5.3(k)).
|
(b)
|
Except where failure would not reasonably be expected to have a Material Adverse Effect, each Company (i) is duly qualified to transact business and is in good standing as a foreign corporation or other organization in each jurisdiction where the nature and extent of its business and properties require the same, and (ii) possesses all requisite authority, power, licenses, permits, and franchises to own and operate its property and to conduct its business as is now being, or is contemplated herein to be, conducted.
|
(c)
|
Each Loan Party possesses all requisite authority, power, licenses, permits, and franchises to execute, deliver, and comply with the terms of the Loan Papers to which it is a party, and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Papers to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement, except where failure, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
|
(d)
|
No consent or authorization of, filing with, notice to or other act by or in respect of any Person or Tribunal is required in connection with this Agreement, the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Papers, except consents, authorizations, filings and notices (i) which have been obtained or made and are in full force and effect or (ii) the failure of which to obtain or make, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
|
3.3
|
Guarantor Significant Subsidiaries
.
|
3.4
|
Financial Statements; No Change
.
|
(a)
|
The Current Financials were prepared in accordance with GAAP and present fairly the consolidated financial condition and the results of operations of the Companies as of, and for the periods ended, the dates thereof. There were no material (to the Companies taken as a whole) liabilities, direct or indirect, fixed or contingent, of any Company as of the date of the Current Financials which are required to be reflected in the Current Financials but are not reflected therein. No Company has incurred any material (to the Companies taken as a whole) liability, direct or indirect, fixed or contingent, between the dates of the Current Financials and the date hereof, except in the ordinary course of business, such as in connection with acquisitions and financing activities.
|
(b)
|
Since December 31, 2013 through the Closing Date, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
|
3.5
|
Compliance with Laws, Charter, and Agreements
.
|
3.6
|
Litigation
.
|
3.7
|
Taxes
.
|
3.8
|
Environmental Matters
.
|
3.9
|
Employee Benefit Plans
.
|
3.10
|
Properties; Liens
.
|
3.11
|
Investment Company Status
.
|
3.12
|
Transactions with Affiliates
.
|
3.13
|
Leases
.
|
3.14
|
Labor Matters
.
|
3.15
|
Insurance
.
|
3.16
|
Solvency
.
|
3.17
|
Business
.
|
3.18
|
General
.
|
3.19
|
No Default
. No Company is in default under or with respect to any Material Agreement to which it is a party in any respect that could reasonably be expected to have a Material Adverse Effect. On each date on which an extension of credit is made hereunder, no Default or Event of Default shall have occurred and be continuing or would result from the making of such extension of credit.
|
3.20
|
OFAC
. (a) None of the Companies nor, in each case to the knowledge of the Borrower, any director, officer, employee, controlled Affiliate of the Borrower, or any agent of the Borrower that will act in any capacity in connection with or benefit from any facility established hereby, nor any other Person of which the Borrower owns 50% or more of the issued and outstanding equity interests, is a Sanctioned Person; and the Borrower will not directly or indirectly use the proceeds of the Loans or otherwise make available such proceeds to any Person (including, without limitation, any Investment permitted pursuant to Section 6.5), for the purpose of financing the activities of, transactions with or acquiring an interest in any Person currently the subject of any Sanctions, except to the extent licensed or otherwise approved by OFAC or not in violation of Anti-Corruption Laws, in each case, as applicable.
|
SECTION 4
|
CONDITIONS PRECEDENT . |
4.1
|
Closing Date
.
|
(e)
|
Loan Papers
. (i) This Agreement, executed and delivered by the Administrative Agent and the Borrower, (ii) a Note payable to each Lender and (iii) the Current Financials.
|
(f)
|
Secretary’s Certificates
. A certificate dated as of the date hereof, substantially in the form of Exhibit F, executed and delivered by each Loan Party, certifying that (i) attached is a true, correct, and complete copy of (A) such Loan Party’s charter, certified by the appropriate state official and dated a Current Date, (B) such Loan Party’s bylaws, and (C) resolutions of such Loan Party’s board of directors authorizing the execution and delivery of each Loan Paper to which such Loan Party is a party and (ii) the officers whose specimen signatures appear on such certificate hold the corporate office indicated and are authorized to sign agreements, documents, and instruments on behalf of such Loan Party.
|
(g)
|
Good Standing, Existence, and Authority
. Certificates (dated a Current Date) relating to each Loan Party’s existence, good standing, and authority to transact business issued by appropriate state officials.
|
(h)
|
Opinions of Borrower’s Counsel
. The favorable opinions, dated the Closing Date and substantially in the form of Exhibit B, of:
|
(i)
|
Jones Walker LLP, special counsel to the Borrower;
|
(ii)
|
Stacey Goff, Executive Vice President, General Counsel and Corporate Secretary of the Borrower; and
|
(iii)
|
Arthur J. Saltareili, Associate General Counsel of the Borrower.
|
(i)
|
Officer’s Certificate
. A certificate, dated the Closing Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance, as of the Closing Date, with the conditions set forth in paragraphs (a) and (b) of Section 4.2.
|
(j)
|
Fees and Expenses
. Payment from the Borrower of all fees then due the Administrative Agent, the Lead Arranger, the Lenders, and counsel to the Lead Arranger and Administrative Agent pursuant to this Agreement or any other agreement.
|
(k)
|
Financial Statements
. The Lenders shall have received (i) audited consolidated financial statements of the Borrower and its Subsidiaries for the 2012 and 2013 fiscal years.
|
(l)
|
Solvency Certificate
. The Lenders shall have received a certificate from the chief financial officer of the Borrower certifying that each Loan Party is, and after giving effect to this Agreement and the incurrence of all Debt and obligations being incurred in connection herewith, will be and will continue to be, Solvent.
|
(m)
|
Ratings
. The Borrower shall have obtained Senior Unsecured Long-Term Debt Ratings from each of Moody’s and S&P.
|
(n)
|
Patriot Act
. The Lenders shall have received, with respect to such documents and other information requested in writing at least five business days prior to the Closing Date, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
|
(o)
|
Other
. Such other agreements, documents, instruments, opinions, certificates, and evidences as the Administrative Agent may reasonably request.
|
4.2
|
Conditions to Funding
.
|
4.3
|
Materiality of Conditions
.
|
4.4
|
Waiver of Conditions
.
|
SECTION 5
|
AFFIRMATIVE COVENANTS . |
5.1
|
Use of Proceeds
.
|
5.2
|
Books and Records
.
|
5.3
|
Items to be Furnished
.
|
(a)
|
Promptly after preparation, and no later than 90 days after the last day of each fiscal year of the Borrower, Financial Statements showing the consolidated financial condition and results of operations of the Companies as of, and for the year ended on, such last day, accompanied by (i) the opinion of KPMG LLP (or another firm of nationally-recognized independent certified public accountants reasonably acceptable to Majority Lenders), based on an audit using generally accepted auditing standards, that such Financial Statements were prepared in accordance with GAAP and present fairly the consolidated financial condition and results of operations of the Companies (and such accountants shall indicate in a letter to the Administrative Agent, that during their audit no Default or Event of Default not already reported was discovered or, if such Default or Event of Default was discovered, the nature and period of existence thereof) and (ii) a Financial Report Certificate with respect to such Financial Statements.
|
(b)
|
Promptly after preparation, and no later than 45 days after the last day of each of the first three quarters of each fiscal year of the Borrower, (i) Financial Statements showing the consolidated financial condition and results of operations of the Companies as of, and for the period from the beginning of the current fiscal year to, such last day, and (ii) a Financial Report Certificate with respect to such Financial Statements.
|
(c)
|
Promptly after preparation (and no later than the later of 15 days (a) after such filing is due or (b) after timely filing, if filed with the SEC), true copies of all regular and periodic reports, proxy statements and filings on Form 8-K furnished by or on behalf of any Company to stockholders generally or filed with the SEC. However, only registration statements covering more than 2% of the Borrower’s outstanding shares of common stock shall be required to be furnished unless specifically requested by the Administrative Agent.
|
(d)
|
Promptly upon receipt thereof, copies of any notices received from any Tribunal (including, without limitation, state regulatory agencies) relating to the possible violation or violation of any Law which might have a Material Adverse Effect.
|
(e)
|
Notice, promptly after the Borrower knows or has reason to know of, (i) the existence of any material Litigation as defined in Section 3.6, (ii) any material change in any material fact or circumstance represented or warranted in any Loan Paper, or (iii) a Default or Event of Default, specifying the nature thereof and what action the Borrower or any other Company has taken, is taking, or proposes to take with respect thereto.
|
(f)
|
Notice, promptly after the Borrower knows or has reason to know of, a Subsidiary Encumbrance, as defined in Section 6.14(b), except with respect to Permitted Refinancing Debt.
|
(g)
|
Within 10 days after execution thereof, copies of any supplements, modifications or amendments to the Equity Units documentation.
|
(h)
|
Promptly upon the Administrative Agent’s or any Lender’s reasonable request, such information (not otherwise required to be furnished under the Loan Papers) respecting the business affairs, assets, and liabilities of any Company, and any opinions, certifications, and documents, in addition to those mentioned herein.
|
(i)
|
Promptly following receipt thereof, copies of any documents described in sections 101(k)or 101(l) of ERISA that any Company or any ERISA Affiliate may request with respect to any Multiemployer Plan or documents described in Section 101(f) of ERISA that any Company or ERISA Affiliate may request with respect to any Plan;
provided
, that if the Companies or any of their ERISA Affiliates have not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Administrative Agent, the Companies and/or their ERISA Affiliates shall promptly make a request for such documents or notices from such administrator or sponsor and the Borrower shall provide copies of such documents and notices to the Administrative Agent promptly after receipt thereof.
|
(j)
|
Notice, promptly after any Company or ERISA Affiliate knows or has reason to know of, (i) the failure of any Plan to comply with any material provisions of ERISA and/or the Code (and applicable regulations under either) or with the material terms of such Plan; (ii) the failure of any Plan to meet the minimum funding standards (within the meaning of Section 412 of the Code or section 302 of ERISA) applicable to such Plan (whether or not waived), the filing pursuant to section 412(c) of the Code or section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, or the receipt by any Plan of a determination that it is, or is expected to be in “at risk” status (within the meaning of section 430 of the Code or Section 303 of ERISA; (iii) the incurrence by any Company or ERISA Affiliate of liability to the PBGC in connection with any Plan; (iv) the withdrawal (in whole or in part) by any Company or ERISA Affiliate from participation in a Plan or Multiemployer Plan or receipt by any Company or ERISA Affiliate of notice from any Multiemployer Plan with respect to the imposition of Withdrawal Liability or that such Multiemployer Plan is, or is expected to be, Insolvent, in Reorganization, “terminated” (within the meaning of section 4041A of ERISA), or in “endangered” or “critical” status (within the meaning of section 432 of the Code or section 305 of ERISA); (v) the occurrence of a non-exempt Prohibited Transaction or a Reportable Event (excluding any Reportable Event that occurs solely as a result of the consummation of this Agreement); or (vi) the failure of any insured medical plan sponsored by any Company for any current or former employee(s) to satisfy the non-discrimination requirements of section 105 of the Code.
|
(k)
|
Concurrently with the delivery of any Financial Statements pursuant to clause (a) or (b) above, a list of the Guarantor Significant Subsidiaries as of the last day of the relevant fiscal period.
|
(l)
|
Notice, promptly after the Borrower knows or has reason to know of the acquisition of one more Excluded Specified Subsidiaries.
|
5.4
|
Inspection
.
|
5.5
|
Taxes
.
|
5.6
|
Payment of Obligations
.
|
5.7
|
Expenses
.
|
5.8
|
Maintenance of Existence, Assets, Business, and Insurance
.
|
5.9
|
Preservation and Protection of Rights
.
|
5.10
|
Environmental Laws
.
|
5.11
|
Environmental Indemnification
.
|
5.12
|
Designation of Unrestricted Subsidiaries
. The board of directors of the Borrower may at any time designate any Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Subsidiary;
provided
, that (a) immediately before and after such designation, no Default or Event of Default shall have occurred and be continuing, (b) immediately after giving effect to such designation, the Loan Parties shall be in compliance, on a pro forma basis, with the covenants set forth in Section 6.14 (and, as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating such compliance), (c) no Guarantor may be designated as an Unrestricted Subsidiary, (d) no Unrestricted Subsidiary may at any time Guaranty any Funded Debt of any Company and (e) no Unrestricted Subsidiary that has been designated as a Subsidiary may be subsequently designated as an Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Borrower or the relevant Subsidiary therein at the date of designation in an amount equal to the net book value of such Person’s investment therein. The designation of any Unrestricted Subsidiary as a Subsidiary shall constitute the incurrence at the time of designation of any Debt of such Subsidiary existing at such time.
|
5.13
|
Additional Guarantors
. At any time after the Closing Date that the Borrower (a) obtains a Below Investment Grade Rating, or (b) fails to maintain compliance with the Priority Debt covenant, (1) any Guarantor Significant Subsidiary that is a Domestic Subsidiary, (2) any Person that becomes a Wholly Owned Subsidiary that is a Guarantor Significant Subsidiary after the occurrence of the events described in clauses (a) or (b) above (which for purposes of this Section 5.13 shall exclude (w) any Excluded Regulated Subsidiary, (x) any person prohibited from incurring any guarantee obligations under any applicable financing obligations, (y) any Unrestricted Subsidiary and (z) any Excluded Specified Subsidiary, in each case unless such Subsidiary ceases to qualify as such), or (3) or any Company that either (i) enters into a Guaranty with respect to Funded Debt of the Borrower or (ii) becomes jointly and severally liable for the Funded Debt of the Borrower, the Borrower shall promptly cause such Guarantor Significant Subsidiary, Person or Company, as the case may be, to deliver to the Administrative Agent a Guarantee Agreement, satisfactory legal opinions and other documentation comparable to the documentation and legal opinions delivered on the Closing Date. Additionally, the Borrower may, in its sole discretion, add any Subsidiary as a Guarantor under this Agreement by causing such Subsidiary to comply with this Section 5.13.
|
5.14
|
Guarantor Release
. If one or more Guarantors has entered into a Guarantee Agreement with respect to this Agreement (a) due to the receipt by the Borrower of a Below Investment Grade Rating and the Borrower subsequently obtains a Debt Rating of at least Baa3 (or the equivalent) by Moody’s and a Debt Rating of at least BBB- (or the equivalent) by S&P and Fitch (in each case, with at least stable outlook), each Guarantor shall cease to be a Guarantor under this Agreement and any other Loan Papers (notwithstanding anything to the contrary herein) and the Borrower’s obligations under Section 5.13 shall cease or (b) for any other reason and the Borrower subsequently obtains a Debt Rating of at least Baa3 (or the equivalent) by Moody’s and a Debt Rating of at least BBB- (or the equivalent) by S&P and Fitch (in each case, with at least stable outlook), each Guarantor may, in the sole discretion of the Borrower, cease to be a Guarantor under this Agreement and any other Loan Papers (notwithstanding anything to the contrary herein) and the Borrower’s obligations under Section 5.13 shall cease,
provided
that, in each case, at such time the Borrower is in compliance with Section 6.15(b).
|
5.15
|
CoBank Equity
.
|
(a)
|
So long as CoBank is a Lender hereunder, the Borrower will acquire equity in CoBank in such amounts and at such times as CoBank may require in accordance with CoBank’s Bylaws and Capital Plan (as each may be amended from time to time), except that the maximum amount of equity that the Borrower may be required to purchase in CoBank in connection with the Loans made by CoBank may not exceed the maximum amount permitted by the Bylaws and the Capital Plan on the Closing Date. The Borrower acknowledges receipt of a copy of (i) CoBank’s most recent annual report, and if more recent, CoBank’s latest quarterly report, (ii) CoBank’s Notice to Prospective Stockholders and (iii) CoBank’s Bylaws and Capital Plan, which describe the nature of all of the Borrower’s stock and other equities in CoBank acquired in connection with its patronage loan from CoBank (the “
CoBank Equities
”) as well as capitalization requirements, and agrees to be bound by the terms thereof.
|
(b)
|
Each party hereto acknowledges that CoBank’s Bylaws and Capital Plan (as each may be amended from time to time) shall govern (x) the rights and obligations of the parties with respect to the CoBank Equities and any patronage refunds or other distributions made on account thereof or on account of the Borrower’s patronage with CoBank, (y) the Borrower’s eligibility for patronage distributions from CoBank (in the form of CoBank Equities and cash) and (z) patronage distributions, if any, in the event of a sale of a participation interest. CoBank reserves the right to assign or sell participations in all or any part of its Commitments or outstanding Loans hereunder on a non-patronage basis.
|
(c)
|
Each party hereto agrees that neither the CoBank Equities nor any accrued patronage shall be offset against the Obligations except that, in the event an Event of Default has occurred and is continuing, CoBank may elect, solely at its discretion, to apply the cash portion of any patronage distribution or retirement of equity to amounts due under this Agreement. The Borrower acknowledges that any corresponding tax liability associated with such application is the sole responsibility of the Borrower. CoBank shall have no obligation to retire the CoBank Equities upon any Event of Default, Default or any other default by the Borrower or any other Loan Party, or at any other time, either for application to the Obligations or otherwise.
|
5.16
|
Compliance with Anti-Corruption Laws, Sanctions.
The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and Sanctions to the extent such Anti-Corruption Laws and Sanctions are applicable to the respective business or operations of the Borrower or its Subsidiaries.
|
SECTION 6
|
NEGATIVE COVENANTS . |
6.1
|
Employee Benefit Plans
.
|
6.2
|
Liens
.
|
6.3
|
Restricted Payments
.
|
6.4
|
Mergers and Consolidations
.
|
(a)
|
any merger or consolidation where the Borrower (or another Company, if the Borrower is not a party thereto) is the surviving corporation;
|
(b)
|
any merger of any Subsidiary into another Company;
|
(c)
|
any merger of a Subsidiary into another Person (other than the Borrower) if after such merger the surviving entity becomes a Subsidiary;
|
(d)
|
any sale of assets permitted by Section 6.7 that is structured as a merger or consolidation;
|
(e)
|
any Subsidiary that is not a Guarantor Significant Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; and
|
(f)
|
any Subsidiary may merge into any other Person to the extent the transaction constitutes an Investment permitted by Section 6.5;
|
6.5
|
Loans, Advances, and Investments
.
|
(d)
|
Investments as of the Closing Date;
|
(e)
|
Acquisitions;
|
(f)
|
expense accounts for and other loans and advances to directors, officers, and employees of such Company in the ordinary course of business not to exceed $1,000,000 in the aggregate outstanding at any time;
|
(g)
|
(i) investments in (or secured by) obligations of the United States of America and agencies thereof and obligations guaranteed by the United States of America maturing within one year from the date of acquisition: (ii) commercial paper rated A-2 or better by Moody’s or P-2 or better by S&P; (iii) certificates of deposit, time deposits and banker’s acceptances which are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial banks organized under the Laws of the United States of America or any state thereof and having combined capital, surplus, and undivided profits of not less than $100,000,000, and which certificates of deposit have one of the two highest ratings from Moody’s or S&P, unless the Borrower has a written commitment to borrow funds from such commercial bank; (iv) repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; (v) in case of any foreign Subsidiary, (A) marketable direct obligations issued by, or unconditionally guaranteed by, sovereign nation in which such Person is organized and is conducting business or issued by any agency of such sovereign nation and backed by full faith and credit of such sovereign nation, in each case maturing within one year from date of acquisition, so long as indebtedness of such sovereign nation is rated at least A by S&P, A2 by Moody’s or A mid by Dominion Bond Rating Service Limited or carries an equivalent rating from a comparable foreign rating agency or (B) investments of type and maturity described in (ii) through (iv) above of foreign obligors, which investments or obligors have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies;
|
(h)
|
time deposits, banker’s acceptances or certificates of deposit issued by any of the Lenders;
|
(i)
|
investments having one of the two highest ratings from Moody’s or S&P;
|
(j)
|
extensions of credit in connection with trade receivables and overpayments of trade payables, in each case resulting from transactions in the ordinary course of business;
|
(k)
|
(i) loans, investments and capital contributions from any Company to any other Company,
provided
that any such loans, investments and capital contributions from any Company to an Excluded Specified Subsidiary shall be (x) solely in the form of loans made in connection with cash management activities in the ordinary course of business and (y) transfers for accounting and tax planning purposes in the ordinary course of business and (ii) Guaranties by any Company of the Debt of any other Company,
provided
that neither the Borrower nor any of its Subsidiaries (other than the applicable Excluded Specified Subsidiary) shall guarantee Excluded Specified Debt;
|
(l)
|
investments in the cash surrender value of life insurance policies issued by Persons with a financial rating from A.M. Best Company (as reported in Best’s Insurance Reports) of at least A+;
provided
, however, that if such Person’s financial rating is downgraded to less than A+, then within 90 days following such downgrading, either (i) such cash value life insurance policies will be transferred to another insurance company with a financial rating of at least A+, (ii) such cash value life insurance policies will be collapsed and the cash value thereof will be collected by the investing Company, or (iii) such investment will become an investment subject to the limitations of subparagraph (m) of this Section 6.5;
|
(m)
|
the purchase of equity or debt securities of any Company, including the Borrower (but, in the case of equity securities of the Borrower, only to the extent permitted by Section 6.3);
|
(n)
|
investments in capital stock or securities of or loans to or Guaranties of the Debt (including Permitted Priority Debt) of any Person engaged in the same or similar line of business as set forth on Schedule 3.17 hereto (or any reasonable extensions or expansions thereof) (i) in which a Company possesses (or will possess after such investment) an equity ownership interest in such Person or (ii) secured by the Borrowers interest in such business;
|
(o)
|
in the ordinary course of business, investments in the capital stock of the Rural Telephone Bank, CoBank, or the National Rural Utilities Cooperative Finance Corporation, or any other lender from whom the investing Company is intending to borrow money which requires such Company to make an equity investment in such lender in order to so borrow;
|
(p)
|
Guaranties of the Debt of the Borrower’s employee stock ownership plan;
|
(q)
|
investments in readily marketable money market funds registered under the Investment Company Act of 1940 with an investment policy to hold at least 90% of its assets in cash and securities of a type described in subsections (d), (e) and (f) of this Section 6.5;
|
(r)
|
investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;
|
(s)
|
investments consisting of non-cash consideration with respect to the sale of assets permitted by Section 6.7;
|
(t)
|
any acquisition of stock or assets to the extent that the consideration is paid in the capital stock of the Borrower;
|
(u)
|
(i) interest rate swap agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements, futures contracts, option contracts, synthetic caps or other similar agreements or arrangements, in each case designed to hedge against fluctuations in interest rates or currency values, respectively, or (iii) collars, caps, spreads and other similar agreements or arrangements, in each case designed to hedge against the total cost and consideration for the conversion of equity linked Debt;
|
(v)
|
acquisition of in-region wirelines as part of capital expenditures program; and
|
(w)
|
any loans, advances, Guaranties, and investments which never exceed in the aggregate at any time 25% of Adjusted Consolidated Net Worth (valued on the basis of original cost, plus subsequent cash and stock additions, less any write-down in value), net of any cash return representing return of capital in respect of any such investment or any cash repayment of any such loans, advances or Guarantees (to the extent funded);
provided
, however, that the aggregate amount at any time of such loans or advances to, Guaranties of, or investments in any joint venture that is not a Domestic Person, including any such joint venture that qualifies as a Subsidiary, shall not exceed $750,000,000 (valued on the basis of original cost, plus subsequent cash and stock additions, less any write-down in value), net of any cash return representing return of capital in respect of any such investment or any cash repayment of any such loans or advances or Guarantees (to the extent funded);
|
6.6
|
Transactions with Affiliates
.
|
6.7
|
Sale of Assets
.
|
(c)
|
sales of inventory or investments permitted under Section 6.5(d), (e), (f) and (n) in the ordinary course of business;
|
(d)
|
sales of equipment for a fair and adequate consideration or disposal of obsolete or worn out equipment;
provided
, that if any such equipment is sold or otherwise disposed of. and a replacement is necessary for the proper operation of the business of such Company, such Company will replace such equipment with adequate equipment;
|
(e)
|
the exchange of assets for assets in a Permitted Line of Business (including securities of an entity that owns assets) of equal or greater value;
|
(f)
|
the sale, discount, or transfer of delinquent notes or accounts receivable in the ordinary course of business for purposes of collection;
|
(g)
|
sales of accounts receivable and related assets or an interest therein of the type specified in the definition of “Qualified Receivables Transaction” made in connection with a Qualified Receivables Transaction (provided that if at any time the aggregate principal amount of all Qualified Receivables Transactions exceeds $150,000,000, the Borrower shall prepay the Loans and/or reduce the Total Commitments under and as defined in the Revolving Credit Agreement by the amount of such excess);
|
(h)
|
sales of assets from one Company to another Company;
|
(i)
|
dispositions of assets pursuant to sale and leaseback transactions so long as, after giving effect thereto and the use of proceeds thereof, the aggregate outstanding amount of Attributable Debt of the Companies shall not exceed the greater of $250,000,000 or 1% of Consolidated Tangible Assets;
|
(j)
|
other dispositions of assets (other than (i) accounts receivable and related assets or (ii) in connection with sale and leaseback transactions);
provided
, that the Companies shall, within the period of 365 days following the consummation of each such transaction, apply (or cause to be applied) an amount equal to the Net Cash Proceeds of such disposition of assets to either (x) make Eligible Reinvestments or (y) prepay the Loans and/or reduce the Total Commitments under and as defined in the Revolving Credit Agreement; and
|
(k)
|
to the extent not already permitted by another subsection of this Section 6.7, sales, transfers and other dispositions of assets (other than (i) accounts receivable and related assets or (ii) in connection with sale and leaseback transactions) that are not permitted by clauses (a) through (h) above;
provided
, that the cumulative consideration for all assets sold, transferred or otherwise disposed of in reliance on this clause (i) shall not exceed $200,000,000 or 2 ½ % of the Consolidated Total Assets of the Companies (measured as of the last day of the most recent fiscal quarter for which the relevant financial information is available), whichever is greater, in the aggregate, net of Eligible Reinvestments.
|
6.8
|
Compliance with Laws and Documents; Use of Proceeds
.
|
6.9
|
New Businesses
.
|
6.10
|
Assignment
.
|
6.11
|
Fiscal Year
.
|
6.12
|
Investment Company Status
.
|
6.13
|
Reserved
.
|
6.14
|
Financial Covenants
.
|
(d)
|
As calculated at the end of each fiscal quarter of the Borrower (but computed with respect to EBITDA for the four fiscal quarters ending on the last day of such fiscal quarter), the Borrower shall not permit the ratio of Consolidated Total Funded Debt to Consolidated EBITDA of the Companies to exceed 2.85 to 1.0.
|
(e)
|
As calculated at the end of each fiscal quarter of the Borrower (but computed for the four fiscal quarters ending on the last day of such fiscal quarter), the Borrower shall not permit the ratio of Consolidated EBITDA of the Companies to the sum of (i) consolidated interest expense of the Companies (less any non-cash amounts attributable to amortization of financing costs paid in a previous period) and (ii) dividends declared or paid by any Company (other than to another Company) on its preferred capital stock (but if such dividends are declared and paid during such four-quarter period, the amount shall not be counted twice) to be less than 1.50 to 1.0.
|
6.15
|
Priority Debt
.
|
(i)
|
At all times occurring after the Closing Date that Guarantors are required to provide Guarantee Agreements pursuant to Section 5.13 but prior to the time that the Guarantors are permitted to be released from their Guarantee Agreements pursuant to Section 5.14, the Borrower shall not at any time permit the aggregate principal amount (without duplication) of (i) all Funded Debt of the Borrower or any of its Subsidiaries secured by Liens permitted by clause (b), (c), (j), (k), (r) (to the extent such Liens are incurred pursuant to clause (r) by a Loan Party in favor of a party that is not a Loan Party), (s) (to the extent replacing a Lien permitted pursuant to a different clause of the definition of “Permitted Liens” listed in this Section 6.15(a)), (t), (w), (x), (y) or (aa) of the definition of “Permitted Liens”
plus
(ii) all Funded Debt of Subsidiaries of the Borrower, whether or not secured (in the case of both clause (i) (other than Debt of Guarantors) and clause (ii), other than any Permitted Priority Debt) to exceed 15% of Consolidated Tangible Assets determined as of the end of the most recent fiscal quarter for which Financial Statements of the Borrower and its Subsidiaries are available.
|
(j)
|
In the event that the Guarantors are permitted to be released from their Guarantee Agreements pursuant to Section 5.14, the Borrower shall not at any time thereafter permit the aggregate principal amount (without duplication) of (i) all Funded Debt of the Borrower or any of its Subsidiaries secured by Liens permitted by clause (b), (c), (j), (k), (r) (to the extent such Liens are incurred pursuant to clause (r) by a Loan Party in favor of a party that is not a Loan Party), (s), (t), (w), (x), (y) or (aa) of the definition of “Permitted Liens”
plus
(ii) all Funded Debt of Subsidiaries of the Borrower, whether or not secured, to exceed 20% of Consolidated Tangible Assets determined as of the end of the most recent fiscal quarter for which Financial Statements of the Borrower and its Subsidiaries are available;
provided
that if the Borrower fails to meet its obligations under clause (i) and clause (ii) of this Section 6.15(b), it shall have the right, by notice to the Administrative Agent, to reinstate as Guarantors all Persons then constituting Guarantors as defined herein (and thereafter Section 5.13 shall again be in effect), at which time it shall no longer have to comply with its obligations under clause (i) and clause (ii) of this Section 6.15(b).
|
SECTION 7
|
DEFAULT . |
7.1
|
Payment of Obligation
.
|
7.2
|
Covenants
.
|
(e)
|
The failure or refusal of the Borrower (and, if applicable, any other Company) to punctually and properly perform, observe, and comply with any covenant, agreement, or condition contained in Section 5.3(e)(iii) or Section 6.
|
(f)
|
The failure or refusal of the Borrower (and, if applicable, any other Company) to punctually and properly perform, observe, and comply with any covenant, agreement, or condition contained in any of the Loan Papers to which such Company is a party, other than covenants to pay the Obligation and the covenants listed in clause (a) preceding, and such failure or refusal continues for 30 days after notice from the Administrative Agent to the Borrower.
|
7.3
|
Debtor Relief
.
|
7.4
|
Attachment
.
|
7.5
|
Payment of Judgments
.
|
7.6
|
Default Under Other Agreements
.
|
7.7
|
Misrepresentation
.
|
7.8
|
ERISA
.
|
7.9
|
Validity and Enforceability of Loan Papers
.
|
7.10
|
Change in Control
. If an Event of Default occurs pursuant to Section 2.23.
|
SECTION 8
|
RIGHTS AND REMEDIES . |
8.1
|
Remedies Upon Event of Default
.
|
(g)
|
Should an Event of Default occur and be continuing under Section 7.3, the entire unpaid balance of the Obligation shall automatically become due and payable without any action of any kind whatsoever.
|
(h)
|
Should any other Event of Default occur and be continuing, subject to any agreement among the Lenders, the Administrative Agent may (and shall upon the request of the Majority Lenders), at its (or the Majority Lenders’) election, do any one or more of the following: (i) if the maturity
|
8.2
|
Waivers
.
|
8.3
|
Performance by Administrative Agent
.
|
8.4
|
Delegation of Duties and Rights
.
|
8.5
|
Lenders Not in Control
.
|
8.6
|
Waivers by Lenders
.
|
8.7
|
Cumulative Rights
.
|
8.8
|
Application of Proceeds
.
|
8.9
|
Certain Proceedings
.
|
8.10
|
Setoff
.
|
SECTION 9
|
THE ADMINISTRATIVE AGENT . |
9.1
|
Appointment
.
|
9.2
|
Delegation of Duties
.
|
9.3
|
Exculpatory Provisions
.
|
9.4
|
Reliance by Administrative Agent
.
|
9.5
|
Notice of Default
.
|
9.6
|
Non-Reliance on the Administrative Agent and Other Lenders
.
|
9.7
|
Indemnification
.
|
9.8
|
Administrative Agent in its Individual Capacity
.
|
9.9
|
Successor Administrative Agent
.
|
SECTION 10
|
MISCELLANEOUS . |
10.1
|
Reserved
.
|
10.2
|
Money and Interest
.
|
10.3
|
Number and Gender of Words
.
|
10.4
|
Headings
.
|
10.5
|
Exhibits
.
|
10.6
|
Notices
.
|
with a copy to:
|
Qwest Corporation
|
Administrative Agent:
|
CoBank, ACB
|
with a copy to:
|
CoBank, ACB
|
10.7
|
Exceptions to Covenants
.
|
10.8
|
Survival
.
|
10.9
|
Governing Law
.
|
10.10
|
Submission to Jurisdiction; Waivers
.
|
(f)
|
submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Papers to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;
|
(g)
|
consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
|
(h)
|
agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower, as the case may be at its address set forth in Section 10.6 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
|
(i)
|
agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
|
(j)
|
waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
|
10.11
|
WAIVERS OF JURY TRIAL
.
|
10.12
|
Severability
.
|
10.13
|
Integration
.
|
10.14
|
Amendments, Etc.
|
10.15
|
Waivers
.
|
10.16
|
Governmental Regulation
.
|
10.17
|
Multiple Counterparts
.
|
10.18
|
Successors and Assigns; Participations; Assignments
.
|
(a)
|
The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.
|
(b)
|
(i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an “
Assignee
”) all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
|
(A)
|
the Borrower;
provided
, that no consent of the Borrower shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default has occurred and is continuing, any other Person; and
provided
,
further
, that the Borrower shall be deemed to have consented to any such assignment unless the Borrower shall object thereto by written notice to the Administrative Agent within ten days after having received notice thereof; and
|
(B)
|
the Administrative Agent;
|
(ii)
|
Assignments shall be subject to the following additional conditions:
|
(B)
|
(1) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 and (2) the assigning Lender shall have paid in full any amounts owing by it to the Administrative Agent;
|
(C)
|
the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire;
|
(D)
|
unless otherwise agreed by the Borrower, the Assignee shall either (1) be a “U.S. Person” as defined in Section 7701(a)(30) of the Code or (2) have delivered the documents required by Section 2.19(d);
|
(E)
|
in the case of an assignment to a CLO (as defined below), unless such assignment (or an assignment to a CLO managed by the same manager or an Affiliate of such manager) shall have been approved by the Borrower (the Borrower agreeing that such approval, if requested, will not be unreasonably withheld or delayed) the assigning. Lender shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Papers,
provided
, that the Assignment and Assumption between such Lender and such CLO may provide that such Lender will not, without the consent of such CLO, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.14 and (2) directly affects such CLO; and
|
(F)
|
no assignment shall be made to (i) a natural person, (2) the Borrower or (3) any of the Borrower’s Affiliates, Subsidiaries or Unrestricted Subsidiaries.
|
(iii)
|
Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and. in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.10, 2.12, 2.19 and 10.22). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.18 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
|
(iv)
|
The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “
Register
”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
|
(v)
|
Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
|
(c)
|
(i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “
Participant
”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Loans owing to it;
provided
, that (A) such Lender’s obligations under this Agreement shall remain unchanged. (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement;
provided
, that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.14 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.10, 2.12 and 2.19 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.10 as though it were a Lender;
provided
, that such Participant shall be subject to Section 2.14 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, solely for tax purposes, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Papers (the “
Participant Register
”);
provided
, that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Loans or its other obligations under any Loan Paper) except to the extent that such disclosure is necessary to establish that such Loan or other obligation is in registered form under Section 5f. 103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
|
(d)
|
Notwithstanding anything in Section 10.18(c) to the contrary, any Farm Credit Lender that (i) has purchased a participation in the minimum aggregate amount of $5,000,000 on or after the Closing Date, (ii) is, by written notice to the Borrower and the Administrative Agent (“
Voting Participant Notification
”), designated by the selling Lender (including any existing Voting Participant) as being entitled to be accorded the rights of a Voting Participant hereunder and (iii) receives the prior written consent of the Borrower and the Administrative Agent, which consent, in each case, shall not be unreasonably withheld, delayed or conditioned, to become a Voting Participant (such consent to be required only to the extent and under the circumstances it would be required if such Voting Participant were to become a Lender pursuant to an assignment in accordance with Section 10.18(b)) (any Farm Credit Lender so designated and consented to being called a “
Voting Participant
”), shall be entitled to vote for so long as such Farm Credit Lender owns such participation and notwithstanding any sub-participation by such Farm Credit Lender (and the voting rights of the selling Lender (including any existing Voting Participant) shall be correspondingly reduced), on a dollar for dollar basis, as if such participant were a Lender, on any matter requiring or allowing a Lender to provide or withhold its consent, or to otherwise vote on any proposed action. To be effective, each Voting Participant Notification shall, with respect to any Voting Participant, (x) state the full name, as well as all contact information required of an assignee in an Assignment and Assumption and (y) state the dollar amount of the participation purchased in any or all of its Loans. Notwithstanding the foregoing, each Farm Credit Lender designated as a Voting Participant on Schedule 10.18 hereto shall be deemed a Voting Participant without delivery of a Voting Participant Notification and without the prior written consent of the Borrower or the Administrative Agent. The selling Lender (including any existing Voting Participant) and the purchasing Voting Participant shall notify the Administrative Agent and the Borrower within 3 Business Days’ of any termination of, or reduction or increase in the amount of, such participation. The Borrower and the Administrative Agent shall be entitled to conclusively rely on information contained in notices delivered pursuant to this paragraph or on Schedule 10.18. The voting rights hereunder are solely for the benefit of the Voting Participant and shall not inure to any assignee or participant of the Voting Participant that is not a Farm Credit Lender.
|
(e)
|
Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest;
provided
, that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
|
(f)
|
The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.
|
10.19
|
Confidentiality
.
|
(a)
|
No Lender will use confidential information obtained from the Borrower by virtue of the transactions contemplated hereby or its other relationships with the Borrower in connection with the performance by such Lender of services for other companies that are not affiliates of such Lender, and no Lender will furnish any such information to such other companies. The Borrower acknowledges that no Lender has any obligation to use in connection with the transactions contemplated hereby, or to furnish to the Borrower, confidential information obtained from other companies.
|
(b)
|
Each Lender agrees to keep confidential, and not to publish, disclose or otherwise divulge to anyone (and to cause their respective officers, directors, employees, agents and representatives to keep confidential, and not to publish, disclose or otherwise divulge to anyone) all information with respect to the Companies, including all financial information and projections or all other information (the “
Confidential Information
”) except that the Lenders shall be permitted to disclose Confidential Information: (i) to the Administrative Agent, any other Lender or any affiliate thereof, (ii) to their respective officers, directors, employees, agents, advisors, attorneys, accountants and representatives on a “need-to-know” basis in connection with the respective roles of the Lenders described herein,
provided
, that the Lenders implement reasonable precautions to prevent disclosure by any such personnel, (iii) to the extent required by applicable laws and regulations or requested or required in connection with any litigation or other legal process,
provided
, that the Lenders will use reasonable efforts to provide the Borrower with a reasonable opportunity to challenge the disclosure and request confidentiality protection for any Confidential Information that is required to be disclosed, (iv) subject to an agreement to comply with the provisions of this Section, to (A) actual or prospective transferees or (B) any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (v) to the extent requested by any regulatory authority or self-regulatory body with jurisdiction or oversight over any Lender or any Affiliate of any Lender, (vi) to the extent such Confidential Information (A) becomes publicly available other than as a result of a breach of this agreement known to the disclosing Lender, (B) becomes available to such Lender on a non-confidential basis from a source other than the Borrower or (C) was available to such Lender on a non-confidential basis prior to its disclosure by the Borrower, (vii) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, or (viii) to the extent the Borrower shall have consented to such disclosure. Notwithstanding anything to the contrary contained above, the Lenders shall be entitled to use the Confidential Information in exercising remedies under this Agreement or any other Loan Paper.
|
10.20
|
Patriot Act
.
|
10.21
|
Conflicts and Ambiguities
.
|
10.22
|
GENERAL INDEMNIFICATION.
|
Lender
|
Commitment
|
CoBank, ACB
|
$100,000,000
|
Voting Participant
|
|
Commitment
|
|
Farm Credit Bank of Texas
|
|
25,000,000.00
|
|
4801 Plaza on the Lake Drive
|
|
|
|
Austin, TX 78746
|
|
|
|
Nicholas King
|
|
|
|
Phone: (512) 465-0294
|
|
|
|
nicholas.king@farmcreditbank.com
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|||||||||||||||
|
|
Years Ended December 31,
|
|
Nine Months Ended December 31,
|
|
|
Three Months
Ended
March 31,
|
|
Year Ended December 31,
|
|||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
|
2011
|
|
2010
|
|||||||
|
|
(Dollars in millions)
|
||||||||||||||||||
Income before income tax expense
|
|
$
|
1,609
|
|
|
1,566
|
|
|
1,391
|
|
|
892
|
|
|
|
490
|
|
|
1,873
|
|
Add: estimated fixed charges
|
|
546
|
|
|
557
|
|
|
513
|
|
|
342
|
|
|
|
171
|
|
|
689
|
|
|
Add: estimated amortization of capitalized interest
|
|
8
|
|
|
8
|
|
|
9
|
|
|
7
|
|
|
|
2
|
|
|
10
|
|
|
Less: interest capitalized
|
|
(17
|
)
|
|
(17
|
)
|
|
(18
|
)
|
|
(5
|
)
|
|
|
(3
|
)
|
|
(12
|
)
|
|
Total earnings available for fixed charges
|
|
$
|
2,146
|
|
|
2,114
|
|
|
1,896
|
|
|
1,236
|
|
|
|
660
|
|
|
2,560
|
|
Estimate of interest factor on rentals
|
|
$
|
25
|
|
|
26
|
|
|
28
|
|
|
38
|
|
|
|
18
|
|
|
62
|
|
Interest expense, including amortization of premiums, discounts and debt issuance costs
|
|
504
|
|
|
514
|
|
|
467
|
|
|
299
|
|
|
|
150
|
|
|
615
|
|
|
Interest capitalized
|
|
17
|
|
|
17
|
|
|
18
|
|
|
5
|
|
|
|
3
|
|
|
12
|
|
|
Total fixed charges
|
|
$
|
546
|
|
|
557
|
|
|
513
|
|
|
342
|
|
|
|
171
|
|
|
689
|
|
Ratio of earnings to fixed charges
|
|
3.9
|
|
|
3.8
|
|
|
3.7
|
|
|
3.6
|
|
|
|
3.9
|
|
|
3.7
|
|
1.
|
I have reviewed this annual report on Form 10-K of Qwest Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors:
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: February 27, 2015
|
/s/ Glen F. Post, III
|
|
Glen F. Post, III
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this annual report on Form 10-K of Qwest Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors:
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: February 27, 2015
|
/s/ R. Stewart Ewing, Jr.
|
|
R. Stewart Ewing, Jr.
|
|
Executive Vice President, Chief
Financial Officer and Assistant
Secretary
|
Dated: February 27, 2015
|
By:
|
/s/ Glen F. Post, III
|
|
|
Glen F. Post, III
|
|
|
Chief Executive Officer and President
|
|
|
|
Dated: February 27, 2015
|
By:
|
/s/ R. Stewart Ewing, Jr.
|
|
|
R. Stewart Ewing, Jr.
|
|
|
Executive Vice President and Chief Financial Officer
|