Statement Of Income Alternative
Statement Of Income Alternative (USD $) | |||
In Millions, except Share data in Thousands | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Operating revenue | $12,311 | $13,475 | $13,778 |
Operating expenses: | |||
Cost of sales (exclusive of depreciation and amortization) | 3,718 | 4,585 | 4,703 |
Selling | 1,961 | 2,208 | 2,162 |
General, administrative and other operating | 2,346 | 2,231 | 2,698 |
Depreciation and amortization | 2,311 | 2,354 | 2,459 |
Total operating expenses | 10,336 | 11,378 | 12,022 |
Operating income | 1,975 | 2,097 | 1,756 |
Other expense (income)-net: | |||
Interest expense on long-term borrowings and capital leases-net | 1,089 | 1,069 | 1,139 |
Loss on early retirement of debt-net | 0 | 0 | 26 |
Other-net | (17) | (23) | (29) |
Total other expense (income)-net | 1,072 | 1,046 | 1,136 |
Income before income taxes | 903 | 1,051 | 620 |
Income tax (expense) benefit | (241) | (399) | 2,270 |
Net income | $662 | $652 | $2,890 |
Earnings per common share: | |||
Basic | 0.38 | 0.38 | 1.57 |
Diluted | 0.38 | 0.37 | 1.5 |
Weighted average common shares outstanding: | |||
Basic | 1,709,346 | 1,728,731 | 1,829,244 |
Diluted | 1,713,498 | 1,730,206 | 1,915,167 |
Statement Of Financial Position
Statement Of Financial Position Classified (USD $) | ||
In Millions | Dec. 31, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $2,406 | $565 |
Accounts receivable-net of allowance of $100 and $129, respectively | 1,302 | 1,465 |
Deferred income taxes-net | 538 | 572 |
Prepaid expenses and other | 368 | 368 |
Total current assets | 4,614 | 2,970 |
Property, plant and equipment-net | 12,299 | 13,045 |
Capitalized software-net | 911 | 875 |
Deferred income taxes-net | 1,971 | 2,168 |
Other | 585 | 1,083 |
Total assets | 20,380 | 20,141 |
Current liabilities: | ||
Current portion of long-term borrowings | 2,196 | 820 |
Accounts payable | 765 | 820 |
Accrued expenses and other | 1,580 | 1,641 |
Deferred revenue and advance billings | 556 | 572 |
Total current liabilities | 5,097 | 3,853 |
Long-term borrowings-net of unamortized debt discount and other of $266 and $270, respectively | 12,004 | 12,735 |
Post-retirement and other post-employment benefits obligations-net | 2,479 | 2,457 |
Pension obligations-net | 817 | 775 |
Deferred revenue | 486 | 519 |
Other | 675 | 1,188 |
Total liabilities | 21,558 | 21,527 |
Stockholders' deficit: | ||
Preferred stock-$1.00 par value, 200 million shares authorized; none issued or outstanding | 0 | 0 |
Common stock-$0.01 par value, 5 billion shares authorized; 1,738,330 and 1,713,520 shares issued, respectively | 17 | 17 |
Additional paid-in capital | 42,269 | 42,167 |
Treasury stock-9,084 and 6,767 shares, respectively (including 44 shares and 62 shares, respectively, held in rabbi trust) | (22) | (20) |
Accumulated deficit | (42,953) | (43,063) |
Accumulated other comprehensive loss | (489) | (487) |
Total stockholders' deficit | (1,178) | (1,386) |
Total liabilities and stockholders' deficit | $20,380 | $20,141 |
1_Statement Of Financial Positi
Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
Dec. 31, 2009
| Dec. 31, 2008
| |
Accounts receivable, allowance | $100,000,000 | $129,000,000 |
Long-term borrowings, unamortized debt discount and other | 266,000,000 | 270,000,000 |
Preferred stock, par value | $1 | $1 |
Preferred stock, shares authorized | 200,000,000 | 200,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 5,000,000,000 | 5,000,000,000 |
Common stock, shares issued | 1,738,330,000 | 1,713,520,000 |
Treasury stock, shares | 9,084,000 | 6,767,000 |
Treasury stock, shares held in rabbi trust | $44,000 | $62,000 |
Statement Of Cash Flows Indirec
Statement Of Cash Flows Indirect (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Operating activities: | |||
Net income | $662 | $652 | $2,890 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 2,311 | 2,354 | 2,459 |
Deferred income taxes | 229 | 450 | (2,299) |
Provision for bad debt-net | 130 | 162 | 173 |
Loss on early retirement of debt-net | 0 | 0 | 26 |
Other non-cash charges-net | 136 | 173 | 104 |
Changes in operating assets and liabilities: | |||
Accounts receivable | 35 | (65) | (142) |
Prepaid expenses and other current assets | (5) | 42 | 11 |
Accounts payable, accrued expenses and other current liabilities | (157) | (530) | 23 |
Deferred revenue and advance billings | (58) | (48) | 12 |
Other non-current assets and liabilities | 24 | (259) | (231) |
Cash provided by operating activities | 3,307 | 2,931 | 3,026 |
Investing activities: | |||
Expenditures for property, plant and equipment and capitalized software | (1,409) | (1,777) | (1,669) |
Proceeds from sale of property and equipment | 4 | 15 | 29 |
Proceeds from sale of investment securities | 18 | 65 | 203 |
Purchases of investment securities | 0 | 0 | (64) |
Reclassification of cash equivalent to investment (Note 4) | 0 | 0 | (100) |
Other | (19) | 4 | 0 |
Cash used for investing activities | (1,406) | (1,693) | (1,601) |
Financing activities: | |||
Proceeds from long-term borrowings | 1,270 | 0 | 493 |
Repayments of long-term borrowings, including current maturities | (827) | (631) | (1,176) |
Proceeds from issuances of common stock | 57 | 42 | 113 |
Dividends paid | (551) | (556) | 0 |
Repurchases of common stock | 0 | (432) | (1,170) |
Early retirement of debt costs | 0 | 0 | (15) |
Other | (9) | 2 | (9) |
Cash used for financing activities | (60) | (1,575) | (1,764) |
Cash and cash equivalents: | |||
Increase (decrease) in cash and cash equivalents | 1,841 | (337) | (339) |
Beginning balance | 565 | 902 | 1,241 |
Ending balance | $2,406 | $565 | $902 |
Statement Of Shareholders Equit
Statement Of Shareholders Equity And Other Comprehensive Income (USD $) | |||||||||||||||||||
In Millions, except Share data in Thousands | Common Stock and Additional Paid-in Capital
| Treasury Stock at cost
| Accumulated Deficit
| AOCI(L)
| Total
| ||||||||||||||
Beginning Balance at Dec. 31, 2006 | $43,641 | ($24) | ($45,952) | $1,083 | [1] | ($1,252) | |||||||||||||
Beginning Balance (in shares) at Dec. 31, 2006 | 1,900,649 | ||||||||||||||||||
Net income | 2,890 | 2,890 | |||||||||||||||||
Other comprehensive income/loss -net of taxes: | |||||||||||||||||||
Pension-net of deferred taxes of $23 in 2009, $950 in 2008 and $150 in 2007 | 237 | [1] | 237 | ||||||||||||||||
Other post-retirement benefit obligations, net of deferred taxes of $33 in 2009, $142 in 2008 and $37 in 2007 | (15) | [1] | (15) | ||||||||||||||||
Unrealized loss on investments, net of deferred taxes of $1 | (2) | [1] | (2) | ||||||||||||||||
Dividends declared | (142) | (142) | |||||||||||||||||
Impact upon adoption of FIN 48 | 48 | 48 | |||||||||||||||||
Common stock repurchases (in shares) | (136,974) | ||||||||||||||||||
Common stock repurchases | (1,172) | (1,172) | |||||||||||||||||
Common stock issuances: | |||||||||||||||||||
Stock options exercised (in shares) | 18,904 | ||||||||||||||||||
Stock options exercised | 84 | 84 | |||||||||||||||||
Employee stock purchase plan (in shares) | 1,707 | ||||||||||||||||||
Employee stock purchase plan | 12 | 12 | |||||||||||||||||
401(k) plan trustee discretionary purchases (in shares) | 2,058 | ||||||||||||||||||
401(k) plan trustee discretionary purchases | 17 | 17 | |||||||||||||||||
Other (in shares) | 943 | ||||||||||||||||||
Other | (56) | 6 | (50) | ||||||||||||||||
Ending Balance (in shares) at Dec. 31, 2007 | 1,787,287 | ||||||||||||||||||
Ending Balance at Dec. 31, 2007 | 42,526 | (18) | (43,156) | 1,303 | [1] | 655 | |||||||||||||
Net income | 652 | 652 | |||||||||||||||||
Other comprehensive income/loss -net of taxes: | |||||||||||||||||||
Pension-net of deferred taxes of $23 in 2009, $950 in 2008 and $150 in 2007 | (1,501) | [1] | (1,501) | ||||||||||||||||
Other post-retirement benefit obligations, net of deferred taxes of $33 in 2009, $142 in 2008 and $37 in 2007 | (267) | [1] | (267) | ||||||||||||||||
Unrealized gain/loss on derivative instruments, net of deferred taxes of $4 in 2009 and $3 in 2008 | (6) | [1] | (6) | ||||||||||||||||
Unrealized gain/loss on auction rate securities and other, net of deferred taxes of $1 in 2009 and $10 in 2008 | (16) | [1] | (16) | ||||||||||||||||
Dividends declared | (550) | (550) | |||||||||||||||||
Common stock repurchases (in shares) | (95,386) | ||||||||||||||||||
Common stock repurchases | (430) | (430) | |||||||||||||||||
Common stock issuances: | |||||||||||||||||||
Stock options exercised (in shares) | 703 | ||||||||||||||||||
Stock options exercised | 3 | 3 | |||||||||||||||||
Employee stock purchase plan (in shares) | 3,409 | ||||||||||||||||||
Employee stock purchase plan | 12 | 12 | |||||||||||||||||
401(k) plan trustee discretionary purchases (in shares) | 7,527 | ||||||||||||||||||
401(k) plan trustee discretionary purchases | 27 | 27 | |||||||||||||||||
Other (in shares) | 3,213 | ||||||||||||||||||
Other | 46 | (2) | (9) | 35 | |||||||||||||||
Ending Balance (in shares) at Dec. 31, 2008 | 1,706,753 | ||||||||||||||||||
Ending Balance at Dec. 31, 2008 | 42,184 | (20) | (43,063) | (487) | [1] | (1,386) | |||||||||||||
Net income | 662 | 662 | |||||||||||||||||
Other comprehensive income/loss -net of taxes: | |||||||||||||||||||
Pension-net of deferred taxes of $23 in 2009, $950 in 2008 and $150 in 2007 | 36 | [1] | 36 | ||||||||||||||||
Other post-retirement benefit obligations, net of deferred taxes of $33 in 2009, $142 in 2008 and $37 in 2007 | (47) | [1] | (47) | ||||||||||||||||
Unrealized gain/loss on derivative instruments, net of deferred taxes of $4 in 2009 and $3 in 2008 | 7 | [1] | 7 | ||||||||||||||||
Unrealized gain/loss on auction rate securities and other, net of deferred taxes of $1 in 2009 and $10 in 2008 | 2 | [1] | 2 | ||||||||||||||||
Dividends declared | (552) | (552) | |||||||||||||||||
Common stock issuances: | |||||||||||||||||||
Stock options exercised (in shares) | 1,043 | ||||||||||||||||||
Stock options exercised | 4 | 4 | |||||||||||||||||
Employee stock purchase plan (in shares) | 3,490 | ||||||||||||||||||
Employee stock purchase plan | 11 | 11 | |||||||||||||||||
401(k) plan trustee discretionary purchases (in shares) | 11,607 | ||||||||||||||||||
401(k) plan trustee discretionary purchases | 42 | 42 | |||||||||||||||||
Other (in shares) | 6,353 | ||||||||||||||||||
Other | 45 | (2) | 43 | ||||||||||||||||
Ending Balance (in shares) at Dec. 31, 2009 | 1,729,246 | ||||||||||||||||||
Ending Balance at Dec. 31, 2009 | $42,286 | ($22) | ($42,953) | ($489) | [1] | ($1,178) | |||||||||||||
[1]Accumulated Other Comprehensive Income (Loss) |
2_Statement Of Shareholders Equ
Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $) | |||
In Millions | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Pension, deferred taxes | $23 | $950 | $150 |
Other post-retirement benefit obligations, deferred taxes | 33 | 142 | 37 |
Unrealized gain/loss on derivative instruments, deferred taxes | 4 | 3 | |
Unrealized loss on investments, deferred taxes | 1 | ||
Unrealized gain/loss on auction rate securities and other, deferred taxes | $1 | $10 |
Business and Background
Business and Background | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Business and Background | Note1: Business and Background We offer data, Internet, video and voice services nationwide and globally. We generate the majority of our revenue from services provided within the 14-state region of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming. We refer to this region as our local service area. In April2008, we signed a five-year agreement with Verizon Wireless to market and sell its wireless services under its brand name beginning in the third quarter of 2008. We recognize revenue from services offered under this Verizon Wireless arrangement on a net basis, whereas we recognized revenue from services provided under the Qwest-branded wireless services arrangement that we had with a different provider on a gross basis. This results in lower revenue and lower expenses under our Verizon Wireless arrangement when compared to the Qwest-branded wireless services arrangement. We record revenue from our Verizon Wireless arrangement in strategic services revenue and revenue from the Qwest-branded wireless services arrangement as a separate line item. The Qwest-branded wireless services arrangement ended on October31, 2009. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Summary of Significant Accounting Policies | Note2: Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries over which we exercise control. All intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. We have reclassified certain prior year cash flow amounts to conform to the current year presentation. We have evaluated subsequent events through February16, 2010, the date these consolidated financial statements were issued. Use of Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions we made when accounting for items and matters such as, but not limited to, investments, long-term contracts, customer retention patterns, allowance for doubtful accounts, depreciation, amortization, asset valuations, internal labor capitalization rates, recoverability of assets (including deferred tax assets), impairment assessments, pension, post-retirement and other post-employment benefits, taxes, reserves and other provisions and contingencies are reasonable, based on information available at the time they were made. These estimates, judgments and assumptions can affect the reported amounts of assets, liabilities and components of equity as of the dates of the consolidated balance sheets, as well as the reported amounts of revenue, expenses and components of cash flows during the periods presented in our consolidated statements of operations and our consolidated statements of cash flows. We also make estimates in our assessments of potential losses in relation to threatened or pending tax and legal matters. See Note12Income Taxes and Note18Commitments and Contingencies for additional information. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss. If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable. For matters related to income taxes, if the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Interest is recognized on the amount of unrecognized benefit from uncertain tax positions. For all of these and other matters, actual results could differ from our estimates. Revenue Recognition We recognize revenue for services when the related services are provided. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include activation fees and installation |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Fair Value of Financial Instruments | Note 3: Fair Value of Financial Instruments Our financial instruments consist of cash and cash equivalents, auction rate securities, accounts receivable, accounts payable, interest rate hedges and long-term notes including the current portion. The carrying values of cash and cash equivalents, auction rate securities, accounts receivable, accounts payable and interest rate hedges approximate their fair values. The carrying value of our long-term notes including the current portion reflects original cost net of unamortized discounts and other and was $14.034billion as of December31, 2009. For additional information, see Note8Borrowings. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB. The table below presents the fair values for auction rate securities, an investment fund, interest rate hedges and long-term notes including the current portion, as well as the input levels used to determine these fair values as of December31, 2009 and 2008: Level FairvalueasofDecember31, 2009 2008 (Dollars in millions) Assets: Auction rate securities 3 $ 95 $ 90 Investment fund 3 20 Fair value hedges 3 2 Total assets $ 97 $ 110 Liabilities: Long-term notes, including the current portion 12 $ 14,245 $ 11,043 Cash flow hedges 3 3 8 Total liabilities $ 14,248 $ 11,051 The three levels of the fair value hierarchy as defined by the FASB are as follows: InputLevel Description of Input Level 1 Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. Level 2 Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. We determined the fair value of our auction rate securities using a discounted cash flow model that takes into consideration the interest rate of the securities, the probability that we will be able to sell the securities in an auction or that the securities will be redeemed early, the prob |
Investments
Investments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Investments | Note4: Investments As of December31, 2009 and 2008, our investments included auction rate securities of $95million and $90million, respectively, which are classified as non-current, available-for-sale investments and are included in other non-current assets at their estimated fair value on our consolidated balance sheets. Auction rate securities are generally long-term debt instruments that provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals, generally every 28days. This mechanism generally allows existing investors to rollover their holdings and continue to own their respective securities or liquidate their holdings by selling their securities at par value. Prior to August 2007, we invested in these securities for short periods of time as part of our cash management program. However, the uncertainties in the credit markets have prevented us and other investors from liquidating holdings of these securities in auctions since the third quarter of 2007. Because we are uncertain as to when the liquidity issues relating to these investments will improve, we continued to classify these securities as non-current as of December31, 2009. These securities: are structured obligations of special purpose reinsurance entities associated with life insurance companies and are referred to as Triple X securities; currently pay interest every 28 days at one-month LIBOR plus 200 basis points; are rated A; are insured against loss of principal and interest by two bond insurers, one of which had a credit rating of BB+ and the other of which was not rated and in the fourth quarter of 2009 was prohibited by its regulator from making any claim payments; are collateralized by the issuers; and mature between 2033 and 2036. We recorded approximately $2million of unrealized gains, net of deferred income taxes, and $15million of unrealized losses, net of deferred income taxes on these auction rate securities for the years ended December31, 2009 and 2008, respectively. The cumulative unrealized losses, net of deferred income taxes, related to these securities was $15million and $17million as of December31, 2009 and 2008, respectively. These unrealized losses were recorded in accumulated other comprehensive loss on our consolidated balance sheets. The cost basis of these securities was $120million and $117million as of December31, 2009 and December31, 2008, respectively. We consider the decline in fair value to be a temporary impairment because we believe it is more likely than not that we will ultimately recover the entire $120million cost basis, in part because the securities are rated investment grade, the securities are collateralized and the issuers continue to make required interest payments. At some point in the future, we may determine that the decline in fair value is other than temporary if, among other factors: the issuers cease making required interest payments; we believe it is more likely than not that we will be required to sell these securities before their values recover; or |
Accounts Receivable
Accounts Receivable | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Accounts Receivable | Note5: Accounts Receivable The following table presents details of our accounts receivable balances as of December31, 2009 and 2008: December31, 2009 2008 (Dollars inmillions) Accounts receivablenet: Trade receivables $ 1,009 $ 1,205 Earned and unbilled receivables 259 276 Purchased and other receivables 134 113 Total accounts receivable 1,402 1,594 Less: allowance for doubtful accounts (100 ) (129 ) Accounts receivablenet $ 1,302 $ 1,465 We are exposed to concentrations of credit risk from consumer and business customers within our local service area, business customers outside of our local service area and from other telecommunications service providers. We generally do not require collateral to secure our receivable balances. We have agreements with other telecommunications service providers whereby we agree to bill and collect on their behalf for services rendered by those providers to our customers within our local service area. We purchase accounts receivable from other telecommunications service providers primarily on a recourse basis and include these amounts in our accounts receivable balance. We have not experienced any significant loss associated with these purchased receivables. The following table presents details of our allowance for doubtful accounts for the years ended December31, 2009, 2008 and 2007: Balanceat beginning of period Chargedto expense Deductions Balanceat end of period (Dollars in millions) Allowance for doubtful accounts: 2009 $ 129 $ 130 $ 159 $ 100 2008 145 162 178 129 2007 146 173 174 145 |
Property, Plant and Equipment
Property, Plant and Equipment | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Property, Plant and Equipment | Note6: Property, Plant and Equipment The components of our property, plant and equipment as of December31, 2009 and 2008 are as follows: Depreciable Lives December31, 2009 2008 (Dollars inmillions) Property, plant and equipmentnet: Land N/A $ 106 $ 101 Buildings 15-30years 3,382 3,412 Communications equipment 5-10years 19,954 20,047 Other network equipment 8-45years 21,267 20,927 General purpose computers and other 5-11years 1,773 2,104 Construction in progress N/A 118 179 Total property, plant and equipment 46,600 46,770 Less: accumulated depreciation (34,301 ) (33,725 ) Property, plant and equipmentnet $ 12,299 $ 13,045 We recorded depreciation expense of $2.071 billion, $2.120 billion and $2.231 billion for the years ended December31, 2009, 2008 and 2007, respectively. Effective January1, 2009, we changed our estimates of the economic lives of certain copper cable and telecommunications equipment assets. These changes resulted in additional depreciation expense of approximately $38million for the year ended December31, 2009 as compared to the year ended December31, 2008. Lower capital expenditures and the changing mix of our investment in property, plant and equipment since 2002 have decreased our depreciation expense. We made a decision in June 2008 to discontinue certain product and service offerings and as a result we changed our estimates of the economic lives of certain assets used in providing those products and services, which resulted in the acceleration of depreciation of those assets beginning in the third quarter of 2008. As a result, we recorded $19million of additional depreciation for the year ended December31, 2009 as compared to the year ended December31, 2008. These assets were fully depreciated as of December31, 2009. The additional depreciation for both of the changes described above, net of deferred taxes, reduced net income by approximately $35million, or approximately $0.02 per basic and diluted common share for the year ended December31, 2009. During 2008, we recognized expenses of approximately $6million, which reduced net income by approximately $4million, or less than $0.01 per basic and diluted common share, for impairment of network assets associated with our transition to selling Verizon Wireless services from selling Qwest-branded wireless services. Asset Retirement Obligations As of December31, 2009, our asset retirement obligations balance was primarily related to estimated future costs of removing circuit equipment from leased properties and estimated future costs of properly disposing of asbestos and other hazardous materials upon remodeling or demolishing buildings. Asset retirement obligations are included in other long-term liabilities on our consolidated balance sheets. The following table provides asset retirement obligation activity for the years ended December31, 2009, 2008 and 2007: Dece |
Capitalized Software
Capitalized Software | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Capitalized Software | Note7: Capitalized Software Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line group method over its estimated useful life. As of December31, 2009 and 2008, our capitalized software had carrying costs of $2.550billion and $2.372billion, respectively, and accumulated amortization was $1.639billion and $1.497billion, respectively. We recorded amortization expense of $240 million, $234million and $228million for the years ended December31, 2009, 2008 and 2007, respectively, for capitalized software based on a life range of four to seven years. During 2008, we recognized expenses of approximately $16million, which reduced net income by approximately $10million, or less than $0.01 per basic and diluted common share, for impairment of capitalized software associated with our transition to selling Verizon Wireless services from selling Qwest-branded wireless services. In 2008, as a result of decisions to discontinue certain product offerings and exiting our expiring wireless services arrangement, we changed our estimates of the remaining economic lives of certain capitalized software, which accelerated the amortization of those assets. This change resulted in additional amortization expense of $20million for the year ended December31, 2008 as compared to the year ended December31, 2008. The additional amortization, net of deferred taxes, reduced net income by approximately $12million, or less than $0.01per basic and diluted common share, for the year ended December31, 2008. The weighted average remaining life of our capitalized software was 3.5 years as of December31, 2009. The estimated future amortization expense for capitalized software is as follows: Estimated Amortization (Dollars in millions) Estimated future amortization expense: 2010 $ 241 2011 200 2012 161 2013 130 2014 101 2015 and thereafter 78 Total estimated future amortization expense $ 911 |
Borrowings
Borrowings | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Borrowings | Note8: Borrowings Current Portion of Long-Term Borrowings As of December31, 2009 and 2008, the current portion of our long-term borrowings consisted of: December31, 2009 2008 (Dollarsinmillions) Current portion of long-term borrowings: Long-term notes $ 2,168 $ 792 Long-term capital lease and other obligations 28 28 Total current portion of long-term borrowings $ 2,196 $ 820 Long-Term Borrowings As of December31, 2009 and 2008, our long-term borrowings consisted of the following (for all notes with unamortized discount or premium, the face amount of the notes and the unamortized discount or premium are presented separately): December31, 2009 2008 (Dollars inmillions) Long-term borrowings: Qwest Communications International Inc. (QCII): Senior notes with various rates ranging from 3.50% to 8.0% including LIBOR+3.50% and maturities from 2010 to 2015* $ 3,640 $ 3,320 Unamortized discount (102 ) (155 ) Less: current portion* (1,265 ) (230 ) Total QCII 2,273 2,935 Qwest Capital Funding (QCF): Notes with various rates ranging from 6.50% to 7.90% and maturities from 2010 to 2031 2,185 2,747 Unamortized discount (2 ) (2 ) Less: current portion (403 ) (562 ) Total QCF 1,780 2,183 Qwest Corporation (QC): Notes and term loan with various rates ranging from 3.504% to 8.875% including LIBOR + 3.25% and maturities from 2010 to 2043 8,468 7,657 Unamortized discount (165 ) (113 ) Fair value hedge adjustment 10 10 Capital lease and other obligations 73 34 Less: current portion (515 ) (19 ) Total QC 7,871 7,569 Qwest Communications Company, LLC (QCC): Capital lease and other obligations 100 67 Unamortized discount (7 ) (10 ) Less: current portion (13 ) (9 ) Total QCC 80 48 Total long-term borrowings $ 12,004 $ 12,735 * Our 3.50% Convertible Senior Notes have a stated maturity of 2025, but they have contractual provisions that allow us to call the notes or their holders to put them to us at earlier dates, the first of which is November15, 2010. For purposes of this table, we treat them as maturing at the earliest of these dates. Our long-term borrowings had the following interest rates and contractual maturities as of December31, 2009: Contractual Maturities 2010 2011 2012 2013 2014 2015 and Thereafter Total (Dollars in millions) Interest rates: Up to 5% $ 1,265 * $ $ $ 750 $ $ $ 2,015 Above 5% to 6% Above 6% to 7% 500 |
Derivative Financial Instrument
Derivative Financial Instruments | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Derivative Financial Instruments | Note9: Derivative Financial Instruments Interest Rate Hedges During 2009 and 2008, we entered into the interest rate hedges described below as part of our short-term and long-term debt strategies. One objective of our short-term debt strategy is to take advantage of favorable interest rates by swapping floating interest rate debt to fixed interest rate debt using cash flow hedges. One objective of our long-term debt strategy is to achieve a more balanced ratio of fixed to floating interest rate debt by swapping a portion of our fixed interest rate debt to floating interest rate debt through fair value hedges. This decreases our exposure to changes in the fair value of our fixed interest rate debt due to changes in interest rates. We evaluate counterparty credit risk before entering into any hedge transaction. Thereafter, we continue to closely monitor the financial market and the risk that our counterparties will default on their obligations to us. We are prepared to unwind these hedge transactions if our counterparties credit risk becomes unacceptable to us. In August 2009, QC entered into interest rate hedges on $400million of the outstanding $1.500billion aggregate principal amount of its 8.875% Notes due in 2012. The hedges have the economic effect of converting QC fixed interest rate debt to a floating interest rate of one-month LIBOR plus 7.0575% until maturity. QC designated the interest rate swaps as fair value hedges. The terms of these hedges match the terms of the underlying debt such that we assume no ineffectiveness of the fair value hedging relationship and recognize the fair value of the hedge with a corresponding adjustment to the carrying value of the debt. In March 2008, QC entered into interest rate hedges on $500million of the outstanding $750million aggregate principal amount of its Floating Rate Notes due 2013. The notes bear interest at a rate per year equal to LIBOR plus 3.25%. These hedges have the economic effect of converting QCs floating interest rate to fixed interest rates of approximately 6.0% through March15, 2010. QC designated these interest rate swaps as cash flow hedges. We did not recognize any gain or loss in earnings for hedge ineffectiveness for the year ended December31, 2009. In March 2008, QC also entered into interest rate hedges on the outstanding $500million aggregate principal amount of its 6.5% Notes due 2017. These hedges had the economic effect of converting QCs fixed interest rate to a floating interest rate until these notes mature in 2017. QC designated these interest rate swaps as fair value hedges. QC terminated these hedges in the fourth quarter of 2008. Upon termination, we received $20 million in cash for the fair value of the swap asset and accrued interest from our counterparty. The accumulated increase of $10 million in the carrying value of the 6.5% Notes due 2017 through the hedge termination date is being amortized to interest expense using the effective interest method over the remaining term of the notes. We valued the interest rate hedges using projected future cash flows, discounted at mid-market implied forward LIBOR. We determined this valuation excl |
Severance and Restructuring
Severance and Restructuring | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Severance and Restructuring | Note10: Severance and Restructuring Severance For the years ended December31, 2009, 2008 and 2007, we recorded severance expenses of $113million, $129million and $14million, respectively. A portion of our severance expenses is included in each of cost of sales, selling expenses and general, administrative and other operating expenses in our consolidated statements of operations. We have not included any severance expenses in our segment expenses. As of December31, 2009 and 2008, our severance liability was $77million and $56million, respectively, and is included in accrued expenses and other in our consolidated balance sheets. Restructuring During 2004 and previous years, as part of our ongoing efforts to evaluate our operating costs, we established restructuring programs, which included workforce reductions, consolidation of excess facilities, and restructuring of certain business functions. As of December31, 2009, the remaining restructuring reserve for these programs related to leases for real estate that we ceased using in prior periods and consisted of our estimates of amounts to be paid for these leases in excess of our estimates of any sublease revenue we may collect. We expect this reserve will be used over the remaining lease terms, which range from 0.5to 16.0years, with a weighted average of 12.2years. During 2008, we reversed approximately $33million of restructuring reserve due to favorable early termination of a lease for which we previously reserved. The restructuring reversal is included in general, administrative and other operating expenses in our consolidated statements of operations. The remaining reserve balances are included on our consolidated balance sheets in accrued expenses and other current liabilities for the current portion and other long-term liabilities for the long-term portion. The provisions, reversals, and adjustments are included in general, administrative and other expenses in our consolidated statements of operations. We have not included any restructuring expenses in our segment expenses. The following table presents the details of our real estate restructuring reserves for the years ended December31, 2009, 2008 and 2007: RealEstate Restructuring (Dollarsinmillions) Balance December31, 2006 $ 347 Provisions 6 Utilization (38 ) Reversals and adjustments (3 ) Balance December31, 2007 312 Provisions Utilization (50 ) Reversals and adjustments (36 ) Balance December31, 2008 226 Provisions Utilization (20 ) Reversals and adjustments Balance December31, 2009 $ 206 As of December31, 2009 and 2008, the restructuring reserve included in current liabilities was $18million and $21million, respectively, and the long-term portion was $188million and $205million, as of those dates. |
Employee Benefits
Employee Benefits | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Employee Benefits | Note11: Employee Benefits Pension, Post-Retirement and Other Post-Employment Benefits We sponsor a noncontributory qualified defined benefit pension plan (referred to as our pension plan) for substantially all management and occupational employees. In addition to this tax qualified pension plan, we also maintain a non-qualified pension plan for certain eligible highly compensated employees. We maintain post-retirement benefit plans that provide health care and life insurance benefits for certain eligible retirees. We also provide other post-employment benefits for eligible former employees. Pension The pension plan provides benefits to participants under five separate formulas which are 1) the pension band or pension factor formula for occupational employees, 2) the account balance formula (ABF) for occupational employees, 3) the Old Management Formula (OMF) for management employees, 4) the Defined Lump Sum (DLS) formula for management employees and 5) the ABF for management employees. Participants, upon retirement or termination, may elect any form of annuity option available, a lump sum distribution or a combination annuity/lump sum. For occupational employees hired or rehired prior to January1, 2009, pension benefits are based on either the pension band or pension factor formula. The pension band formula uses a flat dollar amount per year of service in which each job title has been assigned a dollar amount (pension band). The pension factor formula, which covers occupational sales employees, uses a factor based on final average compensations times years of service. All occupational employees hired or rehired on or after January1, 2009, upon meeting certain requirements, earn a pension under the ABF, which provides a compensation credit equal to 3% of eligible compensation plus an annual interest credit. For management employees, the OMF is based on final average compensation and years of service, the DLS formula is based on final average compensation and age-related service credits and the ABF was based on a compensation credit equal to 3% of eligible compensation plus an annual interest credit. Participants who earned their pension under the OMF and DLS formula were management participants who had completed 20 years of service by December31, 2000 or who were service pension eligible by December31, 2003. Employees who did not meet these requirements accrued a pension under the OMF and DLS formula until December31, 2000, or earlier based on the plans provisions, and then commenced accruing a pension under the ABF beginning on January1, 2001. The ABF covers management participants hired after December31, 2000 and management employees who did not have 20 years of service by December31, 2000 or who did not become service pension eligible by December31, 2003. In November 2009, we amended the pension plan to no longer provide pension benefit accruals for active management employees on or after January1, 2010. This amendment froze average compensation calculations under the OMF and DLS formula and means that we no longer provide calculation of service under the OMF, percentage credits under the DLS formula, nor compensation cr |
Income Taxes
Income Taxes | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Income Taxes | Note12: Income Taxes Income Tax Expense (Benefit) The components of the income tax expense (benefit) from continuing operations are as follows: YearsEndedDecember31, 2009 2008 2007 (Dollars inmillions) Income tax expense (benefit): Current tax provision: Federal $ 10 $ (56 ) $ 29 State and local 2 5 Total current tax provision 12 (51 ) 29 Deferred tax provision: Federal 188 379 96 State and local 43 76 17 Change in beginning of year valuation allowance (2 ) (5 ) (2,412 ) Total deferred tax expense (benefit) 229 450 (2,299 ) Income tax expense (benefit) $ 241 $ 399 $ (2,270 ) The effective income tax rate for continuing operations differs from the statutory tax rate as follows: YearsEndedDecember31, 2009 2008 2007 (in percent) Effective income tax rate: Federal statutory income tax rate 35.0 % 35.0 % 35.0 % State income taxesnet of federal effect and tax expense (benefit) of income (loss) not recognized 3.3 4.8 1.5 Medicare subsidy (1.6 ) (1.3 ) (2.9 ) Uncertain tax position changes (10.0 ) (2.1 ) Other 0.6 0.2 (0.8 ) Adjustments related to prior periods (0.4 ) 1.8 (9.9 ) Changes in valuation allowance (0.2 ) (0.4 ) (389.0 ) Effective income tax rate 26.7 % 38.0 % (366.1 )% Deferred Tax Assets and Liabilities The components of the deferred tax assets and liabilities are as follows: December31, 2009 2008 (Dollars inmillions) Deferred tax assets and liabilities: Deferred tax assets: Net operating loss carryforwards $ 2,118 $ 2,323 Post-retirement benefits 1,180 1,139 Deferred loss subject to amortization 298 316 Restructuring charge 80 88 Pension 305 288 Other employee benefits 99 101 Other 390 404 Gross deferred tax assets 4,470 4,659 Valuation allowance on deferred tax assets (132 ) (134 ) Net deferred tax assets 4,338 4,525 Deferred tax liabilities: Property, plant and equipment and intangible assets (1,750 ) (1,656 ) Other (79 ) (129 ) Total deferred tax liabilities (1,829 ) (1,785 ) Net deferred tax assets $ 2,509 $ 2,740 Tax Audits and Uncertain Tax Positions The IRS examines all of our federal income tax returns because we are included in the coordinated industry case program. As of December31, 2009, our federal income tax returns for tax years 2002-2005 have been examined by |
Stockholders' Deficit
Stockholders' Deficit | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Stockholders' Deficit | Note13: Stockholders Deficit Common Stock ($0.01 par value) We are authorized to issue up to 5.0billion shares of common stock with $0.01 par value per share. We had 1.738billion and 1.714billion shares issued and 1.729 billion and 1.707billion shares outstanding as of December31, 2009 and 2008, respectively. On October4, 2006, our Board of Directors approved a stock repurchase program for up to $2billion of our common stock. For the years ended December31, 2009 and 2008, we repurchased 0 and 95million shares, respectively, of our common stock under this program. The weighted average price per share for the 2008 repurchases was $4.49. As of December31, 2009, we had repurchased a total of $1.807billion of common stock under this program. Preferred Stock ($1.00 par value) Under our charter, our Board of Directors has the authority, without stockholder approval, to (i)create one or more classes or series within a class of preferred stock, (ii)issue shares of preferred stock in such class or series up to the maximum number of shares of the relevant class or series of preferred stock authorized and (iii)determine the preferences, rights, privileges and restrictions of any such class or series, including dividend rights, voting rights, the rights and terms of redemption, the rights and terms of conversion, liquidation preferences, the number of shares constituting any such class or series and the designation of such class or series. One of the effects of authorized but unissued and unreserved shares of capital stock may be to render more difficult or discourage an attempt by a potential acquirer to obtain control of us by means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity of our management. The issuance of such shares of capital stock may have the effect of delaying, deferring or preventing a change in control of us without any further action by our stockholders. We have no present intention to adopt a stockholder rights plan, but could do so without stockholder approval at any future time. As of December31, 2009 and 2008, there were 200million shares of preferred stock authorized but no shares issued or outstanding. Treasury Stock Deferred CompensationRabbi Trusts Rabbi trusts were established for two of our deferred compensation plans. As of December31, 2009 and 2008, the rabbi trusts held approximately 44,000 and 62,000shares, respectively, of our common stock with a cost of $2 million and $3million, respectively. Shares of our common stock held by the rabbi trusts are accounted for as treasury stock, but are considered outstanding for legal purposes. Forfeitures and Vesting of Restricted Stock Under our Equity Incentive Plan and restricted stock agreements, we automatically withhold a portion of vesting shares of restricted stock to cover the withholding taxes due upon vesting. As a result of forfeited and withheld restricted stock, we acquired approximately 2,329,000, 1,546,000 and 3,891,000shares of treasury stock during 2009, 2008 and 2007, respectively. Dividends Our Board of Directors declared the following dividends in 2008 and 2009: Da |
Earnings per Common Share
Earnings per Common Share | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Earnings per Common Share | Note14: Earnings per Common Share Basic earnings per common share excludes dilution and is computed by dividing net income allocated to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if certain outstanding stock options are exercised, the premium on convertible debt is converted into common stock and certain performance shares require payout in common stock. The following is a reconciliation of the number of shares used in the basic and diluted earnings per common share computations for the years ended December31, 2009, 2008 and 2007: Years Ended December31, 2009 2008 2007 (Dollars inmillions except per shareamounts,sharesinthousands) Net income allocated to common shareholders $ 657 $ 649 $ 2,880 Basic weighted average common shares outstanding 1,709,346 1,728,731 1,829,244 Dilutive effect of options with strike prices equal to or less than the average price of our common stock, calculated using the treasury stock method 511 1,139 18,366 Dilutive effect of the equity premium on convertible debt at the average price of our common stock during the period 67,487 Dilutive effect of performance shares 3,641 336 70 Diluted weighted average common shares outstanding 1,713,498 1,730,206 1,915,167 Earnings per common share: Basic $ 0.38 $ 0.38 $ 1.57 Diluted $ 0.38 $ 0.37 $ 1.50 We had weighted average unvested restricted stock grants outstanding of approximately 12million, 7million, and 6million shares during the years ended December31, 2009, 2008 and 2007, respectively. These shares were excluded from the earnings per common share calculation, and these shareholders have their own earnings per share calculation whereby they were allocated net income of approximately $5million, $3million and $10million for the years ended December31,2009, 2008 and 2007 for purposes of calculating basic and diluted earnings per share. The following is a summary of the securities that could potentially dilute basic earnings per common share, but have been excluded from the computations of diluted earnings per common share for the years ended December31, 2009, 2008 and 2007: Years Ended December31, 2009 2008 2007 (Sharesinthousands) Outstanding options to purchase common stock excluded because the strike prices of the options exceeded the average price of common stock during the period 48,300 57,489 28,540 Outstanding options to purchase common stock excluded because the market-based vesting conditions have not been met 2,083 2,083 2,340 Other outstanding instruments excluded because the impact would have been antidilutive 2,243 2,177 4,933 The above table does not include the potential dilutive effects of the equity premium on our 3.50% Convert |
Stock-Based Compensation
Stock-Based Compensation | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Stock-Based Compensation | Note15: Stock-Based Compensation Equity Incentive Plan We adopted an Equity Incentive Plan (EIP) on June23, 1997. The EIP was most recently amended and restated on May23, 2007. The EIP permits the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, stock units and other stock grants to selected eligible employees, consultants and non-employee members of our Board of Directors. Unless otherwise provided by the Compensation and Human Resources Committee of our Board of Directors, the EIP provides that, upon a change in control, all awards granted under the EIP will vest immediately. The maximum number of shares of our common stock that may be issued under the EIP at any time pursuant to awards is equal to 10% of the aggregate number of our common shares issued and outstanding reduced by the aggregate number of options and other awards then outstanding under the EIP or otherwise. Issued and outstanding shares are determined as of the close of trading on the New York Stock Exchange on the preceding trading day. As of December31,2009, approximately 173million shares of our common stock were authorized for grant under the EIP and approximately 81million shares were available for future issuance under the EIP. Except for awards with market-based conditions, awards generally vest in equal increments over three to fiveyears. From September2002 to October 2008, awards granted to our employees at the vice president level and above typically provide for accelerated vesting and an extended exercise period upon a change of control, and awards granted to all other employees typically provide for accelerated vesting if the optionee is terminated without cause following a change in control. Since October 2008, awards granted to our employees at the executive vice president level and above typically provide for accelerated vesting and an extended exercise period if the optionee is terminated without cause following a change in control, awards granted to our employees at the vice president level provide for accelerated vesting and an extended exercise period upon a change of control, and awards granted to all other employees typically provide for accelerated vesting if the optionee is terminated without cause following a change in control. Awards without Market-Based Conditions Stock Options The Compensation and Human Resources Committee of our Board of Directors, or its delegate, approves the granting of and the exercise price for each stock option. Options generally have an exercise price that is at least equal to the fair market value of the common stock on the date of grant, subject to certain restrictions. Options have ten-year terms. Our stock option activity for the three-year period ended December31, 2009 is summarized below: Numberof Shares (inthousands) Weighted Average Exercise Price Weighted Average Grant Date Fair Value Outstanding as of December31,2006 92,525 $ 15.21 Granted 6,052 8.54 $ 3.86 Exercised (18,904 ) 4.41 Canceled or forfeited (1,494 ) 7.43 Expired (8,926 ) 19.4 |
Segment Information
Segment Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Segment Information | Note16: Segment Information Our operating revenue is generated from our business markets, mass markets and wholesale markets segments. Our Chief Operating Decision Maker (CODM) regularly reviews information for each of our segments to evaluate performance and to allocate resources. The accounting principles used to determine segment results are the same as those used in our consolidated financial statements. We have reclassified certain prior year segment revenue and expense amounts presented in our Annual Report on Form10-K for the year ended December31, 2008 to conform to the current year presentation. Each of our segments uses our network to generate revenue by providing data, Internet and voice services to its customers, as described further below. Through our strategic partnerships with DIRECTV and Verizon Wireless, certain of our segments also offer satellite digital television and wireless services to customers in our local services area. Depending on the products or services purchased, a customer may pay a service activation fee, a monthly service fee, a usage charge or a combination of these. Business markets. This segment provides data, Internet and voice services to our enterprise and government customers. Our business markets products and services include: Strategic services, which include primarily private line, Qwest iQ Networking, hosting, broadband and Voice over Internet Protocol (VoIP) services; Legacy services, which include primarily local, long-distance, traditional wide area network (WAN) and Integrated Services Digital Network (ISDN) services; and Data integration, which is telecommunications equipment we sell located on customers premises and related professional services. These services include network management, installation and maintenance of data equipment and building of proprietary fiber-optic broadband networks for our governmental and business customers. Mass markets. This segment provides data, Internet, voice and resold video and wireless services to consumers and small business customers. Our mass markets products and services include: Strategic services, which include primarily broadband, video and Verizon Wireless services; Legacy services, which include primarily local and long-distance services; and Qwest-branded wireless services (until October31, 2009). Wholesale markets. This segment provides data, Internet and voice services primarily to other telecommunications providers. Our wholesale markets products and services include: Strategic services, which include primarily private line services provided to other carriers: and Legacy services, which include primarily long-distance, access, local and traditional WAN services. We also generate other revenue from USF surcharges and the leasing and subleasing of space in our office buildings, warehouses and other properties. We centrally manage this revenue, and consequently it is not assigned to any of our segments. Expenses for each of our segments include direct expenses incurred by the segment and other expenses |
Related Party Transactions
Related Party Transactions | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Related Party Transactions | Note17: Related Party Transactions In October1999, we agreed to purchase certain telecommunications-related assets and all of the stock of Precision Systems,Inc., a telecommunications solutions provider, from Anschutz Digital Media, Inc., a subsidiary of Anschutz Company (which beneficially owned more than 5% of our common stock until November 2009), in exchange for a promissory note in the amount of $34million. The note bore interest at 6% annually with semi-annual interest payments and annual principal payments due through 2008. In 2008, we paid the remaining note principal of $8million, plus accrued interest of less than $1million. In 2009 and 2008, we paid approximately $27million in administrative fees in the ordinary course of business to United Healthcare Services, Inc., which provides health benefit plans to some of our employees and is a subsidiary of UnitedHealth Group. Our director, Anthony Welters, serves as Executive Vice President of UnitedHealth Group and as President of its Public and Senior Markets Group. |
Commitments and Contingencies
Commitments and Contingencies | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Commitments and Contingencies | Note18: Commitments and Contingencies Commitments Future Contractual Obligations The following table summarizes our estimated future contractual obligations as of December31, 2009: Payments Due by Period 2010 2011 2012 2013 2014 2015 and Thereafter Total (Dollars inmillions) Future contractual obligations(1): Debt and lease payments: Long-term debt $ 2,693 $ 1,626 $ 1,500 $ 750 $ 1,900 $ 5,824 $ 14,293 Capital lease and other obligations 36 37 31 26 20 23 173 Interest on long-term borrowings and capital leases(2) 990 832 673 599 529 4,200 7,823 Operating leases 234 205 172 146 127 703 1,587 Total debt and lease payments 3,953 2,700 2,376 1,521 2,576 10,750 23,876 Other long-term liabilities 6 3 4 6 2 171 192 Purchase commitments: Telecommunications and information technology 178 2 2 1 1 184 IRU* operating and maintenance obligations 18 18 18 18 18 134 224 Advertising, promotion and other services(3) 111 63 39 30 25 63 331 Total purchase commitments 307 83 59 49 43 198 739 Non-qualified pension obligation 4 3 3 3 3 32 48 Post-retirement benefit obligation 75 76 75 75 73 1,476 1,850 Total future contractual obligations $ 4,345 $ 2,865 $ 2,517 $ 1,654 $ 2,697 $ 12,627 $ 26,705 * Indefeasible rights of use (1) The table does not include: our open purchase orders as of December31, 2009. These purchase orders are generally at fair value, are generally cancelable without penalty and are part of normal operations; other long-term liabilities, such as accruals for legal matters and income 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; cash funding requirements for pension benefits payable to certain eligible current and future retirees. The accounting unfunded status of our pension plan was $790million at December31, 2009. Benefits paid by our pension plan are paid through a trust. Cash funding requirements for this trust are not included in this table as we are not able to reliably estimate required contributions to the trust. Cash funding requirements can be significantly impacted by earnings on investments, the applicable discount rate at the end of the year, changes in the plan and funding laws and regulations. As a result, it is di |
Quarterly Financial Data
Quarterly Financial Data (Unaudited) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Quarterly Financial Data (Unaudited) | Note19: Quarterly Financial Data (Unaudited) Quarterly Financial Data First Quarter Second Quarter Third Quarter Fourth Quarter Total (Dollars inmillions, except per share amounts) 2009 Operating revenue $ 3,173 $ 3,090 $ 3,054 $ 2,994 $ 12,311 Operating income 549 491 485 450 1,975 Income tax expense (92 ) (5 ) (75 ) (69 ) (241 ) Net income 206 212 136 108 662 Basic earnings per common share $ 0.12 $ 0.12 $ 0.08 $ 0.06 $ 0.38 Diluted earnings per common share $ 0.12 $ 0.12 $ 0.08 $ 0.06 $ 0.38 2008 Operating revenue $ 3,399 $ 3,382 $ 3,379 $ 3,315 $ 13,475 Operating income 520 564 454 559 2,097 Income tax expense (95 ) (118 ) (73 ) (113 ) (399 ) Net income 150 180 145 177 652 Basic earnings per common share $ 0.08 $ 0.10 $ 0.08 $ 0.10 $ 0.38 Diluted earnings per common share $ 0.08 $ 0.10 $ 0.08 $ 0.10 $ 0.37 Second Quarter 2009 Income tax expense for the second quarter of 2009 includes our recognition of previously unrecognized tax benefits on uncertain tax positions and favorable income tax settlements related to prior years. |
Other Financial Information
Other Financial Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Other Financial Information | Note20: Other Financial Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets as of December31, 2009 and 2008 consisted of the following: December31, 2009 2008 (Dollarsinmillions) Prepaid expenses and other current assets: Prepaid expenses $ 223 $ 199 Deferred activation and installation charges 112 121 Other 33 48 Total prepaid expenses and other current assets $ 368 $ 368 Other Non-Current Assets Other non-current assets as of December31, 2009 and 2008 consisted of the following: December31, 2009 2008 (Dollarsinmillions) Other non-current assets: Deposits in escrow accounts related to settlements of the consolidated securities action and other regulatory matters $ $ 402 Non-current investments as described in Note4Investments 96 100 Deferred activation and installation charges 110 124 Debt issuance costs 112 105 Other 267 352 Total other non-current assets $ 585 $ 1,083 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities as of December31, 2009 and 2008 consisted of the following: December31, 2009 2008 (Dollars inmillions) Accrued expenses and other current liabilities: Accrued interest $ 273 $ 259 Employee compensation 365 471 Accrued property and other taxes 244 258 Current portion of post-retirement and other post-employment benefit obligations and non-qualified pension obligations 173 172 Dividends payable 138 136 Other 387 345 Total accrued expenses and other current liabilities $ 1,580 $ 1,641 Other Non-Current Liabilities Other non-current liabilities as of December31, 2009 and 2008 consisted of the following: December31, 2009 2008 (Dollarsinmillions) Other non-current liabilities: Reserves for contingencies and litigation as described in Note18Commitments and Contingencies $ 75 $ 511 Restructuring and realignment reserves as described in Note10Restructuring and Severance 223 235 Other 377 442 Total other non-current liabilities $ 675 $ 1,188 |
Labor Union Contracts
Labor Union Contracts | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Labor Union Contracts | Note 21: Labor Union Contracts We are a party to collective bargaining agreements with our labor unions, the Communications Workers of America and the International Brotherhood of Electrical Workers. Our current four-year collective bargaining agreements expire on October6, 2012. As of December31, 2009, employees covered under these collective bargaining agreements totaled approximately 15,600, or 52% of all our employees. |
Financial Statements of Guarant
Financial Statements of Guarantors | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Financial Statements of Guarantors | Note22: Financial Statements of Guarantors QCII and two of its subsidiaries, Qwest Capital Funding, Inc. (QCF) and QSC, guarantee the payment of certain of each others registered debt securities. As of December31, 2009, QCII had outstanding a total of $2.375billion aggregate principal amount of senior notes that were issued in February 2004,June 2005 and September 2009 and that are guaranteed by QCF and QSC (the QCII Guaranteed Notes). These notes are guaranteed through their respective maturity dates, the latest of which is in October 2015. Each series of QCFs outstanding notes totaling approximately $2.185billion in aggregate principal amount is guaranteed on a senior unsecured basis by QCII (the QCF Guaranteed Notes). These notes are guaranteed through their respective maturity dates, the latest of which is in February 2031. The guarantees are full and unconditional and joint and several. A significant amount of QCIIs and QSCs income and cash flow are generated by their subsidiaries. As a result, the funds necessary to meet their debt service or guarantee obligations are provided in large part by distributions or advances from their subsidiaries. The following information sets forth our consolidating statements of operations for the years ended December31, 2009, 2008 and 2007, our consolidating balance sheets as of December31, 2009 and 2008, and our consolidating statements of cash flows for the years ended December31, 2009, 2008 and 2007. The information for QCII is presented on a stand-alone basis, information for QSC and QCF is presented on a combined basis and information for all of our other subsidiaries is presented on a combined basis. Each entitys investments in its subsidiaries, if any, are presented under the equity method. The consolidating statements of operations and balance sheets include the effects of consolidating adjustments to our subsidiaries tax provisions and the related income tax assets and liabilities in the QSC and QCII results. Both QSC and QCF are 100% owned by QCII, and QCF is a finance subsidiary of QCII. Other than as already described in this note, the accounting principles used to determine the amounts reported in this note are the same as those used in our consolidated financial statements. The effects of our adoption of FSP APB14-1 (ASC 470), which relates to the accounting for convertible debt, are reflected in all columns, except for the Subsidiary Non-Guarantors column in the financial statements that follow. We periodically restructure the internal capital structure of our subsidiaries based on the needs of our business. Allocations among Affiliates We allocate the costs of shared services among our affiliates. These services include marketing and advertising, information technology, product and technical services as well as general support services. The allocation of these costs is based on estimated market values or fully distributed cost (FDC). Most of our affiliate services are priced by applying an FDC methodology. FDC rates are determined using salary rates, which include payroll taxes, employee benefits, facilities and overhead costs. Whenever possible, costs are directly assig |
Document Information
Document Information | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Document Type | 10-K |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
Entity Information
Entity Information (USD $) | |||
12 Months Ended
Dec. 31, 2009 | Feb. 12, 2010
| Jun. 30, 2009
| |
Trading Symbol | Q | ||
Entity Registrant Name | QWEST COMMUNICATIONS INTERNATIONAL INC | ||
Entity Central Index Key | 0001037949 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 1,730,195,688 | ||
Entity Public Float | $6,100,000,000 |