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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-22609
QWEST COMMUNICATIONS INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1339282
(State or other jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification No.)
1801 CALIFORNIA STREET, DENVER, COLORADO 80202
(Address of principal executive offices and zip code)
TELEPHONE NUMBER (303) 992-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At April 30, 2001, 1,661,255,368 shares of common stock were outstanding.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
FORM 10-Q
TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I -- FINANCIAL INFORMATION
1. Financial Statements
Condensed Consolidated Statements of Operations --
Three months ended March 31, 2001 and 2000.................. 1
Condensed Consolidated Balance Sheets --
March 31, 2001 and December 31, 2000........................ 2
Condensed Consolidated Statements of Cash Flows --
Three months ended March 31, 2001 and 2000.................. 3
Notes to Condensed Consolidated Financial Statements........ 4
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 15
PART II -- OTHER INFORMATION
1. Legal Proceedings........................................... 18
6. Exhibits and Reports on Form 8-K............................ 18
Signature page.............................................. 23
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QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------
2001 2000
------ ------
Revenues:
Commercial services....................................... $2,749 $1,207
Consumer and small business services...................... 1,684 1,466
Directory services........................................ 342 347
Switched access services.................................. 276 357
------ ------
Total revenues.................................... 5,051 3,377
------ ------
Operating expenses:
Cost of services.......................................... 1,900 986
Selling, general and administrative....................... 1,154 883
Depreciation.............................................. 832 586
Goodwill and other intangible amortization................ 319 --
Merger-related and other one-time charges................. 209 15
------ ------
Total operating expenses.......................... 4,414 2,470
------ ------
Operating income............................................ 637 907
Other expense (income) - net:
Interest expense - net.................................... 338 211
Decline in market value of financial instruments.......... 116 129
Gain on sale of investments............................... -- (79)
Other expense (income) - net.............................. 20 (1)
------ ------
Total other expense-net........................... 474 260
------ ------
Earnings before income taxes and extraordinary item......... 163 647
Provision for income taxes.................................. 144 243
------ ------
Earnings before extraordinary item.......................... 19 404
Extraordinary item - early retirement of debt, net of tax... (65) --
------ ------
Net (loss) earnings......................................... $ (46) $ 404
====== ======
Basic (loss) earnings per share:
Earnings before extraordinary item........................ $ 0.01 $ 0.46
Extraordinary item - early retirement of debt, net of
tax.................................................... (0.04) --
------ ------
Basic (loss) earnings per share............................. $(0.03) $ 0.46
====== ======
Basic average shares outstanding............................ 1,656 877
====== ======
Diluted (loss) earnings per share:
Earnings before extraordinary item........................ $ 0.01 $ 0.45
Extraordinary item - early retirement of debt, net of
tax.................................................... (0.04) --
------ ------
Diluted (loss) earnings per share........................... $(0.03) $ 0.45
====== ======
Diluted average shares outstanding.......................... 1,674 889
====== ======
Dividends per share......................................... $ -- $ 0.31
====== ======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
MARCH 31, DECEMBER 31,
2001 2000
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 306 $ 154
Accounts receivable - net................................. 4,294 4,235
Inventories and supplies.................................. 302 275
Deferred tax assets....................................... 39 72
Prepaid and other......................................... 825 640
------- -------
Total current assets........................................ 5,766 5,376
Property, plant and equipment - net......................... 27,700 25,583
Goodwill and other intangible assets - net.................. 32,224 32,327
Investments................................................. 8,053 8,186
Other assets................................................ 2,031 2,029
------- -------
Total assets................................................ $75,774 $73,501
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current borrowings........................................ $ 4,103 $ 3,645
Accounts payable.......................................... 2,358 2,049
Accrued expenses and other current liabilities............ 3,514 3,806
Advance billings and customer deposits.................... 379 393
------- -------
Total current liabilities................................... 10,354 9,893
Long-term borrowings........................................ 17,676 15,421
Post-retirement and other post-employment benefit
obligations............................................... 2,916 2,735
Deferred taxes, credits and other........................... 4,172 4,148
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock - $0.01 par value, 200 million shares
authorized, none issued and outstanding................ -- --
Common stock - $0.01 par value, 5 billion shares
authorized, 1,680 million and 1,672 million issued,
1,656 million and 1,672 million outstanding............ 17 17
Additional paid-in capital................................ 41,727 41,289
Treasury stock............................................ (1,000) --
------- -------
Retained (deficit) earnings............................... (22) 24
Accumulated other comprehensive loss...................... (66) (26)
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Total stockholders' equity.................................. 40,656 41,304
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Total liabilities and stockholders' equity.................. $75,774 $73,501
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
Cash provided by operating activities..................... $ 1,333 $ 807
------- -------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment............ (2,943) (1,277)
Proceeds from sale of equity securities................... -- 1,140
Other..................................................... (79) 127
------- -------
Cash used for investing activities........................ (3,022) (10)
------- -------
FINANCING ACTIVITIES
Net proceeds from (repayments of) current borrowings...... 458 (520)
Proceeds from issuance of long-term borrowings - net...... 3,238 --
Repayments of long-term borrowings........................ (995) (32)
Costs relating to the early retirement of debt............ (106) --
Proceeds from issuance of common stock.................... 246 30
Repurchase of stock....................................... (1,000) --
Dividends paid on common stock............................ -- (271)
------- -------
Cash provided by (used for) financing activities.......... 1,841 (793)
------- -------
CASH AND CASH EQUIVALENTS
Increase.................................................. 152 4
Beginning balance......................................... 154 78
------- -------
Ending balance............................................ $ 306 $ 82
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The condensed consolidated interim financial statements are unaudited.
Qwest Communications International Inc. ("Qwest" or "we" or "us" or "our")
prepared these financial statements in accordance with the instructions for Form
10-Q. In compliance with those instructions, certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. We
made certain reclassifications to prior balances to conform with the current
year presentation. In our opinion, we made all the adjustments (consisting only
of normal recurring adjustments) necessary to fairly present our consolidated
results of operations, financial position and cash flows as of March 31, 2001
and for all periods presented. These financial statements should be read in
conjunction with the audited financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2000. The consolidated results of
operations for the three months ended March 31, 2001 are not necessarily
indicative of the results expected for the full year.
NOTE 2: MERGER WITH U S WEST
On June 30, 2000, Qwest completed its acquisition (the "Merger") of U S
WEST, Inc. ("U S WEST"). U S WEST was deemed the accounting acquirer and its
historical financial statements have been carried forward as those of the newly
combined company. In connection with the Merger, each outstanding share of U S
WEST common stock was converted into the right to receive 1.72932 shares of
Qwest common stock. In addition, all outstanding U S WEST stock options were
converted into options to acquire Qwest common stock. All share and per share
amounts have been restated to give retroactive effect to the exchange ratio.
The Merger has been accounted for as a reverse acquisition under the
purchase method of accounting with U S WEST being deemed the accounting acquirer
and Qwest the acquired entity. The total value of the consideration was
approximately $40 billion, which has been allocated to the identifiable tangible
and intangible assets and liabilities of Qwest. The preliminary purchase price
allocation was as follows: (i) $8.0 billion to tangible assets and liabilities,
net; (ii) $4.1 billion to identified intangibles, including product technology,
customer lists, tradenames and assembled workforce; and (iii) $27.9 billion to
goodwill. The amounts allocated to identifiable intangible assets and goodwill
are being amortized over periods ranging from 3 to 40 years. The allocation of
purchase price is preliminary and may change upon completion of an appraisal
currently being performed on the acquired assets and liabilities of Qwest. The
final purchase price allocation will be completed during the second quarter of
2001.
The unaudited results of operations for the three months ended March 31,
2001 and the pro forma, unaudited results of operations for the three months
ended March 31, 2000 (as though the Merger had been completed as of the
beginning of 2000) are as follows (dollars in millions, except for per share
amounts):
THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
------- -------
Revenues.................................................... $5,051 $4,517
Net (loss) earnings......................................... (46) 227
Diluted (loss) earnings per share........................... $(0.03) $ 0.14
For the quarter ended March 31, 2001, we incurred Merger-related and other
one-time charges totaling $209 million. The charges include $102 million of
severance and headcount-related charges, $56 million of contract settlements and
terminations, $10 million of asset impairments and $41 million of other Merger-
related costs. Other Merger-related charges include professional fees,
re-branding costs and other costs related to the integration of U S WEST and
Qwest. Since the Merger, we have reduced staffing levels by
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately 11,000 employees and contractors, with approximately 2,500 of this
reduction occurring in the first quarter of 2001. The severance charge for the
quarter is related to 1,103 employees who were involuntarily terminated. The
aforementioned charges are reflected in the condensed consolidated statements of
operations.
Management anticipates that substantially all of the Merger-related costs
will be paid out by June 30, 2001. We are continuing to review Merger-related
activities that may result in additional Merger-related charges in the second
quarter.
The amounts accrued and charged against the established provisions
described above were as follows (dollars in millions):
DECEMBER 31, CURRENT CURRENT MARCH 31,
2000 BALANCE PROVISION UTILIZATION 2001 BALANCE
------------ --------- ----------- ------------
Contractual settlements and
terminations.......................... $295 $ 56 $ 60 $291
Merger bonuses and severance costs...... 130 102 106 126
Other accrued costs..................... 98 51 57 92
---- ---- ---- ----
Total Merger-related and other
charges..................... $523 $209 $223 $509
==== ==== ==== ====
NOTE 3: WEIGHTED AVERAGE SHARES
The following table is a reconciliation of basic weighted average shares to
diluted weighted average shares (in millions). The 2000 shares have been
adjusted to reflect the conversion of the U S WEST shares into Qwest shares due
to the Merger.
THREE MONTHS
ENDED
MARCH 31,
-------------
2001 2000
----- ----
Basic weighted average shares outstanding................... 1,656 877
Dilutive effect of stock options............................ 18 12
----- ---
Diluted weighted average shares outstanding................. 1,674 889
===== ===
As of March 31, 2001, 61 million options were excluded from the earnings
per share computation solely because the effect was anti-dilutive. Anti-dilutive
options at March 31, 2000 were immaterial.
NOTE 4: SEGMENT INFORMATION
We operate in four segments: retail services, wholesale services, network
services and directory services. The retail services segment provides local
telephone services, long-distance services, wireless services and data services.
The wholesale services segment provides (i) exchange access services that
connect customers to the facilities of Interexchange Carriers ("IXCs") and (ii)
interconnection to our telecommunications network to Competitive Local Exchange
Carriers ("CLECs"). The network services segment provides access to our
telecommunications network, including our information technologies, primarily to
our retail services and wholesale services segments. The directory services
segment publishes White and Yellow Pages telephone directories and provides
electronic directory and other information services. We provide the majority of
our services to more than 25 million residential and business customers in
Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North
Dakota, Oregon, South Dakota, Utah, Washington and Wyoming (our "local service
area").
The following is a breakout of our segments. The accounting policies used
are the same as those used in the condensed consolidated financial statements.
The "other" category includes unallocated corporate
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expenses and revenues. We internally track separately only the assets of our
directory services segment. Reconciling items include unallocated assets,
intersegment revenue eliminations and other adjustments.
TOTAL
COMMUNICATIONS
RETAIL WHOLESALE NETWORK AND RELATED DIRECTORY RECONCILING CONSOLIDATED
SERVICES SERVICES SERVICES SERVICES SERVICES OTHER ITEMS TOTAL
-------- --------- -------- -------------- --------- ----- ----------- ------------
(DOLLARS IN MILLIONS)
THREE MONTHS ENDED
MARCH 31,
2001
Operating revenues.... $3,883 $751 $ 58 $4,692 $ 342 $ 17 $ -- $ 5,051
EBITDA(1)............. 2,940 625 (1,479) 2,086 215 (304) -- 1,997
Assets................ -- -- -- -- 1,459 -- 74,315 75,774
Capital
expenditures........ 162 -- 2,749 2,911 -- 32 -- 2,943
2000
Operating revenues.... 2,300 728 58 3,086 347 -- (56) 3,377
EBITDA(1)............. 1,469 581 (661) 1,389 190 (71) -- 1,508
Assets................ -- -- -- -- 799 -- 21,902 22,701
Capital
expenditures........ 154 24 1,086 1,264 11 2 -- 1,277
- ---------------
(1) Earnings before interest, income taxes, depreciation and amortization
("EBITDA") does not include non-recurring and non-operating items such as
Merger-related costs, asset write-offs and impairments, gains/losses on the
sale of investments and fixed assets, changes in the market values of
investments, one-time legal charges and sales of local telephone exchanges.
EBITDA does not represent cash flow for the periods presented and should not
be considered as an alternative to net earnings (loss) as an indicator of
our operating performance or as an alternative to cash flows as a source of
liquidity, and may not be comparable with EBITDA as defined by other
companies.
A reconciliation from segment EBITDA to earnings before income taxes and
extraordinary item follows:
THREE MONTHS ENDED
MARCH 31,
------------------
2001 2000
(DOLLARS IN MILLIONS) ------- -------
Segment EBITDA.............................................. $1,997 $1,508
Less:
Depreciation and amortization............................. 1,151 586
Merger-related and other one-time charges................. 209 15
Other expense -- net...................................... 474 260
------ ------
Earnings before income taxes and extraordinary item......... $ 163 $ 647
====== ======
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5: OTHER COMPREHENSIVE (LOSS) EARNINGS
Total comprehensive (loss) earnings for the three months ended March 31,
2001 and 2000 is as follows:
THREE MONTHS
ENDED MARCH 31,
----------------
2001 2000
(DOLLARS IN MILLIONS) ------ ------
Net (loss) earnings......................................... $(46) $404
Other comprehensive (loss) earnings:
Net unrealized losses on available for sale marketable
securities............................................. (3) (122)
Foreign currency translation................................ (37) --
---- ----
Comprehensive (loss) earnings............................... $(86) $282
==== ====
Net unrealized losses for the quarters ended March 31, 2001 and 2000 were
net of deferred tax benefits of $2 million and $79 million, respectively.
For the three months ended March 31, 2001, unrealized losses on marketable
securities include reclassification adjustments of $9 million (net of deferred
taxes of $6 million) pertaining to an other than temporary impairment of our
investments in certain marketable equity securities. These reclassification
adjustments have now been realized through the Condensed Consolidated Statement
of Operations. For the three months ended March 31, 2000, unrealized gains
(losses) on marketable investments include reclassification adjustments of $49
million, net of deferred taxes of $30 million, pertaining to realized gains from
the sale of securities.
NOTE 6: COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Qwest CyberCenters(SM). In March 2000, we formed a strategic business
alliance with IBM Global Services ("IBM") to deliver next-generation e-business
services and applications through the construction and activation of
CyberCenters throughout North America. IBM, as contractor, will build and
provide operational support for up to 28 CyberCenters for us. IBM will lease
hosting space in these CyberCenters and will purchase telecommunications
services from us, with the total revenue expected to be approximately $2.5
billion over the seven-year term of the agreement. Under this alliance, we
agreed to purchase equipment and services from IBM, as contractor, over a
seven-year period, which combined with the construction services, is expected to
be approximately $2.5 billion.
Minimum Usage Requirements. We have agreements with IXCs and third party
vendors that require us to maintain minimum monthly and/or annual billings based
on usage. We have historically met substantially all requirements and believe
that we will continue to meet substantially all minimum usage commitments. Where
requirements have not been met, we have recorded appropriate charges. We have
reflected in our financial statements the financial impact of all current, unmet
minimum usage requirements.
CONTINGENCIES
In January 2001, an amended purported class action complaint was filed in
Denver District Court against us and certain current and former officers and
directors on behalf of stockholders of U S WEST. The complaint alleges that we
have a duty to pay a quarterly dividend to U S WEST stockholders of record as of
June 30, 2000. Plaintiffs further claim that the defendants' efforts to close
the Merger in advance of the record date and the defendants' failure to pay the
dividend breaches fiduciary duties owed to stockholders of U S WEST. In June
2000, the court rejected the plaintiffs' motion for a temporary restraining
order
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
attempting to prevent the closing of the Merger. We have filed a motion to
dismiss the complaint, which is pending.
Through March 2001, seven purported class action complaints have been filed
in various state courts against us and U S WEST on behalf of customers in the
states of Arizona, Colorado, Minnesota, New Mexico, Oregon, Utah and Washington.
The complaints allege, among other things, that from 1993 to the present, U S
WEST, in violation of alleged statutory and common law obligations, willfully
delayed the provision of local telephone service to the purported class members.
The complaints also allege that U S WEST misrepresented the date on which such
local telephone service was to be provided to the purported class members. The
complaints seek compensatory damages for purported class members, disgorgement
of profits and punitive damages. As of November 11, 2000, the parties have
signed agreements to settle the complaints. The agreements are subject to a
variety of conditions, including court approval. As of April 23, 2001, the
following state's courts have approved the settlement agreements signed by the
parties: Arizona, Colorado, Minnesota, New Mexico, Utah and Washington.
In April 1999, CSX Transportation, Inc. filed a complaint in federal
district court in Jacksonville, Florida against Qwest claiming breach of a 1995
contract. Discovery in the case is ongoing, and trial is scheduled to commence
in October 2001.
Through March 2001, several purported class actions have been filed in
various courts against us on behalf of landowners in Georgia, Indiana, Kansas,
Louisiana, Missouri, Oregon, Tennessee and Texas. The complaints challenge our
right to install our fiber optic cable network in railroad rights-of-way. The
complaints allege that the railroads own a limited property right-of-way that
did not include the right to permit us to install our fiber optic cable network
on the plaintiffs' property. The Indiana action purports to be on behalf of a
national class of landowners adjacent to railroad rights-of-way over which our
network passes. The Georgia, Kansas, Louisiana, Missouri, Oregon, Tennessee and
Texas actions purport to be on behalf of a class of such landowners in Georgia,
Kansas, Louisiana, Missouri, Oregon, Tennessee and Texas, respectively. The
complaints seek damages on theories of trespass and unjust enrichment, as well
as punitive damages. None of the complaints have been certified by a court as an
appropriate state-wide or national class action. In Tennessee, the court
certified a class of a small number of counties, and that ruling is on appeal.
We have received, and may in the future receive, additional claims and demands
that may be based on similar or different legal theories.
From March 2, 2000 to March 9, 2000, five purported class action complaints
were filed against us in state court in Delaware on behalf of Qwest
stockholders. The complaints allege that we and our directors breached our
fiduciary duty by entering into the Merger and by agreeing not to solicit
alternative transactions. A similar complaint was filed in state court in New
York and was dismissed in December 2000. Since the filing of the complaints,
there has been no discovery or other activity in the cases.
On March 17, 2000 and March 20, 2000, two class action complaints were
filed in federal district court in Delaware against us and Joseph Nacchio on
behalf of U S WEST stockholders. The complaints allege, among other things, that
we and Mr. Nacchio made material false statements regarding our intent to
solicit an alternative transaction to the U S WEST merger. Since the filing of
the complaints, there has been no discovery or other activity in the cases.
In 1999, 12 purported class action complaints were filed against U S WEST
and its directors on behalf of U S WEST stockholders. Each of the complaints
allege that the defendants breached their fiduciary duties to the class members
by entering into a merger agreement with Global Crossing thereby refusing to
seek all bona fide offers for U S WEST and refusing to consider an acquisition
proposal from Qwest. Since the filing of the complaints, there has been no
discovery or other activity in the cases.
From time to time we receive complaints and become subject to
investigations regarding tariffs, "slamming" (the practice of changing
long-distance carriers without the customer's consent) and other
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QWEST COMMUNICATIONS INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
matters. In 2000, the California Public Utilities Commission opened an
investigation relating to certain slamming complaints. A purported class action
complaint was filed in federal court in Connecticut containing slamming
allegations. The Attorney General of Connecticut has also filed a similar
complaint in state court in Connecticut. We continue to analyze regulatory and
governmental requirements and may modify our practices as a result. We may
receive complaints or become subject to investigations in the future. Such
complaints or investigations could result in the imposition of certain fines and
other penalties or awards of damages.
In March 2001, Qwest Communications Corporation received a demand from
Rhythms Netconnections Inc. ("Rhythms") for payment of under-utilization charges
in connection with volume commitments contained in a contract with us for the
purchase of digital subscriber lines services. No lawsuit or arbitration demand
has been filed.
We are currently in the process of attempting to resolve various billing,
reimbursement and other commercial disputes with Touch America, Inc. arising
under agreements entered into for the sale of our interLATA (local access
transport area) business in our local service area to Touch America on June 30,
2000. Although notices of dispute have been delivered by each party, no
arbitration demand has been filed under agreements that permit or require
arbitration.
We have been named as a defendant in various other litigation matters. We
intend to vigorously defend these outstanding claims.
We have provided for these matters in our condensed consolidated financial
statements as of March 31, 2001. We do not expect any material adverse impacts
in excess of such provision as a result of the ultimate resolution of these
matters.
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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains or incorporates by reference "forward-looking
statements," as that term is used in federal securities laws, about Qwest
Communications International Inc.'s ("Qwest" or "us" or "we" or "our") financial
condition, results of operations and business. These statements include, among
others:
- statements concerning the benefits that we expect will result from our
business activities and certain transactions we have completed, such as
increased revenues, decreased expenses and avoided expenses and
expenditures and
- statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this document or may be
incorporated by reference to other documents we will file with the Securities
and Exchange Commission ("SEC"). You can find many of these statements by
looking for words such as "believes," "expects," "anticipates," "estimates," or
similar expressions used in this report or incorporated by reference in this
report.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause our actual results to be materially different
from any future results expressed or implied by us in those statements.
The most important factors that could prevent us from achieving our stated
goals include, but are not limited to, the following:
- intense competition in the markets in which we conduct our business;
- changes in demand for our products and services;
- dependence on new product development and acceleration of the deployment
of advanced new services, such as broadband data, wireless and video
services, which could require substantial expenditure of financial and
other resources in excess of contemplated levels;
- rapid and significant changes in technology and markets;
- higher than anticipated employee levels, capital expenditures and
operating expenses;
- adverse changes in the regulatory or legislative environment impacting
the competitive environment and service pricing in the local exchange
market and affecting our business, and delays in the ability to begin
interLATA (local access transport area) long-distance services in our
14-state local service area;
- failure to maintain the necessary rights-of-way;
- failure to achieve the projected synergies and financial results expected
to result from the acquisition of U S WEST, Inc. ("U S WEST"), by Qwest
on June 30, 2000 (the "Merger"), and difficulties in combining the
operations of Qwest and U S WEST, which could affect our revenues, levels
of expenses and operating results.
Because these statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. We caution you not to place undue reliance on the
statements, which speak only as of the date of this report.
The cautionary statements contained or referred to in this section should
be considered in connection with any subsequent written or oral forward-looking
statements that Qwest or persons acting on our behalf may issue. We do not
undertake any obligation to review or confirm analyst's expectations or
estimates or to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this report or to reflect
the occurrence of unanticipated events. In addition, we make no representation
with respect to any materials available on the Internet, including materials
available on our website.
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MERGER WITH U S WEST
The Merger has been accounted for as a reverse acquisition under the
purchase method of accounting with U S WEST being deemed the accounting acquirer
and Qwest the acquired entity. As U S WEST was deemed the accounting acquirer,
its historical financial statements have been carried forward as those of the
newly combined company. In connection with the Merger, each outstanding share of
U S WEST common stock was converted into the right to receive 1.72932 shares of
Qwest common stock. In addition, all outstanding U S WEST stock options were
converted into options to acquire Qwest common stock. All share and per share
amounts have been restated to give retroactive effect to the exchange ratio.
The results of operations for Qwest (the acquired entity for accounting
purposes) before the Merger with U S WEST on June 30, 2000, are not reflected in
the accompanying condensed consolidated statements of operations. However, the
following unaudited consolidated pro forma results of operations are presented
assuming the Merger had been completed on January 1, 2000 and have been adjusted
to eliminate the impacts of non-recurring items such as Merger costs, asset
write-offs and impairments, gains/losses on the sale of investments and fixed
assets, changes in the market values of investments, one-time legal charges and
in-region long-distance activity.
ACTUAL PRO FORMA
THREE MONTHS THREE MONTHS ENDED
ENDED MARCH 31,
MARCH 31, -------------------------------------
--------------- INCREASE %
2001 2000 2001 2000 (DECREASE) CHANGE
------ ------ ------ ------ ---------- ------
(DOLLARS IN MILLIONS)
Revenues:
Commercial services......................... $2,749 $1,207 $2,749 $2,173 $576 26.5%
Consumer and small business services........ 1,684 1,466 1,684 1,640 44 2.7
Directory services.......................... 342 347 342 347 (5) (1.4)
Switched access services.................... 276 357 276 357 (81) (22.7)
------ ------ ------ ------ ---- -----
Total revenues...................... 5,051 3,377 5,051 4,517 534 11.8
------ ------ ------ ------ ---- -----
Operating expenses:
Cost of services............................ 1,900 986 1,900 1,624 276 17.0
Selling, general and administrative......... 1,154 883 1,154 1,169 (15) (1.3)
------ ------ ------ ------ ---- -----
EBITDA...................................... 1,997 1,508 1,997 1,724 273 15.8
------ ------ ------ ------ ---- -----
Depreciation................................ 832 586 832 625 207 33.1
Amortization................................ 319 -- 319 317 2 0.6
Merger-related and other one-time charges... 209 15 -- -- -- --
------ ------ ------ ------ ---- -----
Total operating expenses............ 4,414 2,470 4,205 3,735 470 12.6
------ ------ ------ ------ ---- -----
Operating income.............................. 637 907 846 782 64 8.2
Other expense (income):
Interest expense -- net..................... 338 211 338 249 89 35.7
Decline in market value of financial
instruments.............................. 116 129 -- -- -- --
Gain on sale of investments................. -- (79) -- -- -- --
Other expense (income) -- net............... 20 (1) 20 4 16 400.0
------ ------ ------ ------ ---- -----
Total other expense -- net.......... 474 260 358 253 105 41.5
------ ------ ------ ------ ---- -----
Income before income taxes and extraordinary
item........................................ 163 647 488 529 (41) (7.8)
Provision for income taxes.................... 144 243 270 290 (20) (6.9)
------ ------ ------ ------ ---- -----
Income before extraordinary item.............. 19 404 218 239 (21) (8.8)
Extraordinary item -- early retirement of
debt, net of tax............................ (65) -- -- -- -- --
------ ------ ------ ------ ---- -----
Net (loss) income............................. $ (46) $ 404 $ 218 $ 239 $(21) (8.8)%
====== ====== ====== ====== ==== =====
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Because of the significance of the Merger, the comparison of 2001 results
to 2000 results will be based upon the above pro forma results except for
goodwill and other intangible amortization expense and Merger-related and other
one-time charges.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared with the Three Months Ended March
31, 2000
REVENUES
Total revenues for the three months ended March 31, 2001 were $5.051
billion, an increase of $534 million over the comparable period in 2000. Major
contributors to the growth were sales of data, Internet and wireless products
and services. Internet and data services grew by 44% and represented
approximately 25% of our total revenues for the quarter ended March 31, 2001.
Our digital subscriber line customers grew by 51,000 during the first quarter of
2001, up 125% over the comparable quarter of 2000. Increases in other Internet
and data services included Web hosting, dedicated Internet access, virtual
private network and Internet professional services. Wireless products and
services revenue in the first quarter of 2001 grew by $47 million or 45% over
the three months ended March 31, 2000. We added over 100,000 wireless customers
during the quarter.
Commercial services revenues are derived from Internet, data, voice and
wireless products and services provided to both retail and wholesale business
customers. The increase in commercial services revenues for the three months
ended March 31, 2001 was primarily attributable to growth in our data and
Internet services. For the first quarter of 2001, data and Internet services
represented more than 45% of commercial services revenue. We believe revenues
from data products and services will account for an increasingly larger portion
of commercial services revenues in future periods.
Consumer and small business services revenues are derived from sales of
Internet, data, voice and wireless products and services to the consumer and
small business markets. The increase in consumer and small business services
revenues for the three months ended March 31, 2001, was principally attributable
to sales of wireless services and products. The majority of the remaining
increase was primarily attributable to data services revenue. These increases
were impacted by the sales of bundled packages (which includes the phone line
and several calling features) to our small business customers for the three
months ended March 31, 2001, which grew by 117% over the same period in 2000.
Directory services revenues are derived primarily from selling advertising
in our published directories. The decrease in directory services revenues for
the three months ended March 31, 2001 was primarily attributable to a change in
the mix of directories published in the three months ended March 31, 2001 versus
the three months ended March 31, 2000, partially offset by increased advertising
rates.
Switched access services revenues are derived from inter- and intrastate
switched access from Interexchange Carriers ("IXCs"). The decrease in switched
access services revenues for the three months ended March 31, 2001 was
principally attributable to competitive losses and federal access reform that
reduced the rates we are able to collect for the switched access services. This
change, however, was partially offset by increased demand. We believe revenues
from switched access services will continue to be negatively impacted by federal
access reform.
The pending sales of approximately 570,000 access lines for almost $1.8
billion, subject to adjustment, will provide downward pressure on revenue growth
as these sales are finalized. The transfer of ownership of the remaining lines
will occur on a state-by-state basis and is expected to be completed by the
first quarter of 2002. All sales are subject to regulatory approvals and other
customary closing conditions. We expect proceeds generated by the sale of the
access lines to be used to reduce outstanding borrowings.
OPERATING EXPENSES
Cost of services. The increase in cost of services for the three months
ended March 31, 2001 was primarily attributable to an increase in our access
expenses and costs associated with the sales of data and wireless products and
services. Cost of services, as a percent of revenues, increased from 36.0% for
the three
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months ended March 31, 2000 to 37.6% for the three months ended March 31, 2001.
The percentage increase was attributable to an increase in revenues and
investments in high-growth services, the impact of regulatory access reform,
costs associated with improving local service and costs related to the re-entry
into the long-distance business in our 14-state local service area.
Selling, general and administrative. The decrease in selling, general and
administrative expenses for the three months ended March 31, 2001, was primarily
attributable to the reduction in employee costs associated with those staff
positions terminated as a result of the Merger and strict cost controls. The
decrease was offset almost entirely, however, by increased rent expenses
relating to the opening of several CyberCenters in the second half of 2000,
increased bad debt expenses and higher customer service costs. Selling, general
and administrative expenses, as a percentage of revenues, decreased from 25.9%
for the three months ended March 31, 2000, to 22.8% for the three months ended
March 31, 2001. The percentage decrease was primarily attributable to lower
employee costs due to the reduction in headcount associated with the Merger.
Depreciation. The increase in depreciation expense was attributable to
higher overall property, plant and equipment balances resulting from our
continued investment in our network to support increased customer demand. The
investments were made for upgrades to and replacements of existing equipment,
improvements in customer service and installation of equipment required for new
products and services.
Goodwill and other intangible amortization. Amortization expense is
directly attributable to goodwill and other intangibles recorded as a result of
the Merger. The preliminary purchase price allocation associated with tangible
and intangible assets and liabilities was as follows: $8.0 billion to tangible
assets and liabilities, net, $4.1 billion to identified intangibles, including
product technology, customer lists, tradenames and assembled workforce and $27.9
billion to goodwill. The amounts allocated to identifiable intangible assets and
goodwill are being amortized over periods ranging from 3 to 40 years. The
allocation of purchase price is preliminary and may change upon completion of an
appraisal currently being performed on the acquired assets and liabilities of
Qwest. The final purchase price allocation will be completed during the second
quarter of 2001.
Merger-related and other one-time charges. For the quarter ended March 31,
2001, we incurred Merger-related and other one-time charges totaling $209
million. The charge includes $102 million of severance and headcount-related
charges, $56 million of contract settlements and terminations, $10 million of
asset impairments and $41 million of other Merger-related charges. Other
Merger-related charges include professional fees, re-branding costs and other
costs related to the integration of Qwest and U S WEST. Since the Merger, we
have reduced staffing levels by approximately 11,000 employees and contractors,
with approximately 2,500 of this reduction occurring in the first quarter of
2001. The severance charge for the quarter is related to 1,103 employees who
were involuntarily terminated.
We anticipate additional Merger-related expenses will be incurred in the
second quarter of 2001 as we complete our Merger integration efforts. We expect
the majority of the Merger-related accruals will be paid by June 30, 2001.
Other expense (income) -- net. Interest expense was $338 million for the
first quarter of 2001 compared to $249 million for the first quarter of 2000.
The increase in interest expense was primarily attributable to increased
borrowings required to fund the capital improvements to our network and the
repurchase of our shares from BellSouth Corporation ("BellSouth").
For the three months ended March 31, 2001, we recorded a loss of $139
million on our marketable equity securities for other than temporary declines in
value that was partially offset by a $23 million increase in the market value of
our derivative financial instruments. For the three months ended March 31, 2000,
we sold various marketable equity securities resulting in a gain of $79 million.
Also, in the quarter ended March 31, 2000, we experienced a $129 million decline
in the market value of our derivative financial instruments associated with our
investment in Global Crossing, Ltd. ("Global Crossing"). Finally, other expenses
increased during the three months ended March 31, 2001 as compared to the same
period in 2000 as a result of an increase in losses from our investments
accounted for under the equity method.
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Provision for income taxes. The pro forma effective tax rate for the three
months ended March 31, 2001 was 55.3% compared to the pro forma rate of 54.8%
for the three months ended March 31, 2000. Although the rates were consistent
between the two periods, the high effective tax rates were the result of the
non-deductible goodwill amortization.
Extraordinary item -- early retirement of debt. In March 2001, we
completed a tender offer to buy back certain outstanding debt. In the tender, we
repurchased approximately $995 million in principal ($1.2 billion in face value)
of outstanding debt. As a result of the repurchase, we incurred $106 million in
premium payments ($65 million after reduction for $41 million in tax benefits).
Net income. Pro forma net income before the extraordinary item associated
with the early debt retirement decreased from $239 million in the first three
months of 2000 to $218 million during the same period in 2001. This 8.8% drop in
net income was due primarily to increases in interest expense and depreciation
driven by our continued investment in our network.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity and capital resources analysis is based upon actual results.
Consequently, the comparisons of operating, investing and financing activities
for the three months ended March 31, 2001 versus the three months ended March
31, 2000 were significantly impacted by the Merger.
Operating Activities. Cash provided by operations increased to $1.333
billion for the three months ended March 31, 2001 from $807 million for the 2000
comparable period. The change was primarily due to the growth in net income
after adjusting for depreciation and amortization.
Investing Activities. Total capital expenditures were $2.943 billion for
the three months ended March 31, 2001 and $1.277 billion for the three months
ended March 31, 2000. Capital expenditures have been, and continue to be,
focused on the modernization and expansion of our telecommunications network,
expansion of our wireless, local broadband, Internet and data communications
networks, construction of CyberCenters in major markets and service
improvements. In addition, as part of our continuing effort to expand our global
operating capabilities, principally in Asia and Europe, we entered into several
indefeasible right of use ("IRU") agreements with major network providers during
the first quarter. These agreements provide us with the right, among other
things, to network capacity on specific routes at current market rates for
periods of 20 to 25 years. Several of these carriers also acquired network
inventory, principally in the United States, from us during the quarter in
separate transactions at fair market rates. These transactions are accounted for
separately as purchases of property, plant and equipment used in our operations
and as sales of inventory.
Future cash needs could be impacted with the pursuit of new business
opportunities, including the acceleration of the deployment of additional and/or
advanced new services to customers, such as broadband data, wireless and video
services. In addition, the expansion and upgrades of our network and the
construction of CyberCenters could effect our future cash requirements. We
expect that such cash needs, if any, will be funded through operations, the sale
of assets and, when necessary, the issuance of debt.
Financing Activities. Cash provided by financing activities was $1.841
billion and cash used for financing operations was $793 million for the three
months ended March 31, 2001 and 2000, respectively. In 2001, we increased
long-term borrowings to repay outstanding commercial paper. Commercial paper
balances, net, increased and commercial paper has been used to finance the
acquisition of telecommunications equipment for the upgrade and expansion of our
network. During the quarter, we reacquired 22.22 million shares of our common
stock from BellSouth.
In March 2001, we completed a cash tender offer to buy back certain
outstanding debt. In the tender offer, we repurchased approximately $995 million
in principal ($1.2 billion in face value) of outstanding debt. As a result of
the repurchase, we incurred $106 million in premium payments ($65 million after
reduction of $41 million in tax benefits).
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No dividends were paid on common stock in the three months ended March 31,
2001 compared to $271 million in the comparable 2000 period. The decline was due
to a change in the dividend policy after the Merger. On May 2, 2001, our Board
of Directors approved a dividend of five cents per share on our common stock
payable on June 29, 2001 to shareholders of record as of the close of business
on June 1, 2001, in satisfaction of any prior statement by us in connection with
or following the Merger regarding the payment or declaration of dividends.
We maintain commercial paper programs to finance purchases of
telecommunications equipment. As of March 31, 2001, we had a $4.0 billion
syndicated credit facility to support our commercial paper programs. On May 4,
2001, we successfully completed the renewal of this $4.0 billion credit facility
that will now expire on May 3, 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from changes in interest rates. The
objective of our interest rate risk management program is to manage the level
and volatility of our interest expense. We may employ derivative financial
instruments to manage our interest rate risk exposure. We may employ financial
derivatives to hedge foreign currency exposures associated with particular debt.
As of March 31, 2001 and December 31, 2000, approximately $2.9 billion and
$2.4 billion, respectively, of floating-rate debt was exposed to changes in
interest rates. This exposure is linked to commercial paper rates and London
Interbank Offered Rates ("LIBOR"). A hypothetical increase of one-percentage
point in commercial paper rates and LIBOR would increase annual pre-tax interest
expense by $29 million. As of March 31, 2001 and December 31, 2000, we also had
approximately $1.3 billion and $1.2 billion, respectively, of long-term fixed
rate debt obligations maturing in the following 12 months. Any new debt obtained
to refinance this debt would be exposed to changes in interest rates. A
hypothetical 10% change in the interest rates on this debt would not have had a
material effect on our earnings.
As of March 31, 2001 and December 31, 2000, we had entered into
cross-currency swaps with notional amounts of $133 million. The cross-currency
swaps synthetically transform $86 million and $93 million of Swiss Franc
borrowings at March 31, 2001 and December 31, 2000, respectively, into U.S.
dollar obligations. Any cross-currency swap gains (losses) from changes in
foreign currency would be offset by losses (gains) on the Swiss Franc debt
obligations, and would have no impact on our results of operations or financial
position.
As of March 31, 2001 and December 31, 2000, we had entered into equity
swaps with notional amounts of $544 million and $761 million relating to the
sale of 16 million and 24 million shares, respectively, of Global Crossing
common stock we previously owned. Of the 24 million shares subject to equity
swaps, one-third matured in February of 2001 leaving equity swaps on 16 million
shares. In connection with the remaining equity swaps, we have equity collars on
8 million shares. The equity collars restrict the magnitude of any gains or
losses generated by the equity swaps on the collared shares. A hypothetical 10%
reduction in the market price of Global Crossing common shares, based upon the
market price of $13.49 at March 31, 2001, would not have had a material effect
on our earnings. The remaining equity swaps will mature in equal increments in
May and August 2001.
Our equity investments in other publicly traded companies consists of the
following (dollars in millions):
MARCH 31, 2001 DECEMBER 31, 2000
- ------------------------------------------- -------------------------------------------
UNREALIZED UNREALIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE COST GAINS LOSSES FAIR VALUE
- ---- ---------- ---------- ---------- ---- ---------- ---------- ----------
$111 $4 $(95) $20 $90 $30 $(62) $58
==== == ==== === === === ==== ===
The estimated potential loss in fair value resulting from a hypothetical
10% decrease in the March 31, 2001 prices quoted by stock exchanges would
decrease the fair value of our equity investments by $2 million.
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RECENT REGULATORY DEVELOPMENTS
As a general matter, we are subject to substantial regulation, including
requirements and restrictions arising under the Telecommunication Act of 1996
(the "Act") and state utility laws, and the rules and policies of the Federal
Communications Commission ("FCC"), state Public Utility Commissions ("PUCs") and
other governmental entities. This regulation, among other matters, currently
prohibits us (with certain exceptions) from providing retail or wholesale
interLATA telecommunications services within our 14-state local service area,
and governs the terms and conditions under which we provide services to our
customers (including competing Competitive Local Exchange Carriers ("CLECs") and
IXCs in our local service area).
Interconnection. The FCC is continuing to interpret the obligations of
incumbent local exchange carriers ("ILECs") under the Act to interconnect their
networks with, and make unbundled network elements available to, CLECs. These
decisions establish our obligations in our local service area, and our rights
when we compete outside of our local service area. In addition, the United
States Supreme Court is now considering an appeal from a ruling of the Eighth
Circuit Court of Appeals that the FCC's rules for the pricing of interconnection
and unbundled network elements by ILECs unlawfully preclude ILECs from
recovering their actual costs as required by the Act.
Access Pricing. The FCC has initiated a number of proceedings that
directly affect the rates and charges for access services that we sold or
purchased. It is expected that these proceedings and related implementation of
resulting FCC decisions will continue through 2002.
On May 31, 2000, the FCC adopted the access reform and universal service
plan developed by the Coalition for Affordable Local and Long-Distance Service
("CALLS"). The adoption of the CALLS proposal resolved many outstanding issues
before the FCC including: the court remand of the 6.5% productivity factor; the
treatment of implicit universal service support; the treatment of low-volume
long-distance users; and the next scheduled price cap review. The CALLS plan has
a five year life and provides for the following: elimination of the residential
presubscribed interexchange carrier charge; increases in subscriber line
charges; reductions in switched access usage rates; the removal of certain
implicit universal service support from access charges and direct recovery from
end users; and commitments from participating IXCs to pass through access charge
reductions to end users. We have opted into the five-year CALLS plan.
Advanced Telecommunications Services. On two separate occasions the FCC
has ruled that advanced services provided by an ILEC are covered by those
provisions of the Act that govern telephone exchange and exchange access
services. We have challenged this finding, contending that advanced services fit
within neither category and are not properly treated as exchange services. On
April 20, 2001, the Court of Appeals vacated and remanded to the FCC its
classification of DS2-based advanced services.
InterLATA Long-Distance Entry. Several Regional Bell Operating Companies
("RBOCs") have filed for entry into the interLATA long-distance business.
Although many of these applications have been supported by state PUCs, the FCC
had rejected all applications until December 1999. As of March 31, 2001,
long-distance authority has been granted in the states of New York, Kansas,
Oklahoma, Texas and Massachusetts.
We filed applications with all of our local service area state PUCs for
support of our planned applications to the FCC for authority to enter the
interLATA long-distance business. Workshops and related proceedings are underway
at the state level to evaluate our satisfaction of requirements under the Act
that must be met in order for an RBOC to obtain long-distance authority. We have
agreed to test operational support systems on a regional basis in thirteen
states, and testing of those systems began in March 2001. Testing in Arizona is
being conducted separately, and began in February 2001. We expect to file FCC
applications in the majority, if not all, of our local service area states by
the end of 2001.
CONTINGENCIES
We have certain pending regulatory actions. See Note 6 to the condensed
consolidated financial statements.
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NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 requires, among other things, that all derivative
instruments be recognized at fair value as assets or liabilities in the
consolidated balance sheets and changes in fair value to be generally recognized
currently in earnings unless specific hedge accounting criteria are met. We
adopted SFAS No. 133 on January 1, 2001 and it did not have a material impact on
our consolidated financial results.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and the extinguishment of liabilities. SFAS No.
140 requires that after a transfer of financial assets, an entity continues to
recognize the financial and servicing assets it controls and the liabilities it
has incurred and does not recognize those financial and servicing assets when
control has been surrendered and the liability has been extinguished. SFAS No.
140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. The effect on our
consolidated financial results is currently being determined.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Qwest and its subsidiaries are subject to claims and proceedings arising in
the ordinary course of business. For a discussion of these actions, see Note 6:
"Commitments and Contingencies" -- to the condensed consolidated financial
statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed for Qwest through the filing of this Form 10-Q.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(2.1) -- Separation Agreement, dated June 5, 1998, between U S
WEST, Inc. (renamed "MediaOne Group, Inc.") ("MediaOne
Group") and USW-C, Inc (renamed U S WEST, Inc.) ("U S
WEST"), (incorporated by reference to U S WEST's Current
Report on Form 8-K/A dated June 26, 1998, File No.
1-14087).
(2.2) -- Amendment to the Separation Agreement between MediaOne
Group and U S WEST dated June 12, 1998 (incorporated by
reference to U S WEST's Annual Report on Form 10-K/A for
the year ended December 31, 1998, File No. 1-14087).
(3.1) -- Amended and Restated Certificate of Incorporation of
Qwest (incorporated by reference to Qwest's Registration
Statement on Form S-4/A, File No. 333-81149, filed
September 17, 1999).
(3.2) -- Amended and Restated Bylaws of Qwest.
(4.1)*** -- Indenture, dated as of October 15, 1997, with Bankers
Trust Company (including form of Qwest's 9.47% Senior
Discount Notes due 2007 and 9.47% Series B Senior
Discount Notes due 2007 as an exhibit thereto).
(4.2)**** -- Indenture dated, as of August 28, 1997, with Bankers
Trust Company (including form of Qwest's 10 7/8% Series B
Senior Discount Notes due 2007 as an exhibit thereto).
(4.3)**** -- Indenture dated as of January 29, 1998 with Bankers Trust
Company (including form of Qwest's 8.29% Senior Discount
Notes due 2008 and 8.29% Series B Senior Discount Notes
due 2008 as an exhibit thereto).
(4.4) -- Indenture, dated as of November 4, 1998, with Bankers
Trust Company (including form of Qwest's 7.50% Senior
Discount Notes due 2008 and 7.50% Series B Senior
Discount Notes due 2008 as an exhibit thereto)
(incorporated by reference to Qwest's Registration
Statement on Form S-4, File No. 333-71603, filed February
2, 1999).
(4.5) -- Indenture, dated as of November 27, 1998, with Bankers
Trust Company (including form of Qwest's 7.25% Senior
Discount Notes due 2008 and 7.25% Series B Senior
Discount Notes due 2008 as an exhibit thereto)
(incorporated by reference to Qwest's Registration
Statement on Form S-4, File No. 333-71603, filed February
2, 1999).
(4.6) -- Registration Agreement, dated November 27, 1998, with
Salomon Brothers Inc. relating to Qwest's 7.25% Senior
Discount Notes due 2008 (incorporated by reference to
Qwest's Registration Statement on Form S-4, File No.
333-71603, filed February 2, 1999).
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
(4.7) -- Indenture, dated as of June 23, 1997, between LCI
International, Inc. and First Trust National Association,
as trustee, providing for the issuance of Senior Debt
Securities, including Resolutions of the Pricing
Committee of the Board of Directors establishing the
terms of the 7.25% Senior Notes due June 15, 2007
(incorporated by reference to Exhibit 4(c) in LCI's
Current Report on Form 8-K, dated June 23, 1997).
(4.8) -- Registration Rights Agreement, dated August 20, 1999,
between U S WEST Capital Funding, Inc., U S WEST, Inc.,
J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (incorporated by reference to
U S WEST's Form S-4 Registration Statement, File No.
333-92523, filed December 10, 1999).
(4.9) -- Indenture, dated as of June 29, 1998, by and among U S
WEST Capital Funding, Inc., U S WEST, Inc., and The First
National Bank of Chicago (now known as Bank One Trust
Company, National Association), as Trustee (incorporated
by reference to U S WEST's Current Report on Form 8-K,
dated November 18, 1998, File No. 1-14087).
(4.10) -- First Supplemental Indenture, dated as of June 30, 2000,
by and among U S WEST Capital Funding, Inc., U S WEST,
Inc., Qwest Communications International Inc., and Bank
One Trust Company, as Trustee (incorporated by reference
to Qwest's quarterly report on Form 10-Q for the quarter
ended June 30, 2000).
4.11 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture dated as of January 29, 1998 with Bankers
Trust Company (including form of Qwest's 8.29% Senior
Discount Notes due 2008 and 8.29% Series B Senior
Discount Notes due 2008 as an exhibit thereto).
4.12 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture, dated as of October 15, 1997, with Bankers
Trust Company (including form of Qwest's 9.47% Senior
Discount Notes due 2007 and 9.47% Series B Senior
Discount Notes due 2007 as an exhibit thereto).
4.13 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture dated, as of August 28, 1997, with Bankers
Trust Company (including form of Qwest's 10 7/8% Series B
Senior Discount Notes due 2007 as an exhibit thereto).
(10.1)** -- Growth Share Plan, as amended, effective October 1,
1996.*
(10.2) -- Equity Incentive Plan, as amended (incorporated by
reference from Exhibit A to Qwest's definitive proxy
statement on Schedule 14A, filed March 17, 2000).*
(10.3) -- Qwest Communications International Inc. Employee Stock
Purchase Plan. (incorporated by reference to Qwest's 2001
Proxy Statement for the Annual Meeting of Stockholders).*
(10.4) -- Qwest Communications International Inc. Deferred
Compensation Plan (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 1998).*
(10.5)**** -- Equity Compensation Plan for Non-Employee Directors.*
(10.6) -- Qwest Communications International Inc. 401-K Plan
(incorporated by reference to Qwest's Annual Report on
Form 10-K for the year ended December 31, 1998).*
(10.7)** -- Employment Agreement dated December 21, 1996 with Joseph
P. Nachio.*
(10.8)**** -- Growth Share Plan Agreement with Joseph P. Nacchio,
effective January 1, 1997, and Amendment thereto.*
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
(10.9)**** -- Non-Qualified Stock Option Agreement with Joseph P.
Nacchio, effective June 23, 1997.*
(10.11) -- Employment Agreement dated October 6, 1998 with Drake S.
Tempest (incorporated by reference to Qwest's Annual
Report on Form 10-K for the year ended December 31,
2000).*
(10.13) -- Employment Agreement dated May 20, 1999 with Afshin
Mohebbi (incorporated by reference to Qwest's Annual
Report on Form 10-K for the year ended December 31,
2000).*
(10.14)**** -- Employment Agreement dated October 8, 1997 with Lewis O.
Wilks.*
(10.15)**# -- IRU Agreement dated as of October 18, 1996 with Frontier
Communications International Inc.
(10.16)**# -- IRU Agreement dated as of February 26, 1996 with WorldCom
Network Services, Inc.
(10.17)**# -- IRU Agreement dated as of May 2, 1997 with GTE.
(10.20) -- Registration Rights Agreement, dated as of April 18,
1999, with Anschutz Company and Anschutz Family
Investment Company LLC (incorporated by reference to
Qwest's Current Report on Form 8-K/A, filed April 28,
1999).
(10.21) -- Common Stock Purchase Agreement, dated as of April 19,
1999, with BellSouth Enterprises, Inc. (incorporated by
reference to Qwest's Current Report on Form 8-K/A, filed
April 28, 1999).
(10.22) -- Registration Rights Agreement, dated as of April 19,
1999, with BellSouth Enterprises, Inc. (incorporated by
reference to Qwest's Current Report on Form 8-K/A, filed
April 28, 1999).
(10.23) -- Securities Purchase Agreement dated January 16, 2001 with
BellSouth Corporation (incorporated by reference to
Qwest's Annual Report on Form 10-K for the year ended
December 31, 2000).
(10.24) -- Purchase Agreement by and among Qwest, Slingshot
Networks, LLC and Anschutz Digital Media, Inc., dated
September 26, 1999 (incorporated by reference to Qwest's
quarterly report on Form 10-Q for the quarter ended
September 30, 1999).
(10.25) -- Unit Purchase Agreement, dated June 21, 2000, by and
among U.S. Telesource, Inc. and Anschutz Digital Media,
Inc. (incorporated by reference to Qwest's quarterly
report on form 10-Q for the quarter ended June 30, 2000).
(10.26) -- Second Amended and Restated Operating Agreement of
Slingshot Networks, LLC entered into as of June 21, 2000
between Anschutz Digital Media, Inc. and U.S. Telesource,
Inc. (incorporated by reference to Qwest's quarterly
report on Form 10-Q for the quarter ended June 30, 2000).
(10.27) -- Employee Matters Agreement between MediaOne Group and U S
WEST, dated June 5, 1998 (incorporated by reference to U
S WEST's Current Report on Form 8-K/A, dated June 26,
1998, File No. 1-14087).
(10.28) -- Tax Sharing Agreement between MediaOne Group and U S
WEST, dated June 5, 1998 (incorporated by reference to
U S WEST's Current Report on Form 8-K/A, dated June 26,
1998, File No. 1-14087).
(10.30) -- Purchase Agreement, dated July 3, 2000, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc. and Salomon Smith Barney Inc. (incorporated by
reference to Qwest's quarterly report on Form 10-Q for
the quarter ended June 30, 2000).
20
23
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(10.31) -- Purchase Agreement, dated August 16, 2000, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc., Salomon Smith Barney Inc. and Lehman Brothers Inc.
as Representatives of the several initial purchasers
listed therein (incorporated by reference to Qwest's
quarterly report on Form 10-Q for the quarter ended
September 30, 2000).
(10.32) -- Registration Rights Agreement, dated August 16, 2000,
among Qwest Capital Funding, Inc., Qwest Communications
International Inc., Salomon Smith Barney Inc. and Lehman
Brothers Inc. as Representatives of the several initial
purchasers listed therein (incorporated by reference to
Qwest's quarterly report on Form 10-Q for the quarter
ended September 30, 2000).
(10.33) -- Purchase Agreement, dated February 7, 2001, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc., Banc of America Securities LLC and Chase Securities
Inc. as Representatives of the several initial purchasers
listed therein (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 2000).
(10.34) -- Registration Rights Agreement, dated February 14, 2001,
among Qwest Capital Funding, Inc., Qwest Communications
International Inc., Banc of America Securities LLC and
Chase Securities Inc. as Representatives of the several
initial purchasers listed therein (incorporated by
reference to Qwest's Annual Report on Form 10-K for the
year ended December 31, 2000).
(10.35) -- Form of Agreement for Purchase and Sale of Telephone
Exchanges, dated as of June 16, 1999, between Citizens
Utilities Company and U S WEST Communications, Inc.
(incorporated by reference to U S WEST's Current Report
on Form 8-K, dated June 17, 1999, File No. 1-14087).
(10.36) -- Qwest Communications International Inc., Deferred
Compensation Plan for Nonemployee Directors, effective as
of July 1, 2000 (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 2000).*
(10.37) -- Amended and Restated Qwest Digital Media, LLC Growth
Share Plan (as of June 1, 2000) (incorporated by
reference to Qwest's Annual Report on Form 10-K for the
year ended December 31, 2000).*
10.38 -- 364-Day $4.0 billion Credit Agreement, dated as of May 4,
2001, among Qwest Capital Funding, Inc., Qwest
Corporation, Qwest Communications International Inc., the
banks listed therein and Bank of America, N.A., as
administrative agent.
(99) -- Annual Report on Form 11-K for the U S WEST Savings
Plan/ESOP for the year ended December 31, 1999
(incorporated by reference to U S WEST's Annual Report on
Form 10-K, File No. 1-14087, Paper Copy (P)).
- ---------------
( ) Previously filed.
* Executive Compensation Plans and Arrangements.
** Incorporated by reference in Form S-1 as declared effective on June 23,
1997 (File No. 333-25391).
*** Incorporated by reference to exhibit 4.1 in Form S-4 as declared effective
on January 5, 1998 (File No. 333-42847).
**** Incorporated by reference in Qwest's Form 10-K for the year ended December
31, 1997.
# Portions have been omitted pursuant to a request for confidential
treatment.
21
24
(b) Reports on Form 8-K:
(i) On January 25, 2001, Qwest filed a report on Form 8-K regarding
its 2000 fourth quarter and full year results of operations.
(ii) On February 27, 2001, Qwest filed a report on Form 8-K regarding
two speeches made by its chief executive officer.
(iii) On March 15, 2001, Qwest filed a report on Form 8-K regarding a
speech made by its president of worldwide operations.
(iv) On March 22, 2001, Qwest filed a report on Form 8-K regarding
statements made by its chief executive officer.
(v) On March 29, 2001, Qwest filed a report on Form 8-K regarding a
speech by its president of worldwide operations.
22
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ ROBIN R. SZELIGA
-------------------------------------
Robin R. Szeliga
Executive Vice President and
Chief Financial Officer
May 15, 2001
23
26
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(2.1) -- Separation Agreement, dated June 5, 1998, between U S
WEST, Inc. (renamed "MediaOne Group, Inc.") ("MediaOne
Group") and USW-C, Inc (renamed U S WEST, Inc.) ("U S
WEST"), (incorporated by reference to U S WEST's Current
Report on Form 8-K/A dated June 26, 1998, File No.
1-14087).
(2.2) -- Amendment to the Separation Agreement between MediaOne
Group and U S WEST dated June 12, 1998 (incorporated by
reference to U S WEST's Annual Report on Form 10-K/A for
the year ended December 31, 1998, File No. 1-14087).
(3.1) -- Amended and Restated Certificate of Incorporation of
Qwest (incorporated by reference to Qwest's Registration
Statement on Form S-4/A, File No. 333-81149, filed
September 17, 1999).
(3.2) -- Amended and Restated Bylaws of Qwest.
(4.1)*** -- Indenture, dated as of October 15, 1997, with Bankers
Trust Company (including form of Qwest's 9.47% Senior
Discount Notes due 2007 and 9.47% Series B Senior
Discount Notes due 2007 as an exhibit thereto).
(4.2)**** -- Indenture dated, as of August 28, 1997, with Bankers
Trust Company (including form of Qwest's 10 7/8% Series B
Senior Discount Notes due 2007 as an exhibit thereto).
(4.3)**** -- Indenture dated as of January 29, 1998 with Bankers Trust
Company (including form of Qwest's 8.29% Senior Discount
Notes due 2008 and 8.29% Series B Senior Discount Notes
due 2008 as an exhibit thereto).
(4.4) -- Indenture, dated as of November 4, 1998, with Bankers
Trust Company (including form of Qwest's 7.50% Senior
Discount Notes due 2008 and 7.50% Series B Senior
Discount Notes due 2008 as an exhibit thereto)
(incorporated by reference to Qwest's Registration
Statement on Form S-4, File No. 333-71603, filed February
2, 1999).
(4.5) -- Indenture, dated as of November 27, 1998, with Bankers
Trust Company (including form of Qwest's 7.25% Senior
Discount Notes due 2008 and 7.25% Series B Senior
Discount Notes due 2008 as an exhibit thereto)
(incorporated by reference to Qwest's Registration
Statement on Form S-4, File No. 333-71603, filed February
2, 1999).
(4.6) -- Registration Agreement, dated November 27, 1998, with
Salomon Brothers Inc. relating to Qwest's 7.25% Senior
Discount Notes due 2008 (incorporated by reference to
Qwest's Registration Statement on Form S-4, File No.
333-71603, filed February 2, 1999).
(4.7) -- Indenture, dated as of June 23, 1997, between LCI
International, Inc. and First Trust National Association,
as trustee, providing for the issuance of Senior Debt
Securities, including Resolutions of the Pricing
Committee of the Board of Directors establishing the
terms of the 7.25% Senior Notes due June 15, 2007
(incorporated by reference to Exhibit 4(c) in LCI's
Current Report on Form 8-K, dated June 23, 1997).
(4.8) -- Registration Rights Agreement, dated August 20, 1999,
between U S WEST Capital Funding, Inc., U S WEST, Inc.,
J.P. Morgan Securities, Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (incorporated by reference to
U S WEST's Form S-4 Registration Statement, File No.
333-92523, filed December 10, 1999).
27
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(4.9) -- Indenture, dated as of June 29, 1998, by and among U S
WEST Capital Funding, Inc., U S WEST, Inc., and The First
National Bank of Chicago (now known as Bank One Trust
Company, National Association), as Trustee (incorporated
by reference to U S WEST's Current Report on Form 8-K,
dated November 18, 1998, File No. 1-14087).
(4.10) -- First Supplemental Indenture, dated as of June 30, 2000,
by and among U S WEST Capital Funding, Inc., U S WEST,
Inc., Qwest Communications International Inc., and Bank
One Trust Company, as Trustee (incorporated by reference
to Qwest's quarterly report on Form 10-Q for the quarter
ended June 30, 2000).
4.11 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture dated as of January 29, 1998 with Bankers
Trust Company (including form of Qwest's 8.29% Senior
Discount Notes due 2008 and 8.29% Series B Senior
Discount Notes due 2008 as an exhibit thereto).
4.12 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture, dated as of October 15, 1997, with Bankers
Trust Company (including form of Qwest's 9.47% Senior
Discount Notes due 2007 and 9.47% Series B Senior
Discount Notes due 2007 as an exhibit thereto).
4.13 -- First Supplemental Indenture dated February 16, 2001, to
the Indenture dated, as of August 28, 1997, with Bankers
Trust Company (including form of Qwest's 10 7/8% Series B
Senior Discount Notes due 2007 as an exhibit thereto).
(10.1)** -- Growth Share Plan, as amended, effective October 1,
1996.*
(10.2) -- Equity Incentive Plan, as amended (incorporated by
reference from Exhibit A to Qwest's definitive proxy
statement on Schedule 14A, filed March 17, 2000).*
(10.3) -- Qwest Communications International Inc. Employee Stock
Purchase Plan. (incorporated by reference to Qwest's 2001
Proxy Statement for the Annual Meeting of Stockholders).*
(10.4) -- Qwest Communications International Inc. Deferred
Compensation Plan (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 1998).*
(10.5)**** -- Equity Compensation Plan for Non-Employee Directors.*
(10.6) -- Qwest Communications International Inc. 401-K Plan
(incorporated by reference to Qwest's Annual Report on
Form 10-K for the year ended December 31, 1998).*
(10.7)** -- Employment Agreement dated December 21, 1996 with Joseph
P. Nachio.*
(10.8)**** -- Growth Share Plan Agreement with Joseph P. Nacchio,
effective January 1, 1997, and Amendment thereto.*
(10.9)**** -- Non-Qualified Stock Option Agreement with Joseph P.
Nacchio, effective June 23, 1997.*
(10.11) -- Employment Agreement dated October 6, 1998 with Drake S.
Tempest (incorporated by reference to Qwest's Annual
Report on Form 10-K for the year ended December 31,
2000).*
(10.13) -- Employment Agreement dated May 20, 1999 with Afshin
Mohebbi (incorporated by reference to Qwest's Annual
Report on Form 10-K for the year ended December 31,
2000).*
(10.14)**** -- Employment Agreement dated October 8, 1997 with Lewis O.
Wilks.*
(10.15)**# -- IRU Agreement dated as of October 18, 1996 with Frontier
Communications International Inc.
28
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(10.16)**# -- IRU Agreement dated as of February 26, 1996 with WorldCom
Network Services, Inc.
(10.17)**# -- IRU Agreement dated as of May 2, 1997 with GTE.
(10.20) -- Registration Rights Agreement, dated as of April 18,
1999, with Anschutz Company and Anschutz Family
Investment Company LLC (incorporated by reference to
Qwest's Current Report on Form 8-K/A, filed April 28,
1999).
(10.21) -- Common Stock Purchase Agreement, dated as of April 19,
1999, with BellSouth Enterprises, Inc. (incorporated by
reference to Qwest's Current Report on Form 8-K/A, filed
April 28, 1999).
(10.22) -- Registration Rights Agreement, dated as of April 19,
1999, with BellSouth Enterprises, Inc. (incorporated by
reference to Qwest's Current Report on Form 8-K/A, filed
April 28, 1999).
(10.23) -- Securities Purchase Agreement dated January 16, 2001 with
BellSouth Corporation (incorporated by reference to
Qwest's Annual Report on Form 10-K for the year ended
December 31, 2000).
(10.24) -- Purchase Agreement by and among Qwest, Slingshot
Networks, LLC and Anschutz Digital Media, Inc., dated
September 26, 1999 (incorporated by reference to Qwest's
quarterly report on Form 10-Q for the quarter ended
September 30, 1999).
(10.25) -- Unit Purchase Agreement, dated June 21, 2000, by and
among U.S. Telesource, Inc. and Anschutz Digital Media,
Inc. (incorporated by reference to Qwest's quarterly
report on form 10-Q for the quarter ended June 30, 2000).
(10.26) -- Second Amended and Restated Operating Agreement of
Slingshot Networks, LLC entered into as of June 21, 2000
between Anschutz Digital Media, Inc. and U.S. Telesource,
Inc. (incorporated by reference to Qwest's quarterly
report on Form 10-Q for the quarter ended June 30, 2000).
(10.27) -- Employee Matters Agreement between MediaOne Group and U S
WEST, dated June 5, 1998 (incorporated by reference to U
S WEST's Current Report on Form 8-K/A, dated June 26,
1998, File No. 1-14087).
(10.28) -- Tax Sharing Agreement between MediaOne Group and U S
WEST, dated June 5, 1998 (incorporated by reference to
U S WEST's Current Report on Form 8-K/A, dated June 26,
1998, File No. 1-14087).
(10.30) -- Purchase Agreement, dated July 3, 2000, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc. and Salomon Smith Barney Inc. (incorporated by
reference to Qwest's quarterly report on Form 10-Q for
the quarter ended June 30, 2000).
(10.31) -- Purchase Agreement, dated August 16, 2000, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc., Salomon Smith Barney Inc. and Lehman Brothers Inc.
as Representatives of the several initial purchasers
listed therein (incorporated by reference to Qwest's
quarterly report on Form 10-Q for the quarter ended
September 30, 2000).
(10.32) -- Registration Rights Agreement, dated August 16, 2000,
among Qwest Capital Funding, Inc., Qwest Communications
International Inc., Salomon Smith Barney Inc. and Lehman
Brothers Inc. as Representatives of the several initial
purchasers listed therein (incorporated by reference to
Qwest's quarterly report on Form 10-Q for the quarter
ended September 30, 2000).
29
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(10.33) -- Purchase Agreement, dated February 7, 2001, among Qwest
Capital Funding, Inc., Qwest Communications International
Inc., Banc of America Securities LLC and Chase Securities
Inc. as Representatives of the several initial purchasers
listed therein (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 2000).
(10.34) -- Registration Rights Agreement, dated February 14, 2001,
among Qwest Capital Funding, Inc., Qwest Communications
International Inc., Banc of America Securities LLC and
Chase Securities Inc. as Representatives of the several
initial purchasers listed therein (incorporated by
reference to Qwest's Annual Report on Form 10-K for the
year ended December 31, 2000).
(10.35) -- Form of Agreement for Purchase and Sale of Telephone
Exchanges, dated as of June 16, 1999, between Citizens
Utilities Company and U S WEST Communications, Inc.
(incorporated by reference to U S WEST's Current Report
on Form 8-K, dated June 17, 1999, File No. 1-14087).
(10.36) -- Qwest Communications International Inc., Deferred
Compensation Plan for Nonemployee Directors, effective as
of July 1, 2000 (incorporated by reference to Qwest's
Annual Report on Form 10-K for the year ended December
31, 2000).*
(10.37) -- Amended and Restated Qwest Digital Media, LLC Growth
Share Plan (as of June 1, 2000) (incorporated by
reference to Qwest's Annual Report on Form 10-K for the
year ended December 31, 2000).*
10.38 -- 364-Day $4.0 billion Credit Agreement, dated as of May 4,
2001, among Qwest Capital Funding, Inc., Qwest
Corporation, Qwest Communications International Inc., the
banks listed therein and Bank of America, N.A., as
administrative agent.
(99) -- Annual Report on Form 11-K for the U S WEST Savings
Plan/ESOP for the year ended December 31, 1999
(incorporated by reference to U S WEST's Annual Report on
Form 10-K, File No. 1-14087, Paper Copy (P)).
- ---------------
( ) Previously filed.
* Executive Compensation Plans and Arrangements.
** Incorporated by reference in Form S-1 as declared effective on June 23,
1997 (File No. 333-25391).
*** Incorporated by reference to exhibit 4.1 in Form S-4 as declared effective
on January 5, 1998 (File No. 333-42847).
**** Incorporated by reference in Qwest's Form 10-K for the year ended December
31, 1997.
# Portions have been omitted pursuant to a request for confidential
treatment.