EXHIBIT 99.1
Press release dated April 24, 2001.
ride the light
Qwest [graphic logo omitted] NEWS
QWEST COMMUNICATIONS REPORTS STRONG FIRST QUARTER 2001
RESULTS DRIVEN BY GROWTH IN COMMERCIAL, INTERNET AND DATA REVENUES
Quarterly Revenue Grew Nearly 12 Percent Over Pro Forma 2000; EBITDA Growth of
Nearly 16 Percent; Met or Exceeded Consensus of Analysts' Estimates for Revenue,
EBITDA and EPS
First Quarter Results Compared to Pro Forma First Quarter 2000:
o Total revenue grew nearly 12 percent to $5.05 billion
o Internet and data services revenue grew 44 percent and represents
approximately 25 percent of total revenue and more than 45 percent
of commercial revenue
o Commercial revenue increased more than 26 percent
o Total EBITDA grew nearly 16 percent to $2 billion
o EBITDA margins increased 130 basis points from 38.2 percent to 39.5
percent
Operational Results:
o DSL customers grew 125 percent over first quarter 2000 to more than
306,000
o Wireless customers grew to approximately 908,000
o Activated 15th U.S. CyberCenter(sm) in Dallas for hosting and
managed applications
o Achieved best service performance results in five to seven years
o Since the acquisition of U S WEST, revenue per employee increased
from $249,000 to $310,000, a 24 percent improvement in productivity
o Achieved significant milestones for accelerated re-entry into the
long-distance business in 14 Western states
DENVER, APRIL 24, 2001 -- Qwest Communications International Inc. (NYSE: Q), the
broadband Internet communications company, today announced record revenue and
earnings before interest, taxes, depreciation and amortization (EBITDA) for the
first quarter of 2001. Total first quarter revenue of $5.05 billion was an 11.8
percent increase versus pro forma normalized first quarter 2000 revenue. First
quarter EBITDA grew 15.8 percent to $2 billion. In addition, Qwest recorded pro
forma normalized earnings per diluted share of $0.13 for the quarter. Qwest has
met or exceeded the consensus of analysts' estimates for the sixteenth
consecutive quarter.
"We are extremely pleased with the results the Qwest team achieved during the
quarter. With our unique blend of assets, Qwest is well positioned for future
growth across all segments of the communications marketplace," said Joseph P.
Nacchio, Qwest's chairman and CEO. "We believe the industry will continue to
provide solid growth opportunities in 2001, especially for our broadband
Internet and data services. Qwest is well positioned to take advantage of that
growth at the local, national and global level."
The total revenue increase was driven by Internet and data services growth of 44
percent as demand for Qwest services remains robust. Digital subscriber line
(DSL) growth remained strong with an increase of more than 125 percent annually
to more than 306,000 customers. Commercial services revenues increased 26.5
percent to $2.7 billion as Qwest continued to focus on the broadband Internet
and data needs of enterprise and wholesale customers. The company's small
business and consumer units recorded services revenue growth of 6.3 percent, or
2.7 percent including out-of-region long-distance results.
First quarter EBITDA grew 15.8 percent to $2 billion as EBITDA margins expanded
130 basis points from 38.2 percent in first quarter 2000 to 39.5 percent in
first quarter 2001. This increase in EBITDA margin resulted from continued tight
cost controls and productivity improvements, as well as merger-related
synergies.
Compared to first quarter 2000, gross margin decreased from 64.0 percent to 62.4
percent in the first quarter of 2001. Factors contributing to the decrease in
gross margin include the increase in revenues and investments in high-growth
services; the impact of regulatory access reform; and costs related to re-entry
into the long-distance business in Qwest's 14- state local service area. The
company expects gross margins to remain near the current level through the end
of 2001.
Selling, general and administrative costs (SG&A) improved as a percentage of
revenue from 25.9 percent in the first quarter of 2000 to 22.9 percent for first
quarter of 2001. SG&A improvements resulted from strict cost controls and a
reduction in payroll and employee-related expenses. Since the acquisition of U S
WEST on June 30, 2000, annual revenue per employee increased from $249,000 to
$310,000, representing a 24 percent increase in productivity.
"We are very pleased with our strong operating and financial results for the
quarter. This solid performance positions us well to achieve our growth rates
for 2001," said Robin R. Szeliga, Qwest executive vice president and CFO. "We
achieved strong revenue and EBITDA growth for the quarter as our focus on
execution and investment for growth continued to produce results. For the second
quarter of 2001 we expect revenue to increase between 12 percent and 13 percent
compared to pro forma second quarter 2000."
Qwest also reconfirmed its financial targets for 2001 of $21.3 to $21.7 billion
in revenue and $8.5 to $8.7 billion in EBITDA. As a result of increased
discounts from suppliers and other procurement synergies, Qwest expects capital
expenditures for 2001 of $9.2 billion, $300 million less than previous
estimates.
On a pro forma normalized basis and excluding merger-related and non-recurring
items, the company recorded first quarter net earnings of $218 million, or $0.13
per diluted share, compared to net earnings of $239 million, or $0.14 per
diluted share, a year ago. The decrease reflects increases in both interest
expense and depreciation following Qwest's continued investment for growth. On a
cash earnings per diluted share basis, the company reported $0.30 for the first
quarter of 2001 versus cash earnings per share in the first quarter of 2000 of
$0.31.
The information above has been presented on a pro forma normalized basis to
exclude the revenue from Qwest's divested interLATA (local access transport
area) business in its local service area and charges from merger-related and
other one-time items. The merger-related and non-recurring items included
severance costs, a write-down of investments and premiums paid to retire
high-interest notes.
COMMERCIAL, SMALL BUSINESS AND CONSUMER MARKETS
Qwest continued to win national and global business accounts with its portfolio
of broadband Internet applications and communications services. Global business
markets achieved more than $1 billion in new contracted sales, up more than 30
percent from the fourth quarter of 2000. Over 60 percent of new global business
sales were for broadband internet and data services with such companies as U.S.
Bancorp, Hewlett-Packard and Target Corp.
The company continued to successfully penetrate the government and education
sectors and recorded key wins with the states of Arizona and Georgia and the
University of Utah. In Arizona, Qwest was awarded a $100 million contract to
construct and support high-speed local area broadband networks that will provide
Internet access to Arizona's 228 public school districts, giving children the
opportunity to learn school lessons using the Internet.
As Qwest is opening its markets to competitors, it continues to see strong
demand for its small-business and consumer communications services. Small
business sales hit an all-time monthly high during the quarter, based on growth
in bundles, Qwest DSL and Qwest wireless services. Sales of small business
bundles grew approximately 117 percent during the first quarter of 2001, with
nine percent of Qwest's small business customers now opting for bundled
services. Through the first quarter, 28 percent of Qwest consumers subscribed to
a bundled service -- a 44 percent increase over the first quarter of 2000. Qwest
has also seen an increase in the average revenue per account of 32 percent since
the introduction of bundles two years ago.
To ensure continued success in the small business and consumer markets, Qwest
has split the operations between two executives. James A. Smith will continue to
serve as Qwest's executive vice president of consumer markets, while Clifford S.
Holtz was appointed earlier this month as Qwest's executive vice president of
small business markets. The additional executive focus will allow Qwest to
exploit unrealized potential for Qwest services in both consumer and small
business markets.
Wireless services revenue grew 45 percent in the quarter to more than $152
million. Qwest wireless customers totaled approximately 908,000 at the end of
the quarter compared with approximately 805,000 customers at the end of 2000.
These results reflect the termination by Qwest of 30,000 customers in its
low-value, pre-paid wireless business. The company expects to end prepaid
wireless services for an additional 8,000 customers in the second quarter of
2001. Qwest is refocusing its wireless business to attract higher-volume
consumer and small business customers.
INTERNET AND DATA SERVICES
Internet and data services revenue grew 44 percent and now represents
approximately 25 percent of total revenue. Strong growth was realized in the
following areas: Web hosting, dedicated Internet access (DIA), DSL, virtual
private network (VPN), Internet professional services and other data services.
During the quarter Qwest was awarded communications services contracts from ADP,
Capital One, United Artists Theatres, Invesco Funds, and Gateway.
Qwest activated approximately 51,000 DSL customers during the quarter and had
more than 306,000 DSL customers at the end of the quarter, up 125 percent from
the end of the first quarter of 2000 and 20 percent from the end of the fourth
quarter of 2000. Qwest is on target to achieve its objective of doubling the
number of DSL subscribers to 500,000 by the end of 2001 and continues to lead
the industry with more than 1,000 customers per central office with DSL-equipped
facilities.
During the quarter Qwest began offering local broadband access services to
commercial customers in Boston and Philadelphia. Qwest now provides local
broadband services in 13 markets outside of its 14-state local service area. In
addition, the company launched commercial DSL services in eight new markets and
is now providing these services in 20 major markets outside its local service
area. The company is on track to offer commercial local broadband access and DSL
services in 25 markets by the end of 2001.
Qwest Cyber.Solutions (QCS) was awarded nearly $60 million in Applications
Service Provider (ASP) contracts with new customers during the quarter, while 30
percent of the company's existing ASP customers increased or expanded the
services they receive. To date, QCS has secured the three largest reported ASP
contracts in the industry.
Qwest also announced its newest CyberCenter Internet hosting facility in Dallas.
Qwest now operates a total of 15 U.S. CyberCenters, providing customers with
complex Web hosting and managed applications services as well as high-speed
links to Qwest's global broadband Internet network.
SERVICE IMPROVEMENT AND LONG-DISTANCE RE-ENTRY
During the quarter, Qwest continued to see positive results from initiatives to
improve customer service and re-enter the long-distance business in the 14-state
local service area.
The company's first-quarter 2001 service results in the 14-state local service
area were the best in five to seven years for small business and residential
customers. Qwest service data at the end of the first quarter 2001 for this
category showed:
o The number of customers who had been waiting more than 30 days for
the installation of their first telephone line reached their lowest
levels in seven years - almost 80 percent fewer than March 2000
o In six states no customers waited more than 30 days for the
installation of their first telephone line
o Nearly 99 percent of 5.1 million installation commitments were met
on time - the best results in five years
o About 96 percent of total repair commitments were met on time - the
best results in five years
o Repeat repairs within 30 days decreased more than seven percent from
first quarter 2000
o About 89 percent of service outages were repaired in less than 24
hours - up 77 percent from a year ago -- the best customer service
results on record
Qwest's internal service results are consistent with a recently released Federal
Communications Commission (FCC) Service Quality report for 2000, which showed
that among 12 major communications companies:
o Qwest was third in meeting its installation commitments to
residential customers
o Qwest was second in completing 16.5 million residential
installations within one day (on average) of the customer placing
the order
o Qwest was second in taking an average of only 19 hours to fix
residential service outages.
Qwest also has achieved two significant milestones in its efforts to re-enter
the long-distance business in the 14 Western states where it provides local
service. First, Qwest announced that it had begun region-wide independent
testing of its operational support systems (OSS), a critical FCC checklist item.
Thirteen of the states in Qwest's local service area are participating in the
test -- the fourteenth state, Arizona, is conducting its own test separately.
Both tests should end in mid-summer 2001.
The company also has completed 75 percent of the state workshops that evaluate
Qwest's compliance with rules to re-enter the long-distance business. Both the
OSS testing and the state workshops are scheduled to be completed this summer.
Qwest expects to file with the FCC an application for approval to offer
long-distance services in one of its 14 states by late summer and to file
applications for the remaining states later in 2001 and in early 2002. After the
first application is filed, Qwest's OSS multi-state testing process is expected
to accelerate FCC approval of the applications for the remaining states.
ABOUT QWEST
Qwest Communications International Inc. (NYSE: Q) is a leader in reliable,
scalable and secure broadband Internet-based data, voice and image
communications for businesses and consumers. The Qwest Macro Capacity(R) Fiber
Network, designed with the newest optical networking equipment for speed and
efficiency, spans more than 106,000 miles globally. For more information, please
visit the Qwest web site at WWW.QWEST.COM.
# # #
As previously announced, Qwest will host a conference call with the investment
community later this morning at 9:00 a.m. (Eastern time). On the call, Joseph P.
Nacchio, chairman and CEO, and Robin R. Szeliga, executive vice president and
CFO, will provide the company's perspective on the business and first quarter
results. The call will be available on a Web broadcast at
HTTP://WWW.QWEST.COM/ABOUT/IR/
This release may contain projections and other forward-looking statements that
involve risks and uncertainties. These statements may differ materially from
actual future events or results. Readers are referred to the documents filed by
Qwest with the Securities and Exchange Commission, specifically the most recent
reports which identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements, including
potential fluctuations in quarterly results, volatility of Qwest's stock price,
intense competition in the communications services market, changes in demand for
Qwest's 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, higher than
anticipated employee levels, capital expenditures and operating expenses, rapid
and significant changes in technology and markets, adverse changes in the
regulatory or legislative environment affecting Qwest's business and delays in
Qwest's ability to provide interLATA services within its 14-state local service
territory, failure to maintain rights of way, and failure to achieve the
projected synergies and financial results expected to result from the
acquisition of U S WEST timely or at all and difficulties in combining the
operations of Qwest and U S WEST. This release may include analysts' estimates
and other information prepared by third parties for which Qwest assumes no
responsibility. Qwest undertakes no obligation to review or confirm analysts'
expectations or estimates or to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The Qwest logo is a registered trademark of, and CyberCenter is a service mark
of, Qwest Communications International Inc. in the U.S. and certain other
countries.
Contacts: MEDIA CONTACT: INVESTOR CONTACT:
Matt Barkett Lee Wolfe
303-992-2085 800-567-7296
matt.barkett@qwest.com IR@qwest.com
ATTACHMENT A
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) - PRO FORMA NORMALIZED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
------------------------------------ %
2001 2000 Change
------------------------------------------------- --------------- --------------- ---------------
OPERATING REVENUES
Commercial services $ 2,749 $ 2,173 26.5
Consumer and small business services 1,684 1,640 2.7
Directory services 342 347 (1.4)
Switched access services 276 357 (22.7)
-------------- --------------
Total operating revenues 5,051 4,517 11.8
OPERATING EXPENSES
Cost of sales 1,900 1,624 17.0
Selling, general and administrative 1,154 1,169 (1.3)
-------------- --------------
EBITDA 1,997 1,724 15.8
Depreciation 832 625 33.1
Goodwill and other intangible amortization 319 317 0.6
-------------- --------------
Operating income 846 782 8.2
OTHER EXPENSE
Interest expense 338 249 35.7
Other expense-net 20 4 400.0
-------------- --------------
Total other expense-net 358 253 41.5
-------------- --------------
Income before income taxes 488 529 (7.8)
Income tax provision 270 290 (6.9)
-------------- --------------
NET INCOME $ 218 $ 239 (8.8)
============== ==============
Basic earnings per share $ 0.13 $ 0.15 (13.3)
============== ==============
Basic average shares outstanding 1,656 1,629 1.7
============== ==============
Diluted earnings per share $ 0.13 $ 0.14 (7.1)
============== ==============
Diluted average shares outstanding 1,674 1,679 (0.3)
============== ==============
Diluted cash earnings per share (2) $ 0.30 $ 0.31 (3.2)
============== ==============
(1) The condensed consolidated pro forma normalized statements give
retroactive effect as though the merger of Qwest and U S WEST, Inc. had
occurred as of the beginning of the periods presented. Shares
outstanding and earnings per share have been restated to give
retroactive effect to the exchange ratio resulting from the Merger. In
addition, results have been adjusted to eliminate the impacts of
non-recurring items, such as merger costs, gains/losses on the sale of
investments, change in the market value of investments, the one-time
write-down of investments, and the elimination of in-region
long-distance activity. The Merger has been accounted for as a purchase
transaction. The purchase price allocation is preliminary and is
subject to change. Accordingly, net earnings and earnings per share are
subject to change. Certain reclassifications have been made to prior
periods to conform to the current presentation.
(2) Diluted cash earnings per share represent diluted earnings per
share adjusted to add back the after-tax amortization of goodwill and
other intangible assets resulting from the Merger.
ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
IN MILLIONS 2001 2000
- ----------------------------------------------------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 306 $ 154
Accounts receivable - net 4,294 4,235
Inventories and supplies 302 275
Prepaid and other 864 712
------------ ------------
Total current assets 5,766 5,376
Property, plant and equipment - net 27,700 25,583
Investments 8,053 8,186
Goodwill and intangibles - net 32,224 32,327
Other assets - net 2,031 2,029
------------ ------------
Total assets $ 75,774 $ 73,501
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 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 debt 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
Stockholders' equity 40,656 41,304
------------ ------------
Total liabilities and
stockholders' equity $ 75,774 $ 73,501
============ ============
ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED CONSOLIDATED DATA
2000-2001
As of and for the
Three Months Ended
March 31,
---------------------------- %
2001 2000 Change
------------ ------------ ------------
DSL (in 14-state region):
Subscribers (thousands) 306 136 125.0%
DSL equipped central offices 303 257 17.9%
Subscribers per equipped central office 1,012 529 91.3%
Wireless/PCS:
Revenues (millions) $ 152 $ 105 44.8%
Subscribers (thousands) 908 600 51.3%
ARPU (dollars) $ 50 $ 54 (7.4%)
Penetration 4.88% 4.02% 21.4%
Capital expenditures (millions) $ 2,943 $ 2,161 36.2%
Access lines (thousands):
Business 6,225 5,899 5.5%
Consumer 11,946 12,047 (0.8%)
------------ ------------ ------------
Total access lines 18,171 17,946 1.3%
============ ============ ============
Voice grade equivalent access lines (thousands):
Business 32,024 23,839 34.3%
Consumer 12,807 12,412 3.2%
------------ ------------ ------------
Total voice grade equivalents 44,831 36,251 23.7%
============ ============ ============
ATTACHMENT D
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
---------------------------- %
2001 2000 Change
- ------------------------------------------------- ------------ ------------ -----------
OPERATING REVENUES
Commercial services $ 2,749 $ 1,207 127.8
Consumer and small business services 1,684 1,466 14.9
Directory services 342 347 (1.4)
Switched access services 276 357 (22.7)
------------ ------------
Total operating revenues 5,051 3,377 49.6
OPERATING EXPENSES
Cost of sales 1,900 986 92.7
Selling, general and administrative 1,154 883 30.7
------------ ------------
EBITDA 1,997 1,508 32.4
Depreciation 832 586 42.0
Goodwill and other intangible amortization 319 -- --
Merger-related and other one-time charges 209 15 1,293.3
------------ ------------
Operating income 637 907 (29.8)
OTHER EXPENSE (INCOME)
Interest expense 338 211 60.2
Change in market value of
financial instruments (23) 129 (117.8)
Gain on sales of investments -- (79) 100.0
One-time investment write-down 139 -- --
Other expense (income)-net 20 (1) 2,100.0
------------ ------------
Total other expense-net 474 260 82.3
------------ ------------
Income before income taxes 163 647 (74.8)
Income tax provision 144 243 (40.7)
------------ ------------
Net income, before extraordinary item $ 19 $ 404 (95.3)
============ ============
Extraordinary item - early retirement of debt, net
of tax (65) -- --
------------ ------------
NET INCOME(LOSS) $ (46) $ 404 (111.4)
============ ============
Basic earnings(loss) per share (2) $ (0.03) $ 0.46 (106.5)
============ ============
Basic average shares outstanding (2) 1,656 877 88.8
============ ============
Diluted earnings(loss) per share (2) $ (0.03) $ 0.45 (106.7)
============ ============
Diluted average shares outstanding (2) 1,656 889 86.3
============ ============
Dividends per share (2) $ 0.00 $ 0.31 (100.0)
============ ============
(1) The condensed consolidated statements of operations reflect the
results of operations for U S WEST, Inc. only (the accounting acquirer)
for the three months ended March 31, 2000. For the three months ended
March 31, 2001, the amounts reflect the results of operations for the
merged Qwest entity.
(2) Earnings (loss) per share gives effect to the 1.72932 merger
exchange ratio.