RIDE THE LIGHT
QWEST
[GRAPHIC OMITTED]
QWEST COMMUNICATIONS REPORTS STRONG SECOND QUARTER 2001 RESULTS DRIVEN
BY GROWTH IN COMMERCIAL, INTERNET AND DATA REVENUES
Quarterly Revenue Grew Over 12 Percent Versus Pro Forma 2000
Second quarter results compared with pro forma second quarter 2000:
o Total revenue grew 12.2 percent to $5.22 billion
o Pro forma normalized net income was $128 million, or $0.08 per diluted
share
o Internet and data services revenue grew about 41 percent and
represents more than 27 percent of total revenue
o Commercial revenue increased 26.7 percent with market share gains in
global business services and wholesale markets
o Total EBITDA grew 13.1 percent to $2.03 billion compared with pro
forma normalized EBITDA in second quarter 2000
Reported second quarter results compared with second quarter 2000:
o Total revenue of $5.22 billion grew 51.4 percent, while EBITDA of
$2.03 billion increased 30.1 percent
o One-time and merger-related charges of $3.72 billion, pre-tax,
primarily comprised of non-cash, non-operating write-downs in equity
holdings of other companies
o Net loss of ($3.31) billion or ($1.99) per share compared to a net
loss of ($121) million or ($0.14) per share in the second quarter of
2000
Operational results:
o DSL customers grew 105 percent to 360,000 customers over second
quarter 2000
o Leadership changes in consumer, small business and wireless units
drove record sales for those units in June
o Strong quarter for wholesale services led by Internet services and
optical network services
Note to investors: Pro forma normalized information regarding Qwest's results
from operations is provided as a complement to reported results provided in
accordance with accounting principles generally accepted in the United States
(GAAP). 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 impact of non-recurring items, such as merger costs, a depreciation
adjustment on access lines returned to service, gains/losses on the sale of
investments, change in the market value of investments, the write-down of
investments, elimination of in-region long-distance activity, and a tax true-up
on merger-related expenses. Certain re-classifications have been made to prior
periods to conform to the current presentation.
7
DENVER, July 24, 2001 -- Qwest Communications International Inc. (NYSE: Q), the
broadband communications company, today announced strong revenue and earnings
before interest, taxes, depreciation and amortization (EBITDA) for the second
quarter of 2001. Total second quarter revenue increased to $5.22 billion, a 12.2
percent increase versus pro forma second quarter 2000 revenue. Second quarter
EBITDA grew 13.1 percent on a pro forma normalized basis to $2.03 billion. In
addition, Qwest recorded pro forma normalized net income of $128 million, or
$0.08 per diluted share. Qwest has met or exceeded the consensus of analysts'
estimates for the 17th consecutive quarter.
"We are pleased with our overall results achieved during the quarter. The Qwest
team demonstrated its ability to continue strong revenue and EBITDA growth by
leveraging our unique and diverse market position in challenging economic
conditions," said Joseph P. Nacchio, Qwest chairman and CEO. "We are encouraged
by strong growth in our commercial unit and by recent operational improvements,
driven by new business leadership. These factors are key to our growth through
the remainder of the year."
Reported in accordance with generally accepted accounting principles (GAAP),
Qwest's revenue increased 51.4 percent; EBITDA grew 30.1 percent over reported
second quarter 2000 results; and Qwest recorded a net loss of ($3.31) billion or
($1.99) per share for the second quarter 2001. The GAAP-based results include
$3.72 billion in pre-tax one-time charges. The one-time items include $3.11
billion in non-cash investment write-downs principally comprised of the
company's holdings in KPNQwest; $415 million in merger-related charges; a
non-cash charge of $222 million for additional depreciation on access lines
previously held for sale; and $27 million in other one-time gains (net). These
one-time items are excluded from the pro forma normalized results presented in
Attachment A to this news release.
On July 20, 2001, Qwest terminated its agreement with Citizens Communications
Company to sell access lines and related properties and ceased actively
marketing all access lines held for sale. As a result, a cumulative depreciation
catch-up of $222 million was recorded in the second quarter.
Commercial services revenues increased 26.7 percent to $2.90 billion, driven by
a robust demand for Qwest's broadband Internet, data and Internet Protocol (IP)
services. Internet, data and IP services grew about 41 percent in the quarter as
compared with the second quarter of the previous year. Strong demand for Qwest's
domestic and international wholesale and global business services led to
continued market share gain, which offset the impact of the slowing economy on
local service revenues.
The company's small business and consumer units reported services revenue growth
of 4.4 percent, or two percent including out-of-region long-distance service
results.
Second quarter EBITDA, on a pro forma normalized basis grew 13.1 percent to
$2.03 billion as EBITDA margins expanded 40 basis points from 38.5 percent in
second quarter 2000 to 38.9 percent in second quarter 2001. This increase in
EBITDA margin resulted from tight cost controls and productivity improvements.
"We are pleased with the continued execution of our financial and operational
plans. Qwest's ability to adjust to market conditions and deliver revenue growth
demonstrates the value of our brand and our diverse asset portfolio," said Robin
R. Szeliga, Qwest executive vice president of finance and CFO. "We achieved
strong revenue and EBITDA growth for the quarter as we continued our focused
8
execution of the company's growth strategies. Additionally, we will continue to
streamline the company's cost structure and achieve operational efficiencies."
On a pro forma normalized basis, the company recorded second quarter net
earnings of $128 million, or $0.08 per diluted share, compared to net earnings
of $255 million, or $0.15 per diluted share, a year ago. The decrease reflects
increases in both interest expense and depreciation driven by Qwest's
growth-stimulated capital program and the amortization impact from
merger-related purchase accounting. Pro forma normalized cash earnings per
diluted share, which excludes amortization, were $0.29 for the second quarter of
2001 versus $0.32 in the second quarter of 2000.
For the full year 2001, Qwest expects to achieve total revenues of $21.3 billion
to $21.5 billion and EBITDA of $8.5 billion to $8.6 billion. Qwest also expects
to spend between $8.8 billion and $9.0 billion of capital in 2001.
Yesterday, Qwest proposed commencing a private placement of approximately $3.0
billion in notes to refinance commercial paper and other debt.
COMMERCIAL, SMALL BUSINESS AND CONSUMER MARKETS
Commercial revenues grew 26.7 percent compared to the second quarter 2000.
Global business markets sales were strong, led by demand for IP-access services,
including dedicated Internet access (DIA), virtual private network (VPN)
services, and Internet dial ports. Data and IP sales comprised 70 percent of the
total global business markets contracted sales in the second quarter 2001,
compared with more than 60 percent in the first quarter.
In the second quarter, Qwest continued to grow its share in large, national
market accounts with new contracts from such companies as Microsoft's MSN,
Kaiser Permanente and Fifth Third Bank. Qwest also won new business in the
government and education sectors during the quarter, including the U. S. Mint,
State of Maryland, State of Louisiana, the University of Missouri System and
California State University.
Commercial wholesale revenues were sparked by strong demand for Internet and
optical network capacity worldwide. Contributing to this demand was a "flight to
safety" spurred by reported and perceived difficulties of many new carriers.
Wholesale revenue from Qwest's 14-state local service territory benefited from
strong demand for private line and access services stimulated in part by local
competition.
Small business sales generated a 5.3 percent sequential growth and hit an
all-time monthly high in June, reflecting the initial success of a newly formed
business unit focused on the small business market.
More than 30 percent of Qwest consumer customers subscribe to bundled services
including Internet access, voice messaging, caller identification, voice
messaging and additional lines -- a 12 percent increase over the second quarter
of 2000. There is significant opportunity for further bundling of DSL and
wireless services as only two percent of customers have bought fully integrated
communications services bundles. The addition of long-distance service to the
bundle, following Federal Communications Commission's approval for Qwest to
re-enter the long-distance business in the 14-state local service area,
represents an additional, significant revenue growth opportunity.
Wireless services revenues grew 20 percent sequentially or 51 percent
year-over-year to more than $181 million in the second quarter of 2001. Qwest
wireless customers totaled over one million at the end of the quarter. Average
9
revenue per user increased to $52 from $50 in the first quarter of 2001 as Qwest
focused on high-value customers and exited the low-usage, pre-paid business. In
June, the wireless business unit, under new leadership, benefited from
promotional and marketing activities by winning nearly 95,000 new (gross)
customers--a record monthly number. This puts Qwest Wireless on track to achieve
between 70 percent to 80 percent annual revenue growth.
INTERNET, DATA and IP SERVICES
Second quarter Internet, data and IP services revenues grew about 41 percent
over the second quarter 2000. Internet and data revenues represent more than 27
percent of total revenue. Strong growth was realized in the following areas: Web
hosting and related services, dedicated Internet access (DIA), DSL, virtual
private network (VPN), and Internet professional services.
Digital Subscriber Line (DSL) growth remained strong with an increase of more
than 105 percent annually to approximately 360,000 customers. The number of DSL
customers is expected to hit 500,000 by the end of 2001.
Qwest and Microsoft during the quarter formed a five-year strategic alliance to
combine premium MSN Internet Access, content and services with Qwest's broadband
Internet network and telecommunications services for 10 million consumer homes
in Qwest's local service area. Qwest will exclusively market MSN Internet Access
and services alone or in bundles of services to new and existing customers
starting later this summer. In addition, MSN will purchase from Qwest; broadband
capacity, digital subscriber lines (DSL), dial ports, and billing and
collections services to support the delivery of its content solutions and
services to consumers.
NETWORK EXPANSION
The company extended its global network to more than 113,000 route miles (4.5
million fiber miles) through 7,000-miles of fiber-optic routes in Asia and the
Middle East that provide customers with seamless global connectivity on Qwest
facilities. Qwest acquired these new routes through transactions with other
carriers, taking advantage of favorable pricing for existing assets. In
addition, Qwest beat its goal of operating local broadband networks in 25 major
markets outside its 14-state local service territory seven months ahead of
schedule.
SERVICE IMPROVEMENT
J.D. Power and Associates has named Qwest number one in customer satisfaction
among residential long-distance customers nationwide who spend more than $50
monthly. The survey measured customer satisfaction across a number of key
attributes including service, product quality and value. The study also cited
Qwest for significant improvement in the past year in resolving customer
questions with one call.
During the quarter, Qwest continued to see the best customer service results in
seven years in key areas for residential and small business customers, including
installations, repairs and out-of-service response intervals. Total customer
complaints in the second quarter were down 18 percent as compared with the same
period a year ago. This is the fourth consecutive quarter of service
improvements.
Conference Call Today
As previously announced, Qwest will host a conference call for investors and the
media today at 9 a.m. (EDT), featuring Joseph P. Nacchio, Qwest chairman and
CEO, and Robin R. Szeliga, Qwest executive vice president of finance and CFO.
The call may be heard on the Web at www.qwest/com/about/investor/meetings.
10
About Qwest
Qwest Communications International Inc. (NYSE: Q) is a leader in reliable,
scalable and secure broadband 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 113,000 miles globally. For more information, please visit the Qwest
web site at www.qwest.com.
# # #
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:
-------------- -----------------
Tyler Gronbach Lee Wolfe
303-992-2155 800-567-7296
tyler.gronbach@qwest.com IR@qwest.com
11
ATTACHMENT A
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2) - PRO FORMA NORMALIZED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- % ------------------ %
2001 2000 Change 2001 2000 Change
- ------------------------------------------ ------- ------- ------- ------- ------- -------
OPERATING REVENUES
Commercial services $ 2,898 $ 2,287 26.7 $ 5,647 $ 4,460 26.6
Consumer and small business services 1,708 1,675 2.0 3,392 3,315 2.3
Directory services 348 331 5.1 690 678 1.8
Switched access services 268 361 (25.8) 544 718 (24.2)
------- ------- ------- -------
Total operating revenues 5,222 4,654 12.2 10,273 9,171 12.0
OPERATING EXPENSES
Cost of services 1,850 1,516 22.0 3,646 3,019 20.8
Selling, general and administrative 1,343 1,344 (0.1) 2,601 2,634 (1.3)
------- ------- ------- -------
EBITDA 2,029 1,794 13.1 4,026 3,518 14.4
Depreciation 865 650 33.1 1,697 1,275 33.1
Goodwill and other intangible amortization 392 317 23.7 711 634 12.1
------- ------- ------- -------
Operating income 772 827 (6.7) 1,618 1,609 0.6
OTHER EXPENSE
Interest expense 343 244 40.6 681 493 38.1
Other expense - net 14 15 (6.7) 34 19 78.9
------- ------- ------- -------
Total other expense - net 357 259 37.8 715 512 39.6
------- ------- ------- -------
Income before income taxes 415 568 (26.9) 903 1,097 (17.7)
Income tax provision 287 313 (8.3) 557 603 (7.6)
------- ------- ------- -------
NET INCOME $ 128 $ 255 (49.8) $ 346 $ 494 (30.0)
======= ======= ======= =======
Basic earnings per share $ 0.08 $ 0.16 (50.0) $ 0.21 $ 0.30 (30.0)
======= ======= ======= =======
Basic average shares outstanding 1,661 1,641 1.2 1,659 1,635 1.5
======= ======= ======= =======
Diluted earnings per share $ 0.08 $ 0.15 (46.7) $ 0.21 $ 0.29 (27.6)
======= ======= ======= =======
Diluted average shares outstanding 1,674 1,684 (0.6) 1,674 1,681 (0.4)
======= ======= ======= =======
Diluted cash earnings per share $ 0.29 $ 0.32 (9.4) $ 0.59 $ 0.63 (6.3)
======= ======= ======= =======
(1) The consolidated pro forma normalized statements give retroactive effect as
though the merger of Qwest and U S WEST 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, a depreciation
adjustment for access lines returned to service, gains/losses on the sale
of investments, change in the market value of financial instruments, the
write-down of investments, elimination of in-region long-distance activity,
and a tax true-up on Merger- related expenses. The Merger has been
accounted for as a purchase transaction. Certain reclassifications have
been made to prior periods to conform to 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.
12
ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- % -------------------- %
2001 2000 Change 2001 2000 Change
- ------------------------------------------------ -------- -------- -------- -------- -------- --------
OPERATING REVENUES
Commercial services $ 2,898 $ 1,252 131.5 $ 5,647 $ 2,459 129.6
Consumer and small business services 1,708 1,506 13.4 3,392 2,972 14.1
Directory services 348 331 5.1 690 678 1.8
Switched access services 268 361 (25.8) 544 718 (24.2)
-------- -------- -------- --------
Total operating revenues 5,222 3,450 51.4 10,273 6,827 50.5
OPERATING EXPENSES
Cost of services 1,850 830 122.9 3,646 1,695 115.1
Selling, general and administrative 1,343 1,061 26.6 2,601 2,066 25.9
-------- -------- -------- --------
EBITDA 2,029 1,559 30.1 4,026 3,066 31.3
Depreciation 865 600 44.2 1,697 1,186 43.1
Depreciation adjustment for access lines
returned to service 222 -- -- 222 -- --
Goodwill and other intangible amortization 392 -- -- 711 -- --
Merger-related and other one-time charges 415 291 42.6 624 306 103.9
-------- -------- -------- --------
Operating income 135 668 (79.8) 772 1,574 (51.0)
OTHER EXPENSE/(INCOME)
Interest expense 343 207 65.7 681 418 62.9
Change in market value of financial instruments 23 639 (96.4) -- 768 (100.0)
Gain on sales of rural exchanges (50) -- -- (50) -- --
Gain on sales of investments -- -- -- -- (79) (100.0)
Investment write-downs 3,108 -- -- 3,247 -- --
Other expense - net 14 15 (6.7) 34 14 142.9
-------- -------- -------- --------
Total other expense - net 3,438 861 299.3 3,912 1,121 249.0
-------- -------- -------- --------
(Loss) income before income taxes and
extraordinary item (3,303) (193) 1,611.4 (3,140) 453 (793.2)
Income tax provision (benefit) 3 (72) (104.2) 147 170 (13.5)
-------- -------- -------- --------
Net (loss) income before extraordinary
item $ (3,306) $ (121) 2,632.2 $ (3,287) $ 283 (1,261.5)
-------- -------- -------- --------
Extraordinary item - early retirement of
debt, net of tax -- -- -- (65) -- --
-------- -------- -------- --------
NET (LOSS) INCOME $ (3,306) $ (121) 2,632.2 $ (3,352) $ 283 (1,284.5)
======== ======== ======== ========
Basic (loss) earnings per share $ (1.99) $ (0.14) 1,321.4 $ (2.02) $ 0.32 (731.3)
======== ======== ======== ========
Basic average shares outstanding 1,661 887 87.3 1,659 882 88.1
======== ======== ======== ========
Diluted (loss) earnings per share $ (1.99) $ (0.14) 1,321.4 $ (2.02) $ 0.32 (731.3)
======== ======== ======== ========
Diluted average shares outstanding 1,661 887 87.3 1,659 895 85.4
======== ======== ======== ========
Dividends per share $ 0.05 $ -- -- $ 0.05 $ 0.31 (83.9)
======== ======== ======== ========
(1) The condensed consolidated statements of operations reflect the results of
operations for the merged Qwest entity for the three and six months ended
June 30, 2001. For the three and six months ended June 30, 2000, the
amounts reflect the results of operations for U S WEST, Inc. only (the
accounting acquirer in the Merger).
(2) Earnings(loss) per share gives effect to the 1.72932 exchange ratio.
13
ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2) - PRO FORMA NORMALIZED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Three Months Ended
June 30, 2001 June 30, 2000
------------------------------------ ------------------------------------
As Pro Forma Pro Forma As Pro Forma Pro Forma
Reported Normalized Normalized Reported Normalized Normalized
Results Adjustments Results Results Adjustments Results
- ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
OPERATING REVENUES
Commercial services $ 2,898 $ -- $ 2,898 $ 1,252 $ 1,035 $ 2,287
Consumer and small business services 1,708 -- 1,708 1,506 169 1,675
Directory services 348 -- 348 331 -- 331
Switched access services 268 -- 268 361 -- 361
---------- ---------- ---------- ---------- ---------- ----------
Total operating revenues 5,222 -- 5,222 3,450 1,204 4,654
OPERATING EXPENSES
Cost of services 1,850 -- 1,850 830 686 1,516
Selling, general and administrative 1,343 -- 1,343 1,061 283 1,344
---------- ---------- ---------- ---------- ---------- ----------
EBITDA 2,029 -- 2,029 1,559 235 1,794
Depreciation 865 -- 865 600 50 650
Depreciation adjustment for access
lines returned to service 222 (222) -- -- -- --
Goodwill and other intangible
amortization 392 -- 392 -- 317 317
Merger-related and other one-time charges 415 (415) -- 291 (291) --
---------- ---------- ---------- ---------- ---------- ----------
Operating income 135 637 772 668 159 827
OTHER EXPENSE/(INCOME)
Interest expense 343 -- 343 207 37 244
Change in market value of financial
instruments 23 (23) -- 639 (639) --
Gain on sales of rural exchanges (50) 50 -- -- -- --
Investment write-downs 3,108 (3,108) -- -- -- --
Other expense - net 14 -- 14 15 -- 15
---------- ---------- ---------- ---------- ---------- ----------
Total other expense - net 3,438 (3,081) 357 861 (602) 259
---------- ---------- ---------- ---------- ---------- ----------
(Loss) income before income taxes (3,303) 3,718 415 (193) 761 568
Income tax provision (benefit) 3 284 287 (72) 385 313
---------- ---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME $ (3,306) $ 3,434 $ 128 $ (121) $ 376 $ 255
========== ========== ========== ========== ========== ==========
Basic (loss) earnings per share $ (1.99) $ 0.08 $ (0.14) $ 0.16
========== ========== ========== ==========
Basic average shares outstanding 1,661 1,661 887 1,641
========== ========== ========== ==========
Diluted (loss) earnings per share $ (1.99) $ 0.08 $ (0.14) $ 0.15
========== ========== ========== ==========
Diluted average shares outstanding 1,661 1,674 887 1,684
========== ========== ========== ==========
Diluted cash earnings per share $ 0.29 $ 0.32
========== ==========
(1) The consolidated pro forma normalized statements give retroactive effect as
though the merger of Qwest and U S WEST 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, a depreciation
adjustment for access lines returned to service, gains/losses on the sale
of investments, change in the market value of financial instruments, the
write-down of investments, elimination of in-region long-distance activity,
and a tax true-up on Merger- related expenses. The Merger has been
accounted for as a purchase transaction. Certain reclassifications have
been made to prior periods to conform to 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.
14
ATTACHMENT D
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2) - PRO FORMA NORMALIZED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
------------------------------------ ------------------------------------
As Pro Forma Pro Forma As Pro Forma Pro Forma
Reported Normalized Normalized Reported Normalized Normalized
Results Adjustments Results Results Adjustments Results
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATING REVENUES
Commercial services $ 5,647 $ -- $ 5,647 $ 2,459 $ 2,001 $ 4,460
Consumer and small business services 3,392 -- 3,392 2,972 343 3,315
Directory services 690 -- 690 678 -- 678
Switched access services 544 -- 544 718 -- 718
---------- ---------- ---------- ---------- ---------- ----------
Total operating revenues 10,273 -- 10,273 6,827 2,344 9,171
OPERATING EXPENSES
Cost of services 3,646 -- 3,646 1,695 1,324 3,019
Selling, general and administrative 2,601 -- 2,601 2,066 568 2,634
---------- ---------- ---------- ---------- ---------- ----------
EBITDA 4,026 -- 4,026 3,066 452 3,518
Depreciation 1,697 -- 1,697 1,186 89 1,275
Depreciation adjustment for access
lines returned to service 222 (222) -- -- -- --
Goodwill and other intangible
amortization 711 -- 711 -- 634 634
Merger-related and other one-time
charges 624 (624) -- 306 (306) --
---------- ---------- ---------- ---------- ---------- ----------
Operating income 772 846 1,618 1,574 35 1,609
OTHER EXPENSE/(INCOME)
Interest expense 681 -- 681 418 75 493
Change in market value of financial
instruments -- -- -- 768 (768) --
Gain on sales of rural exchanges (50) 50 -- -- -- --
Gain on sales of investments -- -- -- (79) 79 --
Investment write-downs 3,247 (3,247) -- -- -- --
Other expense - net 34 -- 34 14 5 19
---------- ---------- ---------- ---------- ---------- ----------
Total other expense - net 3,912 (3,197) 715 1,121 (609) 512
---------- ---------- ---------- ---------- ---------- ----------
(Loss) income before income taxes and
extraordinary item (3,140) 4,043 903 453 644 1,097
Income tax provision 147 410 557 170 433 603
---------- ---------- ---------- ---------- ---------- ----------
Net (loss) income before extraordinary
item $ (3,287) $ 3,633 $ 346 $ 283 $ 211 $ 494
---------- ---------- ---------- ---------- ---------- ----------
Extraordinary item - early retirement of
debt, net of tax (65) 65 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME $ (3,352) $ 3,698 $ 346 $ 283 $ 211 $ 494
========== ========== ========== ========== ========== ==========
Basic (loss) earnings per share $ (2.02) $ 0.21 $ 0.32 $ 0.30
========== ========== ========== ==========
Basic average shares outstanding 1,659 1,659 882 1,635
========== ========== ========== ==========
Diluted (loss) earnings per share $ (2.02) $ 0.21 $ 0.32 $ 0.29
========== ========== ========== ==========
Diluted average shares outstanding 1,659 1,674 895 1,681
========== ========== ========== ==========
Diluted cash earnings per share $ 0.59 $ 0.63
========== ==========
(1) The consolidated pro forma normalized statements give retroactive effect as
though the merger of Qwest and U S WEST 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, a depreciation
adjustment for access lines returned to service, gains/losses on the sale
of investments, change in the market value of financial instruments, the
write-down of investments, elimination of in-region long-distance activity,
and a tax true-up on Merger-related expenses. The Merger has been accounted
for as a purchase transaction. Certain reclassifications have been made to
prior periods to conform to 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.
15
ATTACHMENT E
QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED CONSOLIDATED DATA
2000-2001
As of and for the
Three Months Ended
June 30,
----------------------- %
2001 2000 Change
---------- ---------- ----------
DSL (in 14-state region):
Subscribers (thousands) 360 175 105.7
DSL equipped central offices 303 277 9.4
Subscribers per equipped central office 1,187 633 87.5
Wireless/PCS:
Revenues (millions) $ 181 $ 120 50.8
Subscribers (thousands) 1,002 653 53.4
ARPU (dollars) $ 52 $ 55 (5.5)
Penetration 5.26% 4.33% 21.5
Capital expenditures (millions) $ 2,616 $ 2,521 3.8
Access lines (thousands):
Business 6,252 5,973 4.7
Consumer 11,788 11,980 (1.6)
---------- ---------- ----------
Total access lines 18,040 17,953 0.5
========== ========== ==========
Voice grade equivalent access lines (thousands):
Business 39,261 27,648 42.0
Consumer 12,786 12,424 2.9
---------- ---------- ----------
Total voice grade equivalents 52,047 40,072 29.9
========== ========== ==========
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ATTACHMENT F
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
June 30, December 31,
2001 2000
- ---------------------------------------------------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 516 $ 154
Accounts receivable - net 4,842 4,235
Inventories and supplies 352 275
Prepaid and other 707 535
---------- ----------
Total current assets 6,417 5,199
Property, plant and equipment - net 29,050 25,760
Investments 1,571 8,186
Goodwill and intangibles - net 34,688 32,327
Other assets - net 2,180 2,029
---------- ----------
Total assets $ 73,906 $ 73,501
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 5,859 $ 3,645
Accounts payable 2,426 2,049
Accrued expenses 3,272 3,806
Advance billings and customer deposits 383 393
---------- ----------
Total current liabilities 11,940 9,893
Long-term borrowings 17,575 15,421
Post-retirement and other post-employment
benefit obligations 2,927 2,735
Deferred taxes, credits and other 4,178 4,148
Stockholders' equity 37,286 41,304
---------- ----------
Total liabilities and stockholders' equity $ 73,906 $ 73,501
========== ==========
17
ATTACHMENT G
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
(DOLLARS IN MILLIONS)
(UNAUDITED)
Six Months Ended
June 30,
-----------------------
2001 2000
---------- ----------
Cash provided by operating activities $ 2,307 $ 1,799
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (5,559) (2,702)
Proceeds from sale of Global Crossing Ltd. common stock -- 1,140
Cash from acquisition -- 407
Other 91 (206)
---------- ----------
Cash used for investing activities (5,468) (1,361)
---------- ----------
FINANCING ACTIVITIES
Net proceeds from current borrowings 2,296 89
Proceeds from issuance of long-term borrowings - net 3,238 992
Repayments of long-term borrowings (1,102) (270)
Costs relating to the early retirement of debt (106) --
Proceeds from issuances of common stock 280 115
Repurchase of stock (1,000) --
Dividends paid on common stock (83) (542)
---------- ----------
Cash provided by financing activities 3,523 384
---------- ----------
CASH AND CASH EQUIVALENTS
Increase 362 822
Beginning balance 154 78
---------- ----------
Ending balance $ 516 $ 900
========== ==========
(1) The condensed consolidated statements of cash flows reflect the cash flow
activities for the merged Qwest entity for the six months ended June 30,
2001. For the six months ended June 30 ,2000, the amounts reflect the cash
flow activities for U S WEST, Inc. only (the accounting acquirer in the
Merger).
18