ride the light [GRAPHIC OMITTED] NEWS
QWEST(R)
QWEST COMMUNICATIONS REPORTS
FIRST QUARTER 2002 RESULTS
Investors: Please see definitions of terms used in the "Note to Investors"
below.
DENVER, April 30, 2002-- Qwest Communications International Inc. (NYSE: Q) today
announced its financial results for the first quarter of 2002.
On a reported basis, prepared in accordance with generally accepted accounting
principles in the United States (GAAP), the company reported a net loss of
($698) million or ($0.42) per diluted share, compared to a net loss of ($46)
million or ($0.03) per diluted share in the first quarter of 2001.
The loss reflects after-tax non-operating items of $536 million, or ($0.32) per
diluted share, due primarily to the company's investment in KPNQwest, including
both a write-down of the company's equity investment of $462 million and the
company's share of restructuring charges recorded by KPNQwest in the quarter of
$74 million. After adjusting for these charges and certain other non-recurring
items, the company recorded a ($0.10) normalized loss per diluted share compared
with normalized earnings per diluted share of $0.13 for the same period last
year.
Reported revenue for the quarter was down approximately 13.5 percent to $4.37
billion from $5.05 billion in the same period last year primarily due to the
absence of optical capacity asset sales and certain Internet equipment sales.
Recurring revenue declined approximately 3.7 percent to $4.37 billion as
compared to $4.54 billion in the first quarter of 2001.
Recurring revenue for data and Internet services grew approximately three
percent, or $30 million in the first quarter of 2002, compared with the same
period last year, and now represents 23 percent of total revenue.
Wireless services increased approximately 28 percent or $42 million compared to
the same period last year. The company had more than 1.1 million wireless
customers at the end of the first quarter 2002, approximately 23 percent more
than at the end of the first quarter of 2001, and average revenue per user
increased two percent to $51 compared to the same period last year.
In addition, total DSL (digital subscriber lines) revenues increased
approximately 77 percent year-over-year. Total DSL customers, including
in-region and out-of-region DSL customers, increased to 484,000 at the end of
the first quarter 2002, a 58 percent increase from the same period of 2001.
These growth areas were offset by continued weakness in the telecommunications
sector and ongoing economic and competitive pressures within the company's local
service region. In addition, growth was further offset by strategic decisions to
improve the longer-term profitability of certain product lines and operating
units.
"These results reflect very difficult economic and industry conditions that have
been slow to improve. We are determined to continue reducing our costs to better
scale our business to current market realities. We believe we can improve
financial performance, while maintaining our high levels of customer service,
and that our unique combination of assets positions us well to grow shareowner
value," said Joseph P. Nacchio, Qwest chairman and CEO.
For the quarter, adjusted EBITDA (adjusted earnings before interest, taxes,
depreciation and amortization) was $1.45 billion compared with adjusted EBITDA
for the same period last year of $2.0 billion. This decline was mainly due to
the absence of optical capacity asset sales and certain Internet equipment
sales. In addition, adjusted EBITDA was also impacted by reduced revenues for
local services, increased expenses as a result of the company's continued
investment in product platforms for dial Internet access and managed wavelength
services, increased expenses related to long distance re-entry, and reduced
pension credits.
"We took several steps to improve near term liquidity in the quarter," said
Robin R. Szeliga, Qwest executive vice president of finance and CFO. "We're now
focused on achieving positive free cash flow in the second quarter and
de-levering the balance sheet."
For the quarter, capital expenditures were $1.2 billion, including $254 million
for the retirement of synthetic leases for real estate. This is down from $2.94
billion in the same period last year. Excluding the synthetic lease retirements,
the company had negative free cash flow of approximately $225 million, which
represents an improvement over earlier estimates of $300 to $400 million of
negative free cash flow for the quarter.
FINANCIAL GUIDANCE
As previously announced, for 2002, Qwest expects total revenue in the range of
$18.0 to $18.4 billion, adjusted EBITDA in the range of $6.4 to $6.6 billion,
and capital expenditures in the range of $3.1 to $3.3 billion, excluding the
synthetic lease retirements. This reflects the continuing weakness in both the
telecommunications sector and the economy in Qwest's local service area, as well
as increased competitive pressure. With respect to free cash flow, the company
expects to be positive for the second quarter of 2002 and beyond, and to break
even or be slightly positive for 2002.
Qwest expects to achieve its financial guidance through a combination of several
initiatives. The company expects to generate revenues from increased sales
channel capacity and performance, improved win-back and retention efforts,
historical seasonal increases in certain lines of business (notably, directory
2
and consumer), continued implementation of existing dial Internet access
contracts, and long distance re-entry within its local service region. In
addition, Qwest expects adjusted EBITDA margins to improve as a result of
revenue growth, employee reductions previously announced, improved profitability
through selective pricing actions and de-emphasis of certain low-margin products
and lines of business, additional consolidation of overhead functions, and
continued strict management of expenses.
LOCAL REVENUES
For the quarter, total local services revenues declined three percent compared
to the first quarter of 2001 to $3.47 billion, mainly as a result of economic
and competitive pressures within the company's local service region.
LONG-DISTANCE VOICE, DATA AND INTERNET REVENUES
For the quarter, recurring revenues for long-distance voice, data and Internet
services declined approximately six percent compared to the first quarter of
2001 to $900 million. This change was primarily due to reductions in consumer
and wholesale voice services as the company continues its efforts to improve
long-term profitability and operating cash flow. Total long-distance voice, data
and Internet revenues decreased $573 million, or approximately 39 percent
compared with the first quarter of 2001, mainly as a result of the absence of
optical capacity asset sales and certain Internet equipment sales.
MARKET SEGMENTS
- ---------------
BUSINESS SERVICES
Recurring business services revenues declined 5.5 percent compared with the
first quarter of 2001. Total business services revenue declined approximately 13
percent, or $237 million, compared with the first quarter of 2001, primarily due
to the absence of optical capacity asset sales and certain Internet equipment
sales. Growth in data and Internet services of 6.7 percent was offset by
declines in local and long-distance service revenues of approximately 12.7
percent, including reduced demand for customer premise voice equipment.
Qwest continues to expand its share of enterprise business and government
customers and during the quarter signed agreements to provide services to
AstraZeneca, the U.S. Department of Defense, the U.S. Department of Energy, the
Federal Bureau of Investigation, Freddie Mac, J. P. Morgan Chase & Co., Mellon
Bank, RBC Dain Rauscher, Silicon Graphics Inc.
CONSUMER SERVICES
Total consumer services revenues decreased approximately two percent, or $33
million, compared with the first quarter of 2001. Continued growth in DSL and
wireless services was offset by a decline in access lines of four percent and
continued efforts to maximize out-of-region long-distance service profitability
by slowing the company's acquisition efforts of out-of-region long-distance
customers.
As of March 31, 2002, approximately 35 percent of Qwest in-region consumer
customers subscribed to a package or bundle of services that may include
3
Internet access, DSL, wireless, voice messaging, caller identification or
additional lines. This represents an increase of 25 percent over the first
quarter 2001.
WHOLESALE SERVICES
Recurring wholesale services revenue declined almost 5.7 percent, or $62
million, compared with the first quarter of 2001. Total wholesale services
revenues declined nearly 30 percent, or $428 million, compared with the first
quarter of 2001, primarily due to the absence of optical capacity asset sales
and certain Internet equipment sales. The decline in recurring wholesale
services revenues is attributable mainly to reduced volumes and mandated rate
reductions for switched access services, lower demand for in-region co-location
and billing and collection services, and increased pricing on certain voice
products to improve profitability.
DIRECTORY SERVICES
Total directory services revenues increased more than two percent, or $8
million, due to general pricing increases.
SERVICE IMPROVEMENTS
Qwest continues to make strong customer service improvements across its 14
Western states. Qwest also achieved its seventh consecutive quarter of service
improvements in key areas of installation and repair for residential and
small-business customers in its local service region. In the first quarter,
nearly 99 percent of more than five million installation commitments were met on
time - the best first quarter result in six years. Additionally, Qwest met more
than 96 percent of repair commitments on time - the best first quarter result in
six years.
RE-ENTERING IN-REGION LONG-DISTANCE SERVICE
The company is in the final stages of its efforts to re-enter the long-distance
market. On April 19, 2002 an independent draft final report was issued for 13
states in Qwest's local service territory that demonstrates Qwest is providing
wholesale services and support to competitive local telephone companies. The
report signals the end of the systems and performance test, subject to the
completion of a limited re-test of one minor test segment. The release of the
final report expected in late May will allow Qwest to begin filing applications
with the FCC for approval to sell long-distance services in 13 states. Qwest has
already successfully completed a separate and comparable systems and performance
test in Arizona.
In addition to the OSS tests, 12 states have completed workshops on all 14-point
checklist items. Of those 12 states, nine (Colorado, Idaho, Iowa, Montana,
Nebraska, North Dakota, Oregon, Washington and Wyoming) have issued orders
completing review of all checklist requirements subject to completion of the
multi-state test.
The company plans to begin filing for long-distance approval with the FCC in
early June. The FCC is expected to approve all applications within 90 days.
KPNQWEST
The company wrote down the carrying value of its investment in KPNQwest by $462
million, from approximately $1.305 billion, or $6.10 per share, at December 31,
2001 to approximately $706 million, or $3.30 per share, at March 31, 2002, which
reflects the market value of KPNQwest stock at March 31, 2002. Qwest currently
4
owns approximately 214 million shares of KPNQwest's common stock. Subsequent to
March 31, 2002, the stock price of KPNQwest's common stock declined below its
current carrying value. On April 24, 2002, KPNQwest announced it was reducing
its financial guidance, reviewing its outstanding liabilities, and had retained
a financial advisory firm to advise it on exploring alternative means of
reorganizing its balance sheet. On April 29, 2002, the closing price of
KPNQwest's common stock was $0.70. In accordance with the company's policy to
review the carrying value of marketable equity securities on a quarterly basis
for other than temporary declines in value, at the end of the second quarter of
2002 Qwest will again assess the factors it uses to determine fair value of the
KPNQwest common stock, including the financial condition and prospects of
KPNQwest and the European telecommunications industry, the severity of the
decline of the stock price and the near term potential for stock price recovery,
in determining the timing and amount of a further write-down, which Qwest
believes is likely and believes will be significant.
At March 31, 2002, Qwest had a remaining unconditional purchase obligation to
purchase approximately $41 million worth of network capacity from KPNQwest
through the rest of 2002. There can be no assurance that KPNQwest will not
require additional funding in order to reorganize its balance sheet or meet its
business objectives. However, except for the obligation to purchase network
capacity as described above, Qwest has no further obligation to fund KPNQwest.
BALANCE SHEET AND LIQUIDITY
On March 12, 2002, Qwest Corporation, Qwest's wholly-owned subsidiary, completed
the sale of $1.5 billion 10-year bonds with an 8.875% interest rate. On March
18, 2002, Qwest announced it had amended its syndicated credit facility. Among
other things, the amendments modified the financial covenants providing the
company additional financial flexibility.
At March 31, 2002, the outstanding balance under the facility was approximately
$3.39 billion. Qwest currently expects to exercise its option to convert the
outstanding balance at May 3, 2002 into a one-year term loan that would be due
in May 2003, subject to the terms of the facility.
The company has also announced it intends to de-lever its balance sheet during
2002 and is considering a number of options including, issuing equity-based
securities, selling assets or securities associated with those assets.
As a result of the recent financing transactions and the amendments to its
syndicated credit facility, the company currently believes that cash flow from
operations and available debt and equity financing will be sufficient to satisfy
the company's anticipated cash requirements for operations through the first
quarter of 2003. In addition, the company is currently in compliance with all
financial covenants in its credit facility and indentures as of the last
measurement date.
NOTE TO INVESTORS
"Reported" results are prepared in accordance with generally accepted accounting
principles in the United States (GAAP). Recurring and adjusted or normalized
results are not prepared in accordance with GAAP.
5
"Recurring" results reflect adjustments made for optical capacity asset sale
revenue, certain Internet equipment sales and other items, such as contractual
settlements in the periods presented. The Internet equipment sales for which our
results have been adjusted to derive "recurring" results primarily include
individually large and infrequent wholesale sales. For the three months ended
March 31, 2002 and March 31, 2001, the recurring revenue adjustments were $0 and
$513 million, respectively.
"Normalized" results reflect adjustments to eliminate the impacts of
non-recurring and non-operating items, which for the relevant periods may
include merger-related and other one-time charges, gains (losses) on the sale of
investments, the write-down of investments, KPNQwest restructuring charges,
changes in the market value of financial instruments and gains (losses) on the
early retirement of debt. For additional details on these adjustments, readers
should refer to Attachment A.
"Adjusted EBITDA" excludes non-recurring and non-operating items, which for the
relevant periods may include restructuring charges, merger-related and other
charges, asset write-offs and impairments, losses on the sale of investments,
changes in the market values of investments and gains (losses) on the early
retirement of debt. Adjusted EBITDA does not represent cash flow for the periods
presented and should not be considered as an alternative to cash flows as a
source of liquidity. Qwest's definition of adjusted EBITDA is not necessarily
comparable with adjusted EBITDA or similar non-GAAP concepts used by other
companies or with similar concepts used in Qwest's debt instruments. Adjusted
EBITDA is provided as a complement to the financial results reported in
accordance with GAAP and is presented to provide investors additional
information concerning the company's operations.
Certain reclassifications have been made to prior periods to conform to the
current presentation.
The term "local services" refers to our estimate of the classic U S WEST
business (including wireless). The term "long-distance voice, data and Internet
services" refers to our estimate of the classic Qwest business. The company has
worked to integrate the businesses and operations of Qwest and U S WEST since
the completion of the merger on June 30, 2000. Because we do not operate the two
as separate businesses, we have attempted to approximate the revenues
attributable to the major lines of business of each company, as they existed
prior to the merger. Our estimates do not necessarily reflect the actual results
that would have been generated by the two businesses as standalone entities.
CONFERENCE CALL TODAY
As previously announced, Qwest will host a conference call for investors and the
media today at 9:00 a.m. (EDT) with 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.
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
6
with the newest optical networking equipment for speed and efficiency, spans
more than 190,000 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 assumptions, risks and uncertainties. Readers are cautioned not to place
undue reliance on these statements, which speak only as of the date of this
release. These statements may differ materially from actual future events or
results. Readers are referred to the documents filed by Qwest Communications
International Inc. (together with its affiliates, "Qwest", "we" or "us") with
the Securities and Exchange Commission (the "SEC"), 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 but not
limited to: the duration and extent of the current economic downturn in our
14-state local service area, including its effect on our customers and
suppliers; any adverse outcome of the SEC's current inquiries into Qwest's
accounting policies, practices and procedures; adverse results of increased
review and scrutiny by regulatory authorities, media and others (including any
internal analyses) of financial reporting issues and practices or otherwise;
rapid and significant changes in technology and markets; failure to achieve the
projected synergies and financial results expected to result from the
acquisition of U S WEST, and difficulties in combining the operations of the
combined company; our future ability to provide interLATA services within our
14-state local service area; potential fluctuations in quarterly results;
volatility of Qwest's stock price; intense competition in the markets in which
we compete; changes in demand for our products and services; adverse economic
conditions in the markets served by us or by companies in which we have
substantial investments; 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; adverse changes in
the regulatory or legislative environment affecting our business; adverse
developments in commercial disputes or legal proceedings; and changes in the
outcome of future events from the assumed outcome included by Qwest in its
significant accounting policies. The information contained in this release is a
statement of Qwest's present intention, belief or expectation and is based upon,
among other things, the existing regulatory environment, industry conditions,
market conditions and prices, the economy in general and Qwest's assumptions.
Qwest may change its intention, belief or expectation, at any time and without
notice, based upon any changes in such factors, in Qwest's assumptions or
otherwise. The cautionary statements contained or referred to in this release
should be considered in connection with any subsequent written or oral forward
looking statements that Qwest or persons acting on its behalf may issue. 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
7
ATTACHMENT A
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2)(3) - NORMALIZED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
------------------------ %
2002 2001 Change
- ------------------------------------------ --------- --------- ---------
REVENUES:
Business services $ 1,545 $ 1,782 (13.3)
Consumer services 1,433 1,466 (2.3)
Wholesale services 1,021 1,449 (29.5)
Directory services 350 342 2.3
Network services and other revenue 20 12 66.7
--------- ---------
Total revenues 4,369 5,051 (13.5)
OPERATING EXPENSES:
Cost of sales 1,575 1,796 (12.3)
Selling, general and administrative 1,340 1,258 6.5
--------- ---------
Adjusted EBITDA 1,454 1,997 (27.2)
Depreciation 1,055 832 26.8
Goodwill and other intangible amortization 85 319 (73.4)
--------- ---------
Operating income 314 846 (62.9)
OTHER EXPENSE:
Interest expense - net 411 338 21.6
Other expense - net 97 20 385.0
--------- ---------
Total other expense - net 508 358 41.9
--------- ---------
(Loss) income before income taxes (194) 488 (139.8)
Income tax (benefit) provision (32) 270 (111.9)
--------- ---------
NET (LOSS) INCOME $ (162) $ 218 (174.3)
========= =========
Basic (loss) earnings per share $ (0.10) $ 0.13 (176.9)
========= =========
Basic average shares outstanding 1,667 1,656 0.7
========= =========
Diluted (loss) earnings per share $ (0.10) $ 0.13 (176.9)
========= =========
Diluted average shares outstanding 1,667 1,674 (0.4)
========= =========
Diluted cash (loss) earnings per share $ (0.07) $ 0.30 (123.3)
========= =========
(1) The consolidated normalized statements have been adjusted to eliminate the
impacts of non-recurring and non-operating items, which for the relevant
periods include Merger-related and other one-time charges, gains (losses)
on the sale of investments, the write-down of investments, KPNQwest
restructuring charges, changes in the market value of financial instruments
and gains (losses) on the early retirements of debt. Certain
reclassifications have been made to prior periods to conform to the current
presentation.
(2) Adjusted earnings before interest, income taxes, depreciation and
amortization ("Adjusted 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.
(3) Diluted cash (loss) earnings per share represent diluted (loss) earnings
per share adjusted to add back the after-tax amortization of goodwill and
other intangible assets.
8
ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) - AS REPORTED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
------------------------ %
2002 2001 Change
- --------------------------------------------------------- --------- --------- ---------
REVENUES:
Business services $ 1,545 $ 1,782 (13.3)
Consumer services 1,433 1,466 (2.3)
Wholesale services 1,021 1,449 (29.5)
Directory services 350 342 2.3
Network services and other revenue 20 12 66.7
--------- ---------
Total revenues 4,369 5,051 (13.5)
OPERATING EXPENSES:
Cost of sales 1,575 1,796 (12.3)
Selling, general and administrative 1,340 1,258 6.5
--------- ---------
Adjusted EBITDA 1,454 1,997 (27.2)
Depreciation 1,055 832 26.8
Goodwill and other intangible amortization 85 319 (73.4)
Merger-related and other one-time charges -- 209 (100.0)
--------- ---------
Operating income 314 637 (50.7)
OTHER EXPENSE (INCOME):
Interest expense - net 411 338 21.6
Gain on changes in market value of financial instruments -- (23) 100.0
Loss on sales of investments and FMV adjustments 10 -- --
Investment write-downs 462 139 232.4
Other expense - net 171 20 755.0
--------- ---------
Total other expense - net 1,054 474 122.4
--------- ---------
(Loss) income before income taxes and extraordinary item (740) 163 (554.0)
Income tax (benefit) provision (36) 144 (125.0)
--------- ---------
(Loss) income before extraordinary item (704) 19 (3,805.3)
--------- ---------
Extraordinary item - early retirement of debt, net of tax 6 (65) 109.2
--------- ---------
NET (LOSS) $ (698) $ (46) (1,417.4)
========= =========
Basic loss per share $ (0.42) $ (0.03) (1,300.0)
========= =========
Basic average shares outstanding 1,667 1,656 0.7
========= =========
Diluted loss per share $ (0.42) $ (0.03) (1,300.0)
========= =========
Diluted average shares outstanding 1,667 1,656 0.7
========= =========
Dividends per share $ -- $ -- --
========= =========
(1) Adjusted earnings before interest, income taxes, depreciation and
amortization ("Adjusted EBITDA") does not include non-recurring and
non-operating items, which for the relevant periods include Merger-related
and other one-time charges, gains (losses) on the sale of investments, the
write-down of investments, KPNQwest restructuring charges, changes in the
market values of financial instruments and gains (losses) on the early
retirements of debt. Adjusted 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.
9
ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)(2)(3)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Three Months Ended
March 31, 2002 March 31, 2001
------------------------------------------- ----------------------------------------
As As
Reported Normalized Normalized Reported Normalized Normalized
Results Adjustments Results Results Adjustments Results
- -------------------------------------- ------------ ------------ ------------ ---------- ------------ ------------
REVENUES:
Business services $ 1,545 $ - $ 1,545 $ 1,782 $ - $ 1,782
Consumer services 1,433 - 1,433 1,466 - 1,466
Wholesale services 1,021 1,021 1,449 1,449
Directory services 350 - 350 342 - 342
Network services and other revenue 20 - 20 12 - 12
----------- ----------- ----------- --------- ----------- -----------
Total revenues 4,369 - 4,369 5,051 - 5,051
OPERATING EXPENSES:
Cost of sales 1,575 - 1,575 1,796 - 1,796
Selling, general and administrative 1,340 - 1,340 1,258 - 1,258
----------- ----------- ----------- --------- ----------- -----------
Adjusted EBITDA 1,454 - 1,454 1,997 - 1,997
Depreciation 1,055 - 1,055 832 - 832
Goodwill and other
intangible amortization 85 - 85 319 - 319
Merger-related and other
one-time charges - - - 209 (209) -
----------- ----------- ----------- --------- ----------- -----------
Operating income 314 - 314 637 209 846
OTHER EXPENSE (INCOME):
Interest expense - net 411 - 411 338 - 338
(Gain) on changes in market value
of financial instruments - - - (23) 23 -
Loss on sales of investments and FMV
adjustments 10 (10) - - - -
Investment write-downs 462 (462) - 139 (139) -
Other expense - net 171 (74) 97 20 - 20
----------- ----------- ----------- --------- ----------- -----------
Total other expense - net 1,054 (546) 508 474 (116) 358
----------- ----------- ----------- --------- ----------- -----------
(Loss) income before income taxes
and extraordinary item (740) 546 (194) 163 325 488
Income tax (benefit) provision (36) 4 (32) 144 126 270
----------- ----------- ----------- --------- ----------- -----------
(Loss) income before extraordinary item (704) 542 (162) 19 199 218
----------- ----------- ----------- --------- ----------- -----------
Extraordinary item - early
retirement of debt, net of tax 6 (6) - (65) 65 -
----------- ----------- ----------- --------- ----------- -----------
NET (LOSS) INCOME $ (698) $ 536 $ (162) $ (46) $ 264 $ 218
=========== =========== =========== ========= =========== ===========
Basic (loss) earnings per share $ (0.42) $ (0.10) $ (0.03) $ 0.13
=========== =========== ========= ===========
Basic average shares outstanding 1,667 1,667 1,656 1,656
=========== =========== ========= ===========
Diluted (loss) earnings per share $ (0.42) $ (0.10) $ (0.03) $ 0.13
=========== =========== ========= ===========
Diluted average shares outstanding 1,667 1,667 1,656 1,674
=========== =========== ========= ===========
Diluted cash (loss) earnings
per share $ (0.07) $ 0.30
=========== ===========
10
(1) The consolidated normalized statements have been adjusted to eliminate the
impacts of non-recurring and non-operating items, which for the relevant
periods include Merger-related and other one-time charges, gains (losses)
on the sale of investments, the write-down of investments, KPNQwest
restructuring charges, changes in the market value of financial instruments
and gains (losses) on the early retirements of debt. Certain
reclassifications have been made to prior periods to conform to the current
presentation.
(2) Adjusted earnings before interest, income taxes, depreciation and
amortization ("Adjusted 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.
(3) Diluted cash (loss) earnings per share represent diluted (loss) earnings
per share adjusted to add back the after-tax amortization of goodwill and
other intangible assets.
11
ATTACHMENT D
QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED CONSOLIDATED DATA (1)
(UNAUDITED)
As of and for the
Three Months Ended
March 31,
------------------------------- %
2002 2001 Change
------------- --------------- ----------
DSL (in 14-state region):
Subscribers (in thousands) 464 306 51.6%
DSL equipped central offices 352 303 16.2%
Subscribers per equipped central office 1,318 1,012 30.2%
Wireless/PCS:
Revenues (in millions) $ 194 $ 152 27.6%
Subscribers (in thousands) 1,114 908 22.7%
ARPU (in dollars) $ 51 $ 50 2.0%
Penetration 5.15% 4.88% 5.5%
Capital expenditures (in millions) $ 1,196 $ 2,943 (59.4%)
Access lines (in thousands):
Business 6,158 6,212 (0.9%)
Consumer 11,448 11,920 (4.0%)
------------- --------------- ----------
Total access lines 17,606 18,132 (2.9%)
============= =============== ==========
Voice grade equivalent access lines
(in thousands):
Business 46,516 38,275 21.5%
Consumer 12,807 12,781 0.2%
------------- --------------- ----------
Total voice grade equivalents 59,323 51,056 16.2%
============= =============== ==========
(1) Access line and voice grade equivalent data has been adjusted for prior
periods to conform to the current period presentation.
12
ATTACHMENT E
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
March 31, December 31,
2002 2001
- -------------------------------------------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,378 $ 257
Accounts receivable - net 4,383 4,502
Inventories and supplies 397 377
Prepaid and other 465 621
------------ ------------
Total current assets 6,623 5,757
Property, plant and equipment - net 30,163 29,977
Investments 775 1,400
Goodwill and intangibles - net 34,529 34,523
Other assets 2,172 2,124
------------ ------------
Total assets $ 74,262 $ 73,781
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 5,149 $ 4,806
Accounts payable 1,483 1,529
Accrued expenses 2,870 3,262
Advance billings and customer deposits 393 392
------------ ------------
Total current liabilities 9,895 9,989
Long-term borrowings 21,427 20,197
Post-retirement and other post-employment
benefit obligations 2,894 2,923
Deferred taxes, credits and other 4,077 4,017
Stockholders' equity 35,969 36,655
------------ ------------
Total liabilities and stockholders' equity $ 74,262 $ 73,781
============ ============
13
ATTACHMENT F
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2002 2001
------------ ------------
Cash provided by operating activities $ 727 $ 1,333
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (1,196) (2,943)
Other (11) (79)
------------ ------------
Cash used for investing activities (1,207) (3,022)
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from current borrowings 234 458
Proceeds from issuance of long-term borrowings 1,476 3,258
Repayments of long-term borrowings (49) (995)
Costs relating to the early retirement of debt (106)
Proceeds from issuances of common stock 6 246
Repurchase of stock (12) (1,000)
Debt issuance costs (54) (20)
------------ ------------
Cash provided by financing activities 1,601 1,841
------------ ------------
CASH AND CASH EQUIVALENTS:
Increase 1,121 152
Beginning balance 257 154
------------ ------------
Ending balance $ 1,378 $ 306
============ ============
14