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qwest communications 1231 06 qwest communications 1231 06 Presentation Transcript

  • Qwest Communications International Inc. Historical Financial Information As of December 31, 2006
  • QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars and shares in millions, except per share amounts) Years Ended (Unaudited) Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Operating revenue $3,481 $3,442 $3,449 $3,437 $3,449 $3,470 $3,504 $3,480 $3,476 $3,472 $3,487 $3,488 $13,809 $13,903 $13,923 Operating expenses: Cost of sales (exclusive of depreciation and amortization) 1,454 1,486 1,548 1,402 1,439 1,434 1,512 1,451 1,417 1,393 1,382 1,415 5,890 5,836 5,607 Selling, general and administrative 1,154 1,486 1,261 1,070 1,036 1,045 1,016 1,050 1,014 970 1,014 993 4,971 4,147 3,991 Depreciation and amortization 777 784 779 783 774 765 768 758 691 693 691 695 3,123 3,065 2,770 Asset impairment charges — 43 34 36 — — — — — — — — 113 — — Total operating expenses 3,385 3,799 3,622 3,291 3,249 3,244 3,296 3,259 3,122 3,056 3,087 3,103 14,097 13,048 12,368 Other expense (income)—net: Interest expense—net 397 394 374 366 381 380 384 338 296 298 291 284 1,531 1,483 1,169 Other expense (income)—net 12 (111) 40 (54) (242) 13 (31) 392 (28) (17) (42) (84) (113) 132 (171) Total other expense (income)—net 409 283 414 312 139 393 353 730 268 281 249 200 1,418 1,615 998 (Loss) income before income taxes and cumulative effect of accounting changes - net (313) (640) (587) (166) 61 (167) (145) (509) 86 135 151 185 (1,706) (760) 557 Income tax benefit (expense) 3 (136) 18 27 (4) 3 1 3 2 (18) 43 9 (88) 3 36 (Loss) income before cumulative effect of accounting changes—net (310) (776) (569) (139) 57 (164) (144) (506) 88 117 194 194 (1,794) (757) 593 Cumulative effect of accounting changes—net — — — — — — — (22) — — — — — (22) - Net (loss) income $(310) $(776) $(569) $(139) $57 $(164) $(144) $(528) $88 $117 $194 $194 $(1,794) $(779) $593 Basic (loss) income per share $(0.17) $(0.43) $(0.31) $(0.08) $0.03 $(0.09) $(0.08) $(0.28) $0.05 $0.06 $0.10 $0.10 $(1.00) $(0.42) $0.31 Basic weighted average shares outstanding 1,773 1,801 1,815 1,816 1,817 1,823 1,844 1,862 1,874 1,882 1,901 1,901 1,801 1,836 1,890 Diluted (loss) income per share $(0.17) $(0.43) $(0.31) $(0.08) $0.03 $(0.09) $(0.08) $(0.28) $0.05 $0.06 $0.09 $0.10 $(1.00) $(0.42) $0.30 Diluted weighted average shares outstanding 1,773 1,801 1,815 1,816 1,822 1,823 1,844 1,862 1,911 1,952 2,005 1,992 1,801 1,836 1,972
  • QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in millions) (Unaudited) 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 ASSETS Current assets: Cash and cash equivalents $1,353 $1,184 $1,314 $1,151 $1,406 $2,245 $2,311 $846 $610 $1,189 $962 $1,241 Short-term investments 702 423 598 764 966 634 580 101 130 205 218 248 Accounts receivable—net 1,743 1,742 1,700 1,594 1,603 1,566 1,595 1,525 1,541 1,477 1,718 1,600 Prepaid expenses and other current assets 583 737 634 709 552 453 568 692 743 682 677 565 Total current assets 4,381 4,086 4,246 4,218 4,527 4,898 5,054 3,164 3,024 3,553 3,575 3,654 Property, plant and equipment—net 17,806 17,495 17,255 16,853 16,459 16,101 15,812 15,568 15,273 15,016 14,828 14,579 Capitalized software and other intangible assets—net 1,532 1,346 1,216 1,179 1,112 1,073 1,035 1,007 971 929 943 891 Prepaid pension and other assets 2,077 2,179 2,209 2,074 2,031 1,998 1,826 1,758 1,858 1,794 1,768 2,115 Total assets $25,796 $25,106 $24,926 $24,324 $24,129 $24,070 $23,727 $21,497 $21,126 $21,292 $21,114 $21,239 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current borrowings $996 $836 $652 $596 $601 $261 $527 $512 $604 $2,683 $1,685 $1,686 Accounts payable 1,421 1,242 1,341 1,303 1,235 1,161 1,314 1,314 1,103 1,063 1,094 997 Accrued expenses and other current liabilities 1,536 1,838 2,069 1,718 1,581 1,602 1,756 1,776 1,618 1,740 1,743 1,856 Deferred revenue and advance billings 717 725 693 669 642 626 635 633 622 609 622 621 Total current liabilities 4,670 4,641 4,755 4,286 4,059 3,650 4,232 4,235 3,947 6,095 5,144 5,160 Long-term borrowings—net 16,544 16,407 16,545 16,690 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 Post-retirement and other post-employment benefit obligations 3,370 3,419 3,442 3,428 3,452 3,466 3,457 3,459 3,441 3,439 3,436 2,366 Deferred revenue 702 565 571 559 554 548 532 522 514 508 516 506 Other long-term liabilities 1,761 1,983 2,090 1,973 1,937 1,782 1,520 1,530 1,450 1,383 1,366 1,446 Total liabilities 27,047 27,015 27,403 26,936 26,693 26,733 26,443 24,714 24,186 24,118 23,690 22,684 Stockholders' deficit: Preferred stock — — — — — — — — — — — — Common stock 18 18 18 18 18 18 19 19 19 19 19 19 Additional paid-in capital 42,989 43,106 43,107 43,111 43,111 43,170 43,260 43,290 43,355 43,475 43,531 43,384 Treasury stock (21) (20) (20) (20) (20) (16) (17) (17) (17) (17) (18) (24) Accumulated deficit (44,237) (45,013) (45,582) (45,721) (45,664) (45,828) (45,972) (46,500) (46,412) (46,295) (46,101) (45,907) Accumulated other comprehensive loss — — — — (9) (7) (6) (9) (5) (8) (7) 1,083 Total stockholders' deficit (1,251) (1,909) (2,477) (2,612) (2,564) (2,663) (2,716) (3,217) (3,060) (2,826) (2,576) (1,445) Total liabilities and stockholders' deficit $25,796 $25,106 $24,926 $24,324 $24,129 $24,070 $23,727 $21,497 $21,126 $21,292 $21,114 $21,239
  • QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions) (Unaudited) 3 Mos 6 Mos 9 Mos 12 Mos 3 Mos 6 Mos 9 Mos 12 Mos 3 Mos 6 Mos 9 Mos 12 Mos Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 OPERATING ACTIVITIES Net (loss) income $(310) $(1,086) $(1,655) $(1,794) $57 $(107) $(251) $(779) $88 $205 $399 $593 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 777 1,562 2,341 3,123 774 1,539 2,307 3,065 691 1,384 2,075 2,770 Provision for bad debts—net 93 106 145 194 57 110 137 173 44 71 108 155 Cumulative effect of changes in accounting principles—net of taxes — — — — — — — 22 — — — — Asset impairment charges — 43 77 113 — — — — — — — — Gain on sale of assets (1) — — (8) (257) (257) (257) (263) — (3) (3) (68) Loss (gain) on early retirement of debt—net 15 (5) 1 1 — 43 32 462 — (5) 4 5 Other non-cash charges—net 62 84 89 98 1 9 13 32 15 32 35 52 Changes in operating assets and liabilities: Accounts receivable 126 110 113 170 (66) (82) (138) (104) (60) (23) (294) (223) Prepaid expenses and other current assets 24 15 57 (20) 11 98 1 (8) (37) 28 50 168 Accounts payable and accrued expenses and other current liabilities (128) 1 317 (80) (178) (258) 57 73 (368) (284) (236) (372) Deferred revenue and advance billings (64) (193) (219) (255) (32) (54) (61) (73) (19) (38) (25) (33) Other non-current assets and liabilities (34) 207 343 306 (24) (128) (252) (287) (214) (190) (184) (258) Cash provided by operating activities 560 844 1,609 1,848 343 913 1,588 2,313 140 1,177 1,929 2,789 INVESTING ACTIVITIES Expenditures for property, plant and equipment and intangible assets (455) (941) (1,359) (1,731) (313) (665) (1,110) (1,613) (390) (832) (1,226) (1,632) Proceeds from sale of property and equipment — 5 15 48 418 418 418 420 26 47 63 173 Proceeds from sale of investment securities 216 986 1,164 1,922 630 1,086 1,230 1,793 7 42 56 70 Purchase of investment securities (351) (929) (1,269) (2,137) (822) (912) (1,002) (1,086) (36) (146) (173) (217) Other (4) 5 5 (7) 1 17 22 27 1 — (101) (94) Cash used for investing activities (594) (874) (1,444) (1,905) (86) (56) (442) (459) (392) (889) (1,381) (1,700) FINANCING ACTIVITIES Proceeds from long-term borrowings 1,765 1,766 2,334 2,601 — 1,885 1,887 3,152 — — 600 600 Repayments of long-term borrowings, including current maturities (1,686) (1,862) (2,482) (2,714) (5) (1,550) (1,778) (4,716) (41) (47) (1,145) (1,180) Proceeds from issuance of common and treasury stock 1 4 5 10 3 7 10 39 57 102 150 205 Repurchases of common stock — — — — — — — — — — — (209) Other (59) (60) (74) (55) — (105) (105) (634) — — (37) (110) Cash provided by (used for) financing activities 21 (152) (217) (158) (2) 237 14 (2,159) 16 55 (432) (694) CASH AND CASH EQUIVALENTS (Decrease) increase in cash and cash equivalents (13) (182) (52) (215) 255 1,094 1,160 (305) (236) 343 116 395 Beginning balance 1,366 1,366 1,366 1,366 1,151 1,151 1,151 1,151 846 846 846 846 Ending balance $1,353 $1,184 $1,314 $1,151 $1,406 $2,245 $2,311 $846 $610 $1,189 $962 $1,241
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS (Dollars in millions) Years Ended (Unaudited) Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Operating revenue Wireline services $3,341 $3,303 $3,308 $3,303 $3,312 $3,329 $3,361 $3,333 $3,327 $3,320 $3,343 $3,338 $13,255 $13,335 $13,328 Wireless services 127 130 133 124 126 132 131 138 139 142 135 141 514 527 557 Other services 13 9 8 10 11 9 12 9 10 10 9 9 40 41 38 Total operating revenue 3,481 3,442 3,449 3,437 3,449 3,470 3,504 3,480 3,476 3,472 3,487 3,488 13,809 13,903 13,923 Cost of sales (COS): Facility costs 659 676 745 648 674 677 692 649 618 610 587 625 2,728 2,692 2,440 Network expenses 57 66 73 66 67 59 72 69 52 62 69 69 262 267 252 Employee-related costs 450 437 429 389 409 387 404 387 396 388 397 392 1,705 1,587 1,573 Other non-employee related costs 288 307 301 299 289 311 344 346 351 333 329 329 1,195 1,290 1,342 Total cost of sales 1,454 1,486 1,548 1,402 1,439 1,434 1,512 1,451 1,417 1,393 1,382 1,415 5,890 5,836 5,607 Selling, general and administrative (SG&A): Property and other taxes 81 115 112 78 99 111 100 43 88 72 96 64 386 353 320 Bad debt 93 13 39 49 57 53 27 36 44 27 37 47 194 173 155 Restructuring, realignment and severance related costs 15 132 5 59 15 (1) 26 74 22 (2) 43 211 114 63 — Employee-related costs 469 434 413 413 407 410 401 405 401 405 407 426 1,729 1,623 1,639 Other non-employee related costs 496 792 692 471 458 472 462 492 459 468 431 456 2,451 1,884 1,814 Total selling, general and administrative 1,154 1,486 1,261 1,070 1,036 1,045 1,016 1,050 1,014 970 1,014 993 4,971 4,147 3,991 Subtotal COS + SG&A 2,608 2,972 2,809 2,472 2,475 2,479 2,528 2,501 2,431 2,363 2,396 2,408 10,861 9,983 9,598 Capital expenditures(1) $455 $486 $418 $372 $313 $352 $445 $503 $390 $442 $394 $406 $1,731 $1,613 $1,632 Employees 45,928 45,211 42,739 41,458 40,683 40,303 39,977 39,641 39,127 39,315 39,163 38,383 41,458 39,641 38,383 (1) Capital expenditures represent cash only portion, thus it excludes non-cash items such as capital lease acquisitions.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—WIRELINE SERVICES SEGMENT(1) (Dollars in millions, operating statistics in thousands, except ARPU amounts) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Wireline services revenue Local voice $1,686 $1,633 $1,609 $1,586 $1,581 $1,575 $1,544 $1,526 $1,520 $1,501 $1,466 $1,425 $6,514 $6,226 $5,912 Long-distance 500 492 550 546 558 547 553 558 559 562 572 560 2,088 2,216 2,253 Access 179 179 169 162 161 182 159 162 146 133 139 132 689 664 550 Data and Internet 976 999 980 1,009 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 3,964 4,229 4,613 Total wireline services revenue 3,341 3,303 3,308 3,303 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 13,255 13,335 13,328 Wireline services expenses Facility costs 653 660 698 574 598 598 617 574 547 536 513 550 2,585 2,387 2,146 Network expenses 53 61 67 61 62 58 70 68 52 61 68 67 242 258 248 Bad debt 75 8 30 44 43 40 15 24 28 15 23 32 157 122 98 Restructuring, realignment and severance related costs 5 80 4 13 6 4 2 22 2 1 40 2 102 34 45 Employee-related costs 675 648 639 617 604 584 600 581 596 578 597 592 2,579 2,369 2,363 Other non-employee related costs 352 344 320 332 328 344 377 392 385 372 371 367 1,348 1,441 1,495 Total wireline services expenses 1,813 1,801 1,758 1,641 1,641 1,628 1,681 1,661 1,610 1,563 1,612 1,610 7,013 6,611 6,395 $1,528 $1,502 $1,550 $1,662 $1,671 $1,701 $1,680 $1,672 $1,717 $1,757 $1,731 $1,728 $6,242 $6,724 $6,933 Wireline services segment income 45.7% 45.5% 46.9% 50.3% 50.5% 51.1% 50.0% 50.2% 51.6% 52.9% 51.8% 51.8% 47.1% 50.4% 52.0% Wireline services margin Capital expenditures—wireline services $375 $384 $326 $265 $255 $252 $346 $394 $322 $364 $321 $307 $1,350 $1,247 $1,314 OPERATING STATISTICS As of and for the As of and for the Three Months Ended Years Ended December 31, Access lines: 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 (2) Business Retail 3,192 3,163 3,148 3,109 3,074 3,031 3,012 2,969 2,958 2,920 2,900 2,870 3,109 2,969 2,870 Resold 1,786 1,901 1,907 1,879 1,848 1,808 1,756 1,710 1,667 1,624 1,564 1,495 1,879 1,710 1,495 Total business 4,978 5,064 5,055 4,988 4,922 4,839 4,768 4,679 4,625 4,544 4,464 4,365 4,988 4,679 4,365 Mass markets Primary 8,539 8,321 8,234 8,184 8,107 7,974 7,916 7,851 7,749 7,592 7,454 7,333 8,184 7,851 7,333 Add 1,205 1,150 1,101 1,063 1,024 985 948 913 876 840 803 770 1,063 913 770 Total retail residential 9,744 9,471 9,335 9,247 9,131 8,959 8,864 8,764 8,625 8,432 8,257 8,103 9,247 8,764 8,103 Small business 1,328 1,304 1,290 1,287 1,286 1,289 1,301 1,296 1,296 1,307 1,316 1,327 1,287 1,296 1,327 Total Mass markets 11,072 10,775 10,625 10,534 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 10,534 10,060 9,430 Total access lines 16,050 15,839 15,680 15,522 15,339 15,087 14,933 14,739 14,546 14,283 14,037 13,795 15,522 14,739 13,795 1,043 1,168 1,176 1,151 1,137 1,077 997 953 925 893 852 801 1,151 953 801 UNEs Mass markets retail connections 11,072 10,775 10,625 10,534 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 10,534 10,060 9,430 Mass markets access lines 744 853 956 1,037 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 1,037 1,480 2,138 High-speed Internet subscribers 64 67 73 84 100 120 149 178 219 259 350 424 84 178 424 Video subscribers(6) 816 814 778 754 743 744 748 770 784 777 781 801 754 770 801 Wireless subscribers 12,696 12,509 12,432 12,409 12,382 12,302 12,402 12,488 12,602 12,573 12,677 12,793 12,409 12,488 12,793 Total mass markets retail connections 3,344 4,071 4,385 4,508 4,590 4,631 4,705 4,778 4,824 4,840 4,900 4,920 4,508 4,778 4,920 In-Region long distance lines(5) 744 853 956 1,037 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 1,037 1,480 2,138 High-speed Internet subscribers (3) $43.47 $42.90 $43.21 $45.11 $45.83 $46.27 $46.65 $47.57 $48.55 $49.41 $50.07 $50.81 $43.48 $46.30 $49.51 Consumer ARPU (4) (1) Certain prior period revenue, expense and access line amounts have been reclassified to conform to the current period presentation. (2) Access lines were reclassified during 2006 to conform to our revenue channel presentation. Resold lines include UNE lines, unbundled loops and public pay phone lines. Retail lines at December 31, 2005 reflect a decline of 32,000 lines in the fourth quarter related to affiliate disconnects and 23,000 line and 21,000 line disconnects in the first and second quarter of 2005, respectively, related to UUNet. (3) Included in the first quarter of 2006 high-speed Internet count are 18,000 subscribers which relate to 2005 and 2004 activity and have not been previously reported. (4) Consumer ARPU (Average Revenue Per Unit) is measured as consumer wireline revenue in the period divided by the average number of primary access lines for the period. ARPU is not a measure determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, and should not be considered as a substitute for our wireline services segment revenue or any other measure determined in accordance with GAAP. (5) Included in the third quarter of 2006 long distance lines count are approximately 20,000 lines which relate to second quarter of 2006 activity and have not been previously reported. (6) Video subscribers have been adjusted by approximately 35,000 and 5,000 subscribers as of December 31, 2006 and 2005, respectively, to conform to our current presentation of video subscribers.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—WIRELESS SERVICES SEGMENT (Dollars in millions, operating statistics in thousands, except ARPU amounts) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Wireless services revenue $127 $130 $133 $124 $126 $132 $131 $138 $139 $142 $135 $141 $514 $527 $557 Wireless services expenses Facility costs 6 16 47 74 76 79 75 75 71 74 74 75 143 305 294 Wireless equipment 21 29 38 29 26 28 25 28 30 26 28 27 117 107 111 Bad debt 9 6 9 5 14 14 12 11 12 12 14 15 29 51 53 Employee-related costs 12 12 14 14 14 12 12 12 12 11 12 11 52 50 46 Other non-employee related costs 31 36 38 35 27 14 18 16 16 12 15 15 140 75 58 Total wireless services expenses 79 99 146 157 157 147 142 142 141 135 143 143 481 588 562 Wireless services segment income $48 $31 $(13) $(33) $(31) $(15) $(11) $(4) $(2) $7 $(8) $(2) $33 $(61) $(5) Wireless services margin 37.8% 23.8% -9.8% -26.6% -24.6% -11.4% -8.4% -2.9% -1.4% 4.9% -5.9% -1.4% 6.4% -11.6% -0.9% Capital expenditures—wireless services $- $1 $2 $2 $1 $1 $- $- $- $- $- $1 $5 $2 $1 OPERATING STATISTICS As of and for the As of and for the Three Months Ended Years Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 12/31/04 12/31/05 12/31/06 Subscribers 816 814 778 754 743 744 748 770 784 777 781 801 754 770 801 $43 $46 $47 $46 $46 $50 $51 $51 $50 $52 $49 $50 $45 $49 $50 ARPU(1) (1) ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless services revenue stream attributed to subscribing customers (plus certain activation fees) divided by the average number of subscribers for the period. We believe this metric can be a useful measure of the revenue performance of our wireless business on a per-customer basis. We use ARPU internally to assess the revenue performance of our wireless business and the impact on this business of periodic customer initiatives and product roll-outs. ARPU is not a measure determined in accordance with GAAP and should not be considered as a substitute for our wireless segment revenue or any other measure determined in accordance with GAAP. Wireless ARPU includes surcharges for the recovery of costs associated with providing number portability and wireless 911 services.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—OTHER SERVICES SEGMENT (Dollars in millions) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Other services revenue $13 $9 $8 $10 $11 $9 $12 $9 $10 $10 $9 $9 $40 $41 $38 Other services expenses Property and other taxes 81 114 112 78 98 111 100 42 88 72 96 62 385 351 318 Real estate costs 112 101 105 97 105 99 110 108 110 105 110 112 415 422 437 Restructuring, realignment and severance related costs 10 50 2 44 7 (5) 25 52 20 (3) 3 (1) 106 79 19 Employee-related costs 232 211 189 171 198 201 193 199 189 204 195 215 803 791 803 Other non-employee related costs(1) 281 596 497 284 269 298 277 297 273 287 237 267 1,658 1,141 1,064 Total other services expenses 716 1,072 905 674 677 704 705 698 680 665 641 655 3,367 2,784 2,641 Other services segment income $(703) $(1,063) $(897) $(664) $(666) $(695) $(693) $(689) $(670) $(655) $(632) $(646) $(3,327) $(2,743) $(2,603) Capital expenditures—other services $80 $101 $90 $105 $57 $99 $99 $109 $68 $78 $73 $98 $376 $364 $317 (1) Certain immaterial expenses for facility costs, bad debt, and network expenses in the other services segment are recorded in other non-employee related costs.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SEGMENT REVENUE INCLUDING CUSTOMER CHANNEL WITHIN WIRELINE SERVICES(1) (Dollars in millions) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Wireline services revenue Voice services Local voice: Business $337 $326 $328 $322 $320 $320 $321 $311 $314 $309 $305 $298 $1,313 $1,272 $1,226 Mass markets 1,153 1,101 1,081 1,075 1,063 1,060 1,039 1,035 1,029 1,017 992 966 4,410 4,197 4,004 Wholesale 196 206 200 189 198 195 184 180 177 175 169 161 791 757 682 Total local voice 1,686 1,633 1,609 1,586 1,581 1,575 1,544 1,526 1,520 1,501 1,466 1,425 6,514 6,226 5,912 Long-distance: Business 156 152 157 135 146 145 139 138 144 139 138 133 600 568 554 Mass markets 101 103 115 134 135 133 142 152 155 161 162 162 453 562 640 Wholesale 243 237 278 277 277 269 272 268 260 262 272 265 1,035 1,086 1,059 Total long-distance 500 492 550 546 558 547 553 558 559 562 572 560 2,088 2,216 2,253 Access services 179 179 169 162 161 182 159 162 146 133 139 132 689 664 550 Total voice services 2,365 2,304 2,328 2,294 2,300 2,304 2,256 2,246 2,225 2,196 2,177 2,117 9,291 9,106 8,715 Data and Internet: Business 547 549 544 560 539 561 621 584 583 581 581 593 2,200 2,305 2,338 Mass markets 109 113 111 130 144 147 161 174 191 206 225 253 463 626 875 Wholesale 320 337 325 319 329 317 323 329 328 337 360 375 1,301 1,298 1,400 Total data and Internet 976 999 980 1,009 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 3,964 4,229 4,613 Total wireline services revenue 3,341 3,303 3,308 3,303 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 13,255 13,335 13,328 Wireless services revenue 127 130 133 124 126 132 131 138 139 142 135 141 514 527 557 Other services revenue 13 9 8 10 11 9 12 9 10 10 9 9 40 41 38 Total operating revenue $3,481 $3,442 $3,449 $3,437 $3,449 $3,470 $3,504 $3,480 $3,476 $3,472 $3,487 $3,488 $13,809 $13,903 $13,923 Operating revenue Wireline services revenue Business $1,041 $1,028 $1,030 $1,018 $1,006 $1,027 $1,082 $1,034 $1,041 $1,029 $1,024 $1,024 $4,117 $4,149 $4,118 Mass markets 1,365 1,319 1,309 1,343 1,344 1,342 1,344 1,363 1,376 1,385 1,380 1,382 5,336 5,393 5,523 Wholesale 935 956 969 942 962 960 935 936 910 906 939 932 3,802 3,793 3,687 Total wireline services revenue 3,341 3,303 3,308 3,303 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 13,255 13,335 13,328 Wireless services revenue 127 130 133 124 126 132 131 138 139 142 135 141 514 527 557 Other services revenue 13 9 8 10 11 9 12 9 10 10 9 9 40 41 38 Total operating revenue $3,481 $3,442 $3,449 $3,437 $3,449 $3,470 $3,504 $3,480 $3,476 $3,472 $3,487 $3,488 $13,809 $13,903 $13,923 (1) Certain prior period revenue, expense and access line amounts have been reclassified to conform to the current period presentation.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL DATA—SPECIAL ITEMS (Dollars in millions) (Unaudited) Three Months Ended 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 SPECIAL ITEMS:(1) Operating expenses: Bankruptcy settlements (SG&A) $ — $52 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Legal reserve (SG&A) — (318) (250) — — — — — — — — — Restructuring, realignment and severance related costs (SG&A) (15) (132) (5) (59) (15) 1 (26) (74) (22) — (43) — OPEB - Medicare one-time benefit (COGS and SG&A) — — 16 — — — — — — — — — Asset impairment charges — (43) (34) (36) — — — — — — — — Subtotal operating expenses (15) (441) (273) (95) (15) 1 (26) (74) (22) — (43) — Other (expense) income—net: Gain (loss) on debt extinguishment (13) 20 (6) — — (43) 11 (430) — — — — Gain on sale of assets 1 — — 7 257 — — 6 — — — 64 Gain on agreement terminations (Other—net) — 70 — — — — — — — — — — Tax penalty adjustment (Other—net) — — (36) 36 — — — — — — — — Tax sharing settlement (Other—net) — — — — — — — — — — 53 — Subtotal other (expense) income—net (12) 90 (42) 43 257 (43) 11 (424) — — 53 64 Income tax (expense) benefit: Change in the valuation allowance against deferred tax assets (Income tax) — (140) 16 — — — — — — — — — Tax sharing settlement (Income tax) — — — — — — — — — — 39 — Subtotal income tax (expense) benefit — (140) 16 — — — — — — — 39 — Other special items (expense): Cumulative effect of changes in accounting principles—net — — — — — — — (22) — — — — $— Total special items—(charges)/benefits $(27) $(491) $(299) $(52) $242 $(42) $(15) $(520) $(22) $49 $64 (1) Effective for the quarter ended June 30, 2006, special items will only be identified herein when they are considered to be material. Although certain costs associated with the items described above continue to be incurred, they are not considered to be material and, therefore, are not detailed above.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—EBITDA (Dollars in millions) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 EBITDA—as adjusted:(1) EBITDA—as adjusted $888 $868 $879 $1,024 $989 $990 $1,002 $1,053 $1,067 $1,109 $1,134 $1,080 $3,659 $4,034 $4,390 Less: Restructuring, realignment and severance related costs (15) (132) (5) (59) (15) 1 (26) (74) (22) — (43) — (211) (114) (65) Less: Asset impairment charges — (43) (34) (36) — — — — — — — — (113) — — Less: Special items — (266) (234) — — — — — — — — — (500) — — EBITDA:(1) EBITDA $873 $427 $606 $929 $974 $991 $976 $979 $1,045 $1,109 $1,091 $1,080 $2,835 $3,920 $4,325 Depreciation and amortization (777) (784) (779) (783) (774) (765) (768) (758) (691) (693) (691) (695) (3,123) (3,065) (2,770) Total other expense—net (409) (283) (414) (312) (139) (393) (353) (730) (268) (281) (249) (200) (1,418) (1,615) (998) Income tax benefit (expense) 3 (136) 18 27 (4) 3 1 3 2 (18) 43 9 (88) 3 36 Cumulative effect of accounting changes - net — — — — — — — (22) — — — — — (22) — Net (loss) income $(310) $(776) $(569) $(139) $57 $(164) $(144) $(528) $88 $117 $194 $194 $(1,794) $(779) $593 EBITDA Margin:(1) EBITDA $873 $427 $606 $929 $974 $991 $976 $979 $1,045 $1,109 $1,091 $1,080 $2,835 $3,920 $4,325 Operating revenue $3,481 $3,442 $3,449 $3,437 $3,449 $3,470 $3,504 $3,480 $3,476 $3,472 $3,487 $3,488 $13,923 $13,809 $13,903 EBITDA margin (EBITDA divided by operating revenue) 25.1% 12.4% 17.6% 27.0% 28.2% 28.6% 27.9% 28.1% 30.1% 31.9% 31.3% 31.0% 20.5% 28.2% 31.1% EBITDA—as adjusted:(1) EBITDA—as adjusted $888 $868 $879 $1,024 $989 $990 $1,002 $1,053 $1,067 $1,109 $1,134 $1,080 $3,659 $4,034 $4,390 Operating revenue $3,481 $3,442 $3,449 $3,437 $3,449 $3,470 $3,504 $3,480 $3,476 $3,472 $3,487 $3,488 $13,923 $13,809 $13,903 EBITDA margin—as adjusted 25.5% 25.2% 25.5% 29.8% 28.7% 28.5% 28.6% 30.3% 30.7% 31.9% 32.5% 31.0% 26.5% 29.0% 31.5% (EBITDA—as adjusted divided by operating revenue) (1) EBITDA, EBITDA Margin, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP financial measures. Other companies may calculate these measures (or similarly titled measures) differently. We believe these measures provide useful information to investors in evaluating our capital-intensive business because they reflect our operating performance before the impacts of non-cash items and are indicators of our ability to service debt, pay taxes and fund discretionary spending such as capital expenditures. Management also uses EBITDA for a number of purposes, including setting targets for compensation and assessing the performance of our operations.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—NET DEBT (Dollars in millions) (Unaudited) 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 Net Debt:(1) Current borrowings $996 $836 $652 $596 $601 $261 $527 $512 $604 $2,683 $1,685 $1,686 Long-term borrowings—net 16,544 16,407 16,545 16,690 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 Total borrowings—net 17,540 17,243 17,197 17,286 17,292 17,548 17,229 15,480 15,438 15,376 14,913 14,892 Less: Cash and cash equivalents (1,353) (1,184) (1,314) (1,151) (1,406) (2,245) (2,311) (846) (610) (1,189) (962) (1,241) Less: Short-term investments (702) (423) (598) (764) (966) (634) (580) (101) (130) (205) (218) (248) Less: Long-term investments (35) (124) (105) (45) (36) (1) (1) — — — — — Net Debt $15,450 $15,512 $15,180 $15,326 $14,884 $14,668 $14,337 $14,533 $14,698 $13,982 $13,733 $13,403 (1) Net Debt is a non-GAAP financial measure that we calculate as our total borrowings (current plus long-term) less our cash and cash equivalents and short and long-term investments. We believe net debt is helpful in analyzing our leverage, and management uses this measure in making decisions regarding potential financings. Net debt is not a measure determined in accordance with GAAP and should not be considered as a substitute for “current borrowings”, “long-term borrowings” or any other measure determined in accordance with GAAP.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—FREE CASH FLOW FROM OPERATIONS (Dollars in millions) (Unaudited) Years Ended Three Months Ended December 31, 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 2004 2005 2006 Free Cash Flow from Operations:(1) Cash provided by operating activities $560 $284 $765 $239 $343 $570 $675 $725 $140 $1,037 $752 $860 $1,848 $2,313 $2,789 Less: Expenditures for property, plant and equipment and intangible assets (455) (486) (418) (372) (313) (352) (445) (503) (390) (442) (394) (406) (1,731) (1,613) (1,632) Free Cash Flow from Operations 105 (202) 347 (133) 30 218 230 222 (250) 595 358 454 117 700 1,157 Add: One time settlement payments — — — 311 — — — 204 100 — — 140 311 204 240 Free Cash Flow from Operations—as adjusted $105 $(202) $347 $178 $30 $218 $230 $426 $(150) $595 $358 $594 $428 $904 $1,397 (1) Free cash flow from operations is a non-GAAP financial measure that indicates cash generated by our business after operating expenses, capital expenditures and interest expense. We believe this measure provides useful information to our investors for purposes of evaluating our ability to satisfy our debt and other mandatory payment obligations and because it reflects cash flows available for financing activities, voluntary debt repayment and to strengthen our balance sheet. This is of particular relevance for our business given our significant debt balance. We also use free cash flow from operations internally for a variety of purposes, including setting targets for compensation and budgeting our cash needs. Free cash flow from operations is not a measure determined in accordance with GAAP and should not be considered as a substitute for “operating income” or “net cash flow from operating activities” or any other measure determined in accordance with GAAP.
  • QWEST COMMUNICATIONS INTERNATIONAL INC. WIRELESS SERVICES ARPU RECONCILIATION (Dollars in millions, subscribers in thousands, and ARPU amounts in dollars) (Unaudited) Three Months Ended 3/31/04 6/30/04 9/30/04 12/31/04 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 ARPU is calculated as follows:(1) Total quarterly wireless services revenue $127 $130 $133 $124 $126 $132 $131 $138 $139 $142 $135 $141 Less: quarterly non-recurring revenue (18) (19) (21) (19) (23) (21) (17) (22) (22) (20) (20) (22) Quarterly recurring revenue $109 $111 $112 $105 $103 $111 $114 $116 $117 $122 $115 $119 Average monthly recurring revenue $36 $37 $37 $35 $34 $37 $38 $39 $39 $41 $38 $40 Divided by quarterly average wireless subscribers 838 814 797 767 745 743 745 759 778 782 775 790 Wireless services ARPU $43 $46 $47 $46 $46 $50 $51 $51 $50 $52 $49 $50 (1)ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless services revenue stream attributed to subscribing customers (plus certain activation fees) divided by the average number of subscribers for the period. We believe this metric can be a useful measure of the revenue performance of our wireless business on a per-customer basis. We use ARPU internally to assess the revenue performance of our wireless business and the impact on this business of periodic customer initiatives and product roll-outs. ARPU is not a measure determined in accordance with GAAP and should not be considered as a substitute for our wireless segment revenue or any other measure determined in accordance with GAAP. Wireless ARPU includes surcharges for the recovery of costs associated with providing number portability and wireless 911 services.