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qwest communications 2Q 02Web Financials 2fin

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    qwest communications 2Q 02Web Financials 2fin qwest communications 2Q 02Web Financials 2fin Document Transcript

    • QWEST COMMUNICATIONS INTERNATIONAL INC SECOND QUARTER 2002 FINANCIAL STATEMENTS TABLE OF CONTENTS Attachment A CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - AS REPORTED Attachment B CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NORMALIZED Attachment C CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- 3 MONTHS ENDED Attachment D CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- 6 MONTHS ENDED Attachment E SELECTED CONSOLIDATED DATA Attachment F SELECTED CONSOLIDATED DATA - NORMALIZED Attachment G CONDENSED CONSOLIDATED BALANCE SHEETS Attachment H CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    • ATTACHMENT A QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - AS REPORTED (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Six Months Ended June 30, % June 30, % 2002 2001 Change 2002 2001 Change REVENUES: Business services $ 1,551 $ 1,657 (6.4) $ 3,096 $ 3,439 (10.0) Consumer services 1,410 1,481 (4.8) 2,839 2,944 (3.6) Wholesale services 995 1,699 (41.4) 2,016 3,148 (36.0) Directory services 345 348 (0.9) 695 690 0.7 Network services and other revenue 15 34 (55.9) 35 46 (23.9) Total revenues 4,316 5,219 (17.3) 8,681 10,267 (15.4) OPERATING EXPENSES: Cost of sales 1,644 1,848 (11.0) 3,217 3,643 (11.7) Selling, general and administrative 1,699 1,342 26.6 3,038 2,600 16.8 Depreciation 1,075 865 24.3 2,129 1,696 25.5 Depreciation adjustment for access lines returned to service - 222 (100.0) - 222 (100.0) Goodwill and other intangible amortization 85 392 (78.3) 170 711 (76.1) Merger-related and other charges - 415 (100.0) - 624 (100.0) Operating (loss) income (187) 135 (238.5) 127 771 (83.5) OTHER EXPENSE (INCOME): Interest expense - net 455 343 32.7 866 681 27.2 Loss on changes in market value of financial instruments - 23 (100.0) - - - Gain on sales of rural exchanges - (50) 100.0 - (50) 100.0 Loss on sales of investments and FMV adjustments 11 - - 21 - - Investment write-downs 740 3,108 (76.2) 1,202 3,247 (63.0) Other expense - net 38 14 171.4 209 34 514.7 Total other expense - net 1,244 3,438 (63.8) 2,298 3,912 (41.3) Loss before income taxes, discontinued operations and extraordinary item (1,431) (3,303) (56.7) (2,171) (3,141) (30.9) Income tax (benefit) provision (298) 3 NM (334) 147 (327.2) Loss from continuing operations (1,133) (3,306) 65.7 (1,837) (3,288) 44.1 DISCONTINUED OPERATIONS: (Loss) income from discontinued operations (5) - - (5) 1 (600.0) Income tax benefit 2 - - 2 - - Loss before extraordinary item (1,136) (3,306) 65.6 (1,840) (3,287) 44.0 Extraordinary item - early retirement of debt, net of tax - - - 6 (65) (109.2) NET LOSS $ (1,136) $ (3,306) 65.6 $ (1,834) $ (3,352) 45.3 Basic loss per share $ (0.68) $ (1.99) 65.8 $ (1.10) $ (2.02) 45.5 Basic average shares outstanding 1,678 1,661 1.0 1,672 1,659 0.8 Diluted loss per share $ (0.68) $ (1.99) 65.8 $ (1.10) $ (2.02) 45.5 Diluted average shares outstanding 1,678 1,661 1.0 1,672 1,659 0.8 Dividends per share $ - $ 0.05 (100.0) $ - $ 0.05 (100.0)
    • ATTACHMENT B QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NORMALIZED (1) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Six Months Ended June 30, % June 30, % 2002 2001 Change 2002 2001 Change REVENUES: Business services $ 1,551 $ 1,657 (6.4) $ 3,096 $ 3,439 (10.0) Consumer services 1,413 1,484 (4.8) 2,846 2,950 (3.5) Wholesale services 995 1,699 (41.4) 2,016 3,148 (36.0) Directory services 345 348 (0.9) 695 690 0.7 Network services and other revenue 15 34 (55.9) 35 46 (23.9) Total revenues 4,319 5,222 (17.3) 8,688 10,273 (15.4) OPERATING EXPENSES: Cost of sales 1,647 1,850 (11.0) 3,222 3,646 (11.6) Selling, general and administrative 1,412 1,343 5.1 2,752 2,601 5.8 Adjusted EBITDA (2) 1,260 2,029 (37.9) 2,714 4,026 (32.6) Adjusted EBITDA margin 29.2% 38.9% 31.2% 39.2% Depreciation 1,075 865 24.3 2,130 1,697 25.5 Goodwill and other intangible amortization 85 392 (78.3) 170 711 (76.1) Operating income 100 772 (87.0) 414 1,618 (74.4) OTHER EXPENSE: Interest expense - net 455 343 32.7 866 681 27.2 Other expense - net 38 14 171.4 135 34 297.1 Total other expense - net 493 357 38.1 1,001 715 40.0 (Loss) income before income taxes (393) 415 (194.7) (587) 903 (165.0) Income tax (benefit) provision (183) 287 (163.8) (215) 557 (138.6) NET (LOSS) INCOME $ (210) $ 128 (264.1) $ (372) $ 346 (207.5) Basic (loss) earnings per share $ (0.13) $ 0.08 (262.5) $ (0.22) $ 0.21 (204.8) Basic average shares outstanding 1,678 1,661 1.0 1,672 1,659 0.8 Diluted (loss) earnings per share $ (0.13) $ 0.08 (262.5) $ (0.22) $ 0.21 (204.8) Diluted average shares outstanding 1,678 1,674 0.2 1,672 1,674 (0.1) Diluted cash (loss) earnings per share (3) $ (0.09) $ 0.29 (131.0) $ (0.16) $ 0.59 (127.1) (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 charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. In addition, the normalized statements adjust for a charge recorded by the company in the second quarter to increase its bad debt reserves associated with the WorldCom, Inc. bankruptcy. The Merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. (2) Adjusted earnings before interest, income taxes, depreciation and amortization (quot;Adjusted EBITDAquot;) excludes all items adjusted as a normalizing item and 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.
    • ATTACHMENT C QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Three Months Ended June 30, 2002 June 30, 2001 As Reported Normalized Normalized As Reported Normalized Normalized Results Adjustments Results Results Adjustments Results REVENUES: Business services $ 1,551 $ - $ 1,551 $ 1,657 $ - $ 1,657 Consumer services 1,410 3 1,413 1,481 3 1,484 Wholesale services 995 - 995 1,699 - 1,699 Directory services 345 - 345 348 - 348 Network services and other revenue 15 - 15 34 - 34 Total revenues 4,316 3 4,319 5,219 3 5,222 OPERATING EXPENSES: Cost of sales 1,644 3 1,647 1,848 2 1,850 Selling, general and administrative 1,699 (287) 1,412 1,342 1 1,343 Adjusted EBITDA (2) 973 287 1,260 2,029 - 2,029 Adjusted EBITDA margin 22.5% 29.2% 38.9% 38.9% Depreciation 1,075 - 1,075 865 - 865 Depreciation adjustment for access lines returned to service - - - 222 (222) - Goodwill and other intangible amortization 85 - 85 392 - 392 Merger-related and other charges - - - 415 (415) - Operating income (187) 287 100 135 637 772 OTHER EXPENSE (INCOME): Interest expense - net 455 - 455 343 - 343 Loss on changes in market value of financial instruments - - - 23 (23) - Gain on sales of rural exchanges - - - (50) 50 - Loss on sales of investments and FMV adjustments 11 (11) - - - - Investment write-downs 740 (740) - 3,108 (3,108) - Other expense - net 38 - 38 14 - 14 Total other expense - net 1,244 (751) 493 3,438 (3,081) 357 (Loss) income before income taxes, discontinued operations and extraordinary item (1,431) 1,038 (393) (3,303) 3,718 415 Income tax (benefit) provision (298) 115 (183) 3 284 287 (Loss) income from continuing operations (1,133) 923 (210) (3,306) 3,434 128 DISCONTINUED OPERATIONS: (Loss) from discontinued operations (5) 5 - - - - Income tax benefit 2 (2) - - - - NET (LOSS) INCOME $ (1,136) $ 926 $ (210) $ (3,306) $ 3,434 $ 128 Basic (loss) earnings per share $ (0.68) $ (0.13) $ (1.99) $ 0.08 Basic average shares outstanding 1,678 1,678 1,661 1,661 Diluted (loss) earnings per share $ (0.68) $ (0.13) $ (1.99) $ 0.08 Diluted average shares outstanding 1,678 1,678 1,661 1,674 Diluted cash (loss) earnings per share (3) $ (0.09) $ 0.29 (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 charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. In addition, the normalized statements adjust for a charge recorded by the company in the second quarter to increase its bad debt reserves associated with the WorldCom, Inc. bankruptcy. The Merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. (2) Adjusted earnings before interest, income taxes, depreciation and amortization (quot;Adjusted EBITDAquot;) excludes all items adjusted as a normalizing item and 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.
    • ATTACHMENT D QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Six Months Ended Six Months Ended June 30, 2002 June 30, 2001 As Reported Normalized Normalized As Reported Normalized Normalized Results Adjustments Results Results Adjustments Results REVENUES: Business services $ 3,096 $ - $ 3,096 $ 3,439 $ - $ 3,439 Consumer services 2,839 7 2,846 2,944 6 2,950 Wholesale services 2,016 - 2,016 3,148 - 3,148 Directory services 695 - 695 690 - 690 Network services and other revenue 35 - 35 46 - 46 Total revenues 8,681 7 8,688 10,267 6 10,273 OPERATING EXPENSES: Cost of sales 3,217 5 3,222 3,643 3 3,646 Selling, general and administrative 3,038 (286) 2,752 2,600 1 2,601 Adjusted EBITDA (2) 2,426 288 2,714 4,024 2 4,026 Adjusted EBITDA margin 27.9% 31.2% 39.2% 39.2% Depreciation 2,129 1 2,130 1,696 1 1,697 Depreciation adjustment for access lines returned to service - - - 222 (222) - Goodwill and other intangible amortization 170 - 170 711 - 711 Merger-related and other charges - - - 624 (624) - Operating income 127 287 414 771 847 1,618 OTHER EXPENSE (INCOME): Interest expense - net 866 - 866 681 - 681 Gain on sales of rural exchanges and fixed assets - - - (50) 50 - Loss on sales of investments and FMV adjustments 21 (21) - - - - Investment write-downs 1,202 (1,202) - 3,247 (3,247) - Other expense - net 209 (74) 135 34 - 34 Total other expense - net 2,298 (1,297) 1,001 3,912 (3,197) 715 (Loss) income before income taxes, discontinued operations and extraordinary item (2,171) 1,584 (587) (3,141) 4,044 903 Income tax (benefit) provision (334) 119 (215) 147 410 557 (Loss) income from continuing operations (1,837) 1,465 (372) (3,288) 3,634 346 DISCONTINUED OPERATIONS: (Loss) income from discontinued operations (5) 5 - 1 (1) - Income tax benefit 2 (2) - - - - (Loss) income before extraordinary item (1,840) 1,468 (372) (3,287) 3,633 346 Extraordinary item - early retirement of debt, net of tax 6 (6) - (65) 65 - NET (LOSS) INCOME $ (1,834) $ 1,462 $ (372) $ (3,352) $ 3,698 $ 346 Basic (loss) earnings per share $ (1.10) $ (0.22) $ (2.02) $ 0.21 Basic average shares outstanding 1,672 1,672 1,659 1,659 Diluted (loss) earnings per share $ (1.10) $ (0.22) $ (2.02) $ 0.21 Diluted average shares outstanding 1,672 1,672 1,659 1,674 Diluted cash (loss) earnings per share (3) $ (0.16) $ 0.59 (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 charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. In addition, the normalized statements adjust for a charge recorded by the company in the second quarter to increase its bad debt reserves associated with the WorldCom, Inc. bankruptcy. The Merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. (2) Adjusted earnings before interest, income taxes, depreciation and amortization (quot;Adjusted EBITDAquot;) excludes all items adjusted as a normalizing item and 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.
    • ATTACHMENT E QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED CONSOLIDATED DATA (UNAUDITED) As of and for the Three Months Ended June 30, % 2002 2001 Change Free cash flow (1) $320 ($1,473) NM Capital expenditures (in millions) $618 $2,616 (76.4%) Total employees 55,080 65,479 (15.9%) DSL: Out-of-region subscribers (in thousands) 23 10 130 .0% In-region subscribers (in thousands) 485 360 34.7% Qualified households/businesses (in millions) 4.1 3.6 13.9% DSL equipped central offices 369 303 21 .8% Subscribers per equipped central office 1,315 1,187 10 .8% Wireless/PCS: Revenues (in millions) $188 $181 3.9% Subscribers (in thousands) 1,117 1,002 11.5% ARPU (in dollars) $48 $52 (7.7%) Cost per gross addition (CPGA) $248 $322 (23.0%) Penetration 5.09% 5.26% (3.2%) Access lines (in thousands): (2) Business Retail (3) 5,113 5,390 (5.1%) Resale 82 179 (54.2%) UNE-P 512 451 13 .5% Unbundled Loop 398 232 71 .6% Total Business 6,105 6,252 (2.4%) Consumer Primary line 9,425 9,822 (4.0%) Additional line 1,696 1,810 (6.3%) Public line 127 156 (18.6%) Total Consumer 11,248 11,788 (4.6%) Total access lines 17,353 18,040 (3.8%) Minutes of use from Carriers and CLECs (in millions) 15,809 17,827 (11.3%) Voice grade equivalent access lines (in thousands): Business 48,014 40,820 17.6% Consumer 12,678 12,786 (0.8%) Total voice grade equivalents 60,692 53,606 13.2% (1) Free cash flow is calculated as cash provided (used) from operations, less capital expenditures. (2) Access line and voice grade equivalent data has been adjusted for prior periods to conform to the current period presentation. (3) Business retail access line counts include lines sold to interexchange carriers at retail rates, however the revenue for these lines is accounted for in Wholesale.
    • ATTACHMENT F QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED CONSOLIDATED DATA - NORMALIZED (DOLLARS IN MILLIONS) (UNAUDITED) The following table shows a breakdown of revenues by major products and services for the three primary segments: Business services Consumer services Wholesale services Three months Three months Three months ended June 30, ended June 30, ended June 30, Services & products: 2002 2001 2002 2001 2002 2001 IP & data services $607 $562 $48 $51 $354 $419 Optical capacity asset sales 0 69 0 0 0 361 IP equipment and other 0 0 0 0 0 205 Total IP & data 607 631 48 51 354 985 Voice - long distance 219 226 99 164 236 244 Voice - local 689 759 1,091 1,103 372 444 Wireless 22 23 166 157 0 1 Other 14 18 9 9 33 25 Total $1,551 $1,657 $1,413 $1,484 $995 $1,699
    • ATTACHMENT G QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN MILLIONS) June 30, December 31, 2002 2001 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 699 $ 257 Accounts receivable - net 3,825 4,502 Inventories and supplies 86 170 Restricted Cash 750 - Prepaid and other 473 566 Total current assets 5,833 5,495 Property, plant and equipment - net 29,763 30,238 Investments 53 1,400 Goodwill and intangibles - net 34,470 34,523 Other assets 2,190 2,125 Total assets $ 72,309 $ 73,781 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 5,894 $ 4,806 Accounts payable 1,290 1,529 Accrued expenses and other current liabilities 2,564 3,262 Advance billings and customer deposits 391 392 Total current liabilities 10,139 9,989 Long-term borrowings 20,370 20,197 Post-retirement and other post-employment benefit obligations 2,881 2,923 Deferred taxes, credits and other 4,021 4,017 Stockholders' equity 34,898 36,655 Total liabilities and stockholders' equity $ 72,309 $ 73,781
    • ATTACHMENT H QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS) (UNAUDITED) Six Months Ended June 30, 2002 2001 OPERATING ACTIVITIES: Net Loss: ($1,834) ($3,352) Adjustments to net loss: Depreciation and amortization 2,299 2,629 Loss on sale of investments and fair value adjustments, net 26 17 Non-Cash Merger-related charges (1) 479 Provision for bad debts 435 251 Asset impairment charge 1,333 3,189 Equity loss on investments 155 47 Deferred Income taxes (78) 591 (Gain) loss on early retirement of debt, net (6) 65 Changes in operating assets and liabilities: Accounts receivable 230 (857) Inventories, supplies, prepaids and other current assets 55 (209) Accounts payable, accrued expenses and advance billings (718) 17 Restructuring and Merger-related reserves (251) (330) Other 20 (61) Cash provided by operating activities 1,665 2,476 INVESTING ACTIVITIES: Expenditures for property, plant and equipment (1,814) (5,559) Other 59 19 Cash used for investing activities (1,755) (5,540) FINANCING ACTIVITIES: Net proceeds from current borrowings 97 2,296 Proceeds from issuance of long-term borrowings 1,476 3,238 Repayments of long-term borrowings (236) (1,102) Cash restricted for the repayment of short-term borrowings (750) - Costs relating to the early retirement of debt - (106) Proceeds from issuances of common stock 11 280 Repurchase of stock (12) (1,000) Dividends paid on common stock - (83) Debt issuance costs (54) (97) Cash provided by financing activities 532 3,426 CASH AND CASH EQUIVALENTS: Increase 442 362 Beginning balance 257 154 Ending balance $699 $516