qwest communications Q_3Q07_Historical_v2

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qwest communications Q_3Q07_Historical_v2

  1. 1. Qwest Communications International Inc. Historical Financial Information As of September 30, 2007
  2. 2. QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in millions except per share amounts, shares in thousands) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Operating revenue.......................................................... $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923 Operating expenses: Cost of sales (exclusive of depreciation and and amortization)..................................................... 1,439 1,434 1,512 1,451 1,418 1,394 1,382 1,414 1,317 1,310 1,313 5,836 5,607 Selling, general and administrative............................. 1,036 1,045 1,016 1,050 1,013 969 1,014 994 998 1,004 1,323 4,147 3,991 Depreciation and amortization.................................... 774 765 768 758 691 693 691 695 612 615 619 3,065 2,770 3,249 3,244 3,296 3,259 3,122 3,056 3,087 3,103 2,927 2,929 3,255 13,048 12,368 Total operating expenses................................................ Other expense (income)—net: Interest expense on long-term borrowings and capital leases—net................................................... 381 380 384 338 296 298 291 284 282 274 272 1,483 1,169 Loss (gain) on early retirement of debt—net ............. — 43 (11) 430 — (5) 9 1 — 22 — 462 5 Gain on sale of assets.................................................. (257) — — (6) — (3) — (65) — — — (263) (68) Other—net.................................................................. 15 (30) (20) (32) (28) (9) (51) (20) (5) (8) (9) (67) (108) Total other expense (income)—net................................ 139 393 353 730 268 281 249 200 277 288 263 1,615 998 Income (loss) before income taxes and Cumulative effect of changes in accounting principles—net of taxes............................ 61 (167) (145) (509) 86 135 151 185 242 246 (84) (760) 557 Income tax (expense) benefit ........................................ (4) 3 1 3 2 (18) 43 9 (2) — 2,149 3 36 Income (loss) before cumulative effect of changes in accounting principles—net of taxes........................ 57 (164) (144) (506) 88 117 194 194 240 246 2,065 (757) 593 Cumulative effect of changes in accounting principles—net of taxes............................ — — — (22) — — — — — — — (22) — Net income (loss) .......................................................... $ 57 $ (164) $ (144) $ (528) $ 88 $ 117 $ 194 $ 194 $ 240 $ 246 $ 2,065 $ (779) $ 593 Earnings per share: Basic........................................................................... $ 0.03 $ (0.09) $ (0.08) $ (0.28) $ 0.05 $ 0.06 $ 0.10 $ 0.10 $ 0.13 $ 0.13 $ 1.14 $ (0.42) $ 0.31 Diluted........................................................................ $ 0.03 $ (0.09) $ (0.08) $ (0.28) $ 0.05 $ 0.06 $ 0.09 $ 0.10 $ 0.12 $ 0.13 $ 1.08 $ (0.42) $ 0.30 Weighted average shares outstanding: Basic........................................................................... 1,816,758 1,823,338 1,843,715 1,861,684 1,874,313 1,882,398 1,901,372 1,900,925 1,864,951 1,841,295 1,818,683 1,836,374 1,889,857 Diluted........................................................................ 1,822,377 1,823,338 1,843,715 1,861,684 1,911,376 1,951,728 2,004,502 1,992,133 1,958,535 1,950,056 1,916,478 1,836,374 1,971,545
  3. 3. QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in millions) 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 ASSETS Current assets: Cash and cash equivalents............................................ $ 1,406 $ 2,245 $ 2,311 $ 846 $ 610 $ 1,189 $ 962 $ 1,241 $ 887 $ 869 $ 1,119 Short-term investments................................................. 966 634 580 101 130 205 218 248 242 240 — Accounts receivable—net............................................ 1,603 1,566 1,595 1,525 1,541 1,477 1,718 1,600 1,510 1,497 1,586 Deferred income taxes.................................................. — 8 22 118 132 114 142 187 126 123 658 Prepaid expenses and other.......................................... 552 445 546 574 611 568 535 378 429 358 406 Total current assets.......................................................... 4,527 4,898 5,054 3,164 3,024 3,553 3,575 3,654 3,194 3,087 3,769 Property, plant and equipment—net................................ 16,459 16,101 15,812 15,568 15,273 15,016 14,828 14,579 14,274 14,076 13,849 Capitalized software—net............................................... 1,068 1,030 991 963 927 885 840 818 812 817 824 Deferred income taxes..................................................... — — — — — — — — — — 1,696 Prepaid pension............................................................... 1,187 1,182 1,172 1,165 1,147 1,129 1,111 1,311 1,320 1,329 1,338 Other................................................................................ 888 859 698 637 755 709 760 877 1,101 1,080 1,235 Total assets...................................................................... $ 24,129 $ 24,070 $ 23,727 $ 21,497 $ 21,126 $ 21,292 $ 21,114 $ 21,239 $ 20,701 $ 20,389 $ 22,711 LIABILITIES AND STOCKHOLDERS' DEFICIT OR EQUITY Current liabilities: Current portion of long-term borrowings..................... $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 $ 1,304 $ 1,727 Accounts payable......................................................... 1,235 1,161 1,314 1,314 1,103 1,063 1,094 997 895 918 943 Accrued expenses and other......................................... 1,581 1,602 1,756 1,776 1,618 1,740 1,743 1,856 1,438 1,518 1,982 Deferred revenue and advance billings........................ 642 626 635 633 622 609 622 621 613 610 603 Total current liabilities..................................................... 4,059 3,650 4,232 4,235 3,947 6,095 5,144 5,160 4,634 4,350 5,255 Long-term borrowings—net............................................ 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 13,199 13,207 12,779 Post-retirement and other post-employment benefit obligations........................................................ 3,452 3,466 3,457 3,459 3,441 3,439 3,436 2,366 2,364 2,346 2,325 Deferred revenue............................................................. 554 548 532 522 514 508 516 506 506 509 551 Other................................................................................ 1,937 1,782 1,520 1,530 1,450 1,383 1,366 1,446 1,532 1,533 1,510 Total liabilities................................................................. 26,693 26,733 26,443 24,714 24,186 24,118 23,690 22,684 22,235 21,945 22,420 Stockholders' deficit or equity: Preferred stock............................................................. — — — — — — — — — — — Common stock.............................................................. 18 18 19 19 19 19 19 19 19 18 18 Additional paid-in capital............................................ 43,111 43,170 43,260 43,290 43,355 43,475 43,531 43,384 43,022 42,770 42,576 Treasury stock.............................................................. (20) (16) (17) (17) (17) (17) (18) (24) (28) (33) (51) Accumulated deficit..................................................... (45,664) (45,828) (45,972) (46,500) (46,412) (46,295) (46,101) (45,907) (45,619) (45,373) (43,308) Accumulated other comprehensive (loss) income....... (9) (7) (6) (9) (5) (8) (7) 1,083 1,072 1,062 1,056 Total stockholders' deficit or equity................................ (2,564) (2,663) (2,716) (3,217) (3,060) (2,826) (2,576) (1,445) (1,534) (1,556) 291 Total liabilities and stockholders' deficit or equity......... $ 24,129 $ 24,070 $ 23,727 $ 21,497 $ 21,126 $ 21,292 $ 21,114 $ 21,239 $ 20,701 $ 20,389 $ 22,711
  4. 4. QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in millions) 3 Mos 6 Mos 9 Mos 12 Mos 3 Mos 6 Mos 9 Mos 12 Mos 3 Mos 6 Mos 9 Mos Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 Operating activities: Net income (loss)...................................................... $ 57 $ (107) $ (251) $ (779) $ 88 $ 205 $ 399 $ 593 $ 240 $ 486 $ 2,551 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization............................... 774 1,539 2,307 3,065 691 1,384 2,075 2,770 612 1,227 1,846 Deferred income taxes............................................ — 2 (4) (5) (1) (2) (3) (5) — (2) (2,177) Provision for bad debt—net................................... 57 110 137 173 44 71 108 155 43 80 124 Cumulative effect of changes in accounting principles—net of taxes....................................... — — — 22 — — — — — — — Gain on sale of assets............................................. (257) (257) (257) (263) — (3) (3) (68) — — (1) Loss (gain) on early retirement of debt—net.......... — 43 32 462 — (5) 4 5 — 22 22 Other non-cash charges—net................................. 1 7 17 37 16 34 38 57 14 20 43 Changes in operating assets and liabilities: Accounts receivable............................................... (66) (82) (138) (104) (60) (23) (294) (223) 47 23 (110) Prepaid expenses and other current assets.............. 11 98 1 (8) (37) 28 50 168 (50) 22 (26) Accounts payable and accrued expenses and other current liabilities........................................ (178) (258) 57 73 (368) (284) (236) (372) (584) (447) 21 Deferred revenue and advance billings................... (32) (54) (61) (73) (19) (38) (25) (33) (8) (8) 27 Other non-current assets and liabilities................... (24) (128) (252) (287) (214) (190) (184) (258) (46) (50) (194) Cash provided by operating activities........................... 343 913 1,588 2,313 140 1,177 1,929 2,789 268 1,373 2,126 Investing activities: Expenditures for property, plant and equipment and capitalized software......................................... (313) (665) (1,110) (1,613) (390) (832) (1,226) (1,632) (318) (744) (1,164) Proceeds from sale of property and equipment.......... 418 418 418 420 26 47 63 173 — — — Proceeds from sale of investment securities............... 630 1,086 1,230 1,793 7 42 56 70 6 31 192 Purchase of investment securities.............................. (822) (912) (1,002) (1,086) (36) (146) (173) (217) — (24) (64) Other......................................................................... 1 17 22 27 1 — (101) (94) 4 9 13 Cash used for investing activities.................................. (86) (56) (442) (459) (392) (889) (1,381) (1,700) (308) (728) (1,023) Financing activities: Proceeds from long-term borrowings........................ — 1,885 1,887 3,152 — — 600 600 — 500 500 Repayments of long-term borrowings, including current maturities.................................... (5) (1,550) (1,778) (4,716) (41) (47) (1,145) (1,180) (9) (900) (911) Proceeds from issuances of common stock................ 3 7 10 39 57 102 150 205 34 66 96 Repurchases of common stock.................................. — — — — — — — (209) (393) (681) (925) Other......................................................................... — (105) (105) (634) — — (37) (110) 54 (2) 15 Cash (used for) provided by financing activities........... (2) 237 14 (2,159) 16 55 (432) (694) (314) (1,017) (1,225) Cash and cash equivalents: Increase (decrease) in cash and cash equivalents....... 255 1,094 1,160 (305) (236) 343 116 395 (354) (372) (122) Beginning balance..................................................... 1,151 1,151 1,151 1,151 846 846 846 846 1,241 1,241 1,241 Ending balance.......................................................... $ 1,406 $ 2,245 $ 2,311 $ 846 $ 610 $ 1,189 $ 962 $ 1,241 $ 887 $ 869 $ 1,119
  5. 5. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED DATA—TOTAL COMPANY (UNAUDITED) (Dollars in millions) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Operating revenue: Wireline services.......................................................... $ 3,312 $ 3,329 $ 3,361 $ 3,333 $ 3,327 $ 3,320 $ 3,343 $ 3,338 $ 3,298 $ 3,314 $ 3,282 $ 13,335 $ 13,328 Wireless services.......................................................... 126 132 131 138 139 142 135 141 139 139 144 527 557 Other services............................................................... 11 9 12 9 10 10 9 9 9 10 8 41 38 Total operating revenue................................................... 3,449 3,470 3,504 3,480 3,476 3,472 3,487 3,488 3,446 3,463 3,434 13,903 13,923 Segment expenses: Cost of sales (COS) (2): Facility costs............................................................. 671 675 690 647 616 608 585 623 582 558 550 2,683 2,432 Network expenses..................................................... 67 59 72 69 52 62 69 69 52 65 65 267 252 Employee-related costs............................................. 409 387 404 387 396 388 397 392 379 366 368 1,587 1,573 Other non-employee related costs............................. 293 311 346 349 354 336 331 330 304 321 330 1,299 1,351 Total cost of sales......................................................... 1,440 1,432 1,512 1,452 1,418 1,394 1,382 1,414 1,317 1,310 1,313 5,836 5,608 Selling, general and administrative (SG&A) (2): Property and other taxes........................................... 99 111 100 43 88 72 96 64 90 99 81 353 320 Bad debt.................................................................... 57 53 27 36 44 27 37 47 43 37 44 173 155 Realignment, severance and related costs................ 15 (1) 26 74 22 (2) 43 — (5) 8 12 114 63 Employee-related costs............................................. 407 410 401 405 401 405 407 426 394 390 378 1,623 1,639 Other non-employee related costs............................. 457 474 462 491 458 467 431 457 476 470 808 1,884 1,813 Total selling, general and administrative..................... 1,035 1,047 1,016 1,049 1,013 969 1,014 994 998 1,004 1,323 4,147 3,990 Total Segment Expenses.................................................. $ 2,475 $ 2,479 $ 2,528 $ 2,501 $ 2,431 $ 2,363 $ 2,396 $ 2,408 $ 2,315 $ 2,314 $ 2,636 $ 9,983 $ 9,598 Segment expenses as a percentage of revenue: COS.............................................................................. 42 % 41 % 43 % 42 % 41 % 40 % 40 % 41 % 38 % 38 % 38 % 42 % 40 % SG&A........................................................................... 30 % 30 % 29 % 30 % 29 % 28 % 29 % 28 % 29 % 29 % 39 % 30 % 29 % Capital expenditures (1).................................................. $ 313 $ 352 $ 445 $ 503 $ 390 $ 442 $ 394 $ 406 $ 318 $ 426 $ 420 $ 1,613 $ 1,632 Employees........................................................................ 40,683 40,303 39,977 39,641 39,127 39,315 39,163 38,383 38,011 37,585 37,026 39,641 38,383 (1) Capital expenditures exclude assets acquired through capital leases. (2) Certain prior period expense amounts have benn reclassified to conform to current period presentation.
  6. 6. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED DATA—WIRELINE SERVICES SEGMENT (UNAUDITED) (Dollars in millions except ARPU amounts, operating statistics in thousands) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Wireline services revenue (1): Local voice................................................................... $ 1,581 $ 1,575 $ 1,544 $ 1,526 $ 1,520 $ 1,501 $ 1,466 $ 1,425 $ 1,394 $ 1,392 $ 1,362 $ 6,226 $ 5,912 Long-distance............................................................... 558 547 553 558 559 562 572 560 550 536 514 2,216 2,253 Access........................................................................... 161 182 159 162 146 133 139 132 134 139 127 664 550 Data, Internet and video............................................... 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 1,220 1,247 1,279 4,229 4,613 Total wireline services revenue....................................... 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 3,298 3,314 3,282 13,335 13,328 Wireline services expenses: Facility costs................................................................. 595 596 615 572 545 534 511 548 507 482 475 2,378 2,138 Network expenses........................................................ 62 58 70 68 52 61 68 67 51 64 64 258 248 Bad debt....................................................................... 43 40 15 24 28 15 23 32 30 28 28 122 98 Realignment, severance and related costs.................... 6 4 2 22 2 1 40 2 1 4 7 34 45 Employee-related costs................................................. 604 584 600 581 596 577 596 591 611 600 596 2,369 2,360 Other non-employee related costs................................ 326 342 375 391 383 372 369 366 353 363 375 1,434 1,490 Total wireline services expenses..................................... 1,636 1,624 1,677 1,658 1,606 1,560 1,607 1,606 1,553 1,541 1,545 6,595 6,379 Wireline services segment income.................................. $ 1,676 $ 1,705 $ 1,684 $ 1,675 $ 1,721 $ 1,760 $ 1,736 $ 1,732 $ 1,745 $ 1,773 $ 1,737 $ 6,740 $ 6,949 Wireline services margin................................................ 50.6 % 51.2 % 50.1 % 50.3 % 51.7 % 53.0 % 51.9 % 51.9 % 52.9 % 53.5 % 52.9 % 50.5 % 52.1 % Capital expenditures—wireline services (2)................... $ 255 $ 252 $ 346 $ 394 $ 322 $ 364 $ 321 $ 307 $ 263 $ 350 $ 325 $ 1,247 $ 1,314
  7. 7. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED DATA—WIRELINE SERVICES SEGMENT (CONTINUED) (UNAUDITED) (Dollars in millions except ARPU amounts, operating statistics in thousands) As of and Years Ended Three Months Ended December 31, Access lines (1): 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Business access lines: Retail lines................................................................. 3,074 3,031 3,012 2,969 2,958 2,920 2,900 2,870 2,842 2,817 2,803 2,969 2,870 Resold lines............................................................... 1,848 1,808 1,756 1,710 1,667 1,624 1,564 1,495 1,433 1,385 1,338 1,710 1,495 Total business access lines........................................... 4,922 4,839 4,768 4,679 4,625 4,544 4,464 4,365 4,275 4,202 4,141 4,679 4,365 Mass markets access lines: Consumer primary lines............................................ 8,107 7,974 7,916 7,851 7,749 7,592 7,454 7,333 7,200 7,015 6,860 7,851 7,333 Consumer additional lines......................................... 1,024 985 948 913 876 840 803 770 740 713 686 913 770 Small business lines.................................................. 1,286 1,289 1,301 1,296 1,296 1,307 1,316 1,327 1,336 1,342 1,345 1,296 1,327 Total mass markets access lines................................... 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 9,070 8,891 10,060 9,430 Total access lines............................................................. 15,339 15,087 14,933 14,739 14,546 14,283 14,037 13,795 13,551 13,272 13,032 14,739 13,795 In-Region long distance lines.......................................... 4,590 4,631 4,705 4,778 4,824 4,840 4,900 4,920 4,924 4,884 4,871 4,778 4,920 Minutes of use from carriers and CLECS (in millions).. 13,280 12,677 12,750 12,796 12,442 12,047 11,796 11,765 11,690 10,859 10,635 51,503 48,050 Mass markets retail connections: Mass markets access lines............................................ 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 9,070 8,891 10,060 9,430 Broadband subscribers (4)........................................... 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 2,405 2,516 1,480 2,138 Video subscribers (4)................................................... 100 120 149 178 219 259 350 424 506 572 634 178 424 Wireless subscribers..................................................... 743 744 748 770 784 777 781 801 812 807 819 770 801 Total mass markets retail connections............................. 12,382 12,302 12,402 12,488 12,602 12,573 12,677 12,793 12,899 12,854 12,860 12,488 12,793 Consumer ARPU (3)....................................................... $ 46 $ 46 $ 47 $ 48 $ 49 $ 49 $ 50 $ 51 $ 52 $ 53 $ 55 $ 46 $ 50 Broadband services: Subscribers................................................................... 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 2,405 2,516 1,480 2,138 Qualified households/business (in millions)................ 7 7 7 7 7 7 7 7 7 7 7 7 7 (1) Certain prior period revenue and access line amounts have been reclassified to conform to the current period presentation. Resold lines include UNE lines and public payphone lines. (2) Capital expenditures exclude assets acquired through capital leases. (3) 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. We believe this metric can be a useful measure of the revenue performance of our consumer business within our mass markets channel on a per-customer basis. We use ARPU internally to assess the revenue performance of our consumer business within our mass markets channel and the impact on this business of periodic customer initiatives and product roll-outs. 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. (4) Broadband and video subscribers include certain business customers.
  8. 8. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED DATA—WIRELESS SERVICES SEGMENT (UNAUDITED) (Dollars in millions except ARPU amounts, subscribers in thousands) As of and Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Wireless services revenue (1).......................................... $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 527 $ 557 Wireless services expenses: Facility costs................................................................. 76 79 75 75 71 74 74 75 75 76 75 305 294 Wireless equipment...................................................... 26 28 25 28 30 26 28 27 25 25 26 107 111 Bad debt....................................................................... 14 14 12 11 12 12 14 15 13 9 12 51 53 Employee-related costs................................................. 14 12 12 12 12 12 13 12 14 12 17 50 49 Other non-employee related costs................................ 29 16 20 17 17 12 17 16 12 14 13 82 62 Total wireless services expenses..................................... 159 149 144 143 142 136 146 145 139 136 143 595 569 Wireless services segment income.................................. $ (33) $ (17) $ (13) $ (5) $ (3) $ 6 $ (11) $ (4) $ — $ 3 $ 1 $ (68) $ (12) Wireless services margin................................................ (26.2)% (12.9)% (9.9)% (3.6)% (2.2)% 4.2 % (8.1)% (2.8)% —% 2.2 % 0.7 % (12.9)% (2.2)% Capital expenditures—wireless services (2)................... $ 1 $ 1 $ — $ — $ — $ — $ — $ 1 $ 1 $ — $ 1 $ 2 $ 1 OPERATING STATISTICS As of and Years Ended As of andThree Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Subscribers...................................................................... 743 744 748 770 784 777 781 801 812 807 819 770 801 ARPU (3)......................................................................... $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 50 $ 50 (1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation. (2) Capital expenditures exclude assets acquired through capital leases. (3) Wireless ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless service 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 services 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.
  9. 9. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED DATA—OTHER SERVICES SEGMENT (UNAUDITED) (Dollars in millions) As of and Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Other services revenue (1)............................................... $ 11 $ 9 $ 12 $ 9 $ 10 $ 10 $ 9 $ 9 $ 9 $ 10 $ 8 $ 41 $ 38 Other services expenses: Property and other taxes............................................... 98 111 100 42 88 72 96 62 90 98 80 351 318 Real estate costs........................................................... 105 99 110 108 110 105 110 112 109 109 111 422 437 Realignment, severance and related costs.................... 7 (5) 25 52 20 (3) 3 (1) (6) 2 5 79 19 Employee-related costs................................................. 198 201 193 199 189 204 195 215 148 144 133 791 803 Other non-employee related costs (2).......................... 272 300 279 299 276 289 239 269 282 284 619 1,150 1,073 Total other services expenses.......................................... 680 706 707 700 683 667 643 657 623 637 948 2,793 2,650 Other services segment income....................................... $ (669) $ (697) $ (695) $ (691) $ (673) $ (657) $ (634) $ (648) $ (614) $ (627) $ (940) $ (2,752) $ (2,612) Capital expenditures—other services (3)........................ $ 57 $ 99 $ 99 $ 109 $ 68 $ 78 $ 73 $ 98 $ 54 $ 76 $ 94 $ 364 $ 317 (1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation. (2) Certain immaterial expenses for facility costs, bad debt, and network expenses in other services segment are recorded in other non-employee related expenses. (3) Capital expenditures exclude assets acquired through capital leases.
  10. 10. QWEST COMMUNICATIONS INTERNATIONAL INC. SEGMENT REVENUE INCLUDING CUSTOMER CHANNEL WITHIN WIRELINE SERVICES (UNAUDITED) (Dollars in millions) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Operating revenue (1): Wireline services revenue: Voice services: Local voice: Business............................................................... $ 320 $ 320 $ 321 $ 311 $ 314 $ 309 $ 305 $ 298 $ 283 $ 289 $ 282 $ 1,272 $ 1,226 Mass markets........................................................ 1,063 1,060 1,039 1,035 1,029 1,017 992 966 952 947 931 4,197 4,004 Wholesale............................................................. 198 195 184 180 177 175 169 161 159 156 149 757 682 Total local voice...................................................... 1,581 1,575 1,544 1,526 1,520 1,501 1,466 1,425 1,394 1,392 1,362 6,226 5,912 Long-distance: Business............................................................... 146 145 139 138 144 139 138 133 137 133 132 568 554 Mass markets........................................................ 135 133 142 152 155 161 162 162 163 166 162 562 640 Wholesale............................................................. 277 269 272 268 260 262 272 265 250 237 220 1,086 1,059 Total long-distance.................................................. 558 547 553 558 559 562 572 560 550 536 514 2,216 2,253 Access services........................................................ 161 182 159 162 146 133 139 132 134 139 127 664 550 Total voice services..................................................... 2,300 2,304 2,256 2,246 2,225 2,196 2,177 2,117 2,078 2,067 2,003 9,106 8,715 Data, Internet and video: Business................................................................... 539 561 621 584 583 581 581 593 579 586 602 2,305 2,338 Mass markets........................................................... 144 147 161 174 191 206 225 253 278 291 306 626 875 Wholesale................................................................ 329 317 323 329 328 337 360 375 363 370 371 1,298 1,400 Total data, Internet and video..................................... 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 1,220 1,247 1,279 4,229 4,613 Total wireline services revenue...................................... 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 3,298 3,314 3,282 13,335 13,328 Wireless services revenue.............................................. 126 132 131 138 139 142 135 141 139 139 144 527 557 Other services revenue................................................... 11 9 12 9 10 10 9 9 9 10 8 41 38 Total operating revenue.................................................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923 Operating revenue (1): Wireline services revenue: Business...................................................................... $ 1,006 $ 1,027 $ 1,082 $ 1,034 $ 1,041 $ 1,029 $ 1,024 $ 1,024 $ 999 $ 1,008 $ 1,016 $ 4,149 $ 4,118 Mass markets.............................................................. 1,344 1,342 1,344 1,363 1,376 1,385 1,380 1,382 1,394 1,405 1,400 5,393 5,523 Wholesale.................................................................... 962 960 935 936 910 906 939 932 905 901 866 3,793 3,687 Total wireline services revenue...................................... 3,312 3,329 3,361 3,333 3,327 3,320 3,343 3,338 3,298 3,314 3,282 13,335 13,328 Wireless services revenue.............................................. 126 132 131 138 139 142 135 141 139 139 144 527 557 Other services revenue................................................... 11 9 12 9 10 10 9 9 9 10 8 41 38 Total operating revenue.................................................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923 (1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation.
  11. 11. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL DATA—SPECIAL ITEMS (UNAUDITED) (Dollars in millions) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Special items (1): Operating expenses: Legal reserve (SG&A).................................................. $ —$ — $ —$ —$ —$ — $ —$ — $ (40) $ — $ (353) $ —$ — Realignment, severance and related costs (SG&A)..... (15) 1 (26) (74) (22) — (43) — — — — (114) (65) Subtotal operating expenses............................................ (15) 1 (26) (74) (22) — (43) — (40) — (353) (114) (65) Other (expense) income—net: (Loss) gain on debt extinguishment............................. — (43) 11 (430) — — — — — — — (462) — Gain on sale of assets................................................... 257 — — 6 — — — 64 — — — 263 64 Tax sharing settlement (Other—net)............................ — — — — — — 53 — — — — — 53 Subtotal other (expense) income—net............................ 257 (43) 11 (424) — — 53 64 — — — (199) 117 Income tax sharing settlement......................................... — — — — — — 39 — — — — — 39 Reversal of income tax valuation allowance................... — — — — — — — — — — 2,174 — — Cumulative effect of changes in accounting principles—net of taxes............................. — — — (22) — — — — — — — (22) — Total special items—(charges) benefits.......................... $ 242 $ (42) $ (15) $ (520) $ (22) $ — $ 49 $ 64 $ (40) $ — $ 1,821 $ (335) $ 91 (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.
  12. 12. QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—EBITDA—AS ADJUSTED (UNAUDITED) (Dollars in millions) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 EBITDA—as adjusted (1):.............................................. $ 989 $ 990 $ 1,002 $ 1,053 $ 1,067 $ 1,109 $ 1,134 $ 1,080 $ 1,171 $ 1,149 $ 1,151 $ 4,034 $ 4,390 Less: Legal reserve....................................................... — — — — — — — — (40) — (353) — — Less: Realignment, severance and related costs............................................................... (15) 1 (26) (74) (22) — (43) — — — — (114) (65) EBITDA (1):.................................................................... $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 1,149 $ 798 $ 3,920 $ 4,325 Depreciation and amortization..................................... (774) (765) (768) (758) (691) (693) (691) (695) (612) (615) (619) (3,065) (2,770) Total other expense (income)—net.............................. (139) (393) (353) (730) (268) (281) (249) (200) (277) (288) (263) (1,615) (998) Income tax benefit (expense)....................................... (4) 3 1 3 2 (18) 43 9 (2) — 2,149 3 36 Cumulative effect of changes in accounting principles—net of taxes......................... — — — (22) — — — — — — — (22) — Net income (loss).......................................................... $ 57 $ (164) $ (144) $ (528) $ 88 $ 117 $ 194 $ 194 $ 240 $ 246 $ 2,065 $ (779) $ 593 EBITDA margin—as adjusted (1): EBITDA—as adjusted :............................................... $ 989 $ 990 $ 1,002 $ 1,053 $ 1,067 $ 1,109 $ 1,134 $ 1,080 $ 1,171 $ 1,149 $ 1,151 $ 4,034 $ 4,390 Divided by total operating revenue.............................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923 28.7 % 28.5 % 28.6 % 30.3 % 30.7 % 31.9 % 32.5 % 31.0 % 34.0 % 33.2 % 33.5 % 29.0 % 31.5 % EBITDA margin........................................................... EBITDA margin (1): EBITDA....................................................................... $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 1,149 $ 798 $ 3,920 $ 4,325 Divided by total operating revenue.............................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923 28.2 % 28.6 % 27.9 % 28.1 % 30.1 % 31.9 % 31.3 % 31.0 % 32.8 % 33.2 % 23.2 % 28.2 % 31.1 % EBITDA margin........................................................... (1) EBITDA, EBITDA margin, EBITDA—as adjusted and EBITDA margin—as adjusted 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.
  13. 13. QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—NET DEBT (UNAUDITED) (Dollars in millions) 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 Net Debt (1): Current borrowings.................................................... $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 $ 1,304 $ 1,727 Long-term borrowings—net....................................... 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 13,199 13,207 12,779 Total borrowings—net............................................... 17,292 17,548 17,229 15,480 15,438 15,376 14,913 14,892 14,887 14,511 14,506 Less: cash and cash equivalents ................................ (1,406) (2,245) (2,311) (846) (610) (1,189) (962) (1,241) (887) (869) (1,119) Less: short-term investments...................................... (966) (634) (580) (101) (130) (205) (218) (248) (242) (240) — Less: long-term investments....................................... (36) (1) (1) — — — — — — — (119) Net debt..................................................................... $ 14,884 $ 14,668 $ 14,337 $ 14,533 $ 14,698 $ 13,982 $ 13,733 $ 13,403 $ 13,758 $ 13,402 $ 13,268 (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 quot;current borrowings,quot; quot;long-term borrowingsquot; or any other measure determined in accordance with GAAP.
  14. 14. QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—FREE CASH FLOW FROM OPERATIONS (UNAUDITED) (Dollars in millions) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 Free cash flow from operations (1): Cash provided by operating activities.......................... $ 343 $ 570 $ 675 $ 725 $ 140 $ 1,037 $ 752 $ 860 $ 268 $ 1,105 $ 753 $ 2,313 $ 2,789 Less: Expenditures for property, plant and equipment and capitalized software.................. (313) (352) (445) (503) (390) (442) (394) (406) (318) (426) (420) (1,613) (1,632) Free cash flow from operations.................................... 30 218 230 222 (250) 595 358 454 (50) 679 333 700 1,157 Add: certain one-time settlements................................ — — — 204 100 — — 140 200 — — 204 240 Adjusted free cash flow from operations..................... $ 30 $ 218 $ 230 $ 426 $ (150) $ 595 $ 358 $ 594 $ 150 $ 679 $ 333 $ 904 $ 1,397 (1) Free cash flow and adjusted free cash flow from operations are non-Gaap financial measures that indicates cash generated by our business after operating expenses, capital expenditures and interest expense. We believe these measures provide useful information to our investors for purposes of evaluating our ability to satisfy our debt and other mandatory payment obligations and because they reflect 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 and adjusted free cash flow from operations internally for a variety of purposes, including setting targets for compensation and budgeting our cash needs. These measures are not determined in accordance with GAAP and should not be considered as a substitute for quot;operating incomequot; or quot;net cash provided by operating activitiesquot; or any other measure determined in accordance with GAAP. Due to the forward-looking nature of expected free cash flow amounts for 2007, information to reconcile this non-GAAP financial measure is not available at this time.
  15. 15. QWEST COMMUNICATIONS INTERNATIONAL INC. WIRELESS SERVICES ARPU RECONCILIATION (UNAUDITED) (Dollars in millions, subscribers in in thousands, and ARPU amounts in dollars) As of and Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006 ARPU is calculated as follows (1): Total quarterly wireless services revenue.................... $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 535 $ 557 Less: quarterly non-recurring revenue......................... (23) (21) (17) (22) (22) (20) (20) (22) (19) (17) (24) (91) (84) Quarterly recurring revenue......................................... $ 103 $ 111 $ 114 $ 116 $ 117 $ 122 $ 115 $ 119 $ 120 $ 122 $ 120 $ 444 $ 473 Average monthly recurring revenue................................ $ 34 $ 37 $ 38 $ 39 $ 39 $ 41 $ 38 $ 40 $ 40 $ 41 $ 40 $ 37 $ 39 Divided by quarterly average wireless subscribers......... 745 743 745 759 778 782 775 790 805 809 817 748 781 Wireless services ARPU.................................................. $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 50 $ 50 (1) Wireless ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless service 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 services 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.

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