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  • 1. Qwest Communications International Inc. Historical Financial Information As of March 31, 2007
  • 2. 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, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 2005 2006 Operating revenue $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 13,903 $ 13,923 Operating expenses: Cost of sales (exclusive of depreciation and amortization) 1,439 1,434 1,512 1,451 1,418 1,393 1,382 1,415 1,317 5,836 5,607 Selling, general and administrative 1,036 1,045 1,016 1,050 1,013 970 1,014 993 998 4,147 3,991 Depreciation and amortization 774 765 768 758 691 693 691 695 612 3,065 2,770 13,048 12,368 3,249 3,244 3,296 3,259 3,122 3,056 3,087 3,103 2,927 Total operating expenses Other expense (income)—net: Interest expense—net 381 380 384 338 296 298 291 284 282 1,483 1,169 Other expense (income)—net (242) 13 (31) 392 (28) (17) (42) (84) (5) 132 (171) Total other expense (income)—net 139 393 353 730 268 281 249 200 277 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 (760) 557 Income tax (expense) benefit (4) 3 1 3 2 (18) 43 9 (2) 3 36 Income (loss) before cumulative effect of changes in accounting principles—net of taxes 57 (164) (144) (506) 88 117 194 194 240 (757) 593 Cumulative effect of changes—net of taxes — — — (22) — — — — — (22) — Net income (loss) $ 57 $ (164) $ (144) $ (528) $ 88 $ 117 $ 194 $ 194 $ 240 $ (779) $ 593 Basic income (loss) per share $ 0.03 $ (0.09) $ (0.08) $ (0.28) $ 0.05 $ 0.06 $ 0.10 $ 0.10 $ 0.13 $ (0.42) $ 0.31 Basic weighted average shares outstanding 1,817 1,823 1,844 1,862 1,874 1,882 1,901 1,901 1,865 1,836 1,890 Diluted income (loss) per share $ 0.03 $ (0.09) $ (0.08) $ (0.28) $ 0.05 $ 0.06 $ 0.09 $ 0.10 $ 0.12 $ (0.42) $ 0.30 Diluted weighted average shares outstanding 1,822 1,823 1,844 1,862 1,911 1,952 2,005 1,992 1,959 1,836 1,972
  • 3. QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in millions) (Unaudited) 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 ASSETS Current assets: Cash and cash equivalents $ 1,406 $ 2,245 $ 2,311 $ 846 $ 610 $ 1,189 $ 962 $ 1,241 $ 887 Short-term investments 966 634 580 101 130 205 218 248 242 Accounts receivable—net 1,603 1,566 1,595 1,525 1,541 1,477 1,718 1,600 1,510 Prepaid expenses and other 552 453 568 692 743 682 677 565 555 Total current assets 4,527 4,898 5,054 3,164 3,024 3,553 3,575 3,654 3,194 Property, plant and equipment—net 16,459 16,101 15,812 15,568 15,273 15,016 14,828 14,579 14,274 Capitalized software—net 1,068 1,030 991 963 927 885 840 818 812 Prepaid pension and other 2,075 2,041 1,870 1,802 1,902 1,838 1,871 2,188 2,421 Total assets $ 24,129 $ 24,070 $ 23,727 $ 21,497 $ 21,126 $ 21,292 $ 21,114 $ 21,239 $ 20,701 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current borrowings $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 Accounts payable 1,235 1,161 1,314 1,314 1,103 1,063 1,094 997 895 Accrued expenses and other 1,581 1,602 1,756 1,776 1,618 1,740 1,743 1,856 1,438 Deferred revenue and advance billings 642 626 635 633 622 609 622 621 613 Total current liabilities 4,059 3,650 4,232 4,235 3,947 6,095 5,144 5,160 4,634 Long-term borrowings—net 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 13,199 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 Deferred revenue 554 548 532 522 514 508 516 506 506 Other 1,937 1,782 1,520 1,530 1,450 1,383 1,366 1,446 1,532 Total liabilities 26,693 26,733 26,443 24,714 24,186 24,118 23,690 22,684 22,235 Stockholders' deficit: — Preferred stock — — — — — — — — Common stock 18 18 19 19 19 19 19 19 19 Additional paid-in capital 43,111 43,170 43,260 43,290 43,355 43,475 43,531 43,384 43,022 Treasury stock (20) (16) (17) (17) (17) (17) (18) (24) (28) Accumulated deficit (45,664) (45,828) (45,972) (46,500) (46,412) (46,295) (46,101) (45,907) (45,619) Accumulated other comprehensive loss (9) (7) (6) (9) (5) (8) (7) 1,083 1,072 Total stockholders' deficit (2,564) (2,663) (2,716) (3,217) (3,060) (2,826) (2,576) (1,445) (1,534) Total liabilities and stockholders' deficit $ 24,129 $ 24,070 $ 23,727 $ 21,497 $ 21,126 $ 21,292 $ 21,114 $ 21,239 $ 20,701
  • 4. 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 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 OPERATING ACTIVITIES Net income (loss) $ 57 $ (107) $ (251) $ (779) $ 88 $ 205 $ 399 $ 593 $ 240 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 Provision for bad debts—net 57 110 137 173 44 71 108 155 43 Cumulative effect of changes in accounting principles—net of taxes — — — 22 — — — — — Gain on sale of assets (257) (257) (257) (263) — (3) (3) (68) — Loss (gain) on early retirement of debt—net — 43 32 462 — (5) 4 5 — Other non-cash charges—net 1 9 13 32 15 32 35 52 14 Changes in operating assets and liabilities: Accounts receivable (66) (82) (138) (104) (60) (23) (294) (223) 47 Prepaid expenses and other current assets 11 98 1 (8) (37) 28 50 168 (50) Accounts payable and accrued expenses and other current liabilities (178) (258) 57 73 (368) (284) (236) (372) (584) Deferred revenue and advance billings (32) (54) (61) (73) (19) (38) (25) (33) (8) Other non-current assets and liabilities (24) (128) (252) (287) (214) (190) (184) (258) (46) Cash provided by operating activities 343 913 1,588 2,313 140 1,177 1,929 2,789 268 INVESTING ACTIVITIES Expenditures for property, plant and equipment and capitalized software (313) (665) (1,110) (1,613) (390) (832) (1,226) (1,632) (318) 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 Purchase of investment securities (822) (912) (1,002) (1,086) (36) (146) (173) (217) — Other 1 17 22 27 1 — (101) (94) 4 Cash used for investing activities (86) (56) (442) (459) (392) (889) (1,381) (1,700) (308) FINANCING ACTIVITIES Proceeds from long-term borrowings — 1,885 1,887 3,152 — — 600 600 — Repayments of long-term borrowings, including current maturities (5) (1,550) (1,778) (4,716) (41) (47) (1,145) (1,180) (9) Proceeds from issuances of common stock 3 7 10 39 57 102 150 205 34 Repurchases of common stock — — — — — — — (209) (393) Other — (105) (105) (634) — — (37) (110) 54 Cash (used for) provided by financing activities (2) 237 14 (2,159) 16 55 (432) (694) (314) CASH AND CASH EQUIVALENTS Increase (decrease) in cash and cash equivalents 255 1,094 1,160 (305) (236) 343 116 395 (354) Beginning balance 1,151 1,151 1,151 1,151 846 846 846 846 1,241 Ending balance $ 1,406 $ 2,245 $ 2,311 $ 846 $ 610 $ 1,189 $ 962 $ 1,241 $ 887
  • 5. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS (Dollars in millions) Years Ended (Unaudited) 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 2005 2006 Operating revenue: Wireline services $ 3,312 $ 3,329 $ 3,361 $ 3,333 $ 3,327 $ 3,320 $ 3,343 $ 3,338 $ 3,298 $ 13,335 $ 13,328 Wireless services 126 132 131 138 139 142 135 141 139 527 557 Other services 11 9 12 9 10 10 9 9 9 41 38 Total operating revenue 3,449 3,470 3,504 3,480 3,476 3,472 3,487 3,488 3,446 13,903 13,923 Cost of sales (COS): Facility costs 671 675 690 647 616 608 585 623 582 2,683 2,432 Network expenses 67 59 72 69 52 62 69 69 52 267 252 Employee-related costs 409 387 404 387 396 388 397 392 379 1,587 1,573 Other non-employee related costs 292 313 346 348 354 335 331 331 304 1,299 1,351 Total cost of sales 1,439 1,434 1,512 1,451 1,418 1,393 1,382 1,415 1,317 5,836 5,608 Selling, general and administrative (SG&A): Property and other taxes 99 111 100 43 88 72 96 64 90 353 320 Bad debt 57 53 27 36 44 27 37 47 43 173 155 — Restructuring, realignment and severance 15 (1) 26 74 22 (2) 43 (5) 114 63 Employee-related costs 407 410 401 405 401 405 407 426 394 1,623 1,639 Other non-employee related costs 458 472 462 492 458 468 431 456 476 1,884 1,813 Total selling, general and administrative 1,036 1,045 1,016 1,050 1,013 970 1,014 993 998 4,147 3,990 Total COS + SG&A $ 2,475 $ 2,479 $ 2,528 $ 2,501 $ 2,431 $ 2,363 $ 2,396 $ 2,408 $ 2,315 $ 9,983 $ 9,598 (1) Capital expenditures $ 313 $ 352 $ 445 $ 503 $ 390 $ 442 $ 394 $ 406 $ 318 $ 1,613 $ 1,632 Employees 40,683 40,303 39,977 39,641 39,127 39,315 39,163 38,383 38,011 39,641 38,383 (1) Capital expenditures exclude non-cash items such as capital lease acquisitions.
  • 6. 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, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 2005 2006 Wireline services revenue: Local voice $ 1,581 $ 1,575 $ 1,544 $ 1,526 $ 1,520 $ 1,501 $ 1,466 $ 1,425 $ 1,394 $ 6,226 $ 5,912 Long-distance 558 547 553 558 559 562 572 560 550 2,216 2,253 Access 161 182 159 162 146 133 139 132 134 664 550 Data and Internet 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 1,220 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 13,335 13,328 Wireline services expenses: - Facility costs 595 596 615 572 545 534 511 548 507 2,378 2,138 Network expenses 62 58 70 68 52 61 68 67 51 258 248 Bad debt 43 40 15 24 28 15 23 32 30 122 98 Restructuring, realignment and severance 6 4 2 22 2 1 40 2 1 34 45 Employee-related costs 604 584 600 581 596 577 596 591 611 2,369 2,360 Other non-employee related costs 326 342 375 391 383 372 369 366 353 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 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 $ 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% 50.5% 52.1% Capital expenditures—wireline services $ 255 $ 252 $ 346 $ 394 $ 322 $ 364 $ 321 $ 307 $ 263 $ 1,247 $ 1,314
  • 7. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—WIRELINE SERVICES SEGMENT(1) (Dollars in millions, operating statistics in thousands, except ARPU amounts) (Unaudited) OPERATING STATISTICS As of and for the As of and for the Three Months Ended Years Ended December 31, Access lines(2): 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 12/31/05 12/31/06 Business: Retail 3,074 3,031 3,012 2,969 2,958 2,920 2,900 2,870 2,842 2,969 2,870 Resold 1,848 1,808 1,756 1,710 1,667 1,624 1,564 1,495 1,433 1,710 1,495 Total business 4,922 4,839 4,768 4,679 4,625 4,544 4,464 4,365 4,275 4,679 4,365 Mass markets: Retail residential: Primary 8,107 7,974 7,916 7,851 7,749 7,592 7,454 7,333 7,200 7,851 7,333 Add 1,024 985 948 913 876 840 803 770 740 913 770 Total retail residential 9,131 8,959 8,864 8,764 8,625 8,432 8,257 8,103 7,940 8,764 8,103 Small business 1,286 1,289 1,301 1,296 1,296 1,307 1,316 1,327 1,336 1,296 1,327 Total mass markets 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 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 14,739 13,795 UNEs 1,137 1,077 997 953 925 893 852 801 754 953 801 Mass markets retail connections: 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 10,060 9,430 Mass markets access lines High-speed Internet subscribers(3) 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 1,480 2,138 Video subscribers(3) 100 120 149 178 219 259 350 424 506 178 424 743 744 748 770 784 777 781 801 812 770 801 Wireless subscribers 12,382 12,302 12,402 12,488 12,602 12,573 12,677 12,793 12,899 12,488 12,793 Total mass markets retail connections In-Region long distance lines 4,590 4,631 4,705 4,778 4,824 4,840 4,900 4,920 4,924 4,778 4,920 High-speed Internet subscribers 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 1,480 2,138 Consumer ARPU(4) $ 45.83 $ 46.27 $ 46.65 $ 47.57 $ 48.55 $ 49.41 $ 50.07 $ 50.81 $ 52.01 $ 46.30 $ 49.51 (1) Certain prior period revenue, expense and access line amounts have been reclassified to conform to the current period presentation. (2) 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 of 2005 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) High-speed Internet subscribers and video subscribers include certain business customers. (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.
  • 8. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—WIRELESS SERVICES SEGMENT(1) (Dollars in millions, operating statistics in thousands, except ARPU amounts) (Unaudited) 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 2005 2006 Wireless services revenue $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 527 $ 557 Wireless services expenses: Facility costs 76 79 75 75 71 74 74 75 75 305 294 Wireless equipment 26 28 25 28 30 26 28 27 25 107 111 Bad debt 14 14 12 11 12 12 14 15 13 51 53 Employee-related costs 14 12 12 12 12 12 13 12 14 50 49 Other non-employee related costs 29 16 20 17 17 12 17 16 12 82 62 Total wireless services expenses 159 149 144 143 142 136 146 145 139 595 569 Wireless services segment income $ (33) $ (17) $ (13) $ (5) $ (3) $ 6$ (11) $ (4) $ — $ (68) $ (12) —% Wireless services margin -26.2% -12.9% -9.9% -3.6% -2.2% 4.2% -8.1% -2.8% -12.9% -2.2% Capital expenditures—wireless services $ 1$ 1$ —$ —$ —$ —$ —$ 1$ 1 $ 2$ 1 OPERATING STATISTICS As of and for the As of and for the Three Months Ended Years 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 12/31/05 12/31/06 Subscribers 743 744 748 770 784 777 781 801 812 770 801 (2) ARPU $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 49 $ 50 (1) Certain prior period revenue and expense amounts have been reclassified to conform to the current period presentation. (2) 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.
  • 9. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL RESULTS—OTHER SERVICES SEGMENT(1) (Dollars in millions) (Unaudited) 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 2005 2006 Other services revenue $ 11 $ 9 $ 12 $ 9 $ 10 $ 10 $ 9 $ 9 $ 9 $ 41 $ 38 Other services expenses: Property and other taxes 98 111 100 42 88 72 96 62 90 351 318 Real estate costs 105 99 110 108 110 105 110 112 109 422 437 Restructuring, realignment and severance related costs 7 (5) 25 52 20 (3) 3 (1) (6) 79 19 Employee-related costs 198 201 193 199 189 204 195 215 148 791 803 Other non-employee related costs(2) 272 300 279 299 276 289 239 269 282 1,150 1,073 Total other services expenses 680 706 707 700 683 667 643 657 623 2,793 2,650 Other services segment income $ (669) $ (697) $ (695) $ (691) $ (673) $ (657) $ (634) $ (648) $ (614) $ (2,752) $ (2,612) Capital expenditures—other services $ 57 $ 99 $ 99 $ 109 $ 68 $ 78 $ 73 $ 98 $ 54 $ 364 $ 317 (1) Certain prior period revenue and expense amounts have been reclassified to conform to the current period presentation. (2) Certain immaterial expenses for facility costs, bad debt, and network expenses in the other services segment are recorded in other non-employee related costs.
  • 10. QWEST COMMUNICATIONS INTERNATIONAL INC. SEGMENT REVENUE INCLUDING CUSTOMER CHANNEL WITHIN WIRELINE SERVICES(1) (Dollars in millions) (Unaudited) Years Ended Three Months Ended December 31, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 2005 2006 Wireline services revenue: Voice services: Local voice: Business $ 320 $ 320 $ 321 $ 311 $ 314 $ 309 $ 305 $ 298 $ 283 $ 1,272 $ 1,226 Mass markets 1,063 1,060 1,039 1,035 1,029 1,017 992 966 952 4,197 4,004 Wholesale 198 195 184 180 177 175 169 161 159 757 682 Total local voice 1,581 1,575 1,544 1,526 1,520 1,501 1,466 1,425 1,394 6,226 5,912 Long-distance: Business 146 145 139 138 144 139 138 133 137 568 554 Mass markets 135 133 142 152 155 161 162 162 163 562 640 Wholesale 277 269 272 268 260 262 272 265 250 1,086 1,059 Total long-distance 558 547 553 558 559 562 572 560 550 2,216 2,253 Access services 161 182 159 162 146 133 139 132 134 664 550 Total voice services 2,300 2,304 2,256 2,246 2,225 2,196 2,177 2,117 2,078 9,106 8,715 Data and Internet: Business 539 561 621 584 583 581 581 593 579 2,305 2,338 Mass markets 144 147 161 174 191 206 225 253 278 626 875 Wholesale 329 317 323 329 328 337 360 375 363 1,298 1,400 Total data and Internet 1,012 1,025 1,105 1,087 1,102 1,124 1,166 1,221 1,220 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 13,335 13,328 Wireless services revenue 126 132 131 138 139 142 135 141 139 527 557 Other services revenue 11 9 12 9 10 10 9 9 9 41 38 Total operating revenue $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 13,903 $ 13,923 Operating revenue Wireline services revenue: Business $ 1,006 $ 1,027 $ 1,082 $ 1,034 $ 1,041 $ 1,029 $ 1,024 $ 1,024 $ 999 $ 4,149 $ 4,118 Mass markets 1,344 1,342 1,344 1,363 1,376 1,385 1,380 1,382 1,394 5,393 5,523 Wholesale 962 960 935 936 910 906 939 932 905 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 13,335 13,328 Wireless services revenue 126 132 131 138 139 142 135 141 139 527 557 Other services revenue 11 9 12 9 10 10 9 9 9 41 38 Total operating revenue $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 13,903 $ 13,923 (1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation.
  • 11. QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED FINANCIAL DATA—SPECIAL ITEMS (Dollars in millions) (Unaudited) Three Months 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 SPECIAL ITEMS(1): Operating expenses: Legal reserve (SG&A) $ —$ —$ —$ —$ —$ —$ —$ —$ (40) Restructuring, realignment and severance (SG&A) (15) 1 (26) (74) (22) — (43) — — Subtotal operating expenses (15) 1 (26) (74) (22) — (43) — (40) Other (expense) income—net: — (Loss) gain on debt extinguishment — (43) 11 (430) — — — — Gain on sale of assets 257 — — 6 — — — 64 — Tax sharing settlement (Other—net) — — — — — — 53 — — Subtotal other (expense) income—net 257 (43) 11 (424) — — 53 64 — Income tax sharing settlement — — — — — — 39 — — Cumulative effect of changes in accounting principles—net of taxes — — — (22) — — — — — —$ (22) $ Total special items—(charges) benefits $ 242 $ (42) $ (15) $ (520) $ 49 $ 64 $ (40) (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. QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—EBITDA (Dollars in millions) (Unaudited) 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 2005 2006 (1) EBITDA : $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 3,920 $ 4,325 Depreciation and amortization (774) (765) (768) (758) (691) (693) (691) (695) (612) (3,065) (2,770) Total other expense—net (139) (393) (353) (730) (268) (281) (249) (200) (277) (1,615) (998) Income tax benefit (expense) (4) 3 1 3 2 (18) 43 9 (2) 3 36 Cumulative effect of accounting changes - net — — — (22) — — — — — (22) — Net (loss) income $ 57 $ (164) $ (144) $ (528) $ 88 $ 117 $ 194 $ 194 $ 240 $ (779) $ 593 EBITDA Margin(1): EBITDA $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 3,920 $ 4,325 Operating revenue $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 13,903 $ 13,923 EBITDA margin (EBITDA divided by operating revenue) 28.2% 28.6% 27.9% 28.1% 30.1% 31.9% 31.3% 31.0% 32.8% 28.2% 31.1% (1) EBITDA and 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.
  • 13. QWEST COMMUNICATIONS INTERNATIONAL INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—NET DEBT (Dollars in millions) (Unaudited) Three Months 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 Net Debt(1): Current borrowings $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 Long-term borrowings—net 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 13,199 Total borrowings—net 17,292 17,548 17,229 15,480 15,438 15,376 14,913 14,892 14,887 Less: Cash and cash equivalents (1,406) (2,245) (2,311) (846) (610) (1,189) (962) (1,241) (887) Less: Short-term investments (966) (634) (580) (101) (130) (205) (218) (248) (242) Less: Long-term investments (36) (1) (1) — — — — — — Net Debt $ 14,884 $ 14,668 $ 14,337 $ 14,533 $ 14,698 $ 13,982 $ 13,733 $ 13,403 $ 13,758 (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.
  • 14. 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, 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 2005 2006 Free cash flow from operations(1): Cash provided by operating activities $ 343 $ 570 $ 675 $ 725 $ 140 $ 1,037 $ 752 $ 860 $ 268 $ 2,313 $ 2,789 Less: Expenditures for property, plant and equipment (313) (352) (445) (503) (390) (442) (394) (406) (318) (1,613) (1,632) Free cash flow from operations 30 218 230 222 (250) 595 358 454 (50) 700 1,157 Add: certain one-time settlements — — — 204 100 — — 140 200 204 240 Free Cash Flow from Operations—as adjusted $ 30 $ 218 $ 230 $ 426 $ (150) $ 595 $ 358 $ 594 $ 150 $ 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.
  • 15. QWEST COMMUNICATIONS INTERNATIONAL INC. WIRELESS SERVICES ARPU RECONCILIATION (Dollars in millions, subscribers in in thousands, and ARPU amounts in dollars) (Unaudited) Three Months 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 ARPU is calculated as follows(1): Total quarterly wireless services revenue $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 Less: quarterly non-recurring revenue (23) (21) (17) (22) (22) (20) (20) (22) (19) Quarterly recurring revenue $ 103 $ 111 $ 114 $ 116 $ 117 $ 122 $ 115 $ 119 $ 120 Average monthly recurring revenue $ 34 $ 37 $ 38 $ 39 $ 39 $ 41 $ 38 $ 40 40 Divided by quarterly average wireless subscribers 745 743 745 759 778 782 775 790 796 Wireless services ARPU $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 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.