-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LIgCOptwbS1zb/sEvNH0WbjHrFdZeX25s0cq+bCNldK6HQQj4W2rwUkyw9y2qrNS p3wMOFPBCpAzOoWzGeYX3w== 0000927356-99-001078.txt : 19990630 0000927356-99-001078.hdr.sgml : 19990630 ACCESSION NUMBER: 0000927356-99-001078 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QWEST COMMUNICATIONS INTERNATIONAL INC CENTRAL INDEX KEY: 0001037949 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841339282 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 000-22609 FILM NUMBER: 99654641 BUSINESS ADDRESS: STREET 1: 700 QWEST TOWER STREET 2: 555 SEVENTEENTH STREET CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3032911400 MAIL ADDRESS: STREET 1: 700 QWEST TOWER STREET 2: 555 SEVENTEENTH STREET CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: QUEST COMMUNICATIONS INTERNATIONAL INC DATE OF NAME CHANGE: 19970416 11-K 1 FORM 11-K =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________ FORM 11-K ANNUAL REPORT ____________________ Pursuant to Section 15(d) of the Securities Exchange Act of 1934 ____________________ For the Fiscal Year Ended December 31, 1998 ____________________ QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN Commission File No. 000-22609 _____________________ Qwest Communications International Inc. 401(k) Plan 700 Qwest Tower 555 Seventeenth Street Denver, CO 80202 (303) 992-1400 (Name of issuer of securities held pursuant to the plan and address of its principal executive office) =============================================================================== QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- INDEX TO FINANCIAL STATEMENTS AND --------------------------------- SUPPLEMENTAL SCHEDULES ----------------------
Page(s) ------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 FINANCIAL STATEMENTS: Statement of Net Assets Available for Plan Benefits with Fund Information as of December 31, 1998 2 Statement of Net Assets Available for Plan Benefits with Fund Information as of December 31, 1997 3 Statement of Changes in Net Assets Available for Plan Benefits with Fund Information for the Year Ended December 31, 1998 4 NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES 5-11 SUPPLEMENTAL SCHEDULES: Schedule I--Item 27a--Schedule of Assets Held for Investment Purposes as of December 31, 1998 12 Schedule II--Item 27b--Schedule of Loans or Fixed Income Obligations in Default as of December 31, 1998 13 Schedule III--Item 27d--Schedule of Reportable Transactions for the Year Ended December 31, 1998 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Participants and Plan Administrative Committee of the Qwest Communications International Inc. 401(k) Plan: We have audited the accompanying statements of net assets available for plan benefits with fund information of the QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN (the "Plan") as of December 31, 1998 and 1997, and the related statement of changes in net assets available for plan benefits with fund information for the year ended December 31, 1998. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998 and 1997, and the changes in net assets available for plan benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. As further discussed in Note 1, the Plan was frozen effective December 31, 1998. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes, loans or fixed income obligations in default and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The fund information in the statements of net assets available for plan benefits and the statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to present the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Denver, Colorado, June 28, 1999. -1- QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION ------------------------------------------------------------------------- AS OF DECEMBER 31, 1998 -----------------------
Non- Participant Directed Participant Directed ----------- --------------------------------------------------------- Qwest Qwest Invesco MFS Common Common Stable MFS Emerging Stock Stock Value Research Growth Fund Cash Fund Fund Fund Fund ----------- -------- ---------- -------- ---------- ---------- INVESTMENTS (Note 2): Cash $ - $104,365 $ - $ - $ - $ - Mutual funds - - - - 1,291,714 1,819,493 Collective trust - - - 717,294 - - Employer stock 934,068 - 3,438,061 - - - Participant loans - - - - - - -------- -------- ---------- -------- ---------- ---------- Total investments 934,068 104,365 3,438,061 717,294 1,291,714 1,819,493 -------- -------- ---------- -------- ---------- ---------- RECEIVABLES: Employer contributions 51,160 - 14,931 2,021 6,687 7,590 Participant contributions - - 85,250 8,735 34,528 34,886 -------- -------- ---------- -------- ---------- ---------- Total receivables 51,160 - 100,181 10,756 41,215 42,476 -------- -------- ---------- -------- ---------- ---------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $985,228 $104,365 $3,538,242 $728,050 $1,332,929 $1,861,969 ======== ======== ========== ======== ========== ========== Participant Directed --------------------------------------------------------------- Dodge FPA GAM Mutual & Cox New Participant International Beacon Balanced Income Loan Fund Fund Fund Fund Fund Total ------------- ---------- ---------- -------- ------------ ------------ INVESTMENTS (Note 2): Cash $ - $ - $ - $ - $ - $ 104,365 Mutual funds 1,230,720 1,304,397 1,082,200 146,927 - 6,875,451 Collective trust - - - - - 717,294 Employer stock - - - - - 4,372,129 Participant loans - - - - 367,109 367,109 ---------- ---------- ---------- -------- ------------ ------------ Total investments 1,230,720 1,304,397 1,082,200 146,927 367,109 12,436,348 ---------- ---------- ---------- -------- ------------ ------------ RECEIVABLES: Employer contributions 5,607 4,894 5,392 595 - 98,877 Participant contributions 25,073 26,766 20,502 3,371 - 239,111 ---------- ---------- ---------- -------- ------------ ----------- Total receivables 30,680 31,660 25,894 3,966 - 337,988 ---------- ---------- ---------- -------- ------------ ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $1,261,400 $1,336,057 $1,108,094 $150,893 $367,109 $12,774,336 ========== ========== ========== ======== ============ ===========
The accompanying notes are an integral part of this statement. -2- QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN ---------------------------------------------------- STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION ------------------------------------------------------------------------- AS OF DECEMBER 31, 1997 -----------------------
Participant Directed ------------------------------------------------------------------- New England Invesco MFS Crabbe Stable Stable MFS Emerging GAM Huson Value Value Research Growth International Special Fund Fund Fund Fund Fund Fund ------- -------- -------- ---------- ------------- -------- INVESTMENTS (Note 2): Guaranteed interest fund $86,255 $ - $ - $ - $ - $ - Mutual funds - - 295,633 1,339,348 734,848 459,122 Collective trust - 538,211 - - - - Participant loans - - - - - - ------- -------- -------- ---------- ---------- -------- Total investments 86,255 538,211 295,633 1,339,348 734,848 459,122 ------- -------- -------- ---------- -------- -------- RECEIVABLES: Employer contributions - 5,234 5,774 15,626 6,718 3,896 Participant contributions - 4,420 6,316 15,750 7,230 3,803 ------- -------- -------- ---------- -------- -------- Total receivables - 9,654 12,090 31,376 13,948 7,699 ------- -------- -------- ---------- -------- -------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $86,255 $547,865 $307,723 $1,370,724 $748,796 $466,821 ======= ======== ======== ========== ======== ======== Participant Directed -------------------------------------------- Dodge FPA Mutual & Cox New Participant Beacon Balanced Income Loan Fund Fund Fund Fund Total -------- -------- -------- ----------- ---------- INVESTMENTS (Note 2): Guaranteed interest fund $ - $ - $ - $ - $ 86,255 Mutual funds 948,514 792,080 190,681 - 4,760,226 Collective trust - - - - 538,211 Participant loans - - - 129,798 129,798 -------- -------- -------- -------- ---------- Total investments 948,514 792,080 190,681 129,798 5,514,490 -------- -------- -------- -------- ---------- RECEIVABLES: Employer contributions 8,295 6,392 1,595 - 53,530 Participant contributions 8,390 6,535 1,524 - 53,968 -------- -------- -------- -------- ---------- Total receivables 16,685 12,927 3,119 - 107,498 -------- -------- -------- -------- ---------- NET ASSETS AVAILABLE FOR PLAN BENEFITS $965,199 $805,007 $193,800 $129,798 $5,621,988 ======== ======== ======== ======== ==========
The accompanying notes are an integral part of this statement. -3- QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN ---------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND ------------------------------------------------------------------------ INFORMATION ----------- FOR THE YEAR ENDED DECEMBER 31, 1998 ------------------------------------
Non- Participant Directed Participant Directed ------------ ------------------------------------------------------------------------ New Qwest Qwest England Invesco MFS Common Common Stable Stable MFS Emerging Stock Stock Value Value Research Growth Fund Cash Fund Fund Fund Fund Fund ------------ -------- ---------- -------- -------- ---------- ---------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions- Participant $ - $ - $1,014,029 $ - $109,190 $ 420,583 $ 506,723 Employer 758,750 - 221,438 - 64,604 119,710 172,066 Rollovers - - 484,025 - 166,555 155,190 145,060 Investment income (loss)- Interest and dividends - - - 3,230 36,051 - - Net appreciation (depreciation) in fair value of investments 252,514 - 968,116 - - 176,552 408,258 ------------ -------- ---------- -------- -------- ---------- ---------- Total additions 1,011,264 - 2,687,608 3,230 376,400 872,035 1,232,107 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions to participants (17,684) - (84,012) (7,655) (86,145) (48,185) (362,136) Administrative fees - - (367) (1,344) (2,352) (56) (56) ------------ -------- ---------- -------- -------- ---------- ---------- Total deductions (17,684) - (84,379) (8,999) (88,497) (48,241) (362,192) LOAN ACTIVITY, net - - (4,965) - (47,922) (44,452) (62,862) INTERFUND TRANSFERS, net (8,352) 104,365 939,978 (80,486) (59,796) 245,864 (315,808) ------------ -------- ---------- -------- -------- ---------- ---------- Net increase (decrease) 985,228 104,365 3,538,242 (86,255) 180,185 1,025,206 491,245 NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year - - - 86,255 547,865 307,723 1,370,724 ------------ -------- ---------- -------- -------- ---------- ---------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $ 985,228 $104,365 $3,538,242 $ - $728,050 $1,332,929 $1,861,969 ============ ======== ========== ======== ======== ========== ========== Participant Directed -------------------------------------------------------------------------------- Crabbe Dodge FPA GAM Huson Mutual & Cox New Participant International Special Beacon Balanced Income Loan Fund Fund Fund Fund Fund Fund Total ------------- --------- ---------- ---------- -------- ----------- ----------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Contributions- Participant $ 371,557 $ 50,462 $ 336,006 $ 306,940 $ 47,299 $ - $ 3,162,789 Employer 122,289 32,304 119,399 110,099 16,517 - 1,737,176 Rollovers 117,229 12,873 170,947 107,009 14,778 - 1,373,666 Investment income (loss)- Interest and dividends 15,888 - 39,404 31,404 11,827 14,796 152,600 Net appreciation (depreciation) in fair value of investments 29,525 (116,301) 1,576 34,741 (5,815) - 1,749,166 ---------- --------- ---------- ---------- -------- -------- ----------- Total 656,488 (20,662) 667,332 590,193 84,606 14,796 8,175,397 additions DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Distributions to participants (94,099) (39,607) (47,788) (167,562) (31,119) (31,053) (1,017,045) Administrative fees (1) - (25) - - (1,803) (6,004) ---------- --------- ---------- ---------- -------- -------- ----------- Total deductions (94,100) (39,607) (47,813) (167,562) (31,119) (32,856) (1,023,049) LOAN ACTIVITY, net (30,596) (3,184) (40,950) (19,069) (1,371) 255,371 - INTERFUND TRANSFERS, net (19,188) (403,368) (207,711) (100,475) (95,023) - - ---------- --------- ---------- ---------- -------- -------- ----------- Net increase (decrease) 512,604 (466,821) 370,858 303,087 (42,907) 237,311 7,152,348 NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 748,796 466,821 965,199 805,007 193,800 129,798 5,621,988 ---------- --------- ---------- ---------- -------- -------- ----------- NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $1,261,400 $ - $1,336,057 $1,108,094 $150,893 $367,109 $12,774,336 ========== ========= ========== ========== ======== ======== ===========
The accompanying notes are an integral part of this statement. -4- QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES -------------------------------------------------------- AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- (1) DESCRIPTION OF PLAN ------------------- The following description of the Qwest Communications International Inc. 401(k) Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General ------- The Plan was established effective July 1, 1992 by SP Telecommunications, Inc., the predecessor of Qwest Communications International Inc. ("Qwest" or the "Company"). The Plan was amended and restated effective April 1, 1998 and further amended July 1, 1998 and August 1, 1998. The Plan is a defined contribution plan which covers substantially all employees of Qwest who meet the eligibility requirements, and is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Benefits under the Plan are not guaranteed by the Pension Benefit Guaranty Corporation. Plan Amendments --------------- Phoenix Network, Inc. ("Phoenix") was acquired by the Company in March of 1998. Effective April 1, 1998, the Plan was amended to allow eligible Phoenix employees, as defined, to participate in the Plan on the effective date. The amendment also granted prior service credit for participation and vesting for these employees. Supernet, Inc. ("Supernet") was acquired by the Company in October of 1997. Effective May 1, 1998, the Plan was amended to allow eligible Supernet employees, as defined, to participate in the Plan on the effective date. The amendment also granted prior service credit for all Plan purposes for these employees. Effective as of the close of business on December 31, 1998, the Plan assets were frozen. No contributions are being made to the Plan with respect to compensation paid for any period after December 31, 1998. See Note 7 for a discussion of the subsequent merger of the Plan. Other Plan amendments are discussed in the notes that follow. -5- Trust ----- Trustee and recordkeeping services are performed by EMJAY Corporation ("EMJAY"). Plan assets are held under a trust agreement (the "Trust") maintained by EMJAY (the "Trustee"). Investment advisory services are performed by Qwon Investment Consultants, Inc. ("Qwon"). Eligibility ----------- Prior to August 1, 1998, employees were eligible to participate in the Plan on the first day of any month that coincided with or followed their completion of one year of service (1,000 hours of service, as defined). Effective August 1, 1998, the Plan was amended and restated to allow employees to make salary deferral contributions to the Plan on the first day of the month that coincides with or follows 30 days of continuous employment with the Company. Upon completion of one year of service (1,000 hours of service, as defined), the employee became eligible to participate in the Company's matching and profit sharing contributions. Contributions ------------- Participant Salary Deferral Contributions Prior to July 1, 1998, participants could elect to contribute to the Plan on a pre-tax basis up to 9% of their eligible compensation, as defined by the Plan document. On July 1, 1998, the Plan was amended to allow participants to contribute up to 15% of their eligible compensation, as defined. Participant pre-tax contributions were limited to comply with statutory regulations ($10,000 in 1998). Company Matching and Profit Sharing Contributions Prior to April 1, 1998, the Company matched employee contributions up to 3% of the participant's eligible compensation. The Company also made a profit sharing contribution equal to 3% of the participant's eligible compensation regardless of the participant's contributions to the Plan. On April 1, 1998, the Plan was amended to make Company matching and profit sharing contributions discretionary, and to allow the employer matching contribution, if any, to be made in a combination of cash and shares of Qwest stock. For the year ended December 31, 1998, the Company contributed $1,737,176 to the Plan for matching contributions. The combination used for allocation purposes of the employer matching contribution in 1998 was as follows: The cash portion was equal to $0.50 for each $1.00 contributed by the participant for the Plan year, up to 6% of the participant's eligible compensation, as defined, for the Plan year. The stock portion was equal to $0.575 for each $1.00 contributed by the participant for the Plan year, up to 6% of the participant's eligible compensation, as defined, for the Plan year. The Company profit sharing contribution is allocated based on compensation. There was no profit sharing contribution made for the period from April 1, 1998 to December 31, 1998. -6- Rollover Contributions The Plan provides that the Trustee may accept from a participant a contribution representing distributions from another plan which meets the requirements of the Internal Revenue Code (the "IRC"), as further described in the Plan document. Such "rollover contributions" shall be fully vested and shall not be subject to, or affect in any way, the maximum annual contribution limitation. Total annual additions under the Plan and all other plans sponsored by the Company are limited to the lesser of 25% of eligible compensation, as defined, or $30,000. Annual additions are defined as the participant's contributions and the Company's matching and profit sharing contributions. Vesting ------- Participants vest immediately upon entering the Plan. Participant Accounts -------------------- Each participant's account is credited with the participant's contributions, Company matching contributions and the Company profit sharing contribution, if any. Separate accounts are maintained for each participant. Participants' accounts are adjusted daily to reflect unrealized appreciation or depreciation of investments, income, gains or losses on disposition of assets and any other investment transactions. Payment of Benefits ------------------- Upon retirement, termination of employment or death, each participant or beneficiary is entitled to receive amounts in accordance with the terms and conditions of the Plan. Participants may also make certain in-service voluntary withdrawals and hardship withdrawals if certain criteria are met. Investment Options ------------------ A participant may direct their account in any of the following investment options: Qwest Common Stock Fund - This fund invests in shares of Qwest Common Stock. ----------------------- The purpose of this fund is to allow employees to invest in the Company's common stock. A portion of the employer matching contribution was invested in the Company's common stock. This became an investment option effective April 1, 1998. Invesco Stable Value Fund - This fund invests in contracts with insurance ------------------------- companies, banks and other financial institutions. The contracts promise a specific rate of return for a stated period of time. Since credit quality is the foundation for the portfolio, all investments made for the fund are rated AA or better at the time of purchase, and in recent years, the underlying assets are held in a separate account or trust which is protected from the general creditors of the contract issuer. -7- MFS Research Fund - This fund invests a substantial portion of its assets in ----------------- the common stocks or securities convertible to common stocks of companies believed to possess better than average prospects for long-term growth. The fund may invest in securities whose principal characteristic is income rather than growth. The fund is managed by a team of equity analysts and based on an industry group allocation. MFS Emerging Growth Fund - The fund primarily invests in common stocks of ------------------------ small and medium sized companies early in their life cycle. GAM International Fund - This fund invests primarily in international ----------------------- equities, although it may invest a substantial portion of its assets in debt securities. The fund primarily invests in Canada, the United Kingdom, continental Europe and the Pacific Basin. Crabbe Huson Special Fund - This fund invests primarily in common stocks but ------------------------- can also invest in preferred stocks and bonds. It is limited to invest no more than 35% of its assets in foreign securities. It uses a basic value approach and looks at the market price of a security and its value as an ongoing business. Effective August 31, 1998, this fund ceased to be an investment option. Mutual Beacon Fund - This fund invests in common and preferred stocks and ------------------ corporate debt securities of any credit quality that are trading at prices below their intrinsic value. The fund may also invest 50% of its assets in securities of companies involved in mergers, consolidation, liquidations and reorganizations. Dodge & Cox Balanced Fund - This fund may invest up to 75% of its assets in ------------------------- common stocks and convertible securities. The balance of the assets is invested in investment-grade fixed-income securities. FPA New Income Fund - This fund invests a minimum of 75% of its assets in ------------------- U.S. Government securities, non-convertible debt securities rated AA or better, U.S. dollar-denominated Canadian government debt, repurchase agreements and cash. The balance may be invested in securities rated below AA and/or convertible securities. Participant Loan Fund - This fund allows participants to borrow from their --------------------- fund accounts. Participants may change their investment options at any time. In addition to the previous funds, assets were held during the year in the New England Stable Value Fund, which invests in guaranteed investment contracts. Prior to 1995, participants were allowed to invest in this fund. When EMJAY became the trustee and recordkeeper, no additional investments were allowed into this fund, but the participants could keep their balances in the fund. Large fees were imposed upon participants who received distributions earlier than the maturity date, which was during 1998. As the fees expired in 1998, all participants transferred their balances to other funds prior to December 31, 1998. -8- The cost basis of the Plan's investments was $10,698,578 and $5,092,352 as of December 31, 1998 and 1997, respectively. The fair market value of individual investments that represent 5% or more of the Plan's net assets as of December 31, 1998 and 1997 are as follows:
1998 1997 ---------- ---------- Qwest Common Stock $4,372,129 $ - Invesco Stable Value Fund 717,294 538,211 MFS Research Fund 1,291,714 295,633 MFS Emerging Growth Fund 1,819,493 1,339,348 GAM International Fund 1,230,720 734,848 Crabbe Huson Special Fund - 459,122 Mutual Beacon Fund 1,304,397 948,514 Dodge & Cox Balanced Fund 1,082,200 792,080
Loans ----- Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Participants may take out only one loan in a twelve-month period and may have no more than three loans outstanding at one time. Loan terms range from 1 - 5 years or up to 15 years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates as determined by the Plan's third-party administrator. Principal and interest is paid through payroll deductions. Voting ------ In 1998, all shares of Qwest credited to a participant's accounts were voted by the participants in accordance with the Plan's provisions. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Basis of Accounting ------------------- The accompanying financial statements are prepared on the accrual basis of accounting. The preparation of the financial statements in conformity with generally accepted accounting principles requires the Plan's management to use estimates and assumptions that affect the accompanying financial statements and disclosures. Actual results could differ from these estimates. Purchases and sales of securities are recorded on a trade date basis. Valuation of Investments ------------------------ Investments in mutual funds and employer stock are valued at fair value based on quoted market prices. The Plan's New England Stable Value Fund was not fully benefit-responsive and in accordance with SOP 94-4, "Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined-Contribution Pension Plans" ("SOP 94-4"), is required to be recorded at fair value. The -9- New England Stable Value Fund is stated at contract value as this approximated fair value. The contract value represents contributions made plus a specified rate of return (4.1% in 1998), less distributions to participants. This fund matured during 1998 and was liquidated from the Plan as of December 31, 1998 . The Plan's Invesco Stable Value Fund invests in a collective trust fund which invests in guaranteed investment contracts and synthetic guaranteed investment contracts. These contracts are carried at cost plus accrued interest, which approximates fair market value. The investment in the collective trust fund in the accompanying financial statements is valued at the Plan's proportionate interest in the fund as of the financial statement date. Interest rates earned on the investment change daily. The average yield for the year ended December 31, 1998 was approximately 6.33%. The crediting interest rate as of December 31, 1998 and 1997 was 5.74% and 6.63%, respectively. Participant loans and cash are valued at cost which approximates fair value. Income Recognition ------------------ In the statement of changes in net assets available for plan benefits with fund information, the net appreciation (depreciation) in the fair value of investments consists of realized gains (losses) and the unrealized appreciation (depreciation) on those investments. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date. Payment of Benefits ------------------- Benefits are recorded when paid. Administrative Fees ------------------- The Company pays most administrative expenses of the Plan. The Plan paid certain expenses totaling $6,004 for the Plan year. (3) PLAN TERMINATION ---------------- The Company had the right under the Plan to discontinue contributions at any time, and to terminate the Plan subject to the provisions of ERISA. See Note 7 for subsequent merger of the Plan. (4) TAX STATUS ---------- The Plan obtained its latest determination letter on July 7, 1995, in which the Internal Revenue Service ("IRS") stated that the Plan, as then designated, was in compliance with the applicable requirements of the IRC. The Plan has been amended since receiving the determination letter and a new determination letter has not been requested. However, the Plan administrator believes that the Plan is currently designated and being operated in compliance with the applicable requirements of the IRC. -10- (5) RELATED PARTY TRANSACTIONS -------------------------- Certain Plan investments are shares of Qwest Communications International Inc. Common Stock, which qualify as related-party transactions. (6) RISKS AND UNCERTAINTIES ----------------------- The Plan provides for various investments in mutual funds, collective trust and Company stock. Investments, in general, are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for plan benefits with fund information. At December 31, 1998, the Plan held no derivative instruments directly. However, the Plan held such instruments indirectly through their investments in mutual funds, which under their trust agreements, may invest in such instruments. These instruments consist mainly of futures contracts and options. Credit risk exists with respect to these instruments. The credit related gains and losses during the year ended December 31, 1998 were immaterial. (7) SUBSEQUENT EVENTS ----------------- The Board of Directors of the Company resolved to adopt the Qwest Communications 401(k) Savings Plan (the "New Plan") effective January 1, 1999 for the benefit of eligible employees of the Company and its participating subsidiaries. Merrill Lynch Trust Company FSB has been designated as the trustee and recordkeeper of the New Plan. Effective April 30, 1999, the Plan merged into the New Plan and all assets and liabilities of the Plan became assets and liabilities of the New Plan effective as of that date. Physical transfer of the assets from the Plan to the New Plan occurred in May and June of 1999. -11- SCHEDULE I QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- ITEM 27a--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES --------------------------------------------------------- AS OF DECEMBER 31, 1998 -----------------------
Name of Issue, Borrower, Current Lessor or Similar Party Description of Investment Value Cost - ------------------------ ------------------------- ----------- ----------- Cash Cash $ 104,365 $ 104,365 Qwest Common Stock* Employer Stock 4,372,129 3,174,975 Invesco Stable Value Fund Collective Trust 717,294 717,294 MFS Research Fund Mutual Fund 1,291,714 1,175,208 MFS Emerging Growth Fund Mutual Fund 1,819,493 1,423,185 GAM International Fund Mutual Fund 1,230,720 1,147,876 Mutual Beacon Fund Mutual Fund 1,304,397 1,369,635 Dodge & Cox Balanced Fund Mutual Fund 1,082,200 1,067,931 FPA New Income Fund Mutual Fund 146,927 151,000 Participant Loan Fund Interest rates ranging from 8.75% to 9.5% 367,109 367,109 ----------- ----------- $12,436,348 $10,698,578 =========== ===========
*Party-in-interest (Note 5). The accompanying notes are an integral part of this schedule. -12- SCHEDULE II QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- ITEM 27b--SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT ------------------------------------------------------------------ AS OF DECEMBER 31, 1998 -----------------------
Amount Received Identity During Unpaid And Original Reporting Year Balance Detailed Description of Loan Amount Overdue Address Amount ------------------------- at End (Origination Date, Due Date, -------------------- of Obligor of Loan Principal Interest of Year Interest Rate) Principal Interest - ---------- ------- --------- -------- ------- ---------------------------- --------- -------- Kevin Sharp $5,000 $ - $ - $5,000 Note dated May 13, 1998, $617 $261 555 17th St. due May 31, 2002, 9.5% interest Denver, CO 80202 Deborah Krystynak $2,000 $ 362 $ 85 $1,343 Note dated June 23, 1997, $271 $ 48 555 17th St. due June 30, 2000, 9.5% interest Denver, CO 80202
The accompanying notes are an integral part of this schedule. -13- SCHEDULE III QWEST COMMUNICATIONS INTERNATIONAL INC. 401(k) PLAN --------------------------------------------------- ITEM 27d--SCHEDULE OF REPORTABLE TRANSACTIONS --------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1998 ------------------------------------
Purchases Sales ------------------------ -------------------------------------------- Number of Purchase Number of Selling Cost Net Name of Issuer or Party Involved/Description Transactions Price (a) Transactions Price (a) Basis Gain/(Loss) - ------------------------------------------------- ------------ -------- ------------ -------- ----- ---------- Series of transactions involving securities of the same issue that in the aggregate exceed five percent of the net Plan assets at the beginning of the year: EMJAY Corporation - Qwest Common Stock* 69 $3,417,516 44 $266,016 $242,540 $ 23,476 EMJAY Corporation - Invesco Stable Value Fund 63 607,020 72 427,936 427,936 - EMJAY Corporation - MFS Research Fund 75 1,163,242 67 297,851 280,586 17,265 EMJAY Corporation - MFS Emerging Growth Fund 81 995,404 85 907,093 715,901 191,192 EMJAY Corporation - GAM International Fund 75 850,611 74 384,264 320,976 63,288 EMJAY Corporation - Crabbe Huson Special Fund 46 122,403 50 465,224 596,035 (130,811) EMJAY Corporation - Mutual Beacon Fund 67 874,844 83 445,234 412,255 32,979 EMJAY Corporation - Dodge & Cox Balanced Fund 66 822,637 66 510,276 470,459 39,817 EMJAY Corporation - FPA New Income Fund 52 151,970 49 188,784 188,151 633 Single transactions involving securities that exceed five percent of the net Plan assets at the beginning of the year: EMJAY Corporation - MFS Emerging Growth Fund - $ - 1 $297,575 $221,703 $ 75,872 EMJAY Corporation - Qwest Common Stock* 1 650,761 - - - -
(a) The current value of the assets on the transaction date is equal to the purchase/sales price on that date. * Party-in-interest (Note 5). The accompanying notes are an integral part of this schedule. -14- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Qwest Communications International Inc. 401(k) Plan June 28, 1999 /s/ Drake S. Tempest ------------------------------------------ Drake S. Tempest Executive Vice President, General Counsel, Corporate Secretary -15- EX-23.2 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated June 28, 1999, included in this Form 11-K, into the Company's previously filed Form S-8 Registration Statement File No. 33- 47349. /s/ Arthur Andersen LLP Denver, Colorado June 28, 1999 -----END PRIVACY-ENHANCED MESSAGE-----