-----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, EWSoJC40YWKuAIvlMd8K5XFjSN4K5oq6airykpm/8CTyNTyCo+aa5BugDrcwLj5M QngG6WzOzq4r+GlhyhWGaA== 0001019056-01-500335.txt : 20010814 0001019056-01-500335.hdr.sgml : 20010814 ACCESSION NUMBER: 0001019056-01-500335 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010807 ITEM INFORMATION: FILED AS OF DATE: 20010813 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-15577 FILM NUMBER: 1707643 BUSINESS ADDRESS: STREET 1: 1801 CALIFORNIA ST CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3039921400 MAIL ADDRESS: STREET 1: 1801 CALIFORNIA ST CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: QUEST COMMUNICATIONS INTERNATIONAL INC DATE OF NAME CHANGE: 19970416 8-K/A 1 qw8ka.txt 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 7, 2001 QWEST COMMUNICATIONS INTERNATIONAL INC. --------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware ------------------- (State or other jurisdiction of incorporation) 000-22609 84-1339282 ------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1801 California Street Denver, Colorado 80202 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 303-992-1400 Not applicable ------------------------------------------------- (Former name or former address, if changed since last report) This amended Current Report on Form 8-K/A amends and restates in its entirety the Current Report on Form 8-K filed effective August 7, 2001. ITEM 9. Regulation FD Disclosure On August 7, 2001, Joseph P. Nacchio, Chairman and Chief Executive Officer of Qwest Communications International Inc. ("Qwest"), spoke at a conference hosted by US Bancorp Piper Jaffrey Inc. A copy of Mr. Nacchio's presentation, as modified as of the filing date, is attached to this Current Report on Form 8-K as Exhibit 99.1. Forward Looking Statements Warning - ---------------------------------- This Current Report on Form 8-K contains projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by Qwest with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including potential fluctuations in quarterly results, volatility of Qwest's stock price, intense competition in the communications services market, changes in demand for Qwest's products and services, dependence on new product development and acceleration of the deployment of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels, higher than anticipated employee levels, capital expenditures and operating expenses, rapid and significant changes in technology and markets, adverse changes in the regulatory or legislative environment affecting Qwest's business, delays in Qwest's ability to provide interLATA services within its 14-state local service territory, failure to maintain rights of way, and failure to achieve the projected synergies and financial results expected to result from the acquisition of U S WEST, Inc. timely or at all and difficulties in combining the operations of Qwest and U S WEST, which could affect Qwest's revenues, levels of expenses and operating results. The information contained in this Current Report on Form 8-K is a statement of Qwest's present intention and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and Qwest's assumptions. Qwest may change its intentions, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. This Current Report on Form 8-K includes analysts' estimates and other information prepared by third parties for which Qwest assumes no responsibility. Qwest undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. By including any information in this Current Report on Form 8-K, Qwest does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits Exhibit 99.1 Presentation by Joseph P. Nacchio, August 7, 2001. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Qwest has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QWEST COMMUNICATIONS INTERNATIONAL INC. DATE: August 13, 2001 By: /s/ YASH A. RANA ------------------------- Yash A. Rana Vice President 3 EXHIBIT INDEX Exhibit 99.1 Presentation by Joseph P. Nacchio, August 7, 2001. 4 EX-99.1 3 qwex99-1.txt EXHIBIT 99.1 Slide 1 [Qwest Logo] Slide 2 This presentation contains forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by Qwest with the SEC, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. These materials include analysts' estimates and other information prepared by third parties for which the company assumes no responsibility. The company undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The Qwest logo is a registered trademark of Qwest Communications International Inc. in the U.S. and certain other countries. Slide 3 Market and Economic Trends o Broadband continuing to grow in significance -DSL growth 100% -Optical Private Line growth over 120% o Economic downturn continuing o Industry restructuring -RBOCs into LD -Capital market dynamics -Shake-out of bad business plans -Dis-aggregation of largest companies -Global consolidation delayed o Advances in technology continue to fuel permanent demand --IP VPNs --GigE --DSL --Optical Private Line --Distributed Apps Slide 4 Qwest Represents Top Investment Choice in Industry o Growth with predictable cash flow and earnings --Highest growth rate of any large cap telecom --$8.5 to $8.6 billion in EBITDA in 2001 --Free cash flow positive 4Q02 o Most diverse set of products and services, assets, and customers --Basic voice --> optical wavelength offerings --Wireline --> wireless --Private Line --> IP VPN --Over 110M DS-3 equivalent miles optical backbone capacity --113,000 global network route miles --18M+ access lines --Over 25 million customers: global accounts --> consumer o Entrepreneurial performance culture --Pay for performance --Blend of competitive and local market experience Slide 5 Qwest Represents Top Investment Choice in Industry o Significant upside in long distance following 271 relief o Expanding global capabilities -Strong European presence -Global network expansion o Strongest regional economy -Unemployment rate 30 basis points below national average -13% of population and 17% of housing starts o Broadest out-of-region local broadband offering compared to any RBOC -25 cities operational, ahead of schedule Slide 6 Growth Through Quality Revenues o Qwest revenue growth continues to lead the industry -Total revenue growth more than 2X closest competitor Slide 7 Qwest Total Revenue Growth Leads Industry [Bar graph showing approximate pro forma normalized revenue growth rates for the companies listed.] [Bar chart does not give actual ranges or numbers.] 2Q01 Y/Y Growth Rate (Pro Forma): - --------------------------------- Qwest: 12.2% BLS: 5.2 to 5.5% SBC: about 4% VZ: 4.7 to 5% T: -5.7 to -6% WCOM Inc.: -0.5 to -1% FON : -3 to -3.5% Slide 8 Growth Through Quality Revenues o Qwest revenue growth continues to lead the industry -Total revenue growth more than 2X closest competitor -Local service revenue growth highest in group Slide 9 Qwest Highest "RBOC" Revenue Growth* [Bar graph showing approximate pro forma normalized revenue growth rates for the companies listed below for the RBOC and Wireless businesses.] [Chart does not give actual ranges or numbers] Approximate 2Q01 Y/Y Growth Rate (Pro Forma) --------------------------------------------------------------- 2001 Y/Y RBOC Wireless Total - -------- ----------- ----------- ----------- Qwest: 4.2 to 4.5% 1.3% to 1.5% 5.5 to 6% SBC: about 1.7% about 2.3% about 4% VZ: about 1.5% 3.3 to 3.5% 4.7 to 5% BLS: 3 to 3.3% about 2.2% 5.2 to 5.5% * "RBOC" revenue includes local voice & data, wireless, directory, switched access, intraLATA toll, interLATA toll Slide 10 Growth Through Quality Revenues o Qwest revenue growth continues to lead the industry -Total revenue growth more than 2X closest competitor -Local service revenue growth highest in group o "Non-recurring" revenue component not news to industry -Portion of all companies' revenue o CPE, installation fees, IRU, consulting, handsets, construction, asset sales, etc. -Always will be a part of all companies' revenue o Diverse product set will drive revenue growth -"Non-recurring" as percentage of revenue will trend downward as LD re-entry, wireless, and out-of-region initiatives gain traction Slide 11 "Non-recurring" Broadband Capacity Sales as Percentage of Qwest Revenue [Bar graph showing "non-recurring" broadband capacity sales as a percentage of Qwest's total revenue.] [Chart does not give actual ranges or numbers.] 1996: less than 60% 1997: about 80% 1998: about 30% 1999: about 20% 2000: about 5% 2001E: about 8% Revenue base reflects reported pre-merger Qwest results for 1996 through 1999. 2000 (pro forma) and 2001E reflect full year merged company revenues. Slide 12 Effectively Expanding Network at Lower Cost and Faster Time to Market o Assets purchased for both international expansion and domestic city networks o Each buy opportunity assessed for cost and timing benefits o Transactions at market prices o Associated asset costs appropriately recorded -2001 route purchases included in $8.8 to $9.0B capital plan -$450M in 1H01 Slide 13 Leveraging the Expanding Global Network o Sales funnel and cost savings ramping -$250 million in sales funnel along acquired routes -$10 million per month savings opportunity for traffic termination o Network providers also customers -$540 million in 1H01 optical capacity revenue from those providing global network expansion assets to Qwest o Capacity sales revenue recorded at market prices o Associated cost of goods sold included in financials o Above transactions further solidify our leadership position in wholesale markets: local, national, global Slide 14 Global Network Platform for Growth [Map of Qwest Global Network showing new routes] Global Network Expansion - ------------------------ oTokyo-Taipei-Hong Kong oLA-Sydney oHong Kong-Mumbai-London oSeoul-Tokyo Slide 15 2002 Estimated Revenue Growth [Bar graph showing estimated revenue growth for 2002 over 2001 by various product lines.] [Numbers in billions] 2001 Total: $21.3 - $21.5 [2002 Product Growth] U.S. IP*: $ 1 - $ 1.1 ILEC LD: $ 0.3 - $ 0.4 Wireless: $ 0.5 - $ 0.55 Local BB OOR: $ 0.2 - $ 0.4 U.S. Data: $ 0.5 - $ 0.55 International: $ 0.1 - $ 0.12 U.S. LD Voice: $ 0.3 - $ 0.35 Local, Directory: $ 0.1 - $ 0.12 2002 Estimate: $24.3 - $24.7 *includes DIA, Hosting, VPN, Dial, DSL, QCS, Professional Services Growth Assumptions o 2001 results continue as expected o Economic growth recovers beginning 1Q02 o 271 re-entry in all states by mid-year Slide 16 In-Region Long Distance Re-entry o Significant progress in meeting requirements -Local service area open to competitors -Completed 14-point "checklist" in 12 of 14 states -Operating support systems tests going well o On track to file first application this year o Expect first state approval early 2002 o Qwest LD experience will drive in-region results -Targeting both Consumer and Commercial customers -Nationwide offering will enhance growth -Substantial infrastructure in place Slide 17 Nationwide Local Broadband Capabilities [Map showing cities with local broadband capabilities by region; not including Qwest ILEC region] Western Region - -------------- Sacramento San Diego San Jose San Francisco Orange County Los Angeles Southern Region - --------------- Austin San Antonio Dallas Houston Central Region - -------------- Chicago St. Louis Kansas City Cleveland Indianapolis Detroit Eastern Region - -------------- Washington DC Baltimore Boston Philadelphia Pittsburgh New York Newark White Plains Albany Slide 18 Path to Sustainable 15+% Revenue Growth [Chart showing relative size and long term growth rates for National and International Revenue and Local Service Revenue] National and International Revenue (includes Internet and data) (30%) -> Approx. 30% growth Major Drivers - ------------- Internet and data growth LD re-entry Out-of-region local broadband Net share taker PLUS Local Service Revenue ( 70%) -> Approx. 8% growth Major Drivers - ------------- Improved sales & service performance DSL and wireless growth Stronger economic growth Bundle focus EQUALS 15+% [Total revenue growth rate] Slide 19 2001-2005 Revenue Growth By Product Category [Bar graph showing estimated revenue growth for 2005 over 2001 by various product lines] [Numbers in billions] 2001 Total: $21.3 - $21.5 [Revenue growth 2001-2005] U.S. IP*: $ 6 - $ 6.5 In-region LD: $ 3 - $ 3.5 Wireless: $ 2.2 - $ 2.5 Local BB OOR: $ 2.2 - $ 2.5 U.S. Data: $ 1 - $ 1.2 International: $ 1 - $ 1.2 U.S. LD Voice: $ 0.5 - $ 0.75 Local, Directory: $ 0.5 - $ 0.6 2005 Estimate: $ 38 - $40 *includes DIA, Hosting, VPN, Dial, DSL, QCS, Professional Services Growth Assumptions - ------------------ o 2001 results continue as expected o Economic growth recovers beginning 1Q02 o 271 re-entry in all states by mid-year 2002 o Total global business Market grows 16% CAGR through 2004 o Qwest GB market share increases from 5% in 2000 to approx. 8% in 2004 Slide 20 Maintaining Financial Strength Accounts Receivable Focus o Receivable balance increased $600M from 4Q00 to 2Q01 -Revenue growth -Customer specific disputes -Longer payment terms for major customers -Increased optical private line sales to Fortune 500 companies -Timing of collections o 3Q01 receivables expected to decline/DSOs decrease -Significant collections of 1H01 increases expected during 3Q01 -Aggressive collections management on growth driven A/R Slide 21 Maintaining Financial Strength Path to Free Cash Flow o Free cash flow positive expected 4Q02; full year 2003 o $1.5B to $2B additional debt in 2002 o Committed to investment grade rating Cash Flow Estimates* 2001 2002 ---- ---- EBITDA $8.5-$8.6 $9.8-$10 Capex $8.8-$9.0 $7.5 Interest $1.4 $1.6 Cash Tax $0 $0 Working Cap $1.5 $1.4 Share buy-back $1.0 n/a Cash Flow ($4.5) ($0.7) *all numbers are estimates Slide 22
Qwest Undervalued Qwest VZ SBC BLS WCOM Inc. T FON ----- -- --- --- --------- - --- Stock Price (8/3/01) $24.40 $53.68 $43.49 $40.62 $14.27 $20.54 $23.18 Enterprise Value ($B) $ 70 $ 260 $ 200 $ 100 $ 76 $ 180 $ 26 2002 Revenue($B) (1) $ 21.5 $ 73 $ 59 $ 33 $ 37 $ 53 $ 18 EBITDA($B) (1) $ 10.0 $ 33 $ 25 $ 15 $ 11 $ 16 $ 5 EV/Revenue 3.3 3.6 3.4 3.1 2.1 3.4 1.4 EV/EBITDA 7.0 7.8 8.1 6.6 7.2 11.3 5.5 Growth Rate Revenue (1) 14.5% 7.0% 7.8% 8.1% 3.5% -0.7% 2.0% EBITDA(1) 16.5% 11.0% 9.1% 10.2% 7.7% 5.4% 7.2% Growth Adj. EV/Revenue 0.2 0.5 0.4 0.4 0.6 na 0.7 EV/EBITDA 0.4 0.7 0.9 0.6 0.9 2.1 0.8
(1) Based upon analyst estimates Slide 23 Outlook o 2001 near lower end of range following economic weakness -$21.3B to $21.5B total revenue -$8.5B to $8.6B total EBITDA -Cash EPS $1.10 to $1.20 o $8.8B to $9.0B capital spending in 2001 -Continued reduction as percent of revenue o 2002 growth accelerates -14% to 15% revenue growth -16% to 17% EBITDA growth -Cash EPS in the $1.40 range o 2000 - 2005 -15%+ Revenue CAGR -17%+ EBITDA CAGR Slide 24 [Qwest Logo] -----END PRIVACY-ENHANCED MESSAGE-----