-----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, SpnG+ijXRBsI94LElRq6bbDsKiLcH62tYPZ/8bzIfVOmTIYR/7Zf56uOSohc+AEQ P5pYE9deNmtFhlTmQLpr+A== 0001019056-02-000735.txt : 20021030 0001019056-02-000735.hdr.sgml : 20021030 20021030135851 ACCESSION NUMBER: 0001019056-02-000735 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20021030 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20021030 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-15577 FILM NUMBER: 02802764 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 1 qwest_8k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 30, 2002 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) Item 5. Other Events. On October 30, 2002, Qwest Communications International Inc. ("Qwest") announced its financial results for the 3rd quarter of 2002. A copy of the press release announcing the same is attached as Exhibit 99.1 to this Current Report on Form 8-K. Note to readers: Please see the attached press release for definitions of certain terms. On October 30, 2002, Qwest also hosted a conference call with media, analysts, investors and other interested persons during which it discussed its results and related matters. As previously announced, a webcast of the call is accessible on Qwest's website. On the call or in this Current Report on Form 8-K Qwest announced the following (all numbers are approximate): o In the 4th quarter of 2002, Qwest expects normalized revenues will benefit from the seasonality of the QwestDex publishing business. As previously announced, Qwest has entered into definitive agreements for the sale of that business, and expects the first stage to be completed by the end of 2002. o In the 3rd quarter of 2002, adjusted EBITDA was reduced by $115 million because of regulatory and bad debt reserves. While Qwest expects to review these and other reserves in each quarter, it expects that the additional reserve in the 4th quarter for these matters, if any, will be less than the 3rd quarter amount. o As a result of these and other factors, Qwest estimates its adjusted EBITDA run-rate to be in the mid-$1.3 billion range. 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 us 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 but not limited to: the duration and extent of the current economic downturn in our 14-state local service area, including its effect on our customers and suppliers; the effects of our anticipated restatement of historical financial statements including delays in or restrictions on our ability to access the capital markets or other adverse effects to our business and financial position; our substantial indebtedness, and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the SEC's current investigation into our accounting policies, practices and procedures; any adverse outcome of the current investigation by the U.S. Attorney's Office in Denver into certain matters relating to us; adverse results of increased review and scrutiny by Congress, regulatory authorities, media and others (including any internal analyses) of financial reporting issues and practices or otherwise; the failure of our chief executive and chief financial officers to provide certain certifications relating to certain public filings; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings, including any adverse outcome of current or future legal proceedings related to matters that are the subject of governmental 2 investigations, and, to the extent not covered by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; our future ability to provide interLATA services within our 14-state local service area; potential fluctuations in quarterly results; volatility of our stock price; intense competition in the markets in which we compete; changes in demand for our 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; adverse changes in the regulatory or legislative environment affecting our business; and changes in the outcome of future events from the assumed outcome included in our significant accounting policies. The information contained in this Current Report on Form 8-K is a statement of Qwest's present intention, belief or expectation 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 intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. The cautionary statements contained or referred to in this Current Report on Form 8-K should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This Current Report on Form 8-K may include 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 Press Release dated October 30, 2002. 3 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: October 30, 2002 By: /s/ Yash A. Rana ------------------------------- Yash A. Rana Vice President 4 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- Exhibit 99.1 Press Release dated October 30, 2002. 5 EX-99.1 3 ex99_1.txt EXHIBIT 99.1 [GRAPHIC OMITTED] Qwest NEWS Spirit of Service QWEST COMMUNICATIONS REPORTS THIRD QUARTER 2002 RESULTS o Second Consecutive Quarter of Positive Free Cash Flow o Liquidity Concerns Addressed With Amended/New Credit Facilities and Pending Sale of QwestDex o Expects 2002 Revenue of Approximately $17.1 Billion and Adjusted EBITDA of Approximately $5.4 Billion o Net Loss of ($214) Million or ($0.13) Per Share, Compared to a Loss of ($142) Million or ($0.09) Per Share in the Third Quarter of 2001 Investors: Please see "Note to Investors" below for definitions and explanations of certain matters. DENVER, October 30, 2002 -- Qwest Communications International Inc. (NYSE: Q) today announced its financial results for the third quarter of 2002. On a reported basis, the company reported a net loss of ($214) million or ($0.13) per share, compared to a net loss of ($142) million or ($0.09) per share in the third quarter of 2001. The loss reflects after-tax non-operating items of $44 million, or $0.02 per share, due to adjustments of restructuring reserves, losses associated with the sale of certain assets and an adjustment to the company's deferred tax provision. "Qwest took significant steps to strengthen the company's balance sheet and address liquidity concerns during the third quarter," said Richard C. Notebaert, Qwest chairman and CEO. "We are positioning the company to grow profitably in the future and are pleased with the momentum we have generated to date." As a result of the company's reduced capital investment and continued management of working capital, free cash flow (defined as cash flow from operations less capital expenditures) totaled $53 million for the third quarter of 2002. Reported revenue for the quarter decreased 13.2 percent to $3.80 billion from $4.37 billion in the same period last year. Both periods reflect the classification of the company's QwestDex publishing business as a discontinued operation. Normalized revenue declined approximately 12.3 percent to $4.18 billion, as compared to $4.77 billion in the third quarter of 2001. Excluding $133 million in revenues from optical capacity asset sales from the third quarter of 2001 that are subject to restatement, normalized revenue declined approximately 9.8 percent. Normalized revenues declined owing to, among other things, continued competitive pressures in local and long-distance voice services, industry and economic factors, and reductions in data and IP services primarily due to the company's efforts to eliminate less profitable businesses. "We are creating an efficient and disciplined company and will capitalize on opportunities as market conditions improve," said Oren G. Shaffer Qwest vice chairman and CFO. "We continue to de-emphasize low-margin businesses and are driving costs out of our core operations." Operating expenses declined $41 million, or 1.4 percent, over last year. Sequentially, operating expenses declined $99 million, or 3.2 percent, in the quarter. The reductions reflect the company's ongoing efforts to streamline operations while focusing on long-term annuity-based relationships with its customers. For the quarter, adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) was $1.22 billion compared with $1.77 billion in the third quarter of 2001. Increases to regulatory and bad debt reserves reduced adjusted EBITDA by approximately $115 million. The company has now completed its analysis of policies and practices related to revenue recognition for optical capacity asset sales (IRUs) for the years 2001 and 2000 and concluded that the policies and practices do not support the original accounting treatment. As previously announced, the company will restate prior period financials for the IRUs and certain other incorrectly recorded transactions. The company is consulting with its current external auditors, KPMG LLP, on the scope of the restatement and what adjustments would be required. Until such time as these efforts have been concluded, the company cannot indicate the extent to which the results for 2000-2002 will be impacted. Until the restatement is completed and KPMG has completed the re-audit of the relevant periods, the company anticipates it will not be in a position to file its Quarterly Report on Form 10-Q. The company expects to file a Form 8-K that includes more detailed financial disclosure about the third quarter, material trends related to its results of operations and its current liquidity and capital resources, in November 2002. This additional information will not be a substitute for the disclosure required in the Form 10-Q; however, until the company can file the Form 10-Q, it will provide as much relevant material financial information as it can that is of the type included in a Form 10-Q. BUSINESS SERVICES Normalized business services revenues for the quarter totaled $1.49 billion, a decline of 5.8 percent versus the same period last year. Lower local voice revenues and lower data and IP services revenue, which were primarily due to the company's de-emphasis of low-margin businesses, were offset by growth in long-distance voice and certain IP and data services. 2 Qwest continues to expand its share of enterprise business and government customers, and during the quarter signed agreements to provide services to the U.S. Department of the Treasury, General Services Administration, Alaska Airlines, the Nebraska Distance-Learning Consortium, and the State of New Mexico. CONSUMER SERVICES Normalized consumer services revenues totaled $1.39 billion, representing a decrease of 9.2 percent, or $141 million, compared with the third quarter of 2001. Contributing to the decline were reduced access lines, wireless revenues and the company's continued efforts to de-emphasize less profitable products and improve cash flow of the company's out-of-region long-distance business. As of September 30, 2002, approximately 32 percent of Qwest in-region consumer customers subscribed to a package (multiple calling features sold along with local voice service at a discounted price) and more than four percent to a bundle (multiple Qwest products bundled together on one bill, including local voice service, DSL, wireless, and/or additional lines). This represents an increase of nine percent for package penetration and 83 percent for bundle penetration over the same period last year. WHOLESALE SERVICES Normalized wholesale services revenues totaled $905 million for the quarter. Excluding $133 million in optical capacity asset revenues subject to restatement from the same period last year, normalized revenues declined approximately 20 percent. The decline is mainly attributable to reduced volumes, mandated rate reductions for switched access services, and general economic and industry conditions. The company is increasing pricing on certain products to improve profitability. DIRECTORY SERVICES Directory services revenue decreased approximately one-half of one percent, or $2 million, primarily due to the extension of the life of five directories in 2001 from 12 months to 13 months. The incremental revenue from the directory life extensions in 2001 was $13 million. Net of the directory life extensions, directory services revenue increased by $12 million, or 3.3 percent, primarily due to higher advertising rates in 2002. These results continue to reflect the point of publication method of accounting, which Qwest has used since 1999. As previously announced, Qwest's restated financial statements will reflect directory services results based on the deferral and amortization method of accounting. All books published in the third quarter of 2002 had 12-month service lives. As a result of the pending sale of the QwestDex business, directory services results are reported as a discontinued operation. GUIDANCE The company reaffirmed its financial guidance for 2002 and indicated it expects results to be at the low end of the range provided in the update given on August 8, 2002, before the company entered into agreements to sell its QwestDex business. The low end of that guidance, which included results from the QwestDex business, was for revenue of approximately $17.1 billion and adjusted EBITDA of 3 approximately $5.4 billion. The company expects a normalized loss of ($0.47) to ($0.49) per share and capital investment of between $3.0 - $3.1 billion. Finally, the company believes it will generate free cash flow for the year of between $100 and $200 million. IMPAIRMENT CHARGES As previously announced, the company ceased amortization of its goodwill beginning on January 1, 2002, in conjunction with the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, which will reduce annual amortization expense by approximately $900 million. Further, Qwest expects to record a transitional goodwill impairment charge of approximately $24 billion for its adoption of SFAS No. 142, effective January 1, 2002. Additionally, as required by SFAS No. 142, the company will continue to monitor factors such as the business conditions in the telecommunications industry and the company's market capitalization during 2002. Those factors, among others, will require the company to perform another goodwill impairment test in 2002. In addition, the company has determined that certain network and intangible assets are impaired and approximately $10.8 billion in additional charges are required. This network impairment includes fair market adjustments for the company's domestic and international network as well as its wireless and hosting platforms. The company expects to record an approximate $8.1 billion impairment charge for these assets and an approximate $2.7 billion reduction in the carrying value of intangible assets related to customer lists and product technology associated with the company's interexchange carrier business. Write-downs for these assets will be reflected in the company's Form 10-Q for the second quarter of 2002, the period in which the impairment occurred. The company expects the impact of these write-downs to decrease annual depreciation expense by an additional approximately $1.4 billion. BALANCE SHEET AND LIQUIDITY Several initiatives were completed in the quarter to strengthen the company's balance sheet and improve its liquidity position. On August 20, 2002, the company announced it had reached a definitive agreement to sell its QwestDex publishing business to a new entity formed by the private equity firms of The Carlyle Group and Welsh, Carson, Anderson & Stowe for $7.05 billion. On September 4, 2002, the company announced it had successfully amended its syndicated credit facility, extending the term and relaxing certain financial covenants. In addition, the company's QwestDex subsidiary obtained a $750 million term loan due in 2004. RE-ENTERING IN-REGION LONG-DISTANCE SERVICE In June and July, Qwest filed two applications with the Federal Communications Commission (FCC) to re-enter the long-distance markets in Colorado, Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington and Wyoming. On September 10, 2002, Qwest withdrew those applications because of concerns relating to historical accounting issues. On September 30, 2002, Qwest refiled an application with the FCC for all nine states. The new application addresses the accounting concerns by creating a new long-distance subsidiary - Qwest Long 4 Distance Corporation (QLDC) - that does not have the historical financial accounting issues that caused the withdrawal of the prior application. Additionally, the application incorporates the full record of Qwest's previous long-distance applications that the FCC examined in detail over the course of the summer, and that utility commissions in the nine states and the United States Department of Justice (DOJ) had recommended that the FCC approve. On October 22, 2002, the DOJ conditionally recommended that the FCC approve Qwest's application to re-enter the long-distance business in the nine states. The FCC must act on Qwest's application within 90 days of its filing. Utility commissions in Oregon and New Mexico also have completed proceedings and indicated their support for Qwest being authorized to provide long distance services in their states. NOTE TO INVESTORS Although the company has announced it will be restating its financial statements for 2001 and 2000, until that restatement is completed it will continue to provide a comparison to reported and normalized results for the 2001 period. The comparisons should not be viewed as a confirmation of the previously reported numbers, nor should it be viewed as indicative of the actual trends since the reported numbers for the prior period will be restated. This restatement will also impact the results for the first nine months of 2002. "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. Adjusted or normalized results are not prepared in accordance with GAAP. "Free cash flow" results reflect cash flow from operations less capital expenditures. For the purpose of this release free cash flow includes cash flow from the QwestDex operations. 5 "Normalized" results reflect adjustments to eliminate the impacts of non-recurring and non-operating items, which for the relevant periods may include restructuring, merger-related and other charges, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of assets and investments, a depreciation adjustment for access lines returned to service, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations, asset impairments, and gains (losses) on the early retirement of debt. In addition, the company normalized in the second quarter for the increased bad debt reserves associated with the WorldCom, Inc. bankruptcy consistent with other telecommunications providers. For additional details on these adjustments, readers should refer to Attachments C and D. "Adjusted EBITDA" excludes all items adjusted as a normalizing item. Adjusted EBITDA does not represent cash flow for the periods presented and should not be considered as an alternative to cash flows as a source of liquidity. Qwest's definition of adjusted EBITDA is not necessarily comparable with adjusted EBITDA or similar non-GAAP concepts used by other companies or with similar concepts used in Qwest's debt instruments. Adjusted EBITDA is provided as a complement to the financial results reported in accordance with GAAP and is presented to provide investors additional information concerning the company's operations. The company expects to disclose any differences in the adjusted EBITDA for the three months and four quarters ended September 30, 2002, and the consolidated EBITDA calculation under the credit facility when it is available in its Form 8-K in November 2002. Certain reclassifications have been made to prior periods to conform to the current presentation. CONFERENCE CALL TODAY As previously announced, Qwest will host a conference call for investors and the media today at 9:00 a.m. EST with Richard C. Notebaert, Qwest chairman and CEO and Oren Shaffer, Qwest vice chairman and CFO. The call may be heard on the Web at www.qwest.com/about/investor/meetings. ------------------------------------- ABOUT QWEST Qwest Communications International Inc. (NYSE: Q) is a leading provider of voice, video and data services to more than 25 million customers. The company's 53,000-plus employees are committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, please visit the Qwest Web site at www.qwest.com. # # # 6 This release may contain 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 us 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 but not limited to: the duration and extent of the current economic downturn in our 14-state local service area, including its effect on our customers and suppliers; the effects of our anticipated restatement of historical financial statements including delays in or restrictions on our ability to access the capital markets or other adverse effects to our business and financial position; our substantial indebtedness, and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the SEC's current investigation into our accounting policies, practices and procedures; any adverse outcome of the current investigation by the U.S. Attorney's office in Denver into certain matters relating to us; adverse results of increased review and scrutiny by Congress, regulatory authorities, media and others (including any internal analyses) of financial reporting issues and practices or otherwise; the failure of our chief executive and chief financial officers to provide certain certifications relating to certain public filings; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings, including any adverse outcome of current or future legal proceedings related to matters that are the subject of governmental investigations, and, to the extent not covered by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; our future ability to provide interLATA services within our 14-state local service area; potential fluctuations in quarterly results; volatility of our stock price; intense competition in the markets in which we compete; changes in demand for our 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; adverse changes in the regulatory or legislative environment affecting our business; and changes in the outcome of future events from the assumed outcome included in our significant accounting policies. The information contained in this release is a statement of Qwest's present intention, belief or expectation 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 intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. The cautionary statements contained or referred to in this release should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This release may include 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 release, Qwest does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material. The Qwest logo is a registered trademark of, and CyberCenter is a service mark of, Qwest Communications International Inc. in the U.S. and certain other countries. Contacts: Media Contact: Investor Contact: -------------- ----------------- Tyler Gronbach Stephanie Comfort 303-992-2155 800-567-7296 tyler.gronbach@qwest.com IR@qwest.com 7
ATTACHMENT A QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - AS REPORTED (1) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, ------------------------ % ------------------------ % 2002 2001 Change 2002 2001 Change - ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- REVENUES: Business services $ 1,481 $ 1,567 (5.5) $ 4,569 $ 5,001 (8.6) Consumer services 1,387 1,528 (9.2) 4,203 4,431 (5.1) Wholesale services 905 1,268 (28.6) 2,920 4,415 (33.9) Network services and other revenue 24 11 118.2 63 60 5.0 ---------- ---------- ---------- ---------- Total revenues 3,797 4,374 (13.2) 11,755 13,907 (15.5) OPERATING EXPENSES: Cost of sales 1,457 1,569 (7.1) 4,425 4,941 (10.4) Selling, general and administrative 1,327 1,277 3.9 4,303 3,787 13.6 Depreciation 1,067 987 8.1 3,175 2,676 18.6 Depreciation adjustment for access lines returned to service - - - - 222 (100.0) Goodwill and other intangible amortization 85 315 (73.0) 255 1,026 (75.1) Restructuring, merger-related and other charges 117 - - 117 624 (81.3) ---------- ---------- ---------- ---------- Operating (loss) income (256) 226 (213.3) (520) 631 (182.4) OTHER EXPENSE (INCOME): Interest expense - net 449 380 18.2 1,315 1,061 23.9 Loss on changes in market value of financial instruments - 7 (100.0) - 7 (100.0) Gain on sales of rural exchanges - - - - (50) 100.0 Loss on sales of investments and FMV adjustments 1 - - 22 - - Investment write-downs - - - 1,202 3,247 (63.0) Other expense - net 8 17 (52.9) 217 51 325.5 ---------- ---------- ---------- ---------- Total other expense - net 458 404 13.4 2,756 4,316 (36.1) ---------- ---------- ---------- ---------- Loss before income taxes, discontinued (714) (178) (301.1) (3,276) (3,685) 11.1 operations and extraordinary item Income tax (benefit) provision (387) 104 (472.1) (873) 108 (908.3) ---------- ---------- ---------- ---------- Loss from continuing operations (327) (282) (16.0) (2,403) (3,793) 36.6 ---------- ---------- ---------- ---------- DISCONTINUED OPERATIONS: Income from discontinued operations 184 229 (19.7) 569 596 (4.5) Income tax provision (71) (89) (20.2) (220) (232) (5.2) ---------- ---------- ---------- ---------- Loss before extraordinary item (214) (142) (50.7) (2,054) (3,429) 40.1 ---------- ---------- ---------- ---------- Extraordinary item - early retirement of debt, net of tax - - - 6 (65) (109.2) ---------- ---------- ---------- ---------- NET LOSS $ (214) $ (142) (50.7) $ (2,048) $ (3,494) 41.4 ========== ========== ========== ========== Basic loss per share $ (0.13) $ (0.09) (44.4) $ (1.22) $ (2.10) 41.9 ========== ========== ========== ========== Basic average shares outstanding 1,688 1,664 1.4 1,677 1,660 1.0 ========== ========== ========== ========== Diluted loss per share $ (0.13) $ (0.09) (44.4) $ (1.22) $ (2.10) 41.9 ========== ========== ========== ========== Diluted average shares outstanding 1,688 1,664 1.4 1,677 1,660 1.0 ========== ========== ========== ========== Dividends per share $ - $ - - $ - $ 0.05 (100.0) ========== ========== ========== ==========
(1) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 8
ATTACHMENT B QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NORMALIZED (1) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, ------------------------- % ------------------------- % 2002 2001 Change 2002 2001 Change - ------------------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- REVENUES: Business services $ 1,494 $ 1,586 (5.8) $ 4,613 $ 5,067 (9.0) Consumer services 1,390 1,531 (9.2) 4,213 4,440 (5.1) Wholesale services 905 1,268 (28.6) 2,920 4,415 (33.9) Directory services 369 371 (0.5) 1,064 1,061 0.3 Network services and other revenue 21 10 110.0 57 56 1.8 ---------- ---------- ---------- ---------- Total revenues 4,179 4,766 (12.3) 12,867 15,039 (14.4) OPERATING EXPENSES: Cost of sales 1,576 1,697 (7.1) 4,798 5,343 (10.2) Selling, general and administrative 1,384 1,304 6.1 4,136 3,905 5.9 ---------- ---------- ---------- ---------- Adjusted EBITDA (2) 1,219 1,765 (30.9) 3,933 5,791 (32.1) Adjusted EBITDA margin 29.2% 37.0% 30.6% 38.5% Depreciation 1,071 996 7.5 3,201 2,693 18.9 Goodwill and other intangible amortization 85 315 (73.0) 255 1,026 (75.1) ---------- ---------- ---------- ---------- Operating income 63 454 (86.1) 477 2,072 (77.0) OTHER EXPENSE: Interest expense - net 455 380 19.7 1,321 1,061 24.5 Other expense - net 8 17 (52.9) 143 51 180.4 ---------- ---------- ---------- ---------- Total other expense - net 463 397 16.6 1,464 1,112 31.7 ---------- ---------- ---------- ---------- (Loss) income before income taxes (400) 57 (801.8) (987) 960 (202.8) Income tax (benefit) provision (142) 195 (172.8) (357) 752 (147.5) ---------- ---------- ---------- ---------- NET (LOSS) INCOME $ (258) $ (138) (87.0) $ (630) $ 208 (402.9) ========== ========== ========== ========== Basic (loss) earnings per share $ (0.15) $ (0.08) (87.5) $ (0.38) $ 0.13 (392.3) ========== ========== ========== ========== Basic average shares outstanding 1,688 1,664 1.4 1,677 1,660 1.0 ========== ========== ========== ========== Diluted (loss) earnings per share $ (0.15) $ (0.08) (87.5) $ (0.38) $ 0.12 (416.7) ========== ========== ========== ========== Diluted average shares outstanding 1,688 1,664 1.4 1,677 1,673 0.2 ========== ========== ========== ========== Diluted cash (loss) earnings per share (3) $ (0.12) $ 0.08 (250.0) $ (0.28) $ 0.67 (141.8) ========== ========== ========== ==========
(1) The consolidated normalized statements have been adjusted to eliminate the impacts of non-recurring and non-operating items, which for the relevant periods may include restructuring, merger-related and other charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of assets and investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. In addition, the normalized statements adjust for a charge recorded by the company in the second quarter to increase its bad debt reserves associated with the WorldCom, Inc. bankruptcy. The merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. 9 (2) Adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") excludes all items adjusted as a normalizing item. Adjusted EBITDA does not represent cash flow for the periods presented and should not be considered as an alternative to cash flows as a source of liquidity. Qwest's definition of adjusted EBITDA is not necessarily comparable with adjusted EBITDA or similar non-GAAP concepts used by other companies or with similar concepts used in Qwest's debt instruments. Adjusted EBITDA is provided as a complement to the financial results reported in accordance with GAAP and is presented to provide investors additional information concerning the company's operations. The company expects to disclose any differences in the adjusted EBITDA for the three months and four quarters ended September 30, 2002 and the Consolidated EBITDA calculation under the credit facility when it is available in its Form 8-K in November 2002. (3) Diluted cash (loss) earnings per share represent diluted (loss) earnings per share adjusted to add back the after-tax amortization of goodwill and other intangible assets. 10
ATTACHMENT C QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (4) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Three Months Ended September 30, 2002 September 30, 2001 ----------------------------------------- ----------------------------------------- As As Reported Normalized Normalized Reported Normalized Normalized Results Adjustments Results Results Adjustments Results - ---------------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- REVENUES: Business services $ 1,481 $ 13 $ 1,494 $ 1,567 $ 19 $ 1,586 Consumer services 1,387 3 1,390 1,528 3 1,531 Wholesale services 905 - 905 1,268 - 1,268 Directory services - 369 369 - 371 371 Network services and other revenue 24 (3) 21 11 (1) 10 ----------- ----------- ----------- ----------- ----------- ----------- Total revenues 3,797 382 4,179 4,374 392 4,766 OPERATING EXPENSES: Cost of sales 1,457 119 1,576 1,569 128 1,697 Selling, general and administrative 1,327 57 1,384 1,277 27 1,304 ----------- ----------- ----------- ----------- ----------- ----------- Adjusted EBITDA (2) 1,219 1,765 Adjusted EBITDA margin 29.2% 37.0% Depreciation 1,067 4 1,071 987 9 996 Depreciation adjustment for access lines returned to service - - - - - - Goodwill and other intangible amortization 85 - 85 315 - 315 Restructuring, merger-related and other charges 117 (117) - - - - ----------- ----------- ----------- ----------- ----------- ----------- Operating income (256) 319 63 226 228 454 OTHER EXPENSE (INCOME): Interest expense - net 449 6 455 380 - 380 Loss on changes in market value of financial instruments - - - 7 (7) - Loss on sales of investments and FMV adjustments 1 (1) - - - - Other expense - net 8 - 8 17 - 17 ----------- ----------- ----------- ----------- ----------- ----------- Total other expense - net 458 5 463 404 (7) 397 ----------- ----------- ----------- ----------- ----------- ----------- (Loss) income before income taxes, (714) 314 (400) (178) 235 57 discontinued operations and extraordinary item Income tax (benefit) provision (387) 245 (142) 104 91 195 ----------- ----------- ----------- ----------- ----------- ----------- (Loss) income from continuing operations (327) 69 (258) (282) 144 (138) ----------- ----------- ----------- ----------- ----------- ----------- DISCONTINUED OPERATIONS: Income from discontinued operations 184 (184) - 229 (229) - Income tax provision (71) 71 - (89) 89 - ----------- ----------- ----------- ----------- ----------- ----------- NET (LOSS) INCOME $ (214) (44) (258) $ (142) 4 (138) =========== =========== =========== =========== =========== =========== Basic loss per share $ (0.13) $ (0.15) $ (0.09) $ (0.08) =========== =========== =========== =========== Basic average shares outstanding 1,688 1,688 1,664 1,664 =========== =========== =========== =========== Diluted loss per share $ (0.13) $ (0.15) $ (0.09) $ (0.08) =========== =========== =========== =========== Diluted average shares outstanding 1,688 1,688 1,664 1,664 =========== =========== =========== =========== Diluted cash (loss) earnings per share (3) $ (0.12) $ 0.08 =========== ===========
11 (1) The consolidated normalized statements have been adjusted to eliminate the impacts of non-recurring and non-operating items, which for the relevant periods may include restructuring, merger-related and other charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of assets and investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. The merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. (2) Adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") excludes all items adjusted as a normalizing item. Adjusted EBITDA does not represent cash flow for the periods presented and should not be considered as an alternative to cash flows as a source of liquidity. Qwest's definition of adjusted EBITDA is not necessarily comparable with adjusted EBITDA or similar non-GAAP concepts used by other companies or with similar concepts used in Qwest's debt instruments. Adjusted EBITDA is provided as a complement to the financial results reported in accordance with GAAP and is presented to provide investors additional information concerning the company's operations. The company expects to disclose any differences in the adjusted EBITDA for the three months and four quarters ended September 30, 2002 and the Consolidated EBITDA calculation under the credit facility when it is available in its Form 8-K in November 2002. (3) Diluted cash (loss) earnings per share represent diluted (loss) earnings per share adjusted to add back the after-tax amortization of goodwill and other intangible assets. (4) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 12 ATTACHMENT D QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (4) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Nine Months Ended Nine Months Ended September 30, 2002 September 30, 2001 ------------------------------------------ ------------------------------------------ As As Reported Normalized Normalized Reported Normalized Normalized Results Adjustments Results Results Adjustments Results - -------------------------------------- ----------- ------------ ------------ ---------- ------------ -------------- REVENUES: Business services $ 4,569 $ 44 $ 4,613 $ 5,001 $ 66 $ 5,067 Consumer services 4,203 10 4,213 4,431 9 4,440 Wholesale services 2,920 - 2,920 4,415 - 4,415 Directory services - 1,064 1,064 - 1,061 1,061 Network services and other revenue 63 (6) 57 60 (4) 56 ---------- ----------- ----------- --------- ----------- ------------- Total revenues 11,755 1,112 12,867 13,907 1,132 15,039 OPERATING EXPENSES: Cost of sales 4,425 373 4,798 4,941 402 5,343 Selling, general and administrative 4,303 (167) 4,136 3,787 118 3,905 ---------- ----------- ----------- --------- ----------- ------------- Adjusted EBITDA (2) 3,933 5,791 Adjusted EBITDA margin 30.6% 38.5% Depreciation 3,175 26 3,201 2,676 17 2,693 Depreciation adjustment for access lines returned to service - - - 222 (222) - Goodwill and other intangible amortization 255 - 255 1,026 - 1,026 Restructuring, merger-related and other charges 117 (117) - 624 (624) - ---------- ----------- ----------- --------- ----------- ------------- Operating income (520) 997 477 631 1,441 2,072 OTHER EXPENSE (INCOME): Interest expense - net 1,315 6 1,321 1,061 - 1,061 Loss on changes on market value of financial instruments 7 (7) - Gain on sales of rural exchanges and fixed assets - - - (50) 50 - Loss on sales of investments and FMV adjustments 22 (22) - - - - Investment write-downs 1,202 (1,202) - 3,247 (3,247) - Other expense - net 217 (74) 143 51 - 51 ---------- ----------- ----------- --------- ----------- ------------- Total other expense - net 2,756 (1,292) 1,464 4,316 (3,204) 1,112 ---------- ----------- ----------- --------- ----------- ------------- (Loss) income before income taxes, discontinued operations and extraordinary item (3,276) 2,289 (987) (3,685) 4,645 960 Income tax (benefit) provision (873) 516 (357) 108 644 752 ---------- ----------- ----------- --------- ----------- ------------- (Loss) income from continuing operations (2,403) 1,773 (630) (3,793) 4,001 208 ---------- ----------- ----------- --------- ----------- ------------- DISCONTINUED OPERATIONS: Income from discontinued operations 569 (569) - 596 (596) - Income tax provision (220) 220 - (232) 232 - ---------- ----------- ----------- --------- ----------- ------------- (Loss) income before extraordinary item (2,054) 1,424 (630) (3,429) 3,637 208 ---------- ----------- ----------- --------- ----------- ------------- Extraordinary item - early retirement of debt, net of tax 6 (6) - (65) 65 - ---------- ----------- ----------- --------- ----------- ------------- NET (LOSS) INCOME $ (2,048) $ 1,418 $ (630) $ (3,494) $ 3,702 $ 208 ========== =========== =========== ========= =========== ============= Basic (loss) earnings per share $ (1.22) $ (0.38) $ (2.10) $ 0.13 ========== =========== ========= ============= Basic average shares outstanding 1,677 1,677 1,660 1,660 ========== =========== ========= ============= Diluted (loss) earnings per share $ (1.22) $ (0.38) $ (2.10) $ 0.12 ========== =========== ========= ============= Diluted average shares outstanding 1,677 1,677 1,660 1,673 ========== =========== ========= ============= Diluted cash (loss) earnings per $ (0.28) $ 0.67 share (3) =========== =============
13 (1) The consolidated normalized statements have been adjusted to eliminate the impacts of non-recurring and non-operating items, which for the relevant periods may include restructuring, merger-related and other charges, asset impairments, a depreciation adjustment for access lines returned to service, gains (losses) on the sale of rural exchanges, gains (losses) on the sale of assets and investments, the write-down of investments, KPNQwest restructuring charges, changes in the market value of financial instruments, gains (losses) on discontinued operations and gains (losses) on the early retirements of debt. In addition, the normalized statements adjust for a charge recorded by the company in the second quarter to increase its bad debt reserves associated with the WorldCom, Inc. bankruptcy. The merger has been accounted for as a purchase transaction. Certain reclassifications have been made to prior periods to conform to the current presentation. (2) Adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") excludes all items adjusted as a normalizing item. Adjusted EBITDA does not represent cash flow for the periods presented and should not be considered as an alternative to cash flows as a source of liquidity. Qwest's definition of adjusted EBITDA is not necessarily comparable with adjusted EBITDA or similar non-GAAP concepts used by other companies or with similar concepts used in Qwest's debt instruments. Adjusted EBITDA is provided as a complement to the financial results reported in accordance with GAAP and is presented to provide investors additional information concerning the company's operations. The company expects to disclose any differences in the adjusted EBITDA for the three months and four quarters ended September 30, 2002 and the Consolidated EBITDA calculation under the credit facility when it is available in its Form 8-K in November 2002. (3) Diluted cash (loss) earnings per share represent diluted (loss) earnings per share adjusted to add back the after-tax amortization of goodwill and other intangible assets. (4) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 14 ATTACHMENT E QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED CONSOLIDATED DATA (5) (UNAUDITED)
As of and for the Three Months Ended September 30, -------------------------- % 2002 2001 Change ---------- ---------- ---------- Free cash flow (in millions) (1) $ 53 $ (1,352) NM Capital expenditures (in millions) $ 504 $ 2,232 (77.4%) Total employees 53,133 65,309 (18.6%) DSL: Out-of-region subscribers (in thousands) 25 15 66.7% In-region subscribers (in thousands) 500 391 27.9% Qualified households/businesses (in millions) 4.0 3.7 8.1% DSL equipped central offices 392 318 23.3% Subscribers per equipped central office 1,276 1,228 3.9% Wireless/PCS: Revenues (in millions) $ 179 $ 203 (11.8%) Subscribers (in thousands) 1,084 1,071 1.2% ARPU (in dollars) $ 47 $ 55 (14.5%) Cost per gross addition (CPGA) $ 229 $ 321 (28.7%) Penetration 4.95% 5.01% (1.2%) Access lines (in thousands): (2) Business Retail (3) 5,107 5,344 (4.4%) Resale 77 169 (54.4%) UNE-P 498 459 8.5% Unbundled Loop 437 273 60.1% ---------- ---------- Total Business 6,119 6,245 (2.0%) ---------- ---------- Consumer Primary line 9,323 9,769 (4.6%) Additional line 1,632 1,793 (9.0%) Public line (4) 122 153 (20.3%) ---------- ---------- Total Consumer 11,077 11,715 (5.4%) ---------- ---------- Total access lines 17,196 17,960 (4.3%) ========== ========== Minutes of use from Carriers and CLECs (in millions) 15,993 17,673 (9.5%) Voice grade equivalent access lines (in thousands): (2) Business 50,959 44,082 15.6% Consumer 12,597 12,807 (1.6%) ---------- ---------- Total voice grade equivalents 63,556 56,889 11.7% ========== ==========
15 (1) Free cash flow is calculated as cash provided (used) from operation, less capital expenditures. Please note that this calculation includes the operations of DEX, while the cash flow presented on Attachment H does not. (2) Access line and voice grade equivalent data has been adjusted for prior periods to conform to the current period presentation. A voice-grade equivalent is the amount of capacity required to carry one telephone call. A voice-grade equivalent line is the outcome of measuring all residential and business access lines, and private line channel terminations as if they were converted to single access lines that have the ability to transmit and receive only one voice transmission at a time. (3) Business retail access line counts include lines sold to interexchamge carriers at retail rates, however the revenue for these lines is accounted for in our Wholesale segment. (4) Consumer public access lines represent lines serving public payphones. (5) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 16 ATTACHMENT F QWEST COMMUNICATIONS INTERNATIONAL INC. SELECTED CONSOLIDATED DATA - NORMALIZED (1) (DOLLARS IN MILLIONS) (UNAUDITED) The following table shows a breakdown of revenues by major products and services for the three primary segments:
Business services Consumer services Wholesale services Three months Three months Three months ended September 30, ended September 30, ended September 30, --------------------------------------------------------------------------- Services & products: 2002 2001 2002 2001 2002 2001 - -------------------- ---------- ---------- ---------- ---------- ---------- ---------- IP & data services $ 561 $ 565 $ 49 $ 57 $ 340 $ 428 Optical capacity asset sales - - - - - 133 IP equipment and other - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- Total IP & data 561 565 49 57 340 561 Voice - long distance 226 244 77 142 218 247 Voice - local 671 742 1,093 1,145 342 430 Wireless 20 26 159 176 - 1 Other 16 9 12 11 5 29 ---------- ---------- ---------- ---------- ---------- ---------- Total $ 1,494 $ 1,586 $ 1,390 $ 1,531 $ 905 $ 1,268 ========== ========== ========== ========== ========== ========== (1) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period.
17 ATTACHMENT G QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (1) (DOLLARS IN MILLIONS) September 30, December 31, 2002 2001 - ------------------------------------------------ ------------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,133 $ 257 Accounts receivable - net 2,971 3,725 Inventories and supplies 96 170 Prepaid and other 770 504 Assets held for sale 820 914 ------------ ------------ Total current assets 5,790 5,570 Property, plant and equipment - net 29,180 30,165 Investments 47 1,400 Goodwill and intangibles - net 34,384 34,523 Other assets 2,303 2,123 ------------ ------------ Total assets $ 71,704 $ 73,781 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 2,388 $ 4,805 Accounts payable 1,063 1,488 Accrued expenses and other current liabilities 2,413 3,237 Advance billings and customer deposits 386 391 Liabilities held for sale 191 98 ------------ ------------ Total current liabilities 6,441 10,019 Long-term borrowings 23,742 20,197 Post-retirement and other post-employment benefit obligations 2,816 2,893 Deferred taxes, credits and other 3,970 4,017 Stockholders' equity 34,735 36,655 ------------ ------------ Total liabilities and stockholders' equity $ 71,704 $ 73,781 ============ ============ (1) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 18 ATTACHMENT H QWEST COMMUNICATIONS INTERNATIONAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (1) (DOLLARS IN MILLIONS) (UNAUDITED)
Nine Months Ended September 30, 2002 2001 ----------- ----------- OPERATING ACTIVITIES: Net Loss: $ (2,048) $ (3,494) Adjustments to net loss: Income from discontinued operations, net of income taxes (349) (364) Depreciation and amortization 3,430 3,924 Loss on sale of investments and fair value adjustments, net 22 - Non-Cash Merger-related charges 118 480 Provision for bad debts 581 405 Asset impairment charge 1,339 3,247 Equity loss on investments 155 74 Deferred Income taxes (294) 829 (Gain) loss on sales of rural exchanges and fixed assets 5 (50) (Gain) loss on early retirement of debt, net (6) 65 Changes in operating assets and liabilities: Accounts receivable 161 (875) Inventories, supplies, prepaids and other current assets 58 (501) Accounts payable, accrued expenses and advance billings (1,066) (444) Restructuring and Merger-related reserves (370) (443) Other 53 156 ----------- ----------- Cash provided by operating activities 1,789 3,009 ----------- ----------- INVESTING ACTIVITIES FROM CONTINUING OPERATIONS: Expenditures for property, plant and equipment (2,318) (7,791) Other 63 (24) ----------- ----------- Cash used for investing activities (2,255) (7,815) ----------- ----------- FINANCING ACTIVITIES FROM CONTINUING OPERATIONS: Net proceeds from current borrowings 809 968 Proceeds from issuance of long-term borrowings 1,476 6,937 Repayments of long-term borrowings (1,117) (2,269) Cash restricted for the repayment of short-term borrowings (107) - Costs relating to the early retirement of debt - (106) Proceeds from issuances of common stock 12 296 Repurchase of stock (12) (1,000) Dividends paid on common stock - (83) Debt issuance costs (152) (41) ----------- ----------- Cash provided by financing activities 909 4,702 ----------- ----------- CASH AND CASH EQUIVALENTS: Increase 443 (104) Net cash generated by (used in) discontinued operations 433 375 Beginning balance 257 154 ----------- ----------- Ending balance $ 1,133 $ 425 =========== ===========
19 (1) "Reported" results in the applicable period were prepared in accordance with what the company believed, at the relevant time, were generally accepted accounting principles in the United States (GAAP); however, the company has determined that the results in 2001 were not in accordance with GAAP and is restating those financial statements. In addition, the company has not yet determined the impact of the restatement on the current period. 20 -----END PRIVACY-ENHANCED MESSAGE-----