0000732718-95-000012.txt : 19950810
0000732718-95-000012.hdr.sgml : 19950810
ACCESSION NUMBER: 0000732718-95-000012
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950809
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: US WEST INC
CENTRAL INDEX KEY: 0000732718
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 840926774
STATE OF INCORPORATION: CO
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-08611
FILM NUMBER: 95560084
BUSINESS ADDRESS:
STREET 1: 7800 E ORCHARD RD
STREET 2: SUITE 480
CITY: ENGLEWOOD
STATE: CO
ZIP: 80111
BUSINESS PHONE: 3037936629
MAIL ADDRESS:
STREET 1: 7800 EAST ORCHARD ROAD
STREET 2: SUITE 480
CITY: ENGLEWOOD
STATE: CO
ZIP: 80111
10-Q
1
2ND QUARTER
31
_______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
---------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-8611
U S WEST, Inc.
A Colorado Corporation IRS Employer No. 84-0926774
7800 East Orchard Road, Englewood, Colorado 80111-2526
Telephone Number 303-793-6500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X_ No __
At July 31, 1995, 470,810,118 shares were outstanding.
________________________________________________________________________
U S WEST, Inc.
Form 10-Q
TABLE OF CONTENTS
Item Page
----------------------------------------------------- ----
PART I - FINANCIAL INFORMATION
1. Financial Statements
Consolidated Statements of Income -
Three and six months ended June 30, 1995 and 1994 3
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1995 and 1994 6
Consolidated Statements of Shareowners' Equity -
Six months ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
1. Legal Proceedings 27
4. Submission of Matters to a Vote of Security Holders 27
6. Exhibits and Reports on Form 8-K 28
Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) U S WEST, Inc.
Dollars in millions (except per share amounts)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Sales and other revenues $ 2,894 $ 2,708 $ 5,722 $ 5,349
Employee-related expenses 997 943 1,975 1,854
Other operating expenses 559 518 1,069 995
Taxes other than income taxes 113 105 227 213
Depreciation and amortization 562 507 1,122 1,010
Interest expense 139 110 267 219
Equity losses in unconsolidated ventures 33 22 90 57
Gains on sales of assets:
Rural telephone exchanges 15 24 78 48
Paging assets - 68 - 68
Other income - net 8 14 2 14
--------- --------- --------- ---------
Income before income taxes 514 609 1,052 1,131
Provision for income taxes 196 234 404 432
--------- --------- --------- ---------
NET INCOME 318 375 648 699
Preferred stock dividends 1 - 2 -
--------- --------- --------- ---------
Earnings available for common stock $ 317 $ 375 $ 646 $ 699
========= ========= ========= =========
EARNINGS PER COMMON SHARE $ 0.67 $ 0.83 $ 1.37 $ 1.56
DIVIDENDS PER COMMON SHARE $ 0.535 $ 0.535 $ 1.07 $ 1.07
AVERAGE COMMON SHARES
OUTSTANDING (thousands) 470,414 453,618 469,490 449,024
See Notes to Consolidated Financial Statements.
Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS (Unaudited) U S WEST, Inc.
Dollars in millions
June 30, December 31,
1995 1994
--------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 87 $ 209
Accounts and notes receivable 1,824 1,693
Inventories and supplies 212 189
Deferred tax asset 348 352
Other 341 323
--------- -------------
Total current assets 2,812 2,766
--------- -------------
Gross property, plant and equipment 31,733 31,014
Accumulated depreciation 17,644 17,017
--------- -------------
Property, plant and equipment - net 14,089 13,997
Investment in Time Warner Entertainment 2,510 2,522
Intangible assets - net 1,872 1,858
Investment in international ventures 1,131 881
Net investment in assets held for sale 422 302
Other assets 1,357 878
--------- -------------
Total assets $ 24,193 $ 23,204
========= =============
See Notes to Consolidated Financial Statements.
Form 10-Q - Part I
CONSOLIDATED BALANCE SHEETS (Unaudited), Continued U S WEST, Inc.
Dollars in millions
June 30, December 31,
1995 1994
---------- --------------
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Short-term debt $ 4,364 $ 2,837
Accounts payable 771 944
Employee compensation 335 367
Dividends payable 252 251
Current portion of restructuring charges 354 337
Other 1,455 1,278
---------- --------------
Total current liabilities 7,531 6,014
---------- --------------
Long-term debt 4,626 5,101
Postretirement and other postemployment benefit
obligations 2,315 2,502
Deferred taxes, credits and other 1,991 2,154
Preferred stock subject to mandatory redemption 51 51
Common shareowners' equity
Common shares - no par, 2,000,000,000
authorized, 470,722,738 and 469,343,048
outstanding, respectively 8,123 8,056
Cumulative deficit (282) (458)
LESOP guarantee (157) (187)
Foreign currency translation adjustments (5) (29)
---------- --------------
Total common shareowners' equity 7,679 7,382
---------- --------------
Total liabilities and common shareowners' equity $ 24,193 $ 23,204
========== ==============
See Notes to Consolidated Financial Statements.
Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) U S WEST, Inc.
Dollars in millions
Six Months Ended June 30, 1995 1994
----------------------------------------------------- -------- --------
OPERATING ACTIVITIES
Net income $ 648 $ 699
Adjustments to net income
Depreciation and amortization 1,122 1,010
Gains on sales of assets
Rural telephone exchanges (78) (48)
Paging assets - (68)
Equity losses in unconsolidated ventures 90 57
Deferred income taxes and amortization
of investment tax credits 63 90
Changes in operating assets and liabilities
Restructuring payments (180) (63)
Postretirement medical and life costs, net of
cash fundings (144) (48)
Accounts and notes receivable (127) (53)
Inventories, supplies and other (68) (101)
Accounts payable and accrued liabilities 76 7
Other - net 27 56
-------- --------
Cash provided by operating activities 1,429 1,538
-------- --------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (1,265) (1,282)
Investment in international ventures (291) (151)
Proceeds from disposals of property, plant
and equipment 112 47
Cash (to) net investment in assets held for sale (37) -
Other - net (281) (90)
-------- --------
Cash (used) for investing activities (1,762) (1,476)
-------- --------
FINANCING ACTIVITIES
Net proceeds from short-term debt 1,103 212
Proceeds from issuance of long-term debt - 251
Repayments of long-term debt (390) (327)
Dividends paid on common stock (462) (440)
Proceeds from issuance of common stock 23 295
Purchases of treasury stock (63) -
-------- --------
Cash provided by (used for) financing activities 211 (9)
-------- --------
Cash (used for) provided by continuing operations (122) 53
-------- --------
Cash from discontinued operations - 48
-------- --------
CASH AND CASH EQUIVALENTS
Increase (decrease) (122) 101
Beginning balance 209 128
-------- --------
Ending balance $ 87 $ 229
======== ========
See Notes to Consolidated Financial Statements.
Form 10-Q - Part I
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY (Unaudited) U S WEST, Inc.
Dollars in millions
Six Months Ended June 30, 1995 1994
----------------------------------------------- ----------- -----------
COMMON SHARES
Balance at beginning of period $ 8,056 $ 6,996
Issuance of common stock 63 126
Settlement of litigation - 210
Benefit trust contribution (OPEB) 61 185
Purchase of treasury stock (63) -
Other 6 (3)
----------- -----------
Balance at end of period 8,123 7,514
CUMULATIVE DEFICIT
Balance at beginning of period (458) (857)
Net income 648 699
Dividends declared (504) (486)
Market value adjustment for debt securities 32 (45)
----------- -----------
Balance at end of period (282) (689)
LESOP GUARANTEE
Balance (187) (243)
Activity 30 27
----------- -----------
Balance at end of period (157) (216)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS
Balance at beginning of period (29) (35)
Activity 24 23
----------- -----------
Balance at end of period (5) (12)
----------- -----------
TOTAL COMMON SHAREOWNERS' EQUITY $ 7,679 $ 6,597
=========== ===========
COMMON SHARES AUTHORIZED AT JUNE 30,
(Thousands) 2,000,000 2,000,000
=========== ===========
COMMON SHARES OUTSTANDING (Thousands)
Beginning balance 469,343 441,140
Issuance of common stock 1,585 3,053
Settlement of litigation - 5,506
Benefit trust contribution (OPEB) 1,500 4,600
Purchase of treasury stock (1,705) -
----------- -----------
Ending balance 470,723 454,299
=========== ===========
See Notes to Consolidated Financial Statements.
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
A. Summary of Significant Accounting Policies
Consolidated Financial Statements
The Consolidated Financial Statements have been prepared by U S WEST, Inc. ("U
S WEST" or "Company"), pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC"). Certain information and footnote disclosures
normally accompanying financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such SEC rules and regulations. In the opinion of the Company's
management, the Consolidated Financial Statements include all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly
the financial information set forth therein. It is suggested that these
Consolidated Financial Statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report for the
year ended December 31, 1994.
Certain reclassifications within the Consolidated Financial Statements have
been made to conform to the current year presentation.
B. Recapitalization Proposal
The Board of Directors of U S WEST, a Colorado corporation, has adopted a
proposal (the "Recapitalization Proposal") that would change the state of
incorporation of U S WEST from Colorado to Delaware and create two classes of
common stock that are intended to reflect separately the performance of the
Company's communications and multimedia businesses. Under the
Recapitalization Proposal, shareholders of the Company will be asked to
approve an Agreement and Plan of Merger between the Company and U S WEST,
Inc., a Delaware corporation and wholly owned subsidiary of U S WEST ("U S
WEST Delaware"), pursuant to which U S WEST would be merged (the "Merger")
with and into U S WEST Delaware with U S WEST Delaware continuing as the
surviving corporation. In connection with the Merger, the Certificate of
Incorporation of U S WEST Delaware would be amended and restated (as so
amended and restated, the "Restated Certificate") to, among other things,
designate two classes of common stock of U S WEST Delaware, one class of which
would be authorized as U S WEST Communications Group Common Stock
("Communications Stock"), and the other class of which would be authorized as
U S WEST Media Group Common Stock ("Media Stock"). Upon consummation of the
Merger, each share of existing common stock of the Company would be
automatically converted into one share of Communications Stock and one share
of Media Stock.
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars in millions)
(Unaudited)
The Communications Stock and Media Stock are designed to provide shareholders
with separate securities that are intended to reflect separately the
communications businesses of U S WEST Communications, Inc. ("U S WEST
Communications") and certain other subsidiaries of the Company (the
"Communications Group") and the Company's multimedia businesses (the "Media
Group" and, together with the Communications Group, the "Groups").
The Communications Group is comprised of U S WEST Communications, U S WEST
Communications Services, Inc., U S WEST Federal Services, Inc., U S WEST
Advanced Technologies, Inc. and U S WEST Business Resources, Inc.
The Media Group is comprised of U S WEST Marketing Resources Group, Inc., a
publisher of White and Yellow Pages telephone directories, and provider of
multimedia content and services, U S WEST New Vector Group, Inc., which
provides communications and information products and services over wireless
networks, U S WEST Multimedia Communications, Inc., which owns domestic cable
television operations and investments and U S WEST International Holdings,
Inc., which primarily owns investments in international cable and
telecommunications, wireless communications and directory publishing
operations.
Under the Recapitalization Proposal, dividends to be paid to the holders of
Communications Stock will initially be at a quarterly rate of $0.535 per
share. Dividends on the Communications Stock will be paid at the discretion
of the Board of Directors of U S WEST, based primarily upon the financial
condition, results of operations and business requirements of the
Communications Group and the Company as a whole. With regard to the Media
Stock, the Board of Directors of U S WEST currently intends to retain future
earnings if any, for the development of the Media Group's businesses and does
not anticipate paying dividends on the Media Stock in the foreseeable future.
A preliminary proxy statement on the Recapitalization Proposal was filed with
the Securities and Exchange Commission on May 12, 1995, and amendment one was
filed on June 30, 1995.
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars in millions)
(Unaudited)
C. Investment in Time Warner Entertainment
On September 15, 1993, U S WEST acquired 25.51 percent pro-rata priority
capital and residual equity interests in Time Warner Entertainment Company
L.P. ("TWE"). Summarized operating results for TWE follow:
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues $ 2,392 $ 2,055 $ 4,438 $ 3,974
Operating expenses* 2,126 1,828 3,981 3,544
Interest and other - net** 185 159 361 310
--------- --------- --------- ---------
Income before income taxes $ 81 $ 68 $ 96 $ 120
========= ========= ========= =========
Net income $ 56 $ 56 $ 60 $ 104
========= ========= ========= =========
* Includes 1995 and 1994 depreciation and amortization of $275 and $240,
and $501 and $453 for the three and six months ended, respectively.
** Includes 1995 and 1994 corporate services of $15 and $30 for the three
and six months ended, respectively.
The Company accounts for its investment in TWE under the equity method of
accounting. U S WEST's recorded share of TWE operating results represents
allocated TWE net income or loss adjusted for the amortization of the excess
of fair market value over the book value of the partnership net assets. The
Company's recorded share of TWE operating results was $2 and $6, and $(11) and
$(6) for the three and six months ended June 30, 1995 and 1994, respectively.
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars in millions)
(Unaudited)
D. Contingencies
At U S WEST Communications there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both. In
one such instance, the Utah Supreme Court has remanded a Utah Public Service
Commission ("PSC") order to the PSC for reconsideration, thereby establishing
two exceptions to the rule against retroactive ratemaking: 1) unforeseen and
extraordinary events, and 2) misconduct. The PSC's initial order denied a
refund request from interexchange carriers and other parties related to the
Tax Reform Act of 1986. This action is still in the discovery process. If a
formal filing - made in accordance with the remand from the Supreme Court -
alleges that the exceptions apply, the range of possible risk to U S WEST
Communications is $0 to $140.
E. Net Investment in Assets Held for Sale
Effective January 1, 1995, the capital assets segment has been accounted for
in accordance with Staff Accounting Bulletin No. 93, issued by the Securities
and Exchange Commission, which requires discontinued operations not disposed
of within one year of the measurement date to be accounted for prospectively
in continuing operations as "net investment in assets held for sale." The net
realizable value of the assets will be reevaluated on an ongoing basis with
adjustments to the existing reserve, if any, being charged to continuing
operations. Prior to January 1, 1995, the entire capital assets segment was
accounted for as discontinued operations in accordance with Accounting
Principles Board Opinion No. 30.
Sales and other revenues of net investment in assets held for sale were $31
and $76, and $107 and $382 for the three and six months ended June 30, 1995
and 1994, respectively. Included are the sales of properties for
approximately $47 and $234 during the first half of 1995 and 1994,
respectively. The sales were in line with Company estimates.
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(Dollars in millions)
(Unaudited)
The components of net investment in assets held for sale follow:
June 30, December 31,
Dollars in millions 1995 1994
------------------------------------------------------ --------- -------------
ASSETS
Cash $ 55 $ 7
Finance receivables - net 1,016 1,073
Investment in real estate - net of valuation allowance 424 465
Bonds, at market value 165 155
Investment in FSA 365 329
Other assets 206 362
--------- -------------
Total assets 2,231 2,391
--------- -------------
LIABILITIES
Debt 965 1,283
Deferred income taxes 699 693
Accounts payable, accrued liabilities and other 135 103
Minority interests 10 10
--------- -------------
Total liabilities 1,809 2,089
--------- -------------
Net investment in assets held for sale $ 422 $ 302
========= =============
Selected financial data for U S WEST Financial Services follows:
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------- --------- --------- ---------
Operating revenues $ 12 $ 13 $ 21 $ 30
June 30, December 31,
1995 1994
--------- -------------
Net finance receivables $ 922 $ 981
Total assets 1,263 1,331
Total debt 447 533
Total liabilities 1,193 1,282
Shareowner's equity 70 49
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts)
Results of Operations
Comparative details of net income for the three and six months ended June 30
follow:
Three Three Three Six Six Six
Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended
June 30, June 30, Percent June 30, June 30, Percent
1995 1994 Change 1995 1994 Change
---------- ---------- -------- ---------- ---------- --------
Communications Group:
U S WEST Communications, Inc. $ 289 $ 295 (2.0) $ 612 $ 592 3.4
Other 4 (6) - (4) (8) 50.0
---------- ---------- -------- ---------- ---------- --------
Total Communications Group 293 289 1.4 608 584 4.1
Media Group:
Consolidated:
Multimedia content and services 55 67 (17.9) 114 127 (10.2)
Wireless communications 17 51 (66.7) 32 51 (37.3)
Cable and telecommunications (3) - - (6) - -
Unconsolidated equity investments:
Time Warner Entertainment Company, L.P. - 1 - (13) (11) (18.2)
TeleWest Communications plc (4) (7) 42.8 (12) (14) 14.3
Mercury One-2-One (20) (14) (42.9) (39) (24) (62.5)
Other (20) (12) (66.7) (36) (14) -
---------- ---------- -------- ---------- ---------- --------
Total Media Group 25 86 (70.9) 40 115 (65.2)
---------- ---------- -------- ---------- ---------- --------
Net Income $ 318 $ 375 (15.2) $ 648 $ 699 (7.3)
========== ========== ======== ========== ========== ========
Earnings per common share $ 0.67 $ 0.83 (19.3) $ 1.37 $ 1.56 (12.2)
========== ========== ======== ========== ========== ========
U S WEST's second quarter 1995 net income was $308, a decrease of $10, or 3.1
percent, compared with second quarter 1994, excluding the effects of asset
sales in both periods. After tax gains on the sales of certain rural
telephone exchanges were $10 ($.02 per share) and $16 ($.04 per share) in
second quarter 1995 and 1994, respectively. An after tax gain on the sale of
paging assets in second quarter 1994 was $41 ($.09 per share).
The Communications Group's second quarter net income was $283, an increase of
$10, or 3.7 percent, compared with second quarter 1994, excluding the gains on
the sales of the rural telephone exchanges. Increased income at the
Communications Group is attributable to higher demand for services and access
line growth, and lower employee benefit costs, including the effects of
certain benefit cost true-ups, largely offset by an increase in operating
costs incurred to address current customer service issues.
The Media Group's second quarter net income was $25, a decrease of $20, or
44.4 percent, compared with second quarter 1994, excluding the effect of last
year's gain on the sale of paging assets. The decrease in Media Group income,
as adjusted for the asset sale, is primarily attributable to expansion of
international ventures, higher financing costs, including the use of debt to
partially finance acquisitions, and growth initiatives in multimedia content
and services.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Second quarter 1995 earnings per common share were $.65 compared with $.70 in
1994, excluding the effects of the asset sales. Earnings per common share
reflect approximately 17 million additional average shares outstanding,
including 12.8 million shares issued in connection with the December 1994
purchase of cable television properties in the Atlanta, Georgia area (the
"Atlanta Systems").
For the six months ended June 30, 1995, net income was $599, a decrease of
$28, or 4.5 percent, excluding the gains on asset sales in both periods, and
related earnings per share were $1.27 compared with $1.40 in 1994. In
addition to the $41 ($.09 per share) after tax gain on the sale of paging
assets in second quarter 1994, gains on the sales of certain rural telephone
exchanges were $49 ($.10 per share) and $31 ($.07 per share) in the first half
of 1995 and 1994, respectively.
Excluding the gains on asset sales, Communications Group income was $559, an
increase of $6, or 1.1 percent, as compared with the first half of 1994.
Media Group income during the first half of 1995 was $40, a decrease of $34,
or 46 percent, as compared with the first half of 1994.
Increased demand for the Company's services resulted in growth in earnings
before interest, taxes, depreciation, amortization and other ("EBITDA") of 7.3
and 7.2 percent, for second quarter and the six months ended June 30, 1995,
respectively, as compared with the same periods in 1994. EBITDA also excludes
the effects of asset sales and equity losses. The Company believes EBITDA is
an important indicator of the operational strength of its businesses. EBITDA,
however, should not be considered as an alternative to operating or net income
as an indicator of the performance of U S WEST or as an alternative to cash
flows from operating activities as a measure of liquidity, in each case
determined in accordance with GAAP.
Sales and Other Revenues
An analysis of the change in U S WEST's consolidated sales and other revenues
follows:
Three Three Three Six Six Six
Months Ended Months Ended Months Ended Months Ended Months Ended Months Ended
June 30, June 30, Percent June 30, June 30, Percent
1995 1994 Change 1995 1994 Change
-------------- -------------- ------------- -------------- -------------- -------------
Communications Group $ 2,338 $ 2,281 2.5 $ 4,656 $ 4,534 2.7
Media Group 585 459 27.5 1,121 877 27.8
Intergroup eliminations (29) (32) (9.4) (55) (62) (11.3)
-------------- -------------- ------------- -------------- -------------- -------------
Total $ 2,894 $ 2,708 6.9 $ 5,722 $ 5,349 7.0
============== ============== ============= ============== ============== =============
The increase in sales and other revenues was primarily due to increased demand
for services at U S WEST Communications, the December 1994 acquisition of
the Atlanta Systems and continued subscriber growth in the Company's cellular
business.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Communications Group Revenue
An analysis of changes in the Communications Group's revenues follows:
Lower Increase Increase
Price (Higher) (Decrease) (Decrease)
1995 1994 Changes Refunds Demand Other Dollars Percent
------ ------ --------- --------- -------- ------- ----------- ----------
Local service
Second quarter $1,076 $1,016 $ 2 ($8) $ 66 $ - $ 60 5.9
Six months 2,126 2,001 4 - 121 - 125 6.2
Interstate access
Second quarter 591 556 (9) (1) 47 (2) 35 6.3
Six months 1,180 1,118 (18) (10) 90 - 62 5.5
Intrastate access
Second quarter 184 179 (7) 2 8 2 5 2.8
Six months 372 353 (12) 5 19 7 19 5.4
Long-distance network
Second quarter 294 345 (7) - (11) (33) (51) (14.8)
Six months 593 696 (15) - (28) (60) (103) (14.8)
Other services
Second quarter 193 185 - - - 8 8 4.3
Six months 385 366 - - - 19 19 5.2
------ ------ --------- --------- -------- ------- ----------- ----------
Total
Second quarter 2,338 2,281 (21) (7) 110 (25) 57 2.5
Six months $4,656 $4,534 $ (41) $ (5) $ 202 $ (34) $ 122 2.7
====== ====== ========= ========= ======== ======= =========== ==========
Local service revenues at U S WEST Communications increased principally as a
result of higher demand for services, as evidenced by an increase of 509,000
access lines, or 3.6 percent, during the last 12 months. Access line growth
was 4.2 percent as adjusted for the sale of approximately 82,000 rural
telephone access lines during the last 12 months.
Higher revenues from interstate access services resulted from an increase of
9.1 percent in interstate billed access minutes of use, for both the three and
six months ended June 30, 1995, as compared with the same periods in 1994,
which more than offset the effects of price reductions and refunds.
Multiple toll carrier plans ("MTCP") were implemented in Oregon and Washington
in May and July 1994, respectively. These regulatory arrangements allow
independent telephone companies to act as toll carriers. The impact on U S
WEST Communications in the second quarter and six months ended June 30, 1995,
was long-distance revenue losses of $31 and $62, respectively, partially
offset by increases in intrastate access revenue of $6 and $12, respectively,
and decreases in other operating expenses (i.e., access expense otherwise paid
to independent companies) of $21 and $42, respectively.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Adjusted for the effects of MTCP, long-distance network revenues decreased by
5.8 percent and 5.9 percent for the second quarter and first six months,
respectively, compared to the same periods last year. Long-distance network
revenues continue to be impacted by competition.
Revenues from other services increased primarily as a result of continued
market penetration in voice messaging services.
Media Group Revenue
An analysis of the Media Group's revenues follows:
Three Three Three Six Six Six
Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended
June 30, June 30, Percent June 30, June 30, Percent
1995 1994 Change 1995 1994 Change
--------- --------- ------- --------- --------- -------
Multimedia content and services $ 292 $ 255 14.5 $ 564 $ 497 13.5
Wireless communications 228 197 15.7 430 365 17.8
Cable and telecommunications 55 - - 109 - -
Other 10 7 42.9 18 15 20.0
--------- --------- ------- --------- --------- -------
Total Media Group $ 585 $ 459 27.5 $ 1,121 $ 877 27.8
========= ========= ======= ========= ========= =======
Media Group - Multimedia Content and Services. Domestic revenues related to
Yellow Pages directory advertising increased approximately $16, or 6.6
percent, and $33, or 7.0 percent, for the three and six months ended June 30,
1995, respectively, as compared with the same periods in 1994. The increases
are due to pricing and an increase in Yellow Pages advertising volume.
Product enhancements and the effect of improved marketing programs on business
volume also contributed to the increase in revenues. Non-Yellow Pages
revenues increased by $2 and $6 in the three and six months ended June 30,
1995, respectively, as compared to the same periods in 1994. Partially
offsetting these increases was the effect of last year's sale of certain
software development and marketing operations, which had contributed
approximately $5 in the first quarter of 1994. International directory
publishing revenue increased by $19 and $33 in the second quarter and first
half of 1995, respectively as compared with the same periods in 1994,
primarily due to the May 1994 purchase of Thomson Directories.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Media Group - Wireless Communications. Cellular service revenues increased by
$55, or 36.5 percent, and $107, or 37.4 percent, for the three and six months
ended June 30, 1995, respectively, as compared with the same periods in 1994.
The growth in cellular service revenues is a result of a 58 percent increase
in subscribers during the last twelve months, partially offset by a 13 percent
decrease in average revenue per subscriber to $63.00 per month at June 30,
1995. The increase in subscribers is due to lower costs for cellular phone
equipment and enhanced service offerings, which has resulted in a shift in the
wireless customer base from businesses to consumers. The decrease in average
revenue per subscriber is due to the continuing effects of nonbusiness user
market penetration.
Cellular equipment revenues decreased by $9, or 29.1 percent, and $14, or 26.7
percent, in the three and six months ended June 30, 1995, as compared with the
same periods in 1994. The decrease is primarily due to 12 and 16 percent
decreases in unit sales in the second quarter and first half of 1995,
respectively, due to the impacts of competition.
Revenues related to the paging sales and service operations, which were sold
in 1994, approximated $16 and $28 for the three and six months ended June 30,
1994, respectively.
Media Group - Cable and Telecommunications. Domestic cable and
telecommunications revenues reflect the December 1994 acquisition of the
Atlanta Systems.
Costs and Expenses
Three Three Three Six Six Six
Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended
June 30, June 30, Percent June 30, June 30, Percent
1995 1994 Change 1995 1994 Change
--------- --------- -------- --------- --------- --------
Employee-related expenses $ 997 $ 943 5.7 $ 1,975 $ 1,854 6.5
Other operating expenses 559 518 7.9 1,069 995 7.4
Taxes other than income taxes 113 105 7.6 227 213 6.6
Depreciation and amortization 562 507 10.8 1,122 1,010 11.1
Interest expense 139 110 26.4 267 219 21.9
Equity losses in unconsolidated ventures 33 22 50.0 90 57 57.9
Other income-net 8 14 (42.9) 2 14 (85.7)
Communications Group employee-related expenses increased $26 and $61 for the
three and six months ended June 30, 1995, respectively, compared with the same
periods in 1994. Higher employee-related expenses at the Communications Group
are a result of business growth and related customer service issues, which
have been impacted by a temporary decline in productivity caused by a major
rearrangement of resources due to restructuring. Growth in employee-related
expenses at Communications Group is expected to continue throughout the
remainder of the year. Overtime payments and contract labor increased
employee-related expenses at the Communications Group by approximately $60 and
$95 for the second quarter and first six months of 1995, as compared to the
same periods in 1994. Partially offsetting these increases were lower
health-care benefit costs, including a reduction in the accrual for
postretirement benefits, and certain benefit cost true-ups.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Since December 1993, the Communications Group has separated 3,560 employees
under the Restructuring Plan. (See "Restructuring Charges.") These
separations have been partially offset by the addition of approximately 2,100
employees (a significant portion of which are temporary) primarily dedicated
to improving customer service and also developing new business opportunities.
Benefits from the net work-force reductions at Communications Group have
offset wage and salary increases.
The Company estimates that it will achieve employee reductions of 9,000 in
connection with the Restructuring Plan by the end of 1997. (See
"Restructuring Charges.") These employee reductions will be partially offset
by the planned addition of some employees at Communications Group by the end
of 1997 to accommodate business growth, including wireless and data
transmission services.
Employee-related expenses also increased due to the 1994 purchases of the
Atlanta Systems and Thomson Directories, and growth initiatives in the
multimedia content and services segment.
The 1994 purchases of the Atlanta Systems and Thomson Directories increased
other operating expenses by $42 and $75 for the second quarter and first six
months of 1995, respectively, as compared to the same periods in 1994.
Additionally, expansion of the cellular customer base increased other
operating expenses by $11 and $24 for the second quarter and first six months
of 1995, respectively, as compared to the same periods in 1994. Partially
offsetting these cost increases was the multiple toll carrier plan effect on
other operating expenses at U S WEST Communications.
Increased depreciation and amortization expense was attributable to the
effects of a higher depreciable asset base at U S WEST Communications and the
purchase of the Atlanta Systems.
Equity losses in unconsolidated ventures increased primarily due to increased
network expansion costs at Mercury One-2-One and the impacts of new
investments.
Interest expense increased primarily as a result of increased debt at U S WEST
Communications, the purchase of the Atlanta Systems, partially financed
through the issuance of short-term debt, and a reclassification of certain
debt to continuing operations from net investment in assets held for sale.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Liquidity and Capital Resources
Cash provided by operations decreased by $109 compared with the first six
months of 1994. The effect of business growth was more than offset by
increases of $96 in postretirement benefit funding, $117 in Restructuring Plan
expenditures and higher income tax payments related to prior periods,
including approximately $60 related to the sale of the Company's joint venture
interest in TeleWest.
The Company from time to time engages in discussions regarding acquisitions.
The Company may fund such acquisitions with internally generated funds, debt
or equity. The incurrence of indebtedness to fund such acquisitions and/or
the assumption of indebtedness in connection with acquisitions, if
significant, could result in a downgrading of the credit rating of the Company
and/or U S WEST Communications.
U S WEST invested approximately $290 in international businesses in the first
six months of 1995, primarily in Malaysia, the Czech Republic and at Mercury
One-2-One in the UK.
In March 1995, PCS PrimeCo, L.P. ("PCS PrimeCo") was awarded PCS licenses in
11 markets. The Company's share of the cost of the licenses was $268, all of
which was funded by June 30, 1995. Under the PCS PrimeCo partnership
agreement, the company is required to fund 25 percent of PCS PrimeCo's
operating and capital costs, including licensing costs. The Company
anticipates that its total funding obligations to PCS PrimeCo during the next
four years will be significant.
In the first six months of 1995, U S WEST received cash proceeds of $114 from
the sale of certain rural telephone exchanges as compared to proceeds of $51
in the same period last year.
During the first six months of 1995, debt increased by $1,052 and the
debt-to-capital ratio increased from 51.8 percent at December 31, 1994, to
53.9 percent at June 30, 1995. The increase in debt and the debt-to-capital
ratio was primarily related to cash fundings for a portion of the Company's
postretirement obligation, international investments and PCS licenses, and the
reclassification of certain debt from net investment in assets held for sale
to continuing operations.
During the first quarter of 1995, U S WEST purchased 1,704,700 shares of U S
WEST Common Stock for $63, at an average price of $37.02 per share.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Restructuring Charges
The Company's 1993 results reflected a $1 billion restructuring charge
(pretax). The related restructuring plan (the "Restructuring Plan") is
designed to provide faster, more responsive customer services while reducing
the costs of providing these services. As part of the Restructuring Plan, the
Company is developing new systems and enhanced system functionality that will
enable it to monitor networks to reduce the risk of service interruptions,
activate telephone service on demand, rapidly design and engineer new services
for customers and centralize its service centers. The Company is
consolidating its 560 customer service centers into 26 centers in 10 cities
and reducing its total work force by approximately 9,000 employees.
The Restructuring Plan is scheduled to be completed by the end of 1997.
Implementation to date has been driven by growth in the business and related
service issues, revisions to system delivery schedules and productivity issues
caused by the major rearrangement of resources due to restructuring. These
issues may continue to affect the timing of the implementation of the
Restructuring Plan.
Following is a schedule of the costs included in the Restructuring Plan:
Actual Actual Estimate Estimate Estimate
1993 1994 1995 1996 1997 Total
------- ------- --------- --------- --------- ------
Cash expenditures:
Employee separation (1) $ - $ 19 $ 68 $ 107 $ 66 $260
Systems development - 127 161 112 - 400
Real estate - 50 77 3 - 130
Relocation - 21 52 2 5 80
Retraining and other - 16 30 12 7 65
------- ------- --------- --------- --------- ------
Total cash expenditures - 233 388 236 78 935
Asset write-down 65 - - - - 65
------- ------- --------- --------- --------- ------
Total Plan 65 233 388 236 78 1,000
Remaining 1991 plan
employee costs (1) - 56 - - - 56
------- ------- --------- --------- --------- ------
Total (2) $ 65 $ 289 $ 388 $ 236 $ 78 $1,056
======= ======= ========= ========= ========= ======
(1) Employee separation costs, including the balance of the 1991 restructuring reserve
at December 31, 1993, aggregate $316.
(2) The Restructuring Plan also provides for capital expenditures of $490 over the life
of the Restructuring Plan.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Employee separation costs include severance payments, health-care coverage and
postemployment education benefits. System development costs include new
systems and the application of enhanced system functionality to existing
single purpose systems to provide integrated, end-to-end customer service. A
substantial portion of the work-force reductions will be enabled by developing
new systems and enhanced system functionality, which will simplify the
current, labor-intensive interfaces between existing processes. Real estate
costs include preparation costs for the new service centers. The relocation
and retraining costs are related to moving employees to the new service
centers and retraining employees on the methods and systems required in the
new, restructured mode of operation.
The Company estimates that full implementation of the Restructuring Plan will
reduce employee-related expenses by approximately $400 per year. These
savings are expected to be offset by the effects of inflation. Future
operating costs also will be impacted by business growth.
Employee Separation. Net employee reductions will total 9,000 under the
Restructuring Plan. While the Company will separate 10,000 employees,
approximately 1,000 employees that were originally expected to relocate have
chosen separation or other job assignments and will be replaced. The
estimated total cost for employee separations is $316, compared with $286 in
the original estimate. The $30 cost associated with these additional employee
separations has been reclassified from relocation to the reserve for employee
separations.
The following estimates of employee separations and related amounts reflect
the extension of employee reductions into 1997:
Estimate Actual Estimate Estimate Estimate
1994 1994 (1) 1995 1996 1997 Total
-------- -------- -------- -------- -------- ------
Employee separations
Managerial 1,061 497 862 840 521 2,720
Occupational 1,887 1,683 1,288 2,660 1,649 7,280
-------- -------- -------- -------- -------- ------
Total 2,948 2,180 2,150 3,500 2,170 10,000
======== ======== ======== ======== ======== ======
Estimate Actual Estimate Estimate Estimate
1994 1994 (1) 1995 1996 1997 Total
--------- --------- --------- --------- --------- ------
Employee separation amounts
Managerial $ 25 $ 5 $ 32 $ 33 $ 20 $ 90
Occupational 15 14 36 74 46 170
--------- --------- --------- --------- --------- ------
Total 40 19 68 107 66 260
Remaining 1991 reserve 56 56 - - - 56
--------- --------- --------- --------- --------- ------
Total $ 96 $ 75 $ 68 $ 107 $ 66 $ 316
========= ========= ========= ========= ========= ======
(1) Includes the remaining employees and the separation amounts associated with the
balance of the 1991 restructuring reserve at December 31, 1993.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Compared with the original estimates, employee reduction and separation
amounts shown above have been reduced by 1,319 employees and $35,
respectively, in 1995, and increased by 900 employees and $20 in 1996 and
2,170 employees and $66 in 1997, respectively.
Systems Development. U S WEST Communications' existing information management
systems were largely developed to support a monopoly environment. These
systems have become increasingly inadequate due to the effects of increased
competition, new forms of regulation and changing technology that have driven
consumer demand for new services that can be delivered quickly, reliably and
economically. The Company believes that improved customer service, delivered
at lower cost, can be achieved by a combination of new systems and introducing
new functionality to existing systems. This is a change from the Company's
initial strategy which placed more emphasis on the development of new systems.
The Restructuring Plan is now less dependent on development of entirely new,
untested systems and related technology.
The systems development program involves new systems and enhanced system
functionality for systems that support the following core processes:
Service Delivery - to support service on demand for all products and services.
These new systems and enhanced system functionality will permit one customer
service representative to handle all facets of a customer's requirements as
contrasted to the numerous points of customer interface required today.
Service Assurance - for performance monitoring from one location and remote
testing in the new environment, including identification and resolution of
faults prior to customer impact.
Capacity Provisioning - for integrated planning of future network capacity,
including the installation of software controllable service components.
The direct, incremental and nonrecurring costs of providing new systems and
enhanced system functionality follow:
Estimate Actual Estimate Estimate
1994 1994 1995 1996 Total
--------- ------- --------- --------- ------
Service delivery $ 35 $ 21 $ 21 $ 31 $ 73
Service assurance 45 12 24 28 64
Capacity provisioning 17 57 92 30 179
All other 28 37 24 23 84
--------- ------- --------- --------- ------
Total $ 125 $ 127 $ 161 $ 112 $ 400
========= ======= ========= ========= ======
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
The Company continues to review its estimates of systems expenditures under
the Restructuring Plan. Management does not anticipate any material revisions
in total estimated expenditures. However, should expenditures exceed the
remaining reserve, additional amounts would be expensed as incurred.
Systems expenses charged to current operations at U S WEST Communications
consist of costs associated with the information management function,
including planning, developing, testing and maintaining data bases for general
purpose computers, in addition to systems costs related to maintenance of
telephone network applications. The key related administrative (i.e. general
purpose) systems include customer service, order entry, billing and
collection, accounts payable, payroll, human resources and property records.
Ongoing systems costs comprised approximately six percent of total operating
expenses at U S WEST Communications in 1994, 1993 and 1992. U S WEST
Communications expects systems costs charged to current operations as a
percent of total operating expenses to approximate the current level
throughout the life of the Restructuring Plan. However, systems costs could
increase relative to other operating costs as the business becomes more
technology dependent.
Progress Under the Restructuring Plan:
Following is a reconciliation of restructuring reserve activity since December
1993.
Change in
First Relocation/ Reserve
Reserve Reserve Half Employee Balance
Balance 1994 Balance 1995 Separation June 30,
Dec. 1993 Activity Dec. 1994 Activity Estimates 1995
---------- --------- ---------- --------- ------------- ---------
Employee separations
Managerial $ 80 $ 5 $ 75 $ 11 $ 7 $ 71
Occupational 150 14 136 28 23 131
---------- --------- ---------- --------- ------------- ---------
Total separations 230 19 211 39 30 202
Systems Development
Service delivery 73 21 52 7 45
Service assurance 64 12 52 11 41
Capacity provisioning 179 57 122 47 75
All other 84 37 47 7 - 40
---------- --------- ---------- --------- ------------- ---------
Total systems 400 127 273 72 201
Real estate 130 50 80 50 30
Relocation 110 21 89 10 (30) 49
Retraining and other 65 16 49 9 - 40
---------- --------- ---------- --------- ------------- ---------
Total 935 233 702 180 - 522
Remaining 1991 Plan
expenditures 56 56 - - - -
---------- --------- ---------- --------- ------------- ---------
Total $ 991 $ 289 $ 702 $ 180 $ - $ 522
========== ========= ========== ========= ============= =========
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Cumulative
First Half Separations
1994 Separations 1995 Separations At June 30, 1995
---------------- ---------------- ----------------
Employee separations
Managerial 497 324 821
Occupational 1,683 1,056 2,739
---------------- ---------------- ----------------
Total 2,180 1,380 3,560
================ ================ ================
Recapitalization Proposal
The Board of Directors of U S WEST has adopted a proposal that would change
the state of incorporation of U S WEST from Colorado to Delaware and create
two classes of common stock, the Communications Stock and the Media Stock,
which are intended to reflect separately the performance of the communications
and multimedia businesses. A preliminary proxy statement on the
Recapitalization Proposal was filed with the Securities and Exchange
Commission on May 12, 1995, and amendment one was filed on June 30, 1995. For
a more complete discussion on the Recapitalization Proposal see Footnote B in
the Notes to the Consolidated Financial Statements.
AirTouch Communications Joint Venture
On July 25, 1994, AirTouch Communications, Inc. ("AirTouch") and U S WEST
announced a definitive agreement to combine their domestic wireless
operations. The initial equity ownership of the wireless joint venture will
be approximately 70 percent by AirTouch and approximately 30 percent by U S
WEST. The transaction is expected to close in the third quarter of 1995.
After closing, the earnings of the Company will reflect its 30 percent
interest in the joint venture. The wireless operations of both parties will
initially continue operating as separate entities owned by the individual
partners, but will receive support services on a contract basis from a joint
wireless management company. Following the combination of the wireless
operations of the two companies, the assets, liabilities and operations of the
domestic wireless operations of the Media Group will no longer be
consolidated, but will be reported based on the equity method of accounting
for less than majority-owned entities.
Had the Company recognized 30 percent of the combined earnings of the joint
venture beginning January 1, 1994, U S WEST's net income for the year ended
December 31, 1994, would have increased by approximately $30.
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Personal Communications Services ("PCS") Alliance
In October 1994, AirTouch and U S WEST agreed to form a strategic wireless
alliance with Bell Atlantic and NYNEX. As part of this alliance, the
AirTouch-U S WEST PCS Partnership and a partnership formed between Bell
Atlantic and NYNEX formed PCS PrimeCo, L.P. ("PCS PrimeCo") for the purpose of
bidding on PCS licenses being auctioned by the FCC. The objective of PCS
PrimeCo is to build and operate PCS networks where its partners do not operate
cellular networks, thus enabling them to establish a national wireless
alliance. In the FCC auction, which concluded in March 1995, PCS PrimeCo was
awarded PCS licenses in 11 markets covering 57 million POPs including licenses
in Chicago, Dallas, Tampa, Houston, Miami and New Orleans. The Company's
share of the cost of the licenses was $268, all of which was funded by June
30, 1995. PCS PrimeCo will be governed by an executive committee made up of
three Bell Atlantic-NYNEX representatives and three AirTouch-U S WEST
representatives.
TeleWest Communications plc. Acquisition
In June 1995, TeleWest Communications plc. ("TeleWest"), announced that it had
entered into an agreement in principle to acquire SBC CableComms (UK) in
exchange for shares of TeleWest. Upon completion of the acquisition, which is
expected in September 1995, U S WEST will recognize a pretax gain of
approximately $150, and will own 26.7 percent of the combined company. The
new entity (New TeleWest) will be the largest cable television and cable
telephony operator in the UK.
Broadband
In early 1994, U S WEST Communications filed applications with the FCC to
install Broadband Network architecture in Denver; Minneapolis-St. Paul; Salt
Lake City; Boise; and Portland, Oregon (collectively, the "Broadband
Applications"). In May 1995, however, in order to fully assess the results of
the Omaha trials and examine alternative technologies, including wireless
cable and direct broadcast satellite services, U S WEST Communications
withdrew the Broadband Applications. The Communications Group plans to
incorporate the results of the Omaha trials , as well as applicable new
technologies, into its Broadband Network architecture in order to develop an
advanced Broadband Network that is responsive to the needs of customers.
Form 10-Q - Part I
Item 2. Management's' Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
continued
Regulatory
Though Congress failed to pass telecommunications reform legislation in 1994,
new telecommunications legislation has been introduced in both houses in 1995.
The Senate passed a bill on June 16, 1995, and the House of Representatives
passed a bill on August 4, 1995. The thrust of this legislation is to open up
the network of local exchange carriers to further competition and to eliminate
certain prohibitions upon local exchange carriers entering into other lines of
business. The proposed legislation would (i) open local exchange service to
competition and preempt states from imposing barriers preventing such
competition, (ii) impose new unbundling and interconnection requirements on
local exchange carrier networks, (iii) remove the MFJ prohibitions on
interLATA services and manufacturing if certain competitive conditions are
met, (iv) transfer any remaining MFJ requirements (including the MFJ's
nondiscrimination provisions) to the FCC's jurisdiction, (v) impose
requirements to conduct certain competitive activities only through
structurally separate affiliates, and (vi) eliminate many of the remaining
cable and telephone company cross-ownership restrictions. There is, however,
uncertainty concerning the outcome of such legislation and whether key
differences between the House and Senate bills could be resolved in Conference
Committee. The passing of such legislation would significantly change the
competitive landscape of the telecommunications industry as a whole.
Contingencies
At U S WEST Communications, there are pending regulatory actions in local
regulatory jurisdictions that call for price decreases, refunds or both. In
one such instance, the Utah Supreme Court has remanded a Utah Public Service
Commission ("PSC") order to the PSC for reconsideration, thereby establishing
certain exceptions to the rule against retroactive ratemaking: 1) unforeseen
and extraordinary events, and 2) misconduct. The Commission's initial order
denied a refund request from an interexchange carrier and other parties that
relates to the Tax Reform Act of 1986. This action is still in the discovery
process. If a formal filing - made in accordance with the remand from the
Supreme Court - alleges that the exceptions apply, the range of possible risk
is $0 to $140.
Form 10-Q - Part II
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders on May 5, 1995, shareholders
voted their shares as follows for the purpose of electing four individuals as
directors of the Company:
Director Shares Voted For Shares Withheld
--------------------- ---------------- ---------------
Richard B. Cheney 393,952,326 12,277,315
Remedios Diaz-Oliver 394,395,963 11,833,678
Grant A. Dove 394,330,081 11,899,560
Shirley M. Hufstedler 393,856,027 12,373,614
Coopers & Lybrand L.L.P. was confirmed as the Company's independent
auditors with 396,668,832 shares voting for, 6,318,868 voting against and
3,241,941 abstaining.
The shareholders voted as follows to approve the amendment of the 1994
Stock Plan:
For Against Abstain Broker No Vote
----------- ---------- --------- --------------
337,374,514 61,242,213 7,612,914 62,147,456
The shareholders also considered and rejected two shareholder proposals at
the annual meeting as follows:
Proposal No. For Against Abstain Broker No Vote
------------ ----------- ----------- ---------- --------------
1 108,763,030 249,229,081 9,216,511 101,168,475
2 78,453,655 273,623,934 15,133,425 101,166,083
Proposal 1 was to eliminate the classified board of directors, and proposal 2
was to initiate cumulative voting for the election of directors.
Form 10-Q - Part II
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- ---------------------------------------------------------------------------------------------------------------------------
10a Form of U S WEST, Inc. Restricted Stock Agreement
10b Form of U S WEST, Inc. Non-Qualified Stock Option Agreement
10c Agreement for Services between U S WEST, Inc. and A. Gary Ames.
10d Assignment Agreement between A. Gary Ames and U S WEST Overseas Operations, Inc.
11 Statement regarding computation of earnings per share of U S WEST, Inc.
12 Statement regarding computation of earnings to combined fixed charges and preferred stock dividends ratio of U S WEST, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K filed during the second quarter
(i) report dated April 10, 1995, concerning U S WEST's announcement
with respect to its plans to create two classes of Common Stock;
(ii) report dated April 18, 1995, concerning the release of earnings
for the first quarter ended March 31, 1995, and related exhibits;
(iii) report dated May 23, 1995, filing financial statements for Time
Warner Entertainment Company, L.P., Mercury Personal Communications, Georgia
Cable Holdings Limited Partnership and subsidiary partnerships, and Wometco
Cable Corp. and subsidiaries; and
(iv) report dated June 20, 1995, concerning U S WEST's announcement
with respect to key executive changes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U S WEST, Inc.
/S/ James M. Osterhoff
James M. Osterhoff
Executive Vice President
and Chief Financial Officer
August 9, 1995
EX-10
2
RESTRICTED STOCK AGMT
____________________________________________________________________
____________________________________________________________________
4
1
EXHIBIT 10A
U S WEST, INC.
RESTRICTED STOCK AGREEMENT
GRANT # ________
THIS AGREEMENT is entered into as of _______, between U S WEST, Inc. (the
"Company") and ___________ (the "Grantee").
RECITAL
Pursuant to the U S WEST, Inc. 1994 Stock Plan (the "Plan"), the Human
Resources Committee of the Board of Directors (the "Committee") has granted to
the Grantee on ____________, as a matter of separate inducement in connection
with his/her engagement with the Company or a Related Entity, and not in lieu
of salary or other compensation for his/her services, restricted shares of
Common Stock ("Restricted Stock") issued by the Company on the terms and
conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:
1. Grant of Restricted Stock. On the terms and conditions set forth
herein, the Company hereby grants to the Grantee an aggregate of _______
shares of Restricted Stock. The Restricted Stock is granted pursuant to the
Plan, the terms of which are incorporated by reference and apply to this
Agreement as if they were set forth herein. Terms used in this Agreement and
not otherwise defined shall have the meanings ascribed to them in the Plan.
2. Restricted Period. The Restricted Stock shall become Vested in
accordance with the following schedule and is herein called the "Restricted
Period." Except as set forth below, the Restricted Stock shall not become
Vested before the expiration of the Restricted Period, regardless of the
circumstances under which the Grantee's employment is terminated, and the
Restricted Stock shall consequently remain subject to forfeiture during the
Restricted Period.
RESTRICTED PERIOD
(i) Death. In the event of the death of the Grantee, the Restricted
Stock shall no longer be subject to any restriction and shall be immediately
Vested.
(ii) Disability. If the Grantee's employment with the Company or a
Related Entity is terminated because of Disability, the Restricted Stock shall
no longer be subject to any restriction and shall be immediately Vested.
(iii) Other Termination. If the Grantee's employment with the
Company or a Related Entity is terminated for any reason other than for death
or Disability, the Restricted Stock shall be forfeited unless the Committee,
in its sole discretion, determines that such Restricted Stock is then Vested
or sets alternative terms on which such Restricted Stock may become Vested.
(iv) Change of Control. Upon the occurrence of a Change of Control,
the Restricted Stock shall no longer be subject to any restriction and shall
be immediately Vested.
3. Custody; Voting and Dividends. The Company shall hold the Restricted
Stock in an account on behalf of the Grantee. The Grantee shall execute and
return the attached stock power in favor of the Company, to be exercised by
the Company only in the case of the forfeiture or other return of the
Restricted Stock to the Company as provided herein. The Grantee shall receive
such dividends as may be declared on such Restricted Stock, and shall be
entitled to voting privileges associated with such Restricted Stock.
4. Non-Transferability of Restricted Stock. The Restricted Stock is not
transferable other than by will or the laws of descent and distribution. The
Restricted Stock shall not be otherwise transferred or assigned, pledged,
hypothecated or otherwise disposed of in any way, whether by operation of law
or otherwise, and shall not be subject to execution, attachment or similar
process, it being understood that the Restricted Stock shall not be assignable
or transferable pursuant to a domestic relations order. Upon any attempt to
transfer the Restricted Stock other than by will or the laws of descent and
distribution, or to assign, pledge, hypothecate or otherwise dispose of the
Restricted Stock, or upon the levy of any execution, attachment or similar
process upon the Restricted Stock, the Restricted Stock shall immediately be
canceled.
5. Decisions of Committee. Any decision, interpretation or other action
made or taken in good faith by the Committee arising out of or in connection
with the Plan or the Restricted Stock shall be final, binding and conclusive
on the Company and the Grantee and any respective heir, executor,
administrator, successor or assign.
6. ARBITRATION. ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN THE GRANTEE
AND THE COMPANY, UNLESS OTHERWISE COVERED BY A COLLECTIVE BARGAINING
AGREEMENT, WHETHER SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD,
MISREPRESENTATION, DISCRIMINATION OR ANY OTHER LEGAL THEORY, INCLUDING, BUT
NOT LIMITED TO, DISPUTES RELATING TO THE INTERPRETATION OF THIS SECTION 6;
CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; CLAIMS
UNDER THE CIVIL RIGHTS ACT OF 1991; CLAIMS UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, AS AMENDED; CLAIMS UNDER 42 U.S.C. 1981, 1981A,
1983, 1985, OR 1988; CLAIMS UNDER THE FAMILY AND MEDICAL LEAVE ACT OF 1993;
CLAIMS UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS AMENDED; AND,
CLAIMS UNDER THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, WHENEVER
BROUGHT SHALL BE RESOLVED BY ARBITRATION. THE ONLY LEGAL CLAIMS BETWEEN THE
GRANTEE AND THE COMPANY WHICH ARE NOT INCLUDED WITHIN THIS SECTION 6 ARE
CLAIMS BY THE GRANTEE FOR WORKERS' COMPENSATION OR UNEMPLOYMENT COMPENSATION
BENEFITS AND/OR CLAIMS FOR BENEFITS UNDER A COMPANY BENEFIT PLAN IF THE PLAN
DOES NOT PROVIDE FOR ARBITRATION OF SUCH DISPUTES. THE GRANTEE HEREBY WAIVES
AND RELEASES ALL RIGHTS TO RECOVER PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION
WITH ANY COMMON LAW CLAIMS, INCLUDING CLAIMS ARISING IN TORT OR CONTRACT,
AGAINST THE COMPANY. BY SIGNING THIS AGREEMENT, THE GRANTEE VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHT HE OR SHE MAY OTHERWISE HAVE TO
SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO A JURY TRIAL
AND THE RIGHT TO SEEK PUNITIVE DAMAGES ON COMMON LAW CLAIMS. THE FEDERAL
ARBITRATION ACT, 9 U.S.C. 1-16 (THE "FAA") SHALL GOVERN THE ARBITRABILITY OF
ALL CLAIMS, PROVIDED THAT THEY ARE ENFORCEABLE UNDER THE FAA, AS IT MAY BE
AMENDED FROM TIME TO TIME. IN THE EVENT THE FAA DOES NOT GOVERN, THE COLORADO
UNIFORM ARBITRATION ACT SHALL APPLY. ADDITIONALLY, THE SUBSTANTIVE LAW OF
COLORADO, ONLY TO THE EXTENT CONSISTENT WITH THE TERMS STATED IN THIS SECTION
6, SHALL APPLY TO ANY COMMON LAW CLAIMS. THIS AGREEMENT SUPERSEDES ANY OTHER
ARBITRATION AGREEMENT BETWEEN THE GRANTEE AND THE COMPANY TO THE EXTENT THEY
ARE INCONSISTENT.
A SINGLE ARBITRATOR ENGAGED IN THE PRACTICE OF LAW SHALL CONDUCT THE
ARBITRATION UNDER THE APPLICABLE RULES AND PROCEDURES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE "AAA"). ANY DISPUTE THAT RELATES TO THE
GRANTEE'S EMPLOYMENT WITH THE COMPANY OR TO THE TERMINATION OF THE GRANTEE'S
EMPLOYMENT WILL BE CONDUCTED UNDER THE AAA EMPLOYMENT DISPUTE RESOLUTION
RULES. THE ARBITRATOR SHALL BE CHOSEN FROM A STATE OTHER THAN THE GRANTEE'S
STATE OF RESIDENCE AND OTHER THAN COLORADO. OTHER THAN AS SET FORTH HEREIN,
THE ARBITRATOR SHALL HAVE NO AUTHORITY TO ADD TO, DETRACT FROM, CHANGE, AMEND,
OR MODIFY EXISTING LAW. ALL ARBITRATION PROCEEDINGS, INCLUDING SETTLEMENTS
AND AWARDS, UNDER THIS AGREEMENT WILL BE CONFIDENTIAL. THE PARTIES SHALL
SHARE EQUALLY IN THE HOURLY FEES OF THE ARBITRATOR. THE COMPANY SHALL PAY THE
EXPENSES (INCLUDING TRAVEL AND LODGING) OF THE ARBITRATOR. THE PREVAILING
PARTY IN ANY ARBITRATION MAY BE ENTITLED TO RECEIVE REASONABLE ATTORNEYS'
FEES. THE ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL AND BINDING, AS TO
ALL CLAIMS WHICH WERE, OR COULD HAVE BEEN RAISED IN ARBITRATION, AND JUDGMENT
UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED TO ANY COURT HAVING
JURISDICTION THEREOF. IF ANY PARTY HERETO FILES A JUDICIAL OR ADMINISTRATIVE
ACTION ASSERTING CLAIMS SUBJECT TO THIS ARBITRATION PROVISION, AND ANOTHER
PARTY SUCCESSFULLY STAYS SUCH ACTION AND/OR COMPELS ARBITRATION OF SUCH
CLAIMS, THE PARTY FILING SAID ACTION SHALL PAY THE OTHER PARTY'S COSTS AND
EXPENSES INCURRED IN SEEKING SUCH STAY AND/OR COMPELLING ARBITRATION,
INCLUDING REASONABLE ATTORNEYS' FEES.
7. Performance for Competitors. Unless otherwise determined by the
Committee, in its sole discretion, or unless in compliance with the Company's
Outside Director Policy, as interpreted solely by the Company's Compliance
Committee, if at any time following the date hereof and before the Restricted
Stock is Vested the Grantee directly or indirectly receives payment for
services from, or is otherwise employed by, any person, firm or corporation in
competition with the Company or engaged in providing any services whatever
that are substantially the same as services provided by the Company, the
Grantee shall immediately forfeit all rights under the Restricted Stock to the
extent that such Restricted Stock is not Vested.
8. Miscellaneous.
(i) Notices. Any notice to be given to the Company shall be
personally delivered to or addressed to its Vice President, Human Resources,
and any notice to be given to the Grantee shall be addressed to him/her at the
address given beneath his/her signature below or such other address as the
Company reasonably believes to be his/her most current address. Any notice to
the Company is deemed given when received on behalf of the Company by the Vice
President, Human Resources, of the Company at 188 Inverness Drive West, Suite
800, Englewood, Colorado 80112. Any notice to the Grantee is deemed given
when personally delivered or enclosed in a properly sealed envelope addressed
as aforesaid and deposited, postage prepaid, in a post office or branch post
office regularly maintained by the United States Government.
(II) EMPLOYMENT. THE COMPANY MAY TERMINATE AN EMPLOYEE'S EMPLOYMENT
AT ANY TIME, WITH OR WITHOUT CAUSE, UNLESS THE EMPLOYMENT IS COVERED BY
SEPARATE CONDITIONS CONTAINED IN A COLLECTIVE BARGAINING AGREEMENT OR OTHER
AUTHORIZED WRITTEN AGREEMENT, AND NOTHING CONTAINED IN THIS AGREEMENT CREATES
OR IMPLIES AN EMPLOYMENT CONTRACT OR TERM OF EMPLOYMENT OR ANY PROMISE OF
SPECIFIC TREATMENT UPON WHICH THE GRANTEE MAY RELY.
(iii) Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado.
(iv) Amendments. The Company may at any time propose to amend this
Agreement, but any such alteration or amendment shall be effective only if in
writing, signed by a duly authorized officer of the Company and by the
Grantee.
IN WITNESS WHEREOF, the undersigned have hereunto executed this Agreement
as of the date first above written.
U S WEST, INC. GRANTEE
By:_____________________________________
_____________________________________
[Name]
_____________________________________
Street Address
_____________________________________
City, State and Zip Code
_____________________________________
Social Security Number
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does (do) hereby sell, assign and
transfer to:
U S WEST, INC.
84-0926774
(Tax Identification Number)
______ shares of the common stock of U S WEST, Inc. (the "Company")
represented by Grant Number __________, standing in the name of the
undersigned on the books of the Company.
The undersigned does (do) hereby irrevocably constitute and appoint the
Executive Vice President of Human Resources for the Company as attorney to
transfer the said stock on the books of the Company, with full power of
substitution in the premises.
_______________________________________ Dated:
________________________________
[Name]
_______________________________________
Dated:_________________________________
IMPORTANT -- READ CAREFULLY: The signature(s) of this Stock Power must
correspond with the name(s) as written upon the face of the certificate(s) or
account(s) in every particular without alternation or enlargement or any
change whatever.
EX-10
3
NON-QUAL. STOCK OPTION AGMT
____________________________________________________________________
____________________________________________________________________
08/08/95
08/08/95
EXHIBIT 10B
U S WEST, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT (GRANT #GRANT_NUMBER)
THIS AGREEMENT is entered into as of Grant_Date, between U S WEST, Inc. (the
"Company") and First Last (the "Optionee").
RECITAL
Pursuant to the U S WEST, Inc. 1994 Stock Plan (the "Plan"), as amended
effective May 5, 1995, the Human Resources Committee of the Board of Directors
(the "Committee") has granted to the Optionee on Grant_Date, as a matter of
separate inducement in connection with his/her engagement with the Company or
a Related Entity, and not in lieu of salary or other compensation for his/her
services, an option (the "Option") to purchase shares of Common Stock issued
by the Company on the terms and conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:
1. Shares Optioned; Option Price. The Optionee may purchase all or any
part of an aggregate of Shares shares of Common Stock, at a purchase price per
share of Price (which is not less than the Fair Market Value on the date
hereof), on the terms and conditions set forth herein. The Option is granted
pursuant to the Plan, the terms of which are incorporated by reference and
apply to this Agreement as if they were set forth herein. Terms used in this
Agreement and not otherwise defined shall have the meanings ascribed to them
in the Plan.
2. Option Term; Times of Exercise. The Option shall become a Vested
Option upon three years of continuous employment following the date of this
Agreement, but shall not be exercisable after Expdat (the "Expiration Date").
Except as set forth below, the Option shall not become a Vested Option if the
three-year continuous employment requirement is not satisfied, regardless of
the circumstances under which the Optionee's employment is terminated.
(i) Death. In the event of the death of the Optionee, the Option
shall become a Vested Option and the estate of the Optionee shall have the
right, at any time and from time to time within one year after the date of
death or such longer period, if any, as the Committee in its sole discretion
shall determine (but not after the Expiration Date), to exercise all or any
portion of the Option.
(ii) Disability. If the employment of the Optionee is terminated
because of Disability, the Option shall be retained by the Optionee, and the
Option, if not then a Vested Option, shall become a Vested Option on [insert
date based on above vesting schedule -- e.g., date that is three years from
date of agreement]. Upon vesting, the Optionee shall have the right to
exercise the Option, at any time and from time to time, but not after the
expiration date of the Option.
(iii) Retirement. Upon the Optionee's Retirement, the Option shall
be retained by the Optionee, and the Option, if not then a Vested Option,
shall become a Vested Option on [insert date based on above vesting schedule
-- e.g., date that is three years from date of agreement], unless the
Committee, in its sole discretion, determines otherwise. Upon vesting, the
Optionee will have the right to exercise the Option, at any time and from time
to time, but not after the expiration date of the Option.
(iv) Other Termination. If the Optionee's employment with the
Company or a Related Entity is terminated for any reason other than for death,
Disability or Retirement and other than "for cause," as such term is defined
in the Plan, the Optionee shall have the right, if the Option is a Vested
Option, at any time and from time to time within three months of termination
or such longer period, if any, as the Committee in its sole discretion shall
determine (but not after the Expiration Date), to exercise all or any portion
of the Option.
(v) Change of Control. Upon the occurrence of a Change of Control,
the Option shall immediately become a Vested Option.
(vi) Termination for Cause. Notwithstanding any other provision in
this Agreement, if the Optionee's employment is terminated by the Company or
any Related Entity "for cause," as such term is defined in the Plan, the
Optionee shall immediately forfeit all rights under the Option except as to
the shares of Common Stock already purchased prior to such termination.
3. Exercise: Payment for and Delivery of Stock. The Option may be
exercised only by the Optionee or his or her transferee(s) by will or the laws
of descent and distribution. The Option may be exercised by giving written
notice of exercise to the Company specifying the number of shares (minimum of
100, unless the unexercised balance of the Option is less than 100) to be
purchased and the total purchase price, accompanied by a personal check to the
order of the Company or shares of Common Stock in payment of the purchase
price. Any shares of Common Stock so tendered shall be valued at their Fair
Market Value on the date of exercise.
4. Non-Transferability of Option. The Option is not transferable
otherwise than by will or the laws of descent and distribution. The Option
shall not be otherwise transferred or assigned, pledged, hypothecated or
otherwise disposed of in any way, whether by operation of law or otherwise,
and shall not be subject to execution, attachment or similar process, it being
understood that the Option shall not be assignable or transferable pursuant to
a domestic relations order. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee, the Optionee's guardian or his
legal representative. Upon any attempt to transfer the Option otherwise than
by will or the laws of descent and distribution, or to assign, pledge,
hypothecate or otherwise dispose of the Option, or upon the levy of any
execution, attachment or similar process upon the Option, the Option shall
immediately terminate and become null and void.
5. Decisions of Committee. Any decision, interpretation or other action
made or taken in good faith by the Committee arising out of or in connection
with the Plan or the Option shall be final, binding and conclusive on the
Company and the Optionee and any respective heir, executor, administrator,
successor or assign.
6. ARBITRATION. ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN THE OPTIONEE
AND THE COMPANY, UNLESS OTHERWISE COVERED BY A COLLECTIVE BARGAINING
AGREEMENT, WHETHER SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD,
MISREPRESENTATION, DISCRIMINATION OR ANY OTHER LEGAL THEORY, INCLUDING, BUT
NOT LIMITED TO, DISPUTES RELATING TO THE INTERPRETATION OF THIS SECTION 6;
CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; CLAIMS
UNDER THE CIVIL RIGHTS ACT OF 1991; CLAIMS UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, AS AMENDED; CLAIMS UNDER 42 U.S.C. 1981, 1981A,
1983, 1985, OR 1988; CLAIMS UNDER THE FAMILY AND MEDICAL LEAVE ACT OF 1993;
CLAIMS UNDER THE AMERICANS WITH DISABILITIES ACT OF 1990, AS AMENDED; AND,
CLAIMS UNDER THE FAIR LABOR STANDARDS ACT OF 1938, AS AMENDED, WHENEVER
BROUGHT SHALL BE RESOLVED BY ARBITRATION. THE ONLY LEGAL CLAIMS BETWEEN THE
OPTIONEE AND THE COMPANY WHICH ARE NOT INCLUDED WITHIN THIS SECTION 6 ARE
CLAIMS BY THE OPTIONEE FOR WORKERS' COMPENSATION OR UNEMPLOYMENT COMPENSATION
BENEFITS AND/OR CLAIMS FOR BENEFITS UNDER A COMPANY BENEFIT PLAN IF THE PLAN
DOES NOT PROVIDE FOR ARBITRATION OF SUCH DISPUTES. THE OPTIONEE HEREBY WAIVES
AND RELEASES ALL RIGHTS TO RECOVER PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION
WITH ANY COMMON LAW CLAIMS, INCLUDING CLAIMS ARISING IN TORT OR CONTRACT,
AGAINST THE COMPANY. BY SIGNING THIS AGREEMENT, THE OPTIONEE VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHT HE OR SHE MAY OTHERWISE HAVE TO
SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO A JURY TRIAL
AND THE RIGHT TO SEEK PUNITIVE DAMAGES ON COMMON LAW CLAIMS. THE FEDERAL
ARBITRATION ACT, 9 U.S.C. 1-16 (THE "FAA") SHALL GOVERN THE ARBITRABILITY OF
ALL CLAIMS, PROVIDED THAT THEY ARE ENFORCEABLE UNDER THE FAA, AS IT MAY BE
AMENDED FROM TIME TO TIME. IN THE EVENT THE FAA DOES NOT GOVERN, THE COLORADO
UNIFORM ARBITRATION ACT SHALL APPLY. ADDITIONALLY, THE SUBSTANTIVE LAW OF
COLORADO, ONLY TO THE EXTENT CONSISTENT WITH THE TERMS STATED IN THIS SECTION
6, SHALL APPLY TO ANY COMMON LAW CLAIMS. THIS AGREEMENT SUPERSEDES ANY OTHER
ARBITRATION AGREEMENT BETWEEN THE OPTIONEE AND THE COMPANY TO THE EXTENT THEY
ARE INCONSISTENT.
A SINGLE ARBITRATOR ENGAGED IN THE PRACTICE OF LAW SHALL CONDUCT THE
ARBITRATION UNDER THE APPLICABLE RULES AND PROCEDURES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE "AAA"). ANY DISPUTE THAT RELATES TO THE
OPTIONEE'S EMPLOYMENT WITH THE COMPANY OR TO THE TERMINATION OF THE OPTIONEE'S
EMPLOYMENT WILL BE CONDUCTED UNDER THE AAA EMPLOYMENT DISPUTE RESOLUTION
RULES. THE ARBITRATOR SHALL BE CHOSEN FROM A STATE OTHER THEN THE OPTIONEE'S
STATE OF RESIDENCE AND OTHER THAN COLORADO. OTHER THAN AS SET FORTH HEREIN,
THE ARBITRATOR SHALL HAVE NO AUTHORITY TO ADD TO, DETRACT FROM, CHANGE, AMEND,
OR MODIFY EXISTING LAW. ALL ARBITRATION PROCEEDINGS, INCLUDING SETTLEMENTS
AND AWARDS, UNDER THIS AGREEMENT WILL BE CONFIDENTIAL. THE PARTIES SHALL
SHARE EQUALLY THE HOURLY FEES OF THE ARBITRATOR. THE COMPANY SHALL PAY THE
EXPENSES (INCLUDING TRAVEL AND LODGING) OF THE ARBITRATOR. THE PREVAILING
PARTY IN ANY ARBITRATION MAY BE ENTITLED TO RECEIVE REASONABLE ATTORNEYS'
FEES. THE ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL AND BINDING, AS TO
ALL CLAIMS WHICH WERE, OR COULD HAVE BEEN RAISED IN ARBITRATION, AND JUDGMENT
UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED TO ANY COURT HAVING
JURISDICTION THEREOF. IF ANY PARTY HERETO FILES A JUDICIAL OR ADMINISTRATIVE
ACTION ASSERTING CLAIMS SUBJECT TO THIS ARBITRATION PROVISION, AND ANOTHER
PARTY SUCCESSFULLY STAYS SUCH ACTION AND/OR COMPELS ARBITRATION OF SUCH
CLAIMS, THE PARTY FILING SAID ACTION SHALL PAY THE OTHER PARTY'S COSTS AND
EXPENSES INCURRED IN SEEKING SUCH STAY AND/OR COMPELLING ARBITRATION,
INCLUDING REASONABLE ATTORNEYS' FEES.
7. Performance for Competitors. Unless otherwise determined by the
Committee, in its sole discretion, or unless in compliance with the Company's
Outside Director Policy, as interpreted solely by the Company's Compliance
Committee, if at any time following the date hereof and before the Option is
fully exercised the Optionee directly or indirectly receives payment for
services from, or is otherwise employed by, any person, firm or corporation in
competition with the Company or engaged in providing any services whatever
that are substantially the same as services provided by the Company, the
Optionee shall immediately forfeit all rights under the Option except as to
the shares of Common Stock already purchased.
8. Miscellaneous.
(i) Notices. Any notice to be given to the Company shall be
personally delivered to or addressed to its Vice President, Human Resources,
and any notice to be given to the Optionee shall be addressed to him/her at
the address given beneath his/her signature below or such other address as the
Company reasonably believes to be his/her most current address. Any notice to
the Company is deemed given when received on behalf of the Company by the Vice
President, Human Resources, of the Company at 188 Inverness Drive West, Suite
800, Englewood, Colorado 80112. Any notice to the Optionee is deemed given
when personally delivered or enclosed in a properly sealed envelope addressed
as aforesaid and deposited, postage prepaid, in a post office or branch post
office regularly maintained by the United States Government.
(II) EMPLOYMENT. THE COMPANY MAY TERMINATE AN EMPLOYEE'S EMPLOYMENT
AT ANY TIME, WITH OR WITHOUT CAUSE, UNLESS THE EMPLOYMENT IS COVERED BY
SEPARATE CONDITIONS CONTAINED IN A COLLECTIVE BARGAINING AGREEMENT OR OTHER
AUTHORIZED WRITTEN AGREEMENT, AND NOTHING CONTAINED IN THIS AGREEMENT CREATES
OR IMPLIES AN EMPLOYMENT CONTRACT OR TERM OF EMPLOYMENT OR ANY PROMISE OF
SPECIFIC TREATMENT UPON WHICH THE OPTIONEE MAY RELY.
(iii) Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Colorado.
(iv) Amendments. The Company may at any time propose to amend this
Agreement, but any such alteration or amendment shall be effective only if in
writing, signed by a duly authorized officer of the Company and by the
Optionee.
IN WITNESS WHEREOF, the undersigned have hereunto executed this Agreement
as of the date first above written.
U S WEST, INC. OPTIONEE
By:
FIRST LAST
Address
City, State, Zip
SOCIAL SECURITY NUMBER: SSN
EX-10
4
SERVICES AGMT W/A.G.AMES
7
EXHIBIT 10c
AGREEMENT FOR SERVICES
THIS AGREEMENT is made this _____ day of ________________________, 1995, by
and between U S WEST, Inc. a company incorporated under the laws of Colorado
with its principal offices at Englewood, Colorado (hereinafter called
"Company") and A. Gary Ames, presently residing at Englewood, Colorado
(hereinafter called "Employee").
Recognizing that Employee, who is presently employed by Company, has been
asked to enter into the Assignment Agreement referred to in Paragraph 13 of
this Agreement, Company wishes to assure itself of the continuing availability
of the advice and services of Employee in the United States of America and
elsewhere outside the United Kingdom and the European Community, upon the
terms and conditions set forth in this Agreement for Services.
WHEREAS, Company desires to enter into such Agreement for Services.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein set forth, the parties hereto agree as follows:
1. SERVICES OF EMPLOYEE AND TERM OF AGREEMENT
Company hereby confirms that it wishes Employee to perform such services as it
may designate and Employee hereby confirms that he will perform such services
for Company commencing on July 1, 1995 for a term of five (5) years; all on
and subject to the terms and conditions contained in this Agreement.
Employee shall be an executive in the U S WEST Media Group, which is currently
a division of U S WEST, Inc. In the event U S WEST Media Group becomes
incorporated as a legal entity separate from U S WEST, Inc., then U S WEST's
rights and obligations under this Agreement shall automatically be assigned to
such new corporate entity. On behalf of the Company, Employee shall perform
the following:
Outside the United Kingdom, the European Community and the United States,
Employee shall be responsible for the management of U S WEST's telephone,
cable, directory publishing and wireless communication investments on a
worldwide basis, but not including any such investments or operations situated
within the United Kingdom or the European Community.
Within the United States, Employee will consult with U S WEST Media Group on
telecommunications investments situated within the United States
All fundamental policy decisions affecting the business activities of Company
in which Employee participates as an executive of U S WEST Media Group
pursuant to this Agreement shall be made outside the United Kingdom of Great
Britain. Nothing herein shall authorize Employee to obligate Company or
contract on behalf of Company while in the United Kingdom of Great Britain.
At any time during the term of this Agreement, Company may reassign Employee
to a new position comparable or superior in terms of remuneration and
responsibility to the position under this Agreement.
2. HOURS AND PLACES OF EMPLOYMENT
Employee's services will be rendered primarily in the United States of America
and elsewhere as required, but not within the United Kingdom. Employee may be
required to travel on Company's business to such places as the duly authorized
officers of Company shall designate. Employee shall, subject to the
provisions of Paragraph 13, devote such time and attention of his duties under
this Agreement, both within and outside normal working hours, as shall
reasonably be required by Company.
3. COMPENSATION
a. Base Salary
Employee's annual base salary under this Agreement shall be One Hundred Forty
Seven Thousand, and 00/100 Dollars ($147,00.00), which may be increased at the
Company's discretion. Base salary will be paid on a bi-weekly basis and will
reflect a base pay amount of Five Thousand Six Hundred Fifty Three and 85/100
($5,653.85) before deduction for taxes and allowances.
b. Short Term Bonus
Employee will be eligible to participate in the short term bonus plan at sixty
percent (60%) target of his base pay according to the performance of the
Company and Employee's performance of services for and on behalf of the
Company Payout schedule is according to plan provisions. Payment of this
bonus is conditioned on Employee performing services under this Agreement for
the full twelve (12) month period on which the bonus is based. If Employee is
transferred to another U S WEST entity during a salary year, a prorated
portion of the short term bonus will be paid.
c. Long Term Incentive Plans
Employee will continue to participate in both the U S WEST Long Term Incentive
Plan and the U S WEST Stock Option Plan. Target opportunities under both of
these plans, to the extent they exist, will continue to be at or above the
level they are as of the date of execution of this Agreement. Actual awards
under both of these plans will continue to be based on performance and subject
to the discretion of the CEO and the approval of the Human Resources Committee
of the Board of Directors. Actual awards may, therefore, differ from the
target opportunities. In the event either plan is amended or eliminated, the
long term target opportunity under any new plan or combination of plans will
be equivalent to the target opportunities in force, if any, as of the date of
execution of this agreement. Actual awards under any future plan or
combination of plans will be based on performance and subject to the
discretion of the CEO and the approval of the Human Resources Committee of the
Board of Directors. In determining any new long term target opportunity, it
may be necessary to attribute a value to current target opportunities to the
extent they exist. In this event, generally accepted projections of U S
WEST's financial performance and/or stock price may be used in addition to a
Black-Scholes option pricing model.
4. BENEFITS
Employee will be eligible to participate in the following U S WEST benefit
plans:
Business Travel & Accident Plan
Executive Short Term Disability
Executive Long Term Disability
Health Care (Medical, Dental and Vision)
Life Insurance and Executive Supplemental Insurance
Pension Plan and Executive Non-Qualified Executive Pension Plan
Savings Plan for Salaried Employees
Workers' Compensation
Compensation used to calculate the amounts of these benefits will be
consistent with Company plan provisions. Certain elements of compensation,
such as the award shares and options under the Long Term Incentive Plan, are
specifically excluded from the definition of compensation for benefits
purposes.
In no event will Employee receive benefits under employee benefit plans
sponsored by U S WEST, Inc. (whether executive level programs or otherwise)
which, on a combined basis, would exceed the benefits Employee would have
otherwise received had he been employed solely by Company, with a salary, long
term incentive and short term incentive equal to the combined salaries, long
term incentive and short term incentives Employee receives pursuant to this
Agreement and the Assignment Agreement referred to in Paragraph 13.
In the event U S WEST Media Group elects to participate in a pension plan
other than the U S WEST Pension Plan and the associated U S WEST Executive
Non-Qualified Pension Plan, the Company will provide Employee with a total
benefit which shall be no less than the benefit that would have been provided
had Employee continued participation in the U S WEST Management and Executive
Non Qualified Pension Plans.
The benefit will be composed of four parts:
1) The U S WEST Qualified Pension Benefit ( i.e., from the U S WEST
Management Pension Plan);
2) The U S WEST Non Qualified Pension Benefit (i.e., from the U S WEST
Executive Non Qualified Pension Plan);
3) The U S WEST Media Group Qualified and Non Qualified Pension Benefits
(these plans currently do not exist and may never exist); and
4) If necessary, an additional benefit which shall, when combined with the
above three benefits, provide a total benefit equal to that which you would
have received had you remained only in Plans 1 and 2 during the Assignment
Term.
The definition of "eligible pay" to be applied in this calculation will be
identical to that contained in the existing U S WEST Pension Plans (i.e., 1 &
2 above). Any additional benefit paid pursuant to number 4, above, will be in
a lump sum paid out of operation funds of the Company.
Pension calculations described in this Agreement will assume a minimum age of
55 years which results in no age-related discount. However, actual years of
service will be used in the benefit calculation.
5. DEFERRAL PLAN
Employee may defer a portion of all Company source salary under the U S WEST
Senior Management Deferred Compensation Plan.
6. VACATION
Employee shall be entitled to an annual vacation not to exceed six (6) weeks
during each complete year of employment.
7. EXPENSES
Reasonable expenses incurred by Employee for travel, entertainment and other
business activities in connection with duties under this Agreement shall be
reimbursed to Employee in the manner prescribed by Company.
8. INVOLUNTARY TERMINATION
As part of this Agreement, Employee agrees to execute to be bound by the terms
of the Executive Severance Agreement attached hereto and made a part of this
Agreement by this reference. If Employee's employment with U S WEST were to
sever for any reason defined as "Discharge from Employment" in the Executive
Severance Agreement, then he will become eligible, at his choice, for either:
(a) "Severance Benefits" pursuant to the Executive Severance Agreement (less
severance amounts paid or payable to Employee from any other U S WEST
company), if all other conditions for such Severance Benefits are met, or
(b) Total severance benefits equal to the Employee's then current salary
pursuant to this Agreement, multiplied by a factor of 3.33, multiplied by the
number of whole and fractional years remaining in the Term of this Agreement,
but less any severance amounts paid or payable to Employee from any other U S
WEST company. As a condition to receipt of severance benefits under this
provision Executive must sign a "Waiver and Release" as that term is defined
in the Executive Severance Agreement.
The parties understand and agree that the phrase, "Discharge from Employment,"
shall not include Employee's retirement from or cessation of employment with
the Company upon the completed performance of the five year term of this
Agreement in accordance with the provisions of this Agreement.
The parties acknowledge that Employee has entered into a separate Assignment
Agreement (more fully described in Paragraph 13, below, here referred to as
the "Expatriate Assignment"). In the event employment under the Expatriate
Assignment ceases, either (1) upon completion of the initial term of the
Expatriate Assignment, without extension thereof having been offered by U S
WEST, or (2) during the term of this Agreement for any reason defined as
"Discharge from Employment" (as that language is used in this section), then
Employee may, at his option, resign his employment pursuant to this Agreement
and be deemed to be "Discharged from Employment" for purposes of eligibility
for severance benefits provided under this Agreement.
Since Employee is currently service pension eligible, in the event of his
retirement he would ordinarily be eligible for the continued vesting of any
unvested stock options he may hold, and would ordinarily have until the
expiration date of the option within which to exercise them. This is referred
to here as "the policy for retirees." If Employee severs under alternative
(b), above, the policy for retirees will apply.
If Executive chooses "Severance Benefits" pursuant to the Executive Severance
Agreement, his stock options will be handled in accordance with the terms of
the Executive Severance Agreement.
The severance arrangements under this provision in part are in recognition of
Employee's long and dedicated service for more than 27 years to the Company,
its predecessors and affiliates.
CONFLICTS OF INTEREST AND COMPLIANCE WITH POLICIES AND LAWS
Employee agrees that during his employment with Company, he will not engage in
any employment or business enterprise that would in any way conflict with his
service and the interests of Company. He also agrees he will comply with all
U S WEST policies, including the U S WEST Code of Business Ethics and Conduct
and the U S WEST Code of International Business Conduct, and with all
applicable laws, including the Modification of Final Judgment, the Civil
Enforcement Consent Order and the Enforcement Order.
COMPANY INFORMATION AND NON-SOLICITATION
Unless authorized in writing or instructed by Company or required by
legally_constituted authority, Employee will not, except as required in the
conduct of the business of Company, during or after his employment, disclose
to others or use any of Company's inventions or discoveries or secret or
Confidential Information, knowledge, or data (including, but not limited to,
technical, marketing, financial and business information or other information
of value to competitors), to which Employee had access or received or prepared
or caused to be prepared in connection with his services under this Agreement.
Employee covenants and agrees that for a period of three years after his
employment with the Company has ended, Employee shall not, without the written
consent of either the CEO of U S WEST Media Group or the CEO of U S WEST,
Inc., seek, solicit or try to obtain, directly or indirectly the business or
professional services of any current employee of the Company. For purposes of
this provision, "current employee of the Company" means an individual who is
in the employ of the Company at the time Employee's employment with the
company ends, or who was in the employ of the Company at any time during the
twelve months prior to the time Employee's employment with the Company ends.
DISPUTE RESOLUTION
Any dispute arising between Employee and Company with respect to the
performance or interpretation of this Agreement shall be submitted to
arbitration in the State of Colorado, for resolution in accordance with the
rules of the American Arbitration Association, modified to provide that the
decision of the arbitrator shall be binding on the parties, shall be furnished
in writing separately and specifically stating the findings of fact and
conclusions of law on which the decision is based, and shall be rendered
within ninety (90) days following the impanelment of the arbitrator. In the
event of arbitration, the cost of arbitration shall be borne equally by the
parties. The arbitrator will be selected in accordance with the rules of the
American Arbitration Association. Following a decision by the arbitrator, the
successful party will be reimbursed by the other party for all costs or fees
paid by the successful party to the American Arbitration Association in
relation to the dispute under this Agreement.
GOVERNING LAW
This Agreement and the relationship of the parties in connection with the
subject matter of this Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement with respect of Employee's
services for Company to be rendered primarily in the United States of America
and his remuneration therefrom. It is acknowledged that Employee has entered
into an Assignment Agreement relating to Employee's services in the United
Kingdom of Great Britain and Northern Ireland. The parties hereto have agreed
that, in the case of conflict, the performance of Employee's duties under that
Assignment Agreement shall take precedence over the performance of Employee's
duties under this Agreement. The parties hereto expressly agree that
Employee's services under this Agreement shall not be terminated or affected
in any way, and Employee's remuneration under this Agreement shall not be
changed, by the termination for any reason whatsoever of Employee's employment
under such Assignment Agreement, the intent being that each employment shall
be separate from, and independent of, the other.
IN WITNESS WHEREOF, Company has caused this Agreement to be signed by a duly
authorized officer and Employee has hereunto set his hand the day and year
first written above.
U S WEST, INC. A. GARY AMES
By:____________________________ _______________________________
Charles M. Lillis
Executive Vice President
EX-10
5
ASSIGNMENT AGMT - A.G.AMES
13
EXHIBIT 10d
* STRICTLY PRIVATE AND CONFIDENTIAL *
A. Gary Ames
1801 California Street
Suite 4540
Denver, CO 80202
Re: Assignment Agreement
Dear Gary,
This letter constitutes an agreement (the "Assignment Agreement") between you
and U S WEST Overseas Operations, Inc., a Colorado corporation, with respect
to your assignment to perform services within the United Kingdom of Great
Britain and Northern Ireland, and within the European Community, for the
United Kingdom branch of U S WEST International, Inc., a United States
corporation. Further detail on all of the policies referred to herein is
contained in the U S WEST Expatriate Personnel Policy dated July 1, 1992, a
copy of which has been provided to you. In the event of a conflict between the
terms set forth in this Assignment and changes to the Expatriate Policy that
may occur from time to time, the terms specified herein shall prevail.
GENERAL PROVISIONS
ASSIGNMENT.
You will assume responsibility for the management of U S WEST's telephone,
cable, directory publishing and wireless investments within the United Kingdom
and the European Community. In connection with this assignment, you will
relocate to London with your spouse. You will be employed by U S WEST Overseas
Operations, Inc. assigned to perform services on behalf of U S WEST
International, Inc. Your hours of work will be normal office hours for the
London Branch office of U S WEST International, Inc., plus such additional
hours as may be necessary for the performance of your duties. Your place of
work will normally be Lansdowne House, Berkeley Square, London W1; however,
the Company reserves the right to nominate some other place of work.
ASSIGNMENT TERM.
This assignment is anticipated to last for a period of three years commencing
on or about July 1, 1995. The assignment, and therefore your employment by U
S WEST Overseas Operations, Inc., can be terminated sooner by either you or U
S WEST Overseas Operations, Inc. giving twelve (12) weeks notice in writing at
any time.
REASSIGNMENT DURING THE TERM.
At any time during the assignment term, U S WEST may relocate you to the
United States, in accordance with this Assignment Agreement, to assume an
assignment comparable or superior in terms of remuneration and responsibility
to the assignment under this Assignment Agreement.
OFFICER STATUS.
Effective with your start date, you will cease to be an officer of U S WEST,
Inc. and cease to be a regular member of the U S WEST Senior Management Team.
You will become the managing director of the United Kingdom branch of U S WEST
International.
OUTSIDE BOARDS.
As we have discussed, you agree to drop two of the three outside board seats
you currently occupy and remain only on the Board of Directors of Albertson's.
You may attend their quarterly meetings in the United States. Expenses for
such meetings will be billed to Albertson's to the extent that your attendance
at such meetings would otherwise have caused incremental costs to U S WEST.
INVOLUNTARY SEPARATION.
If your employment under this Assignment Agreement is terminated by U S WEST,
other than for cause, prior to the end of the assignment term, then you shall
receive a severance payment equal to the lesser of (a) one year's base salary
or (b) base salary for the balance of the assignment term.
Standard post-assignment relocation benefits as described in this Assignment
Agreement and in the U S WEST Expatriate Personnel Policy will apply. Any
salary guarantee or severance payments will be made after repatriation to the
United States and United Kingdom residency is terminated.
COMPENSATION & BENEFITS
BASE SALARY.
Your base salary will be at a minimum of $343,000 per year. You will be paid
bi-weekly. Each paycheck will reflect a base pay amount of $13,192.31 before
taxes and allowances.
BONUS.
Your current bonus program opportunity of 60% will be maintained throughout
the assignment term, unless the U S WEST Board of Directors votes to increase
it.
FOREIGN SERVICE PREMIUM.
An annual foreign service premium of $25,000 (or $961.54 per bi-weekly pay
period before taxes) will be paid, with base salary, throughout the assignment
term. This amount exceeds the Expatriate Personnel Policy which is currently
10% of base pay per pay period up to a maximum of $8,000.
GOODS AND SERVICES DIFFERENTIAL.
In order to assist with the increased cost of goods and services (i.e., the
"market basket") in London, a Goods and Services Differential currently
estimated to be approximately $3,000 per pay period before taxes would be
provided. This is based upon a family size of two residing at the assignment
location. The Goods and Services Differential is determined according to
tables provided by an outside consulting firm.
The spendable income basis Goods and Services Differential amounts are
adjusted upward or downward based on survey data a minimum of two times per
year.
HOUSING COST ASSISTANCE.
Since housing is more expensive in London, a housing allowance currently
estimated to be approximately 6,300 English Pounds per month will be provided
before taxes. This amount is intended to cover the cost of rent and
utilities. In the event that actual housing costs are less than the
allowance, U S WEST will pay rent directly to the landlord and you will not be
entitled to the difference between the actual rent and the amount of the
allowance.
In the event that the actual rental cost of housing exceeds the allowance, U S
WEST will pay the rent directly to the landlord and the amount in excess of
the housing allowance would be deducted from your paycheck unless an
additional allowance is approved by the CEO of U S WEST Media Group in
advance. Employees exceeding the housing allowance are not entitled to submit
utilities costs for reimbursement.
U S WEST will also pay for the rental or purchase of furniture and furnishings
for the rented housing unit, in a reasonable amount subject to the approval of
the CEO of U S WEST Media Group.
HOME COUNTRY HOUSING NORM.
Under the terms of the Expatriate Policy, you are required to contribute to
part of your housing cost. Based upon United States housing cost averages, as
determined by an outside consulting firm, a Home Country Housing norm
currently estimated to be approximately $2,000 per period will be deducted
each two-week pay period. By signing and returning this Assignment Agreement,
you authorize U S WEST Overseas Operations, Inc., to make these deductions
from your salary.
SOCIAL SECURITY.
Since there is a Social Security Totalization Agreement between the United
States and the United Kingdom, participation in the United States Social
Security system would continue during the international assignment and FICA
deductions would be made from your paycheck
No contributions to the United Kingdom Social Insurance system would be
required to be made by you or U S WEST.
BENEFITS.
During the assignment, you will continue to participate in the following U S
WEST benefits programs. All payroll deductions for employee contributions to
these plans also will continue, and you hereby authorize U S WEST Overseas
Operations, Inc. to make these deductions.
Business Travel and Accident Plans
Executive Short Term Disability
Executive Long Term Disability
Health Care (Medical, Dental and Vision)
Life Insurance and Executive Supplemental Insurance
Pension Plan and Non-Qualified Executive Pension Plan
Savings Plans for Salaried Employees
SOS Emergency Medical
Workers' Compensation
Compensation used to calculate the amounts of these benefits will be
consistent with plan provisions. Certain elements of compensation, such as
expatriate differentials and all bonuses or allowances other than the short
term bonus, are excluded from compensation for benefit purposes.
Company may change, at its sole discretion, from time to time, the provisions
of these benefits plans.
Several differences in medical plan administration have been made related to
international assignments as there are no reasonable and customary fee
schedules for international locations.
For example, if a broken leg occurred in the United States, and the reasonable
and customary fee for this service was $500 at 80% coverage, then the maximum
reimbursement would be $400 even if the doctor's charge was $1000 for this
service. In the United Kingdom since the fee schedules do not apply, if the
doctor charged $1,000 and coverage was at 80%, then the reimbursement would be
$800.
The preauthorization requirements for certain procedures that exist in the
United States are waived for international assignees.
HYPOTHETICAL TAXATION.
Since the United States taxes its citizens on a world-wide basis, you will
continue to have a United States tax liability during the assignment to
London. In addition, since the United Kingdom taxes income at source, you
will have a tax liability in that country as well. In order to protect
against the impacts of double taxation, U S WEST has adopted a Hypothetical
Taxation Policy.
Under the terms of the policy, you are responsible for the United States tax
on base salary, bonus payments, foreign service premium and outside income
(i.e., non-U S WEST). U S WEST is responsible for any additional tax due in
the United States related to allowances, differentials and relocation costs.
U S WEST also pays any income tax due in the United Kingdom. U S WEST will
also pay your Colorado state income tax due.
U S WEST will also pay your Colorado state income tax in accordance with the
Expatriate Policy in effect on the date of this Assignment Agreement,
regardless of whether the Expatriate Policy is subsequently amended in this
regar
Each pay period a hypothetical tax will be deducted from your paycheck which
approximates the tax that will be due on base salary, foreign service premium
and estimated outside income. At the end of the year, a hypothetical tax
return will be prepared by an outside accounting firm selected by U S WEST
(currently Arthur Andersen). This return calculates the tax that will be due
on the income elements for which you are responsible (base salary, bonuses,
Foreign Service Premium and outside income). If the tax collected through
payroll is less than the hypothetical tax shown on the return, then you will
owe U S WEST the difference. If the amount collected through payroll is
higher than that on the return, U S WEST will refund the difference to you.
The outside accounting firm will also prepare your actual U. S. tax return.
If the return indicates that money is due to the IRS, U S WEST will make this
payment on your behalf.
U S WEST will also make monthly withholding payments in the United Kingdom and
will pay any additional tax due at the time the return is filed.
In order to determine the appropriate amount of withholding required related
to outside income, you are requested to meet with the accounting firm prior to
departure for the assignment and furnish them with copies of the most recent
two years of tax returns.
So long as you make reasonable efforts to keep your personal investments
outside the United Kingdom, for tax years relating to your services under this
Agreement, U S WEST will protect you from any additional taxes which may arise
in the United Kingdom on your investment income including additional taxes
relating to changes in tax laws and regulations or interpretations of existing
laws and regulations. U S WEST will pay for all attorneys fees and costs you
incur in responding to challenges or audits relating to tax owed as a result
of this Agreement. You agree to cooperate with U S WEST in the event U S WEST
chooses to contest any such challenge or audit., other than additional taxes
which arise due to changes in the tax laws or due to voluntary or involuntary
actions on your part which would cause such investment income to be taxable in
the United Kingdom.
TAX PLANNING CONSIDERATIONS.
Since the tax associated costs of most expatriates assigned to the United
Kingdom are very high, there are several planning considerations related to
assignment to this location.
As your position will have substantial duties performed outside of the United
Kingdom, you will need to keep records of your trips including passport copies
showing entry and exit visas. These records will allow U S WEST to allocate
income sourced outside of the United Kingdom to other jurisdictions thereby
avoiding United Kingdom tax on that portion of the income since the United
Kingdom generally only taxes income earned within its borders.
FINANCIAL COUNSELING.
The standard allowance policy as approved by the Board of Directors will apply
during the Assignment Term. An additional one-time allowance of $5,000 will
be provided in the first year of the assignment to cover unexpected financial
planning issues associated with moving to the United Kingdom. Justification
must be provided in order to utilize this additional allowance and is subject
to approval of the President & CEO of U S WEST Media Group.
RELOCATION ELEMENTS AT START OF ASSIGNMENT
LOCATION VISIT AND HOME FINDING.
The first trip taken overseas prior to relocation is usually an assignment
location evaluation trip of no more than five consecutive business days and is
permitted for you and your spouse at U S WEST expense. U S WEST will
reimburse the cost of airfare, lodging, meals and local transportation.
Upon acceptance of the international assignment, you and your spouse will take
a second trip to select housing. The trip will be for no more than five
consecutive business days. U S WEST will reimburse the cost of airfare,
lodging, meals and local transportation.
Home Finding assistance will be provided through a service to assist in
locating acceptable properties for your review. The service also normally
provides area tours, interfaces with U S WEST and landlord solicitors to
assist in the completion of tenancy agreements, and supervises any repairs
needed prior to moving into the property. If the property is furnished, they
assist with inventories.
Exceptions to the above policy necessitated by business needs or extenuating
circumstances require the approval of the President & CEO of U S WEST Media
Group.
TEMPORARY LIVING EXPENSES AND TRANSPORTATION.
Temporary living expenses prior to departure from the United States for an
international assignment are limited to 7 days. Temporary living expenses at
the assignment location are limited to 30 days. U S WEST will reimburse the
cost of hotels, cleaning and laundry, meals, gratuities, relocation related
telephone charges and one rental car.
The Goods and Services Differential does not start until permanent housing is
occupied.
Per the Expatriate Policy, U S WEST will reimburse the cost of transportation
for you and your spouse to London. U S WEST also reimburse the cost of
transportation to and from the airport, reasonable excess baggage fees and any
customs and duty charges approved in advance.
Exceptions to the above policy necessitated by business needs or extenuating
circumstances require the approval of the President & CEO of U S WEST Media
Group.
HOUSEHOLD GOODS MOVING AND RELOCATION ALLOWANCE.
Packing and shipment of the household goods will be completed by a moving
company selected by the Company. Weight allowances are as follows:
Surface shipment
Couple 10,000 lbs
each additional dependent 500 lbs
Air Shipment
Couple 400 lbs
each additional dependent 100 lbs
Air shipments are limited to essential items needed upon arrival. You will
bear the cost of shipping goods in excess of the allowable limits. Certain
limitations exist on the types of items which may be shipped and these are
outlined in the Expatriate Personnel Policy on Page 12.
U S WEST would bear the cost of storing items left in the United States. The
storage facility and packing and transportation agents will be selected by U S
WEST.
At the time of return to the United States, an additional 350 lbs per year
spent on the assignment will be added to the original shipping amounts to
allow for goods purchased overseas. This additional weight must be sent by
surface shipment.
Per the Expatriate Policy, a one time relocation allowance of $4,000 would be
paid to help defray miscellaneous costs associated with the move.
HOME SALE AND PROPERTY MANAGEMENT POLICIES.
There are two different plans to assist with the retention or disposal of your
primary United States residence.
As long as your house in the United States remains unsold and vacant during
the assignment, U S WEST will The property management plan covers the cost of
all maintenance, homeowners and utility property management fees relating to
this residence., including utilities and maintenance costs, and rental
commissions. Commissions are usually 7-8% of the annual rental price for the
property. If the residence is vacant during the assignment, U S WEST will
reimburse you for 90% of the mortgage costs for up to four months during the
assignment. Mortgage costs include principal, interest, taxes and insurance.
The home sale plan assists with the cost of selling the residence. A home
sale manager is assigned to coordinate the sale of the home. Based upon two
appraisals, U S WEST will extend an offer to purchase your home which is good
for 90 days. The expatriate may elect to accept U S WEST's offer or list the
home for sale. If you were to sell the home within the 90-day period, U S
WEST will amend its original offer and close with you. Details of amended
sales are contained in the Expatriate Policy. In the event you find a buyer
for the home and an amended sale is completed, you may be eligible for a self
sale bonus equal to 5% of the actual sale price of the home up to a maximum
payment of $10,000.
If there is a capital loss on the sale of the home, and the home is sold in
accordance with the provisions of the home sale plan, then U S WEST will
reimburse you for the amount of the loss. In addition, you may be reimbursed
for the cost of capital improvements not received in the sale price of the
home. Improvements are depreciated at a rate of 5% per year and reimbursement
for the cost of capital improvements may not exceed 15% of the original value
of the home.
As we have discussed, the above policies will apply to your Glenmoor house,
but the home sale plan will apply only during the first three years of the
assignment. In addition, outside of the Expatriate Policy, U S WEST will also
pay any selling costs associated with the sale of your Santa Fe residence, but
will not guarantee your equity in that residence. Should you sell the Glenmoor
house within the first three years of the Assignment Term, any amounts paid to
you by U S WEST in connection with said sale will have deducted from them the
amounts paid to you in connection with the sale of the Santa Fe residence.
DURING THE ASSIGNMENT
VACATION AND HOLIDAYS.
Vacation allowances are the same as those for assignments within the United
States. You will observe established local holidays in the United Kingdom.
Three additional United States holidays may also be observed: Christmas,
Thanksgiving and Independence Day.
Carry-over vacation is not normally permitted during international
assignments.
HOME LEAVE AND ASSIGNMENT LOCATION VISITS.
U S WEST will reimburse the cost of home leave once every 12 months during the
assignment. Per the Expatriate Policy, reimbursed costs include round trip
airfare, hotel accommodations up to $75 per night and rental car expenses.
Vacation is used for home leave time and home leave may not exceed four weeks
per year.
For a period of four years after the date of their graduation from high
school, dDependent children under age 21 in the United States will be entitled
each year to one economy class round trip ticket to visit their parents.
As we have discussed, in addition to the Expatriate Policy provisions, your
spouse may accompany you on up to six (6) business trips per year, whether to
the U.S. or elsewhere, at U S WEST expense.
AUTOMOBILES.
U S WEST does not ship personal vehicles overseas. Therefore, coverage is
provided for loss on sale. U S WEST will protect you on the loss on sale for
up to two personal vehicles based upon the difference between the actual sale
price and the Used Car Guide retail price (minus reconditioning). The maximum
loss on sale, which will be paid for each vehicle, is the difference between
the current wholesale and retail value of the car as determined from a "Blue
Book".
As we have discussed, U S WEST will reimburse you for the two year prepayment
on your Ford Explorer and take over the car and the lease. The car will be
available for your use, or the use of your spouse, when you come to Denver,
but will become a general company car.
As your position overseas requires a car for business use, U S WEST will
furnish you with a Jaguar XJ6 or similar car and driver, and pay the cost of
the driver, lease, insurance, maintenance and petrol for business purposes.
When a car is offered and declined, no allowance is paid in lieu of a car.
Assistance is not provided with the lease or purchase of a second car at the
assignment location.
CLUB MEMBERSHIP.
U S WEST will reimburse you for a non-resident, if possible, or resident
monthly dues associated with your Cherry Hills membership during the
Assignment Term. You will receive a U S WEST paid lunch/dinner club
membership in London equivalent to that which is currently held by Dick
Callahan or take over Mr. Callahan's membership (if possible) upon his
repatriation.
RELOCATION TO THE UNITED STATES
LEASED HOUSING AND HOME PURCHASE.
Normally, 30 days are provided for transition back to the United States at the
end of the work assignment in the United Kingdom.
U S WEST will cover some of the costs associated with purchasing a new home in
the United States at the end of the assignment if you sell your Glenmoor house
during the first two years of the Assignment Term. Normal buyer's closing
costs are reimbursed including service fees, loan origination fees and
interest rate buy down fees with combined cost not to exceed 3% on 80% of the
purchase price of the home. Appraisal and attorney fees, title insurance
fees, transfer and recording fees, surveys and inspection fees, credit report
and notary fees are also reimbursed.
Fees will be reimbursed only if the purchase contract is signed within 12
months of the date of repatriation.
RELOCATION TRIP AND ALLOWANCE.
Where time schedules permit, there will be a trip to the United States for you
and your spouse to locate housing, purchase automobiles, etc. U S WEST will
reimburse the cost of airfare and expenses for meals, lodging and local
transportation.
Upon relocation, an allowance to cover miscellaneous costs will be provided in
the amount of $4,000.
TEMPORARY LIVING EXPENSES AND TRANSPORTATION.
After overseas housing is vacated, U S WEST will reimburse temporary living
expenses in the United Kingdom for up to seven days and in the United States
for up to 30 days. Covered expenses will include hotel, meals, normal
gratuities, and telephone charges related to relocation. A rental car will be
provided in the United Kingdom for up to seven days and in the United States
for no more than 14 days.
U S WEST will pay the direct route cost of airfare from London to the
destination in the United States for you and your spouse at the time the
assignment is completed.
Exceptions to the above policy necessitated by business needs or extenuating
circumstances require the approval of the President & CEO of U S WEST Media
Group.
ADDITIONAL PROVISIONS
TERMS AND CONDITIONS.
You agree to the following terms and conditions of employment under this
Assignment Agreement:
a. U S WEST may change, at its sole discretion, from time to time, the
provisions of the Company's benefits and plans and corporate policies, and
these changes will be applicable to you prospectively.
b. You will not engage in any employment or business enterprise or other
activity that would in any way conflict with the efficient and proper
discharge of your duties or which is not in the interests of Company.
c. You will comply with all U S WEST policies, including the U S WEST Code
of Business Ethics and Conduct, the U S WEST Code of International Business
Conduct and the U S WEST Drug & Alcohol Policy, as well as the laws of the
United Kingdom and all laws of the United States, including the Foreign
Corrupt Practices Act, the Modification of Final Judgment, the Civil
Enforcement Consent Order and the Enforcement Order.
d. You understand that some of the technology associated with the business
of U S WEST International, Inc. and other U S WEST Companies may be subject to
U. S. Government export controls and that you may be involved in technical
discussions concerning such controlled technology. If you receive any
technical information from U S WEST International, Inc. or any U S WEST
company, you agree not to discuss it with others without first ascertaining
from U S WEST International, Inc. whether it is controlled.
CONFIDENTIALITY AND NON-SOLICITATION.
You shall, neither during the continuance of your employment (except in the
proper performance of your duties) nor at any time (without limit) after the
termination thereof, howsoever arising, directly or indirectly use for your
own purposes or those of any other person, company, business entity or other
organization whatsoever or disclose to any person, company, business entity or
other organization whatsoever any trade secrets or confidential information
relating or belonging to U S WEST International, Inc. or any other U S WEST
affiliated company, including but not limited to any such information relating
to customers, customer lists or requirements, price lists or pricing
structures, marketing information, business plans or dealings, employees or
officers, financial information and plans, designs, formulae, product lines,
research activities, and any document marked "Confidential," or any
information which you have been told is "Confidential" or which you might
reasonably expect Company would regard as "Confidential" or any information
which has been given to any U S WEST affiliated company in confidence by
customers, suppliers or other persons.
You also covenant and agree that for a period of three years after your
employment with U S WEST has ended, you will not, without the written consent
of either the CEO of U S WEST Media Group, or the CEO of U S WEST, Inc., seek,
solicit or try to obtain, directly or indirectly the business or professional
services of any current employee of U S WEST. For purposes of this paragraph,
"current employee of U S WEST" means an individual who is in the employ of U S
WEST at the time Employee's employment with U S WEST ends, or who was in the
employ of U S WEST at any time during the twelve months prior to the time
Employee's employment with U S WEST ends.
GOVERNING LAW.
This Assignment Agreement and the relationship of the parties in connection
with the subject matter of this Agreement shall be governed by and construed
in accordance with the laws of England and Wales.
ENTIRE AGREEMENT.
This Assignment Agreement constitutes the entire agreement of the parties with
respect to your assignment by U S WEST Overseas Operations, Inc. and your
remuneration therefor. The parties acknowledge that U S WEST, Inc. and you
have entered into an Agreement for Services relating to your services to be
rendered primarily in the United States of America. The parties to that
Agreement have agreed that, in the case of conflict, the performance of your
duties under this Assignment Agreement shall take precedence over the
performance of your duties under that Agreement. It is expressly agreed that
your assignment under this Agreement shall not be changed, by the termination
for any reason whatsoever of your Agreement for Services with U S WEST, Inc.,
the intent being that each employment shall be separate from, and independent
of, the other.
Please feel free to contact me with any questions.
Very truly yours,
Charles P. Russ, III
President
U S WEST Overseas Operations, Inc.
Accepted and Agreed To
________________________
A. Gary Ames
Date:_____________________
EX-11
6
EARNINGS PER SHARE
EXHIBIT 11
U S WEST, Inc.
Computation of Earnings Per Common Share
(In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
EARNINGS PER COMMON SHARE: June 30, June 30,
1995 1994 1995 1994
-------- -------- ------- --------
Net income $318,040 $374,832 $647,676 $698,555
Less preferred dividends 854 - 1,681 -
Net income available for -------- -------- -------- --------
common share calculation $317,186 $374,832 $645,995 $698,555
======== ======== ======== ========
Weighted average common
shares outstanding 470,414 453,618 469,490 449,024
======== ======== ======== ========
Earnings per common share $0.67 $0.83 $1.37 $1.56
======== ======== ======== ========
EXHIBIT 11 (continued)
U S WEST, Inc.
Computation of Earnings Per Common Share
(In Thousands, Except Per Share Amounts)
EARNINGS PER COMMON
AND COMMON EQUIVALENT
SHARE: Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
Net income $318,040 $374,832 $647,676 $698,555
Less preferred dividends 854 - 1,681 -
-------- -------- -------- --------
Net income available for
common share calculation $317,186 $374,832 $645,995 $698,555
======== ======== ======== ========
Weighted average common
shares outstanding 470,414 453,618 469,490 449,024
Incremental shares from
assumed exercise of
stock options 612 482 515 490
-------- -------- -------- --------
Total common shares $471,026 $454,100 $470,005 $449,514
======== ======== ======== ========
Earnings per common and $0.67 $0.83 $1.37 $1.55
common equivalent share ======== ======== ======== ========
EXHIBIT 11 (continued)
U S WEST, Inc.
Computation of Earnings Per Common Share
(In Thousands, Except Per Share Amounts)
EARNINGS PER COMMON SHARE
- ASSUMING FULL DILUTION:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
-------- -------- -------- --------
Net income $318,040 $374,832 $647,676 $698,555
Interest on Convertible
Liquid Yield Option Notes
(LYONS) 5,586 5,342 11,163 10,779
-------- -------- -------- --------
Adjusted income 323,626 380,174 658,839 709,334
Less preferred dividends 854 - 1,681 -
-------- -------- -------- --------
Adjusted net income
available for common
share calculations $322,772 $380,174 $657,158 $709,334
======== ======== ======== ========
Weighted average common
shares outstanding 470,414 453,618 469,490 449,024
Incremental shares from
assumed exercise of
stock options 664 562 668 534
Shares issued upon
conversion of LYONS 9,876 10,216 9,885 10,223
-------- -------- -------- --------
Total common shares 480,954 464,396 480,043 459,781
======== ======== ======== ========
Earnings per common share - $0.67 $0.82 $1.37 $1.54
assuming full dilution ======== ======== ======== ========
EX-12
7
FIXED CHARGES
EXHIBIT 12
U S WEST, Inc.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Dollars in Millions)
Quarter Ended
6/30/95 6/30/94
--------- ---------
Income before income taxes $514 $609
Interest expense (net of amounts capitalized) 139 110
Interest factor on rentals (1/3) 27 25
Equity losses in unconsolidated ventures 2 -
--------- ---------
Earnings $682 $744
Interest expense 153 117
Interest factor on rentals (1/3) 27 25
Preferred stock dividends 2 -
--------- ---------
Fixed charges $182 $142
Ratio of earnings to fixed charges 3.75 5.24
--------- ---------
Year-to-Date
6/30/95 6/30/94
--------- ---------
Income before income taxes $1,052 $1,131
Interest expense (net of amounts capitalized) 267 219
Interest factor on rentals (1/3) 49 48
Equity losses in unconsolidated ventures 28 -
--------- ---------
Earnings $1,396 $1,398
Interest expense 292 233
Interest factor on rentals (1/3) 49 48
Preferred stock dividends 3 -
--------- ---------
Fixed charges $344 $281
Ratio of earnings to fixed charges 4.06 4.98
--------- ---------
EX-12
8
FIXED CHARGES CONT'D.
EXHIBIT 12 (continued)
U S WEST Financial Services, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
Quarter Ended
6/30/95 6/30/94
--------- ---------
Income before income taxes $4,567 $973
Interest expense 7,419 10,049
Interest factor on rentals (1/3) 14 37
--------- ---------
Earnings $12,000 $11,059
Interest expense 7,419 10,049
Interest factor on rentals (1/3) 14 37
--------- --------
Fixed charges $7,433 $10,086
Ratio of earnings to fixed charges 1.61 1.10
--------- --------
Year-to-Date
6/30/95 6/30/94
--------- ---------
Income before income taxes $5,380 $2,100
Interest expense 16,569 22,773
Interest factor on rentals (1/3) 31 77
--------- --------
Earnings $21,980 $24,950
Interest expense 16,569 22,773
Interest factor on rentals (1/3) 31 77
--------- --------
Fixed charges $16,600 $22,850
Ratio of earnings to fixed charges 1.32 1.09
--------- --------
EX-27
9
FINANCIAL DATA SCHEDULE
5
0000732718
U S WEST, INC.
1,000,000
3-MOS 6-MOS
DEC-31-1995 DEC-31-1995
JUN-30-1995 JUN-30-1995
87 87
0 0
1,824 1,824
0 0
212 212
2,812 2,812
31,733 31,733
17,644 17,644
24,193 24,193
7,531 7,531
4,626 4,626
8,123 8,123
51 51
0 0
(444) (444)
24,193 24,193
2,894 5,722
2,894 5,722
0 0
0 0
2,231 4,393
0 0
139 267
514 1,052
196 404
318 648
0 0
0 0
0 0
318 648
.67 1.37
.67 1.37