This document contains condensed consolidated financial statements and notes for Qwest Communications International Inc. for quarters ending March 31, 2005 through September 30, 2007. Some key details include:
- Operating revenue ranged from $3.4 to $3.5 billion per quarter while operating expenses ranged from $3.1 to $3.3 billion per quarter.
- Net income/loss fluctuated each quarter from a loss of $528 million in Q4 2005 to a gain of $2.065 billion in Q3 2007.
- Total assets ranged from $21.1 to $24.1 billion while total liabilities ranged from $24.1 to $26.7 billion.
7. QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED DATA—WIRELINE SERVICES SEGMENT (CONTINUED)
(UNAUDITED)
(Dollars in millions except ARPU amounts, operating statistics in thousands)
As of and Years Ended
Three Months Ended December 31,
Access lines (1): 3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Business access lines:
Retail lines................................................................. 3,074 3,031 3,012 2,969 2,958 2,920 2,900 2,870 2,842 2,817 2,803 2,969 2,870
Resold lines............................................................... 1,848 1,808 1,756 1,710 1,667 1,624 1,564 1,495 1,433 1,385 1,338 1,710 1,495
Total business access lines........................................... 4,922 4,839 4,768 4,679 4,625 4,544 4,464 4,365 4,275 4,202 4,141 4,679 4,365
Mass markets access lines:
Consumer primary lines............................................ 8,107 7,974 7,916 7,851 7,749 7,592 7,454 7,333 7,200 7,015 6,860 7,851 7,333
Consumer additional lines......................................... 1,024 985 948 913 876 840 803 770 740 713 686 913 770
Small business lines.................................................. 1,286 1,289 1,301 1,296 1,296 1,307 1,316 1,327 1,336 1,342 1,345 1,296 1,327
Total mass markets access lines................................... 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 9,070 8,891 10,060 9,430
Total access lines............................................................. 15,339 15,087 14,933 14,739 14,546 14,283 14,037 13,795 13,551 13,272 13,032 14,739 13,795
In-Region long distance lines.......................................... 4,590 4,631 4,705 4,778 4,824 4,840 4,900 4,920 4,924 4,884 4,871 4,778 4,920
Minutes of use from carriers and CLECS (in millions).. 13,280 12,677 12,750 12,796 12,442 12,047 11,796 11,765 11,690 10,859 10,635 51,503 48,050
Mass markets retail connections:
Mass markets access lines............................................ 10,417 10,248 10,165 10,060 9,921 9,739 9,573 9,430 9,276 9,070 8,891 10,060 9,430
Broadband subscribers (4)........................................... 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 2,405 2,516 1,480 2,138
Video subscribers (4)................................................... 100 120 149 178 219 259 350 424 506 572 634 178 424
Wireless subscribers..................................................... 743 744 748 770 784 777 781 801 812 807 819 770 801
Total mass markets retail connections............................. 12,382 12,302 12,402 12,488 12,602 12,573 12,677 12,793 12,899 12,854 12,860 12,488 12,793
Consumer ARPU (3)....................................................... $ 46 $ 46 $ 47 $ 48 $ 49 $ 49 $ 50 $ 51 $ 52 $ 53 $ 55 $ 46 $ 50
Broadband services:
Subscribers................................................................... 1,122 1,190 1,340 1,480 1,678 1,798 1,973 2,138 2,305 2,405 2,516 1,480 2,138
Qualified households/business (in millions)................ 7 7 7 7 7 7 7 7 7 7 7 7 7
(1) Certain prior period revenue and access line amounts have been reclassified to conform to the current period presentation. Resold lines include UNE lines and public payphone lines.
(2) Capital expenditures exclude assets acquired through capital leases.
(3) Consumer ARPU (Average Revenue Per Unit) is measured as consumer wireline revenue in the period divided by the average number of primary access lines for the period. We believe this metric can be a useful measure of the revenue performance of our
consumer business within our mass markets channel on a per-customer basis. We use ARPU internally to assess the revenue performance of our consumer business within our mass markets channel and the impact on this business of periodic customer initiatives
and product roll-outs. ARPU is not a measure determined in accordance with accounting principles generally accepted in the United States of America, or GAAP and should not be considered as a substitute for our wireline services segment revenue or any other
measure determined in accordance with GAAP.
(4) Broadband and video subscribers include certain business customers.
8. QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED DATA—WIRELESS SERVICES SEGMENT
(UNAUDITED)
(Dollars in millions except ARPU amounts, subscribers in thousands)
As of and Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Wireless services revenue (1).......................................... $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 527 $ 557
Wireless services expenses:
Facility costs................................................................. 76 79 75 75 71 74 74 75 75 76 75 305 294
Wireless equipment...................................................... 26 28 25 28 30 26 28 27 25 25 26 107 111
Bad debt....................................................................... 14 14 12 11 12 12 14 15 13 9 12 51 53
Employee-related costs................................................. 14 12 12 12 12 12 13 12 14 12 17 50 49
Other non-employee related costs................................ 29 16 20 17 17 12 17 16 12 14 13 82 62
Total wireless services expenses..................................... 159 149 144 143 142 136 146 145 139 136 143 595 569
Wireless services segment income.................................. $ (33) $ (17) $ (13) $ (5) $ (3) $ 6 $ (11) $ (4) $ — $ 3 $ 1 $ (68) $ (12)
Wireless services margin................................................ (26.2)% (12.9)% (9.9)% (3.6)% (2.2)% 4.2 % (8.1)% (2.8)% —% 2.2 % 0.7 % (12.9)% (2.2)%
Capital expenditures—wireless services (2)................... $ 1 $ 1 $ — $ — $ — $ — $ — $ 1 $ 1 $ — $ 1 $ 2 $ 1
OPERATING STATISTICS As of and Years Ended
As of andThree Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Subscribers...................................................................... 743 744 748 770 784 777 781 801 812 807 819 770 801
ARPU (3)......................................................................... $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 50 $ 50
(1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation.
(2) Capital expenditures exclude assets acquired through capital leases.
(3) Wireless ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless service revenue stream attributed to subscribing customers (plus certain activation fees) divided by the average number of subscribers for the
period. We believe this metric can be a useful measure of the revenue performance of our wireless business on a per-customer basis. We use ARPU internally to assess the revenue performance of our wireless business and the impact on this
business of periodic customer initiatives and product roll-outs. ARPU is not a measure determined in accordance with GAAP and should not be considered as a substitute for our wireless services segment revenue or any other measure
determined in accordance with GAAP. Wireless ARPU includes surcharges for the recovery of costs associated with providing number portability and wireless 911 services.
9. QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED DATA—OTHER SERVICES SEGMENT
(UNAUDITED)
(Dollars in millions)
As of and Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Other services revenue (1)............................................... $ 11 $ 9 $ 12 $ 9 $ 10 $ 10 $ 9 $ 9 $ 9 $ 10 $ 8 $ 41 $ 38
Other services expenses:
Property and other taxes............................................... 98 111 100 42 88 72 96 62 90 98 80 351 318
Real estate costs........................................................... 105 99 110 108 110 105 110 112 109 109 111 422 437
Realignment, severance and related costs.................... 7 (5) 25 52 20 (3) 3 (1) (6) 2 5 79 19
Employee-related costs................................................. 198 201 193 199 189 204 195 215 148 144 133 791 803
Other non-employee related costs (2).......................... 272 300 279 299 276 289 239 269 282 284 619 1,150 1,073
Total other services expenses.......................................... 680 706 707 700 683 667 643 657 623 637 948 2,793 2,650
Other services segment income....................................... $ (669) $ (697) $ (695) $ (691) $ (673) $ (657) $ (634) $ (648) $ (614) $ (627) $ (940) $ (2,752) $ (2,612)
Capital expenditures—other services (3)........................ $ 57 $ 99 $ 99 $ 109 $ 68 $ 78 $ 73 $ 98 $ 54 $ 76 $ 94 $ 364 $ 317
(1) Certain prior period revenue amounts have been reclassified to conform to the current period presentation.
(2) Certain immaterial expenses for facility costs, bad debt, and network expenses in other services segment are recorded in other non-employee related expenses.
(3) Capital expenditures exclude assets acquired through capital leases.
11. QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED FINANCIAL DATA—SPECIAL ITEMS
(UNAUDITED)
(Dollars in millions)
Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Special items (1):
Operating expenses:
Legal reserve (SG&A).................................................. $ —$ — $ —$ —$ —$ — $ —$ — $ (40) $ — $ (353) $ —$ —
Realignment, severance and related costs (SG&A)..... (15) 1 (26) (74) (22) — (43) — — — — (114) (65)
Subtotal operating expenses............................................ (15) 1 (26) (74) (22) — (43) — (40) — (353) (114) (65)
Other (expense) income—net:
(Loss) gain on debt extinguishment............................. — (43) 11 (430) — — — — — — — (462) —
Gain on sale of assets................................................... 257 — — 6 — — — 64 — — — 263 64
Tax sharing settlement (Other—net)............................ — — — — — — 53 — — — — — 53
Subtotal other (expense) income—net............................ 257 (43) 11 (424) — — 53 64 — — — (199) 117
Income tax sharing settlement......................................... — — — — — — 39 — — — — — 39
Reversal of income tax valuation allowance................... — — — — — — — — — — 2,174 — —
Cumulative effect of changes in
accounting principles—net of taxes............................. — — — (22) — — — — — — — (22) —
Total special items—(charges) benefits.......................... $ 242 $ (42) $ (15) $ (520) $ (22) $ — $ 49 $ 64 $ (40) $ — $ 1,821 $ (335) $ 91
(1) Effective for the quarter ended June 30, 2006, special items will only be identified herein when they are considered to be material. Although certain costs associated with the items described above continue to be incurred, they are not
considered to be material and, therefore, are not detailed above.
12. QWEST COMMUNICATIONS INTERNATIONAL INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—EBITDA—AS ADJUSTED
(UNAUDITED)
(Dollars in millions) Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
EBITDA—as adjusted (1):.............................................. $ 989 $ 990 $ 1,002 $ 1,053 $ 1,067 $ 1,109 $ 1,134 $ 1,080 $ 1,171 $ 1,149 $ 1,151 $ 4,034 $ 4,390
Less: Legal reserve....................................................... — — — — — — — — (40) — (353) — —
Less: Realignment, severance and
related costs............................................................... (15) 1 (26) (74) (22) — (43) — — — — (114) (65)
EBITDA (1):.................................................................... $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 1,149 $ 798 $ 3,920 $ 4,325
Depreciation and amortization..................................... (774) (765) (768) (758) (691) (693) (691) (695) (612) (615) (619) (3,065) (2,770)
Total other expense (income)—net.............................. (139) (393) (353) (730) (268) (281) (249) (200) (277) (288) (263) (1,615) (998)
Income tax benefit (expense)....................................... (4) 3 1 3 2 (18) 43 9 (2) — 2,149 3 36
Cumulative effect of changes in
accounting principles—net of taxes......................... — — — (22) — — — — — — — (22) —
Net income (loss).......................................................... $ 57 $ (164) $ (144) $ (528) $ 88 $ 117 $ 194 $ 194 $ 240 $ 246 $ 2,065 $ (779) $ 593
EBITDA margin—as adjusted (1):
EBITDA—as adjusted :............................................... $ 989 $ 990 $ 1,002 $ 1,053 $ 1,067 $ 1,109 $ 1,134 $ 1,080 $ 1,171 $ 1,149 $ 1,151 $ 4,034 $ 4,390
Divided by total operating revenue.............................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923
28.7 % 28.5 % 28.6 % 30.3 % 30.7 % 31.9 % 32.5 % 31.0 % 34.0 % 33.2 % 33.5 % 29.0 % 31.5 %
EBITDA margin...........................................................
EBITDA margin (1):
EBITDA....................................................................... $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 1,149 $ 798 $ 3,920 $ 4,325
Divided by total operating revenue.............................. $ 3,449 $ 3,470 $ 3,504 $ 3,480 $ 3,476 $ 3,472 $ 3,487 $ 3,488 $ 3,446 $ 3,463 $ 3,434 $ 13,903 $ 13,923
28.2 % 28.6 % 27.9 % 28.1 % 30.1 % 31.9 % 31.3 % 31.0 % 32.8 % 33.2 % 23.2 % 28.2 % 31.1 %
EBITDA margin...........................................................
(1) EBITDA, EBITDA margin, EBITDA—as adjusted and EBITDA margin—as adjusted are non-GAAP financial measures. Other companies may calculate these measures (or similarly titled measures) differently. We believe these measures
provide useful information to investors in evaluating our capital-intensive business because they reflect our operating performance before the impacts of non-cash items and are indicators of our ability to service debt, pay taxes and fund
discretionary spending such as capital expenditures. Management also uses EBITDA for a number of purposes including setting targets for compensation and assessing the performance of our operations.
13. QWEST COMMUNICATIONS INTERNATIONAL INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—NET DEBT
(UNAUDITED)
(Dollars in millions)
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07
Net Debt (1):
Current borrowings.................................................... $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 $ 1,304 $ 1,727
Long-term borrowings—net....................................... 16,691 17,287 16,702 14,968 14,834 12,693 13,228 13,206 13,199 13,207 12,779
Total borrowings—net............................................... 17,292 17,548 17,229 15,480 15,438 15,376 14,913 14,892 14,887 14,511 14,506
Less: cash and cash equivalents ................................ (1,406) (2,245) (2,311) (846) (610) (1,189) (962) (1,241) (887) (869) (1,119)
Less: short-term investments...................................... (966) (634) (580) (101) (130) (205) (218) (248) (242) (240) —
Less: long-term investments....................................... (36) (1) (1) — — — — — — — (119)
Net debt..................................................................... $ 14,884 $ 14,668 $ 14,337 $ 14,533 $ 14,698 $ 13,982 $ 13,733 $ 13,403 $ 13,758 $ 13,402 $ 13,268
(1) Net debt is a non-GAAP financial measure that we calculate as our total borrowings (current plus long-term) less our cash and cash equivalents and short and long-term investments. We believe net debt is helpful in analyzing
our leverage, and management uses this measure in making decisions regarding potential financings. Net debt is not a measure determined in accordance with GAAP and should not be considered as a substitute for quot;current
borrowings,quot; quot;long-term borrowingsquot; or any other measure determined in accordance with GAAP.
14. QWEST COMMUNICATIONS INTERNATIONAL INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—FREE CASH FLOW FROM OPERATIONS
(UNAUDITED)
(Dollars in millions)
Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
Free cash flow from operations (1):
Cash provided by operating activities.......................... $ 343 $ 570 $ 675 $ 725 $ 140 $ 1,037 $ 752 $ 860 $ 268 $ 1,105 $ 753 $ 2,313 $ 2,789
Less: Expenditures for property, plant
and equipment and capitalized software.................. (313) (352) (445) (503) (390) (442) (394) (406) (318) (426) (420) (1,613) (1,632)
Free cash flow from operations.................................... 30 218 230 222 (250) 595 358 454 (50) 679 333 700 1,157
Add: certain one-time settlements................................ — — — 204 100 — — 140 200 — — 204 240
Adjusted free cash flow from operations..................... $ 30 $ 218 $ 230 $ 426 $ (150) $ 595 $ 358 $ 594 $ 150 $ 679 $ 333 $ 904 $ 1,397
(1) Free cash flow and adjusted free cash flow from operations are non-Gaap financial measures that indicates cash generated by our business after operating expenses, capital expenditures and interest expense. We believe these measures provide useful information
to our investors for purposes of evaluating our ability to satisfy our debt and other mandatory payment obligations and because they reflect cash flows available for financing activities, voluntary debt repayment and to strengthen our balance sheet. This is of
particular relevance for our business given our significant debt balance. We also use free cash flow and adjusted free cash flow from operations internally for a variety of purposes, including setting targets for compensation and budgeting our cash needs. These
measures are not determined in accordance with GAAP and should not be considered as a substitute for quot;operating incomequot; or quot;net cash provided by operating activitiesquot; or any other measure determined in accordance with GAAP. Due to the forward-looking
nature of expected free cash flow amounts for 2007, information to reconcile this non-GAAP financial measure is not available at this time.
15. QWEST COMMUNICATIONS INTERNATIONAL INC.
WIRELESS SERVICES ARPU RECONCILIATION
(UNAUDITED)
(Dollars in millions, subscribers in in thousands, and ARPU amounts in dollars)
As of and Years Ended
Three Months Ended December 31,
3/31/05 6/30/05 9/30/05 12/31/05 3/31/06 6/30/06 9/30/06 12/31/06 3/31/07 6/30/07 9/30/07 2005 2006
ARPU is calculated as follows (1):
Total quarterly wireless services revenue.................... $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 535 $ 557
Less: quarterly non-recurring revenue......................... (23) (21) (17) (22) (22) (20) (20) (22) (19) (17) (24) (91) (84)
Quarterly recurring revenue......................................... $ 103 $ 111 $ 114 $ 116 $ 117 $ 122 $ 115 $ 119 $ 120 $ 122 $ 120 $ 444 $ 473
Average monthly recurring revenue................................ $ 34 $ 37 $ 38 $ 39 $ 39 $ 41 $ 38 $ 40 $ 40 $ 41 $ 40 $ 37 $ 39
Divided by quarterly average wireless subscribers......... 745 743 745 759 778 782 775 790 805 809 817 748 781
Wireless services ARPU.................................................. $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 50 $ 50
(1) Wireless ARPU (Average Revenue Per Unit) is measured as the recurring portion of our wireless service revenue stream attributed to subscribing customers (plus certain activation fees) divided by the average number of subscribers for the period. We believe
this metric can be a useful measure of the revenue performance of our wireless business on a per-customer basis. We use ARPU internally to assess the revenue performance of our wireless business and the impact on this business of periodic customer initiatives
and product roll-outs. ARPU is not a measure determined in accordance with GAAP and should not be considered as a substitute for our wireless services segment revenue or any other measure determined in accordance with GAAP. Wireless ARPU includes
surcharges for the recovery of costs associated with providing number portability and wireless 911 services.