Qwest Communications International Inc. published condensed consolidated financial statements for quarters ending March 2005 through December 2007. The statements show operating revenue decreased slightly from $13.9 billion in 2005 to $13.8 billion in 2007. Net income fluctuated from a loss of $779 million in 2005 to a gain of $2.9 billion in 2007. Total assets decreased from $24.1 billion in 2005 to $22.5 billion in 2007, while total liabilities decreased from $26.7 billion to $22 billion over the same period.
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 12/31/07 2005 2006 2007
Business access lines:
Retail lines............................................................. 3,084 3,041 3,023 2,979 2,969 2,931 2,909 2,878 2,853 2,830 2,817 2,803 2,979 2,878 2,803
Resold lines............................................................ 1,848 1,808 1,756 1,710 1,667 1,624 1,564 1,495 1,433 1,385 1,338 1,292 1,710 1,495 1,292
Total business access lines......................................... 4,932 4,849 4,779 4,689 4,636 4,555 4,473 4,373 4,286 4,215 4,155 4,095 4,689 4,373 4,095
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 6,705 7,851 7,333 6,705
Consumer additional lines...................................... 1,024 985 948 913 876 840 803 770 740 713 686 660 913 770 660
Small business lines............................................... 1,276 1,279 1,290 1,286 1,285 1,296 1,307 1,319 1,325 1,329 1,331 1,329 1,286 1,319 1,329
Total mass markets access lines................................ 10,407 10,238 10,154 10,050 9,910 9,728 9,564 9,422 9,265 9,057 8,877 8,694 10,050 9,422 8,694
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 12,789 14,739 13,795 12,789
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 4,810 4,778 4,920 4,810
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 10,448 51,503 48,050 43,632
Mass markets retail connections:
Mass markets access lines......................................... 10,407 10,238 10,154 10,050 9,910 9,728 9,564 9,422 9,265 9,057 8,877 8,694 10,050 9,422 8,694
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 2,611 1,480 2,138 2,611
Video subscribers (4)................................................ 96 115 143 172 210 249 338 411 491 554 605 649 172 411 649
Wireless subscribers.................................................. 743 744 748 770 784 777 781 801 812 807 819 824 770 801 824
Total mass markets retail connections.......................... 12,368 12,287 12,385 12,472 12,582 12,552 12,656 12,772 12,873 12,823 12,817 12,778 12,472 12,772 12,778
Consumer ARPU (3).................................................... $ 46 $ 46 $ 47 $ 48 $ 49 $ 49 $ 50 $ 51 $ 52 $ 53 $ 55 $ 55 $ 46 $ 50 $ 54
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 2,611 1,480 2,138 2,611
Qualified households/business (in millions).............. 7 7 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 12/30/07 2005 2006 2007
Wireless services revenue (1)........................................ $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 138 $ 527 $ 557 $ 560
Wireless services expenses:
Facility costs.............................................................. 76 79 75 75 71 74 74 75 75 76 75 73 305 294 299
Wireless equipment................................................... 26 28 25 28 30 26 28 27 25 25 26 28 107 111 104
Bad debt.................................................................... 14 14 12 11 12 12 14 15 13 9 12 12 51 53 46
Employee-related costs.............................................. 15 12 12 12 12 12 13 13 14 12 17 13 51 50 56
Other non-employee related costs.............................. 38 22 23 22 18 14 20 19 14 18 15 18 105 71 65
Total wireless services expenses................................... 169 155 147 148 143 138 149 149 141 140 145 144 619 579 570
Wireless services segment income................................ $ (43) $ (23) $ (16) $ (10) $ (4) $ 4$ (14) $ (8) $ (2) $ (1) $ (1) $ (6) $ (92) $ (22) $ (10)
Wireless services margin............................................. (34.1)% (17.4)% (12.2)% (7.2)% (2.9)% 2.8 % (10.4)% (5.7)% (1.4)% (0.7)% (0.7)% (4.3)% (17.5)% (3.9)% (1.8)%
Capital expenditures—wireless services (2).................. $ 1 $ 1 $ — $ — $ — $ — $ — $ 1 $ 1 $ — $ 1 $ — $ 2 $ 1 $ 2
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 12/30/07 2005 2006 2007
Subscribers................................................................... 743 744 748 770 784 777 781 801 812 807 819 824 770 801 824
ARPU (3)..................................................................... $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 49 $ 50 $ 50 $ 49
(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 12/31/07 2005 2006 2007
Other services revenue (1)............................................ $ 11 $ 9 $ 12 $ 9 $ 10 $ 10 $ 9 $ 9 $ 9 $ 10 $ 8 $ 9 $ 41 $ 38 $ 36
Other services expenses:
Property and other taxes............................................ 97 108 96 40 86 70 94 61 88 96 79 81 341 311 344
Real estate costs........................................................ 107 101 113 110 112 107 113 112 111 111 113 108 431 444 443
Realignment, severance and related costs.................. 7 (5) 23 52 20 (3) 3 (1) (6) 2 4 1 77 19 1
Employee-related costs.............................................. 195 198 190 196 186 200 192 212 144 140 128 122 779 790 534
Other non-employee related costs (2)........................ 220 229 213 211 192 211 161 192 211 192 531 195 873 756 1,129
Total other services expenses........................................ 626 631 635 609 596 585 563 576 548 541 855 507 2,501 2,320 2,451
Other services segment income..................................... $ (615) $ (622) $ (623) $ (600) $ (586) $ (575) $ (554) $ (567) $ (539) $ (531) $ (847) $ (498) $ (2,460) $ (2,282) $ (2,415)
Capital expenditures—other services (3)...................... $ 57 $ 99 $ 99 $ 109 $ 68 $ 78 $ 73 $ 98 $ 54 $ 76 $ 94 $ 138 $ 364 $ 317 $ 362
(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 12/30/07 2005 2006 2007
Special items (1):
Operating expenses:
Legal reserve (SG&A)............................................... $ —$ — $ —$ —$ —$ — $ —$ — $ (40) $ — $ (353) $ — $ —$ —$ (393)
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) (393)
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 — — — 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 $ 1,781
(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 12/31/07 2005 2006 2007
EBITDA—as adjusted (1):........................................... $ 989 $ 990 $ 1,002 $ 1,053 $ 1,067 $ 1,109 $ 1,134 $ 1,080 $ 1,171 $ 1,149 $ 1,151 $ 1,137 $ 4,034 $ 4,390 $ 4,608
Less: Legal reserve.................................................... — — — — — — — — (40) — (353) — — — (393)
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 $ 1,137 $ 3,920 $ 4,325 $ 4,215
Depreciation and amortization................................... (774) (765) (768) (758) (691) (693) (691) (695) (612) (615) (619) (613) (3,065) (2,770) (2,459)
Total other expense (income)—net............................ (139) (393) (353) (730) (268) (281) (249) (200) (277) (288) (263) (264) (1,615) (998) (1,092)
Income tax benefit (expense)..................................... (4) 3 1 3 2 (18) 43 9 (2) — 2,149 106 3 36 2,253
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 $ 366 $ (779) $ 593 $ 2,917
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 $ 1,137 $ 4,034 $ 4,390 $ 4,608
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 $ 3,435 $ 13,903 $ 13,923 $ 13,778
28.7 % 28.5 % 28.6 % 30.3 % 30.7 % 31.9 % 32.5 % 31.0 % 34.0 % 33.2 % 33.5 % 33.1 % 29.0 % 31.5 % 33.4 %
EBITDA margin........................................................
EBITDA margin (1):
EBITDA.................................................................... $ 974 $ 991 $ 976 $ 979 $ 1,045 $ 1,109 $ 1,091 $ 1,080 $ 1,131 $ 1,149 $ 798 $ 1,137 $ 3,920 $ 4,325 $ 4,215
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 $ 3,435 $ 13,903 $ 13,923 $ 13,778
28.2 % 28.6 % 27.9 % 28.1 % 30.1 % 31.9 % 31.3 % 31.0 % 32.8 % 33.2 % 23.2 % 33.1 % 28.2 % 31.1 % 30.6 %
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 12/31/07
Net Debt (1):
Current borrowings........................................................ $ 601 $ 261 $ 527 $ 512 $ 604 $ 2,683 $ 1,685 $ 1,686 $ 1,688 $ 1,304 $ 1,727 $ 601
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 13,650
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 14,251
Less: cash and cash equivalents .................................... (1,406) (2,245) (2,311) (846) (610) (1,189) (962) (1,241) (887) (869) (1,119) (902)
Less: short-term investments.......................................... (966) (634) (580) (101) (130) (205) (218) (248) (242) (240) — (79)
Less: long-term investments........................................... (36) (1) (1) — — — — — — — (119) (126)
Net debt.......................................................................... $ 14,884 $ 14,668 $ 14,337 $ 14,533 $ 14,698 $ 13,982 $ 13,733 $ 13,403 $ 13,758 $ 13,402 $ 13,268 $ 13,144
(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 12/31/07 2005 2006 2007
Free cash flow from operations (1):
Cash provided by operating activities........................ $ 343 $ 570 $ 675 $ 725 $ 140 $ 1,037 $ 752 $ 860 $ 268 $ 1,105 $ 753 $ 900 $ 2,313 $ 2,789 $ 3,026
Less: Expenditures for property, plant
and equipment and capitalized software................. (313) (352) (445) (503) (390) (442) (394) (406) (318) (426) (420) (505) (1,613) (1,632) (1,669)
Free cash flow from operations................................. 30 218 230 222 (250) 595 358 454 (50) 679 333 395 700 1,157 1,357
Add: certain one-time settlements.............................. — — — 204 100 — — 140 200 — — 245 204 240 445
Adjusted free cash flow from operations................... $ 30 $ 218 $ 230 $ 426 $ (150) $ 595 $ 358 $ 594 $ 150 $ 679 $ 333 $ 640 $ 904 $ 1,397 $ 1,802
(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 12/31/07 2005 2006 2007
ARPU is calculated as follows (1):
Total quarterly wireless services revenue................... $ 126 $ 132 $ 131 $ 138 $ 139 $ 142 $ 135 $ 141 $ 139 $ 139 $ 144 $ 138 $ 527 $ 557 $ 560
Less: quarterly non-recurring revenue........................ (23) (21) (17) (22) (22) (20) (20) (22) (19) (17) (24) (18) (83) (84) (78)
Quarterly recurring revenue....................................... $ 103 $ 111 $ 114 $ 116 $ 117 $ 122 $ 115 $ 119 $ 120 $ 122 $ 120 $ 120 $ 444 $ 473 $ 482
Average monthly recurring revenue.............................. $ 34 $ 37 $ 38 $ 39 $ 39 $ 41 $ 38 $ 40 $ 40 $ 41 $ 40 $ 40 $ 37 $ 39 $ 40
Divided by quarterly average wireless subscribers........ 745 743 745 759 778 782 775 790 805 809 817 822 748 781 813
Wireless services ARPU............................................... $ 46 $ 50 $ 51 $ 51 $ 50 $ 52 $ 49 $ 50 $ 50 $ 51 $ 49 $ 49 $ 49 $ 50 $ 49
(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.