SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 20, 1998
QWEST COMMUNICATIONS INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
000-22609 84-1339282
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(Commission File Number) (IRS Employer Identification No.)
1000 QWEST TOWER, 555 SEVENTEENTH STREET DENVER, COLORADO 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-992-1400
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
The Registrant issued the press release attached as Exhibit 99.1 to this
Current Report on Form 8-K on October 20, 1998 and the press release attached as
Exhibit 99.2 to this Current Report on Form 8-K on October 27, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 99.1 Press release of the Registrant dated October 20, 1998.
Exhibit 99.2 Press release of the Registrant dated October 27, 1998.
<PAGE>
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.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
DATE: October 28, 1998 By: /s/ Robert Woodruff
---------------------------------------
Robert Woodruff, Executive Vice President
and Chief Financial Officer.
Exhibit 99.1 Press release of the Registrant dated October 20, 1998.
FOR IMMEDIATE RELEASE Contact: For Investors: For Media:
Lee Wolfe Tyler Gronbach
800-567-7296 703-363-4494
QWEST REPORTS THIRD QUARTER 1998 RESULTS
Record Revenue and EBITDA with Strong, Double-digit Sequential Growth
HIGHLIGHTS:
>> Total revenue increased four-fold to $806.8 million
>> Data services revenue grew 780 percent
>> EBITDA increased 369 percent to $117.6 million
DENVER, October 20, 1998 -- Qwest Communications (NASDAQ: QWST) today reported
record third quarter 1998 results with strong growth in all business segments.
For the three months ended September 30, 1998, total revenue was $806.8 million,
a four-fold increase over the third quarter of 1997. During the quarter,
communications services revenue grew eighteen-fold to $601.8 million, with data
services revenue growth of 780 percent, over the prior year. Earnings before
interest, taxes, depreciation and amortization (EBITDA) increased four-fold to
$117.6 million, up from $25.1 million as reported in the third quarter of the
prior year.
The company narrowed its net loss from $876.3 million, or ($3.62) per share
reported in the second quarter of 1998, to a net loss of $5.0 million, or
($0.02) per share in the current quarter. Excluding one-time merger-related
charges, the company posted a net loss of $15.6 million, or ($0.06) per share in
the previous quarter.
The company also said that results for the quarter exceeded the consensus of
analysts' expectations.
Commenting on the quarter, Qwest's President and CEO Joseph P. Nacchio said,
"We're pleased with the strong operational and financial results achieved during
the quarter. The customers, partners and strategic initiatives announced during
the last 90 days epitomize Qwest's commitment to driving growth through the
convergence of data, video and voice services."
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Qwest Communications
October 20, 1998
Page 2
Total revenue of $806.8 million grew 23 percent from $653.6 million in the third
quarter of 1997, on a pro forma basis (reflecting the company's acquisitions for
all previously reported periods). EBITDA in the quarter grew to $117.6 million,
compared to $101.2 million in the previous year. Net loss for the quarter was
($0.02) per share, versus pro forma earnings per share of $0.03 a year ago,
reflecting increased depreciation and interest expenses caused by the continued
build out of the Qwest network and other investments in infrastructure to
support the companies rapid growth.
Total revenue grew sequentially by more than 16 percent to $806.8 million from
$694.3 million in the second quarter of 1998, on a pro forma basis.
Communications services revenue of $601.8 million was up over 11 percent from
$540.4 million in the second quarter. The company generated double-digit
sequential growth in each of the business, consumer and wholesale markets.
Sequentially, EBITDA increased 76 percent from $66.7 million in the second
quarter to $117.6 million. Strong growth in customer revenues enabled the
company to narrow its loss from ($0.06) per share in the second quarter of 1998
(excluding one-time merger-related items), to ($0.02) per share in the quarter.
"The financial results for the quarter reflect strong, double-digit sequential
gains that were achieved in all areas of the business. While Qwest makes
progress on its network construction, invests for future growth and successfully
integrates its recent acquisitions, the company continues to realize improved
EBITDA and revenue," said Robert Woodruff, Qwest's executive vice president and
chief financial officer.
Rapid Growth in Data Services
The company expanded its data services presence with the introduction of its
native IP network and new multimedia services. Domestic and international data
revenue was up 50 percent from the same quarter of last year, while sequential
data revenue posted even stronger gains, up nearly 20 percent from the previous
quarter. The company's frame relay revenues grew more than 150 percent on an
annual basis. All results reflected above are on a pro forma basis.
Qwest also took an important step to augment its data services capability during
the quarter by announcing that it will offer the world's first commercially
available native IP OC-48 network service beginning next month. This network
will offer customers virtually unlimited high-speed bandwidth to support a wide
range of multimedia, e-commerce and data applications and a comprehensive
package of service level agreements.
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Qwest Communications
October 20, 1998
Page 3
During the quarter, Qwest announced the signing of a definitive agreement to
acquire Icon CMT Corp. The transaction, which will add $75 million in revenue
and more than 400 IP data technicians and sales professionals, will further
support Qwest's expansion into the Web hosting and Web enabling market. The
acquisition will also help facilitate the creation of 10 new CyberCenters Qwest
plans to open by the end of 1999.
The acquisition is subject to certain shareholder and regulatory approvals. The
company expects to close the transaction by the end of the year.
Expanded Sales Channels
To support the growing demand of data and Internet services, the company
expanded its distribution channels through a strategic agreement with Netscape
Communications Corporation. As part of the company's previously stated objective
for continued growth and penetration into the multinational and Fortune 1000
business sectors, the company also created a National Accounts sales division
during the quarter.
Merger Integration/Synergies
With respect to Qwest's acquisition of LCI, the company continues to expect that
it will realize projected merger synergies and strategic objectives that were
originally outlined when the transaction was announced. The financial results of
the quarter already reflect the revenue and administrative cost synergies from
the transaction.
Since the close of the LCI transaction, the companies aligned their sales
organizations, consolidated product portfolios, created a new product
development process, and established a uniform sales incentive program. A common
order entry/customer provisioning platform has also been implemented. Billing
migration has been completed for private line services with scheduled completion
for all services in early '99. In addition, a consolidated network plan has been
created and is being implemented.
Construction Services
The company continued to make significant progress on the construction of its
planned 18,449-mile nationwide network in the third quarter. To date, the
company has secured 99.5 percent of its rights of way, commenced construction on
17,955
-more-
Qwest Communications
October 20, 1998
Page 4
miles of network, placed 16,100 route miles of conduit in the ground, installed
12,900 miles of fiber-optic cable and lit nearly 50 percent of the network.
Continued progress on the completion of the network and recent higher-margin
contracts with customers helped boost construction revenue to $205.0 million, up
33 percent from the second quarter of 1998.
The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 18,449-mile network will serve over 130 cities, which
represent approximately 80 percent of the data and voice traffic originating in
the United States, upon its scheduled completion in the second quarter of 1999.
To date, approximately 9,100 miles of the Qwest Macro Capacity Fiber Network are
activated, and construction has commenced on 17,955 miles. Qwest's
transcontinental segment extends from Los Angeles to Sacramento and across to
New York. Additionally, Qwest owns transatlantic submarine capacity linking the
United States to Europe and will jointly own a transpacific submarine cable
system connecting the U.S. to the Pacific Rim. Qwest is also extending its
network 1,400 miles into Mexico with completion slated for late 1998.
The Qwest Macro Capacity Fiber network is designed with highly reliable and
secure bi-directional, line switching OC-192 SONET ring architecture. Upon
completion, the network will offer a self-healing system that provides the
ultimate security and reliability by allowing instantaneous re-routing in the
event of a fiber cut.
This release may contain forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual future events
or results. Readers are referred to the documents filed by Qwest with the SEC,
which identify important risk factors that could cause actual results to differ
from those contained in the forward-looking statements, including, but not
limited to, (a) failure by Qwest to construct the Qwest Network on schedule and
on budget, (b) failure by Qwest to maintain all necessary rights-of-way, (c)
intense competition in Qwest's communications services markets, (d) rapid and
significant changes in technology and markets, (e) dependence on new product
development, (f) operating and financial risks related to managing rapid growth,
integrating acquired businesses, being highly leveraged and sustaining operating
cash deficits and (g) adverse changes in the regulatory environment and (h)
volatility of stock price. These cautionary statements should be considered in
connection with any subsequent written or oral forward-looking statements that
may be issued by Qwest or persons acting on its behalf. Qwest undertakes no
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
This announcement is not an offer to sell or a solicitation to buy any
securities of Qwest. The offering with respect to the proposed acquisition of
Icon will be made only by the proxy statement/prospectus that will be
distributed to stockholders of Icon in connection with their consideration of
the transaction.
The Qwest logo is a registered trademark of Qwest Communications International
Inc. in the U.S. and certain other countries.
# # #
Attachment A
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1998 and 1997
(In Millions, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -------------------------------
1998 1997 1998 1997
----------------------------- -------------------------------
Revenue:
<S> <C> <C> <C> <C>
Communications services $ 601.8 $ 32.5 $ 884.2 $ 77.1
Construction services 205.0 156.5 493.4 413.2
-------------- ------------- -------------- --------------
Total revenue 806.8 189.0 1,377.6 490.3
-------------- ------------- -------------- --------------
Operating expenses:
Access and network operations 371.6 25.0 556.1 61.8
Construction services 128.2 107.5 333.8 292.0
Selling, general and administrative - communications 178.7 24.3 312.3 105.6
Selling, general and administrative - construction 10.7 7.1 29.2 17.6
-------------- ------------- -------------- --------------
EBITDA 117.6 25.1 146.2 13.3
Depreciation and amortization 76.6 5.1 115.6 13.1
Merger related costs - - 880.5 -
-------------- ------------- -------------- --------------
Earnings (loss) from operations 41.0 20.0 (849.9) 0.2
Interest expense and other, net 31.9 0.2 50.7 (4.3)
-------------- ------------- -------------- --------------
Earnings (loss) before income taxes 9.1 19.8 (900.6) 4.5
Income tax expense (benefit) 14.1 7.0 (12.5) 2.2
-------------- ------------- -------------- --------------
Net earnings (loss) $ (5.0) $ 12.8 $ (888.1) $ 2.3
============== ============= ============== ==============
Net earnings (loss) per share - basic $ (0.02) $ 0.06 $ (3.42) $ 0.01
============== ============= ============== ==============
Net earnings (loss) per share - diluted $ (0.02) $ 0.06 $ (3.42) $ 0.01
============== ============= ============== ==============
Weighted average shares outstanding - basic 330.7 206.6 259.9 185.1
============== ============= ============== ==============
Weighted average shares outstanding - diluted 346.1 211.6 273.9 189.0
============== ============= ============== ==============
Earnings from operations before merger related charges $ 41.0 $ 20.0 $ 30.6 $ 0.2
============== ============= ============== ==============
Net earnings (loss) before merger related charges $ (5.0) $ 12.8 $ (28.2) $ 2.3
============== ============= ============== ==============
Net earnings (loss) per share before merger related charges $ (0.02) $ 0.06 $ (0.11) $ 0.01
============== ============= ============== ==============
</TABLE>
Attachment B
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Pro Forma
For the Three and Nine Months Ended September 30, 1998 and 1997
(In Millions, Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma (1) Pro Forma (1)
Three Months Ended Nine Months Ended
----------------------------- -------------------------------
1998 1997 1998 1997
----------------------------- -------------------------------
Revenue:
<S> <C> <C> <C> <C>
Communications services $ 601.8 $ 497.1 $ 1,665.4 $ 1,377.5
Construction services 205.0 156.5 493.4 413.1
-------------- ------------- -------------- --------------
Total revenue 806.8 653.6 2,158.8 1,790.6
-------------- ------------- -------------- --------------
Operating expenses:
Access and network operations 371.6 308.7 1,027.3 859.8
Construction services 128.2 109.4 333.8 292.0
Selling, general and administrative - communications 178.7 127.2 500.0 402.3
Selling, general and administrative - construction 10.7 7.1 29.2 17.6
-------------- ------------- -------------- --------------
EBITDA 117.6 101.2 268.5 218.9
Depreciation and amortization 76.6 60.3 205.1 170.8
-------------- ------------- -------------- --------------
Earnings from operations 41.0 40.9 63.4 48.1
Interest expense and other, net 31.9 9.7 64.5 19.8
-------------- ------------- -------------- --------------
Earnings (loss) before income taxes 9.1 31.2 (1.1) 28.3
Income tax expense (benefit) 14.1 22.5 30.0 41.3
-------------- ------------- -------------- --------------
Net earnings (loss) $ (5.0) $ 8.7 $ (31.1) $ (13.0)
============== ============= ============== ==============
Net earnings (loss) per share - basic $ (0.02) $ 0.03 $ (0.09) $ (0.04)
============== ============= ============== ==============
Net earnings (loss) per share - diluted $ (0.02) $ 0.03 $ (0.09) $ (0.04)
============== ============= ============== ==============
Weighted average shares outstanding - basic 330.7 325.6 327.5 323.9
============== ============= ============== ==============
Weighted average shares outstanding - diluted 346.1 332.2 341.5 329.4
============== ============= ============== ==============
(1) Pro forma numbers reflect results as if each acquisition had been included
from January 1, 1997 and exclude one-time merger related charges.
</TABLE>
Attachment C
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 and December 31, 1997
(In Millions)
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
ASSETS
<S> <C> <C>
Cash $ 225.4 $ 379.8
Other current assets 903.0 344.1
---------------- -----------------
Total current assets 1,128.4 723.9
Property and equipment, net 2,043.9 614.6
Excess of cost over net assets acquired 3,215.4 21.2
Other, net 327.6 38.4
---------------- -----------------
TOTAL ASSETS $ 6,715.3 $ 1,398.1
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 1,179.8 $ 315.4
Long-term debt and capital lease obligations 1,387.1 630.5
Other long-term liabilities 461.9 70.5
Total stockholders' equity 3,686.5 381.7
---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,715.3 $ 1,398.1
================ =================
</TABLE>
Exhibit 99.2 Press release of the Registrant dated October 27, 1998.
FOR IMMEDIATE RELEASE Contacts: Media Contact: Investor Contact:
Qwest Communications Qwest Communications
Christy Weiner Lee Wolfe
(303) 992-2085 (877) 877-QWST
[email protected] [email protected]
QWEST ANNOUNCES $750 MILLION SENIOR NOTES OFFERING
DENVER, October 27, 1998 - Qwest Communications International Inc. (Nasdaq:
QWST) today announced that it has agreed to sell $750 million aggregate
principal amount of 7.5 percent ten year Senior Notes due 2008. Gross proceeds
from the sales of the notes will total approximately $741 million. The offering
is expected to close on November 4, 1998.
Proceeds of the notes sale will be used primarily to fund the continued
deployment of Qwest's Macro CapacitySM Fiber Network, market share initiatives
in traditional telecommunications segments, and the expansion of Qwest's data
strategy. This strategy includes the Company's deployment of its IP backbone and
product development initiatives including the establishment of web hosting
CyberCenters and the development of e-commerce solutions. Additionally, the
proceeds will be used to expand unique distribution channels.
"We are experiencing strong growth across all aspects of our business and we are
delighted with the market's continued positive perception of Qwest," said Robert
Woodruff, executive vice president and chief financial officer, Qwest
Communications. "With this debt issue, we've taken advantage of the improvement
in the capital markets, helping us to secure valuable investment capability.
Resources from this transaction will allow us to continue our rapid growth
across all aspects of the business."
The notes to be sold have not been registered under the Securities Act of 1933
and may not be offered or sold in the U.S. absent registration or an applicable
exemption from registration requirements.
The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 18,449-mile network will serve over 130 cities, which
represent approximately 80 percent of the data and voice traffic originating in
the United States, upon its scheduled completion in the second quarter of 1999.
To date, approximately 9,100 miles of the Qwest Macro Capacity Fiber Network are
activated, and construction has commenced on 17,955 miles. Qwest's
transcontinental segment extends from Los Angeles to Sacramento and across to
New York. Additionally, Qwest owns transatlantic submarine capacity linking the
United States to Europe and will jointly own a transpacific submarine cable
system connecting the U.S. to the Pacific Rim. Qwest is also extending its
network 1,400 miles into Mexico with completion slated for late 1998.
The Qwest Macro Capacity Fiber Network is designed with highly reliable and
secure bi-directional, line switching OC-192 SONET ring architecture. Upon
completion, the network will offer a self-healing system that provides the
ultimate security and reliability by allowing instantaneous rerouting in the
event of a fiber cut.
About Qwest
Qwest Communications International Inc. (NASDAQ: QWST) is a multimedia
communications company and one of the fastest growing companies in America
today. Headquartered in Denver, Colorado, Qwest has approximately 6,000
employees and over 80 sales offices worldwide. With its world-class data and
multimedia network, marketing expertise, and customer care and billing systems,
Qwest is delivering high-quality data, video and voice connectivity securely and
reliably to customers around the world. Further information is available at
www.qwest.net.
# # #
This release may contain forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual future events
or results. Readers are referred to the documents filed by Qwest with the SEC,
which identify important risk factors that could cause actual results to differ
from those contained in the forward-looking statements, including, but not
limited to, (a) failure by Qwest to construct the Qwest Network on schedule and
on budget, (b) failure by Qwest to maintain all necessary rights-of-way, (c)
intense competition in Qwest's communications services markets, (d) rapid and
significant changes in technology and markets, (e) dependence on new product
development, (f) operating and financial risks related to managing rapid growth,
integrating acquired businesses, being highly leveraged and sustaining operating
cash deficits and (g) adverse changes in the regulatory environment. These
cautionary statements should be considered in connection with any subsequent
written or oral forward-looking statements that may be issued by Qwest or
persons acting on its behalf. Qwest undertakes no obligation to review or
confirm analysts' expectations or estimates or to release publicly any revisions
to any forward looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
The Qwest logo is a registered trademark of Qwest Communications International
Inc. in the U.S. and certain other countries.
