<PAGE>
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): January 29, 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.)
555 Seventeenth Street, Suite 1000 Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-291-1400
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Reference is made to Exhibit 99.1 attached to this Current Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibit 99.1 Unaudited Pro Forma Combined Financial Statements as of
September 30, 1997
<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: January 29, 1998 By: /s/ Robert S. Woodruff
------------------------------------
Robert S. Woodruff
Executive Vice President - Finance,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
Exhibit No Description
---------- -----------
99.1 Unaudited Pro Forma Combined Financial
Statements as of September 30, 1997
<PAGE>
Exhibit 99.1
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
The unaudited pro forma financial statements presented below are derived from
the historical consolidated financial statements of Qwest Communications
International Inc. (the "Company"), SuperNet, Inc., a Colorado Corporation
("SuperNet"), and Phoenix Network, Inc., a Delaware Corporation ("Phoenix"). The
unaudited pro forma balance sheet as of September 30, 1997 gives pro forma
effect to: (i) the acquisition by the Company of all issued and outstanding
shares of capital stock, and capital stock issued at the closing of the
acquisition in October 1997, of SuperNet; (ii) the proposed acquisition by the
Company of all the issued and outstanding shares of capital stock of Phoenix
(collectively the "acquisitions"); and (iii) the issuance of $555,890,000
aggregate principal amount at maturity of 9.47% Senior Discount Notes (the
"9.47% Notes") as if the acquisitions and the issuance of the 9.47% Notes had
occurred on September 30, 1997, and as adjusted to reflect the issuance of
$450,505,000 aggregate principal amount at maturity of 8.29% Senior Discount
Notes (the "Notes") as if the issuance of the Notes had occurred on September
30, 1997. The unaudited pro forma consolidated statement of operations for the
nine months ended September 30, 1997 and for the year ended December 31, 1996
give pro forma effect to the acquisitions as if they had occurred on January 1,
1996. There are no pro forma operating statement effects of the 9.47% Notes or
the Notes since they have been issued to fund the future construction and
activation of the Qwest Network. Further, primarily all interest expense
attributable to these notes will be capitalized as a cost of constructing the
Qwest Network.
The unaudited pro forma financial statements give effect to the acquisitions
described above under the purchase method of accounting and are based on the
assumptions and adjustments described in the accompanying notes to the
unaudited pro forma financial statements presented on the following pages. The
allocations of the total purchase price for the acquisitions presented are
based on preliminary estimates and are subject to final allocation
adjustments.
The unaudited pro forma financial statements do not purport to represent
what the Company's results of operations or financial condition would have
actually been or what operations would be if the transactions that give rise
to the pro forma adjustments had occurred on the dates assumed.
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA PRO FORMA AS
QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED ADJUSTED(16)
----------- ----------- ----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $186,731 38 1,068 (20,100)(3) $ 510,337 $ 809,537
342,600 (5)
Accounts receivable,
net................... 64,719 626 12,165 77,510 77,510
Costs and estimated
earnings in excess of
billings.............. 164,986 -- -- 164,986 164,986
Deferred commissions... 475 (475)(9) -- --
Deferred income tax
asset................. -- 325 -- (325)(6) -- --
Notes and other
receivables........... 14,936 -- -- 14,936 14,936
Other current assets... 7,063 116 476 7,655 7,655
-------- ------ ------- ------- ---------- ----------
Total current assets... 438,435 1,105 14,184 321,700 775,424 1,074,624
Property and equipment,
net.................... 444,816 2,928 6,228 453,972 453,972
Deferred commissions.... 145 (145)(9) -- --
Customer acquisition
costs, net............. 1,608 1,608 1,608
Deferred income tax
asset.................. 8,902 -- -- 8,902 8,902
Notes and other
receivables............ 115 -- -- 115 115
Intangible and other
long-term assets, net.. 16,210 -- 18,800 19,574 (6) 77,368 78,168
15,385 (7)
7,399 (8)
-------- ------ ------- ------- ---------- ----------
Total assets........... $908,478 4,033 40,965 363,913 $1,317,389 $1,617,389
======== ====== ======= ======= ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses...... $178,676 1,315 17,208 500 (4) $ 197,699 197,699
Bank line of credit.... -- 600 4,678 5,278 5,278
Deferred revenue....... 4,044 462 4,506 4,506
Billings in excess of
costs and estimated
earnings.............. 12,440 12,440 12,440
Deferred income tax
liability............. 6,432 6,432 6,432
Current portion of
long-term debt........ 15,782 306 840 16,928 16,928
-------- ------ ------- ------- ---------- ----------
Total current
liabilities........... 217,374 2,683 22,726 500 243,283 243,283
Long-term debt.......... 268,946 454 1,704 349,999 (5) 621,103 921,103
Deferred income tax
liability.............. -- 45 -- 45 45
Other liabilities....... 53,307 -- -- 4,000 (4) 57,307 57,307
-------- ------ ------- ------- ---------- ----------
Total liabilities...... 539,627 3,182 24,430 354,499 921,738 1,221,738
-------- ------ ------- ------- ---------- ----------
Stockholders' equity:
Preferred stock........ -- -- -- -- --
Common stock........... 1,033 1 30 5 (4) 1,038 1,038
(1)(10)
(30)(11)
Additional paid-in
capital................ 412,005 4,514 52,218 26,795 (4) 438,800 438,800
(4,514)(10)
(52,218)(11)
Treasury stock.......... (2) 2 (11)
Accumulated deficit..... (44,187) (3,664) (35,711) 3,664 (10) (44,187) (44,187)
35,711 (11)
-------- ------ ------- ------- ---------- ----------
Total stockholders'
equity................ 368,851 851 16,535 9,414 395,651 395,651
-------- ------ ------- ------- ---------- ----------
Commitments and
contingencies
Total liabilities and
stockholders' equity.. $908,478 4,033 40,965 363,913 $1,317,389 $1,617,389
======== ====== ======= ======= ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Carrier services...... $ 39,062 -- -- $ 39,062
Commercial services... 38,033 5,128 59,932 103,093
-------- ----- ------ ------ --------
77,095 5,128 59,932 142,155
Network construction
services............. 413,226 -- -- 413,226
-------- ----- ------ ------ --------
490,321 5,128 59,932 555,381
-------- ----- ------ ------ --------
Operating expenses:
Telecommunications
services............. 65,310 2,624 43,942 111,876
Network construction
services............. 282,472 -- -- 282,472
Selling, general and
administrative....... 59,987 1,950 20,010 (765)(9) 81,182
Growth share and stock
option plans......... 69,320 341 -- 69,661
Depreciation and amor-
tization............. 13,114 586 2,961 2,936 (12) 20,404
807 (13)
-------- ----- ------ ------ --------
490,203 5,501 66,913 2,978 565,595
-------- ----- ------ ------ --------
Income (loss) from oper-
ations................. 118 (373) (6,981) (2,978) (10,214)
Other (expense) income:
Gain on sale of
contract rights...... 9,296 -- -- 9,296
Interest expense,
net.................. (2,974) (98) (797) (210)(14) (4,079)
Other (expense) in-
come, net............ (1,986) -- -- (1,986)
-------- ----- ------ ------ --------
Income (loss) before
income tax expense
(benefit)............ 4,454 (471) (7,778) (3,188) (6,983)
Income tax expense (ben-
efit).................. 2,191 (3) -- 222 (15) 2,410
-------- ----- ------ ------ --------
Net income (loss)... $ 2,263 (468) (7,778) (3,410) $ (9,393)
======== ===== ====== ====== ========
Net income (loss) per
share.................. $ 0.02 $ (0.10)
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA PRO FORMA
QWEST SUPERNET PHOENIX ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Carrier services...... $ 57,573 -- -- $ 57,573
Commercial services... 34,265 5,542 99,307 139,114
-------- ------ ------- ------ --------
91,838 5,542 99,307 196,687
Network construction
services............. 139,158 -- -- 139,158
-------- ------ ------- ------ --------
230,996 5,542 99,307 335,845
-------- ------ ------- ------ --------
Operating expenses:
Telecommunications
services............. 80,368 2,994 73,439 156,801
Network construction
services............. 87,542 -- -- 87,542
Selling, general and
administrative....... 45,755 2,011 33,817 (1,718)(9) 79,865
Growth share and stock
option plans......... 13,100 3,500 -- 16,600
Depreciation and
amortization......... 16,245 563 4,358 3,915 (12) 26,272
1,191 (13)
-------- ------ ------- ------ --------
243,010 9,068 111,614 3,388 367,080
-------- ------ ------- ------ --------
Loss from operations.... (12,014) (3,526) (12,307) (3,388) (31,235)
Other (expense) income:
Gain on sale of
telecommunications
service agreements... 6,126 -- -- 6,126
Interest expense,
net.................. (4,373) (84) (541) (280)(14) (5,278)
Other (expense)
income, net.......... 60 -- 4 64
-------- ------ ------- ------ --------
Loss before income
tax benefit........ (10,201) (3,610) (12,844) (3,668) (30,323)
Income tax expense
(benefit).............. (3,234) (191) -- 799 (15) (2,626)
-------- ------ ------- ------ --------
Net loss............ $ (6,967) (3,419) (12,844) (4,467) $(27,697)
======== ====== ======= ====== ========
Net loss per share...... $ (0.08) $ (0.31)
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(1) On September 30, 1997, the Company entered into a Stock Purchase
Agreement with NEWSUPERNET, a Colorado nonprofit corporation and the sole
shareholder of SuperNet, for all the issued and outstanding shares of capital
stock, and capital stock issued at the closing of the acquisition of SuperNet.
For accounting purposes the acquisition will be accounted for using the
purchase method of accounting. The fair value of the cash consideration will
be allocated to the assets and liabilities acquired based upon the estimated
fair values of such assets and liabilities. The estimated fair values of the
assets and liabilities acquired, as reflected in the accompanying unaudited
pro forma financial statements, is based upon information available at the
date of preparation of these unaudited pro forma financial statements, and
will be adjusted upon the final determination of such fair values.
(2) In January 1998 the Company, its newly-formed wholly owned subsidiary
Qwest 1997-5 Acquisition Corp. ("Qwest Subsidiary"), and Phoenix entered into
the Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the
Merger Agreement, Qwest Subsidiary will merge with and into Phoenix (the
"Merger"), with Phoenix being the surviving corporation of the Merger.
Immediately prior to the Merger, each outstanding share of Phoenix Series I
Stock will be converted into shares of Phoenix Common Stock. In the Merger,
each outstanding share of Phoenix Common Stock (including shares of Phoenix
Common Stock issued upon conversion of the Phoenix Series I Stock) will be
acquired for that many shares of Qwest Common Stock having an aggregate market
value equal to $28.5 million, reduced by certain adjustments and limitations
to $26.8 million ("Common Stock Consideration"), and future payments of $4
million. The proposed acquisition is subject to certain closing conditions
that include requisite shareholder approval.
For accounting purposes the proposed acquisition will be accounted for using
the purchase method of accounting. The fair value of the consideration will be
allocated to the assets and liabilities acquired based upon the estimated fair
values of such assets and liabilities. The estimated fair values of the assets
and liabilities acquired, as reflected in the accompanying unaudited pro forma
financial statements, is based upon information available at the date of
preparation of these unaudited pro forma financial statements, and will be
adjusted upon the final determination of such fair values.
(3) Represents the purchase by the Company of SuperNet's outstanding capital
stock and capital stock issued at the closing of the acquisition and the
incurrence of related transaction costs. Additional information regarding the
aggregate purchase price is set forth below (amounts in thousands):
<TABLE>
<S> <C>
Cash consideration paid for all the issued and outstanding capital
stock of SuperNet................................................. $15,900
Cash consideration paid for the capital stock issued at the closing
of the acquisition................................................ 4,100
Estimated direct costs of the acquisition.......................... 100
-------
Aggregate purchase price to be allocated to net assets acquired.... $20,100
=======
</TABLE>
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(4) Represents the purchase by the Company of Phoenix's outstanding capital
stock and the incurrence of related transaction costs. Additional information
regarding the aggregate purchase price is set forth below (amounts in
thousands):
<TABLE>
<S> <C>
Aggregate value of the Common Stock Consideration................... $26,800
Future payments..................................................... 4,000
Estimated direct costs of the acquisition........................... 500
-------
Aggregate purchase price to be allocated to net assets acquired..... $31,300
=======
</TABLE>
(5) Represents the issuance of the 9.47% Notes. The 9.47% Notes were issued
at a price of 62.962% of their principal amount at maturity, representing a
yield to maturity of 9.47% and yielding gross proceeds to the Company of
approximately $350 million. The 9.47% will mature on October 15, 2007.
(6) Represents the increase to SuperNet's intangible assets to reflect the
preliminary allocation of the purchase price. The increase to SuperNet's
intangible assets represents the excess of the purchase price over the
identifiable net tangible assets of SuperNet and the establishment of a
valuation allowance for SuperNet's deferred tax assets. Such intangible assets
are assumed to be primarily associated with the customer base, trademarks, and
goodwill of SuperNet, and, for pro forma purposes, have been amortized over an
assumed weighted average life of five years. The actual purchase price
allocation that will be made may differ from such assumptions, and the actual
lives assigned to the intangible assets may differ from the assumed weighted
average life used in preparing the pro forma financial statements.
(7) Represents the increase to Phoenix's intangible assets to reflect the
preliminary allocation of the purchase price. Such intangible assets are
assumed to be primarily associated with the customer base, trademarks, and
goodwill of Phoenix, and, for pro forma purposes, have been amortized over an
assumed weighted average useful life of fifteen years. The actual purchase
price allocation that will be made may differ from such assumptions, and the
actual useful lives assigned to the intangible assets may differ from the
assumed weighted average useful life used in preparing the pro forma financial
statements.
(8) Represents deferred issuance costs related to the 9.47% Notes.
(9) Represents the reduction to deferred commissions and the associated
amortization to selling, general and administrative expenses to conform with
the Company's policy to expense sales commissions as incurred. Phoenix had
capitalized certain sales commissions, all of which had been incurred prior to
1996.
(10) Represents the elimination of the historical equity of SuperNet.
(11) Represents the elimination of the historical equity of Phoenix.
(12) Represents the amortization of the intangible assets that results from
the preliminary SuperNet purchase price allocation. Such amortization is
calculated using an estimated weighted average life of five years. See note 6.
<PAGE>
QWEST COMMUNICATIONS INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
(13) Represents the amortization of the intangible assets that results from
the preliminary Phoenix purchase price allocation. Such amortization is
calculated using an estimated weighted average useful life of 15 years. See
note 7.
(14) Represents interest expense on the future payments related to the
Phoenix acquisition at 7% per annum.
(15) Represents the assumed income tax effect of the pro forma adjustment
relating to interest expense and deferred commissions. The other pro forma
adjustments are not expected to have an income tax impact because
substantially all of the excess purchase price has been assumed to be
goodwill.
(16) Represents the issuance of the Notes. The Notes were issued at a price
of 66.592% of their principal amount at maturity, representing a yield to
maturity of 8.29% and yielding gross proceeds to the Company of approximately
$300 million. The Notes will mature on February 1, 2008. Offering costs of
approximately $800,000 are included in intangible and other long-term assets.
(17) Transactions among the Company, SuperNet and Phoenix are not
significant.
