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 27, 1999
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.)
700 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
Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On October 27, 1999, the Registrant announced its financial results for
the quarter ended September 30, 1999. A copy of the press release announcing the
results is attached as Exhibit 99.1 to this Current Report on Form 8-K.
On October 27, 1999, the Registrant also announced that (1) for the
year ending December 31, 1999, it expects total revenue of approximately $3.8
billion to $3.9 billion, EBITDA (earnings before interest, tax, depreciation and
amortization) of approximately $750 million and capital expenditure of
approximately $1.8 billion to $1.9 billion, and (2) for the year ending December
31, 2000, it expects total revenue to exceed the consensus of analysts'
estimates (which range from $4.6 billion to $4.7 billion) and EBITDA to be in
line with such estimates (which range from $1.1 billion to $1.2 billion). This
information relates to Qwest on a "stand-alone" basis. It does not give effect
to Qwest's pending merger with U S WEST, Inc. or the synergies expected to be
achieved from the merger.
This Current Report on Form 8-K contains projections and other
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, specifically the most
recent reports which identify important risk factors that could cause actual
results to differ from those contained in the forward-looking statements,
including potential fluctuations in quarterly results, dependence on new product
development, rapid technological and market change, failure to maintain rights
of way, financial risk management and future growth subject to risks, Qwest's
ability to achieve Year 2000 compliance, adverse changes in the regulatory or
legislative environment, and failure to complete the merger with U S WEST timely
or at all. This Current Report on Form 8-K and the attachments include or
incorporate by reference analysts' estimates and other information prepared by
third parties for which Qwest assumes no responsibility. 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.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 99.1 Press release of the Registrant dated October 27, 1999.
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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.
QWEST COMMUNICATIONS INTERNATIONAL INC.
DATE: October 27, 1999 By: /s/ ROBERT S. WOODRUFF
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Robert S. Woodruff
Executive Vice President - Finance,
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
Exhibit 99.1 Press release of the Registrant dated October 27, 1999.
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RIDE THE LIGHT(SM) NEWS
QWEST(R)
FOR IMMEDIATE RELEASE Contacts: MEDIA CONTACT: INVESTOR CONTACT:
Tyler Gronbach Lee Wolfe
(303) 992-2155 800-567-7296
[email protected] [email protected]
QWEST COMMMUNICATIONS REPORTS FIRST BILLION DOLLAR REVENUE
QUARTER AND CONTINUED STRONG EBITDA GROWTH
Reported results compared to the previous year:
o Total revenue grew 26 percent to $1.02 billion
o Communications services revenue increased 69 percent to $1.02 billion
o Internet and data services grew more than 200 percent and now account
for more than 23 percent of Qwest's communications services revenue
o Total EBITDA increased 62 percent to $190.5 million
Compared to the second quarter of 1999 communications services:
o Revenue was up 29 percent to $1.02 billion
o EBITDA grew 42 percent to $190.5 million
o EBITDA margin increased to 18.7 percent from 17.0 percent
DENVER, OCTOBER 27, 1999 - Qwest Communications International Inc. (NASDAQ:
QWST), the broadband Internet communications company, today announced that for
the first time the company has recorded revenue for a quarter in excess of one
billion dollars. For the tenth consecutive quarter the company met or exceeded
the consensus of analysts' estimates.
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The $1.02 billion in total revenue for the quarter reflects a 26 percent
increase over the same period in 1998, while communications services revenue
grew 69 percent. The strong revenue results were achieved during the quarter
despite the expected decline in construction services revenue as a result of the
mid-year completion of 18,500 miles of the company's U.S. network. Construction
services accounted for less than two percent of total revenue for the quarter
and was combined with communications services.
Total EBITDA was up 62 percent to $190.5 million compared to the third quarter
of 1998, while communications services EBITDA increased more than 250 percent.
Excluding one-time costs of $25.0 million directly related to the pending merger
with U S WEST, Qwest reported net earnings of $19.8 million, or $0.03 per
diluted share, compared to a pro forma net loss of ($0.02) per share during the
same period in 1998. Including the merger-related costs, Qwest reported a net
loss of $1.8 million, or ($0.00) per share, compared to a net loss of ($0.01)
per share a year ago.
Commenting on the quarter, Qwest Chairman and CEO Joseph P. Nacchio said,
"Reaching a billion dollars in revenue for the quarter is a major achievement --
and a significant milestone for the company. We've said from the beginning that
we are creating a growth company and our results clearly show the steps we've
taken -- building a next-generation network, acquiring strategic assets and
capabilities, creating alliances to build advanced applications on our network,
and rapidly growing our Internet and data business segment. We continue to see
the payoff and the potential in what we've created."
On a sequential basis, Qwest reported a 29 percent increase in revenue as a
result of continued growth in Internet and data services, the creation of the
Cyber.Solutions joint venture with KPMG and the acceleration of business from
major selected customers. As a result of strong revenue growth and improved
gross margin, EBITDA for communications services was up 42 percent compared to
the second quarter of 1999. Communications services EBITDA margin improved to
18.7 percent compared to 17.0 percent in the previous quarter. The margin
improvement largely reflects the company's ability to achieve a more favorable
product mix.
"The results for the third quarter demonstrate Qwest's ability to drive strong
revenue and EBITDA growth while making the necessary investments for the
future," said Robert S. Woodruff, Qwest's executive vice president and CFO.
"With 18,500 miles of the U.S. network now complete, we are committing more
resources to the expansion of the Qwest Internet and data services portfolio,
CyberCenter operations, trans-Atlantic service platform and local broadband
access services so that we may continue to capitalize on our first-to-market
advantage."
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INTERNET AND DATA SERVICES EXPANSION
Internet and data services operations continued to be the company's fastest
growing segment and was up more than 200 percent over the third quarter of 1998.
The company's strong Internet and data services growth continues to be fueled by
the high demand for dedicated Internet connectivity and broadband applications
and services. Qwest also announced a major expansion of its CyberCenter
operations, which are the platform for the delivery of hosting, e-commerce and
other business applications. The company plans to add seven more Centers,
bringing the total to 14. The new Centers will be up to 200,000 square feet
each, providing more than 1.5 million of additional square feet of total
operational space.
In order to increase application performance and drive the demand for broadband
services, the company signed an agreement with Hewlett-Packard Company that will
provide high-end data storage for Qwest's CyberCenters. This initiative is
expected to provide approximately $200 million in revenue to Qwest in the first
year and up to $1.5 billion in revenue to Qwest over the next three years.
QWEST/U S WEST MERGER
The merger with US WEST is moving quickly and the companies have completed all
government filings and shareowner mailings in anticipation of the shareowner
meetings on November 2 in Denver and New York City.
The merger combines Qwest's advanced network and broadband Internet service
capability with U S WEST's innovative local communications and broadband
Internet access capability. The combined company will offer customers in the
U.S. and around the world more choices and greater access to next-generation
communications and broadband Internet-based services.
LOCAL BROADBAND ACCESS
Qwest continues with the build-out of the QwestLink(sm) local broadband network
in 25 markets. In each market, Qwest will offer a combination of access
technologies including dedicated broadband access, fixed wireless and digital
subscriber line (DSL). Networks in seven cities are expected to provide
high-speed local broadband access services by the end of 2000, followed by 18
more in 2001.
The company has established operations in California to support the QwestLink
services initiative and will continue doing so in other markets through 1999 and
continuing in 2000. Beginning in the first quarter of 2000, customers in Los
Angeles will be able to use the QwestLink local access network to transmit all
of their Internet, data, image and voice communications directly to the Qwest
nationwide fiber-optic network. Sacramento, San Diego and San Jose/San Francisco
customers will have access to these services during the second quarter of 2000.
Qwest also launched its DSL service in 13 markets for small and medium
businesses. Qwest plans to expand to 30 markets by the end of the year.
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KPNQWEST OPERATIONS
On August 30, 1999 KPNQwest announced for an initial public offering (IPO) and
has filed its F-1 registration statement with the U.S. Securities and Exchange
Commission. KPNQwest intends to issue 44 million C shares at a price of $18.73
to $21.41 per C share. KPNQwest has applied to have the C shares quoted on the
Nasdaq National Market and listed in bearer form on the Official Segment of
Amsterdam Exchanges N.V.'s Stock Market. Listings on both markets will be under
the symbol "KQIP."
KPNQwest plans to use the net proceeds of the offering primarily to expand its
network and service offerings, construct mega-cybercentres in Europe that will
enable the company to provide advanced web hosting, applications hosting and
electronic commerce services to its customers, make selected acquisitions, for
working capital and other general corporate purposes.
Construction has begun on the third of the seven network rings that will
eventually span 9,150 miles throughout Western Europe when completed.
ABOUT QWEST
Qwest Communications International Inc. (Nasdaq: QWST) is a leader in reliable
and secure broadband Internet-based data, voice and image communications for
businesses and consumers. The Qwest Macro Capacity(R) Fiber Network, designed
with the newest optical networking, spans more than 18,500 route miles in the
United States, and an additional 315-mile network route will be completed by the
end of the year. For more information, please visit the Qwest web site at
www.qwest.com.
# # #
This release is not an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of the KPNQwest securities in any state in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
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,
specifically the most recent reports which identify important risk factors that
could cause actual results to differ from those contained in the forward-looking
statements, including potential fluctuations in quarterly results, dependence on
new product development, rapid technological and market change, failure to
maintain the rights of way, financial risk management and future growth subject
to risks, Qwest's ability to achieve Year 2000 compliance, and adverse changes
in the regulatory or legislative environment, and failure to complete the merger
with U S WEST timely or at all. This release may include analysts' estimates and
other information prepared by third parties, for which Qwest assumes no
responsibility. 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.
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<TABLE>
<CAPTION>
ATTACHMENT A
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
Three Months Ended Nine Months Ended
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenue:
Communications services $ 1,018.1 $ 601.8 $ 2,545.7 $ 884.2
Construction services -- 205.0 224.5 493.4
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Total revenue 1,018.1 806.8 2,770.2 1,377.6
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Operating expenses:
Access and network operations 556.3 371.6 1,433.8 556.1
Construction services -- 128.2 96.4 333.8
Selling, general and administrative -
communications 271.3 178.7 686.5 312.3
Selling, general and administrative -
construction -- 10.7 20.7 29.2
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EBITDA 190.5 117.6 532.8 146.2
Depreciation and amortization 101.7 79.9 290.5 120.0
Merger related costs 25.0 -- 25.0 812.5
--------- --------- ----------- ---------
Earnings (loss) from operations 63.8 37.7 217.3 (786.3)
Interest expense and other, net 31.0 31.9 112.0 50.7
Earnings (loss) before income taxes 32.8 5.8 105.3 (837.0)
Income tax expense (benefit) 34.6 12.7 83.8 (14.4)
--------- --------- ----------- ---------
Net earnings (loss) $ (1.8) $ (6.9) $ 21.5 $ (822.6)
========= ========= =========== =========
Net earnings (loss) per share - basic $ -- $ (0.01) $ 0.03 $ (1.58)
========= ========= =========== =========
Net earnings (loss) per share - diluted $ -- $ (0.01) $ 0.03 $ (1.58)
========= ========= =========== =========
Weighted average shares outstanding - basic 745.9 661.5 720.9 519.9
========= ========= =========== =========
Weighted average shares outstanding - diluted 777.8 692.1 757.5 547.9
========= ========= =========== =========
Net earnings (loss) before nonrecurring charges (1) $ 19.8 $ (6.9) $ 40.6 $ (18.5)
========= ========= =========== =========
Net earnings (loss) per share before nonrecurring
charges - basic $ 0.03 $ (0.01) $ 0.06 $ (0.04)
========= ========= =========== =========
Net earnings (loss) per share before nonrecurring
charges - diluted $ 0.03 $ (0.01) $ 0.05 $ (0.04)
========= ========= =========== =========
</TABLE>
(1) Net earnings (loss) before nonrecurring charges excludes merger related
charges incurred in conjunction with the LCI and EUnet acquisitions in 1998, as
well as merger related charges incurred in conjunction with the pending merger
with U S WEST.
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<TABLE>
<CAPTION>
ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - PRO FORMA
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
Pro Forma (1) (2) (3) Pro Forma (1) (2) (3)
Three Months Ended Nine Months Ended
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1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenue:
Communications services $ 1,018.1 $ 602.1 $ 2,520.9 $ 1,669.9
Construction services -- 205.0 224.5 493.4
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Total revenue 1,018.1 807.1 2,745.4 2,163.3
--------- ------- --------- ---------
Operating expenses:
Access and network operations 556.3 376.5 1,421.1 1,048.4
Construction services -- 128.2 96.4 333.8
Selling, general and administrative -
communications 271.3 179.5 673.4 497.7
Selling, general and administrative -
construction -- 10.7 20.7 29.2
--------- ------- --------- ---------
EBITDA 190.5 112.2 533.8 254.2
Depreciation and amortization 101.7 80.8 284.7 222.8
--------- ------- --------- ---------
Earnings from operations 88.8 31.4 249.1 31.4
Interest expense and other, net 31.0 32.4 110.6 64.8
--------- ------- --------- ---------
Earnings (loss) before income taxes 57.8 (1.0) 138.5 (33.4)
Income tax expense 38.0 10.4 91.3 19.2
--------- ------- --------- ---------
Net earnings (loss) $ 19.8 $ (11.4) $ 47.2 $ (52.6)
========= ======= ========= =========
Net earnings (loss) per share - basic $ 0.03 $ (0.02) $ 0.07 $ (0.08)
========= ======= ========= =========
Net earnings (loss) per share - diluted $ 0.03 $ (0.02) $ 0.06 $ (0.08)
========= ======= ========= =========
Weighted average shares outstanding - basic 745.9 671.6 720.9 662.3
========= ======= ========= =========
Weighted average shares outstanding - diluted 777.8 702.9 757.5 691.0
========= ======= ========= =========
</TABLE>
(1) Pro forma results are reflected as if the acquisitions of Phoenix, LCI, and
Icon had been included from January 1, 1998 and exclude one-time merger related
charges.
(2) Pro forma results exclude results of operations for EUnet, which was
contributed to the KPNQwest Joint Venture in April, 1999.
(3) Pro forma results exclude one-time merger related charges incurred in
conjunction with the pending merger with U S WEST.
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ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1999 1998
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ASSETS
Cash $ 859.9 $ 462.8
Other current assets 1,049.0 976.3
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Total current assets 1,908.9 1,439.1
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Property and equipment, net 3,545.3 2,655.4
Excess of cost over net assets acquired 3,282.0 3,402.0
Other, net 1,411.0 571.1
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TOTAL ASSETS $ 10,147.2 $ 8,067.6
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LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 955.5 $ 1,237.5
Long-term debt and capital lease obligations 2,352.0 2,307.1
Long-term liabilities and other 382.8 284.8
Total stockholders' equity 6,456.9 4,238.2
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,147.2 $ 8,067.6
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