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): February 2, 2000
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 February 2, 2000, the Registrant announced its financial results for the year
ended December 31, 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 February 2, 2000, the Registrant also announced that it expects (1)
communications services revenue growth of approximately 37% to 42% and
communications services EBITDA (earnings before interest, taxes, depreciation
and amortization) growth of approximately 65% to 75%, in each case for the year
ending December 31, 2000, compared to the year ended December 31, 1999, and (2)
gross margins for the fourth quarter of 2000 to be in the high 40% range. 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 and achieve
projected synergies and financial results 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 February 2, 2000.
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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: February 2, 2000 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 February 2, 2000.
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Exhibit 99.1
RIDE THE LIGHT
QWEST NEWS
[GRAPHIC LOGO OMITTED]
QWEST REPORTS RECORD REVENUE AND EBITDA FOR
FOURTH QUARTER AND YEAR-END 1999 DRIVEN BY MORE THAN 200%
GROWTH IN INTERNET AND DATA REVENUES
REPORTED 1999 REVENUE INCREASED 75%, EBITDA UP 158%
FOURTH QUARTER SEQUENTIAL REVENUE INCREASED 14%, EBITDA UP 19%
Fourth Quarter Reported Results Compared to Previous Year:
o Total revenue grew 34 percent to $1.16 billion
o Communications services revenue increased 73 percent
o Internet and data revenues grew more than 200 percent and comprised
more than 25% of total revenue
o Total EBITDA of $226.4 million represents a 53 percent increase
o Communications Services EBITDA margin improved from 11.4 percent to
19.6 percent
Fourth Quarter Reported Results Compared to Third Quarter:
o Revenue grew 14 percent to $1.16 billion
o EBITDA increased 19 percent to $226.4 million
o EBITDA margin increased from 18.7 percent to 19.6 percent
Full Year Pro Forma 1999 Compared to Pro Forma 1998:
o Total revenue grew 29 percent to $3.90 billion
o Communications services revenue increased 57 percent to $3.68 billion
o Total EBITDA of $760.2 million represents 92 percent growth
o Communications services EBITDA increased 238 percent to $652.8 million
DENVER, FEBRUARY 2, 2000 - Qwest Communications International Inc. (NYSE: Q),
the broadband Internet communications company, today announced record revenue
and earnings before interest, taxes, depreciation and amortization (EBITDA) for
the fourth quarter and year-end 1999. For the eleventh consecutive quarter Qwest
has met or exceeded the consensus of analysts' estimates.
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The $1.16 billion in total reported revenue for the quarter reflects a 34
percent increase from the $865.1 million recorded in the same period in 1998,
while communications services revenue grew 73 percent. On a sequential basis,
Qwest reported a 14 percent increase from $1.02 billion in the third quarter of
1999 to $1.16 billion as a result of continued growth in Internet, multimedia
and data services. Full year reported revenue increased 75 percent from $2.24
billion to $3.93 billion. Full year 1999 pro forma revenue increased 29 percent
from $3.03 billion to $3.90 billion.
Total reported EBITDA for the fourth quarter was up 53 percent to $226.4 million
compared to $148.3 million in the fourth quarter of 1998, while communications
services EBITDA increased more than 197 percent. Communications services EBITDA
grew 19 percent compared to the third quarter of 1999. Pro forma 1999 EBITDA
grew 92 percent to $760.2 million from $396.0 million in 1998, despite a 47
percent decline in construction EBITDA resulting from the mid-year completion of
18,500 miles of the U.S. portion of the company's North American network. Full
year 1999 reported EBITDA increased 158 percent from $294.5 million to $759.2
million. Full year 1999 pro forma communications services EBITDA grew 238
percent over 1998.
As a result of strong revenue growth and the company's ability to carefully
manage expenses, communications services EBITDA margin went from 11.4 percent in
the fourth quarter of 1998 to 19.6 percent for the same period in 1999.
Sequentially, communications services EBITDA increased from 18.7 percent for the
third quarter 1999 to 19.6 percent for the fourth quarter in spite of
investments for growth in areas such as, CyberCenters(sm), data services,
enhanced data sales channels, and broadband local access services.
On a reported basis, the company achieved net earnings of $458.5 million, or
$0.60 per diluted share, for the year, compared to a net loss of $844.0 million,
or $1.51 loss per share, for 1998. The company reported net earnings of $72.6
million, or $0.09 per diluted share, before non-recurring items, compared to a
net loss of $19.4 million, or $0.03 loss per share, before non-recurring items.
Excluding the one-time items of a $414.0 million gain recognized as a result of
the KPNQwest initial public offering and $6.5 million of costs directly related
to the pending merger with U S WEST, Qwest reported net earnings of $29.4
million, or $0.04 per diluted share, compared to a pro forma net earnings of
$0.01 per diluted share during the same period in 1998. Including the
non-recurring items, Qwest reported net earnings of $437.0 million, or $0.56 per
diluted share, compared to a net loss of $0.03 per share a year ago.
"We are extremely pleased to continue our strong financial performance in our
core businesses, while our management team focuses on growing revenues globally
through strategic initiatives, including the merger with U S WEST," said Joseph
P. Nacchio, Qwest chairman and CEO. "In 1999 we made the necessary investments
and commitments to continue to deliver to customers leading-edge broadband
Internet communications solutions that will solidly position us as the new
Internet communications company of the next decade."
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Robert S. Woodruff, Qwest executive vice president and chief financial officer,
said, "The financial results for the year reflect Qwest's strong revenue growth
and continued margin improvement as a result of our ability to manage expenses.
We expect to continue to see strong revenue and EBITDA growth in 2000 led by the
demand for Qwest's Internet-based applications and services. In 2000, we
anticipate revenue will continue to grow in the range of 30 - 35 percent, with
EBITDA growth of approximately 40 - 50 percent."
Woodruff continued, "Our capital spending program for 2000 will be between $2.5
and $2.7 billion to take advantage of growth opportunities by expanding our
CyberCenters, creating new global businesses, and by building and selling
broadband local access, including Digital Subscriber Line services and expanding
Internet and data services."
These estimates do not include the impact of the pending merger with U S WEST or
estimated financial synergies.
INTERNET AND COMMUNICATIONS BUSINESS
During the quarter Qwest was awarded a $50 million data communications contract
to support the U.S. Department of Energy's (DOE), Energy Sciences Network
(ESnet). ESnet will connect DOE's sites including the national labs, as well as
major corporate partners and universities, to Qwest's high-performance broadband
Internet communications network. Qwest was selected because it can provide
network speeds over the next several years that are 500 times faster than the
highest speed available today.
Strong demand continued for Qwest's hosting and advanced application services.
Qwest accelerated CyberCenter construction during the quarter as work on three
centers neared completion. Qwest has seven CyberCenters in operation for Web and
applications hosting and e-commerce services and is building seven additional
facilities in the U.S.
Qwest has contracts with and is providing service to 40 of the top 50 Fortune
500 companies. Contracts secured by Qwest with major national and multi-national
corporations increased more than 80 percent compared to 1998. In addition, Qwest
and BellSouth Corporation announced contracts totaling more than $250 million in
the fourth quarter. The companies said their teaming agreement has produced 27
contracts for communications services, and more than 540 proposals are pending
with business customers.
NORTH AMERICAN NETWORK
Qwest's North American network increased to 24,500 miles in the quarter with the
addition of 4,300-miles of network across Canada. The Canadian network joins two
existing Qwest U.S. transcontinental routes to deliver a wide variety of
broadband Internet solutions, including dedicated access, Web and application
hosting, and E-commerce applications. The company also plans to add broadband
local access and hosting facilities to serve customers in major markets
including Montreal, Toronto and Vancouver.
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Qwest announced four California cities would be the first of 25 cities in the U.
S. to have high-speed Digital Subscriber Line services through the QwestLink
network. The cities are Sacramento, San Diego, San Jose and San Francisco. By
the end of 2000, QwestLink networks are scheduled to be completed in 11 cities
followed by 14 additional cities in 2001.
Qwest also announced that it would be the first company to offer an all-optical,
OC-192 network by mid-2000. Enabled by relationships with emerging technology
companies and established market leaders, Qwest's Internet Protocol network will
provide customers with unprecedented high-speed capacity at a lower cost.
QWEST/ U S WEST MERGER
The Qwest and U S WEST merger is on schedule to close mid-year. People from both
companies are working on 30 teams and are ahead of schedule implementing
processes to realize the synergies outlined when the merger was announced.
Shareowners of both companies overwhelmingly approved the merger Nov. 2. The
Colorado utility commission approved the merger in early January. Hearings are
underway or scheduled to begin soon in many other states.
GLOBAL EXPANSION
In November, KPNQwest, the European joint venture between Qwest and KPN, the
Dutch communications company, completed an IPO. The stock is listed under the
symbol "KQIP" on the Nasdaq and Amsterdam exchange, and the company has a
current market capitalization in excess of $28 billion. Qwest owns 44 percent of
the KQIP stock, which is currently valued at approximately $12.5 billion.
KPNQwest is building an 11,800-mile network in 46 cities throughout Europe. On
February 1, 2000 KPNQwest reported revenue of $199 million for the nine months
ended December 31, 1999.
ABOUT QWEST
Qwest Communications International Inc. (NYSE: Q) is a leader in reliable,
scalable 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 equipment for speed and
efficiency, spans more than 24,500 miles in North America. For more information,
please visit the Qwest web site at www.qwest.com.
# # #
Contacts: MEDIA CONTACT: INVESTOR CONTACT:
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Tyler Gronbach Lee Wolfe
(303) 992-2155 800-567-7296
[email protected] [email protected]
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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 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 and achieve projected synergies and financial results 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 TWELVE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
Three Months Ended Twelve Months Ended
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1999 1998 1999 1998
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Communications services $ 1,157.4 $ 670.1 $ 3,703.1 $ 1,554.3
Construction services -- 195.0 224.5 688.4
----------- --------- ----------- -----------
Total revenue 1,157.4 865.1 3,927.6 2,242.7
----------- --------- ----------- -----------
Operating expenses:
Access and network operations 628.9 405.8 2,062.7 961.8
Construction services -- 113.1 96.4 446.8
Selling, general and administrative -
communications 302.1 188.2 988.6 500.6
Selling, general and administrative -
construction -- 9.7 20.7 39.0
----------- --------- ----------- -----------
EBITDA 226.4 148.3 759.2 294.5
Depreciation and amortization 113.6 81.8 404.1 201.7
Merger related costs 6.5 34.0 31.5 846.5
----------- --------- ----------- -----------
Earnings (loss) from operations 106.3 32.5 323.6 (753.7)
Interest expense and other, net (371.9) 45.4 (259.9) 96.1
----------- --------- ----------- -----------
Earnings (loss) before income taxes 478.2 (12.9) 583.5 (849.8)
Income tax expense (benefit) 41.2 8.7 125.0 (5.8)
----------- --------- ----------- -----------
Net earnings (loss) $ 437.0 $ (21.6) $ 458.5 $ (844.0)
=========== ========= =========== ===========
Net earnings (loss) per share - basic $ 0.58 $ (0.03) $ 0.63 $ (1.51)
=========== ========= =========== ===========
Net earnings (loss) per share - diluted $ 0.56 $ (0.03) $ 0.60 $ (1.51)
=========== ========= =========== ===========
Weighted average shares outstanding - basic 748.7 673.0 727.8 558.2
=========== ========= =========== ===========
Weighted average shares outstanding - diluted 784.8 703.0 764.3 586.7
=========== ========= =========== ===========
Net earnings (loss) before
non-recurring items (1) $ 29.4 $ 10.4 $ 72.6 $ (19.4)
=========== ========= =========== ===========
Net earnings (loss) per share before
non-recurring items - basic $ 0.04 $ 0.02 $ 0.10 $ (0.03)
=========== ========= =========== ===========
Net earnings (loss) per share before
non-recurring items - diluted $ 0.04 $ 0.01 $ 0.09 $ (0.03)
=========== ========= =========== ===========
</TABLE>
(1) Net earnings (loss) before non-recurring items excludes merger related
charges incurred in conjunction with the LCI, EUnet, and Icon
acquisitions and the loss on redemption of certain debt of the company
in 1998, as well as merger related charges incurred in conjunction with
the pending merger with U S WEST and the equity gain as a result of the
KPNQwest Initial Public Offering in 1999.
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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 TWELVE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
Pro Forma (1) Pro Forma (1)
Three Months Ended Twelve Months Ended
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1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Communications services $ 1,157.4 $ 670.7 $ 3,678.2 $ 2,340.5
Construction services -- 195.0 224.5 688.4
----------- ---------- ----------- ----------
Total revenue 1,157.4 865.7 3,902.7 3,028.9
----------- ---------- ----------- ----------
Operating expenses:
Access and network operations 628.9 412.9 2,050.0 1,461.4
Construction services -- 113.1 96.4 446.8
Selling, general and administrative -
communications 302.1 188.0 975.4 685.7
Selling, general and administrative -
construction -- 9.7 20.7 39.0
----------- ---------- ----------- ----------
EBITDA 226.4 142.0 760.2 396.0
Depreciation and amortization 113.6 82.3 398.3 305.0
----------- ---------- ----------- ----------
Earnings from operations 112.8 59.7 361.9 91.0
Interest expense and other, net 42.2 31.4 152.8 96.1
----------- ---------- ----------- ----------
Earnings (loss) before income taxes 70.6 28.3 209.1 (5.1)
Income tax expense 41.2 22.2 134.2 41.3
----------- ---------- ----------- ----------
Net earnings (loss) $ 29.4 $ 6.1 $ 74.9 $ (46.4)
=========== ========== =========== ==========
Net earnings (loss) per share - basic $ 0.04 $ 0.01 $ 0.10 $ (0.07)
=========== ========== =========== ==========
Net earnings (loss) per share - diluted $ 0.04 $ 0.01 $ 0.10 $ (0.07)
=========== ========== =========== ==========
Weighted average shares outstanding - basic 748.7 683.1 727.8 667.5
=========== ========== =========== ==========
Weighted average shares outstanding - diluted 784.8 713.8 764.3 696.7
=========== ========== =========== ==========
</TABLE>
(1) Pro forma results reflect the following items:
o The acquisitions of Phoenix, LCI, and Icon had been included from
January 1, 1998 and exclude one-time merger related charges.
o Exclude the results of operations for EUnet, which was contributed to
the KPNQwest Joint Venture in April, 1999.
o Exclude one-time merger related charges incurred in conjunction with
the pending merger with U S WEST in 1999.
o Exclude a charge for the redemption of certain debt of the company in
1998.
o Exclude the gain as a result of the KPNQwest Initial Public Offering in
1999.
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ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
1999 1998
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ASSETS
Cash $ 349.2 $ 462.8
Other current assets 1,436.0 976.3
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Total current assets 1,785.2 1,439.1
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Property and equipment, net 4,108.7 2,655.4
Excess of cost over net assets acquired 3,290.1 3,402.0
Other, net 1,874.1 571.1
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TOTAL ASSETS $ 11,058.1 $ 8,067.6
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 1,238.4 $ 1,237.5
Long-term debt and capital lease obligations 2,368.3 2,307.1
Long-term liabilities and other 450.1 284.8
Total stockholders' equity 7,001.3 4,238.2
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,058.1 $ 8,067.6
=============== ==============
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