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): April 19, 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
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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
On April 19, 2000, the Registrant reported its financial results for the first
quarter of 2000. A copy of the press release announcing the same is attached as
Exhibit 99.1 to this Current Report on Form 8-K.
On April 19, 2000, the Registrant also announced the following:
o It remains comfortable with the consensus of analysts' estimates for
2000 revenues of approximately $5.1 billion and EBITDA (earnings before
interest, taxes, depreciation and amortization) of approximately $1.1
billion.
o It continues to expect Internet Protocol (IP) and data revenues to
account for 35% to 40% of total revenues for the fourth quarter of
2000.
o It expects gross margins to be in the high 40% range by the end of
2000.
o It expects SG&A (selling, general and administrative expenses) for 2000
will be in the 25% to 26% range.
o It expects capital expenditure to be approximately $3.3 billion for
2000. For 2001, capital expenditure could be around $4 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 or
financial results 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, adverse changes in the
regulatory or legislative environment, and failure to complete the merger with
U S WEST, or to achieve the synergies and financial results expected to result
from the merger, 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 April 19, 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: April 19, 2000 By: /s/ DRAKE S. TEMPEST
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Drake S. Tempest
Executive Vice President and General Counsel
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EXHIBIT INDEX
Exhibit 99.1 Press release of the Registrant dated April 19, 2000.
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EXHIBIT 99.1
QWEST COMMUNICATIONS REPORTS STRONG REVENUE
AND EBITDA FOR FIRST QUARTER 2000
RESULTS FUELED BY MORE THAN 200% GROWTH IN INTERNET AND DATA REVENUES
THAT NOW COMPRISE OVER 30% OF TOTAL REVENUE
First quarter financial results compared to previous year:
>> Internet and data revenues continued strong growth of more than 200
percent and comprise more than 30 percent of total revenue
>> Services revenue increased 65 percent
>> Total revenue grew 39 percent to $1.22 billion
>> Total EBITDA increased 52% to $236.0 million
>> Services EBITDA margins improved from 13.7 percent to 19.4 percent
First quarter operational highlights:
>> Qwest has grown from the 25th to the third largest carrier of Internet
traffic in only 14 months
>> Qwest and KPNQwest struck deals with IBM to support expansion of
CyberCenters(sm) in North America and Europe, with combined revenue to
Qwest and KPNQwest of $4.5 billion expected over the life of the
contracts
>> Qwest/U S WEST merger gained approvals from the FCC, Colorado and
Iowa; new senior management team selected; Qwest announced plan to
sell its long distance business in the U S WEST territory to Touch
America
DENVER, APRIL 19, 2000 - Qwest Communications International Inc. (NYSE: Q), the
broadband Internet communications company, today announced strong Internet and
data services drove record first quarter revenue of $1.22 billion and $236.0
million of earnings before interest, taxes, depreciation and amortization
(EBITDA). Internet and data services revenues continued to grow as a significant
part of Qwest's overall revenue mix, comprising more than 30 percent of total
revenue. For the 12th consecutive quarter the company met or exceeded the
consensus of analysts' estimates.
"We continue to drive strong demand for our industry-leading portfolio of
Internet and data services in the business marketplace," said Joseph P. Nacchio,
Qwest's chairman and CEO. "We are riveted on delivering next-generation
broadband Internet applications and services. Importantly, during the quarter we
strengthened our services portfolio through the deal with IBM to deliver a
broader range of hosting and e-commerce solutions to our customers."
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The $1.22 billion in total revenue for the quarter reflects a 39 percent
increase from the $878.4 million for the first quarter of 1999, fueled by 65
percent growth in services revenue. Sequential total revenue grew more than five
percent reflecting the strength in Internet and data services and less
dependence on voice long distance services.
EBITDA for the first quarter was up 52 percent to $236.0 million compared to
$155.4 million in the first quarter of 1999, while services EBITDA increased by
more than 134 percent. Sequential EBITDA grew more than four percent even as the
company continued to make investments for future growth. These investments
include the build-out of CyberCenters, broadband local access products and
services, Internet Protocol (IP) enabling platforms, data product development,
and enhanced data sales channels.
This aggressive investment strategy continues to drive the company's revenue
growth, outpacing increases in expenses. As a result, the services EBITDA margin
improved from 13.7 percent in the first quarter of 1999 to 19.4 percent for the
same period in 2000.
Excluding non-recurring items, the company achieved first quarter net earnings
of $30.0 million, or $0.04 per diluted share, compared to net earnings of $4.8
million, or $0.01 per diluted share a year ago. These non-recurring items are
comprised of U S WEST merger related charges incurred during the quarter and a
gain on the sale of an investment. The company reported net earnings of $12.6
million, or $0.02 per diluted share, for the quarter, compared to net earnings
of $4.8 million, or $0.01 per diluted share, for 1999.
Robert S. Woodruff, Qwest executive vice president and CFO, said, "We are
extremely pleased with the strong financial results for the quarter, and expect
continued strong revenue and EBITDA growth led by the demand for Qwest's
Internet-based broadband applications and services."
Woodruff continued, "Our capital spending program for 2000 is expected to be
approximately $3.3 billion. This increase over our previously announced $2.5 to
$2.7 billion plan reflects time to market and growth opportunities for
acceleration of our CyberCenter expansion and build-out of local broadband
services."
INTERNET AND DATA SERVICES BUSINESS
During the quarter, Qwest continued to drive demand for its broadband
applications and services. Qwest and KPNQwest announced two multi-year
initiatives with IBM to deliver next-generation e-business services and
applications through the construction and activation of new Qwest CyberCenters
throughout North America and Europe. The initiatives are expected to produce
$4.5 billion in combined revenue for Qwest and KPNQwest over the life of the
contracts.
Qwest has selected IBM Global Services to build and provide operational support
for 28 additional CyberCenters in North America. IBM will purchase hosting space
from Qwest to support its customers' e-commerce initiatives and will become an
anchor tenant in the
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CyberCenters it builds. After all planned IBM-built CyberCenters are completed,
Qwest expects to operate a total of 42 CyberCenters in the U.S. and Canada.
In Europe, KPNQwest, Qwest's European joint venture with KPN, selected IBM to
build and provide operational support for up to 18 new KPNQwest CyberCenters
connected to KPNQwest's high capacity fiber-optic EuroRings(sm) network. IBM
will also purchase hosting space in the centers to host their customers'
e-business and business-to-business initiatives.
Qwest Cyber.Solutions, the industry's largest application service provider (ASP)
based on market share, continued to win customers in the ASP arena by securing
more than $20 million in contracts for applications management, hosting and
packaged applications services. The newest Qwest Cyber.Solutions clients include
JDS Uniphase Corporation, BMC Software, Corban Communications, Goldschmidt
Chemical Corporation and Terra Industries.
LOCAL BROADBAND
During the quarter, Qwest Link (sm), Qwest's business unit responsible for
developing local broadband networks, completed the initial phase of its build
out in selected California cities and activated customers on its facilities,
providing high-speed local connectivity to the company's global Internet
network. Qwest is on schedule with its local build out plans and currently has
projects underway in a number of major U.S. cities including, Chicago, Dallas,
Los Angeles, New York, Sacramento, San Jose, San Francisco, and Washington D.C.
QWEST/ U S WEST MERGER
The Qwest and U S WEST merger received approval during the quarter from the
Federal Communications Commission (FCC), Colorado and Iowa regulators. Six
states in the U S WEST region still must approve the merger. In addition, last
week Qwest and U S WEST reached agreement with the Minnesota Department of
Commerce and the Minnesota Office of the Attorney General on key issues, and
these agencies agreed to support expeditious approval of the merger. Earlier in
the quarter, the staff of the Washington Utilities and Transportation Commission
and the Public Counsel of the Washington Attorney General's Office reached
agreement on similar issues.
Qwest also announced the senior officers for the new company that will be formed
after the merger is completed. These nine persons will report directly to
Nacchio and are responsible for working with current executives of both
companies to facilitate the merger process.
Qwest also announced plans in March to sell its long distance business in the U
S WEST territory to Touch America, the telecommunications subsidiary of The
Montana Power Co. The divestiture plan was filed April 14 with the FCC and
action is expected by the end of June.
GLOBAL EXPANSION
In January, KPNQwest announced plans to construct a seventh high-capacity
fiber-optic network ring. The 2,500-mile Iberian Ring will bring the total size
of KPNQwest's
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European network to approximately 11,800 miles and connect additional cities in
Southern France and Spain into KPNQwest's pan-European network. In addition,
during the quarter KPNQwest completed construction of a 1,700- mile fiber-optic
ring in Germany. KPNQwest announced April 17 that it is acquiring COMM2000, a
market-leading Italian Internet Service Provider with 4,000 customers.
Qwest also named Richard Cantin as regional president of Qwest's Internet and
multimedia services in Canada. Cantin is responsible for establishing strategic
partnerships and alliances that will leverage Qwest's new 4,300-mile high-speed,
fiber optic broadband Internet network in Canada.
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 25,500 miles in North America. In addition, KPNQwest
(Nasdaq: KQIP), Qwest's European joint venture with KPN, the Dutch
telecommunications company, is building and will operate a high-capacity
European fiber optic, Internet-based network that will span 11,800 miles when it
is completed in 2001. For more information, please visit the Qwest web site at
www.qwest.com.
# # #
Contacts: MEDIA CONTACT: INVESTOR CONTACT:
Tyler Gronbach Lee Wolfe
(303) 992-2155 800-567-7296
[email protected] [email protected]
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, adverse changes in the regulatory or legislative environment. 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 MONTHS ENDED MARCH 31, 2000 AND 1999
(In Millions, Except Per Share Information)
(Unaudited)
Three Months Ended
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2000 1999
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<S> <C> <C>
Revenue:
Communications services $ 1,216.8 $ 737.2
Construction services -- 141.2
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Total revenue 1,216.8 878.4
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Operating expenses:
Access and network operations 677.9 432.9
Construction services -- 76.8
Selling, general and administrative -
communications 302.9 203.6
Selling, general and administrative -
construction -- 9.7
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EBITDA 236.0 155.4
Depreciation and amortization 118.1 95.9
Merger related costs 21.2 --
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Earnings from operations 96.7 59.5
Interest expense and other, net 37.1 34.9
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Earnings before income taxes 59.6 24.6
Income tax expense 47.0 19.8
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Net earnings $ 12.6 $ 4.8
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Net earnings per share - basic $ 0.02 $ 0.01
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Net earnings per share - diluted $ 0.02 $ 0.01
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Weighted average shares outstanding - basic 751.5 698.3
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Weighted average shares outstanding - diluted 789.4 737.1
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Net earnings excluding non-recurring items (1) $ 30.0 $ 4.8
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Net earnings per share excluding non-recurring
items - basic $ 0.04 $ 0.01
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Net earnings per share excluding non-recurring
items - diluted $ 0.04 $ 0.01
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(1) Excludes merger related charges incurred in conjunction with the pending
merger with U S WEST and a gain on the sale of an investment in 2000.
</TABLE>
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ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - PRO FORMA
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN MILLIONS, EXCEPT PER SHARE INFORMATION)
(UNAUDITED)
Pro Forma (1)
Three Months Ended
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2000 1999
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Revenue:
Communications services $ 1,216.8 $ 712.3
Construction services -- 141.2
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Total revenue 1,216.8 853.5
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Operating expenses:
Access and network operations 677.9 420.2
Construction services -- 76.8
Selling, general and administrative -
communications 302.9 190.3
Selling, general and administrative -
construction -- 9.7
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EBITDA 236.0 156.5
Depreciation and amortization 118.1 90.1
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Earnings from operations 117.9 66.4
Interest expense and other, net 43.4 33.5
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Earnings before income taxes 74.5 32.9
Income tax expense 44.5 25.7
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Net earnings $ 30.0 $ 7.2
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Net earnings per share - basic $ 0.04 $ 0.01
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Net earnings per share - diluted $ 0.04 $ 0.01
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Weighted average shares outstanding - basic 751.5 698.3
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Weighted average shares outstanding - diluted 789.4 737.1
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(1) Pro forma results reflect the following items:
o Exclude the results of operations for Eunet, which was contributed to
the KPNQwest Joint Venture in April, 1999.
o Exclude the one-time merger related charges incurred in conjunction
with the pending merger with U S WEST in 2000.
o Exclude a gain on the sale of an investment in 2000.
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ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
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ASSETS
Cash $ 40.6 $ 349.2
Other current assets 1,715.7 1,436.0
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Total current assets 1,756.3 1,785.2
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Property and equipment, net 4,934.2 4,108.7
Excess of cost over net assets acquired 3,263.0 3,290.1
Other, net 2,021.7 1,874.1
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TOTAL ASSETS $ 11,975.2 $ 11,058.1
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LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 1,969.3 $ 1,238.4
Long-term debt and capital lease obligations 2,384.9 2,368.3
Long-term liabilities and other 546.0 450.1
Total stockholders' equity 7,075.0 7,001.3
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,975.2 $ 11,058.1
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