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UNITED STATES
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): MAY 15, 1998
USW-C, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
A DELAWARE CORPORATION COMMISSION FILE IRS EMPLOYER
IDENTIFICATION
(STATE OF INCORPORATION) NUMBER 1-14087 NO. 84-0953188
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1801 CALIFORNIA STREET, DENVER, COLORADO 80202
(Address of principal executive offices, including Zip Code)
TELEPHONE NUMBER (303) 672-2700
(Registrant's telephone number, including area code)
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ITEM 7. EXHIBITS
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EXHIBIT DESCRIPTION
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99 USW-C, Inc. Unaudited Pro Forma Condensed Combined Financial Statements
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SIGNATURE
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 hereunto duly authorized.
USW-C, INC.
By: /s/ THOMAS O. MCGIMPSEY
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Thomas O. McGimpsey
CORPORATE COUNSEL AND
ASSISTANT SECRETARY
Dated: May 15, 1998
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EXHIBIT 99
USW-C, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
THE SEPARATION
On October 25, 1997, the Board of Directors of U S WEST, Inc. ("U S WEST")
adopted a proposal to separate U S WEST into two independent companies (the
"Separation"). As a result of the Separation, the Communications Group will
become an independent public company and will be renamed "U S WEST, Inc."
("USW-C, Inc." or "New U S WEST"). In addition, the Media Group's directory
business known as U S WEST Dex, Inc. ("Dex") will be aligned with New U S WEST
(the "Dex Alignment"). The assets of New U S WEST will be accounted for at the
historical values at which they were carried by U S WEST prior to the
Separation. Following the Separation, U S WEST will continue as an independent
public company comprised of the current businesses of Media Group other than Dex
and will be renamed "MediaOne Group, Inc." ("MediaOne").
The Separation will be implemented pursuant to the terms of a separation
agreement between U S WEST and New U S WEST (the "Separation Agreement"). Under
the Separation Agreement, U S WEST will redeem each issued and outstanding share
of Communications Stock for one share of New U S WEST Common Stock, and each
outstanding share of Media Stock will remain outstanding and will thereafter
represent one share of MediaOne Common Stock. In connection with the Separation,
New U S WEST and MediaOne will seek to refinance certain indebtedness issued or
guaranteed by U S WEST (the "U S WEST Indebtedness") through a combination of
tender offers, prepayments, defeasance, consent solicitations and/or exchange
offers (the "Refinancing").
In connection with the Dex Alignment, (i) U S WEST will distribute, as a
dividend, an aggregate of $850 in value of New U S WEST Common Stock to holders
of Media Stock (the "Dex Dividend") and (ii) $3.9 billion of U S WEST debt,
currently allocated to Media Group, will be refinanced by New U S WEST (the "Dex
Indebtedness").
The transaction is subject to shareowner approval and is expected to be
completed by mid-June 1998.
The following unaudited pro forma condensed combined statement of operations
of New U S WEST for the three months ended March 31, 1998 and year ended
December 31, 1997 gives effect to the Refinancing (including the refinancing by
New U S WEST of the Dex Indebtedness), the issuance of the Dex Dividend to
holders of Media Stock in connection with the Dex Alignment, transfers of
certain assets and liabilities of U S WEST to New U S WEST and allocations of
certain costs and expenses in connection with the Separation (the "New U S WEST
Separation Adjustments") as if such transactions had been consummated as of
January 1, 1998 and 1997, respectively. The unaudited pro forma condensed
combined balance sheet as of March 31, 1998 gives effect to the New U S WEST
Separation Adjustments as if such transactions had been consummated as of March
31, 1998.
The combined historical financial statements of New U S WEST (not included
herein) combine the historical results of operations, balance sheets and cash
flows of the businesses that comprise the Communications Group and Dex as if
such businesses operated as a separate entity for all periods presented and do
not give effect to any of the New U S WEST Separation Adjustments. The following
unaudited pro forma condensed combined financial statements present the
historical results of operations and financial position of the Communications
Group and Dex in separate columns to the left of New U S WEST's combined
historical results of operations and financial position. This presentation is
intended to assist the reader in gaining a better understanding of the impact of
the Dex Alignment on the combined historical results of operations and financial
position of New U S WEST.
The assets of New U S WEST will be accounted for at the historical book
values at which they were carried by U S WEST prior to the Separation. MediaOne
will account for the distribution of New
1
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EXHIBIT 99
USW-C, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(CONTINUED)
U S WEST to U S WEST's stockholders at fair value, and will recognize a gain on
the distribution. The historical results of New U S WEST will be reflected as
discontinued operations by MediaOne.
The pro forma adjustments included herein are based on available information
and certain assumptions that management believes are reasonable and are
described in the accompanying notes. The unaudited pro forma financial
statements do not necessarily represent what New U S WEST's financial position
or results of operations would have been had the transactions occurred at such
dates or to project New U S WEST's financial position or results of operations
at or for any future date or period. In the opinion of management, all
adjustments necessary to present fairly the unaudited pro forma financial
information have been made. The unaudited pro forma financial statements should
be read in conjunction with the historical financial statements of USW-C, Inc.
2
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USW-C, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
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COMMUNICATIONS NEW U S WEST
GROUP DEX NEW U S WEST SEPARATION NEW U S WEST
HISTORICAL HISTORICAL(A) HISTORICAL ADJUSTMENTS PRO FORMA
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Operating revenues...................... $ 2,710 $ 299 $ 3,009 $ 3,009
Operating expenses...................... 2,040 154 2,194 2,194
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Operating Income........................ 670 145 815 815
Interest expense........................ 97 97 $ 61(B) 158
Other expense--net...................... 25 25 25
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Income (loss) before income taxes....... 548 145 693 (61) 632
Provision (benefit) for income taxes.... 201 58 259 (23)(C) 236
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Income (loss)........................... $ 347 $ 87 $ 434 $ (38) $ 396
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Basic earnings per common share......... $ 0.72 $ 0.79
Average basic common shares outstanding 485.0 15.7(D) 500.7(E)
(millions)............................
Diluted earnings per common share....... $ 0.71 $ 0.78
Average diluted common shares 489.1 15.7 504.8
outstanding (millions)................
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
3
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USW-C, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
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COMMUNICATIONS NEW U S WEST
GROUP DEX NEW U S WEST SEPARATION NEW U S WEST
HISTORICAL HISTORICAL(A) HISTORICAL ADJUSTMENTS PRO FORMA
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Operating revenues...................... $ 10,319 $ 1,160 $ 11,479 $ 11,479
Operating expenses...................... 8,109 594 8,703 8,703
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Operating Income........................ 2,210 566 2,776 2,776
Interest expense........................ 403 2 405 $ 243(B) 648
Gains on sales of rural telephone 77 77 77
exchanges.............................
Gain on sale of investment in 53 53 53
Bellcore..............................
Other expense (income)--net............. 73 (1) 72 72
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Income (loss) before income taxes and 1,864 565 2,429 (243) 2,186
extraordinary item....................
Provision (benefit) for income taxes.... 684 218 902 (93)(C) 809
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Income (loss) before extraordinary $ 1,180 $ 347 $ 1,527 $ (150) $ 1,377
item..................................
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Basic earnings per common share before $ 2.44 $ 2.76
extraordinary item....................
Average basic common shares outstanding 482.8 15.7(D) 498.5(E)
(millions)............................
Diluted earnings per common share before $ 2.42 $ 2.73
extraordinary item....................
Average diluted common shares 491.2 15.7 506.9
outstanding (millions)................
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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USW-C, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
DOLLARS IN MILLIONS
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COMMUNICATIONS NEW U S WEST
GROUP DEX NEW U S WEST SEPARATION NEW U S WEST
HISTORICAL HISTORICAL(A) HISTORICAL ADJUSTMENTS PRO FORMA
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ASSETS
Current assets.......................... $ 2,433 $ 318 $ 2,751 $ 10(F) $ 2,761
Property, plant and equipment--net...... 14,178 73 14,251 26(F) 14,277
Other assets............................ 825 24 849 24(F) 886
13(G)
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Total assets............................ $ 17,436 $ 415 $ 17,851 $ 73 $ 17,924
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LIABILITIES AND EQUITY
Short term debt......................... $ 898 $ 26 $ 924 $ 775(B) $ 1,878
13(G)
45(H)
24(F)
122(I)
(13)(J)
(12)(K)
Other current liabilities............... 3,260 166 3,426 16(F) 3,442
Long-term debt.......................... 4,931 -- 4,931 3,099(B) 8,030
Other noncurrent liabilities............ 4,066 54 4,120 20(F) 4,152
12(K)
Equity.................................. 4,281 169 4,450 (3,874)(B) 422
(45)(H)
(122)(I)
13(J)
850(D)
(850)(D)
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Total liabilities and equity............ $ 17,436 $ 415 $ 17,851 $ 73 $ 17,924
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</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
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USW-C, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A) Reflects the historical results of operations and financial position of Dex.
Such amounts include the effects of all transactions and receivable and
payable balances between New U S WEST and MediaOne that will continue after
the Separation.
(B) Reflects an increase in New U S WEST debt totaling $3.9 billion (net of $26
million of Dex debt) in conjunction with the refinancing by New U S WEST of
the Dex Indebtedness. Also included is debt incurred related to costs and
expenses associated with the Separation. Interest expense is based on a rate
of 5.70 percent for short term debt and 6.26 percent for long term debt (the
current average of the 5- and 10-year borrowing rates available to U S WEST
Communications). A 1/8 percentage point change in the assumed financing rate
would change annual interest expense by approximately $5 million.
(C) Reflects the estimated income tax effects of the pro forma adjustments.
(D) Issuance of $850 million of New U S WEST Common Stock at $54.03 per share
(the average price of Communications stock for the 20 trading days ending 5
days prior to the Separation, as if the Separation had occurred on May 1,
1998) pursuant to the Dex Alignment. The share issuance is accounted for as
a dividend.
(E) Reflects the redemption of each share of Communications Stock for one share
of New U S WEST Common Stock and the issuance of $850 million of New U S
WEST Common Stock at $54.03 per share pursuant to the Dex Alignment.
(F) Reflects the transfer of assets and liabilities of U S WEST previously
shared by New U S WEST and MediaOne, for which debt financing is assumed.
(G) Reflects debt issuance costs related to the Refinancing.
(H) Reflects New U S WEST's after-tax, allocated share of Separation costs, for
which debt financing is assumed. Total separation costs of approximately
$175 million include cash payments under severance agreements of $45 million
and financial advisory, legal, registration fee, printing and mailing costs
related to the Separation. The income statement effects of New U S WEST's
allocated share of Separation Costs are not presented since such costs are
nonrecurring in nature. However, New U S WEST's cost of the Separation will
not affect the cost of providing service to telecommunications customers and
New U S WEST will not seek recovery of such costs from rate payers.
(I) Reflects a dividend to MediaOne of $122 million for New U S WEST's allocated
share of refinancing costs associated with the Separation, for which debt
financing is assumed.
(J) Reflects a $13 million return of capital to New U S WEST for insurance
premiums paid by New U S WEST to MediaOne in excess of liabilities incurred.
(K) Reflects $12 million, pre-tax payment to New U S WEST by MediaOne for the
present value of shared operating expenses to be assumed by New U S WEST
subsequent to the Separation.
6
