================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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): July 23, 1999
U S WEST, Inc.
(Formerly "USW-C, Inc.")
(Exact name of registrant as specified in its charter)
A Delaware Corporation Commission File IRS Employer Identification
(State of Incorporation) Number 1-14087 No. 84-0953188
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)
(The Exhibits index is located on page 4 of this report)
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<PAGE>
Item 5. Other Events
On July 23, 1999, U S WEST, Inc. released its second quarter earnings
results. The release and financial statements are attached hereto as Exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The following exhibits are filed as part of this current report on Form
8-K:
<TABLE>
<CAPTION>
<S> <C>
Exhibit Number Exhibit
27 Financial Data Schedule
99 Press Release issued July 23, 1999 concerning the earnings
results of U S WEST, Inc. for the Second quarter of 1999.
99A.1 Unaudited Consolidated Statements of Income of U S WEST, Inc.
for the quarters and six-month periods ended July 30, 1998 and
1999, respectively, filed in connection with the Press Release
dated July 23, 1999.
99A.2 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for
the quarter and six-month period ended June 30, 1999 and the
year ended December 31, 1998, respectively, filed in
connection with the Press Release dated July 23, 1999.
99A.3 Unaudited Consolidated Statements of Cash Flows of U S WEST,
Inc. for the six-month periods ended June 30, 1998 and 1999,
respectively, filed in connection with the Press Release
dated July 23, 1999.
99A.4 Unaudited Selected Consolidated Data of U S WEST, Inc. for the
quarters and six-month periods ended June 30, 1998 and 1999,
respectively, filed in connection with the Press Release dated
July 23, 1999.
99A.5 Unaudited Consolidated Statements of Operations of
U S WEST Communications, Inc. for the quarters and
six-month periods ended June 30, 1998 and 1999,
respectively, filed in connection with the Press Release
dated July 23, 1999
99A.6 Unaudited Consolidated Balance Sheets of U S WEST
Communications, Inc. for the six-month period ended
June 30, 1999 and the year ended December 31, 1998,
respectively, filed in connection with the Press Release dated
July 23, 1999.
</TABLE>
<PAGE>
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.
U S WEST, Inc.
(Formerly "USW-C, Inc.")
By: /s/ Thomas O. McGimpsey
-------------------------------------------------
Thomas O. McGimpsey
Assistant Secretary
Dated: July 23, 1999
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit Number Exhibit
27 Financial Data Schedule
99 Press Release issued July 23, 1999 concerning the earnings
results of U S WEST, Inc. for the Second quarter of 1999.
99A.1 Unaudited Consolidated Statements of Income of U S WEST, Inc.
for the quarters and six-month periods ended July 30, 1998 and
1999, respectively, filed in connection with the Press Release
dated July 23, 1999.
99A.2 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for
the quarter and six-month period ended June 30, 1999 and the
year ended December 31, 1998, respectively, filed in
connection with the Press Release dated July 23, 1999.
99A.3 Unaudited Consolidated Statements of Cash Flows of U S WEST,
Inc. for six-month periods ended June 30,1998 and 1999,
respectively, filed in connection with the Press Release
dated July 23, 1999.
99A.4 Unaudited Selected Consolidated Data of U S WEST, Inc. for the
quarters and six-month periods ended June 30, 1998 and 1999,
respectively, filed in connection with the Press Release dated
July 23, 1999.
99A.5 Unaudited Consolidated Statements of Operations of
U S WEST Communications, Inc. for the quarters and
six-month periods ended June 30, 1998 and 1999,
respectively, filed in connection with the Press Release
dated July 23, 1999
99A.6 Unaudited Consolidated Balance Sheets of U S WEST
Communications, Inc. for the six-month period
ended June 30, 1999 and the year ended December 31, 1998,
respectively, filed in connection with the Press Release dated
July 23, 1999.
</TABLE>
July 23, 1999
- - --------------------------------------------------------------------------------
Note to investors: Sol Trujillo, Chairman, President and CEO of U S WEST (NYSE:
USW), will host a live teleconference call at 9:00a.m. MDT (11:00 a.m. EDT)
today to discuss second quarter, 1999 results. U.S. participants should call
1-800-967-7141 by the scheduled start time. International callers should dial
719-457-2630. A replay will be available starting at noon MDT, through 6p.m. MDT
on Friday, July 30 by calling 1-888-203-1112 and enter-ing confirmation number
726120. International callers can reach the replay at 719-457-0820.
- - --------------------------------------------------------------------------------
U S WEST Second Quarter Earnings Rise 9.2 Percent
-- PCS Subscribers Up Five Fold Year Over Year;
Surpasses 50,000 DSL Subscribers --
DENVER - Riding a near 7 percent revenue growth rate, U S WEST (NYSE: USW) today
announced second quarter diluted earnings per share of $.83, up $.07 or 9.2
percent from pro forma, normalized second quarter 1998 earnings.
Revenue growth increased to 6.7 percent during the quarter, driven primarily by
the continued momentum of the company's growth products: PCS, data and
Internet-related services. Also aiding the quarter's results were moderating
growth in expenses, which fell to a normalized rate of 7.3 percent, from a first
quarter growth rate of 8.9 percent. Quarterly results were partially offset by
increasing investment in growth areas.
As announced earlier this week, U S WEST has entered into a merger agreement
with Qwest Communications International.
"We had an exciting quarter at U S WEST," said Sol Trujillo, president and CEO.
"In addition to announcing our merger with Qwest, we've also announced quarterly
results that show clear operational momentum. And the strength of those results
underscores our desire to link up with a partner that can help broaden the scale
and scope of our offerings.
"I'm particularly pleased with the progress of our growth initiatives," he
added. "Those initiatives -- coupled with quarterly sales of nearly 250,000
additional Caller ID and voice messaging features -- are now driving much of the
revenue growth in our business."
- more -
<PAGE>
U S WEST Second Quarter Earnings - Page 2
The following are key product and service highlights from U S WEST's growth
businesses:
Growth Product Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------ ------------------------------ ------------------- -----------------------------------------------
Division Revenues (comparisons are Key Product Subscriber/Penetration Levels
Q299 over Q298)
- - ------------ ------------------------------ ------------------- -----------------------------------------------
- - ------------ ------------------------------ ------------------- -----------------------------------------------
Data o $410 million, up 37 o U S o To date, total of 225,000, up almost
percent WEST.net 23,000 for the quarter and 380 percent
over 2Q98 totals.
o !NTERPRISE data
revenues were $203 o MegaBit o Added nearly 14,000 for the quarter.
million for the (DSL) To date at 50,000 total.
quar-ter, up 67 percent. services
- - ------------ ------------------------------ ------------------- -----------------------------------------------
- - ------------ ------------------------------ ------------------- -----------------------------------------------
PCS o ARPU of $58. o Advanced o Added nearly 65,000 during the
PCS quarter for a total of almost 285,000.
o Total quarterly
revenue of $57 o Now has a weighted average
million, up 250 percent. penetration of 2.2 percent.
o 50 percent of users now subscribe to
o at least one of the product's integrated
Integrated features
features
- - ------------ ------------------------------ ------------------- -----------------------------------------------
- - ------------ ------------------------------ ------------------- -----------------------------------------------
Dex o E-Commerce-related o Internet o Has sold web sites to nearly 6,000
revenues grew to nearly Yellow Pages small businesses since the service was
$5 million. introduced in 1998.
o Represents a 53 o
percent increase in E-Commerce o Year to date, Dex has sold nearly
Internet, audio and 21,000 Internet advertising items, which
database marketing also include Web site and e-mail links
services. and local banner ads.
- - ------------ ------------------------------ ------------------- -----------------------------------------------
</TABLE>
Total "growth subscribers" (customers for the company's PCS, DSL and Internet
access service) were up more than 100,000 for the quarter -- almost double
second quarter 1998 -- and now total 550,000. Investment in growth initiatives
negatively impacted EPS by $0.17 for the quarter versus $0.10 for second
quarter, 1998.
U S WEST Dex, the company's directory and Internet Yellow Pages business,
continued its strong performance in the second quarter, with double-digit net
income growth. Dex grew revenues at 7.4 percent compared to second quarter last
year, led by top-line growth in Internet advertising and audio services as well
as healthy print Yellow Pages results. Additionally, the company's Internet
Yellow Pages site (http://uswestdex.com) experienced tremendous usage growth
during the quarter, up more than 23 percent over the first quarter.
- more -
<PAGE>
U S WEST Second Quarter Earnings - Page 3
During the quarter, the company saw continuing impacts from competition in its
local telephony business in both line growth and pricing. It now has re-sold
nearly 475,000 lines to competitors, up from 444,000 lines at the end of first
quarter.
During the quarter, U S WEST announced an agreement to sell 530,000 (about 3
percent of its total access lines) access lines throughout its region to
Citizen's Utilities.
Other second quarter highlights include:
Volumes and Penetration:
o Residential subscriber levels at the end of the quarter for the company's
most popular custom calling features continued to grow, with Caller ID and
Call Waiting both now at 37 percent penetration and Voice Messaging now at
20 percent penetration (tops in the industry).
o So far this year, the company has signed up 120,000 customers -- most of
them during the second quarter -- for several of its new privacy-related
custom-calling features, including Caller ID with Privacy Plus and No
Solicitation.
o Sales of the company's bundled "Custom Choice" package for residential
customers surpassed 910,000 during the quarter.
o The addition of 510,000 access lines over the past 12 months for a growth
rate of 3.1 percent. On a "voice-grade-equivalent" basis, business access
line growth was 14.2 percent.
o On the small business side, total access lines equipped with Centrex 21
services grew to 492,000, a 63 percent year-over-year increase.
Sales and Revenues:
o An 18.8 percent increase compared with second quarter 1998 in private line
and special access revenues, which totaled $291 million - a reflection of
the company's growing data networking services business and its ability to
successfully compete in one of the most highly competitive segments of the
telecommunications market.
o During the quarter, consumer revenues from vertical services increased by
more than 17 percent, compared to second quarter 1998.
o Frame Relay revenues increased by nearly 38 percent quarter-over-quarter
and ISDN revenues jumped by 73 percent quarter-over-quarter.
o Toll revenues dropped by 22 percent during the quarter, driven partially by
five states moving to 1+ pre-subscription during the first quarter and Iowa
moving to 1+ pre-subscription in April.
- more -
<PAGE>
U S WEST Second Quarter Earnings - Page 4
Costs and Margins:
o Absorbed approximately $117 million in expenses related to interconnection,
number portability and Year 2000 compliance during the quarter. To date,
the company has spent $200 million in expense and capital on Y2K. It
expects to spend another $75 million during the balance of 1999.
o Capital expenditures were up 21 percent during the second quarter, rising
from $809 million in second quarter to $981 million this quarter. For the
year, capital expenditures are up 33 percent at $1.8 billion. Full-year
capital expenditures are now expected to be approximately $4.0 billion.
o Employee-related expenses grew by 7.9 percent during the quarter, due in
large part to efforts related to keeping up with service demands. These
expenses include the addition of 400 employees during the quarter and
nearly 2,200 since second quarter, 1998 -- more than 1,100 of which have
been added specifically to keep up with service demands.
U S WEST (NYSE: USW) provides a full range of telecommunications services -
including wireline, wireless PCS, data networking, directory and information
services - to more than 25 million customers nationally and in 14 western and
midwestern states. More information about U S WEST can be found on the Internet
at http://www.uswest.com.
Safe Harbor Statement: This document contains statements about expected future
events and financial results that are forward-looking and subject to risks and
uncertainties. For these statements, we claim the safe harbor for
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Factors that could cause actual results to differ
from expectations include: (i) greater than anticipated competition from new
entrants into the local exchange, intraLATA toll, wireless, data and directories
markets, causing loss of customers and increased price competition; (ii) changes
in demand for U S WEST's products and services, including optional custom
calling features; (iii) higher than anticipated employee levels, capital
expenditures and operating expenses (such as costs associated with
interconnection and year 2000 remediation); (iv) the loss of significant
customers; (v) pending and future state and federal regulatory changes affecting
the telecommunications industry, including changes that could have an impact on
the competitive environment in the local exchange market; (vi) a change in
economic conditions in the various markets served by U S WEST's operations;
(vii) higher than anticipated start-up costs associated with new business
opportunities; (viii) delays in U S WEST's ability to begin offering interLATA
long-distance services; (ix) consumer acceptance of broadband services,
including telephony, data and wireless services; (x) delays in the development
of anticipated technologies, or the failure of such technologies to perform
according to expectations; and (xi) timing and completion of the recently
announced merger with Qwest Communications International Inc. These cautionary
statements by U S WEST should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by U S WEST. U S WEST cannot always
predict or determine after the fact what factors would cause actual results to
differ materially from those indicated by the forward-looking statements or
other statements. In addition, readers are urged to consider statements that
include the terms "believes", "belief", "expects", "plans", "objectives",
"anticipates", "intends", "targets", or the like to be uncertain and
forward-looking. All cautionary statements should be read as being applicable to
all forward-looking statements wherever they appear. U S WEST does not undertake
any obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
- ### -
Further information: Larry Thede, 303-896-3550; Martha Daniele Paine,
303-896-5706; Kent Evans, 303-896-3096.
NOTE: This release and the financial statements will be available on the
Internet after 7 a.m. (MDT) by accessing U S WEST's Internet site:
www.uswest.com.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (1) U S WEST, INC.
(UNAUDITED)
Quarter Ended Six Months Ended
In millions, except June 30, % June 30, %
per share amounts 1999 1998 (2) Change 1999 1998 (2) Change
- - ------------------- -------- --------- ------ ------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $ 1,933 $ 1,756 10.1 $ 3,800 $ 3,486 9.0
Access services 688 671 2.5 1,369 1,336 2.5
Long-distance services 156 200 (22.0) 330 404 (18.3)
Directory services 333 310 7.4 659 616 7.0
Other services 148 116 27.6 282 220 28.2
------- -------- ----- -------
Total operating rev. 3,258 3,053 6.7 6,440 6,062 6.2
------- -------- ----- -------
OPERATING EXPENSES
Employee-related 1,153 1,069 7.9 2,278 2,075 9.8
Other operating 677 636 6.4 1,339 1,292 3.6
Depreciation & amort 573 535 7.1 1,175 1,067 10.1
------ ------- ----- -----
Total operating exp. 2,403 2,240 7.3 4,792 4,434 8.1
------ ------- ----- -----
OPERATING INCOME 855 813 5.2 1,648 1,628 1.2
Interest expense 163 160 1.9 316 323 (2.2)
Other expense 13 33 (60.6) 14 58 (75.9)
------ ------- ----- -----
Income before income taxes 679 620 9.5 1,318 1,247 5.7
Income tax provision 258 235 9.8 500 469 6.6
------ ------- ----- -----
NET INCOME $ 421 $ 385 9.4 $ 818 $ 778 5.1
====== ======= ===== =====
Basic earnings per share $ 0.84 $ 0.77 9.1 $ 1.62 $ 1.55 4.5
====== ======= ===== =====
Basic average shares
outstanding 503.9 501.5 0.5 503.6 501.4 0.4
====== ======= ===== =====
Diluted earnings per share $ 0.83 $ 0.76 9.2 $ 1.61 $ 1.54 4.5
====== ======= ===== =====
Diluted average shares
outstanding 508.2 505.6 0.5 508.3 505.5 0.6
====== ======= ====== =====
<FN>
<F1>
(1) The separation of U S WEST, Inc. into two independent companies, U S WEST,
Inc. ("New U S WEST") and MediaOne Group, Inc.,(the "Separation") occurred on
June 12, 1998. The results for the quarter and six months ended June 30, 1998
give effect to the Separation as if the business that comprised New U S WEST
operated as a separate entity for the entire periods presented. Additionally,
the results of operations include pro forma adjustments for the assumption of
indebtedness and the issuance of shares in connection with the alignment of the
directory business with New U S WEST, as if the Separation had been consummated
as of the beginning of the periods indicated.
<F2>
(2) Net income for the quarter and six months ended June 30, 1998 excludes $89
of after tax charges associated with the Separation and an asset impairment,
consisting of $129 of other operating expense, net of $40 of income tax expense.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST, Inc.
(Unaudited)
June 30, December 31,
In millions 1999 1998
- - ------------------------------------- ------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 122 $ 49
Accounts receivable, net 1,730 1,743
Inventories and supplies 264 197
Deferred directory costs 272 274
Deferred tax asset 153 151
Prepaid and other 129 78
------------ --------------
Total current assets 2,670 2,492
Property, plant and equipment - net 15,480 14,908
Other assets - net 3,741 1,007
------------ --------------
Total assets $ 21,891 $ 18,407
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 4,218 $ 1,277
Accounts payable 1,352 1,347
Accrued expenses 1,951 1,702
Advance billings and deposits 381 370
------------ --------------
Total current liabilities 7,902 4,696
Long-term debt 8,458 8,642
Postretirement and other postemployment
benefit obligations 2,634 2,643
Deferred taxes, credits and other 1,831 1,671
Stockholders' equity 1,066 755
------------ --------------
Total liabilities and
stockholders' equity $ 21,891 $ 18,407
============ ==============
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS U S WEST, Inc.
(UNAUDITED)
Six Months Ended
June 30,
In millions 1999 1998
- - ----------------------------------------------- ------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 818 $ 778
Adjustments to net income:
Depreciation and amortization 1,175 1,067
Deferred income taxes and amortization
of investment tax credits 74 89
Changes in operating assets and liabilities:
Accounts receivable 13 11
Inventories, supplies and other current assets (120) (88)
Accounts payable, accrued expense
and advance billings 159 (93)
Other (50) 55
- - ----------------------------------------------- ------- --------
Cash provided by operating activities 2,069 1,819
- - ----------------------------------------------- ------- --------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (1,681) (1,283)
Proceeds from (payments on) disposals of property,
plant and equipment (18) 34
Investment in Global Crossing Ltd. common stock (2,464) -
Other (14) (52)
- - ----------------------------------------------- ------- --------
Cash used for investing activities (4,177) (1,301)
- - ----------------------------------------------- ------- --------
FINANCING ACTIVITIES
Net proceeds from short-term debt 2,940 2,060
Proceeds from issuance of long-term debt 17 3,066
Repayments of long-term debt (280) (83)
Net repayments of Old U S WEST short-term debt - (198)
Repayment of Old U S WEST debt in connection
with the DEX Alignment - (3,829)
Proceeds from issuance of common stock 42 44
Dividends paid on common stock (538) (519)
Dividends paid to Old U S WEST - (183)
Payment to Old U S WEST for debt refinancing costs - (140)
Return of capital from Old U S WEST - 13
Purchases of treasury stock - (46)
- - ----------------------------------------------- ------- -------
Cash used for financing activities 2,181 185
- - ----------------------------------------------- ------- ------
CASH AND CASH EQUIVALENTS
Increase 73 703
Beginning balance 49 27
- - ----------------------------------------------- ------- -------
Ending balance $ 122 $ 730
=============================================== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED DATA U S WEST, INC.
(UNAUDITED)
Quarter Ended Six Months Ended
In millions, except June 30, % June 30, %
per share amounts 1999 1998 Change 1999 1998 Change
- - ------------------------------- ------ ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Access lines
(thousands):
Business 4,986 4,884 2.1 4,986 4,884 2.1
Consumer 11,830 11,422 3.6 11,830 11,422 3.6
------ ------ ------ ------ ---------
Total access lines 16,816 16,306 3.1 16,816 16,306 3.1
Billed access minutes of use (millions):
Interstate 15,415 14,799 4.2 30,720 29,161 5.3
Intrastate 3,216 3,116 3.2 6,355 6,099 4.2
------ ------ ------ ------ ---------
Total minutes of use 18,631 17,915 4.0 37,075 35,260 5.1
Wireless/PCS:
Revenues (millions) $ 57 $ 16 256.3 $ 97 $ 25 288.0
Subscribers (thousands) 284 54 425.9 284 54 425.9
Penetration 2.1% 0.7% 200.0 2.1% 0.7% 200.0
Data Revenues (millions):
Frame Relay/ATM $ 44.6 $ 32.2 38.5 $ 83.6 $ 62.0 34.8
ISDN 61.2 35.4 72.9 111.9 66.7 67.8
Other !NTERPRISE 81.6 52.2 56.3 150.3 105.9 41.9
.Net/DSL 15.6 1.8 766.7 29.2 2.4 1,116.7
------ ------ ------ ------ ---------
Subtotal !NTERPRISE 203.0 121.6 66.9 375.0 237.0 58.2
Other Special Access
& Private Line 207.4 177.6 16.8 412.1 350.8 17.5
------ ------ ------ ------ ---------
Total Data Revenues 410.4 299.2 37.2 787.1 587.8 33.9
====== ====== ====== ====== =========
Employees:
U S WEST, Inc. 55,726 53,535 4.1 55,726 53,535 4.1
Telephone
operations only 47,044 45,497 3.4 47,044 45,497 3.4
Telephone empl per
10,000 access lines 28.0 27.9 0.4 28.0 27.9 0.4
Dividends per
common share (#1) $ 0.750$ 0.535 40.2 $ 1.285 $ 1.07 20.1
Common shares
outstanding (#1) 504.3 501.4 0.6 504.3 501.4 0.6
Capital expend $ 981 $ 809 21.3 $ 1,768 $ 1,331 32.8
EBITDA (#2) 1,428 1,348 5.9 2,823 2,695 4.7
EBITDA margin 43.8% 44.2% (0.9) 43.8% 44.5% (1.6)
Debt-to-capital
ratio (#3) 58.6% 56.4% 3.9 58.6% 56.4% 3.9
<FN>
<F1>
# 1: Common shares outstanding at June 30, 1998 are pro forma, assuming the
Separation had been consummated as of the date indicated.
<F2>
# 2: Earnings before interest, taxes, depreciation, amortization,
and other (EBITDA).
<F3>
# 3: Telephone operations only.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS U S WEST COMMUNICATIONS, INC.
(UNAUDITED) (Telephone Operations Only)
Quarter Ended Six Months Ended
June 30, % June 30, %
In millions 1999 1998 (1) Change 1999 1998 (1) Change
- - -------------------------- ------- ------- ------ ------ ------- ------
OPERATING REVENUES
<S> <C> <C> <C> <C> <C> <C>
Local service $ 1,933 $ 1,756 10.1 $ 3,800 $ 3,486 9.0
Access services 688 671 2.5 1,369 1,336 2.5
Long-distance services 150 195 (23.1) 321 396 (18.9)
Other services 78 73 6.8 152 146 4.1
------- ------- ------ -------
Total operating revenues 2,849 2,695 5.7 5,642 5,364 5.2
------- ------- ------ -------
OPERATING EXPENSES
Employee-related 891 860 3.6 1,784 1,682 6.1
Other operating (1) 658 611 7.7 1,287 1,215 5.9
Depreciation & amort 557 518 7.5 1,142 1,036 10.2
------- ------- ------ -------
Total operating expenses 2,106 1,989 5.9 4,213 3,933 7.1
------- ------- ------ -------
Operating income 743 706 5.2 1,429 1,431 (0.1)
Interest expense 98 94 4.3 187 185 1.1
Other expense 12 29 (58.6) 24 56 (57.1)
------- ------- ------ -------
Income before income
taxes 633 583 8.6 1,218 1,190 2.4
Income tax provision 246 218 12.8 462 451 2.4
------- ------- ------ -------
NET INCOME $ 387 $ 365 6.0 $ 756 $ 739 2.3
======= ======= ====== =======
<FN>
<F1>
(1) Net income for the quarter and six months ended June 30, 1998 excludes $89
of after tax charges associated with the Separation and an asset impairment,
consisting of $129 of other operating expense, net of $40 of income tax expense.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST COMMUNICATIONS, INC.
(Unaudited)
June 30, December 31,
In millions 1999 1998
- - --------------------------------------- ------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 66 $ 68
Accounts receivable, net 1,640 1,619
Inventories and supplies 194 154
Deferred tax asset 109 113
Prepaid and other 115 61
------------ ------------
Total current assets 2,124 2,015
Property, plant and equipment - net 15,224 14,681
Other assets - net 987 882
------------ -------------
Total assets $ 2,124 $ 17,578
============ =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term debt $ 1,342 $ 789
Accounts payable 1,446 1,411
Accrued expenses 1,604 1,383
Advance billings and deposits 337 326
------------ -------------
Total current liabilities 4,729 3,909
Long-term debt 4,970 5,154
Postretirement and other postemployment
benefit obligations 2,427 2,458
Deferred taxes, credits and other 1,747 1,594
Stockholder's equity 4,462 4,463
------------ -------------
Total liabilities and
stockholder's equity $ 18,335 $ 17,578
============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001054522
<NAME> U S WEST, Inc.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 730 730
<SECURITIES> 0 0
<RECEIVABLES> 1,706 1,706
<ALLOWANCES> 0 0
<INVENTORY> 213 213
<CURRENT-ASSETS> 3,216 3,216
<PP&E> 34,565 34,565
<DEPRECIATION> 20,074 20,074
<TOTAL-ASSETS> 18,597 18,597
<CURRENT-LIABILITIES> 5,990 5,990
<BONDS> 7,946 7,946
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 480 480
<TOTAL-LIABILITY-AND-EQUITY> 18,597 18,597
<SALES> 3,258 6,062
<TOTAL-REVENUES> 3,258 6,062
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,403 4,434
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 163 323
<INCOME-PRETAX> 679 1,247
<INCOME-TAX> 258 469
<INCOME-CONTINUING> 421 778
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 421 778
<EPS-BASIC> .84 1.55
<EPS-DILUTED> .83 1.54
</TABLE>
