===============================================================================
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): January 22, 1999
U S WEST, Inc.
(Formerly "USW-C, Inc.")
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
A Delaware Corporation Commission File IRS Employer Identification
(State of Incorporation) Number 1-14087 No. 84-0953188
</TABLE>
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)
===============================================================================
<PAGE>
Item 5. Other Events
On January 22, 1999, U S WEST, Inc. (formerly "USW-C, Inc.")
released its fourth quarter earnings results for the year ended December 31,
1998. The release and financial statements are attached hereto as Exhibits.
Item 7. Exhibits
Exhibit Description
27 Financial Data Schedule
99 Press Release issued January 22, 1999 concerning the earnings
results of U S WEST, Inc. for the fourth quarter of 1998.
99A.1 Unaudited Consolidated Pro Forma Statements of Income of U S WEST,
Inc. for the quarters and twelve-month periods ended December 31,
1997 and 1998, respectively, filed in connection with the Press
Release dated January 22, 1999.
99A.2 Unaudited Pro Forma Earnings Normalization Schedule of U S WEST,
Inc. for the quarters and twelve-month periods ended December 31,
1997 and 1998, respectively, filed in connection with the Press
Release dated January 22, 1999.
99A.3 Unaudited Selected Consolidated Data of U S WEST, Inc. for the
quarters and twelve-month periods ended December 31, 1997 and
1998, respectively, filed in connection with the Press Release
dated January 22, 1999.
99A.4 Unaudited Consolidated Statements of Income of U S WEST, Inc. for
the quarters and twelve-month periods ended December 31, 1997 and
1998, respectively, filed in connection with the Press Release
dated January 22, 1999.
99A.5 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for the
twelve-month periods ended December 31, 1997 and 1998,
respectively, filed in connection with the Press Release dated
January 22, 1999.
99A.6 Unaudited Consolidated Statements of Cash Flows of U S WEST, Inc.
for the twelve-month periods ended December 31, 1997 and 1998,
respectively, filed in connection with the Press Release dated
January 22, 1999.
99A.7 Unaudited Consolidated Pro Forma Statements of Income Normalized
Results for the quarters ended December 31, 1997 and 1998,
respectively.
99A.8 Unaudited Consolidated Pro Forma Statements of Income Normalized
Results for the years ended December 31, 1997 and 1998,
respectively.
<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: January 22, 1999
EXHIBIT 99
U S WEST (Registered Trademark)
Investor Relations
NEWS FLASH
January 22, 1999
Note to investors: U S WEST (NYSE: USW) will hold a live teleconference call at
9:00 a.m. MST (11:00 a.m. EST) today to discuss fourth quarter, 1998 results.
Participants should call 1-800-946-0712 by the scheduled start time. A replay
will be available starting at noon MST, through 6 p.m. MST on Friday, Jan. 29 by
calling 1-888-567-0844.
U S WEST EARNINGS UP 5.6 PERCENT FOR 1998
-- Advanced PCS Wireless Customers and Data Business,
Including Internet and DSL Offerings, Grow Dramatically;
Strong Core Growth Helps Drive Results --
DENVER - U S WEST (NYSE: USW) today announced fourth quarter normalized, diluted
earnings per share of $.73, up 5.8 percent from normalized fourth quarter 1997
earnings. For the full year, normalized, diluted EPS was $3.01, up 5.6 percent
from full-year 1997 normalized earnings of $2.85. [Note: EPS figures used in
this release are pro-forma and include full-quarter and year-to-date, 1997 and
1998 impacts from the U S WEST Dex transaction.]
Results were driven by double-digit earnings growth in the core communications
business. U S WEST's data and wireless growth initiatives each posted strong
subscriber growth gains for the quarter and the year. Additionally, U S WEST
Dex, the company's directory and Internet Yellow Pages business, turned in solid
quarterly and year-end results.
o During the quarter, the company's Advanced PCS wireless product grew its
customer base to more than 185,000 - a gain of more than 80,000 for the
quarter, up 77 percent. On a weighted average basis, these customer levels
now represent about 2 percent penetration in the company's six major market
areas. More than 50 percent of all PCS customers take advantage of Advanced
PCS' first-in-the-nation integrated features.
o Total 1998 data revenues grew by 29 percent to nearly $1.3 billion.
!NTERPRISE - which manages the company's in-region and out-of-region
emerging data products, including DSL, U S WEST.net, ATM and Frame Relay -
grew revenues by 45 percent to $157 million for the quarter and 46 percent
to $533 million for the year. Full-year 1998 revenues from Frame Relay and
ISDN services each surpassed $100 million for the first time, with Frame
Relay revenues increasing by more than 45 percent and ISDN revenues jumping
by 94 percent year-over-year.
o The company's Internet access service, U S WEST.net, grew customer levels
to more than 150,000.
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 2
o MegaBit Services customers exceeded 20,000 for the year, reaching the
company's year-end forecast and beating projections of at least two highly
regarded research firms. MegaBit, U S WEST's high-speed ADSL (Asymmetric
Digital Subscriber Line) data offering, is now available to about 5.5
million lines in nearly 40 cities. According to a recent survey by The
Yankee Group, potential high-speed Internet customers prefer to buy that
access from their phone company versus their cable company by a margin of
more than four to one.
o U S WEST Dex expanded its Internet advertising and commerce growth
initiatives during the quarter and for the entire year, in addition to
achieving strong 6.7 percent revenue growth in its print advertising
business for the year. This led to total annual revenues of almost $1.3
billion for 1998. Among those revenues were almost $1 million in Internet
advertising services during the month of December alone. The company's
Internet Yellow Pages site posted more than 1.4 million visits in December,
up more than 25 percent from November.
"Growth in our core business is solid, and our growth engines, related to
wireless, data and Internet initiatives, are truly accelerating in the most
competitive spaces," said Sol Trujillo, president and CEO of U S WEST. "Our PCS
business nearly doubled in just one quarter, and we're exceeding all industry
projections for demand of our Internet-related data products. And importantly,
we're turning in these gains in new business areas while keeping our core
vibrant."
The company achieved its fourth quarter results while absorbing significant
costs related to expansion of new growth businesses, expenses associated with
mandated interconnection and number portability, and Year 2000 expenses. 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
382,000 lines to competitors.
Other fourth quarter and year-end highlights include:
Volumes and Penetration:
o Residential penetration levels at the end of the quarter for the company's
most popular custom calling features continued to grow: Caller ID, 33.9
percent, Voice Messaging, 19.3 percent (tops in the industry) and Call
Waiting, 35.8 percent.
o The addition of 573,000 access lines (adjusted for the sale of selected
rural exchanges) over the past 12 months for a normalized growth rate of
3.6 percent. On an adjusted basis, business access lines grew 3.3 percent;
residential access lines grew 3.7 per-cent; and residential additional
lines grew 18 percent, reaching penetration of 15.9 per-cent. On a
"voice-grade-equivalent" basis, business access line growth was 13 percent.
o On the small business side, total access lines equipped with Centrex
services grew to 1.45 million, a 38 percent year-over-year increase.
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 3
Sales and Revenues:
o A 19.5 percent increase in private line and special access revenues, which
totaled $1.0 billion for the year - 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 Consumer revenues from vertical services increased by nearly 15 percent for
1998.
Costs and Margins:
o Absorbed approximately $27 million in incremental expenses related to
interconnection, number portability and Year 2000 during the quarter.
On a reported basis, quarterly normalized EPS was up 87 percent from fourth
quarter, 1997 when the company took a pre-tax regulatory charge of $250 million,
primarily to cover a rate refund in Washington. Full-year reported earnings grew
18 percent, including the charge.
Trujillo said the company expects to achieve 12-14 percent earnings growth
beginning in 1999, a year earlier than expected. He said this includes the
effects of accounting changes that require the company to treat software as a
capital, rather than an expense item.
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 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; and (x) delays in the development of anticipated technologies, or the
failure of such technologies to perform according to expectations. 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; Rodney Miller, 303-896-3096;
Martha Daniele Paine, 303-896-5706.
NOTE: This release and the financial statements will be available on the
Internet after 7 a.m. (MST) by accessing U S WEST's Internet site:
www.uswest.com.
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (1) U S WEST, INC.
(UNAUDITED)
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1998 1997 Change 1998 1997 Change
- -------------------- ------- ------- -------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,408 $ 1,277 10.3 $ 5,525 $ 5,016 10.1
Interstate access 714 638 11.9 2,816 2,666 5.6
Intrastate access 206 153 34.6 822 761 8.0
Long-distance
network 184 164 12.2 779 885 (12.0)
Directory services 342 318 7.5 1,277 1,197 6.7
Other services 350 272 28.7 1,159 954 21.5
---------------- -------- --------
Total operating rev. 3,204 2,822 13.5 12,378 11,479 7.8
---------------- -------- --------
OPERATING EXPENSES
Employee-related 1,133 1,038 9.2 4,312 3,953 9.1
Other operating 746 750 (0.5) 2,818 2,587 8.9
Depreciation & amort 574 547 4.9 2,199 2,163 1.7
---------------- -------- --------
Total operating exp. 2,453 2,335 5.1 9,329 8,703 7.2
---------------- -------- --------
Operating income 751 487 54.2 3,049 2,776 9.8
Interest expense 165 167 (1.2) 660 667 (1.0)
Gains on sales of rural
telephone exchanges - - - - 77 -
Gain on sale of
investment in Bellcore - 53 - - 53 -
Other expense 10 21 (52.4) 87 72 20.8
---------------- -------- --------
Income before income
taxes and extra-
ordinary item 576 352 63.6 2,302 2,167 6.2
Income tax provision 208 125 66.4 866 802 8.0
---------------- -------- --------
Income before
extraordinary item 368 227 62.1 1,436 1,365 5.2
Extraordinary item:
Early extinguishment
of debt - net of tax - - - - (3) -
---------------- -------- --------
PRO FORMA
NET INCOME $ 368 $ 227 62.1 $ 1,436 $ 1,362 5.4
================ ======== ========
5
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME, (1) U S WEST, INC.
CONTINUED (UNAUDITED)
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1998 1997 Change 1998 1997 Change
- -------------------- ------- ------- -------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Pro forma basic earnings per share:
Income before
extraordinary item $ 0.73 $ 0.45 62.2 $ 2.86 $ 2.73 4.8
Extraordinary item:
Early extinguishment
of debt - - - - (0.01) -
------- ------- ------- -------
Pro forma basic
earnings per share $ 0.73 $ 0.45 62.2 $ 2.86 $ 2.73 # 4.8
================ ======== ========
Pro forma basic
average shares
outstanding 502.7 500.2 0.5 501.8 499.1 0.5
================ ======== ========
Pro forma diluted earnings per share:
Income before
extraordinary item $ 0.73 $ 0.45 62.2 $ 2.84 $ 2.71 4.8
Extraordinary item:
Early extinguishment
of debt - - - - (0.01) -
------- ------- ------- -------
Pro forma diluted
earnings per share $ 0.73 $ 0.45 62.2 $ 2.84 $ 2.70 5.2
================ ======== ========
Pro forma diluted
average shares
outstanding 508.0 503.7 0.9 506.2 507.6 (0.3)
================ ======== ========
<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 pro forma results for the years ended December 31, 1998 and
1997 and for fourth quarter 1997 give effect to the Separation, including the
assumption of indebtedness and the issuance of shares in connection with the
alignment of the directory business with New U S WEST, (the "Dex transaction"),
as if the Separation had been consummated as of the beginning of the periods
indicated.
<F2>
# Amount does not foot due to rounding of the individual components.
</FN>
</TABLE>
6
<TABLE>
<CAPTION>
PRO FORMA EARNINGS NORMALIZATION SCHEDULE U S WEST, INC.
(UNAUDITED)
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1998 1997 Change 1998 1997 Change
- -------------------- ------- ------- -------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
NORMALIZED PRO FORMA INCOME:
Reported pro forma
net income $ 368 $ 227 62.1 $ 1,436 $ 1,362 5.4
Adjustments:
Rural exchange sales - - - - (48) -
Bellcore sale - (32) - - (32) -
Separation costs - - - 68 - -
Asset impairment - - - 21 - -
Extraordinary item - - - - 3 -
---------------- -------- --------
Normalized pro forma
income $ 368 $ 195 88.7 $ 1,525 $ 1,285 18.7
================ ======== ========
NORMALIZED PRO FORMA
BASIC EARNINGS PER SHARE:
Reported pro forma
basic earnings
per share $ 0.73 $ 0.45 62.2 $ 2.86 $ 2.73 4.8
Adjustments:
Rural exchange sales - - - - (0.10) -
Bellcore sale - (0.07) - - (0.07) -
Separation costs - - - 0.13 - -
Asset impairment - - - 0.04 - -
Extraordinary item - - - - 0.01 -
---------------- -------- --------
Normalized pro forma basic
earnings per share $ 0.73 $ 0.39 # 87.2 $ 3.04 #$ 2.57 18.3
---------------- -------- --------
NORMALIZED PRO FORMA
DILUTED EARNINGS
PER SHARE:
Reported pro forma
diluted earnings
per share $ 0.73 $ 0.45 62.2 $ 2.84 $ 2.70 5.2
Adjustments:
Rural exchange sales - - - - (0.10) -
Bellcore sale - (0.07) - - (0.07) -
Separation costs - - - 0.13 - -
Asset impairment - - - 0.04 - -
Extraordinary item - - - - 0.01 -
---------------- -------- --------
Normalized pro forma
diluted earnings
per share $ 0.73 $ 0.39 # 87.2 $ 3.01 $ 2.55 # 18.0
================ ======== ========
<FN>
<F1>
# Amount does not foot due to rounding of the individual components.
</FN>
</TABLE>
7
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED DATA (UNAUDITED) U S WEST, INC.
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1998 1997 Change 1998 1997 Change
- -------------------- ------- ------- ------------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Normalized access lines (thousands):
Business 4,946 4,790 3.3 4,946 4,790 3.3
Consumer 11,660 11,243 3.7 11,660 11,243 3.7
Total 16,606 16,033 3.6 16,606 16,033 3.6
Access lines
(thousands):
Business 4,945 4,790 3.2 4,945 4,790 3.2
Consumer 11,656 11,243 3.7 11,656 11,243 3.7
Total access lines 16,601 16,033 3.5 16,601 16,033 3.5
Billed access minutes of use (millions):
Interstate 14,895 14,277 4.3 58,763 55,362 6.1
Intrastate 3,124 3,027 3.2 12,330 11,729 5.1
Total minutes of use 18,019 17,304 4.1 71,093 67,091 6.0
Employees:
U S WEST, Inc. 54,483 51,110 6.6 54,483 51,110 6.6
Telephone
operations only 46,310 43,749 5.9 46,310 43,749 5.9
Telephone empl per
10,000 access lines 27.9 27.3 2.2 27.9 27.3 2.2
Dividends per
common share (#1) $ 0.535 $ 0.535 - $ 2.14 $ 2.14 -
Common shares
outstanding (#1) 502.9 500.9 0.3 502.9 500.9 0.3
Capital expend $ 985 $ 1,028 (4.2)$ 2,905 $ 2,672 8.7
EBITDA (#2) 1,325 1,034 28.1 5,248 4,939 6.3
EBITDA margin 41.4% 36.6% - 42.4% 43.0% -
Debt-to-capital
ratio (#3) 57.1% 55.6% - 57.1% 55.6% -
<FN>
<F1>
# 1: Dividends per common share for the years ended December 31, 1998 and 1997
and for the fourth quarter 1997, and common shares outstanding at December 31,
1997 are pro forma and assume the Separation had been consummated as of each
period indicated.
<F2>
# 2: Earnings before interest, taxes, depreciation, amortization,
and other (EBITDA). EBITDA also excludes gains on asset sales.
<F3>
# 3: Telephone operations only.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (1) U S WEST, INC.
(UNAUDITED)
Quarter Ended Year Ended
December 31, % December 31, %
In millions 1998 1997 Change 1998 1997 Change
- --------------------- ---------------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,408 $ 1,277 10.3 $ 5,525 $ 5,016 10.1
Interstate access 714 638 11.9 2,816 2,666 5.6
Intrastate access 206 153 34.6 822 761 8.0
Long-distance network 184 164 12.2 779 885 (12.0)
Directory services 342 318 7.5 1,277 1,197 6.7
Other services 350 272 28.7 1,159 954 21.5
--------------- -------- --------
Total operating rev. 3,204 2,822 13.5 12,378 11,479 7.8
--------------- -------- --------
OPERATING EXPENSES
Employee-related 1,133 1,038 9.2 4,312 3,953 9.1
Other operating 746 750 (0.5) 2,818 2,587 8.9
Depreciation & amort 574 547 4.9 2,199 2,163 1.7
--------------- -------- --------
Total operating exp. 2,453 2,335 5.1 9,329 8,703 7.2
--------------- -------- --------
Operating income 751 487 54.2 3,049 2,776 9.8
Interest expense 165 101 63.4 543 405 34.1
Gains on sales of rural
telephone exchanges - - - - 77 -
Gain on sale of
investment in
Bellcore - 53 - - 53 -
Other expense 10 21 (52.4) 87 72 20.8
--------------- -------- --------
Income before taxes
and extraordinary
item 576 418 37.8 2,419 2,429 (0.4)
Income tax provision 208 150 38.7 911 902 1.0
--------------- -------- --------
Income before
extraordinary item 368 268 37.3 1,508 1,527 (1.2)
Extraordinary Item:
Early extinguishment
of debt - net of tax - - - - (3) -
--------------- -------- --------
NET INCOME $ 368 $ 268 37.3 $ 1,508 $ 1,524 (1.0)
=============== ======== ========
<FN>
<F1>
(1) The historical results presented reflect historical financial information as
if the businesses that comprise New U S WEST operated as a separate entity for
the periods presented. The effects of the Separation, including the assumption
of indebtedness and the issuance of shares in connection with the Dex
transaction, have been included in the historical results as of the Separation
Date.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST, Inc.
December 31, December 31,
In millions 1998 1997
- ----------------------------- ------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 49 $ 27
Accounts receivable, net 1,743 1,717
Inventories and supplies 197 150
Deferred directory costs 274 257
Deferred tax asset 151 271
Prepaid and other 78 82
------------- --------------
Total current assets 2,492 2,504
Property, plant and equipment - n 14,908 14,308
Other assets - net 1,007 855
------------- --------------
Total assets $ 18,407 $ 17,667
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,277 $ 695
Accounts payable 1,347 1,377
Accrued expenses 1,702 1,791
Advanced billings and deposits 370 336
------------- --------------
Total current liabilities 4,696 4,199
Long-term debt 8,642 5,020
Postretirement and other
postemployment
benefit obligations 2,643 2,534
Deferred taxes, credits and other 1,671 1,547
Stockholders' equity 755 4,367
------------- --------------
Total liabilities and
stockholders' equity $ 18,407 $ 17,667
============================
</TABLE>
10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS U S WEST, Inc.
Year Ended
December 31,
In millions 1998 1997
- ------------------------------------------------- -------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,508 $ 1,524
Adjustments to net income:
Depreciation and amortization 2,199 2,163
Gains on sales of rural telephone exchanges - (77)
Gain on sale of investment in Bellcore - (53)
Asset impairment 35 -
Deferred income taxes and amortization
of investment tax credits 106 (15)
Changes in operating assets and liabilities:
Accounts receivable (26) (60)
Inventories, supplies and other current assets (12) (63)
Accounts payable, accrued expense
and advanced billings (13) 487
Other 130 285
- ------------------------------------------------- -------- ---------
Cash provided by operating activities 3,927 4,191
- ------------------------------------------------- -------- ---------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (2,672) (2,168)
Proceeds from (payments on) disposals of property,
plant and equipment (30) 22
Proceeds from sales of rural telephone exchanges - 67
Proceeds from sale of investment in Bellcore - 65
Other (67) (73)
- ------------------------------------------------- -------- ---------
Cash used for investing activities (2,769) (2,087)
- ------------------------------------------------- -------- ---------
FINANCING ACTIVITIES
Net proceeds from (repayments of) short-term debt 887 (640)
Net (repayments of) proceeds from issuance
of Old U S WEST short-term debt (198) 153
Proceeds from issuance of long-term debt 3,781 29
Repayment of Old U S WEST debt in connection
with the DEX Alignment (3,829) -
Repayments of long-term debt (442) (446)
Proceeds from issuance of common stock 88 75
Dividends paid on common stock (1,056) (992)
Dividends paid to Old U S WEST (194) (336)
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 (1,136) (2,157)
- ------------------------------------------------- -------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease) 22 (53)
Beginning balance 27 80
- ------------------------------------------------- -------- ---------
Ending balance $ 49 $ 27
================================================= ======== =========
</TABLE>
11
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME U S WEST, INC.
NORMALIZED RESULTS
(UNAUDITED)
Quarter Ended December 31,
In millions except Reported One Time NormalizReportedRegulatoryNormalized %
per share amounts 1998 Charge (1 1998 1997 Accrual 1997 Change
- -------------------- ----------------------------------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service 1,408 - 1,408 1,277 86 $ 1,363 3.3
Interstate access 714 - 714 638 25 663 7.7
Intrastate access 206 - 206 153 68 221 (6.8)
Long distance 184 - 184 164 51 215 (14.4)
Directory services 342 - 342 318 - 318 7.5
Other services 350 - 350 272 - 272 28.7
-------- -------- ------- ------- --------- ----------
Total operating revenu 3,204 - 3,204 2,822 230 3,052 5.0
-------- -------- ------- ------- --------- ----------
OPERATING EXPENSES
Employee-related 1,133 - 1,133 1,038 - 1,038 9.2
Other operating 648 - 648 642 - 642 0.9
Taxes other than
income tax 98 - 98 108 - 108 (9.3)
Depreciation & amort 574 - 574 547 - 547 4.9
-------- -------- ------- ------- --------- ----------
Total operating expens 2,453 - 2,453 2,335 - 2,335 5.1
-------- -------- ------- ------- --------- ----------
Operating income 751 - 751 487 230 717 4.7
Interest expense 165 - 165 167 - 167 (1.2)
Gains on rural sales - - - - - -
Gain on Bellcore - - - 53 - 53 (100.0)
Other expense 10 - 10 21 (20) 1 900.0
-------- -------- ------- ------- --------- ----------
Income before income taxes
and extraordinary ite 576 - 576 352 250 602 (4.3)
Income Tax Provision 208 - 208 125 98 223 (6.7)
-------- -------- ------- ------- --------- ----------
Income before
extraordinary item 368 - 368 227 152 379 (2.9)
Extraordinary item - - - - - -
-------- -------- ------- ------- --------- ----------
NET INCOME 368 - 368 227 152 379 (2.9)
Adjustment to normalize
net income - - - (32) - (32) (100.0)
PRO FORMA NORMALIZED -------- -------- ------- ------- --------- ----------
NET INCOME 368 - 368 195 152 $ 347 6.1
=========================================== =========
Diluted Average Shares
Outstanding 508.0 508.0 508.0 503.7 503.7 503.7
Diluted EPS 0.73 - 0.73 0.39 0.30 $ 0.69 5.8
<FN>
<F1>
(1) Separation expense and asset impairment.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME U S WEST, INC.
NORMALIZED RESULTS
(UNAUDITED)
Year Ended December 31,
In millions except Reported One Time Normalized Reported Regulatory Normalized %
per share amounts 1998 Charge (1 1998 1997 Accrual 1997 Change
- -------------------- -------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local service 5,525 - 5,525 5,016 86 $ 5,102 8.3
Interstate access 2,816 - 2,816 2,666 25 2,691 4.6
Intrastate access 822 - 822 761 68 829 (0.8)
Long distance 779 - 779 885 51 936 (16.8)
Directory services 1,277 - 1,277 1,197 - 1,197 6.7
Other services 1,159 - 1,159 954 - 954 21.5
------- -------- ------- ------- --------- ----------
Total operating revenue 12,378 - 12,378 11,479 230 11,709 5.7
------- -------- ------- ------- --------- ----------
OPERATING EXPENSES
Employee-related 4,312 - 4,312 3,953 - 3,953 9.1
Other operating 2,446 (129) 2,317 2,159 - 2,159 7.3
Taxes other than
income tax 372 - 372 428 - 428 (13.1)
Depreciation & amort 2,199 - 2,199 2,163 - 2,163 1.7
------- -------- ------- ------- --------- ----------
Total operating expense 9,329 (129) 9,200 8,703 - 8,703 5.7
------- -------- ------- ------- --------- ----------
Operating income 3,049 129 3,178 2,776 230 3,006 5.7
Interest expense 660 - 660 667 - 667 (1.0)
Gains on rural sales - - - 77 - 77 (100.0)
Gain on Bellcore - - - 53 - 53 (100.0)
Other expense 87 - 87 72 (20) 52 67.3
------- -------- ------- ------- --------- ----------
Income before income taxes
and extraordinary items 2,302 129 2,431 2,167 250 2,417 0.6
Income Tax Provision 866 40 906 802 98 900 0.7
------- -------- ------- ------- --------- ----------
Income before
extraordinary item 1,436 89 1,525 1,365 152 1,517 0.5
Extraordinary item - - - 3 - 3 (100.0)
------- -------- ------- ------- --------- ----------
NET INCOME 1,436 89 1,525 1,362 152 1,514 0.7
Adjustment to normalize
net income - - - (77) - (77) (100.0)
PRO FORMA NORMALIZED ------- -------- ------- ------- --------- ----------
NET INCOME 1,436 89 1,525 1,285 152 $ 1,437 6.1
======== ======== ======= ======= ========= ==========
Diluted Ave. Shares
Outstanding 506.2 506.2 506.2 507.6 507.6 507.6
Diluted EPS 2.84 0.17 3.01 2.53 0.30 $ 2.83 5.6
<FN>
<F1>
(1) Separation expense and asset impairment.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001054522
<NAME> U S WEST, INC.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> OCT-01-1998 JAN-01-1998
<PERIOD-END> DEC-31-1998 DEC-31-1998
<CASH> 49 22
<SECURITIES> 0 0
<RECEIVABLES> 1,743 1,735
<ALLOWANCES> 0 0
<INVENTORY> 197 248
<CURRENT-ASSETS> 2,492 2,553
<PP&E> 35,638 34,840
<DEPRECIATION> 20,729 20,342
<TOTAL-ASSETS> 18,407 18,061
<CURRENT-LIABILITIES> 4,696 5,258
<BONDS> 8,642 7,920
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 755 625
<TOTAL-LIABILITY-AND-EQUITY> 18,407 18,061
<SALES> 3,204 12,378
<TOTAL-REVENUES> 3,204 12,378
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,453 9,329
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 165 660
<INCOME-PRETAX> 576 2,302
<INCOME-TAX> 208 866
<INCOME-CONTINUING> 368 1,436
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 368 1,436
<EPS-PRIMARY> .73 2.86
<EPS-DILUTED> .73 2.84
</TABLE>
