================================================================================
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): April 21, 1999
U S WEST, Inc.
(Fomerly "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)
================================================================================
<PAGE>
Item 5. Other Events
On April 21, 1999, U S WEST, Inc. released its second quarter
earnings results. The release and financial statements are attached hereto as
Exhibits.
Item 7. Exhibits
Exhibit Description
27 Financial Data Schedule
99 Press Release issued April 21, 1999 concerning the earnings
results of U S WEST, Inc. for the first quarter of 1999.
99A.1 Unaudited Consolidated Statements of Income of U S WEST,
Inc. for the quarters ended March 31, 1998 and 1999, respectively,
filed in connection with the Press Release dated April 21, 1999.
99A.2 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for the
quarter ended March 31, 1999 and the year ended December 31, 1998,
respectively, filed in connection with the Press Release dated
April 21, 1999.
99A.3 Unaudited Consolidated Statements of Cash Flows of U S WEST, Inc.
for the quarters ended March 31, 1998 and 1999, respectively,
filed in connection with the Press Release dated April 21, 1999.
99A.4 Unaudited Selected Consolidated Data of U S WEST, Inc. for the
quarters ended March 31, 1998 and 1999, respectively, filed in
connection with the Press Release dated April 21, 1999.
99A.5 Unaudited New R-Line Format by Quarter of U S WEST, Inc. for
1996 - 1998, filed in connection with the Press Release
dated April 21, 1999.
99A.6 New R-Line Format Definition of U S WEST, Inc. filed in
connection with the Press Release dated April 21, 1999.
99A.7 Unaudited Old R-Line Format of U S WEST, Inc. for the quarters
ended March 31, 1998 and 1999, respectively, filed in connection
with the Press Release dated April 21, 1999.
<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: April 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001054522
<NAME> U S WEST, Inc.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 36
<SECURITIES> 0
<RECEIVABLES> 1,700
<ALLOWANCES> 0
<INVENTORY> 236
<CURRENT-ASSETS> 2,536
<PP&E> 36,031
<DEPRECIATION> 20,933
<TOTAL-ASSETS> 18,709
<CURRENT-LIABILITIES> 4,849
<BONDS> 8,642
0
0
<COMMON> 0
<OTHER-SE> 920
<TOTAL-LIABILITY-AND-EQUITY> 18,709
<SALES> 3,182
<TOTAL-REVENUES> 3,182
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> 639
<INCOME-TAX> 242
<INCOME-CONTINUING> 397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 397
<EPS-PRIMARY> .79
<EPS-DILUTED> .78
</TABLE>
EXHIBIT 99
U S WEST (REGISTERED TRADEMARK)
INVESTOR RELATIONS
April 21, 1999
- --------------------------------------------------------------------------------
Note to investors: U S WEST (NYSE: USW) will hold a live teleconference call at
9:00 a.m. MDT (11:00 a.m. EDT) today to discuss first quarter, 1999 results.
Participants should call 1-888-569-5033 by the scheduled start time. A replay
will be available starting at noon MDT, through 6 p.m. MDT on Wednesday, Apr. 28
by calling 1-888-203-1112 and entering confirmation number 652668.
- --------------------------------------------------------------------------------
U S WEST Announces First Quarter Earnings Results
-- PCS, DSL, Internet Access Products Achieving Strong Growth --
-- Accelerating Revenues, Slowing Expenses Expected to Yield Growth
Through Remainder of Year --
DENVER - U S WEST (NYSE: USW) today announced first quarter diluted earnings per
share of $.78, unchanged from pro forma first quarter 1998 earnings.
Results were aided by overall revenue growth of 5.7 percent, better than the 5.0
percent normalized growth in fourth quarter, 1998. Capitalizing on the
opportunity in the high-growth wireless and data markets, the company's
quarterly results were offset by increased investment in these areas. Additional
spending to increase the company's electronic sales capabilities and continue
improving its infrastructure - spending which is expected to ease later in the
year - also affected first-quarter earnings.
"The continued strength in our revenues led to bottom-line results that met
first quarter expectations," said Sol Trujillo, president and CEO. "However, our
first quarter spending was well above last year. That was driven not only by our
own growth and long-distance compliance initiatives, but also by the escalating
costs for a customer base that has increasingly complex demands. For the year,
we expect to achieve our full-year growth of around 10 percent, but it will be
dependent on our ability to moderate the current cost trend and execute on
certain investments and initiatives, including those we announced in February.
"Meanwhile, our growth initiatives continue to show very strong results," he
added. "Our wireless offering continues to increase penetration, our Internet
access product is showing incredible growth, our industry-leading DSL data
offering continues to perform well, and our electronic commerce effort is
starting to build momentum."
- more -
<PAGE>
U S WEST First Quarter Earnings - Page 2
Trujillo said the company drove strong quarterly revenue growth in several ways.
U S WEST's data and wireless businesses posted strong subscriber growth gains
for the quarter. U S WEST Dex, the company's directory and Internet Yellow Pages
business, turned in very good quarterly results. Additionally, the core
telephony business benefited from strength in its deployment of vertical
services.
o First quarter data revenues grew to nearly $380 million, up 31 percent over
first quarter 1998. !NTERPRISE - which manages the company's in-region and
out-of-region emerging data products, including digital subscriber line,
Internet access, ATM and Frame Relay - grew revenues by 50 percent over
first quarter 1998 to $173 million for the quarter. Customer levels for the
company's Internet access service, uswest.net, grew by almost 50,000 to
nearly 200,000.
o Customers opting for the company's high-speed digital subscriber line (DSL)
data product, MegaBit Services, grew by about 10,000 for the quarter and
now total more than 30,000. U S WEST expects to have more than 100,000 DSL
subscribers by year's end.
o During the quarter, the company's Advanced PCS wireless product grew its
customer base to nearly 220,000 - a gain of about 35,000 for the quarter in
what is traditionally the slowest quarter of the year in the wireless
business. On a weighted average basis, these customer levels now represent
about 2 percent penetration. Average monthly revenue per subscriber
remained at $54. Nearly 50 percent of all PCS customers continue to take
advantage of Advanced PCS' first-in-the-nation integrated features. The
company estimates it will have more than 370,000 subscribers by the end of
1999.
o U S WEST Dex grew revenues at 6.5 percent compared to first quarter 1998,
led by strong print directory results in Minneapolis and Phoenix. In
addition, Dex accelerated its efforts in the Internet advertising and
commerce arena, with sales of more than 6,000 Internet advertising items,
such as web sites, links and banners. Dex's Internet Yellow Pages, the
region's leading on-line directory, is attracting nearly 2 million visits
per month, nearly three times the amount of usage compared with first
quarter 1998. During the quarter, Dex also invested in Flycast, a leading
Web advertising network, and signed long-term distribution agreements with
Flycast and DoubleClick, another on-line advertising network.
o Total "growth subscribers" (customers for the company's PCS, DSL and
Internet access service) now total 450,000, up nearly 95,000 for the
quarter -- a three-fold increase over first quarter 1998. Investment in
these growth initiatives negatively impacted EPS by $0.16 for the quarter
versus $0.08 for first quarter, 1998. This spending is expected to peak by
third quarter 1999.
o In the core telephony business, vertical services continued to show
strength. The company added more than 300,000 Caller ID subscribers during
the quarter. Residential Caller ID penetration is now at 35.7 percent. And
more than 20,000 customers signed up for "No Solicitation," a recently
introduced service that combats unwanted sales calls.
- more -
<PAGE>
U S WEST First Quarter Earnings - Page 3
On the expense side, Trujillo said he believes the spending growth rate peaked
during the first quarter and should slow later in the year as first quarter
initiatives begin to take effect and infrastructure spending eases. The
quarter's increased spending resulted primarily from:
o additional spending for data, wireless and electronic commerce growth
initiatives;
o accelerated spending to create new electronic channel capabilities and
infrastructure enhancements;
o additional expenses related to mandates, such as year 2000 compliance and
interconnection to enable the company more rapid entry into the
long-distance market;
o escalating network costs, including pro-active maintenance and delivery
of increasingly complex products.
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 444,000 lines to competitors. It also opened five additional states to
1-plus pre-subscription for intraLATA toll calls. This contributed to the 14.7
percent decline in intraLATA toll revenues versus first quarter 1998.
Other first 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 Voice
Messaging now at 19.3 percent penetration (tops in the industry) and Call
Waiting at 36.5 percent penetration.
o Sales of the company's bundled "Custom Choice" package for residential
customers surpassed 800,000 during the quarter.
o The addition of 569,000 access lines over the past 12 months for a growth
rate of 3.5 percent. On a "voice-grade-equivalent" basis, business access
line growth was 15.8 percent.
o On the small business side, total access lines equipped with Centrex 21
services grew to 450,000, an 89 percent year-over-year increase.
Sales and Revenues:
o A 16.7 percent increase compared with first quarter 1998 in private line
and special access revenues, which totaled $279 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
nearly 16 percent, compared to first quarter 1998.
- more -
<PAGE>
U S WEST First Quarter Earnings - Page 4
o Frame Relay revenues increased by 29 percent quarter-over-quarter and
ISDN revenues jumped by 62 percent quarter-over-quarter.
Costs and Margins:
o Absorbed approximately $85 million in incremental expenses related to
interconnection, number portability and Year 2000 compliance during the
quarter. To date, the company has spent $140 million on Y2K. It expects to
spend another $80 during the balance of 1999.
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; 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 STATEMENTS OF INCOME (1) U S WEST, INC.
(UNAUDITED)
Quarter Ended
In millions, except March 31, %
per share amounts 1999 1998 Change
- ------------------------------------ ------- ------- -------
<S> <C> <C> <C>
OPERATING REVENUES
Local service $1,867 $ 1,730 7.9
Exchange access 681 665 2.4
Long-distance services 174 204 (14.7)
Directory services 326 306 6.5
Other services 134 104 28.8
----------------
Total operating rev. 3,182 3,009 5.7
----------------
OPERATING EXPENSES
Employee-related 1,125 1,006 11.8
Other operating 662 656 0.9
Depreciation & amort 602 532 13.2
----------------
Total operating exp. 2,389 2,194 8.9
----------------
Operating income 793 815 (2.7)
Interest expense 153 163 (6.1)
Other expense 1 25 (96.0)
----------------
Income before income taxes 639 627 1.9
Income tax provision 242 234 3.4
----------------
NET INCOME $ 397 $ 393 1.0
================
Basic earnings per share $ 0.79 $ 0.78 1.3
================
Basic average shares
outstanding 503.3 501.3 0.4
================
Diluted earnings per share $ 0.78 $ 0.78 -
================
Diluted average shares
outstanding 508.1 505.5 0.5
================
<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 ended March 31, 1998
give effect to the Separation as if the business that
comprised New U S WEST operated as a separate entity
for the entire period. 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 period indicated.
</FN>
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS U S WEST, Inc.
March 31, December 31,
In millions 1999 1998
- -------------------------------------- ------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36 $ 49
Accounts receivable, net 1,700 1,743
Inventories and supplies 236 197
Deferred directory costs 276 274
Deferred tax asset 161 151
Prepaid and other 127 78
------------- --------------
Total current assets 2,536 2,492
Property, plant and equipment - net 15,098 14,908
Other assets - net 1,075 1,007
------------- --------------
Total assets $ 18,709 $ 18,407
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,393 $ 1,277
Accounts payable 1,326 1,347
Accrued expenses 1,753 1,702
Advanced billings and deposits 377 370
------------- --------------
Total current liabilities 4,849 4,696
Long-term debt 8,642 8,642
Postretirement and other postemployment
benefit obligations 2,632 2,643
Deferred taxes, credits and other 1,666 1,671
Stockholders' equity 920 755
------------- --------------
Total liabilities and
stockholders' equity $ 18,709 $ 18,407
============================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS U S WEST, Inc.
(UNAUDITED)
Quarter Ended
March 31,
In millions 1999 1998
- -------------------------------------------------- -------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 397 $ 393
Adjustments to net income:
Depreciation and amortization 602 532
Deferred income taxes and amortization
of investment tax credits 14 40
Changes in operating assets and liabilities:
Accounts receivable 43 101
Inventories, supplies and other current assets (109) (41)
Accounts payable, accrued expense
and advance billings 51 201
Other (61) (17)
- -------------------------------------------------- -------- --------
Cash provided by operating activities 937 1,209
- -------------------------------------------------- -------- --------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (753) (563)
Proceeds from (payments on) disposals of property,
plant and equipment (8) 19
Other (11) (18)
- -------------------------------------------------- -------- --------
Cash used for investing activities (772) (562)
- -------------------------------------------------- -------- --------
FINANCING ACTIVITIES
Net proceeds from short-term debt 256 119
Net repayments of Old U S WEST debt - (44)
Repayments of long-term debt (181) (23)
Proceeds from issuance of common stock 16 17
Dividends paid on common stock (269) (259)
Dividends paid to Old U S WEST - (90)
Purchases of treasury stock - (21)
- -------------------------------------------------- -------- --------
Cash used for financing activities (178) (301)
- -------------------------------------------------- -------- --------
CASH AND CASH EQUIVALENTS
Increase (decrease) (13) 346
Beginning balance 49 27
- -------------------------------------------------- -------- --------
Ending balance $ 36 $ 373
================================================= ======== ========
</TABLE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED DATA U S WEST, INC.
(UNAUDITED)
Quarter Ended
Dollars in millions, except March 31, %
per share amounts 1999 1998 Change
<S> <C> <C> <C>
Access lines
(thousands):
Business 4,972 4,839 2.9
Consumer 11,799 11,363 3.8
Total access lines 16,771 16,202 3.5
Minutes of use (millions):
Interstate 15,305 14,362 6.6
Intrastate 3,139 2,983 5.2
Total minutes of use 18,444 17,345 6.3
Employees:
U S WEST, Inc. 55,324 52,142 6.1
Telephone
operations only 47,007 44,667 5.2
Telephone empl per
10,000 access lines 28.0 27.6 1.4
Dividends per
common share $0.535$ 0.535 -
Common shares
outstanding (millions) (#1) 503.5 501.3 0.4
Capital expend $ 787 $ 522 50.8
EBITDA (#2) 1,395 1,347 3.6
EBITDA margin 43.8% 44.8% (2.2)
Debt-to-capital
ratio (#3) 57.4% 55.6% 3.2
<FN>
<F1>
# 1: Common shares outstanding at March 31, 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
expense (EBITDA).
<F3>
# 3: Telephone operations only.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NEW R-LINE FORMAT BY QUARTER FOR 1996-1998 U S WEST, INC.
(UNAUDITED)
1998 revenues for the quarter ended
In millions Mar 31, Jun 30, Sep 30, Dec 31, Total
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $1,730 $1,756 $1,805 $1,837 $7,128
Access services 665 671 660 673 2,669
Long-distance services 204 200 202 189 795
Directory services 306 310 313 339 1,268
Other services 104 116 132 166 518
------- ------- ------- ------- ------
Total operating rev. $3,009 $3,053 $3,112 $3,204 $12,378
======= ======= ======= ======= ======
<CAPTION>
1997 revenues for the quarter ended
In millions Mar 31, Jun 30, Sep 30, Dec 31, Total
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $1,530 $1,498 $1,639 $1,613 $6,280
Access services 701 689 669 586 2,645
Long-distance services 250 240 235 172 897
Directory services 286 294 295 315 1,190
Other services 100 109 122 136 467
------- ------- ------- ------- ------
Total operating rev. $2,867 $2,830 $2,960 $2,822 $11,479
======= ======= ======= ======= ======
<CAPTION>
1996 revenues for the quarter ended
In millions Mar 31, Jun 30, Sep 30, Dec 31, Total
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $1,423 $1,463 $1,493 $1,527 $5,906
Access services 631 634 617 667 2,549
Long-distance services 290 277 271 259 1,097
Directory services 263 271 268 286 1,088
Other services 122 126 134 146 528
------- ------- ------- ------- ------
Total operating rev. $2,729 $2,771 $2,783 $2,885 $11,168
======= ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
NEW R-LINE FORMAT DEFINITION U S WEST, INC.
Commencing with the first quarter of 1999, the revenue lines on the
income statement have been recast to more accurately depict the
point of origin of revenue by customer. The revenue lines now in
use and the types of revenue contained in each revenue
line are as follows:
Local services revenue Access services Long-distance services
- ----------------------- --------------- ----------------------
<S> <C> <C>
Basic local Interstate access Intralata long-
telephone services distance services
Vertical services Intrastate access Long-distance
(caller ID, calling cards (1)
call waiting, etc.)
Wireless services (1) Directory services Other services
------------------ --------------
Carrier access line <C> <C>
charge (2) Yellow page Unregulated products
services sales
Inside wire installation
and maintenance (1) Billing and collection
services
Megabit services (2)
Enhanced white pages
directory listings (1)
Public payphone services (1)
<FN>
<F1>
(1) Previously included in Other Services.
<F2>
(2) Previously included in Interstate and Intrastate Access Services.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OLD R-LINE FORMAT
(UNAUDITED)
Quarter Ended
March 31, %
In millions 1999 1998 Change
----------- ---- ---- ------
<S> <C> <C> <C>
OPERATING REVENUES
Local services $1,413 $1,350 4.7
Interstate access 739 698 5.9
Intrastate access 197 206 (4.4)
Long-distance
network 171 201 (14.9)
Directory services 329 307 7.2
Other services 333 247 34.8
---- ---- ------
Total operating rev. $3,182 $3,009 5.7
===== ===== ======
</TABLE>
