================================================================================
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 26, 2000
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)
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Item 5. Other Events
On January 26, 2000, U S WEST, Inc. (formerly "USW-C, Inc.") released its
fourth quarter earnings results for the year ended December 31, 1999. The
release and financial statements are attached hereto as Exhibits.
Item 7. Exhibits
<TABLE>
<CAPTION>
Exhibit Description
<S> <C>
27 Financial Data Schedule
99.1 Press Release issued January 26, 2000 concerning the earnings
results of U S WEST, Inc. for the fourth quarter of 1999.
99.2 Unaudited Pro Forma Consolidated Statements of Income of U S
WEST, Inc. for the quarters and twelve-month periods ended
December 31, 1998 and 1999, respectively, filed in connection
with the Press Release dated January 26, 2000.
99.3 Unaudited Pro Forma Earnings Normalization Schedule of U S WEST,
Inc. for the quarters and twelve-month periods ended December 31,
1998 and 1999, respectively, filed in connection with the Press
Release dated January 26, 2000.
99.4 Unaudited Consolidated Statements of Income of U S WEST, Inc. for
the quarters and twelve-month periods ended December 31, 1998 and
1999, respectively, filed in connection with the Press Release
dated January 26, 2000.
99.5 Unaudited Consolidated Balance Sheets of U S WEST, Inc. for the
twelve-month periods ended December 31, 1998 and 1999,
respectively, filed in connection with the Press Release dated
January 26, 2000.
99.6 Unaudited Consolidated Statements of Cash Flows of U S WEST, Inc.
for the years ended December 31, 1998 and 1999, respectively,
filed in connection with the Press Release dated January 26,
2000.
99.7 Unaudited Selected Consolidated Data of U S WEST, Inc. for the
quarters and twelve-month periods ended December 31, 1998 and
1999, respectively, filed in connection with the Press Release
dated January 26, 2000.
99.8 Unaudited Pro Forma Statements of Income of U S WEST, Inc. for
the quarters ended March 31, June 30, September 30, and December
31, 1999 and the year ended December 31, 1999, respectively,
filed in connection with the Press Release dated January 26,
2000.
99.9 Unaudited Consolidated Pro Forma Statements of Income for U S
WEST, Inc. for the quarters ended March 31, June 30, September
30, and December 31, 1998 and the year ended December 31, 1998,
respectively, filed in connection with the Press Release dated
January 26, 2000.
99.10 Unaudited Consolidated Statements of Operations for U S WEST
Communications, Inc. for the quarters and years ended December
31, 1998 and 1999, respectively.
99.11 Consolidated Balance Sheets for U S WEST Communications, Inc. for
the years ended December 31, 1998 and 1999, respectively.
</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: January 26, 2000
[U S WEST LOGO]
INVESTOR RELATIONS
January 26, 2000 NEWS FLASH
U S WEST 4th Quarter Earnings Rise 6.4% on Strong New Product Growth
High-Speed Data, Wireless Subscriber Levels Exceed Annual Targets,
Drive Results; Industry-Leading DSL Tops 110,000 Customers;
Advanced PCS Exceeds Half-Million Mark
DENVER - U S WEST (NYSE: USW) today announced fourth quarter diluted earnings
per share of $0.83 on net income of $425 million. EPS rose $0.05 or 6.4 percent.
Full-year EPS grew to $3.23, up 6.3 percent or $0.19 on net income of $1.64
billion.
(All the above numbers are pro forma and normalized for a change to an
industry-standard "point of publication" accounting method that allows U S WEST
Dex, the company's directory publishing unit, to recognize directory revenues
and costs of sale at the time of directory publication.)
Also during the quarter, the company reported that EBITDA (Earnings Before
Interest, Taxes, Depreciation, Amortization and other) grew to $1.45 billion, up
5.3 percent from the fourth quarter of last year.
The company achieved results with fourth quarter revenue growth of 6.3 percent,
driven largely by acceleration of U S WEST's data and wireless products. In
fact, nearly 78 percent of revenue growth for the quarter resulted from these
two growth areas.
"Exceeding our 1999 targets in the emerging data, Internet, wireless and even
video growth areas of our business is a significant milestone for U S WEST,"
said Sol Trujillo, chairman, president and CEO of U S WEST. "Our early success
with these critical future growth engines puts us in prime position to take
advantage of the exploding telecommunications and entertainment markets.
"Continuing to transform U S WEST into a higher growth-oriented vehicle will be
critical as we move closer to completing our merger with Qwest," Trujillo added.
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 2
QUARTERTLY Growth Product Highlights
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<CAPTION>
Division Revenues (comparisons are Key Product Subscriber/Penetration Levels
4Q99 over 4Q98)
- - -------- ------------------------- ----------- -----------------------------
<S> <C> <C> <C>
Data o $486 million, up o U S WEST.net o Added 73,000 for the quarter.
36 percent
o !NTERPRISE data o MegaBit o Added more than 30,000 for the quarter.
revenues were $252 Services
million, up 61 (DSL)
percent.
PCS o ARPU of $55. o Advanced o Added 122,000 in the quarter, up 52 percent
PCS over 4Q98 additions and more than double the
o Total quarterly additions from 3Q99.
revenue of $78
million, up 71
percent.
Video o ChoiceTV o Have 35,000 video subscribers
& OnLine o 16,000 to ChoiceTV in Phoenix
o 19,000 in Omaha, Neb.
o 20 percent of ChoiceTV customers also opt for
U S WEST Choice Online service.
</TABLE>
During the quarter, the company's total "growth subscribers" (customers for the
company's PCS, DSL and Internet access service) were up more than 225,000.
Growth initiatives negatively impacted EPS by $0.27 for the quarter versus $0.18
for fourth quarter, 1998.
For the year, U S WEST added nearly 600,000 "growth subscribers" for its
Advanced PCS, MegaBit, and U S WEST.net services. U S WEST now has nearly
960,000 growth subscribers, surpassing company targets by better than 33 percent
for the year. Investment in growth initiatives negatively impacted EPS by $0.81
for the year versus $0.48 for 1998.
"What is most encouraging about our growth businesses is not just the pure
volume we're generating, but the characteristics of our growth products,"
Trujillo said. "For example, we have aggressively won about 85 percent of the
DSL customers in our region. And the way we've begun bundling products has
improved customer retention and satisfaction, driven increased per-customer
revenue, and helped improve product penetration."
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 3
ANNUAL Growth Product Highlights
<TABLE>
<CAPTION>
Division Revenues (comparisons are Key Product Subscriber/Penetration Levels (comparisons
1999 over 1998) are 1999 over 1998)
- - -------- ------------------------- ----------- ------------------------------------------
<S> <C> <C> <C>
Data o $1.7 billion, up o U S WEST.net o To date, total 380,000, up almost 230,000 in
34 percent 1999, or 152 percent.
o !NTERPRISE data o MegaBit o Added more than 88,000 during 1999, a
revenues were $847 (DSL) four-fold increase over 1998, bringing the total
million, up 59 services to 110,000.
percent. o USW serves 451 subs. per Central Office, with
244 equipped COs.
o 93 percent of customers self-install.
PCS o Annual ARPU of o Advanced o Added more than 280,000 during 1999 for a
$57. PCS total of more than 465,000 by end of year.
(Topped 500,000 in January 2000)
o Total annual
revenue of $236 o Penetration is now 3.2 percent.
million,
two-and-a-half times o Number two market slot in mature markets.
1998 totals.
o Wireless o 60 percent of users subscribe to at least one
Integrated of the product's integrated features
features
Dex o 1999 E-Commerce o Internet o In 1999, IYP usage up nearly 120 percent.
revenues grew 92 Yellow Pages
percent to more than
$24 million. o Web Site o Sold over 10,000 web sites to businesses in
Service 1999, more than any other web site developer
in U S WEST's 14 states.
</TABLE>
Other fourth quarter and year-end highlights include:
Volumes and Penetration:
o Became the most densely penetrated of any DSL provider nationwide, with
more than 10 percent of qualified on-line households taking the service.
o Residential subscriber levels at the end of the quarter for the company's
most popular custom calling features were: Caller ID, 37 percent; Call
Waiting, 36 percent; Voice Messaging, 20 percent.
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 4
o In 1999, the company has signed up more than 250,000 customers for several
of its new privacy-related custom-calling features, including Caller ID
with Privacy Plus and No Solicitation.
o Subscribers to the company's bundled Custom Choice package for residential
customers now stand at 1.3 million, more than double the number from fourth
quarter 1998.
o The number of primary rate ISDN lines in service increased 80 percent
during the year. Total ISDN lines grew 23 percent in 1999.
o U S WEST Dex Internet yellow pages volume surpassed the 2.2-million-visit
mark for one month in December.
o Added 408,000 access lines over the past year. On a
"voice-grade-equivalent" basis, business access line growth was 17 percent.
o On the small business side, total access lines equipped with Centrex 21
services grew to 576,000, a 42 percent year-over-year increase.
o 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 535,000 lines to competitors, up from 382,000 lines at the
end of 1998.
Sales and Revenues:
o Generated $236 million in annual revenue from PCS customers, up more than
two-and-one-half times the 1998 amount. More than 60 percent of Advanced
PCS customers now subscribe to at least one of the company's integrated
features, and these customers are less likely to look for a competitive
offering.
o Frame relay revenues increased by more than 33 percent quarter-over-quarter
and ISDN revenues jumped by 64 percent quarter-over-quarter.
o A 17 percent increase compared with fourth quarter 1998 in private line and
special access revenues, which totaled $316 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. For the year, private line and special access
revenues were almost $1.2 billion, up 18 percent over 1998.
o During the quarter, consumer revenues from vertical services increased by
14 percent, compared to fourth quarter 1998. Consumer vertical services
revenues grew 15 percent during the year.
o Toll revenues dropped by 40 percent during the quarter.
Costs and Margins:
o Capital expenditures were up 42 percent during the quarter, rising to $1.4
billion. For the year, capital expenditures rose 45 percent to $4.2
billion. The increases have helped bolster service levels for traditional
services and aided in deployment of new services.
o Absorbed approximately $117 million in expenses related to interconnection,
number portability and Year 2000 readiness during the quarter. In total,
the company spent $270 million in expense and capital on Y2K.
- more -
<PAGE>
U S WEST Fourth Quarter Earnings - Page 5
o Employee-related expenses grew by 11 percent during the quarter, due in
part with efforts related to keeping up with service demands. These
expenses include a net addition of more than 1,600 employees during the
quarter and nearly 3,800 since in 1999 -- more than 2,000 of which have
been added specifically to keep up with service demands.
During the quarter, the company sold approximately 24 million shares (65 percent
of its holdings) in Global Crossing, Ltd. (NASDAQ: GBLX) at a value of about
$1.14 billion. This sale resulted in an after tax loss of $259 million, or $0.51
per share. Of this amount, $0.44 related to the actual sale of shares. The
remaining $0.07 resulted from the costs of entering into agreements that allow
U S WEST to participate in additional upside appreciation in Global Crossing
stock. Those agreements also have potential downside risk associated with them.
Taken together, these charges reduced U S WEST's quarterly reported normalized
diluted EPS to $0.32.
In other news, U S WEST announced that its annual shareholder meeting will take
place in December 2000. This meeting was originally scheduled for April 20. If
the company's pending merger with Qwest Communications International Inc. closes
as scheduled, U S WEST will not hold an independent annual shareholder meeting.
U S WEST (NYSE: USW) provides a full range of telecommunications and other
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); (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) acceleration of the deployment of additional
services and/or advanced new services to customers, such as broadband data,
wireless and video services, which would require substantial expenditure of
financial and other resources; (vii) a change in economic conditions in the
various markets served by U S WEST's operations; (viii) higher than anticipated
start-up costs associated with new business opportunities; (ix) delays in
U S WEST's ability to begin offering interLATA long-distance services; (x)
consumer acceptance of broadband services, including telephony, data and
wireless services; (xi) delays in the development of anticipated technologies,
or the failure of such technologies to perform according to expectations; and
(xii) timing and completion of the recently announced merger with Qwest
Communications International Inc. and subequent integration of the businesses of
the two companies. 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.
- ### -
For 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 7:15 a.m. (MST) by accessing U S WEST's Internet site:
www.uswest.com.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME (1)(2) U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1999 1998(3) Change 1999 1998(3) Change
- - ------------------- ---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $2,000 $1,829 9.3 $7,746 $7,104 9.0
Access services 691 670 3.1 2,729 2,660 2.6
Directory services 455 430 5.8 1,436 1,349 6.4
Long-distance services 113 189 (40.2) 584 795 (26.5)
Other services 232 166 39.8 687 518 32.6
----- ----- ------ ------
Total operating rev. 3,491 3,284 6.3 13,182 12,426 6.1
----- ----- ------ ------
OPERATING EXPENSES
Employee-related 1,266 1,141 11.0 4,733 4,315 9.7
Other operating 774 765 1.2 2,745 2,842 (3.4)
Depreciation & amort 604 574 5.2 2,367 2,199 7.6
----- ----- ------ ------
Total operating exp. 2,644 2,480 6.6 9,845 9,356 5.2
----- ----- ------ ------
Operating Income 847 804 5.3 3,337 3,070 8.7
OTHER EXPENSE
Interest expense 217 165 31.5 736 660 11.5
Loss on sale of Global
Crossing investment 423 - - 423 - -
Terminated merger -
related expenses - - - 282 - -
Other expense
(income), net (16) 10 (260.0) (6) 87 (106.9)
----- ----- ------ ------
Income before income
taxes 223 629 (64.5) 1,902 2,323 (18.1)
Income tax provision 57 232 (75.4) 800 875 (8.6)
----- ----- ------ ------
Net Income $ 166 $ 397 (58.2) $1,102 $1,448 (23.9)
===== ===== ====== ======
Basic earnings per
share $ 0.33 $ 0.79 (58.2) $ 2.18 $2.89 (24.6)
===== ===== ====== ======
Basic average shares
outstanding 505.7 502.7 0.6 504.4 501.8 0.5
===== ===== ====== ======
Diluted earnings per
share $ 0.32 $ 0.78 (59.0) $ 2.16 $2.86 (24.5)
===== ===== ====== ======
Diluted average shares
outstanding 511.7 508.0 0.7 509.3 506.2 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 year ended December 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 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 year.
<F2>
(2) The results of operations for 1999 and 1998 include pro forma adjustments
for the change in accounting principle to recognize revenues and expenses for
directory publishing under the "point of publication" method from the
"amortization" method as if the change in accounting principle had been adopted
as of the beginning of each period presented. Under the "point of publication"
method, revenues and expenses are recognized when the directories are delivered
whereas under the "amortization" method, revenues and expenses were recognized
over the lives of the directories, generally one year.
<F3>
(3) Certain reclassifications have been made to the 1998 amounts to conform with
the 1999 presentation.
</FN>
</TABLE>
PRO FORMA EARNINGS NORMALIZATION SCHEDULE U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1999 1998 Change 1999 1998 Change
- - ------------------- ---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
NORMALIZED INCOME:
Reported net income $ 166 $ 397 (58.2) $1,102 $1,448 (23.9)
Adjustments:
Loss on sale of Global
Crossing investment 259 - - 259 - -
Terminated merger -
related expenses - - - 282 - -
Separation costs - - - - 68 -
Asset impairment - - - - 21 -
---- ---- ----- -----
Normalized income $ 425 $ 397 7.1 $1,643 $1,537 6.9
==== ==== ===== =====
NORMALIZED BASIC
EARNINGS PER SHARE:
Reported basic earnings
per share $0.33 $0.79 (58.2) $2.18 $2.89 (24.6)
Adjustments:
Loss on sale of Global
Crossing investment 0.51 - - 0.51 - -
Terminated merger -
related expenses - - - 0.56 - -
Separation costs - - - - 0.13 -
Asset impairment - - - - 0.04 -
---- ---- ----- -----
Normalized basic
earnings per share $0.84 $0.79 6.3 $3.26 # $3.07 # 6.2
==== ==== ===== =====
NORMALIZED DILUTED
EARNINGS PER SHARE:
Reported diluted
earnings per share $0.32 $0.78 (59.0) $2.16 $2.86 (24.5)
Adjustments:
Loss on sale of Global
Crossing investment 0.51 - - 0.51 -
Terminated merger -
related expenses - - - 0.55 - -
Separation costs - - - 0.13 -
Asset impairment - - - - 0.04 -
---- ---- ----- -----
Normalized diluted
earnings per share $0.83 $0.78 6.4 $3.23 # $3.04 # 6.3
==== ==== ===== =====
<FN>
<F1>
# Amount does not foot due to rounding of individual components.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF INCOME (1)(2) U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
In millions, except December 31, % December 31, %
per share amounts 1999 1998(3) Change 1999 1998(3) Change
- - ------------------- ---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $2,000 $1,829 9.3 $7,746 $7,104 9.0
Access services 691 670 3.1 2,729 2,660 2.6
Directory services 455 355 28.2 1,436 1,318 9.0
Long-distance services 113 189 (40.2) 584 795 (26.5)
Other services 232 166 39.8 687 518 32.6
----- ----- ------ ------
Total operating rev. 3,491 3,209 8.8 13,182 12,395 6.3
----- ----- ------ ------
OPERATING EXPENSES
Employee-related 1,266 1,133 11.7 4,733 4,312 9.8
Other operating 774 751 3.1 2,745 2,835 (3.2)
Depreciation & amort 604 574 5.2 2,367 2,199 7.6
----- ----- ------ ------
Total operating exp. 2,644 2,458 7.6 9,845 9,346 5.3
----- ----- ------ ------
Operating Income 847 751 12.8 3,337 3,049 9.4
OTHER EXPENSE
Interest expense 217 165 31.5 736 660 11.5
Loss on sale of Global
Crossing investment 423 - - 423 - -
Terminated merger -
related expenses - - - 282 - -
Other expense
(income), net (16) 10 (260.0) (6) 87 (106.9)
----- ----- ------ ------
Income before income
taxes 223 576 (61.3) 1,902 2,302 (17.4)
Income tax provision 57 208 (72.6) 800 866 (7.6)
----- ----- ------ ------
Income before
cumultive effect of
accounting change 166 368 (54.9) 1,102 1,436 (23.3)
Cumulative effect of
change in accounting
principle - - - 240 - -
Net Income $ 166 $ 368 (54.9) $1,342 $1,436 (6.5)
=== === ====== ======
Basic earnings per
share $ 0.33 $ 0.73 (54.8) $ 2.66 $2.86 (7.0)
===== ===== ====== ======
Basic average shares
outstanding 505.7 502.7 0.6 504.4 501.8 0.5
===== ===== ====== ======
Diluted earnings per
share $ 0.32 $ 0.73 (56.2) $ 2.63 $2.84 (7.4)
===== ===== ====== ======
Diluted average shares
outstanding 511.7 508.0 0.7 509.3 506.2 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 year ended December 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 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 year.
<F2>
(2) The results of operations for 1999 include adjustments for the change in
accounting principle to recognize revenues and expenses for directory publishing
under the "point of publication" method from the "amortization" method as if the
change in accounting principle had been adopted as of the beginning of the year.
Under the "point of publication" method, revenues and expenses are recognized
when the directories are delivered whereas under the "amortization" method,
revenues and expenses were recognized over the lives of the directories,
generally one year.
<F3>
(3) Certain reclassifications have been made to the 1998 amounts
to conform with the 1999 presentation.
</FN>
</TABLE>
CONSOLIDATED BALANCE SHEETS U S WEST, Inc.
<TABLE>
<CAPTION>
December 31, December 31,
In millions 1999 1998
- - ---------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 78 $ 49
Accounts receivable, net 2,455 1,743
Receivable from Global Crossing Ltd.
sale of investment 1,140 -
Inventories and supplies 272 197
Deferred directory costs 85 274
Deferred tax asset 46 151
Prepaid and other 116 78
------ ------
Total current assets 4,192 2,492
Property, plant and equipment - net 16,404 14,908
Investments 1,234 63
Other assets - net 1,386 944
------ ------
Total assets $23,216 $18,407
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 2,882 $ 1,277
Accounts payable 1,700 1,347
Accrued expenses 1,840 1,702
Advance billings and deposits 344 370
------ ------
Total current liabilities 6,766 4,696
Long-term debt 10,189 8,642
Postretirement and other postemployment
benefit obligations 2,890 2,643
Deferred taxes, credits and other 2,116 1,671
Stockholders' equity 1,255 755
------ ------
Total liabilities and
stockholders' equity $23,216 $18,407
====== ======
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS U S WEST, Inc.
<TABLE>
<CAPTION>
Year Ended
December 31,
In millions 1999 1998
- - ------------------------------------------------- ------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,342 $ 1,436
Adjustments to net income:
Depreciation and amortization 2,367 2,199
Cumulative effect of change in
accounting principle (240) -
Loss on sale of Global Crossing Ltd. shares 423 -
Deferred income taxes and amortization
of investment tax credits 225 61
Changes in operating assets and liabilities:
Accounts receivable (126) (26)
Inventories, supplies and other current assets (106) (12)
Accounts payable, accrued expense
and advance billings 345 104
Other 316 165
- - ------------------------------------------------- ------- -------
Cash provided by operating activities 4,546 3,927
- - ------------------------------------------------- ------- -------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (3,944) (2,672)
Payments on disposals of property,
plant and equipment (49) (30)
Investment in Global Crossing Ltd. common stock (2,464) -
Other (5) (67)
- - ------------------------------------------------- ------- -------
Cash used for investing activities (6,462) (2,769)
- - ------------------------------------------------- ------- -------
FINANCING ACTIVITIES
Net proceeds from short-term debt 1,304 887
Proceeds from issuance of long-term debt 2,062 3,781
Repayments of long-term debt (336) (442)
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 102 88
Dividends paid on common stock (1,187) (1,056)
Dividends paid to Old U S WEST - (194)
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 1,945 (1,136)
- - ------------------------------------------------- ------- -------
CASH AND CASH EQUIVALENTS
Increase 29 22
Beginning balance 49 27
- - ------------------------------------------------- ------- -------
Ending balance $ 78 $ 49
================================================= ======= =======
</TABLE>
SELECTED CONSOLIDATED DATA U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
As of and for the As of and for the
Quarter Ended Year Ended
December 31, % December 31, %
1999 1998 Change 1999 1998 Change
- - --------------------- ---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Access lines
(thousands):
Business 5,029 4,945 1.7
Consumer 11,980 11,656 2.8
------ ------
Total access lines 17,009 16,601 2.5
====== ======
Billed access minutes
of use (millions):
Interstate 15,647 15,059 3.9 61,854 58,927 5.0
Intrastate 3,397 3,160 7.5 13,022 12,366 5.3
------ ------ ------ ------
Total minutes of use 19,044 18,219 4.5 74,876 71,293 5.0
====== ====== ====== ======
Wireless/PCS:
Revenues (millions) $ 78 $ 46 69.6 $ 236 $ 94 151.1
Subscribers (thousands) 466 185 151.9
ARPU (Dollars) $ 55 $ 53 3.8
Penetration 3.2% 1.4% 128.6
Data Revenues (millions):
Frame Relay $ 49.5 $ 37.1 33.4 $ 176.4 $ 132.1 33.5
Private Line
LAN Interconnect / ATM 38.7 32.0 20.9 148.0 124.4 19.0
ISDN 64.2 39.1 64.2 238.9 142.6 67.5
USW.Net/Megabit(DSL) 25.7 7.9 225.3 74.6 15.0 397.3
Other !NTERPRISE 73.4 40.3 82.1 209.5 119.3 75.6
---- ---- ----- -----
Subtotal !NTERPRISE 251.5 156.4 60.8 847.4 533.4 58.9
Other Data (TMS, CVDS) 6.8 - - 14.6 - -
Other Special Access
& Private Line 228.0 201.0 13.4 864.7 755.3 14.5
----- ----- ----- -----
Total Data Revenues $ 486.3 $357.4 36.1 $1,726.7 $1,288.7 34.0
===== ===== ======= =======
Total Special Access
and Private Line (#1) $ 316.2 $270.1 17.1 $1,189.1 $1,011.8 17.5
===== ===== ======= =======
Additional Data Stats:
XDSL Equipped
Central Offices (C.O.) 244 N.A.
Subscribers per XDSL
Equipped C.O.'s 451 N.A.
Employees:
U S WEST, Inc. 58,272 54,483 7.0
Telephone
operations only 46,352 46,310 0.1
Telephone empl per
10,000 access lines 27.3 27.9 (2.2)
Dividends per
common share $ 0.535 $ 0.535 - $ 2.355 $ 2.140 10.0
Common shares
outstanding (millions) 506.3 502.9 0.7
Cap. expend (million) $ 1,399 $ 985 42.0 $ 4,218 $ 2,905 45.2
EBITDA (millions) (#2) 1,451 1,378 5.3 5,704 5,269 8.3
EBITDA margin 41.6% 42.0% (1.0) 43.3% 42.4% 2.1
Debt-to-capital
ratio (#3) 60.0% 57.1% 5.1
<FN>
<F1>
# 1: Includes Frame Relay, Private Line LAN Interconnect and Other Special
Access and Private Line revenues.
<F2>
# 2: Earnings before interest, taxes, depreciation, amortization, and other
(EBITDA).
<F3>
# 3: Telephone operations only.
<F4>
N.A. = Not Available
</FN>
</TABLE>
PRO FORMA STATEMENTS OF INCOME (1) U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Year ended
In millions, except Mar 31,Jun 30, Sep 30, Dec 31, Dec 31,
per share amounts 1999 1999 1999 1999 1999
- - --------------------------- ------ -------- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $1,863 $1,920 $1,963 $2,000 $7,746
Access services 671 684 683 691 2,729
Directory services 326 319 336 455 1,436
Long-distance services 174 156 141 113 584
Other services 134 148 173 232 687
------ ------ ------ -------- --------
Total operating rev. 3,168 3,227 3,296 3,491 13,182
------ ------ ------ -------- --------
OPERATING EXPENSES
Employee-related 1,122 1,153 1,192 1,266 4,733
Other operating 656 671 644 774 2,745
Depreciation & amort 602 573 588 604 2,367
------ ------ ------ -------- --------
Total operating exp. 2,380 2,397 2,424 2,644 9,845
------ ------ ------ -------- --------
Operating Income 788 830 872 847 3,337
OTHER EXPENSE
Interest expense 153 163 203 217 736
Loss on the sale of
Global Crossing investment - - - 423 423
Terminated merger-related
expenses - - 282 0 282
Other expense 1 13 (4) (16) (6)
------ ------ ------ -------- --------
Income before income taxes 634 654 391 223 1,902
Income tax provision 240 248 255 57 800
------ ------ ------ -------- --------
NET INCOME $ 394 $ 406 $ 136 $ 166 $1,102
====== ====== ====== ======== ========
Basic earnings per share $ 0.78 $ 0.81 $0.27 $ 0.33 $ $ 2.18
====== ====== ====== ======== ========
Basic average shares
outstanding 503.3 503.9 504.8 505.7 504.4
====== ====== ====== ======== ========
Diluted earnings per share$ 0.78 $ 0.80 $ 0.27 $ 0.32 $ 2.16
====== ====== ====== ======== ========
Diluted average shares
outstanding 508.1 508.2 509.0 511.7 509.3
====== ====== ====== ======== ========
Normalized diluted earnings
per share (2) $ 0.78 $ 0.80 $ 0.82 $ 0.83 $ 3.23
====== ====== ====== ======== ========
<FN>
<F1>
(1) The results of operations for 1999 include pro forma adjustments for the
change in accounting principle to recognize revenues and expenses for directory
publishing under the "point of publication" method from the "amortization"
method as if the change in accounting principle had been adopted as of the
beginning of each period presented. Under the "point of publication" method,
revenues and expenses are recognized when the directories are delivered whereas
under the "amortization" method, revenues and expenses were recognized over the
lives of the directories, generally one year.
<F2>
(2) Third quarter 1999 income was normalized for terminated merger-related
expenses of $282 ($0.56 per share). Fourth quarter 1999 income was normalized
for the loss on the sale of Global Crossing common shares of $259 ($0.51 per
share).
</FN>
</TABLE>
PRO FORMA STATEMENTS OF INCOME (1) (2) U S WEST, INC.
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Year ended
In millions, except Mar 31, Jun 30,Sept 30,Dec 31, Dec 31,
per share amounts 1998 1998 1998 1998 1998
- - ----------------------------- ------- ----- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Local services $ 1,726 $1,751 $1,798 $1,829 $ 7,104
Access services 664 669 657 670 2,660
Directory services 305 300 314 430 1,349
Long-distance services 204 200 202 189 795
Other services 104 116 132 166 518
------- ----- ------- ------ ---------
Total operating rev. 3,003 3,036 3,103 3,284 12,426
------- ----- ------- ------ ---------
OPERATING EXPENSES
Employee-related 1,004 1,070 1,100 1,141 4,315
Other operating 660 770 647 765 2,842
Depreciation & amort 532 535 558 574 2,199
------- ----- ------- ------ ---------
Total operating exp. 2,196 2,375 2,305 2,480 9,356
------- ----- ------- ------ ---------
Operating Income 807 661 798 804 3,070
OTHER EXPENSE
Interest expense 163 160 172 165 660
Other expense 25 33 19 10 87
------- ----- ------- ------ ---------
Income before income taxes 619 468 607 629 2,323
Income tax provision 230 184 229 232 875
------- ----- ------- ------ ---------
NET INCOME $ 389 $ 284 $ 378 $ 397 $ 1,448
======= ===== ======= ====== =========
Basic earnings per share $ 0.78 $0.57 $ 0.75 $ 0.79 $ 2.89
======= ===== ======= ====== =========
Basic average shares
outstanding 501.3 501.5 501.8 502.7 501.8
======= ===== ======= ====== =========
Diluted earnings per share $ 0.77 $0.56 $ 0.75 $ 0.78 $ 2.86
======= ===== ======= ====== =========
Diluted average shares
outstanding 505.5 505.6 506.0 508.0 506.2
======= ===== ======= ====== =========
Normalized diluted earnings
per share (3) $ 0.77 $0.74 $ 0.75 $ 0.78 $ 3.04
======= ===== ======= ====== =========
<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 year ended December 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 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 year.
<F2>
(2) The results of operations for 1998 include pro forma adjustments for the
change in accounting principle to recognize revenues and expenses for directory
publishing under the "point of publication" method from the "amortization"
method as if the change in accounting principle had been adopted as of the
beginning of each period presented. Under the "point of publication" method,
revenues and expenses are recognized when the directories are delivered whereas
under the "amortization" method, revenues and expenses were recognized over the
lives of the directories, generally one year.
<F3>
(3) Second quarter 1998 income was normalized for $89 ($0.17 per share) for
costs associated with the Separation and an asset impairment.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS U S WEST COMMUNICATIONS, INC.
(UNAUDITED) (Telephone Operations Only)
Quarter Ended Year Ended
December 31, % December 31, %
In millions 1999 1998 Change 1999 1998 Change
OPERATING REVENUES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Local service $ 1,996 $ 1,835 8.8 $ 7,773 $ 7,124 9.1
Access services 691 671 3.0 2,731 2,662 2.6
Long-distance services 109 184 (40.8) 568 779 (27.1)
Other services 130 85 52.9 392 306 28.1
Total operating revenues 2,926 2,775 5.4 11,464 10,871 5.5
OPERATING EXPENSES
Employee-related 977 880 11.0 3,696 3,430 7.8
Other operating 611 723 (15.5) 2,515 2,685 (6.3)
Depreciation & amort 580 558 3.9 2,293 2,138 7.2
Total operating expenses 2,168 2,161 0.3 8,504 8,253 3.0
Operating income 758 614 23.5 2,960 2,618 13.1
Interest expense 114 98 16.3 403 386 4.4
Other expense 4 6 (33.3) 37 82 (54.9)
Income before income
taxes 640 510 25.5 2,520 2,150 17.2
Income tax provision 245 185 32.4 958 815 17.5
NET INCOME $ 395 $ 325 21.5 $ 1,562 $ 1,335 17.0
</TABLE>
CONSOLIDATED BALANCE SHEETS U S WEST COMMUNICATIONS, INC.
(Telephone Operations Only)
December 31, December 31,
In millions 1999 1998
ASSETS
Current assets:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash and cash equivalents $ 61 $ 68
Accounts receivable, net 1,811 1,619
Inventories and supplies 211 154
Deferred tax asset 154 113
Prepaid and other 95 61
Total current assets 2,332 2,015
Property, plant and equipment - net 16,049 14,681
Other assets - net 1,597 882
Total assets $ 19,978 $ 17,578
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term debt $ 1,684 $ 789
Accounts payable 1,721 1,411
Accrued expenses 1,560 1,383
Advance billings and deposits 343 326
Total current liabilities 5,308 3,909
Long-term debt 5,408 5,154
Postretirement and other postemployment
benefit obligations 2,462 2,458
Deferred taxes, credits and other 2,080 1,594
Stockholder's equity 4,720 4,463
Total liabilities and
stockholder's equity $ 19,978 $ 17,578
</TABLE>
<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> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 78
<SECURITIES> 0
<RECEIVABLES> 3,595
<ALLOWANCES> 0
<INVENTORY> 272
<CURRENT-ASSETS> 4,192
<PP&E> 38,126
<DEPRECIATION> 21,722
<TOTAL-ASSETS> 23,216
<CURRENT-LIABILITIES> 6,766
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,255
<TOTAL-LIABILITY-AND-EQUITY> 23,216
<SALES> 3,491
<TOTAL-REVENUES> 3,491
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217
<INCOME-PRETAX> 223
<INCOME-TAX> 57
<INCOME-CONTINUING> 166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166
<EPS-BASIC> .33
<EPS-DILUTED> .32
</TABLE>
