<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 1-3040
U S WEST Communications, Inc.
A Colorado Corporation IRS Employer No.
84-0273800
1801 California Street, Denver, Colorado 80202
Telephone Number (303) 896-3099
THE REGISTRANT, A WHOLLY-OWNED SUBSIDIARY OF U S WEST, INC., MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) OF FORM 10-Q
AND IS THEREFORE FILING THIS FORM WITH REDUCED DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H(2).
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No__
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<PAGE> 2
U S WEST Communications, Inc.
Form 10-Q
TABLE OF CONTENTS
Item Page
PART I - FINANCIAL INFORMATION
1. Financial Statements (Unaudited)
Consolidated Statements of Operations -
Three and nine months ended September 30, 1994 and
1993 ................................................ 3
Condensed Consolidated Balance Sheets -
September 30, 1994 and December 31, 1993 ............ 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1994 and 1993 ....... 6
Consolidated Statements of Shareowner's Equity -
Nine months ended September 30, 1994 and 1993 ....... 7
Notes to Consolidated Financial Statements ............ 8
2. Management's Analysis - (Reduced disclosure format pursuant to
General Instruction H(2)) ............................. 9
PART II - OTHER INFORMATION
6. Exhibits and Reports on Form 8-K ....................... 16
2
<PAGE> 3
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 1994 1993 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local service $1,034 $942 $3,035 $2,842
Interstate access
service 573 528 1,691 1,593
Intrastate access
service 188 173 541 513
Long distance network
service 323 371 1,019 1,082
Other services 149 134 442 410
-------- -------- ------- --------
Total operating
revenues 2,267 2,148 6,728 6,440
-------- -------- ------- --------
OPERATING EXPENSES
Employee-related costs 752 732 2,207 2,134
Other operating expenses 400 391 1,199 1,212
Taxes other than income
taxes 99 98 294 290
Restructuring charge - 880 - 880
Depreciation and
amortization 471 454 1,406 1,355
-------- -------- ------- --------
Total operating
expenses 1,722 2,555 5,106 5,871
-------- -------- ------- --------
Income (loss) from
operations 545 (407) 1,622 569
Interest expense 82 87 243 286
Other income (expense) (6) 2 25 (11)
-------- -------- ------- --------
Income (loss) before
income taxes and
extraordinary items 457 (492) 1,404 272
Provision for (benefit of)
income taxes 172 (143) 527 111
-------- -------- ------- --------
Income (loss) before
extraordinary items 285 (349) 877 161
Extraordinary items
Discontinuance of SFAS
No. 71, net of tax - (3,041) - (3,041)
Early extinguishment
of debt, net of tax - (27) - (77)
-------- -------- ------- --------
NET INCOME (LOSS) $285 ($3,417) $877 ($2,957)
======== ======== ======= ========
See Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE> 4
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
------------------------------------------------------------------
September 30, December 31,
(Dollars in millions) 1994 1993
------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $53 $67
Accounts receivable 1,514 1,391
Materials and supplies 123 108
Deferred tax asset 219 292
Other 45 59
-------- --------
Total current assets 1,954 1,917
-------- --------
Property, plant and equipment 28,887 28,012
Less: Accumulated
depreciation 16,165 15,465
-------- --------
Net property, plant and
equipment 12,722 12,547
-------- --------
Other 820 698
-------- --------
Total assets $15,496 $15,162
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE> 5
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
------------------------------------------------------------------
September 30, December 31,
(Dollars in millions) 1994 1993
------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREOWNER'S EQUITY
Current liabilities
Short-term debt $1,432 $1,260
Accounts payable 747 935
Employee compensation 301 303
Current portion of
restructuring charge 367 421
Other 933 893
-------- ---------
Total current liabilities 3,780 3,812
-------- ---------
Long-term debt 4,245 4,092
Postretirement benefit
obligation 2,358 2,593
Deferred taxes and credits 1,522 1,525
Shareowner's equity
Common shares - one share
without par value 7,193 6,742
Accumulated deficit (3,602) (3,602)
-------- ---------
Total shareowner's equity 3,591 3,140
-------- ---------
Total liabilities and
shareowner's equity $15,496 $15,162
======== =========
See Notes to Consolidated Financial Statements.
</TABLE>
5
<PAGE> 6
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
-----------------------------------------------------------------
Nine Months Ended
September 30,
(Dollars in millions) 1994 1993
-----------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $877 ($2,957)
Adjustments
Depreciation and amortization 1,406 1,355
Deferred income taxes and
amortization of investment
tax credit 135 (240)
Discontinuance of SFAS No. 71 - 3,041
Restructuring charge - 880
Changes in operating assets and
liabilities
Accounts recei (123) (110)
Materials, supplies and other (31) (36)
Accounts payable and accrued
liabilities 15 71
Funding of postretirement benefit
obligation (288) (246)
Restructuring payments (156) (64)
Other - net 4 289
-------- ---------
Cash provided by operating
activities 1,839 1,983
-------- ---------
INVESTING ACTIVITIES
Expenditures for property,
plant and equipment (1,732) (1,555)
Other - net 48 26
-------- ---------
Cash used for investing
activities (1,684) (1,529)
-------- ---------
FINANCING ACTIVITIES
Net proceeds from short-term debt 286 701
Proceeds from long-term debt 251 1,794
Repayments of long-term debt (263) (1,862)
Dividends paid (894) (686)
Equity infusions from parent 451 193
-------- ---------
Cash provided by (used for)
financing activities (169) 140
-------- ---------
CASH AND CASH EQUIVALENTS
Increase (decrease) (14) 594
Beginning balance 67 53
-------- ---------
Ending balance $53 $647
======== =========
See Notes to Consolidated Financial Statements.
</TABLE>
6
<PAGE> 7
Form 10-Q - Part I U S WEST Communications, Inc.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY (Unaudited)
<CAPTION>
-----------------------------------------------------------------
Nine Months Ended
September 30,
(Dollars in millions) 1994 1993
-----------------------------------------------------------------
<S> <C> <C>
COMMON SHARES
Balance at beginning of period $6,742 $6,457
Equity infusions from parent 451 193
Other - 15
-------- ---------
Balance at end of period 7,193 6,665
-------- ---------
ACCUMULATED DEFICIT
Balance at beginning of period (3,602) -
Net income (loss) 877 (2,957)
Dividends declared (877) (645)
-------- ---------
Balance at end of period (3,602) (3,602)
-------- ---------
TOTAL SHAREOWNER'S EQUITY $3,591 $3,063
======== =========
See Notes to Consolidated Financial Statements.
</TABLE>
7
<PAGE> 8
Form 10-Q - Part I U S WEST Communications, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in millions)
A. Summary of Significant Accounting Policies
Consolidated Financial Statements
The consolidated financial statements have been prepared by
U S WEST Communications, Inc. (the "Company") pursuant to the rules
and regulations of the SEC (Securities and Exchange Commission).
Certain information and footnote disclosures normally accompanying
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such SEC rules and regulations. In the opinion of the
Company's management, the consolidated financial statements include
all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the financial information set forth
therein. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1993.
Certain reclassifications within the financial statements have
been made to conform to the current year presentation.
Computer Software
The cost of computer software, whether purchased or developed
internally, is charged to expense with two exceptions. Initial
operating system software is capitalized and amortized over the
life of the related hardware, and initial network applications
software is capitalized and amortized over three years.
Subsequent upgrades to capitalized software are expensed.
Research and Development
The Company recognized $42, $55 and $56 for research and
development expense in 1993, 1992 and 1991, respectively.
Approximately half of this activity was conducted at Bell
Communications Research, Inc. ("Bellcore"), one-seventh of which
is owned by the Company.
Contingencies
There are pending regulatory actions in local regulatory
jurisdictions which call for price decreases, refunds or both.
In one such instance, the Utah Supreme Court has remanded a Utah
Public Service ("PSC") order to the PSC for reconsideration,
thereby establishing two exceptions to the rule against
retroactive ratemaking: 1) unforeseen and extraordinary events
and 2) misconduct. The Commission's initial order denied a
refund request from interexchange carriers and other parties
related to the Tax Reform Act of 1986. At the current time,
this case is still in the discovery process. If a formal
filing, to be made in accordance with the remand from the Supreme
Court, alleges that the exceptions apply, the range of possible
risk is $0 to $140.
8
<PAGE> 9
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Details of operations for the first nine months of 1994,
including a comparison to the prior year, are presented in the
following table:
-----------------------------------------------------------------
1994 1993 % Change
-----------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $6,728 $6,440 4.5
Operating expenses
Employee-related costs 2,207 2,134 3.4
Other operating expenses 1,199 1,212 (1.1)
Taxes other than income taxes 294 290 1.4
Restructuring charge - 880 -
Depreciation and amortization 1,406 1,355 3.8
Interest expense 243 286 (15.0)
Other income (expense) 25 (11) -
-----------------------------------------------------------------
Income before income taxes and
extraordinary items 1,404 272 -
Provision for income taxes 527 111 -
-----------------------------------------------------------------
Income before extraordinary items 877 161 -
Extraordinary items
Discontinuance of SFAS No. 71,
net of tax - (3,041) -
Early extinguishment of debt,
net of tax - (77) -
-----------------------------------------------------------------
Net income (loss) $877 ($2,957) -
=================================================================
</TABLE>
The Company's volume growth resulted in a normalized
increase in net income of $96 or 12.8% for the nine months ended
September 30, 1994 compared to the same period last year.
Normalized items exclude the effects of the 1994 $32 gain on the
sale of certain rural telephone exchanges, the 1993 $534
(aftertax) restructuring charge, the 1993 $54 federally mandated
income tax increase and the 1993 extaordinary charges of $3,041
for the discontinuance of Statement of Financial Accounting
Standard ("SFAS") No. 71, and $77 for the early extinguishment of
debt.
Volume growth also resulted in a 8.0 percent increase in
earnings before interest, taxes, depreciation and amortization
and other ("EBITDA"), excluding the 1993 $880 restructuring
charge. The Company believes EBITDA is an important indicator of
the operational strength of the business.
OPERATING REVENUES
In the table that follows, price changes primarily represent
the aggregate effects of regulatory proceedings and growth
represents increased market penetration through both increased
access lines and additional sales to existing customers. Different
regulatory commissions govern the interstate and intrastate
jurisdictions, resulting in varying price and refund impacts.
9
<PAGE> 10
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
<TABLE>
OPERATING REVENUES (continued)
<CAPTION>
Lower Increase
Price (Higher) (Decrease)
Changes Refunds Growth Other $ %
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Local service $ (7) $ 35 $164 $ 1 $193 6.8
Interstate access (31) 17 117 (5) 98 6.2
Intrastate access (3) (7) 34 4 28 5.5
Long distance (5) 1 (26) (33) (63) (5.8)
Other services - - - 32 32 7.8
-----------------------------------------------------------------
Total $(46) $ 46 $289 $ (1) $288 4.5
</TABLE>
Local service revenues increased principally as a result of
higher demand for services, as evidenced by an increase of
approximately 480,000 access lines, or 3.5 percent, during the
last twelve months. Access line growth was 3.8 percent as
adjusted for the sale of approximately 38,000 rural telephone
access lines.
Increased demand for access services more than offset the
effects of rate reductions. Billed access minutes of use
increased 8.6 percent over the same period last year. Long
distance network service revenues decreased principally due to
the effects of multiple toll calling plans ("MTCP") in the states
of Washington and Oregon. These regulatory arrangements allow
independent telephone companies to act as toll carriers. The
impact to the Company in the third quarter was a loss of $31 in
long distance revenue, partially offset by an increase of $4 to
intrastate access revenue, and a decrease of $19 to other
operating expenses (i.e. access expense). In addition to the
effects of MTCP, competition continues to impact long distance
network revenues. Revenues from other services increased
primarily as a result of continued market penetration in voice
messaging services.
OPERATING EXPENSES
Employee-related costs increased over the prior year as a
result of additional costs associated with an increase in
salaries, wages and contract labor of approximately $47. Costs
associated with customer service initiatives and related temporary
staffing requirements contributed to the increase in employee-
related costs. The customer service initiatives have partially
offset 1994 employee reductions associated with restructuring.
A change in pension expense of $48 (resulting from the changes in
actuarial assumptions, which included a decrease in the discount
rate and the expected long-term rate of return on plan assets),
also contributed to the increase. Partially offsetting this
increase was a reduction in postretirement benefits expense of
$25.
Other operating expenses decreased over the same period last
year due to a reduction in general operating expenses, including
access charges paid to independent companies of $25 ($19 of which
is associated with the effects of MTCP as discussed above),
partially offset by an increase in advertising of $11. Taxes
other than income taxes remained essentially flat compared to the
same period last year. Depreciation and amortization expense
increased primarily due to the aggregate effects of a higher
depreciable plant base and the discontinuance of SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation."
10
<PAGE> 11
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
INTEREST EXPENSE AND OTHER
Interest expense decreased as a result of refinancing debt in
the prior year to take advantage of lower interest rates, and
reclassifying capitalized interest costs of $15 from other income
(expense) in 1994. Pursuant to the discontinuance of SFAS No. 71,
interest capitalized as a component of plant construction is
offset against interest expense.
Other income (expense) increased as a result of a pre-tax
gain of approximately $50 from the sale of certain rural telephone
exchanges in 1994. Partially offsetting this gain was the
reclassification of capitalized interest of $15 to interest
expense.
PROVISION FOR INCOME TAXES
The effective tax rate was 37.5 percent in the first nine
months of 1994 compared to 33.3 percent in the same period last
year (excluding the effects of the 1993 restructuring charge and
the 1993 federally-mandated increase in income taxes). This
increase is primarily a result of the effects of discontinuing
the application of SFAS No. 71 in the third quarter of 1993, the
ongoing impacts of the 1993 federally-mandated increase in income
tax rates and an increase in income before taxes.
OTHER ITEMS
Restructuring Charges
The Company's 1993 third-quarter results included a $880
million restructuring charge (pretax). The related restructuring
plan is designed to provide faster, more responsive customer
services while reducing the costs of providing these services.
As part of the plan, the Company is developing new systems that
will enable it to monitor networks to reduce the risk of service
interruptions, activate telephone service on demand, provide
automated inventory systems and centralize its service centers so
that customers can have their telecommunications needs resolved
with one phone call. The Company will also reduce its work force
by approximately 9,000 employees (including the remaining employee
reductions pursuant to the restructuring plan announced in 1991)
over the life of the plan.
<TABLE>
<CAPTION>
Following is a schedule of the costs included in the original
restructuring charge:
<S> <C>
Employee separation $225
Real estate 130
Relocation 105
Retraining and other 60
Systems development 360
----
Total $880
====
</TABLE>
Employee separation costs include severance payments, health
care coverage and postemployment education benefits. Real estate
costs include preparation costs for the new service centers. The
relocation and retraining costs are related to moving employees to
the sites of the new service centers and retraining employees on
the new methods and systems required in the new, restructured mode
of operation.
11
<PAGE> 12
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
OTHER ITEMS (continued)
Restructuring Charges (continued)
Systems development costs include the replacement of
existing, single-purpose systems with new systems designed to
provide integrated, end-to-end customer service. The work-force
reductions would not be possible without the development and
installation of the new systems, which will eliminate the current,
labor-intensive interfaces between existing systems.
Due to Company concerns associated with maintaining quality
customer service while at the same time reengineering its
business, the 1993 restructuring plan is expected to extend into
1997, rather than being completed by 1996 as originally contemplated.
The total cash expenditures for the plan of $880 remain unchanged.
In 1994, expenditures related to the 1993 restructuring plan are
estimated at $210 as compared to $365 as originally planned.
Originally estimated expenditures of $300 for 1995 and $215 for
1996 are also being revised.
The Company anticipates incremental capital expenditures
related to the restructuring plan of $450 over the life of the
plan. Management will continue to carefully monitor and evaluate
the progress of the restructuring plan.
Employee Separation:
The original restructuring plan provided for annual employee
reductions and separation amounts as follows:
<TABLE>
<CAPTION>
Employee Reductions 1994* 1995 1996 Total
------- ------- ------- ------
<S> <C> <C> <C> <C>
Network - managerial 602 1,095 977 2,674
Network - occupational 865 1,227 978 3,070
All other - managerial 459 335 323 1,117
All other - occupational 1,022 812 322 2,156
------- ------- ------- ------
Total 2,948 3,469 2,600 9,017
======= ======= ======= ======
<CAPTION>
Separation Costs 1994* 1995 1996 Total
------- ------- ------- ------
<S> <C> <C> <C> <C>
Network - managerial $22 $42 $40 $104
Network - occupational 14 28 25 67
All other - managerial 0 13 13 26
All other - occupational 1 19 8 28
--- ---- ---- ----
Subtotal 37 102 86 225
Remaining 1991 reserve 56 - - 56
--- ---- ---- ----
Total $93 $102 $86 $281
=== ==== ==== ====
<FN>
* 1994 includes the remaining employees and the separation
amounts associated with the 1991 restructuring reserve at
December 31, 1993.
</FN>
</TABLE>
12
<PAGE> 13
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
OTHER ITEMS (continued)
Restructuring Charges (continued)
While restructuring plans are being revised to reflect the
extension of employee reductions into 1997, the total work-force
reduction of approximately 9,000 employees under the plan remains
unchanged. Approximately 2,000 employees are expected to leave
the Company in 1994 in conjunction with the restructuring plan.
Systems Development:
The Company's existing information management systems were
largely developed to support analog technology in a monopoly
environment. These systems are increasingly inadequate due to
the effects of increased competition, new forms of regulation
and changing technology which has driven consumer demand for new
services which can be delivered quickly, reliably and
economically. The sequential systems currently in place are slow,
labor intensive and costly to maintain, and often cannot be
adapted to support new product and service offerings, including
future multimedia services envisioned by U S WEST.
The systems reengineering program in place involves
development of new systems around the following core processes:
Service Delivery - to support faster and more accurate
delivery of all products and services, including repair.
These systems will permit one customer service
representative to handle all facets of a customer's
requirements as contrasted to the numerous points of
customer interface required today.
Service Assurance - for automation and centralization of
the network, including earlier identification and more rapid
resolution of network problems.
Capacity Provisioning - for integrated planning of future
network capacity, including the installation of software-
controllable service components.
The direct, incremental and nonrecurring systems development
costs contained in the restructuring plan are comprised of the
following amounts:
<TABLE>
<CAPTION>
1994 1995 1996 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Service delivery systems $35 $45 $20 $100
Service assurance systems 45 40 30 115
All other 25 55 65 145
---- ---- ---- -----
Total $105 $140 $115 $360
==== ==== ==== ====
</TABLE>
13
<PAGE> 14
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
OTHER ITEMS (continued)
Restructuring Charges (continued)
Systems Development (continued):
The majority of systems development labor will be supplied
through the use of temporary employees, contractors and new
employees with special skills. While it is likely that a number
of the new employees will be retained after the completion of the
restructuring plan due to their specialized skills, it is planned
that any related increase in headcount will be offset through
other employee reductions.
Systems expenses charged to current operations consist of
all costs associated with the information management function,
including planning, developing, testing and maintaining data
bases for general purpose computers, in addition to systems costs
related to maintenance of telephone network applications. Key
related administrative (i.e. general purpose) systems include
customer service, order entry, billing and collection, accounts
payable, payroll, human resources and property records.
On-going systems costs comprised approximately six, six and
five percent of the total operating expenses of the Company for
1993, 1992 and 1991, respectively, and are expected to be
approximately six percent in 1994. The Company expects systems
costs charged to current operations as a percent of total
operating expenses to approximate the current level throughout
the life of the restructuring plan. However, systems costs
could increase relative to other operating costs as the Company
becomes more technology-dependent.
Progress Under the Plan:
For the third quarter and nine months ended September 30,
1994, the following amounts have been charged against the
restructuring reserve:
<TABLE>
<CAPTION>
Third Quarter Nine Months
Employee Separations # $ # $
---- ----- ------ -----
<S> <C> <C> <C> <C>
Network - managerial 95 $4 150 $6
Network - occupational 543 22 798 27
All other - managerial 79 1 212 7
All other - occupational 281 5 526 14
---- --- ----- ---
Total 998 $32 1,686 $54
=== === ===== ===
<CAPTION>
Third Quarter Nine Months
<S> <C> <C>
Systems Development Costs $ $
----- ----
Service delivery systems $6 $11
Service assurance systems 9 18
All other 17 26
----- ----
Total $32 $55
===== ====
</TABLE>
14
<PAGE> 15
Form 10-Q - Part I U S WEST Communications, Inc.
Item 2. Management's Analysis (Dollars in millions)
OTHER ITEMS (continued)
Restructuring Charges (continued)
<TABLE>
Progress Under the Plan (continued):
<CAPTION>
Third Quarter Nine Months
Other Costs $ $
-------- --------
<S> <C> <C>
Real Estate $23 $37
Relocation 4 6
Retraining and other 2 4
-------- --------
Total $29 $47
======== ========
1994 Restructuring Reserve
Activity $93 $156
======== ========
</TABLE>
The rate of spending for systems costs was slower than
anticipated during the first nine months of 1994. While the
original estimate for 1994 may not be fully realized, there are
no significant changes to the systems plan in total.
Relocation costs are dependent upon employee acceptance of
assignments to the new service centers. It is possible that
shifts in reserve categories may occur due to factors beyond the
Company's control, e.g. higher terminations due to employee
unwillingness to relocate.
The Company's 1991 restructuring plan included a pretax
charge of $240 to reduce the Company's work force by approximately
6,000 employees. Approximately $2 of the 1991 restructuring
charge was unused at September 30, 1994, as compared to $56
remaining at December 31, 1993. The remaining balance of this
reserve will be expended in the fourth quarter of 1994.
Contingencies
There are pending regulatory actions in local regulatory
jurisdictions which call for price decreases, refunds or both.
In one such instance, the Utah Supreme Court has remanded a Utah
Public Service ("PSC") order to the PSC for reconsideration,
thereby establishing two exceptions to the rule against
retroactive ratemaking: 1) unforeseen and extraordinary events
and 2) misconduct. The Commission's initial order denied a refund
request from interexchange carriers and other parties related to
the Tax Reform Act of 1986.
At the current time, this case is still in the discovery
process. If a formal filing, to be made in accordance with the
remand from the Supreme Court, alleges that the exceptions apply,
the range of possible risk is $0 to $140.
15
<PAGE> 16
Form 10-Q - Part II U S WEST Communications, Inc.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission, are incorporated by
reference as exhibits hereto.
Exhibit
Number
12 Statement regarding computation of earnings to fixed
charges ratio of U S WEST Communications, Inc.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of
1994.
16
<PAGE> 17
Form 10-Q U S WEST Communications, Inc.
SIGNATURES
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 thereunto duly authorized.
U S WEST Communications, Inc.
/s/ David R. Laube
November 14, 1994 _____________________________
David R. Laube
Vice President-Controller
and Treasurer
17
<PAGE> 1
EXHIBIT 12
<TABLE>
U S WEST COMMUNICATIONS, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<CAPTION>
Quarter Ended
9/30/94 9/30/93
- --------------------------------------------------------------------
<S> <C> <C>
Income (loss) before income taxes and
extraordinary items (1) $457 ($492)
Interest expense (net of amounts capitalized) 82 87
Interest factor on rentals (1/3) 16 15
---- ------
Earnings $555 ($390)
Interest expense 89 87
Interest factor on rentals (1/3) 16 15
---- ------
Fixed charges $105 $102
Ratio of earnings to fixed charges 5.29 (3.82)
- -------------------------------------------------------------------
<CAPTION>
Year-to-Date
9/30/94 9/30/93
- ----------------------------------------------------------------
<S> <C> <C>
Income before income taxes and
extraordinary items $1,404 $272
Interest expense (net of amounts capitalized) 243 286
Interest factor on rentals (1/3) 52 48
------ ----
Earnings $1,699 $606
Interest expense 263 286
Interest factor on rentals (1/3) 52 48
------ ----
Fixed charges $315 $334
Ratio of earnings to fixed charges 5.39 1.81
- ----------------------------------------------------------------
<FN>
(1) Third quarter 1993 includes a one-time restructuring charge of
$880. Excluding the restructuring charge the ratio of earnings to
fixed charges would have been 4.80.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000068622
<NAME> U S WEST COMMUNICATIONS, INC.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> SEP-30-1994 SEP-30-1994
<CASH> 53 53
<SECURITIES> 0 0
<RECEIVABLES> 1,514 1,514
<ALLOWANCES> 0 0
<INVENTORY> 123 123
<CURRENT-ASSETS> 1,954 1,954
<PP&E> 28,887 28,887
<DEPRECIATION> 16,165 16,165
<TOTAL-ASSETS> 15,946 15,946
<CURRENT-LIABILITIES> 3,780 3,780
<BONDS> 0 0
<COMMON> 7,193 7,193
0 0
0 0
<OTHER-SE> (3,602) (3,602)
<TOTAL-LIABILITY-AND-EQUITY> 15,496 15,496
<SALES> 2,267 6,728
<TOTAL-REVENUES> 2,267 6,728
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,722 5,106
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 82 243
<INCOME-PRETAX> 457 1,404
<INCOME-TAX> 172 527
<INCOME-CONTINUING> 285 877
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 285 877
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
