<PAGE> 1
____________________________________________________________________________
____________________________________________________________________________
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 March 31, 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 1-8611
U S WEST, Inc.
A Colorado Corporation IRS Employer No. 84-0926774
7800 East Orchard Road, Englewood, Colorado 80111-2526
Telephone Number 303-793-6500
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__
At April 30, 1994, 453,133,119 shares were outstanding.
____________________________________________________________________________
____________________________________________________________________________
<PAGE> 2
U S WEST, Inc.
Form 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page
PART I - FINANCIAL INFORMATION
<S> <C>
1. Financial Statements
Consolidated Statements of Operations -
Three Months Ended March 31, 1994 and 1993 . . . . . . . . .3
Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993. . . . . . . . . .4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1994 and 1993. . . . . . . .6
Notes to Consolidated Financial Statements. . . . . . . . .7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 10
PART II - OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders . . . . . 14
6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 14
2
<PAGE> 3
Form 10-Q - Part I
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
___________________________________________________________________________
Three Months Ended
Dollars in millions March 31,
(except per share amounts) 1994 1993
___________________________________________________________________________
<S> <C> <C>
Sales and other revenues $2,641 $2,510
Employee-related costs 911 870
Other operating expenses 477 472
Taxes other than income taxes 108 105
Depreciation and amortization 503 490
Interest expense 109 106
Other expense - net 11 18
------- -------
Income from continuing operations
before income taxes 522 449
Provision for income taxes 198 153
------- -------
Income from continuing operations 324 296
Discontinued operations, net of tax - 20
------- -------
NET INCOME $324 $316
======= =======
Earnings per share:
Continuing operations $0.73 $0.71
Discontinued operations - 0.05
------- -------
EARNINGS PER SHARE $0.73 $0.76
======= =======
DIVIDENDS PER SHARE $0.535 $0.535
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
Form 10-Q - Part I
<TABLE>
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>
____________________________________________________________________________
March 31, December 31,
Dollars in millions 1994 1993
____________________________________________________________________________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $446 $128
Accounts and notes receivable 1,544 1,570
Inventories and supplies 203 193
Prepaid and other 648 609
---------- --------
Total current assets 2,841 2,500
---------- --------
Property, plant and equipment 29,441 29,161
Less: Accumulated depreciation 16,225 15,929
---------- --------
Net property, plant and equipment 13,216 13,232
Investment in Time Warner Entertainment 2,529 2,552
Net assets of discontinued operations 515 554
Other assets 2,078 1,842
---------- --------
Total assets $21,179 $20,680
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
Form 10-Q - Part I
<TABLE>
CONSOLIDATED BALANCE SHEETS (Unaudited), Continued
<CAPTION>
____________________________________________________________________________
March 31, December 31,
Dollars in millions 1994 1993
____________________________________________________________________________
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Short-term debt $2,093 $1,776
Accounts payable 708 977
Current portion of restructuring charges 443 456
Other 1,911 1,772
---------- --------
Total current liabilities 5,155 4,981
---------- --------
Long-term debt 5,349 5,423
Postretirement and other postemployment
benefit obligations 2,432 2,699
Deferred taxes, credits and other 1,868 1,716
Shareowners' equity
Common shares - no par, 2,000,000,000
authorized, 452,825,531 and 441,139,829
outstanding, respectively 7,457 6,996
Accumulated deficit (839) (892)
LESOP guarantee (243) (243)
---------- --------
Total shareowners' equity 6,375 5,861
---------- --------
Total liabilities and shareowners' equity $21,179 $20,680
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
Form 10-Q - Part I
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
____________________________________________________________________________
Three Months Ended
March 31,
Dollars in millions 1994 1993
____________________________________________________________________________
<S> <C> <C>
OPERATING ACTIVITIES
Net income $324 $316
Adjustments to net income:
Depreciation and amortization 503 490
Discontinued operations - (20)
Deferred income taxes and amortization
of investment tax credits 75 17
Changes in operating assets and liabilities:
Accounts and notes receivable 26 (23)
Inventories, supplies and other (59) (71)
Accounts payable and accrued liabilities (44) 136
Other adjustments - net (68) (189)
---------- --------
Cash provided by operating activities 757 656
---------- --------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment (654) (640)
Proceeds from disposals of property, plant
and equipment-net 18 22
Other - net (76) (73)
---------- --------
Cash (used) for investing activities (712) (691)
---------- --------
FINANCING ACTIVITIES
Net proceeds from short-term debt 335 422
Proceeds from long-term debt 182 112
Repayments of long-term debt (116) (229)
Dividends paid (223) (201)
Proceeds from issuance of common stock 256 19
---------- --------
Cash provided by financing activities 434 123
---------- --------
Cash provided by continuing operations 479 88
---------- --------
Cash provided by (used for) discontinued
operations (161) 25
---------- --------
CASH AND CASH EQUIVALENTS
Increase 318 113
Beginning balance 128 159
---------- --------
Ending balance $446 $272
========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
A. Consolidated Financial Statements
The consolidated financial statements have been prepared by U S WEST,
Inc. ("U S WEST" or "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
Annual Report for the year ended December 31, 1993.
Certain reclassifications within the consolidated financial statements
have been made to conform to the current year presentation.
B. Investment in Time Warner Entertainment
On September 15, 1993, U S WEST acquired 25.51 percent pro-rata
priority capital and residual equity interests in Time Warner
Entertainment Company L.P. (TWE). Summarized operating results for TWE
follow:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994
<S> <C>
Revenues $1,919
Operating expenses* 1,716
Interest and other - net** 151
--------
Income before income taxes $52
========
Net income $48
========
<FN>
* Includes depreciation and amortization of $213
** Includes corporate services of $15
</TABLE>
The Company accounts for its investment in TWE under the equity method
of accounting. U S WEST's recorded share of TWE's operating results is
based on (1) TWE allocated net income or loss adjusted for the amortization
of the excess of fair market value over the book value of the partnership
assets; and (2) special income allocations as defined in the TWE Partnership
Agreement.
7
<PAGE> 8
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
C. Discontinued Operations
The Company's consolidated financial statements reflect the operating
results of discontinued operations separately from continuing operations.
Discontinued operations includes activities related to financial services
and the financial guarantee insurance operations, in addition to U S WEST
Real Estate, Inc. Prior periods have been restated to exclude the effects
of discontinued operations.
On April 11, 1994, U S WEST signed an agreement to sell 2 million
shares of its common stock in Financial Security Assurance (FSA) to Fund
American Enterprises Holdings, Inc. (FFC). In conjunction with the sale
agreement, FSA issued, on May 6, 1994, 7.5 million shares (including the
2 million shares of common stock to be purchased by FFC and excluding shares
issuable upon exercise of the over-allotment option) at $20 per share.
Pursuant to the sale and offering, U S WEST reduced its ownership interest
in FSA to 62.8 percent.
Sales and other revenues of discontinued operations for first quarter
1994 and 1993 were $305 and $142, respectively. In January 1994, U S WEST
Real Estate Inc. sold two properties for approximately $230. The sales were
in line with company estimates.
The assets and liabilities of the Capital Assets segment have been
separately classified on the balance sheet as net assets of discontinued
operations. Following is a summary of the net assets of discontinued
operations:
<TABLE>
<CAPTION>
____________________________________________________________________________
March 31, December 31,
Dollars in millions 1994 1993
____________________________________________________________________________
<S> <C> <C>
ASSETS
Cash and cash equivalents $36 $24
Finance receivables - net 1,109 1,131
Investment in real estate - net 509 711
Bonds, at market value 866 894
Other assets 773 600
------ --------
Total assets $3,293 $3,360
====== ========
LIABILITIES
Debt $1,477 $1,496
Deferred income taxes 681 681
Unearned premiums 332 346
Accounts payable and accrued liabilities 238 243
Minority interests 50 40
------ --------
Total liabilities $2,778 $2,806
====== ========
Net assets of discontinued operations $515 $554
====== ========
</TABLE>
8
<PAGE> 9
Form 10-Q - Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions)
(Unaudited)
D. Contingencies
At U S WEST Communications, there are pending regulatory actions in
local regulatory jurisdictions that call for price decreases, refunds or
both. In one such instance, the Utah Supreme Court has remanded a Utah
Public Service Commission ("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. If the
Commission finds that either of the exceptions apply, the Company could be
liable for refunds, although at this time any such amount is not reasonably
estimable since the case is still in the discovery process.
E. Selected Financial Data
Selected financial data for U S WEST Financial Services, Inc.
("Financial Services"), a wholly-owned subsidiary of U S WEST, follows. The
financial results of the Capital Assets segment, which includes Financial
Services, are excluded from continuing operations due to the Company's
decision to dispose of the segment.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Operating revenues $17 $70
<CAPTION>
As of
March 31 December 31,
1994 1993
<S> <C> <C>
Net finance receivables $1,005 $1,020
Total assets 1,524 1,784
Total debt 750 957
Total liabilities 1,475 1,735
Shareowner's equity 49 49
</TABLE>
9
<PAGE> 10
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts)
<TABLE>
Results of Operations
Comparative details of Company operations for the three months ended
March 31 follow:
<CAPTION>
Three Months Ended
March 31, %
1994 1993 Change
<S> <C> <C> <C>
Sales and other revenues $2,641 $2,510 5.2
Employee-related costs 911 870 4.7
Other operating expenses 477 472 1.1
Taxes other than income taxes 108 105 2.9
------- -------
Earnings before interest, taxes,
depreciation, amortization and
other (EBITDA) $1,145 $1,063 7.7
======= =======
Income from continuing operations $324 $296 9.5
======= =======
Earnings per share from
continuing operations $0.73 $0.71 2.8
======= =======
</TABLE>
U S WEST's first quarter income from continuing operations increased by
$28, or 9.5 percent, compared to the same period last year. Excluding the
sale of certain rural telephone exchanges by U S WEST Communications, income
from continuing operations increased by $13, or 4.4 percent. Income from
continuing operations excludes results from U S WEST's Capital Assets
segment, which is a discontinued operation as discussed in Note C to the
Consolidated Financial Statements.
U S WEST's volume growth, and the effect of continued cost controls,
resulted in a 7.7 percent increase in earnings before interest, taxes,
depreciation, amortization and other (EBITDA).
10
<PAGE> 11
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
Continued
<TABLE>
Sales and Other Revenues
An analysis of the change in revenues follows:
<CAPTION>
Lower
Price (Higher) Inc(Dec)
Changes Refunds Demand Other $ %
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U S WEST Communications:
Local service $1 ($5) $52 - $48 5.1
Interstate access (15) (2) 43 $(2) 24 4.5
Intrastate access (3) (2) 9 - 4 2.4
Long distance (1) 1 (5) - (5) (1.4)
Other services 6 6 4.3
-----------------------------------------------------------------------------
($18) ($8) $99 $4 $77 3.6
Cellular 51 43.6
Publishing 10 4.3
Other (7) -
-----------------------------------------------------------------------------
U S WEST Consolidated $131 5.2
-----------------------------------------------------------------------------
</TABLE>
The increase in revenues for the first quarter was largely due to
increased demand for services at U S WEST Communications. Continued
subscriber growth in the Company's cellular business also contributed to
revenue growth. The Company increased its cellular subscriber base by 53
percent, to approximately 665,000, during the last 12 months.
Local service revenues at U S WEST Communications increased principally
as a result of higher demand for services, as evidenced by an increase of
490,000 access lines, or 3.6 percent, during the last 12 months. Access line
growth was 3.8 percent adjusted for the sale of approximately 20,000 rural
telephone access lines.
Increased demand for access services more than offset the effects of
rate reductions and refunds. Billed access minutes of use increased by 9.1
percent over the first quarter of last year. Long distance network revenues
decreased due principally to the continuing effects of competition. Revenues
from other services increased primarily as a result of continued market
penetration in voice messaging services.
Costs and Expenses
Consolidated employee-related costs increased by $41, or 4.7 percent,
during the first quarter as compared to the same period last year. The
increase is primarily due to the elimination of the pension credit
(resulting from changes in actuarial assumptions) and additional costs
associated with customer service initiatives in the current year.
Partially offsetting this increase was a reduction in postretirement
benefits expense. Other operating expenses increased by $5, or 1.1
percent. Higher selling costs related to growth in the cellular
subscriber base contributed to the increase.
11
<PAGE> 12
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
Continued
Increased depreciation and amortization expense was attributable to
the aggregrate effects of a higher depreciable asset base and the
discontinuance of Statement of Financial Accounting Standards ("SFAS") No.
71, "Accounting for the Effects of Certain Types of Regulation."
Interest expense increased slightly, primarily as a result of the
financing costs associated with the TWE investment. This increase was
largely offset by the refinancing of debt in the prior year to take
advantage of lower interest rates, in addition to a reclassification of
capitalized interest in the current year. Pursuant to the discontinuance
of SFAS No. 71, interest capitalized as a component of plant construction
is being offset against interest expense.
Other expense decreased during the first quarter primarily due to a
pretax gain of $24 on the sale of certain rural telephone exchanges by
U S WEST Communications. Partially offsetting this gain was the
reclassification of capitalized interest and higher losses associated with
developing businesses.
The effective tax rate was 37.9 percent in the first quarter compared
to 34.1 percent in the same period last year. This increase is primarily
a result of the effects of discontinuing SFAS No. 71, the 1993 federally-
mandated increase in income tax rates, and an increase in income before
income taxes.
Restructuring Charges
The Company's 1993 third-quarter results included a $1 billion
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 aproximately
8,000 employees (in addition to the remaining employee reductions pursuant
to the restructuring plan announced in 1991) by the end of 1996.
U S WEST Communications has begun the time-intensive staffing process
necessary to consolidate the operations of its existing 560 customer
centers into 26 customer centers in ten cities. Charges amounting to $2
and $8 for center moves and systems development, respectively, have been
charged against the reserve in the first quarter. These charges will
accelerate over the remainder of 1994 as the Company continues consolidation
of the customer service centers and development of the new systems.
The Company's 1991 restructuring plan included a pretax charge of $364
due to planned work-force reductions and the write-off of certain intangible
and other assets. The plan will result in a work-force reduction of
approximately 6,000 employees, of which approximately 5,200 have left the
Company as of March 31, 1994. The portion of the restructuring charge
related to work-force reductions was $240, of which approximately $45 was
unused at March 31, 1994. The remaining balance of the restructuring
reserve will be used by the end of 1994.
12
<PAGE> 13
Form 10-Q - Part I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in millions, except per share amounts),
Continued
Liquidity and Capital Resources
Cash provided by operations increased by $101 over the first three
months of 1993, primarily due to a decrease in cash funding related to
postretirement benefits during the first quarter of 1994. In the first
quarter of 1994, the funding for postretirement benefits was $288, of
which approximately $185 was in the form of a stock contribution, compared
to cash funding of $246 in the first quarter last year. Details of cash
provided by operating activities are provided in the Consolidated
Statements of Cash Flows.
In March 1994 approximately 5.5 million shares of common stock were
issued in connection with the settlement of shareholder litigation
("Rosenbaum v. U S WEST Inc. et al.") for proceeds of approximately $210.
Contingencies
At U S WEST Communications, there are pending regulatory actions in
local regulatory jurisdictions that call for price decreases, refunds or
both. In one such instance, the Utah Supreme Court has remanded a Utah
Public Service Commission ("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. If the
Commission finds that either of the exceptions apply, the Company could be
liable for refunds, although at this time any such amount is not reasonably
estimable since the case is still in the discovery process.
13
<PAGE> 14
PART II - OTHER INFORMATION
Form 10-Q - Part II
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
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
11 Statement regarding computation of earnings per share of
U S WEST, Inc.
12 Statement regarding computation of earnings to fixed charges
ratio of U S WEST, Inc. and U S WEST Financial Services, Inc.
99 Financial statements of Financial Security Assurance Inc., a 92
percent-owned subsidiary of the Company, for the quarterly period
ended March 31, 1994.
(b) Reports on Form 8-K
U S WEST filed the following reports on Form 8-K during the first
quarter of 1994:
(i) report dated January 21, 1994, concerning the release of earnings
for the fourth quarter and year ended December 31, 1993.
(ii) report dated February 24, 1994, concerning the Company's
announcement that it expects to issue 5.6 million shares of
common stock in settlement of a class-action suit filed against
the Company and other individuals in December 1991.
14
<PAGE> 15
Form 10-Q U S WEST, 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.
/s/ James M. Osterhoff
----------------------
May 12, 1994 U S WEST, Inc.
James M. Osterhoff
Executive Vice President
and Chief Financial Officer
15
<PAGE> 1
EXHIBIT 11
U S WEST, Inc.
Computation of Earnings Per Share
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
EARNINGS PER SHARE: Three Months Ended
March 31,
1994 1993
---------- ----------
<S> <C> <C>
Income from continuing operations $323,723 $295,713
Discontinued operations - 20,395
---------- ----------
Net income for per share calculation $323,723 $316,108
========== ==========
Weighted average shares outstanding 444,378 415,082
========== ==========
Income from continuing operations $0.73 $0.71
Discontinued operations - 0.05
---------- ----------
Earnings per share $0.73 $0.76
========== ==========
</TABLE>
<PAGE> 2
EXHIBIT 11
U S WEST, Inc.
Computation of Earnings Per Share
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
EARNINGS PER COMMON AND COMMON Three Months Ended
EQUIVALENT SHARE: March 31,
1994 1993
---------- ----------
<S> <C> <C>
Income from continuing operations $323,723 $295,713
Discontinued operations - 20,395
---------- ----------
Net income for per share calculation $323,723 $316,108
========== ==========
Weighted average shares outstanding 444,378 415,082
Incremental shares from assumed exercise
of stock options 391 298
---------- ----------
Total shares 444,769 415,380
========== ==========
Income from continuing operations $0.73 $0.71
Discontinued operations - 0.05
---------- ----------
Earnings per common and common $0.73 $0.76
equivalent share ========== ==========
</TABLE>
<PAGE> 3
EXHIBIT 11
U S WEST, Inc.
Computation of Earnings Per Share
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
EARNINGS PER SHARE - ASSUMING Three Months Ended
FULL DILUTION: March 31,
1994 1993
---------- ----------
<S> <C> <C>
Income from continuing operations $323,723 $295,713
Interest on Convertible Liquid Yield Options
Notes (LYONS) 5,441 5,067
---------- ----------
Adjusted income from continuing operations
for per share calculation 329,164 300,780
Discontinued operations - 20,395
---------- ----------
Adjusted net income for per share calculation $329,164 $321,175
========== ==========
Weighted average shares outstanding 444,378 415,082
Incremental shares from assumed exercise
of stock options 390 396
Shares issued upon conversion of LYONS 10,230 10,238
---------- ----------
Total shares 454,998 425,716
========== ==========
Adjusted income from continuing operations $0.72 $0.71
Discontinued operations - 0.05
---------- ----------
Earnings per share - assuming $0.72 $0.76
full dilution ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 12
U S WEST, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Quarter Ended
3/31/94 3/31/93
- ------------------------------------------- --------- ---------
<S> <C> <C>
Income from continuing operations
before income taxes $522 $449
Interest expense (net of amounts capitalized) 109 106
Interest factor on rentals (1/3) 23 25
--------- ---------
Earnings $654 $580
Interest expense 116 106
Interest factor on rentals (1/3) 23 25
--------- ---------
Fixed charges $139 $131
Ratio of earnings to fixed charges 4.71 4.43
- ----------------------------------------------- ---------- ---------
</TABLE>
<PAGE> 1
EXHIBIT 12
U S WEST Financial Services, Inc.
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
With Without
Parent Support Parent Support
Quarter Ended Quarter Ended
3/31/94 3/31/93 3/31/94 3/31/93
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before income taxes $3,196 $17,574 $1,127 $17,574
Interest expense 12,724 33,110 12,724 33,110
Interest factor on rentals (1/3) 41 186 41 186
------ ------ ------ ------
Earnings $15,961 $50,870 $13,892 50,870
Interest expense 12,724 33,110 12,724 33,110
Interest factor on rentals (1/3) 41 186 41 186
------ ------ ------ ------
Fixed charges $12,765 $33,296 $12,765 $33,296
Ratio of earnings to fixed charges 1.25 1.53 1.09 1.53
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 99
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
Condensed Consolidated Financial
Statements
March 31, 1994
<PAGE> 2
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1994 AND 1993
INDEX
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS:
<S> <C>
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
</TABLE>
<PAGE> 3
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands,
except share data)
<TABLE>
<CAPTION>
March 31 December 31,
ASSETS 1994 1993
------ ---- ----
(unaudited)
<S> <C> <C>
Bonds at market value (amortized
cost of $701,198 and $683,176 $703,194 $736,872
Short-term investments 3,369 31,720
-------- --------
Total investments 706,563 768,592
Cash and cash equivalents 15,204 15,770
Deferred acquisition costs 83,833 81,992
Prepaid reinsurance premiums 126,422 127,849
Reinsurance recoverable on unpaid
losses 630 79
Receivable for securities sold 22,402 21
Other assets 36,001 34,878
-------- ----------
TOTAL ASSETS $991,055 $1,029,181
======== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Unearned premiums $332,393 $328,165
Losses and loss adjustment expenses 37,397 36,094
Deferred federal income taxes 19,348 35,832
Ceded reinsurance balances payable 6,987 7,408
Payable for securities purchased 14,459 30,741
Amounts withheld on account for
others 25,566 25,649
Accrued expenses and other
liabilities 27,885 22,824
-------- --------
TOTAL LIABILITIES 464,035 486,713
-------- --------
Common stock (1,000 shares
authorized, issued and
outstanding; par value of
$15,000 per share) 15,000 15,000
Additional paid-in capital 497,506 497,506
Unrealized gain on investments
(net of deferred income
taxes of $699 and $18,788) 1,297 34,892
Accumulated earnings (deficit) 13,217 (4,930)
-------- ---------
TOTAL SHAREHOLDER'S EQUITY 527,020 542,468
-------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY $991,055 $1,029,181
======== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
---- ----
<S> <C> <C>
REVENUES:
Net premiums written (net of premiums
ceded of $8,406 and $11,332) $22,181 $16,772
Increase in unearned premiums (5,466) (3,600)
-------- --------
Premiums earned (net of premiums
ceded of $9,890 and $6,337) 16,715 13,172
Net investment income 11,181 11,837
Net realized gains 3,122 7,858
Other income 77 129
-------- --------
TOTAL REVENUES 31,095 32,996
-------- --------
EXPENSES:
Losses and loss adjustment
expenses (net of reinsurance
recoveries of $551 and $87) 754 498
Policy acquisition costs 3,636 3,245
Other operating expenses 2,797 5,047
-------- --------
TOTAL EXPENSES 7,187 8,790
-------- --------
INCOME BEFORE INCOME TAXES 23,908 24,206
Provision for income taxes 5,761 5,916
-------- --------
NET INCOME $18,147 $18,290
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums received, net $ 17,276 $ 7,345
Policy acquisition and other
operating expenses paid, net (4,042) (2,571)
Loss and LAE recoverd (paid), net 560 (6,489)
Net investment income received 11,452 12,548
Federal income taxes recovered (paid) 508 (3,640)
Interest paid (460) (754)
Other, net (1,636) 888
--------- --------
Net cash provided by operating
activities 23,658 7,327
-------- --------
Cash flows from investing activities:
Proceeds from sales of bonds 107,646 128,107
Purchases of bonds (159,999) (134,332)
Purchases of property and equipment (207) (290)
Net decrease in short-term securities 28,336 5,351
--------- ---------
Net cash used for investing
activities (24,224) (1,164)
--------- ---------
Net increase (decrease) in cash and
cash equivalents (566) 6,163
Cash and cash equivalents at
beginning of period 15,770 13,483
--------- ---------
Cash and cash equivalents at
end of period $ 15,204 $ 19,646
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 6
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(UNAUDITED)
1. ORGANIZATION AND OWNERSHIP
Financial Security Assurance Inc. (the "Company"), a wholly
owned subsidiary of Financial Security Assurance Holdings Ltd.
(the "Parent"), is an insurance company domiciled in the State of
New York. The Company is engaged in providing financial guaranty
insurance on asset-backed financings and municipal obligations.
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements
have been prepared by the Company and are unaudited. In the
opinion of management, all adjustments, which include only normal
recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows at March 31, 1994
and for all periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. These statements should be read in conjunction with the
Company's December 31, 1993 consolidated financial statements and
notes thereto. The year-end condensed balance sheet was derived
from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
The results of operations for the periods ended March 31, 1994
and 1993 are not necessarily indicative of the operating results
for the full year.
Certain amounts in the 1993 financial statements have been
reclassed to conform to the 1994 presentation.
