<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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): MAY 15, 1998
U S WEST, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
A DELAWARE CORPORATION COMMISSION FILE IRS EMPLOYER
IDENTIFICATION
(STATE OF INCORPORATION) NUMBER 1-8611 NO. 84-0926774
</TABLE>
7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices, including Zip Code)
TELEPHONE NUMBER (303) 793-6500
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 7. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- - ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
99 U S WEST, Inc. Unaudited Pro Forma Condensed Combined Financial Statements
</TABLE>
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.
By: /s/ STEPHEN E. BRILZ
-----------------------------------------
Stephen E. Brilz
CORPORATE COUNSEL AND
ASSISTANT SECRETARY
Dated: May 15, 1998
<PAGE>
EXHIBIT 99
U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
THE SEPARATION
On October 25, 1997, the Board of Directors of U S WEST, Inc. ("U S WEST")
adopted a proposal to separate U S WEST into two independent companies (the
"Separation"). As a result of the Separation, the Communications Group will
become an independent public company and will be renamed "U S WEST, Inc." ("New
U S WEST"). In addition, the Media Group's directory business known as U S WEST
Dex, Inc. ("Dex") will be aligned with New U S WEST (the "Dex Alignment"). The
assets of New U S WEST will be accounted for at the historical values at which
they were carried by U S WEST prior to the Separation. Following the Separation,
U S WEST will continue as an independent public company comprised of the current
businesses of Media Group other than Dex and will be renamed "MediaOne Group,
Inc." ("MediaOne").
The Separation will be implemented pursuant to the terms of a separation
agreement between U S WEST and New U S WEST (the "Separation Agreement"). Under
the Separation Agreement, U S WEST will redeem each issued and outstanding share
of Communications Stock for one share of New U S WEST Common Stock, and each
outstanding share of Media Stock will remain outstanding and will thereafter
represent one share of MediaOne Common Stock. In connection with the Separation,
New U S WEST and MediaOne will seek to refinance certain indebtedness issued or
guaranteed by U S WEST (the "U S WEST Indebtedness") through a combination of
tender offers, prepayments, defeasance, consent solicitations and/or exchange
offers (the "Refinancing").
In connection with the Dex Alignment, (i) U S WEST will distribute, as a
dividend, an aggregate of $850 in value of New U S WEST Common Stock to holders
of Media Stock (the "Dex Dividend") and (ii) $3.9 billion of U S WEST debt,
currently allocated to Media Group, will be refinanced by New U S WEST (the "Dex
Indebtedness").
The transaction is subject to shareowner approval and is expected to be
complete by mid-June 1998.
THE AIRTOUCH TRANSACTION
On April 6, 1998, U S WEST sold its domestic wireless businesses to AirTouch
Communications, Inc. ("AirTouch") in a tax-efficient transaction (the "AirTouch
Transaction"). The AirTouch Transaction was consummated pursuant to an Agreement
and Plan of Merger (the "AirTouch Merger Agreement") dated as of January 29,
1998. The domestic wireless businesses included cellular communication services
provided to 2.6 million customers in 12 western and midwestern states and a 25
percent interest in PrimeCo Personal Communications, L.P. ("PrimeCo"), a
provider of personal communications services ("PCS") services. Pursuant to the
AirTouch Merger Agreement, AirTouch acquired these cellular and PCS interests.
Consideration under the AirTouch Transaction consists of (i) debt reduction of
$1.35 billion, (ii) the issuance to U S WEST of $1.65 billion in liquidation
preference of dividend bearing AirTouch preferred stock (fair value of
approximately $1.5 billion), and (iii) the issuance to U S WEST of 59.5 million
shares of AirTouch common stock. This transaction resulted in the disposition of
Media Group's domestic wireless businesses.
In connection with this transaction, U S WEST and AirTouch have entered into
an investment agreement, pursuant to which AirTouch has agreed to provide to U S
WEST registration rights with respect to the shares of AirTouch preferred stock
and AirTouch common stock which U S WEST received in the AirTouch Transaction
and to assist U S WEST in the monetization of such shares.
1
<PAGE>
EXHIBIT 99
U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS (CONTINUED)
Prior to April 6, 1998, U S WEST and AirTouch were parties to a joint
venture pursuant to which they had agreed to combine their domestic cellular
businesses. The AirTouch Transaction was consummated in lieu of the joint
venture.
The following unaudited pro forma condensed combined statements of
operations of U S WEST for the three months ended March 31, 1998 and year ended
December 31, 1997 give effect to (i) the discontinuance of the businesses of New
U S WEST (the "Discontinued Operations Adjustments"), (ii) the Refinancing
(including the refinancing by New U S WEST of the Dex Indebtedness), the
distribution of all of the New U S WEST Common Stock to U S WEST's stockholders,
transfers of certain assets and liabilities of U S WEST to New U S WEST and
allocations of certain costs and expenses in connection with the Separation (the
"MediaOne Separation Adjustments") and (iii) the AirTouch Transaction (the
"AirTouch Transaction Adjustments") as if such transactions had been consummated
as of January 1, 1998 and 1997, respectively. The unaudited pro forma condensed
combined balance sheet as of March 31, 1998 gives effect to the Discontinued
Operations Adjustments, the MediaOne Separation Adjustments and the AirTouch
Transaction Adjustments as if such transactions had been consummated as of March
31, 1998.
The assets of New U S WEST will be accounted for at the historical book
values at which they were carried by U S WEST prior to the Separation. MediaOne
will account for the distribution of New U S WEST to U S WEST's stockholders at
fair value, and will recognize a gain on the distribution. The historical
results of New U S WEST will be reflected as discontinued operations by
MediaOne.
The pro forma adjustments included herein are based on available information
and certain assumptions that management believes are reasonable and are
described in the accompanying notes. The unaudited pro forma financial
statements do not necessarily represent what MediaOne's financial position or
results of operations would have been had the transactions occurred at such
dates or to project MediaOne's financial position or results of operations at or
for any future date or period. In the opinion of management, all adjustments
necessary to present fairly the unaudited pro forma financial information have
been made. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of U S WEST.
2
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues.......................... $ 3,967 $ (2,995)(A) $ 972 $ 972 $ (339)(G)
Operating expenses before depreciation and
amortization.................................... 2,272 (1,648)(A) 624 624 (200)(G)
Depreciation and amortization..................... 880 (532)(A) 348 348 (53)(G)
-------- ------------ ------- ------------ ------------- -------------
Total operating expenses.......................... 3,152 (2,180) 972 972 (253)
-------- ------------ ------- ------------ ------------- -------------
Operating income (loss) from continuing
operations...................................... 815 (815) -- -- (86)(G)
Other income (expense):
Interest expense................................ (247 ) 97(A) (150 ) $ 68(B) (82) 23(G)
Equity losses in unconsolidated ventures........ (136 ) (136 ) (136) 33(G)
Other income (expense)--net..................... (67 ) 25(A) (42 ) (2)(B) (44) 26(G)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. 365 (693) (328 ) 66 (262) (4)
(Provision) benefit for income taxes.............. (153 ) 259(A) 106 (21)(C) 85 6(C)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations ......... 212 (434) (222 ) 45 (177) 2
-------- ------------ ------- ------------ ------------- -------------
Discontinued operations:
Results of operations, net of tax............... 434(A) 434 (434)(D) --
Gain on separation.............................. 25,589(D) 25,589
-------- ------------ ------- ------------ ------------- -------------
Income before extraordinary item.................. 212 -- 212 25,200 25,412 2
-------- ------------ ------- ------------ ------------- -------------
Extraordinary item:
Debt extinguishment, net of tax................. (278)(E) (278)
-------- ------------ ------- ------------ ------------- -------------
Net income........................................ 212 -- 212 24,922 25,134 2
-------- ------------ ------- ------------ ------------- -------------
Dividends on preferred stock...................... (13 ) (13 ) (13)
Loss on early extinguishment of Preferred
Securities, net of tax.......................... (48)(E) (48)
-------- ------------ ------- ------------ ------------- -------------
Earnings available for common stock............... $ 199 $ -- $ 199 $ 24,874 $ 25,073 $ 2
-------- ------------ ------- ------------ ------------- -------------
-------- ------------ ------- ------------ ------------- -------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
Sales and other revenues.......................... $ 633
Operating expenses before depreciation and
amortization.................................... 424
Depreciation and amortization..................... 295
-------------
Total operating expenses.......................... 719
-------------
Operating income (loss) from continuing
operations...................................... (86)
Other income (expense):
Interest expense................................ (59)
Equity losses in unconsolidated ventures........ (103)
Other income (expense)--net..................... (18)
-------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. (266)
(Provision) benefit for income taxes.............. 91
-------------
Income (loss) from continuing operations ......... (175)
-------------
Discontinued operations:
Results of operations, net of tax............... --
Gain on separation.............................. 25,589
-------------
Income before extraordinary item.................. 25,414
-------------
Extraordinary item:
Debt extinguishment, net of tax................. (278)
-------------
Net income........................................ 25,136
-------------
Dividends on preferred stock...................... (13)
Loss on early extinguishment of Preferred
Securities, net of tax.......................... (48)
-------------
Earnings available for common stock............... $ 25,075
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
3
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK........................................... $ 0.72
--------
--------
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK.................................... $ 0.71
--------
--------
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 485.0
--------
--------
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 489.1
--------
--------
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK........................................... $ (0.24 )
--------
--------
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions).......................... 608.3
--------
--------
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
MEDIAONE COMMON STOCK:
CONTINUING OPERATIONS........................... $ (0.39)
DISCONTINUED OPERATIONS......................... 42.07(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.46)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 41.22
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 608.3(F)
-------------
-------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK...........................................
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK....................................
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK...........................................
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions)..........................
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE OF
MEDIAONE COMMON STOCK:
CONTINUING OPERATIONS........................... $ (0.39)
DISCONTINUED OPERATIONS......................... 42.07(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.46)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 41.22
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 608.3(F)
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
4
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues.......................... $15,235 $(11,388)(A) $3,847 $ 3,847 $ (1,428)(G)
Operating expenses before depreciation and
amortization.................................... 9,009 (6,449)(A) 2,560 2,560 (895)(G)
Depreciation and amortization..................... 3,420 (2,163)(A) 1,257 1,257 (183)(G)
-------- ------------ ------- ------------ ------------- -------------
Total operating expenses........................ 12,429 (8,612) 3,817 3,817 (1,078)
-------- ------------ ------- ------------ ------------- -------------
Operating income (loss) from continuing
operations...................................... 2,806 (2,776) 30 30 (350)(G)
Other income (expense):
Interest expense................................ (1,083 ) 405(A) (678 ) $ 279(B) (399) 92(G)
Equity losses in unconsolidated ventures........ (909 ) (909 ) (909) 115(G)
Other income (expense)--net..................... 408 (58)(A) 350 (7)(B) 343 132(G)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. 1,222 (2,429) (1,207 ) 272 (935) (11)
(Provision) benefit for income taxes.............. (522 ) 902(A) 380 (84)(C) 296 33(C)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
extraordinary item.............................. 700 (1,527) (827 ) 188 (639) 22
Discontinued operations(A):
Results of operations, net of tax............... 1,527(A) 1,527 (1,527)(D)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) before extraordinary item........... 700 -- 700 (1,339) (639) 22
Dividends on preferred stock...................... (52 ) (52 ) (52)
-------- ------------ ------- ------------ ------------- -------------
Earnings (loss) available for common stock........ $ 648 $ -- $ 648 $ (1,339) $ (691) $ 22
-------- ------------ ------- ------------ ------------- -------------
-------- ------------ ------- ------------ ------------- -------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
Sales and other revenues.......................... $ 2,419
Operating expenses before depreciation and
amortization.................................... 1,665
Depreciation and amortization..................... 1,074
-------------
Total operating expenses........................ 2,739
-------------
Operating income (loss) from continuing
operations...................................... (320)
Other income (expense):
Interest expense................................ (307)
Equity losses in unconsolidated ventures........ (794)
Other income (expense)--net..................... 475
-------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. (946)
(Provision) benefit for income taxes.............. 329
-------------
Income (loss) from continuing operations before
extraordinary item.............................. (617)
Discontinued operations(A):
Results of operations, net of tax...............
-------------
Income (loss) before extraordinary item........... (617)
Dividends on preferred stock...................... (52)
-------------
Earnings (loss) available for common stock........ $ (669)
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
MEDIAONE MEDIAONE PRO
PRO FORMA
DISCONTINUED FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
-------- ------------ ------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK BEFORE EXTRAORDINARY ITEM................. $ 2.44
--------
--------
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK BEFORE EXTRAORDINARY ITEM.......... $ 2.41
--------
--------
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 482.75
--------
--------
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions).................... 491.23
--------
--------
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK........................................... $ (0.88 )
--------
--------
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions).......................... 606.75
--------
--------
BASIC AND DILUTED LOSS PER SHARE OF MEDIAONE
COMMON STOCK:
CONTINUING OPERATIONS........................... $ (1.14)
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 606.75(F)
-------------
-------------
<CAPTION>
MEDIAONE PRO
FORMA
-------------
<S> <C>
BASIC EARNINGS PER SHARE OF COMMUNICATIONS COMMON
STOCK BEFORE EXTRAORDINARY ITEM.................
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK BEFORE EXTRAORDINARY ITEM..........
BASIC AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
DILUTED AVERAGE SHARES OF COMMUNICATIONS COMMON
STOCK OUTSTANDING (millions)....................
BASIC AND DILUTED LOSS PER COMMON SHARE OF MEDIA
STOCK...........................................
BASIC AND DILUTED AVERAGE COMMON SHARES OF MEDIA
STOCK
OUTSTANDING (millions)..........................
BASIC AND DILUTED LOSS PER SHARE OF MEDIAONE
COMMON STOCK:
CONTINUING OPERATIONS........................... $ (1.10)
-------------
-------------
BASIC AND DILUTED AVERAGE SHARES OF MEDIAONE
COMMON STOCK OUTSTANDING (millions)............. 606.75(F)
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
6
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1998
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE
MEDIAONE PRO FORMA
DISCONTINUED PRO FORMA MEDIAONE EXCLUDING AIRTOUCH
U S WEST OPERATIONS EXCLUDING SEPARATION AIRTOUCH TRANSACTION
HISTORICAL ADJUSTMENTS(A) SEPARATION ADJUSTMENTS TRANSACTION ADJUSTMENTS(G)
----------- --------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets..................... $ 3,517 $ (2,691)(A) $ 826 $ (10)(H) $ 816 $ (204)(G)
Net investment in assets of
discontinued operations(A)....... 4,450(A) 4,450 (3,875)(J)
(575)(D)
----------- --------------- ----------- ------------- ----------- ------
Total current assets............... 3,517 1,759 5,276 (4,460) 816 (204)
----------- --------------- ----------- ------------- ----------- ------
Property, plant and
equipment--net................... 18,656 (14,251)(A) 4,405 (26)(H) 4,379 (1,022)(G)
Investment in Time Warner
Entertainment.................... 2,487 2,487 2,487
Investment in AirTouch
Communications................... 4,406(G)
Net investments in international
ventures......................... 456 456 456
Intangible assets--net............. 12,537 (95)(A) 12,442 12,442 (412)(G)
Net investment in assets held for
sale............................. 441 441 441
Other assets....................... 1,786 (751)(A) 1,035 (23)(H) 986 (523)(G)
(26)(K)
----------- --------------- ----------- ------------- ----------- ------
Total assets....................... $ 39,880 $ (13,338) $ 26,542 $ (4,535) $ 22,007 $ 2,245
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
LIABILITIES AND EQUITY
Short-term debt.................... $ 1,882 $ (924)(A) $ 958 $ (23)(H) $ 948 $ 61(G)
13(I)
Total other current liabilities.... 4,565 (3,365)(A) 1,200 (16)(H) 1,184 (255)(G)
Long-term debt..................... 13,178 (4,931)(A) 8,247 (3,875)(J) 4,635 (1,350)(G)
263(K)
Deferred taxes..................... 4,086 (825)(A) 3,261 10(H) 3,271 1,677(G)
Deferred credits and other......... 3,637 (3,293)(A) 344 (30)(H) 314 (126)(G)
Mandatorily redeemable preferred
stock and Preferred Securities... 1,180 1,180 1,180
Total equity....................... 11,352 11,352 (26,249)(D) 10,475 2,238(G)
25,589(D)
(326)(E)
122(K)
(13)(I)
----------- --------------- ----------- ------------- ----------- ------
Total liabilities and equity....... $ 39,880 $ (13,338) $ 26,542 $ (4,535) $ 22,007 $ 2,245
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
<CAPTION>
MEDIAONE
PRO FORMA
-----------
<S> <C>
ASSETS
Current assets..................... $ 612
Net investment in assets of
discontinued operations(A).......
-----------
Total current assets............... 612
-----------
Property, plant and
equipment--net................... 3,357
Investment in Time Warner
Entertainment.................... 2,487
Investment in AirTouch
Communications................... 4,406
Net investments in international
ventures......................... 456
Intangible assets--net............. 12,030
Net investment in assets held for
sale............................. 441
Other assets....................... 463
-----------
Total assets....................... $ 24,252
-----------
-----------
LIABILITIES AND EQUITY
Short-term debt.................... $ 1,009
Total other current liabilities.... 929
Long-term debt..................... 3,285
Deferred taxes..................... 4,948
Deferred credits and other......... 188
Mandatorily redeemable preferred
stock and Preferred Securities... 1,180
Total equity....................... 12,713
-----------
Total liabilities and equity....... $ 24,252
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
7
<PAGE>
EXHIBIT 99
U S WEST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A) Reflects the removal of the assets, liabilities, revenues and expenses of
the businesses of New U S WEST. All transactions and receivable and payable
balances between New U S WEST and MediaOne that will continue after the
Separation are reflected in such amounts. Also reflects the
reclassification of New U S WEST's results to net investment in and income
from discontinued operations. The measurement date of the Separation, for
discontinued operations accounting purposes, will be the date upon which U
S WEST stockholder approval is received.
(B) Reflects a reduction of historical interest expense of $72 million and $296
million for the quarter ended March 31, 1998 and the year ended December
31, 1997, respectively, as a result of the Refinancing, including the
refinancing by New U S WEST of the Dex Indebtedness, and an increase in
interest expense of $4 million and $17 million, for the same periods, for
financing the costs of the Refinancing and Separation. Also includes
incremental guaranteed minority interest expense (included in "other income
(expense)--net") related to the refinancing of Company-obligated
mandatorily redeemable preferred securities of subsidiary trust holding
solely Company-guaranteed debentures ("Preferred Securities") of $2 million
and $7 million for quarter ended March 31, 1998 and the year ended December
31, 1997, respectively. To the extent the Preferred Securities are tendered
for cash in conjunction with the Refinancing, it is anticipated that
MediaOne will issue additional Preferred Securities following the
Separation so that it will have approximately $1 billion of Preferred
Securities outstanding. The interest effects of the Refinancing were
calculated at the anticipated rates MediaOne will achieve on the
Refinancing. The actual interest rates achieved on Refinancing may vary
based on movement in interest rates and the cost of new debt available to
MediaOne. A 1/8 percentage point change in the assumed Refinancing rates
would change annual interest expense by $3.4 million.
(C) Reflects the estimated income tax effects of the pro forma adjustments.
(D) Reflects the distribution of the New U S WEST Common Stock to U S WEST's
stockholders. The distribution will be accounted for as a dividend. Because
the distribution is non pro-rata, as compared with the businesses
previously attributed to U S WEST's two classes of stockholders, it will be
accounted for at fair value. The estimated gain on the distribution
represents the difference between the fair value of New U S WEST (as of May
1, 1998) and the historical investment in New U S WEST. The actual gain
will be determined upon Separation. Since the distribution is accounted for
at fair value, the related distribution of the net pension assets and net
postretirement and other postemployment obligations are also accounted for
at fair value. The estimated gain on the distribution includes a net gain
of $1,833 million for the distribution of net pension assets and net
postretirement and other postemployment obligations at fair value. The
estimated gain is calculated as follows (dollars in millions):
<TABLE>
<S> <C>
Market capitalization of Communications Group
(484,953,000 shares of Communications Stock at $52.375 per
share)........................................................... $ 25,399
Dex Dividend....................................................... 850
---------
Fair value of New U S WEST......................................... 26,249
Investment in New U S WEST......................................... (575)
Separation costs (net of income tax benefits of $29)............... (85)
---------
Gain on distribution............................................... $ 25,589
---------
---------
</TABLE>
8
<PAGE>
EXHIBIT 99
U S WEST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(E) Reflects debt extinguishment costs of $278 million (net of income tax
benefits of $186 million) and Preferred Securities extinguishment costs of
$48 million (net of income tax benefits of $32 million) associated with the
Refinancing. In addition to refinancing costs, debt extinguishment costs
include the difference between the market and face value of the U S WEST
Indebtedness and a charge for unamortized debt issuance costs. The cost of
extinguishing Preferred Securities is reflected as a charge to equity and a
reduction to earnings available for common stock.
(F) As a result of the Separation each share of Media Stock will remain
outstanding as one share of MediaOne Common Stock.
(G) Reflects the consummation of the AirTouch Transaction. MediaOne has
retained the international portion of its wireless business segment. The
pro forma adjustments reflect the following:
- Receipt of 59.5 million shares of AirTouch common stock, representing an
approximate 10 percent ownership interest in AirTouch. This interest will
be accounted for by MediaOne as a marketable equity security.
- Receipt of $1,493 million of AirTouch preferred stock at market value
(liquidation value of $1,650 million).
- Receipt of $92 million in dividends per year ($23 million for the quarter)
on the AirTouch preferred stock, at an annual rate of 5.14 percent.
- Reduction in debt of $1,350 million and a corresponding reduction of
annual interest expense of $92 million ($23 million for the quarter).
- Removal of the consolidated assets, liabilities, revenues and expenses of
MediaOne's domestic cellular operations.
- Removal of MediaOne's equity method investment and related equity losses
associated with its investment in PrimeCo.
- Recognition of a gain on the disposition calculated as follows (in
millions):
<TABLE>
<S> <C>
AirTouch common stock.............................................. $ 2,913
AirTouch preferred stock (at market value)......................... 1,493
Debt reduction..................................................... 1,350
---------
Total proceeds..................................................... 5,756
Net book value of assets sold...................................... (1,778)
Sale related costs................................................. (63)
---------
Gain (before income taxes)......................................... 3,915
Deferred tax expense............................................... (1,677)
---------
Gain (after income taxes).......................................... $ 2,238
---------
---------
</TABLE>
Such gain has been excluded from the unaudited pro forma condensed combined
statement of operations.
9
<PAGE>
EXHIBIT 99
U S WEST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(H) Reflects the transfer of assets and liabilities of U S WEST previously
shared by New U S WEST and MediaOne and a corresponding reduction in debt.
(I) Reflects a $13 million contribution to New U S WEST for insurance premiums
paid by New U S WEST to MediaOne in excess of liabilities incurred.
(J) Reflects a reduction in MediaOne debt totaling $3.9 billion in conjunction
with the refinancing by New U S WEST of the Dex Indebtedness. Dex debt
reduction totaling $25 million is included in the Discontinued Operations
Adjustments and the remaining $3,875 million is reflected as a MediaOne
Separation Adjustment.
(K) Reflects incremental borrowing to finance $278 million of debt
extinguishment costs (net of income tax benefits of $186 million) $48
million of Preferred Securities extinguishment costs (net of income tax
benefits of $32 million) and $85 million of Separation costs (net of income
tax benefits of $29 million). The incremental borrowing is net of a $26
million net reduction in debt issuance costs and a $122 million
reimbursement from New U S WEST for its share of debt and Preferred
Securities extinguishment costs. Such reimbursement is reflected as a
dividend from New U S WEST to MediaOne. Separation costs include cash
payments under severance agreements of $45 million and financial advisory,
legal, registration fee, printing and mailing costs related to the
Separation. Separation costs also include a one-time payment to terminate
the sale of the Company's cable systems in Minnesota.
10
