<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K/A
CURRENT REPORT
(AMENDMENT NO. 1)
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): APRIL 13, 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: April 13, 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-1998.
THE AIRTOUCH TRANSACTION
On April 6, 1998, U S WEST sold its domestic wireless businesses to 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., a provider of 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 the AirTouch
Joint Venture pursuant to which they had agreed to combine their domestic
cellular businesses. The AirTouch Transaction was consummated in lieu of the
AirTouch Joint Venture.
The following unaudited pro forma condensed combined statement of operations
of U S WEST for the year ended December 31, 1997 gives 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, 1997. The unaudited pro forma
condensed combined balance sheet as of December 31, 1997 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 December 31, 1997. The unaudited pro forma condensed combined statements of
operations for the years ended December 31, 1996 and 1995, give effect to the
Discontinued Operations Adjustments but do not give effect to the MediaOne
Separation Adjustments or the AirTouch Transaction Adjustments.
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 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 ) 289(B) (389) 90(G)
Equity losses in unconsolidated ventures........ (909 ) (909 ) (909) 115(G)
Other income (expense)--net..................... 408 (58)(A) 350 (6)(B) 344 132(G)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. 1,222 (2,429) (1,207 ) 283 (924) (13)
(Provision) benefit for income taxes.............. (522 ) 902(A) 380 (87)(C) 293 34(C)
-------- ------------ ------- ------------ ------------- -------------
Income (loss) from continuing operations before
extraordinary item.............................. 700 (1,527) (827 ) 196 (631) 21
Discontinued operations(A):
Results of operations, net of tax............... 1,524(A) 1,524 (1,524)(D)
Gain on separation.............................. 25,229(D) 25,229
-------- ------------ ------- ------------ ------------- -------------
Income before extraordinary item.................. 700 (3) 697 23,901 24,598 21
Extraordinary item:
Loss on early extinguishment of debt, net of
tax........................................... (3 ) 3(A) (346)(E) (346)
-------- ------------ ------- ------------ ------------- -------------
Net income........................................ 697 -- 697 23,555 24,252 21
Dividends on preferred stock...................... (52 ) (52 ) (52)
-------- ------------ ------- ------------ ------------- -------------
Earnings available for common stock............... $ 645 $ -- $ 645 $ 23,555 $ 24,200 $ 21
-------- ------------ ------- ------------ ------------- -------------
-------- ------------ ------- ------------ ------------- -------------
<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................................ (299)
Equity losses in unconsolidated ventures........ (794)
Other income (expense)--net..................... 476
-------------
Income (loss) from continuing operations before
income taxes and extraordinary item............. (937)
(Provision) benefit for income taxes.............. 327
-------------
Income (loss) from continuing operations before
extraordinary item.............................. (610)
Discontinued operations(A):
Results of operations, net of tax...............
Gain on separation.............................. 25,229
-------------
Income before extraordinary item.................. 24,619
Extraordinary item:
Loss on early extinguishment of debt, net of
tax........................................... (346)
-------------
Net income........................................ 24,273
Dividends on preferred stock...................... (52)
-------------
Earnings available for common stock............... $ 24,221
-------------
-------------
</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 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........................................... $ 2.43
--------
--------
DILUTED EARNINGS PER SHARE OF COMMUNICATIONS
COMMON STOCK.................................... $ 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 EARNINGS (LOSS) PER SHARE OF
MEDIAONE COMMON STOCK:
CONTINUING OPERATIONS........................... $ (1.13)
DISCONTINUED OPERATIONS......................... 41.58(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.57)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 39.88
-------------
-------------
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...........................................
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........................... $ (1.09)
DISCONTINUED OPERATIONS......................... 41.58(D)
EXTRAORDINARY ITEM:
LOSS ON EARLY EXTINGUISHMENT OF DEBT.......... (0.57)
-------------
BASIC AND DILUTED EARNINGS PER SHARE.............. $ 39.92
-------------
-------------
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.
4
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
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..................... $ 3,399 $ (2,432)(A) $ 967 $ (8)(H) $ 959 $ (223)(G)
Net investment in assets of
discontinued operations(A)....... 4,367(A) 4,367 (3,831)(J)
(536)(D)
----------- --------------- ----------- ------------- ----------- ------
Total current assets............... 3,399 1,935 5,334 (4,375) 959 (223)
----------- --------------- ----------- ------------- ----------- ------
Property, plant and
equipment--net................... 18,580 (14,308)(A) 4,272 (25)(H) 4,247 (1,006)(G)
Investment in Time Warner
Entertainment.................... 2,486 2,486 2,486
Investment in AirTouch
Communications................... 4,413(G)
Net investments in international
ventures......................... 475 475 475
Intangible assets--net............. 12,674 (77)(A) 12,597 12,597 (415)(G)
Net investment in assets held for
sale............................. 419 419 419
Other assets....................... 1,707 (775)(A) 932 (28)(H) 853 (491)(G)
(51)(K)
----------- --------------- ----------- ------------- ----------- ------
Total assets....................... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,278
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
LIABILITIES AND EQUITY
Short-term debt.................... $ 1,430 $ (695)(A) $ 735 $ (23)(H) $ 738 $ 16(G)
26(I)
Total other current liabilities.... 4,885 (3,432)(A) 1,453 (19)(H) 1,434 (332)(G)
Long-term debt..................... 13,248 (5,020)(A) 8,228 (3,831)(J) 4,637 (1,352)(G)
240(K)
Deferred taxes..................... 4,068 (791)(A) 3,277 14(H) 3,291 1,735(G)
Deferred credits and other......... 3,605 (3,287)(A) 318 (33)(H) 285 (88)(G)
Mandatorily redeemable preferred
stock and Preferred Securities... 1,180 1,180 1,180
Total equity....................... 11,324 11,324 (25,831)(D) 10,471 2,299(G)
25,229(D)
(346)(E)
121(K)
(26)(I)
----------- --------------- ----------- ------------- ----------- ------
Total liabilities and equity....... $ 39,740 $ (13,225) $ 26,515 $ (4,479) $ 22,036 $ 2,278
----------- --------------- ----------- ------------- ----------- ------
----------- --------------- ----------- ------------- ----------- ------
<CAPTION>
MEDIAONE
PRO FORMA
-----------
<S> <C>
ASSETS
Current assets..................... $ 736
Net investment in assets of
discontinued operations(A).......
-----------
Total current assets............... 736
-----------
Property, plant and
equipment--net................... 3,241
Investment in Time Warner
Entertainment.................... 2,486
Investment in AirTouch
Communications................... 4,413
Net investments in international
ventures......................... 475
Intangible assets--net............. 12,182
Net investment in assets held for
sale............................. 419
Other assets....................... 362
-----------
Total assets....................... $ 24,314
-----------
-----------
LIABILITIES AND EQUITY
Short-term debt.................... $ 754
Total other current liabilities.... 1,102
Long-term debt..................... 3,285
Deferred taxes..................... 5,026
Deferred credits and other......... 197
Mandatorily redeemable preferred
stock and Preferred Securities... 1,180
Total equity....................... 12,770
-----------
Total liabilities and equity....... $ 24,314
-----------
-----------
</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
YEAR ENDED DECEMBER 31, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
DISCONTINUED
U S WEST OPERATIONS
HISTORICAL ADJUSTMENTS(A)
----------- ----------------
<S> <C> <C>
Sales and other revenues................................................................... $ 12,911 $ (11,074)
Operating expenses before depreciation and amortization.................................... 7,512 (6,105)
Depreciation and amortization.............................................................. 2,544 (2,158)
----------- --------
Total operating expenses............................................................... 10,056 (8,263)
----------- --------
Operating income from continuing operations................................................ 2,855 (2,811)
Other income (expense):
Interest expense......................................................................... (612) 448
Equity losses in unconsolidated ventures................................................. (346)
Other income (expense)--net.............................................................. (57) (14)
----------- --------
Income (loss) from continuing operations before income taxes and
cumulative effect of change in accounting principle...................................... 1,840 (2,377)
(Provision) benefit for income taxes....................................................... (696) 876
----------- --------
Income (loss) from continuing operations before cumulative
effect of change in accounting principle................................................. 1,144 (1,501)
Income from discontinued operations(A)..................................................... 1,501
----------- --------
Income (loss) before cumulative effect of change in accounting principle................... $ 1,144 $ --
----------- --------
----------- --------
<CAPTION>
MEDIAONE
PRO FORMA
EXCLUDING
SEPARATION
-----------
<S> <C>
Sales and other revenues................................................................... $ 1,837
Operating expenses before depreciation and amortization.................................... 1,407
Depreciation and amortization.............................................................. 386
-----------
Total operating expenses............................................................... 1,793
-----------
Operating income from continuing operations................................................ 44
Other income (expense):
Interest expense......................................................................... (164)
Equity losses in unconsolidated ventures................................................. (346)
Other income (expense)--net.............................................................. (71)
-----------
Income (loss) from continuing operations before income taxes and
cumulative effect of change in accounting principle...................................... (537)
(Provision) benefit for income taxes....................................................... 180
-----------
Income (loss) from continuing operations before cumulative
effect of change in accounting principle................................................. (357)
Income from discontinued operations(A)..................................................... 1,501
-----------
Income (loss) before cumulative effect of change in accounting principle................... $ 1,144
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
6
<PAGE>
EXHIBIT 99
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIAONE
DISCONTINUED PRO FORMA
U S WEST OPERATIONS EXCLUDING
HISTORICAL ADJUSTMENTS(A) SEPARATION
----------- --------------- -----------
<S> <C> <C> <C>
Sales and other revenues................................................ $ 11,746 $ (10,416) $ 1,330
Operating expenses before depreciation and amortization................. 6,810 (5,774) 1,036
Depreciation and amortization........................................... 2,291 (2,066) 225
----------- --------------- -----------
Total operating expenses.............................................. 9,101 (7,840) 1,261
----------- --------------- -----------
Operating income from continuing operations............................. 2,645 (2,576) 69
Other income (expense):
Interest expense...................................................... (527) 429 (98)
Equity losses in unconsolidated ventures.............................. (207) (207)
Other income (expense)--net........................................... 243 (101) 142
----------- --------------- -----------
Income (loss) from continuing operations before income taxes and
extraordinary item.................................................... 2,154 (2,248) (94)
(Provision) benefit for income taxes.................................... (825) 817 (8)
----------- --------------- -----------
Income (loss) from continuing operations before extraordinary item...... 1,329 (1,431) (102)
Income from discontinued operations(A).................................. 1,431 1,431
----------- --------------- -----------
Income before extraordinary item........................................ $ 1,329 $ -- $ 1,329
----------- --------------- -----------
----------- --------------- -----------
</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 $304 million for the
year ended December 31, 1997 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 $15 million 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 $6 million. 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 $4.4 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
February 20, 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
(485,061,000 shares of Communications Stock at $51.50 per
share)........................................................... $ 24,981
Dex Dividend....................................................... 850
---------
Fair value of New U S WEST......................................... 25,831
Investment in New U S WEST......................................... (536)
Separation costs (net of income tax benefits of $24)............... (66)
---------
Gain on distribution............................................... $ 25,229
---------
---------
</TABLE>
(E) Reflects debt extinguishment costs of $346 million (net of income tax
benefits of $231 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.
(F) As a result of the separation each share of Media Stock will remain
outstanding as one share of MediaOne Common Stock.
8
<PAGE>
EXHIBIT 99
U S WEST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(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 $1,500 million of AirTouch preferred stock at market value
(liquidation value of $1,650 million).
- Receipt of $92 million in dividends per year 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 $90 million.
- 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)......................... 1,500
Debt reduction..................................................... 1,350
---------
Total proceeds..................................................... 5,763
Net book value of assets sold...................................... (1,686)
Sale related costs................................................. (70)
---------
Gain (before income taxes)......................................... 4,007
Deferred tax expense............................................... (1,735)
---------
Gain (after income taxes).......................................... $ 2,272
---------
---------
</TABLE>
Such gain has been excluded from the unaudited pro forma condensed combined
statement of operations.
(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 an $18 million contribution to New U S WEST for insurance premiums
paid by New U S WEST to MediaOne in excess of liabilities incurred and a
payment of $8 primarily related to a lease termination.
(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. $69 million
of Dex debt reduction is included in the Discontinued Operations
Adjustments and the remaining $3,831 million is reflected as a MediaOne
Separation Adjustment.
9
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EXHIBIT 99
U S WEST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(K) Reflects incremental borrowing to finance $346 million of debt
extinguishment costs (net of income tax benefits of $231 million) and $66
million of Separation costs (net of income tax benefits of $24 million).
The incremental borrowing is net of a $51 million net reduction in debt
issuance costs and a $121 million reimbursement from New U S WEST for its
share of debt 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 Minnesota Sale Agreement.
10
