Qwest Reports Higher Sequential Net Income, Continued Margin Expansion, and Strong Free Cash Flow.DENVER Denver, city (1990 pop. 467,610), alt. 5,280 ft (1,609 m), state capital, coextensive with Denver co., N central Colo., on a plateau at the foot of the Front Range of the Rocky Mts., along the South Platte River where Cherry Creek meets it; inc. 1861. -- Qwest Communications
See: New York Stock Exchange :Q):
Unaudited (in millions, except per share amounts)
Seq. Y over Y
Q2 2006 Q1 2006 Change Q2 2005 Change
Operating Revenues $ 3,472 $3,476 (0.1)% $3,470 0.0%
Net Income (Loss) 117 88 33% (164) nm
Net Income (Loss) per Diluted
Share 0.06 0.05 20% (0.09) nm
----------------------------------------------------------------------
--Improved Earnings Per Share of $0.06 --EBITDA Margin Advances 330 Basis Points Year-Over-Year to 31.9 Percent(a) --Net Income Increases 33 Percent Sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen --Strong Free Cash Flow(a) of $595 Million Qwest Communications International Inc. (NYSE:Q) today reported solid second quarter results highlighted by improved earnings per share, further margin expansion and strong free cash flow. For the quarter, Qwest (Qwest Communications International Inc., Denver, CO, www.qwest.com) A telecommunications company that offers services to telecom carriers, businesses and homes using an extensive fiber-optic network throughout the U.S. and Mexico. reported net income of $117 million, or $0.06 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with a loss of $164 million, or ($0.09) per share in the second quarter 2005. "We are very pleased that we've we've Contraction of we have. we've have entered the second half of the year with the momentum of two profitable quarters," said Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a C. Notebaert, Qwest chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Our cost structure and investments remain focused and rational while customers are embracing our higher-value, higher ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. products that contribute to our revenue." Financial Results Qwest reported revenue of $3.5 billion for the second quarter, benefiting from improving sales within Qwest's diverse portfolio of growth products, including high-speed Internet See broadband. , advanced data products, long distance and wireless. "The second quarter continues to illustrate that we are delivering on goals and meeting expectations," said Oren G. Shaffer Shaffer is a wholly owned subsidiary of National Oilwell Varco and is involved in the manufacturing and distribution of pressure control devices for the petroleum industry. , Qwest vice chairman and CFO See Chief Financial Officer. . "Our free cash flow is on track for the year, our margins continue to widen wid·en tr. & intr.v. wid·ened, wid·en·ing, wid·ens To make or become wide or wider. wid  en·er n. toward our target of
the mid- mid-pref. Middle: midbrain. 30 percent range, and we have continued growth opportunity for the remainder of the year." Qwest's operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. declined 6 percent to $3.1 billion for the second quarter of 2006 over the second quarter of 2005 as a result of improvement in productivity and operating efficiencies, lower facility costs, and lower depreciation. Qwest's EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margins continued to expand, reaching 31.9 percent in the second quarter, a 330 basis point improvement from the second quarter a year ago and up more than 100 basis points sequentially. Cash Flow, Capital Spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. and Interest The company generated strong free cash flow of $595 million in the quarter by benefiting from improved operating results and lower interest payments. Qwest continues to expect free cash flow of $1.35 billion to $1.5 billion in 2006 compared with $904 million in 2005 (both before one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. payments). Second quarter capital expenditures totaled $442 million, compared to $352 million in the second quarter of 2005, with a continued focus on the proportion spent on broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). , enabling higher speeds and footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. expansion. Capital spending in 2006 is expected to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. equal to our 2005 level as the company continues to focus in a disciplined fashion on investment in key growth areas and to support the highest service levels. Interest expense totaled $298 million for the second quarter compared to $380 million in the year-ago quarter. As a result of successfully tendering for and retiring high coupon A certificate evidencing the obligation to pay an installment of interest or a dividend that must be cut and presented to its issuer for payment when it is due. Coupons are usually attached to a document, such as a promissory note, bond, share of stock, or a bearer legacy debt in the fourth quarter of last year, interest expense is expected to be reduced by approximately $300 million in 2006. Balance Sheet Update The company ended the quarter with total debt of $15.4 billion, a decline of $2.2 billion compared with the second quarter a year ago. The company's near doubling of cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments to $1.4 billion during the quarter, brought total debt less cash and short-term investments to less than $14 billion. Customer Connections The company continues to see growth from customer connections since new bundling bundling, courtship custom, thought to have originated in Holland and the British Isles. It was extended to America, particularly to New England, and most widely practiced in the years prior to the Revolution of 1776. and localized Translated into the spoken language of the country. See localization. sales initiatives began in May 2005. Qwest's customer connections -- which include consumer and small-business primary and secondary access lines, high-speed Internet subscribers, wireless and video customers -- grew 318,000 from the year-ago quarter, marking the third quarter of year-over-year increases. Total retail line losses held steady at a decline of 4.4 percent year-over-year, excluding 32,000 UUnet and affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. disconnects in the prior year. Anticipated pressure from the decline in the number of access lines resold by Qwest's competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. continued to impact access-line trends. High-Speed Internet Qwest High-Speed Internet continued to show strong growth for the quarter. As a result, mass markets data and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the revenues increased 8 percent sequentially and 40 percent year-over-year. The company added 120,000 high-speed Internet lines in the second quarter. Qwest benefited from strong demand, particularly in the conversion of customers from dial-up Refers to using the regular "dial-up" telephone network to send data from a computer to a remote network or to a remote device. The computer's digital data are converted to analog signals in the same frequency range as human voice by a modem. to broadband and growing demand for higher-speed offerings. These strong net additions bring the total subscribers to 1.8 million -- a 7 percent increase sequentially and a 51 percent increase year-over-year. Qwest continued to invest in its high-speed Internet footprint as well as increase the speeds available to customers. Currently, 80 percent of Qwest's households are eligible for broadband services See broadband and broadband service provider. , up from approximately 67 percent at the end of 2004. About 98 percent of qualified households are able to purchase broadband speeds of 1.5 Mbps or greater, more than 50 percent are able to purchase service at speeds in excess of 3.0 Mbps, and more than 25 percent are able to purchase service at speeds in excess of 7.0 Mbps. In addition to its focus on availability and speeds, Qwest was able, through attention to the customer service and support experience, to increase retention. During the quarter, Qwest teamed with Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. Corp. to become the first communications company Communications Company is a communications unit of the United States Marine Corps. They are part of Combat Logistics Regiment 37 , 3rd Marine Logistics Group (3MLG) and III Marine Expeditionary Force (III MEF). The unit is based out of the Marine Corps Base Camp Smedley D. in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. to announce plans to offer co-branded Windows Live A family of free desktop and Web-based applications from Microsoft, most of which can be accessed from a personal home page as well as a Windows Live browser toolbar. Launched in late 2005, Microsoft integrated and rebranded its Hotmail and MSN and Windows instant messaging as "Windows (TM) services. The Windows Live services platform will complement the Qwest High-Speed Internet offering by providing customers with enhanced communications flexibility and security features. Bundles Qwest has been rewarded for its aggressive focus on bundle To sell hardware and software as a combined product or to combine several software packages for sale as a single unit. Contrast with unbundle. See bundled software and bundling. packaging and sales. Since the launch of new bundles a year ago, followed by targeted incentives and promotional initiatives, the company has significantly increased the number of products available in its bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. offerings. Qwest's full-featured bundled offering includes high-speed Internet access, a national wireless offering, local and long-distance long-dis·tance adj. 1. Covering a long distance: a long-distance runner; operating under long-distance supervision. 2. service, and integrated TV services through Qwest's own ChoiceTV or its marketing alliance with DIRECTV DirecTV (trademarked as "DIRECTV") is a direct broadcast satellite (DBS) service based in El Segundo, California, USA, that transmits digital satellite television and audio to households in the United States, the Caribbean and Latin America except for Mexico. , Inc. The company's bundle penetration The successful unauthorized breach of a security perimeter. See penetration test. increased to 54 percent in the quarter, compared to 48 percent a year ago. Sales of voice packages plus three and four products continue to experience significant growth. Customer demand for value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. is driving higher consumer ARPU, which increased 7 percent to $49 from $46 a year ago. In-Region Long-Distance Long-distance penetration of total retail lines reached 38 percent in the second quarter, compared to 35 percent a year ago. The company ended the quarter with more than 4.8 million long-distance lines, a 5 percent increase over a year ago. During the quarter, the company launched its "digital voice" campaign to promote Qwest's reliable, high-quality, integrated local and long-distance services. Wireless Wireless revenue grew 8 percent compared to the prior year, driven by promotions and successful bundling efforts. As a result of proactively focusing on high-value customers, Qwest's wireless segment income turned positive in the quarter. Qwest continues to benefit from wireless in the bundle with approximately 75 percent of wireless subscribers on an integrated bill with at least one other service. The company's wireless subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. base totaled 777,000 for the quarter. Qwest's data and enhanced features, as well as higher-value price plans, are driving higher wireless ARPU, which increased 4 percent to $52 from $50 a year ago. The company continues to focus on adding wireless data to subscribers and approximately 50 percent of new customers sign up for additional wireless enhancements. DIRECTV(R) Alliance Customer net additions for DIRECTV service grew 25 percent in the second quarter or more than three times from a year ago. Subscribers totaled nearly 213,000 in the quarter. Qwest and DIRECTV's strategic relationship allows Qwest to offer DIRECTV digital satellite television services to residential customers across the entire Qwest region. Last month, the company in coordination coordination /co·or·di·na·tion/ (ko-or?di-na´shun) the harmonious functioning of interrelated organs and parts. co·or·di·na·tion n. 1. The harmonious adjustment or interaction of parts. with DIRECTV, launched the "Qwest Football Bundle" -- Qwest High-Speed Internet service, digital voice (unlimited local and long-distance service) and DIRECTV programming. The new campaign features a more interactive football experience, just in time for the upcoming fall season. Enterprise and Wholesale Revenues from Qwest's enterprise channel, which includes business and government customers, held steady in the quarter benefiting from continued strong growth in data and Internet revenue of 3.6 percent year over year. Qwest continues to advance its MPLS-based capabilities, VoIP and iQ suite of services in the marketplace driving strong volumes of approximately 4 billion VoIP minutes per month. In a move to expand the reach of its nationwide MPLS (1) (MultiProtocol Lambda Switching) The earlier name for GMPLS. See GMPLS. (2) (MultiProtocol Label Switching) A standard from the IETF for including routing information in the packets of an IP network. backbone network A backbone network provides a path for the exchange of information between different LANs or subnetworks.[1] A backbone can tie together diverse networks in the same building, in different buildings in a campus environment, or over wide areas. , Qwest agreed to acquire OnFiber Communications, Inc., an Austin Austin. 1 City (1990 pop. 21,907), seat of Mower co., SE Minn., on the Cedar River, near the Iowa line; inc. 1868. The commercial and industrial center of a rich farm region, it is noted as home to the Hormel meatpacking company, whose Spam Town museum , Texas-based provider of custom-built cus·tom-built adj. Built according to the specifications of the buyer. custom-built or -made Adjective made according to the specifications of an individual customer Noun and managed metropolitan Ethernet Ethernet Telecommunications networking protocol introduced by Xerox Corp. in 1979. It was developed as an inexpensive way of sending information quickly between office machines connected together in a single room or building, but it rapidly became a standard computer and wide-area networks Wide-area networks Communication networks that are regional, nationwide, or worldwide in geographic area, with a minimum distance typical of that between major metropolitan areas. Smaller networks include metropolitan and local-area networks. . OnFiber operates an all-optical network A communications network that works completely in the optical domain. It uses optical switches connected by optical fibers. See optical switch and optical computer. in 23 metropolitan areas and features a full offering of access and transport services The collective functions of layers 1 through 4 of the OSI model. . The transaction is expected to close in the third quarter. Also in the quarter, Qwest announced new or expanded networking and voice and data agreements with U.S. Bancorp  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. , Scottrade Scottrade is a privately owned discount retail brokerage firm headquartered in St. Louis, Missouri. Its founder and president is Rodger O. Riney. Scottrade has more than 317 local branch offices. , Inc., Arizona State University Arizona State University, at Tempe; coeducational; opened 1886 as a normal school, became 1925 Tempe State Teachers College, renamed 1945 Arizona State College at Tempe. Its present name was adopted in 1958. and the State of Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). . The company's wholesale channel continued to drive profitable growth and improve efficiency in delivering services to customers. Wholesale long distance revenue grew 3.7 percent year over year, continuing to benefit from its focus on growth customers including cable, wireless and VoIP providers. In the quarter, Qwest wholesale also has increased its focus on international long distance services and as a result customers are seeing improved service delivery in this space. Customer Service For the fourth consecutive year, the J.D. Power results show significant improvement for Qwest as the company improved two levels this year. In addition, satisfaction with Qwest's technicians is the highest among all providers, demonstrating Qwest's unwavering commitment to the Spirit of Service. Qwest continues to make steady progress, and all Qwest employees are committed to driving even more improvement. Conference Call Today As previously announced, Qwest will host a conference call for investors and the media today at 9 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT with Richard C. Notebaert, Qwest chairman and CEO, and Oren G. Shaffer, Qwest vice chairman and CFO. The call can be heard on the Web at www.qwest.com/about/investor/events. About Qwest Qwest Communications International Inc. (NYSE:Q), through its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , is a leading provider of high-speed Internet, data, video and voice services. With nearly 40,000 employees, Qwest is committed to the "Spirit of Service" and providing world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. services that exceed customers' expectations for quality, value and reliability. For more information, please visit the Qwest Web site at www.qwest.com. Forward Looking Statement Note This release may contain projections and other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by us with the Securities and Exchange Commission, specifically the most recent reports which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to: access line losses due to increased competition, including from technology substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. of our access lines with wireless and cable alternatives, among others; our substantial indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , and our inability to complete any efforts to de-lever our balance sheet through asset sales or other transactions; any adverse outcome of the current investigation by the U.S. Attorney's CERTIFICATE, ATTORNEY'S, Practice, English law. By statute 37 Geo. III., c. 90, s. 26, 28, attorneys are required to deliver to the commissioners of stamp duties, a paper or note in writing, containing the name and usual place of residence of such person, and thereupon, on paying certain office in Denver into certain matters relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc us; adverse results of increased review and scrutiny Scrutiny (Fr. scrutin, Late Lat. scrutinium, from scrutari, to search or examine thoroughly) is a careful examination or inquiry (as though there was a mistake). by regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , media and others (including any internal analyses) of financial reporting issues and practices or otherwise; rapid and significant changes in technology and markets; any adverse developments in commercial disputes or legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , including any adverse outcome of current or future legal proceedings related to matters that are or were the subject of governmental investigations, and, to the extent not covered not covered Health care adjective Referring to a procedure, test or other health service to which a policy holder or insurance beneficiary is not entitled under the terms of the policy or payment system–eg, Medicare. Cf Covered. by insurance, if any, our inability to satisfy any resulting obligations from funds available to us, if any; potential fluctuations in quarterly results; volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the of our stock price; intense competition in the markets in which we compete including the likelihood of certain of our competitors consolidating with other providers; changes in demand for our products and services; acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of advanced new services, such as broadband data, wireless and video services, which could require substantial expenditure of financial and other resources in excess of contemplated levels; higher than anticipated employee levels, capital expenditures and operating expenses; adverse changes in the regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. or legislative environment affecting our business; changes in the outcome of future events from the assumed outcome included in our significant accounting policies; and our ability to utilize net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. in projected amounts. The information contained in this release is a statement of Qwest's present intention, belief or expectation and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and Qwest's assumptions. Qwest may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in Qwest's assumptions or otherwise. The cautionary statements contained or referred to in this release should be considered in connection with any subsequent written or oral forward-looking statements that Qwest or persons acting on its behalf may issue. This release may include analysts' estimates and other information prepared by third parties for which Qwest assumes no responsibility. Qwest undertakes no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to any forward-looking statements and other statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events. By including any information in this release, Qwest does not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material. The Qwest logo is a registered trademark of Qwest Communications International Inc. in the U.S. and certain other countries. (a) See attachment See attach a file. E for Non GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Reconciliation
ATTACHMENT A
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS, SHARES IN THOUSANDS)
(UNAUDITED)
Three Months Ended
June 30, %
-----------------------
2006 2005 Change
----------- ---------- --------
Operating revenue $ 3,472 $ 3,470 0.1%
Operating expenses:
Cost of sales (exclusive of
depreciation
and amortization) 1,393 1,434 (2.9)%
Selling, general and administrative 970 1,045 (7.2)%
Depreciation and amortization 693 765 (9.4)%
----------- -----------
Total operating expenses 3,056 3,244 (5.8)%
----------- -----------
Other expense (income)--net:
Interest expense--net 298 380 (21.6)%
(Gain) loss on early retirement of
debt--net (5) 43 nm
Gain on sale of assets (3) - nm
Other income--net (9) (30) (70.0)%
----------- -----------
Total other expense (income)--net 281 393 (28.5)%
----------- -----------
Income (loss) before income taxes 135 (167) nm
Income tax (expense) benefit (18) 3 nm
----------- -----------
Net income (loss) $ 117 $ (164) nm
=========== ===========
Basic income (loss) per share $ 0.06 $ (0.09) nm
=========== ===========
Basic weighted average shares
outstanding 1,882,398 1,823,338 3.2%
=========== ===========
Diluted income (loss) per share $ 0.06 $ (0.09) nm
=========== ===========
Diluted weighted average shares
outstanding 1,951,728 1,823,338 7.0%
=========== ===========
Six Months Ended
June 30, %
-----------------------
2006 2005 Change
----------- ----------- -------
Operating revenue $ 6,948 $ 6,919 0.4%
Operating expenses:
Cost of sales (exclusive of
depreciation
and amortization) 2,810 2,873 (2.2)%
Selling, general and administrative 1,984 2,081 (4.7)%
Depreciation and amortization 1,384 1,539 (10.1)%
----------- -----------
Total operating expenses 6,178 6,493 (4.9)%
----------- -----------
Other expense (income)--net:
Interest expense--net 594 761 (21.9)%
(Gain) loss on early retirement of
debt--net (5) 43 nm
Gain on sale of assets (3) (257) (98.8)%
Other income--net (37) (15) 146.7%
----------- -----------
Total other expense (income)--net 549 532 3.2%
----------- -----------
Income (loss) before income taxes 221 (106) nm
Income tax (expense) benefit (16) (1) nm
----------- -----------
Net income (loss) $ 205 $ (107) nm
=========== ===========
Basic income (loss) per share $ 0.11 $ (0.06) nm
=========== ===========
Basic weighted average shares
outstanding 1,878,378 1,820,048 3.2%
=========== ===========
Diluted income (loss) per share $ 0.11 $ (0.06) nm
=========== ===========
Diluted weighted average shares
outstanding 1,935,806 1,820,048 6.4%
=========== ===========
nm - percentages greater than 200% and comparisons from positive to
negative values or to
zero values are considered not meaningful.
ATTACHMENT B
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
(UNAUDITED)
June 30, December 31,
2006 2005
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 1,189 $ 846
Short-term investments 205 101
Other current assets 2,159 2,217
------- ---------
Total current assets 3,553 3,164
Property, plant and equipment--net, and other
assets 17,739 18,333
-------- ---------
Total assets $21,292 $21,497
======== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current borrowings $ 2,683 $ 512
Accounts payable and other current liabilities 3,412 3,723
-------- ---------
Total current liabilities 6,095 4,235
Long-term borrowings--net 12,693 14,968
Other long-term liabilities 5,330 5,511
-------- ---------
Total liabilities 24,118 24,714
Stockholders' deficit (2,826) (3,217)
-------- ---------
Total liabilities and stockholders' deficit $21,292 $21,497
======== =========
ATTACHMENT C
QWEST COMMUNICATIONS INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
Six Months Ended
June 30,
------------------
2006 2005
--------- --------
Cash provided by operating activities $ 1,177 $ 913
========= ========
Cash used for investing activities $ (889) $ (56)
========= ========
Cash provided by financing activities $ 55 $ 237
========= ========
Increase in cash and cash equivalents $ 343 $ 1,094
========= ========
ATTACHMENT D
QWEST COMMUNICATIONS INTERNATIONAL INC.
SELECTED CONSOLIDATED DATA
(DOLLARS IN MILLIONS)
(UNAUDITED)
As of and for the
Three Months Ended
June 30,
-------------------------
%
2006 2005 Change
-------- -------- -------
OPERATING REVENUE (1)
Wireline services revenue
Voice services
Local voice services
Business $ 309 $ 323 (4.3)%
Mass markets 1,018 1,058 (3.8)%
Wholesale 174 194 (10.3)%
-------- --------
Total local voice services 1,501 1,575 (4.7)%
Long-distance services
Business 138 146 (5.5)%
Mass markets 161 133 21.1%
Wholesale 278 268 3.7%
-------- --------
Total long-distance services 577 547 5.5%
Access services 133 182 (26.9)%
-------- --------
Total voice services 2,211 2,304 (4.0)%
-------- --------
Data and Internet services
Business 582 562 3.6%
Mass markets 206 147 40.1%
Wholesale 321 316 1.6%
-------- --------
Total data and Internet services 1,109 1,025 8.2%
-------- --------
Total wireline services revenue 3,320 3,329 (0.3)%
Wireless services revenue 142 132 7.6%
Other services revenue 10 9 11.1%
-------- --------
Total operating revenue $ 3,472 $ 3,470 0.1%
======== ========
Capital expenditures (in millions) (2) $ 442 $ 352 25.6%
Total employees 38,843 40,187 (3.3)%
Consumer revenue: (3)
ARPU (in dollars) $ 49.41 $ 46.22 6.9%
In-Region long distance lines (in
thousands) 4,840 4,631 4.5%
High-speed Internet:
Subscribers (in thousands) (4) 1,798 1,190 51.1%
Qualified households/businesses (in
millions) 7.2 7.0 2.9%
Wireless/PCS: (5)
Total wireless services revenue $ 142 $ 132 7.6%
End of period subscribers (in thousands) 777 744 4.4%
ARPU (in dollars) 52 50 4.0%
Access lines (in thousands): (6)
Business access lines
Retail lines 2,900 3,044 (4.7)%
Resold lines 1,624 1,808 (10.2)%
-------- --------
Total business access lines 4,524 4,852 (6.8)%
-------- --------
Mass markets access lines
Consumer primary lines 7,592 7,974 (4.8)%
Consumer additional lines 840 985 (14.7)%
Small business lines 1,327 1,276 4.0%
-------- --------
Total mass markets access lines 9,759 10,235 (4.7)%
------- -------
Total access lines 14,283 15,087 (5.3)%
======== ========
Mass markets retail connections
(in thousands):
Mass markets access lines 9,759 10,235 (4.7)%
High-speed Internet subscribers (4) 1,798 1,190 51.1%
Video subscribers 273 120 127.5%
Wireless subscribers 777 744 4.4%
-------- --------
Total mass markets retail connections 12,607 12,289 2.6%
======== ========
Minutes of use from carriers and
CLECs (in Millions) 12,047 12,677 (5.0)%
(1) Product revenue categories have been adjusted for current period
presentation.
(2) Capital expenditures exclude assets acquired through capital
leases.
(3) Consumer ARPU (Average Revenue Per Unit) is measured as consumer
revenue in the period divided by the average number of primary access
lines for the period. We believe this metric can be a useful measure
of the revenue performance of our consumer business within our mass
markets channel on a per-customer basis. We use ARPU internally to
assess the revenue performance of our consumer business within our
mass markets channel and the impact on this business of periodic
customer initiatives and product roll-outs. ARPU is not a measure
determined in accordance with accounting principles generally
accepted in the United States of America, or GAAP, and should not be
considered as a substitute for our wireline services segment revenue
or any other measure determined in accordance with GAAP.
(4) Total High-speed Internet subscribers does not include out-of-
region subscribers. Included in the 2006 high-speed Internet count
are 18,000 subscribers which relate to 2005 and 2004 activity and
have not been previously reported. If they had been included in 2005,
the subscriber count and the percentage change would have been 1,198
and 50.0%, respectively.
(5) Wireless ARPU (Average Revenue Per Unit) is measured as the
recurring portion of our wireless services revenue stream attributed
to subscribing customers (plus certain activation fees) divided by
the average number of subscribers for the period. We believe this
metric can be a useful measure of the revenue performance of our
wireless business on a per-customer basis. We use ARPU internally to
assess the revenue performance of our wireless business and the
impact on this business of periodic customer initiatives and product
roll-outs. ARPU is not a measure determined in accordance with GAAP
and should not be considered as a substitute for our wireless
services segment revenue or any other measure determined in
accordance with GAAP. Wireless ARPU includes surcharges for the
recovery of costs associated with providing number portability and
wireless 911 services.
Three Months
Ended
June 30, %
-----------------
2006 2005 Change
-------- -------- -------
ARPU is calculated as follows:
Total quarterly wireless services revenue
(in millions) $ 142 $ 132 7.6%
Less: quarterly non-recurring revenue (in
millions) (20) (21) (4.8)%
-------- --------
Quarterly recurring revenue (in
millions) $ 122 $ 111 9.9%
-------- --------
Average monthly recurring revenue (in
millions) 41 37 10.8%
-------- --------
Divided by quarterly average wireless
services subscribers (in thousands) 782 743 5.2%
-------- --------
Wireless services ARPU (in dollars) $ 52 $ 50 4.0%
======== ========
(6) We modified the classification of our access lines during the
fourth quarter of 2005 in our effort to better approximate our
revenue channels. Resold lines includes UNE-P lines, unbundled loops,
resale lines and public pay phone lines. Business retail access lines
at December 31, 2005 reflect a decline of 32,000 lines in the fourth
quarter related to affiliate disconnects as well as 23,000 line and
21,000 line disconnects in the first quarter and second quarter of
2005, respectively, related to UUNet.
ATTACHMENT E
QWEST COMMUNICATIONS INTERNATIONAL INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(DOLLARS IN MILLIONS)
(UNAUDITED)
As of and for the As of and for the
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
2006 2005 2006 2005
-------- -------- -------- --------
Segment Income:
Operating revenue $ 3,472 $ 3,470 $ 6,948 $ 6,919
Cost of sales (exclusive of
depreciation and amortization) (1,393) (1,434) (2,810) (2,873)
Selling, general and administrative (970) (1,045) (1,984) (2,081)
-------- -------- -------- --------
Segment income $ 1,109 $ 991 $ 2,154 $ 1,965
======== ======== ======== ========
EBITDA: (1)
EBITDA $ 1,109 $ 991 $ 2,154 $ 1,965
Depreciation and amortization (693) (765) (1,384) (1,539)
Total other expense--net (281) (393) (549) (532)
Income tax (expense) benefit (18) 3 (16) (1)
-------- -------- -------- --------
Net income $ 117 $ (164) $ 205 $ (107)
======== ======== ======== ========
EBITDA Margin: (1)
EBITDA $ 1,109 $ 991 $ 2,154 $ 1,965
-------- -------- -------- --------
Divided by total operating revenue 3,472 3,470 6,948 6,919
-------- -------- -------- --------
EBITDA Margin 31.9% 28.6% 31.0% 28.4%
======== ======== ======== ========
Free Cash Flow from Operations: (2)
Cash provided by operating
activities $ 1,037 $ 570 $ 1,177 $ 913
Less: Expenditures for property,
plant and equipment (442) (352) (832) (665)
-------- -------- -------- --------
Free Cash Flow from Operations 595 218 345 248
Add: One-time settlement deposit - - 100 -
-------- -------- -------- --------
Free Cash Flow from Operations--as
adjusted $ 595 $ 218 $ 445 $ 248
======== ======== ======== ========
Net Debt: (3)
Current borrowings $ 2,683 $ 261
Long-term borrowings 12,693 17,287
------- -------
Total borrowings $15,376 $17,548
Less: Cash and cash equivalents (1,189) (2,245)
Less: Short-term investments (205) (634)
Less: Long-term investments -- (1)
------- -------
Net Debt $13,982 $14,668
======= =======
(1) EBITDA and EBITDA Margin are non-GAAP financial measures. Other
companies may calculate these measures (or similarly titled measures)
differently. We believe these measures provide useful information to
investors in evaluating our capital-intensive business because they
reflect our operating performance before the impacts of non-cash
items and are indicators of our ability to service debt, pay taxes
and fund discretionary spending such as capital expenditures.
Management also uses EBITDA for a number of purposes, including
setting targets for compensation and assessing the performance of our
operations.
(2) Free cash flow from operations is a non-GAAP financial measure
that indicates cash generated by our business after operating
expenses, capital expenditures and interest expense. We believe this
measure provides useful information to our investors for purposes of
evaluating our ability to satisfy our debt and other mandatory
payment obligations and because it reflects cash flows available for
financing activities, voluntary debt repayment and to strengthen our
balance sheet. This is of particular relevance for our business given
our highly leveraged position. We also use free cash flow from
operations internally for a variety of purposes, including setting
targets for compensation and budgeting our cash needs. Free cash flow
from operations is not a measure determined in accordance with GAAP
and should not be considered as a substitute for "operating income"
or "net cash provided by operating activities" or any other measure
determined in accordance with GAAP. Due to the forward-looking nature
of expected free cash flow amounts for 2006, information to reconcile
this non-GAAP financial measure is not available at this time.
(3) Net Debt is a non-GAAP financial measure that is calculated as our
total borrowings (current plus long-term) less our cash, cash
equivalents and short and long-term investments. We believe net debt
is helpful in analyzing our leverage, and management uses this
measure in making decisions regarding potential financings. Net debt
is not a measure determined in accordance with GAAP and should not be
considered as a substitute for "current borrowings," "long-term
borrowings" or any other measure determined in accordance with GAAP.
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