*NEWS* A very long post....
QWEST REPORTS STRONG SECOND QUARTER RESULTS; REVENUES GROW BY
MORE THAN 70 PERCENT; LCI Acquisition Successfully Completed; Communications
Services Revenue Grows Ten-fold
DENVER (July 27) BUSINESS WIRE -July 27, 1998--Qwest Communications
International Inc. today reported its second quarter results reflecting
significant increases in revenues and EBITDA. For the three months
ended June 30, 1998, revenues were $393.7 million, representing an
increase of $165.0 million or 72 percent over the same quarter 1997.
Communications services revenues grew ten-fold from $24.0 million to
$239.8 million over the same quarter 1997. Earnings before interest,
taxes, depreciation and amortization (EBITDA) in the second quarter was
$24.1 million, an increase of $27.1 million over the prior year.
Excluding the impact of previously announced one-time merger related
charges that totaled $880.5 million, the company posted a net loss of
$15.6 million in the quarter, or ($0.06) per share, compared to a net
loss of $5.6 million, or ($0.03) per share a year ago. These results
exceeded analyst expectations. After giving effect to the one-time
merger related charges, the company's net loss was $876.3 million in
the quarter, or ($3.62) per share. Results for the quarter include one
month of operations from LCI International, which was acquired during
the quarter.
On a pro forma basis, communications services revenue grew to $540.4
million, an increase of $83.0 million over the same quarter 1997.
Construction services revenue declined from $204.7 million to $153.9
million. The decline in construction services revenue reflects one-time
non-recurring revenues in the second quarter of 1997 associated with
the GTE contract. Pro forma EBITDA, excluding one-time merger related
charges, grew to $66.7 million compared to $62.4 million a year ago.
Pro forma net loss, excluding one-time merger related charges, was
$20.0 million in the quarter or ($0.06) per share, compared to a loss
of $11.3 million, or ($0.03) per share, in the second quarter of 1997.
"Qwest is pleased with its strong second quarter results. The demand
for broadband capacity on the Qwest network continues to increase, and
we have capitalized upon this growing demand. The company continues to
expand organically and through strategic acquisitions," said Robert S.
Woodruff, executive vice president and chief financial officer of
Qwest. "The acquisition of LCI International was completed in just 88
days, and the integration of the two companies is progressing very
well, with operating and capital synergies expected to be better than
originally announced." Communications Services
Reported communications services revenue for the quarter grew ten-fold
reaching $239.8 million, an increase of $215.8 million from the second
quarter of 1997. On a pro forma basis, communications services revenue
grew $83.0 million year over year to $540.4 million.
Pro forma revenue from business and wholesale customers comprised
approximately 70 percent of revenue, while revenue from consumers made
up approximately 30 percent. Carrier services achieved more than 40
percent growth in broadband private line services year over year. In
total, the company's data services grew by approximately 40 percent
compared to the same quarter 1997, driven by industry leading IP, ATM
and frame relay services. The strength in data services this quarter
was achieved with only approximately 50 percent of the 18,449-mile
planned network activated. In addition, consumer revenue grew more than
30 percent year over year and was achieved with continued development
of alternate sales channels. Construction Services
Reported construction services revenue for the quarter was $153.9
million, a decrease of $50.8 million or 25 percent from the second
quarter of 1997. As indicated in the second quarter last year, $95.8
million of revenue was recognized upon signing of the GTE network
contract for construction milestones, which had already been met (on
segments for which construction was previously commenced). Adjusting
for these revenues, construction services revenue would have grown
approximately 40 percent year over year.
During the second quarter, Qwest activated most of its network west of
the Mississippi River including the world's first OC-192 four-fiber
SONET ring, which is located between San Jose, Oakland and San
Francisco. In addition, Qwest activated the crucial segment in the East
between New York City and Washington, D.C. As of June 30, 1998, Qwest
had approximately, 17,600 miles of rights of way secured, 12,300 miles
of conduit in the ground, 9,700 miles of fiber optic cable installed,
and 8,850 route miles activated. Construction of the Qwest network is
expected to be completed by mid-1999.
"With the successful acquisition of LCI and EUnet International, Qwest
has become - in less than a year - a formidable player in the
multimedia communications industry. Our technologically advanced native
IP network is not only attracting multimedia companies in need of the
most advanced and prolific capacity available, it is also enabling
Qwest to be creative and lead the industry in providing businesses and
residential customers with the most cutting edge communication services
available today," said Joseph P. Nacchio, president and CEO of Qwest.
One-time merger related charges
As the company previously announced, the results for the quarter
reflect a total of $880.5 million of one-time merger related charges.
Of these non-recurring charges, $818.0 million was related to in
process R&D from the LCI and EUnet acquisitions. In addition, there was
$62.5 million of other merger related charges such as severance,
duplicate facilities, duplicate commitments and channel consolidation.
As a result of the acquisitions to date, which were accounted for as
purchases, a total of $3.3 billion of goodwill will be amortized over
an average life slightly less than 40 years, and $257.0 million of
developed technology will be amortized over 10 years. Synergies
As previously announced, synergies created with the combination of
Qwest and LCI International are expected to be greater than originally
estimated. Over the four year period through 2001, operating synergies
(both cost savings and contribution from incremental revenue) are
expected to exceed $1.2 billion, which is consistent with earlier
estimates, while capital savings are expected to exceed $600 million,
an increase over the $290 million in savings initially estimated. In
the second half of 1998, the company expects to realize approximately
$75 million in cost savings and $70 million in avoided capital
spending. The Qwest Macro Capacity Fiber Network
Qwest's planned domestic 18,449 mile network will serve over 130
cities, which represent approximately 80 percent of the data and voice
traffic originating in the United States, upon its scheduled completion
in the second quarter of 1999. To date, approximately 8,850 miles of
the Qwest Macro Capacity Fiber Network are activated, including the
transcontinental segment that extends from Los Angeles to Sacramento
and across to New York. Additionally, Qwest owns transatlantic
submarine capacity linking the United States to Europe including
connections in London, Amsterdam and continental Europe. Qwest is also
extending its network 1,400 miles into Mexico with completion slated
for late 1998.
The Qwest Macro Capacity Fiber network is designed with a highly
reliable and secure bi-directional, line switching OC-192 SONET ring
architecture. Upon completion, the network will offer a self-healing
system that provides the ultimate security and reliability by allowing
instantaneous rerouting in the event of a fiber cut. About Qwest
Qwest Communications International Inc. (NASDAQ:QWST) is a multimedia
communications company and one of the fastest growing companies in
America today. Headquartered in Denver, Colorado, Qwest has over 6,000
employees and over 80 sales offices worldwide. With its world-class
data and multimedia network, marketing expertise, and customer care and
billing systems, Qwest is delivering high-quality data, video and voice
connectivity securely and reliably to customers around the world.
Further information is available at www.qwest.net .
Note to Editors: This release contains or refers to forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 that
include, among others, (i) statements by Qwest concerning the benefits
expected to result from certain transactions, including, without
limitation, synergies in the form of increased revenues, decreased
expenses and avoided expenses and expenditures that are expected to be
realized by Qwest after the closing of such transactions, (ii) Qwest's
plans to complete the Qwest Macro Capacity Fiber Network and (iii)
other statements by Qwest of expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not
historical facts. Qwest cautions the reader that these forward-looking
statements are subject to risks and uncertainties, including financial,
regulatory environment, and trend projections, that could cause actual
events or results to differ materially from those expressed or implied
by the statements. Such risks and uncertainties include those risks,
uncertainties and risk factors identified, among other places, in
documents filed with Securities and Exchange Commission. These
cautionary statements should be considered in connection with any
subsequent written or oral forward-looking statements that may be
issued by Qwest or persons acting on its behalf. Qwest undertakes no
obligation to review or confirm analysts' expectations or estimates or
to release publicly any revisions to any forward- looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The Qwest logo is a registered trademark of Qwest Communications
International Inc. in the U.S. and certain other countries.
Attachment A
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 1998 and 1997
(In Millions, Except Per Share Information)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
1998 1997 1998 1997
------------------ ----------------
Revenue:
Communications services $ 239.8 $ 24.0 $ 282.4 $ 44.6
Construction services 153.9 204.7 288.4 256.7
---------------------------------------
Total revenue 393.7 228.7 570.8 301.3
---------------------------------------
Operating expenses:
Access and network
operations 153.6 19.7 184.5 36.8
Construction services 108.1 143.3 205.6 182.6
Selling, general and
administrative 107.9 68.7 (1) 152.1 93.7 (1)
----------------- ----------------
EBITDA 24.1 (3.0) 28.6 (11.8)
Depreciation and
amortization 30.9 4.1 39.0 8.0
Merger related costs 880.5 - 880.5 -
----------------- ----------------
Operating loss (887.3) (7.1) (890.9) (19.8)
Interest (income)
expense, net 12.5 0.9 18.8 (4.6)
----------------- ----------------
Loss before
income taxes (899.8) (8.0) (909.7) (15.2)
Income tax benefit (23.5) (2.4) (26.6) (4.8)
----------------- ----------------
Net loss $(876.3) $ (5.6) $(883.1) $ (10.4)
================= =================
Net loss per share -
basic and diluted $ (3.62) $(0.03) $ (3.93) $ (0.06)
================= =================
Weighted average shares
outstanding -
Basic 242.4 175.7 224.6 174.4
Diluted 258.3 179.1 237.9 176.0
Operating loss before
merger related charges $ (6.8) $ (7.1) $ (10.4) $ (19.7)
================= =================
Net loss before
merger related charges $ (15.6) $ (5.6) $ (21.9) $ (10.4)
================= =================
Net loss per share
before merger related
charges $ (0.06) $(0.03) $ (0.10) $ (0.06)
================= =================
(1) Growth share costs included in the three and six month
periods ending June 30, 1997 were $52.1 million and $65.2 million,
respectively.
Attachment B
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - Pro Forma
For the Three and Six Months Ended June 30, 1998 and 1997
(In Millions, Except Per Share Information)
(Unaudited)
Pro Forma (1) Pro Forma (1)
Three Months Ended Six Months Ended
-------------------- ------------------
1998 1997 1998 1997
-------------------- ------------------
Revenue:
Communications services $540.4 $457.4 $1,063.6 $ 880.4
Construction services 153.9 204.7 288.4 256.7
----------------- -----------------
Total revenue 694.3 662.1 1,352.0 1,137.1
----------------- -----------------
Operating expenses:
Access and network
operations 338.5 287.3 655.8 551.1
Construction services 108.1 143.3 205.6 182.6
Selling, general and
administrative 181.0 169.1 (2) 339.8 285.7 (2)
----------------- -----------------
EBITDA 66.7 62.4 150.8 117.7
Depreciation and
amortization 65.2 56.1 128.5 110.6
----------------- -----------------
Operating income 1.5 6.3 22.3 7.1
Interest expense, net 18.1 8.5 32.6 10.1
----------------- -----------------
Loss before income
taxes (16.6) (2.2) (10.3) (3.0)
Income tax expense 3.4 9.1 15.9 18.8
----------------- -----------------
Net loss $(20.0) $(11.3) $ (26.2) $(21.8)
================= =================
Net loss per share -
basic and diluted $(0.06) $(0.03) $ (0.08) $(0.07)
================= =================
Weighted average
shares outstanding -
Basic 326.0 323.0 325.9 323.0
Diluted 341.9 326.4 341.9 324.9
(1) Pro forma results reflect as if each acquisition had been included
from January 1, 1997 and exclude one-time merger related charges.
(2) Growth share costs included in the three and six month periods
ending June 30, 1997 were $52.1 and $65.2 million, respectively.
Attachment C
QWEST COMMUNICATIONS INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 1998 and December 31, 1997
(In Millions)
1998 1997
---------- ----------
(unaudited)
ASSETS
Cash $ 366.0 $ 379.8
Other current assets 676.8 344.1
--------- ---------
Total current assets 1042.8 723.9
Property and equipment,
net 1,742.8 614.6
Excess of cost over
net assets acquired 3,327.0 21.2
Other, net 315.6 38.4
--------- ---------
TOTAL ASSETS $6,428.2 $1,398.1
========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Total current liabilities $1,027.7 315.4
Long-term debt and
capital lease obligations 1,365.3 630.5
Other long-term
liabilities 431.4 70.5
Total stockholders' equity 3,603.8 381.7
-------- --------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $6,428.2 $1,398.1
======== ========
-0- crd/sf*
CONTACT: Corporate Contact:
Qwest Communications
Tyler Gronbach
Pgr: (800) 213-0041
gronbacht@lci.com
qwest.net
or
Investor Contact:
Qwest Communications
Lee Wolfe
(800) 567-7296
lwolfe@qwest.net
qwest.net
KEYWORD: COLORADO
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS COMED TELECOMMUNICATIONS
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