Qwest Communications International Inc. (Q)
Q1 2009 Earnings Call
April 29, 2009; 9:00 am ET
Ed Mueller - Chairman & Chief Executive Officer
Tom Richards - Chief Operating Officer
Joe Euteneuer - Chief Financial Officer
Kurt Fawkes - Senior Vice President, Investor Relations
Tom Seitz - Barclays Capital
David Barden - Banc of America
Simon Flannery - Morgan Stanley
Michael Rollins - Citi Investment
Frank Louthan - Raymond James
Jason Armstrong - Goldman Sachs
Mike McCormack - JP Morgan
Chris Larson - Piper Jaffray
David Dixon - FBR
Tim Horan - Oppenheimer
Donna Jaegers - DA Davidson
Previous Statements by Q
» Qwest Communications International Inc. Q3 2009 Earnings Call Transcript
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Mr. Fawkes, you may now begin your conference.
Thank you, Howard. Good morning and welcome everyone to our call this morning. For the format of the call today, we’re going to begin with some prepared remarks from Ed Mueller, our Chairman and CEO, Tom Richards, our COO and Joe Euteneuer, our CFO and then we’ll take your questions.
As we begin our call, let me point you to slide three and remind everyone that today’s discussion contains forward-looking statements. Our future actual results may vary materially from any forecast contained in these forward-looking statements due to a number of risks and uncertainties and for a detailed discussion of these risks and uncertainties; I strongly encourage you to review our periodic SEC filings.
Additionally, we do not adopt analyst estimates nor do we necessarily commit to updating forward-looking statements that we’ll be making this morning. This morning we will also be discussing certain non-GAAP financial measures including adjusted EBITDA, adjusted free cash flow and net debt. A full reconciliation of these measures is available on our website.
Moving on to slide four, our reported earnings per share for the quarter was $0.12. If you remove severance charges from both periods, the comparison is $0.13 this quarter versus $0.10 in the year ago period, that’s a 30% increase.
The current quarter results were aided by an improved contribution from cash EBITDA, which added $0.02 to earnings and this was offset by $0.02 per share dilution, associated with incremental non-cash pension and OPEB expense. The first quarter of 2009 also benefited by $0.001 due to a lower effective tax rate and by another $0.001 from reduced net interest expense compared to the year ago period.
With that, I’m going to turn it over to Ed.
Thanks Kurt and good morning everyone. Thank you for joining us on our call today. Let me begin by saying I’m very pleased with our execution in the quarter. We started off 2009 with strong free cash flow and EBITDA performance that exceeded expectations. This was particularly encouraging given the current challenges in the economy.
Our results this quarter reflect our priority of managing the business for free cash flow, including disciplined margin and capital return thresholds to generate profitable revenues. For example, about half of our annual decline in revenues in the quarter was due to our initiatives to improve wireless profitability and reduce other low margin revenue. Tom and Joe will describe this in more detail in their remarks.
Our first quarter results reflect our commitment to our vision of perfecting the customer experience. This vision is a next step beyond spirit of service. It captures the imagination of the customer, offering the products and services they desire, while exceeding their expectations in value, service and quality.
When we deliver the perfect experience, we can retain and convert customers to advocates who stand next to us to win the battle against our competitors and ultimately unlock shareholder value. The road map for achieving our vision is our key strategies we have discussed with you on prior calls. So, let me update you on our progress on these strategies.
As an example of our strategy of delivering simplified solutions, in the first quarter, we launched the digital vault, a virtual storage capability for our high-speed internet customers. We expect this to be the first of several distinctive enhancements that we will be delivering for our broadband customers in the months ahead. In the quarter, our video and wireless subscriber bases continue to grow as customers bundle Qwest services with our partners DIRECTV and Verizon Wireless service.
Our investments in fiber to the node deployment continue to fuel broadband subscriber growth in the quarter. Our experience has shown a substantial segment of the market is attracted by higher speed services and later this year we’ll begin a trial infrastructure to further increase speeds through our current fiber to the node deployment. The FTTN deployment continues to support our transition to a broadband company.
We continue to see the results of our efforts to improve efficiency and productivity. In the quarter, we introduced new tools in our call centers to enhance productivity and provide faster resolution of customer issues. In addition, our regionalization efforts are driving improved customer rapport and ownership.
Finally, we maintained a disciplined balance of investment returns in the quarter, including a $0.08 per share dividend and paid-off $230 million in debt. In summary, we believe our strategic progress continues to strengthen our competitive position and provides a solid foundation for long term success and rewards for our shareholders.
Now, before I turn the call over to Tom, I would like to take a minute to address recent speculation regarding our long distance business. As you know, we have an ongoing policy that we do not comment on acquisition or divesture rumors or speculation, and we don’t intend to change that policy on this call.