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February 6, 2004
Jean Jewell
Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ill 83720-0074
RE: Qwest Year 2000 Restated Idaho-South and Idaho-North Annual Report Form
Enclosed are the restated Idaho-South and Idaho-North Annual Report Form Ms of
Qwest Corporation (Qwest) for the year ended December 31 2000. These reports
include the Summary Balance Sheet and Earnings and Expenses Reports along with the
FCC 43-02 B-5 Analysis of Entries in Accumulated Depreciation and B- 7, Bases of
Charges for Depreciation. The other more detailed reports are not available on a restated
basis.
In making this restatement, we have performed an internal analysis of our accounting
policies, practices, procedures and disclosures for the affected periods. We have
determined that, in certain cases, we misinterpreted or misapplied GAAP in our 2000 and
2001 financial statements and, accordingly, we have restated our financial statements for
each of the two years. The aggregated impacts of restatement on the current 2000
ARMIS over the prior 2000 ARMIS submission are as follows:
Total Company Operating Revenues: $76.2 million decrease
Total Company Operating Expenses: $47.1 million increase
Total Company End of Year Invest: $140.1 million decrease
Adjustments at the company level included in the restatement are:
Network Labor costs
In 2000, we began capitalizing certain labor costs that were associated with designing,
deploying and testing facilities. During our internal analysis, we determined that certain
of these costs should have been expensed as incurred. As a result, in our restated
financial statements we have recorded adjustments to increase operating expenses and
decrease net property, plant and equipment by $100.7 million for the year ended
December 31 2000. As a result of the restatement adjustments, depreciation expense
was reduced by $2.5 million.
Termination fees
In 2000, QC recognized operating revenue related to contractual termination fees that
were assessed to customers. At or about the same time, we entered into new
arrangements with these customers to provide services in the future. In connection with
our internal analysis, we have determined that the revenues recognized in these instances
should have been deferred and recognized as revenue ratably over the term of the new
arrangements. We have reduced previously reported 2000 operating revenue by $49.
million.
Stock Compensation
During 2001 and 2000, the terms of certain outstanding stock option were modified to
allow the extension of the exercise period upon the employee s separation :fTom the
Company. In our previously issued financial statements, we did not record compensation
expense in connection with these modifications or with regard to certain other awards
where the fair value of the underlying stock at the measurement date was greater than the
strike price of the award. As part of our internal analysis, we determined that
compensation expense should have been recorded for these matters in accordance with
APB Opinion No. 25
, '
Accounting for Stock Issued to employees and FIN No. 44
Accounting for Certain Transaction involving Stock Compensation' (an interpretation of
APB Opinion No. 25). As a result, in our restated financial statements we have increased
our previously reported expenses by $82.5 million for the year ended December 31 , 2000.
Curtailment Gain
During the third quarter of 2000, and in conjunction with the merger of Qwest
Communications International Inc and US WEST, Inc. ('Merger ), we changed certain
post-retirement benefits. The reduction in the accumulated post-retirement benefit
obligation was originally accounted for as a plan curtailment, resulting in a one-time gain
in our previous financial statements. Based on our internal analysis, and in consideration
of SF AS No.1 06
, '
Employers Accounting for Postretirement Benefits Other Than
Pensions ' (SFAS No. 106) and the FASB Stafflmplementation Guide for SFAS No.
106 , we determined that the elimination of benefits should have been recorded as a
negative plan amendment. Negative plan amendments are amortized as a reduction of
benefit expense over the expected remaining service period or life expectancy of the
participants, as appropriate, or approximately seven years in our case. As a result, we
have increased our previously reported expenses by $43.1 million.
Merger and Restructure Reserves
During our internal analysis, it was discovered that the liabilities established for the
Qwest merger and the restructure reserves were charged to operating expense for
Regulatory purposes. Responsible Accounting Officer (RAO) Letter No. 24 requires
carriers to record the liability for these programs in accordance with GAAP but charge
the expense 'below-the-line ' to other nonoperating income. When the restructuring
expenses are actually paid or otherwise require Part 32 recognition, they should then be
charged' above the line ' to operating expense with an offsetting credit to nonoperating
income. This required a reclassification of$199.9 million resulting in a reduction of
operating expense.
Investment Transfer
In 2000, we transferred an investment to our parent company, Qwest Services
Corporation (QSC), in the form of a dividend at its original cost of approximately $10
million. The investment was sold later in 2000. As part of our internal analysis, we
determined that the dividend to QSC should have been recorded at its $220 million
market value at the date of transfer and the unrealized appreciation of $210 million, less
related income taxes of $82 million, should have remained in other comprehensive
income until the subsequent sale of the investment by our affiliate, when a realized gain
should have been recognized. As a result, we have recorded adjustments in our restated
financial statements that result in a $210 million increase in our 2000 nonoperating
mcome.
Other
We reduced our previously reported operating revenue by $26.6 million and increased
our previously reported operating expenses by $20.9 million for the year ended
December 31 , 2000 for other errors discovered as a result of our internal analysis.
Impacts on Total Investment in addition to the Network labor cost impact were a decrease
of$39.4 million.
Because of its restatement of2000 and 2001 financial statements, Qwest's parent
company will file amended income tax returns for 2000 2001 and 2002. Qwest will
record any changes to its current tax liability or deferred tax liability that result fTom
filing amended returns in the then current period and not to the period in which the
changes were realized. Once the amended returns have been filed and the effect of the
filing on Qwest's tax liability has been determined , Qwest will also review and, as
necessary, true-up the allocation of current and deferred income taxes among the various
state jurisdictions in which it does business. This true-up will also be recorded in the
then current period.
Cordially
John Souba
Director Regulatory Affairs
Enclosures
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ANNUAL REPORT FORM M zan4 FEB - 6 Api 10= 1+ 0
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UTILITiES CO!'H'1ISSION
QWEST CORPORATION
DENVER, COLORADO
TO THE
PUBLIC UTILITY COMMISSION OF IDAHO (NO.
FOR THE
YEAR ENDING DECEMBER 31 , 2000
RESTATED
Office or other person to whom correspondence should be addressed concerning this report:
Name: James M. Schmit Title: Vice President
Address: 999 Main St, 11th Floor City: Boise State: Idaho Zip: 83702
ANNUAL REPORT FORM M
PUBLIC UTILITY COMMISSION OF IDAHO (NO)
TABLE OF CONTENTS
REPORT DESCRIPTION
MR 1, IP Restated Earnings and Expenses
Balance Sheet
ARMIS 43-, IP Restated S, Analysis of Entries in Accumulated Depreciation
ARMIS 43-02, IP Restated 7, Bases of Charges for Depreciation
MR 1, TOTAL COMPANY-Restated Earnings and Expenses
Balance Sheet
REST A TED
IDAHO-NORTH
Owest Corporation
Summary of Reports
Period: December 2000
Earnings and Expenses
(Lines 1-33 in Thousands)
Year to Date
Restated
Revenue
Local Service
Access Service
Interstate
Intrastate
4 Long Distance Service
Miscellaneous
Total Revenue
803 045
154 139
2,444,405
871 890
866 054
139 533
Expenses
Cost of Services and Products
Maintenance
Engineering
Network Operations
Network Access
Access
Other
Total Cost of Services and Products
255,403
159 682
418 808
827)
266 175
(535)
094 706
Selling, General and Administrative14 Customer Operations15 Corporate Operations16 Property and Other Operating Taxes17 Uncollectibles18 Total Selling, General and Administrative
19 Other Operating Income and Expense
20 Depreciation and Amortization21 Total Operating Expenses
22 Income from Operations Before Taxes
23 Interest Expense
24 Nonoperating Income and Expense
25 Income before Income Taxes
735 094
879 976
624 042
167
328 279
815 765
238 750
900 783
776 872
607 172
516 739
Income Taxes26 Federal27 State and Local
28 Income Before Juris Diff and Extraord Items
29 Juris Diff and Nonreg Net Income
30 Extraordinary Items
31 Net Income
685,485
241 258
589 996
360 279
229 717
RESTATED
IDAHO-NORTH
Balance Sheet
(Thousands)
Period: December 2000
Restated
Assets
Current
1 Cash and Short Term Investments
Receivable
Trade
Other
Total Receivable
Inventories
Prepaid Expenses and Other Current Assets
Total Current Assets
Property, Plant and Equipment
Telecommunications Plant in Service
Telecommunications Plant Under Construction10 Prop Held for Future Use & Plant Adjustment
11 Non - Operating Plant12 Gross Property, Plant and Equipment
13 Less-Accumulated Depree. and Amortization14 Total Telephone Plant Less Reserves
15 Investments and Other Assets
16 Total Assets
264 701
827 503
827 503
804
389
139 397
926 601
676
941 277
386 844
554 433
698 810
392 641
Liabilities
Current
17 Short Term Borrowings
Accounts Payable and Accrued Liabilities18 Accounts Payable - Trade19 Accounts Payable - Other20 Employee Compensation21 Advance Billing and Payments22 Dividend Payable
23 Customers' Deposits24 Other Accrued Liabilities25 Total Acct Payable & Accured Liabilities26 Income Taxes Payable27 Current Portion long Term Borrowing/Lease
28 Total Current Liabilities
Other29 Long Term Borrowings
30 Accum Deferred Income Taxes (Non-Current)31 Unamortized Investment Tax Credit
32 Other
33 Other Juris Liabilities & Deferred Credits - Net34 Total Other Liabilities
35 Total Liabilities
325 500
208 316
541
701 558
123
179,365
474 402
419 943
223
926 568
90,050
783 650
948 832
034 047
129 985
986 564
913 133
Shareholders ' Equity
36 Capital Stock & Additional Paid in Capital
37 Retained Earnings
37 Retained Earnings38 Total Capital Stock and Retained Earnings39 Total Liabilities and Capital
668)
30,485 176
479 508
392 641
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M
RESTATED
TOTAL COMPANY
Owest Corporation
Summary of Reports Period December - 2000
Earnings and Expenses
(Lines 1-33 in Thousands)
Restated
Year to Date
Revenue
Local Service
Access Service
Interstate
Intrastate
4 Long Distance Service
Miscellaneous
Total Revenue
783 645,743
320,351,071
741,020,104
373,686,330
363 343 375
582 046 623
Expenses
Cost of Services and Products
Maintenance
Engineering
Network Operations
Network Access
Access
Other
Total Cost of Services and Products
162,602,115
61,895,221
402,182,490
704,418
344 184,583
579 922
987,148 748
Selling, General and Administrative14 Customer Operations15 Corporate Operations16 Property and Other Operating Taxes17 Uncollectibles18 Total Selling, General and Administrative
19 Other Operating Income and Expense
20 Depreciation and Amortization21 Total Operating Expenses
22 Income from Operations Before Taxes
23 Interest Expense
24 Nonoperating Income and Expense
25 Income before Income Taxes
1,411 708 618
532,956,458
401,242,845
130 609 968
3,476,517,890
(52,808)
802 844 142
266,457,973
315,588,650
564 939 052
323,196,886
1,427,452,712
Income Taxes26 Federal27 State and Local
28 Income Before Juris Diff and Extraord Items
29 Juris Diff and Nonreg Net Income
30 Extraordinary Items
31 Net Income
573,372,417
082,712
767,997,583
176,297,783
591,699 800
RESTATED
TOTAL COMPANY
Qwest Corporation
Balance Sheet
(Thousands)
Assets
Current
1 Cash and Short Term Investments
Receivable
Trade
Other
Total Receivable
Inventories
Prepaid Expenses and Other Current Assets
Total Current Assets
Property, Plant and Equipment
Telecommunications Plant in Service
Telecommunications Plant Under Construction
10 Prop Held for Future Use & Plant Adjustment
11 Non - Operating Plant12 Gross Property, Plant and Equipment
13 Less-Accumulated Depree. and Amortization14 Total Telephone Plant Less Reserves
15 Investments and Other Assets
16 Total Assets
Liabilities
Current17 Short Term Borrowings
Accounts Payable and Accrued Liabilities18 Accounts Payable - Trade19 Accounts Payable - Other20 Employee Compensation21 Advance Billing and Payments22 Dividend Payable
23 Customers Deposits24 Other Accrued Liabilities25 Total Acct Payable & Accured Liabilities
26 Income Taxes Payable
27 Current Portion long Term Borrowing/Lease
28 Total Current Liabilities
Other
29 Long Term Borrowings
30 Accum Deferred Income Taxes (Non-Current)
31 Unamortized Investment Tax Credit
32 Other
33 Other Juris Liabilities & Deferred Credits - Net34 Total Other Liabilities
35 Total Liabilities
Shareholders' Equity
36 Capital Stock & Additional Paid in Capital37 Retained Earnings37 Retained Earnings38 Total Capital Stock and Retained Earnings
39 Total Liabilities and Capital
Period: December- 2000
Restated
150 572 823
890 971 712
284 633 812
175 605 525
131 414 596
093 153
539 686 098
524 966 911
992 760,482
745 906
056,482
573 529 780
668 313 701
905 216 079
334 793,723
779 695 900
586,497 724
690 317 669
135 023 721
194 790,344
341 984 963
679,853,698
686,420
668 303,733
750 960 547
793 635
356 518 139
4,781 770 046
215 375,407
535 530 012
234 618 555
204 629 743
46,706 450
236,860,167
018 630 213
329 980 667
568 914 930)
761 065 737
779 695 950
-." '--0
r;1L::JQr-rr-\VED
. .
u1-
, iLLL!
ANNUAL REPORT FORM zuni) FEB -6 M'i to: 40
, ,,- "',-- , "' "
T'FS - COt'it'1\SSION. t L ,\.-
QWEST CORPORATION
DENVER, COLORADO
TO THE
PUBLIC UTILITY COMMISSION OF IDAHO (SO.
FOR THE
YEAR ENDING DECEMBER 31 2000
RESTATED
Office or other person to whom correspondence should be addressed concerning this report:
Name: James M. Schmit Title: Vice President
Address: 999 Main St, 11th Floor City: Boise State: Idaho Zip: 83702
ANNUAL REPORT FORM M
PUBLIC UTILITY COMMISSION OF IDAHO (SO)
TABLE OF CONTENTS
REPORT DESCRIPTION
MR 1, ID Restated Earnings and Expenses
Balance Sheet
ARMIS 43-, ID Restated S, Analysis of Entries in Accumulated Depreciation
ARMIS 43-, ID Restated 7, Bases of Charges for Depreciation
MR 1, TOTAL COMPANY Restated Earnings and Expenses
Balance Sheet
RESTATED
IDAHO-SOUTH
Qwest Corporation
Summary of Reports Period December - 2000
Earnings and Expenses
(Lines 1-33 in Thousands)
Restated
Year to Date
Revenue
Local Service
Access Service
Interstate
Intrastate
Long Distance Service
Miscellaneous
Total Revenue
188,875 170
629,921
253 660
929 246
242 910
327 930,907
Expenses
Cost of Services and Products
Maintenance
Engineering
Network Operations
Network Access
Access
Other
Total Cost of Services and Products
362,472
295 338
195,620
(54 742)
935,296
199
745 182
Selling, General and Administrative14 Customer Operations15 Corporate Operations16 Property and Other Operating Taxes17 Uncollectibles18 Total Selling, General and Administrative
19 Other Operating Income and Expense
20 Depreciation and Amortization21 Total Operating Expenses22 Income from Operations Before Taxes23 Interest Expense24 Nonoperating Income and Expense
25 Income before Income Taxes
38,620,288
720 795
381 959
038,092
83,761 133
967 324
214,473 639
113,457 268
397 197
7,490 763
569 308
Income Taxes26 Federal27 State and Local28 Income Before Juris Diff and Extraord Items29 Juris Diff and Nonreg Net Income30 Extraordinary Items
31 Net Income
35,030,445
338 119
200,745
854 612
346 132
RESTATED
IDAHO-SOUTH
Qwest Corporation
Balance Sheet
(Thousands)
Period: December- 2000
Restated
Assets
Current
1 Cash and Short Term Investments
Receivable
Trade
Other
Total Receivable
Inventories
Prepaid Expenses and Other Current Assets
Total Current Assets
Property, Plant and Equipment
Telecommunications Plant in Service
Telecommunications Plant Under Construction
10 Prop Held for Future Use & Plant Adjustment
11 Non - Operating Plant12 Gross Property, Plant and Equipment
13 Less-Accumulated Depree. and Amortization14 Total Telephone Plant Less Reserves
15 Investments and Other Assets
16 Total Assets
(44,478)
51,652 064
(18,050)
51,634 014
125,404
662 760
53,377,699
020,558,611
27,417 235
294
047 987 140
546,998 882
500,988,258
236 013 877
790,379 835
Liabilities
Current
17 Short Term Borrowings
Accounts Payable and Accrued Liabilities18 Accounts Payable - Trade19 Accounts Payable - Other20 Employee Compensation21 Advance Billing and Payments22 Dividend Payable
23 Customers' Deposits24 Other Accrued Liabilities25 Total Acct Payable & Accured Liabilities26 Income Taxes Payable
27 Current Portion long Term Borrowing/Lease
28 Total Current Liabilities
Other29 Long Term Borrowings
30 Accum Deferred Income Taxes (Non-Current)
31 Unamortized Investment Tax Credit
32 Other
33 Other Juris Liabilities & Deferred Credits - Net34 Total Other Liabilities35 Total Liabilities
157,417
954 335
124 782
556 767
857,618
4,483 230
134 149
302,152
340,400
45,776,701
955,370
58,886,488
389,934
703,826
820 897)
135,114 721
180,891,422
Shareholders' Equity
36 Capital Stock & Additional Paid in Capital
37 Retained Earnings
37 Retained Earnings38 Total Capital Stock and Retained Earnings39 Total Liabilities and Capital
(92,639)
609 581 052
609,488,413
790 379 835
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54
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3

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,
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16
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61
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%
24
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4

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_
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%
24
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%
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2
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I
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8.4
55
,
31
4
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9
%
24
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%
24
3
1

A
E
R
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W
I
R
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12
3
,
11
7
,
21
.
5
%
40
1
21
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5
%
24
4
1

C
O
N
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S
Y
S
T
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S
43
.
23
,
1.9
%
81
9
11
5
90
%
To
t
a
l

(
l
i
n
e
s

1
,
,
32
)
36
6
16
7
93
7
73
7
10
%
ID
-
s
o
u
t
h

2
0
0
0
-
RE
S
T
A
T
E
D
1

2
/
5
/
2
0
0
4
3
:
3
6

P
M
RESTATED
TOTAL COMPANY
Qwest Corporation
Summary of Reports Period December. 2000
Earnings and Expenses
(Lines 1-33 in Thousands)
Restated
Year to Date
Revenue
Local Service
Access Service
Interstate
Intrastate
Long Distance Service
Miscellaneous
Total Revenue
783 645 743
320 351 071
741 020 104
373 686 330
363 343 375
582 046 623
Expenses
Cost of Services and Products
Maintenance
Engineering
Network Operations
Network Access
Access
Other
Total Cost of Services and Products
162 602 115
895 221
402 182,490
704,418
344 184 583
579,922
987 148 748
Selling, General and Administrative14 Customer Operations15 Corporate Operations16 Property and Other Operating Taxes17 Uncollectibles18 Total Selling, General and Administrative19 Other Operating Income and Expense20 Depreciation and Amortization21 Total Operating Expenses22 Income from Operations Before Taxes23 Interest Expense24 Nonoperating Income and Expense
25 Income before Income Taxes
1,411 708 618
532 956.458
401 242 845
130,609 968
3,4 76 517 ,890
(52 808)
802 844 142
266,457 973
315 588 650
564 939 052
323 196,886
427 452 712
Income Taxes26 Federal27 State and Local28 Income Before Juris Diff and Extraord Items29 Juris Diff and Nonreg Net Income30 Extraordinary Items
31 Net Income
573 372 417
082 712
767 997 583
176 297 783
591 699 800
RESTATED
TOTAL COMPANY
Qwest Corporation
Balance Sheet
(Thousands)
Period: December- 2000
Restated
Assets
Current
1 Cash and Short Term Investments
Receivable
Trade
Other
Total Receivable
Inventories
Prepaid Expenses and Other Current Assets
Total Current Assets
Property, Plant and Equipment
Telecommunications Plant in Service
Telecommunications Plant Under Construction10 Prop Held for Future Use & Plant Adjustment
11 Non - Operating Plant12 Gross Property, Plant and Equipment
13 Less-Accumulated Depree. and Amortization14 Total Telephone Plant Less Reserves
15 Investments and Other Assets16 Total Assets
150 572 823
890 971 712
284 633,812
175 605 525
131,414 596
093 153
539,686 098
524 966 911
992 760,482
745 906
056,482
573 529 780
668 313 701
905,216,079
334 793 723
779 695 900
Liabilities
Current
17 Short Term Borrowings
Accounts Payable and Accrued Liabilities18 Accounts Payable - Trade19 Accounts Payable - Other20 Employee Compensation21 Advance Billing and Payments22 Dividend Payable
23 Customers' Deposits24 Other Accrued Liabilities25 Total Acct Payable & Accured Liabilities26 Income Taxes Payable27 Current Portion long Term Borrowing/Lease
28 Total Current Liabilities
Other29 Long Term Borrowings
30 Accum Deferred Income Taxes (Non-Current)31 Unamortized Investment Tax Credit
32 Other33 Other Juris Liabilities & Deferred Credits - Net34 Total Other Liabilities35 Total Liabilities
586 497 724
690 317 669
135 023 721
194 790 344
341 984 963
679 853 698
686,420
668 303 733
750 960 547
793 635
356 518,139
781 770 046
215,375,407
535 530 012
234 618,555
204 629 743
46,706,450
236 860,167
018,630,213
Shareholders ' Equity36 Capital Stock & Additional Paid in Capital37 Retained Earnings
37 Retained Earnings38 Total Capital Stock and Retained Earnings39 Total Liabilities and Capital
329 980 667
568 914 930)
761 065,737
779 695 950