Qwest To Take Hefty 2Q Charge, Adjusts 2001 Earnings

Qwest Communications International

The goodwill charge stems from decreased demand for telecom services, Qwest CEO Joseph Nacchio said in a statement.

Qwest, currently under an informal investigation by the Securities and Exchange Commission, also adjusted its fiscal 2001 fourth-quarter and year-end unaudited results. The Denver-based telecommunications company increased its loss by 1 cent per share for both reporting periods. The move raised the year-end loss to $4.023 billion from $4.01 billion and the fourth-quarter loss to $529 million from $516 million. In addition, pro forma earnings for year-end 2001 were reduced to $55 million from $85 million.

"The changes reflect the result of year-end adjustments that we made when we closed our books," Nacchio stated. "We do not believe these adjustments are material."

Qwest also reported that the SEC probe initiated last month--which focused on the carrier's fiscal 2000 and 2001 accounting practices, policies and procedures--has resulted in a recommended action against the company that could lead to a fine. If imposed, the fine would penalize Qwest for using pro forma figures only in reporting fourth-quarter 2000 earnings.

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The SEC investigation scrutinized Qwest's revenue recognition and accounting of sales of optical-capacity assets and its sale of equipment to customers from which the carrier bought Internet services or contributed equity financing, including equipment sales to KMC Telecom Holdings and Calpoint.

In afternoon trading, Qwest's stock price fell 34 percent to $7.66.