-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VoCVDgMMWRXd7I1H8KVAvGimXTn/PcSCaHtUNIHFbPupnoPxZvB9wGfTHEkUMjYa O9PdA5zsdia8IUdTyVrdUw== 0000950152-03-003531.txt : 20030327 0000950152-03-003531.hdr.sgml : 20030327 20030327153003 ACCESSION NUMBER: 0000950152-03-003531 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030327 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADWING INC CENTRAL INDEX KEY: 0000716133 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 311056105 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08519 FILM NUMBER: 03620850 BUSINESS ADDRESS: STREET 1: 201 E FOURTH ST 102 732 CITY: CINCINNATI STATE: OH ZIP: 45201 BUSINESS PHONE: 5133979900 MAIL ADDRESS: STREET 1: P O BOX 2301 CITY: CINCINNATI STATE: OH ZIP: 45201 FORMER COMPANY: FORMER CONFORMED NAME: CBI INC DATE OF NAME CHANGE: 19830814 FORMER COMPANY: FORMER CONFORMED NAME: CINCINNATI BELL INC /OH/ DATE OF NAME CHANGE: 19920703 8-K 1 l99944ae8vk.txt BROADWING INC. 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: March 27, 2003 BROADWING INC. (Exact name of registrant as specified in its charter) Ohio 1-8519 31-1056105 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 201 East Fourth Street Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 397-9900 FORM 8-K BROADWING INC. ITEM 5. OTHER EVENT. Broadwing Inc. (NYSE: BRW) issued a press release on March 27, 2003 announcing a comprehensive recapitalization that includes the successful completion of an amendment to its bank credit facility for, among other things, extension of its scheduled maturities, providing the company with sufficient liquidity to meet its obligations until 2006. A copy of the press release is attached as Exhibit 99(i). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (C) (i) Exhibit 99(ii) - Press Release of Broadwing Inc. dated March 27, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BROADWING INC. By: /s/ Jeffrey C. Smith ---------------------------------- Jeffrey C. Smith Chief Human Resources Officer, General Counsel and Corporate Secretary Date: March 27, 2003 EX-99.I 3 l99944aexv99wi.txt EXHIBIT 99.I EXHIBIT 99(i) BROADWING PRESS RELEASE Investor contact: Media contact: Mike Hemsath Thomas Osha 513.397.7788 513.397.7316 mike.hemsath@broadwing.com tom.osha@broadwing.com BROADWING INC. SUCCESSFULLY COMPLETES CREDIT FACILITY RENEGOTIATION, INITIATES RECAPITALIZATION - - Provides Liquidity to 2006 - - Closes on $350 Million Financing to Retire Bank Debt - - Obtains Additional Flexibility on 6 3/4% Convertible Debt - - Expects to File Exchange Offer for 12 1/2% Preferred, 9% Senior Subordinated Debt CINCINNATI - MARCH 27, 2003 -- BROADWING INC. (NYSE: BRW) TODAY ANNOUNCED A COMPREHENSIVE RECAPITALIZATION THAT INCLUDES THE SUCCESSFUL COMPLETION OF AN AMENDMENT TO ITS BANK CREDIT FACILITY FOR, AMONG OTHER THINGS, EXTENSION OF ITS SCHEDULED MATURITIES, PROVIDING THE COMPANY WITH SUFFICIENT LIQUIDITY TO MEET ITS OBLIGATIONS UNTIL 2006. "Undertaking a recapitalization of the company and completing the renegotiation of our bank credit facility allows Broadwing to move forward to rebuild our financial structure and create value for our shareholders and employees," said Kevin Mooney, chief executive officer of Broadwing Inc. "Now we can execute the remaining elements of our strategic restructuring plan, including working to close the sale of Broadwing's broadband business to C III Communications, maintaining the strength of our Cincinnati Bell franchise, and further strengthening our financial position by de-leveraging the balance sheet." Under terms of the amendment, the company is permanently reducing its credit facility by $220 million and increasing the interest rate on the bank facility by approximately 60 basis points. Additionally, the company announced that it has obtained a waiver from the holder of its 6 3/4 percent convertible debt, Oak Hill Capital Partners, L.P. that provides the company more latitude in managing liabilities at its Broadwing Communications subsidiary, provides flexibility in raising future sources of capital, and waives certain acceleration rights. Under the terms of this agreement, the company will increase the coupon to nine percent through the maturity of this instrument. The 2 1/4 percent increase in the coupon will be payable in-kind through maturity. The remaining interest payment terms remain unchanged. In addition, the company closed and funded the previously announced $350 million in new financing arranged by Goldman, Sachs & Co. and will use the proceeds primarily to retire a portion of its bank debt. The notes will pay a 16 percent coupon, of which 12 percent is cash interest and 4 percent is payable in-kind. In addition, the company will issue to the investor group warrants for 17.5 million shares of Broadwing's common stock at $3.00 per share. The terms of the new financing, along with the amended credit facility, include restrictions that limit Broadwing Inc.'s funding of Broadwing Communications beyond an aggregate amount of $118 million after October 1, 2002. The amount remaining that can be invested in Broadwing Communications was $58 million as of February 28, 2003. Furthermore, the company has reached an agreement with more than two-thirds of the holders of the 12 1/2 percent preferred stock and 9 percent senior subordinated notes of its Broadwing Communications subsidiary to exchange these instruments for common stock of Broadwing Inc. If all of the holders of these securities participate in the exchange offers, which are contingent upon closing the sale of the assets of Broadwing Communications Services, the company expects to issue 26 million new shares of common stock. "These actions substantially increase our financial flexibility," said Tom Schilling, chief financial officer of Broadwing Inc. "The amendment to our credit facility provides Broadwing with liquidity until 2006 and will enable us to significantly de-leverage the company over the next three years. The net effect of this recapitalization will reduce Broadwing's minority interest and debt by approximately $500 million and have a modest negative impact on net income." Banc of America Securities acted as the lead financial advisor to the bank amendment process with Lehman Brothers as co-advisor to Broadwing Inc. TODAY, THE COMPANY ALSO ANNOUNCED IN A SEPARATE RELEASE ITS 2002 FOURTH QUARTER AND YEAR-END EARNINGS RESULTS. ### CONFERENCE CALL/WEBCAST Broadwing Inc. will host a conference call discussing its 2002 results and progress against its restructuring plan on Thursday, March 27, 2003 at 10:00 am EST, which will be web-cast on the company's website at www.broadwing.com. ABOUT BROADWING Broadwing Inc. (NYSE: BRW) is an integrated communications company comprised of Broadwing Communications and Cincinnati Bell. Broadwing Communications leads the industry as the world's first intelligent, all-optical, switched network provider and offers businesses nationwide a competitive advantage by providing data, voice and Internet solutions that are flexible, reliable and innovative on its 18,700-mile optical network and its award-winning IP backbone. Cincinnati Bell is one of the nation's most respected and best performing local exchange and wireless providers with a legacy of unparalleled customer service excellence and financial strength. The company was recently ranked number one in customer satisfaction, for the second year in a row, by J.D. Power and Associates for local residential telephone service and residential long distance among mainstream users and received the number one ranking in wireless customer satisfaction in its Cincinnati market. Cincinnati Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. Broadwing Inc. is headquartered in Cincinnati, Ohio. For more information, visit www.broadwing.com. NOTE: INFORMATION INCLUDED IN THIS NEWS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE POTENTIAL RISKS AND UNCERTAINTIES. BROADWING'S FUTURE RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, BROADWING'S ABILITY TO MAINTAIN ITS MARKET POSITION IN COMMUNICATIONS SERVICES, GENERAL ECONOMIC TRENDS AFFECTING THE PURCHASE OF TELECOMMUNICATION SERVICES, WORLD AND NATIONAL EVENTS THAT MAY AFFECT THE ABILITY TO PROVIDE SERVICES, AND ITS ABILITY TO DEVELOP AND LAUNCH NEW PRODUCTS AND SERVICES. MORE INFORMATION ON POTENTIAL RISKS AND UNCERTAINTIES IS AVAILABLE IN THE COMPANY'S RECENT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE 2001 FORM 10-K FOR BROADWING INC. AND BROADWING COMMUNICATIONS INC. EX-99.II 4 l99944aexv99wii.txt EXHIBIT 99.II EXHIBIT 99(ii) BROADWING PRESS RELEASE Investor contact: Media contact: Mike Hemsath Thomas Osha 513.397.7788 513.397.7316 mike.hemsath@broadwing.com tom.osha@broadwing.com BROADWING INC. REPORTS FINANCIAL RESULTS FOR 2002 Delivers on Previously Announced Financial Guidance Reports Second Consecutive Quarter of Positive Cash Flow Reduces Net Debt by $300 Million During 2002 Completes Write-off of Broadband Business CINCINNATI--March 27, 2003--Broadwing Inc. (NYSE:BRW) today announced its financial results for the fourth quarter and full year 2002. For the fourth quarter, Broadwing reported revenue of $503 million, an 8 percent decline over the same period in 2001. While the company's Cincinnati Bell businesses grew 4 percent, the revenue decline was due to weakness in its Broadwing Communications operations. In the quarter, the company announced an asset impairment charge due to the exit of its Broadwing Communications business. This non-cash charge produced an operating loss of $2.2 billion for the quarter. On a per share basis, the loss from continuing operations was $10.92, versus a loss of $0.95 per share for the same period last year. Additionally, the company produced $30 million of positive cash flow* in the fourth quarter, its second consecutive quarter of positive cash flow. For the year, revenue declined 5 percent to $2.16 billion. Operating loss increased $1.87 billion to $2.09 billion. The loss from continuing operations was $11.18 per share; an increase of $9.68 over the $1.50 per share loss recorded in 2001. Broadwing also reported that net debt** had decreased $300 million during 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA)*** increased 11 percent to $641 million. This compares favorably with guidance for revenue of $2.15 billion and EBITDA of $640 million. Excluding the impact of all special items discussed in detail later in this release, the company's loss from continuing operations was $0.12 per share and $0.46 per share for the fourth quarter and full year 2002, respectively. "Our Cincinnati Bell businesses continued to produce solid financial results," said Kevin Mooney, chief executive officer of Broadwing Inc. "While it has been a difficult year for our company and our industry, we have made notable progress against our restructuring plan over the last six months. We have strategically realigned our company, successfully completed a comprehensive amendment to our credit facility, and raised new capital. We remain focused on executing our restructuring plan, strengthening our financial position, and creating value for our shareholders." "We have made good strides toward strengthening our balance sheet and improving our liquidity," said Tom Schilling, chief financial officer of Broadwing Inc. "The company was cash flow positive for the third and fourth quarters, reduced net debt by 9 percent for the year, and has sufficient liquidity until 2006." Cincinnati-Based Operations For the fourth quarter, Broadwing's Cincinnati Bell businesses reported revenue growth of 4 percent to $302 million. Operating income improved 19 percent to $85 million. Selling, general and administrative expenses of $46 million represented a 13 percent decrease from the prior period. Capital spending declined year over year by 40 percent, to $28 million. For the year, the Cincinnati Bell businesses reported consolidated revenue of $1.17 billion for 2002, an increase of 3 percent from a year ago. Operating income increased 18 percent to $356 million. Selling, general and administrative expenses of $180 million were down 18 percent from 2001. For the year, capital spending was $111 million, a reduction of 37 percent from the prior year. The Cincinnati Bell businesses also produced $285 million of positive cash flow during 2002. Local Communications Services Broadwing's local-exchange subsidiary, Cincinnati Bell Telephone, produced revenue growth of 5 percent to $223 million for the fourth quarter. Operating income of $72 million was up 15 percent versus the fourth quarter of 2001. Capital spending of $23 million was $4 million less than the fourth quarter of 2001. For 2002, Cincinnati Bell Telephone delivered revenue of $849 million, a 2 percent improvement over the prior year. Operating income grew 7 percent to $285 million. CBT's capital spending of $80 million was $41 million less than 2001 and just 9 percent of revenue for the year. Cincinnati Bell's bundled services offerings added almost 53,000 subscribers during the year and now total almost 289,000 subscribers. The company's penetration of bundled services among its residential access lines is 40 percent, making it one of the industry leaders. The company also expanded its ADSL subscriber base by 23 percent to almost 75,000 subscribers. This represents a 9 percent penetration of addressable access lines. At the end of 2002, Cincinnati Bell had approximately 1,012,000 lines in service, a loss of less than 2 percent from the end of 2001. Wireless Services For the fourth quarter, CBW reported revenue of $64 million, essentially flat versus fourth quarter 2001. Operating income improved 49 percent to $13 million. Capital spending of $4 million was $14 million less than the same period a year ago and represented just 7 percent of revenue. For the quarter, postpaid churn was under 2 percent and postpaid ARPU was $57 per month. For the year, Cincinnati Bell Wireless produced revenue of $260 million, a 5 percent increase over 2001. Operating income grew by 83 percent to $69 million. Capital spending for 2002 declined $23 million to $30 million. Cincinnati Bell Wireless ended the year with 470,000 subscribers, an increase of 2 percent versus prior year. Other Communications Services Other Communications Services, which includes the company's switched long distance and public payphone operations, reported revenue of $20 million, down 2 percent from the same period a year ago. Operating income remained at break even, unchanged from the fourth quarter of 2001. For the year, revenue was up 2 percent from 2001 to $80 million. Operating income improved to $2 million from a loss of $4 million in the prior year. Market share for Cincinnati Bell Any Distance, the company's long distance offering, improved to 69 percent in the residential market and 43 percent in the business market, an improvement of 2 points and 5 points respectively versus the prior year. "The solid performance of our Cincinnati Bell businesses in 2002, especially relative to their peer group, is a result of that management team's focus and action to preserve and enhance the strength, profitability, competitive position, and substantial cash flows of our local operations," said Jack Cassidy, chief operating officer, Broadwing Inc. Broadband Services For the fourth quarter, Broadwing Communications' revenue declined 18 percent to $225 million. As a result of the impact of special items, the operating loss of $2.28 billion was $1.96 billion larger than the loss in the same period a year ago. Capital spending of $8 million in the fourth quarter was $57 million less than the prior year and represented just 4 percent of revenue. For the full year 2002, Broadwing Communications reported revenue of $1.07 billion, a decline of 11 percent from 2001. Operating loss increased $1.94 billion to $2.44 billion as a result of asset write-downs. Primarily as a result of the completion of the optical network in 2001, capital spending was reduced by $407 million to $65 million in 2002, a level which represented just 6 percent of revenue. The terms of the $350 million in new financing arranged by Goldman Sachs & Company includes restrictions that limit Broadwing Inc.'s funding of Broadwing Communications beyond an aggregate amount of $118 million after October 1, 2002. The amount remaining that could be invested in Broadwing Communications was $58 million as of February 28, 2003. These restraints and liquidity uncertainties have prompted the company's independent accountants to issue a going concern qualification to their audit report that will be filed along with the 2002 standalone, subsidiary financial statements of Broadwing Communications Inc. Special Items The following special items impacted Broadwing's income (loss) from continuing operations for the fourth quarter and full year 2002. - - In accordance with SFAS 144, the company recorded a non-cash asset impairment charge at its Broadwing Communications subsidiary of $2.2 billion for the fourth quarter. The net impact of this charge reduced the company's earnings from continuing operations by $6.55 per share for the fourth quarter and full year 2002. - - As a result of the liquidity restrictions and uncertainties surrounding Broadwing Communications, the company's federal income tax provision of $115 million in the fourth quarter of 2002, included a charge of $912 million to establish a valuation reserve against certain deferred tax assets. The impact of this charge reduced the company's earnings from continuing operations by $4.18 per share in both 2002 and the fourth quarter. The company is pursuing several alternatives to resolve these uncertainties related to Broadwing Communications that it expects will result in the realization of these reserved tax assets. - - The company also recorded charges to earnings for restructuring activities of $14 million and $37 million for the fourth quarter and full year 2002, respectively. The net impact of these charges reduced the company's earnings from continuing operations by $0.04 and $0.11 in the fourth quarter and for 2002, respectively. - - During the fourth quarter, the company recorded a non-cash, non-recurring charge of $11 million for the write-down of an investment security. This net impact of this charge reduced the company's earnings from continuing operations by $0.03 for both the fourth quarter and full year. - - During the second and third quarters of 2002 the company recognized non-cash, non-recurring benefits to both revenue and operating income of $18 million and $41 million respectively, as a result of the bankruptcy of two carrier customers, releasing Broadwing Communications from its service obligations. This net impact of these items increased the company's earnings from continuing operations by $0.19 in 2002. They had no impact on the fourth quarter results. - - In the second quarter, the company recorded $13 million to recognize shutdown and other costs related to the termination of a construction contract that is in dispute. The net impact of this item reduced earnings from continuing operations by $0.04 per share in 2002. This item had no impact on fourth quarter results. The company adopted SFAS 142, effective January 1, 2002. As a result, the statement of operations reflects a $2.0 billion non-cash, after-tax charge associated with the write-off of goodwill related to the acquisition of its broadband business. This item had no impact on earnings from continuing operations as it was reported as a cumulative effect of a change in accounting principle. "For Broadwing, 2003 will represent a transition year as our company migrates back to our roots and core business of running one of the best performing local and wireless operations in our industry," said Mooney. TODAY, THE COMPANY ALSO ANNOUNCED IN A SEPARATE RELEASE THE SUCCESSFUL COMPLETION OF A COMPREHENSIVE AMENDMENT TO IT BANK CREDIT FACILITY AS WELL AS OTHER PROGRESS AGAINST ITS RESTRUCTURING PLAN. * The company has presented certain information regarding cash flow in the preceding discussion because the company believes cash flow provides a useful measure of a company's operational performance, liquidity and financial health. Cash flow is defined by the company as SFAS 95 cash provided by (used in) operating, financing and investing activities, less changes in restricted cash in operating activities, issuance and repayment of long-term debt in financing activities, short-term borrowings (repayments) in financing activities and proceeds from the sale of discontinued operations in investing activities. Cash flow should not be considered as an alternative to net income (loss) or operating income (loss) and may not be comparable with cash flow as defined by other companies. **The company has presented certain information regarding net debt in the preceding discussion because the company believes net debt provides a useful measure of a company's liquidity and financial health. Net debt is defined by the company as the principle balances of short-term and long-term borrowings under the company's credit facility; Cincinnati Bell Telephone notes; 9% senior subordinated notes and 12 1/2% senior notes of Broadwing Communications; 7 1/4% senior secured notes and 6 3/4% convertible subordinated debentures of the parent company; capital leases; other short-term debt of the company and minority interest, offset by cash and cash equivalents. ***The company has presented certain information regarding Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) in the preceding discussion because the company believes that EBITDA is generally accepted as providing useful information regarding a company's ability to service and incur debt. In this regard, the company uses EBITDA as one of the measures to evaluate its operating performance and the operating performance of its segments. EBITDA represents net income (loss) from continuing operations before discontinued operations and cumulative effect of change in accounting principle, interest expense and other financing costs, income tax expense (benefit), depreciation, amortization, restructuring, asset impairments and other charges, minority interest expense (income), equity loss in unconsolidated entities, loss (gain) on investments and other expense (income). EBITDA does not represent cash flow for the periods presented and should not be considered as an alternative to net income (loss) or operating income (loss) or as an alternative to cash flow as a source of liquidity, and may not be comparable with EBITDA as defined by other companies. ### CONFERENCE CALL/WEBCAST Broadwing Inc. will host a conference call discussing its 2002 results and progress against its restructuring plan on Thursday, March 27, 2003 at 10:00 am EST, which will be web-cast on the company's website at www.broadwing.com. ABOUT BROADWING Broadwing Inc. (NYSE: BRW) is an integrated communications company comprised of Broadwing Communications and Cincinnati Bell. Broadwing Communications leads the industry as the world's first intelligent, all-optical, switched network provider and offers businesses nationwide a competitive advantage by providing data, voice and Internet solutions that are flexible, reliable and innovative on its 18,700-mile optical network and its award-winning IP backbone. Cincinnati Bell is one of the nation's most respected and best performing local exchange and wireless providers with a legacy of unparalleled customer service excellence and financial strength. The company was recently ranked number one in customer satisfaction, for the second year in a row, by J.D. Power and Associates for local residential telephone service and residential long distance among mainstream users and received the number one ranking in wireless customer satisfaction in its Cincinnati market. Cincinnati Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. Broadwing Inc. is headquartered in Cincinnati, Ohio. For more information, and to obtain detail of the company's definition of net debt, EBITDA and cash flow, visit www.broadwing.com. NOTE: Information included in this news release contains forward-looking statements that involve potential risks and uncertainties. Broadwing's future results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, Broadwing's ability to maintain its market position in communications services, general economic trends affecting the purchase of telecommunication services, world and national events that may affect the ability to provide services, and its ability to develop and launch new products and services. More information on potential risks and uncertainties is available in the company's recent filings with the Securities and Exchange Commission, including the 2001 Form 10-K for Broadwing Inc. and Broadwing Communications Inc. -----END PRIVACY-ENHANCED MESSAGE-----