UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACTS OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACTS OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _____________ .
A. FULL TITLE OF THE PLAN AND THE ADDRESS OF THE PLAN, IF
DIFFERENT FROM
THAT OF THE ISSUER NAMED BELOW:
BROADWING COMMUNICATIONS INC. 401(K) PLAN
B. NAME OF ISSUER OF THE SECURITIES HELD PURSUANT TO THE PLAN
AND THE
ADDRESS OF ITS PRINCIPAL EXECUTIVE OFFICE:
BROADWING COMMUNICATIONS INC.
1122 CAPITAL OF TEXAS HIGHWAY SOUTH, AUSTIN, TEXAS 78746-6426
(512) 328-1112
BROADWING COMMUNICATIONS INC. 401(k) PLAN
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1999
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULES
Reports of Independent Accountants 1 - 2
Financial Statements:
Statements of Net Assets Available for Benefits 3
Statement of Changes in Net Assets Available for Benefits 4
Notes to Financial Statements 5 - 8
Supplemental Schedule:
Schedule of Assets Held for Investment Purposes at End of Year 9
Consent of Independent Accountants 11-12
Report of Independent Accountants
To the Trustees and Participants of the
Broadwing Communications Inc. 401(k) Plan
(formerly the IXC Communications, Inc. 401(k) Plan
In our opinion, the accompanying statements of net assets available for
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available
for benefits of the Broadwing Communications Inc. 401(k) Plan ("the Plan") at
December 30, 1999, and the changes in net assets available for benefits for
the year ended December 30, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Supplemental Schedule of Assets
Held for Investment Purposes at End of Year is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedules are the
responsibility of the Plan's management. This supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Austin, Texas
June 8, 2000
1
Report of Independent Accountants
The Trustees
Broadwing Communications Inc. 401(k) Plan
(formerly the IXC Communications, Inc. 401(k) Plan)
We have audited the accompanying statement of net assets available for
benefits of Broadwing Communications Inc. 401(k) Plan ("the Plan"), as of
December 31, 1998. This financial statement is the responsibility of the
Plan's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1998 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Austin, Texas
June 23, 1999
2
Broadwing Communications Inc. 401(k) Plan
Statements of Net Assets Available for Benefits
As of December 30, 1999 and December 31, 1999
(Thousands of Dollars)
1999 1998
------- -------
ASSETS:
Investments at fair value $25,047 $12,901
Cash 7 39
Employer contributions receivable 2,867 2,459
Employee contributions receivable 270 331
------- -------
Net assets available for benefits $28,191 $15,730
======= =======
The accompanying notes are an integral part of these financial statements.
3
Broadwing Communications Inc. 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 30, 1999
(Thousands of Dollars)
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Net appreciation in fair value of investments $ 5,127
Interest and dividends 1,328
-------
6,455
Contributions:
Employee 4,204
Employer 4,050
-------
Total contributions 8,254
Total additions 14,709
-------
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 2,248
-------
Net increase in net assets available for benefits 12,461
Net assets available for benefits - beginning of year 15,730
-------
Net assets available for benefits - end of year $28,191
=======
The accompanying notes are an integral part of these financial statements.
4
Broadwing Communications Inc. 401(k) Plan
Notes to Financial Statements
1. DESCRIPTION OF PLAN
As a result of its merger with Broadwing Inc. (then named Cincinnati
Bell Inc.) on November 9, 1999, IXC Communications, Inc. ("IXC") became
a wholly owned subsidiary of Broadwing Inc. Subsequent to the merger
date, IXC was renamed Broadwing Communications Inc. ("the Company") and
the IXC Communications, Inc. 401(k) Plan was renamed the Broadwing
Communications Inc. 401(K) Plan ("the Plan").
The following brief description of the Plan is provided for general
purposes only. Participants should refer to the Plan agreement for more
complete information.
GENERAL
The Plan is a defined contribution profit sharing plan covering
substantially all employees of Broadwing Communications Inc. and its
subsidiaries. It is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") and is intended to
qualify as a tax-favored plan under Section 401(a) of the Internal
Revenue Code ("the Code"), as amended.
CONTRIBUTIONS
Eligible employees may contribute to the Plan an elected portion of
their eligible compensation, as defined in the Plan agreement, up to
the statutory annual deferral limit. The Company matches 100% of
participant contributions to the Plan up to the first 3% of eligible
compensation of the employee.
Employer profit sharing contributions in excess of the required
matching contributions are permitted under the Plan and are made at the
discretion of the Company. During 1999, the Company made profit
sharing contributions in excess of the required matching contributions
in the amount of $3,240,000 to the Plan.
ELIGIBILITY
Employees of the Company who have both attained age 20 -1/2 and
completed 500 hours of service within six months are eligible to
participate in the Plan. An employee may enter the Plan on January 1,
April 1, July 1 or October 1, whichever occurs first after the employee
satisfies the eligibility requirements.
VESTING
Each participant is fully vested in his/her own savings contribution
and shall become fully vested in his/her employer contribution account
on his/her normal retirement date, death or permanent disability.
5
Prior to April 1, 1998, Plan participants were 40% vested in employer
contributions after two years of service and continued to vest 20% per
year until they were fully vested. Effective April 1, 1998,
participants are 20% vested in employer contributions after one year of
service and continue to vest 20% per year until they are fully vested.
PAYMENT OF BENEFITS
On termination of service due to death, disability or retirement,
participants are entitled to receive benefit payments in a lump-sum
distribution or by an annuity. For termination of service due to
other reasons, participants may elect to defer their benefit payments
until the earlier of age 65 or death, providing that their benefit is
worth more than $5,000.
PLAN TERMINATION
Although the Company has not expressed any intent to terminate the
Plan, it reserves the right to do so at any time. Upon such
termination, each participant becomes fully vested and all benefits
shall be distributed to the participants or their beneficiaries.
PARTICIPANT ACCOUNTS
Discretionary employer profit sharing contributions are allocated
annually to participant accounts based upon the percentage of the
individual participant's eligible compensation to total participants'
eligible compensation.
Investment earnings or losses are allocated among the participants'
accounts based upon the percentage of the balance of each such account
to the total balance of all such accounts within each investment
option.
PARTICIPANT LOANS
Participants are allowed to borrow a maximum amount of the lesser of
(i) 50% of the participants vested account balance or (ii) $50,000.
Loans are amortized over a maximum of 60 months and repayment is
generally made through payroll deductions. The amount of the loan is
deducted from the participant's investment accounts, with repaid
interest and principal being credited to the participant's individual
plan account according to the current investment options selected by
the participant.
FORFEITURES
Forfeited amounts under the Plan are applied to the Company's matching
contribution to the Plan for the Plan year in which the forfeitures
occur. During 1999, employer contributions were reduced by $213,000
from forfeited nonvested amounts.
ADMINISTRATION
Prior to 1999, the Plan was administered by trustees consisting of
officers and employees of the Company. In 1999, the Company engaged
Morgan Stanley Dean Witter as new trustee of the Plan. Administrative
expenses of the Plan are paid by the Company.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION
The Plan's financial statements have been prepared on the accrual basis
of accounting.
In 1999, the Plan adopted AICPA Statement of Position 99-3, "Accounting
for and Reporting of Certain Defined Contribution Plan Investments and
Other Disclosure Matters" which, among other things, eliminated
previous requirements for defined contribution plans to present plan
investments by general type for participant-directed investment
programs and to disclose participant-directed investment programs.
Accordingly, the accompanying financial statements do not include
details of the Plan's participant-directed investment programs.
VALUATION OF INVESTMENTS
Investments are stated at fair value, which is determined based on
quoted market prices in an active market. The investment in the money
market fund is stated at cost, which approximates fair value.
Participant loans are stated at cost which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and the accompanying schedule. Actual results could differ
from those estimates.
3. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue
Service dated April 6, 1998, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code and, therefore, the related
trust is exempt from taxation. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The
Company has indicated that it will take the necessary steps, if any, to
maintain the Plan's qualified status.
7
4. INVESTMENTS
The following investments represent 5% or more of the Plan's net assets
(dollars in thousands):
December 30, December 31,
1999 1998
------------ ------------
Morgan Stanley Dean Witter Mutual Funds:
Enterprise Fund $ 2,604 $ 1,404
Emerging Growth Fund 5,405 1,159
Reserve Fund 2,314 1,074
Equity Income Fund 1,822 1,746
American Value Fund 2,257 1,580
International Magnum Fund 1,673 1,415
Value Fund 1,803 2,363
Common stock of IXC Communications, Inc. - 834
Common stock of Broadwing Inc. 4,877 -
Total
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated in
value as follows (dollars in thousands):
Morgan Stanley Dean Witter Mutual Funds $2,708
Broadwing, Inc. Common Stock 2,419
-----
$5,127
=====
All plan investments during 1999 and 1998 were participant-directed.
5. PLAN AMENDMENTS EFFECTIVE DURING 1999
A Plan amendment that became effective on December 30, 1999 changes the
year-end of the Plan to a 12-month period ending each December 30.
Prior to this change, the Plan's year was a calendar year. The effect
of this change is not material to the financial statements. In
addition, because of this change, the Plan had a "short" year that
began on January 1, 1999 and ended on December 30, 1999.
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Broadwing Communications Inc. 401(k) Plan
Schedule of Assets Held for Investment Purposes at End of Year
EIN: 74-2644120 Plan Number 002
As of December 30, 1999
IDENTITY OF ISSUE DESCRIPTION OF ASSET COST CURRENT VALUE
- --------------------------------------------------------------------------------------------------------------
The Morgan Stanley Dean Witter Group:
Enterprise Fund Mutual Fund ** $ 2,603,831
115,061 shares
Emerging Growth Fund Mutual Fund ** 5,405,213
62,844 shares
Corporate Bond Fund Mutual Fund ** 857,886
132,186 shares
Reserve Fund Money Market Fund ** 2,314,056
2,314,056 shares
Equity Income Fund Mutual Fund ** 1,821,891
239,093 shares
Real Estate Securities Fund Mutual Fund ** 283,046
26,232 shares
American Value Fund Mutual Fund ** 2,256,849
97,027 shares
Emerging Markets Fund Mutual Fund ** 596,751
42,716 shares
International Magnum Fund Mutual Fund ** 1,673,423
105,247 shares
Value Fund Mutual Fund ** 1,802,630
193,001 shares
Broadwing Inc.* Company Stock ** 4,876,785
132,028 shares
Participants Loans Loans secured by vested
account balances with
interest rates ranging from
7.275% to 9.525% ** 554,411
------------
$ 25,046,772
============
* Party-in-interest
** This information is not required for participant-directed investment
accounts.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 23, 2000
BROADWING COMMUNICATIONS INC.
By: /s/ THOMAS SCHILLING
Thomas Schilling
Chief Accounting Officer
of Broadwing Communications Inc.
(formerly IXC Communications, Inc.)
10