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.
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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.