11-K 1 a2052724z11-k.txt FORM 11-K 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, 2000 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, 2000 TABLE OF CONTENTS Report of Independent Accountants 1 Financial Statements: Statements of Net Assets Available for Benefits As of December 30, 2000 and 1999 2 Statement of Changes in Net Assets Available for Benefits for the year ended December 30, 2000 3 Notes to Financial Statements 4-8 Supplemental Schedule: Schedule of Assets Held for Investment Purposes at End of Year 9 Consent of Independent Accountants 10
Report of Independent Accountants To the Trustees and Participants of the Broadwing 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, 2000 and 1999 and the changes in net assets available for benefits for the year ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion. 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 schedule is the responsibility of the Plan's management. The 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. /s/ PricewaterhouseCoopers LLP Cincinnati, Ohio June 28, 2001 1 Broadwing Communications Inc. 401(K) Plan Statements of Net Assets Available for Benefits As of December 30, 2000 and 1999 (Thousands of Dollars)
2000 1999 --------- --------- ASSETS: Investments at fair value $31,674 $25,047 Cash - 7 Employer contributions receivable 200 2,867 Employee contributions receivable 400 270 --------- --------- Net assets available for plan benefits $32,274 $28,191 ========= =========
The accompanying notes are an integral part of these financial statements. 2 Broadwing Communications Inc. 401(K) Plan Statement of Changes in Net Assets Available for Benefits For the Year Ended December 30, 2000 (Thousands of Dollars)
ADDITIONS Contributions: Employee $11,010 Employer 2,528 -------- Total contributions 13,538 Interest and dividends 2,468 -------- Total additions 16,006 -------- DEDUCTIONS Benefits paid to participants 5,623 Net depreciation in fair value of investments 6,300 -------- Total deductions 11,923 -------- Net increase in net assets available for benefits 4,083 Net assets available for benefits - beginning of year 28,191 -------- Net assets available for benefits - end of year $32,274 ========
The accompanying notes are an integral part of these financial statements 3 BROADWING COMMUNICATIONS INC 401(K) PLAN NOTES TO FINANCIAL STATEMENTS 1. PLAN MERGER Effective at the end of December 30, 2000, the Broadwing Communications Inc. 401(K) Plan (the "Plan") merged into the Broadwing Retirement Savings Plan (the "Broadwing Retirement Savings Plan"), which was originally named the Cincinnati Bell Inc. Retirement Savings Plan and which is sponsored by Broadwing Inc. As a result, the last fiscal year of the Plan was the year ended December 30, 2000. After the end of such year, the prior assets and liabilities of the Plan became assets and liabilities of the Broadwing Retirement Savings Plan. The trustee of the Plan during 2000 was Morgan Stanley Dean Witter Trust FSB ("Morgan Stanley"), and the trustee of the Broadwing Retirement Savings Plan for the 2001 plan year is Fidelity Management Trust Company (together with its affiliates, "Fidelity"). Assets of the Plan invested in Morgan Stanley fund options were transferred into Fidelity fund options with similar investment strategies. The following matrix identifies the Morgan Stanley fund option and the corresponding Fidelity fund option:
----------------------------------------------- ---------------------------------------------------------------- Morgan Stanley Fund Option Corresponding Fidelity Fund Option ----------------------------------------------- ---------------------------------------------------------------- ----------------------------------------------- ---------------------------------------------------------------- Enterprise Fund Fidelity Growth Company Fund ----------------------------------------------- ---------------------------------------------------------------- Emerging Growth Fund Fidelity Mid Cap Stock Fund ----------------------------------------------- ---------------------------------------------------------------- Corporate Bond Fund Fidelity U.S. Bond Index Fund ----------------------------------------------- ---------------------------------------------------------------- Reserve Fund Fidelity Managed Income Portfolio II ----------------------------------------------- ---------------------------------------------------------------- Equity Income Fund Fidelity U.S. Equity Index Commingled Pool Fund ----------------------------------------------- ---------------------------------------------------------------- Real Estate Fund Fidelity Freedom 2020 Fund ----------------------------------------------- ---------------------------------------------------------------- American Value Fund Manager's Special Equity Fund ----------------------------------------------- ---------------------------------------------------------------- Emerging Markets Fund American Funds Europacific Growth Fund ----------------------------------------------- ---------------------------------------------------------------- International Magnum Fund American Funds Europacific Growth Fund ----------------------------------------------- ---------------------------------------------------------------- Value Fund Strong Opportunity Fund ----------------------------------------------- ---------------------------------------------------------------- Broadwing Inc. Common Stock Broadwing Stock Fund ----------------------------------------------- ----------------------------------------------------------------
This report only describes the financial activities of the Plan and its provisions to December 30, 2000 and does not describe in any manner the financial activities or provisions of the Broadwing Retirement Savings Plan after December 30, 2000. 2. 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. 4 BROADWING COMMUNICATIONS INC 401(K) PLAN NOTES TO FINANCIAL STATEMENTS 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. 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. 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 Participants are entitled to receive benefit payments at the normal retirement age of 65, in the event of the participant's death or disability, or in the event of termination under certain circumstances other than normal retirement, disability or death. Benefits may be paid in a lump-sum distribution or by an annuity. 5 BROADWING COMMUNICATIONS INC 401(K) PLAN NOTES TO FINANCIAL STATEMENTS 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 2000, employer contributions were reduced by $866,000 from forfeited nonvested accounts. ADMINISTRATION In 1999 and 2000, the Plan was administered on behalf of the Company by a committee appointed by the Company. The Plan's trustee during such years was Morgan Stanley Dean Witter Trust FSB. Administrative expenses of the Plan were paid by the Company. 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 for purposes of reports on Form 11-K 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. 6 BROADWING COMMUNICATIONS INC 401(K) PLAN NOTES TO FINANCIAL STATEMENTS VALUATION OF INVESTMENTS Investments are stated in the Plan's financial statements 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. Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plan's tax counsel believe that the Plan is designed and currently being operated in compliance with applicable requirements of the Internal Revenue Code. 4. INVESTMENTS The following investments represent 5% or more of the Plan's net assets (dollars in thousands):
December 30, December 30, 2000 1999 Morgan Stanley Dean Witter Funds: Enterprise Fund, 194,017 and 115,061 shares, respectively $ 3,289 $ 2,604 Emerging Growth Fund, 102,634 and 62,844 shares, respectively 6,443 5,405 Reserve Fund, 4,181,742 and 2,314,056 shares, respectively 4,182 2,314 Equity Income Fund, 341,940 and 239,093 shares, respectively 2,759 1,822 American Value Fund, 133,712 and 97,027 shares, respectively 2,590 2,257 International Magnum Fund, 120,432 and 105,247 shares, respectively 1,694 1,673 Value Fund, 187,798 and 193,001 shares, respectively 2,139 1,803 Common stock of Broadwing Inc., 231,390 and 132,028 shares, respectively 5,279 4,877
7 BROADWING COMMUNICATIONS INC 401(K) PLAN NOTES TO FINANCIAL STATEMENTS During 2000, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value as follows (dollars in thousands): Morgan Stanley Dean Witter Mutual Funds $ (3,884) Broadwing Inc. Common Stock (2,416) --------- $ (6,300) =========
All Plan investments during 2000 and 1999 were participant-directed. 5. PLAN AMENDMENTS EFFECTIVE DURING 1999 AND 2000 A Plan amendment that became effective on December 30, 1999 changed 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 was not considered material to the Plan's 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. 8 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, 2000
IDENTITY OF ISSUE DESCRIPTION OF ASSET CURRENT VALUE ----------------------------------------------------------------------------------------------------------------- The Morgan Stanley Dean Witter Group: Enterprise Fund Mutual Fund $ 3,288,592 194,017 shares Emerging Growth Fund Mutual Fund 6,443,347 102,634 shares Corporate Bond Fund Mutual Fund 1,130,295 173,093 shares Reserve Fund Money Market Fund 4,181,742 4,181,742 shares Equity Income Fund Mutual Fund 2,759,465 341,940 shares Real Estate Securities Fund Mutual Fund 596,874 44,246 shares American Value Fund Mutual Fund 2,590,009 133,712 shares Emerging Markets Fund Mutual Fund 711,633 82,270 shares International Magnum Fund Mutual Fund 1,694,474 120,432 shares Value Fund Mutual Fund 2,139,022 187,798 shares Broadwing Inc.* Company Stock 5,278,584 231,390 shares Participants' Loans Loans secured by vested account balances with interest rates ranging from 9.50% to 10.50% 860,284 ------------ $ 31,674,321 ============
* Party-in-interest 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Employees' Benefit Committee have duly caused this annual report to be signed by the undersigned, thereunto duly authorized. BROADWING COMMUNICATIONS INC. 401(K) PLAN By /s/ Virginia Neill Virginia Neill Secretary Employees' Benefit Committee June 28, 2001