Broadwing Delivers On Its Promises: Building A Strong Base For Accelerating Growth
On a proforma basis - assuming the businesses were combined for both periods - Broadwing's fourth-quarter revenues were $452 million, a 14% increase over the fourth quarter last year. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the quarter were $82 million versus $97 million a year ago. Excluding merger-related costs and wireless dilution, EBITDA increased $4 million over the third quarter.
Rick Ellenberger, president and chief executive officer, said "We've set a bold vision through a transforming acquisition. In this, our first quarter, we began to see tangible results of our proven ability to execute. During the quarter, Broadwing Communications (formerly IXC Communications) became EBITDA positive, our Cincinnati businesses produced record revenue growth, and margins in our local exchange business continued to expand."
- Coast-To-Coast Network - For the year, Broadwing Communications added more than 6,000 route-miles to its national fiber optic network to finish the year with 15,700 route miles. The network averages 28 fibers and now reaches 63 top-100 cities, up from 52 in 1998.
- Service Metrics Improving - As a result of new systems and top management involvement, service to Broadwing Communications customers improved dramatically. Average monthly rates in fourth quarter vs. August show:
- Order intervals decreased to 56 days from 79 days.
- Completed orders increased to 803 from 330.
- Cancelled orders decreased to 224 from 467.
- ADSL - ADSL subscribers totaled nearly 18,000 at year-end, up almost 50% from the third quarter. A record 72% of Cincinnati-area homes and businesses can connect to the Internet and to unique ZoomTown content at ADSL speeds up to 1.5Mb per second.
- PCS - Cincinnati Bell Wireless added almost 50,000 subscribers in the quarter to end the year with more than 162,000 subscribers. A new teen-focused prepaid service attracted 11,000 of the total. Average revenue per customer was $66 per month on postpaid accounts. Churn declined from 1.51 in the third quarter to 1.44 in the fourth quarter.
- Value-Added Services - Revenues for value-added local exchange services increased 21 percent in the fourth quarter, driven by sales of Complete Connections all-in-one residential service bundles. On average, each of the more than 100,000 Complete Connections customers added an extra $8 per month of high-margin revenue.
Broadwing formed or extended relationships with key providers of advanced data and Internet technologies during the year, including several announced since the start of the fourth quarter:
- Cisco Systems - Last week Broadwing expanded its already strong relationship with Cisco for joint marketing efforts, deployment of new technology, the new Cincinnati-based Network Operations Center, and a training center to develop more Cisco-qualified technicians.
- Corvis - An agreement to trial Corvis' unique optical networking technology that could vastly improve efficiency and service quality over Broadwing's long-haul fiber networks. Broadwing also holds an option to invest in Corvis.
- e-Net - A partnership that makes Broadwing's Gemini 2000 the primary network provider and Broadwing a partner in e-Net's rapidly growing VoIP business, Zeroplus.com. Internet Telephony magazine this month recognized ZeroPlus.com as its Product of The Year. In December, Broadwing exercised rights to acquire about 18 percent of e-Net shares for $11 million.
On a standalone basis, as if the acquisition had not occurred, Broadwing (formerly Cincinnati Bell Inc.) results excluding special charges were as follows:
$M excluding per- share amounts 4Q99 4Q98 1999 1998 Revenues $ 274 $ 227 $ 1,032 $ 885 EBITDA 85 80 339 290 EPS (diluted) $ 0.18 $ 0.15 $ 0.82 $ 0.58
Revenues of $274 million grew a record 21% in the fourth quarter. EBITDA of $85 million was up 7% from a year ago. Excluding wireless dilution of $11 million, EBITDA of $96 million was up 20% versus last year. Fully diluted earnings per share from continuing operations excluding special charges was $0.18 per share, and $0.25 per share adjusted for wireless dilution.
Broadwing's local exchange business, Cincinnati Bell Telephone (CBT), continued its string of solid performance. Strong demand for data products and aggressive marketing of value-added services produced 4% revenue growth to $193 million.
Operating expenses declined $12 million for the quarter resulting in EBITDA of $86 million. CBT's EBITDA margin of 45% was 9 percentage points higher this quarter than a year ago.
The wireless business also had a strong quarter, with 44% sequential subscriber growth. Revenues in the fourth quarter were $30 million and EBITDA losses were $11 million. In 1998, wireless results were included in other expense prior to the purchase of an 80 percent interest in the business from AT&T Wireless.
Directory revenues increased 5 percent for the quarter from strong 1999 advertising sales for its printed and electronic Yellow Pages products. Effective cost control permitted EBITDA to increase 8 percent in the quarter to $7 million.
For the full year, Broadwing earned $0.82 per share from continuing operations excluding special charges, an increase of 41% versus last year. Excluding wireless dilution, per-share earnings of $1.03 increased 45% over 1998.
Broadwing Communications Results
On a standalone basis, as if it had not been acquired, Broadwing Communications' (formerly IXC Communications) results were as follows:
4Q98 1Q99 2Q99 3Q99 4Q99 Private Line $ 70.9 $ 70.9 $ 73.6 $ 76.1 $ 83.8 Switched Long Distance 84.3 77.7 74.8 77.5 81.9 Broadband/Internet 3.8 5.2 5.4 5.5 7.5 Other 10.8 7.5 4.1 11.0 4.7 Total Revenues 169.8 161.3 157.9 170.1 177.9 Expenses 152.9 156.6 169.2 172.7 177.3 EBITDA $ 16.9 $ 4.7 $ (11.3) $ (2.6) $ 0.6
Revenues of $178 million for the fourth quarter were up 5% sequentially from the third quarter and EBITDA became positive in the quarter at $0.6 million.
Broadband transport revenues of $84 million were up 10% sequentially and 18% versus a year ago, as other carriers continued to utilize Broadwing's next-generation broadband network for their Internet, data and voice traffic.
Switched long distance revenues were $82 million for the quarter. Consistent with the company's intention to de-emphasize this market, switched wholesale revenues declined $20 million from the same quarter last year.
Data and internet revenues grew 36% sequentially, and Other Revenues, which constitutes the company's interest in a partnership, declined to $4 million.
Financial Results As Reported
Broadwing's financial results on an as-reported basis, giving effect to the closing of the acquisition on Nov. 9, 1999, and using the purchase method of accounting, are included in detail on the attachments. Revenues for the quarter were $373 million and EBITDA was $82 million.
During the quarter, the company recorded restructuring and related expenses of $11 million to consolidate its CBLD operations with Broadwing Communications, terminate CBLD's network contract with another carrier, and integrate selected support functions. In addition, the company incurred a non-cash extraordinary charge of $7 million for the early retirement of debt related to IXC Communications' bank credit facilities. Net loss for the quarter was $0.29 per share.
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"In a very short period of time, we have made real progress in our businesses," Ellenberger said. "Based on that progress we have already begun to move quickly this year, introducing a precedent-setting guarantee of on-time delivery, launching a highly competitive mass-market long distance offer in Cincinnati, and starting a major national television and print advertising campaign to create lasting impressions of Broadwing as a fierce competitor known for speed and accountability."
Broadwing Inc. (NYSE: BRW) delivers advanced voice, data, and Internet communications solutions to customers nationwide. Focused on customer service, Broadwing's reliable high-bandwidth data and Internet capabilities give businesses a competitive advantage. Broadwing can be found on the World Wide Web at 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, and its ability to develop and successfully launch new products and services.