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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission File No. 000-50040

WilTel Communications Group, Inc.

Registrant’s Telephone Number, Including Area Code:
(918) 547-6000

No Change
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x   No   o

     Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes   x   No  o

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes   x   No   o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

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INDEX

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WilTel Communications Group, Inc.
Forward-Looking Statements

     Certain matters discussed in this report, include “forward-looking statements,” which are statements other than those of historical fact, concerning plans, objectives, goals, strategies, future events or performance and other matters. The Company makes these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

     Forward-looking statements can be identified by words such as “anticipates,” “believes,” “expects,” “planned,” “scheduled,” or similar expressions.

     Although the Company believes these forward-looking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of risks, assumptions, and uncertainties that could cause the Company’s actual results to differ materially from those projected. In particular, projections are necessarily speculative in nature, and it is often the case that one or more significant assumptions used in preparing those projections do not materialize. Therefore, projections should not be relied upon as fact.

     Some, but not all, of the risks and uncertainties that could cause actual results to differ materially from those expressed in the Company’s forward-looking statements include:

	•		the effects of continuing restructuring and consolidation in the telecommunications industry, including the emergence of new competitors and existing competitors with stronger financial positions;
	•		the Company’s ability to add customers, retain its current customer base and increase the volume of traffic on its fiber optic network at attractive margins;
	•		the Company’s ability to effectively manage its liquidity and cash position;
	•		the Company’s ability to secure financing on reasonable terms as required to support or expand its existing operations or to pursue attractive acquisition opportunities;
	•		federal and state regulatory and legislative actions; and
	•		technological developments.

     A more detailed discussion of the factors which may cause the Company’s actual results to differ from its anticipated results is included in Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 under the caption “Business—Forward-Looking Information,” to which we refer you. Additional discussion of the risks and uncertainties facing the Company is included in the other sections of this quarterly report and in the Company’s other reports filed from time to time with the Securities and Exchange Commission.

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WilTel Communications Group, Inc.

Condensed Consolidated Balance Sheets
(Unaudited)

See accompanying notes.

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WilTel Communications Group, Inc.

Condensed Consolidated Statements of Operations
(Unaudited)

See accompanying notes.

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WilTel Communications Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

See accompanying notes.

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WilTel Communications Group, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

     On April 22, 2002, Williams Communications Group, Inc. (“WCG”) and CG Austria, Inc. (collectively, the “Debtors”) commenced proceedings under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). Pursuant to the terms of a plan of reorganization (the “Plan”), WilTel Communications Group, Inc. (“WilTel” and, together with its direct and indirect subsidiaries, the “Company”) emerged on October 15, 2002 as the successor to WCG.

     The Company implemented fresh start accounting under the provisions of Statement of Position (“SOP”) 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” effective October 31, 2002 to coincide with its normal monthly financial closing cycle. The financial results in the condensed consolidated statements of operations and condensed consolidated cash flows have been separately presented under the label “Successor Company” for the three and six months ended June 30, 2003 and “Predecessor Company” for the three and six months ended June 30, 2002 as required by SOP 90-7. All periods in the condensed consolidated balance sheets have been presented under the label “Successor Company” as required by SOP 90-7. The Successor Company is also referred to as “WilTel” and the Predecessor Company is also referred to as “WCG”. As a result of implementing fresh start accounting, the Successor Company financial statements are not comparable to the Predecessor Company financial statements.

     The Successor Company and Predecessor Company interim financial statements presented in this Form 10-Q are based on the results of operations and financial position of WilTel and its direct and indirect subsidiaries and WCG and its direct and indirect subsidiaries, respectively. The interim condensed consolidated financial statements do not include all notes in annual financial statements and therefore should be read in conjunction with the consolidated financial statements and notes thereto in WilTel’s Annual Report on Form 10-K for the year ended December 31, 2002. The financial statements have not been audited by independent auditors but include all normal recurring adjustments and others, which, in the opinion of the Company’s management, are necessary to present fairly the Company’s financial position as of June 30, 2003 and its results of operations and cash flows for the three and six months ended June 30, 2003 and 2002.

2. Segment Revenues and Profit (Loss)

     The Company evaluates performance based upon segment profit (loss) from operations, which represents earnings before interest, income taxes, depreciation and amortization and other unusual, non-recurring or non-cash items, such as asset impairments and restructuring charges, equity earnings or losses and minority interest. A reconciliation of segment profit (loss) from operations to loss from operations is provided below. Intercompany sales are generally accounted for as if the sales were to unaffiliated third parties. The following tables present certain financial information concerning the Company’s reportable segments.

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WilTel Communications Group, Inc.
 
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)

Successor Company:

Predecessor Company: