Cincinnati Bell Inc. Posts Solid Second Quarter Results; Revenue Increase Driven by Strong Contributions from Data Center and Long Distance Operations.CINCINNATI Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. -- Cincinnati Bell Cincinnati Bell is the dominant telephone company for Cincinnati, Ohio and its nearby suburbs in Ohio, Indiana and Kentucky. The parent company is named Cincinnati Bell Inc. Inc. (NYSE NYSE See: New York Stock Exchange :CBB CBB Celebrity Big Brother CBB College van Beroep voor het Bedrijfsleven (Dutch) CBB Cattlemen's Beef Board CBB Coalition for Buzzards Bay CBB Could Be Better (visual effects) CBB Can't Be Bothered ) today announced its financial results for the second quarter of 2005 including revenue of $315 million, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $76 million and a net loss of $30 million, or 13 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . Reported results include the impact of a $44 million deferred tax asset write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. related to a change in state tax laws. Excluding this non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. , net income for the quarter was $14 million, or 5 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. "Cincinnati Bell's solid second quarter financial performance was a direct result of our 'de-lever, defend and grow' strategy," said Jack Cassidy For the bass guitarist from Jefferson Airplane, see Jack Casady. Jack Cassidy (March 5, 1927 – December 12, 1976) was an American actor, who achieved success in theater, cinema and television. , president and chief executive officer. "We also posted steady improvement in wireless postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. churn churn: see butter. as a result of much higher network quality. This quality, combined with our presence as the premier wireless and wireline carrier in the region, forms the foundation of the unique new rate plans we announced on August 1." Second Quarter Highlights --The company reported revenue of $315 million, a 6 percent increase over the second quarter of 2004, and a 9 percent increase versus the first quarter of 2005, due primarily to strong equipment sales related to recent data center investments and solid growth in long distance revenue. --EBITDA(1) (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
--Free cash flow(2) of $42 million increased 13 percent versus the second quarter of 2004, due to the timing of interest payments related to the company's refinancing Refinancing An extension and/or increase in amount of existing debt. plan. --Wireless churn continued to improve, reflecting higher GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. network quality. Postpaid churn in the second quarter was 2.2 percent, compared with 2.6 percent in the first quarter of 2005 and 2.8 percent in the fourth quarter of 2004. --Cincinnati Bell now has 144,000 "super bundle To sell hardware and software as a combined product or to combine several software packages for sale as a single unit. Contrast with unbundle. See bundled software and bundling. " subscribers, up 41 percent from a year ago and representing a 24 percent penetration The successful unauthorized breach of a security perimeter. See penetration test. of in-territory households. Bundling bundling, courtship custom, thought to have originated in Holland and the British Isles. It was extended to America, particularly to New England, and most widely practiced in the years prior to the Revolution of 1776. success resulted in Revenue per Household served of $78, a 3 percent increase from a year ago. --The company also reported 145,000 DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary subscribers, a 23 percent increase versus the second quarter of 2004. As a result, DSL penetration of in-territory primary consumer access lines was 22 percent at quarter-end, up from 17 percent at the same time a year ago. --On August 8, Cincinnati Bell announced the refinancing of its 16% Notes, which is expected to increase free cash flow by $20 million to $25 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. --The company reported net debt(3) of $2.1 billion at quarter-end, a 5 percent reduction from the same time a year ago. Capital expenditures were $43 million, or 14 percent of revenue, for the quarter. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , capital expenditures were $71 million, or 12 percent of revenue. "This quarter's results benefited from investments we have made in data centers and in our long distance business," said Brian Ross
Brian Ross (born September 4, 1944 in Ballston Spa, New York) is a racecar driver. He won Rookie of the Year honors in the Auto Racing Club of America in 2000. , chief financial officer. "As a result of these investments and our continued focus on cost structure improvements, we are on track to deliver on our financial goals for the year." Local Communications Services Quarterly revenue from the Local segment, which includes the operations of Cincinnati Bell Telephone (CBT (Computer-Based Training) Using the computer for training and instruction. CBT programs are called "courseware" and provide interactive training sessions for all disciplines. ), held firm at $190 million, essentially unchanged from a year ago as higher DSL revenue helped offset lower voice revenue. EBITDA of $97 million was up slightly from the prior year after adjusting for a $5 million increase in non-cash post-retirement medical expenses. Access lines declined 3.4 percent from the same time a year ago as a 65 percent increase in out-of-territory lines partially offset lower in-territory lines. In-territory access lines decreased 4.7 percent versus the second quarter of 2004 due primarily to wireless substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. . Wireless Services Cincinnati Bell Wireless (CBW cbw - Crypt Breakers Workbench ) generated revenue of $60 million compared with $67 million in the second quarter of 2004. Higher data and equipment revenue partially offset lower postpaid voice revenue and a $3 million reduction in roaming The ability to use a communications device such as a cellphone or PDA and be able to move from one cell or access point to another without losing the connection. revenue related to the merger of AT&T Wireless and Cingular. Segment EBITDA was $19 million compared with $22 million in the second quarter of 2004. A $4 million reduction in roaming expense and a $2 million reduction in handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. subsidies partially offset the impact of lower revenue. Higher network quality continued to benefit postpaid churn, which was 2.2 percent in the second quarter compared with 2.6 percent in the first quarter of 2005. As announced on August 1, CBW has leveraged improved network quality by launching new rate plans that offer unlimited calling to any Cincinnati Bell wireless or wireline number. The company expects to generate positive net postpaid subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. additions in the fourth quarter of 2005. For the quarter, CBW reported improved postpaid subscriber performance, as subscribers decreased by 3,000, compared to a decline of 7,000 in the first quarter of 2005. At quarter-end, CBW served 469,000 subscribers, of which 291,000, or 62 percent, were on the GSM network. Prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. Average Revenue per User (ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. ) rose to $21 versus $19 in
the second quarter of 2004, due primarily to a 60 percent increase in
data revenue. Postpaid ARPU was $48 as higher data revenue was offset by
lower roaming and voice revenue.Hardware and Managed Services Revenue from the Hardware and Managed Services segment, which includes the operations of Cincinnati Bell Technology Solutions, increased to $55 million, up 94 percent versus the second quarter of 2004. The increase was due primarily to strong equipment and managed services revenue related to the company's recent data center investments. Two equipment sales, totaling $23 million, to data center customers, drove the equipment revenue increase. Quarterly EBITDA of $5 million represents a 39 percent increase versus the same quarter a year ago, driven by higher contribution from equipment and managed services revenue. Other Communications Services Other Communications Services, which includes long distance and payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt operations, generated $20 million in quarterly revenue, up 3 percent, or $1 million, from a year ago. Long distance revenue increased 14 percent, or $2 million, which more than offset a 42 percent, or $2 million, decline in payphone and other revenue due to the disposal of unprofitable assets. Long distance revenue increased due to the introduction of new business products and the benefits of bundling. EBITDA of $8 million more than doubled versus the prior year quarter as the cost of long distance minutes fell substantially with the installation of a switch and negotiation of lower long distance rates in the second quarter of 2004. Long distance subscribers increased 24,000, or 4 percent, versus the end of the second quarter of 2004. Cincinnati Bell's market share of CBT lines for which a long distance carrier is selected was 79 percent in the consumer market and 50 percent in the business market, improvements of 6 points and 4 points, respectively, compared to the same time a year ago. 16% Notes Refinancing As announced on August 8, 2005, Cincinnati Bell has entered into a Note Repurchase Agreement Repurchase agreement An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. all of its outstanding 16% Senior Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Discount Notes due 2009 (the "16% Notes"). The company expects to finance the purchase of the 16% Notes with new borrowings under its senior secured credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . As a result of lower interest expense, this refinancing is expected to increase free cash flow by $20 million to $25 million on an annualized basis. Cincinnati Bell expects to close this refinancing in the third quarter of 2005. Upon closing, the company will have completed the second and final stage of its refinancing plan announced in January January: see month. 2005. Cincinnati Bell's obligation to repurchase the 16% Notes is conditioned upon the completion of the new financing. The company expects to pay approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $448 million, including accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. , to repurchase the 16% Notes. This will result in a third quarter pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt of approximately $92 million, including a non-cash loss of approximately $37 million. 2005 Guidance Cincinnati Bell has updated its free cash flow guidance to reflect the impact of the refinancing of its 16% Notes. All other guidance remains unchanged:
Category Guidance
----------------------------------------------------------------------
Revenue Low single-digit percent decline
----------------------------------------------------------------------
EBITDA $480 million to $490 million, including
approximately $20 million in incremental
non-cash expense related to post-
retirement medical benefits.
----------------------------------------------------------------------
Capital Expenditures Approximately 12 percent of revenue
----------------------------------------------------------------------
Free Cash Flow Approximately $155 million, a $10 million
increase from the company's previous
guidance of approximately $145 million
----------------------------------------------------------------------
Conference Call/Webcast Cincinnati Bell will host a conference call today at 10:00 a.m. (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ) to discuss its second quarter 2005 results. A live webcast of the call will be available via the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of www.cincinnatibell.com. The conference call dial-in number is 877.641.0086. International callers may dial 678.460.1867. A taped replay call will be available one hour after the conclusion of the teleconference until 5:00 p.m. (EDT) on August 23, 2005. For U.S. callers, the replay will be available at 888.284.7564. For international callers, the replay will be available at 678.460.1866. The replay reference number is 201054. An archived version of the webcast will also be available at www.cincinnatibell.com. About Cincinnati Bell Inc. Cincinnati Bell Inc. (NYSE:CBB) is parent to one of the nation's most-respected and best-performing local exchange and wireless providers with a legacy of unparalleled customer service excellence. With headquarters in Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , Cincinnati Bell provides a wide range of telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. products and services to residential and business customers in Ohio, Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. and Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). . For more information, visit www.cincinnatibell.com. Use of Non-GAAP Financial Measures This press release contains information about net debt, free cash flow and earnings before interest, taxes, depreciation and amortization (EBITDA). These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures. Detailed reconciliations of net debt, free cash flow and EBITDA to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com. (1) EBITDA provides a useful measure of operational performance. The company defines EBITDA as GAAP Operating Income plus depreciation, amortization, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , asset impairments and other special items. EBITDA should not be considered as an alternative to comparable GAAP measures of profitability. (2) Free cash flow provides a useful measure of operational performance, liquidity and financial health. The company defines free cash flow as SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 95 cash provided by (used in) operating, financing and investing activities, less changes in issuance and repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and credit facilities in financing activities and less proceeds from the sale of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and assets in investing activities. Free cash flow should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities, or the change in cash on the balance sheet and may not be comparable with free cash flow as defined by other companies. (3) Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and long-term debt and unamortized premium and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. discount, offset by cash and cash equivalents. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Note Certain of the statements and predictions contained in this release constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and . In particular, statements, projections or estimates that include or reference the words "believes," "anticipates," "plans," "intends," "expects," "will," or any similar expression fall within the safe harbor for forward-looking statements contained in the Reform Act. Actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statement for a variety of reasons, including, but not limited to: Cincinnati Bell's ability to maintain its market position in communications services, including wireless, wireline and internet services; general economic trends affecting the purchase or supply of telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. services; world and national events that may affect the ability to provide services; changes in the regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environment; any rulings, orders or decrees that may be issued by any court or arbitrator arbitrator n. one who conducts an arbitration, and serves as a judge who conducts a "mini-trial," somewhat less formally than a court trial. In most cases the arbitraror is an attorney, either alone or as part of a panel. ; restrictions imposed under various credit facilities and debt instruments; work stoppages caused by labor disputes; adjustments resulting from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. audit procedures; and Cincinnati Bell's ability to develop and launch new products and services. More information on potential risks and uncertainties is available in recent filings with the Securities and Exchange Commission, including Cincinnati Bell's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. report, Form 10-Q Form 10-Q See 10-Q. reports and Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. reports. The forward-looking statements included in this release represent company estimates as of August 9, 2005. Cincinnati Bell anticipates that subsequent events and developments will cause its estimates to change.
Cincinnati Bell Inc.
Consolidated Statements of Income
(Unaudited)
(in millions - except per share amounts)
Three Months Six Months
Ended June 30, % Ended June 30, %
2005 2004 Change 2005 2004 Change
------- ------- ------ ------- ------- ------
Revenue $315.4 $297.0 6% $604.0 $599.4 1%
------------------------
Costs and Expenses
------------------------
Cost of Services and
Products 133.7 117.6 14% 242.9 243.3 (0%)
Selling, General and
Administrative 57.4 53.6 7% 115.5 111.5 4%
Depreciation and
Amortization 48.4 45.6 6% 91.4 91.3 0%
Restructuring -- -- n/m -- 0.2 n/m
Asset Impairments and
Other Charges
(Credits) -- (0.2) n/m 23.1 (0.1) n/m
------- ------- ------- -------
Operating Income 75.9 80.4 (6%) 131.1 153.2 (14%)
Minority Interest
Expense (Income) (0.5) 1.2 (142%) (4.8) 1.3 n/m
Interest Expense 49.6 50.5 (2%) 100.1 101.4 (1%)
Loss on Extinguishment
of Debt -- -- n/m 7.9 -- n/m
Other Income, Net (0.7) -- n/m (0.2) (0.1) 100%
------- ------- ------- -------
Income before Income
Taxes 27.5 28.7 (4%) 28.1 50.6 (44%)
Income Tax Expense 57.3 13.8 n/m 61.1 24.8 146%
------- ------- ------- -------
Net Income (Loss) (29.8) 14.9 n/m (33.0) 25.8 n/m
Preferred Stock
Dividends 2.6 2.6 0% 5.2 5.2 0%
------- ------- ------- -------
Net Income (Loss)
Applicable to Common
Shareowners $(32.4) $12.3 n/m $(38.2) $20.6 n/m
======= ======= ======= =======
Basic and Diluted
Earnings (Loss) Per
Common Share $(0.13) $0.05 $(0.16) $0.08
---------------------- ======= ======= ======= =======
Weighted Average Common
Shares Outstanding
-----------------------
- Basic 245.8 245.0 245.7 245.0
- Diluted 245.8 250.4 245.7 252.0
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions) Three Months Six Months
Ended June 30, % Ended June 30, %
2005 2004 Change 2005 2004 Change
------ ------ ------ ------ ------ ------
Local
Revenue
Voice $126.4 $130.8 (3%) $254.4 $261.4 (3%)
Data 54.2 50.4 8% 107.3 100.7 7%
Other services 9.0 8.4 7% 18.0 18.4 (2%)
------ ------ ------ ------
Total revenue 189.6 189.6 0% 379.7 380.5 0%
Operating Costs and
Expenses:
Cost of services and
products 59.0 55.8 6% 116.7 112.1 4%
Selling, general and
administrative 33.7 33.3 1% 69.0 66.8 3%
Depreciation 26.8 29.8 (10%) 53.9 59.7 (10%)
Restructuring -- -- -- -- 0.2 n/m
------ ------ ------ ------
Total operating costs
and expenses 119.5 118.9 1% 239.6 238.8 0%
------- ------- ------- -------
Operating income $ 70.1 $ 70.7 (1%) $140.1 $141.7 (1%)
====== ====== ====== ======
Wireless
Revenue
Service $ 55.3 $ 62.9 (12%) $110.9 $123.2 (10%)
Equipment 5.0 4.2 19% 10.6 8.0 33%
------ ------ ------ ------
Total revenue 60.3 67.1 (10%) 121.5 131.2 (7%)
Operating Costs and
Expenses:
Cost of services and
products 28.0 32.0 (13%) 57.3 65.4 (12%)
Selling, general and
administrative 13.6 13.3 2% 27.0 25.5 6%
Depreciation 20.2 14.7 37% 35.2 29.2 21%
Amortization -- 0.5 n/m -- 1.0 n/m
Asset impairments and
other charges -- -- -- 23.7 2.4 n/m
------ ------ ------ ------
Total operating costs
and expenses 61.8 60.5 2% 143.2 123.5 16%
------- ------- ------- -------
Operating income (loss) $ (1.5) $ 6.6 (123%) $(21.7) $ 7.7 n/m
====== ====== ====== ======
Hardware & Mgd.
Services
Revenue
Hardware $ 38.1 $ 14.7 159% $ 50.4 $ 32.9 53%
Managed services 16.4 13.4 22% 31.2 29.6 5%
------ ------ ------ ------
Total revenue 54.5 28.1 94% 81.6 62.5 31%
Operating Costs and
Expenses:
Cost of services and
products 45.1 21.3 112% 65.4 48.2 36%
Selling, general and
administrative 4.5 3.3 36% 8.6 8.7 (1%)
Depreciation 0.6 0.2 200% 1.0 0.4 150%
Asset impairments and
other charges -- -- -- (0.1) (1.1) (91%)
------ ------ ------ ------
Total operating costs
and expenses 50.2 24.8 102% 74.9 56.2 33%
------- ------- ------- -------
Operating income $ 4.3 $ 3.3 30% $ 6.7 $ 6.3 6%
====== ====== ====== ======
Other
Revenue $ 19.6 $ 19.0 3% $ 38.7 $ 37.8 2%
Operating Costs and
Expenses:
Cost of services and
products 8.3 12.9 (36%) 17.1 26.0 (34%)
Selling, general and
administrative 3.7 3.2 16% 7.6 6.1 25%
Depreciation 0.5 0.3 67% 0.9 0.7 29%
------ ------ ------ ------
Total costs and
expenses 12.5 16.4 (24%) 25.6 32.8 (22%)
------- ------- ------- -------
Operating income $ 7.1 $ 2.6 173% $ 13.1 $ 5.0 162%
====== ====== ====== ======
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions) Three Months Six Months
Ended June 30, % Ended June 30, %
2005 2004 Change 2005 2004 Change
------ ------ ------ ------ ------ ------
Revenue
------------------------
Local $189.6 $189.6 0% $379.7 $380.5 (0%)
Wireless 60.3 67.1 (10%) 121.5 131.2 (7%)
Hardware & Mgd.
Services 54.5 28.1 94% 81.6 62.5 31%
Other 19.6 19.0 3% 38.7 37.8 2%
Broadband -- -- -- -- -- --
Corporate and
eliminations (8.6) (6.8) 26% (17.5) (12.6) 39%
------ ------ ------ ------
Total Revenue $315.4 $297.0 6% $604.0 $599.4 1%
====== ====== ====== ======
Cost of Services and
Products
------------------------
Local $ 59.0 $ 55.8 6% $116.7 $112.1 4%
Wireless 28.0 32.0 (13%) 57.3 65.4 (12%)
Hardware & Mgd.
Services 45.1 21.3 112% 65.4 48.2 36%
Other 8.3 12.9 (36%) 17.1 26.0 (34%)
Broadband -- -- -- -- -- --
Corporate and
eliminations (6.7) (4.4) 52% (13.6) (8.4) 62%
------ ------ ------ ------
Total Cost of
Services and
Products $133.7 $117.6 14% $242.9 $243.3 (0%)
====== ====== ====== ======
Selling, General &
Administrative
------------------------
Local $ 33.7 $ 33.3 1% $ 69.0 $ 66.8 3%
Wireless 13.6 13.3 2% 27.0 25.5 6%
Hardware & Mgd.
Services 4.5 3.3 36% 8.6 8.7 (1%)
Other 3.7 3.2 16% 7.6 6.1 25%
Broadband (1.4) (0.1) n/m (2.1) -- n/m
Corporate and
eliminations 3.3 0.6 n/m 5.4 4.4 23%
------ ------ ------ ------
Total Selling,
General &
Administrative $ 57.4 $ 53.6 7% $115.5 $111.5 4%
====== ====== ====== ======
Depreciation and
Amortization
------------------------
Local $ 26.8 $ 29.8 (10%) $ 53.9 $ 59.7 (10%)
Wireless 20.2 15.2 33% 35.2 30.2 17%
Hardware & Mgd.
Services 0.6 0.2 200% 1.0 0.4 150%
Other 0.5 0.3 67% 0.9 0.7 29%
Broadband -- -- -- -- -- --
Corporate and
eliminations 0.3 0.1 200% 0.4 0.3 33%
------ ------ ------ ------
Total Depreciation
and Amortization $ 48.4 $ 45.6 6% $ 91.4 $ 91.3 0%
====== ====== ====== ======
Restructuring
------------------------
Local $ - $ - -- $ - $ 0.2 n/m
Wireless - - -- - - --
Hardware & Mgd.
Services - - -- - - --
Other - - -- - - --
Broadband - - -- - - --
Corporate and
eliminations -- -- -- -- -- --
------ ------ ------ ------
Total Restructuring $ - $ - -- $ - $ 0.2 n/m
====== ====== ====== ======
Asset Impairments and
Other Charges (Credits)
------------------------
Local $ - $ - -- $ - $ - --
Wireless -- -- -- 23.7 2.4 n/m
Hardware & Mgd.
Services -- -- -- (0.1) (1.1) (91%)
Other -- -- -- -- -- --
Broadband -- (0.2) n/m (0.5) (1.4) (64%)
Corporate and
eliminations -- -- -- -- -- --
------ ------ ------ ------
Total Asset
Impairments and
Other Charges
(Credits) $ - $ (0.2) n/m $ 23.1 $ (0.1) n/m
====== ====== ====== ======
Operating Income
------------------------
Local $ 70.1 $ 70.7 (1%) $140.1 $141.7 (1%)
Wireless (1.5) 6.6 (123%) (21.7) 7.7 n/m
Hardware & Mgd.
Services 4.3 3.3 30% 6.7 6.3 6%
Other 7.1 2.6 173% 13.1 5.0 162%
Broadband 1.4 0.3 n/m 2.6 1.4 86%
Corporate and
eliminations (5.5) (3.1) 77% (9.7) (8.9) 9%
------ ------ ------ ------
Total Operating
Income $ 75.9 $ 80.4 (6%) $131.1 $153.2 (14%)
====== ====== ====== ======
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(in millions - except segment metric information)
June 30, December 31,
2005 2004
------------ ------------
Assets
-------------------------------------------
Cash and Cash Equivalents $22.7 $24.9
Receivables - Net 145.5 139.0
Materials and Supplies 25.7 22.7
Other Current Assets 76.4 66.6
Property, Plant and Equipment - Net 821.5 857.7
Goodwill 40.9 40.9
Other Intangible Assets - Net 35.8 35.8
Noncurrent Deferred Tax Assets 594.8 656.7
Other Noncurrent Assets 128.1 114.4
------------ ------------
Total Assets $1,891.4 $1,958.7
============ ============
Liabilities and Shareowners' Deficit
-------------------------------------------
Current Portion of Long-Term Debt $24.2 $30.1
Accounts Payable 61.4 58.9
Current Portion of Unearned Revenue and
Customer Deposits 39.8 42.5
Accrued Taxes 33.4 45.4
Other Current Liabilities 129.7 120.5
Long-Term Debt, Less Current Portion 2,076.0 2,111.1
Unearned Revenue, Less Current Portion 8.1 8.9
Other Noncurrent Liabilities 143.7 126.6
Minority Interest 34.4 39.2
Shareowners' Deficit (659.3) (624.5)
------------ ------------
Total Liabilities and Shareowners'
Deficit $1,891.4 $1,958.7
============ ============
Other Data:
-------------------------------------------
Common Shares Outstanding at Balance Sheet
Date 245.9 245.4
Net Debt $2,068.2 $2,112.4
Credit Facility Availability $211.5 $377.8
Segment Metric Information (in thousands):
-------------------------------------------
Local Access Lines 946.5 970.1
Complete Connections Subscribers 337.8 336.4
DSL Subscribers 144.6 130.8
Custom Connections Subscribers 144.0 123.4
GSM:
Postpaid Wireless Subscribers 175.9 119.3
Prepaid Wireless Subscribers 115.2 87.5
TDMA:
Postpaid Wireless Subscribers 120.3 187.0
Prepaid Wireless Subscribers 57.8 87.2
------------ ------------
Total Wireless Subscribers 469.2 481.0
============ ============
Consumer Long Distance Lines 420.8 423.5
Business Long Distance Lines 145.5 138.1
------------ ------------
Total Long Distance Lines 566.3 561.6
============ ============
Cincinnati Bell Telephone
Access Line Detail
(Unaudited)
(in thousands)
----------------------------
2003
----------------------------
1Q 2Q 3Q 4Q
----------------------------
Access Lines
-----------------------
In-Territory:
Primary
Residential 624.6 620.3 617.7 613.9
Secondary
Residential 64.3 62.2 60.0 58.1
Business/Other 313.2 310.2 308.0 304.6
----------------------------
Total In-Territory 1,002.1 992.7 985.7 976.6
Out-of-Territory:
Primary
Residential 2.3 2.7 3.1 3.4
Secondary
Residential 0.1 0.1 0.2 0.2
Business/Other 4.7 5.0 5.2 5.6
----------------------------
Total Out-of-Territory 7.1 7.8 8.5 9.2
----------------------------
Total Access Lines 1,009.2 1,000.5 994.2 985.8
============================
Cincinnati Bell Telephone
Access Line Detail
(Unaudited)
(in thousands)
------------------------ ------------
2004 2005
------------------------ ------------
1Q 2Q 3Q 4Q 1Q 2Q
------------------------ ------------
Access Lines
-----------------------
In-Territory:
Primary
Residential 611.8 606.3 601.5 592.7 584.2 573.0
Secondary
Residential 56.0 54.0 52.2 50.5 48.9 47.1
Business/Other 301.5 299.6 298.4 296.6 296.1 294.3
------------------------ ------------
Total In-Territory 969.3 959.9 952.1 939.8 929.2 914.4
Out-of-Territory:
Primary
Residential 4.6 10.9 15.8 18.4 17.7 18.4
Secondary
Residential 0.2 0.6 0.7 0.8 0.8 0.9
Business/Other 6.8 8.0 9.9 11.1 12.2 12.8
------------------------ ------------
Total Out-of-Territory 11.6 19.5 26.4 30.3 30.7 32.1
------------------------ ------------
Total Access Lines 980.9 979.4 978.5 970.1 959.9 946.5
======================== ============
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
June 30, December 31, -------------
(dollars in millions) 2005 2004 $ %
---------- ---------- ------------
Credit Facilities $ 32.0 $ 438.8 $(406.8)(93%)
Cincinnati Bell Telephone
notes 250.0 250.0 - -
7 1/4% Senior Notes due 2013 500.0 500.0 - -
16% Senior Subordinated
Discount Notes due 2009 382.7 375.2 7.5 2%
7 1/4% Senior Notes due 2023 50.0 50.0 - -
8 3/8% Senior Subordinated
Notes due 2014 646.3 543.9 102.4 19%
7% Senior Notes due 2015 252.9 - 252.9 n/m
Capital leases 12.9 15.6 (2.7)(17%)
Other short-term debt 1.0 1.6 (0.6)(38%)
Other long-term debt 0.4 - 0.4 n/m
Unamortized discount, net of
unamortized premiums (28.0) (33.9) 5.9 (17%)
---------- ---------- -------
Total Debt 2,100.2 2,141.2 (41.0) (2%)
Add: Interest Rate Swap
Asset on 8 3/8% Notes due
2014 and 7% Notes due 2015 (9.3) (3.9) (5.4) 138%
Less: Cash and Cash
Equivalents (22.7) (24.9) 2.2 (9%)
---------- ---------- -------
Net Debt (as defined by
the company) $ 2,068.2 $ 2,112.4 $ (44.2) (2%)
========== ========== =======
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions) Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
------- ------ ------- -------
Cash provided by operating activities $86.8 $74.6 $151.2 $144.4
------- ------ ------- -------
Capital expenditures (43.0) (38.1) (71.0) (61.3)
Proceeds from sale of assets - (1.3) - 1.9
Other - 1.5 - 1.5
------- ------ ------- -------
Cash used in investing activities (43.0) (37.9) (71.0) (57.9)
------- ------ ------- -------
Issuance of long-term debt 0.1 - 352.1 -
Increase (decrease) in new credit
facility, net (43.0) - 32.0 -
Repayment of previous credit
facility and other debt (1.2) (36.2) (442.0) (88.1)
Debt issuance costs and consent fees - - (21.0) -
Issuance of common shares - exercise
of stock options 0.8 0.3 1.7 1.8
Preferred stock dividends paid (2.6) (2.6) (5.2) (5.2)
Other - 1.3 - 1.3
------- ------ ------- -------
Cash used in financing activities (45.9) (37.2) (82.4) (90.2)
------- ------ ------- -------
Net decrease in cash and cash
equivalents (2.1) (0.5) (2.2) (3.7)
Cash and cash equivalents at beginning
of period 24.8 22.8 24.9 26.0
------- ------ ------- -------
Cash and cash equivalents at end of
period $22.7 $22.3 $22.7 $22.3
======= ====== ======= =======
Reconciliation of GAAP Cash Flow to
Free Cash Flow as defined by the
company
Net decrease in cash and cash
equivalents $(2.1) $(0.5) $(2.2) $(3.7)
Less adjustments:
Issuance of debt (financing
activities) 0.1 - 384.1 -
Repayment of debt (financing
activities) (44.2) (36.2) (442.0) (88.1)
Proceeds from sale of assets
(purchase price adjustment)
(financing activities) - (1.3) - 1.9
------- ------ ------- -------
Free cash flow (as defined by the
company) $42.0 $37.0 $55.7 $82.5
======= ====== ======= =======
Cash Expenditures for Restructuring $(0.4) $(0.7) $(0.9) $(2.2)
Income Tax Refunds / (Payments) $(1.6) $(1.7) $(1.1) $(1.6)
Reconciliation of EBITDA to Operating Income (GAAP)
Three Months Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
------- ------ ------- ------
Operating Income (GAAP) $ 75.9 $ 80.4 $131.1 $153.2
Add:
Depreciation and Amortization 48.4 45.6 91.4 91.3
Restructuring - - - 0.2
Asset Impairments & Other - (0.2) 23.1 (0.1)
------- ------ ------- ------
48.4 45.4 114.5 91.4
------- ------ ------- ------
EBITDA (Non-GAAP) $124.3 $125.8 $245.6 $244.6
======= ====== ======= ======
Cincinnati Bell Inc.
Normalized Statements of Operations - Reconciliation to Reported
Results
(Unaudited)
(in millions - except per Special
share amounts) Items
----------
Three Months
Three Months Ended
Ended June 30, 2005
June 30, Income Tax Before
2005 (GAAP) Expense Special Items
----------------------------------------
(b)
Revenue $ 315.4 $ - $ 315.4
--------------------------
Costs and Expenses
--------------------------
Cost of Services and
Products 133.7 -- 133.7
Selling, General and
Administrative 57.4 -- 57.4
Depreciation and
Amortization 48.4 -- 48.4
--------- ------- --------
Operating Income 75.9 -- 75.9
Minority Interest Expense
(Income) (0.5) (0.5)
Interest Expense 49.6 -- 49.6
Other Income, Net (0.7) -- (0.7)
--------- ------- --------
Income before Income
Taxes 27.5 -- 27.5
Income Tax Expense 57.3 (44.2) 13.1
--------- ------- --------
Net Income (Loss) (29.8) 44.2 14.4
Preferred Stock Dividends 2.6 - 2.6
--------- ------- --------
Net Income (Loss)
Applicable to Common
Shareowners $ (32.4) $ 44.2 $ 11.8
========= ======= ========
Weighted Average Diluted
Shares 245.8 251.6(a) 251.6(a)
Diluted Earnings (Loss)
Per Common Share $ (0.13) $ 0.18 $ 0.05
========= ======= ========
(a) Shares have been adjusted for dilutive common stock equivalents
that result after excluding the income tax adjustment from
earnings.
Normalized results have been adjusted for the following:
(b) Write-down of certain state deferred tax assets due to change in
state tax laws.
Cincinnati Bell Inc.
Normalized Statements of Operations - Reconciliation to Reported
Results
(Unaudited)
(in millions - except per share amounts)
Special Items
----------------------------------
Six
Six Months
Months Ended
Ended Asset June 30,
June Impair- 2005
30, Income Debt ments & Before
2005 Tax Extinguish- Other Special
(GAAP) Expense ment Charges Items
-----------------------------------------------------
(b) (c) (d)
Revenue $604.0 $ - $ - $ - 604.0
--------------
Costs and
Expenses
--------------
Cost of
Services
and
Products 242.9 -- -- -- 242.9
Selling,
General and
Administra-
tive 115.5 -- -- -- 115.5
Depreciation
and
Amortiza-
tion 91.4 -- -- -- 91.4
Asset
Impairments
and Other
Charges 23.1 -- -- (23.1) --
------ ------- ----------- ------- -------
Operating
Income 131.1 -- -- 23.1 154.2
Minority
Interest
Expense
(Income) (4.8) -- -- 4.6 (0.2)
Interest
Expense 100.1 -- -- -- 100.1
Loss on
Extinquish-
ment of Debt 7.9 -- (7.9) -- --
Other Income,
Net (0.2) -- -- -- (0.2)
------ ------- ----------- ------- -------
Income
before
Income
Taxes 28.1 -- 7.9 18.5 54.5
Income Tax
Expense 61.1 (47.6) 3.2 7.4 24.1
------ ------- ----------- ------- -------
Net Income
(Loss) (33.0) 47.6 4.7 11.1 30.4
Preferred
Stock
Dividends 5.2 -- -- -- 5.2
------ ------- ----------- ------- -------
Net Income
(Loss)
Applicable to
Common
Shareowners $(38.2) $ 47.6 $ 4.7 $ 11.1 $ 25.2
====== ======= =========== ======= =======
Weighted
Average
Diluted
Shares 245.7 251.1(a) 251.1(a) 251.1(a) 251.1(a)
Diluted
Earnings
(Loss) Per
Common Share $(0.16) $ 0.19 $ 0.02 $ 0.04 $ 0.10
====== ======= =========== ======= =======
(a) Shares have been adjusted for dilutive common stock equivalents
that result after excluding the adjustments from earnings.
Normalized results have been adjusted for the following:
(b) Write-down of certain state deferred tax assets due to change in
state tax rates and state tax laws;
(c) Non-cash loss of $7.9 million due to the extinguishment of the
company's prior credit facility; and
(d) Asset impairments and other charges of $23.1 million,
substantially all of which related to a write-down of the
company's TDMA network assets.
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