Cincinnati Bell Inc. Reports Financial Results for the First Quarter 2004.Business Editors CINCINNATI--(BUSINESS WIRE)--April 28, 2004 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 ): -- Reduces net debt(a) by $44 million -- Adds 12,000 wireless subscribers -- Adds 11,000 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, its highest quarter ever -- Confirms guidance for 2004 Cincinnati Bell Inc. (NYSE:CBB) today announced its financial results for the first quarter 2004. Summary In the first quarter, the company posted significant progress toward its primary goal of reducing net debt. The company also had strong net activations of wireless and record net activations of DSL. As expected, the cost of these acquisitions had the effect of reducing 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. versus the prior year quarter. For the quarter, the company reported revenue of $302 million, operating income of $73 million, and net income of $11 million, or $0.03 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. In addition, during the first quarter, the company reduced net debt by $44 million, to $2.2 billion, or 24 percent less than the end of the first quarter of 2003, and produced $45 million of cash flow(b). Operational Highlights -- The company posted record Digital Subscriber Line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (DSL) net additions of 11,000 in the quarter, up 56 percent from the prior quarter and 30 percent from the prior year. DSL subscribers now stand at 110,000, up 27,000, or 33 percent, from the prior year. -- Sequential access In computer science, sequential access means that a group of elements (e.g. data in a memory array or a disk file or on a tape) is accessed in a predetermined, ordered sequence. Sequential access is sometimes the only way of accessing the data, for example if it is on a tape. line decline slowed to 5,000 during the quarter versus the 8,000 line decline in the fourth quarter of 2003. Access lines declined 2.8 percent versus the prior year. The increase in DSL lines of 27,000 compared to the same quarter last year nearly offset the effect of 28,000 fewer access lines over the same period. -- During the quarter, the company continued to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution its plan of accelerating wireless acquisitions by adding 12,000 subscribers. Post-paid Adv. 1. post-paid - having the postage paid by the sender; "I will send it post-paid" post-free post-paid adj → porte pagado post-paid adj (Brit churn churn: see butter. was 1.8 percent, essentially flat to the prior quarter and prior year, as the company continued to see little impact from Wireless Local Number Portability "LNP" redirects here. For the airport in Virginia with that IATA code, see Lonesome Pine Airport. For the compound InP, see Indium phosphide. Local number portability, (LNP) for fixed lines, and full mobile number portability (WLNP (Wireless Local Number Portability) The capability of keeping the same cellphone number when switching carriers. See NP and LNP. ). -- During the first quarter, the company added 22,000 net subscribers to its Custom Connections "super-bundle" which offers local, long distance, wireless and DSL. This activation activation /ac·ti·va·tion/ (ak?ti-va´shun) 1. the act or process of rendering active. 2. the transformation of a proenzyme into an active enzyme by the action of a kinase or another enzyme. 3. performance, our best quarter ever, was 70 percent better than the fourth quarter of 2003 and 60 percent better than the first quarter of 2003. Fifteen percent of the company's consumer households are now super-bundle customers. This helped to increase consumer revenue per household 3 percent versus the first quarter of 2003, to a total of $75 per month. Excluding results of operations from the Broadband Services See broadband and broadband service provider. segment, first quarter revenue of $302 million was down 3 percent and operating income of $72 million was down 20 percent, or $18 million, both versus the same quarter in the prior year. Operating income declined primarily due to increases in wireless 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. acquisition cost (up $7 million) and depreciation and other charges (up $9 million) with the remainder due to revenue declines. Revenue declined primarily in traditional voice service and business equipment sales, partially offset by an increase in DSL revenue. In the quarter, capital expenditures were $23 million, or 8 percent of revenue. The company reaffirms its capital expenditure and other guidance for 2004 as provided in its fourth quarter and full-year 2003 earnings release. "In the first quarter, Cincinnati Bell executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. against its strategy of de-levering, reducing net debt by $44 million. We also demonstrated success in protecting and growing our core franchise through 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. of wireless and DSL. Our sales performance was driven by growth in the 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. , as evidenced by 22,000 net additions to our Custom Connections "super-bundle," 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 of Cincinnati Bell Inc. "Over half of our wireless and DSL activations in the quarter came as part of the bundle, which will reduce churn and maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. customer value going forward." New Segment Reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four The company has formed a new business unit focused on hardware and managed services An umbrella term for third-party monitoring and maintaining of computers, networks and software. The actual equipment may be inhouse or at the third-party's facilities, but the "managed" implies an ongoing effort; for example, making sure the equipment is running at a certain quality sales to business customers. As such, the company is reporting the results of this business unit in a new segment, called Hardware and Managed Services. The segment includes the company's Cincinnati Bell Technology Solutions (CBTS CBTS Computer Based Training System CBTS Computer Based Training Squadron CBTS Can't Be Too Sure ) business. CBTS now includes, in addition to its traditional data equipment and managed services businesses, the company's business telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. equipment sales and operations, which were formerly reported as part of the Local segment. A nine quarter recast re·cast tr.v. re·cast, re·cast·ing, re·casts 1. To mold again: recast a bell. 2. of financial results according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the new segmentation can be found in the financial statements distributed with this release. Local Communications Services The company's Local segment, which includes the operations of the company's local-exchange subsidiary, 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. ), produced revenue of $191 million for the first quarter, down 2 percent from the same quarter a year ago, while operating income was $71 million, up 10 percent from the prior quarter and up 4 percent from the same quarter last year. Operating income increased versus the prior year quarter as reduction in bad debt expense, employee costs and depreciation more than offset revenue declines. Capital investment was $19 million, or 10 percent of revenue, during the quarter. Wireless Services CBW cbw - Crypt Breakers Workbench reported revenue of $64 million in the first quarter, flat to the prior year quarter and up 2 percent compared to the fourth quarter of 2003. Operating income for the quarter was $1 million, an $18 million decline versus the first quarter of 2003. Operating income declined primarily due to a $9 million increase in depreciation and other charges and a $7 million increase in subscriber acquisition cost. For the quarter, postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. 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. (c)) was $53, a 4 percent decline, while prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. ARPU was $21, a 1 percent
increase, both versus the first quarter of 2003. Postpaid ARPU declined
versus the prior year quarter due to customer migration to more
aggressive plans offered in the third and fourth quarters of 2003 in
anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of WLNP. Postpaid cost per gross addition (CPGA (Ceramic PGA) See PGA. CPGA - Ceramic Pin Grid Array (d)) was $412, while prepaid CPGA was $89, 17 percent and 79 percent increases, respectively, over the prior year quarter. CPGA increased primarily due to increased 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. subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. related to 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. migrations. Capital investment was $3 million in the quarter, or 5% of revenue. Hardware and Managed Services The segment reported first quarter 2004 revenue of $34 million, down 9 percent from the prior year quarter, due to reduced sales opportunities following heavy equipment revenue in the fourth quarter of 2003, as well as lower collocation collocation - co-location and managed services revenue. Operating income in the segment was $3 million after a net of a gain of $1 million from the sale of substantially all of the assets of CBTS outside the 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. market. Other Communications Services Other Communications Services, which includes the company's Cincinnati-area retail voice long distance and public payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt operations, reported revenue of $19 million in the first quarter, down 6 percent from the same quarter a year ago. The segment's Cincinnati Bell Any Distance division reported revenue of $15 million for the quarter, down 8 percent due to a decline in usage. The Public Communications division reported revenue of $3 million, up 9 percent. The segment produced $2 million in operating income for the quarter, up from $1 million in the prior year quarter due to increased margin on long distance minutes of use. Estimated Cincinnati market share of CBT access lines for Cincinnati Bell Any Distance, the company's retail voice long distance offering, was 72 percent in the consumer market and 46 percent in the business market at the end of the first quarter, both improvements of 2 points versus the prior year quarter. Broadband Services Broadband Services produced no revenue in the quarter, due to the sale of substantially all of the company's broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). assets in 2003. There are no longer any meaningful operations in Broadband Services. The remaining activity relates to the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of remaining liabilities associated with the broadband sale. Operating income for the quarter was $1 million, due to tax refunds Tax refund Money back from the government when too much tax has been paid or withheld from a salary. and positive liability adjustments which offset continuing legal expenses. "Cincinnati Bell executed on every element of its strategy by reducing net debt while achieving outstanding activations of wireless and DSL subscribers," 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. , Cincinnati Bell Inc.'s Chief Financial Officer. "We continue to improve our balance sheet while making investments in the protection and growth of our core franchise." Use of Non-GAAP Financial Measures (a) 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 sum 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 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. , in addition to BRCOM preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. (as applicable), offset by cash and cash equivalents. A detailed reconciliation of the company's net debt to comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measures is given in the attached financial information and is posted on the company's website at www.cincinnatibell.com, under the Investor Relations Investor relations The process by which the corporation communicates with its investors. tab. (b) 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 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 restricted cash in operating activities, 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 in financing activities, short-term borrowings (repayments) in financing activities and 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. 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 cash flow as defined by other companies. A detailed reconciliation of the company's cash flow to comparable GAAP financial measures is given in the attached financial information and is posted on the company's website at www.cincinnatibell.com, under the Investor Relations tab. These non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. They are presented because Cincinnati Bell Inc. management uses this information when evaluating the company's results of operations and cash flow and believes that this information provides the users of the financial statements with additional and useful comparisons of the company's current results of operations and cash flows with past and future periods. (c) The company has presented certain information regarding average revenue per user (ARPU) because the company believes ARPU provides a useful measure of the operational performance of the wireless business. ARPU is calculated by dividing service revenue by our average subscriber base for the respective period. For a given period, average subscribers is calculated by adding subscribers at the beginning of the period to subscribers at the end of the period and dividing the sum by two. (d) The company has presented certain information regarding cost per gross addition (CPGA) because the company believes CPGA provides a useful measure of the initial expense to add a wireless subscriber. CPGA is calculated by adding incentives for handsets sold (costs have historically exceeded the related revenue) to selling expenses (which excludes bad debt) and dividing the sum by total gross subscriber acquisitions during the relevant period. Conference Call/Webcast Cincinnati Bell Inc. will host a conference call discussing its first quarter 2004 results on Wednesday Wednesday: see week. , April 28, 2004 at 9:00 am EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , which will be web-cast on the company's website at www.cincinnatibell.com. The dial-in number for the conference call is 1-877-641-0086. International callers may dial 678-460-1867. A taped replay of the conference call will be available one hour after the conclusion of the teleconference until 5 p.m. (EDT) on May 12, 2004. For U.S. callers, the replay will be available at 866-453-6660. For international callers, the replay will be available at 678-460-1866. The replay reference number is 147506. 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. The company was recently ranked number one in customer satisfaction, for the third year in a row, by J.D. Power and Associates for residential long distance among mainstream users. Cincinnati Bell provides a wide range of telecommunications 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). . Cincinnati Bell is headquartered 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. . For more information, visit www.cincinnatibell.com. 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 press 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, any statements, projections or estimates that include or reference the words "believe," "anticipates," "plans," "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 are not limited to, Cincinnati Bell's ability to maintain its market position in communications services, general economic trends affecting the purchase 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. and Cincinnati Bell's 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 Cincinnati Bell's annual 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, Quarterly Form 10-Q Form 10-Q See 10-Q. reports, Forms 8-K, and Forms S-4 and S-3 Registration Statements. The forward-looking statements included in this press release represent the company's estimates as of April 28, 2004. The company anticipates that subsequent events and developments will cause its estimates to change.
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(in millions - except per share amounts)
For the Three Months
Ended March 31, %
2004 2003 Change
---------- --------- ------
Revenue $302.4 $480.7 (37%)
-------
Costs & Expenses
----------------
Cost of Services and Products 125.7 219.0 (43%)
Selling, General & Administrative 57.9 120.7 (52%)
Depreciation and Amortization 45.7 41.5 10%
Restructuring 0.2 -- n/m
Asset Impairments and Other Charges
(Credits) 0.1 0.3 (67%)
---------- ---------
Operating Income 72.8 99.2 (27%)
Minority Interest Expense 0.1 14.1 (99%)
Other (Income) Expense, Net -- (0.1) n/m
Interest Expense and Other Financing Costs 50.8 45.3 12%
---------- ---------
Income from Continuing Operations before
Income Taxes and Cumulative Effect of
Change in Accounting Principle 21.9 39.9 (45%)
Income Tax Expense 11.0 2.0 n/m
---------- ---------
Income from Continuing Operations before
Cumulative Effect of Change in
Accounting Principle 10.9 37.9 (71%)
Cumulative Effect of Change in Accounting
Principle, Net of Taxes -- 85.9 n/m
---------- ---------
Net Income 10.9 123.8 (91%)
Preferred Stock Dividends 2.6 2.6 -
---------- ---------
Net Income Applicable to Common
Shareowners $8.3 $121.2 (93%)
========== =========
Basic Earnings Per Common Share
-------------------------------
Income from Continuing Operations before
Cumulative Effect of Change in Accounting
Principle $0.03 $0.16
Cumulative Effect of Change in Accounting
Principle, Net of Taxes -- 0.39
---------- ---------
Net Earnings Per Common Share $0.03 $0.55
========== =========
Diluted Earnings Per Common Share
---------------------------------
Income from Continuing Operations before
Cumulative Effect of Change in Accounting
Principle $0.03 $0.16
Cumulative Effect of Change in Accounting
Principle, Net of Taxes -- 0.39
---------- ---------
Net Earnings Per Common Share $0.03 $0.55
========== =========
Weighted Average Common Shares Outstanding
------------------------------------------
- Basic 245.0 218.9
- Diluted 253.6 219.9
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions) For the Three Months
Ended March 31, %
2004 2003 Change
---------- --------- ------
Revenue
-------
Local $190.9 $194.7 (2%)
Wireless 64.0 63.9 -
Hardware & Mgd. Services 34.4 37.9 (9%)
Other 18.8 20.1 (6%)
Broadband -- 185.4 n/m
Corporate and eliminations (5.7) (21.3) (73%)
---------- ---------
Total Revenue $302.4 $480.7 (37%)
========== =========
Cost of Services and Products
-----------------------------
Local $56.3 $60.5 (7%)
Wireless 33.3 25.7 30%
Hardware & Mgd. Services 26.9 28.0 (4%)
Other 13.1 14.7 (11%)
Broadband -- 106.6 n/m
Corporate and eliminations (3.9) (16.5) (76%)
---------- ---------
Total Cost of Services and Products $125.7 $219.0 (43%)
========== =========
Selling, General & Administrative
---------------------------------
Local $33.4 $34.5 (3%)
Wireless 12.2 11.2 9%
Hardware & Mgd. Services 5.4 5.9 (8%)
Other 3.0 3.9 (23%)
Broadband 0.1 67.7 (100%)
Corporate and eliminations 3.8 (2.5) n/m
---------- ---------
Total Selling, General & Administrative $57.9 $120.7 (52%)
========== =========
Depreciation and Amortization
-----------------------------
Local $29.9 $31.2 (4%)
Wireless 15.0 7.7 95%
Hardware & Mgd. Services 0.2 0.1 100%
Other 0.4 0.5 (20%)
Broadband -- 1.9 n/m
Corporate and eliminations 0.2 0.1 100%
---------- ---------
Total Depreciation and Amortization $45.7 $41.5 10%
========== =========
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 $- $0.3 n/m
Wireless 2.4 - n/m
Hardware & Mgd. Services (1.1) - n/m
Other - - --
Broadband (1.3) - n/m
Corporate and eliminations 0.1 - n/m
---------- ---------
Total Asset Impairments and Other
Charges (Credits) $0.1 $0.3 (67%)
========== =========
Operating Income
----------------
Local $71.1 $68.2 4%
Wireless 1.1 19.3 (94%)
Hardware & Mgd. Services 3.0 3.9 (23%)
Other 2.3 1.0 130%
Broadband 1.2 9.2 (87%)
Corporate and eliminations (5.9) (2.4) 146%
---------- ---------
Total Operating Income $72.8 $99.2 (27%)
========== =========
Note: Beginning with the first quarter of 2004, the company is
reporting its results in new segments based upon organizational
changes made to better serve its customers. The company has formed a
new segment, called Hardware and Managed Services, which contains the
company's Cincinnati Bell Technology Solutions (CBTS) business, which
was formerly reported in the Broadband segment. CBTS now includes, in
addition to its traditional data equipment and managed services
businesses, the company's business telecommunications equipment sales
and operations, which were formerly reported as part of the Local
segment. The above results of the Local segment, Hardware and Managed
Services segment and Broadband segment have been recast in all periods
presented to conform with the new segment alignment.
Cincinnati Bell Inc.
9 Quarter Segment Information
(Unaudited)
(dollars in millions)
----------------------------------
2002
----------------------------------
1Q 2Q 3Q 4Q
------- ------- ------- ----------
Revenue
-------
Local $196.8 $194.1 $192.9 $197.9
Wireless 63.5 69.4 68.9 65.4
Hardware & Mgd. Services 58.7 53.1 54.6 49.0
Other 20.1 21.1 20.5 21.1
Broadband 223.0 238.0 253.7 196.7
Corporate and eliminations (19.3) (19.5) (20.3) (20.8)
------- ------- ------- ----------
Total Revenue $542.8 $556.2 $570.3 $509.3
======= ======= ======= ==========
Cost of Services and Products
-----------------------------
Local $61.1 $53.7 $55.4 $57.8
Wireless 28.7 30.0 27.9 32.8
Hardware & Mgd. Services 43.7 44.3 45.1 36.9
Other 16.2 15.3 15.5 16.5
Broadband 132.6 143.1 125.1 118.8
Corporate and eliminations (16.2) (16.0) (16.1) (16.5)
------- ------- ------- ----------
Total Cost of Services and
Products $266.1 $270.4 $252.9 $246.3
======= ======= ======= ==========
Selling, General & Administrative
---------------------------------
Local $35.5 $32.6 $32.0 $35.1
Wireless 11.5 13.3 10.9 11.6
Hardware & Mgd. Services 7.3 6.9 7.6 6.2
Other 4.0 3.9 3.7 4.2
Broadband 72.1 73.1 72.3 67.1
Corporate and eliminations (1.3) (1.5) (3.7) (2.2)
------- ------- ------- ----------
Total Selling, General &
Administrative $129.1 $128.3 $122.8 $122.0
======= ======= ======= ==========
Depreciation and Amortization
-----------------------------
Local $35.8 $36.0 $38.0 $36.8
Wireless 7.5 7.7 8.2 8.0
Hardware & Mgd. Services 1.5 1.6 1.7 1.7
Other 0.4 0.4 0.5 0.5
Broadband 76.3 76.4 78.3 78.4
Corporate and eliminations 0.1 0.1 0.1 0.2
------- ------- ------- ----------
Total Depreciation and
Amortization $121.6 $122.2 $126.8 $125.6
======= ======= ======= ==========
Restructuring Charges (Credits)
-------------------------------
Local $0.4 $- $(2.0) $1.1
Wireless -- -- -- --
Hardware & Mgd. Services -- -- -- 0.1
Other -- -- -- --
Broadband 15.9 -- 5.0 11.5
Corporate and eliminations 0.2 -- 4.1 0.8
------- ------- ------- ----------
Total Restructuring $16.5 $- $7.1 $13.5
======= ======= ======= ==========
Asset Impairments and Other
Charges (Credits)
----------------------------
Local $- $- $- $0.3
Wireless -- -- -- --
Hardware & Mgd. Services -- -- -- 19.4
Other -- -- -- --
Broadband -- -- 0.6 2,180.6
Corporate and eliminations -- -- -- --
------- ------- ------- ----------
Total Asset Impairments and Other
Charges (Credits) $- $- $0.6 $2,200.3
======= ======= ======= ==========
Gain on Sale of Broadband Assets
--------------------------------
Local $- $- $- $-
Wireless -- -- -- --
Hardware & Mgd. Services -- -- -- --
Other -- -- -- --
Broadband -- -- -- --
Corporate and eliminations -- -- -- --
------- ------- ------- ----------
Total Gain on Sale of Broadband
Assets $- $- $- $-
======= ======= ======= ==========
Operating Income
----------------
Local $64.0 $71.8 $69.5 $66.8
Wireless 15.8 18.4 21.9 13.0
Hardware & Mgd. Services 6.2 0.3 0.2 (15.3)
Other (0.5) 1.5 0.8 (0.1)
Broadband (73.9) (54.6) (27.6) (2,259.7)
Corporate and eliminations (2.1) (2.1) (4.7) (3.1)
------- ------- ------- ----------
Total Operating Income $9.5 $35.3 $60.1 $(2,198.4)
======= ======= ======= ==========
Cincinnati Bell Inc.
9 Quarter Segment Information
(Unaudited)
(dollars in millions)
-------------------------------- -------
2003 2004
-------------------------------- -------
1Q 2Q 3Q 4Q 1Q
------- -------- ------- ------- -------
Revenue
-------
Local $194.7 $194.5 $193.6 $191.8 $190.9
Wireless 63.9 67.9 65.1 62.6 64.0
Hardware & Mgd. Services 37.9 39.6 41.8 43.5 34.4
Other 20.1 20.8 20.8 19.3 18.8
Broadband 185.4 147.0 -- -- --
Corporate and eliminations (21.3) (19.2) (6.0) (6.0) (5.7)
------- -------- ------- ------- -------
Total Revenue $480.7 $450.6 $315.3 $311.2 $302.4
======= ======== ======= ======= =======
Cost of Services and Products
-----------------------------
Local $60.5 $58.5 $56.4 $57.0 $56.3
Wireless 25.7 25.4 26.9 32.4 33.3
Hardware & Mgd. Services 28.0 30.2 31.4 32.1 26.9
Other 14.7 13.9 12.5 13.0 13.1
Broadband 106.6 96.7 (0.5) -- --
Corporate and eliminations (16.5) (14.9) (4.2) (4.1) (3.9)
------- -------- ------- ------- -------
Total Cost of Services and
Products $219.0 $209.8 $122.5 $130.4 $125.7
======= ======== ======= ======= =======
Selling, General & Administrative
---------------------------------
Local $34.5 $31.7 $29.3 $33.3 $33.4
Wireless 11.2 12.5 11.3 15.1 12.2
Hardware & Mgd. Services 5.9 6.0 5.6 6.7 5.4
Other 3.9 3.7 4.7 2.4 3.0
Broadband 67.7 49.6 6.1 1.7 0.1
Corporate and eliminations (2.5) 6.0 3.7 2.9 3.8
------- -------- ------- ------- -------
Total Selling, General &
Administrative $120.7 $109.5 $60.7 $62.1 $57.9
======= ======== ======= ======= =======
Depreciation and Amortization
-----------------------------
Local $31.2 $31.1 $31.5 $31.9 $29.9
Wireless 7.7 7.7 7.5 15.9 15.0
Hardware & Mgd. Services 0.1 0.2 0.1 0.2 0.2
Other 0.5 0.6 0.5 0.6 0.4
Broadband 1.9 -- -- -- --
Corporate and eliminations 0.1 0.1 0.2 0.1 0.2
------- -------- ------- ------- -------
Total Depreciation and
Amortization $41.5 $39.7 $39.8 $48.7 $45.7
======= ======== ======= ======= =======
Restructuring Charges (Credits)
-------------------------------
Local $- $- $- $4.5 $0.2
Wireless -- -- -- -- --
Hardware & Mgd. Services -- -- -- 0.1 --
Other -- -- -- -- --
Broadband -- (3.4) -- (7.6) --
Corporate and eliminations -- -- -- 3.8 --
------- -------- ------- ------- -------
Total Restructuring $- $(3.4) $- $0.8 $0.2
======= ======== ======= ======= =======
Asset Impairments and
Other Charges (Credits)
------------------------
Local $0.3 $- $- $0.3 $-
Wireless -- -- -- -- 2.4
Hardware & Mgd. Services -- (1.2) -- -- (1.1)
Other -- -- -- 3.5 --
Broadband -- 0.1 -- 5.7 (1.3)
Corporate and eliminations -- -- -- -- 0.1
------- -------- ------- ------- -------
Total Asset Impairments
and Other Charges
(Credits) $0.3 $(1.1) $- $9.5 $0.1
======= ======== ======= ======= =======
Gain on Sale of Broadband
Assets
-------------------------
Local $- $- $- $- $-
Wireless -- -- -- -- --
Hardware & Mgd. Services -- -- -- -- --
Other -- -- -- -- --
Broadband -- (299.0) (37.3) (0.4) --
Corporate and eliminations -- -- -- -- --
------- -------- ------- ------- -------
Total Gain on Sale of
Broadband Assets $- $(299.0) $(37.3) $(0.4) $-
======= ======== ======= ======= =======
Operating Income
----------------
Local $68.2 $73.2 $76.4 $64.8 $71.1
Wireless 19.3 22.3 19.4 (0.8) 1.1
Hardware & Mgd. Services 3.9 4.4 4.7 4.4 3.0
Other 1.0 2.6 3.1 (0.2) 2.3
Broadband 9.2 303.0 31.7 0.6 1.2
Corporate and eliminations (2.4) (10.4) (5.7) (8.7) (5.9)
------- -------- ------- ------- -------
Total Operating Income $99.2 $395.1 $129.6 $60.1 $72.8
======= ======== ======= ======= =======
Note: Beginning with the first quarter of 2004, the company is
reporting its results in new segments based upon organizational
changes made to better serve its customers. The company has formed a
new segment, called Hardware and Managed Services, which contains the
company's Cincinnati Bell Technology Solutions (CBTS) business, which
was formerly reported in the Broadband segment. CBTS now includes, in
addition to its traditional data equipment and managed services
businesses, the company's business telecommunications equipment sales
and operations, which were formerly reported as part of the Local
segment. The above results of the Local segment, Hardware and Managed
Services segment and Broadband segment have been recast in all periods
presented to conform with the new segment alignment.
Cincinnati Bell Telephone
9 Quarter Revenue Detail
(Unaudited)
(dollars in millions)
-------------------------------
2002
-------------------------------
1Q 2Q 3Q 4Q
------- ------- ------- -------
Revenue
-------
Data $46.6 $48.3 $47.5 $48.6
Voice 136.7 135.8 136.2 139.9
Other 13.5 10.0 9.2 9.4
------- ------- ------- -------
Total Revenue $196.8 $194.1 $192.9 $197.9
======= ======= ======= =======
Cincinnati Bell Telephone
9 Quarter Revenue Detail
(Unaudited)
(dollars in millions)
------------------------------- --------
2003 2004
------------------------------- --------
1Q 2Q 3Q 4Q 1Q
------- ------- ------- ------- --------
Revenue
-------
Data $48.6 $49.8 $48.3 $49.6 $50.3
Voice 135.8 134.4 133.6 132.7 130.5
Other 10.3 10.3 11.7 9.5 10.1
------- ------- ------- ------- --------
Total Revenue $194.7 $194.5 $193.6 $191.8 $190.9
======= ======= ======= ======= ========
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(in millions - except debt covenants and segment metric information)
March 31, December 31,
2004 2003
---------- -------------
Assets
------
Cash and Cash Equivalents $22.8 $26.0
Receivables - Net 120.6 140.5
Materials and Supplies 35.7 33.6
Other Current Assets 65.2 59.3
Property, Plant and Equipment - Net 875.7 898.8
Goodwill 40.9 40.9
Other Intangible Assets - Net 44.4 47.2
Noncurrent Deferred Tax Assets 689.2 696.9
Other Noncurrent Assets 130.4 130.3
---------- -------------
Total Assets $2,024.9 $2,073.5
========== =============
Liabilities and Shareowners' Deficit
------------------------------------
Current Portion of Long-Term Debt $55.7 $13.3
Current Portion of Unearned Revenue and
Customer Deposits 40.2 41.5
Accounts Payable 52.2 64.5
Accrued Taxes 33.8 43.7
Other Current Liabilities 149.4 143.8
Long-Term Debt, Less Current Portion 2,184.5 2,274.5
Unearned Revenue, Less Current Portion 11.1 11.9
Other Noncurrent Liabilities 126.9 120.0
Minority Interest 39.8 39.7
Shareowners' Deficit (668.7) (679.4)
---------- -------------
Total Liabilities and Shareowners'
Deficit $2,024.9 $2,073.5
========== =============
Other Data:
-----------
Common Shares Outstanding at Balance Sheet
Date 245.2 244.6
Net Debt $2,217.4 $2,261.8
Credit Facility Availability $351.4 $299.5
Debt Covenants:
---------------
Debt to EBITDA Ratio - Calculated 4.78 4.70
Debt to EBITDA Ratio - Required 6.10 6.20
Senior Secured Debt to EBITDA Ratio - Calculated 1.81 1.87
Senior Secured Debt to EBITDA Ratio - Required 3.85 4.00
Interest Coverage Ratio - Calculated 3.10 3.56
Interest Coverage Ratio - Required 2.29 2.50
Year-to-date Capital Expenditures -
Restricted Group Actual 23.1 122.2
Maximum Annual Capital Expenditures -
Restricted Group Allowed 137.8 146.0
Segment Metric Information (in thousands):
------------------------------------------
Local Access Lines 980.9 985.8
Complete Connections Subscribers 323.9 312.5
DSL Subscribers 110.4 99.5
Custom Connections Subscribers 93.7 71.4
Postpaid Wireless Subscribers 318.9 311.9
Prepaid Wireless Subscribers 167.1 162.5
---------- -------------
Total Wireless Subscribers 486.0 474.4
========== =============
Consumer Long Distance Lines 414.5 414.4
Business Long Distance Lines 124.3 124.6
---------- -------------
Total Long Distance Lines 538.8 539.0
========== =============
Cincinnati Bell Inc.
Consolidated Revenue and Operating Income Excluding Broadband
(Unaudited)
(dollars in millions) For the Three Months
Ended March 31, %
2004 2003 Change
---------- --------- ------
Reconciliation of Consolidated Revenue to
Consolidated Revenue Excluding Broadband
Revenue $302.4 $480.7 (37%)
Less adjustments:
Broadband Revenue - 185.4 (100%)
Broadband Intercompany Activity - (16.7) (100%)
---------- ---------
Consolidated Revenue Excluding Broadband $302.4 $312.0 (3%)
========== =========
Reconciliation of Consolidated Operating
Income to Consolidated Operating Income
Excluding Broadband
Operating Income $72.8 $99.2 (27%)
Less adjustments:
Broadband Operating Income 1.2 9.2 (87%)
---------- ---------
Consolidated Operating Income Excluding
Broadband $71.6 $90.0 (20%)
========== =========
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
March 31, December 31, -------------
(dollars in millions) 2004 2003 $ %
--------- ------------ ------- -----
Credit Facilities $556.4 $608.4 $(52.0) (9%)
Cincinnati Bell Telephone notes 250.0 250.0 - -
7 1/4% Senior notes due 2013 of
Cincinnati Bell Inc. 500.0 500.0 - -
16% Senior subordinated notes of
Cincinnati Bell Inc. 364.2 360.6 3.6 1%
7 1/4% Senior notes due 2023 of
Cincinnati Bell Inc. 50.0 50.0 - -
8 3/8% Senior notes due 2014 of
Cincinnati Bell Inc. 540.0 540.0 - -
Capital leases 18.1 18.2 (0.1) (1%)
Other short-term debt 1.6 2.7 (1.1) (41%)
Unamortized discount (40.1) (42.1) 2.0 (5%)
--------- ------------ -------
Total Debt 2,240.2 2,287.8 (47.6) (2%)
Less: Cash and Cash Equivalents 22.8 26.0 (3.2) (12%)
--------- ------------ -------
Net Debt (as defined by the
company) $2,217.4 $2,261.8 $(44.4) (2%)
========= ============ =======
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions) For the Three Months
Ended March 31,
Consolidated Cash Flow 2004 2003
---------- ---------
Cash provided by operating activities $69.8 $32.7
---------- ---------
Capital expenditures (23.3) (22.0)
Proceeds from sale of investments - 3.8
Proceeds from sale of assets 3.2 -
---------- ---------
Cash used in investing activities (20.1) (18.2)
---------- ---------
Issuance of long-term debt - 380.0
Repayment of long-term debt (52.1) (356.1)
Short-term borrowings (repayments), net 0.3 (1.0)
Debt issuance costs - (44.6)
Issuance of common shares - exercise of stock
options 1.5 1.3
Preferred stock dividends paid (2.6) (2.6)
---------- ---------
Cash used in financing activities (52.9) (23.0)
---------- ---------
Net decrease in cash and cash equivalents (3.2) (8.5)
Cash and cash equivalents at beginning of period 26.0 44.9
---------- ---------
Cash and cash equivalents at end of period $22.8 $36.4
========== =========
Reconciliation of GAAP Cash Flow to Cash Flow as
defined by the company
Net decrease in cash and cash equivalents $(3.2) $(8.5)
Less adjustments:
Issuance of long-term debt (financing activities) - 380.0
Repayment of long-term debt (financing activities) (52.1) (356.1)
Short-term borrowings (repayments), net
(financing activities) 0.3 (1.0)
Proceeds from sale of assets (investing
activities) 3.2 -
---------- ---------
Cash flow (as defined by the company) $45.4 $(31.4)
========== =========
Cash Expenditures for Restructuring $(3.6) $(5.7)
Income Tax Refunds / (Payments) $- $(0.5)
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