Cincinnati Bell Inc. Reports Financial Results for the Fourth Quarter and Full Year 2003.Business Editors CINCINNATI--(BUSINESS WIRE)--March 22, 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(1) by $49 million in the quarter -- 4Q03 wireless net adds up 154 percent -- 4Q03 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 net adds up 74 percent Cincinnati Bell Inc. (NYSE:CBB) today announced its financial results for the fourth quarter and full year 2003 and confirmed the effects of the previously announced restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior financial statements. Summary In the fourth 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 primary strategy of reducing net debt. The company also achieved outstanding net activations of wireless and DSL as compared to the fourth quarter of 2002. The cost of these acquisitions, plus increased depreciation in the wireless business as well as revenue declines in the local and wireless segments, contributed to a decline in 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. when compared to the fourth quarter of 2002. For the quarter, the company reported revenue of $311 million, operating income of $60 million, and net income of $843 million, or $3.17 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 the quarter, the company reversed a previously recorded deferred tax asset valuation allowance. As a result, the company recorded a non-cash income tax benefit of $823 million, which increased diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of in the fourth quarter by $3.08. In addition, during the fourth quarter, the company reduced net debt by $49 million. For the full year, the company posted revenue of $1,558 million, operating income of $684 million, and net income of $1,332 million, or $5.36 per diluted share. In 2003, the company reduced net debt by $666 million, or 23 percent. Capital expenditures for the year were $126 million, or 8 percent of total revenue. Operational Highlights -- Strong demand for the company's 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) services drove 7,000 net additions in the quarter, up 74 percent from the prior year quarter. The company finished the year with nearly 100,000 subscribers, a 33 percent increase compared to the end of 2002. -- The increase in DSL lines nearly offset the effect of an access line decline of 2.6 percent versus a year ago. One third of this decline was due to a 13 percent decrease in second access lines. Access line losses increased from the 2 percent annual decline reported in third quarter primarily due to increases in company-initiated disconnects (non-pay), competitive losses in the business market and 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. . -- During the quarter, the company accelerated 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, driving 13,000 net activations, a 154 percent increase over the fourth quarter of 2002. 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 1.7 percent, a 0.2 point improvement from the prior quarter and the fourth quarter of 2002, as the company saw 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. ). -- For the quarter, the company continued to drive penetration The successful unauthorized breach of a security perimeter. See penetration test. of its key wireline feature package, Complete Connections, by adding 7,100 subscribers during the quarter, bringing its total number of subscribers to 312,000, an increase of 8 percent versus a year ago. Consumer penetration of Complete Connections now stands at 44 percent, up from 40 percent at the end of 2002. -- During the fourth quarter, the company added 16,000 net subscribers to its Custom Connections "super-bundle" which offers local, long distance, wireless and DSL. This helped to increase consumer revenue per household 2 percent versus the fourth quarter of 2002 and 3 percent for the year, to a total of $75 per month. Excluding results of operations from the Broadband Services See broadband and broadband service provider. segment, fourth quarter revenue of $286 million was down 4 percent and operating income of $59 million was down 28 percent, or $23 million, both versus the same quarter in the prior year. Operating income declined primarily due to increases in wireless subscriber acquisition cost (up $7 million), depreciation (up $3 million), 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. (up $7 million) and asset impairments (up $4 million), with the remainder due to revenue declines. Revenue declined primarily in local service, business equipment installation and wireless service, partially offset by an increase in DSL revenue. 2003 revenue of $1,143 million was down 2 percent while operating income of $335 million decreased 3 percent versus 2002. Capital expenditures for 2003 were $122 million, or 11 percent of revenue. "Cincinnati Bell closed 2003 a stronger, more focused company than in 2002. We said our number one priority was to de-lever the company. We accomplished that, reducing net debt 23 percent versus the end of 2002. We also said we would invest in customer acquisition to defend our strong market position. In the face of significant competition and WLNP, we posted strong unit growth of our key products, wireless and DSL, and maintained low churn levels," 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. Special Items The following special items impacted Cincinnati Bell Inc.'s reported results for the fourth quarter and full year 2003: -- In the quarter, the company reversed certain previously recorded valuation allowances against deferred tax assets. The company has maintained these valuation allowances primarily due to liquidity concerns at the company's subsidiary, BRCOM, Inc. Because these uncertainties have been substantially mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. , the company recorded a non-cash income tax benefit of $823 million. This benefit increased diluted earnings per share in the fourth quarter by $3.08. For the year, this reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its , plus a $12 million decrease in tax reserves recorded in the third quarter, increased diluted earnings per share by $3.30. -- In the quarter, the company recorded a non-cash gain of $16 million due to the 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 the company's Convertible Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Notes, which were purchased at 97 percent of accreted value accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. . This increased the company's diluted earnings per share by $0.06. This fourth quarter gain offset a $17 million non-cash loss recorded in the third quarter on the exchange of $46 million of 9% Senior Subordinated Notes of BRCOM, Inc. for 11 million shares of common stock of Cincinnati Bell Inc. For the year, the net impact of these items was a loss of $1 million, reducing diluted earnings per share by less than $0.01. -- The company recorded a gain of $10 million in the quarter due to the modification A change or alteration in existing materials. Modification generally has the same meaning in the law as it does in common parlance. The term has special significance in the law of contracts and the law of sales. of a lease at the company's headquarters. This modification required the lease to be reclassified from a capital lease to an operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. . This increased the company's diluted earnings per share by $0.04 for the quarter and the year. -- The company recorded a 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. of $7 million in the quarter to recognize the unamortized cost of bank debt that was refinanced during the quarter. This decreased the company's diluted earnings per share by $0.02. For the year, the company recorded $16 million total in similar charges. These charges reduced diluted earnings per share by $0.06 for the year. -- In the fourth quarter, the company recorded a charge of $5 million to recognize certain costs and potential liabilities associated with the final settlement of the previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the proceedings with El Paso El Paso (ĕl pă`sō), city (1990 pop. 515,342), seat of El Paso co., extreme W Tex., on the Rio Grande opposite Juárez, Mex.; inc. 1873. Global Networks. This decreased diluted earnings per share for the quarter and year by $0.02. -- The company recorded, in the fourth quarter, an asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $4 million, substantially related to a write down of the company's public payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt assets to fair value. This reduced the company's diluted earnings per share by $0.02 for the quarter and $0.01 for the year. -- In the fourth quarter, the company's Local segment recorded a restructuring charge of $5 million related to a reduction in workforce of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 100 employees. 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). segment recorded a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). credit of $8 million due to the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of certain data center lease agreements. Finally, the company recorded a restructuring charge of $4 million at the corporate level to increase the reserve for a data center lease agreement. These restructuring charges and credits netted out to a charge of less than $1 million in the fourth quarter and reduced diluted earnings per share by less than $0.01. Combined with a restructuring credit of $3 million in the second quarter, the company recorded a net credit of $3 million for 2003, which increased the company's diluted earnings per share by $0.01 for the year. -- In the fourth quarter, the company recorded a charge of $2 million for certain executive incentives and termination benefits. This reduced the company's diluted earnings per share by $0.01. For the year, the company recorded a total of $11 million in similar charges, reducing diluted earnings per share by $0.04. -- As previously announced, the company recorded $337 million in gains on the sale of substantially all of its broadband assets in the second and third quarters. This increased the company's 2003 diluted earnings per share by $1.33. -- Also as previously announced, the company recorded a gain of $86 million in the first quarter resulting from the cumulative effect of a change in accounting principle in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with 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 143. This increased the company's diluted earnings per share by $0.34 for the year. Excluding the impact of these special items, the company's operating income was $72 million, net income was $13 million and diluted earnings per share were $0.06 for the quarter. For 2003, excluding the impact of these special items, the company's operating income was $365 million, net income was $100 million and diluted earnings per share were $0.48. Local Communications Services 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 $209 million for the fourth quarter, down 4 percent from the same quarter a year ago, due largely to declines in access lines, carrier access and installation of telecom equipment. These declines were partially offset by an increase in DSL revenue. For the fourth quarter, operating income was $69 million. Excluding a $3 million increase in restructuring charges, operating income was flat to the fourth quarter of 2002, as a $5 million decrease in depreciation offset revenue declines. Capital investment was $23 million, or 11 percent of revenue, during the quarter. Access lines declined by 26,000, or 2.6 percent, to 986,000 since the fourth quarter of 2002. Thirty-three percent of this decrease was due to declines in second access lines. Access line losses accelerated from the 2 percent annual decline reported in the third quarter primarily due to increases in company-initiated disconnects, competitive losses in the business market and wireless substitution. However, DSL subscribers increased by 25,000, or 33 percent, compared to last year. In the fourth quarter, CBT added 7,000 net DSL subscribers, 1,600 more than the third quarter of 2003 and 3,000 more than the same quarter a year ago. Total DSL subscribers now number nearly 100,000, for a 10 percent penetration of total access lines. Eighty-six percent of CBT's access lines are DSL-enabled. Complete Connections, CBT's value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. 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. , added 7,100 subscribers during the quarter, bringing its total number of subscribers to 312,000, up 8 percent versus a year ago. Consumer penetration of Complete Connections now stands at 44 percent. Custom Connections, the company's suite of customized bundles that offers local, long distance, wireless and DSL, added 16,000 subscribers, increasing its subscribership 41 percent in the quarter to 55,000. As of the end of 2003, 47 percent of the company's households subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day" subscribe, take buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company"; 2 or more key services (defined as Complete Connections, long distance, wireless or internet). Twenty-two percent subscribe to three or more of these services. For the year 2003, CBT had revenues of $820 million, down 2 percent from 2002, and operating income of $296 million, up 4 percent. Capital expenditures were $81 million for the year, or 10 percent of revenue. Wireless Services For the quarter, Cincinnati Bell Wireless (CBW cbw - Crypt Breakers Workbench ) added 13,000 net subscribers, nearly all postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. , 154 percent more than the fourth quarter of 2002. Gross activations were 59,000 for the quarter, a 20 percent increase versus the prior year quarter. This occurred as CBW 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. its stated strategy of accelerating wireless activations upon the turn-up turn-up n (BRIT) (on trousers) → vuelta turn-up turn n (Brit) (on trousers) → revers m turn-up turn ( of its GSM/GPRS network, which is now complete. CBW ended the fourth quarter with 474,000 total subscribers, an increase of 1 percent versus the prior year. Penetration of covered population is estimated at 20 percent at the end of 2003. Postpaid churn declined approximately 0.2 points from the prior quarter and prior year to 1.7 percent. This churn performance was especially strong considering the launch of WLNP during the fourth quarter. CBW reported revenue of $63 million, down 4 percent from the fourth quarter of 2002 due to a 4 percent decline in postpaid 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. (3)) compared to the same period last year, and a 1 percent lower subscriber count at the beginning of the quarter. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the quarter was $1 million, a $14 million decline in operating income versus the fourth quarter of 2002. Operating income declined primarily due to revenue declines as well as an $8 million increase in depreciation expense and a $7 million increase in subscriber acquisition cost offset by other items. Of the $8 million increase in depreciation, $5 million was due to the decrease in the estimate of the remaining economic useful life of the TDMA (Time Division Multiple Access) A satellite and cellular phone technology that interleaves multiple digital signals onto a single high-speed channel. For cellular, TDMA triples the capacity of the original analog method (FDMA). assets and the remainder was due to depreciation on the GSM/GPRS assets placed into service in October October: see month. of 2003. Cost of subscriber acquisition increased approximately 75 percent, or $7 million, versus the prior year quarter. For the quarter, postpaid ARPU was $55, 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 $17,
a 4 percent and 2 percent decline, respectively, versus the fourth
quarter of 2002. ARPU declined as CBW pursued more aggressive pricing in
order to drive acquisition within bundles with other Cincinnati Bell
products. Postpaid cost per gross addition (CPGA (Ceramic PGA) See PGA. CPGA - Ceramic Pin Grid Array (4)) was $391, while prepaid CPGA was $98, both 25 percent increases versus the prior year quarter. Capital investment of $8 million in the quarter, an 85 percent increase from the fourth quarter of 2002, included $4 million associated with the deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of the GSM/GPRS network. For 2003, CBW posted $260 million in revenue, down 3 percent versus 2002. Operating income of $60 million was down 13 percent from the prior year. Excluding the increase in depreciation and increase in acquisition costs in the fourth quarter, operating income of $75 million was 8 percent higher than 2002. Postpaid APRU APRU Association of Pacific Rim Universities APRU Average Revenue Per User APRU Anomalistic Psychology Research Unit (Goldsmiths College, University of London, UK) APRU Australian Police Rugby Union Association Inc. was $56 for the year, a 2 percent decline versus 2002, while prepaid ARPU was $19, an 11 percent increase. For the year, postpaid CPGA was $389, a 7 percent increase versus 2002, while prepaid CPGA was $64, flat compared to 2002. Capital expenditures in 2003 of $40 million, which equaled 15 percent of 2003 revenue and a 36 percent decline from 2002, included $25 million associated with the deployment of the GSM/GPRS network. Other Communications Services Other Communications Services, which includes the company's Cincinnati-area retail voice long distance and public payphone operations, reported revenue of $19 million in the fourth quarter, down 8 percent from the same quarter a year ago. The segment's Cincinnati Bell Any Distance division reported revenue of $16 million for the quarter, down 6 percent, while the Public Communications division reported revenue of $3 million, down 19 percent. The segment was break even at the operating income line for the quarter. For the year, the segment had revenue of $81 million, down 2 percent versus 2002, and operating income of $7 million, an increase of $5 million over 2002. Estimated 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 share of CBT access lines for Cincinnati Bell Any Distance, the company's retail voice long distance offering, was 71 percent in the consumer market and 45 percent in the business market at the end of the fourth quarter, an improvement year-over-year of 2 points and 3 points, respectively. Broadband Services Broadband Services produced revenue of $27 million in the quarter, all attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to 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, which remains in the Broadband Services segment following the sale of substantially all of the company's broadband assets. Operating income for the quarter was $1 million, which included $0.3 million at CBTS, and a net $0.7 million due to offsetting charges from the settlement of outstanding legal disputes and credits from data center lease terminations. Financial Position Cincinnati Bell Inc. reduced its net debt by $49 million to $2.26 billion during the fourth quarter through a combination of the following: -- A reduction of $31 million from cash flow(2) generated during the quarter. -- A reduction of $14 million from the modification of a lease at the company's headquarters. -- A reduction of $16 million from the extinguishment of the company's convertible subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before , which were purchased at 97 percent of accreted value. -- An increase of $12 million from in-kind in-kind adj. Given in goods, commodities, or services rather than money: cash and in-kind benefits. interest expense and non-cash amortization of debt discounts. For the year, the company reduced its net debt by $666 million, or 23 percent, versus the end of 2002. This was substantially due to a reduction of $461 million due to the exchange offers in the third quarter, $92 million of cash flow for 2003 and $83 million in proceeds from the sale of substantially all of the broadband assets. "In defense of our core business, we increased our level of investment in wireless and DSL subscriber acquisition, while simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics producing cash flow to reduce net debt," 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. Financial Guidance The company provides the following guidance for 2004: -- Revenue decline, excluding Broadband Services, of low single-digit percent -- Access line decline of 2 to 4 percent -- DSL net additions of 30,000 to 35,000 -- Wireless net additions of 50,000 to 60,000 -- Depreciation of $190 to $195 million -- Operating income of $295 to $310 million -- Effective tax rate of approximately 50 percent; with approximately $5 million in cash tax payments -- Capital expenditures of 10 to 12 percent of revenue -- Net debt reduction of approximately $140 million The company has entered into an agreement to sell substantially all of the non-Cincinnati-based CBTS assets for approximately $3 million in cash. 2003 revenue associated with the divested assets was approximately $60 million, while operating income for the same period was approximately $1 million. Restatement of Prior Financial Statements As previously disclosed, the company has restated its financial statements to reflect the revised accounting for a particular broadband network construction agreement entered into in 2000. The effects of this restatement on the company's financial statements are reflected in the financial tables distributed with this release and are further described in Note 2 to the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge included in its 2003 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. . Use of Non-GAAP Financial Measures (1) 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. (2) 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 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 an additional and useful comparison of the company's current results of operations and cash flows with past and future periods. (3) 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. (4) 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 fourth quarter 2003 results on Tuesday Tuesday: see week. , March 23, 2004 at 9:00 am EST EST electroshock therapy. EST abbr. electroshock therapy , 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 5:00 (PST PST Paroxysmal supraventricular tachycardia, see there ) on April 30, 2004. For U.S. callers, the replay will be available at 866-543-6660. For international callers, the replay will be available at 678-460-1866. The replay reference number is 144318. 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 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). . 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 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 March 22, 2004. The company anticipates that subsequent events and developments will cause its estimates to change. Cincinnati Bell Inc. Restatement of Prior Financial Statements (Unaudited) The Audit Committee of the Company's Board of Directors recently completed an investigation into the allegations contained in an amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. class action securities lawsuit lawsuit: see procedure; tort. filed in December December: see month. 2003. These allegations relate primarily to the manner in which the Company recognized revenue, and wrote down assets, with respect to its former broadband business. In connection with that investigation, adjustments have been identified related to the manner that the Company recorded a particular broadband network construction agreement entered into in 2000. These adjustments related to the timing of revenue recognition resulting from the inappropriate inappropriate Medtalk adjective A diagnostic or therapeutic procedure proven to be unnecessary for the efficient management of a particular Pt. See Appropriateness, Canadian plan, Practice guidelines Neurology adjective Referring to a response or behavior inclusion of certain costs that had not been fully incurred and use of estimates regarding the extent to which the construction contract had been completed. The Company's restatement also includes the reversal of a related unbilled un·billed adj. 1. Not having been billed or charged for: unbilled medical charges. 2. Appearing, as in a movie, without being credited: an unbilled walk-on. account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. that was previously written off in the second quarter of 2003, as the account receivable was eliminated as a result of the adjustments to revenue in 2001 and 2000. The Company has restated its financial statements to reflect the revised accounting for this contract. Revenue for the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. period ended September September: see month. 30, 2003 will remain the same as previously reported, cost of services and products will decrease by $50.5 million and net income will increase by $50.5 million; revenue and cost of services and products will be unchanged in 2002 and net loss will increase by $18.0 million due to an increase in income tax expense; revenue for 2001 will decrease by $30.6 million, cost of services and products for 2001 will increase by $15.1 million, and net loss for 2001 will increase by $29.4 million; and revenue for 2000 will decrease by $22.7 million, cost of services and products for 2000 will decrease by $17.9 million, and net loss for 2000 will increase by $3.1 million. Thus, there is no cumulative change to net income over the reporting period as a result of this restatement.
2003 2002 2001 2000
---------- ---------- ---------- ----------
(through
9/30)
Revenue, as previously
reported $1,246.6 $2,178.6 $2,282.9 $1,992.9
Adjustment - - (30.6) (22.7)
---------- ---------- ---------- ----------
Revenue, as restated $1,246.6 $2,178.6 $2,252.3 $1,970.2
========== ========== ========== ==========
Cost of services and
products, as previously
reported $601.7 $1,035.6 $1,154.2 $966.3
Adjustment (50.5) - 15.1 (17.9)
---------- ---------- ---------- ----------
Cost of services and
products, as restated $551.2 $1,035.6 $1,169.3 $948.4
========== ========== ========== ==========
Net income (loss), as
previously reported $438.4 $(4,222.3) $(286.2) $(377.1)
Adjustment 50.5 (18.0) (29.4) (3.1)
---------- ---------- ---------- ----------
Net income (loss),
as restated $488.9 $(4,240.3) $(315.6) $(380.2)
========== ========== ========== ==========
Cincinnati Bell Inc.
Consolidated Statements of Operations (Unaudited)
(in millions --
except per
share amounts)
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
------------------ % -------------------- %
2003 2002 Change 2003 2002 Change
------- ---------- ------ --------- ---------- ------
(Restated)
Revenue $311.2 $509.3 (39%) $1,557.8 $2,178.6 (28%)
----------------
Costs & Expenses
----------------
Cost of
Services and
Products 130.3 246.3 (47%) 681.5 1,035.6 (34%)
Selling,
General &
Administrative 62.2 122.0 (49%) 353.1 502.2 (30%)
Depreciation
and
Amortization 48.7 125.6 (61%) 169.7 496.3 (66%)
Restructuring
Charges
(Credits) 0.8 13.5 (94%) (2.6) 37.1 n/m
Asset
Impairments
and Other
Charges
(Credits) 9.5 2,200.3 (100%) 8.8 2,200.9 (100%)
Gain on Sale of
Broadband
Assets (0.4) -- n/m (336.7) -- n/m
------- ---------- --------- ----------
Operating
Income (Loss) 60.1 (2,198.4) n/m 684.0 (2,093.5) n/m
Minority
Interest
Expense
(Income) (0.3) 13.2 n/m 42.2 57.6 (27%)
Loss (Gain) on
Extinguishment
of Debt (16.2) -- n/m 1.2 -- n/m
Other (Income)
Expense, Net (10.2) 10.2 n/m (10.8) 10.2 n/m
Interest
Expense and
Other
Financing
Costs 60.4 46.8 29% 234.2 164.2 43%
------- ---------- --------- ----------
Income (Loss)
from
Continuing
Operations
before Income
Taxes,
Discontinued
Operations
and Cumulative
Effect of
Change in
Accounting
Principle 26.4 (2,268.6) n/m 417.2 (2,325.5) n/m
Income Tax
Expense
(Benefit) (816.6) 132.8 n/m (828.8) 123.7 n/m
------- ---------- --------- ----------
Income (Loss)
from
Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle 843.0 (2,401.4) n/m 1,246.0 (2,449.2) n/m
Discontinued
Operations,
Net of Taxes -- -- n/m -- 217.6 (100%)
Cumulative
Effect of
Change in
Accounting
Principle, Net
of Taxes -- -- n/m 85.9 (2,008.7) n/m
------- ---------- --------- ----------
Net Income
(Loss) 843.0 (2,401.4) n/m 1,331.9 (4,240.3) n/m
Preferred Stock
Dividends 2.6 2.6 - 10.4 10.4 -
------- ---------- --------- ----------
Net Income
(Loss)
Applicable to
Common
Shareowners $840.4 $(2,404.0) n/m $1,321.5 $(4,250.7) n/m
======= ========== ========= ==========
Basic Earnings
(Loss) Per
Common Share
----------------
Income (Loss)
from
Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle $3.44 $(11.00) $5.44 $(11.27)
Discontinued
Operations,
Net of Taxes -- -- -- 1.00
Cumulative
Effect of
Change in
Accounting
Principle, Net
of Taxes -- -- 0.38 (9.20)
------- ---------- --------- ----------
Net Earnings
(Loss) Per
Common Share $3.44 $(11.00) $5.82 $(19.47)
======= ========== ========= ==========
Diluted
Earnings (Loss)
Per Common
Share
----------------
Income (Loss)
from
Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle $3.17 $(11.00) $5.02 $(11.27)
Discontinued
Operations,
Net of Taxes -- -- -- 1.00
Cumulative
Effect of
Change in
Accounting
Principle, Net
of Taxes -- -- 0.34 (9.20)
------- ---------- --------- ----------
Net Earnings
(Loss) Per
Common Share $3.17 $(11.00) $5.36 $(19.47)
======= ========== ========= ==========
Weighted
Average Common
Shares
Outstanding
----------------
-- Basic 244.3 218.5 226.9 218.4
-- Diluted 267.6 218.5 253.3 218.4
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in For the Three For the Twelve
millions) Months Months
Ended December 31, % Ended December 31, %
2003 2002 Change 2003 2002 Change
------- ---------- ------ --------- ---------- ------
Revenue (Restated)
----------------
Local $208.6 $216.5 (4%) $820.4 $833.1 (2%)
Wireless 62.6 65.4 (4%) 259.5 267.2 (3%)
Other 19.4 21.1 (8%) 81.1 82.8 (2%)
Broadband 26.6 227.1 (88%) 448.7 1,075.4 (58%)
Corporate and
eliminations (6.0) (20.8) (71%) (51.9) (79.9) (35%)
------- ---------- --------- ----------
Total Revenue $311.2 $509.3 (39%) $1,557.8 $2,178.6 (28%)
======= ========== ========= ==========
Cost of Services
and Products
----------------
Local $68.6 $69.9 (2%) $260.0 $261.8 (1%)
Wireless 32.4 32.8 (1%) 110.5 119.5 (8%)
Other 12.9 16.5 (22%) 54.1 63.4 (15%)
Broadband 20.5 143.6 (86%) 296.2 655.6 (55%)
Corporate and
eliminations (4.1) (16.5) (75%) (39.3) (64.7) (39%)
------- ---------- --------- ----------
Total Cost of
Services and
Products $130.3 $246.3 (47%) $681.5 $1,035.6 (34%)
======= ========== ========= ==========
Selling,
General &
Administrative
----------------
Local $34.4 $36.2 (5%) $133.5 $139.5 (4%)
Wireless 15.1 11.6 30% 50.0 47.3 6%
Other 2.6 4.2 (38%) 14.8 15.8 (6%)
Broadband 7.3 72.2 (90%) 144.5 308.3 (53%)
Corporate and
eliminations 2.8 (2.2) n/m 10.3 (8.7) n/m
------- ---------- --------- ----------
Total Selling,
General &
Administrative $62.2 $122.0 (49%) $353.1 $502.2 (30%)
======= ========== ========= ==========
Depreciation
and
Amortization
----------------
Local $31.9 $36.8 (13%) $125.7 $146.7 (14%)
Wireless 15.9 8.0 99% 38.8 31.3 24%
Other 0.6 0.5 20% 2.1 1.9 11%
Broadband 0.2 80.1 (100%) 2.5 315.9 (99%)
Corporate and
eliminations 0.1 0.2 (50%) 0.6 0.5 20%
------- ---------- --------- ----------
Total
Depreciation
and
Amortization $48.7 $125.6 (61%) $169.7 $496.3 (66%)
======= ========== ========= ==========
Restructuring
Charges
(Credits)
----------------
Local $4.5 $1.1 n/m $4.5 $(0.5) n/m
Wireless - - n/m - - n/m
Other - - n/m - - n/m
Broadband (7.6) 11.6 n/m (11.0) 32.6 n/m
Corporate and
eliminations 3.9 0.8 n/m 3.9 5.0 (22%)
------- ---------- --------- ----------
Total
Restructuring $0.8 $13.5 (94%) $(2.6) $37.1 n/m
======= ========== ========= ==========
Asset
Impairments
and Other
Charges
(Credits)
----------------
Local $0.3 $0.3 - $0.6 $0.3 100%
Wireless - - n/m - - n/m
Other 3.5 - n/m 3.6 - n/m
Broadband 5.7 2,200.0 (100%) 4.6 2,200.6 (100%)
Corporate and
eliminations - - n/m - - n/m
------- ---------- --------- ----------
Total Asset
Impairments
and Other
Charges
(Credits) $9.5 $2,200.3 (100%) $8.8 $2,200.9 (100%)
======= ========== ========= ==========
Gain on Sale of
Broadband
Assets
----------------
Local $- $- n/m $- $- n/m
Wireless - - n/m - - n/m
Other - - n/m - - n/m
Broadband (0.4) - n/m (336.7) - n/m
Corporate and
eliminations - - n/m - - n/m
------- ---------- --------- ----------
Total Gain on
Sale of
Broadband
Assets $(0.4) $- n/m $(336.7) $- n/m
======= ========== ========= ==========
Operating
Income
----------------
Local $68.9 $72.2 (5%) $296.1 $285.3 4%
Wireless (0.8) 13.0 n/m 60.2 69.1 (13%)
Other (0.2) (0.1) 100% 6.5 1.7 n/m
Broadband 0.9 (2,280.4) n/m 348.6 (2,437.6) n/m
Corporate and
eliminations (8.7) (3.1) 181% (27.4) (12.0) 128%
------- ---------- --------- ----------
Total
Operating
Income $60.1 $(2,198.4) n/m $684.0 $(2,093.5) n/m
======= ========== ========= ==========
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(in millions - except debt covenants and segment
information)
December December
31, 2003 31, 2002
--------- ----------
(Restated)
Assets
------------------------------------------------
Cash and Cash Equivalents $26.0 $44.9
Restricted Cash - 7.0
Receivables - Net 140.5 240.1
Materials and Supplies 33.6 32.2
Other Current Assets 59.3 70.6
Property, Plant and Equipment -- Net 898.8 867.9
Goodwill 40.9 40.9
Other Intangible Assets -- Net 47.2 47.8
Noncurrent Deferred Tax Assets 696.9 -
Other Noncurrent Assets 130.3 101.2
--------- ----------
Total Assets $2,073.5 $1,452.6
========= ==========
Liabilities and Shareowners' Deficit
------------------------------------------------
Current Portion of Long-Term Debt $13.3 $203.7
Current Portion of Unearned Revenue and Customer
Deposits 41.5 118.9
Accounts Payable 64.5 129.4
Accrued Taxes 43.7 84.4
Other Current Liabilities 143.8 213.2
Long-Term Debt, Less Current Portion 2,274.5 2,354.7
Unearned Revenue, Less Current Portion 11.9 306.0
Other Noncurrent Liabilities 120.0 197.2
Minority Interest 39.7 443.9
Shareowners' Deficit (679.4) (2,598.8)
--------- ----------
Total Liabilities and Shareowners' Deficit $2,073.5 $1,452.6
========= ==========
Other Data:
------------------------------------------------
Common Shares Outstanding at Balance Sheet Date 244.6 218.7
Net Debt $2,261.8 $2,927.9
Credit Facility Availability $299.5 $163.9
Debt Covenants (See Note 1):
------------------------------------------------
Debt to EBITDA Ratio -- Calculated 4.70 n/a
Debt to EBITDA Ratio -- Required 6.20 n/a
Senior Secured Debt to EBITDA Ratio --
Calculated 1.87 n/a
Senior Secured Debt to EBITDA Ratio -- Required 4.00 n/a
Interest Coverage Ratio -- Calculated 3.56 n/a
Interest Coverage Ratio -- Required 2.50 n/a
Year-to-date Capital Expenditures -- Restricted
Group Actual 122.2 n/a
Maximum Annual Capital Expenditures --
Restricted Group Allowed 146.0 n/a
Segment Information (in thousands):
------------------------------------------------
Local Access Lines 985.8 1,011.9
Complete Connections Subscribers 312.5 288.9
DSL Subscribers 99.5 74.8
Custom Connections Subscribers 54.7 -
Postpaid Wireless Subscribers 311.9 311.2
Prepaid Wireless Subscribers 162.5 159.2
--------- ----------
Total Wireless Subscribers 474.4 470.4
Consumer Long Distance Lines 414.4 431.3
Business Long Distance Lines 124.6 123.5
--------- ----------
Total Long Distance Lines 539.0 554.8
Note 1: The company renegotiated its debt covenants in March 2003 in
conjunction with its refinancing, which rendered historical
covenant information irrelevant.
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions) For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
Consolidated Cash Flow 2003 2002 2003 2002
---------- ---------- ---------- ----------
(Restated)
Cash provided by operating
activities $79.9 $62.6 $310.6 $192.6
Capital expenditures (31.6) (36.0) (126.4) (175.9)
Cash provided by sale of
Broadband assets - - 82.7 -
Proceeds from the sale of
discontinued operations - - - 345.0
Other (0.1) - 0.9 23.3
---------- ---------- ---------- ----------
Cash used in investing
activities (31.7) (36.0) (42.8) 192.4
Issuance of long-term debt 540.0 38.0 1,390.0 151.0
Repayment of long-term
debt (576.2) (51.2) (1,585.1) (470.0)
Short-term borrowings
(repayments), net (1.7) 0.5 (5.5) (6.9)
Debt issuance costs (15.2) (0.8) (80.4) (9.2)
Issuance of common shares
-- exercise of stock
options 0.7 0.3 2.2 0.8
Purchase of Cincinnati
Bell shares for treasury
and employee benefit
plans - (0.6) - (0.6)
Preferred stock dividends
paid (2.6) (2.6) (7.9) (35.2)
---------- ---------- ---------- ----------
Cash used in financing
activities (55.0) (16.4) (286.7) (370.1)
---------- ---------- ---------- ----------
Net increase in cash and
cash equivalents (6.8) 10.2 (18.9) 14.9
Cash and cash equivalents
at beginning of period 32.8 34.7 44.9 30.0
---------- ---------- ---------- ----------
Cash and cash equivalents
at end of period $26.0 $44.9 $26.0 $44.9
========== ========== ========== ==========
Reconciliation of GAAP Cash
Flow to Cash Flow as
defined by the company
Net increase (decrease) in
cash and cash equivalents $(6.8) $10.2 $(18.9) $14.9
Less adjustments:
Issuance of long-term debt 540.0 38.0 1,390.0 151.0
Repayment of long-term
debt (financing
activities) (576.2) (51.2) (1,585.1) (470.0)
Short-term borrowings
(repayments), net
(financing activities) (1.7) 0.5 (5.5) (6.9)
Restricted Cash (7.0) 6.9 (7.0)
Proceeds from the sale of
discontinued operations 345.0
Cash provided by sale of
Broadband assets 82.7
---------- ---------- ---------- ----------
Cash flow (as defined by
the company) $31.1 $29.9 $92.1 $2.8
========== ========== ========== ==========
Cash Expenditures for
Restructuring $(9.0) $(12.4) $(21.3) $(72.4)
Income Tax Refunds Received $- $- $0.3 $(40.3)
Cincinnati Bell Inc.
Consolidated Revenue and Operating Income Excluding Broadband
(Unaudited)
(dollars in For the Three For the Twelve
millions) Months Ended Months Ended
December 31, December 31,
--------------------- % --------------------- %
2003 2002 Change 2003 2002 Change
---------- ---------- ------ ---------- ---------- ------
(Restated)
Reconciliation of Consolidated Revenue to
Consolidated Revenue Excluding Broadband
Revenue $311.2 $509.3 (39%) $1,557.8 $2,178.6 (28%)
Less
adjustments:
Broadband
Revenue 26.6 227.1 (88%) 448.7 1,075.4 (58%)
Broadband
Intercompany
Activity (1.2) (16.7) (93%) (34.1) (62.6) (46%)
---------- ---------- ---------- ----------
Consolidated
Revenue
Excluding
Broadband $285.8 $298.9 (4%) $1,143.2 $1,165.8 (2%)
========== ========== ========== ==========
Reconciliation of Consolidated Operating Income to
Consolidated Operating Income Excluding Broadband
Operating
Income $60.1 $(2,198.4) n/m $684.0 $(2,093.5) n/m
Less
adjustments:
Broadband
Operating
Income
(Loss) 0.9 (2,280.4) n/m 348.6 (2,437.6) n/m
---------- ---------- ---------- ----------
Consolidated
Operating
Income
Excluding
Broadband $59.2 $82.0 (28%) $335.4 $344.1 (3%)
========== ========== ========== ==========
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
December December -----------------
(dollars in millions) 31, 2003 31, 2002 $ %
--------- --------- ---------- ------
Credit Facilities $608.4 $1,648.1 $(1,039.7) (63%)
Cincinnati Bell Telephone notes 250.0 270.0 (20.0) (7%)
9% Senior subordinated notes of
BRCOM - 46.0 (46.0) (100%)
7 1/4% Senior notes due 2013 of
Cincinnati Bell Inc. 500.0 - 500.0 n/m
16% Senior subordinated notes
of Cincinnati Bell Inc. 360.6 - 360.6 n/m
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 n/m
Convertible subordinated notes
of Cincinnati Bell Inc. - 502.8 (502.8) (100%)
Capital leases 18.2 39.0 (20.8) (53%)
Other short-term debt of BRCOM 2.7 2.6 0.1 4%
Unamortized discount (42.1) (0.9) (41.2) n/m
12 1/2% Senior Notes of BRCOM - 0.8 (0.8) (100%)
12 1/2% Series B Junior
Exchangeable Preferred Stock
of BRCOM Inc. - 414.4 (414.4) (100%)
--------- --------- ----------
Total Debt and Minority
Interest 2,287.8 2,972.8 (685.0) (23%)
Less: Cash and Cash Equivalents 26.0 44.9 (18.9) (42%)
--------- --------- ----------
Net Debt (as defined by the
company) $2,261.8 $2,927.9 $(666.1) (23%)
========= ========= ==========
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
--------------
(dollars in millions) December 31, September 30,
2003 2003 $ %
------------ ------------- ------- ------
Credit Facilities $608.4 $639.9 $(31.5) (5%)
Cincinnati Bell
Telephone notes 250.0 270.0 (20.0) (7%)
9% Senior subordinated
notes of BRCOM - - - n/m
7 1/4% Senior notes
due 2013 of
Cincinnati Bell Inc. 500.0 500.0 - -
16% Senior subordinated
notes of
Cincinnati Bell Inc. 360.6 357.1 3.5 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 n/m
Convertible subordinated
notes of
Cincinnati Bell Inc. - 534.5 (534.5) (100%)
Capital leases 18.2 33.6 (15.4) (46%)
Other short-term debt
of BRCOM 2.7 2.8 (0.1) (4%)
Unamortized discount (42.1) (44.2) 2.1 (5%)
12 1/2% Senior Notes
of BRCOM - - - n/m
12 1/2% Series B Junior
Exchangeable Preferred
Stock of BRCOM Inc. - - - n/m
------------ ------------- -------
Total Debt and
Minority Interest 2,287.8 2,343.7 (55.9) (2%)
Less: Cash and
Cash Equivalents 26.0 32.9 (6.9) (21%)
------------ ------------- -------
Net Debt (as defined by
the company) $2,261.8 $2,310.8 $(49.0) (2%)
============ ============= =======
Cincinnati Bell Inc.
Normalized Statements of Operations --
Reconciliation to Reported Results
(Unaudited)
(in millions --
except per share
amounts)
Special and Nonrecurring Items
------------------------------------------
For the Twelve
Months Ended
December Income Debt Asset El Paso
31, 2003 Tax Exting- Impair- Restruc- Settle-
(GAAP) Benefits uishment ments turing ment
--------- -------- -------- ------- -------- -------
A B C D E
Revenue $1,557.8 $- $- $- $-
-----------------
Costs & Expenses
-----------------
Cost of Services
and Products 681.5 -- -- -- -- --
Selling, General
& Administrative 353.1 -- -- -- -- --
Depreciation and
Amortization 169.7 -- -- -- -- --
Restructuring
Charges
(Credits) (2.6) -- -- -- (2.6) --
Asset Impairments
and Other
Charges
(Credits) 8.8 -- -- 3.6 -- 5.2
Gain on Sale of
Broadband
Assets (336.7) -- -- -- --
--------- -------- -------- ------- -------- -------
Operating Income
(loss) 684.0 -- -- (3.6) 2.6 (5.2)
Minority Interest
Expense (Income) 42.2 -- -- -- -- --
Loss (Gain) on
Extinguishment
of Debt 1.2 -- 1.2 -- -- --
Other (Income)
Expense, Net (10.8) -- -- -- -- --
Interest Expense
and Other
Financing Costs 234.2 -- 16.4 -- -- --
--------- -------- -------- ------- -------- -------
Income (Loss)
from Continuing
Operations
before Income
Taxes,
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle 417.2 -- (17.6) (3.6) 2.6 (5.2)
Income Tax
Expense
(Benefit) (828.8) (834.7) -- -- -- --
--------- -------- -------- ------- -------- -------
Income (Loss)
from Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle 1,246.0 834.7 (17.6) (3.6) 2.6 (5.2)
Discontinued
Operations, Net
of Taxes -- -- -- -- -- --
Cumulative Effect
of Change in
Accounting
Principle, Net
of Taxes 85.9 -- -- -- -- --
--------- -------- -------- ------- -------- -------
Net Income
(Loss) 1,331.9 834.7 (17.6) (3.6) 2.6 (5.2)
Preferred Stock
Dividends 10.4 - - - - -
--------- -------- -------- ------- -------- -------
Net Income (Loss)
Applicable to
Common
Shareowners $1,321.5 $834.7 $(17.6) $(3.6) $2.6 $(5.2)
========= ======== ======== ======= ======== =======
Weighted average
diluted shares 253.3 253.3 253.3 253.3 253.3 253.3
Diluted Earnings
(Loss) Per
Common Share $5.36 $3.30 $(0.07) $(0.01) $0.01 $(0.02)
Special and Nonrecurring Items
-----------------------------------------
For the
Twelve
Months
Ended
Executive December
Incentives Gain on 31, 2003
and Sale of Change in Other Before
Termination Broadband Accounting Special Special
Benefits Assets Principle Items Items
----------- --------- ---------- -------- ---------
F G H I
Revenue $- $- $- $- $1,557.8
-----------------
Costs & Expenses
-----------------
Cost of Services
and Products -- -- -- -- 681.5
Selling, General
& Administrative 11.2 -- -- -- 341.9
Depreciation and
Amortization -- -- -- -- 169.7
Restructuring
Charges
(Credits) -- -- -- -- --
Asset Impairments
and Other
Charges
(Credits) -- -- -- -- --
Gain on Sale of
Broadband Assets -- (336.7) -- -- --
----------- --------- ---------- -------- ---------
Operating Income
(loss) (11.2) 336.7 -- -- 364.7
Minority Interest
Expense (Income) -- -- -- -- 42.2
Loss (Gain) on
Extinguishment
of Debt -- -- -- -- --
Other (Income)
Expense, Net -- -- -- (10.0) (0.8)
Interest Expense
and Other
Financing Costs -- -- -- -- 217.8
----------- --------- ---------- -------- ---------
Income (Loss)
from Continuing
Operations
before Income
Taxes,
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle (11.2) 336.7 -- 10.0 105.5
Income Tax
Expense
(Benefit) -- -- -- -- 5.9
----------- --------- ---------- -------- ---------
Income (Loss)
from Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle (11.2) 336.7 -- 10.0 99.6
Discontinued
Operations, Net
of Taxes -- -- -- -- --
Cumulative Effect
of Change in
Accounting
Principle, Net
of Taxes -- -- 85.9 -- --
----------- --------- ---------- -------- ---------
Net Income
(Loss) (11.2) 336.7 85.9 10.0 99.6
Preferred Stock
Dividends - - - - 10.4
----------- --------- ---------- -------- ---------
Net Income (Loss)
Applicable to
Common
Shareowners $(11.2) $336.7 $85.9 $10.0 $89.2
=========== ========= ========== ======== =========
Weighted average
diluted shares 253.3 253.3 253.3 253.3 253.3
Diluted Earnings
(Loss) Per
Common Share $(0.04) $1.33 $0.34 $0.04 $0.48
Normalized Results have been adjusted for the following:
A The company reversed certain previously recorded valuation
allowances against deferred tax assets. The company has maintained
these valuation allowances primarily due to liquidity concerns at
the company's subsidiary, BRCOM, Inc. Because these uncertainties
have been substantially mitigated, the company recorded a non-cash
income tax benefit of $823.0 million in the fourth quarter of
2003. In addition, the Company recorded a tax benefit of $11.7
million in the third quarter of 2003 related to the reversal of
certain income tax reserves due to the closure of certain recent
IRS audit periods. Due to the reversal of valuation allowance,
special items have not been tax effected as they were initially
recorded at a 0% effective tax rate.
B The Company recorded a non-cash gain of $16.2 million during the
fourth quarter due to the extinguishment of the Company's
convertible subordinated debentures (Oak Hill), which were
purchased at 97% of accreted value. This gain was offset by a
non-cash charge of $17.4 million related to the exchange of $46
million of 9% senior subordinated notes of BRCOM in the third
quarter. Additionally, the Company recorded a charge of $16.4
million in 2003 related to the write-off of deferred financing
cost associated with the refinancing of the Company's credit
facilities.
C The Company recorded an asset impairment charge in the fourth
quarter, substantially related to a write down the value of the
Company's public payphone assets to fair value.
D The Company recorded a restructuring credit of $2.6 million
during 2003.
E The Company reached a final settlement in February 2004 of an
arbitration proceeding with El Paso Global Networks regarding a
broadband network construction contract entered into in 2000. As
part of the settlement, both parties agreed to drop their
respective claims for monetary damages. The Company recorded a
$5.2 million charge in the fourth quarter as a result of this
settlement.
F The Company recorded a charge of $11.2 million for certain
executive incentives and termination benefits, $2.6 million of
which consisted of a non-cash charge for the accelerated vesting
of stock options.
G The Company's recorded a gain on the sale of its broadband assets
of $336.7 million.
H The Company recorded a non-cash gain of $85.9 million resulting
from the cumulative effect of a change in accounting principle
in accordance with SFAS 143.
I The Company recorded a gain of $10.0 million due to the
modification of a lease at the Company's headquarters. This
modification required the lease to be reclassified from a capital
lease to an operating lease.
(in millions -- except per
share amounts) Special and Nonrecurring Items
-----------------------------------
For the
Three
Months
Ended
December Income
31, 2003 Tax Debt Asset
(GAAP) Benefits Extinguishment Impairments
-------- -------- -------------- -----------
A B C
Revenue $311.2 $- $- $-
-------------------------
Costs & Expenses
-------------------------
Cost of Services and
Products 130.3 -- -- --
Selling, General &
Administrative 62.2 -- -- --
Depreciation and
Amortization 48.7 -- -- --
Restructuring Charges
(Credits) 0.8 -- -- --
Asset Impairments and
Other Charges (Credits) 9.5 -- -- 4.3
Gain on Sale of Broadband
Assets (0.4) -- -- --
-------- -------- -------------- -----------
Operating Income (loss) 60.1 -- -- (4.3)
Minority Interest Expense
(Income) (0.3) -- -- --
Loss (Gain) on
Extinguishment of Debt (16.2) -- (16.2) --
Other (Income) Expense,
Net (10.2) -- -- --
Interest Expense and
Other Financing Costs 60.4 -- 6.5 --
-------- -------- -------------- -----------
Income (Loss) from
Continuing Operations
before Income Taxes,
Discontinued
Operations and
Cumulative Effect of
Change in Accounting
Principle 26.4 -- 9.7 (4.3)
Income Tax Expense
(Benefit) (816.6) (823.0) -- --
-------- -------- -------------- -----------
Income (Loss) from
Continuing Operations
before Discontinued
Operations and
Cumulative Effect of
Change in Accounting
Principle 843.0 823.0 9.7 (4.3)
Discontinued Operations,
Net of Taxes -- -- -- --
Cumulative Effect of
Change in Accounting
Principle, Net of Taxes -- -- -- --
-------- -------- -------------- -----------
Net Income (Loss) 843.0 823.0 9.7 (4.3)
Preferred Stock Dividends 2.6 -- -- --
-------- -------- -------------- -----------
Net Income (Loss)
Applicable to Common
Shareowners $840.4 $823.0 $9.7 $(4.3)
======== ======== ============== ===========
Weighted average diluted
shares 267.6 267.6 267.6 267.6
Diluted Earnings (Loss)
Per Common Share $3.17 $3.08 $0.04 $(0.02)
(in millions -
except per
share amounts) Special and Nonrecurring Items
--------------------------------------------
For the
Three
Months
Ended
Executive December
Incentives 31, 2003
and Other Before
Restruc- EPGN Benefits Special Special
turing Settlement Termination Items Items
------------ ---------- ----------- -------- --------
D E F G
Revenue $- $311.2
---------------
Costs &
Expenses
---------------
Cost of
Services and
Products -- -- -- -- 130.3
Selling,
General &
Administrative -- -- 2.0 -- 60.2
Depreciation
and
Amortization -- -- -- -- 48.7
Restructuring
Charges
(Credits) 0.8 -- -- -- --
Asset
Impairments
and Other
Charges
(Credits) -- 5.2 -- -- --
Gain on Sale of
Broadband
Assets -- -- -- -- (0.4)
------------ ---------- ----------- -------- --------
Operating
Income (loss) (0.8) (5.2) (2.0) -- 72.4
Minority
Interest
Expense
(Income) -- -- -- -- (0.3)
Loss (Gain) on
Extinguishment
of Debt -- -- -- -- --
Other (Income)
Expense, Net -- -- -- (10.0) (0.2)
Interest
Expense and
Other
Financing
Costs -- -- -- -- 53.9
------------ ---------- ----------- -------- --------
Income (Loss)
from
Continuing
Operations
before Income
Taxes,
Discontinued
Operations
and
Cumulative
Effect of
Change in
Accounting
Principle (0.8) (5.2) (2.0) 10.0 19.0
Income Tax
Expense
(Benefit) -- -- -- -- 6.4
------------ ---------- ----------- -------- --------
Income (Loss)
from
Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle (0.8) (5.2) (2.0) 10.0 12.6
Discontinued
Operations,
Net of Taxes -- -- -- -- --
Cumulative
Effect of
Change in
Accounting
Principle, Net
of Taxes -- -- -- -- --
------------ ---------- ----------- -------- --------
Net Income
(Loss) (0.8) (5.2) (2.0) 10.0 12.6
Preferred Stock
Dividends - - - 2.6
------------ ---------- ----------- -------- --------
Net Income
(Loss)
Applicable to
Common
Shareowners $(0.8) $(5.2) $(2.0) $10.0 $10.0
============ ========== =========== ======== ========
Weighted
average
diluted shares 267.6 267.6 267.6 267.6 267.6
Diluted
Earnings
(Loss) Per
Common Share $-- $(0.02) $(0.01) $0.04 $0.06
Normalized Results have been adjusted for the following:
A The company reversed certain previously recorded valuation
allowances against deferred tax assets. The company has maintained
these valuation allowances primarily due to liquidity concerns at
the company's subsidiary, BRCOM, Inc. Because these uncertainties
have been substantially mitigated, the company recorded a non-cash
income tax benefit of $823.0 million in the fourth quarter of
2003. Due to the reversal of valuation allowance, special items
have not been tax effected as they were initially recorded at a
0% effective tax rate.
B The Company recorded a non-cash gain of $16.2 million during the
fourth quarter of 2003 due to the extinguishment of the Company's
convertible subordinated debentures (Oak Hill), which were
purchased at 97% of accreted value. Additionally, the Company
recorded a charge of $6.5 million in the fourth quarter related to
the write-off of deferred financing cost associated with the
refinancing of the Company's credit facilities.
C The Company recorded an asset impairment charge of $4.3 million in
the fourth quarter of 2003, substantially related to a write down
the value of the Company's public payphone assets to fair value.
D The Company recorded a restructuring charge of $0.8 million during
the fourth quarter of 2003. The net restructuring charge was
comprised primarily of a $4.6 million charge related to employee
separation benefits, offset by a $4.1 million reversal of a
restructuring charge previously recorded related to the
November 2001 restructuring plan.
E The Company reached a final settlement in February 2004 of an
arbitration proceeding with El Paso Global Networks regarding a
broadband network construction contract entered into in 2000. As
part of the settlement, both parties agreed to drop their
respective claims for monetary damages. The Company recorded a
$5.2 million charge in the fourth quarter of 2003 as a result of
this settlement.
F The Company recorded a charge of $2.0 million for certain
executive incentives and termination benefits in the fourth
quarter of 2003.
G The Company recorded a gain of $10.0 million due to the
modification of a lease at the Company's headquarters. This
modification required the lease to be reclassified from a capital
lease to an operating lease in the fourth quarter of 2003.
Cincinnati Bell Inc.
Normalized Statements of Operations --
Reconciliation to Reported Results
(Unaudited)
(in millions -
except per
share amounts) Special and Nonrecurring Items
------------------------------------------
For the
Twelve
Months
Ended
December Income
31, 2002 Tax Asset El Paso
(GAAP) Benefits Impairments Restructuring Charge
---------- -------- ----------- ------------- -------
(Restated) A B C D
Revenue $2,178.6 $- $- $- $-
----------------
Costs & Expenses
----------------
Cost of Services
and Products 1,035.6 -- -- -- 13.3
Selling, General
& Administrative 502.2 -- -- -- --
Depreciation and
Amortization 496.3 -- -- -- --
Restructuring
Charges
(Credits) 37.1 -- -- 37.1 --
Asset
Impairments and
Other Charges
(Credits) 2,200.9 -- 2,200.3 -- --
Gain on Sale of
Broadband
Assets -- -- -- -- --
---------- -------- ----------- ------------- -------
Operating
Income (loss) (2,093.5) -- (2,200.3) (37.1) (13.3)
Minority
Interest
Expense
(Income) 57.6 -- -- -- --
Other (Income)
Expense, Net 10.2 -- -- -- --
Interest Expense
and Other
Financing Costs 164.2 -- -- -- --
---------- -------- ----------- ------------- -------
Income (Loss)
from
Continuing
Operations
before
Income Taxes,
Discontinued
Operations
and Cumulative
Effect of
Change in
Accounting
Principle (2,325.5) -- (2,200.3) (37.1) (13.3)
Income Tax
Expense
(Benefit) 123.7 912.8 (770.1) (13.0) (4.7)
---------- -------- ----------- ------------- -------
Income (Loss)
from
Continuing
Operations
before
Discontinued
Operations
and Cumulative
Effect of
Change in
Accounting
Principle (2,449.2) (912.8) (1,430.2) (24.1) (8.6)
Discontinued
Operations, Net
of Taxes 217.6 -- -- -- --
Cumulative
Effect of
Change in
Accounting
Principle, Net
of Taxes (2,008.7) -- -- -- --
---------- -------- ----------- ------------- -------
Net Income
(Loss) (4,240.3) (912.8) (1,430.2) (24.1) (8.6)
Preferred Stock
Dividends 10.4 - - - -
---------- -------- ----------- ------------- -------
Net Income
(Loss)
Applicable to
Common
Shareowners $(4,250.7) $(912.8) $(1,430.2) $(24.1) $(8.6)
========== ======== =========== ============= =======
Weighted average
diluted shares 218.4 218.4 218.4 218.4 218.4
Diluted Earnings
(Loss) Per
Common Share $(19.47) $(4.18) $(6.55) $(0.11) $(0.04)
(in millions -
except per share
amounts) Special and Nonrecurring Items
----------------------------------------
For the
Twelve
Months
Ended
December
Termin- 31, 2002
ation Change in Other Before
of Accounting Discontinued Special Special
IRUs Principle Operations Items Items
------- ---------- ------------ -------- ----------
E F G H (Restated)
Revenue $58.7 $- $- $- $2,119.9
------------------
Costs & Expenses
------------------
Cost of Services
and Products -- -- -- -- 1,022.3
Selling, General &
Administrative -- -- -- -- 502.2
Depreciation and
Amortization -- -- -- -- 496.3
Restructuring
Charges (Credits) -- -- -- -- --
Asset Impairments
and Other Charges
(Credits) -- -- -- -- 0.6
Gain on Sale of
Broadband Assets -- -- -- -- --
------- ---------- ------------ -------- ----------
Operating Income
(loss) 58.7 -- -- -- 98.5
Minority Interest
Expense (Income) -- -- -- -- 57.6
Other (Income)
Expense, Net -- -- -- 11.2 (1.0)
Interest Expense
and Other
Financing Costs -- -- -- -- 164.2
------- ---------- ------------ -------- ----------
Income (Loss)
from Continuing
Operations
before Income
Taxes,
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle 58.7 -- -- (11.2) (122.3)
Income Tax Expense
(Benefit) 20.5 -- -- (3.9) (17.9)
------- ---------- ------------ -------- ----------
Income (Loss)
from Continuing
Operations
before
Discontinued
Operations and
Cumulative
Effect of
Change in
Accounting
Principle 38.2 -- -- (7.3) (104.4)
Discontinued
Operations, Net
of Taxes -- -- 217.6 -- --
Cumulative Effect
of Change in
Accounting
Principle, Net of
Taxes -- (2,008.7) -- -- --
------- ---------- ------------ -------- ----------
Net Income (Loss) 38.2 (2,008.7) 217.6 (7.3) (104.4)
Preferred Stock
Dividends - - - - 10.4
------- ---------- ------------ -------- ----------
Net Income (Loss)
Applicable to
Common
Shareowners $38.2 $(2,008.7) $217.6 $(7.3) $(114.8)
======= ========== ============ ======== ==========
Weighted average
diluted shares 218.4 218.4 218.4 218.4 218.4
Diluted Earnings
(Loss) Per Common
Share $0.17 $(9.20) $1.00 $(0.03) $(0.53)
Normalized Results have been adjusted for the following:
A As a result of the liquidity restrictions and uncertainties at the
company's subsidiary, BRCOM, Inc., the Company's federal income
tax provision included a charge of $912.8 million to establish a
valuation reserve against certain deferred tax assets. These
uncertainties were substantially mitigated and $823 million of the
valuation reserve was reversed in the fourth quarter of 2003.
B In accordance with SFAS 144, the company recorded a non-cash asset
impairment charge of $2.2 billion to reduce the carrying value of
the Broadband unit's assets to estimated fair market value.
C The company recorded restructuring charges of $37.1 million in
2002, which comprised $16.5 million recorded in the first quarter
of 2002 for employee termination benefits, the termination
of a contractual commitment with a vendor related to the November
2001 restructuring, $7.1 million recorded in the third quarter of
2002 primarily for employee termination benefits related to the
September 2002 restructuring, and $14.7 million recorded in the
fourth quarter of 2002 related to the October 2002 restructuring.
D In the second quarter of 2002 the Company incurred a charge of
$13.3 million for costs associated with the termination
of the Company's uncompleted network construction with
El Paso Global Networks.
E In the second and third quarter of 2002, the Company terminated
IRU contracts as a result of the bankruptcy of two carrier
customers, releasing the Company from its service obligations.
F The Company recorded a non-cash charge of $2,008.7 million
resulting from the cumulative effect of a change in
accounting principle in accordance with SFAS 142.
G In the first quarter of 2002, the Company sold substantially all
of the assets of its Cincinnati Bell Directory subsidiary.
H During the fourth quarter, the company recorded a non-cash charge
of $11.2 million for the write-down of an investment security.
Cincinnati Bell Inc.
Normalized Statements of Operations --
Reconciliation to Reported Results
(Unaudited)
(in millions --
except per share amounts) Special and Nonrecurring Items
-------------------------------
For the
Three
Months
Ended
December Income
31, 2002 Tax Asset
(GAAP) Benefits Impairments
---------- -------- -----------
A B
Revenue $509.3 $- $-
-------------------------------------
Costs & Expenses
-------------------------------------
Cost of Services and Products 246.3 -- --
Selling, General & Administrative 122.0 -- --
Depreciation and Amortization 125.6 -- --
Restructuring Charges (Credits) 13.5 -- --
Asset Impairments and Other Charges
(Credits) 2,200.3 -- 2,200.3
Gain on Sale of Broadband Assets -- -- --
---------- -------- -----------
Operating Income (loss) (2,198.4) -- (2,200.3)
Minority Interest Expense (Income) 13.2 -- --
Other (Income) Expense, Net 10.2 -- --
Interest Expense and Other Financing
Costs 46.8 -- --
---------- -------- -----------
Income (Loss) from Continuing
Operations before Income Taxes,
Discontinued Operations and
Cumulative Effect of Change in
Accounting Principle (2,268.6) -- (2,200.3)
Income Tax Expense (Benefit) 132.8 912.8 (770.1)
---------- -------- -----------
Income (Loss) from Continuing
Operations before Discontinued
Operations and Cumulative Effect of
Change in Accounting Principle (2,401.4) (912.8) (1,430.2)
Discontinued Operations, Net of Taxes -- -- --
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- -- --
---------- -------- -----------
Net Income (Loss) (2,401.4) (912.8) (1,430.2)
Preferred Stock Dividends 2.6 - -
---------- -------- -----------
Net Income (Loss) Applicable to
Common Shareowners $(2,404.0) $(912.8) $(1,430.2)
========== ======== ===========
Weighted average diluted shares 218.5 218.5 218.5
Diluted Earnings (Loss) Per Common
Share $(11.00) $(4.18) $(6.55)
(in millions -- except Special and
per share amounts) Nonrecurring Items
-----------------------
For the
Three
Months
Ended
December
31, 2002
Other Before
Special Special
Restructuring Items Items
------------- -------- --------
C D
Revenue $- $- $509.3
------------------------------------
Costs & Expenses
------------------------------------
Cost of Services and Products -- -- 246.3
Selling, General & Administrative -- -- 122.0
Depreciation and Amortization -- -- 125.6
Restructuring Charges (Credits) 13.5 -- --
Asset Impairments and Other Charges
(Credits) -- -- --
Gain on Sale of Broadband Assets -- -- --
------------- -------- --------
Operating Income (loss) (13.5) -- 15.4
Minority Interest Expense (Income) -- -- 13.2
Other (Income) Expense, Net -- 11.2 (1.0)
Interest Expense and Other Financing
Costs -- -- 46.8
------------- -------- --------
Income (Loss) from Continuing
Operations before Income Taxes,
Discontinued Operations and
Cumulative Effect of Change in
Accounting Principle (13.5) (11.2) (43.6)
Income Tax Expense (Benefit) (4.7) (3.9) (1.3)
------------- -------- --------
Income (Loss) from Continuing
Operations before Discontinued
Operations and Cumulative Effect of
Change in Accounting Principle (8.8) (7.3) (42.3)
Discontinued Operations, Net of
Taxes -- -- --
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- -- --
------------- -------- --------
Net Income (Loss) (8.8) (7.3) (42.3)
Preferred Stock Dividends - - 2.6
------------- -------- --------
Net Income (Loss) Applicable to
Common Shareowners $(8.8) $(7.3) $(44.9)
============= ======== ========
Weighted average diluted shares 218.5 218.5 218.5
Diluted Earnings (Loss) Per Common
Share $(0.04) $(0.03) $(0.20)
Normalized Results have been adjusted for the following:
A As a result of the liquidity restrictions and uncertainties at the
Company's subsidiary, BRCOM, Inc., the company's federal income
tax provision included a charge of $912.8 million to establish a
valuation reserve against certain deferred tax assets. These
uncertainties were substantially mitigated and $823 million of the
valuation reserve was reversed in the fourth quarter of 2003.
B In accordance with SFAS 144, the company recorded a non-cash asset
impairment charge of $2.2 billion to reduce the carrying value of
the Broadband unit's assets to estimated fair market value.
C The company recorded restructuring charges of $13.5 million in the
fourth quarter of 2002. The restructuring of BRCOM was intended to
reduce annual expenses.
D During the fourth quarter, the company recorded a non-cash charge
of $11.2 million for the write- down of an investment security.
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