Cincinnati Bell Inc. Reports Financial Results for the Second Quarter 2004.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. -- (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 $30 million --Adds 11,000 "super bundle To sell hardware and software as a combined product or to combine several software packages for sale as a single unit. Contrast with unbundle. See bundled software and bundling. " subscribers --Adds 9,000 wireless subscribers and 7,000 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 --Improves 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. 10 percent versus prior quarter --Reaffirms guidance for 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:CBB) today announced its financial results for the second quarter 2004. Summary In the second quarter, the company continued to make steady progress toward reducing net debt. The company also posted solid wireless and DSL activations. As in previous quarters, the cost of these activations had the effect of reducing operating income versus the prior year quarter. However, operating income showed substantial improvement sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . For the quarter, the company reported revenue of $297 million, operating income of $80 million, and net income of $15 million, or $0.05 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. Excluding the 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 segment and the 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, revenue declined by $9 million, or 3 percent, versus the prior year quarter. Revenue declined primarily in local voice and long distance services. Excluding only the Broadband segment, revenue declined $20 million, or 6 percent, versus the second quarter of 2003. This decline is due in part to the sale of substantially all of the out-of-territory assets of the company's Cincinnati Bell Technology Solutions (CBTS CBTS Computer Based Training System CBTS Computer Based Training Squadron CBTS Can't Be Too Sure ) division in the first quarter of 2004. Primarily as a result of this sale, revenue in the Hardware and Managed Services segment, where CBTS is reported, fell by $12 million versus the prior year quarter. Operating income, excluding the Broadband segment, declined by $12 million, or 13 percent, versus the second quarter of 2003, but improved by $9 million, or 12 percent, versus the first quarter of 2004. The year over year decline is due primarily to increased depreciation ($6 million) and increased 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 ($7 million) related to wireless, DSL and out-of-territory local service, as well as revenue declines offset by other cost reductions. The sequential One after the other in some consecutive order such as by name or number. improvement in operating income is due primarily to a $5 million improvement in operating income in the Wireless segment plus a $5 million decline in Selling, General and Administrative expenses in the remaining segments, offset by revenue declines. In addition, during the second quarter, the company produced $37 million of cash flow(b). The company reduced net debt by $30 million in the quarter, as $6 million of accreting debt and a $1 million working capital adjustment partially offset the net debt reduction due to cash flow.At quarter-end, net debt was $2.2 billion, or 23 percent lower than at the end of the second quarter of 2003. The company also reported capital expenditures of $38 million during the second quarter, an increase of $15 million from the first quarter of 2004. This increase was primarily due to a $9 million increase in wireless capital substantially related to cell site construction and radio additions, plus a $4 million increase in the Other segment related to the installation of a long distance switch designed to reduce the cost of long distance minutes. The company maintains its guidance for full-year capital expenditures of 10-12 percent of revenue. Operational Highlights --The company posted 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 7,000 in the quarter, up 70 percent from the second quarter of 2003. The company finished the second quarter with 117,000 DSL subscribers, up 30,000, or 35 percent, from the prior year. DSL penetration The successful unauthorized breach of a security perimeter. See penetration test. stood at 12 percent of access lines at quarter end, up from 9 percent the prior year and 11 percent the prior quarter. --Access lines declined by 21,000, or 2.1 percent, from the prior year. Access lines declined 2,000 from the prior quarter, a significant improvement over the 5,000 line sequential decline in the first quarter of 2004 and the 8,000 line sequential decline in the fourth quarter of 2003. This improvement was due primarily to the success of the company's out-of-territory local service offering in Dayton Dayton, city (1990 pop. 182,044), seat of Montgomery co., SW Ohio, on the Great Miami River where it is joined by the Stillwater River; inc. 1805. It is the trade center for a fertile farm area, but is best known for its involvement with industry, invention, and , which was launched in March of 2004. The company added 8,000 out-of-territory lines in the second quarter of 2004, finishing the quarter with 19,000 total out-of-territory lines. Meanwhile, in-territory lines declined by 33,000 versus the second quarter of 2003. The company has provided a ten-quarter history of access lines for both in-territory and out-of-territory operations in the table distributed with this release. --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 9,000 subscribers, versus a decline of 6,000 subscribers in the prior year quarter. The company reported gross activations of 61,000 in the second quarter, up 60 percent from the second quarter of 2003 and flat to the first quarter of 2004. --During the second quarter, the company added 11,000 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 was 96 percent better than the second quarter of 2003. Sixteen percent of the company's in-territory consumer households are now super-bundle customers. This helped to increase in-territory consumer revenue per household 3 percent versus the second quarter of 2003, to a total of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $77 per month. As a result of these 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. efforts, 75 percent of in-territory DSL and postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. wireless activations came as part of the bundle. "In the second quarter, Cincinnati Bell remained focused on de-levering, reducing net debt by $30 million, while improving the profitability of the business versus the prior quarter. Meanwhile, we protected our core franchise through bundling of wireless and DSL. Our sales performance was driven by growth in the bundle, as evidenced by strong 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. "We also achieved substantial growth in our out-of-territory local service effort." 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 $190 million and operating income was $71 million for the second quarter of 2004, both down 3 percent versus the second quarter of 2003. The decline in revenue was primarily due to a decline in voice revenue driven by declining access lines, offset by growth in DSL revenue. Operating income declined due to the revenue decline and due to increases in both bad debt expense and subscriber acquisition expense, offset by a reduction in labor expense. Bad debt expense, which declined versus the prior two quarters, increased $2 million versus the second quarter of 2003 due to a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. bad debt adjustment in that quarter, which was not repeated in second quarter of 2004. Subscriber acquisition expense increased $1 million from the prior year quarter primarily related to DSL and local service in Dayton, while labor expense declined $3 million due to reduced staffing levels and favorable pension expense adjustments. Capital investment was $22 million, or 12 percent of revenue, during the quarter. Wireless Services CBW cbw - Crypt Breakers Workbench reported revenue of $67 million in the second quarter, down 1 percent versus the second quarter of 2003, as an increase in equipment revenue partially offset lower service revenue. However, second quarter revenue was up 5 percent compared to the first quarter of 2004. Revenue increased sequentially due to a seasonal increase in usage and price increases on certain rate plans launched in the third and fourth quarters of 2003. Operating income for the quarter was $7 million, a $16 million decline versus the second quarter of 2003 and a $5 million increase from the prior quarter. Operating income declined year over year due to an $8 million increase in depreciation and amortization and a $6 million increase in subscriber acquisition cost, with the remainder due to the decline in revenue. Operating income increased versus the first quarter of 2004 primarily due to the increase in revenue and a $2 million 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 taken in the first quarter, which was not repeated in the second quarter. For the quarter, 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. (c)) was $56, a 6 percent increase, 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 $19, a 10 percent
decline, both versus the first quarter of 2004. Postpaid ARPU increased
due to the seasonal impacts and price increases described above.
Postpaid ARPU declined 8 percent, while prepaid ARPU declined 6 percent,
both versus the second quarter of 2003. Postpaid ARPU declined versus
the prior year quarter due to customer migration to lower ARPU plans
offered in the third and fourth quarters of 2003. Postpaid cost per
gross addition (CPGA (Ceramic PGA) See PGA. CPGA - Ceramic Pin Grid Array (d)) was $411, while prepaid CPGA was $109, a 4 percent decrease and a 91 percent increase, respectively, versus the prior year quarter. Prepaid CPGA increased primarily due to increased promotional cost and 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. . Postpaid churn churn: see butter. finished the quarter at 1.95 percent, up 0.11 points versus the prior quarter and 0.13 points versus the second quarter of 2003. The churn increase was due primarily to the price increases described above. Capital investment was $12 million in the quarter, or 18 percent of revenue. The company finished the quarter with 495,000 subscribers, 92,000 of which were on the company's GSM/GPRS network, which the company launched in the fourth quarter of 2003. Hardware and Managed Services Revenue in the segment of $28 million increased 16 percent versus the second quarter of 2003, excluding revenue associated with the sale of substantially all of the out-of-territory assets of CBTS. This increase was due primarily to a large non-recurring sale of hardware to the new owner of the sold assets and an increase in sales of telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. equipment to enterprises. Including the impact of the sold assets, revenue was down 29 percent versus the second quarter of 2003. Operating income of $3 million was down $1 million, also versus the second quarter of 2003. Operating income declined primarily due to a $1 million gain on the sale of assets in the second quarter of 2003, which was not repeated in the second quarter of 2004. Other Communications Services Other Communications Services, which includes the company's 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 second quarter, down 9 percent from the same quarter a year ago, primarily due to declines in long distance and payphone usage. The segment produced $3 million in operating income for the quarter, flat to the prior year quarter, as the cost of long distance minutes, selling, general and administrative expenses and depreciation all declined. The cost of long distance minutes fell due to lower minute volume, the installation of a switch and the negotiation of lower wholesale long distance per-minute costs. CBAD's Cincinnati market share of CBT access lines for which a long distance carrier is selected was 73 percent in the consumer market and 46 percent in the business market at the end of the second quarter, improvements of 3 points and 1 point, respectively, versus the prior year quarter. Broadband The Broadband segment produced no revenue in the quarter, due to the sale of substantially all of the company's broadband assets in 2003. There are no longer any meaningful operations in this segment. 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. At the end of the second quarter, the company had $52 million in such liabilities. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , the company has eliminated $10 million of such liabilities, using $4 million in cash. "In the second 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. well against its strategy of reducing net debt while driving wireless and DSL activations," 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. "Our financial condition continues to improve even as we invest in the defense of our core franchise." Financial Guidance Cincinnati Bell reaffirms its guidance for 2004: --Revenue decline, excluding the Broadband segment, of low single-digit percent (Note that, due to 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 effective 1/1/04, the operations of CBTS are no longer reported in the Broadband segment, but are now in the Hardware and Managed Services segment. Note further that the company sold substantially all of the out-of-territory assets of CBTS in the first quarter of 2004, which will reduce revenue by approximately $15 million per quarter. However, the guidance statement above remains unchanged.) --Net 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 as a result of utilizing net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. . --Capital expenditures of 10 to 12 percent of revenue --Net debt reduction of approximately $140 million 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. , net of the fair value of hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. instruments that are applicable to such 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. (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. 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, the average subscriber base 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 second quarter 2004 results on Wednesday Wednesday: see week. , July July: see month. 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 August 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 149528. 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. 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 and Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. reports. The forward-looking statements included in this press release represent the company's estimates as of July 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 June 30, %
2004 2003 Change
--------- --------- ------
Revenue $ 297.0 $ 450.6 (34%)
Costs & Expenses:
Cost of Services and Products 117.6 209.8 (44%)
Selling, General & Administrative 53.6 109.5 (51%)
Depreciation and Amortization 45.6 39.7 15%
Restructuring -- (3.4) n/m
Asset Impairments and
Other Charges (Credits) (0.2) (1.1) (82%)
Gain on Sale of Broadband Assets -- (299.0) n/m
-------- --------
Operating Income 80.4 395.1 (80%)
Minority Interest Expense 1.2 15.8 (92%)
Other (Income) Expense, Net -- (0.4) n/m
Interest Expense and
Other Financing Costs 50.5 61.3 (18%)
-------- --------
Income before Income Taxes and
Cumulative Effect of Change
in Accounting Principle 28.7 318.4 (91%)
Income Tax Expense 13.8 (2.0) n/m
-------- --------
Income before Cumulative Effect
of Change in Accounting Principle 14.9 320.4 (95%)
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- -- n/m
-------- --------
Net Income 14.9 320.4 (95%)
Preferred Stock Dividends 2.6 2.6 --
-------- --------
Net Income Applicable to
Common Shareowners $ 12.3 $ 317.8 (96%)
======== ========
Basic Earnings Per Common Share:
Income before Cumulative Effect of
Change in Accounting Principle $ 0.05 $ 1.45
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- --
-------- --------
Net Earnings Per Common Share $ 0.05 $ 1.45
======== ========
Diluted Earnings Per Common Share:
Income before Cumulative Effect of
Change in Accounting Principle $ 0.05 $ 1.33
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- --
-------- --------
Net Earnings Per Common Share $ 0.05 $ 1.33
======== ========
Weighted Average Common Shares
Outstanding:
- Basic 245.0 218.9
- Diluted 250.4 249.1
For the Six Months
Ended June 30, %
2004 2003 Change
--------- --------- ------
Revenue $ 599.4 $ 931.3 (36%)
Costs & Expenses:
Cost of Services and Products 243.3 428.7 (43%)
Selling, General & Administrative 111.5 230.2 (52%)
Depreciation and Amortization 91.3 81.3 12%
Restructuring 0.2 (3.4) (106%)
Asset Impairments and
Other Charges (Credits) (0.1) (0.8) (88%)
Gain on Sale of Broadband Assets -- (299.0) n/m
-------- --------
Operating Income 153.2 494.3 (69%)
Minority Interest Expense 1.3 29.9 (96%)
Other (Income) Expense, Net (0.1) (0.5) (80%)
Interest Expense and
Other Financing Costs 101.4 106.6 (5%)
-------- --------
Income from Continuing Operations
before Income Taxes and
Cumulative Effect of Change in
Accounting Principle 50.6 358.3 (86%)
Income Tax Expense 24.8 -- n/m
-------- --------
Income from Continuing Operations
before Cumulative Effect of Change
in Accounting Principle 25.8 358.3 (93%)
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- 85.9 n/m
-------- --------
Net Income 25.8 444.2 (94%)
Preferred Stock Dividends 5.2 5.2 --
-------- --------
Net Income Applicable to
Common Shareowners $ 20.6 $ 439.0 (95%)
======== ========
Basic Earnings Per Common Share:
Income from Continuing Operations
before Cumulative Effect of Change
in Accounting Principle $ 0.08 $ 1.62
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- 0.39
-------- --------
Net Earnings Per Common Share $ 0.08 $ 2.01
======== ========
Diluted Earnings Per Common Share:
Income from Continuing Operations
before Cumulative Effect of Change
in Accounting Principle $ 0.08 $ 1.55
Cumulative Effect of Change in
Accounting Principle, Net of Taxes -- 0.35
-------- --------
Net Earnings Per Common Share $ 0.08 $ 1.90
======== ========
Weighted Average Common Shares
Outstanding:
- Basic 245.0 218.9
- Diluted 252.0 244.9
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions) For the Three Months
Ended June 30, %
2004 2003 Change
--------- --------- ------
Revenue:
Local $ 189.6 $ 194.5 (3%)
Wireless 67.1 67.9 (1%)
Hardware & Mgd. Services 28.1 39.6 (29%)
Other 19.0 20.8 (9%)
Broadband -- 147.0 n/m
Corporate and eliminations (6.8) (19.2) (65%)
-------- --------
Total Revenue $ 297.0 $ 450.6 (34%)
======== ========
Cost of Services and Products:
Local $ 55.8 $ 58.5 (5%)
Wireless 32.0 25.4 26%
Hardware & Mgd. Services 21.3 30.2 (29%)
Other 12.9 13.9 (7%)
Broadband -- 96.7 n/m
Corporate and eliminations (4.4) (14.9) (70%)
-------- --------
Total Cost of Services
and Products $ 117.6 $ 209.8 (44%)
======== ========
Selling, General & Administrative:
Local $ 33.3 $ 31.7 5%
Wireless 13.3 12.5 6%
Hardware & Mgd. Services 3.3 6.0 (45%)
Other 3.2 3.7 (14%)
Broadband (0.1) 49.6 (100%)
Corporate and eliminations 0.6 6.0 (90%)
-------- --------
Total Selling, General &
Administrative $ 53.6 $ 109.5 (51%)
======== ========
Depreciation and Amortization:
Local $ 29.8 $ 31.1 (4%)
Wireless 15.2 7.7 97%
Hardware & Mgd. Services 0.2 0.2 --
Other 0.3 0.6 (50%)
Broadband -- -- --
Corporate and eliminations 0.1 0.1 --
-------- --------
Total Depreciation and
Amortization $ 45.6 $ 39.7 15%
======== ========
Restructuring:
Local $ -- $ -- --
Wireless -- -- --
Hardware & Mgd. Services -- -- --
Other -- -- --
Broadband -- (3.4) n/m
Corporate and eliminations -- -- --
-------- --------
Total Restructuring $ -- $ (3.4) n/m
======== ========
Asset Impairments and Other Charges (Credits):
Local $ -- $ -- --
Wireless -- -- --
Hardware & Mgd. Services -- (1.2) n/m
Other -- -- --
Broadband (0.2) (298.9) (100%)
Corporate and eliminations -- -- --
-------- --------
Total Asset Impairments and
Other Charges (Credits) $ (0.2) $ (300.1) (100%)
======== ========
Operating Income:
Local $ 70.7 $ 73.2 (3%)
Wireless 6.6 22.3 (70%)
Hardware & Mgd. Services 3.3 4.4 (25%)
Other 2.6 2.6 --
Broadband 0.3 303.0 (100%)
Corporate and eliminations (3.1) (10.4) (70%)
-------- --------
Total Operating Income $ 80.4 $ 395.1 (80%)
======== ========
For the Six Months
Ended June 30, %
2004 2003 Change
--------- --------- ------
Revenue:
Local $ 380.5 $ 389.1 (2%)
Wireless 131.2 131.8 --
Hardware & Mgd. Services 62.5 77.4 (19%)
Other 37.8 40.9 (8%)
Broadband -- 332.4 n/m
Corporate and eliminations (12.6) (40.3) (69%)
-------- --------
Total Revenue $ 599.4 $ 931.3 (36%)
======== ========
Cost of Services and Products:
Local $ 112.1 $ 118.8 (6%)
Wireless 65.4 51.2 28%
Hardware & Mgd. Services 48.2 58.0 (17%)
Other 26.0 28.6 (9%)
Broadband -- 203.2 n/m
Corporate and eliminations (8.4) (31.1) (73%)
-------- --------
Total Cost of Services
and Products $ 243.3 $ 428.7 (43%)
======== ========
Selling, General & Administrative:
Local $ 66.8 $ 66.2 1%
Wireless 25.5 23.7 8%
Hardware & Mgd. Services 8.7 12.0 (28%)
Other 6.1 7.6 (20%)
Broadband -- 117.4 n/m
Corporate and eliminations 4.4 3.3 33%
-------- --------
Total Selling, General &
Administrative $ 111.5 $ 230.2 (52%)
======== ========
Depreciation and Amortization:
Local $ 59.7 $ 62.3 (4%)
Wireless 30.2 15.3 97%
Hardware & Mgd. Services 0.4 0.3 33%
Other 0.7 1.1 (36%)
Broadband -- 1.9 n/m
Corporate and eliminations 0.3 0.4 (25%)
-------- --------
Total Depreciation and
Amortization $ 91.3 $ 81.3 12%
======== ========
Restructuring:
Local $ 0.2 $ -- n/m
Wireless -- -- --
Hardware & Mgd. Services -- -- --
Other -- -- --
Broadband -- (3.4) n/m
Corporate and eliminations -- -- --
-------- --------
Total Restructuring $ 0.2 $ (3.4) (106%)
======== ========
Asset Impairments and Other Charges (Credits):
Local $ -- $ 0.3 n/m
Wireless 2.4 -- n/m
Hardware & Mgd. Services (1.1) (1.2) (8%)
Other -- -- --
Broadband (1.4) (298.9) (100%)
Corporate and eliminations -- -- --
-------- --------
Total Asset Impairments and
Other Charges (Credits) $ (0.1) $ (299.8) (100%)
======== ========
Operating Income:
Local $ 141.7 $ 141.5 --
Wireless 7.7 41.6 (81%)
Hardware & Mgd. Services 6.3 8.3 (24%)
Other 5.0 3.6 39%
Broadband 1.4 312.2 (100%)
Corporate and eliminations (8.9) (12.9) (31%)
-------- --------
Total Operating Income $ 153.2 $ 494.3 (69%)
======== ========
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(in millions - except debt covenants and segment metric information)
June 30, December 31,
2004 2003
------------ ------------
Assets:
Cash and Cash Equivalents $ 22.3 $ 26.0
Receivables - Net 132.7 140.5
Materials and Supplies 45.4 33.6
Other Current Assets 77.2 59.3
Property, Plant and Equipment - Net 869.9 898.8
Goodwill 40.9 40.9
Other Intangible Assets - Net 43.8 47.2
Noncurrent Deferred Tax Assets 662.4 696.9
Other Noncurrent Assets 127.4 130.3
---------- ----------
Total Assets $ 2,022.0 $ 2,073.5
========== ==========
Liabilities and Shareowners' Deficit:
Current Portion of Long-Term Debt $ 16.9 $ 13.3
Current Portion of Unearned Revenue
and Customer Deposits 41.3 41.5
Accounts Payable 70.8 64.5
Accrued Taxes 29.0 43.7
Other Current Liabilities 136.5 143.8
Long-Term Debt, Less Current Portion 2,192.7 2,274.5
Unearned Revenue, Less Current Portion 10.7 11.9
Other Noncurrent Liabilities 139.3 120.0
Minority Interest 41.0 39.7
Shareowners' Deficit (656.2) (679.4)
---------- ----------
Total Liabilities and
Shareowners' Deficit $ 2,022.0 $ 2,073.5
========== ==========
Other Data:
Common Shares Outstanding at
Balance Sheet Date 245.2 244.6
Net Debt $ 2,187.6 $ 2,261.8
Credit Facility Availability $ 334.8 $ 299.5
Debt Covenants:
Debt to EBITDA Ratio - Calculated 4.80 4.70
Debt to EBITDA Ratio - Required 5.95 6.20
Senior Secured Debt to EBITDA Ratio -
Calculated 1.77 1.87
Senior Secured Debt to EBITDA Ratio -
Required 3.75 4.00
Interest Coverage Ratio - Calculated 2.89 3.52
Interest Coverage Ratio - Required 2.25 2.50
Year-to-date Capital Expenditures -
Restricted Group Actual 60.9 122.2
Maximum Annual Capital Expenditures -
Restricted Group Allowed 137.8 146.0
Segment Metric Information (in thousands):
Local Access Lines 979.4 985.8
Complete Connections Subscribers 329.4 312.5
DSL Subscribers 117.4 99.5
Custom Connections Subscribers 102.4 71.4
GSM:
Postpaid Wireless Subscribers 60.4 8.3
Prepaid Wireless Subscribers 31.6 --
TDMA:
Postpaid Wireless Subscribers 258.2 303.6
Prepaid Wireless Subscribers 144.4 162.5
---------- ----------
Total Wireless Subscribers 494.6 474.4
========== ==========
Consumer Long Distance Lines 417.2 414.4
Business Long Distance Lines 125.1 124.6
---------- ----------
Total Long Distance Lines 542.3 539.0
========== ==========
Cincinnati Bell Telephone
10 Quarter Access Line Detail
(Unaudited)
(in thousands)
2002
-----------------------------------
1Q 2Q 3Q 4Q
-------- -------- -------- --------
Access Lines:
In-Territory 1,025.2 1,017.4 1,008.6 1,005.4
Out-of-Territory 3.3 4.1 5.3 6.5
-------- -------- -------- --------
Total Access Lines 1,028.5 1,021.5 1,013.9 1,011.9
======== ======== ======== ========
2003
-----------------------------------
1Q 2Q 3Q 4Q
-------- -------- -------- --------
Access Lines:
In-Territory 1,002.1 992.7 985.7 976.6
Out-of-Territory 7.1 7.8 8.5 9.2
-------- -------- -------- --------
Total Access Lines 1,009.2 1,000.5 994.2 985.8
======== ======== ======== ========
2004
-----------------
1Q 2Q
-------- --------
Access Lines:
In-Territory 969.3 959.9
Out-of-Territory 11.6 19.5
-------- --------
Total Access Lines 980.9 979.4
======== ========
Cincinnati Bell Inc.
Consolidated Revenue and Operating Income Excluding Broadband
(Unaudited)
(dollars in millions)
For the Three Months
Ended June 30, %
2004 2003 Change
--------- --------- ------
Reconciliation of Consolidated Revenue to Consolidated Revenue
Excluding Broadband
Revenue $ 297.0 $ 450.6 (34%)
Less adjustments:
Broadband Revenue -- 147.0 (100%)
Broadband Intercompany Activity -- (13.7) (100%)
-------- --------
Consolidated Revenue
Excluding Broadband $ 297.0 $ 317.3 (6%)
======== ========
Reconciliation of Consolidated Operating Income to Consolidated
Operating Income Excluding Broadband
Operating Income $ 80.4 $ 395.1 (80%)
Less adjustments:
Broadband Operating Income 0.3 303.0 (100%)
-------- --------
Consolidated Operating Income
Excluding Broadband $ 80.1 $ 92.1 (13%)
======== ========
For the Six Months
Ended June 30, %
2004 2003 Change
--------- --------- ------
Reconciliation of Consolidated Revenue to Consolidated Revenue
Excluding Broadband
Revenue $ 599.4 $ 931.3 (36%)
Less adjustments:
Broadband Revenue -- 332.4 (100%)
Broadband Intercompany Activity -- (30.3) (100%)
-------- --------
Consolidated Revenue Excluding
Broadband $ 599.4 $ 629.2 (5%)
======== ========
Reconciliation of Consolidated Operating Income to Consolidated
Operating Income Excluding Broadband
Operating Income $ 153.2 $ 494.3 (69%)
Less adjustments:
Broadband Operating Income 1.4 312.2 (100%)
-------- --------
Consolidated Operating Income
Excluding Broadband $ 151.8 $ 182.1 (17%)
======== ========
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
June 30, Dec. 31, --------------
(dollars in millions) 2004 2003 $ %
---------- ---------- ------- ------
Credit Facilities $ 521.0 $ 608.4 $(87.4) (14%)
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. 367.8 360.6 7.2 2%
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. 539.7 540.0 (0.3) --
Capital leases 17.9 18.2 (0.3) (2%)
Other short-term debt 1.3 2.7 (1.4) (52%)
Unamortized discount (38.1) (42.1) 4.0 (10%)
--------- --------- ------
Total Debt 2,209.6 2,287.8 (78.2) (3%)
Add: Interest Rate Swap Liability
on 8 3/8% Notes Due 2014 0.3 -- 0.3 --
Less: Cash and Cash Equivalents (22.3) (26.0) 3.7 (14%)
--------- --------- ------
Net Debt (as defined by the
company) $ 2,187.6 $ 2,261.8 $(74.2) (3%)
========= ========= ======
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions) For the Three Months
Ended June 30,
Consolidated Cash Flow 2004 2003
--------- ---------
Cash provided by operating activities $ 74.6 $ 90.7
-------- --------
Capital expenditures (38.1) (35.5)
Proceeds from sale of assets (1.3) 62.2
Other 1.5 (4.3)
-------- --------
Cash used in investing activities (37.9) 22.4
-------- --------
Issuance of long-term debt -- --
Repayment of long-term debt (35.4) (112.4)
Short-term borrowings (repayments), net (0.8) (1.7)
Debt issuance costs -- (2.7)
Issuance of common shares -
exercise of stock options 0.3 --
Preferred stock dividends paid (2.6) (2.6)
Other 1.3 --
-------- --------
Cash used in financing activities (37.2) (119.4)
-------- --------
Net decrease in cash and cash equivalents (0.5) (6.3)
Cash and cash equivalents at beginning of
period 22.8 36.4
-------- --------
Cash and cash equivalents at end of period $ 22.3 $ 30.1
======== ========
Reconciliation of GAAP Cash Flow to Cash Flow
as defined by the company
Net decrease in cash and cash equivalents $ (0.5) $ (6.3)
Less adjustments:
Change in restricted cash (operating
activities) -- 6.9
Issuance of long-term debt (financing
activities) -- --
Repayment of long-term debt (financing
activities) (35.4) (112.4)
Short-term borrowings (repayments),
net (financing activities) (0.8) (1.7)
Proceeds from sale of assets (investing
activities) (1.3) 62.2
-------- --------
Cash flow (as defined by the company) $ 37.0 $ 38.7
======== ========
Cash Expenditures for Restructuring $ (0.7) $ (3.7)
Income Tax Refunds/(Payments) $ (1.7) $ (0.1)
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