Cincinnati Bell Inc. Reports Third Quarter Results; Strong DSL and Wireless Activations Generate Solid Performance and Momentum.CINCINNATI Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. -- Cincinnati Bell Cincinnati Bell is the dominant telephone company for Cincinnati, Ohio and its nearby suburbs in Ohio, Indiana and Kentucky. The parent company is named Cincinnati Bell Inc. Inc. (NYSE NYSE See: New York Stock Exchange :CBB CBB Celebrity Big Brother CBB College van Beroep voor het Bedrijfsleven (Dutch) CBB Cattlemen's Beef Board CBB Coalition for Buzzards Bay CBB Could Be Better (visual effects) CBB Can't Be Bothered ) today announced financial results for the third quarter of 2005 including revenue of $300 million, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $72 million and a net loss of $44 million, or 19 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . Reported results reflect the impact of debt refinancing Refinancing An extension and/or increase in amount of existing debt. completed during the quarter and include a $92 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss on 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 debt. Excluding this charge, net income for the quarter was $11 million, or 3 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. "Cincinnati Bell continues to assert its competitive edge in the market by delivering the best wireless network in Cincinnati and growing wireless and 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 activations," 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. "In addition, completing the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of our 16% Senior Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Discount Notes is expected to increase free cash flow and accelerate our ability to reduce debt going forward." Third Quarter Highlights --Strong promotions drove record third-quarter DSL net additions of 9,000, up 65 percent from the third quarter 2004. Penetration The successful unauthorized breach of a security perimeter. See penetration test. of in-territory primary consumer access lines increased to 24 percent at quarter-end, up from 18 percent at the same time a year ago. DSL penetration of total in-territory access lines rose to 17 percent versus 13 percent a year ago. --Introduction of the innovative "New Rules" wireless rate plans led to a 38 percent increase in postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. gross activations versus the prior quarter while higher network quality continued to improve churn churn: see butter. to 2.15 percent. As a result, postpaid net additions were 4,100, an improvement of 7,500 from the second quarter of 2005. --Reflecting Cincinnati Bell's bundling bundling, courtship custom, thought to have originated in Holland and the British Isles. It was extended to America, particularly to New England, and most widely practiced in the years prior to the Revolution of 1776. success, its "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. " 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. base expanded to 147,000, up 30 percent from a year ago and representing a 25 percent penetration of in-territory households. --Cincinnati Bell completed the final stage of its refinancing plan on August 31 with the repurchase of its 16% Notes. The repurchase was financed with new borrowings under the company's senior secured credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities . Due to lower interest rates on the new bank debt, the refinancing will increase free cash flow by $20 million to $25 million on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. Financial and Operations Review "We continued to see improvements driven by investments made in our business over the past year," said Brian Ross
Brian Ross (born September 4, 1944 in Ballston Spa, New York) is a racecar driver. He won Rookie of the Year honors in the Auto Racing Club of America in 2000. , chief financial officer. "For example, investments in wireless network quality have resulted in consistently better postpaid churn. Access line performance improved sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen due in part to the investments we made in DSL activations and out-of-territory line additions. We also continued to benefit from investments in our data center and long distance operations." Cincinnati Bell recorded quarterly revenue of $300 million, consistent with the third quarter of 2004 after normalizing for $6 million in revenue recorded in the prior year but associated with assets that were sold in 2004. Increased revenue from equipment and data center operations, long distance and DSL partially offset lower wireless and local voice revenue. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (1) (earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Due to improvements in working capital, quarterly free cash flow(2) increased to $36 million, up 6 percent from the third quarter of 2004. Cincinnati Bell reported net debt(3) of $2.1 billion at quarter-end, down approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 2 percent from a year ago. Capital expenditures were $38 million, or 13 percent of revenue for the quarter. Local Communications Services Total access line performance of Cincinnati Bell Telephone (CBT (Computer-Based Training) Using the computer for training and instruction. CBT programs are called "courseware" and provide interactive training sessions for all disciplines. ) improved during the quarter. Sequentially, in-territory access line decline slowed while the growth of out-of-territory lines increased. A loss of 12,000 in-territory lines in the third quarter compared favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to the 15,000 line loss in the second quarter of 2005. Out-of-territory operations added 3,300 access lines in the quarter, more than double the amount added in the second quarter of 2005. DSL net additions totaled 9,000, up significantly from 4,000 additions in the prior quarter. The Local segment produced quarterly revenue of $187 million, down 2 percent from the third quarter of 2004 as a 17 percent increase in DSL revenue partially offset lower voice revenue. Due in part to better than expected DSL activations, EBITDA of $95 million declined 5 percent compared to the third quarter of 2004 after adjusting for a $4 million increase in non-cash post-retirement medical and pension expenses. Wireless Services Cincinnati Bell Wireless achieved improvement in both gross activations and churn during the third quarter. Postpaid gross activations were up 38 percent on a sequential One after the other in some consecutive order such as by name or number. basis driven by the success of the "New Rules" campaign introduced in August 2005. These "New Rules" rate plans represent a first in the wireless industry, offering unlimited calling from any Cincinnati Bell Wireless phone to any other wireless or wireline Cincinnati Bell number. Consistently higher network quality resulted in postpaid churn of 2.15 percent versus 3.68 percent in the third quarter of 2004. As a result, postpaid net additions were 4,100, an improvement of 14,600 from the prior year period. The Wireless segment generated quarterly revenue of $58 million compared with $66 million in the third quarter of 2004. Growth in equipment and data revenue partially offset lower voice revenue and a reduction in roaming The ability to use a communications device such as a cellphone or PDA and be able to move from one cell or access point to another without losing the connection. revenue related to the merger of AT&T Wireless and Cingular. EBITDA for the quarter was $9 million versus $23 million in the third quarter of 2004, driven by continued subscriber voice revenue compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. and increased subsidies associated with higher activations and increased migrations from the legacy 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). network to the GSM (Global System for Mobile Communications) A digital cellular phone technology based on TDMA that is the predominant system in Europe, but also used worldwide. Developed in the 1980s, GSM was first deployed in seven European countries in 1992. network. 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 Driven by strong equipment sales and managed services revenue from data center operations, revenue from the Hardware and Managed Services segment was $44 million, a $5 million increase versus the third quarter 2004. Quarterly EBITDA of $4 million was even with the third quarter of 2004. Other Communications Services Cincinnati Bell's long distance operations, part of the Other Communications Services segment, increased subscribers by 12,000, or 2 percent, versus the end of the third quarter 2004. Long distance market share (as measured by the number of CBT lines for which a long distance carrier was selected) was 80 percent in the consumer market and 51 percent in the business market, improvements of 5 points and 4 points, respectively, compared to the same time a year ago. Quarterly revenue for the segment, which also includes payphone payphone Noun a coin-operated telephone payphone pay n → Münztelefon nt; (card phone) → Kartentelefon nt operations, was $20 million, up $1 million from a year ago when excluding $2 million in revenue associated with assets sold in 2004. Increased revenue contributions from new long distance business products and bundling partially offset a decline in payphone and other revenue due to the sale of low-margin assets. EBITDA of $7 million was even with the third quarter of 2004. 2005 Guidance The company has revised 2005 financial guidance for EBITDA and Free Cash Flow to reflect lower year to date wireless voice revenue and additional expense related to increased wireless and DSL activations, which are expected to continue into the fourth quarter. Category Guidance ---------------------------------------------------------------------- Revenue Low single-digit percent decline ---------------------------------------------------------------------- EBITDA $470 million to $480 million ---------------------------------------------------------------------- Capital Expenditures Approximately 12 percent of revenue ---------------------------------------------------------------------- Free Cash Flow Approximately $145 million ---------------------------------------------------------------------- Conference Call/Webcast Cincinnati Bell will host a conference call today at 10:00 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) to discuss its third quarter 2005 results. A live webcast of the call will be available via the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of www.cincinnatibell.com. The conference call dial-in number is 877.641.0086. International callers may dial 678.460.1867. A taped replay call will be available one hour after the conclusion of the teleconference until 5:00 p.m. (EST) on November November: see month. 22, 2005. For U.S. callers, the replay will be available at 888.284.7564. For international callers, the replay will be available at 678.460.1866. The replay reference number is 205170. An archived version of the webcast will also be available at www.cincinnatibell.com. About Cincinnati Bell Inc. Cincinnati Bell Inc. (NYSE:CBB) is parent to one of the nation's most-respected and best-performing local exchange and wireless providers with a legacy of unparalleled customer service excellence. With headquarters in Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , Cincinnati Bell provides a wide range of telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. products and services to residential and business customers in Ohio, Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. and Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). . For more information, visit www.cincinnatibell.com. Use of Non-GAAP Financial Measures This press release contains information about net debt, free cash flow and earnings before interest, taxes, depreciation and amortization (EBITDA). These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures. Detailed reconciliations of net debt, free cash flow and EBITDA to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com. (1)EBITDA provides a useful measure of operational performance. The company defines EBITDA as GAAP Operating Income plus depreciation, amortization, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , asset impairments and other special items. EBITDA should not be considered as an alternative to comparable GAAP measures of profitability. (2)Free cash flow provides a useful measure of operational performance, liquidity and financial health. The company defines free cash flow as SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 95 cash provided by (used in) operating, financing and investing activities, less changes in issuance and repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and credit facilities in financing activities and less proceeds from the sale of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and assets in investing activities. Free cash flow should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities, or the change in cash on the balance sheet and may not be comparable with free cash flow as defined by other companies. (3)Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and long-term debt and unamortized premium and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. discount, offset by cash and cash equivalents. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Note Certain of the statements and predictions contained in this release constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and . In particular, statements, projections or estimates that include or reference the words "believes," "anticipates," "plans," "intends," "expects," "will," or any similar expression fall within the safe harbor for forward-looking statements contained in the Reform Act. Actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statement for a variety of reasons, including, but not limited to: Cincinnati Bell's ability to maintain its market position in communications services, including wireless, wireline and internet services; general economic trends affecting the purchase or supply of telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. services; world and national events that may affect the ability to provide services; changes in the regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. environment; any rulings, orders or decrees that may be issued by any court or arbitrator arbitrator n. one who conducts an arbitration, and serves as a judge who conducts a "mini-trial," somewhat less formally than a court trial. In most cases the arbitraror is an attorney, either alone or as part of a panel. ; restrictions imposed under various credit facilities and debt instruments; work stoppages caused by labor disputes; adjustments resulting from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. audit procedures; and Cincinnati Bell's ability to develop and launch new products and services. More information on potential risks and uncertainties is available in recent filings with the Securities and Exchange Commission, including Cincinnati Bell's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. report, Form 10-Q Form 10-Q See 10-Q. reports and Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. reports. The forward-looking statements included in this release represent company estimates as of November 8, 2005. Cincinnati Bell anticipates that subsequent events and developments will cause its estimates to change.
Cincinnati Bell Inc.
Consolidated Statements of Income
(Unaudited)
(dollars in millions, except per share amounts)
Three Months Nine Months
Ended September 30, % Ended September 30, %
2005 2004 Change 2005 2004 Change
--------- --------- ------ --------- --------- ------
Revenues $300.3 $307.9 (2%) $904.3 $907.3 (0%)
-----------------
Costs and
Expenses
-----------------
Cost of Services
and Products 130.6 118.3 10% 373.5 361.4 3%
Selling, General
and
Administrative 55.8 53.9 4% 171.3 165.6 3%
Depreciation and
Amortization 41.8 51.5 (19%) 133.2 142.8 (7%)
Restructuring -- -- n/m -- 0.2 n/m
Asset
Impairments and
Other Charges -- 1.6 n/m 23.1 1.5 n/m
--------- --------- --------- ---------
Operating
Income 72.1 82.6 (13%) 203.2 235.8 (14%)
Minority Interest
Expense (Income) (1.0) 0.2 n/m (5.8) 1.5 n/m
Interest Expense 47.0 50.6 (7%) 147.1 151.9 (3%)
Loss on
Extinguishment
of Debt 91.9 -- n/m 99.8 -- n/m
Other Income, Net (1.3) (0.7) 86% (1.5) (0.7) 114%
--------- --------- --------- ---------
Income (Loss)
before Income
Taxes (64.5) 32.5 n/m (36.4) 83.1 (144%)
Income Tax
(Benefit)
Expense (20.4) 15.0 n/m 40.7 39.8 2%
--------- --------- --------- ---------
Net Income
(Loss) (44.1) 17.5 n/m (77.1) 43.3 n/m
Preferred Stock
Dividends 2.6 2.6 0% 7.8 7.8 0%
--------- --------- --------- ---------
Net Income (Loss)
Applicable to
Common
Shareowners $(46.7) $14.9 n/m $(84.9) $35.5 n/m
========= ========= ========= =========
Basic and Diluted
Earnings (Loss)
Per Common Share $(0.19) $0.06 $(0.35) $0.14
---------------- ========= ========= ========= =========
Weighted Average
Common Shares
Outstanding
(millions)
-----------------
- Basic 246.1 245.1 245.8 245.0
- Diluted 246.1 249.2 245.8 251.1
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions)
Three Months Nine Months
Ended September 30, % Ended September 30, %
2005 2004 Change 2005 2004 Change
--------- --------- ------ --------- --------- ------
Local
Revenue
Voice $123.6 $130.3 (5%) $377.9 $391.7 (4%)
Data 54.9 50.8 8% 162.3 151.6 7%
Other services 8.9 9.3 (4%) 26.9 27.7 (3%)
--------- --------- --------- ---------
Total revenue 187.4 190.4 (2%) 567.1 571.0 (1%)
Operating Costs
and Expenses:
Cost of
services and
products 58.4 53.2 10% 175.2 165.4 6%
Selling,
general and
administrative 34.0 33.1 3% 103.0 99.9 3%
Depreciation 27.1 29.9 (9%) 81.0 89.6 (10%)
Restructuring -- -- n/m -- 0.2 n/m
--------- --------- --------- ---------
Total operating
costs and
expenses 119.5 116.2 3% 359.2 355.1 1%
--------- --------- --------- ---------
Operating income $67.9 $74.2 (8%) $207.9 $215.9 (4%)
========= ========= ========= =========
Wireless
Revenue
Service $52.3 $61.7 (15%) $163.3 $184.9 (12%)
Equipment 5.9 4.5 31% 16.5 12.5 32%
--------- --------- --------- ---------
Total revenue 58.2 66.2 (12%) 179.8 197.4 (9%)
Operating Costs
and Expenses:
Cost of
services and
products 34.9 30.3 15% 92.2 95.7 (4%)
Selling,
general and
administrative 14.2 13.3 7% 41.3 38.8 6%
Depreciation 13.2 14.7 (10%) 48.4 43.9 10%
Amortization -- 6.1 n/m -- 7.0 n/m
Asset
impairments
and other
charges -- 1.7 n/m 23.7 4.2 n/m
--------- --------- --------- ---------
Total operating
costs and
expenses 62.3 66.1 (6%) 205.6 189.6 8%
--------- --------- --------- ---------
Operating income
(loss) $(4.1) $0.1 n/m $(25.8) $7.8 n/m
========= ========= ========= =========
Hardware & Mgd.
Services
Revenue
Hardware $26.4 $24.0 10% $76.8 $56.9 35%
Managed
services 17.1 14.6 17% 48.4 44.2 10%
--------- --------- --------- ---------
Total revenue 43.5 38.6 13% 125.2 101.1 24%
Operating Costs
and Expenses:
Cost of
services and
products 35.6 31.0 15% 101.1 79.2 28%
Selling,
general and
administrative 4.4 3.8 16% 13.0 12.4 5%
Depreciation 0.7 0.2 n/m 1.7 0.7 143%
Asset
impairments
and other
charges
(credits) -- -- n/m (0.1) (1.1) (91%)
--------- --------- --------- ---------
Total operating
costs and
expenses 40.7 35.0 16% 115.7 91.2 27%
--------- --------- --------- ---------
Operating income $2.8 $3.6 (22%) $9.5 $9.9 (4%)
========= ========= ========= =========
Other
Revenue $19.7 $20.7 (5%) $58.3 $58.6 (1%)
Operating Costs
and Expenses:
Cost of
services and
products 8.2 9.5 (14%) 25.2 35.6 (29%)
Selling,
general and
administrative 4.0 4.0 -- 11.7 10.1 16%
Depreciation 0.5 0.4 25% 1.4 1.2 17%
--------- --------- --------- ---------
Total costs and
expenses 12.7 13.9 (9%) 38.3 46.9 (18%)
--------- --------- --------- ---------
Operating income $7.0 $6.8 3% $20.0 $11.7 71%
========= ========= ========= =========
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(dollars in millions)
Three Months Nine Months
Ended September 30, % Ended September 30, %
2005 2004 Change 2005 2004 Change
--------- --------- ------ --------- --------- ------
Revenue
-----------------
Local $187.4 $190.4 (2%) $567.1 $571.0 (1%)
Wireless 58.2 66.2 (12%) 179.8 197.4 (9%)
Hardware & Mgd.
Services 43.5 38.6 13% 125.2 101.1 24%
Other 19.7 20.7 (5%) 58.3 58.6 (1%)
Broadband -- -- n/m -- -- n/m
Corporate and
eliminations (8.5) (8.0) 6% (26.1) (20.8) 25%
--------- --------- --------- ---------
Total Revenue $300.3 $307.9 (2%) $904.3 $907.3 (0%)
========= ========= ========= =========
Cost of Services
and Products
-----------------
Local $58.4 $53.2 10% $175.2 $165.4 6%
Wireless 34.9 30.3 15% 92.2 95.7 (4%)
Hardware & Mgd.
Services 35.6 31.0 15% 101.1 79.2 28%
Other 8.2 9.5 (14%) 25.2 35.6 (29%)
Broadband -- -- n/m -- -- n/m
Corporate and
eliminations (6.5) (5.7) 14% (20.2) (14.5) 39%
--------- --------- --------- ---------
Total Cost of
Services and
Products $130.6 $118.3 10% $373.5 $361.4 3%
========= ========= ========= =========
Selling, General
& Administrative
-----------------
Local $34.0 $33.1 3% $103.0 $99.9 3%
Wireless 14.2 13.3 7% 41.3 38.8 6%
Hardware & Mgd.
Services 4.4 3.8 16% 13.0 12.4 5%
Other 4.0 4.0 -- 11.7 10.1 16%
Broadband (1.0) (2.7) (63%) (3.0) (2.7) 11%
Corporate and
eliminations 0.2 2.4 (92%) 5.3 7.1 (25%)
--------- --------- --------- ---------
Total Selling,
General &
Administrative $55.8 $53.9 4% $171.3 $165.6 3%
========= ========= ========= =========
Depreciation and
Amortization
-----------------
Local $27.1 $29.9 (9%) $81.0 $89.6 (10%)
Wireless 13.2 20.8 (37%) 48.4 50.9 (5%)
Hardware & Mgd.
Services 0.7 0.2 n/m 1.7 0.7 143%
Other 0.5 0.4 25% 1.4 1.2 17%
Broadband -- -- n/m -- -- n/m
Corporate and
eliminations 0.3 0.2 50% 0.7 0.4 75%
--------- --------- --------- ---------
Total
Depreciation
and
Amortization $41.8 $51.5 (19%) $133.2 $142.8 (7%)
========= ========= ========= =========
Asset Impairments
and Other
Charges
(Credits)
-----------------
Local $- $- n/m $- $- n/m
Wireless -- 1.7 n/m 23.7 4.2 n/m
Hardware & Mgd.
Services -- -- n/m (0.1) (1.1) (91%)
Other -- -- n/m -- -- n/m
Broadband -- (0.1) n/m (0.5) (1.6) (69%)
Corporate and
eliminations -- -- n/m -- -- n/m
--------- --------- --------- ---------
Total Asset
Impairments
and Other
Charges
(Credits) $- $1.6 n/m $23.1 $1.5 n/m
========= ========= ========= =========
Operating Income
-----------------
Local $67.9 $74.2 (8%) $207.9 $215.9 (4%)
Wireless (4.1) 0.1 n/m (25.8) 7.8 n/m
Hardware & Mgd.
Services 2.8 3.6 (22%) 9.5 9.9 (4%)
Other 7.0 6.8 3% 20.0 11.7 71%
Broadband 1.0 2.8 (64%) 3.6 4.3 (16%)
Corporate and
eliminations (2.5) (4.9) (49%) (12.0) (13.8) (13%)
--------- --------- --------- ---------
Total
Operating
Income $72.1 $82.6 (13%) $203.2 $235.8 (14%)
========= ========= ========= =========
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(dollars in millions, except segment metric information)
September 30, December 31,
2005 2004
------------- -------------
Assets
------
Cash and Cash Equivalents $23.7 $24.9
Receivables - Net 148.8 139.0
Materials and Supplies 24.9 22.7
Other Current Assets 78.2 66.6
Property, Plant and Equipment - Net 822.5 857.7
Goodwill 40.9 40.9
Other Intangible Assets - Net 35.8 35.8
Noncurrent Deferred Tax Assets 608.5 656.7
Other Noncurrent Assets 110.0 114.4
------------- -------------
Total Assets $1,893.3 $1,958.7
============= =============
Liabilities and Shareowners' Deficit
------------------------------------
Current Portion of Long-Term Debt $35.4 $30.1
Accounts Payable 69.1 58.9
Current Portion of Unearned Revenue and
Customer Deposits 39.6 42.5
Accrued Taxes 37.4 45.4
Other Current Liabilities 104.3 120.5
Long-Term Debt, Less Current Portion 2,109.8 2,111.1
Unearned Revenue, Less Current Portion 7.9 8.9
Other Noncurrent Liabilities 161.5 126.6
Minority Interest 33.4 39.2
Shareowners' Deficit (705.1) (624.5)
------------- -------------
Total Liabilities and Shareowners'
Deficit $1,893.3 $1,958.7
============= =============
Other Data:
-----------
Common Shares Outstanding at Balance Sheet
Date 246.2 245.4
Net Debt $2,126.2 $2,112.4
Credit Facility Availability $205.5 $377.8
Segment Metric Information (in thousands):
------------------------------------------
Local Access Lines 937.6 970.1
Complete Connections Subscribers 334.6 336.4
DSL Subscribers 153.5 130.8
Custom Connections Subscribers 146.6 123.4
GSM:
Postpaid Wireless Subscribers 209.4 119.3
Prepaid Wireless Subscribers 126.6 87.5
TDMA:
Postpaid Wireless Subscribers 90.9 187.0
Prepaid Wireless Subscribers 45.3 87.2
------------- -------------
Total Wireless Subscribers 472.2 481.0
============= =============
Consumer Long Distance Lines 418.1 423.5
Business Long Distance Lines 148.7 138.1
------------- -------------
Total Long Distance Lines 566.8 561.6
============= =============
Cincinnati Bell Telephone
Access Line Detail
(Unaudited)
(in thousands)
--------------------------------
2003
--------------------------------
1Q 2Q 3Q 4Q
--------------------------------
Access Lines
------------
In-Territory:
Primary Residential 624.6 620.3 617.7 613.9
Secondary Residential 64.3 62.2 60.0 58.1
Business/Other 313.2 310.2 308.0 304.6
--------------------------------
Total In-Territory 1,002.1 992.7 985.7 976.6
Out-of-Territory:
Primary Residential 2.3 2.7 3.1 3.4
Secondary Residential 0.1 0.1 0.2 0.2
Business/Other 4.7 5.0 5.2 5.6
--------------------------------
Total Out-of-Territory 7.1 7.8 8.5 9.2
--------------------------------
Total Access Lines 1,009.2 1,000.5 994.2 985.8
================================
Cincinnati Bell Telephone
Access Line Detail
(Unaudited)
(in thousands)
------------------------ ------------------
2004 2005
------------------------ ------------------
1Q 2Q 3Q 4Q 1Q 2Q 3Q
------------------------ ------------------
Access Lines
-------------
In-Territory:
Primary Residential 611.8 606.3 601.5 592.7 584.2 573.0 563.9
Secondary Residential 56.0 54.0 52.2 50.5 48.9 47.1 45.4
Business/Other 301.5 299.6 298.4 296.6 296.1 294.3 292.9
------------------------ ------------------
Total In-Territory 969.3 959.9 952.1 939.8 929.2 914.4 902.2
Out-of-Territory:
Primary Residential 4.6 10.9 15.8 18.4 17.7 18.4 20.5
Secondary Residential 0.2 0.6 0.7 0.8 0.8 0.9 1.0
Business/Other 6.8 8.0 9.9 11.1 12.2 12.8 13.9
------------------------ ------------------
Total Out-of-Territory 11.6 19.5 26.4 30.3 30.7 32.1 35.4
------------------------ ------------------
Total Access Lines 980.9 979.4 978.5 970.1 959.9 946.5 937.6
======================== ==================
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Change
September 30, December 31, -------------
(dollars in millions) 2005 2004 $ %
------------- ------------- -------------
Credit Facilities $438.0 $438.8 $(0.8) 0%
Cincinnati Bell Telephone
notes 250.0 250.0 - --
7 1/4% Senior Notes due 2013 500.0 500.0 - --
16% Senior Subordinated
Discount Notes due 2009 - 375.2 (375.2) n/m
7 1/4% Senior Notes due 2023 50.0 50.0 - --
8 3/8% Senior Subordinated
Notes due 2014 637.2 543.9 93.3 17%
7% Senior Notes due 2015 248.1 - 248.1 n/m
Capital leases 19.2 15.6 3.6 23%
Other short-term debt 1.3 1.6 (0.3) (19%)
Other long-term debt 0.4 - 0.4 n/m
Net unamortized premium
(discounts) 1.0 (33.9) 34.9 (103%)
------------- ------------- -------------
Total Debt 2,145.2 2,141.2 4.0 0%
Add: Interest Rate Swap
Liability (Asset) 4.7 (3.9) 8.6 n/m
Less: Cash and Cash
Equivalents (23.7) (24.9) 1.2 (5%)
------------- ------------- -------------
Net Debt (as defined by
the company) $2,126.2 $2,112.4 $13.8 1%
============= ============= =============
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions) Three Months Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
--------- --------- --------- ----------
Cash provided by operating
activities $74.2 $72.0 $225.4 $216.5
--------- --------- --------- ----------
Capital expenditures (37.7) (38.6) (108.7) (100.0)
Proceeds from sale of assets - - - 1.9
Other 1.2 1.6 1.2 3.1
--------- --------- --------- ----------
Cash used in investing
activities (36.5) (37.0) (107.5) (95.0)
--------- --------- --------- ----------
Issuance of long-term debt - - 352.1 -
Increase in new credit
facility, net 406.0 - 438.0 -
Repayment of previous credit
facility and other debt (440.5) (32.9) (882.5) (120.9)
Debt issuance costs and
consent fees (0.9) - (21.9) -
Issuance of common shares -
exercise of stock options 0.7 0.1 2.4 1.9
Preferred stock dividends
paid (2.6) (2.6) (7.8) (7.8)
Other 0.6 1.1 0.6 2.3
--------- --------- --------- ----------
Cash used in financing
activities (36.7) (34.3) (119.1) (124.5)
--------- --------- --------- ----------
Net decrease in cash and cash
equivalents 1.0 0.7 (1.2) (3.0)
Cash and cash equivalents at
beginning of period 22.7 22.3 24.9 26.0
--------- --------- --------- ----------
Cash and cash equivalents at
end of period $23.7 $23.0 $23.7 $23.0
========= ========= ========= ==========
Reconciliation of GAAP Cash
Flow to Free Cash Flow as
defined by the company
Net decrease in cash and cash
equivalents $1.0 $0.7 $(1.2) $(3.0)
Less adjustments:
Issuance of debt (financing
activities) - - (352.1) -
Repayment of debt (financing
activities), net 34.5 32.9 444.5 120.9
Proceeds from sale of assets
(investing activities) - - - (1.9)
--------- --------- --------- ----------
Free cash flow (as defined
by the company) $35.5 $33.6 $91.2 $116.0
========= ========= ========= ==========
Cash Expenditures for
Restructuring $(0.2) $(0.7) $(1.5) $(4.9)
Income Tax Refunds /
(Payments) $- $(0.3) $(1.1) $(2.0)
Cincinnati Bell Inc.
Reconciliation of EBITDA to Operating Income (GAAP)
(Unaudited)
(dollars in millions) Three Months Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
--------- --------- --------- ----------
Operating Income (GAAP) $72.1 $82.6 $203.2 $235.8
Add:
Depreciation and
Amortization 41.8 51.5 133.2 142.8
Restructuring - - - 0.2
Asset Impairments and
Other Charges - 1.6 23.1 1.5
--------- --------- --------- ----------
41.8 53.1 156.3 144.5
--------- --------- --------- ----------
EBITDA (Non-GAAP) $113.9 $135.7 $359.5 $380.3
========= ========= ========= ==========
Cincinnati Bell Inc.
Normalized Statements of Operations -
Reconciliation to Reported Results
(Unaudited)
(dollars in millions, except per share amounts)
Special Items
--------------
Three
Three Months Ended
Months Ended September 30, 2005
September 30, 16% Notes Before Special
2005 (GAAP) Extinguishment Items
-------------------------------------------------
(b)
Revenues $ 300.3 $ - $ 300.3
------------------
Costs and Expenses
------------------
Cost of Services
and Products 130.6 -- 130.6
Selling, General
and
Administrative 55.8 -- 55.8
Depreciation and
Amortization 41.8 -- 41.8
------------- -------------- ------------------
Operating Income 72.1 -- 72.1
Minority Interest
Expense (Income) (1.0) -- (1.0)
Interest Expense 47.0 -- 47.0
Loss on
Extinguishment of
Debt 91.9 (91.9) --
Other Income, Net (1.3) -- (1.3)
------------- -------------- ------------------
Income (Loss)
before Income
Taxes (64.5) 91.9 27.4
--
Income Tax
(Benefit) Expense (20.4) 36.8 16.4
------------- -------------- ------------------
Net Income (Loss) (44.1) 55.1 11.0
Preferred Stock
Dividends 2.6 - 2.6
------------- -------------- ------------------
Net Income (Loss)
Applicable to
Common
Shareowners $ (46.7) $ 55.1 $ 8.4
============= ============== ==================
Weighted Average
Diluted Shares 246.1 253.1 (a) 253.1 (a)
============= ============== ==================
Diluted Earnings
(Loss) Per Common
Share $ (0.19) $ 0.22 $ 0.03
============= ============== ==================
(a)Shares have been adjusted for dilutive common stock equivalents
that result after excluding special items from earnings.
Normalized results have been adjusted for the following:
(b)Loss on extinguishment of 16% notes
Cincinnati Bell Inc.
Normalized Statements of Operations -
Reconciliation to Reported Results
(Unaudited)
(dollars in millions, except per share amounts)
Special Items
-----------------------------------
Nine
Months
Nine Ended
Months Asset Sept.
Ended Impair- 30,
Sept. ments 2005
30, Income Debt & Before
2005 Tax Extinguish- Other Special
(GAAP) Expense ment Charges Items
---------------------------------------------------
(b) (c) (d)
Revenues $904.3 $ - $ - $ - $ 904.3
----------------
Costs and
Expenses
----------------
Cost of
Services and
Products 373.5 -- -- -- 373.5
Selling,
General and
Administrative 171.3 -- -- -- 171.3
Depreciation
and
Amortization 133.2 -- -- -- 133.2
Asset
Impairments
and Other
Charges 23.1 -- -- (23.1) --
------- ------- ----------- -------- --------
Operating
Income 203.2 -- -- 23.1 226.3
Minority
Interest
Expense
(Income) (5.8) -- -- 4.6 (1.2)
Interest Expense 147.1 -- -- -- 147.1
Loss on
Extinguishment
of Debt 99.8 -- (99.8) -- --
Other Income,
Net (1.5) -- -- -- (1.5)
------- ------- ----------- -------- --------
Income (Loss)
before
Income Taxes (36.4) -- 99.8 18.5 81.9
Income Tax
Expense 40.7 (47.6) 39.9 7.4 40.4
------- ------- ----------- -------- --------
Net Income
(Loss) (77.1) 47.6 59.9 11.1 41.5
Preferred Stock
Dividends 7.8 -- -- -- 7.8
------- ------- ----------- -------- --------
Net Income
(Loss)
Applicable to
Common
Shareowners $(84.9) $ 47.6 $ 59.9 $ 11.1 $ 33.7
======= ======= =========== ======== ========
Weighted Average (a) (a) (a) (a)
Diluted Shares 245.8 251.8 251.8 251.8 251.8
======= ======= =========== ======== ========
Diluted Earnings
(Loss) Per
Common Share $(0.35) $ 0.19 $ 0.24 $ 0.04 $ 0.13
======= ======= =========== ======== ========
(a)Shares have been adjusted for dilutive common stock equivalents
that result after excluding the special items from earnings.
Normalized results have been adjusted for the following:
(b)Write-down of certain state deferred tax assets due to change in
state tax rates and state tax laws;
(c)Loss on extinguishment of the company's prior credit facility and
16% Notes; and
(d)Asset impairments and other charges of $23.1 million, substantially
all of which related to a write-down of the company's TDMA network
assets.
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