Exhibit 99.1
 | Press Release | |
Investor / Media contact:
Tony Schulte
513.397.9540
tony.schulte@cinbell.com
Tony Schulte
513.397.9540
tony.schulte@cinbell.com
Cincinnati Bell Inc. Reports Third Quarter Earnings Growth
CINCINNATI— November 2, 2006 — Cincinnati Bell Inc. (NYSE:CBB) today reported improved earnings for the third quarter driven by strong wireless and data growth and lower depreciation and interest expense. Quarterly revenue was $320 million with operating income of $84 million and net income of $25 million, or 9 cents per share. Net income excluding special items1 in the quarter was $24 million, or 9 cents per share, an increase of $13 million, or 6 cents per share from the third quarter of 2005 also excluding special items. Special items in the current quarter included a charge of $3 million related to the outsourcing of supply chain management functions and a gain on the sale of broadband fiber assets of $5 million.
“Cincinnati Bell’s third quarter performance clearly demonstrates the effectiveness and consistent execution of our strategy,” said Jack Cassidy, president and chief executive officer. “We continue to operate the best wireless network in Cincinnati and Dayton and generate subscriber growth in an extremely competitive market as evidenced by strong postpaid and record breaking DSL net activations in the quarter.”
Third Quarter Highlights
| • | Quarterly revenue increased to $320 million, up 7 percent or $20 million from a year ago as a result of growth in hardware and managed services, wireless, and data services. | ||
| • | Net DSL activations totaled 11,000 in the quarter, an increase of 25 percent from a year ago and an all-time record. As a result, the DSL subscriber base reached 188,000, or 21 percent of total access lines. DSL penetration of in-territory consumer primary access lines was 31 percent, up 7 percentage points from a year ago, representing 163,000 subscribers. | ||
| • | Net postpaid wireless activations in the quarter totaled 11,000, a significant improvement from 4,000 net activations reported in the third quarter of 2005 and approximately even with activations in the second quarter of 2006. Postpaid average revenue per user (ARPU) was $47, a slight increase from a year ago. In |
| Press Release | |
| the quarter, an independent third party reaffirmed Cincinnati Bell’s claim to the best wireless network in Cincinnati and Dayton. This superior network quality contributed to postpaid churn of 1.7 percent, a 23 percent improvement from the third quarter of 2005. | ||
| • | Penetration of the company’s “Super Bundle” of services reached 30 percent of Cincinnati Bell households in its traditional operating area, representing 157,000 customers, up 16,000 from a year ago. This continued bundling success drove revenue per household to an all-time high of $84, up 8 percent from the third quarter of 2005. | |
| • | Free cash flow2 was $15 million in the quarter, with which the company repaid debt. Net debt3 totaled $2.1 billion at the end of the quarter. Capital expenditures during the quarter were $35 million, or 11 percent of revenue. |
Financial and Operations Overview
“Our third quarter performance is indicative of progress in all areas of our business,” said Brian Ross, chief financial officer of Cincinnati Bell. “We continue to offset the impact of access line loss with growth in wireless, DSL and managed services. This quarter, DSL net additions were at record levels, wireless service margins improved, and the hardware and managed services segment generated its highest EBITDA ever.”
Cincinnati Bell recorded quarterly revenue of $320 million, an increase of 7 percent from the third quarter of 2005. Year-to-date revenue totaled $942 million, an increase of 4 percent from 2005.
In the current quarter, adjusted EBITDA4 (earnings before interest, taxes, depreciation and amortization) was $118 million, up 3 percent from a year ago. Year-to-date adjusted EBITDA of $346 million represented a decline of 4 percent from the prior year period. Current quarter results include a gain of $3.6 million in the Broadband segment related to the sale of a bankruptcy claim receivable.
Local Segment
Quarterly total access line performance improved from a year ago as the rate of decline slowed from 4.2 percent to 4.0 percent. Compared with the second quarter of 2006, access line decline was up slightly primarily due to higher levels of involuntary churn. Continued growth in expansion markets adjacent to Cincinnati Bell’s traditional service area benefited total access line performance and partially offset the impact of in-
2
| Press Release | |
territory line loss. At the end of the quarter, the company had 47,000 out-of-territory access lines, up 34 percent from the prior year.
The Local segment produced quarterly revenue of $187 million, equal to the third quarter of 2005 as an 11 percent increase in data revenue offset lower voice revenue. Adjusted EBITDA in the quarter of $92 million decreased by $3 million compared to a year ago as a result of increased pension and post-retirement medical expenses. Year-to-date adjusted EBITDA of $283 million was down 2 percent from the prior year period.
Wireless Services
Cincinnati Bell Wireless maintained strong subscriber growth in the quarter as postpaid net activations of 11,000 represented an increase of 7,000 from a year ago. Postpaid churn of 1.7 percent was a significant improvement from 2.2 percent in the third quarter of 2005. ARPU of $47.25 was a slight increase from a year ago. Compared with the second quarter of 2006, postpaid net activations, churn and ARPU declined slightly reflecting the impact of traditional seasonal factors.
The Wireless segment generated quarterly revenue of $65 million, up 12 percent from the third quarter of 2005 and included a $7 million increase in postpaid service revenue. Quarterly adjusted EBITDA was $14 million, an increase of $5 million from a year ago. Year-to-date adjusted EBITDA was $38 million compared with $46 million in the prior year period.
In the quarter, Cincinnati Bell acquired 20 megahertz of advanced wireless spectrum in the company’s Cincinnati and Dayton operating area. This spectrum will enable Cincinnati Bell to continue to expand the wireless business through new data services. After the initial build next year, it will also allow the company to grow by providing increased capacity at historical capital levels.
In addition, outside of its traditional markets Cincinnati Bell acquired spectrum in areas including Indianapolis. The company is currently evaluating the best use of this spectrum, which adjoins its traditional operating area.
Hardware and Managed Services
The Hardware and Managed Services segment produced quarterly revenue of $57 million, a 32 percent increase from a year ago driven by an increase in equipment sales and data center and related managed service activity. This growth produced record
3
| Press Release | |
quarterly adjusted EBITDA of $6 million, up 74 percent from the third quarter of 2005. The increase was fueled by equipment sales and data center growth. Year-to-date adjusted EBITDA was $14 million, an increase of 27 percent from the prior year period on the strength of increased revenue and higher data center and managed services margins.
This growth is the result of Cincinnati Bell’s smart build data center strategy, whereby the company has made significant investments to serve its enterprise customers. Cincinnati Bell continues to see growth opportunities in the Hardware and Managed Services segment at attractive returns and will continue to invest capital in data center services.
Other Communications Services
The Other Communications Services segment, which includes long distance, security monitoring and payphone operations, generated revenue of $20 million, equal to the third quarter of 2005. Adjusted EBITDA of $7 million for the quarter and $22 million year to date, were both approximately equal to the prior year period.
2006 Guidance
In the quarter, Cincinnati Bell participated in the Advanced Wireless Spectrum auction and acquired $37 million of spectrum located primarily in its Cincinnati and Dayton operating territory as well as in the Indianapolis market. The company paid an initial deposit of $7 million in the third quarter and the remaining $30 million in October. As a result of this activity, guidance for 2006 free cash flow has been revised. There are no changes to 2006 revenue, adjusted EBITDA or capital expenditure guidance.
Category | 2006 Guidance | ||||
| Revenue | Approx. flat at $1.2 billion | ||||
| Adjusted EBITDA | Approx. $460 million | ||||
| Capital Expenditures | Approx. 12% of revenue | ||||
| Free Cash Flow | Approx. $125 million* | ||||
* Excludes acquisitions totaling $87 million, which includes the purchase of the 20% minority stake of Cincinnati Bell Wireless previously owned by Cingular.
4
| Press Release | |
Conference Call/Webcast
Cincinnati Bell will host a conference call today at 10:00 a.m. (ET) to discuss its results for the third quarter of 2006. A live webcast of the call will be available via the Investor Relations section ofwww.cincinnatibell.com. The conference call dial-in number is 866.278.7926. International callers may dial 904.596.2360. A taped replay call will be available one hour after the conclusion of the teleconference until 5:00 p.m. (ET) on November 16, 2006. For U.S. callers, the replay will be available at 888.284.7564. For international callers, the replay will be available at 904.596.3174. The replay reference number is 192470. An archived version of the webcast will also be available atwww.cincinnatibell.com.
Cincinnati Bell will host a conference call today at 10:00 a.m. (ET) to discuss its results for the third quarter of 2006. A live webcast of the call will be available via the Investor Relations section ofwww.cincinnatibell.com. The conference call dial-in number is 866.278.7926. International callers may dial 904.596.2360. A taped replay call will be available one hour after the conclusion of the teleconference until 5:00 p.m. (ET) on November 16, 2006. For U.S. callers, the replay will be available at 888.284.7564. For international callers, the replay will be available at 904.596.3174. The replay reference number is 192470. An archived version of the webcast will also be available atwww.cincinnatibell.com.
Safe Harbor Note
Certain of the statements and predictions contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. 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 services; world and national events that may affect the ability to provide services; changes in the regulatory environment; any rulings, orders or decrees that may be issued by any court or arbitrator; restrictions imposed under various credit facilities and debt instruments; work stoppages caused by labor disputes; 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 report, Form 10-Q reports and Form 8-K reports. The forward-looking statements included in this release represent company estimates as of November 2, 2006. Cincinnati Bell anticipates that subsequent events and developments will cause its estimates to change.
Certain of the statements and predictions contained in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. 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 services; world and national events that may affect the ability to provide services; changes in the regulatory environment; any rulings, orders or decrees that may be issued by any court or arbitrator; restrictions imposed under various credit facilities and debt instruments; work stoppages caused by labor disputes; 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 report, Form 10-Q reports and Form 8-K reports. The forward-looking statements included in this release represent company estimates as of November 2, 2006. Cincinnati Bell anticipates that subsequent events and developments will cause its estimates to change.
Use of Non-GAAP Financial Measures
This press release contains information about net income excluding special items, free cash flow, net debt and adjusted earnings before interest, taxes, depreciation and amortization (adjusted 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
This press release contains information about net income excluding special items, free cash flow, net debt and adjusted earnings before interest, taxes, depreciation and amortization (adjusted 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
5
| Press Release | |
past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of net income excluding special items, free cash flow, net debt and adjusted EBITDA to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section ofwww.cincinnatibell.com.
1Net income excluding special itemsprovides a useful measure of operating performance. The amounts of the special items are detailed and reconciled to GAAP net income in the accompanying financial statements and in the Investor Relations section of the company’s Web site,www.cincinnatibell.com.
2Free cash flowprovides a useful measure of operational performance, liquidity and financial health. The company defines free cash flow as SFAS 95 cash provided by (used in) operating, financing and investing activities, adjusted for the issuance and repayment of debt and for the proceeds from the sale or the use of funds from the purchase of business operations. 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.
3Net debtprovides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term and long-term debt and unamortized premium and/or discount, offset by cash and cash equivalents.
4Adjusted EBITDAprovides a useful measure of operational performance. The company defines adjusted EBITDA as GAAP Operating Income plus depreciation, amortization, restructuring charges, asset impairments and other special items. Adjusted EBITDA should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with Adjusted EBITDA as defined by other companies.
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 Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. For more information, visit www.cincinnatibell.com.
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 Bell provides a wide range of telecommunications products and services to residential and business customers in Ohio, Kentucky and Indiana. For more information, visit www.cincinnatibell.com.
###
6
Cincinnati Bell Inc.
Consolidated Statements of Income
(Unaudited)
Consolidated Statements of Income
(Unaudited)
(dollars in millions, except per share amounts)
| Three Months | Nine Months | |||||||||||||||||||||||
| Ended September 30, | % | Ended September 30, | % | |||||||||||||||||||||
| 2006 | 2005 | Change | 2006 | 2005 | Change | |||||||||||||||||||
Revenue | $ | 320.1 | $ | 300.3 | 7 | % | $ | 941.7 | $ | 904.3 | 4 | % | ||||||||||||
Costs and expenses | ||||||||||||||||||||||||
| Cost of services and products | 142.9 | 130.6 | 9 | % | 416.5 | 373.5 | 12 | % | ||||||||||||||||
| Selling, general and administrative | 59.5 | 55.8 | 7 | % | 179.6 | 171.3 | 5 | % | ||||||||||||||||
| Depreciation and amortization | 35.6 | 41.8 | (15 | %) | 105.6 | 133.2 | (21 | %) | ||||||||||||||||
| Shareholder claim settlement | — | — | n/m | 6.3 | — | n/m | ||||||||||||||||||
| Gain on sale of broadband assets | (4.7 | ) | — | n/m | (7.6 | ) | — | n/m | ||||||||||||||||
| Restructuring charges | 3.3 | — | n/m | 3.5 | — | n/m | ||||||||||||||||||
| Asset impairments and other charges | — | — | n/m | — | 23.1 | n/m | ||||||||||||||||||
| Operating income | 83.5 | 72.1 | 16 | % | 237.8 | 203.2 | 17 | % | ||||||||||||||||
| Minority interest expense (income) | (0.2 | ) | (1.0 | ) | (80 | %) | 0.1 | (5.8 | ) | (102 | %) | |||||||||||||
| Interest expense | 41.4 | 47.0 | (12 | %) | 121.3 | 147.1 | (18 | %) | ||||||||||||||||
| Loss on extinguishment of debt | 0.1 | 91.9 | (100 | %) | 0.1 | 99.8 | (100 | %) | ||||||||||||||||
| Other income, net | (0.2 | ) | (1.3 | ) | (85 | %) | (0.5 | ) | (1.5 | ) | (67 | %) | ||||||||||||
| Income (loss) before income taxes | 42.4 | (64.5 | ) | n/m | 116.8 | (36.4 | ) | n/m | ||||||||||||||||
| Income tax expense (benefit) | 17.3 | (20.4 | ) | n/m | 53.2 | 40.7 | 31 | % | ||||||||||||||||
Net income (loss) | 25.1 | (44.1 | ) | n/m | 63.6 | (77.1 | ) | n/m | ||||||||||||||||
| Preferred stock dividends | 2.6 | 2.6 | 0 | % | 7.8 | 7.8 | 0 | % | ||||||||||||||||
Net income (loss) applicable to common shareowners | $ | 22.5 | $ | (46.7 | ) | n/m | $ | 55.8 | $ | (84.9 | ) | n/m | ||||||||||||
Basic earnings (loss) per common share | $ | 0.09 | $ | (0.19 | ) | $ | 0.23 | $ | (0.35 | ) | ||||||||||||||
Diluted earnings (loss) per common share | $ | 0.09 | $ | (0.19 | ) | $ | 0.22 | $ | (0.35 | ) | ||||||||||||||
Weighted average common shares outstanding (millions) | ||||||||||||||||||||||||
| - Basic | 247.1 | 246.1 | 246.8 | 245.8 | ||||||||||||||||||||
| - Diluted | 254.4 | 246.1 | 252.7 | 245.8 | ||||||||||||||||||||
Cincinnati Bell Inc.
Segment Information
(Unaudited)
Segment Information
(Unaudited)
(dollars in millions)
| Three Months | Nine Months | |||||||||||||||||||||||
| Ended September 30, | % | Ended September 30, | % | |||||||||||||||||||||
| 2006 | 2005 | Change | 2006 | 2005 | Change | |||||||||||||||||||
Local | ||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Voice | $ | 117.5 | $ | 123.6 | (5 | %) | $ | 357.3 | $ | 377.9 | (5 | %) | ||||||||||||
| Data | 60.7 | 54.9 | 11 | % | 176.1 | 162.3 | 9 | % | ||||||||||||||||
| Other | 8.4 | 8.9 | (6 | %) | 27.0 | 26.9 | 0 | % | ||||||||||||||||
| Total revenue | 186.6 | 187.4 | (0 | %) | 560.4 | 567.1 | (1 | %) | ||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||||||
| Cost of services and products | 59.5 | 58.4 | 2 | % | 175.7 | 175.2 | 0 | % | ||||||||||||||||
| Selling, general and administrative | 35.4 | 34.0 | 4 | % | 101.9 | 103.0 | (1 | %) | ||||||||||||||||
| Depreciation | 26.6 | 27.1 | (2 | %) | 77.6 | 81.0 | (4 | %) | ||||||||||||||||
| Restructuring charges | 3.0 | — | n/m | 3.0 | — | n/m | ||||||||||||||||||
| Total operating costs and expenses | 124.5 | 119.5 | 4 | % | 358.2 | 359.2 | (0 | %) | ||||||||||||||||
| Operating income | $ | 62.1 | $ | 67.9 | (9 | %) | $ | 202.2 | $ | 207.9 | (3 | %) | ||||||||||||
Wireless | ||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Service | $ | 59.3 | $ | 52.3 | 13 | % | $ | 174.5 | $ | 163.3 | 7 | % | ||||||||||||
| Equipment | 5.7 | 5.9 | (3 | %) | 18.7 | 16.5 | 13 | % | ||||||||||||||||
| Total revenue | 65.0 | 58.2 | 12 | % | 193.2 | 179.8 | 7 | % | ||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||||||
| Cost of services and products | 35.4 | 34.9 | 1 | % | 109.9 | 92.2 | 19 | % | ||||||||||||||||
| Selling, general and administrative | 15.8 | 14.2 | 11 | % | 45.2 | 41.3 | 9 | % | ||||||||||||||||
| Depreciation and amortization | 7.5 | 13.2 | (43 | %) | 23.6 | 48.4 | (51 | %) | ||||||||||||||||
| Asset impairments and other charges | — | — | n/m | — | 23.7 | n/m | ||||||||||||||||||
| Total operating costs and expenses | 58.7 | 62.3 | (6 | %) | 178.7 | 205.6 | (13 | %) | ||||||||||||||||
| Operating income (loss) | $ | 6.3 | $ | (4.1 | ) | n/m | $ | 14.5 | $ | (25.8 | ) | n/m | ||||||||||||
Hardware & Managed Services | ||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||
| Hardware | $ | 36.4 | $ | 26.4 | 38 | % | $ | 97.3 | $ | 76.8 | 27 | % | ||||||||||||
| Managed services | 20.9 | 17.1 | 22 | % | 57.0 | 48.4 | 18 | % | ||||||||||||||||
| Total revenue | 57.3 | 43.5 | 32 | % | 154.3 | 125.2 | 23 | % | ||||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||||||
| Cost of services and products | 45.8 | 35.6 | 29 | % | 124.2 | 101.1 | 23 | % | ||||||||||||||||
| Selling, general and administrative | 5.4 | 4.4 | 23 | % | 16.0 | 13.0 | 23 | % | ||||||||||||||||
| Depreciation and amortization | 0.9 | 0.7 | 29 | % | 2.7 | 1.7 | 59 | % | ||||||||||||||||
| Asset impairments and other charges (credits) | — | — | n/m | — | (0.1 | ) | n/m | |||||||||||||||||
| Total operating costs and expenses | 52.1 | 40.7 | 28 | % | 142.9 | 115.7 | 24 | % | ||||||||||||||||
| Operating income | $ | 5.2 | $ | 2.8 | 86 | % | $ | 11.4 | $ | 9.5 | 20 | % | ||||||||||||
Other | ||||||||||||||||||||||||
| Revenue | $ | 19.9 | $ | 19.7 | 1 | % | $ | 59.3 | $ | 58.3 | 2 | % | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||||||
| Cost of services and products | 8.9 | 8.2 | 9 | % | 26.5 | 25.2 | 5 | % | ||||||||||||||||
| Selling, general and administrative | 3.8 | 4.0 | (5 | %) | 11.0 | 11.7 | (6 | %) | ||||||||||||||||
| Depreciation | 0.6 | 0.5 | 20 | % | 1.7 | 1.4 | 21 | % | ||||||||||||||||
| Total operating costs and expenses | 13.3 | 12.7 | 5 | % | 39.2 | 38.3 | 2 | % | ||||||||||||||||
| Operating income | $ | 6.6 | $ | 7.0 | (6 | %) | $ | 20.1 | $ | 20.0 | 1 | % | ||||||||||||
Broadband | ||||||||||||||||||||||||
| Revenue | $ | — | $ | — | n/m | $ | — | $ | — | n/m | ||||||||||||||
| Costs, expenses, gains and losses: | ||||||||||||||||||||||||
| Selling, general and administrative | (3.5 | ) | (1.0 | ) | n/m | (2.6 | ) | (3.0 | ) | n/m | ||||||||||||||
| Restructuring charges | 0.3 | — | n/m | 0.5 | — | n/m | ||||||||||||||||||
| Gain on sale of assets and other | (4.7 | ) | — | n/m | (7.6 | ) | (0.6 | ) | n/m | |||||||||||||||
| Total costs, expenses, gains and losses | (7.9 | ) | (1.0 | ) | n/m | (9.7 | ) | (3.6 | ) | n/m | ||||||||||||||
| Operating income | $ | 7.9 | $ | 1.0 | n/m | $ | 9.7 | $ | 3.6 | n/m | ||||||||||||||
Cincinnati Bell Inc.
Segment Information
(Unaudited)
Segment Information
(Unaudited)
(dollars in millions)
| Three Months | Nine Months | |||||||||||||||||||||||
| Ended September 30, | % | Ended September 30, | % | |||||||||||||||||||||
| 2006 | 2005 | Change | 2006 | 2005 | Change | |||||||||||||||||||
Revenue | ||||||||||||||||||||||||
| Local | $ | 186.6 | $ | 187.4 | (0 | %) | $ | 560.4 | $ | 567.1 | (1 | %) | ||||||||||||
| Wireless | 65.0 | 58.2 | 12 | % | 193.2 | 179.8 | 7 | % | ||||||||||||||||
| Hardware & Managed Services | 57.3 | 43.5 | 32 | % | 154.3 | 125.2 | 23 | % | ||||||||||||||||
| Other | 19.9 | 19.7 | 1 | % | 59.3 | 58.3 | 2 | % | ||||||||||||||||
| Broadband | — | — | n/m | — | — | n/m | ||||||||||||||||||
| Corporate and eliminations | (8.7 | ) | (8.5 | ) | 2 | % | (25.5 | ) | (26.1 | ) | (2 | %) | ||||||||||||
| Total revenue | $ | 320.1 | $ | 300.3 | 7 | % | $ | 941.7 | $ | 904.3 | 4 | % | ||||||||||||
Cost of Services and Products | ||||||||||||||||||||||||
| Local | $ | 59.5 | $ | 58.4 | 2 | % | $ | 175.7 | $ | 175.2 | 0 | % | ||||||||||||
| Wireless | 35.4 | 34.9 | 1 | % | 109.9 | 92.2 | 19 | % | ||||||||||||||||
| Hardware & Managed Services | 45.8 | 35.6 | 29 | % | 124.2 | 101.1 | 23 | % | ||||||||||||||||
| Other | 8.9 | 8.2 | 9 | % | 26.5 | 25.2 | 5 | % | ||||||||||||||||
| Broadband | — | — | n/m | — | — | n/m | ||||||||||||||||||
| Corporate and eliminations | (6.7 | ) | (6.5 | ) | 3 | % | (19.8 | ) | (20.2 | ) | (2 | %) | ||||||||||||
| Total cost of services and products | $ | 142.9 | $ | 130.6 | 9 | % | $ | 416.5 | $ | 373.5 | 12 | % | ||||||||||||
Selling, General & Administrative | ||||||||||||||||||||||||
| Local | $ | 35.4 | $ | 34.0 | 4 | % | $ | 101.9 | $ | 103.0 | (1 | %) | ||||||||||||
| Wireless | 15.8 | 14.2 | 11 | % | 45.2 | 41.3 | 9 | % | ||||||||||||||||
| Hardware & Managed Services | 5.4 | 4.4 | 23 | % | 16.0 | 13.0 | 23 | % | ||||||||||||||||
| Other | 3.8 | 4.0 | (5 | %) | 11.0 | 11.7 | (6 | %) | ||||||||||||||||
| Broadband | (3.5 | ) | (1.0 | ) | n/m | (2.6 | ) | (3.0 | ) | n/m | ||||||||||||||
| Corporate and eliminations | 2.6 | 0.2 | n/m | 8.1 | 5.3 | 53 | % | |||||||||||||||||
| Total selling, general & administrative | $ | 59.5 | $ | 55.8 | 7 | % | $ | 179.6 | $ | 171.3 | 5 | % | ||||||||||||
Depreciation and Amortization | ||||||||||||||||||||||||
| Local | $ | 26.6 | $ | 27.1 | (2 | %) | $ | 77.6 | $ | 81.0 | (4 | %) | ||||||||||||
| Wireless | 7.5 | 13.2 | (43 | %) | 23.6 | 48.4 | (51 | %) | ||||||||||||||||
| Hardware & Managed Services | 0.9 | 0.7 | 29 | % | 2.7 | 1.7 | 59 | % | ||||||||||||||||
| Other | 0.6 | 0.5 | 20 | % | 1.7 | 1.4 | 21 | % | ||||||||||||||||
| Broadband | — | — | n/m | — | — | n/m | ||||||||||||||||||
| Corporate and eliminations | — | 0.3 | n/m | — | 0.7 | n/m | ||||||||||||||||||
| Total depreciation and amortization | $ | 35.6 | $ | 41.8 | (15 | %) | $ | 105.6 | $ | 133.2 | (21 | %) | ||||||||||||
Shareholder Claim Settlement, Gain on Sale of Broadband Assets, Restructuring Charges and Asset Impairments | ||||||||||||||||||||||||
| Local | $ | 3.0 | $ | — | n/m | $ | 3.0 | $ | — | n/m | ||||||||||||||
| Wireless | — | — | n/m | — | 23.7 | n/m | ||||||||||||||||||
| Hardware & Managed Services | — | — | n/m | — | (0.1 | ) | n/m | |||||||||||||||||
| Other | — | — | n/m | — | — | n/m | ||||||||||||||||||
| Broadband | (4.4 | ) | — | n/m | (7.1 | ) | (0.6 | ) | n/m | |||||||||||||||
| Corporate and eliminations | — | — | n/m | 6.3 | 0.1 | n/m | ||||||||||||||||||
| Total shareholder claim settlement, gain on sale of broadband assets, restructuring charges and asset impairments | $ | (1.4 | ) | $ | — | n/m | $ | 2.2 | $ | 23.1 | n/m | |||||||||||||
Operating Income | ||||||||||||||||||||||||
| Local | $ | 62.1 | $ | 67.9 | (9 | %) | $ | 202.2 | $ | 207.9 | (3 | %) | ||||||||||||
| Wireless | 6.3 | (4.1 | ) | n/m | 14.5 | (25.8 | ) | n/m | ||||||||||||||||
| Hardware & Managed Services | 5.2 | 2.8 | 86 | % | 11.4 | 9.5 | 20 | % | ||||||||||||||||
| Other | 6.6 | 7.0 | (6 | %) | 20.1 | 20.0 | 1 | % | ||||||||||||||||
| Broadband | 7.9 | 1.0 | n/m | 9.7 | 3.6 | n/m | ||||||||||||||||||
| Corporate and eliminations | (4.6 | ) | (2.5 | ) | 84 | % | (20.1 | ) | (12.0 | ) | 67 | % | ||||||||||||
| Total operating income | $ | 83.5 | $ | 72.1 | 16 | % | $ | 237.8 | $ | 203.2 | 17 | % | ||||||||||||
Cincinnati Bell Inc.
Segment Metric Information
(Unaudited)
Segment Metric Information
(Unaudited)
(in thousands)
| September 30, | December 31, | |||||||
| 2006 | 2005 | |||||||
| Local access lines | 900.5 | 930.6 | ||||||
| DSL subscribers | 187.7 | 162.5 | ||||||
| Custom Connections (Super Bundle) subscribers | 166.4 | 150.3 | ||||||
| Postpaid wireless subscribers | 350.1 | 315.1 | ||||||
| Prepaid wireless subscribers | 156.1 | 180.5 | ||||||
| Total wireless subscribers | 506.2 | 495.6 | ||||||
| Consumer long distance lines | 398.9 | 412.6 | ||||||
| Business long distance lines | 156.6 | 151.1 | ||||||
| Total long distance lines | 555.5 | 563.7 | ||||||
Cincinnati Bell Telephone
Local Access Line Detail
(Unaudited)
Local Access Line Detail
(Unaudited)
(in thousands)
| 2004 | 2005 | 2006 | ||||||||||||||||||||||||||||||||||||||||||
| 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | 4Q | 1Q | 2Q | 3Q | ||||||||||||||||||||||||||||||||||
Local Access Lines | ||||||||||||||||||||||||||||||||||||||||||||
| In-Territory: | ||||||||||||||||||||||||||||||||||||||||||||
| Primary Residential | 611.8 | 606.3 | 601.5 | 592.7 | 584.2 | 573.0 | 563.9 | 555.7 | 547.4 | 536.7 | 522.5 | |||||||||||||||||||||||||||||||||
| Secondary Residential | 56.0 | 54.0 | 52.2 | 50.5 | 48.9 | 47.1 | 45.4 | 43.9 | 42.4 | 40.9 | 39.2 | |||||||||||||||||||||||||||||||||
| Business/Other | 301.5 | 299.6 | 298.4 | 296.6 | 296.1 | 294.3 | 292.9 | 293.3 | 290.9 | 291.3 | 291.4 | |||||||||||||||||||||||||||||||||
| Total In-Territory | 969.3 | 959.9 | 952.1 | 939.8 | 929.2 | 914.4 | 902.2 | 892.9 | 880.7 | 868.9 | 853.1 | |||||||||||||||||||||||||||||||||
| Out-of-Territory: | ||||||||||||||||||||||||||||||||||||||||||||
| Primary Residential | 4.6 | 10.9 | 15.8 | 18.4 | 17.7 | 18.4 | 20.5 | 21.5 | 22.8 | 24.8 | 26.8 | |||||||||||||||||||||||||||||||||
| Secondary Residential | 0.2 | 0.6 | 0.7 | 0.8 | 0.8 | 0.9 | 1.0 | 1.0 | 1.1 | 1.1 | 1.2 | |||||||||||||||||||||||||||||||||
| Business/Other | 6.8 | 8.0 | 9.9 | 11.1 | 12.2 | 12.8 | 13.9 | 15.2 | 16.3 | 17.7 | 19.4 | |||||||||||||||||||||||||||||||||
| Total Out-of-Territory | 11.6 | 19.5 | 26.4 | 30.3 | 30.7 | 32.1 | 35.4 | 37.7 | 40.2 | 43.6 | 47.4 | |||||||||||||||||||||||||||||||||
| Total Access Lines | 980.9 | 979.4 | 978.5 | 970.1 | 959.9 | 946.5 | 937.6 | 930.6 | 920.9 | 912.5 | 900.5 | |||||||||||||||||||||||||||||||||
Cincinnati Bell Inc.
Net Debt Calculation
(Unaudited)
Net Debt Calculation
(Unaudited)
(dollars in millions)
| September 30, | December 31, | Change | ||||||||||||||
| 2006 | 2005 | $ | % | |||||||||||||
| Credit facility, revolver | $ | 4.0 | $ | — | $ | 4.0 | n/m | |||||||||
| Credit facility, tranche B term loan | 396.0 | 399.0 | (3.0 | ) | (1 | %) | ||||||||||
| Cincinnati Bell Telephone notes | 230.0 | 230.0 | — | 0 | % | |||||||||||
| 7 1/4% Senior Notes due 2013 | 496.9 | 500.0 | (3.1 | ) | (1 | %) | ||||||||||
| 7 1/4% Senior Notes due 2023 | 50.0 | 50.0 | — | 0 | % | |||||||||||
| 8 3/8% Senior Subordinated Notes due 2014 | 630.9 | 633.4 | (2.5 | ) | (0 | %) | ||||||||||
| 7% Senior Notes due 2015 | 244.8 | 246.4 | (1.6 | ) | (1 | %) | ||||||||||
| Capital leases and other debt | 19.6 | 24.9 | (5.3 | ) | (21 | %) | ||||||||||
| Net unamortized premium | 0.9 | 1.0 | (0.1 | ) | (10 | %) | ||||||||||
| Total debt | 2,073.1 | 2,084.7 | (11.6 | ) | (1 | %) | ||||||||||
| Add: Interest rate swap liability | 14.3 | 10.2 | 4.1 | 40 | % | |||||||||||
| Less: Cash and cash equivalents | (27.5 | ) | (25.7 | ) | (1.8 | ) | 7 | % | ||||||||
| Net debt (as defined by the company) | $ | 2,059.9 | $ | 2,069.2 | $ | (9.3 | ) | (0 | %) | |||||||
| Credit facility availability | $ | 238.7 | $ | 243.6 | $ | (4.9 | ) | (2 | %) | |||||||
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Consolidated Statements of Cash Flows
(Unaudited)
(dollars in millions)
| Three Months | Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| Cash provided by operating activities | $ | 52.6 | $ | 74.2 | $ | 210.2 | $ | 225.4 | ||||||||
| Capital expenditures | (35.2 | ) | (37.7 | ) | (109.8 | ) | (108.7 | ) | ||||||||
| Acquisition of business and remaining minority interest in CBW | — | — | (86.7 | ) | — | |||||||||||
| Deposit for wireless licenses purchase | (7.0 | ) | — | (7.0 | ) | — | ||||||||||
| Proceeds from sale of broadband assets | 4.7 | — | 4.7 | — | ||||||||||||
| Other | 0.2 | 1.2 | 2.2 | 1.2 | ||||||||||||
| Cash used in investing activities | (37.3 | ) | (36.5 | ) | (196.6 | ) | (107.5 | ) | ||||||||
| Issuance of long-term debt | — | — | — | 352.1 | ||||||||||||
| Increase (decrease) in corporate credit facility, net | (8.0 | ) | 406.0 | 4.0 | 438.0 | |||||||||||
| Repayment of debt | (5.7 | ) | (440.5 | ) | (11.4 | ) | (882.5 | ) | ||||||||
| Debt issuance costs and consent fees | — | (0.9 | ) | — | (21.9 | ) | ||||||||||
| Issuance of common shares — exercise of stock options | 1.0 | 0.7 | 1.7 | 2.4 | ||||||||||||
| Preferred stock dividends | (2.6 | ) | (2.6 | ) | (7.8 | ) | (7.8 | ) | ||||||||
| Other | 0.9 | 0.6 | 1.7 | 0.6 | ||||||||||||
| Cash provided by (used in) financing activities | (14.4 | ) | (36.7 | ) | (11.8 | ) | (119.1 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 0.9 | 1.0 | 1.8 | (1.2 | ) | |||||||||||
| Cash and cash equivalents at beginning of period | 26.6 | 22.7 | 25.7 | 24.9 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 27.5 | $ | 23.7 | $ | 27.5 | $ | 23.7 | ||||||||
Reconciliation of GAAP Cash Flow to Free Cash Flow as defined by the company | ||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 0.9 | $ | 1.0 | $ | 1.8 | $ | (1.2 | ) | |||||||
| Less adjustments: | ||||||||||||||||
| Issuance of long-term debt and net change in corporate credit facility | 8.0 | (406.0 | ) | (4.0 | ) | (790.1 | ) | |||||||||
| Repayment of debt | 5.7 | 440.5 | 11.4 | 882.5 | ||||||||||||
| Acquisition of business and remaining minority interest in CBW | — | — | 86.7 | — | ||||||||||||
| Free cash flow (as defined by the company) | $ | 14.6 | $ | 35.5 | $ | 95.9 | $ | 91.2 | ||||||||
| Income tax payments | $ | (1.4 | ) | $ | — | $ | (5.2 | ) | $ | (1.1 | ) | |||||
Cincinnati Bell Inc.
Reconciliation of Adjusted EBITDA (Non-GAAP) to Operating Income (GAAP)
(Unaudited)
Reconciliation of Adjusted EBITDA (Non-GAAP) to Operating Income (GAAP)
(Unaudited)
(dollars in millions)
| Three Months Ended September 30, 2006 | ||||||||||||||||||||||||||||
| Local | Wireless | HMS | Other | Broadband | Corporate | Total Company | ||||||||||||||||||||||
Operating Income (GAAP) | $ | 62.1 | $ | 6.3 | $ | 5.2 | $ | 6.6 | $ | 7.9 | $ | (4.6 | ) | $ | 83.5 | |||||||||||||
| Add: | ||||||||||||||||||||||||||||
| Depreciation and amortization | 26.6 | 7.5 | 0.9 | 0.6 | — | — | 35.6 | |||||||||||||||||||||
| Shareholder claim settlement, gain on sale of broadband assets, restructuring charges and asset impairments | 3.0 | — | — | — | (4.4 | ) | — | (1.4 | ) | |||||||||||||||||||
EBITDA (Non-GAAP) | $ | 91.7 | $ | 13.8 | $ | 6.1 | $ | 7.2 | $ | 3.5 | $ | (4.6 | ) | $ | 117.7 | |||||||||||||
| Three Months Ended September 30, 2005 | ||||||||||||||||||||||||||||
| Local | Wireless | HMS | Other | Broadband | Corporate | Total Company | ||||||||||||||||||||||
Operating Income (GAAP) | $ | 67.9 | $ | (4.1 | ) | $ | 2.8 | $ | 7.0 | $ | 1.0 | $ | (2.5 | ) | $ | 72.1 | ||||||||||||
| Add: | ||||||||||||||||||||||||||||
| Depreciation and amortization | 27.1 | 13.2 | 0.7 | 0.5 | — | 0.3 | 41.8 | |||||||||||||||||||||
EBITDA (Non-GAAP) | $ | 95.0 | $ | 9.1 | $ | 3.5 | $ | 7.5 | $ | 1.0 | $ | (2.2 | ) | $ | 113.9 | |||||||||||||
| Nine Months Ended September 30, 2006 | ||||||||||||||||||||||||||||
| Local | Wireless | HMS | Other | Broadband | Corporate | Total Company | ||||||||||||||||||||||
Operating Income (GAAP) | $ | 202.2 | $ | 14.5 | $ | 11.4 | $ | 20.1 | $ | 9.7 | $ | (20.1 | ) | $ | 237.8 | |||||||||||||
| Add: | ||||||||||||||||||||||||||||
| Depreciation and amortization | 77.6 | 23.6 | 2.7 | 1.7 | — | — | 105.6 | |||||||||||||||||||||
| Shareholder claim settlement, gain on sale of broadband assets, restructuring charges and asset impairments | 3.0 | — | — | — | (7.1 | ) | 6.3 | 2.2 | ||||||||||||||||||||
EBITDA (Non-GAAP) | $ | 282.8 | $ | 38.1 | $ | 14.1 | $ | 21.8 | $ | 2.6 | $ | (13.8 | ) | $ | 345.6 | |||||||||||||
| Nine Months Ended September 30, 2005 | ||||||||||||||||||||||||||||
| Local | Wireless | HMS | Other | Broadband | Corporate | Total Company | ||||||||||||||||||||||
Operating Income (GAAP) | $ | 207.9 | $ | (25.8 | ) | $ | 9.5 | $ | 20.0 | $ | 3.6 | $ | (12.0 | ) | $ | 203.2 | ||||||||||||
| Add: | ||||||||||||||||||||||||||||
| Depreciation and amortization | 81.0 | 48.4 | 1.7 | 1.4 | — | 0.7 | 133.2 | |||||||||||||||||||||
| Shareholder claim settlement, gain on sale of broadband assets, restructuring charges and asset impairments | — | 23.7 | (0.1 | ) | — | (0.6 | ) | 0.1 | 23.1 | |||||||||||||||||||
EBITDA (Non-GAAP) | $ | 288.9 | $ | 46.3 | $ | 11.1 | $ | 21.4 | $ | 3.0 | $ | (11.2 | ) | $ | 359.5 | |||||||||||||
Cincinnati Bell Inc.
Normalized Statements of Operations (Non-GAAP) — Reconciliation to Reported Results
(Unaudited)
Normalized Statements of Operations (Non-GAAP) — Reconciliation to Reported Results
(Unaudited)
(dollars in millions, except per share amounts)
| Special Items | ||||||||||||||||
| Three | ||||||||||||||||
| Three | Gain on | Months Ended | ||||||||||||||
| Months Ended | Sale of | September 30, 2006 | ||||||||||||||
| September 30, | Broadband | Restructuring | Before Special Items | |||||||||||||
| 2006 (GAAP) | Assets | Charge | (Non-GAAP) | |||||||||||||
| A | B | |||||||||||||||
Revenue | $ | 320.1 | $ | — | $ | — | $ | 320.1 | ||||||||
Costs and expenses | ||||||||||||||||
| Cost of services and products | 142.9 | — | — | 142.9 | ||||||||||||
| Selling, general and administrative | 59.5 | — | — | 59.5 | ||||||||||||
| Depreciation and amortization | 35.6 | — | — | 35.6 | ||||||||||||
| Gain on sale of broadband assets | (4.7 | ) | 4.7 | — | ||||||||||||
| Restructuring charges | 3.3 | (3.3 | ) | — | ||||||||||||
| Operating income (loss) | 83.5 | (4.7 | ) | 3.3 | 82.1 | |||||||||||
| Minority interest income | (0.2 | ) | (0.2 | ) | ||||||||||||
| Interest expense | 41.4 | — | — | 41.4 | ||||||||||||
| Loss on extinguishment of debt | 0.1 | 0.1 | ||||||||||||||
| Other income, net | (0.2 | ) | — | — | (0.2 | ) | ||||||||||
| Income (loss) before income taxes | 42.4 | (4.7 | ) | 3.3 | 41.0 | |||||||||||
| Income tax expense (benefit) | 17.3 | (1.9 | ) | 1.3 | 16.7 | |||||||||||
Net income (loss) | 25.1 | (2.8 | ) | 2.0 | 24.3 | |||||||||||
| Preferred stock dividends | 2.6 | — | — | 2.6 | ||||||||||||
Net income (loss) applicable to common shareowners | $ | 22.5 | $ | (2.8 | ) | $ | 2.0 | 21.7 | ||||||||
| Weighted average diluted common shares | 254.4 | 254.4 | 254.4 | 254.4 | ||||||||||||
| Diluted earnings (loss) per common share | $ | 0.09 | $ | (0.01 | ) | $ | 0.01 | $ | 0.09 | |||||||
| A | The Company sold certain broadband fiber assets for a gain of $4.7 million. | |
| B | In September 2006, the Company incurred employee separation expense related to the outsourcing of certain supply chain functions. |
Cincinnati Bell Inc.
Normalized Statements of Operations (Non-GAAP) — Reconciliation to Reported Results
(Unaudited)
Normalized Statements of Operations (Non-GAAP) — Reconciliation to Reported Results
(Unaudited)
(dollars in millions, except per share amounts)
| Special Items | ||||||||||||||||||||||||
| Nine | ||||||||||||||||||||||||
| Nine | Gain on | Months Ended | ||||||||||||||||||||||
| Months Ended | Sale of | Shareholder | Income | September 30, 2006 | ||||||||||||||||||||
| September 30, | Broadband | Claim | Tax | Restructuring | Before Special Items | |||||||||||||||||||
| 2006 (GAAP) | �� | Assets | Settlement | Expense | Charge | (Non-GAAP) | ||||||||||||||||||
| A | B | C | D | |||||||||||||||||||||
Revenue | $ | 941.7 | $ | — | $ | — | $ | — | $ | — | $ | 941.7 | ||||||||||||
Costs and expenses | ||||||||||||||||||||||||
| Cost of services and products | 416.5 | — | — | — | — | 416.5 | ||||||||||||||||||
| Selling, general and administrative | 179.6 | — | — | — | — | 179.6 | ||||||||||||||||||
| Depreciation and amortization | 105.6 | — | — | — | — | 105.6 | ||||||||||||||||||
| Shareholder claim settlement | 6.3 | — | (6.3 | ) | — | — | — | |||||||||||||||||
| Gain on sale of broadband assets | (7.6 | ) | 7.6 | — | — | — | — | |||||||||||||||||
| Restructuring charges | 3.5 | — | — | — | (3.5 | ) | — | |||||||||||||||||
| Operating income (loss) | 237.8 | (7.6 | ) | 6.3 | — | 3.5 | 240.0 | |||||||||||||||||
| Minority interest expense | 0.1 | — | — | — | — | 0.1 | ||||||||||||||||||
| Interest expense | 121.3 | — | — | — | — | 121.3 | ||||||||||||||||||
| Loss on extinguishment of debt | 0.1 | — | — | — | — | 0.1 | ||||||||||||||||||
| Other income, net | (0.5 | ) | — | — | — | — | (0.5 | ) | ||||||||||||||||
| Income (loss) before income taxes | 116.8 | (7.6 | ) | 6.3 | — | 3.5 | 119.0 | |||||||||||||||||
| Income tax expense (benefit) | 53.2 | (3.0 | ) | 2.5 | (3.6 | ) | 1.4 | 50.5 | ||||||||||||||||
Net income | 63.6 | (4.6 | ) | 3.8 | 3.6 | 2.1 | 68.5 | |||||||||||||||||
| Preferred stock dividends | 7.8 | — | — | — | — | 7.8 | ||||||||||||||||||
Net income (loss) applicable to common shareowners | $ | 55.8 | $ | (4.6 | ) | $ | 3.8 | $ | 3.6 | $ | 2.1 | $ | 60.7 | |||||||||||
| Weighted average diluted common shares | 252.7 | 252.7 | 252.7 | 252.7 | 252.7 | 252.7 | ||||||||||||||||||
| Diluted earnings (loss) per common share | $ | 0.22 | $ | (0.02 | ) | $ | 0.02 | $ | 0.01 | $ | 0.01 | $ | 0.24 | |||||||||||
| A | Gain on sale of Broadband assets includes sale of certain broadband fiber assets and expiration of certain indemnifications that were previously reserved. | |
| B | Reserve of $6.3 million recorded to settle the Company's shareholder claim. | |
| C | Kentucky net operating loss carry-forward write-off due to regulations issued in first quarter 2006. | |
| D | In September 2006, the Company incurred employee separation expense related to the outsourcing of certain supply chain functions. |
Cincinnati Bell Inc.
Normalized Statements of Operations — Reconciliation to Reported Results
(Unaudited)
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, | 16% Notes | September 30, 2005 | ||||||||||
| 2005 (GAAP) | Extinguishment | Before Special Items | ||||||||||
| B | ||||||||||||
Revenue | $ | 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 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 expense (benefit) | (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 common 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 the special items from earnings. | |
| B | Loss on extinguishment of the company’s 16% Notes. |
Cincinnati Bell Inc.
Normalized Statements of Operations — Reconciliation to Reported Results
(Unaudited)
Normalized Statements of Operations — Reconciliation to Reported Results
(Unaudited)
(dollars in millions, except per share amounts)
| Special Items | ||||||||||||||||||||
| Nine | Nine | |||||||||||||||||||
| Months Ended | Asset | Months Ended | ||||||||||||||||||
| September 30, | Income Tax | Debt | Impairments | September 30, 2005 | ||||||||||||||||
| 2005 (GAAP) | Expense | Extinguishment | & Other Charges | Before Special Items | ||||||||||||||||
| B | C | D | ||||||||||||||||||
Revenue | $ | 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 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 (benefit) | 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 diluted common shares | 245.8 | 251.8 | A | 251.8 | A | 251.8 | A | 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. | |
| 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. | |
| 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. |