SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
October 22, 1999
---------------------------------
(Date of earliest event reported)
CINCINNATI BELL INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 1-8519 31-1056105
---- ------ ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Identification
organization) Number) Number)
201 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(513) 397-9900
----------------------------------------------------
(Registrant's telephone number, including area code)
Item 5. Other Events
The press release of Cincinnati Bell Inc. dated October 22, 1999
regarding its third quarter financial results for the quarterly period ended
September 30, 1999 is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CINCINNATI BELL INC.
by:
/s/ Thomas E. Taylor
------------------------------
Name: Thomas E. Taylor
Title: General Counsel and
Secretary
Date: October 22, 1999
3
Exhibit Index
Exhibit No. Exhibit Page No.
----------- -------------------------------- --------
99.1 Press Release of Cincinnati Bell
Inc. dated October 22, 1999.
4
CONTACT: Hugh Anderson
Director Investor Relations
(513) 397-7877
CINCINNATI BELL DELIVERS STRONG REVENUE AND MARGIN GROWTH
Wireless, Value-Added Services, Broadband Lead Revenue Gains
FOR IMMEDIATE RELEASE
CINCINNATI, OHIO, October 22, 1999 - Cincinnati Bell Inc. (NYSE:CSN) today
reported sharp increases in revenues, EBITDA and earnings per share for the
third quarter, compared with the same period last year.
For the quarter, revenues increased 18 percent to $262.4 million, EBITDA
increased 21 percent to $91.6 million, and EPS from continuing operations
increased 47 percent to 22 cents.
"I am very pleased with these excellent results," Cincinnati Bell President
and CEO Rick Ellenberger said. "We continue to attack our Midwest market
opportunities aggressively, generating strong demand for our wireless, data,
e-commerce and value-added communications services. These results confirm that
our management team remains focused on growth, while leveraging margins by
keeping costs in check."
FINANCIAL HIGHLIGHTS
o Double-Digit Growth - Revenue growth continued to accelerate in the third
quarter, topping growth of 12 percent and 16 percent, respectively, in
the first and second quarters this year.
o Strong Operating Cost Controls - Excluding costs of our PCS wireless
business, cash operating expenses were down 4 percent in the third
quarter from the third quarter last year.
o Increasing Margins - Excluding PCS wireless, EBITDA (earnings before
interest expense, income taxes, depreciation and amortization) margin
increased for the fifth straight quarter, to 40 percent. That is up from
34 percent in the third quarter last year. Including wireless,
third-quarter EBITDA margin was 35 percent.
o Bottom-line leverage - Net income from continuing operations increased 42
percent to $29.8 million, or 22 cents per diluted shares for the third
quarter.
o DSL subscribers - DSL subscriber additions accelerated during the
quarter, increasing by 4,000, or nearly 50 percent, to about 12,000 at
the end of the third quarter. Cincinnati Bell's Zoom-Town branded DSI
service is now available to about 68 percent of households in Cincinnati
Bell's market. Of those, about 2.4 percent subscribe to Zoom-Town.
o Wireless subscribers - Penetration reached 5.6 percent of covered POPs in
the Cincinnati/Dayton market, with 112,000 subscribers in September, up
from 88,000 in June. Average monthly revenue was a robust $78 per
subscriber.
o Complete Connections - More than 10 percent of Cincinnati-area households
subscribe to Cincinnati Bell's all-in-one bundle of 20 residential
calling services plus phone line. Each new Complete Connections sale
represented an average $6 in incremental monthly revenue per household in
the quarter. Total value-added services revenues increased 32 percent.
o Broadband and Internet services - High-speed access on a voice-grade
equivalent basis was up 35 percent. Revenues from related data services
grew 33 percent. Subscribers to Cincinnati Bell's FUSE Internet access
service increased 67 percent.
For the first nine months of 1999, Cincinnati Bell's revenues increased 15
percent to $758.2 million, EBITDA increased 21 percent to $253.6 million, and
net income from continuing operations increased 39 percent to $82.8 million,
or 59 cents per diluted share.
Cincinnati Bell completed Y2K testing in September. It expects no effect on
its network, facilities and information technology systems are as a result of
the Y2K event. Cincinnati Bell has spent a total of $20 million on Y2K,
including $4.2 million year to date in 1999.
On July 21, Cincinnati Bell announced an agreement to acquire IXC
Communications, Inc., a provider of advanced voice, data and Internet services
for businesses over a nationwide, next-generation fiber network. Cincinnati
Bell will exchange 2.0976 of its common shares for each IXC common share and
assume about $1 billion in IXC debt in the transaction. Pending regulatory
clearances, shareholder approvals and other conditions, the merger is expected
to close at or before year-end.
In connection with the IXC acquisition, Cincinnati Bell issued $400 million in
convertible subordinated debt to Oak Hill Capital Partners, a private
investment firm. Cincinnati Bell also purchased 5 million IXC shares from
IXC's largest shareholder, launched a repurchase program for Cincinnati Bell
shares, and eliminated its common-share dividend.
"In just three months, we have made substantial progress toward combining
Cincinnati Bell and IXC into an aggressive new player in the U.S.
communications market," Ellenberger said. "Our goal is to create more value
for shareholders by applying Cincinnati Bell's proven operational and
financial strengths to IXC. Together, we will offer a full range of
communications services for our Midwest customers, and attack new
opportunities to integrate voice, data and Internet services for businesses
nationwide."
* * * * *
Cincinnati Bell provides competitive local, long distance, wireless, data,
e-commerce, Internet and directory services to communications customers in the
Cincinnati, Ohio, metropolitan area and in other Midwest southeast markets.
Note:
Information included in this news release contains forward-looking statements
that involve potential risks and uncertainties for Cincinnati Bell. The future
results of Cincinnati Bell could differ materially from those discussed
herein. Factor that could cause or contribute to such differences include, but
are not limited to, difficulties in
completing or integrating acquisitions, Year-2000 compliance, and other
factors disclosed in Cincinnati Bell's most recent S-4, 10-Q and 10-K reports
to the SEC.
Cincinnati Bell Inc.
Consolidated Statements of Income
(Unaudited)
(In millions-except per share amounts) For the Three Months For the Nine Months
- -------------------------------------- Ended September 30, Ended September 30,
1999 1998 % Change 1999 1998 % Change
---- ---- -------- ---- ---- --------
Revenues
- --------
Local Service $108.5 $102.3 6 $317.3 $303.8 4
Network Access 46.2 44.5 4 138.8 134.8 3
Other Services 34.4 32.7 5 100.7 94.3 7
------ ------ ------ ------
Local Communication Services 189.1 179.5 5 556.8 532.9 4
Directory Services 18.9 18.0 5 55.3 54.8 1
Wireless Services 25.8 - - 61.7 - -
Other Communications Services 32.7 28.4 15 95.1 79.4 20
Intersegment (4.1) (3.3) 25 (10.7) (8.5) 25
------ ------ ------ ------
Total Revenues 262.4 222.6 18 758.2 658.6 15
------ ------ ------ ------
Costs and Expenses
- ------------------
Cost of Providing Services and Products Sold 112.1 91.8 22 329.0 274.0 20
Selling, General and Administrative 58.2 51.9 12 171.4 156.0 10
Year 2000 Programming Costs 0.5 2.5 (80) 4.2 7.7 (45)
Mandated Telecommunications Costs - 0.9 - - 10.7 -
------ ------ ------ ------
Operating Expenses Less Depreciation and
Amortization 170.8 147.1 16 504.6 448.4 13
------ ------ ------ ------
EBITDA 91.6 75.5 21 253.6 210.2 21
Depreciation and Amortization 33.3 28.4 17 98.2 82.4 19
---- ---- ---- ----
Operating Income 58.3 47.1 24 155.4 127.8 22
Wireless Venture - (7.5) - - (16.2) -
Minority Interest (1.7) - - (5.8) - -
Other Income (Expense), net 0.8 0.4 25 0.5 (1.6) (131)
Interest Expense 13.9 7.0 99 31.9 17.8 79
------ ------ ------ ------
Income From Continuing Operations Before
Income Taxes 46.6 33.0 41 129.8 92.2 41
Income Taxes 18.8 12.0 40 47.0 32.6 44
---- ---- ---- ----
Income From Continuing Operations 29.8 21.0 42 82.8 59.8 39
Discontinued Operations, Net of Taxes - 27.4 - - 54.1 -
------ ------ ------ ------
Net Income $29.8 $48.4 $82.8 $113.7
====== ====== ====== ======
Basic Earnings Per Common Share
- -------------------------------
Income From Continuing Operations 0.22 0.15 47 0.61 0.44 39
Income From Discontinued Operations - 0.21 - 0.40
------ ------ ------ ------
Net Income $0.22 $0.36 $0.61 $0.84
====== ====== ====== ======
Diluted Earnings Per Common Share
- ---------------------------------
Income From Continuing Operations 0.22 0.15 47 0.59 0.43 37
Income From Discontinued Operations - 0.20 - 0.39
------ ------ ------ ------
Net Income $0.22 $0.35 $0.59 $0.82
====== ====== ====== ======
Dividends Declared Per Common Share $ - $0.10 $0.20 $0.30
====== ====== ====== ======
Weighted Average Common Shares Outstanding
(millions)
- Basic 134.1 136.0 135.8 135.9
- Diluted 137.7 138.1 139.7 138.3
Other Data
- ----------
EBITDA Margin 34.9% 33.9% 3 33.4% 31.9% 5
Operating Margin 22.2% 21.2% 5 20.5% 19.4% 6
Capital Additions:
Telephone Plant $30.9 $23.2 33 $99.9 $105.4 (5)
Other (including acquisitions) 24.5 7.6 - 63.7 10.8 -
------ ------ ------ ------
Total $55.4 $30.8 80 $163.6 $116.2 41
Access Minutes of Use (millions) 1,154 1,078 7 3,407 3,177 7
Market Price Per Share
- ----------------------
High $26.500 $13.549 $26.500 $15.769
Low $16.313 $9.186 $16.063 $9.186
Close $19.438 $10.615 $19.438 $10.615
Cincinnati Bell Inc.
Consolidated Statements of Income
(Unaudited)
(In millions-except per share amounts) 4th 1st 2nd 3rd Trailing
Quarter Quarter Quarter Quarter Four
1998 1999 1999 1999 Quarters
---- ---- ---- ---- --------
Revenues
- ---------
Local Service $104.1 $103.9 $104.9 $108.5 $421.4
Network Access 45.1 45.8 46.8 46.2 184.9
Other Services 35.3 31.9 34.4 34.4 135.0
------ ------ ------ ------ ------
Local Communication Services 185.5 181.8 186.1 189.1 742.3
Directory Services 18.1 18.1 18.3 18.9 73.4
Wireless Services - 15.2 20.7 25.8 61.7
Other Communications Services 28.4 30.6 31.8 32.7 121.5
Intersegment (3.5) (3.3) (3.3) (4.1) (14.2)
------ ------ ------ ------ ------
Total Revenues 226.5 242.2 253.8 282.4 984.7
------ ------ ------ ------ ------
Costs and Expenses
- --------------------
Cost of Providing Services and Products Sold 95.6 107.1 109.8 112.1 424.5
Selling, General and Administrative 48.0 55.1 58.1 58.2 219.4
Year 2000 Programming Costs 3.2 2.4 1.3 0.5 7.4
Mandated Telecommunications Costs (0.1) - - - (0.1)
------ ------ ------ ------ ------
Operating Expenses Less Depreciation and
Amortization 146.7 164.6 169.2 170.8 651.3
------ ------ ------ ------ ------
EBITDA 79.8 77.6 84.4 91.6 333.4
Depreciation and Amortization 28.7 32.3 32.6 33.3 126.9
Special Charges (Credits) (1.1) - - - (1.1)
------ ------ ------ ------ ------
Operating Income 52.2 45.3 51.8 58.3 207.6
Wireless Venture (11.1) - - - (11.1)
Minority Interest - (2.3) (1.8) (1.7) (5.8)
Other Income (Expense), net (0.8) - - 0.5 (0.3)
Interest Expense 8.4 8.7 9.3 13.9 38.3
------ ------ ------ ------ ------
Income From Continuing Operations Before Income
Taxes 33.9 38.9 44.3 46.6 163.7
Income Taxes 11.7 14.2 16.0 16.8 58.7
------ ------ ------ ------ ------
Income From Continuing Operations 22.2 24.7 28.3 29.8 105.0
Discontinued Operations, Net of Taxes 15.0 - - - 15.0
Extraordinary Item, Net of Taxes 1.0 - - - (1.0)
------ ------ ------ ------ ------
Net Income $38.2 $24,7 $28.3 $29.8 $119.0
====== ====== ====== ====== ======
Basic Earnings Per Common Share
- --------------------------------
Income From Continuing Operations 0.16 0.18 0.21 0.22 0.77
Income From Discontinued Operations 0.11 - - - 0.11
Extraordinary Item (0.01) - - - (0.01)
------ ------ ------ ------ ------
Net Income $0.28 $0.18 $0.21 $0.22 $0.87
====== ====== ====== ====== ======
Diluted Earnings Per Common Share
- ----------------------------------
Income From Continuing Operations 0.16 0.18 0.20 0.22 0.76
Income From Discontinued Operations 0.11 - - - 0.11
Extraordinary Item (0.01) - - - (0.01)
------ ------ ------ ------ ------
Net Income $0.25 $0.18 $0.20 $0.22 $0.86
====== ====== ====== ====== ======
Dividends Declared Per Common Share $0.10 $0.10 $0.10 $ - $0.30
====== ====== ====== ====== ======
Weighted Average Common Shares Outstanding (millions)
-Basic 136.1 136.4 136.9 134.1 135.9
-Diluted 138.0 140.1 140.9 137.7 139.1
Other Data
- ------------
EBITDA Margin 35.2% 32.0% 33.3% 34.9% 33.9%
Operating Margin 23.0% 18.7% 20.4% 22.2% 21.1%
Capital Additions:
Telephone Plant $30.8 $28.1 $40.9 $30.9 $130.7
Other (including acquisitions) 156.5 20.8 18.4 24.5 220.2
------ ------ ------ ------ ------
Total $187.3 $48.9 $59.3 $55.4 $350.9
Access Minutes of Use (millions) 1,086 1,142 1,111 1,154 4,493
Market Price Per Share
- ----------------------
High $15.588 $23.438 $26.500 $26.500 $26.500
Low $8.523 $16.063 $19.825 $18.313 $8.523
Close $15.438 $22.438 $24.938 $19.438 $19.438
(a) Excludes special credits
Cincinnati Bell Inc.
Consolidated Balance Sheets
(Unaudited)
(Dollars in Millions) September 30, December 31, March 31, June 30, September 30,
1998 1998 1999 1999 1999
Assets
- ------
Cash and Cash Equivalents $0.1 $10.1 $7.7 $4.1 $3.4
Receivables - Net 153.4 138.0 135.4 149.0 146.2
Other Current Assets 55.9 49.3 58.1 63.6 63.2
Property, Plant and Equipment - Net 609.5 698.2 706.6 727.4 748.5
Other Assets 101.3 145.4 165.3 191.0 471.1
Net Assets of Discontinued Operations 471.6 - - - -
-------- -------- -------- -------- --------
Total Assets $1,391.8 $1,041.0 $1,073.1 $1,135.1 $1,432.4
======== ======== ======== ======== ========
Liabilities and Shareowners' Equity
- -----------------------------------
Debt Maturing in One Year $140.8 $186.2 $190.3 $250.3 $221.8
Other Current Liabilities 211.1 219.1 219.4 195.0 216.1
Long-Term Debt 267.5 366.8 366.5 366.3 766.1
Deferred Credits and Other Liabilities 125.2 126.8 135.4 147.0 136.8
Common Shareowners' Equity 647.2 142.1 161.5 176.5 91.6
-------- -------- -------- -------- -------
Total Liabilities and Shareowners'
Equity $1,391.8 $1,041.0 $1,073.1 $1,135.1 $1,432.4
======== ======== ======== ======== ========
Other Data
- ----------
Net Debt (Debt less Cash) $408.2 $542.9 $549.1 $612.5 $984.5
Common Shares Outstanding (millions) 136.4 136.4 137.5 137.8 131.6
Network Access Lines (000)
Residence 700 700 707 711 713
Business 332 333 337 340 343
-------- -------- -------- -------- --------
Total 1,032 1,033 1,044 1,051 1,056
CBT Employees 2,900 3,000 2,900 2,900 2,900
Access Lines Per CBT Employee 356 344 360 362 364
Cincinnati Bell Inc.
Operating Highlights
3Q 1999 3Q 1998 Increase
------- ------- --------
Access Minutes of Use (millions)
Interstate 838 794 5.5%
Intrastate 316 284 11.5%
--------- ---------
Total 1,154 1,078 7.1%
Switched Access Lines
Residence 712,937 699,893 1.9%
Business 342,720 331,632 3.3%
--------- ---------
Total 1,055,657 1,031,525 2.3%
Voice Grade Equivalents(a) 477,232 345,373 38.2%
--------- ---------
Total Switched Access Lines
and Voice Grade
Equivalents 1,532,889 1,376,898 11.3%
FUSE Subscribers 45,368 27,179 66.9%
ADSL Subscribers 11,865 0 NM
Telephone Employees per 10,000
Switched Access Lines 27.6 28.4
Residential Penetration Rates
Call Waiting 46.9% 44.5%
Caller ID 31.6% 21.7%
Call Forward 40.1% 21.7%
Voice Messaging 15.6% 9.9%
Additional Lines 12.9% 12.2%
3Q 1999 2Q 1999 1Q 1999
------- ------- -------
Wireless PCS
Subscribers 112,466 88,833 70,516
Penetration of Covered POPs 5.6% 4.4% 3.7%
ARPU $78 $77 $67
Monthly Churn 1.51% 1.37% 1.37%
Acquisition Cost per Gross Add $387 $395 $422
(a) Voice Grade Equivalents used in calculations:
ISDN BRI = 2
ISDN PRI = 21
DSO = 1
DSI = 24
DS3 = 672