Cincinnati Bell Reports Fourth Quarter and Full Year 2012 Results
Cincinnati Bell Reports Fourth Quarter and Full Year 2012 Results
Business Wire
CINCINNATI -- February 27, 2013
Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the full
year and fourth quarter of 2012.
Highlights
* Achieved 2012 financial guidance for Revenue and Adjusted EBITDA
* Completed successful IPO of CyrusOne in January 2013 and retained 69
percent ongoing ownership of CyrusOne
* Passed 71,000 units with Fioptics in 2012 and achieved 28 percent customer
penetration
Ted Torbeck, president and chief executive officer, stated, “In 2012,
Cincinnati Bell delivered solid financial results while executing on a data
center strategy that positions us to significantly reduce debt and
fundamentally change Cincinnati Bell’s future leverage profile.”
“As the new CEO of Cincinnati Bell, I am honored to be leading a company with
a very strong foundation from which to build. While challenges exist, our
growth initiatives are clear. Our fiber investments are delivering strong
results, and are approaching an inflection point. In 2013, we will increase
capital investment to accelerate our fiber deployment to consumers and
businesses in Cincinnati. As a result, we believe we can return our Wireline
business to growth in 2014,” Mr. Torbeck concluded.
Fourth Quarter and Full-Year Performance Highlights
* Revenue of $1.5 billion was in line with guidance and reflects a 1 percent
increase over 2011. Fourth quarter 2012 revenue was $375 million, up $9
million from the same period in 2011. Full year earnings before interest,
taxes, depreciation and amortization^1 (Adjusted EBITDA) was $535 million
for 2012, ahead of guidance of $530 million and down 2 percent compared to
2011.
* Wireline revenue for the quarter was $182 million, flat compared to the
prior year when considering a one-time charge for credits recorded in the
fourth quarter of 2011. Revenue for the full year of $731 million was down
slightly compared to 2011, as the growth in Fioptics and data revenue from
business customers continues to partially offset the impact of access line
losses. Wireline Adjusted EBITDA for the full year was $344 million,
resulting in an Adjusted EBITDA margin^2 of 47 percent, down from 49
percent in the full year of 2011.
* CyrusOne revenue for the quarter increased 18 percent year-over-year to
$58 million, and revenue for the full year of $221 million represents a 20
percent increase over 2011. CyrusOne Adjusted EBITDA for the full year was
$115 million, an increase of 13 percent compared to 2011, resulting in an
Adjusted EBITDA margin of 52 percent. During the fourth quarter, the
company added 36,000 square feet of data center space and sold 41,000
square feet. For the year, the company constructed 199,000 square feet of
additional data center space, increasing total capacity to 932,000 square
feet, and sold 92,000 square feet of space. As a result, the segment’s
utilization at the end of 2012 was 78 percent.
* CyrusOne raised $525 million in 6.375% senior notes in the fourth quarter,
and $480 million of the proceeds were used by the company to repay
Cincinnati Bell corporate bonds and other debt. The company’s net debt^3,
excluding CyrusOne, totaled $2.1 billion at the end of 2012.
Fourth Quarter and Full Year Review
For the year, revenue of $1.5 billion reflects a 1 percent increase over 2011,
while fourth quarter revenue was 3 percent higher than the comparable period
in 2011. Operating income for the full year of 2012 was $270 million, up 4
percent compared to 2011, with operating income from the quarter totaling $58
million. Net income for the year of $11 million was affected by a loss on
extinguishment of debt of $14 million, asset impairments of $14 million and
CyrusOne REIT formation and other transaction costs of $6 million. Net income
excluding special items^4 for the year was $34 million and resulted in 11
cents per diluted share, down from 24 cents in 2011 due primarily to
additional depreciation associated with our CyrusOne capital expenditures.
Full year 2012 Adjusted EBITDA was $535 million, which includes an $8 million
mark-to-market charge on certain compensation plans as a result of the
increase in the company’s stock price in 2012, and was down from 2011 Adjusted
EBITDA of $545 million.
“With the repayment of our 2015 bonds and other indebtedness in the fourth
quarter, the company has no significant maturities until 2017,” said Kurt
Freyberger, chief financial officer. “We believe our current capital structure
provides sufficient flexibility to support the growth of both our Fioptics
suite of products and our business-class fiber product offerings.”
Wireline Segment
For the quarter, Wireline revenue of $182 million was flat compared to the
fourth quarter of 2011, after adjusting 2011 for one-time revenue credits, as
the company’s Fioptics and strategic business data and VoIP product lines
continue their growth trend, offsetting the impact of access line losses. For
the full year, Wireline revenue totaled $731 million compared to $732 million
generated in 2011.
Operating income was $50 million in the quarter, up slightly compared to the
same period in 2011, while the full year 2012 operating income was $213
million, down $16 million or 7 percent compared to 2011.
Adjusted EBITDA was $84 million in the fourth quarter of 2012 and $344 million
for the full year, down 4 percent and 3 percent, respectively, from the same
periods in 2011. Adjusted EBITDA margins of 46 percent for the quarter and 47
percent for the year were also down from 2011, driven largely by the continued
loss of higher-margin access lines and the additional costs associated with
Fioptics customer acquisition.
At the end of the fourth quarter, the company had a total of 205,000 homes and
businesses passed with Fioptics, which represents approximately 26 percent of
the Greater Cincinnati market. The segment attained an additional 4,000
Fioptics entertainment customers in the quarter and an additional 5,000
Fioptics high-speed internet subscribers, increasing the total number of such
subscribers to 55,000 and 57,000, respectively. Total high-speed internet
subscribers numbered 259,000 at the end of the fourth quarter, up from 257,000
at the end of 2011, as the increase in Fioptics subscribers continues to more
than offset the decrease in DSL high-speed internet subscribers.
Wireless Segment
Wireless revenue was $57 million for the quarter, a decrease of 17 percent
from the fourth quarter of 2011, and 2012 full year revenue of $242 million
was down 13 percent compared to 2011 as postpaid subscriber losses continued.
The segment generated operating income of $8 million in the quarter and $51
million for the year.
Adjusted EBITDA of $17 million in the quarter resulted in an Adjusted EBITDA
margin of 30 percent. Adjusted EBITDA for the year totaled $85 million, which
equated to a 35 percent Adjusted EBITDA margin.
Total wireless subscribers at the end of the quarter decreased to 398,000
compared to 459,000 at the end of 2011.
Data Center Colocation Segment
CyrusOne fourth quarter revenue was $58 million, an 18 percent increase over
the fourth quarter in 2011, and annual revenues were $221 million, up 20
percent compared to 2011. The segment’s operating income of $8 million in the
quarter and $30 million for the year was down $2 million and $16 million,
respectively, compared to the same periods in 2011.
Adjusted EBITDA for the quarter was $28 million compared to $27 million in the
fourth quarter of 2011, reflecting higher revenue and additional overhead and
other expenses as the company continued to prepare to operate as a
stand-alone, publicly-traded real estate investment trust entity. As a result,
the segment’s Adjusted EBITDA margin in the quarter was 48 percent, down from
56 percent in the fourth quarter of 2011. For the year, Adjusted EBITDA of
$115 million reflects a 13 percent increase over 2011. The company’s 2012
Adjusted EBITDA margin was 52 percent compared to 55 percent in 2011.
CyrusOne added 36,000 square feet of new data center space during the quarter
and 199,000 square feet for the full year, increasing total capacity to
932,000 square feet at the end of 2012. The company sold 41,000 square feet of
new space during the fourth quarter, and 92,000 square feet for the full year.
IT Services and Hardware Segment
For the quarter, revenue was $87 million, a 15 percent increase over the
fourth quarter in 2011, driven by strong hardware sales which were up 19
percent year-over-year. The segment’s full-year revenue of $316 million was up
5 percent over 2011 due to a $17 million year-over-year increase in managed
and professional services. Adjusted EBITDA in the quarter was $4 million,
resulting in an Adjusted EBITDA margin of 5 percent. Adjusted EBITDA generated
in the full year was $18 million, down $2 million from 2011.
2013 Outlook
Cincinnati Bell is providing the following guidance for 2013, which excludes
CyrusOne results:
Category 2013 Guidance
Revenue $1.2 billion
Adjusted EBITDA Approx. $390 million*
*Plus or minus 2 percent
Conference Call/Webcast
Cincinnati Bell will host a conference call on February 27, 2013 at 8:30 a.m.
(ET) to discuss its results for the fourth quarter and full year of 2012. A
live webcast of the call will be available via the Investor Relations section
of www.cincinnatibell.com. The conference call dial-in number is (866)
780-1078. Callers located outside of the U.S. and Canada may dial (816)
581-1572. A taped replay of the conference call will be available one hour
after the conclusion of the call until 8:30 a.m. on Wednesday March 13, 2013.
For U.S. callers, the replay will be available at (888) 203-1112. For callers
outside of the U.S. and Canada, the replay will be available at (719)
457-0820. The replay reference number is 6508834. An archived version of the
webcast will also be available in the Investor Relations section of
www.cincinnatibell.com.
Safe Harbor Note
This release and the documents incorporated by reference herein contain
forward-looking statements regarding future events and our future results that
are subject to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, are statements that could be deemed forward-looking
statements. These statements are based on current expectations, estimates,
forecasts, and projections about the industries in which we operate and the
beliefs and assumptions of our management. Words such as “expects,”
“anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations
of such words and similar expressions are intended to identify such
forward-looking statements. In addition, any statements that refer to
projections of our future financial performance, our anticipated growth and
trends in our businesses, and other characterizations of future events or
circumstances are forward-looking statements. Readers are cautioned these
forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties, which could cause our actual
results to differ materially and adversely from those reflected in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this release
and those discussed in other documents we file with the Securities and
Exchange Commission (SEC). More information on potential risks and
uncertainties is available in our recent filings with the SEC, including
Cincinnati Bell's Form 10-K report, Form 10-Q reports and Form 8-K reports.
Actual results may differ materially and adversely from those expressed in any
forward-looking statements. We undertake no obligation to revise or update any
forward-looking statements for any reason.
Use of Non-GAAP Financial Measures
This press release contains information about adjusted earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA), Adjusted
EBITDA margin, net debt, net income excluding special items, and free cash
flow. 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 measures. Detailed reconciliations
of these non-GAAP financial measures 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.
^1Adjusted EBITDA provides a useful measure of operational performance. The
company defines Adjusted EBITDA as GAAP operating income plus depreciation,
amortization, restructuring charges, asset impairments, components of pension
and other retirement plan costs related to interest costs, asset returns, and
amortization of actuarial gains and losses, and other special items.
^2Adjusted EBITDA margin provides a useful measure of operational performance.
The company defines Adjusted EBITDA margin as Adjusted EBITDA divided by
revenue. Adjusted EBITDA margin should not be considered as an alternative to
comparable GAAP measures of profitability and may not be comparable with the
measure as defined by other companies.
^3Net 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 and
long-term debt and unamortized premium and/or discount, offset by cash and
cash equivalents.
^4Net income excluding special items in total and per share provides a useful
measure of operating performance. Net income excluding special items should
not be considered as an alternative to comparable GAAP measures of
profitability and may not be comparable with net income excluding special
items as defined by other companies.
Free cash flow provides a useful measure of operational performance, liquidity
and financial health. The company defines free cash flow as cash provided by
(used in) operating, financing and investing activities, adjusted for the
issuance and repayment of debt, debt issuance costs, the repurchase of common
stock, and the proceeds from the sale or the use of funds from the purchase of
business operations, including transaction costs. 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. Although the company feels that there is no comparable GAAP measure
for free cash flow, the attached financial information reconciles free cash
flow to the net increase (decrease) in cash and cash equivalents.
About Cincinnati Bell Inc.
With headquarters in Cincinnati, Ohio, Cincinnati Bell (NYSE: CBB) provides
integrated communications solutions - including local and long distance voice,
data, high-speed internet, entertainment and wireless services - that keep
residential and business customers in Greater Cincinnati and Dayton connected
with each other and with the world. In addition, enterprise customers across
the United States rely on Cincinnati Bell for efficient, scalable office
communications systems and end-to-end IT solutions. Cincinnati Bell also is
the majority owner of CyrusOne (NASDAQ: CONE), which provides best-in-class
data center colocation services to enterprise customers through its facilities
with fully redundant power and cooling solutions that are currently located in
the Midwest, Texas, Arizona, London and Singapore. For more information,
please visit www.cincinnatibell.com.
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, Change December 31, Change
2012 2011 $ % 2012 2011 $ %
Revenue $ 374.7 $ 365.3 $ 9.4 3% $ 1,473.9 $ 1,462.4 $ 11.5 1%
Costs and
expenses
Cost of
services and 184.8 174.5 10.3 6% 694.6 677.3 17.3 3%
products
Selling,
general and 69.9 65.4 4.5 7% 269.5 263.1 6.4 2%
administrative
Depreciation
and 57.2 53.2 4.0 8% 217.4 199.5 17.9 9%
amortization
Restructuring 0.4 12.2 (11.8 ) (97)% 3.4 12.2 (8.8 ) (72)%
charges
Curtailment - - - n/m - 4.2 (4.2 ) n/m
loss
Gain on sale
or disposal of (1.0 ) - (1.0 ) n/m (1.6 ) (8.4 ) 6.8 81%
assets
Impairment of
goodwill and 0.9 50.8 (49.9 ) (98)% 14.2 52.4 (38.2 ) (73)%
other assets
Transaction 4.6 - 4.6 n/m 6.3 2.6 3.7 n/m
costs
Operating 57.9 9.2 48.7 n/m 270.1 259.5 10.6 4%
income
Interest expense 55.6 53.8 1.8 3% 218.9 215.0 3.9 2%
Loss on
extinguishment 13.6 - 13.6 n/m 13.6 - 13.6 n/m
of debt
Other expense, 0.1 0.9 (0.8 ) (89)% 1.7 0.9 0.8 89%
net
Income (loss)
before income (11.4 ) (45.5 ) 34.1 75% 35.9 43.6 (7.7 ) (18)%
taxes
Income tax
expense (1.6 ) (15.1 ) 13.5 89% 24.7 25.0 (0.3 ) (1)%
(benefit)
Net income (9.8 ) (30.4 ) 20.6 68% 11.2 18.6 (7.4 ) (40)%
(loss)
Preferred stock 2.6 2.6 - 0% 10.4 10.4 - 0%
dividends
Net income
(loss)
applicable to $ (12.4 ) $ (33.0 ) $ 20.6 62% $ 0.8 $ 8.2 $ (7.4 ) (90)%
common
shareowners
Basic earnings
(loss) per $ (0.06 ) $ (0.17 ) $ 0.00 $ 0.04
common share
Diluted earnings
(loss) per $ (0.06 ) $ (0.17 ) $ 0.00 $ 0.04
common share
Weighted average
common shares
outstanding
(in millions)
- Basic 199.9 194.9 197.0 196.8
- Diluted 199.9 194.9 204.7 200.0
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share amounts)
Three Months Ended
December 31, September Change
30,
2012 2012 $ %
Revenue $ 374.7 $ 368.2 $ 6.5 2%
Costs and expenses
Cost of services and 184.8 172.3 12.5 7%
products
Selling, general and 69.9 72.2 (2.3 ) (3)%
administrative
Depreciation and 57.2 55.4 1.8 3%
amortization
Restructuring charges 0.4 0.9 (0.5 ) (56)%
Gain on sale or (1.0 ) (0.6 ) (0.4 ) (67)%
disposal of assets
Impairment of goodwill 0.9 0.3 0.6 n/m
and other assets
Transaction costs 4.6 1.7 2.9 n/m
Operating income 57.9 66.0 (8.1 ) (12)%
Interest expense 55.6 55.2 0.4 1%
Loss on extinguishment of 13.6 - 13.6 n/m
debt
Other expense, net 0.1 0.1 - 0%
Income (loss) before (11.4 ) 10.7 (22.1 ) n/m
income taxes
Income tax expense (1.6 ) 6.8 (8.4 ) n/m
(benefit)
Net income (loss) (9.8 ) 3.9 (13.7 ) n/m
Preferred stock dividends 2.6 2.6 - 0%
Net income (loss)
applicable to common $ (12.4 ) $ 1.3 $ (13.7 ) n/m
shareowners
Basic earnings (loss) per $ (0.06 ) $ 0.01
common share
Diluted earnings (loss) $ (0.06 ) $ 0.01
per common share
Weighted average common
shares outstanding
(in millions)
- Basic 199.9 196.4
- Diluted 199.9 205.6
Cincinnati Bell Inc.
Income Statements by Segment
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, Change December 31, Change
2012 2011 $ % 2012 2011 $ %
Wireline
Revenue
Voice - local $ 61.7 $ 66.2 $ (4.5 ) (7)% $ 255.4 $ 280.3 $ (24.9 ) (9)%
service
Data 77.5 74.2 3.3 4% 306.9 291.5 15.4 5%
Long distance 27.8 28.0 (0.2 ) (1)% 113.9 111.3 2.6 2%
and VoIP
Entertainment 9.8 7.2 2.6 36% 35.4 26.6 8.8 33%
Other 5.3 4.7 0.6 13% 18.9 22.4 (3.5 ) (16)%
Total revenue 182.1 180.3 1.8 1% 730.5 732.1 (1.6 ) 0%
Operating costs
and expenses
Cost of
services and 72.3 67.8 4.5 7% 283.8 270.0 13.8 5%
products
Selling,
general and 31.6 29.7 1.9 6% 125.6 126.7 (1.1 ) (1)%
administrative
Depreciation
and 27.1 26.3 0.8 3% 106.0 102.4 3.6 4%
amortization
Other* 1.0 8.2 (7.2 ) (88)% 2.2 4.5 (2.3 ) (51)%
Total
operating 132.0 132.0 - 0% 517.6 503.6 14.0 3%
costs and
expenses
Operating income $ 50.1 $ 48.3 $ 1.8 4% $ 212.9 $ 228.5 $ (15.6 ) (7)%
Wireless
Revenue
Service $ 52.8 $ 60.4 $ (7.6 ) (13)% $ 224.5 $ 252.4 $ (27.9 ) (11)%
Equipment 4.0 8.0 (4.0 ) (50)% 17.3 25.2 (7.9 ) (31)%
Total revenue 56.8 68.4 (11.6 ) (17)% 241.8 277.6 (35.8 ) (13)%
Operating costs
and expenses
Cost of
services and 28.3 36.1 (7.8 ) (22)% 113.0 134.2 (21.2 ) (16)%
products
Selling,
general and 11.4 13.4 (2.0 ) (15)% 43.7 55.2 (11.5 ) (21)%
administrative
Depreciation
and 7.9 8.4 (0.5 ) (6)% 31.9 33.5 (1.6 ) (5)%
amortization
Other* 1.5 50.3 (48.8 ) (97)% 2.0 51.4 (49.4 ) (96)%
Total
operating 49.1 108.2 (59.1 ) (55)% 190.6 274.3 (83.7 ) (31)%
costs and
expenses
Operating income $ 7.7 $ (39.8 ) $ 47.5 n/m $ 51.2 $ 3.3 $ 47.9 n/m
(loss)
Data Center
Colocation
Revenue $ 58.0 $ 49.1 $ 8.9 18% $ 221.3 $ 184.7 $ 36.6 20%
Operating costs
and expenses
Cost of 20.6 15.8 4.8 30% 75.7 59.7 16.0 27%
services
Selling,
general and 9.8 6.4 3.4 53% 31.0 23.8 7.2 30%
administrative
Depreciation
and 19.7 16.6 3.1 19% 70.6 54.8 15.8 29%
amortization
Other* - - - n/m 13.6 - 13.6 n/m
Total
operating 50.1 38.8 11.3 29% 190.9 138.3 52.6 38%
costs and
expenses
Operating income $ 7.9 $ 10.3 $ (2.4 ) (23)% $ 30.4 $ 46.4 $ (16.0 ) (34)%
IT Services and
Hardware
Revenue
Telecom and IT
equipment $ 59.6 $ 49.9 $ 9.7 19% $ 204.6 $ 206.0 $ (1.4 ) (1)%
distribution
Managed and
professional 27.3 25.7 1.6 6% 111.1 94.5 16.6 18%
services
Total revenue 86.9 75.6 11.3 15% 315.7 300.5 15.2 5%
Operating costs
and expenses
Cost of
services and 72.4 62.4 10.0 16% 255.7 243.0 12.7 5%
products
Selling,
general and 10.3 8.4 1.9 23% 42.3 37.4 4.9 13%
administrative
Depreciation
and 2.3 1.8 0.5 28% 8.6 8.4 0.2 2%
amortization
Other* (1.2 ) 1.9 (3.1 ) n/m (1.2 ) 1.9 (3.1 ) n/m
Total
operating 83.8 74.5 9.3 12% 305.4 290.7 14.7 5%
costs and
expenses
Operating income $ 3.1 $ 1.1 $ 2.0 n/m $ 10.3 $ 9.8 $ 0.5 5%
*Other includes restructuring charges, curtailment loss, gain on sale or
disposal of assets, impairment of goodwill and asset impairments.
Cincinnati Bell Inc.
Income Statements by Segment
(Unaudited)
(Dollars in millions)
Three Months Ended
December 31, September 30, Change
2012 2012 $ %
Wireline
Revenue
Voice - local service $ 61.7 $ 63.0 $ (1.3 ) (2)%
Data 77.5 77.2 0.3 0%
Long distance and VoIP 27.8 28.1 (0.3 ) (1)%
Entertainment 9.8 9.5 0.3 3%
Other 5.3 4.5 0.8 18%
Total revenue 182.1 182.3 (0.2 ) 0%
Operating costs and
expenses
Cost of services and 72.3 71.5 0.8 1%
products
Selling, general and 31.6 32.8 (1.2 ) (4)%
administrative
Depreciation and 27.1 26.6 0.5 2%
amortization
Other* 1.0 0.5 0.5 100%
Total operating costs 132.0 131.4 0.6 0%
and expenses
Operating income $ 50.1 $ 50.9 $ (0.8 ) (2)%
Wireless
Revenue
Service $ 52.8 $ 55.0 $ (2.2 ) (4)%
Equipment 4.0 4.5 (0.5 ) (11)%
Total revenue 56.8 59.5 (2.7 ) (5)%
Operating costs and
expenses
Cost of services and 28.3 27.8 0.5 2%
products
Selling, general and 11.4 11.0 0.4 4%
administrative
Depreciation and 7.9 8.1 (0.2 ) (2)%
amortization
Other* 1.5 - 1.5 n/m
Total operating costs 49.1 46.9 2.2 5%
and expenses
Operating income $ 7.7 $ 12.6 $ (4.9 ) (39)%
Data Center Colocation
Revenue $ 58.0 $ 56.7 $ 1.3 2%
Operating costs and
expenses
Cost of services 20.6 20.0 0.6 3%
Selling, general and 9.8 7.1 2.7 38%
administrative
Depreciation and 19.7 18.3 1.4 8%
amortization
Other* - 0.1 (0.1 ) n/m
Total operating costs 50.1 45.5 4.6 10%
and expenses
Operating income $ 7.9 $ 11.2 $ (3.3 ) (29)%
IT Services and Hardware
Revenue
Telecom and IT equipment $ 59.6 $ 49.5 $ 10.1 20%
distribution
Managed and professional 27.3 28.8 (1.5 ) (5)%
services
Total revenue 86.9 78.3 8.6 11%
Operating costs and
expenses
Cost of services and 72.4 61.3 11.1 18%
products
Selling, general and 10.3 10.8 (0.5 ) (5)%
administrative
Depreciation and 2.3 2.4 (0.1 ) (4)%
amortization
Other* (1.2 ) - (1.2 ) n/m
Total operating costs 83.8 74.5 9.3 12%
and expenses
Operating income $ 3.1 $ 3.8 $ (0.7 ) (18)%
*Other includes restructuring charges, gain on sale or disposal of assets,
impairment of goodwill and asset impairments.
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
Three Months Ended Twelve Months Ended
December 31, Change December 31, Change
2012 2011 $ % 2012 2011 $ %
Revenue
Wireline $ 182.1 $ 180.3 $ 1.8 1% $ 730.5 $ 732.1 $ (1.6 ) 0%
Wireless 56.8 68.4 (11.6 ) (17)% 241.8 277.6 (35.8 ) (13)%
Data Center 58.0 49.1 8.9 18% 221.3 184.7 36.6 20%
Colocation
IT Services 86.9 75.6 11.3 15% 315.7 300.5 15.2 5%
and Hardware
Eliminations (9.1 ) (8.1 ) (1.0 ) (12)% (35.4 ) (32.5 ) (2.9 ) (9)%
Total revenue $ 374.7 $ 365.3 $ 9.4 3% $ 1,473.9 $ 1,462.4 $ 11.5 1%
Cost of Services
and Products
Wireline $ 72.3 $ 67.8 $ 4.5 7% $ 283.8 $ 270.0 $ 13.8 5%
Wireless 28.3 36.1 (7.8 ) (22)% 113.0 134.2 (21.2 ) (16)%
Data Center 20.6 15.8 4.8 30% 75.7 59.7 16.0 27%
Colocation
IT Services 72.4 62.4 10.0 16% 255.7 243.0 12.7 5%
and Hardware
Eliminations (8.8 ) (7.6 ) (1.2 ) (16)% (33.6 ) (29.6 ) (4.0 ) (14)%
Total cost of
services and $ 184.8 $ 174.5 $ 10.3 6% $ 694.6 $ 677.3 $ 17.3 3%
products
Selling, General
and
Administrative
Wireline $ 31.6 $ 29.7 $ 1.9 6% $ 125.6 $ 126.7 $ (1.1 ) (1)%
Wireless 11.4 13.4 (2.0 ) (15)% 43.7 55.2 (11.5 ) (21)%
Data Center 9.8 6.4 3.4 53% 31.0 23.8 7.2 30%
Colocation
IT Services 10.3 8.4 1.9 23% 42.3 37.4 4.9 13%
and Hardware
Corporate and 6.8 7.5 (0.7 ) (9)% 26.9 20.0 6.9 35%
eliminations
Total selling,
general and $ 69.9 $ 65.4 $ 4.5 7% $ 269.5 $ 263.1 $ 6.4 2%
administrative
Depreciation and
Amortization
Wireline $ 27.1 $ 26.3 $ 0.8 3% $ 106.0 $ 102.4 $ 3.6 4%
Wireless 7.9 8.4 (0.5 ) (6)% 31.9 33.5 (1.6 ) (5)%
Data Center 19.7 16.6 3.1 19% 70.6 54.8 15.8 29%
Colocation
IT Services 2.3 1.8 0.5 28% 8.6 8.4 0.2 2%
and Hardware
Corporate 0.2 0.1 0.1 100% 0.3 0.4 (0.1 ) (25)%
Total
depreciation $ 57.2 $ 53.2 $ 4.0 8% $ 217.4 $ 199.5 $ 17.9 9%
and
amortization
Other*
Wireline $ 1.0 $ 8.2 $ (7.2 ) (88)% $ 2.2 $ 4.5 $ (2.3 ) (51)%
Wireless 1.5 50.3 (48.8 ) (97)% 2.0 51.4 (49.4 ) (96)%
Data Center - - - n/m 13.6 - 13.6 n/m
Colocation
IT Services (1.2 ) 1.9 (3.1 ) n/m (1.2 ) 1.9 (3.1 ) n/m
and Hardware
Corporate 3.6 2.6 1.0 38% 5.7 5.2 0.5 10%
Total other $ 4.9 $ 63.0 $ (58.1 ) (92)% $ 22.3 $ 63.0 $ (40.7 ) (65)%
Operating Income
(Loss)
Wireline $ 50.1 $ 48.3 $ 1.8 4% $ 212.9 $ 228.5 $ (15.6 ) (7)%
Wireless 7.7 (39.8 ) 47.5 n/m 51.2 3.3 47.9 n/m
Data Center 7.9 10.3 (2.4 ) (23)% 30.4 46.4 (16.0 ) (34)%
Colocation
IT Services 3.1 1.1 2.0 n/m 10.3 9.8 0.5 5%
and Hardware
Corporate (10.9 ) (10.7 ) (0.2 ) (2)% (34.7 ) (28.5 ) (6.2 ) (22)%
Total
operating $ 57.9 $ 9.2 $ 48.7 n/m $ 270.1 $ 259.5 $ 10.6 4%
income
*Other includes restructuring charges, curtailment loss, gain on sale or
disposal of assets, impairment of goodwill, asset impairments and transaction
costs.
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
Three Months Ended
December 31, September 30, Change
2012 2012 $ %
Revenue
Wireline $ 182.1 $ 182.3 $ (0.2 ) 0%
Wireless 56.8 59.5 (2.7 ) (5)%
Data Center Colocation 58.0 56.7 1.3 2%
IT Services and Hardware 86.9 78.3 8.6 11%
Eliminations (9.1 ) (8.6 ) (0.5 ) (6)%
Total revenue $ 374.7 $ 368.2 $ 6.5 2%
Cost of Services and
Products
Wireline $ 72.3 $ 71.5 $ 0.8 1%
Wireless 28.3 27.8 0.5 2%
Data Center Colocation 20.6 20.0 0.6 3%
IT Services and Hardware 72.4 61.3 11.1 18%
Eliminations (8.8 ) (8.3 ) (0.5 ) (6)%
Total cost of services $ 184.8 $ 172.3 $ 12.5 7%
and products
Selling, General and
Administrative
Wireline $ 31.6 $ 32.8 $ (1.2 ) (4)%
Wireless 11.4 11.0 0.4 4%
Data Center Colocation 9.8 7.1 2.7 38%
IT Services and Hardware 10.3 10.8 (0.5 ) (5)%
Corporate and 6.8 10.5 (3.7 ) (35)%
eliminations
Total selling, general $ 69.9 $ 72.2 $ (2.3 ) (3)%
and administrative
Depreciation and
Amortization
Wireline $ 27.1 $ 26.6 $ 0.5 2%
Wireless 7.9 8.1 (0.2 ) (2)%
Data Center Colocation 19.7 18.3 1.4 8%
IT Services and Hardware 2.3 2.4 (0.1 ) (4)%
Corporate 0.2 - 0.2 n/m
Total depreciation and $ 57.2 $ 55.4 $ 1.8 3%
amortization
Other*
Wireline $ 1.0 $ 0.5 $ 0.5 100%
Wireless 1.5 - 1.5 n/m
Data Center Colocation - 0.1 (0.1 ) n/m
IT Services and Hardware (1.2 ) - (1.2 ) n/m
Corporate 3.6 1.7 1.9 n/m
Total other $ 4.9 $ 2.3 $ 2.6 n/m
Operating Income
Wireline $ 50.1 $ 50.9 $ (0.8 ) (2)%
Wireless 7.7 12.6 (4.9 ) (39)%
Data Center Colocation 7.9 11.2 (3.3 ) (29)%
IT Services and Hardware 3.1 3.8 (0.7 ) (18)%
Corporate (10.9 ) (12.5 ) 1.6 13%
Total operating income $ 57.9 $ 66.0 $ (8.1 ) (12)%
*Other includes restructuring charges, gain on sale or disposal of assets,
transaction costs and asset impairments.
Cincinnati Bell Inc.
Segment Metric Information
(Unaudited)
(In thousands)
December 31, September 30, December 31,
2012 2012 2011
Local access lines 573.9 585.8 621.3
Long distance lines 417.9 426.4 447.4
High-speed internet
subscribers
DSL subscribers 202.6 207.8 218.0
Fioptics subscribers 56.8 52.3 39.3
259.4 260.1 257.3
Fioptics entertainment 55.1 51.1 39.6
subscribers
Wireless
Postpaid wireless 251.3 270.7 311.0
subscribers
Prepaid wireless subscribers 146.5 144.9 148.0
397.8 415.6 459.0
Data Center Colocation
Data center capacity (in 932.0 896.0 763.0
square feet)
Utilization rate* 78% 78% 88%
Data center utilization is calculated by dividing data center square
* footage that is committed contractually to customers, if built, by total
data center square footage. Some data center square footage that is
committed contractually may not yet be billing to the customer.
Cincinnati Bell Inc.
Local Access Line Detail
(Unaudited)
(In thousands)
2010 2011 2012
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Local Access
Lines
In-Territory:
Primary 354.1 345.5 336.8 328.9 321.8 313.8 304.8 296.7 288.9 281.7 274.3 266.4
Residential
Secondary 21.8 20.8 19.3 19.1 18.3 16.3 15.6 14.9 14.2 13.6 13.1 12.5
Residential
Business/ 261.9 258.7 256.2 252.5 250.7 248.7 244.4 240.8 238.5 237.5 234.4 232.1
Other
Total 637.8 625.0 612.3 600.5 590.8 578.8 564.8 552.4 541.6 532.8 521.8 511.0
In-Territory
Out-of-Territory:
Primary 32.9 32.5 32.1 31.2 30.4 29.3 27.8 26.7 25.2 24.3 23.3 22.4
Residential
Secondary 1.1 1.1 1.0 1.0 0.9 0.9 0.9 0.8 0.8 0.8 0.7 0.7
Residential
Business/ 39.9 40.4 41.5 41.4 41.5 41.6 41.8 41.4 41.0 40.6 40.0 39.8
Other
Total 73.9 74.0 74.6 73.6 72.8 71.8 70.5 68.9 67.0 65.7 64.0 62.9
Out-of-Territory
Total Access 711.7 699.0 686.9 674.1 663.6 650.6 635.3 621.3 608.6 598.5 585.8 573.9
Lines
Cincinnati Bell Inc.
Net Debt and Common Shares Outstanding
(Unaudited)
(Dollars and shares in millions)
December 31, September 30, December 31,
2012 2012 2011
Receivables Facility $ 52.0 $ 44.0 $ -
7% Senior Notes due 2015 - 249.7 250.4
8 1/4% Senior Notes due 2017 500.0 500.0 500.0
8 3/4% Senior Subordinated Notes 625.0 625.0 625.0
due 2018
8 3/8% Senior Notes due 2020 683.9 775.0 775.0
CyrusOne 6 3/8% Senior Notes due 525.0 - -
2022
7 1/4% Senior Notes due 2023 40.0 40.0 40.0
Various Cincinnati Bell 134.5 207.5 207.5
Telephone notes
Capital leases and other debt 136.5 141.5 144.4
Net unamortized discount (7.5 ) (7.5 ) (8.7 )
Total debt 2,689.4 2,575.2 2,533.6
Less: Interest rate swap - (2.2 ) (2.9 )
adjustment
Less: Cash and cash equivalents (23.6 ) (7.7 ) (73.7 )
Net debt (as defined by the $ 2,665.8 $ 2,565.3 $ 2,457.0
company)
Credit facility availability:
Corporate 200.0 210.0 210.0
CyrusOne* 225.0 - -
$ 425.0 $ 210.0 $ 210.0
Common shares outstanding 202.5 199.4 195.7
* On January 24, 2013, we completed the initial public offering of CyrusOne,
and Cincinnati Bell no longer has access to this facility.
Cincinnati Bell Inc.
Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (Non-GAAP)
(Unaudited)
(Dollars in millions)
Three Months Ended December 31, 2012
Data IT Total
Wireline Wireless Center Services Corporate
Colocation & Company
Hardware
Net Loss (GAAP) $ (9.8 )
Add:
Income tax (1.6 )
benefit
Interest 55.6
expense
Loss on
extinguishment 13.6
of debt
Other expense, 0.1
net
Operating Income $ 50.1 $ 7.7 $ 7.9 $ 3.1 $ (10.9 ) $ 57.9
(GAAP)
Add:
Depreciation
and 27.1 7.9 19.7 2.3 0.2 57.2
amortization
Restructuring
charges 1.9 1.1 - (1.2 ) (1.4 ) 0.4
(reversals)
Loss (gain) on
sale or (1.4 ) - - - 0.4 (1.0 )
disposal of
assets
Transaction - - - - 4.6 4.6
costs
Impairment of
goodwill and 0.5 0.4 - - - 0.9
other assets
Legal claim - - 0.2 - - 0.2
costs
Pension and
other 5.8 - - - 0.3 6.1
retirement
plan expenses
Adjusted EBITDA $ 84.0 $ 17.1 $ 27.8 $ 4.2 $ (6.8 ) $ 126.3
(Non-GAAP)
Adjusted EBITDA 46 % 30 % 48 % 5 % - 34 %
Margin
Three Months Ended September 30, 2012
Data IT Total
Wireline Wireless Center Services Corporate
Colocation & Company
Hardware
Net Income $ 3.9
(GAAP)
Add:
Income tax 6.8
expense
Interest 55.2
expense
Other expense, 0.1
net
Operating Income $ 50.9 $ 12.6 $ 11.2 $ 3.8 $ (12.5 ) $ 66.0
(GAAP)
Add:
Depreciation
and 26.6 8.1 18.3 2.4 - 55.4
amortization
Restructuring 0.9 - - - - 0.9
charges
Gain on sale
or disposal of (0.4 ) - (0.2 ) - - (0.6 )
assets
Transaction - - - - 1.7 1.7
costs
Asset - - 0.3 - - 0.3
impairments
Pension and
other 5.8 - - - 0.4 6.2
retirement
plan expenses
Adjusted EBITDA $ 83.8 $ 20.7 $ 29.6 $ 6.2 $ (10.4 ) $ 129.9
(Non-GAAP)
Adjusted EBITDA 46 % 35 % 52 % 8 % - 35 %
Margin
Sequential
dollar change in $ 0.2 $ (3.6 ) $ (1.8 ) $ (2.0 ) $ 3.6 $ (3.6 )
Adjusted EBITDA
Sequential
percentage 0 % (17 )% (6 )% (32 )% 35 % (3 )%
change in
Adjusted EBITDA
Three Months Ended December 31, 2011
Data IT Total
Wireline Wireless Center Services Corporate
Colocation & Company
Hardware
Net Loss (GAAP) $ (30.4 )
Add:
Income tax (15.1 )
benefit
Interest 53.8
expense
Other expense, 0.9
net
Operating Income $ 48.3 $ (39.8 ) $ 10.3 $ 1.1 $ (10.7 ) $ 9.2
(Loss) (GAAP)
Add:
Depreciation
and 26.3 8.4 16.6 1.8 0.1 53.2
amortization
Restructuring 7.7 - - 1.9 2.6 12.2
charges
Impairment of
goodwill and 0.5 50.3 - - - 50.8
other assets
Legal claim - - 0.4 - 0.8 1.2
costs
Pension and
other 4.9 - - - 0.4 5.3
retirement
plan expenses
Adjusted EBITDA $ 87.7 $ 18.9 $ 27.3 $ 4.8 $ (6.8 ) $ 131.9
(Non-GAAP)
Adjusted EBITDA 49 % 28 % 56 % 6 % - 36 %
Margin
Year-over-year
dollar change in $ (3.7 ) $ (1.8 ) $ 0.5 $ (0.6 ) $ - $ (5.6 )
Adjusted EBITDA
Year-over-year
percentage (4 )% (10 )% 2 % (13 )% 0 % (4 )%
change in
Adjusted EBITDA
Cincinnati Bell Inc.
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)
(Unaudited)
(Dollars in millions)
Twelve Months Ended December 31, 2012
Data IT Total
Wireline Wireless Center Services Corporate
Colocation & Company
Hardware
Net
In*Story
too
large*
[TRUNCATED]
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