Cincinnati Bell Reports First Quarter 2013 Results

  Cincinnati Bell Reports First Quarter 2013 Results

  *Strong first quarter Adjusted EBITDA of $110 million, excluding CyrusOne
  *Fioptics revenue totaled $22 million, up 52 percent year-over-year
  *Fioptics and DSL high-speed internet subs increased 3,000 compared to
    first quarter 2012

Business Wire

CINCINNATI -- May 09, 2013

Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the
first quarter of 2013. Revenue excluding CyrusOne for the first quarter of
2013 was $310 million, up slightly on a comparable basis to the prior year.
Adjusted EBITDA^1 excluding CyrusOne of $110 million was comparable with the
first quarter of 2012. The first quarter 2013 results include a $6 million
gain related to mark-to-market adjustments on compensation plans.

For the quarter, the company’s consolidated results include CyrusOne up to its
IPO date of January 24, 2013. On this basis, revenue was $326 million and
operating income was $19 million. The 2013 first quarter net loss of $37
million included the following special items: IPO-related compensation of $36
million, additional depreciation of $9 million resulting from a change in the
remaining estimated useful lives of certain network assets, restructuring
charges of $3 million, a loss on the disposal of assets of $3 million, and an
income tax charge of $11 million primarily related to the reserve of Texas tax
credits.

After the IPO date, the company no longer consolidates the results of
CyrusOne, but accounts for CyrusOne as an equity method investment. For the
period to January 24, 2013, CyrusOne revenue of $15 million, operating income
of $3 million, and Adjusted EBITDA of $8 million were included in the
company’s results for the quarter ended March 31, 2013. Additionally, CyrusOne
capital expenditures were $8 million and free cash flows^2 were negative $3
million through the close of the IPO.

“We are very pleased with our performance to start the year, particularly the
strong Adjusted EBITDA generated during the quarter,” said Ted Torbeck,
president and chief executive officer. “Fioptics revenue growth of 52 percent
from the first quarter of 2012 is impressive and in line with our expectations
for this superior product suite. As we generate growth from our fiber
services, we remain intently focused on customer service, our operations
initiatives and maximizing profitability from our legacy products.”

Quarterly Highlights

  *Including both Fioptics and DSL, high-speed internet subscribers increased
    to 260,000, up from 257,000 at the end of the first quarter in 2012. The
    construction of the Fioptics network continues to improve the overall
    quality and speed of our entire network, generating increases in our
    Fioptics subscribers and mitigating the losses of our legacy DSL
    customers.
  *Fioptics revenue totaled $22 million in the quarter, a 52 percent increase
    compared to revenue of $14 million in the first quarter of 2012. During
    the quarter, the company expanded its Fioptics network to pass 15,000
    additional homes and businesses, ending the quarter with a total of
    220,000 units passed. Compared to the first quarter of 2012, the company
    increased its Fioptics entertainment subscribers by 35 percent to 58,000
    subscribers and its Fioptics high-speed internet subscribers by 42 percent
    to 61,000 subscribers at the end of March 2013. Fioptics consumer monthly
    ARPU was $136 for the quarter, up from $126 in the first quarter of 2012.
  *The company effectively owns a 69 percent equity method investment in
    CyrusOne. In its first quarter 2013 earnings call yesterday evening,
    CyrusOne reported 15 percent year-over-year revenue growth to $60 million,
    and an 11 percent year-over-year Adjusted EBITDA increase to $32 million.

Financial and Operations Review

“The increases in Fioptics subscribers and revenue are very encouraging. It
provides us strong momentum going into the rest of the year and will be the
catalyst to transform Cincinnati Bell into a growth-oriented fiber company,”
said Kurt Freyberger, chief financial officer. “The results reported last
evening by CyrusOne were impressive as well, and we continue to be bullish on
this investment as an opportunity to significantly reduce our long-term debt
and create shareholder value.”

Wireline Segment

Wireline revenue of $180 million during the quarter was comparable to $182
million in the first quarter of 2012, as the growth of the company’s Fioptics
entertainment and data product lines continue to partially offset the impact
of access line losses. Operating income for the first quarter of 2013 was $50
million, down from $57 million in the same period of 2012. Adjusted EBITDA in
the first quarter of 2013 declined by $4 million to $84 million due to
continued loss of high margin access lines. Adjusted EBITDA margin^3 of 47
percent was comparable to the fourth quarter of 2012.

The company’s Fioptics product suite now passes 220,000 addresses. The segment
ended the quarter with 61,000 Fioptics high-speed internet subscribers and
58,000 entertainment subscribers, up 42 percent and 35 percent, respectively,
compared to the first quarter in 2012. Access line losses were 7.8 percent in
the first quarter of 2013 compared to 8.3 percent in the prior year.

Wireless Segment

Wireless revenue was $53 million for the quarter, a decrease of 16 percent
from the first quarter of 2012 as postpaid subscriber losses continued. The
segment’s Adjusted EBITDA of $20 million in the quarter resulted in an
Adjusted EBITDA margin of 38 percent. Wireless operating income was $1 million
compared to $15 million in the first quarter of 2012. During the first quarter
of 2013, the remaining useful lives of certain network software were
reassessed, which resulted in additional depreciation expense of approximately
$9 million.

Total wireless subscribers at the end of the quarter decreased to 385,000
compared to 446,000 at the end of the first quarter of 2012.

IT Services and Hardware Segment

Revenue was $85 million for the quarter compared to $73 million in the first
quarter of 2012, driven by a 25 percent increase in hardware sales. Adjusted
EBITDA of $4 million was comparable to the first quarter of 2012, and the
Adjusted EBITDA margin of 5 percent was down from 6 percent last year.

Investment in CyrusOne

CyrusOne revenue of $15 million and operating income of $3 million were
included in the company’s consolidated results to January 24, the closing date
of CyrusOne’s IPO. After the IPO date, the company no longer consolidates the
results of CyrusOne, but rather accounts for CyrusOne on the equity method.

In April of 2013, Cincinnati Bell received a $7 million quarterly cash
dividend from CyrusOne. Cincinnati Bell continues to effectively own 69
percent of CyrusOne, and the company’s investment in CyrusOne is currently
valued at approximately $1 billion.

In the first quarter of 2013, CyrusOne reported revenue of $60 million and
Adjusted EBITDA of $32 million. CyrusOne has 921,000 square feet of total data
center colocation space, which is 81 percent utilized at March 31, 2013.
CyrusOne provided a full year 2013 revenue guidance range of $260 million to
$270 million and an Adjusted EBITDA guidance range of $133 million to $137
million.

2013 Outlook

Cincinnati Bell reaffirms its financial 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 May 9 at 10:00 a.m. (ET) to
discuss its results for the first quarter of 2013. 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 10:00 a.m. on Thursday May 23, 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 9108548. 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.

CyrusOne defines Adjusted EBITDA as net (loss) income as defined by U.S. GAAP
excluding noncontrolling interests plus interest expense, income tax (benefit)
expense, depreciation and amortization, stock-based compensation expense,
transaction costs and employee incentive compensation expense related to the
initial public offering, including acquisition pursuit costs, loss on sale of
receivables to affiliate, restructuring costs, loss on extinguishment of debt,
asset impairments and excluding (gain) loss on sale of real estate
improvements. Other companies may not calculate Adjusted EBITDA in the same
manner as CyrusOne. Accordingly, CyrusOne’s Adjusted EBITDA as presented may
not be comparable to others. Detailed reconciliations of CyrusOne’s Adjusted
EBITDA to the comparable GAAP financial measure is available in the Investor
Relations section of www.cyrusone.com.

^2Free 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.

^3Adjusted 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.

Net debt provides a useful measure of liquidity and financial health. The
company defines net debt as the sum of the face amount of short-term and
long-term debt and unamortized premium and/or discount, offset by cash and
cash equivalents.

Net 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.

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
                                      March 31,             Change
                                      2013        2012      $           %
                                                                        
  Revenue                             $ 325.7     $ 362.8   $ (37.1 )   (10 )%
                                                                        
  Costs and expenses
      Cost of services and products     161.8       165.8     (4.0  )   (2  )%
      Selling, general and              53.1        64.0      (10.9 )   (17 )%
      administrative
      Depreciation and amortization     50.6        51.1      (0.5  )   (1  )%
      Transaction-related               35.5        -         35.5      n/m
      compensation
      Restructuring charges             2.6         0.9       1.7       n/m
      Loss on sale or disposal of       2.5         -         2.5       n/m
      assets, net
      Transaction costs                0.4       -        0.4      n/m 
                                                                        
               Operating income         19.2        81.0      (61.8 )   (76 )%
                                                                        
  Interest expense                      47.9        54.4      (6.5  )   (12 )%
  Loss from CyrusOne equity method      1.9         -         1.9       n/m
  investment
  Other (income) expense, net          (0.3  )    1.5      (1.8  )   n/m 
                                                                        
  (Loss) income before income taxes     (30.3 )     25.1      (55.4 )   n/m
  Income tax expense                   6.4       12.5     (6.1  )   (49 )%
                                                                        
  Net (loss) income                     (36.7 )     12.6      (49.3 )   n/m
                                                                        
  Preferred stock dividends            2.6       2.6      -        0   %
                                                                        
  Net (loss) income applicable to     $ (39.3 )   $ 10.0    $ (49.3 )   n/m 
  common shareowners
                                                                        
                                                                        
  Basic and diluted (loss) earnings   $ (0.19 )   $ 0.05
  per common share
                                                                        
  Weighted average common shares
  outstanding
      (in millions)
      - Basic                           202.8       195.3
      - Diluted                         202.8       201.6
                                                                        

                                                                   
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share amounts)
   
                                                                        
                                 Three Months Ended
                                 March 31,   December 31,   Change
                                 2013        2012           $           %
                                                                        
  Revenue                        $ 325.7     $  374.7       $ (49.0 )   (13 )%
                                                                        
  Costs and expenses
     Cost of services and          161.8        184.8         (23.0 )   (12 )%
     products
     Selling, general and          53.1         69.9          (16.8 )   (24 )%
     administrative
     Depreciation and              50.6         57.2          (6.6  )   (12 )%
     amortization
     Transaction-related           35.5         -             35.5      n/m
     compensation
     Restructuring charges         2.6          0.4           2.2       n/m
     Loss (gain) on sale or        2.5          (1.0   )      3.5       n/m
     disposal of assets, net
     Transaction costs             0.4          4.6           (4.2  )   (91 )%
     Assets impairments           -          0.9         (0.9  )   n/m 
                                                                        
              Operating income     19.2         57.9          (38.7 )   (67 )%
                                                                        
  Interest expense                 47.9         55.6          (7.7  )   (14 )%
  Loss from CyrusOne equity        1.9          -             1.9       n/m
  method investment
  Loss on extinguishment of        -            13.6          (13.6 )   n/m
  debt
  Other (income) expense, net     (0.3  )     0.1         (0.4  )   n/m 
                                                                        
  Loss before income taxes         (30.3 )      (11.4  )      (18.9 )   n/m
  Income tax expense (benefit)    6.4        (1.6   )     8.0      n/m 
                                                                        
  Net loss                         (36.7 )      (9.8   )      (26.9 )   n/m
                                                                        
  Preferred stock dividends       2.6        2.6         -        0   %
                                                                        
  Net loss applicable to         $ (39.3 )   $  (12.4  )    $ (26.9 )   n/m 
  common shareowners
                                                                        
                                                                        
  Basic and diluted loss per     $ (0.19 )   $  (0.06  )
  common share
                                                                        
  Weighted average common
  shares outstanding
     (in millions)
     - Basic                       202.8        199.9
     - Diluted                     202.8        199.9
                                                                        

                                                                  
Cincinnati Bell Inc.
Income Statements by Segment
(Unaudited)
(Dollars in millions)
 
                                       Three Months Ended
                                       March 31,            Change
                                       2013       2012      $           %
  Wireline
  Revenue
    Data                               $  78.1    $ 76.0    $ 2.1       3   %
    Voice - local service                 59.5      66.0      (6.5  )   (10 )%
    Long distance and VoIP                26.9      28.9      (2.0  )   (7  )%
    Entertainment                         12.0      7.7       4.3       56  %
    Other                                3.2      3.8      (0.6  )   (16 )%
                                                                        
    Total revenue                        179.7    182.4    (2.7  )   (1  )%
                                                                        
  Operating costs and expenses
    Cost of services and products         71.2      68.8      2.4       3   %
    Selling, general and                  31.0      30.5      0.5       2   %
    administrative
    Depreciation and amortization         26.8      25.9      0.9       3   %
    Other*                               0.6      -        0.6      n/m 
                                                                        
    Total operating costs and            129.6    125.2    4.4      4   %
    expenses
                                                                        
  Operating income                     $  50.1    $ 57.2    $ (7.1  )   (12 )%
                                                                        
  Wireless
  Revenue
    Service                            $  49.3    $ 59.1    $ (9.8  )   (17 )%
    Equipment                            4.0      4.6      (0.6  )   (13 )%
                                                                        
    Total revenue                        53.3     63.7     (10.4 )   (16 )%
                                                                        
  Operating costs and expenses
    Cost of services and products         23.5      29.5      (6.0  )   (20 )%
    Selling, general and                  9.8       10.7      (0.9  )   (8  )%
    administrative
    Depreciation and amortization         16.0      7.9       8.1       n/m
    Other*                               3.3      0.5      2.8      n/m 
                                                                        
    Total operating costs and            52.6     48.6     4.0      8   %
    expenses
                                                                        
  Operating income                     $  0.7     $ 15.1    $ (14.4 )   (95 )%
                                                                        
  IT Services and Hardware
  Revenue
    Telecom and IT equipment           $  56.9    $ 45.7    $ 11.2      25  %
    distribution
    Managed and professional             27.6     27.5     0.1      0   %
    services
                                                                        
    Total revenue                        84.5     73.2     11.3     15  %
                                                                        
  Operating costs and expenses
    Cost of services and products         69.4      58.7      10.7      18  %
    Selling, general and                  10.7      10.3      0.4       4   %
    administrative
    Depreciation and amortization        2.5      1.6      0.9      56  %
                                                                        
    Total operating costs and            82.6     70.6     12.0     17  %
    expenses
                                                                        
  Operating income                     $  1.9     $ 2.6     $ (0.7  )   (27 )%
                                                                        
  Data Center Colocation**
  Revenue                              $  15.6    $ 52.6    $ (37.0 )   (70 )%
                                                                        
  Operating costs and expenses
    Cost of services                      4.8       17.3      (12.5 )   (72 )%
    Selling, general and                  2.4       6.5       (4.1  )   (63 )%
    administrative
    Depreciation and amortization        5.2      15.6     (10.4 )   (67 )%
                                                                        
    Total operating costs and            12.4     39.4     (27.0 )   (69 )%
    expenses
                                                                        
  Operating income                     $  3.2     $ 13.2    $ (10.0 )   (76 )%
                                                                            

     
            *Other includes restructuring charges and loss or gain on sale or
            disposal of assets.
            **CyrusOne completed its IPO on January 24, 2013. Results for 2013
            only include CyrusOne's results through this date. After January
            24, 2013, the Company owns 69% of CyrusOne as an equity method
            investment, and therefore does not consolidate the CyrusOne
            results of operations in the total company or segment results.
            

                                                                  
Cincinnati Bell Inc.
Income Statements by Segment
(Unaudited)
(Dollars in millions)
 
                                 Three Months Ended
                                 March 31,   December 31,   Change
                                 2013        2012           $           %
  Wireline
  Revenue
    Data                         $  78.1     $  77.5        $ 0.6       1   %
    Voice - local service           59.5        61.7          (2.2  )   (4  )%
    Long distance and VoIP          26.9        27.8          (0.9  )   (3  )%
    Entertainment                   12.0        9.8           2.2       22  %
    Other                          3.2        5.3         (2.1  )   (40 )%
                                                                        
    Total revenue                  179.7      182.1       (2.4  )   (1  )%
                                                                        
  Operating costs and
  expenses
    Cost of services and            71.2        72.3          (1.1  )   (2  )%
    products
    Selling, general and            31.0        31.6          (0.6  )   (2  )%
    administrative
    Depreciation and                26.8        27.1          (0.3  )   (1  )%
    amortization
    Other*                         0.6        1.0         (0.4  )   (40 )%
                                                                        
    Total operating costs          129.6      132.0       (2.4  )   (2  )%
    and expenses
                                                                        
  Operating income               $  50.1     $  50.1       $ -        0   %
                                                                        
  Wireless
  Revenue
    Service                      $  49.3     $  52.8        $ (3.5  )   (7  )%
    Equipment                      4.0        4.0         -        0   %
                                                                        
    Total revenue                  53.3       56.8        (3.5  )   (6  )%
                                                                        
  Operating costs and
  expenses
    Cost of services and            23.5        28.3          (4.8  )   (17 )%
    products
    Selling, general and            9.8         11.4          (1.6  )   (14 )%
    administrative
    Depreciation and                16.0        7.9           8.1       n/m
    amortization
    Other*                         3.3        1.5         1.8      n/m 
                                                                        
    Total operating costs          52.6       49.1        3.5      7   %
    and expenses
                                                                        
  Operating income               $  0.7      $  7.7        $ (7.0  )   (91 )%
                                                                        
  IT Services and Hardware
  Revenue
    Telecom and IT equipment     $  56.9     $  59.6        $ (2.7  )   (5  )%
    distribution
    Managed and professional       27.6       27.3        0.3      1   %
    services
                                                                        
    Total revenue                  84.5       86.9        (2.4  )   (3  )%
                                                                        
  Operating costs and
  expenses
    Cost of services and            69.4        72.4          (3.0  )   (4  )%
    products
    Selling, general and            10.7        10.3          0.4       4   %
    administrative
    Depreciation and                2.5         2.3           0.2       9   %
    amortization
    Other*                         -          (1.2   )     1.2      n/m 
                                                                        
    Total operating costs          82.6       83.8        (1.2  )   (1  )%
    and expenses
                                                                        
  Operating income               $  1.9      $  3.1        $ (1.2  )   (39 )%
                                                                        
  Data Center Colocation**
  Revenue                        $  15.6     $  58.0       $ (42.4 )   (73 )%
                                                                        
  Operating costs and
  expenses
    Cost of services                4.8         20.6          (15.8 )   (77 )%
    Selling, general and            2.4         9.8           (7.4  )   (76 )%
    administrative
    Depreciation and               5.2        19.7        (14.5 )   (74 )%
    amortization
                                                                        
    Total operating costs          12.4       50.1        (37.7 )   (75 )%
    and expenses
                                                                        
  Operating income               $  3.2      $  7.9        $ (4.7  )   (59 )%
                                                                            

 
    *Other includes restructuring charges, loss or gain on sale or disposal of
    assets and asset impairments.
    **CyrusOne completed its IPO on January 24, 2013. Results for 2013 only
    include CyrusOne's results through this date. After January 24, 2013, the
    Company owns 69% of CyrusOne as an equity method investment, and therefore
    does not consolidate the CyrusOne results of operations in the total
    company or segment results.
    

                                                                  
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
   
                                                                        
                                    Three Months Ended
                                    March 31,               Change
                                    2013        2012        $           %
  Revenue
     Wireline                       $ 179.7     $ 182.4     $ (2.7  )   (1  )%
     Wireless                         53.3        63.7        (10.4 )   (16 )%
     IT Services and Hardware         84.5        73.2        11.3      15  %
     Data Center Colocation**         15.6        52.6        (37.0 )   (70 )%
     Eliminations                    (7.4  )    (9.1  )    1.7      19  %
                                                                        
     Total revenue                  $ 325.7    $ 362.8    $ (37.1 )   (10 )%
                                                                        
  Cost of Services and
  Products
     Wireline                       $ 71.2      $ 68.8      $ 2.4       3   %
     Wireless                         23.5        29.5        (6.0  )   (20 )%
     IT Services and Hardware         69.4        58.7        10.7      18  %
     Data Center Colocation**         4.8         17.3        (12.5 )   (72 )%
     Eliminations                    (7.1  )    (8.5  )    1.4      16  %
                                                                        
     Total cost of services and     $ 161.8    $ 165.8    $ (4.0  )   (2  )%
     products
                                                                        
  Selling, General and
  Administrative
     Wireline                       $ 31.0      $ 30.5      $ 0.5       2   %
     Wireless                         9.8         10.7        (0.9  )   (8  )%
     IT Services and Hardware         10.7        10.3        0.4       4   %
     Data Center Colocation**         2.4         6.5         (4.1  )   (63 )%
     Corporate and                   (0.8  )    6.0       (6.8  )   n/m 
     eliminations
                                                                        
     Total selling, general and     $ 53.1     $ 64.0     $ (10.9 )   (17 )%
     administrative
                                                                        
  Depreciation and
  Amortization
     Wireline                       $ 26.8      $ 25.9      $ 0.9       3   %
     Wireless                         16.0        7.9         8.1       n/m
     IT Services and Hardware         2.5         1.6         0.9       56  %
     Data Center Colocation**         5.2         15.6        (10.4 )   (67 )%
     Corporate                       0.1       0.1       -        0   %
                                                                        
     Total depreciation and         $ 50.6     $ 51.1     $ (0.5  )   (1  )%
     amortization
                                                                        
  Other*
     Wireline                       $ 0.6       $ -         $ 0.6       n/m
     Wireless                         3.3         0.5         2.8       n/m
     IT Services and Hardware         -           -           -         n/m
     Data Center Colocation**         -           -           -         n/m
     Corporate                       37.1      0.4       36.7     n/m 
                                                                        
     Total other                    $ 41.0     $ 0.9      $ 40.1     n/m 
                                                                        
  Operating Income
     Wireline                       $ 50.1      $ 57.2      $ (7.1  )   (12 )%
     Wireless                         0.7         15.1        (14.4 )   (95 )%
     IT Services and Hardware         1.9         2.6         (0.7  )   (27 )%
     Data Center Colocation**         3.2         13.2        (10.0 )   (76 )%
     Corporate                       (36.7 )    (7.1  )    (29.6 )   n/m 
                                                                        
     Total operating income         $ 19.2     $ 81.0     $ (61.8 )   (76 )%
                                                                        

 
    *Other includes restructuring charges, loss or gain on sale or disposal of
    assets, transaction-related compensation and transaction costs.
    **CyrusOne completed its IPO on January 24, 2013. Results for 2013 only
    include CyrusOne's results through this date. After January 24, 2013, the
    Company owns 69% of CyrusOne as an equity method investment, and therefore
    does not consolidate the CyrusOne results of operations in the total
    company or segment results.
    

                                                                  
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
  
                                                                        
                                 Three Months Ended
                                 March 31,   December 31,   Change
                                 2013        2012           $           %
  Revenue
    Wireline                     $ 179.7     $  182.1       $ (2.4  )   (1  )%
    Wireless                       53.3         56.8          (3.5  )   (6  )%
    IT Services and                84.5         86.9          (2.4  )   (3  )%
    Hardware
    Data Center                    15.6         58.0          (42.4 )   (73 )%
    Colocation**
    Eliminations                  (7.4  )     (9.1   )     1.7      19  %
                                                                        
    Total revenue                $ 325.7    $  374.7      $ (49.0 )   (13 )%
                                                                        
  Cost of Services and
  Products
    Wireline                     $ 71.2      $  72.3        $ (1.1  )   (2  )%
    Wireless                       23.5         28.3          (4.8  )   (17 )%
    IT Services and                69.4         72.4          (3.0  )   (4  )%
    Hardware
    Data Center                    4.8          20.6          (15.8 )   (77 )%
    Colocation**
    Eliminations                  (7.1  )     (8.8   )     1.7      19  %
                                                                        
    Total cost of services       $ 161.8    $  184.8      $ (23.0 )   (12 )%
    and products
                                                                        
  Selling, General and
  Administrative
    Wireline                     $ 31.0      $  31.6        $ (0.6  )   (2  )%
    Wireless                       9.8          11.4          (1.6  )   (14 )%
    IT Services and                10.7         10.3          0.4       4   %
    Hardware
    Data Center                    2.4          9.8           (7.4  )   (76 )%
    Colocation**
    Corporate and                 (0.8  )     6.8         (7.6  )   n/m 
    eliminations
                                                                        
    Total selling, general       $ 53.1     $  69.9       $ (16.8 )   (24 )%
    and administrative
                                                                        
  Depreciation and
  Amortization
    Wireline                     $ 26.8      $  27.1        $ (0.3  )   (1  )%
    Wireless                       16.0         7.9           8.1       n/m
    IT Services and                2.5          2.3           0.2       9   %
    Hardware
    Data Center                    5.2          19.7          (14.5 )   (74 )%
    Colocation**
    Corporate                     0.1        0.2         (0.1  )   (50 )%
                                                                        
    Total depreciation and       $ 50.6     $  57.2       $ (6.6  )   (12 )%
    amortization
                                                                        
  Other*
    Wireline                     $ 0.6       $  1.0         $ (0.4  )   (40 )%
    Wireless                       3.3          1.5           1.8       n/m
    IT Services and                -            (1.2   )      1.2       n/m
    Hardware
    Data Center                    -            -             -         n/m
    Colocation**
    Corporate                     37.1       3.6         33.5     n/m 
                                                                        
    Total other                  $ 41.0     $  4.9        $ 36.1     n/m 
                                                                        
  Operating Income
    Wireline                     $ 50.1      $  50.1        $ -         0   %
    Wireless                       0.7          7.7           (7.0  )   (91 )%
    IT Services and                1.9          3.1           (1.2  )   (39 )%
    Hardware
    Data Center                    3.2          7.9           (4.7  )   (59 )%
    Colocation**
    Corporate                     (36.7 )     (10.9  )     (25.8 )   n/m 
                                                                        
    Total operating income       $ 19.2     $  57.9       $ (38.7 )   (67 )%
                                                                        

 
    *Other includes restructuring charges, loss or gain on sale or disposal of
    assets, transaction-related compensation, transaction costs and asset
    impairments.
    **CyrusOne completed its IPO on January 24, 2013. Results for 2013 only
    include CyrusOne's results through this date. After January 24, 2013, the
    Company owns 69% of CyrusOne as an equity method investment, and therefore
    does not consolidate the CyrusOne results of operations in the total
    company or segment results.
    

                                                              
Cincinnati Bell Inc.
Segment Metric Information
(Unaudited)
(In thousands)
 
                                       March, 31   December 31,   March 31,
                                       2013        2012           2012
                                                                  
  Local access lines                   561.4       573.9          608.6
                                                                  
  Long distance lines                  410.4       417.9          439.2
                                                                  
  High-speed internet subscribers
      DSL subscribers                  199.5       202.6          214.4
      Fioptics subscribers             60.7        56.8           42.8
                                                                  
                                       260.2       259.4          257.2
                                                                  
  Fioptics units passed                220.0       205.0          147.0
                                                                  
  Fioptics entertainment subscribers   57.6        55.1           42.7
                                                                  
  Wireless
      Postpaid wireless subscribers    236.6       251.3          297.7
      Prepaid wireless subscribers     148.7       146.5          148.7
                                                                  
                                       385.3       397.8          446.4
                                                                  

                                                                          
Cincinnati Bell Inc.
Local Access Line Detail
(Unaudited)
(In thousands)

                                                                                  
                    2011                            2012                            2013
                    1Q      2Q      3Q      4Q      1Q      2Q      3Q      4Q      1Q
Local Access
Lines
                                                                                    
In-Territory:
   Primary          321.8   313.8   304.8   296.7   288.9   281.7   274.3   266.4   259.1
   Residential
   Secondary        18.3    16.3    15.6    14.9    14.2    13.6    13.1    12.5    12.0
   Residential
   Business/Other   250.7  248.7  244.4  240.8   238.5  237.5  234.4  232.1   229.7
Total               590.8   578.8   564.8   552.4   541.6   532.8   521.8   511.0   500.8
In-Territory
                                                                                    
Out-of-Territory:
   Primary          30.4    29.3    27.8    26.7    25.2    24.3    23.3    22.4    20.8
   Residential
   Secondary        0.9     0.9     0.9     0.8     0.8     0.8     0.7     0.7     0.6
   Residential
   Business/Other   41.5   41.6   41.8   41.4    41.0   40.6   40.0   39.8    39.2
Total               72.8    71.8    70.5    68.9    67.0    65.7    64.0    62.9    60.6
Out-of-Territory
                                                                      
Total Access        663.6  650.6  635.3  621.3   608.6  598.5  585.8  573.9   561.4
Lines
                                                                                    

                                                        
Cincinnati Bell Inc.
Net Debt and Common Shares Outstanding
(Unaudited)
(Dollars and shares in millions)

                                                            
                                              March 31,     December 31,
                                              2013          2012
                                                            
                                                            
Receivables Facility                          $ 54.0        $  52.0
8 1/4% Senior Notes due 2017                    500.0          500.0
8 3/4% Senior Subordinated Notes due 2018       625.0          625.0
8 3/8% Senior Notes due 2020                    683.9          683.9
CyrusOne 6 3/8% Senior Notes due 2022*          -              525.0
7 1/4% Senior Notes due 2023                    40.0           40.0
Various Cincinnati Bell Telephone notes         134.5          134.5
Capital leases and other debt*                  103.7          136.5
Net unamortized discount                       (7.1    )     (7.5    )
                                                            
    Total debt                                  2,134.0        2,689.4
                                                            
Less: Cash and cash equivalents                (5.1    )     (23.6   )
                                                            
    Net debt (as defined by the company)      $ 2,128.9    $  2,665.8 
                                                            
Credit facility availability:
    Corporate                                 $ 200.0       $  200.0
    CyrusOne**                                 -            225.0   
                                                            
                                              $ 200.0      $  425.0   
                                                            
Common shares outstanding                      207.9        202.5   
                                                                       


*On January 24, 2013, CyrusOne completed its IPO. As of this date, Cincinnati
Bell no longer has any obligations related to CyrusOne's 6 3/8% Senior Notes
due 2022 or capital lease obligations.
** On January 24, 2013, CyrusOne completed its IPO. As of this date,
Cincinnati Bell no longer has access to the CyrusOne credit facility.


                                                                                
Cincinnati Bell Inc.
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)
(Unaudited)
(Dollars in millions)
                                                                           
                          Three Months Ended March 31, 2013
                                                  IT                                   Total
                          Wireline    Wireless    Services   Data Center   Corporate
                                                  &          Colocation*               Company
                                                  Hardware
                                                                                       
  Net Loss (GAAP)                                                                      $ (36.7 )
  Add:
    Income tax expense                                                                   6.4
    Interest expense                                                                     47.9
    Loss from CyrusOne
    equity method                                                                        1.9
    investment
    Other income, net                                                                   (0.3  )
                                                                                       
  Operating Income        $ 50.1      $ 0.7       $ 1.9      $  3.2        $ (36.7 )   $ 19.2
  (GAAP)
  Add:
    Depreciation and        26.8        16.0        2.5         5.2          0.1         50.6
    amortization
    Transaction-related     -           -           -           -            35.5        35.5
    compensation
    Restructuring           1.4         -           -           -            1.2         2.6
    charges
    Loss (gain) on sale
    or disposal of          (0.8 )      3.3         -           -            -           2.5
    assets
    Transaction costs       -           -           -           -            0.4         0.4
    Pension and other
    retirement plan        6.9       -         -         -          0.4       7.3   
    expenses
                                                                                       
  Adjusted EBITDA         $ 84.4     $ 20.0     $ 4.4     $  8.4       $ 0.9      $ 118.1 
  (Non-GAAP)
                                                                                       
  Adjusted EBITDA           47   %      38   %      5    %      54    %      -           36    %
  Margin
                                                                             
                          Three Months Ended December 31, 2012
                                                  IT                                   Total
                          Wireline    Wireless    Services   Data Center   Corporate
                                                  &          Colocation                Company
                                                  Hardware
                                                                                       
  Net Loss (GAAP)                                                                      $ (9.8  )
  Add:
    Income tax benefit                                                                   (1.6  )
    Interest expense                                                                     55.6
    Loss on
    extinguishment of                                                                    13.6
    debt
    Other expense, net                                                                  0.1   
                                                                                       
  Operating Income        $ 50.1      $ 7.7       $ 3.1      $  7.9        $ (10.9 )   $ 57.9
  (GAAP)
  Add:
    Depreciation and        27.1        7.9         2.3         19.7         0.2         57.2
    amortization
    Restructuring           1.9         1.1         (1.2 )      -            (1.4  )     0.4
    charges (reversals)
    Loss (gain) on sale
    or disposal of          (1.4 )      -           -           -            0.4         (1.0  )
    assets
    Transaction costs       -           -           -           -            4.6         4.6
    Impairment of
    goodwill and other      0.5         0.4         -           -            -           0.9
    assets
    Legal claim costs       -           -           -           0.2          -           0.2
    Pension and other
    retirement plan        5.8       -         -         -          0.3       6.1   
    expenses
                                                                                       
  Adjusted EBITDA         $ 84.0     $ 17.1     $ 4.2     $  27.8      $ (6.8  )   $ 126.3 
  (Non-GAAP)
                                                                                       
  Adjusted EBITDA           46   %      30   %      5    %      48    %      -           34    %
  Margin
                                                                                       
  Sequential dollar
  change in Adjusted      $ 0.4       $ 2.9       $ 0.2      $  (19.4 )    $ 7.7       $ (8.2  )
  EBITDA
                                                                                       
  Sequential percentage
  change in Adjusted        0    %      17   %      5    %      (70   )%     113   %     (6    )%
  EBITDA
                                                                             
                          Three Months Ended March 31, 2012
                                                  IT                                   Total
                          Wireline    Wireless    Services   Data Center   Corporate
                                                  &          Colocation                Company
                                                  Hardware
                                                                                       
  Net Income (GAAP)                                                                    $ 12.6
  Add:
    Income tax expense                                                                   12.5
    Interest expense                                                                     54.4
    Other expense, net                                                                  1.5   
                                                                                       
  Operating Income        $ 57.2      $ 15.1      $ 2.6      $  13.2       $ (7.1  )   $ 81.0
  (GAAP)
  Add:
    Depreciation and        25.9        7.9         1.6         15.6         0.1         51.1
    amortization
    Restructuring           -           0.5         -           -            0.4         0.9
    charges
    Pension and other
    retirement plan        5.4       -         -         -          0.4       5.8   
    expenses
                                                                                       
  Adjusted EBITDA         $ 88.5     $ 23.5     $ 4.2     $  28.8      $ (6.2  )   $ 138.8 
  (Non-GAAP)
                                                                                       
  Adjusted EBITDA           49   %      37   %      6    %      55    %      -           38    %
  Margin
                                                                                       
  Year-over-year dollar
  change in Adjusted      $ (4.1 )    $ (3.5 )    $ 0.2      $  (20.4 )    $ 7.1       $ (20.7 )
  EBITDA
                                                                                       
  Year-over-year
  percentage change in      (5   )%     (15  )%     5    %      (71   )%     115   %     (15   )%
  Adjusted EBITDA
                                                                                       


*CyrusOne completed its IPO on January 24, 2013. Results for 2013 only include
CyrusOne's results through this date. After January 24, 2013, the Company owns
69% of CyrusOne as an equity method investment, and therefore does not
consolidate the CyrusOne results of operations in the total company or segment
results.

                                                                 
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions)
 
                                                         Three Months Ended
                                                         March 31,
                                                         2013        2012
                                                                     
  Cash provided by operating activities                  $ 42.3     $ 23.6  
                                                                     
    Capital expenditures                                   (50.9 )     (84.6 )
    Proceeds from sale of assets                           0.8         -
    Release of restricted cash                             0.4         -
    Cash divested from deconsolidation of CyrusOne        (12.2 )    -     
                                                                     
  Cash used in investing activities                       (61.9 )    (84.6 )
                                                                     
    Increase in corporate credit and receivables           2.0         -
    facilities, net
    Repayment of debt                                      (3.1  )     (4.0  )
    Dividends paid on preferred stock                      (2.6  )     (2.6  )
    Common stock repurchase                                -           (0.3  )
    Proceeds from exercise of options and warrants         6.6         -
    Other, net                                            (1.8  )    1.1   
                                                                     
  Cash provided by (used in) financing activities         1.1       (5.8  )
                                                                     
  Net decrease in cash and cash equivalents                (18.5 )     (66.8 )
  Cash and cash equivalents at beginning of period        23.6      73.7  
                                                                     
  Cash and cash equivalents at end of period             $ 5.1      $ 6.9   
                                                                     
                                                                     
  Reconciliation of GAAP Cash Flow to
    Free Cash Flow (as defined by the company)
  Net decrease in cash and cash equivalents              $ (18.5 )   $ (66.8 )
  Less adjustments:
    Increase in corporate credit and
                                                           (2.0  )     -
    receivables facilities, net
    Cash divested from deconsolidation of CyrusOne         12.2        -
    Repayment of debt                                      3.1         4.0
    Transaction-related compensation and other costs       2.4         -
    Common stock repurchase                               -         0.3   
                                                                     
    Free cash flow                                         (2.8  )     (62.5 )
                                                                     
    Less: CyrusOne's free cash flows*                     (3.3  )    (34.8 )
    Free cash flow excluding CyrusOne                    $ 0.5      $ (27.7 )
                                                                     
  Income tax payments (refunds)                          $ 1.8      $ (0.8  )
                                                                             

*CyrusOne's free cash flows for 2013 were comprised of cash generated from
operating activities of $4.0 million and cash used in investing activities of
$7.3 million.

                                                                   
Cincinnati Bell Inc.
Free Cash Flow (as defined by the company)
(Unaudited)
(Dollars in millions)

                                                                     
  Free Cash Flow for the three months ended March 31, 2012           $ (62.5 )
                                                                     
  Decrease in Adjusted EBITDA                                          (20.7 )
  Decrease in capital expenditures                                     33.7
  Decrease in interest payments                                        10.2
  Decrease in pension and postretirement payments and                  3.9
  contributions
  Change in working capital and other                                 32.6  
                                                                     
  Free Cash Flow for the three months ended March 31, 2013             (2.8  )
  Less: CyrusOne's free cash flows for the period ended January       (3.3  )
  23, 2013
  Free Cash Flow excluding CyrusOne for the three months ended       $ 0.5   
  March 31, 2013
                                                                             

                                                                
Cincinnati Bell Inc.
Capital Expenditures
(Unaudited)
(Dollars in millions)

                                                                      
                         Three Months Ended
                         Mar. 31,   Dec. 31,    Sep. 30,   Jun. 30,   Mar. 31,
                         2013       2012        2012       2012       2012
                                                                      
Wireline                 $ 33.8     $ 36.7      $ 27.8     $ 26.4     $ 23.3
Wireless                 8.2        3.4         4.2        1.9        6.3
IT Services and          1.2        2.4         1.9        2.5        2.2
Hardware
Data Center              7.7        81.8        41.6       52.0       52.8
Colocation*
Total capital            $ 50.9     $ 124.3     $ 75.5     $ 82.8     $ 84.6
expenditures
                                                                      

*CyrusOne completed its IPO on January 24, 2013. Results for 2013 only include
CyrusOne's results through this date. After January 24, 2013, the Company owns
69% of CyrusOne as an equity method investment, and therefore does not
consolidate the CyrusOne results of operations in the total company or segment
results.

                                             
Cincinnati Bell Inc.
Normalized Statements of Operations (Non-GAAP) - Reconciliation to Reported
Results
(Unaudited)
(Dollars in millions, except per share amounts)
    
                                                                 
                                                                 
                                                                 Three
                                 Three                           Months Ended
                                 Months Ended                    March 31,
                                                                 2013
                                 March 31,                       Before
                                 2013                            Special Items
                                 (GAAP)         Special          (Non-GAAP)
                                                Items
                                                                 
  Revenue                        $  325.7       $  -             $   325.7
                                                                 
  Costs and expenses
      Cost of services and          161.8          -                 161.8
      products
      Selling, general and          53.1           -                 53.1
      administrative
      Depreciation and              50.6           (8.5   )  [A]     42.1
      amortization
      Transaction-related           35.5           (35.5  )  [B]     -
      compensation
      Restructuring charges         2.6            (2.6   )  [C]     -
      Loss on sale or disposal      2.5            (2.5   )  [D]     -
      of assets, net
      Transaction costs            0.4          (0.4   )  [E]    -      
               Operating            19.2           49.5              68.7
               income
                                                                 
  Interest expense                  47.9           -                 47.9
  Loss from CyrusOne equity         1.9            -                 1.9
  method investment
  Other (income) expense, net      (0.3   )      -               (0.3   )
                                                                 
  (Loss) income before income       (30.3  )       49.5              19.2
  taxes
  Income tax expense               6.4          9.1      [F]    15.5   
                                                                 
  Net (loss) income                 (36.7  )       40.4              3.7
                                                                 
  Preferred stock dividends        2.6          -               2.6    
                                                                 
  Net (loss) income applicable   $  (39.3  )    $  40.4         $   1.1    
  to common shareowners
                                                                 
                                                                 
  Weighted average diluted         202.8        207.9    [G]    207.9  
  common shares
                                                                 
  Diluted (loss) earnings per    $  (0.19  )    $  0.19         $   0.01   
  common share*
                                                                 

  
    Normalized results have been adjusted for the following (pretax
    adjustments are tax effected at 40%):
    
A   Increased depreciation due to change in the estimated useful lives
    assigned to wireless network software.
    
B   Transaction-related compensation represents incentives earned upon
    completion of CyrusOne's initial public offering.
    
C   Restructuring charges consist of severance and lease abandonments.
    
D   Loss on sale or disposal of wireline and wireless network equipment.
    
E   Transaction costs consist of legal and consulting fees incurred in legal
    entity restructuring.
    
    Tax effect of above adjustments at 40%, partially offset by a gross
F   valuation allowance provision of $10.7 million for Texas margin tax
    credits.
    
G   Dilutive effect of common stock equivalents based on net income excluding
    special items.
    
    Diluted earnings per common share have been calculated independently for
*   the results above. Therefore, the sum of the per share amounts will not
    necessarily equal the per share results for the Before Special Items
    (Non-GAAP) results.
    

<td class="bwpadl0 *Story too large*
                                           
Cincinnati Bell Inc.
Normalized Statements of Operations (Non-GAAP) - Reconciliation to Reported
Results
(Unaudited)
(Dollars in millions, except per share amounts)
   
                                                                
                                                                
                                                                Three
                              Three                             Months Ended
                              Months Ended                      March 31, 2012
                              March 31,                         Before Special
                              2012                              Items
                              (GAAP)          Special Items     (Non-GAAP)
                                                                
   Revenue                    $    362.8      $   -             $     362.8
                                                                
   Costs and expenses
     Cost of services and          165.8          -                   165.8
     products
     Selling, general and          64.0           -                   64.0
     administrative
     Depreciation and              51.1           -                   51.1
     amortization
     Restructuring charges        0.9           (0.9   )  [A]      -
             Operating             81.0           0.9                 81.9
             income
                                                                
   Interest expense                54.4           -                   54.4
   Other expense, net             1.5           (1.4   )  [B]      0.1
                                                                
   Income before income            25.1           2.3                 27.4
   taxes
   Income tax expense             12.5          0.9               13.4
                                                                
   Net income                      12.6           1.4

[TRUNCATED]
 
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