Cincinnati Bell Reports Fourth Quarter and Full Year 2013 Results

  Cincinnati Bell Reports Fourth Quarter and Full Year 2013 Results  Highlights    *Strong Adjusted EBITDA of $407 million in line with revised guidance range   *Achieved full year revenue guidance of $1.2 billion   *Revenue from strategic products totaled $359 million, up 17 percent     year-over-year   *Fioptics annual revenue exceeded $100 million, up 48 percent over prior     year   *Record high 23,100 Fioptics high-speed internet and 19,100 entertainment     net activations  Business Wire  CINCINNATI -- February 20, 2014  Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the full year and fourth quarter of 2013, highlighted by impressive full-year Adjusted EBITDA^1 totaling $407 million, after excluding CyrusOne, and the continued strong demand and growth in our strategic products.  “2013 was a transformational year for Cincinnati Bell on many levels,” said Ted Torbeck, president and chief executive officer. “Our year started with the successful IPO of CyrusOne and concluded with Fioptics, one of our key strategic products, generating more than $100 million in annual revenues.”  CONSOLIDATED RESULTS  On January 24, 2013, the company successfully completed the initial public offering (“IPO”) of CyrusOne, and its consolidated year-to-date results for 2013 include the results of that business up to the IPO date. Year-to-date revenue for 2013 was $1.3 billion, operating income was $164 million, and net income excluding special items^2 totaled $14 million. Excluding the data center segment results, Cincinnati Bell generated revenue of $1.2 billion, down 1 percent from the prior year and operating income of $181 million. Adjusted EBITDA excluding the data center business was $407 million, and includes a gain of $6 million associated with mark-to-market adjustments on compensation plans indexed to the company’s stock price.  Total revenue for the fourth quarter of 2013 was $308 million, down $10 million from the prior year after excluding the data center segment results. Operating income totaled $40 million, down $10 million from the prior year after excluding CyrusOne. The fourth quarter net loss of $28 million includes a $30 million loss on the early extinguishment of the 8.25 percent Senior Notes due 2017, repaid with proceeds from the issuance of a $540 million Tranche B term loan facility.  SEGMENT RESULTS  Wireline Segment  Revenue growth from strategic fiber based products continues to increasingly mitigate access line loss. Fioptics revenue totaled $29 million in the quarter, up 49 percent from the same period in 2012. Strategic revenue for business customers totaled $40 million, up 12 percent compared to the prior year. Adjusted EBITDA margin^3 was 44 percent in the quarter, down from prior year due to the loss of higher margin access lines.    *Wireline revenue was $182 million for the quarter, flat compared to the     fourth quarter of 2012. Full year Wireline revenue totaled $725 million,     down 1 percent from a year ago.   *Operating income for the quarter was $43 million, down from $50 million in     the same period of 2012, and full year 2013 operating income was $190     million, down 11 percent compared to 2012.   *Adjusted EBITDA was $80 million in the fourth quarter of 2013 and $331     million for the full year, down 5 percent and 4 percent, respectively,     from the same periods in 2012.   *Fioptics entertainment subscribers increased by 4,500 in the quarter and     19,100 for the year. Fioptics entertainment subscribers totaled 74,200 at     the end of the year, up 35 percent compared to the end of 2012.   *Fioptics internet subscribers now total 79,900, up more than 40 percent     from a year ago. The company added 5,600 new Fioptics high-speed internet     subscribers in the quarter, and 23,100 for the year.   *In 2013, we passed 71,000 units with Fioptics and achieved 29 percent     penetration. The Fiopitcs suite of products is now available to 276,000     residential and business customers, approximately 35 percent of Greater     Cincinnati.  IT Services and Hardware Segment  Strong demand for managed and professional services resulted in revenue of $33 million, up 20 percent over the prior year. Hardware sales totaled $53 million for the quarter.    *Revenue for the quarter was $86 million, down $1 million from the fourth     quarter of 2012. Full year revenue was $344 million, up 9 percent compared     to the prior year.   *Operating income totaled $2 million for the quarter and $9 million for the     full year.   *Adjusted EBITDA for the quarter was $5 million, up $1 million from a year     ago. Full year Adjusted EBITDA totaled $20 million, up 11 percent from the     prior year.  Wireless Segment  We continue to manage our Wireless segment for cash flow and profitability as the business is challenged by revenue declines due to the loss of postpaid subscribers.    *Revenue was $47 million for the quarter and $202 million for 2013, a     decrease of 17 percent for both periods compared to 2012.   *Wireless reported full year operating income of $18 million, including a     $1 million operating loss for the fourth quarter of 2013.   *Adjusted EBITDA was $10 million in the fourth quarter of 2013 and $63     million for the full year, down from $17 million and $85 million,     respectively, from the same periods in 2012.   *Wireless subscribers totaled 340,000 at the end of the year compared to     398,000 a year ago.  Investment in CyrusOne  Cincinnati Bell continues to effectively own 69 percent of CyrusOne, which is accounted for as an equity method investment. As of year-end, the company’s investment in CyrusOne was valued at approximately $1 billion.    *CyrusOne reported revenue of $72 million and Adjusted EBITDA of $40     million for the fourth quarter of 2013. For the full year, CyrusOne     reported revenue of $264 million and Adjusted EBITDA of $139 million, in     line with its established financial guidance range.   *CyrusOne provided 2014 financial guidance targets for Revenue and Adjusted     EBITDA, indicating expected growth of 18 percent and 17 percent at the     mid-point of the range.  “Looking ahead, we are very excited about the opportunity to turn Cincinnati Bell into a growing fiber based company capable of producing significant sustainable free cash flows,” Torbeck said. “The momentum created in 2013 and the continued demand for our strategic products gives us great confidence that we will grow Wireline revenue and generate positive free cash flow in 2014.”  2014 Outlook  Cincinnati Bell is providing the following guidance for 2014:  Category               2014 Guidance Revenue                       $1.2 billion Adjusted EBITDA               $383 million* *Plus or minus 2 percent  Conference Call/Webcast  Cincinnati Bell will host a conference call on February 20 at 10:00 a.m. (ET) to discuss its results for the fourth quarter and full year 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) 863-7412. Callers located outside of the U.S. and Canada may dial (816) 581-1570. 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 March 6, 2014. 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 8619702. 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, transaction-related compensation, restructuring charges, (gain) loss on sale or disposal of assets, transaction costs, curtailment gain, asset impairments, components of pension and other retirement plan costs (including interest costs, asset returns, and amortization of actuarial gains and losses), and other special items. Adjusted EBITDA should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.  CyrusOne defines Adjusted EBITDA as net (loss) income as defined by U.S. GAAP before noncontrolling interests plus interest expense, income tax (benefit) expense, depreciation and amortization, non-cash compensation, transaction costs and transaction-related compensation, including acquisition pursuit costs, loss on sale of receivables to affiliate, restructuring costs, loss on extinguishment of debt, asset impairments, (gain) loss on sale of real estate improvements,and other special items. 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 are available in the Investor Relations section of www.cyrusone.com.  ^2Net 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.  ^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.  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.  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 debt should not be considered as an alternative to comparable GAAP measures of liquidity and may not be comparable with the measure 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 CBTS, a wholly-owned subsidiary, 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                           2013        2012        $           %        2013          2012          $            %                                                                                                                    Revenue                 $ 308.4     $ 374.7     $ (66.3 )   (18 )%   $ 1,256.9     $ 1,473.9     $ (217.0 )   (15 )%                                                                                                                    Costs and expenses     Cost of services        164.2       184.8       (20.6 )   (11 )%     643.0         694.6         (51.6  )   (7  )%     and products     Selling, general        59.4        69.9        (10.5 )   (15 )%     220.8         269.5         (48.7  )   (18 )%     and administrative     Depreciation and        42.0        57.2        (15.2 )   (27 )%     169.6         217.4         (47.8  )   (22 )%     amortization     Restructuring           2.9         0.4         2.5       n/m        13.7          3.4           10.3       n/m     charges     Transaction-related     —           —           —         n/m        42.6          —             42.6       n/m     compensation     Curtailment gain        —           —           —         n/m        (0.6    )     —             (0.6   )   n/m     (Gain) loss on sale     or disposal of          (0.2  )     (1.0  )     0.8       80  %      2.4           (1.6    )     4.0        n/m     assets     Asset impairments       —           0.9         (0.9  )   n/m        —             14.2          (14.2  )   n/m     Transaction costs      —         4.6       (4.6  )   n/m       1.6         6.3         (4.7   )   (75 )%                                                                                                                             Operating        40.1        57.9        (17.8 )   (31 )%     163.8         270.1         (106.3 )   (39 )%            income                                                                                                                    Interest expense          42.0        55.6        (13.6 )   (24 )%     182.0         218.9         (36.9  )   (17 )%   Loss on   extinguishment of         29.6        13.6        16.0      n/m        29.6          13.6          16.0       n/m   debt   Loss from CyrusOne   equity method             2.6         —           2.6       n/m        10.7          —             10.7       n/m   investment   Other expense            0.1       0.1       —        0   %     (1.3    )    1.7         (3.0   )   n/m   (income), net                                                                                                                    (Loss) income before      (34.2 )     (11.4 )     (22.8 )   n/m        (57.2   )     35.9          (93.1  )   n/m   income taxes   Income tax (benefit)     (6.1  )    (1.6  )    (4.5  )   n/m       (2.5    )    24.7        (27.2  )   n/m   expense                                                                                                                    Net (loss) income         (28.1 )     (9.8  )     (18.3 )   n/m        (54.7   )     11.2          (65.9  )   n/m                                                                                                                    Preferred stock          2.6       2.6       —        0   %     10.4        10.4        —         0   %   dividends                                                                                                                    Net (loss) income   applicable to common    $ (30.7 )   $ (12.4 )   $ (18.3 )   n/m      $ (65.1   )   $ 0.8        $ (65.9  )   n/m   shareowners                                                                                                                                                                                                                                     Basic and diluted   (loss) earnings per     $ (0.15 )   $ (0.06 )                        $ (0.32   )   $ 0.00       common share                                                                                                                    Weighted average   common shares   outstanding     (in millions)     - Basic                 207.1       199.9                            205.9         197.0     - Diluted               207.1       199.9                            205.9         204.7                                                                                                                    Cincinnati Bell Inc. Consolidated Statements of Operations (Unaudited) (Dollars in millions, except per share amounts)                                                                                                                                                                         Three Months Ended                               December 31,   September      Change                                              30,                               2013           2013           $           %                                                                            Revenue                     $  308.4       $  310.8       $ (2.4  )   (1  )%                                                                            Costs and expenses       Cost of services and       164.2          159.4         4.8       3   %       products       Selling, general and       59.4           53.6          5.8       11  %       administrative       Depreciation and           42.0           39.8          2.2       6   %       amortization       Restructuring charges      2.9            —             2.9       n/m       Gain on sale or            (0.2   )       (0.2   )      —         0   %       disposal of assets       Transaction costs         —            0.5         (0.5  )   n/m                                                                                        Operating          40.1           57.7          (17.6 )   (31 )%               income                                                                            Interest expense               42.0           46.7          (4.7  )   (10 )%   Loss on extinguishment of      29.6           —             29.6      n/m   debt   Loss from CyrusOne equity      2.6            1.5           1.1       73  %   method investment   Other expense (income),       0.1          (1.2   )     1.3      n/m   net                                                                            (Loss) income before           (34.2  )       10.7          (44.9 )   n/m   income taxes   Income tax (benefit)          (6.1   )      1.4         (7.5  )   n/m   expense                                                                            Net (loss) income              (28.1  )       9.3           (37.4 )   n/m                                                                            Preferred stock dividends     2.6          2.6         —        0   %                                                                            Net (loss) income   applicable to common        $  (30.7  )    $  6.7        $ (37.4 )   n/m   shareowners                                                                                                                                                     Basic and diluted (loss)    $  (0.15  )    $  0.03      earnings per common share                                                                            Weighted average common   shares outstanding       (in millions)       - Basic                    207.1          207.0       - Diluted                  207.1          208.5                                                                            Cincinnati Bell Inc. Income Statements by Segment (Unaudited) (Dollars in millions)                                                                                                                 Three Months Ended                           Twelve Months Ended                      December 31,            Change               December 31,          Change                      2013        2012        $           %        2013      2012        $            %   Wireline   Revenue     Voice - local    $ 54.7      $ 61.7      $ (7.0  )   (11 )%   $ 229.1   $ 255.4     $ (26.3  )   (10 )%     service     Data               80.9        77.5        3.4       4   %      317.8     306.9       10.9       4   %     Long distance      26.7        27.8        (1.1  )   (4  )%     107.2     113.9       (6.7   )   (6  )%     and VoIP     Entertainment      15.8        9.8         6.0       61  %      55.2      35.4        19.8       56  %     Other             4.0       5.3       (1.3  )   (25 )%    15.5     18.9      (3.4   )   (18 )%                                                                                                           Total revenue     182.1     182.1     —        0   %     724.8    730.5     (5.7   )   (1  )%                                                                                                         Operating costs   and expenses     Cost of     services and       73.8        72.3        1.5       2   %      287.2     283.8       3.4        1   %     products     Selling,     general and        33.4        31.6        1.8       6   %      127.8     125.6       2.2        2   %     administrative     Depreciation     and                28.4        27.1        1.3       5   %      112.2     106.0       6.2        6   %     amortization     Other*            3.1       1.0       2.1      n/m       7.4      2.2       5.2       n/m                                                                                                           Total     operating         138.7     132.0     6.7      5   %     534.6    517.6     17.0      3   %     costs and     expenses                                                                                                         Operating income   $ 43.4     $ 50.1     $ (6.7  )   (13 )%   $ 190.2   $ 212.9    $ (22.7  )   (11 )%                                                                                                         Wireless   Revenue     Service          $ 43.1      $ 52.8      $ (9.7  )   (18 )%   $ 184.9   $ 224.5     $ (39.6  )   (18 )%     Equipment         4.3       4.0       0.3      8   %     16.6     17.3      (0.7   )   (4  )%                                                                                                           Total revenue     47.4      56.8      (9.4  )   (17 )%    201.5    241.8     (40.3  )   (17 )%                                                                                                         Operating costs   and expenses     Cost of     services and       26.6        28.3        (1.7  )   (6  )%     98.1      113.0       (14.9  )   (13 )%     products     Selling,     general and        11.0        11.4        (0.4  )   (4  )%     40.3      43.7        (3.4   )   (8  )%     administrative     Depreciation     and                10.5        7.9         2.6       33  %      41.2      31.9        9.3        29  %     amortization     Other*            0.2       1.5       (1.3  )   (87 )%    3.7      2.0       1.7       85  %                                                                                                           Total     operating         48.3      49.1      (0.8  )   (2  )%    183.3    190.6     (7.3   )   (4  )%     costs and     expenses                                                                                                         Operating (loss)   $ (0.9  )   $ 7.7      $ (8.6  )   n/m      $ 18.2    $ 51.2     $ (33.0  )   (64 )%   income                                                                                                         IT Services and   Hardware   Revenue     Telecom and IT     equipment        $ 53.4      $ 59.6      $ (6.2  )   (10 )%   $ 222.6   $ 204.6     $ 18.0       9   %     distribution     Managed and     professional      32.7      27.3      5.4      20  %     121.5    111.1     10.4      9   %     services                                                                                                           Total revenue     86.1      86.9      (0.8  )   (1  )%    344.1    315.7     28.4      9   %                                                                                                         Operating costs   and expenses     Cost of     services and       70.3        72.4        (2.1  )   (3  )%     279.8     255.7       24.1       9   %     products     Selling,     general and        10.9        10.3        0.6       6   %      44.6      42.3        2.3        5   %     administrative     Depreciation     and                3.0         2.3         0.7       30  %      10.5      8.6         1.9        22  %     amortization     Other*            —         (1.2  )    1.2      n/m       0.7      (1.2  )    1.9       n/m                                                                                                           Total     operating         84.2      83.8      0.4      0   %     335.6    305.4     30.2      10  %     costs and     expenses                                                                                                         Operating income   $ 1.9      $ 3.1      $ (1.2  )   (39 )%   $ 8.5     $ 10.3     $ (1.8   )   (17 )%                                                                                                         Data Center   Colocation**   Revenue            $ —        $ 58.0     $ (58.0 )   n/m      $ 15.6    $ 221.3    $ (205.7 )   n/m                                                                                                         Operating costs   and expenses     Cost of            —           20.6        (20.6 )   n/m        4.8       75.7        (70.9  )   n/m     services     Selling,     general and        —           9.8         (9.8  )   n/m        2.4       31.0        (28.6  )   n/m     administrative     Depreciation     and                —           19.7        (19.7 )   n/m        5.2       70.6        (65.4  )   n/m     amortization     Other*            —         —         —        n/m       —        13.6      (13.6  )   n/m                                                                                                           Total     operating         —         50.1      (50.1 )   n/m       12.4     190.9     (178.5 )   n/m     costs and     expenses                                                                                                         Operating income   $ —        $ 7.9      $ (7.9  )   n/m      $ 3.2     $ 30.4     $ (27.2  )   n/m                                                                                                            *Other includes restructuring charges, curtailment gain, (gain) loss on sale or disposal of assets and asset impairments.  **Results for 2013 only include CyrusOne's results through January 23, 2013. Effective January 24, 2013, the date of completion of CyrusOne's IPO, 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                               December 31,   September 30,   Change                               2013           2013            $          %   Wireline   Revenue     Voice - local service     $  54.7        $   56.6        $ (1.9 )   (3  )%     Data                         80.9            79.6          1.3      2   %     Long distance and VoIP       26.7            26.8          (0.1 )   (0  )%     Entertainment                15.8            14.4          1.4      10  %     Other                       4.0           4.0         —       0   %                                                                              Total revenue               182.1         181.4       0.7     0   %                                                                            Operating costs and   expenses     Cost of services and         73.8            72.4          1.4      2   %     products     Selling, general and         33.4            31.7          1.7      5   %     administrative     Depreciation and             28.4            29.7          (1.3 )   (4  )%     amortization     Other*                      3.1           (0.2   )     3.3     n/m                                                                              Total operating costs       138.7         133.6       5.1     4   %     and expenses                                                                            Operating income            $  43.4       $   47.8       $ (4.4 )   (9  )%                                                                            Wireless   Revenue     Service                   $  43.1        $   45.0        $ (1.9 )   (4  )%     Equipment                   4.3           4.1         0.2     5   %                                                                              Total revenue               47.4          49.1        (1.7 )   (3  )%                                                                            Operating costs and   expenses     Cost of services and         26.6            24.2          2.4      10  %     products     Selling, general and         11.0            10.5          0.5      5   %     administrative     Depreciation and             10.5            7.4           3.1      42  %     amortization     Other*                      0.2           —           0.2     n/m                                                                              Total operating costs       48.3          42.1        6.2     15  %     and expenses                                                                            Operating (loss) income     $  (0.9   )    $   7.0        $ (7.9 )   n/m                                                                            IT Services and Hardware   Revenue     Telecom and IT equipment  $  53.4        $   56.2        $ (2.8 )   (5  )%     distribution     Managed and professional    32.7          31.3        1.4     4   %     services                                                                              Total revenue               86.1          87.5        (1.4 )   (2  )%                                                                            Operating costs and   expenses     Cost of services and         70.3            69.4          0.9      1   %     products     Selling, general and         10.9            11.2          (0.3 )   (3  )%     administrative     Depreciation and            3.0           2.5         0.5     20  %     amortization                                                                              Total operating costs       84.2          83.1        1.1     1   %     and expenses                                                                            Operating income            $  1.9        $   4.4        $ (2.5 )   (57 )%                                                                           *Other includes restructuring charges and gain on sale or disposal of assets.                                                                                                     Cincinnati Bell Inc. Segment Information (Unaudited) (Dollars in millions)                      Three Months Ended                           Twelve Months Ended                    December 31,            Change               December 31,                Change                    2013        2012        $           %        2013          2012          $            %   Revenue     Wireline       $ 182.1     $ 182.1     $ —         0   %    $ 724.8       $ 730.5       $ (5.7   )   (1  )%     Wireless         47.4        56.8        (9.4  )   (17 )%     201.5         241.8         (40.3  )   (17 )%     IT Services      86.1        86.9        (0.8  )   (1  )%     344.1         315.7         28.4       9   %     and Hardware     Data Center      —           58.0        (58.0 )   n/m        15.6          221.3         (205.7 )   n/m     Colocation**     Eliminations    (7.2  )    (9.1  )    1.9      21  %     (29.1   )    (35.4   )    6.3       18  %                                                                                                               Total revenue  $ 308.4    $ 374.7    $ (66.3 )   (18 )%   $ 1,256.9    $ 1,473.9    $ (217.0 )   (15 )%                                                                                                             Cost of   Services and   Products     Wireline       $ 73.8      $ 72.3      $ 1.5       2   %    $ 287.2       $ 283.8       $ 3.4        1   %     Wireless         26.6        28.3        (1.7  )   (6  )%     98.1          113.0         (14.9  )   (13 )%     IT Services      70.3        72.4        (2.1  )   (3  )%     279.8         255.7         24.1       9   %     and Hardware     Data Center      —           20.6        (20.6 )   n/m        4.8           75.7          (70.9  )   n/m     Colocation**     Eliminations    (6.5  )    (8.8  )    2.3      26  %     (26.9   )    (33.6   )    6.7       20  %                                                                                                               Total cost of     services and   $ 164.2    $ 184.8    $ (20.6 )   (11 )%   $ 643.0      $ 694.6      $ (51.6  )   (7  )%     products                                                                                                             Selling, General   and   Administrative     Wireline       $ 33.4      $ 31.6      $ 1.8       6   %    $ 127.8       $ 125.6       $ 2.2        2   %     Wireless         11.0        11.4        (0.4  )   (4  )%     40.3          43.7          (3.4   )   (8  )%     IT Services      10.9        10.3        0.6       6   %      44.6          42.3          2.3        5   %     and Hardware     Data Center      —           9.8         (9.8  )   n/m        2.4           31.0          (28.6  )   n/m     Colocation**     Corporate and   4.1       6.8       (2.7  )   (40 )%    5.7         26.9        (21.2  )   (79 )%     eliminations                                                                                                               Total selling,     general and    $ 59.4     $ 69.9     $ (10.5 )   (15 )%   $ 220.8      $ 269.5      $ (48.7  )   (18 )%     administrative                                                                                                             Depreciation   and   Amortization     Wireline       $ 28.4      $ 27.1      $ 1.3       5   %    $ 112.2       $ 106.0       $ 6.2        6   %     Wireless         10.5        7.9         2.6       33  %      41.2          31.9          9.3        29  %     IT Services      3.0         2.3         0.7       30  %      10.5          8.6           1.9        22  %     and Hardware     Data Center      —           19.7        (19.7 )   n/m        5.2           70.6          (65.4  )   n/m     Colocation**     Corporate       0.1       0.2       (0.1  )   (50 )%    0.5         0.3         0.2       67  %                                                                                                               Total     depreciation   $ 42.0     $ 57.2     $ (15.2 )   (27 )%   $ 169.6      $ 217.4      $ (47.8  )   (22 )%     and     amortization                                                                                                             Other*     Wireline       $ 3.1       $ 1.0       $ 2.1       n/m      $ 7.4         $ 2.2         $ 5.2        n/m     Wireless         0.2         1.5         (1.3  )   (87 )%     3.7           2.0           1.7        85  %     IT Services      —           (1.2  )     1.2       n/m        0.7           (1.2    )     1.9        n/m     and Hardware     Data Center      —           —           —         n/m        —             13.6          (13.6  )   n/m     Colocation**     Corporate       (0.6  )    3.6       (4.2  )   n/m       47.9        5.7         42.2      n/m                                                                                                               Total other    $ 2.7      $ 4.9      $ (2.2  )   (45 )%   $ 59.7       $ 22.3       $ 37.4      n/m                                                                                                             Operating   Income (Loss)     Wireline       $ 43.4      $ 50.1      $ (6.7  )   (13 )%   $ 190.2       $ 212.9       $ (22.7  )   (11 )%     Wireless         (0.9  )     7.7         (8.6  )   n/m        18.2          51.2          (33.0  )   (64 )%     IT Services      1.9         3.1         (1.2  )   (39 )%     8.5           10.3          (1.8   )   (17 )%     and Hardware     Data Center      —           7.9         (7.9  )   n/m        3.2           30.4          (27.2  )   n/m     Colocation**     Corporate       (4.3  )    (10.9 )    6.6      61  %     (56.3   )    (34.7   )    (21.6  )   (62 )%                                                                                                               Total     operating      $ 40.1     $ 57.9     $ (17.8 )   (31 )%   $ 163.8      $ 270.1      $ (106.3 )   (39 )%     income                                                                                                                *Other includes restructuring charges, transaction-related compensation, curtailment gain, (gain) loss on sale or disposal of assets, asset impairments and transaction costs.  **Results for 2013 only include CyrusOne's results through January 23, 2013. Effective January 24, 2013, the date of completion of CyrusOne's IPO, 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                              December 31,   September 30,   Change                              2013           2013            $           %   Revenue       Wireline               $  182.1       $   181.4       $ 0.7       0   %       Wireless                  47.4            49.1          (1.7  )   (3  )%       IT Services and           86.1            87.5          (1.4  )   (2  )%       Hardware       Eliminations             (7.2   )       (7.2   )     —        0   %                                                                                Total revenue          $  308.4      $   310.8      $ (2.4  )   (1  )%                                                                            Cost of Services and   Products       Wireline               $  73.8        $   72.4        $ 1.4       2   %       Wireless                  26.6            24.2          2.4       10  %       IT Services and           70.3            69.4          0.9       1   %       Hardware       Eliminations             (6.5   )       (6.6   )     0.1      2   %                                                                                Total cost of services $  164.2      $   159.4      $ 4.8      3   %       and products                                                                            Selling, General and Administrative       Wireline               $  33.4        $   31.7        $ 1.7       5   %       Wireless                  11.0            10.5          0.5       5   %       IT Services and           10.9            11.2          (0.3  )   (3  )%       Hardware       Corporate and            4.1           0.2         3.9      n/m       eliminations                                                                                Total selling, general $  59.4       $   53.6       $ 5.8      11  %       and administrative                                                                            Depreciation and   Amortization       Wireline               $  28.4        $   29.7        $ (1.3  )   (4  )%       Wireless                  10.5            7.4           3.1       42  %       IT Services and           3.0             2.5           0.5       20  %       Hardware       Corporate                0.1           0.2         (0.1  )   (50 )%                                                                                Total depreciation and $  42.0       $   39.8       $ 2.2      6   %       amortization                                                                            Other*       Wireline               $  3.1         $   (0.2   )    $ 3.3       n/m       Wireless                  0.2             —             0.2       n/m       IT Services and           —               —             —         n/m       Hardware       Corporate                (0.6   )       0.5         (1.1  )   n/m                                                                                Total other            $  2.7        $   0.3        $ 2.4      n/m                                                                            Operating Income (Loss)       Wireline               $  43.4        $   47.8        $ (4.4  )   (9  )%       Wireless                  (0.9   )        7.0           (7.9  )   n/m       IT Services and           1.9             4.4           (2.5  )   (57 )%       Hardware       Corporate                (4.3   )       (1.5   )     (2.8  )   n/m                                                                                Total operating        $  40.1       $   57.7       $ (17.6 )   (31 )%       income                                                                           *Other includes restructuring charges, gain on sale or disposal of assets and transaction costs.    Cincinnati Bell Inc. Segment Metric Information (Unaudited) (In thousands)                                                                                                  December 31,   September 30,   December 31,                                    2013           2013            2012                                                                                                                                         Local access lines               530.7          541.2           573.9                                                                      Long distance lines              394.1          400.8           417.9                                                                      High-speed internet subscribers       DSL subscribers              188.5          191.3           202.6       Fioptics subscribers         79.9           74.3            56.8                                    268.4          265.6           259.4                                                                      Fioptics units passed            276.0          258.0           205.0                                                                      Fioptics entertainment           74.2           69.7            55.1   subscribers                                                                      Wireless       Postpaid wireless            197.4          209.4           251.3       subscribers       Prepaid wireless subscribers 142.3          145.8           146.5                                    339.7          355.2           397.8                                                                                                                                                                                      Cincinnati Bell Inc. Local Access Line Detail (Unaudited) (In thousands)                                                                                                                                         2011                                      2012                                      2013                           1Q        2Q        3Q        4Q          1Q        2Q        3Q        4Q          1Q        2Q        3Q        4Q   Local Access   Lines                                                                                                                                                In-Territory:   Primary                 321.8     313.8     304.8     296.7       288.9     281.7     274.3     266.4       259.1     253.1     247.7     242.2   Residential   Secondary               18.3      16.3      15.6      14.9        14.2      13.6      13.1      12.5        12.0      11.4      10.9      10.5   Residential   Business/ Other         250.7   248.7   244.4   240.8    238.5   237.5   234.4   232.1    229.7   228.2   226.7   223.3   Total                   590.8     578.8     564.8     552.4       541.6     532.8     521.8     511.0       500.8     492.7     485.3     476.0   In-Territory                                                                                                                                                Out-of-Territory:   Primary                 30.4      29.3      27.8      26.7        25.2      24.3      23.3      22.4        20.8      19.8      18.9      18.2   Residential   Secondary               0.9       0.9       0.9       0.8         0.8       0.8       0.7       0.7         0.6       0.6       0.6       0.5   Residential   Business/ Other         41.5    41.6    41.8    41.4     41.0    40.6    40.0    39.8     39.2    36.9    36.4    36.0   Total                   72.8      71.8      70.5      68.9        67.0      65.7      64.0      62.9        60.6      57.3      55.9      54.7   Out-of-Territory                                                                                                             Total Access            663.6   650.6   635.3   621.3    608.6   598.5   585.8   573.9    561.4   550.0   541.2   530.7   Lines                                                                                                                                                                                                               Cincinnati Bell Inc. Net Debt and Common Shares Outstanding (Unaudited) (Dollars and shares in millions)                                     December 31,   September 30,   December 31,                                    2013           2013            2012                                                                    Corporate Credit Agreement***      $  40.0        $  —            $  — Receivables Facility***               106.2          —               52.0 8 1/4% Senior Notes due 2017***       —              500.0           500.0 8 3/4% Senior Subordinated Notes      625.0          625.0           625.0 due 2018 Corporate Credit Agreement -          538.6          540.0           — Tranche B Term Loan 8 3/8% Senior Notes due 2020          683.9          683.9           683.9 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 Telephone     134.5          134.5           134.5 notes Capital leases and other debt*        103.3          104.1           136.5 Net unamortized discount             (6.3    )     (10.4    )     (7.5    )                                                                            Total debt                    2,265.2        2,617.1         2,689.4                                                                    Less: Cash and cash equivalents***   (4.6    )     (413.7   )     (23.6   )                                                                            Net debt (as defined by    $  2,260.6    $  2,203.4     $  2,665.8          the company)                                                                    Credit facility availability:         Corporate                     160.0          200.0           200.0         CyrusOne**                   —            —             225.0                                                                                                          $  160.0      $  200.0       $  425.0                                                                       Common shares outstanding            208.2        208.0         202.5                                                                         *On January 24, 2013, CyrusOne completed its IPO. As of this date, Cincinnati Bell Inc. 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 Inc. no longer has access to the CyrusOne credit facility.  *** On October 15, 2013, the company used the proceeds from the Tranche B Term Loan to fully repay the 8 1/4% Senior Notes due 2017. In September 2013, prior to the October 15, 2013 call date, the proceeds temporarily increased cash and were used to temporarily pay down the Corporate Credit Agreement and Receivables Facility.   <td cl*Story too large*                                                                              Cincinnati Bell Inc. Reconciliation of Net (Loss) Income (GAAP) to Adjusted EBITDA (Non-GAAP) (Unaudited) (Dollars in millions)                                                                                             Three Months Ended December 31, 2013                                              IT                      Wireline    Wireless    Services    Data Center   Corporate   Total                                              &           Colocation*               Company                                              Hardware   Net Loss (GAAP)                                                                  $ (28.1 )   Add:     Income tax                                                                       (6.1  )     benefit     Interest                                                                         42.0     expense     Loss on     extinguishment                                                                   29.6     of debt     Loss from     CyrusOne                                                                         2.6     equity method     investment     Other expense,                                                                  0.1        net                                                                                       Operating Income   $ 43.4      $ (0.9 )    $ 1.9       $  —          $ (4.3  )   $ 40.1   (GAAP)   Add:     Depreciation     and                28.4        10.5        3.0          —            0.1         42.0     amortization     Restructuring     charges            3.3         0.2         —            —            (0.6  )     2.9     (reversals)     (Gain) loss on     sale or            (0.2 )      —           —            —            —           (0.2  )     disposal of     assets     Pension and     other             4.8       —         —          —          0.4       5.2        retirement     plan expenses                                                                                       Adjusted EBITDA    $ 79.7     $ 9.8      $ 4.9      $  —         $ (4.4  )   $ 90.0     (Non-GAAP)                                                                                       Adjusted EBITDA      44   %      21   %      6    %       —            —           29    %   Margin                                                                                                Three Months Ended September 30, 2013                                              IT                      Wireline    Wireless    Services    Data Center   Corporate   Total                                              &           Colocation*               Company                                              Hardware   Net Income                                                                       $ 9.3   (GAAP)   Add:     Income tax                                                                       1.4     expense     Interest                                                                         46.7     expense     Loss from     CyrusOne                                                                         1.5     equity method     investment     Other income,                                                                   (1.2  )     net                                                                                       Operating Income   $ 47.8      $ 7.0       $ 4.4       $  —          $ (1.5  )   $ 57.7   (GAAP)   Add:     Depreciation     and                29.7        7.4         2.5          —            0.2         39.8     amortization     Gain on sale     or disposal of     (0.2 )      —           —            —            —           (0.2  )     assets     Transaction        —           —           —            —            0.5         0.5     costs     Pension and     other             5.2       —         —          —          0.3       5.5        retirement     plan expenses                                                                                       Adjusted EBITDA    $ 82.5     $ 14.4     $ 6.9      $  —         $ (0.5  )   $ 103.3    (Non-GAAP)                                                                                       Adjusted EBITDA      45   %      29   %      8    %       —            —           33    %   Margin                                                                                       Sequential   dollar change in   $ (2.8 )    $ (4.6 )    $ (2.0 )    $  —          $ (3.9  )   $ (13.3 )   Adjusted EBITDA                                                                                       Sequential   percentage           (3   )%     (32  )%     (29  )%      n/m          n/m         (13   )%   change in   Adjusted EBITDA                                                                                                Three Months Ended December 31, 2012                                              IT                      Wireline    Wireless    Services    Data Center   Corporate   Total                                              &           Colocation                Company                                              Hardware   Net Loss (GAAP)                                                                  $ (9.8  )   Add:     Income tax                                                                       (1.6  )     benefit     Interest                                                                         55.6     expense     Loss on     extinguisment                                                                    13.6     of debt     Other expense,                                                                  0.1        net                                                                                       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     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     Asset              0.5         0.4         —            —            —           0.9     impairments     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     $ 4.2      $  27.8     (Non-GAAP)  [TRUNCATED]