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Cincinnati Bell Reports Third Quarter 2012 Results

10/29/12
  • Third quarter Adjusted EBITDA increases $3 million year-over-year, excluding $6 million of mark-to-market charges from a 53 percent third quarter increase in stock price
  • CyrusOne third quarter revenue increases 20 percent and Adjusted EBITDA increases 19 percent year-over-year
  • CyrusOne receives favorable private letter ruling regarding qualification as a real estate investment trust
  • Fioptics passes 15,000 new homes during the third quarter and subscribers increase 34 percent year-over-year

CINCINNATI--(BUSINESS WIRE)--Oct. 29, 2012-- Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the third quarter of 2012. For the quarter, revenue was $368 million, comparable to the third quarter of 2011. Net income of $4 million in the quarter resulted in diluted earnings per share of 1 cent compared to 7 cents in the third quarter of 2011, due primarily to $6 million of mark-to-market charges on compensation plans associated with a 53 percent increase in the company’s stock price during the third quarter of 2012 and an $8 million gain in 2011 on the sale of the company’s home security business. Adjusted earnings before interest, taxes, depreciation and amortization1 (Adjusted EBITDA) for the third quarter were $130 million, down from $133 million generated in the same period of 2011, as a result of the mark-to-market charges partially offset by growth in CyrusOne Adjusted EBITDA.

“Cincinnati Bell delivered strong financial results again this quarter, building on its performance from the first half of 2012,” said Jack Cassidy, president and chief executive officer. “During the third quarter, the company achieved its highest stock price in almost five years, up 88 percent since the beginning of the year.”

Highlights

  • Wireline revenue for the quarter was $182 million, comparable to $183 million in the third quarter of 2011, while Adjusted EBITDA of $84 million was down from $87 million generated in the third quarter of 2011 as a result of access line losses. Fioptics entertainment subscribers increased 34 percent year-over-year to 51,000, which represents 28 percent of the total 184,000 units passed with Fioptics at quarter-end.
  • Wireless generated revenue of $60 million and Adjusted EBITDA of $21 million during the quarter, translating into a strong Adjusted EBITDA margin2 of 35 percent.
  • For the quarter, CyrusOne revenue of $57 million increased by 20 percent compared to the third quarter of 2011, and its Adjusted EBITDA increased by 19 percent to $30 million, resulting in an Adjusted EBITDA margin of 52 percent. At the end of the quarter, the segment had 896,000 square feet of data center capacity, and utilization was 78 percent.
  • The company received a favorable outcome on its private letter ruling request with the Internal Revenue Service regarding CyrusOne’s qualification as a real estate investment trust.

Financial and Operations Review

“The company’s strong third quarter results were led by CyrusOne’s 20 percent increase in revenue and 19 percent increase in Adjusted EBITDA compared to 2011,” said Kurt Freyberger, chief financial officer. “We were also happy to receive a favorable outcome on our private letter ruling request regarding CyrusOne’s qualification as a REIT, which continues our progress toward an IPO of this company.”

Wireline Segment

Wireline revenue of $182 million during the quarter was comparable to $183 million in the third quarter of 2011, as the growth of the company’s entertainment, data and VoIP product lines continue to offset the impact of access line losses. Operating income in the quarter decreased to $51 million from $65 million in the third quarter of 2011, driven primarily by the $8 million gain from the 2011 sale of the home security business and the impact of access line losses. Adjusted EBITDA in the quarter was $84 million compared to $87 million in the third quarter of 2011, and the segment’s Adjusted EBITDA margin was 46 percent.

During the quarter, the company expanded its Fioptics network to pass 15,000 additional homes and businesses, ending the quarter with a total of 184,000 units passed. The segment added 5,000 new Fioptics entertainment and high-speed internet subscribers during the quarter, increasing the total number of such subscribers to 51,000 and 52,000, respectively, at the end of the quarter. Total high-speed internet subscribers at quarter-end increased to 260,000, up from 257,000 at the end of the second quarter in 2012, as the increase in Fioptics subscribers was partially offset by a decrease in DSL high-speed internet subscribers.

Wireless Segment

Wireless revenue for the quarter was $60 million, down from $68 million in the third quarter of 2011 due to subscriber losses. Despite falling revenue, continued focus on cost reduction during the quarter provided operating income of $13 million, up from $12 million in the third quarter of 2011, while Adjusted EBITDA of $21 million was also up from $20 million in the third quarter of 2011. As a result, the segment generated a strong Adjusted EBITDA margin of 35 percent during the quarter.

Total wireless subscribers at the end of the quarter decreased to 416,000 from 472,000 at the end of the third quarter in 2011. Wireless ended the quarter with a total of 126,000 smartphone subscribers, up from 120,000 at the end of the third quarter in 2011. Postpaid smartphone subscribers at quarter-end represented 38 percent of the total postpaid subscribers, up from 32 percent at the end of the third quarter in 2011.

Data Center Colocation Segment

CyrusOne revenue in the quarter grew to $57 million, an increase of $10 million or 20 percent compared to the third quarter in 2011, while the segment’s operating income of $11 million was comparable to the same period in 2011. Adjusted EBITDA in the quarter was $30 million, an increase of 19 percent compared to the third quarter in 2011. During the quarter, the company completed construction on 95,000 square feet of new data center space in Dallas, San Antonio, and Houston, increasing capacity to 896,000 square feet. CyrusOne sold 11,000 square feet of new space in the third quarter, resulting in quarter-end utilization of 78 percent. The segment’s Adjusted EBITDA margin in the third quarter of 52 percent was comparable to 53 percent in both the third quarter of 2011 and the second quarter in 2012.

IT Services and Hardware Segment

Revenue was $78 million in the quarter compared to $79 million in the third quarter of 2011, while Adjusted EBITDA and Adjusted EBITDA margin were both comparable to the same period in 2011 at $6 million and 8 percent, respectively.

2012 Outlook

   

Cincinnati Bell reaffirms its financial guidance for 2012:

   

Category

2012 Guidance

Revenue $1.5 billion
Adjusted EBITDA Approx. $530 million*
   

*Plus or minus 2 percent

 

Conference Call/Webcast

Cincinnati Bell will host a conference call on October 30, 2012 at 10:00 a.m. (ET) to discuss its results for the third quarter of 2012. A live webcast of the call will be available via the Investor Relations section of www.cincinnatibell.com. The conference call dial-in number is (866) 780-1235. 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 Tuesday November 13, 2012. 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 6953549. 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, free cash flow, net income excluding special items, and net debt. These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com.

1Adjusted EBITDA provides a useful measure of operational performance. The company defines Adjusted EBITDA as GAAP operating income plus depreciation, amortization, restructuring charges, asset impairments, components of pension and other retirement plan costs related to interest costs, asset returns, and amortization of actuarial gains and losses, and other special items.

2Adjusted EBITDA margin provides a useful measure of operational performance. The company defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Adjusted EBITDA margin should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.

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 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.

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.

About Cincinnati Bell Inc.

With headquarters in Cincinnati, Ohio, Cincinnati Bell (NYSE: CBB) provides integrated communications solutions - including local, long distance, data, 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, Cincinnati Bell provides best-in-class data center colocation services to its enterprise customers through its facilities with fully redundant power and cooling solutions that are currently located in the Midwest, Texas, London and Singapore. Complementing the colocation products, Cincinnati Bell also offers complex information technology solutions like managed services and technology staffing. For more information, visit www.cincinnatibell.com.

 
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share amounts)
                                   
      Three Months Ended           Nine Months Ended        
      September 30,   Change   September 30,   Change
      2012   2011   $   %   2012   2011   $   %
                                   
Revenue     $ 368.2     $ 368.8     $ (0.6 )   0%   $ 1,099.2     $ 1,097.1     $ 2.1     0%
                                   
Costs and expenses                                  
Cost of services and products       172.3       174.6       (2.3 )   (1)%     509.8       502.8       7.0     1%
Selling, general and administrative       72.2       66.5       5.7     9%     199.6       197.7       1.9     1%
Depreciation and amortization       55.4       49.1       6.3     13%     160.2       146.3       13.9     10%
Restructuring charges       0.9       -       0.9     n/m     3.0       -       3.0     n/m
Gain on sale or disposal of assets       (0.6 )     (8.4 )     7.8     93%     (0.6 )     (8.4 )     7.8     93%
Curtailment loss       -       -       -     n/m     -       4.2       (4.2 )   n/m
Transaction costs       1.7       0.7       1.0     n/m     1.7       2.6       (0.9 )   (35)%
Asset impairments       0.3       -       0.3     n/m     13.3       1.6       11.7     n/m
                                   
Operating income       66.0       86.3       (20.3 )   (24)%     212.2       250.3       (38.1 )   (15)%
                                   
Interest expense       55.2       53.3       1.9     4%     163.3       161.2       2.1     1%
Other expense, net       0.1       -       0.1     n/m     1.6       -       1.6     n/m
                                   
Income before income taxes       10.7       33.0       (22.3 )   (68)%     47.3       89.1       (41.8 )   (47)%
Income tax expense       6.8       15.4       (8.6 )   (56)%     26.3       40.1       (13.8 )   (34)%
                                   
Net income       3.9       17.6       (13.7 )   (78)%     21.0       49.0       (28.0 )   (57)%
                                   
Preferred stock dividends       2.6       2.6       -     0%     7.8       7.8       -     0%
                                   
Net income applicable to common shareowners     $ 1.3     $ 15.0     $ (13.7 )   (91)%   $ 13.2     $ 41.2     $ (28.0 )   (68)%
                                   
                                   
Basic earnings per common share     $ 0.01     $ 0.08             $ 0.07     $ 0.21          
Diluted earnings per common share     $ 0.01     $ 0.07             $ 0.07     $ 0.21          
                                   
Weighted average common shares outstanding                                  
(in millions)                                  
- Basic       196.4       196.5               195.8       197.4          
- Diluted       205.6       200.6               203.0       200.4          
                                                   
 
Cincinnati Bell Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in millions, except per share amounts)
                     
      Three Months Ended          
      September 30,   June 30,   Change  
      2012   2012   $   %  
                     
Revenue     $ 368.2     $ 368.2   $ -     0%  
                     
Costs and expenses                    
Cost of services and products       172.3       171.7     0.6     0%  
Selling, general and administrative       72.2       63.4     8.8     14%  
Depreciation and amortization       55.4       53.7     1.7     3%  
Restructuring charges       0.9       1.2     (0.3 )   (25)%  
Gain on sale or disposal of assets       (0.6 )     -     (0.6 )   n/m  
Transaction costs       1.7       -     1.7     n/m  
Asset impairments       0.3       13.0     (12.7 )   (98)%  
                     
Operating income       66.0       65.2     0.8     1%  
                     
Interest expense       55.2       53.7     1.5     3%  
Other expense, net       0.1       -     0.1     n/m  
                     
Income before income taxes       10.7       11.5     (0.8 )   (7)%  
Income tax expense       6.8       7.0     (0.2 )   (3)%  
                     
Net income       3.9       4.5     (0.6 )   (13)%  
                     
Preferred stock dividends       2.6       2.6     -     0%  
                     
Net income applicable to common shareowners     $ 1.3     $ 1.9   $ (0.6 )   (32)%  
                     
                     
Basic and diluted earnings per common share     $ 0.01     $ 0.01          
                     
Weighted average common shares outstanding                    
(in millions)                    
- Basic       196.4       195.8          
- Diluted       205.6       201.7          
                           
 
Cincinnati Bell Inc.
Income Statements by Segment
(Unaudited)
(Dollars in millions)
                                       
        Three Months Ended           Nine Months Ended          
        September 30,   Change   September 30,   Change  
        2012   2011   $   %   2012   2011   $   %  
Wireline                                      
Revenue                                      
Voice - local service       $ 63.0   $ 69.1     $ (6.1 )   (9 )%   $ 193.7   $ 214.1     $ (20.4 )   (10 )%  
Data         77.2     73.5       3.7     5 %     229.4     217.3       12.1     6 %  
Long distance and VoIP         28.1     28.0       0.1     0 %     86.1     83.3       2.8     3 %  
Entertainment         9.5     7.0       2.5     36 %     25.6     19.4       6.2     32 %  
Other         4.5     5.1       (0.6 )   (12 )%     13.6     17.7       (4.1 )   (23 )%  
                                       
Total revenue         182.3     182.7       (0.4 )   0 %     548.4     551.8       (3.4 )   (1 )%  
                                       
Operating costs and expenses                                      
Cost of services and products         71.5     68.7       2.8     4 %     211.5     202.2       9.3     5 %  
Selling, general and administrative         32.8     31.6       1.2     4 %     94.0     97.0       (3.0 )   (3 )%  
Depreciation and amortization         26.6     25.6       1.0     4 %     78.9     76.1       2.8     4 %  
Other*         0.5     (8.4 )     8.9     106 %     1.2     (3.7 )     4.9     132 %  
                                       
Total operating costs and expenses         131.4     117.5       13.9     12 %     385.6     371.6       14.0     4 %  
                                       
Operating income       $ 50.9   $ 65.2     $ (14.3 )   (22 )%   $ 162.8   $ 180.2     $ (17.4 )   (10 )%  
                                       
Wireless                                      
Revenue                                      
Service       $ 55.0   $ 62.3     $ (7.3 )   (12 )%   $ 171.7   $ 192.0     $ (20.3 )   (11 )%  
Equipment         4.5     5.8       (1.3 )   (22 )%     13.3     17.2       (3.9 )   (23 )%  
                                       
Total revenue         59.5     68.1       (8.6 )   (13 )%     185.0     209.2       (24.2 )   (12 )%  
                                       
Operating costs and expenses                                      
Cost of services and products         27.8     34.2       (6.4 )   (19 )%     84.7     98.1       (13.4 )   (14 )%  
Selling, general and administrative         11.0     14.3       (3.3 )   (23 )%     32.3     41.8       (9.5 )   (23 )%  
Depreciation and amortization         8.1     8.0       0.1     1 %     24.0     25.1       (1.1 )   (4 )%  
Other*         -     -       -     n/m       0.5     1.1       (0.6 )   (55 )%  
                                       
Total operating costs and expenses         46.9     56.5       (9.6 )   (17 )%     141.5     166.1       (24.6 )   (15 )%  
                                       
Operating income       $ 12.6   $ 11.6     $ 1.0     9 %   $ 43.5   $ 43.1     $ 0.4     1 %  
                                       
Data Center Colocation                                      
Revenue       $ 56.7   $ 47.1     $ 9.6     20 %   $ 163.3   $ 135.6     $ 27.7     20 %  
                                       
Operating costs and expenses                                      
Cost of services         20.0     15.8       4.2     27 %     55.1     43.9       11.2     26 %  
Selling, general and administrative         7.1     6.8       0.3     4 %     21.2     17.4       3.8     22 %  
Depreciation and amortization         18.3     13.2       5.1     39 %     50.9     38.2       12.7     33 %  
Other*         0.1     -       0.1     n/m       13.6     -       13.6     n/m    
                                       
Total operating costs and expenses         45.5     35.8       9.7     27 %     140.8     99.5       41.3     42 %  
                                       
Operating income       $ 11.2   $ 11.3     $ (0.1 )   (1 )%   $ 22.5   $ 36.1     $ (13.6 )   (38 )%  
                                       
IT Services and Hardware                                      
Revenue                                      
Telecom and IT equipment distribution       $ 49.5   $ 54.3     $ (4.8 )   (9 )%   $ 145.0   $ 156.1     $ (11.1 )   (7 )%  
Managed and professional services         28.8     24.6       4.2     17 %     83.8     68.8       15.0     22 %  
                                       
Total revenue         78.3     78.9       (0.6 )   (1 )%     228.8     224.9       3.9     2 %  
                                       
Operating costs and expenses                                      
Cost of services and products         61.3     63.0       (1.7 )   (3 )%     183.3     180.6       2.7     1 %  
Selling, general and administrative         10.8     9.7       1.1     11 %     32.0     29.0       3.0     10 %  
Depreciation and amortization         2.4     2.2       0.2     9 %     6.3     6.6       (0.3 )   (5 )%  
                                       
Total operating costs and expenses         74.5     74.9       (0.4 )   (1 )%     221.6     216.2       5.4     2 %  
                                       
Operating income       $ 3.8   $ 4.0     $ (0.2 )   (5 )%   $ 7.2   $ 8.7     $ (1.5 )   (17 )%  
                                       
*Other includes restructuring charges, gain on sale or disposal of assets, curtailment loss and asset impairments.
 
   
Cincinnati Bell Inc.  
Income Statements by Segment  
(Unaudited)  
(Dollars in millions)  
                     
      Three Months Ended          
      September 30,   June 30,   Change  
      2012   2012   $   %  
Wireline                    
Revenue                    
Voice - local service     $ 63.0   $ 64.7     $ (1.7 )   (3 )%  
Data       77.2     76.2       1.0     1 %  
Long distance and VoIP       28.1     29.1       (1.0 )   (3 )%  
Entertainment       9.5     8.4       1.1     13 %  
Other       4.5     5.3       (0.8 )   (15 )%  
                     
Total revenue       182.3     183.7       (1.4 )   (1 )%  
                     
Operating costs and expenses                    
Cost of services and products       71.5     71.2       0.3     0 %  
Selling, general and administrative       32.8     30.7       2.1     7 %  
Depreciation and amortization       26.6     26.4       0.2     1 %  
Other*       0.5     0.7       (0.2 )   (29 )%  
                     
Total operating costs and expenses       131.4     129.0       2.4     2 %  
                     
Operating income     $ 50.9   $ 54.7     $ (3.8 )   (7 )%  
                     
Wireless                    
Revenue                    
Service     $ 55.0   $ 57.6     $ (2.6 )   (5 )%  
Equipment       4.5     4.2       0.3     7 %  
                     
Total revenue       59.5     61.8       (2.3 )   (4 )%  
                     
Operating costs and expenses                    
Cost of services and products       27.8     27.4       0.4     1 %  
Selling, general and administrative       11.0     10.6       0.4     4 %  
Depreciation and amortization       8.1     8.0       0.1     1 %  
Other*       -     -       -     n/m    
                     
Total operating costs and expenses       46.9     46.0       0.9     2 %  
                     
Operating income     $ 12.6   $ 15.8     $ (3.2 )   (20 )%  
                     
Data Center Colocation                    
Revenue     $ 56.7   $ 54.0     $ 2.7     5 %  
                     
Operating costs and expenses                    
Cost of services       20.0     17.8       2.2     12 %  
Selling, general and administrative       7.1     7.6       (0.5 )   (7 )%  
Depreciation and amortization       18.3     17.0       1.3     8 %  
Other*       0.1     13.5       (13.4 )   (99 )%  
                     
Total operating costs and expenses       45.5     55.9       (10.4 )   (19 )%  
                     
Operating income (loss)     $ 11.2   $ (1.9 )   $ 13.1     n/m    
                     
IT Services and Hardware                    
Revenue                    
Telecom and IT equipment distribution     $ 49.5   $ 49.8     $ (0.3 )   (1 )%  
Managed and professional services       28.8     27.5       1.3     5 %  
                     
Total revenue       78.3     77.3       1.0     1 %  
                     
Operating costs and expenses                    
Cost of services and products       61.3     63.3       (2.0 )   (3 )%  
Selling, general and administrative       10.8     10.9       (0.1 )   (1 )%  
Depreciation and amortization       2.4     2.3       0.1     4 %  
                     
Total operating costs and expenses       74.5     76.5       (2.0 )   (3 )%  
                     
Operating income     $ 3.8   $ 0.8     $ 3.0     n/m    
                     
*Other includes restructuring charges, gain on sale or disposal of assets and asset impairments.
 
 
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
                                     
                                     
      Three Months Ended           Nine Months Ended          
      September 30,   Change       September 30,   Change      
      2012   2011   $   %   2012   2011   $   %  
Revenue                                    
Wireline     $ 182.3     $ 182.7     $ (0.4 )   0%   $ 548.4     $ 551.8     $ (3.4 )   (1)%  
Wireless       59.5       68.1       (8.6 )   (13)%     185.0       209.2       (24.2 )   (12)%  
Data Center Colocation       56.7       47.1       9.6     20%     163.3       135.6       27.7     20%  
IT Services and Hardware       78.3       78.9       (0.6 )   (1)%     228.8       224.9       3.9     2%  
Eliminations       (8.6 )     (8.0 )     (0.6 )   (8)%     (26.3 )     (24.4 )     (1.9 )   (8)%  
                                     
Total revenue     $ 368.2     $ 368.8     $ (0.6 )   0%   $ 1,099.2     $ 1,097.1     $ 2.1     0%  
                                     
Cost of Services and Products                                    
Wireline     $ 71.5     $ 68.7     $ 2.8     4%   $ 211.5     $ 202.2     $ 9.3     5%  
Wireless       27.8       34.2       (6.4 )   (19)%     84.7       98.1       (13.4 )   (14)%  
Data Center Colocation       20.0       15.8       4.2     27%     55.1       43.9       11.2     26%  
IT Services and Hardware       61.3       63.0       (1.7 )   (3)%     183.3       180.6       2.7     1%  
Eliminations       (8.3 )     (7.1 )     (1.2 )   (17)%     (24.8 )     (22.0 )     (2.8 )   (13)%  
                                     
Total cost of services and products     $ 172.3     $ 174.6     $ (2.3 )   (1)%   $ 509.8     $ 502.8     $ 7.0     1%  
                                     
Selling, General and Administrative                                    
Wireline     $ 32.8     $ 31.6     $ 1.2     4%   $ 94.0     $ 97.0     $ (3.0 )   (3)%  
Wireless       11.0       14.3       (3.3 )   (23)%     32.3       41.8       (9.5 )   (23)%  
Data Center Colocation       7.1       6.8       0.3     4%     21.2       17.4       3.8     22%  
IT Services and Hardware       10.8       9.7       1.1     11%     32.0       29.0       3.0     10%  
Corporate and eliminations       10.5       4.1       6.4     n/m     20.1       12.5       7.6     61%  
                                     
Total selling, general and administrative     $ 72.2     $ 66.5     $ 5.7     9%   $ 199.6     $ 197.7     $ 1.9     1%  
                                     
Depreciation and Amortization                                    
Wireline     $ 26.6     $ 25.6     $ 1.0     4%   $ 78.9     $ 76.1     $ 2.8     4%  
Wireless       8.1       8.0       0.1     1%     24.0       25.1       (1.1 )   (4)%  
Data Center Colocation       18.3       13.2       5.1     39%     50.9       38.2       12.7     33%  
IT Services and Hardware       2.4       2.2       0.2     9%     6.3       6.6       (0.3 )   (5)%  
Corporate       -       0.1       (0.1 )   n/m     0.1       0.3       (0.2 )   (67)%  
                                     
Total depreciation and amortization     $ 55.4     $ 49.1     $ 6.3     13%   $ 160.2     $ 146.3     $ 13.9     10%  
                                     
Other*                                    
Wireline     $ 0.5     $ (8.4 )   $ 8.9     106%   $ 1.2     $ (3.7 )   $ 4.9     132%  
Wireless       -       -       -     n/m     0.5       1.1       (0.6 )   (55)%  
Data Center Colocation       0.1       -       0.1     n/m     13.6       -       13.6     n/m  
IT Services and Hardware       -       -       -     n/m     -       -       -     n/m  
Corporate       1.7       0.7       1.0     n/m     2.1       2.6       (0.5 )   (19)%  
                                     
Total other     $ 2.3     $ (7.7 )   $ 10.0     130%   $ 17.4     $ -     $ 17.4     n/m  
                                     
Operating Income                                    
Wireline     $ 50.9     $ 65.2     $ (14.3 )   (22)%   $ 162.8     $ 180.2     $ (17.4 )   (10)%  
Wireless       12.6       11.6       1.0     9%     43.5       43.1       0.4     1%  
Data Center Colocation       11.2       11.3       (0.1 )   (1)%     22.5       36.1       (13.6 )   (38)%  
IT Services and Hardware       3.8       4.0       (0.2 )   (5)%     7.2       8.7       (1.5 )   (17)%  
Corporate       (12.5 )     (5.8 )     (6.7 )   (116)%     (23.8 )     (17.8 )     (6.0 )   (34)%  
                                     
Total operating income     $ 66.0     $ 86.3     $ (20.3 )   (24)%   $ 212.2     $ 250.3     $ (38.1 )   (15)%  
                                     
*Other includes restructuring charges, gain on sale or disposal of assets, curtailment loss, transaction costs and asset impairments.
 
 
Cincinnati Bell Inc.
Segment Information
(Unaudited)
(Dollars in millions)
                       
                       
      Three Months Ended            
      September 30,   June 30,     Change  
      2012   2012     $   %  
Revenue                      
Wireline     $ 182.3     $ 183.7       $ (1.4 )   (1)%  
Wireless       59.5       61.8         (2.3 )   (4)%  
Data Center Colocation       56.7       54.0         2.7     5%  
IT Services and Hardware       78.3       77.3         1.0     1%  
Eliminations       (8.6 )     (8.6 )       -     0%  
                       
Total revenue     $ 368.2     $ 368.2       $ -     0%  
                       
Cost of Services and Products                      
Wireline     $ 71.5     $ 71.2       $ 0.3     0%  
Wireless       27.8       27.4         0.4     1%  
Data Center Colocation       20.0       17.8         2.2     12%  
IT Services and Hardware       61.3       63.3         (2.0 )   (3)%  
Eliminations       (8.3 )     (8.0 )       (0.3 )   (4%)  
                       
Total cost of services and products     $ 172.3     $ 171.7       $ 0.6     0%  
                       
Selling, General and Administrative                      
Wireline     $ 32.8     $ 30.7       $ 2.1     7%  
Wireless       11.0       10.6         0.4     4%  
Data Center Colocation       7.1       7.6         (0.5 )   (7)%  
IT Services and Hardware       10.8       10.9         (0.1 )   (1)%  
Corporate and eliminations       10.5       3.6         6.9     n/m  
                       
Total selling, general and administrative     $ 72.2     $ 63.4       $ 8.8     14%  
                       
Depreciation and Amortization                      
Wireline     $ 26.6     $ 26.4       $ 0.2     1%  
Wireless       8.1       8.0         0.1     1%  
Data Center Colocation       18.3       17.0         1.3     8%  
IT Services and Hardware       2.4       2.3         0.1     4%  
Corporate       -       -         -     n/m  
                       
Total depreciation and amortization     $ 55.4     $ 53.7       $ 1.7     3%  
                       
Other*                      
Wireline     $ 0.5     $ 0.7       $ (0.2 )   (29)%  
Wireless       -       -         -     n/m  
Data Center Colocation       0.1       13.5         (13.4 )   (99)%  
IT Services and Hardware       -       -         -     n/m  
Corporate       1.7       -         1.7     n/m  
                       
Total other     $ 2.3     $ 14.2       $ (11.9 )   (84)%  
                       
Operating Income (Loss)                      
Wireline     $ 50.9     $ 54.7       $ (3.8 )   (7)%  
Wireless       12.6       15.8         (3.2 )   (20)%  
Data Center Colocation       11.2       (1.9 )       13.1     n/m  
IT Services and Hardware       3.8       0.8         3.0     n/m  
Corporate       (12.5 )     (4.2 )       (8.3 )   n/m  
                       
Total operating income     $ 66.0     $ 65.2       $ 0.8     1%  
                       
*Other includes restructuring charges, gain on sale or disposal of assets, transaction costs and asset impairments.        
 
Cincinnati Bell Inc.
Segment Metric Information
(Unaudited)
(In thousands)
                   
          September 30,   June 30,   September 30,
          2012   2012   2011
                   
  Local access lines     585.8     598.5     635.3  
                   
  Long distance lines     426.4     433.6     457.8  
                   
  High-speed internet subscribers              
    DSL subscribers     207.8     210.5     221.4  
    Fioptics subscribers     52.3     47.1     37.3  
                   
          260.1     257.6     258.7  
                   
  Fioptics entertainment subscribers     51.1     46.4     38.0  
                   
                   
  Wireless              
    Postpaid wireless subscribers     270.7     284.9     322.2  
    Prepaid wireless subscribers     144.9     145.2     149.6  
                   
          415.6     430.1     471.8  
                   
                   
  Data Center Colocation              
    Data center capacity (in square feet)     896,000     801,000     736,000  
    Utilization rate*     78 %   85 %   86 %
                   
                   
                   
                   
  * Data center utilization is calculated by dividing data center square footage that is committed contractually to customers, if built, by total data center square footage. Some data center square footage that is committed contractually may not yet be billed to the customer.
     
                                                         
Cincinnati Bell Inc.
Local Access Line Detail
(Unaudited)
(In thousands)
                                                           
                                                           
        2010       2011       2012  
       

1Q

 

2Q

 

3Q

 

4Q

     

1Q

 

2Q

 

3Q

 

4Q

     

1Q

 

2Q

 

3Q

 

Local Access Lines

                                                       
                                                           
In-Territory:                                                        
Primary Residential     354.1   345.5   336.8   328.9       321.8   313.8   304.8   296.7       288.9   281.7   274.3  
Secondary Residential     21.8   20.8   19.3   19.1       18.3   16.3   15.6   14.9       14.2   13.6   13.1  
Business/Other     261.9   258.7   256.2   252.5       250.7   248.7   244.4   240.8       238.5   237.5   234.4  
Total In-Territory     637.8   625.0   612.3   600.5       590.8   578.8   564.8   552.4       541.6   532.8   521.8  
                                                           
Out-of-Territory:                                                        
Primary Residential     32.9   32.5   32.1   31.2       30.4   29.3   27.8   26.7       25.2   24.3   23.3  
Secondary Residential     1.1   1.1   1.0   1.0       0.9   0.9   0.9   0.8       0.8   0.8   0.7  
Business/Other     39.9   40.4   41.5   41.4       41.5   41.6   41.8   41.4       41.0   40.6   40.0  
Total Out-of-Territory     73.9   74.0   74.6   73.6       72.8   71.8   70.5   68.9       67.0   65.7   64.0  
                                                           
Total Access Lines     711.7   699.0   686.9   674.1       663.6   650.6   635.3   621.3       608.6   598.5   585.8  
 
Cincinnati Bell Inc.
Net Debt and Common Shares Outstanding
(Unaudited)
(Dollars and shares in millions)
                 
                 
        September 30,   June 30,   December 31,
        2012   2012   2011
                 
Receivables Facility     $ 44.0     $ 19.0     $ -  
7% Senior Notes due 2015       249.7       250.0       250.4  
8 1/4% Senior Notes due 2017       500.0       500.0       500.0  
8 3/4% Senior Subordinated Notes due 2018       625.0       625.0       625.0  
8 3/8% Senior Notes due 2020       775.0       775.0       775.0  
7 1/4% Senior Notes due 2023       40.0       40.0       40.0  
Various Cincinnati Bell Telephone notes       207.5       207.5       207.5  
Capital leases and other debt       141.5       143.6       144.4  
Net unamortized discount       (7.5 )     (7.9 )     (8.7 )
                 
  Total debt       2,575.2       2,552.2       2,533.6  
                 
Less: Interest rate swap adjustment       (2.2 )     (2.4 )     (2.9 )
Less: Cash and cash equivalents       (7.7 )     (4.1 )     (73.7 )
                 
  Net debt (as defined by the company)     $ 2,565.3     $ 2,545.7     $ 2,457.0  
                 
Credit facility availability     $ 210.0     $ 210.0     $ 210.0  
                 
Common shares outstanding       199.4       197.4       195.7  
 
Cincinnati Bell Inc.
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)
(Unaudited)
(Dollars in millions)
             
            Three Months Ended September 30, 2012
            Wireline     Wireless     Data Center Colocation     IT Services

& Hardware

    Corporate     Total

Company

                                               
  Net Income (GAAP)                                         $ 3.9  
  Add:                                          
    Income tax expense                                           6.8  
    Interest expense                                           55.2  
    Other expense, net                                           0.1  
                                               
  Operating Income (GAAP)       $ 50.9       $ 12.6       $ 11.2         $ 3.8         $ (12.5 )     $ 66.0  
  Add:                                          
    Depreciation and amortization         26.6         8.1         18.3           2.4           -         55.4  
    Restructuring charges         0.9         -         -           -           -         0.9  
    Gain on sale or disposal of assets         (0.4 )       -         (0.2 )         -           -         (0.6 )
    Transaction costs         -         -         -           -           1.7         1.7  
    Asset impairments         -         -         0.3           -           -         0.3  
    Pension and other retirement plan expenses         5.8         -         -           -           0.4         6.2  
                                               
  Adjusted EBITDA (Non-GAAP)       $ 83.8       $ 20.7       $ 29.6         $ 6.2         $ (10.4 )     $ 129.9  
                                               
  Adjusted EBITDA Margin         46 %       35 %       52 %         8 %         -         35 %
                                               
             
            Three Months Ended June 30, 2012
            Wireline     Wireless     Data Center Colocation     IT Services

& Hardware

    Corporate     Total

Company

                                               
  Net Income (GAAP)                                         $ 4.5  
  Add:                                          
    Income tax expense                                           7.0  
    Interest expense                                           53.7  
                                               
  Operating Income (Loss) (GAAP)       $ 54.7       $ 15.8       $ (1.9 )       $ 0.8         $ (4.2 )     $ 65.2  
  Add:                                          
    Depreciation and amortization         26.4         8.0         17.0           2.3           -         53.7  
    Restructuring charges         0.7         -         0.5           -           -         1.2  
    Asset impairments         -         -         13.0           -           -         13.0  
    Legal claim costs         -         -         0.2           -           -         0.2  
    Pension and other retirement plan expenses         6.0         -         -           -           0.3         6.3  
                                               
  Adjusted EBITDA (Non-GAAP)       $ 87.8       $ 23.8       $ 28.8         $ 3.1         $ (3.9 )     $ 139.6  
                                               
  Adjusted EBITDA Margin         48 %       39 %       53 %         4 %         -         38 %
                                               
  Sequential dollar change in Adjusted EBITDA       $ (4.0 )     $ (3.1 )     $ 0.8         $ 3.1         $ (6.5 )     $ (9.7 )
                                               
  Sequential percentage change in Adjusted EBITDA         (5 )%       (13 )%       3 %         100 %         (167 )%       (7 )%
                                               
             
            Three Months Ended September 30, 2011
            Wireline     Wireless     Data Center Colocation     IT Services

& Hardware

    Corporate     Total

Company

                                               
  Net Income (GAAP)                                         $ 17.6  
  Add:                                          
    Income tax expense                                           15.4  
    Interest expense                                           53.3  
                                               
  Operating Income (GAAP)       $ 65.2       $ 11.6       $ 11.3         $ 4.0         $ (5.8 )     $ 86.3  
  Add:                                          
    Depreciation and amortization         25.6         8.0         13.2           2.2           0.1         49.1  
    Gain on sale of assets         (8.4 )       -         -           -           -         (8.4 )
    Transaction costs         -         -         -           -           0.7         0.7  
    Legal claim costs         -         -         0.4           -           -         0.4  
    Pension and other retirement plan expenses         4.8         -         -           -           0.3         5.1  
                                               
  Adjusted EBITDA (Non-GAAP)       $ 87.2       $ 19.6       $ 24.9         $ 6.2         $ (4.7 )     $ 133.2  
                                               
  Adjusted EBITDA Margin         48 %       29 %       53 %         8 %         -         36 %
                                               
                                               
  Year-over-year dollar change in Adjusted EBITDA       $ (3.4 )     $ 1.1       $ 4.7         $ -         $ (5.7 )     $ (3.3 )
                                               
  Year-over-year percentage change in Adjusted EBITDA         (4 )%       6 %       19 %         0 %         (121 )%       (2 )%
                                         
Cincinnati Bell Inc.
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)
(Unaudited)
(Dollars in millions)
           
          Nine Months Ended September 30, 2012
          Wireline     Wireless    

Data Center

Colocation

   

IT Services

&

Hardware

    Corporate     Total

Company

                                             
  Net Income (GAAP)                                       $ 21.0  
  Add:                                        
    Income tax expense                                         26.3  
    Interest expense                                         163.3  
    Other expense, net                                         1.6  
                                             
  Operating Income (GAAP)     $ 162.8       $ 43.5       $ 22.5         $ 7.2         $ (23.8 )     $ 212.2  
  Add:                                        
    Depreciation and amortization       78.9         24.0         50.9           6.3           0.1         160.2  
    Restructuring charges       1.6         0.5         0.5           -           0.4         3.0  
    Gain on sale or disposal of assets       (0.4 )       -         (0.2 )         -           -         (0.6 )
    Transaction costs       -         -         -           -           1.7         1.7  
    Asset impairments       -         -         13.3           -           -         13.3  
    Legal claim costs       -         -         0.2           -           -         0.2  
    Pension and other retirement plan expenses       17.2         -         -           -           1.1         18.3  
                                             
  Adjusted EBITDA (Non-GAAP)     $ 260.1       $ 68.0       $ 87.2         $ 13.5         $ (20.5 )     $ 408.3  
                                             
  Adjusted EBITDA Margin       47 %       37 %       53 %         6 %         -         37 %
                                             
                                             
          Nine Months Ended September 30, 2011
          Wireline     Wireless    

Data Center

Colocation

    IT Services

& Hardware

    Corporate     Total

Company

                                             
  Net Income (GAAP)                                       $ 49.0  
  Add:                                        
    Income tax expense                                         40.1  
    Interest expense                                         161.2  
                                             
  Operating Income (GAAP)     $ 180.2       $ 43.1       $ 36.1         $ 8.7         $ (17.8 )     $ 250.3  
  Add:                                        
    Depreciation and amortization       76.1         25.1         38.2           6.6           0.3         146.3  
    Gain on sale of assets       (8.4 )       -         -           -           -         (8.4 )
    Transaction costs       -         -         -           -           2.6         2.6  
    Legal claim costs       -         -         0.4           -           -         0.4  
    Asset impairments       0.5         1.1         -           -           -         1.6  
    Pension and other retirement plan expenses       18.9         -         -           -           1.1         20.0  
                                             
  Adjusted EBITDA (Non-GAAP)     $ 267.3       $ 69.3       $ 74.7         $ 15.3         $ (13.8 )     $ 412.8  
                                             
  Adjusted EBITDA Margin       48 %       33 %       55 %         7 %         -         38 %
                                             
                                             
  Year-over-year dollar change in Adjusted EBITDA     $ (7.2 )     $ (1.3 )     $ 12.5         $ (1.8 )       $ (6.7 )     $ (4.5 )
                                             
  Year-over-year percentage change in Adjusted EBITDA       (3 )%       (2 )%       17 %         (12 )%         (49 )%       (1 )%
                                                                   
Cincinnati Bell Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in millions)
                         
          Three Months Ended     Nine Months Ended
          September 30,     September 30,
          2012   2011     2012   2011
                         
  Cash provided by operating activities     $ 63.1     $ 80.6       $ 155.0     $ 198.5  
                         
    Capital expenditures       (75.5 )     (74.5 )       (242.9 )     (167.0 )
    Proceeds from sale of assets       0.6       9.8         0.6       9.8  
    Increase in restricted cash       (11.1 )     -         (11.1 )     -  
    Release of restricted cash       0.7       -         0.7       -  
    Other, net       -       (0.1 )       -       (0.3 )
                         
  Cash used in investing activities       (85.3 )     (64.8 )       (252.7 )     (157.5 )
                         
    Increase in corporate credit and receivables facilities, net       25.0       -         44.0       0.4  
    Repayment of debt       (3.3 )     (2.8 )       (11.3 )     (9.0 )
    Debt issuance costs       -       -         -       (0.8 )
    Dividends paid on preferred stock       (2.6 )     (2.6 )       (7.8 )     (7.8 )
    Common stock repurchase       -       (10.0 )       (0.3 )     (10.0 )
    Proceeds from exercise of options and warrants       6.6       -         8.1       0.1  
    Other, net       0.1       0.2         (1.0 )     (0.5 )
                         
  Cash provided by (used in) financing activities       25.8       (15.2 )       31.7       (27.6 )
                         
  Net (decrease) increase in cash and cash equivalents       3.6       0.6         (66.0 )     13.4  
  Cash and cash equivalents at beginning of period       4.1       90.1         73.7       77.3  
                         
  Cash and cash equivalents at end of period     $ 7.7     $ 90.7       $ 7.7     $ 90.7  
                         
                         
 

Reconciliation of GAAP Cash Flow to Free Cash Flow (as defined by the company)

                   
  Net (decrease) increase in cash and cash equivalents     $ 3.6     $ 0.6       $ (66.0 )   $ 13.4  
  Less adjustments:                    
    Increase in corporate credit and receivables facilities, net       (25.0 )     -         (44.0 )     (0.4 )
    Repayment of debt       3.3       2.8         11.3       9.0  
    Debt issuance costs       -       -         -       0.8  
    Proceeds from sale of assets, net of expenses       (0.6 )     (9.1 )       (0.6 )     (9.1 )
    Transaction costs       1.7       0.7         1.7       2.6  
    Common stock repurchase       -       10.0         0.3       10.0  
                         
    Free cash flow (as defined by the company)     $ (17.0 )   $ 5.0       $ (97.3 )   $ 26.3  
                         
  Income tax payments (refunds)     $ 0.4     $ -       $ (0.3 )   $ (1.3 )
 
 
Cincinnati Bell Inc.
Free Cash Flow (as defined by the company)
(Unaudited)
(Dollars in millions)
         
         
  Free Cash Flow for the three months ended September 30, 2011     $ 5.0  
         
  Decrease in Adjusted EBITDA       (3.3 )
  Increase in capital expenditures       (1.0 )
  Increase in pension and postretirement payments and contributions       (5.6 )
  Change in working capital and other       (12.1 )
         
  Free Cash Flow for the three months ended September 30, 2012     $ (17.0 )
         
         
  Free Cash Flow for the nine months ended September 30, 2011     $ 26.3  
         
  Decrease in Adjusted EBITDA       (4.5 )
  Increase in capital expenditures       (75.9 )
  Increase in pension and postretirement payments and contributions       (4.8 )
  Change in working capital and other       (38.4 )
         
  Free Cash Flow for the nine months ended September 30, 2012     $ (97.3 )
                               
                               
Cincinnati Bell Inc.
Capital Expenditures
(Unaudited)
(Dollars in millions)
                                 
                                 
        Three Months Ended
        Sep. 30, 2012     Jun. 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Sep. 30, 2011
                                 
Wireline     $ 27.8     $ 26.4     $ 23.3     $ 37.4     $ 27.1
Wireless       4.2       1.9       6.3       7.0       4.9
Data Center Colocation       41.6       52.0       52.8       41.3       41.0
IT Services and Hardware       1.9       2.5       2.2       2.8       1.5
Total capital expenditures     $ 75.5     $ 82.8     $ 84.6     $ 88.5     $ 74.5
                                         
                 
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         September 30, 2012
            September 30, 2012         Before Special Items
            (GAAP)   Special Items   (Non-GAAP)
                       
  Revenue     $ 368.2     $ -     $ 368.2
                       
  Costs and expenses                
    Cost of services and products       172.3       -       172.3
    Selling, general and administrative       72.2       -       72.2
    Depreciation and amortization       55.4       -       55.4
    Restructuring charges       0.9       (0.9 ) [A]   -
    Gain on sale or disposal of assets       (0.6 )     0.6   [B]   -
    Transaction costs       1.7       (1.7 ) [C]   -
    Asset impairments       0.3       (0.3 ) [D]   -
      Operating income       66.0       2.3       68.3
                       
  Interest expense       55.2       -       55.2
  Other expense, net       0.1       -       0.1
                       
  Income before income taxes       10.7       2.3       13.0
  Income tax expense       6.8       0.9       7.7
                       
  Net income       3.9       1.4       5.3
                       
  Preferred stock dividends       2.6       -       2.6
                       
  Net income applicable to common shareowners     $ 1.3     $ 1.4     $ 2.7
                       
                       
  Weighted average diluted common shares       205.6       205.6       205.6
                       
  Diluted earnings per common share*     $ 0.01     $ 0.01     $ 0.01
                       
                       
  Normalized results have been adjusted for the following (pretax adjustments are tax effected at 40%):
                       
A Restructuring charges consist of severance and lease abandonments.
                       
B Gain on sale of data center and wireline equipment.
                       
C Transaction costs consist of legal and consulting fees incurred in legal entity restructuring.
                       
D Impairment of intangibles and property recorded to reduce the carrying values of these assets to reflect their estimated fair values.        
                       
* 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.
   
                   
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           September 30, 2011
            September 30, 2011           Before Special Items
            (GAAP)     Special Items     (Non-GAAP)
                         
  Revenue     $ 368.8       $ -       $ 368.8
                         
  Costs and expenses                  
    Cost of services and products       174.6         -         174.6
    Selling, general and administrative       66.5         (0.4 ) [A]     66.1
    Depreciation and amortization       49.1         -         49.1
    Gain on sale of assets       (8.4 )       8.4   [B]     -
    Transaction costs       0.7         (0.7 ) [C]     -
      Operating income       86.3         (7.3 )       79.0
                         
  Interest expense       53.3         -         53.3
                         
  Income before income taxes       33.0         (7.3 )       25.7
  Income tax expense       15.4         (2.9 )       12.5
                         
  Net income       17.6         (4.4 )       13.2
                         
  Preferred stock dividends       2.6         -         2.6
                         
  Net income applicable to common shareowners     $ 15.0       $ (4.4 )     $ 10.6
                         
                         
  Weighted average diluted common shares       200.6         200.6         200.6
                         
  Diluted earnings per common share     $ 0.07       $ (0.02 )     $ 0.05
                         
                         
  Normalized results have been adjusted for the following (pretax adjustments are tax effected at 40%):
                         
A Legal claim costs.
                         
B Gain on sale of assets sold in connection with the home security monitoring business.
                         
C Transaction costs consist of legal and professional fees incurred in due diligence.
                       
  Cincinnati Bell Inc.
  Normalized Statements of Operations (Non-GAAP) - Reconciliation to Reported Results
  (Unaudited)
  (Dollars in millions, except per share amounts)
                           
                           
                           
                          Nine
            Nine             Months Ended
            Months Ended             September 30, 2012
            September 30, 2012             Before Special Items
            (GAAP)     Special Items     (Non-GAAP)
                           
  Revenue     $ 1,099.2       $ -       $ 1,099.2
                           
  Costs and expenses                    
    Cost of services and products       509.8         -         509.8
    Selling, general and administrative       199.6         (0.2 ) [A]     199.4
    Depreciation and amortization       160.2         -         160.2
    Restructuring charges       3.0         (3.0 ) [B]     -
    Gain on sale or disposal of assets       (0.6 )       0.6   [C]     -
    Transaction costs       1.7         (1.7 ) [D]     -
    Asset impairments       13.3         (13.3 ) [E]     -
      Operating income       212.2         17.6         229.8
                           
  Interest expense       163.3         -         163.3
  Other expense, net       1.6         (1.4 ) [F]     0.2
                           
  Income before income taxes       47.3         19.0         66.3
  Income tax expense       26.3         7.6         33.9
                           
  Net income       21.0         11.4         32.4
                           
  Preferred stock dividends       7.8         -         7.8
                           
  Net income applicable to common shareowners     $ 13.2       $ 11.4       $ 24.6
                           
                           
  Weighted average diluted common shares       203.0         203.0         203.0
                           
  Diluted earnings per common share*     $ 0.07       $ 0.06       $ 0.12
                           
                           
  Normalized results have been adjusted for the following (pretax adjustments are tax effected at 40%):
                           

A

Costs associated with the investigation and resolution of special legal matters.

                           

B

Restructuring charges consist of severance and lease abandonments.

                           

C

Gain on sale of data center and wireline equipment.

                           

D Transaction costs consist of legal and consulting fees incurred in legal entity restructuring.

                           

E

Impairment of intangibles and property recorded to reduce the carrying values of these assets to reflect their estimated fair values.

                           

F Loss on termination of financing obligation.

                           

*

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.

 
Cincinnati Bell Inc.
Normalized Statements of Operations (Non-GAAP) - Reconciliation to Reported Results
(Unaudited)
(Dollars in millions, except per share amounts)
                         
                         
                         
                        Nine
            Nine           Months Ended
            Months Ended           September 30, 2011
            September 30, 2011           Before Special Items
            (GAAP)     Special Items     (Non-GAAP)
                         
  Revenue     $ 1,097.1       $ -       $ 1,097.1
                         
  Costs and expenses                  
    Cost of services and products       502.8         -         502.8
    Selling, general and administrative       197.7         (0.4 ) [A]     197.3
    Depreciation and amortization       146.3         -         146.3
    Gain on sale of assets       (8.4 )       8.4   [B]     -
    Curtailment loss       4.2         (4.2 ) [C]     -
    Transaction costs       2.6         (2.6 ) [D]     -
    Asset impairments       1.6         (1.6 ) [E]     -
      Operating income       250.3         0.4         250.7
                         
  Interest expense       161.2         -         161.2
                         
  Income before income taxes       89.1         0.4         89.5
  Income tax expense       40.1         0.2         40.3
                         
  Net income       49.0         0.2         49.2
                         
  Preferred stock dividends       7.8         -         7.8
                         
  Net income applicable to common shareowners     $ 41.2       $ 0.2       $ 41.4
                         
                         
  Weighted average diluted common shares       200.4         200.4         200.4
                         
  Diluted earnings per common share     $ 0.21       $ 0.00       $ 0.21
                         
                         
  Normalized results have been adjusted for the following (pretax adjustments are tax effected at 40%):
                         
A Legal claim costs.
                         
B Gain on sale of assets sold in connection with the home security monitoring business.
                         
C Curtailment of bargained pension plan as a result of pension service credits being frozen for the majority of the plan participants.
                         
D Transaction costs consist of legal and professional fees incurred in due diligence.
                         
E Impairment recorded to reduce carrying value of property to reflect its estimated fair value.
             
Cincinnati Bell Inc.  
Reconciliation of Operating Income (GAAP) Guidance to Adjusted EBITDA (Non-GAAP) Guidance
(Unaudited)
(Dollars in millions)
                   
                   
                   
      2012 Operating Income (GAAP) Guidance     $ 273  
                   
      Add:            
                   
      Depreciation and amortization       215  
      Other           5  
      Pension and other retirement plan expenses       24  
      Asset impairments       13  
                   
      2012 Adjusted EBITDA (Non-GAAP) Guidance     $ 530 *
                   
                   
      * Plus or minus 2 percent.        

 

Source: Cincinnati Bell Inc.

Cincinnati Bell Inc.
Josh Duckworth, 513-397-2292(Investor/Media)
joshua.duckworth@cinbell.com