Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for
the full year and fourth quarter of 2012.
Ted Torbeck, president and chief executive officer, stated, "In 2012,
Cincinnati Bell delivered solid financial results while executing on a
data center strategy that positions us to significantly reduce debt and
fundamentally change Cincinnati Bell's future leverage profile."
"As the new CEO of Cincinnati Bell, I am honored to be leading a company
with a very strong foundation from which to build. While challenges
exist, our growth initiatives are clear. Our fiber investments are
delivering strong results, and are approaching an inflection point. In
2013, we will increase capital investment to accelerate our fiber
deployment to consumers and businesses in Cincinnati. As a result, we
believe we can return our Wireline business to growth in 2014," Mr.
Fourth Quarter and Full-Year Performance Highlights
Fourth Quarter and Full Year Review
For the year, revenue of $1.5 billion reflects a 1 percent increase over
2011, while fourth quarter revenue was 3 percent higher than the
comparable period in 2011. Operating income for the full year of 2012
was $270 million, up 4 percent compared to 2011, with operating income
from the quarter totaling $58 million. Net income for the year of $11
million was affected by a loss on extinguishment of debt of $14 million,
asset impairments of $14 million and CyrusOne REIT formation and other
transaction costs of $6 million. Net income excluding special items4
for the year was $34 million and resulted in 11 cents per diluted
share, down from 24 cents in 2011 due primarily to additional
depreciation associated with our CyrusOne capital expenditures. Full
year 2012 Adjusted EBITDA was $535 million, which includes an $8 million
mark-to-market charge on certain compensation plans as a result of the
increase in the company's stock price in 2012, and was down from 2011
Adjusted EBITDA of $545 million.
"With the repayment of our 2015 bonds and other indebtedness in the
fourth quarter, the company has no significant maturities until 2017,"
said Kurt Freyberger, chief financial officer. "We believe our current
capital structure provides sufficient flexibility to support the growth
of both our Fioptics suite of products and our business-class fiber
For the quarter, Wireline revenue of $182 million was flat compared to
the fourth quarter of 2011, after adjusting 2011 for one-time revenue
credits, as the company's Fioptics and strategic business data and VoIP
product lines continue their growth trend, offsetting the impact of
access line losses. For the full year, Wireline revenue totaled $731
million compared to $732 million generated in 2011.
Operating income was $50 million in the quarter, up slightly compared to
the same period in 2011, while the full year 2012 operating income was
$213 million, down $16 million or 7 percent compared to 2011.
Adjusted EBITDA was $84 million in the fourth quarter of 2012 and $344
million for the full year, down 4 percent and 3 percent, respectively,
from the same periods in 2011. Adjusted EBITDA margins of 46 percent for
the quarter and 47 percent for the year were also down from 2011, driven
largely by the continued loss of higher-margin access lines and the
additional costs associated with Fioptics customer acquisition.
At the end of the fourth quarter, the company had a total of 205,000
homes and businesses passed with Fioptics, which represents
approximately 26 percent of the Greater Cincinnati market. The segment
attained an additional 4,000 Fioptics entertainment customers in the
quarter and an additional 5,000 Fioptics high-speed internet
subscribers, increasing the total number of such subscribers to 55,000
and 57,000, respectively. Total high-speed internet subscribers numbered
259,000 at the end of the fourth quarter, up from 257,000 at the end of
2011, as the increase in Fioptics subscribers continues to more than
offset the decrease in DSL high-speed internet subscribers.
Wireless revenue was $57 million for the quarter, a decrease of 17
percent from the fourth quarter of 2011, and 2012 full year revenue of
$242 million was down 13 percent compared to 2011 as postpaid subscriber
losses continued. The segment generated operating income of $8 million
in the quarter and $51 million for the year.
Adjusted EBITDA of $17 million in the quarter resulted in an Adjusted
EBITDA margin of 30 percent. Adjusted EBITDA for the year totaled $85
million, which equated to a 35 percent Adjusted EBITDA margin.
Total wireless subscribers at the end of the quarter decreased to
398,000 compared to 459,000 at the end of 2011.
Data Center Colocation Segment
CyrusOne fourth quarter revenue was $58 million, an 18 percent increase
over the fourth quarter in 2011, and annual revenues were $221 million,
up 20 percent compared to 2011. The segment's operating income of $8
million in the quarter and $30 million for the year was down $2 million
and $16 million, respectively, compared to the same periods in 2011.
Adjusted EBITDA for the quarter was $28 million compared to $27 million
in the fourth quarter of 2011, reflecting higher revenue and additional
overhead and other expenses as the company continued to prepare to
operate as a stand-alone, publicly-traded real estate investment trust
entity. As a result, the segment's Adjusted EBITDA margin in the quarter
was 48 percent, down from 56 percent in the fourth quarter of 2011. For
the year, Adjusted EBITDA of $115 million reflects a 13 percent increase
over 2011. The company's 2012 Adjusted EBITDA margin was 52 percent
compared to 55 percent in 2011.
CyrusOne added 36,000 square feet of new data center space during the
quarter and 199,000 square feet for the full year, increasing total
capacity to 932,000 square feet at the end of 2012. The company sold
41,000 square feet of new space during the fourth quarter, and 92,000
square feet for the full year.
IT Services and Hardware Segment
For the quarter, revenue was $87 million, a 15 percent increase over the
fourth quarter in 2011, driven by strong hardware sales which were up 19
percent year-over-year. The segment's full-year revenue of $316 million
was up 5 percent over 2011 due to a $17 million year-over-year increase
in managed and professional services. Adjusted EBITDA in the quarter was
$4 million, resulting in an Adjusted EBITDA margin of 5 percent.
Adjusted EBITDA generated in the full year was $18 million, down $2
million from 2011.
Cincinnati Bell is providing the following guidance for 2013, which
excludes CyrusOne results:
*Plus or minus 2 percent
Cincinnati Bell will host a conference call on February 27, 2013 at 8:30
a.m. (ET) to discuss its results for the fourth quarter and full year of
2012. A live webcast of the call will be available via the Investor
Relations section of www.cincinnatibell.com.
The conference call dial-in number is (866) 780-1078. Callers located
outside of the U.S. and Canada may dial (816) 581-1572. A taped replay
of the conference call will be available one hour after the conclusion
of the call until 8:30 a.m. on Wednesday March 13, 2013. For U.S.
callers, the replay will be available at (888) 203-1112. For callers
outside of the U.S. and Canada, the replay will be available at (719)
457-0820. The replay reference number is 6508834. An archived version of
the webcast will also be available in the Investor Relations section of www.cincinnatibell.com.
Safe Harbor Note
This release and the documents incorporated by reference herein contain
forward-looking statements regarding future events and our future
results that are subject to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, are statements that could be deemed
forward-looking statements. These statements are based on current
expectations, estimates, forecasts, and projections about the industries
in which we operate and the beliefs and assumptions of our management.
Words such as "expects," "anticipates," "predicts," "projects,"
"intends," "plans," "believes," "seeks," "estimates," "continues,"
"endeavors," "strives," "may," variations of such words and similar
expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future
financial performance, our anticipated growth and trends in our
businesses, and other characterizations of future events or
circumstances are forward-looking statements. Readers are cautioned
these forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties, which could
cause our actual results to differ materially and adversely from those
reflected in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed in this release and those discussed in other documents we file
with the Securities and Exchange Commission (SEC). More information on
potential risks and uncertainties is available in our recent filings
with the SEC, including Cincinnati Bell's Form 10-K report, Form 10-Q
reports and Form 8-K reports. Actual results may differ materially and
adversely from those expressed in any forward-looking statements. We
undertake no obligation to revise or update any forward-looking
statements for any reason.
Use of Non-GAAP Financial Measures
This press release contains information about adjusted earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA),
Adjusted EBITDA margin, net debt, net income excluding special items,
and free cash flow. These are non-GAAP financial measures used by
Cincinnati Bell management when evaluating results of operations and
cash flow. Management believes these measures also provide users of the
financial statements with additional and useful comparisons of current
results of operations and cash flows with past and future periods.
Non-GAAP financial measures should not be construed as being more
important than comparable GAAP measures. Detailed reconciliations of
these non-GAAP financial measures to comparable GAAP financial measures
have been included in the tables distributed with this release and are
available in the Investor Relations section of www.cincinnatibell.com.
1Adjusted EBITDA provides a useful measure of
operational performance. The company defines Adjusted EBITDA as GAAP
operating income plus depreciation, amortization, restructuring charges,
asset impairments, components of pension and other retirement plan costs
related to interest costs, asset returns, and amortization of actuarial
gains and losses, and other special items.
2Adjusted EBITDA margin provides a useful measure of
operational performance. The company defines Adjusted EBITDA margin as
Adjusted EBITDA divided by revenue. Adjusted EBITDA margin should not be
considered as an alternative to comparable GAAP measures of
profitability and may not be comparable with the measure as defined by
3Net debt provides a useful measure of liquidity and
financial health. The company defines net debt as the sum of the face
amount of short-term and long-term debt and unamortized premium and/or
discount, offset by cash and cash equivalents.
4Net income excluding special items in total and per share provides
a useful measure of operating performance. Net income excluding special
items should not be considered as an alternative to comparable GAAP
measures of profitability and may not be comparable with net income
excluding special items as defined by other companies.
Free cash flow provides a useful measure of operational
performance, liquidity and financial health. The company defines free
cash flow as cash provided by (used in) operating, financing and
investing activities, adjusted for the issuance and repayment of debt,
debt issuance costs, the repurchase of common stock, and the proceeds
from the sale or the use of funds from the purchase of business
operations, including transaction costs. Free cash flow should not be
considered as an alternative to net income (loss), operating income
(loss), cash flow from operating activities, or the change in cash on
the balance sheet and may not be comparable with free cash flow as
defined by other companies. Although the company feels that there is no
comparable GAAP measure for free cash flow, the attached financial
information reconciles free cash flow to the net increase (decrease) in
cash and cash equivalents.
About Cincinnati Bell Inc.
With headquarters in Cincinnati, Ohio, Cincinnati Bell (NYSE: CBB)
provides integrated communications solutions - including local and long
distance voice, data, high-speed internet, entertainment and wireless
services - that keep residential and business customers in Greater
Cincinnati and Dayton connected with each other and with the world. In
addition, enterprise customers across the United States rely on
Cincinnati Bell for efficient, scalable office communications systems
and end-to-end IT solutions. Cincinnati Bell also is the majority owner
of CyrusOne (NASDAQ: CONE), which provides best-in-class data center
colocation services to enterprise customers through its facilities with
fully redundant power and cooling solutions that are currently located
in the Midwest, Texas, Arizona, London and Singapore. For more
information, please visit www.cincinnatibell.com.
*Other includes restructuring charges, curtailment loss, gain on sale or
disposal of assets, impairment of goodwill and asset impairments.
*Other includes restructuring charges, gain on sale or disposal of
assets, impairment of goodwill and asset impairments.
*Other includes restructuring charges, curtailment loss, gain on sale or
disposal of assets, impairment of goodwill, asset impairments and
Local Access Lines
IT Services &Hardware
Loss on extinguishment of debt
Other expense, net
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