Form 8-K CINCINNATI BELL INC For: Nov 02
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 2, 2017
CINCINNATI BELL INC.
(Exact Name of Registrant as Specified in its Charter)
Ohio | 001-8519 | 31-1056105 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
221 East Fourth Street
Cincinnati, OH 45202
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (513) 397-9900
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. o
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition
On November 2, 2017, Cincinnati Bell Inc. reported its financial results for the third quarter 2017. The earnings release is attached as Exhibit 99.1.
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure
On November 2, 2017, Leigh R. Fox, the Company's president and chief executive officer, and Andrew R. Kaiser, the Company's chief financial officer, will present third quarter 2017 results. The presentation will be webcast both live and on-demand. To listen, go to the Investor Relations section of www.cincinnatibell.com, click on the Webcasts/Presentations tab and follow the instructions for accessing the webcast.
A copy of the presentation to be made during the meeting is attached to this Current Report as Exhibit 99.2.
The information in Items 2.02 and 7.01 and the exhibits attached to this Current Report as Exhibit 99.1 and 99.2 are being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Act of 1934 or otherwise subject to the liabilities of that Section nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Act of 1934, except as shall be expressly stated by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) | Exhibit No. | Description | ||||
Press release dated November 2, 2017 | ||||||
Presentation made during the Cincinnati Bell third quarter 2017 earnings conference call on November 2, 2017 | ||||||
Cautionary Statement Concerning Forward-Looking Statements
This report and the documents incorporated by reference herein contain forward-looking statements regarding future events and 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,” or variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, anticipated growth and trends in 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 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 the company filed 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. The company undertakes no obligation to revise or update any forward-looking statements for any reason. The forward-looking statements included in this report represent company estimates as of November 2, 2017. Cincinnati Bell anticipates that subsequent events and developments will cause its estimates to change.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CINCINNATI BELL INC. | ||||
Date: | November 2, 2017 | By: | /s/ Christopher J. Wilson | |
Christopher J. Wilson | ||||
Vice President and General Counsel | ||||
EXHIBIT INDEX
Exhibit No. | Description | ||||
99.1 | Press release dated November 2, 2017 | ||||
99.2 | Presentation made during the Cincinnati Bell third quarter 2017 earnings conference call on November 2, 2017 | ||||
Cincinnati Bell Reports Third Quarter 2017 Results
HIGHLIGHTS
• | Increased video and internet subscribers during the quarter |
– | Video subscribers totaled 143,500, up 10,100 year-over-year |
– | Internet subscribers totaled 307,900, up 8,100 year-over-year |
• | Strategic revenue of $168 million, up 3% year-over-year with Fioptics revenue increasing 21% |
• | Entertainment and Communications revenue of $196 million, up 2% year-over-year |
• | Cash provided by operating activities totaled $157 million year-to-date, up $15 million year-over-year |
• | Free cash flows1 totaled $37 million year-to-date, up $78 million compared to the prior year |
• | Completed acquisition of OnX Enterprise Solutions, creating a leading North American IT services provider |
CINCINNATI - November 2, 2017 - Cincinnati Bell Inc. (NYSE: CBB), today announced financial results for its third quarter, ended September 30, 2017, highlighted by strategic revenue increasing $5 million over the prior year. Fioptics internet subscribers totaled 221,200, up 19% compared to a year ago. Fioptics video subscribers were up 8% compared to the same period in 2016. In the third quarter of 2017, the Company passed an additional 8,000 addresses with Fioptics, which is now available to 564,700 homes and businesses, or approximately 70 percent of Greater Cincinnati.
Leigh Fox, President and Chief Executive Officer of Cincinnati Bell, commented, "We delivered another quarter of strong operational performance, demonstrating our ability to differentiate ourselves in the marketplace. Our success highlights that fiber investments provide us the best platform to capitalize on the ever-increasing demand for data capacity, which will continue creating value for both shareholders and customers.”
Mr. Fox continued, “We also recently completed the acquisition of OnX, which represents a significant milestone in the strategic development of our IT services business. We now have enhanced scale, a broader geographic footprint as well as an expanded portfolio of complementary IT offerings, which positions us well to tap into a $250 billion industry as a leading cloud integrator for unified communications and hybrid IT workloads.”
CONSOLIDATED RESULTS
Consolidated revenue for the third quarter of 2017 was $289 million, down 7% from the prior year, as strategic revenue growth driven by strong demand for fiber-based products was offset by lower Telecom and IT hardware sales.
Operating income was $13 million in the third quarter of 2017, compared to $26 million in the prior year period. The decline was primarily driven by $12 million of transaction and integration costs incurred in the
third quarter of 2017. Adjusted EBITDA2 totaled $76 million for the third quarter of 2017, compared to $78 million in the prior year period.
Net loss for the third quarter of 2017 totaled $11 million. Net income applicable to common shareholders, excluding special items was $1 million, or $0.03 per diluted share.
Entertainment and Communications Segment
• | Entertainment and Communications revenue of $196 million, up $3 million year-over-year |
• | Fioptics revenue of $79 million, up 21% year-over-year |
• | Strategic business and carrier revenue of $53 million, up 6% year-over-year |
• | Operating income of $25 million, up 18% year-over-year |
• | Adjusted EBITDA of $73 million, up 5% year-over-year |
With its pending merger with Hawaiian Telcom, the leading integrated communications provider serving the state of Hawaii, Cincinnati Bell will continue to expand its portfolio of high density, next-generation fiber to capitalize on the growing demand for data capacity. The merger is expected to occur during the second half of 2018, pending regulatory and shareholder approval, and represents an important step toward building scale and locking in fiber density value for shareholders and customers.
Fiber density remains a key market differentiator in an increasingly competitive environment and Cincinnati Bell’s strategic investments in fiber allow the Company to offer higher bandwidth and faster internet speed than traditional carriers.
IT Services and Hardware Segment
• | IT Services and Hardware revenue of $96 million, flat sequentially, and down $27 million year-over-year |
– | Strategic revenue of $41 million, down $9 million year-over-year, reflecting cost cutting initiatives by a large customer |
– | Telecom and IT hardware sales of $44 million, down 33% year-over-year |
• | Operating income of $5 million, compared to $8 million in the prior year, reflecting a decline in revenue and increased costs associated with the expansion of the Company's national footprint |
• | Adjusted EBITDA of $8 million, up $2 million sequentially, and down $3 million year-over-year |
Cincinnati Bell recently announced it has successfully completed the acquisition of OnX Enterprise Solutions in the beginning of the fourth quarter of 2017. The combination of CBTS and OnX brings meaningful scale, service and product offerings, free cash flow generation, and client diversification, supporting the transformation to a hybrid IT solutions provider. The combined company’s hosted and managed services portfolio coupled with its expanded footprint will uniquely position Cincinnati Bell to capitalize on significant market opportunities presented by UCaaS, cloud, security, and infrastructure
needs. Integration of the business is progressing well, with access to additional sales offices and data centers in the U.S. and Canada strengthening the Company's North American platform.
Financial Position and Cash Flow
The Company reported cash provided by operating activities of $157 million in the first nine months of 2017, compared to $142 million in the same period last year. Free cash flow increased $78 million compared to the first nine months of 2016, totaling $37 million for the first nine months of 2017. Capital expenditures were $148 million in the first nine months of 2017, compared to $189 million in the same period last year. The Company is targeting full year 2017 capital expenditures at the high end of the $180 million to $210 million range.
On October 2, 2017, Cincinnati Bell entered into a new credit agreement, comprised of a seven-year $600 million senior secured term loan facility and a five-year $200 million senior secured revolving credit facility, in connection with the completion of the OnX transaction.
On October 6, 2017, Cincinnati Bell completed the issuance, in a private placement, of $350 million aggregate principal amount of 8.000% senior notes due 2025. The Company intends to use the net proceeds from the issuance, together with cash on hand and borrowings under the Company’s senior credit facilities and receivables facility, to fund the cash portion of its pending merger with Hawaiian Telcom, refinance existing Hawaiian Telcom indebtedness and pay fees and expenses in connection with the foregoing.
2017 Outlook
The updated 2017 guidance reflects contributions from OnX which is projected to generate revenue ranging between $150 million and $200 million and Adjusted EBITDA of approximately $10 million* in the fourth quarter of 2017.
Category | 2017 Previous Guidance Provided on 02/15/17 | 2017 Revised Guidance Provided on 11/02/17 |
Revenue | $1.2 billion | $1.35 billion - $1.40 billion |
Adjusted EBITDA | $295 million* | $305 million* |
*Plus or minus 2 percent
Mr. Fox concluded, “Overall, we remain well positioned to achieve our revised full year targets and are confident in our ability to successfully integrate OnX enabling us to provide our customers with enhanced service capabilities and product offerings. Looking ahead, we will continue to invest in our strategic offerings where we are winning, and we remain committed to maximizing value for our shareholders as we focus on building two distinct businesses with enhanced scale and strategic optionality.”
Conference Call/Webcast
Cincinnati Bell will host a conference call on November 2, 2017 at 10:00 a.m. (ET) to discuss its results for the third quarter of 2017. 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 877-857-6144. Callers located outside of the U.S. and Canada may dial 719-325-4886. To participate, please call 15 minutes prior to the start time. A taped replay of the conference call will be available approximately one hour after the conclusion of the call until 1:00 p.m. (ET) on Thursday, November 16, 2017. 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 3587808. An archived version of the webcast will also be available in the Investor Relations section of www.cincinnatibell.com.
Safe Harbor Note
This release may contain “forward-looking” statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on our current expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements about the beliefs, expectations and future plans and strategies of the Company, are forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements. The following important factors, among other things, could cause or contribute to actual results being materially and adversely different from those described or implied by such forward-looking statements including, but not limited to: those discussed in this release; we operate in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share; we may be unable to grow our revenues and cash flows despite the initiatives we have implemented; failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise our success in the telecommunications industry; our access lines, which generate a significant portion of our cash flows and profits, are decreasing in number and if we continue to experience access line losses similar to the past several years, our revenues, earnings and cash flows from operations may be adversely impacted; our failure to meet performance standards under our agreements could result in customers terminating their relationships with us or customers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs; we generate a substantial portion of our revenue by serving a limited geographic area; a large customer accounts for a significant portion of our revenues and accounts receivable and the loss or significant reduction in business from this customer would cause operating revenues to decline and could negatively impact profitability and cash flows; maintaining our telecommunications networks requires significant capital expenditures, and our inability or failure to maintain our telecommunications networks could have a material impact on our market share and ability to generate revenue; increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers; we may be liable for material that content providers distribute on our networks; cyber attacks or other breaches of network or other information technology security could have an
adverse effect on our business; natural disasters, terrorists acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations; the regulation of our businesses by federal and state authorities may, among other things, place us at a competitive disadvantage, restrict our ability to price our products and services and threaten our operating licenses; we depend on a number of third party providers, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers; a failure of back-office information technology systems could adversely affect our results of operations and financial condition; if we fail to extend or renegotiate our collective bargaining agreements with our labor union when they expire or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed; the loss of any of the senior management team or attrition among key sales associates could adversely affect our business, financial condition, results of operations and cash flows; our debt could limit our ability to fund operations, raise additional capital, and fulfill our obligations, which, in turn, would have a material adverse effect on our businesses and prospects generally; our indebtedness imposes significant restrictions on us; we depend on our loans and credit facilities to provide for our short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited; the servicing of our indebtedness is dependent on our ability to generate cash, which could be impacted by many factors beyond our control; we depend on the receipt of dividends or other intercompany transfers from our subsidiaries and investments; the trading price of our common shares may be volatile, and the value of an investment in our common shares may decline; the uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact our business and financial condition; our future cash flows could be adversely affected if it is unable to fully realize our deferred tax assets; adverse changes in the value of assets or obligations associated with our employee benefit plans could negatively impact shareowners’ deficit and liquidity; third parties may claim that we are infringing upon their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products; third parties may infringe upon our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury; we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements; we could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws; the timing and likelihood of completing the merger with Hawaiian Telcom, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed transaction that could reduce anticipated benefits or cause the parties to abandon the transaction; the possibility that Hawaiian Telcom’s stockholders may not approve the proposed merger; the possibility that competing offers or acquisition proposals for Hawaiian Telcom will be made; the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction; the possibility that the expected synergies and value creation from the proposed transaction involving Hawaiian Telcom will not be realized or will not be realized within the expected time period; the risk that the businesses of the
Company and Hawaiian Telcom and other acquired companies will not be integrated successfully; disruption from the proposed transaction involving Hawaiian Telcom making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; and the possibility that the proposed transaction involving Hawaiian Telcom does not close, including due to the failure to satisfy the closing conditions and the other risks and uncertainties detailed in our filings, including our Form 10-K, with the SEC as well as Hawaiian Telcom’s filings, including its Form 10-K, with the SEC.
These forward-looking statements are based on information, plans and estimates as of the date hereof and there may be other factors that may cause our actual results to differ materially from these forward-looking statements. We assume no obligation to update the information contained in this release except as required by applicable law.
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 applicable to common shareholders 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.
1Free 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 activities, adjusted for capital expenditures, restructuring and severance related payments, preferred stock dividends, dividends received from CyrusOne, cash used in or (provided by) discontinued operations, including the decommission of wireless towers, and transaction and integration 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 there is no comparable GAAP measure for free cash flow, the attached financial information reconciles cash provided by operating activities to free cash flow.
2Adjusted EBITDA provides a useful measure of operational performance. The company defines Adjusted EBITDA as GAAP operating income plus depreciation, amortization, restructuring and severance related charges, (gain) loss on sale or disposal of assets, transaction and integration costs,
curtailment (gain) loss, 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.
Adjusted EBITDA margin provides a useful measure of operational performance. The company defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Adjusted EBITDA margin should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.
Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term and long-term debt, unamortized premium and/or discount and unamortized note issuance costs, offset by cash and cash equivalents.
Net income applicable to common shareholders excluding special items in total and per share provides a useful measure of operating performance. Net income applicable to common shareholders excluding special items should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with net income excluding special items as defined by other companies.
About Cincinnati Bell Inc.
With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. (NYSE: CBB) provides integrated communications solutions - including local and long distance voice, data, high-speed Internet and video - 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 and Canada rely on CBTS and OnX, wholly-owned subsidiaries, for efficient, scalable office communications systems and end-to-end IT solutions. For more information, please visit www.cincinnatibell.com. The information on the Company’s website is not incorporated by reference in this press release.
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 | ||||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | ||||||||||||||||||||||||
Revenue | $ | 289.2 | $ | 312.4 | $ | (23.2 | ) | (7)% | $ | 861.4 | $ | 900.5 | $ | (39.1 | ) | (4)% | |||||||||||||||
Costs and expenses | |||||||||||||||||||||||||||||||
Cost of services and products | 162.6 | 183.8 | (21.2 | ) | (12)% | 482.8 | 517.3 | (34.5 | ) | (7)% | |||||||||||||||||||||
Selling, general and administrative | 54.5 | 55.5 | (1.0 | ) | (2)% | 166.6 | 164.9 | 1.7 | 1% | ||||||||||||||||||||||
Depreciation and amortization | 47.3 | 46.5 | 0.8 | 2% | 140.1 | 134.7 | 5.4 | 4% | |||||||||||||||||||||||
Restructuring and severance related charges | — | — | — | n/m | 29.2 | — | 29.2 | n/m | |||||||||||||||||||||||
Transaction and integration costs | 12.1 | — | 12.1 | n/m | 14.4 | — | 14.4 | n/m | |||||||||||||||||||||||
Other | — | 1.1 | (1.1 | ) | n/m | — | 1.1 | (1.1 | ) | n/m | |||||||||||||||||||||
Operating income | 12.7 | 25.5 | (12.8 | ) | (50)% | 28.3 | 82.5 | (54.2 | ) | (66)% | |||||||||||||||||||||
Interest expense | 18.8 | 17.9 | 0.9 | 5% | 54.9 | 58.1 | (3.2 | ) | (6)% | ||||||||||||||||||||||
Loss on extinguishment of debt, net | — | 11.4 | (11.4 | ) | n/m | — | 14.2 | (14.2 | ) | n/m | |||||||||||||||||||||
Gain on sale of Investment in CyrusOne | — | (33.3 | ) | 33.3 | n/m | (117.7 | ) | (151.9 | ) | 34.2 | (23)% | ||||||||||||||||||||
Other expense (income), net | 4.5 | (0.1 | ) | 4.6 | n/m | 3.5 | (1.2 | ) | 4.7 | n/m | |||||||||||||||||||||
(Loss) income before income taxes | (10.6 | ) | 29.6 | (40.2 | ) | n/m | 87.6 | 163.3 | (75.7 | ) | (46)% | ||||||||||||||||||||
Income tax expense | 0.6 | 10.8 | (10.2 | ) | (94)% | 36.3 | 59.9 | (23.6 | ) | (39)% | |||||||||||||||||||||
Net (loss) income | (11.2 | ) | 18.8 | (30.0 | ) | n/m | 51.3 | 103.4 | (52.1 | ) | (50)% | ||||||||||||||||||||
Preferred stock dividends | 2.6 | 2.6 | — | 0% | 7.8 | 7.8 | — | 0% | |||||||||||||||||||||||
Net (loss) income applicable to common shareowners | $ | (13.8 | ) | $ | 16.2 | $ | (30.0 | ) | n/m | $ | 43.5 | $ | 95.6 | $ | (52.1 | ) | (54)% | ||||||||||||||
Basic net (loss) earnings per common share | $ | (0.33 | ) | $ | 0.39 | $ | 1.03 | $ | 2.28 | ||||||||||||||||||||||
Diluted net (loss) earnings per common share | $ | (0.33 | ) | $ | 0.38 | $ | 1.03 | $ | 2.27 | ||||||||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
- Basic | 42.2 | 42.0 | 42.1 | 42.0 | |||||||||||||||||||||||||||
- Diluted | 42.2 | 42.1 | 42.3 | 42.1 | |||||||||||||||||||||||||||
Cincinnati Bell Inc. | |||||||||||||||||||||||||||||||
Revenues by Segment | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
September 30, | Change | September 30, | Change | ||||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | ||||||||||||||||||||||||
Entertainment and Communications | |||||||||||||||||||||||||||||||
Consumer | |||||||||||||||||||||||||||||||
Strategic | |||||||||||||||||||||||||||||||
Data | $ | 32.2 | $ | 26.5 | $ | 5.7 | 22% | $ | 93.2 | $ | 75.2 | $ | 18.0 | 24% | |||||||||||||||||
Voice | 6.2 | 5.4 | 0.8 | 15% | 18.2 | 16.0 | 2.2 | 14% | |||||||||||||||||||||||
Video | 37.2 | 31.7 | 5.5 | 17% | 109.1 | 90.6 | 18.5 | 20% | |||||||||||||||||||||||
Services and other | 0.4 | 0.8 | (0.4 | ) | (50)% | 1.2 | 2.6 | (1.4 | ) | (54)% | |||||||||||||||||||||
76.0 | 64.4 | 11.6 | 18% | 221.7 | 184.4 | 37.3 | 20% | ||||||||||||||||||||||||
Legacy | |||||||||||||||||||||||||||||||
Data | 8.4 | 10.4 | (2.0 | ) | (19)% | 27.0 | 34.4 | (7.4 | ) | (22)% | |||||||||||||||||||||
Voice | 16.1 | 18.2 | (2.1 | ) | (12)% | 50.8 | 56.7 | (5.9 | ) | (10)% | |||||||||||||||||||||
Services and other | 0.7 | 1.0 | (0.3 | ) | (30)% | 2.2 | 3.2 | (1.0 | ) | (31)% | |||||||||||||||||||||
25.2 | 29.6 | (4.4 | ) | (15)% | 80.0 | 94.3 | (14.3 | ) | (15)% | ||||||||||||||||||||||
Integration | |||||||||||||||||||||||||||||||
Services and other | 0.2 | 0.9 | (0.7 | ) | (78)% | 0.3 | 3.0 | (2.7 | ) | (90)% | |||||||||||||||||||||
Total consumer revenue | $ | 101.4 | $ | 94.9 | $ | 6.5 | 7% | $ | 302.0 | $ | 281.7 | $ | 20.3 | 7% | |||||||||||||||||
Business | |||||||||||||||||||||||||||||||
Strategic | |||||||||||||||||||||||||||||||
Data | $ | 25.1 | $ | 24.3 | $ | 0.8 | 3% | $ | 74.9 | $ | 71.9 | $ | 3.0 | 4% | |||||||||||||||||
Voice | 16.3 | 13.3 | 3.0 | 23% | 46.3 | 37.8 | 8.5 | 22% | |||||||||||||||||||||||
Video | 0.6 | 0.5 | 0.1 | 20% | 1.9 | 1.5 | 0.4 | 27% | |||||||||||||||||||||||
Services and other | 0.5 | 0.6 | (0.1 | ) | (17)% | 1.6 | 1.5 | 0.1 | 7% | ||||||||||||||||||||||
42.5 | 38.7 | 3.8 | 10% | 124.7 | 112.7 | 12.0 | 11% | ||||||||||||||||||||||||
Legacy | |||||||||||||||||||||||||||||||
Data | 4.1 | 4.9 | (0.8 | ) | (16)% | 13.3 | 15.4 | (2.1 | ) | (14)% | |||||||||||||||||||||
Voice | 24.4 | 27.7 | (3.3 | ) | (12)% | 74.5 | 85.1 | (10.6 | ) | (12)% | |||||||||||||||||||||
Services and other | 0.1 | 0.4 | (0.3 | ) | (75)% | 0.6 | 1.0 | (0.4 | ) | (40)% | |||||||||||||||||||||
28.6 | 33.0 | (4.4 | ) | (13)% | 88.4 | 101.5 | (13.1 | ) | (13)% | ||||||||||||||||||||||
Integration | |||||||||||||||||||||||||||||||
Services and other | 0.4 | 0.4 | — | 0% | 1.1 | 1.3 | (0.2 | ) | (15)% | ||||||||||||||||||||||
Total business revenue | $ | 71.5 | $ | 72.1 | $ | (0.6 | ) | (1)% | $ | 214.2 | $ | 215.5 | $ | (1.3 | ) | (1)% | |||||||||||||||
Carrier | |||||||||||||||||||||||||||||||
Strategic | |||||||||||||||||||||||||||||||
Data | $ | 10.7 | $ | 11.3 | $ | (0.6 | ) | (5)% | $ | 31.5 | $ | 33.9 | $ | (2.4 | ) | (7)% | |||||||||||||||
Services and other | — | — | — | n/m | 5.4 | — | 5.4 | n/m | |||||||||||||||||||||||
10.7 | 11.3 | (0.6 | ) | (5)% | 36.9 | $ | 33.9 | 3.0 | 9% | ||||||||||||||||||||||
Legacy | |||||||||||||||||||||||||||||||
Data | 7.5 | 9.0 | (1.5 | ) | (17)% | 23.4 | 27.6 | (4.2 | ) | (15)% | |||||||||||||||||||||
Voice | 3.7 | 4.1 | (0.4 | ) | (10)% | 11.7 | 12.4 | (0.7 | ) | (6)% | |||||||||||||||||||||
Services and other | 1.4 | 1.6 | (0.2 | ) | (13)% | 4.7 | 4.7 | — | 0% | ||||||||||||||||||||||
12.6 | 14.7 | (2.1 | ) | (14)% | 39.8 | 44.7 | (4.9 | ) | (11)% | ||||||||||||||||||||||
Total carrier revenue | $ | 23.3 | $ | 26.0 | $ | (2.7 | ) | (10)% | $ | 76.7 | $ | 78.6 | $ | (1.9 | ) | (2)% | |||||||||||||||
Total Entertainment and Communications | $ | 196.2 | $ | 193.0 | $ | 3.2 | 2% | $ | 592.9 | $ | 575.8 | $ | 17.1 | 3% | |||||||||||||||||
Cincinnati Bell Inc. | |||||||||||||||||||||||||||||||
Revenues by Segment | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
September 30, | Change | September 30, | Change | ||||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | ||||||||||||||||||||||||
IT Services and Hardware | |||||||||||||||||||||||||||||||
Business | |||||||||||||||||||||||||||||||
Strategic | |||||||||||||||||||||||||||||||
Professional Services | $ | 17.5 | $ | 22.9 | $ | (5.4 | ) | (24)% | $ | 54.2 | $ | 68.3 | $ | (14.1 | ) | (21)% | |||||||||||||||
Management and Monitoring | 5.5 | 8.1 | (2.6 | ) | (32)% | 15.6 | 24.1 | (8.5 | ) | (35)% | |||||||||||||||||||||
Unified Communications | 7.2 | 7.3 | (0.1 | ) | (1)% | 21.7 | 22.1 | (0.4 | ) | (2)% | |||||||||||||||||||||
Cloud Services | 10.9 | 12.2 | (1.3 | ) | (11)% | 36.2 | 33.2 | 3.0 | 9% | ||||||||||||||||||||||
41.1 | 50.5 | (9.4 | ) | (19)% | 127.7 | 147.7 | (20.0 | ) | (14)% | ||||||||||||||||||||||
Integration | |||||||||||||||||||||||||||||||
Professional Services | 7.4 | 3.6 | 3.8 | n/m | 15.9 | 11.6 | 4.3 | 37% | |||||||||||||||||||||||
Unified Communications | 3.5 | 2.6 | 0.9 | 35% | 9.9 | 8.0 | 1.9 | 24% | |||||||||||||||||||||||
Telecom and IT hardware | 44.3 | 66.2 | (21.9 | ) | (33)% | 125.0 | 167.9 | (42.9 | ) | (26)% | |||||||||||||||||||||
55.2 | 72.4 | (17.2 | ) | (24)% | 150.8 | 187.5 | (36.7 | ) | (20)% | ||||||||||||||||||||||
Total IT Services and Hardware Revenue | $ | 96.3 | $ | 122.9 | $ | (26.6 | ) | (22)% | $ | 278.5 | $ | 335.2 | $ | (56.7 | ) | (17)% | |||||||||||||||
Cincinnati Bell Inc. | ||||||||||||||||||||||||||||||
Income Statements by Segment | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | Change | September 30, | Change | |||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | |||||||||||||||||||||||
Entertainment and Communications | ||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
Data | $ | 88.0 | $ | 86.4 | $ | 1.6 | 2% | $ | 263.3 | $ | 258.4 | $ | 4.9 | 2% | ||||||||||||||||
Voice | 66.7 | 68.7 | (2.0 | ) | (3)% | 201.5 | 208.0 | (6.5 | ) | (3)% | ||||||||||||||||||||
Video | 37.8 | 32.2 | 5.6 | 17% | 111.0 | 92.1 | 18.9 | 21% | ||||||||||||||||||||||
Services and Other | 3.7 | 5.7 | (2.0 | ) | (35)% | 17.1 | 17.3 | (0.2 | ) | (1)% | ||||||||||||||||||||
Total revenue | 196.2 | 193.0 | 3.2 | 2% | 592.9 | 575.8 | 17.1 | 3% | ||||||||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||
Cost of services and products | 93.5 | 91.0 | 2.5 | 3% | 282.6 | 267.1 | 15.5 | 6% | ||||||||||||||||||||||
Selling, general and administrative | 33.8 | 37.1 | (3.3 | ) | (9)% | 104.5 | 107.1 | (2.6 | ) | (2)% | ||||||||||||||||||||
Depreciation and amortization | 43.9 | 43.0 | 0.9 | 2% | 129.1 | 124.8 | 4.3 | 3% | ||||||||||||||||||||||
Other* | — | 0.8 | (0.8 | ) | n/m | 26.9 | 0.8 | 26.1 | n/m | |||||||||||||||||||||
Total operating costs and expenses | 171.2 | 171.9 | (0.7 | ) | 0% | 543.1 | 499.8 | 43.3 | 9% | |||||||||||||||||||||
Operating income | $ | 25.0 | $ | 21.1 | $ | 3.9 | 18% | $ | 49.8 | $ | 76.0 | $ | (26.2 | ) | (34)% | |||||||||||||||
IT Services and Hardware | ||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
Professional Services | $ | 24.9 | $ | 26.5 | $ | (1.6 | ) | (6)% | $ | 70.1 | $ | 79.9 | $ | (9.8 | ) | (12)% | ||||||||||||||
Management and Monitoring | 5.5 | 8.1 | (2.6 | ) | (32)% | 15.6 | 24.1 | (8.5 | ) | (35)% | ||||||||||||||||||||
Unified Communications | 10.7 | 9.9 | 0.8 | 8% | 31.6 | 30.1 | 1.5 | 5% | ||||||||||||||||||||||
Cloud Services | 10.9 | 12.2 | (1.3 | ) | (11)% | 36.2 | 33.2 | 3.0 | 9% | |||||||||||||||||||||
Telecom and IT hardware | 44.3 | 66.2 | (21.9 | ) | (33)% | 125.0 | 167.9 | (42.9 | ) | (26)% | ||||||||||||||||||||
Total revenue | 96.3 | 122.9 | (26.6 | ) | (22)% | 278.5 | 335.2 | (56.7 | ) | (17)% | ||||||||||||||||||||
Operating costs and expenses | ||||||||||||||||||||||||||||||
Cost of services and products | 72.4 | 96.2 | (23.8 | ) | (25)% | 209.8 | 260.3 | (50.5 | ) | (19)% | ||||||||||||||||||||
Selling, general and administrative | 15.7 | 15.2 | 0.5 | 3% | 47.6 | 42.9 | 4.7 | 11% | ||||||||||||||||||||||
Depreciation and amortization | 3.4 | 3.4 | — | 0% | 10.9 | 9.8 | 1.1 | 11% | ||||||||||||||||||||||
Other* | — | 0.3 | (0.3 | ) | n/m | 2.3 | 0.3 | 2.0 | n/m | |||||||||||||||||||||
Total operating costs and expenses | 91.5 | 115.1 | (23.6 | ) | (21)% | 270.6 | 313.3 | (42.7 | ) | (14)% | ||||||||||||||||||||
Operating income | $ | 4.8 | $ | 7.8 | $ | (3.0 | ) | (38)% | $ | 7.9 | $ | 21.9 | $ | (14.0 | ) | (64)% | ||||||||||||||
* Other includes restructuring and severance related charges. | ||||||||||||||||||||||||||||||
Cincinnati Bell Inc. | ||||||||||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | Change | September 30, | Change | |||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2017 | 2016 | $ | % | |||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | 196.2 | $ | 193.0 | $ | 3.2 | 2% | $ | 592.9 | $ | 575.8 | $ | 17.1 | 3% | ||||||||||||||||
IT Services and Hardware | 96.3 | 122.9 | (26.6 | ) | (22)% | 278.5 | 335.2 | (56.7 | ) | (17)% | ||||||||||||||||||||
Eliminations | (3.3 | ) | (3.5 | ) | 0.2 | (6)% | (10.0 | ) | (10.5 | ) | 0.5 | (5)% | ||||||||||||||||||
Total revenue | $ | 289.2 | $ | 312.4 | $ | (23.2 | ) | (7)% | $ | 861.4 | $ | 900.5 | $ | (39.1 | ) | (4)% | ||||||||||||||
Cost of Services and Products | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | 93.5 | $ | 91.0 | $ | 2.5 | 3% | $ | 282.6 | $ | 267.1 | $ | 15.5 | 6% | ||||||||||||||||
IT Services and Hardware | 72.4 | 96.2 | (23.8 | ) | (25)% | 209.8 | 260.3 | (50.5 | ) | (19)% | ||||||||||||||||||||
Eliminations | (3.3 | ) | (3.4 | ) | 0.1 | (3)% | (9.6 | ) | (10.1 | ) | 0.5 | (5)% | ||||||||||||||||||
Total cost of services and products | $ | 162.6 | $ | 183.8 | $ | (21.2 | ) | (12)% | $ | 482.8 | $ | 517.3 | $ | (34.5 | ) | (7)% | ||||||||||||||
Selling, General and Administrative | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | 33.8 | $ | 37.1 | $ | (3.3 | ) | (9)% | $ | 104.5 | $ | 107.1 | $ | (2.6 | ) | (2)% | ||||||||||||||
IT Services and Hardware | 15.7 | 15.2 | 0.5 | 3% | 47.6 | 42.9 | 4.7 | 11% | ||||||||||||||||||||||
Corporate and eliminations | 5.0 | 3.2 | 1.8 | 56% | 14.5 | 14.9 | (0.4 | ) | (3)% | |||||||||||||||||||||
Total selling, general and administrative | $ | 54.5 | $ | 55.5 | $ | (1.0 | ) | (2)% | $ | 166.6 | $ | 164.9 | $ | 1.7 | 1% | |||||||||||||||
Depreciation and Amortization | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | 43.9 | $ | 43.0 | $ | 0.9 | 2% | $ | 129.1 | $ | 124.8 | $ | 4.3 | 3% | ||||||||||||||||
IT Services and Hardware | 3.4 | 3.4 | — | 0% | 10.9 | 9.8 | 1.1 | 11% | ||||||||||||||||||||||
Corporate | — | 0.1 | (0.1 | ) | n/m | 0.1 | 0.1 | — | 0% | |||||||||||||||||||||
Total depreciation and amortization | $ | 47.3 | $ | 46.5 | $ | 0.8 | 2% | $ | 140.1 | $ | 134.7 | $ | 5.4 | 4% | ||||||||||||||||
Other* | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | — | $ | 0.8 | $ | (0.8 | ) | n/m | $ | 26.9 | $ | 0.8 | $ | 26.1 | n/m | |||||||||||||||
IT Services and Hardware | — | 0.3 | (0.3 | ) | n/m | 2.3 | 0.3 | 2.0 | n/m | |||||||||||||||||||||
Corporate | 12.1 | — | 12.1 | n/m | 14.4 | — | 14.4 | n/m | ||||||||||||||||||||||
Total other | $ | 12.1 | $ | 1.1 | $ | 11.0 | n/m | $ | 43.6 | $ | 1.1 | $ | 42.5 | n/m | ||||||||||||||||
Operating Income | ||||||||||||||||||||||||||||||
Entertainment and Communications | $ | 25.0 | $ | 21.1 | $ | 3.9 | 18% | $ | 49.8 | $ | 76.0 | $ | (26.2 | ) | (34)% | |||||||||||||||
IT Services and Hardware | 4.8 | 7.8 | (3.0 | ) | (38)% | 7.9 | 21.9 | (14.0 | ) | (64)% | ||||||||||||||||||||
Corporate | (17.1 | ) | (3.4 | ) | (13.7 | ) | n/m | (29.4 | ) | (15.4 | ) | (14.0 | ) | 91% | ||||||||||||||||
Total operating income | $ | 12.7 | $ | 25.5 | $ | (12.8 | ) | (50)% | $ | 28.3 | $ | 82.5 | $ | (54.2 | ) | (66)% | ||||||||||||||
* Other includes restructuring and severance related charges and transaction and integration costs. | ||||||||||||||||||||||||||||||
Cincinnati Bell Inc. | ||||||||||||||||
Segment Metric Information | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||||||||
2017 | 2017 | 2017 | 2016 | 2016 | ||||||||||||
Residential voice lines | ||||||||||||||||
Legacy voice lines | 99.5 | 104.9 | 111.1 | 117.5 | 124.6 | |||||||||||
Strategic voice lines (Fioptics) | 88.1 | 87.0 | 85.5 | 83.8 | 80.3 | |||||||||||
Total residential voice lines | 187.6 | 191.9 | 196.6 | 201.3 | 204.9 | |||||||||||
Business voice lines | ||||||||||||||||
Legacy voice lines | 172.1 | 177.3 | 183.9 | 190.7 | 197.7 | |||||||||||
Strategic voice lines* | 151.9 | 146.2 | 136.4 | 131.7 | 121.2 | |||||||||||
Total business voice lines | 324.0 | 323.5 | 320.3 | 322.4 | 318.9 | |||||||||||
Total voice lines | 511.6 | 515.4 | 516.9 | 523.7 | 523.8 | |||||||||||
Long distance lines | 299.1 | 304.3 | 311.0 | 317.3 | 323.7 | |||||||||||
Internet subscribers | ||||||||||||||||
DSL | 86.7 | 93.0 | 100.1 | 105.6 | 114.2 | |||||||||||
Fioptics | 221.2 | 214.1 | 207.3 | 197.6 | 185.6 | |||||||||||
Total internet subscribers | 307.9 | 307.1 | 307.4 | 303.2 | 299.8 | |||||||||||
Fioptics video subscribers | 143.5 | 142.8 | 141.1 | 137.6 | 133.4 | |||||||||||
Fioptics units passed | 564.7 | 556.7 | 545.2 | 533.4 | 509.5 | |||||||||||
* Strategic voice lines include VoIP lines and Fioptics voice lines. | ||||||||||||||||
Cincinnati Bell Inc. | |||||||||
Net Debt (Non-GAAP) and Common Shares Outstanding | |||||||||
(Unaudited) | |||||||||
(Dollars and shares in millions) | |||||||||
September 30, | December 31, | ||||||||
2017 | 2016 | ||||||||
Receivables Facility | $ | — | $ | 89.5 | |||||
Corporate Credit Agreement - Tranche B Term Loan | 315.8 | 315.8 | |||||||
7 1/4% Senior Notes due 2023 | 22.3 | 22.3 | |||||||
7% Senior Notes due 2024 | 625.0 | 625.0 | |||||||
Cincinnati Bell Telephone Notes | 87.9 | 87.9 | |||||||
Capital leases and other debt | 84.4 | 69.5 | |||||||
Net unamortized premium | 8.0 | 8.5 | |||||||
Unamortized note issuance costs | (10.6 | ) | (11.9 | ) | |||||
Total debt | 1,132.8 | 1,206.6 | |||||||
Less: Cash and cash equivalents | (43.7 | ) | (9.7 | ) | |||||
Net debt (Non-GAAP: as defined by the company) | $ | 1,089.1 | $ | 1,196.9 | |||||
Corporate Credit Agreement availability | $ | 150.0 | $ | 150.0 | |||||
Common shares outstanding | 42.2 | 42.1 | |||||||
Cincinnati Bell Inc. | ||||||||||||||||||
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||||
Entertainment & Communications | IT Services & Hardware | Corporate | Total Company | |||||||||||||||
Net income (GAAP) | $ | (11.2 | ) | |||||||||||||||
Add: | ||||||||||||||||||
Income tax expense | 0.6 | |||||||||||||||||
Interest expense | 18.8 | |||||||||||||||||
Other income, net | 4.5 | |||||||||||||||||
Operating income (GAAP) | $ | 25.0 | $ | 4.8 | $ | (17.1 | ) | $ | 12.7 | |||||||||
Add: | ||||||||||||||||||
Depreciation and amortization | 43.9 | 3.4 | — | 47.3 | ||||||||||||||
Transaction and integration costs | — | — | 12.1 | 12.1 | ||||||||||||||
Pension and other retirement plan expenses | 3.6 | — | 0.5 | 4.1 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 72.5 | $ | 8.2 | $ | (4.5 | ) | $ | 76.2 | |||||||||
Adjusted EBITDA Margin (Non-GAAP) | 37 | % | 9 | % | 0 | % | 26 | % | ||||||||||
Three Months Ended September 30, 2016 | ||||||||||||||||||
Entertainment & Communications | IT Services & Hardware | Corporate | Total Company | |||||||||||||||
Net income (GAAP) | $ | 18.8 | ||||||||||||||||
Add: | ||||||||||||||||||
Income tax expense | 10.8 | |||||||||||||||||
Interest expense | 17.9 | |||||||||||||||||
Gain on sale of Investment in CyrusOne | (33.3 | ) | ||||||||||||||||
Loss on extinguishment of debt, net | 11.4 | |||||||||||||||||
Other income, net | (0.1 | ) | ||||||||||||||||
Operating income (GAAP) | $ | 21.1 | $ | 7.8 | $ | (3.4 | ) | $ | 25.5 | |||||||||
Add: | ||||||||||||||||||
Depreciation and amortization | 43.0 | 3.4 | 0.1 | 46.5 | ||||||||||||||
Loss on sale or disposal of assets | 0.8 | 0.3 | — | 1.1 | ||||||||||||||
Pension and other retirement plan expenses | 3.9 | — | 0.5 | 4.4 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 68.8 | $ | 11.5 | $ | (2.8 | ) | $ | 77.5 | |||||||||
Adjusted EBITDA Margin (Non-GAAP) | 36 | % | 9 | % | 0 | % | 25 | % | ||||||||||
Year-over-year dollar change in Adjusted EBITDA | $ | 3.7 | $ | (3.3 | ) | $ | (1.7 | ) | $ | (1.3 | ) | |||||||
Year-over-year percentage change in Adjusted EBITDA | 5 | % | (29 | )% | 61 | % | (2 | )% | ||||||||||
Cincinnati Bell Inc. | ||||||||||||||||||
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||
Nine Months Ended September 30, 2017 | ||||||||||||||||||
Entertainment & Communications | IT Services & Hardware | Corporate | Total Company | |||||||||||||||
Net income (GAAP) | $ | 51.3 | ||||||||||||||||
Add: | ||||||||||||||||||
Income tax expense | 36.3 | |||||||||||||||||
Interest expense | 54.9 | |||||||||||||||||
Gain on sale of Investment in CyrusOne | (117.7 | ) | ||||||||||||||||
Other expense, net | 3.5 | |||||||||||||||||
Operating income (GAAP) | $ | 49.8 | $ | 7.9 | $ | (29.4 | ) | $ | 28.3 | |||||||||
Add: | ||||||||||||||||||
Depreciation and amortization | 129.1 | 10.9 | 0.1 | 140.1 | ||||||||||||||
Restructuring and severance related charges | 26.9 | 2.3 | — | 29.2 | ||||||||||||||
Transaction and integration costs | — | — | 14.4 | 14.4 | ||||||||||||||
Pension and other retirement plan expenses | 10.9 | — | 1.4 | 12.3 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 216.7 | $ | 21.1 | $ | (13.5 | ) | $ | 224.3 | |||||||||
Adjusted EBITDA Margin (Non-GAAP) | 37 | % | 8 | % | 0 | % | 26 | % | ||||||||||
Nine Months Ended September 30, 2016 | ||||||||||||||||||
Entertainment and Communications | IT Services & Hardware | Corporate | Total Company | |||||||||||||||
Net income (GAAP) | $ | 103.4 | ||||||||||||||||
Add: | ||||||||||||||||||
Income tax expense | 59.9 | |||||||||||||||||
Interest expense | 58.1 | |||||||||||||||||
Gain on sale of Investment in CyrusOne | (151.9 | ) | ||||||||||||||||
Loss on extinguishment of debt, net | 14.2 | |||||||||||||||||
Other income, net | (1.2 | ) | ||||||||||||||||
Operating income (GAAP) | $ | 76.0 | $ | 21.9 | $ | (15.4 | ) | $ | 82.5 | |||||||||
Add: | ||||||||||||||||||
Depreciation and amortization | 124.8 | 9.8 | 0.1 | 134.7 | ||||||||||||||
Loss on sale or disposal of assets | 0.8 | 0.3 | — | 1.1 | ||||||||||||||
Pension and other retirement plan expenses | 11.3 | — | 1.4 | 12.7 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 212.9 | $ | 32.0 | $ | (13.9 | ) | $ | 231.0 | |||||||||
Adjusted EBITDA Margin (Non-GAAP) | 37 | % | 10 | % | 0 | % | 26 | % | ||||||||||
Year-over-year dollar change in Adjusted EBITDA | $ | 3.8 | $ | (10.9 | ) | $ | 0.4 | $ | (6.7 | ) | ||||||||
Year-over-year percentage change in Adjusted EBITDA | 2 | % | (34 | )% | (3 | )% | (3 | )% | ||||||||||
Cincinnati Bell Inc. | |||||||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||||||
(Unaudited) | |||||||||||||||||
(Dollars in millions) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Cash provided by operating activities | $ | 33.9 | $ | 43.7 | $ | 156.8 | $ | 141.6 | |||||||||
Capital expenditures | (43.0 | ) | (67.2 | ) | (148.2 | ) | (188.8 | ) | |||||||||
Increase in restricted cash | — | (90.7 | ) | — | (90.7 | ) | |||||||||||
Proceeds from sale of Investment in CyrusOne | — | 38.7 | 140.7 | 181.2 | |||||||||||||
Acquisitions of businesses | — | — | (9.6 | ) | — | ||||||||||||
Dividends received from Investment in CyrusOne | — | 1.3 | — | 6.2 | |||||||||||||
Other, net | (0.1 | ) | (0.1 | ) | 0.3 | (0.8 | ) | ||||||||||
Cash used in investing activities | (43.1 | ) | (118.0 | ) | (16.8 | ) | (92.9 | ) | |||||||||
Proceeds from issuance of long-term debt | — | 425.0 | — | 425.0 | |||||||||||||
Net (decrease) increase in corporate credit and receivables facilities with initial maturities less than 90 days | — | (9.5 | ) | (89.5 | ) | 5.9 | |||||||||||
Repayment of debt | (2.2 | ) | (336.4 | ) | (6.4 | ) | (461.0 | ) | |||||||||
Debt issuance costs | (0.6 | ) | (6.5 | ) | (1.3 | ) | (8.4 | ) | |||||||||
Dividends paid on preferred stock | (2.6 | ) | (2.6 | ) | (7.8 | ) | (7.8 | ) | |||||||||
Common stock repurchase | — | (0.2 | ) | — | (4.8 | ) | |||||||||||
Other, net | 0.1 | 3.4 | (1.0 | ) | 3.5 | ||||||||||||
Cash (used in) provided by financing activities | (5.3 | ) | 73.2 | (106.0 | ) | (47.6 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents | (14.5 | ) | (1.1 | ) | 34.0 | 1.1 | |||||||||||
Cash and cash equivalents at beginning of period | 58.2 | 9.6 | 9.7 | 7.4 | |||||||||||||
Cash and cash equivalents at end of period | $ | 43.7 | $ | 8.5 | $ | 43.7 | $ | 8.5 | |||||||||
Reconciliation of Cash Provided by Operating Activities (GAAP) to | |||||||||||||||||
Free Cash Flow (Non-GAAP) | |||||||||||||||||
Cash provided by operating activities | $ | 33.9 | $ | 43.7 | 156.8 | $ | 141.6 | ||||||||||
Adjustments: | |||||||||||||||||
Capital expenditures | (43.0 | ) | (67.2 | ) | (148.2 | ) | (188.8 | ) | |||||||||
Restructuring and severance related payments | 9.9 | 0.3 | 27.0 | 0.9 | |||||||||||||
Preferred stock dividends | (2.6 | ) | (2.6 | ) | (7.8 | ) | (7.8 | ) | |||||||||
Dividends received from Investment in CyrusOne | — | 1.3 | — | 6.2 | |||||||||||||
Decommissioning of wireless towers | — | — | — | 1.9 | |||||||||||||
Cash used by discontinued operations | — | 0.2 | — | 5.0 | |||||||||||||
Transaction and integration costs | 8.2 | — | 8.9 | — | |||||||||||||
Free cash flow (Non-GAAP) | $ | 6.4 | $ | (24.3 | ) | $ | 36.7 | $ | (41.0 | ) | |||||||
Income tax payments (refunds) | $ | 0.1 | $ | — | $ | (16.2 | ) | $ | 1.4 | ||||||||
Cincinnati Bell Inc. | ||||
Free Cash Flow (Non-GAAP) | ||||
(Unaudited) | ||||
(Dollars in millions) | ||||
Free Cash Flow (Non-GAAP) for the three months ended September 30, 2016 | $ | (24.3 | ) | |
Decrease in Adjusted EBITDA (Non-GAAP) | (1.3 | ) | ||
Decrease in capital expenditures | 24.2 | |||
Increase in interest payments | (9.9 | ) | ||
Decrease in dividends received from Investment in CyrusOne | (1.3 | ) | ||
Increase in pension and postretirement payments and contributions | (0.7 | ) | ||
Change in working capital and other | 19.7 | |||
Free Cash Flow (Non-GAAP) for the three months ended September 30, 2017 | $ | 6.4 | ||
Free Cash Flow (Non-GAAP) for the nine months ended September 30, 2016 | $ | (41.0 | ) | |
Decrease in Adjusted EBITDA (Non-GAAP) | (6.7 | ) | ||
Decrease in capital expenditures | 40.6 | |||
Decrease in interest payments | 5.4 | |||
Decrease in dividends received from Investment in CyrusOne | (5.1 | ) | ||
Increase in pension and postretirement payments and contributions | (1.2 | ) | ||
Change in working capital and other | 44.7 | |||
Free Cash Flow (Non-GAAP) for the nine months ended September 30, 2017 | $ | 36.7 | ||
Cincinnati Bell Inc. | ||||||||||||||||||||
Capital Expenditures | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Sep. 30, 2017 | June 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | ||||||||||||||||
Entertainment and Communications | $ | 41.4 | $ | 48.0 | $ | 49.5 | $ | 93.8 | $ | 63.1 | ||||||||||
IT Services and Hardware | 1.6 | 2.1 | 5.6 | 3.8 | 4.1 | |||||||||||||||
Total capital expenditures | $ | 43.0 | $ | 50.1 | $ | 55.1 | $ | 97.6 | $ | 67.2 | ||||||||||
Cincinnati Bell Inc. | |||||||||
Reconciliation of Net (Loss) Income Applicable to Common Shareholders (GAAP) to Net Income Applicable to Common Shareholders, Excluding Special Items (Non-GAAP) and Adjusted Diluted Earnings Per Share (Non-GAAP) | |||||||||
(Unaudited) | |||||||||
(Dollars in millions, except per share amounts) | |||||||||
Three Months Ended | |||||||||
September 30, 2017 | September 30, 2016 | ||||||||
Net (loss) income applicable to common shareholders (GAAP) | $ | (13.8 | ) | $ | 16.2 | ||||
Special items: | |||||||||
Loss on sale or disposal of assets | — | 1.1 | |||||||
Transaction and integration costs | 12.1 | — | |||||||
Loss on extinguishment of debt, net | — | 11.4 | |||||||
Gain on sale of Investment in CyrusOne | — | (33.3 | ) | ||||||
Impairment of equity method investment | 4.7 | — | |||||||
Income tax effect of special items * | (1.7 | ) | 7.6 | ||||||
Total special items | 15.1 | (13.2 | ) | ||||||
Net (loss) income applicable to common shareowners, excluding special items (Non-GAAP) | $ | 1.3 | $ | 3.0 | |||||
Weighted average diluted shares outstanding | 42.2 | 42.1 | |||||||
Diluted (loss) earnings per common share (GAAP) | $ | (0.33 | ) | $ | 0.38 | ||||
Adjusted diluted earnings per common share (Non-GAAP) | $ | 0.03 | $ | 0.07 | |||||
* | Special items have been tax effected such that the normalized effective tax rate is 36% with the exception of transaction costs, which are treated as a discrete item in the quarter incurred. | ||||||||
Cincinnati Bell Inc. | |||||||||
Reconciliation of Net Income Applicable to Common Shareholders (GAAP) to Net Income Applicable to Common Shareholders, Excluding Special Items (Non-GAAP) and Adjusted Diluted Earnings Per Share (Non-GAAP) | |||||||||
(Unaudited) | |||||||||
(Dollars in millions, except per share amounts) | |||||||||
Nine Months Ended | |||||||||
September 30, 2017 | September 30, 2016 | ||||||||
Net income applicable to common shareholders (GAAP) | $ | 43.5 | $ | 95.6 | |||||
Special items: | |||||||||
Restructuring and severance related charges | 29.2 | — | |||||||
Loss on sale or disposal of assets | — | 1.1 | |||||||
Transaction and integration costs | 14.4 | — | |||||||
Loss on extinguishment of debt, net | — | 14.2 | |||||||
Gain on sale of Investment in CyrusOne | (117.7 | ) | (151.9 | ) | |||||
Reversal of wireless tower decommissioning accrual | — | (1.1 | ) | ||||||
Impairment of equity method investment | 4.7 | — | |||||||
Income tax effect of special items * | 29.7 | 50.7 | |||||||
Total special items | (39.7 | ) | (87.0 | ) | |||||
Net income applicable to common shareowners, excluding special items (Non-GAAP) | $ | 3.8 | $ | 8.6 | |||||
Weighted average diluted shares outstanding | 42.3 | 42.1 | |||||||
Diluted earnings per common share (GAAP) | $ | 1.03 | $ | 2.27 | |||||
Adjusted diluted earnings per common share (Non-GAAP) | $ | 0.09 | $ | 0.20 | |||||
* | Special items have been tax effected such that the normalized effective tax rate is 36% with the exception of transaction costs, which are treated as a discrete item in the quarter incurred. | ||||||||
Cincinnati Bell Inc. | |||||||||
Reconciliation of Operating Income (GAAP) Guidance to Adjusted EBITDA (Non-GAAP) Guidance | |||||||||
(Unaudited) | |||||||||
(Dollars in millions) | |||||||||
2017 Operating Income (GAAP) Guidance | $ | 64 | |||||||
Add: | |||||||||
Depreciation and amortization | 185 | ||||||||
Restructuring and severance related charges | 30 | ||||||||
Pension and other retirement plan expenses | 16 | ||||||||
2017 Previous Adjusted EBITDA (Non-GAAP) Guidance- Provided on 02/15/17 | $ | 295 | * | ||||||
OnX 4Q17 Contribution | 10 | ||||||||
2017 Revised Adjusted EBITDA (Non-GAAP) Guidance- Provided on 11/02/17 | $ | 305 | * | ||||||
* Plus or minus 2 percent | |||||||||
CONTACT:
Cincinnati Bell Inc.
Investor contact:
Josh Duckworth, 513-397-2292
Media contact:
Jane Weiler, 513-397-9941
Cincinnati Bell
Third Quarter 2017 Results
November 2, 2017
Safe Harbor
This presentation may contain “forward-looking” statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on our current
expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements about the beliefs, expectations and future plans and strategies of the Company, are
forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements. The following important factors, among other things, could cause or
contribute to actual results being materially and adversely different from those described or implied by such forward-looking statements including, but not limited to: those discussed in this release;
we operate in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share; we may be unable to
grow our revenues and cash flows despite the initiatives we have implemented; failure to anticipate the need for and introduce new products and services or to compete with new technologies may
compromise our success in the telecommunications industry; our access lines, which generate a significant portion of our cash flows and profits, are decreasing in number and if we continue to
experience access line losses similar to the past several years, our revenues, earnings and cash flows from operations may be adversely impacted; our failure to meet performance standards under
our agreements could result in customers terminating their relationships with us or customers being entitled to receive financial compensation, which would lead to reduced revenues and/or
increased costs; we generate a substantial portion of our revenue by serving a limited geographic area; a large customer accounts for a significant portion of our revenues and accounts receivable
and the loss or significant reduction in business from this customer would cause operating revenues to decline and could negatively impact profitability and cash flows; maintaining our
telecommunications networks requires significant capital expenditures, and our inability or failure to maintain our telecommunications networks could have a material impact on our market share
and ability to generate revenue; increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers; we may be liable for
material that content providers distribute on our networks; cyber attacks or other breaches of network or other information technology security could have an adverse effect on our business; natural
disasters, terrorists acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations; the regulation of our businesses by federal and state
authorities may, among other things, place us at a competitive disadvantage, restrict our ability to price our products and services and threaten our operating licenses; we depend on a number of
third party providers, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers; a failure of back-office information technology systems
could adversely affect our results of operations and financial condition; if we fail to extend or renegotiate our collective bargaining agreements with our labor union when they expire or if our
unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed; the loss of any of the senior management team or attrition
among key sales associates could adversely affect our business, financial condition, results of operations and cash flows; our debt could limit our ability to fund operations, raise additional capital,
and fulfill our obligations, which, in turn, would have a material adverse effect on our businesses and prospects generally; our indebtedness imposes significant restrictions on us; we depend on our
loans and credit facilities to provide for our short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited; the
servicing of our indebtedness is dependent on our ability to generate cash, which could be impacted by many factors beyond our control; we depend on the receipt of dividends or other
intercompany transfers from our subsidiaries and investments; the trading price of our common shares may be volatile, and the value of an investment in our common shares may decline; the
uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact our business and financial condition; our future cash flows could be adversely affected
if it is unable to fully realize our deferred tax assets; adverse changes in the value of assets or obligations associated with our employee benefit plans could negatively impact shareowners’ deficit and
liquidity; third parties may claim that we are infringing upon their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products; third
parties may infringe upon our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury; we could be subject to a significant amount of litigation,
which could require us to pay significant damages or settlements; we could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety
laws; the timing and likelihood of completion of our proposed merger of Hawaiian Telcom, including the timing, receipt and terms and conditions of any required governmental and regulatory
approvals for the proposed transaction that could reduce anticipated benefits or cause the parties to abandon the transaction; the possibility that Hawaiian Telcom’s stockholders may not approve
the proposed merger; the possibility that competing offers or acquisition proposals for Hawaiian Telcom will be made; the occurrence of any event, change or other circumstance that could give rise
to the termination of the proposed transaction; the possibility that the expected synergies and value creation from the proposed transaction involving Hawaiian Telcom will not be realized or will not
be realized within the expected time period; the risk that the businesses of the Company and Hawaiian Telcom and other acquired companies will not be integrated successfully; disruption from the
proposed transaction involving Hawaiian Telcom making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; and the possibility that
the proposed transaction involving Hawaiian Telcom does not close, including due to the failure to satisfy the closing conditions and the other risks and uncertainties detailed in our filings, including
our Form 10-K, with the SEC as well as Hawaiian Telcom’s filings, including its Form 10-K, with the SEC.
These forward-looking statements are based on information, plans and estimates as of the date hereof and there may be other factors that may cause our actual results to differ materially from
these forward-looking statements. We assume no obligation to update the information contained in this release except as required by applicable law.
2
Non-GAAP Financial Measures
This presentation contains information about adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA), Adjusted EBITDA margin, net debt, net income applicable to common
shareholders 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 within the Investor
Relations section.
.
3
Call Participants
Page 4
Leigh Fox
President and CEO, Cincinnati Bell
Andy Kaiser
CFO, Cincinnati Bell
4
Page 5
Third Quarter 2017 Highlights
5
Strategic Revenue
$168M
+3% y/y
Fioptics
Revenue of
$79M
+21% y/y
564,700
addresses
+11% y/y
Key Financial Metrics
Strategic Revenue
with breakdown
for 2 segments
Adj EBITDA with
breakdown for 2
segments
Adjusted EBITDA
($ in millions)
Total Revenue
($ in millions)
-$3 -$5
$12 $8
$69 $73
3Q16 3Q17
Entertainment & Communications IT & Hardware Corporate
$78 $76
-$4 -$3
$123 $96
$193
$196
3Q16 3Q17
Entertainment & Communications IT & Hardware Eliminations
$312
$289
Business
Description
• Expansion of geographic footprint and addressable
market beyond Cincinnati to accelerate momentum
in IT services
Closing • Closed on October 2, 2017
Page 6
• $201M in cash1
Recent Business Highlights
Completion of the OnX Acquisition
6
Growth
Opportunity
Transaction
Size
• OnX provides industry-leading technology services
and solutions to enterprise customers in the U.S.,
Canada and the U.K.
Expected
Cost Synergies*
• ~$10M annually
*To be realized within two years post-close, and excluding
potential revenue synergies from cross-selling opportunities
1. The acquisition of OnX, originally announced on July 10, 2017, indicated that the purchase price of $201 million was subject to customary post-closing adjustments. Based on preliminary working capital adjustments, the cash consideration
exchanged for the acquisition on October 2, 2017 was $242.3 million. The final purchase price is subject to finalization of post-closing adjustments. The initial accounting for the business combination was not complete at the time the financial
statements were issued due to the timing of the acquisition and the filing of this Quarterly Report on Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, are not possible at this time.
Source: Company Filings
Access to
50+
Data Centers
Through
Strategic
Partners
20+
Offices
2,400+
Customers
Offices
Market
Opportunity
• $250 billion expected to be spent globally
on cloud services in 2017
Strengthened North American platform dramatically transforms
IT service business runway for growth
Acquisition of OnX Creates Leading North American IT Services Provider
Page 7
Entertainment & Communications
7
Strategic Revenue
with breakdown
for 2 segments
Segment Results
Strategic Revenue
Highlights
• Strong and consistent performance in our fiber network business
• Fioptics revenue of $79M, up 21% y/y
• Fioptics internet subscribers of 221,200, up 19% y/y
• Fioptics video subscribers of 143,500, up 8% y/y
• Positive net subscriber adds for internet and video in 3Q17
• Total internet subscribers of 307,900 in 3Q17, up 3% y/y
• Pending merger with Hawaiian Telcom to add operational scale
and expand the Company’s fiber-centric footprint and commercial
opportunity to Hawaii
($ in millions) 3Q17 Y/Y
Consumer $76 18%
Business 43 10%
Carrier 10 -5%
Total $129 13%
($ in millions) 3Q17 Y/Y
Revenue $196 2%
Adj. EBITDA $73 5%
Adj. EBITDA margin 37% 4%
Segment Revenue Elements
Page 8
Fioptics Update
8
Fioptics Revenue
($ in millions)
Total Fioptics Subscribers
(in thousands)
Fioptics Penetration (y/y)
Video
Internet
Voice
25%
39%
19%
Fioptics Monthly ARPU
Video
Internet
Voice
$88
$50
$28
+6% y/y
+5% y/y
+2% y/y
CBB continues to win with
fiber in an increasingly
competitive environment
• Fioptics is available to 564,700 addresses - approximately 70% of Greater Cincinnati
• On track to pass 35,000 new addresses in 2017
• Video churn of 2.9% in 3Q17, flat vs. 3Q16
• Single-family churn was 2.1%; apartment churn was 5.0%
$32 $38
$26
$32
$7
$9
3Q16 3Q17
Video Internet Voice
$65
$79
133 144
186
221
91 105
3Q16 3Q17
Video Internet Voice
Page 9
Entertainment & Communications
9
Consumer Market
Business Market
Carrier Market
• Fioptics revenue growth
continues to more than offset
legacy declines
• Ongoing transition of
customers from copper
network to strategic fiber-
based products continues
• On-going FCC switched access
rate reductions
• National carriers increased
focus on reducing costs
• Recent customer win in
wireless tower market
1. Entertainment & Communications Consumer Integration revenue totaled $0.9 million in 3Q16 and $0.2 in 3Q17
2. Entertainment & Communications Business Integration revenue was $0.4 million in 3Q16 and 3Q17
($ in millions)
(1) (2)
$30 $25
$64 $76
3Q16 3Q17
Legacy Strategic Integration
$95
$101
$33 $29
$39 $43
3Q16 3Q17
Legacy Strategic Integration
$72 $72
=
$15
$13
$11
$10
3Q16 3Q17
Legacy Strategic
$26
$23
Page 10
IT Services & Hardware
10
Strategic Revenue
with breakdown
for 2 segments
Segment Results
Strategic Revenue
($ in millions) 3Q17 Y/Y
Professional Services $17 -24%
Management and Monitoring 6 -32%
Unified Communications 7 -1%
Cloud Services 11 -11%
Total $41 -19%
Highlights
• IT Services and Hardware revenue flat sequentially
• Decline in Telecom & IT hardware due to cost cutting initiatives by
a large customer
• Positive contribution from the SunTel Services acquisition,
expanding CBTS' presence into the Michigan market
• Completion of the acquisition of OnX Enterprise Solutions to
expand the Company’s product offering and provide greater
geographic and customer diversification
• Recent win of national NaaS project to start in H2 2018
($ in millions) 3Q17 Y/Y
Revenue $96 -22%
Adj. EBITDA $8 -29%
Adj. EBITDA margin 9% -9%
Segment Revenue Elements
Management and
Monitoring
-32% y/y
Unified Communications
+8% y/y
Cloud Services
-11% y/y
Telecom &
IT Hardware
-33% y/y
Professional
Services
-6% y/y
Page 11
Capital Structure and Free Cash Flow Performance
11
Net Debt
Change in Working Capital/Other
1. Calculated as net debt divided by LTM adjusted EBITDA
2. Includes decommissioning of wireless towers
($ in millions)
3.7x
Net Leverage(1)
3.6x
Net Leverage(1)
$1,125 $1,089
3Q16 3Q17
-$27
$26
3Q16 3Q17
Capital Structure
• Committed financing for the cash consideration portions
of both the Hawaiian Telcom and OnX transactions, and
refinancing for portions of existing Cincinnati debt and all
of Hawaiian Telcom’s existing debt
• New credit agreement comprised of a 7-year
$600 million senior secured term loan facility and
5-year $200 million senior secured revolving
credit facility
• Raised $350 million in senior unsecured notes
YTD Free Cash Flow
3Q17 Y/Y
YTD Change
Adjusted EBITDA (Non-GAAP) $224 ($7)
Interest Payments (53) 5
Pension and OPEB Payments (9) (1)
Stock-based Compensation 5 -
Restructuring & Severance related payments (27) (26)
Transaction and Integration Costs (9) (9)
Working Capital and Other 26 53
Cash Provided by Operating Activities (GAAP) $157 $15
Capital expenditures (148) 41
Restructuring & severance related payments 27 26
Preferred stock dividends (8) -
Dividends received from Investment in CyrusOne - (6)
Cash used by discontinued operations(2) - (7)
Transaction Costs 9 9
Free Cash Flow (Non-GAAP) $37 $78
Page 12
Capital Expenditures
12
Capital Expenditures
Total $43 $148 $180 - $210
• Anticipates CapEx towards high-end
of guidance range for 2017
• Invested $92 million in Fioptics in
the first nine months of 2017
• Passed an additional 31,300
customer locations
• On track to pass 35,000 new
addresses during 2017 and
extend coverage to more
than 70% of Greater
Cincinnati
• Other strategic represents success-
based capital for fiber builds for
business and new IT services
projects
3Q17 YTD 3Q17 FY 2017
Construction $12 $44 $40 - $50
Installation 11 40 40 - 50
Value Added 2 8 10
Total Fioptics $25 $92 $90 - $110
Other Strategic 8 30 50 - 60
Total Success-based Investments $33 $122 $140 - $170
Legacy Maintenance 10 26 40
($ in millions)
Page 13
2017 Outlook
13
Revenue Adjusted EBITDA
Previous Guidance $1.2 billion $295 million*
OnX Contribution $0.15 - $0.2 billion $10 million
Revised Guidance $1.35 - $1.4 billion $305 million*
• Updated previous 2017 financial guidance to
include the acquisition of OnX, which closed on
October 2, 2017
* Plus or minus 2 percent
Selected 2017 Free Cash Flow Items
Capital Expenditures $180 - $210 million
Interest payments ~$70 million
Pension and OPEB payments ~$15 million
Page 14
Appendix
Page 15
15
Consolidated Results
($ in millions, except per share amounts)
2017 2016
Revenue 289.2$ 312.4$
Costs and expenses
Cost of services and products 162.6 183.8
Selling, general and administrative 54.5 55.5
Depreciation and amortization 47.3 46.5
Restructuring and severance related charges — —
Transaction and integration costs 12.1 —
Other — 1.1
Operating income 12.7 25.5
Interest expense 18.8 17.9
Loss on extinguishment of debt, net — 11.4
Gain on sale of Investment in CyrusOne — (33.3)
Other expense (income), net 4.5 (0.1)
Income before income taxes (10.6) 29.6
Income tax expense 0.6 10.8
Net (loss) income (11.2) 18.8
Preferred stock dividends 2.6 2.6
Net (loss) income applicable to common shareowners (13.8)$ 16.2$
Basic net (loss) earnings per common share (0.33)$ 0.39$
Dil ted net (loss) earnings per common share (0.33)$ 0.38$
Weighted average common shares outstanding (in millions)
– Basic 42.2 42.0
– Diluted 42.2 42.1
September 30,
Three Months Ended
Page 16
16
Consolidated Results
($ in millions, except per share amounts)
2017 2016
Revenue 861.4$ 900.5$
Costs and expenses
Cost of services and products 482.8 517.3
Selling, general and administrative 166.6 164.9
Depreciation and amortization 140.1 134.7
Restructuring and severance related charges 29.2 —
Transaction and integration costs 14.4 —
Other — 1.1
Operating income 28.3 82.5
Interest expense 54.9 58.1
Loss on extinguishment of debt, net — 14.2
Gain on sale of Investment in CyrusOne (117.7) (151.9)
Other expense (income), net 3.5 (1.2)
Income before income taxes 87.6 163.3
Income tax expense 36.3 59.9
Net income 51.3 103.4
Preferred stock dividends 7.8 7.8
Net income applicable to common shareowners 43.5$ 95.6$
Basic net earnings per common share 1.03$ 2.28$
Dil ted net earnings per common share 1.03$ 2.27$
Weighted average common shares outstanding (in millions)
– Basic 42.1 42.0
– Diluted 42.3 42.1
Nine Months Ended
September 30,
Page 17
17
Strategic Legacy Integration
Data
Fioptics Internet
DSL (1) (> 10 meg)
Ethernet
Private Line
MPLS (2)
SONET (3)
Dedicated Internet Access
Wavelength
Audio Conferencing
DSL (< 10 meg)
DS0 (5), DS1, DS3
TDM (6)
Voice Fioptics Voice
VoIP (4)
Traditional Voice
Long Distance
Switched Access
Digital Trunking
Video Fioptics Video
Services and Other Wiring Projects Advertising Directory
Assistance
Maintenance
Information Services
Wireless Handsets and
Accessories
(1) Digital Subscriber Line
(2) Multi-Protocol Label Switching
(3) Synchronous Optical Network
(4) Voice of Internet Protocol
(5) Digital Signal
(6) Time Division Multiplexing
Revenue Classifications – Entertainment and Communications
Page 18
18
Strategic Integration
Professional Services
Consulting
Staff Augmentation
Installation
Unified Communications Voice Monitoring
Managed IP Telephony Solutions
Maintenance
Cloud Services Virtual Data Centers
Storage
Backup
Monitoring and Management Network Monitoring/Management
Security
Telecom & IT Hardware Hardware
Software Licenses
Revenue Classifications – IT Services and Hardware
Page 19
19
Revenue – Strategic, Legacy and Integration
($ in millions)
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data 68.0$ $ —
Voice 22.5 —
Video 37.8 —
Services and other 0.9 —
Professional Services — 17.5
Management and monitoring — 5.5
Unified communications — 7.2
Cloud services — 10.9
Total Strategic 129.2 41.1 170.3 (2.4) 167.9
Legacy
Data 20.0$ $ —
Voice 44.2 —
Services and other 2.2 —
Total Legacy 66.4 - 66.4 (0.4) 66.0
Integration
Services and other 0.6$ $ —
Professional Services — 7.4
Unified communications — 3.5
Telecom and IT hardware — 44.3
Total Integration 0.6 55.2 55.8 (0.5) 55.3
196.2$ 96.3$ 292.5$ (3.3)$ 289.2$
Eliminations (0.4) (2.9) (3.3)
Total Revenue 195.8$ 93.4$ 289.2$
3Q17
Page 20
20
Revenue – Strategic, Legacy and Integration
($ in millions)
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data 199.6$ $ —
Voice 64.5 —
Video 111.0 —
Services and other 8.2 —
Professional Services — 54.2
Management and monitoring — 15.6
Unified communications — 21.7
Cloud services — 36.2
Total Strategic 383.3 127.7 511.0 (7.0) 504.0
Legacy
Data 63.7$ $ —
Voice 137.0 —
Services and other 7.5 —
Total Legacy 208.2 - 208.2 (0.9) 207.3
Integration
Services and other 1.4$ $ —
Professional Services — 15.9
Unified communications — 9.9
Telecom and IT hardware — 125.0
Total Integration 1.4 150.8 152.2 (2.1) 150.1
592.9$ 278.5$ 871.4$ (10.0)$ 861.4$
Eliminations (1.3) (8.7) (10.0)
Total Revenue 591.6$ 269.8$ 861.4$
YTD 2017
Page 21
21
Revenue – Strategic, Legacy and Integration
($ in millions)
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data 62.1$ $ —
Voice 18.7 —
Video 32.2 —
Services and other 1.4 —
Professional Services — 22.9
Management and monitoring — 8.1
Unified communications — 7.3
Cloud services — 12.2
Total Strategic 114.4 50.5 164.9 (2.1) 162.8
Legacy
Data 24.3$ $ —
Voice 50.0 —
Services and other 3.0 —
Total Legacy 77.3 - 77.3 (0.3) 77.0
Integration
Services and other 1.3$ $ —
Professional Services — 3.6
Unified communications — 2.6
Telecom and IT hardware — 66.2
Total Integration 1.3 72.4 73.7 (1.1) 72.6
193.0$ 122.9$ 315.9$ (3.5)$ 312.4$
Eliminations (0.4) (3.1) (3.5)
Total Revenue 192.6$ 119.8$ 312.4$
3Q16
Page 22
22
Revenue – Strategic, Legacy and Integration
($ in millions)
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data 181.0$ $ —
Voice 53.8 —
Video 92.1 —
Services and other 4.1 —
Professional Services — 68.3
Management and monitoring — 24.1
Unified communications — 22.1
Cloud services — 33.2
Total Strategic 331.0 147.7 478.7 (6.7) 472.0
Legacy
Data 77.4$ $ —
Voice 154.2 —
Services and other 8.9 —
Total Legacy 240.5 - 240.5 (0.7) 239.8
Integration
Services and other 4.3$ $ —
Professional Services — 11.6
Unified communications — 8.0
Telecom and IT hardware — 167.9
Total Integration 4.3 187.5 191.8 (3.1) 188.7
575.8$ 335.2$ 911.0$ (10.5)$ 900.5$
Eliminations (1.0) (9.5) (10.5)
Total Revenue 574.8$ 325.7$ 900.5$
YTD 2016
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