HIGHLIGHTS
- Consolidated revenue totaled $387
million with strong Adjusted EBITDA1 of $105 million
- Completed merger with Hawaiian Telcom
on July 2, 2018, a major step toward building scale and locking in
fiber density value for shareholders and customers
- Hawaiian Telcom revenue totaled $87
million which generated Adjusted EBITDA of $23 million, up 4%
compared to the prior quarter
- Cincinnati Fioptics revenue totaled $86
million, up 9% from a year ago
- IT Services and Hardware Adjusted
EBITDA totaled $17 million, up $7 million from the prior year
- Cash provided by operating activities
totaled $123 million year-to-date, and free cash flow2 totaled $27
million year-to-date
- Reaffirming full year financial
guidance which includes contributions from Hawaiian Telcom in the
second half of 2018
Cincinnati Bell Inc. (NYSE:CBB), reported financial results for
the third quarter ended September 30, 2018, including Hawaiian
Telcom’s financial performance subsequent to the close of the
merger on July 2, 2018.
"Our performance this quarter highlights the continued demand
for our fiber offerings, reinforcing our ability to win with fiber
as we successfully transition customers to an infrastructure that
supports high-density data transmission,” said President and CEO
Leigh Fox. “We remain encouraged by the growth in our IT services
business and the demand for UCaaS, SD-WAN and NaaS as customers
shift from legacy to strategic IT solutions, driving significant
recurring revenue.”
Mr. Fox continued, “Integration efforts at Hawaiian Telcom are
progressing as planned with a clear path forward and solid
foundation to replicate Cincinnati Bell’s fiber success in Hawaii.
We remain confident in our ability to realize the expected
synergies and are optimistic about cross selling IT services in
Hawaii. We are on target to achieve our objectives for the year and
will continue to invest in our strategic offerings where we are
winning to maximize shareholder value."
CONSOLIDATED RESULTS
- Consolidated revenue totaled $387
million for third quarter of 2018, compared to $256 million in the
prior year
- Operating income for the quarter
totaled $15 million, down $1 million from the prior year due to
merger related costs
- Adjusted EBITDA of $105 million,
increased $29 million compared to a year ago
- Net loss for the third quarter of 2018
totaled $18 million, resulting in diluted loss per share of $0.41
due to transaction and integration costs as well as increased
interest expense compared to the prior year
Entertainment and Communications Segment
- Entertainment and Communications
revenue totaled $253 million, up $78 million from a year ago
- Cincinnati revenue totaled $173
million, down less than 1% from the prior year due to legacy
declines
- Fioptics revenue of $86 million, up $7
million year-over-year
- Fioptics internet subscribers totaled
236,600 at the end of the third quarter, up 15,400 compared to a
year ago
- Fioptics video subscribers totaled
141,500, down 2,000 compared to the same period in 2017
- Fioptics is available to 598,600 homes
and businesses, or approximately 73% of Greater Cincinnati which
includes fiber to the premise ("FTTP") and fiber to the node
("FTTN")
- Year-to-date, we passed 26,400 new
addresses with fiber, and now offer FTTP to 56% of Cincinnati's
total addressable market
- Hawaii revenue totaled $80 million in
the third quarter of 2018, consistent with the prior quarter
- Total internet subscribers were
114,400, consistent with the prior quarter
- Video subscriber base totaled 48,600,
consistent with the prior quarter
- Consumer/SMB Fiber is available to
approximately 208,700 homes in Oahu, covering more than 65% of the
island
- Adjusted EBITDA was $91 million, up $21
million year-over-year
Cincinnati Bell’s merger with Hawaiian Telcom expands its base
of high-quality metro fiber assets to meet the accelerating need
for increased bandwidth and support the growing demand for IoT
ecosystems.
IT Services and Hardware Segment
- IT Services and Hardware revenue of
$141 million, up $54 million year-over-year due to contributions
from OnX and Hawaiian Telcom
- Consulting revenue of $42 million, up
$26 million year-over-year
- Cloud revenue of $26 million, up $9
million year-over-year
- Communications revenue of $47 million,
up $3 million year-over-year
- Infrastructure Solutions revenue of $26
million, up $16 million year-over-year
- Adjusted EBITDA of $17 million, up $7
million year-over-year
The expansion of the Company's geographic footprint in IT
services brings meaningful scale and client diversification,
supporting the transformation to a hybrid IT solutions
provider.
Cash Flow and Financial Position
- Cash provided by operating activities
totaled $123 million and free cash flow totaled $27 million during
the first nine months of 2018
- Interest payments for the first nine
months of 2018 totaled $101 million, a $48 million increase from
the prior year due to financing the mergers with Hawaiian Telcom
and OnX
- Capital expenditures were $141 million
year-to-date, including $21 million for Hawaiian Telcom
2018 Outlook
Cincinnati Bell is reaffirming its financial guidance for 2018,
which reflects contributions from Hawaiian Telcom in the second
half of 2018:
Category
2018
OriginalGuidanceProvided on 02/15/18
HawaiianTelcomContribution
2018 RevisedGuidanceProvided
on 08/08/18
Revenue $1,200M - $1,275M $175M - $185M
$1,375M - $1,460M Adjusted EBITDA $320M
- $330M $43M - $49M $363M - $379M
This revenue guidance reflects the new ASC 606 revenue
recognition standard, effective January 1, 2018, and presents
Infrastructure Solutions sales net of product cost. For reference,
had the revenue standard not been effective, our revenue guidance
would have been between $1,880 million to $1,965 million.
Conference Call/Webcast
Cincinnati Bell will host a conference call on November 8, 2018
at 9:00 a.m. (ET) to discuss its results for the third quarter of
2018. A live webcast of the call will be available via the Investor
Relations section of www.cincinnatibell.com. Callers can dial
toll-free (888) 220-8474 or toll (323) 794-2588. A taped replay of
the conference call will be available starting at 12:00 p.m. (ET)
on Thursday, November 8, 2018 until Thursday, November 22, 2018 at
midnight ET. To access the telephone replay, please dial toll-free
(888) 203-1112 or toll (719) 457-0820, and then enter the
conference ID number 3110083. 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
possibility that the expected synergies and value creation from our
acquisition of 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; the risk that
unexpected costs will be incurred; and the other risks and
uncertainties detailed in our filings with the SEC, including our
Form 10-K report, Form 10-Q reports and Form 8-K reports.
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 (loss)
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.
1Adjusted EBITDA provides a useful measure of operational
performance. The company defines Adjusted EBITDA as GAAP operating
income plus depreciation, amortization, stock based compensation,
restructuring and severance related charges, (gain) loss on sale or
disposal of assets, transaction and integration costs, asset
impairments, and other special items. During the first quarter
ended March 31, 2018, the Company revised its methodology to
calculate Adjusted EBITDA to exclude stock-based compensation
expense to align more closely with its peer group. In addition, the
presentation of Adjusted EBITDA is adjusted for the amended
accounting guidance adopted by the Company on January 1, 2018 and
implemented retrospectively, which requires pension and
postretirement benefit costs (excluding current service cost
component) to be reported below operating income. 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.
2Free cash flow provides a useful measure of operational
performance, liquidity and financial health. The company defines
free cash flow as cash provided by (used in) operating activities,
adjusted for restructuring and severance related payments,
transaction and integration payments, less capital expenditures and
preferred stock dividends. 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.
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 (loss) applicable to common shareholders excluding
special items in total and per share provides a useful measure
of operating performance. Net income (loss) 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 (loss) excluding special items as
defined by other companies.
About Cincinnati Bell Inc.
With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc.
(NYSE: CBB) delivers integrated communications solutions to
residential and business customers over its fiber-optic and copper
networks including high-speed internet, video, voice and data.
Cincinnati Bell provides service in areas of Ohio, Kentucky,
Indiana and Hawaii. 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 2018 2017 $
% 2018 2017 $ %
Revenue $ 386.7 $ 255.5 $ 131.2 51 % $ 979.2 $ 764.5 $ 214.7
28 %
Costs and expenses Cost of services and products
197.7 127.0 70.7 56 % 499.4 380.0 119.4 31 % Selling, general and
administrative 85.7 53.2 32.5 61 % 220.2 162.3 57.9 36 %
Depreciation and amortization 75.5 47.3 28.2 60 % 177.6 140.1 37.5
27 % Restructuring and severance related charges — — — n/m 4.9 29.2
(24.3 ) (83 )% Transaction and integration costs 13.3 12.1
1.2 10 % 18.2 14.4 3.8 26 %
Operating income 14.5 15.9 (1.4 ) (9 )% 58.9 38.5 20.4 53 %
Interest expense 33.7 18.8 14.9 79 % 96.3 54.9 41.4 75 %
Loss on extinguishment of debt — — — n/m 1.3 — 1.3 n/m Other
components of pension and postretirement benefit plans expense 3.0
3.0 — — 9.5 9.4 0.1 1 % Gain on sale of Investment in CyrusOne — —
— n/m — (117.7 ) 117.7 n/m Other (income) expense, net (1.2 ) 4.5
(5.7 ) n/m (2.4 ) 3.5 (5.9 ) n/m (Loss) income
before income taxes (21.0 ) (10.4 ) (10.6 ) n/m (45.8 ) 88.4 (134.2
) n/m Income tax (benefit) expense (3.3 ) 0.6 (3.9 ) n/m
(6.0 ) 36.5 (42.5 ) n/m
Net (loss) income
(17.7 ) (11.0 ) (6.7 ) 61 % (39.8 ) 51.9 (91.7 ) n/m
Preferred stock dividends 2.6 2.6 — —
7.8 7.8 — —
Net (loss) income
applicable to common shareowners $ (20.3 ) $ (13.6 ) $ (6.7 )
49 % $ (47.6 ) $ 44.1 $ (91.7 ) n/m
Basic net
(loss) earnings per common share $ (0.41 ) $ (0.32 ) $ (1.06 )
$ 1.05
Diluted net (loss) earnings per common share $ (0.41
) $ (0.32 ) $ (1.06 ) $ 1.04
Weighted average common
shares outstanding
(in
millions)
- Basic 50.1 42.2 45.0 42.1 - Diluted 50.1 42.2 45.0 42.3
Cincinnati Bell Inc. Entertainment and
Communications Income Statement (Unaudited) (Dollars
in millions)
Three Months Ended Nine Months
Ended September 30, Change September 30,
Change 2018 2017 $ % 2018
2017 $ % Income Statement Revenue $
253.4 $ 175.0 $ 78.4 45 % $ 601.5 $ 531.1 $ 70.4 13 %
Operating costs and expenses Cost of services and products 118.8
75.7 43.1 57 % 274.8 229.7 45.1 20 % Selling, general and
administrative 44.0 29.4 14.6 50 % 100.1 90.5 9.6 11 % Depreciation
and amortization 65.6 41.2 24.4 59 % 147.5 121.0 26.5 22 %
Restructuring and severance related charges — — —
n/m — 26.7 (26.7 ) n/m Total operating
costs and expenses 228.4 146.3 82.1 56 % 522.4
467.9 54.5 12 % Operating income $ 25.0
$ 28.7 $ (3.7 ) (13 )% $ 79.1 $ 63.2 $
15.9 25 %
Cincinnati Bell Inc.
Entertainment and Communications Revenue (Unaudited)
(Dollars in millions)
Three Months Ended
Three Months Ended September 30, 2018 September
30, 2017 Cincinnati Hawaii Total
Cincinnati Hawaii Total Revenue
Consumer / SMB Fiber * Data $ 36.0 $ 6.3 $ 42.3 $ 32.5 $ — $ 32.5
Video 40.7 11.7 52.4 37.7 — 37.7 Voice 9.4 2.7 12.1 8.6 — 8.6 Other
0.3 0.1 0.4 0.3 — 0.3 Total
Consumer / SMB Fiber 86.4 20.8 107.2 79.1
— 79.1
Enterprise Fiber
Data 21.0 8.7 29.7 20.5 — 20.5 Legacy Data 27.5 16.5 44.0
32.3 — 32.3 Voice 35.0 29.7 64.7 40.3 — 40.3 Other 3.8 4.0
7.8 2.8 — 2.8 Total Legacy 66.3
50.2 116.5 75.4 — 75.4 Total
Entertainment & Communications $ 173.7 $ 79.7 $
253.4 $ 175.0 $ — $ 175.0
Nine
Months Ended Nine Months Ended September 30, 2018
September 30, 2017 Cincinnati Hawaii
Total Cincinnati Hawaii Total
Revenue Consumer / SMB Fiber * Data $ 106.0 $ 6.3 $ 112.3 $
93.4 $ — $ 93.4 Video 119.6 11.7 131.3 110.5 — 110.5 Voice 28.0 2.7
30.7 24.8 — 24.8 Other 0.9 0.1 1.0 0.9
— 0.9 Total Consumer / SMB Fiber 254.5
20.8 275.3 229.6 —
229.6 Enterprise Fiber Data 62.8 8.7 71.5 65.5 — 65.5
Legacy Data 85.0 16.5 101.5 100.9 — 100.9 Voice 109.4 29.7
139.1 126.3 — 126.3 Other 10.1 4.0 14.1
8.8 — 8.8 Total Legacy 204.5
50.2 254.7 236.0 —
236.0 Total Entertainment & Communications $ 521.8
$ 79.7 $ 601.5 $ 531.1 $ — $
531.1 * Represents Fioptics in Cincinnati
Cincinnati Bell Inc.
Entertainment and Communications Metric Information
(Unaudited) (In thousands)
September 30, June 30, March 31,
December 31, September 30, 2018 2018
2018 2017 2017 Cincinnati Metrics
Fioptics
Data
Internet FTTP * 196.8 192.7 187.8 179.6 174.2 Internet FTTN * 39.8
42.6 45.0 47.0 47.0 Total
Fioptics Internet 236.6 235.3 232.8 226.6 221.2
Video
Video FTTP 115.6 118.1 118.1 116.5 113.5 Video FTTN 25.9
27.0 28.2 30.0 30.0 Total Fioptics
Video 141.5 145.1 146.3 146.5 143.5
Voice
Fioptics Voice Lines 107.0 107.6 106.9 105.9 104.7
Fioptics Units
Passed
Units Passed FTTP 459.1 449.3 440.5 431.3 423.6 Units Passed FTTN
139.5 139.9 140.3 140.9 141.1
Total Fioptics Units Passed 598.6 589.2 580.8 572.2 564.7
Enterprise Fiber
Data
Ethernet Bandwidth (Gb) 4,331 4,133 4,046 3,919 3,733
Legacy
Data
DSL 74.1 75.2 78.1 82.1 86.7
Voice
Legacy Voice Lines 232.7 240.6 251.4 262.0 271.6 *Fiber to
the Premise (FTTP), Fiber to the Node (FTTN)
Cincinnati Bell Inc. Entertainment and Communications
Metric Information (Unaudited) (In thousands)
September 30, 2018
Hawaii Metrics Consumer / SMB Fiber
Data
Internet FTTP * 49.5 Internet FTTN * 14.5 Total Consumer / SMB
Fiber Internet 64.0
Video
Video FTTP 33.3 Video FTTN 15.3 Total Consumer / SMB Fiber Video
48.6
Voice
Consumer / SMB Fiber Voice Lines 29.9
Consumer / SMB Fiber
Units Passed **
Units Passed FTTP 163.6 Units Passed FTTN 73.3 Total Consumer / SMB
Fiber Units Passed 236.9
Enterprise Fiber
Data
Ethernet Bandwidth (Gb) 1,948
Legacy
Data
DSL 50.4
Voice
Legacy Voice Lines 203.4 *Fiber to the Premise (FTTP), Fiber
to the Node (FTTN) ** Includes units passed for both consumer and
business on Oahu and neighboring islands.
Cincinnati Bell Inc.
IT Services and Hardware Income Statement and Metric
Information (Unaudited) (Dollars in millions)
Three Months Ended Nine Months
Ended September 30, Change September 30,
Change 2018 2017 $ % 2018
2017 $ % Income Statement
Revenue $ 141.1 $ 87.0 $ 54.1 62 % $ 397.0 $ 252.8 $ 144.2 57 %
Operating costs and expenses Cost of services and products
86.4 57.6 28.8 50 % 243.1 169.0 74.1 44 % Selling, general and
administrative 37.5 19.4 18.1 93 % 110.5 59.0 51.5 87 %
Depreciation and amortization 9.9 6.1 3.8 62 % 30.0 19.0 11.0 58 %
Restructuring and severance related charges — — —
n/m 4.9 2.5 2.4 96 % Total
operating costs and expenses 133.8 83.1 50.7
61 % 388.5 249.5 139.0 56 % Operating
income $ 7.3 $ 3.9 $ 3.4 87 % $ 8.5 $
3.3 $ 5.2 n/m
Revenue Consulting $ 42.1
$ 16.1 $ 26.0 n/m $ 120.0 $ 49.3 $ 70.7 n/m Cloud 26.2 17.4 8.8 51
% 71.8 57.5 14.3 25 % Communications 47.0 43.9 3.1 7 % 129.1 120.7
8.4 7 % Infrastructure Solutions 25.8 9.6 16.2
n/m 76.1 25.3 50.8 n/m Total IT Services and
Hardware Revenue $ 141.1 $ 87.0 $ 54.1 62 % $
397.0 $ 252.8 $ 144.2 57 %
September 30, June 30,
March 31, 2018 2018 2018
Consulting Billable Resources 999 926 888
Communications NaaS Locations 1,101 782 564 SD - WAN
Locations 488 310 117 Hosted UCaaS Profiles* 223,311 192,715
178,457
* Includes 23,700 Hawaii Hosted UCaaS Profiles
beginning September 30, 2018 Cincinnati Bell
Inc. Net Debt (Non-GAAP) (Unaudited) (Dollars
in millions) September 30,
December 31, 2018 2017 Receivables
Facility $ 144.2 $ — Credit Agreement - Tranche B Term Loan due
2024 600.0 600.0 Credit Agreement - Revolving Credit Facility 50.0
— 7 1/4% Senior Notes due 2023 22.3 22.3 7% Senior Notes due 2024
625.0 625.0 8% Senior Notes due 2025 350.0 350.0 Cincinnati Bell
Telephone Notes 87.9 87.9 Capital leases and other debt 74.8 82.9
Net unamortized premium 1.7 1.9 Unamortized note issuance costs
(28.2 ) (22.3 ) Total debt 1,927.7 1,747.7 Less: Cash
and cash equivalents (10.6 ) (396.5 ) * Net debt (Non-GAAP)
$ 1,917.1 $ 1,351.2 * Includes restricted cash
of $366.5 million, which was used to fund the merger with Hawaiian
Telcom that closed on July 2, 2018.
Cincinnati Bell Inc. Reconciliation of Net (loss)
Income (GAAP) to Adjusted EBITDA (Non-GAAP) (Unaudited)
(Dollars in millions)
Three Months Ended September 30,
2018
Entertainment
&Communications
IT Services
&Hardware
Corporate
TotalCompany
Net loss (GAAP) $ (17.7 ) Add: Income tax benefit
(3.3 ) Interest expense 33.7 Loss on extinguishment of debt — Other
income, net (1.2 ) Other components of pension and postretirement
benefit plans expense 3.0
Operating income (loss)
(GAAP) $ 25.0 $ 7.3 $ (17.8 ) $ 14.5 Add: Depreciation and
amortization 65.6 9.9 — 75.5 Transaction and integration costs — —
13.3 13.3 Stock-based compensation — — 1.9 1.9
Adjusted EBITDA (Non-GAAP) $ 90.6 $ 17.2
$ (2.6 ) $ 105.2
Adjusted EBITDA Margin
(Non-GAAP) 36 % 12 % — 27 %
Three Months Ended September 30, 2017
Entertainment
&Communications
IT Services
&Hardware
Corporate
TotalCompany
Net loss (GAAP) $ (11.0 ) Add: Income tax expense 0.6
Interest expense 18.8 Other income, net 4.5 Other components of
pension and postretirement benefit plans expense 3.0
Operating income (loss) (GAAP) $ 28.7 $ 3.9 $ (16.7 ) $ 15.9
Add: Depreciation and amortization 41.2 6.1 — 47.3 Transaction and
integration costs — — 12.1 12.1 Stock-based compensation — —
1.3 1.3
Adjusted EBITDA (Non-GAAP) $
69.9 $ 10.0 $ (3.3 ) $ 76.6
Adjusted
EBITDA Margin (Non-GAAP) 40 % 11 % — 30 %
Year-over-year dollar change in Adjusted EBITDA $ 20.7 $ 7.2
$ 0.7 $ 28.6
Year-over-year percentage change in Adjusted
EBITDA 30 % 72 % (21 )% 37 %
Cincinnati Bell Inc. Reconciliation of Net (loss) Income
(GAAP) to Adjusted EBITDA (Non-GAAP) (Unaudited)
(Dollars in millions)
Nine Months Ended September 30,
2018
Entertainment
&Communications
IT Services
&Hardware
Corporate
TotalCompany
Net loss (GAAP) $ (39.8 ) Add: Income tax benefit
(6.0 ) Interest expense 96.3 Loss on extinguishment of debt 1.3
Other income, net (2.4 ) Other components of pension and
postretirement benefit plans expense 9.5
Operating
income (loss) (GAAP) $ 79.1 $ 8.5 $ (28.7 ) $ 58.9 Add:
Depreciation and amortization 147.5 30.0 0.1 177.6 Restructuring
and severance related charges — 4.9 — 4.9 Transaction and
integration costs — — 18.2 18.2 Stock-based compensation — —
4.5 4.5
Adjusted EBITDA (Non-GAAP) $
226.6 $ 43.4 $ (5.9 ) $ 264.1
Adjusted EBITDA Margin (Non-GAAP) 38 % 11 % — 27 %
Nine Months Ended
September 30, 2017
Entertainment
&Communications
IT Services
&Hardware
Corporate TotalCompany Net income
(GAAP) $ 51.9 Add: Income tax expense 36.5 Interest expense
54.9 Gain on sale of CyrusOne (117.7 ) Other income, net 3.5 Other
components of pension and postretirement benefit plans expense 9.4
Operating income (loss) (GAAP) $ 63.2 $ 3.3 $
(28.0 ) $ 38.5 Add: Depreciation and amortization 121.0 19.0 0.1
140.1 Restructuring and severance related charges 26.7 2.5 — 29.2
Transaction and integration costs — — 14.4 14.4 Stock-based
compensation — — 5.2 5.2
Adjusted
EBITDA (Non-GAAP) $ 210.9 $ 24.8 $ (8.3 ) $ 227.4
Adjusted EBITDA Margin (Non-GAAP) 40 % 10 % —
30 %
Year-over-year dollar change in Adjusted EBITDA
$ 15.7 $ 18.6 $ 2.4 $ 36.7
Year-over-year percentage
change in Adjusted EBITDA 7 % 75 % (29 )% 16 %
Cincinnati Bell Inc. Consolidated
Statements of Cash Flows (Unaudited) (Dollars in
millions) Three Months Ended Nine
Months Ended September 30, September 30,
2018 2017 2018 2017 Cash
provided by operating activities $ 32.9 $ 33.9 $
122.8 $ 156.8 Capital expenditures (69.7 )
(43.0 ) (140.7 ) (148.2 ) Proceeds from sale of Investment in
CyrusOne — — — 140.7 Acquisitions of businesses (214.0 ) — (216.8 )
(9.6 ) Other, net (0.1 ) (0.1 ) (0.1 ) 0.3 Cash used
in investing activities (283.8 ) (43.1 ) (357.6 ) (16.8 )
Net increase (decrease) in corporate credit and receivables
facilities with initial maturities less than 90 days 194.2 — 194.2
(89.5 ) Repayment of debt (318.4 ) (2.2 ) (324.3 ) (6.4 ) Debt
issuance costs (8.5 ) (0.6 ) (11.0 ) (1.3 ) Dividends paid on
preferred stock (2.6 ) (2.6 ) (7.8 ) (7.8 ) Other, net (0.1 ) 0.1
(2.1 ) (1.0 ) Cash used in financing activities
(135.4 ) (5.3 ) (151.0 ) (106.0 ) Effect of exchange rate
changes on cash, cash equivalents and restricted cash 0.1 —
(0.1 ) — Net (decrease) increase in cash, cash
equivalents and restricted cash (386.2 ) (14.5 ) (385.9 ) 34.0
Cash, cash equivalents and restricted cash at beginning of period
396.8 58.2 396.5 9.7 Cash, cash
equivalents and restricted cash at end of period $ 10.6 $
43.7 $ 10.6 $ 43.7
Reconciliation of Cash Provided by Operating Activities (GAAP)
to Free Cash Flow (Non-GAAP) Cash provided by operating
activities $ 32.9 $ 33.9 $ 122.8 $ 156.8 Adjustments: Capital
expenditures (69.7 ) (43.0 ) (140.7 ) (148.2 ) Restructuring and
severance related payments 6.5 9.9 14.7 27.0 Preferred stock
dividends (2.6 ) (2.6 ) (7.8 ) (7.8 ) Transaction and integration
costs* 33.7 8.2 37.9 8.9 Free
cash flow (Non-GAAP) $ 0.8 $ 6.4 $ 26.9 $ 36.7
Income tax payments (refunds) $ 0.4 $ 0.1 $ (13.2 ) $
(16.2 ) * For the three and nine months ended
September 30, 2018, the adjustment for transaction and integration
costs includes a $3.5 million payment of accrued interest on
Hawaiian Telcom’s debt that was repaid upon the completion of the
merger and a $5.0 million contribution to Hawaiian Telcom's pension
plan. The pension plan contribution was required by the Public
Utilities Commission of the State of Hawaii in order to complete
the merger between Cincinnati Bell Inc. and Hawaiian Telcom.
Cincinnati Bell Inc. Capital
Expenditures (Unaudited) (Dollars in millions)
Three Months Ended September 30, 2018 June
30, 2018 March 31, 2018 December 31, 2017
September 30, 2017 Entertainment and Communications $
62.3 $ 31.8 $ 27.6 $ 55.1 $ 38.8 IT Services and Hardware 7.4
6.5 5.1 7.2 4.2 Total capital
expenditures $ 69.7 $ 38.3 $ 32.7 $ 62.3
$ 43.0
Cincinnati Bell Inc.
Reconciliation of Net (Loss) Income Applicable to Common
Shareholders (GAAP) to Net (Loss) 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, 2018
September 30, 2017 Net (loss) income applicable to
common shareholders (GAAP) $ (20.3 ) $ (13.6 ) Special
items: Transaction and integration costs 13.3 12.1 Impairment of
equity method investment — 4.7 Income tax effect of special items *
(0.9 ) (1.7 ) Total special items 12.4 15.1 Net
(loss) income applicable to common shareowners, excluding special
items (Non-GAAP) $ (7.9 ) $ 1.5 Weighted average
diluted shares outstanding** 50.1 42.2 Diluted
earnings per common share (GAAP) $ (0.41 ) $ (0.32 )
Adjusted diluted (loss) earnings per common share (Non-GAAP) $
(0.16 ) $ 0.04 * Special items have been tax
effected such that the normalized effective tax rate is 19% and 36%
for the three months ended September 30, 2018 and 2017,
respectively, with the exception of transaction and integration
costs, which are treated as a discrete item in the quarter
incurred. ** Weighted average diluted shares outstanding based on
net (loss) income applicable to common shareowners, excluding
special items (Non-GAAP).
Cincinnati Bell Inc.
Reconciliation of Net (Loss) Income Applicable to Common
Shareholders (GAAP) to Net (Loss) 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, 2018
September 30, 2017 Net (loss) income applicable to
common shareholders (GAAP) $ (47.6 ) $ 44.1 Special items:
Restructuring and severance related charges 4.9 29.2 Loss on
extinguishment of debt 1.3 — Transaction and integration costs 18.2
14.4 Gain on sale of Investment in CyrusOne — (117.7 ) Impairment
of equity method investment — 4.7 Income tax effect of special
items * (0.6 ) 29.7 Total special items 23.8 (39.7 )
Net (loss) income applicable to common shareowners,
excluding special items (Non-GAAP) $ (23.8 ) $ 4.4
Weighted average diluted shares outstanding** 45.0 42.3
Diluted earnings per common share (GAAP) $ (1.06 ) $
1.04 Adjusted diluted (loss) earnings per common
share (Non-GAAP) $ (0.53 ) $ 0.10 * Special
items have been tax effected such that the normalized effective tax
rate is 19% and 36% for the Nine months ended September 30, 2018
and 2017, respectively, with the exception of transaction and
integration costs, which are treated as a discrete item in the
quarter incurred. ** Weighted average diluted shares outstanding
based on net (loss) income applicable to common shareowners,
excluding special items (Non-GAAP).
Cincinnati Bell
Inc. Reconciliation of Operating Income (GAAP) Guidance to
Adjusted EBITDA (Non-GAAP) Guidance (Unaudited)
(Dollars in millions)
2018Adjusted
EBITDAGuidance(original - 02/15/18)
Hawaiian
TelcomContribution
2018Adjusted
EBITDAGuidance(revised - 08/08/18)
Low High Low High Low
High 2018 Operating Income (GAAP) Guidance Range $ 70
$ 95 $ (7 ) $ 4 $ 63 $ 99 Add: Depreciation and
amortization 215 210 50 45 265 255 Restructuring and severance
related charges 10 5 — — 10 5 Transaction and integration costs 20
15 — — 20 15 Stock compensation expense 5 5 —
— 5 5
2018 Adjusted EBITDA (Non-GAAP)
Guidance Range $ 320 $ 330
$ 43 $ 49 $
363 $ 379
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181108005378/en/
Cincinnati Bell Inc.Investor contact:Kei
Lawson, 513-565-0510Takeitha.Lawson@cinbell.comorMedia
contact:Josh Pichler,
513-565-0310Josh.Pichler@cinbell.com
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