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Cincinnati Bell Reports Fourth Quarter And Full Year 2012 Results

Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the full year and fourth quarter of 2012.

Highlights
  • Achieved 2012 financial guidance for Revenue and Adjusted EBITDA
  • Completed successful IPO of CyrusOne in January 2013 and retained 69 percent ongoing ownership of CyrusOne
  • Passed 71,000 units with Fioptics in 2012 and achieved 28 percent customer penetration

Ted Torbeck, president and chief executive officer, stated, “In 2012, Cincinnati Bell delivered solid financial results while executing on a data center strategy that positions us to significantly reduce debt and fundamentally change Cincinnati Bell’s future leverage profile.”

“As the new CEO of Cincinnati Bell, I am honored to be leading a company with a very strong foundation from which to build. While challenges exist, our growth initiatives are clear. Our fiber investments are delivering strong results, and are approaching an inflection point. In 2013, we will increase capital investment to accelerate our fiber deployment to consumers and businesses in Cincinnati. As a result, we believe we can return our Wireline business to growth in 2014,” Mr. Torbeck concluded.

Fourth Quarter and Full-Year Performance Highlights
  • Revenue of $1.5 billion was in line with guidance and reflects a 1 percent increase over 2011. Fourth quarter 2012 revenue was $375 million, up $9 million from the same period in 2011. Full year earnings before interest, taxes, depreciation and amortization 1 (Adjusted EBITDA) was $535 million for 2012, ahead of guidance of $530 million and down 2 percent compared to 2011.
  • Wireline revenue for the quarter was $182 million, flat compared to the prior year when considering a one-time charge for credits recorded in the fourth quarter of 2011. Revenue for the full year of $731 million was down slightly compared to 2011, as the growth in Fioptics and data revenue from business customers continues to partially offset the impact of access line losses. Wireline Adjusted EBITDA for the full year was $344 million, resulting in an Adjusted EBITDA margin 2 of 47 percent, down from 49 percent in the full year of 2011.
  • CyrusOne revenue for the quarter increased 18 percent year-over-year to $58 million, and revenue for the full year of $221 million represents a 20 percent increase over 2011. CyrusOne Adjusted EBITDA for the full year was $115 million, an increase of 13 percent compared to 2011, resulting in an Adjusted EBITDA margin of 52 percent. During the fourth quarter, the company added 36,000 square feet of data center space and sold 41,000 square feet. For the year, the company constructed 199,000 square feet of additional data center space, increasing total capacity to 932,000 square feet, and sold 92,000 square feet of space. As a result, the segment’s utilization at the end of 2012 was 78 percent.
  • CyrusOne raised $525 million in 6.375% senior notes in the fourth quarter, and $480 million of the proceeds were used by the company to repay Cincinnati Bell corporate bonds and other debt. The company’s net debt 3, excluding CyrusOne, totaled $2.1 billion at the end of 2012.

Fourth Quarter and Full Year Review

For the year, revenue of $1.5 billion reflects a 1 percent increase over 2011, while fourth quarter revenue was 3 percent higher than the comparable period in 2011. Operating income for the full year of 2012 was $270 million, up 4 percent compared to 2011, with operating income from the quarter totaling $58 million. Net income for the year of $11 million was affected by a loss on extinguishment of debt of $14 million, asset impairments of $14 million and CyrusOne REIT formation and other transaction costs of $6 million. Net income excluding special items 4 for the year was $34 million and resulted in 11 cents per diluted share, down from 24 cents in 2011 due primarily to additional depreciation associated with our CyrusOne capital expenditures. Full year 2012 Adjusted EBITDA was $535 million, which includes an $8 million mark-to-market charge on certain compensation plans as a result of the increase in the company’s stock price in 2012, and was down from 2011 Adjusted EBITDA of $545 million.

“With the repayment of our 2015 bonds and other indebtedness in the fourth quarter, the company has no significant maturities until 2017,” said Kurt Freyberger, chief financial officer. “We believe our current capital structure provides sufficient flexibility to support the growth of both our Fioptics suite of products and our business-class fiber product offerings.”

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