CINCINNATI - February 20, 2014 - Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the full year and fourth quarter of 2013, highlighted by impressive full-year Adjusted EBITDA1 totaling $407 million, after excluding CyrusOne, and the continued strong demand and growth in our strategic products.
"2013 was a transformational year for Cincinnati Bell on many levels," said Ted Torbeck, president and chief executive officer. "Our year started with the successful IPO of CyrusOne and concluded with Fioptics, one of our key strategic products, generating more than $100 million in annual revenues."
On January 24, 2013, the company successfully completed the initial public offering ("IPO") of CyrusOne, and its consolidated year-to-date results for 2013 include the results of that business up to the IPO date. Year-to-date revenue for 2013 was $1.3 billion, operating income was $164 million, and net income excluding special items2 totaled $14 million. Excluding the data center segment results, Cincinnati Bell generated revenue of $1.2 billion, down 1 percent from the prior year and operating income of $181 million. Adjusted EBITDA excluding the data center business was $407 million, and includes a gain of $6 million associated with mark-to-market adjustments on compensation plans indexed to the company's stock price.
Total revenue for the fourth quarter of 2013 was $308 million, down $10 million from the prior year after excluding the data center segment results. Operating income totaled $40 million, down $10 million from the prior year after excluding CyrusOne. The fourth quarter net loss of $28 million includes a $30 million loss on the early extinguishment of the 8.25 percent Senior Notes due 2017, repaid with proceeds from the issuance of a $540 million Tranche B term loan facility.
Revenue growth from strategic fiber based products continues to increasingly mitigate access line loss. Fioptics revenue totaled $29 million in the quarter, up 49 percent from the same period in 2012. Strategic revenue for business customers totaled $40 million, up 12 percent compared to the prior year. Adjusted EBITDA margin3 was 44 percent in the quarter, down from prior year due to the loss of higher margin access lines.
Strong demand for managed and professional services resulted in revenue of $33 million, up 20 percent over the prior year. Hardware sales totaled $53 million for the quarter.
We continue to manage our Wireless segment for cash flow and profitability as the business is challenged by revenue declines due to the loss of postpaid subscribers.
Cincinnati Bell continues to effectively own 69 percent of CyrusOne, which is accounted for as an equity method investment. As of year-end, the company's investment in CyrusOne was valued at approximately $1 billion.
"Looking ahead, we are very excited about the opportunity to turn Cincinnati Bell into a growing fiber based company capable of producing significant sustainable free cash flows," Torbeck said. "The momentum created in 2013 and the continued demand for our strategic products gives us great confidence that we will grow Wireline revenue and generate positive free cash flow in 2014."
Cincinnati Bell is providing the following guidance for 2014:
|Adjusted EBITDA||$383 million*|
Cincinnati Bell will host a conference call on February 20 at 10:00 a.m. (ET) to discuss its results for the fourth quarter and full year of 2013. A live webcast of the call will be available via the Investor Relations section of www.cincinnatibell.com. The conference call dial-in number is (866) 863-7412. Callers located outside of the U.S. and Canada may dial (816) 581-1570. A taped replay of the conference call will be available one hour after the conclusion of the call until 10:00 a.m. on Thursday March 6, 2014. 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 8619702. An archived version of the webcast will also be available in the Investor Relations section of www.cincinnatibell.com.
This release and the documents incorporated by reference herein contain forward-looking statements regarding future events and our future results that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "predicts," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forwardlooking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this release and those discussed in other documents we file with the Securities and Exchange Commission (SEC). More information on potential risks and uncertainties is available in our recent filings with the SEC, including Cincinnati Bell's Form 10-K report, Form 10-Q reports and Form 8-K reports. Actual results may differ materially and adversely from those expressed in any forwardlooking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
This press release contains information about adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), Adjusted EBITDA margin, net debt, net income excluding special items, and free cash flow. These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com.
CyrusOne defines Adjusted EBITDA as net (loss) income as defined by U.S. GAAP before noncontrolling interests plus interest expense, income tax (benefit) expense, depreciation and amortization, non-cash compensation, transaction costs and transaction-related compensation, including acquisition pursuit costs, loss on sale of receivables to affiliate, restructuring costs, loss on extinguishment of debt, asset impairments, (gain) loss on sale of real estate improvements, and other special items. Other companies may not calculate Adjusted EBITDA in the same manner as CyrusOne. Accordingly, CyrusOne's Adjusted EBITDA as presented may not be comparable to others. Detailed reconciliations of CyrusOne's Adjusted EBITDA to the comparable GAAP financial measure are available in the Investor Relations section of www.cyrusone.com.
2 Net income excluding special items in total and per share provides a useful measure of operating performance. Net income excluding special items should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with net income excluding special items as defined by other companies.
3 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.
Free cash flow provides a useful measure of operational performance, liquidity and financial health. The company defines free cash flow as cash provided by (used in) operating, financing and investing activities, adjusted for the issuance and repayment of debt, debt issuance costs, the repurchase of common stock, and the proceeds from the sale or the use of funds from the purchase of business operations, including transaction costs. Free cash flow should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities, or the change in cash on the balance sheet and may not be comparable with free cash flow as defined by other companies. Although the company feels that there is no comparable GAAP measure for free cash flow, the attached financial information reconciles free cash flow to the net increase (decrease) in cash and cash equivalents.
Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term and long-term debt and unamortized premium and/or discount, offset by cash and cash equivalents. Net debt should not be considered as an alternative to comparable GAAP measures of liquidity and may not be comparable with the measure as defined by other companies.
With headquarters in Cincinnati, Ohio, Cincinnati Bell (NYSE: CBB) provides integrated communications solutions - including local and long distance voice, data, high-speed internet, entertainment and wireless services - that keep residential and business customers in Greater Cincinnati and Dayton connected with each other and with the world. In addition, enterprise customers across the United States rely on CBTS, a wholly-owned subsidiary, for efficient, scalable office communications systems and end-to-end IT solutions. Cincinnati Bell also is the majority owner of CyrusOne (NASDAQ: CONE), which provides bestin- class data center colocation services to enterprise customers through its facilities with fully redundant power and cooling solutions that are currently located in the Midwest, Texas, Arizona, London and Singapore. For more information, please visit www.cincinnatibell.com.