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Cincinnati Bell Inc. Reports Second Quarter 2008 Double-Digit Earnings per Share Growth

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Posted July 31, 2008

CINCINNATI, Jul 31, 2008 (BUSINESS WIRE) -- Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the second quarter of 2008, which included year-over-year revenue and earnings growth. Revenue totaled $351 million, an increase of 7 percent year-over-year, with operating income of $80 million. Net income for the quarter was $26 million, up 6 percent from last year. Earnings per share on a diluted basis were 9 cents, which is a 10 percent increase over the second quarter of 2007. Adjusted earnings before interest, taxes, depreciation and amortization(1) (Adjusted EBITDA) equaled $119 million, up $1 million, or 1 percent from a year ago.

"By focusing on the quality, convenience and value that consumers and businesses demand in today's market, we continue to deliver outstanding value to our customers," said Jack Cassidy, president and chief executive officer of Cincinnati Bell. "As a result, we were able to achieve another quarter of year-over-year growth in revenue and Adjusted EBITDA."

Quarterly Highlights

-- Quarterly revenue increased $22 million to $351 million with both service and equipment revenue driving the growth equally.

-- The Technology Solutions segment produced quarterly revenue of $79 million, up 37 percent from a year ago resulting in operating income growth of 8 percent and Adjusted EBITDA growth of 51 percent. The segment began billing an additional 21,000 square feet of new data center space in the quarter, which reflects a 14 percent increase over the first quarter of 2008.

-- Wireless service revenue in the second quarter was $72 million, up 7 percent from a year ago, which contributed to operating income growth of 19 percent and Adjusted EBITDA growth of 7 percent. The Adjusted EBITDA margin(1) was 27 percent.

-- Year-over-year DSL subscriber growth equaled 8 percent and churn remained below 2 percent. At the end of the quarter, Cincinnati Bell had a total of 229,000 DSL subscribers.

-- Quarterly free cash flow(2) was $54 million. Capital expenditures in the second quarter equaled $43 million, down $6 million from a year ago. The company used part of its free cash flow to reduce net debt(3) to $1.97 billion, a decline of $18 million from the end of the first quarter 2008.

-- Cincinnati Bell also purchased an additional 7 million shares of common stock for a total of $30 million in the second quarter. The company has now purchased 11 million shares under its current common stock repurchase program. This leaves $103 million remaining in its purchase authorization. Cincinnati Bell expects to continue repurchases and the timing and nature are subject to market conditions and applicable securities laws.

-- On July 10, Cincinnati Bell announced the promotion of Brian Ross to the position of chief operating officer and named Gary Wojtaszek as its new chief financial officer.

"Our second quarter results reflect the many steps Cincinnati Bell has taken over the past few years to balance wireless and technology solutions growth while still generating strong and stable free cash flow," said Brian Ross, chief operating officer. "We are pleased with these results which continue to fund our share repurchase program and net debt reduction."

Wireline Segment

Quarterly Wireline revenue equaled $203 million, down $2 million or 1 percent from the second quarter of 2007. Increased revenue from data services, long distance, expansion markets and the acquisition of eGix, partially offset lower voice revenue in Cincinnati Bell's traditional service area. Operating income totaled $70 million compared with $72 million in the second quarter of 2007 with Adjusted EBITDA of $97 million, down $2 million from a year ago. Year-over-year total access line loss in the second quarter was 6.7 percent reflecting a decline in the company's in-territory consumer access lines. Business lines increased 1.3 percent while expansion market access lines increased 16 percent from a year ago.

Wireless Segment

Quarterly revenue from the Wireless segment increased 7 percent to $78 million and operating income equaled $12 million, up $2 million from a year ago, primarily due to a $5 million, or 7 percent, increase in service revenue. Adjusted EBITDA was $21 million, up $1 million compared with the second quarter of 2007.

Cincinnati Bell had 575,000 wireless customers at the end of the quarter, which reflected year-over-year growth of 7 percent in its postpaid wireless customer base. Postpaid quarterly average revenue per user (ARPU) was $47.36, down slightly from the second quarter of 2007. Prepaid ARPU was $25.75, up 15 percent year-over-year, while prepaid subscribers declined 4 percent.

Technology Solutions

Technology Solutions revenue was $79 million, up $21 million or 37 percent from a year ago. Telecommunications and IT Equipment revenue increased $10 million or 26 percent from the prior year while Data Center and Managed Services revenue grew $10 million, a 62 percent increase compared to the second quarter of 2007. Operating income totaled $4 million. Adjusted EBITDA was $8 million, up 51 percent from the second quarter of 2007.

Capital expenditures of $10 million in the quarter were used primarily for construction of future data center space. Billable data center capacity during the second quarter increased by 21,000 square feet to 202,000 square feet. A total of 21,000 square feet also began billing in the quarter, which resulted in an 87 percent utilization rate compared to 85 percent in the first quarter of 2008.