<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
---- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
-------- ---------
Commission File Number 1-8519
CINCINNATI BELL INC.
Incorporated under the laws of the State of Ohio
201 East Fourth Street, Cincinnati, Ohio 45202
I.R.S. Employer Identification Number 31-1056105
Telephone - Area Code 513 397-9900
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X . No .
----- -----
At July 31, 1995, 66,331,888 Common Shares were outstanding.
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $334,071 $299,844 $665,888 $591,913
-------- -------- -------- --------
Costs and Expenses
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 165,207 154,745 334,025 308,171
Plant and building services. . . . . . . . . . . . . . . . . . . . . 48,348 42,538 95,365 82,619
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 39,822 36,879 79,265 74,044
Taxes other than income taxes. . . . . . . . . . . . . . . . . . . . 24,334 23,202 49,261 47,886
Special charges. . . . . . . . . . . . . . . . . . . . . . . . . . . - - 132,000 -
-------- -------- -------- --------
Total Costs and Expenses. . . . . . . . . . . . . . . . . . . . . 277,711 257,364 689,916 512,720
-------- -------- -------- --------
Operating Income (Loss) . . . . . . . . . . . . . . . . . . . . . 56,360 42,480 (24,028) 79,193
Other Income (Expense) - Net . . . . . . . . . . . . . . . . . . . . . (11) (192) 37 410
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,217 12,498 25,981 24,892
-------- -------- -------- --------
Income (Loss) Before Income Taxes and
Cumulative Effect of Accounting Change. . . . . . . . . . . . . . . . 43,132 29,790 (49,972) 54,711
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,118 11,070 (17,391) 20,345
-------- -------- -------- --------
Income (Loss) Before Cumulative Effect of
Accounting Change . . . . . . . . . . . . . . . . . . . . . . . . . . 27,014 18,720 (32,581) 34,366
Cumulative Effect of Accounting Change . . . . . . . . . . . . . . . . - - - (2,925)
-------- -------- -------- --------
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,014 $ 18,720 $(32,581) $ 31,441
-------- -------- -------- --------
-------- -------- -------- --------
Earnings (Loss) Per Common Share
Income (Loss) Before Cumulative Effect of
Accounting Change. . . . . . . . . . . . . . . . . . . . . . . . . . $ .41 $ .28 $ (.49) $ .52
Cumulative Effect of Accounting Change . . . . . . . . . . . . . . . - - - (.04)
-------- -------- -------- --------
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ .41 $ .28 $ (.49) $ .48
-------- -------- -------- --------
-------- -------- -------- --------
Dividends Declared per Common Share. . . . . . . . . . . . . . . . . . $ .20 $ .20 $ .40 $ .40
-------- -------- -------- --------
-------- -------- -------- --------
Weighted Average Number of Common Shares
Outstanding (000) . . . . . . . . . . . . . . . . . . . . . . . . . . 66,216 65,311 66,131 65,197
Retained Earnings at Beginning of Period . . . . . . . . . . . . . . . $173,756 $226,050 $246,568 $227,392
Add: Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . . 27,014 18,720 (32,581) 31,441
Deduct: Common Dividends. . . . . . . . . . . . . . . . . . . . . . 13,261 13,074 26,478 26,116
Pension Liability Adjustment. . . . . . . . . . . . . . . . - - - 1,021
Issuance of Common Shares Under
Employee Plans. . . . . . . . . . . . . . . . . . . . . . 53 - 53 -
-------- -------- -------- --------
Retained Earnings at End of Period . . . . . . . . . . . . . . . . . . $187,456 $231,696 $187,456 $231,696
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,774 $ 78,368
Receivables less allowances of $16,871 and $14,056 . . . . . . . . . . . . . . 240,889 246,122
Material and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,403 15,988
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,172 29,180
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,703 28,984
---------- ----------
403,941 398,642
Property, Plant and Equipment
Telephone plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,477,762 1,447,411
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (594,911) (556,004)
---------- ----------
882,851 891,407
---------- ----------
Other property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,621 279,355
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (141,470) (134,587)
---------- ----------
133,151 144,768
---------- ----------
1,016,002 1,036,175
---------- ----------
Other Assets
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . 202,055 197,425
Investments in unconsolidated entities . . . . . . . . . . . . . . . . . . . . 49,887 48,809
Deferred charges and other . . . . . . . . . . . . . . . . . . . . . . . . . . 41,360 42,397
---------- ----------
293,302 288,631
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,713,245 $1,723,448
---------- ----------
---------- ----------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Debt maturing in one year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 112,103 $ 68,689
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . 161,953 179,658
Accrued disposal and restructuring costs . . . . . . . . . . . . . . . . . . . 32,763 11,076
Accrued taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,058 61,054
Advanced billing and customers' deposits . . . . . . . . . . . . . . . . . . . 30,670 38,793
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 23,073 24,067
---------- ----------
392,620 383,337
---------- ----------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491,278 528,255
---------- ----------
Deferred Credits and Other Long-Term Liabilities
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,461 164,059
Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . 15,362 16,191
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 189,720 79,204
---------- ----------
329,543 259,454
---------- ----------
Shareowners' Equity
Common shares-$1 par value; authorized shares-240,000,000. . . . . . . . . . . 66,308 65,948
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 246,040 239,507
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,456 246,568
Foreign currency translation adjustment. . . . . . . . . . . . . . . . . . . . - 379
---------- ----------
499,804 552,402
---------- ----------
Total Liabilities and Shareowners' Equity. . . . . . . . . . . . . . . . . . . . $1,713,245 $1,723,448
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
----------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(32,581) $ 31,441
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 79,265 74,044
Special charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,000 -
Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . - 2,925
Provision for loss on receivables. . . . . . . . . . . . . . . . . . . . . . . 4,996 2,871
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,783 7,026
Changes in assets and liabilities:
Increase in receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . (761) (14,833)
Decrease (increase) in other current assets. . . . . . . . . . . . . . . . . . (2,407) 5,410
Increase (decrease) in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,001) 3,656
Decrease in accrued disposal and restructuring costs . . . . . . . . . . . . . (6,313) (15,486)
Decrease in other current liabilities. . . . . . . . . . . . . . . . . . . . . (35,496) (2,299)
Increase (decrease) in deferred income taxes and unamortized
investment tax credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,508) 8,436
Decrease in other assets and liabilities-net . . . . . . . . . . . . . . . . . 15,246 8,177
-------- --------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 87,223 111,368
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures-telephone plant . . . . . . . . . . . . . . . . . . . . . (45,214) (66,605)
Capital expenditures-other . . . . . . . . . . . . . . . . . . . . . . . . . . (7,851) (14,862)
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . (18,087) -
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,009 9,593
-------- --------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . (62,143) (71,874)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . 3,485 (9,443)
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . (1,411) (2,073)
Proceeds from issuance of common shares. . . . . . . . . . . . . . . . . . . . 5,156 4,541
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,422) (26,049)
-------- --------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . (19,192) (33,024)
-------- --------
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . (482) 705
-------- --------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . 5,406 7,175
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 78,368 8,668
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 83,774 $ 15,843
-------- --------
-------- --------
Cash paid for:
Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . . . . $ 22,799 $ 21,722
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,917 $ 11,681
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION - The consolidated financial statements of
Cincinnati Bell Inc. have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and, in
the opinion of Management, include all adjustments necessary for a
fair presentation of the results of operations, financial position and
cash flows for each period shown. All adjustments are of a normal and
recurring nature except for those outlined in Notes (2), (3), (4) and
(8). Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC
rules and regulations. Management believes that the disclosures made
are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with
financial statements and notes thereto included in the Company's 1994
Annual Report on Form 10-K and the current year's previously issued
Form 10-Q.
The consolidated financial statements include the accounts of
Cincinnati Bell Inc. ("CBI") and its wholly owned subsidiaries (the
"Company"). The Company operates in three industry segments. The
telephone operations segment includes Cincinnati Bell Telephone
Company ("CBT") which provides telecommunications services and
products. The information systems segment includes Cincinnati Bell
Information Systems Inc. ("CBIS") which provides data processing
services and software development services. The marketing services
segment includes MATRIXX Marketing Inc. ("MATRIXX") which provides
telephone marketing, research, fulfillment and database services.
(2) BUSINESS RESTRUCTURING - In the first quarter 1995, the Company
approved a restructuring plan for CBT and CBI. The restructuring plan
results in the need for fewer people to operate the businesses. In
all, CBT expected to eliminate approximately 800 management and hourly
positions. The majority of the reduction in CBT's workforce will be
from the offer of early retirement incentives to eligible employees.
The retirement incentive offer increases by five years each eligible
employee's age and years of service for purposes of calculating
pension benefits. In addition, retiring employees will receive an
enhancement to their pensions equal to two weeks pay for every year of
service, but not to exceed one year's pay.
Employee response to the early retirement offer and other financial
incentives being offered by CBT exceeded CBT's initial expectations.
Over 1,300 employees have accepted the early retirement offer
including approximately 1,000 hourly employees. The Company has the
option to delay the retirement date of the hourly employees over the
next two years for a smooth transition.
The Company recorded $132 million of special charges in the first
quarter 1995 to reflect the cost of restructuring programs at CBT and
CBI. The charges reduced net income by $84.1 million or $1.27 per
common share. The charges included costs to be incurred for workforce
reductions and for other restructuring activities.
The special charges included approximately $61 million primarily for
pension enhancements and $54 million of curtailment losses for
postretirement health care costs. Also included in the charges were
$5 million for lease termination costs, $5 million for vacation buyout
and severance pay and the remaining $7 million for other costs of the
restructuring.
5
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(Unaudited)
The pension and postretirement charges will require minimal cash
outflows in the near term. Some of the costs of the pension
enhancements will be funded by the Company's pension plans' trusts.
Estimated cash outflows for 1995, 1996 and 1997 are $9 million, $11
million, $7 million, respectively. The principal cash outflow will be
to pay the non-qualified portion of lump sum pension distributions to
employees retiring under this offer. The Company expects to record a
small amount of non-cash settlement gains associated with the lump sum
pension distributions through March 1997 as employees leave the
Company.
During the six months ended June 30, 1995, $3.5 million in cash
charges were applied against the first quarter 1995 restructuring
reserve. These charges were primarily for non-qualified lump sum
pension distributions and vacation buyouts. The Company believes that
the reserve balance of $128.5 million at June 30, 1995 is adequate for
future estimated costs.
(3) DISPOSAL AND RESTRUCTURING OF CBIS OPERATIONS - For the six months
ended June 30, 1995 a total of $2.9 million net was charged to the
disposal and restructuring reserve that was established in 1993.
Charges to the reserve required net cash outlays of approximately $2.3
million. The charges were primarily for discontinued products and
contingencies related to businesses sold. The Company believes that
the reserve balance of $8.2 million at June 30, 1995 is adequate to
provide for estimated future costs associated with a lease
termination, discontinued products and contingencies related to
businesses sold.
(4) CINCINNATI BELL TELEPHONE COMPANY - The following summarized financial
information, in millions of dollars, is for the Company's consolidated
wholly owned subsidiary, Cincinnati Bell Telephone Company:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------ -----------------------
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $156.6 $147.6 $309.9 $293.9
Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . $128.1 $121.6 $377.7 $244.3
Income (Loss) Before Cumulative
Effect of Accounting Change. . . . . . . . . . . . . . . . . . . . $ 16.0 $ 14.7 $(47.2) $ 28.3
Cumulative Effect of Accounting
Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ (2.4)
Net Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.0 $ 14.7 $(47.2) $ 25.9
</TABLE>
Results for the six months ended June 30, 1995, include special
charges of $124 million recorded in the first quarter for
restructuring CBT's operations as described in note (2). These
charges reduced CBT's net income by $79.0 million or $1.20 per common
share.
Results for the six months ended June 30, 1994, include two
significant non-recurring charges. In 1994 the Company, including
CBT, adopted SFAS 112, "Employers' Accounting for Postemployment
Benefits", thereby reducing CBT's net income by $2.4 million, net of a
deferred tax benefit. In addition, CBT recognized $2.5 million in
incremental postretirement expenses resulting from adjusting deferred
amounts to a level that is expected to be recovered in regulated
rates. This adjustment reduced net income by $1.6 million. CBT had
received approval from the Public Utilities Commission of Ohio
("PUCO") in 1993 to defer these incremental postretirement expenses.
6
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 191.9 $ 187.9
Telephone Plant-Net. . . . . . . . . . . . . . . . . . . . . . . 892.1 901.6
Other Noncurrent Assets. . . . . . . . . . . . . . . . . . . . . 17.8 21.0
-------- --------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $1,101.8 $1,110.5
-------- --------
-------- --------
Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . $ 165.0 $ 148.3
Noncurrent Liabilities . . . . . . . . . . . . . . . . . . . . . 260.7 195.0
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . 274.4 312.3
Common Shareowner's Equity . . . . . . . . . . . . . . . . . . . 401.7 454.9
-------- --------
Total Liabilities and Shareowner's Equity. . . . . . . . . . . . $1,101.8 $1,110.5
-------- --------
-------- --------
</TABLE>
(5) CONTINGENCIES - The Company, which has a 45% interest in a cellular
partnership, is seeking to dissolve the partnership because of poor
performance. The Company has pursued this litigation to maximize the
value of this asset for the benefit of the shareholders. There are
many possible outcomes of this litigation. The potential impact of a
settlement from the lawsuit is an extremely broad range depending upon
the form of distribution and the amount of damages awarded. At this
time, the Company is unable to determine a range but the Company
believes it will recover its $44 million investment in the
partnership.
(6) AT&T RELATIONSHIP - The Company derives significant revenues from AT&T
and its affiliates by providing network services, information
management systems, and marketing services. With the completion of
the merger of AT&T and McCaw Cellular Communications Inc. in the third
quarter of 1994, the Company's revenues from AT&T as combined with
McCaw have increased when compared to prior periods. Revenues
(excluding network access charges) from AT&T accounted for 22% of the
Company's consolidated revenues and 50% of the information systems
segment's revenues for the six months ended June 30, 1995.
(7) INTEREST RATE AND CURRENCY EXCHANGE SWAP - The Company has an interest
rate and foreign currency swap agreement in place to reduce the impact
of changes in interest rates and foreign currency exchange rates. The
Company accrues interest on a notional amount of 225 million French
francs. The approximate effective rate is such that net interest
expense is based on the interest cost implicit in the contract
measured in French francs (approximately 11%). Net amounts due to or
from the counterparty are reflected in interest expense in the periods
in which they accrue. The net effect of the swap for the first six
months of 1995 and 1994 was to increase expense by $2.4 million and
$2.1 million, respectively. For the first six months the swap also
increased the Company's average interest rate from 7.7% to 8.5% in
1995 and from 7.2% to 7.9% in 1994.
(8) ACQUISITION - In March 1995, CBIS acquired X International of Bristol,
England for cash. The acquisition was accounted for as a purchase. X
International provides billing software development services for
telecommunications companies in Europe.
Incident to this acquisition, CBIS acquired the on-going software
development projects of X International. Of the purchase price, $2.5
million was allocated to in-process research and development costs.
Accordingly, these costs were expensed resulting in a non-recurring
charge which reduced net income by $1.5 million or $.02 per common
share.
7
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS (Cont'd)
(Unaudited)
(9) BUSINESS SEGMENT INFORMATION - The Company operates primarily in three
industry segments, Telephone Operations, Information Systems and
Marketing Services. The Company's business segment information is as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------------------- -----------------------------
Millions of Dollars 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Telephone Operations
Local Service $ 87.7 $ 81.7 $ 173.2 $ 159.6
Network Access 35.4 34.6 72.2 71.5
Long Distance 8.7 9.1 17.3 18.8
Other 24.8 22.2 47.2 44.0
-------- -------- -------- --------
Total 156.6 147.6 309.9 293.9
Information Systems 94.6 82.1 184.7 162.7
Marketing Services 66.5 54.0 137.1 104.6
Other 34.2 31.7 70.2 63.2
Intersegment Revenues (17.8) (15.6) (36.0) (32.5)
-------- -------- -------- --------
Total $ 334.1 $ 299.8 $ 665.9 $ 591.9
-----------------------------------------------------------------------------------------------------------------------------------
Intersegment Revenues
Telephone Operations $ 5.9 $ 5.7 $ 11.2 $ 11.6
Information Systems 10.5 9.0 21.5 18.9
Marketing Services .4 - 1.0 -
Other 1.0 .9 2.3 2.0
-------- -------- -------- --------
Total $ 17.8 $ 15.6 $ 36.0 $ 32.5
------------------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)
Telephone Operations $ 28.5 $ 26.0 $ (67.8) $ 49.6
Information Systems 12.2 6.8 20.2 10.8
Marketing Services 8.8 5.7 16.8 10.1
Other 6.9 4.0 6.8 8.7
-------- -------- -------- --------
Total $ 56.4 $ 42.5 $ (24.0) $ 79.2
------------------------------------------------------------------------------------------------------------------------------------
Assets
Telephone Operations $1,101.8 $1,088.2
Information Systems 235.6 296.0
Marketing Services 261.9 237.5
Other 113.9 52.3
-------- --------
Total $1,713.2 $1,674.0
------------------------------------------------------------------------------------------------------------------------------------
Capital Additions
Telephone Operations $ 26.0 $ 34.6 $ 47.6 $ 68.6
Information Systems 1.4 3.3 9.4 15.0
Marketing Services 2.6 2.7 15.3 4.0
Other .6 .7 1.2 2.9
-------- -------- -------- --------
Total $ 30.6 $ 41.3 $ 73.5 $ 90.5
------------------------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization
Telephone Operations $ 28.0 $ 26.8 $ 55.9 $ 53.7
Information Systems 7.2 5.8 14.3 12.1
Marketing Services 3.8 3.4 7.5 6.6
Other .9 .8 1.6 1.6
-------- -------- -------- --------
Total $ 39.9 $ 36.8 $ 79.3 $ 74.0
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain corporate administrative expenses have been allocated to segments based
upon the nature of the expense. Assets are those assets used in the operations
of the segment.
8
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED
The Company's consolidated net income and earnings per common share for the
quarter ended June 30, 1995 were $27 million and $.41 compared to $18.7 million
and $.28, respectively, for the same three month period in 1994. The results
reflect increases of $8.3 million in net income and $.13 in earnings per common
share.
The Company's consolidated net loss and loss per common share for the first six
months 1995 were $32.6 million and $.49 compared with net income of $31.4
million and earnings per common share of $.48, respectively, for the first six
months 1994. The results for the six months 1995 included $132 million of
special charges and a non-recurring charge of $2.5 million. The special and
non-recurring charges reduced net income by $85.6 million or $1.29 per common
share. The results for the six months 1994 included a charge for the cumulative
effect of an accounting change for postemployment benefits. This charge reduced
net income by $2.9 million or $.04 per common share.
The following discussion should be read in conjunction with the consolidated
financial statements and segment data. Results for interim periods may not be
indicative of the results for the full year.
BUSINESS RESTRUCTURING
In the first quarter of 1995, the Board of Directors approved a restructuring
plan for CBT and CBI. These actions resulted in the recording of $132 million
of pre-tax special charges in the first quarter of 1995. The charges,
principally related to pension enhancements and associated postretirement health
costs, were based on retirements and other costs of employee separations.
CBT announced in February 1995 that it would eliminate approximately 800
management and hourly employees by 1997 through early retirement incentives.
Over 1,300 employees accepted the early retirement offer including approximately
1,000 hourly employees. As a result, CBT recorded restructuring charges $124
million. CBT has the option to delay the retirement date of the hourly
employees through March 1997 for a smooth transition. Through the end of the
second quarter approximately 175 management and 130 hourly employees had left as
a result of the offer. CBT's plan was developed over the past year by its
Business Transition Team and involves the re-engineering of the telephone
operations to streamline the fundamental processes and work activities at CBT.
Implementation of the plan is expected to position CBT to better respond in an
increasingly competitive business environment.
CBT has reorganized its functions into 12 processes designed to streamline work.
It has also put in place a management team responsible for the processes. Other
elements will be adopted over the next several years. CBT will develop advanced
information systems in response to increasing expectations of its customers.
The development costs for such systems will increase 1995 expenses. These costs
are expected to be incurred prior to the release of many of the employees from
the workforce. CBT estimates that the restructuring, when fully implemented in
1997, should result in a reduction of its workforce by more than 800 employees
and reduce operating expenses in excess of $50 million. The specific future
financial impact of the cost savings on CBT's earnings is uncertain as it will
depend upon regulatory treatment and the competitive market.
The remaining restructuring charges of $8 million were recorded by CBI. The
restructuring plan included early retirement incentives similar to CBT's as well
as voluntary separations.
9
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
<TABLE>
<CAPTION>
TELEPHONE OPERATIONS
Three Months Ended June 30 Six Months Ended June 30
------------------------------------ ------------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ ---------------- ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Local service $ 87.7 $ 81.7 $ 6.0 7% $173.2 $159.6 $ 13.6 9%
Network access 35.4 34.6 .8 2 72.2 71.5 .7 1
Long distance 8.7 9.1 (.4) (4) 17.3 18.8 (1.5) (8)
Other 24.8 22.2 2.6 12 47.2 44.0 3.2 7
------ ------ ------ ------ ------ ------
$156.6 $147.6 $ 9.0 6% $309.9 $293.9 $ 16.0 5%
Costs and expenses
Operating expenses $128.2 $121.6 $ 6.6 5% $253.7 $244.3 $ 9.4 4%
Special charges - - - - 124.0 - 124.0 -
------ ------ ------ ------ ------ ------
$128.2 $121.6 $ 6.6 5% $377.7 $244.3 $133.4 55%
Access lines (000) 893 865 28 3
Minutes of use (Millions)
Interstate 628 577 51 9 1,252 1,151 101 9
Intrastate 236 228 8 4 473 470 3 1
------ ------ ------ ------ ----- ------
864 805 59 7 1,725 1,621 104 6
</TABLE>
The continued growth in access lines, along with new rates in Ohio effective May
1994 and in Kentucky effective May 1995 increased local service revenues by $3.7
million and $8.5 million for the three and six months 1995 compared to 1994.
The remainder of the increase of $2.3 million and $5.1 million was primarily
from increased customer usage of central office features and directory
assistance.
Network access revenues had increases because of larger settlements, greater
sales of special access services and higher end usage as a result of access line
growth and increased interstate minutes of use. Offsetting the increases were
decreases in Ohio intrastate carrier common line revenues resulting from a rate
decrease in May 1994.
Long distance revenues decreased because of lower settlements with interexchange
carriers and independent companies.
Other telephone operations revenues increased from growth in customer premise
equipment contract revenues and in billing and collection services provided.
Operating expenses for telephone operations increased by $6.6 million and $9.4
million for the quarter and six months compared to the same periods in 1994.
Contract services for systems development and other services increased $2
million and $5.4 million, respectively. Depreciation and amortization expenses
increased $1.2 million and $2.2 million, respectively, as a result of rate
represcriptions in Ohio which became effective in July 1994. Unfavorable
adjustments of non-regulated inventory balances and higher right-to-use fees for
network software upgrades accounted for $3.5 million of the increase in costs
for the three and six month periods of 1995 when compared to the same periods of
1994. The first quarter 1995 business restructuring caused contract labor costs
to increase but this was offset somewhat by a decrease in salaries and wages for
both periods. This trend will continue throughout the remainder of 1995 as the
business restructuring is implemented. First quarter 1994 expenses include a
$2.5 million nonrecurring charge for postretirement benefit costs which had
previously been deferred with regulatory approval.
10
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
<TABLE>
<CAPTION>
INFORMATION SYSTEMS
Three Months Ended June 30 Six Months Ended June 30
--------------------------------- ---------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ ------------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 94.6 $ 82.1 $12.5 15% $184.7 $162.7 $ 22.0 14%
Costs and expenses $ 82.4 $ 75.3 $ 7.1 9% $164.5 $151.9 $ 12.6 8%
</TABLE>
Information Systems' revenues were up $12.5 million during the three months
ended June 30, 1995, and $22 million during the six months ended June 30, 1995
compared to the same periods last year. Revenues from data processing and
professional services increased $17.4 million and $30.8 million for the three
and six months, respectively. Data processing revenues increased because of
strong subscriber growth in the cellular industry somewhat offset by lower net
prices. Professional services revenues grew from increased development requests
for product enhancements from existing customers. Outstanding domestic revenue
growth was somewhat offset by declines in international contract revenue.
Revenues from international clients for the development of telecommunications
solutions were $4.9 million and $8.8 million lower for the same periods when
compared to 1994. This resulted from the timing, terms and adjustments to
reflect new estimates on long-term contracts. Additionally one long-term
contract was completed in 1994.
Information Systems' costs and expenses were up $7.1 million during the three
months ended June 30, 1995 versus the previous year, and up $12.6 million during
the six months ended June 30, 1995 versus the prior year. Costs and expenses
increased $3.2 million during the second quarter and $4.4 million year to date
primarily from increased costs related to the data processing and professional
services revenue growth. Depreciation and amortization expenses increased $1.3
million for the quarter and $2.2 million for the six months from increased
amortization of capitalized software. Sales and marketing and general and
administrative costs were lower by $2 million and $4 million for the two
periods, respectively, as the result of workforce reductions and lower rent
costs from less requirements for leased office space. Research and development
costs increased $4.6 million and $10 million for the quarter and six months,
respectively. Included in the increase of research and development costs for
the six month period is a non-recurring charge of $2.5 million related to the
expensing of in-process research and development costs of X International (See
Note 8 of Notes to Financial Statements). Research and development expenses
were also higher in 1995 resulting from an increase in development activity for
billing systems solutions software and fewer of these costs eligible to be
capitalized.
<TABLE>
<CAPTION>
MARKETING SERVICES
Three Months Ended June 30 Six Months Ended June 30
--------------------------------- ----------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ -------------- ------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 66.5 $ 54.0 $12.5 23% $137.1 $104.6 $ 32.5 31%
Costs and expenses $ 57.7 $ 48.3 $ 9.4 19% $120.3 $ 94.5 $ 25.8 27%
</TABLE>
Marketing Services revenues were up $12.5 million and $32.5 million during the
three months and six months ending June 30, 1995, respectively. Revenues from a
contract with a major provider of satellite broadcast services accounted for
$6.6 million and $18.6 million of the increase in revenues for the three and six
months of 1995 compared to the same periods last year. The contract began in
mid-year 1994. Higher volumes directly associated with a major long distance
carrier have also generated increased revenues of $4.6 million in the quarter
and $10.1 million for the six month period. Custom service revenues have
increased
11
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
as new programs with existing customers have been established. An overall
increase in rates per talk-time second in inbound marketing services has more
than offset the lower volumes of inbound calls in 1995 compared to 1994.
European operation revenues increased $1.7 million and $3.1 million,
respectively, for the quarter and six months from additional business with
existing customers.
Costs and expenses increased at a lower rate than revenues for the three and six
months compared to last year reflecting continuing cost management efforts. The
increase in costs and expenses was primarily from labor costs and long distance
telephone costs. Labor costs increases of $5 million for the three months and
$13 million for the six months reflect the additional workforce required to meet
the increases in call volumes. Directly related to the increased call volumes
are higher telephone charges of $1.5 million and $3.2 million for the three and
six months, respectively. General and administrative expenses increased $1.9
and $4.3 million for the same periods from expenses associated with information
systems and systems design. European operation costs and expenses increased
$1.6 million and $3 million compared to last year. Even though European
operations continue to operate at a loss, they remain strategically important
for the future.
<TABLE>
<CAPTION>
OTHER
Three Months Ended June 30 Six Months Ended June 30
---------------------------------- -------------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ ------------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 34.2 $ 31.7 $ 2.5 8% $ 70.2 $ 63.2 $ 7.0 11%
Costs and expenses
Operating expenses $ 27.5 $ 28.5 $(1.0) (4)% $ 56.5 $ 56.7 $ (.2) -
Special charges - - - - 8.0 - 8.0 -
------ ------ ------ ------ ------ ------
$ 27.5 $ 28.5 $(1.0) (4)% $ 64.5 $ 56.7 $ 7.8 14%
</TABLE>
Higher sales of used telecommunications equipment and commodities scrap by the
Company's supply business accounted for revenues increases of $1.6 million and
$4.7 million for the three and six month periods. Other increases in revenues
resulted from sales campaigns in the directory business and additional customers
and higher usage in the long distance re-selling business.
<TABLE>
<CAPTION>
INTEREST EXPENSE
Three Months Ended June 30 Six Months Ended June 30
--------------------------------- ----------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ ------------- ------ ------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13.2 $ 12.5 $ .7 6% $ 26.0 $ 24.9 $ 1.1 4%
</TABLE>
Interest expense increased primarily because of higher interest rates on short-
term borrowings. The increase from higher rates was partially offset by less
interest from lower balances of short-term borrowings. The interest related to
the Company's swap agreement was $1.2 million and $2.4 million for the quarter
and six months ended June 30, 1995 compared to $1 million and $2.1 million for
the quarter and six months ended June 30, 1994. The interest expense for the
swap will continue to increase as interest is accrued on the principal and
unpaid interest costs. The accrued interest on the French franc loan segment of
the swap is 148 million French francs or $27.3 million at June 30, 1995. The
Company has decided not to hedge the currency risk associated with the accrued
interest because the financial risk is immaterial to the Company's financial
position. The swap agreement has increased the Company's weighted average
interest rate from 7.7% to 8.5% for the six months 1995 as compared to an
increase from 7.2% to 7.9% for the six month period in 1994.
12
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
<TABLE>
<CAPTION>
INCOME TAXES
Three Months Ended June 30 Six Months Ended June 30
--------------------------------- ---------------------------------
(Dollars in Millions) 1995 1994 Change 1995 1994 Change
------ ------ ------------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 16.1 $ 11.0 $ 5.1 46% $(17.4) $ 20.3 $(37.7) -
</TABLE>
Higher income before taxes for the three months and lower income before taxes
for the six months were the principal reasons for the changes in income tax
expense. The Company's effective tax rates for the three and six months ending
June 30, 1995 were 37.4% and 34.8%, respectively, compared to 37.2% for the same
two periods last year. The effective tax rate, excluding the 1995 special and
non-recurring charges, would have been 37.2% for the six months 1995.
FINANCIAL CONDITION
CAPITAL INVESTMENT, RESOURCES AND LIQUIDITY
Management believes that the Company has adequate internal and external
resources available to finance its ongoing operating requirements, including
network expansion and modernization, business development and dividend programs.
The Company maintains adequate lines of credit with several institutions to
provide support for borrowings and general corporate purposes.
Cash provided by operating activities, which is the Company's primary source of
liquidity, was $87 million for the first six months 1995, a decrease of $24
million from the first six months 1994. This was primarily the result of $29
million more in income tax payments made in 1995. Cash was used to fund capital
expenditures, acquisitions and dividends.
The Company's most significant investing activity continued to be capital
expenditures which were $53 million for the six months ended June 30, 1995, a
decrease of $28 million from the same period in 1994. In 1995, CBT spent less
for digital switching equipment, electronic switching equipment and buildings
primarily because of the installation of the North American Numbering Plan in
1994. CBIS had reduced capital expenditures for capitalized software, computers
and office equipment compared to 1994. Requirements for additional updating of
facilities are evaluated continuously based on customer and market demand and
engineering economics. Capital expenditures for 1995 are expected to be
approximately $120 million. CBT's portion of the total is about $90 million.
CBT could decide that in order to remain competitive in the future, it must
aggressively pursue a strategy of expanding its offerings beyond its traditional
business. However, capital spending increases under this scenario would not
necessarily be incremental as reductions could be achieved in other areas. CBT
may also wish to enter other businesses through investments and strategic
alliances with established companies in such businesses and through the
development of such capabilities internally. Such transactions could require
substantial capital which could be generated internally and from external
sources.
Accounts payable and accrued liabilities decreased $18 million from December 31,
1994. The balance was reduced by payments in 1995 related to an acquisition
earn-out agreement, employee-related costs and software and hardware upgrades
that were accrued at December 31, 1994. The balance of accrued taxes was $29
million lower than December 31, 1994 resulting from payments made in 1995 for
federal income and property taxes. The balance of non-current deferred income
taxes was $40 million lower than at December 31, 1994, as a result of the tax
benefit recorded for the special charges in the first quarter 1995. The balance
of other long-term liabilities increased $111 million principally from pension
and postretirement liabilities as a result of the business restructuring
charges. During the second quarter 1995 $40 million of CBT's long-term debt due
in April 1996 became debt maturing in one year.
13
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
REGULATORY MATTERS
FEDERAL COMMUNICATIONS COMMISSION (FCC)
In 1993, CBT accrued approximately $11 million related to orders by the FCC to
refund to interexchange carriers earnings in excess of the FCC's target range in
the 1987-1988 monitoring period. On August 1, 1995, the U.S. Court of Appeals
denied the Company's appeal to overturn the FCC's order to refund excess
earnings and also disallowed the FCC's limited offset policy. The Company is
currently analyzing the effect of this decision.
KENTUCKY FILING
During October 1994 CBT filed a proposal with the Public Service Commission of
Kentucky ("PSCK") for new regulated rates for telephone services provided to its
Kentucky customers. An order was received from the PSCK in May 1995 that
maintains uniform rates for basic services in CBT's Kentucky and Ohio
metropolitan service areas, but is essentially revenue neutral, as local service
increases are offset by carrier common line and other rate adjustments. Both
CBT and the Kentucky Attorney General filed for rehearing of certain aspects of
the rate order. CBT has been granted a rehearing on one issue, while all of the
Attorney General's requests were denied.
LOCAL TELECOMMUNICATIONS COMPETITION
CBT is assessing the effects of local competition issues and has participated in
proceedings before the Public Utilities Commission of Ohio ("PUCO") involving
these issues.
Formal hearings before the PUCO have concluded in the matter of the issuance of
a certificate to a cable company to provide local telephone service. By
granting the certificate the PUCO would allow local competition into CBT's
franchised area. The PUCO could render its decision by the third quarter 1995.
The Ohio Supreme Court declined to order the PUCO to set the rules for local
competition before addressing which companies could enter local exchange markets
as competitors, as CBT had requested.
The PUCO staff has released a preliminary document covering local competition
issues in the telecommunications market. The goal is to provide for the
adoption of rules allowing local competition to proceed in the state of Ohio.
CBT is in the process of responding to this document. It is anticipated that
these rules could be in place by January 1996.
In April 1995 the PSCK issued an administrative order dealing with local
competition. Responses were to be submitted by mid-July 1995. At this time CBT
is uncertain as to what future direction the PSCK will take in this matter.
EFFECTS OF REGULATORY ACCOUNTING
CBT presently gives accounting recognition to the actions of regulators where
appropriate, as prescribed by SFAS 71, "Accounting for the Effects of Certain
Types of Regulation." Under SFAS 71, CBT records certain assets and liabilities
because of the actions of regulators. Amounts charged to operations for
depreciation expense reflect estimated useful lives and methods prescribed by
regulators rather than those that might otherwise apply to unregulated
enterprises. Typically, regulatory recovery periods are longer than the useful
lives that otherwise might be used. Criteria that could give rise to the
discontinuance of SFAS 71 include increasing competition, which would restrict
CBT's ability to establish prices to recover specific costs, and a significant
change in the manner in which rates are set by regulators from cost-based
regulation to another form of regulation. CBT continues to carefully evaluate
the criteria in light of recent legislative and regulatory changes. If CBT were
14
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.)
required to discontinue the accounting prescribed in SFAS 71, there would be a
significant, extraordinary, non-cash charge. It is expected that the minimum
after-tax charge would be at least $60 million. The actual charge could be much
higher depending on many factors including CBT's business strategy, and
judgments of competitive impact and technology changes at the time.
OUTLOOK
Cincinnati Bell operates businesses in several different markets. Each of the
businesses has fluctuations in revenues and operating earnings as the result of
the overall level, timing and terms of many contracts. There is also a business
risk that a customer will decide to perform services in-house or move its
business to a competitor if the services do not meet price and performance
standards. These circumstances may increase the variability of financial
results on a period to-period basis.
The Company's 1995 revenues may not grow at the same rate as in 1994 because
revenues generated from the WATS operations for 1994 and 1995 will be on a
comparable basis.
CBT's revenues are expected to increase but could be offset by a potential
decline in its customer base from increased competition. CBT is redesigning and
streamlining its processes and work activities to improve responsiveness to
customer needs, permit more rapid introduction of new products and services,
improve the quality of product and service offerings and reduce costs.
CBIS will continue to concentrate primarily on building its core business in the
cellular market. Timing and adjustments related to international contracts
could add variability to CBIS's earnings. The cellular market will be the
principal driver for CBIS's growth this year. During 1995, CBIS continued to
maintain its customer base with the renewal of several multi-year contracts for
customer care and billing solutions services with major clients.
The continued trend in the outsourcing of telemarketing is important for
MATRIXX's continued growth. MATRIXX's profitability in 1995 and beyond depends
upon its ability to add strategic clients. During the second half of 1995,
MATRIXX may have reductions in revenue from a major long distance carrier from
changes in their marketing plans.
The other Company businesses expect to continue to grow by offering superior
value, quality and customer service.
The Company has general and specific risks that could affect trends in future
operating results. Some of the risks include international contracts,
sustaining the quality of customer service during downsizing and sustaining high
levels of revenues from certain customers.
The Company continues to review opportunities for acquisitions and divestitures
for all its businesses to enhance shareowner value.
15
<PAGE>
Form 10-Q Part II Cincinnati Bell Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following are filed as Exhibits to Part I of this Form 10-Q:
Exhibit
Number
------
11 Computation of Earnings per Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
16
<PAGE>
SIGNATURE
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 thereunto duly authorized.
Cincinnati Bell Inc.
Date August 10, 1995 /s/ James M. Dahmus
-------------------- --------------------
James M. Dahmus
Vice President and Controller
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the quarterly period ended June 30, 1995
CINCINNATI BELL INC.
(Exact Name of Registrant as specified in its charter)
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
Filed Pursuant to Item 601 of Regulation S-K
Exhibit
No. Title of Exhibit Page
------- ------------------------------------ ----
(11) Computation of Earnings per Common Share *
(27) Financial Data Schedule *
<PAGE>
Exhibit 11
to
Form 10-Q for the Quarterly
Period Ended June 30, 1995
CINCINNATI BELL INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
In thousands, except per share amounts
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income (loss) before cumulative effect of
accounting change . . . . . . . . . . . . . . . . . $27,014 $18,720 ($32,581) $34,366
Cumulative effect of accounting change . . . . . . . . - - - (2,925)
------- ------- ------- -------
Net income (loss). . . . . . . . . . . . . . . . . . . $27,014 $18,720 ($32,581) $31,441
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . . . . 66,216 65,311 66,131 65,197
Common share conversions applicable to
common share options. . . . . . . . . . . . . . . . 445 8 445 8
------- ------- ------- -------
Total number of shares for computing primary
and fully diluted earnings per common share*. . . . 66,661 65,319 66,576 65,205
------- ------- ------- -------
EARNINGS PER COMMON SHARE
As reported
Income (loss) before accounting change. . . . . . . $ .41 $ .28 $ (.49) $ .52
Cumulative effect of accounting change. . . . . . . - - - (.04)
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . $ .41 $ .28 $ (.49) $ .48
------- ------- ------- -------
------- ------- ------- -------
Primary
Income (loss) before accounting change. . . . . . . $ .41 $ .28 $ (.49) $ .52
Cumulative effect of accounting change. . . . . . . - - - (.04)
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . $ .41 $ .28 $ (.49) $ .48
------- ------- ------- -------
------- ------- ------- -------
Fully Diluted
Income (loss) before accounting change. . . . . . . $ .41 $ .28 $ (.49) $ .52
Cumulative effect of accounting change. . . . . . . - - - (.04)
------- ------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . $ .41 $ .28 $ (.49) $ .48
------- ------- ------- -------
------- ------- ------- -------
Earnings (loss) per common share for the three and six months ended June 30,
1995 and 1994 as reported in the Consolidated Statements of Income were based on
the weighted average number of common shares outstanding for the respective
periods. Primary and fully diluted earnings (loss) per common share were not
shown in the Consolidated Statements of Income as they differ from the reported
earnings (loss) per common share by less than three percent or are anti-
dilutive.
<FN>
* For the six-month period ended June 30, 1995, common share conversions
applicable to common share options are anti-dilutive for the primary
loss per common share calculation and therefore are not included in
the calculation.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 83,774
<SECURITIES> 0
<RECEIVABLES> 257,760
<ALLOWANCES> 16,871
<INVENTORY> 15,403
<CURRENT-ASSETS> 403,941
<PP&E> 1,752,383
<DEPRECIATION> 736,381
<TOTAL-ASSETS> 1,713,245
<CURRENT-LIABILITIES> 392,620
<BONDS> 491,278
<COMMON> 66,308
0
0
<OTHER-SE> 433,496
<TOTAL-LIABILITY-AND-EQUITY> 1,713,245
<SALES> 0
<TOTAL-REVENUES> 665,888
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 689,916
<LOSS-PROVISION> 4,996
<INTEREST-EXPENSE> 25,981
<INCOME-PRETAX> (49,972)
<INCOME-TAX> (17,391)
<INCOME-CONTINUING> (32,581)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,581)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
