<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
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 October 31, 1998, 136,417,592 Common Shares were outstanding.
<PAGE>
Item 1. Financial Statements
This Amendment No. 1 on Form 10-Q/A amends Part I, Item 1, Financial
Statements for Cincinnati Bell Inc.'s Quarterly Report on Form 10-Q for
September 30, 1998 in its entirety. This is a result of a typing error on page
2 of the originally filed Form 10-Q regarding the Condensed Consolidated
Statements of Income. The line, Earnings Per Common Share - Basic, should have
been $1.21 instead of $.21 for the column, Nine Months Ended September 30, 1997.
2
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME,
COMPREHENSIVE INCOME AND RETAINED EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- -------------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578.4 $ 433.2 $ 1,653.7 $ 1,295.8
---------- ---------- ---------- ----------
Costs and Expenses
Cost of providing services and products sold . . . . . . . 324.1 228.3 926.0 692.2
Selling, general and administrative. . . . . . . . . . . . 92.0 68.1 269.3 212.6
Depreciation and amortization. . . . . . . . . . . . . . . 56.2 47.4 154.9 137.2
Year 2000 programming costs. . . . . . . . . . . . . . . . 9.7 4.8 28.4 6.9
Mandated telecommunications costs. . . . . . . . . . . . . .9 2.8 10.7 5.0
Purchased research and development costs . . . . . . . . . - - 42.6 -
Special credits. . . . . . . . . . . . . . . . . . . . . . - - - (21.0)
---------- ---------- ---------- ----------
Total Costs and Expenses . . . . . . . . . . . . . . . . 482.9 351.4 1,431.9 1,032.9
---------- ---------- ---------- ----------
Operating Income . . . . . . . . . . . . . . . . . . . . . . 95.5 81.8 221.8 262.9
Other Income (Expense), Net. . . . . . . . . . . . . . . . . (2.7) 6.0 (1.9) 14.3
Interest Expense . . . . . . . . . . . . . . . . . . . . . . 16.1 9.1 44.5 26.8
Minority Interest. . . . . . . . . . . . . . . . . . . . . . 1.5 - 1.5 -
---------- ---------- ---------- ----------
Income Before Income Taxes . . . . . . . . . . . . . . . . . 75.2 78.7 173.9 250.4
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 26.8 26.9 60.2 87.2
---------- ---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . $ 48.4 $ 51.8 $ 113.7 $ 163.2
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Other Comprehensive Income, Net of Tax:
Foreign currency translation adjustments. . . . . . . . . $ (1.0) $ (.1) $ (2.7) $ (1.5)
Pension liability adjustment. . . . . . . . . . . . . . . - - - .8
Unrealized loss on investments. . . . . . . . . . . . . . (2.1) - (2.1) -
---------- ---------- ---------- ----------
Total Other Comprehensive Income. . . . . . . . . . . . (3.1) (.1) (4.8) (.7)
---------- ---------- ---------- ----------
Comprehensive Income . . . . . . . . . . . . . . . . . . . . $ 45.3 $ 51.7 $ 108.9 $ 162.5
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings Per Common Share
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . $ .36 $ .38 $ .84 $ 1.21
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $ .35 $ .38 $ .82 $ 1.19
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividends Declared Per Common Share. . . . . . . . . . . . . $ .10 $ .10 $ .30 $ .30
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average Common Shares Outstanding Including Equivalents
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . 136.0 135.3 135.9 135.2
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 138.1 137.7 138.3 137.7
Retained Earnings
Beginning of period. . . . . . . . . . . . . . . . . . . . $ 261.0 $ 373.5 $ 221.9 $ 288.5
Net income . . . . . . . . . . . . . . . . . . . . . . . . 48.4 51.8 113.7 163.2
Common dividends declared. . . . . . . . . . . . . . . . . (13.6) (13.5) (41.0) (40.7)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . .6 (.4) 1.8 .4
---------- ---------- ---------- ----------
End of period. . . . . . . . . . . . . . . . . . . . . . . $ 296.4 $ 411.4 $ 296.4 $ 411.4
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Accumulated Other Comprehensive Income:
Beginning of period. . . . . . . . . . . . . . . . . . . . $ (9.8) $ (7.9) $ (8.1) $ (7.3)
Foreign currency translation adjustments . . . . . . . . . (1.0) (.1) (2.7) (1.5)
Pension liability adjustment . . . . . . . . . . . . . . . - - - .8
Unrealized loss on investments . . . . . . . . . . . . . . (2.1) - (2.1) -
---------- ---------- ---------- ----------
End of period. . . . . . . . . . . . . . . . . . . . . . . $ (12.9) $ (8.0) $ (12.9) $ (8.0)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of Dollars)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 1.5 $ 9.9
Receivables, less allowances of $20.7 and $14.0. . . . . . 461.3 350.8
Material and supplies. . . . . . . . . . . . . . . . . . . 14.7 16.3
Deferred income taxes. . . . . . . . . . . . . . . . . . . 25.2 24.6
Prepaid expenses and other current assets. . . . . . . . . 52.3 48.4
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . 555.0 450.0
Property, plant and equipment - net. . . . . . . . . . . . . 838.9 703.2
Goodwill and other intangibles - net . . . . . . . . . . . . 698.2 195.0
Investments in unconsolidated entities . . . . . . . . . . . 90.1 77.6
Deferred charges and other assets. . . . . . . . . . . . . . 110.2 72.9
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . $ 2,292.4 $ 1,498.7
---------- ----------
---------- ----------
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Debt maturing in one year. . . . . . . . . . . . . . . . . $ 619.3 $ 190.6
Accounts payable and accrued liabilities . . . . . . . . . 275.8 208.4
Accrued taxes. . . . . . . . . . . . . . . . . . . . . . . 55.3 51.5
Advance billing and customers' deposits. . . . . . . . . . 36.1 35.0
Other current liabilities. . . . . . . . . . . . . . . . . 45.2 49.4
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . 1,031.7 534.9
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 267.8 269.2
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 26.8 12.7
Other long-term liabilities. . . . . . . . . . . . . . . . . 111.1 102.2
---------- ----------
Total liabilities. . . . . . . . . . . . . . . . . . . . 1,437.4 919.0
---------- ----------
Minority interest. . . . . . . . . . . . . . . . . . . . . . 207.8 -
Shareowners' equity
Common shares-$1 par value; 480,000,000 shares authorized;
136,401,037 and 136,066,965 issued and outstanding . . . 136.4 136.1
Additional paid-in capital . . . . . . . . . . . . . . . . 227.3 229.8
Retained earnings. . . . . . . . . . . . . . . . . . . . . 296.4 221.9
Accumulated other comprehensive income . . . . . . . . . . (12.9) (8.1)
---------- ----------
Total shareowners' equity. . . . . . . . . . . . . . . . 647.2 579.7
---------- ----------
Total Liabilities and Shareowners' Equity. . . . . . . . . . $ 2,292.4 $ 1,498.7
---------- ----------
---------- ----------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------------
1998 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 113.7 $ 163.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.9 137.2
Special credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (21.0)
Acquired research and development costs. . . . . . . . . . . . . . . . . . . . . . . 42.6 -
Provision for loss on receivables. . . . . . . . . . . . . . . . . . . . . . . . . . 11.8 9.7
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15.3) (11.6)
Changes in assets and liabilities, net of effects from acquisitions and disposals:
Increase in receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65.3) (34.8)
Increase in other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . (1.1) (5.0)
Increase in accounts payable and accrued liabilities . . . . . . . . . . . . . . . . 40.9 6.6
Increase (decrease) in other current liabilities . . . . . . . . . . . . . . . . . . (23.7) .7
Increase (decrease) in deferred income taxes and unamortized
investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.1 (3.6)
Increase in other assets and liabilities - net . . . . . . . . . . . . . . . . . . . (38.0) (31.7)
---------- ----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . 234.6 209.7
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - telephone plant . . . . . . . . . . . . . . . . . . . . . . . . . (105.4) (114.1)
Capital expenditures - other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78.1) (62.6)
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . (658.3) -
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 5.9
---------- ----------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . (841.3) (170.8)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434.1 5.4
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6.0) (8.9)
Issuance of common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 9.0
Issuance of Convergys common shares . . . . . . . . . . . . . . . . . . . . . . . . . . 206.3 -
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41.0) (40.7)
---------- ----------
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . 598.3 (35.2)
---------- ----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (8.4) 3.7
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . 9.9 2.0
---------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 1.5 $ 5.7
---------- ----------
---------- ----------
Cash paid for:
Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43.6 $ 22.9
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71.3 $ 70.6
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Cincinnati Bell Inc. and its wholly owned subsidiaries (the
Company). The Company is a diversified communications company with
principal businesses in three industry segments. The Communications
Services segment, consisting of Cincinnati Bell Telephone Company (CBT),
Cincinnati Bell Directory Inc. (CBD), Cincinnati Bell Long Distance Inc.
(CBLD), Cincinnati Bell Supply Company (CBS) and Cincinnati Bell Wireless
Company (CBW), provides local telephone exchange services and products in
Greater Cincinnati, and long distance services, yellow pages and directory
services, telecommunications equipment and advanced digital personal
communications services (PCS) and products. The Information Management
segment, which consists of the Convergys Information Management Group Inc.,
formerly known as Cincinnati Bell Information Systems Inc. (CBIS), provides
and manages customer care and billing solutions for the communications and
cable TV industries. The Customer Management segment, which consists of
the Convergys Customer Management Group Inc., formerly known as MATRIXX
Marketing Inc. (MATRIXX), provides a full range of customer management
solutions to large corporations. Certain prior year amounts have been
reclassified to conform to the current classifications with no effect on
financial results.
The consolidated financial statements of the Company 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 Note (3). 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. The December 31, 1997 condensed balance sheet was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. It is suggested that
these financial statements be read in conjunction with financial statements
and notes thereto included in the Company's 1997 Annual Report on Form 10-K
and the current year's previously issued Quarterly Reports on Form
10-Q.
(2) FORMATION OF CONVERGYS CORPORATION - On April 27, 1998, the Company
announced the formation of a new subsidiary, Convergys Corporation
(Convergys), which holds the Company's billing and customer management
businesses, and which the Company intends, subject to certain conditions,
to spin-off by December 31, 1998 (the Convergys Distribution).
In July 1998, the Company contributed the common shares of CBIS and
MATRIXX, as well as its 45% interest in a cellular partnership with
Ameritech to Convergys. Additionally, in July 1998 the Company received a
tax ruling from the Internal Revenue Service (IRS) indicating that the
planned distribution of Convergys shares will qualify as a tax-free
distribution for federal income tax purposes under Section 355 of the
Internal Revenue Code. Company shares owned as of the record date of the
distribution will entitle holders to receive Convergys common shares on a
one-to-one basis.
On August 12, 1998, Convergys issued 14,950,000 common shares or
approximately 10% of its outstanding shares to the public. The offering
price was $15 less underwriting discounts and commissions of $.98 per
share. The net proceeds from the offering, approximately $206 million,
were used by the Company to repay a portion of its short-term variable rate
debt. The sale of the Convergys common shares to the public resulted in
the Company recording a minority interest equal to the sum of the net
proceeds and a proportionate amount of Convergys' net income for the period
subsequent to the offering.
(3) ACQUISITIONS - During the first quarter of 1998, MATRIXX acquired
American Transtech, Inc. and the assets of AT&T's Canadian customer care
business (the Transtech Acquisition) from AT&T for approximately $625
million in cash. The acquisition was accounted for under the purchase
method of accounting. It was financed through short-term commercial paper
borrowings.
In the first quarter of 1998, the Company recorded a charge of $42.6
million to expense purchased research and development costs associated with
the acquisition. The amount expensed relates to two projects at Transtech
that had not reached technological feasibility at the time of the
acquisition and for which there is no alternative future use.
6
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Approximately $68 million of the purchase price was allocated to an
eight-year contract under which MATRIXX provides customer management
solutions services to AT&T, approximately $11 million to the assembled
workforce which is being amortized over a fifteen-year useful life,
approximately $4 million to capitalized software that is being amortized
over a three-year useful life and approximately $91 million to the acquired
tangible net assets. The fair values of the acquired assets were based on
an independent valuation. The excess of the purchase price over the fair
value of the net assets acquired, approximately $415 million, was recorded
as goodwill, which is being amortized on a straight-line basis over a
thirty-year life.
MATRIXX is currently evaluating certain acquired contingent liabilities and
its integration plan for Transtech and will incur integration liabilities,
including severance pay and lease termination costs. Such liabilities will
result in the recording of additional goodwill. Through September 30,
1998, MATRIXX has accrued and paid nearly $6 million in severance,
primarily for management employees, related to the integration plan for
Transtech. The integration plan has not been finalized, but is awaiting
determination of the facilities portion of the plan, which could result in
additional severance and lease termination costs. Any subsequent
adjustments of estimated integration costs and acquired contingent
liabilities will be reflected as adjustments to goodwill.
The following unaudited pro forma data summarizes the combined results of
the operations of the Company and Transtech as though the acquisition had
occurred as of the beginning of each period:
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
Millions of Dollars ---------------------
- ------------------- 1998 1997
-------- --------
<S> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . $1,716.1 $1,595.8
Net income. . . . . . . . . . . . . . . . . . $ 108.3 $ 152.6
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . $ .80 $ 1.13
Diluted . . . . . . . . . . . . . . . . . . $ .78 $ 1.11
</TABLE>
On January 8, 1998, MATRIXX acquired the teleservices assets of Maritz,
Inc. for approximately $30 million in cash. The acquisition agreement
contains provisions that could increase the purchase price by up to $20
million. The acquisition was accounted for under the purchase method of
accounting and the resulting goodwill is being amortized over a twenty-five
year life. The acquisition of Maritz did not have a material effect on the
Company's results of operations during the first nine months of 1998.
(4) STATUS OF BUSINESS RESTRUCTURINGS - The following is an update of the
Company's business restructurings:
MATRIXX - In the fourth quarter of 1997, the Company approved a
restructuring plan for MATRIXX. The restructuring plan will result in the
consolidation of certain operating divisions and facilities. A charge of
$35.0 million was recorded which reduced net income by $23.0 million. At
December 31, 1997, the restructuring reserve balance was $24.9 million.
During the first nine months of 1998, MATRIXX recorded cash expenditures of
$4.1 million primarily for severance pay and recorded non-cash asset
writedowns of $4.6 million. The restructuring reserve has a balance of
$16.2 million at September 30, 1998. Management expects the restructuring
plan activities to be substantially complete by December 31, 1998 and that
the remaining balance in the reserve will be adequate to complete the plan.
CBT and CBI - In 1995, the Company initiated a restructuring plan resulting
in the need for fewer people to operate the businesses of CBT and CBI. For
the nine months ended September 30, 1997, the Company recorded non-cash
settlement gains of $21.0 million resulting from lump-sum pension
distributions to employees retiring under the offer. For the first nine
months of 1998, there were cash expenditures of $.5 million for severance
pay. Management believes that the remaining reserve balance of $3.9
million at September 30, 1998 (primarily for obligations under terminated
leases) is adequate to complete the restructuring plan.
7
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(5) CINCINNATI BELL TELEPHONE COMPANY - The following summarized financial
information is for the Company's consolidated wholly owned subsidiary,
Cincinnati Bell Telephone Company:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
Millions of Dollars 1998 1997 1998 1997
------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . $179.5 $168.3 $532.9 $495.0
Costs and expenses. . . . . . . . . . . 142.4 135.8 430.4 382.7
------ ------ ------ ------
Operating income. . . . . . . . . . . . $ 37.1 $ 32.5 $102.5 $112.3
Net income. . . . . . . . . . . . . . . $ 20.8 $ 17.9 $ 57.7 $ 64.9
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
CBT incurred mandated telecommunications and Year 2000 programming costs of
$3.5 million for the third quarter in 1998 compared with $4.3 million for
the third quarter in 1997, and $18.5 million for the nine months ended
September 30, 1998 compared with $6.5 million for the nine months ended
September 30, 1997. These costs reduced CBT's net income by $2.3 million
for the third quarter in 1998 compared to $2.8 million in 1997 and $12.0
million for the nine months ended September 30, 1998 compared to $4.2
million for the nine months ended September 30, 1997.
Results for the nine months ended September 30, 1997 include $21.0 million
of pension settlement gains that increased net income by $13.4 million.
<TABLE>
<CAPTION>
September 30, December 31,
Millions of Dollars 1998 1997
------------------- -------------- ------------
<S> <C> <C>
Current assets. . . . . . . . . . . . . . . . . . $ 147.4 $ 142.5
Telephone plant - net . . . . . . . . . . . . . . 578.0 550.6
Other noncurrent assets . . . . . . . . . . . . . 13.8 13.3
------------- ------------
Total assets. . . . . . . . . . . . . . . . . . . $ 739.2 $ 706.4
------------- ------------
------------- ------------
Current liabilities . . . . . . . . . . . . . . . $ 239.3 $ 214.0
Noncurrent liabilities. . . . . . . . . . . . . . 34.8 33.8
Long-term debt. . . . . . . . . . . . . . . . . . 217.8 218.4
Shareowner's equity . . . . . . . . . . . . . . . 247.3 240.2
------------- ------------
Total liabilities and shareowner's equity . . . . $ 739.2 $ 706.4
------------- ------------
------------- ------------
</TABLE>
(6) AT&T RELATIONSHIP - Each of the Company's major subsidiaries derives
significant revenues from AT&T and its affiliates (AT&T) by providing
network services, information systems and billing services and customer
management solutions. Revenues from AT&T were 27% and 23% of the Company's
consolidated revenues for the nine months ended September 30, 1998 and
1997, respectively.
(7) CONTINGENCIES - The Company is from time to time subject to routine
complaints incidental to the business. The Company believes that the
results of any complaints and proceedings will not have a materially
adverse effect on the Company's financial condition.
(8) EARNINGS PER SHARE - In 1997, the Company adopted Statement of Financial
Standards (SFAS) 128, "Earnings Per Share." SFAS 128 requires the dual
presentation of basic and diluted earnings per share (EPS). Basic EPS is
based on the weighted average common shares outstanding during the period.
Diluted EPS reflects the potential dilution that would occur if common
stock equivalents were exercised. Prior year EPS have been restated to
reflect the adoption of SFAS 128. The following table is a reconciliation
of the numerators and denominators of the basic and diluted EPS
computations:
8
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ---------------------
In Millions, Except Per Share Amounts 1998 1997 1998 1997
------------------------------------- ------- ------ ------ ------
<S> <C> <C> <C> <C>
BASIC EPS
Net Income. . . . . . . . . . . . . . . . . . $ 48.4 $ 51.8 $113.7 $163.2
Average common shares outstanding . . . . . . 136.0 135.3 135.9 135.2
Basic earnings per share. . . . . . . . . . . $ .36 $ .38 $ .84 $ 1.21
------ ------ ------ ------
------ ------ ------ ------
DILUTED EPS
Net Income. . . . . . . . . . . . . . . . . . $ 48.4 $ 51.8 $113.7 $163.2
Effect of dilutive securities:
Average common shares outstanding . . . . . 136.0 135.3 135.9 135.2
Stock options . . . . . . . . . . . . . . . 1.5 1.8 1.8 1.9
Stock-based compensation arrangements . . . .6 .6 .6 .6
------ ------ ------ ------
Total . . . . . . . . . . . . . . . . . . . . 138.1 137.7 138.3 137.7
Diluted earnings per share. . . . . . . . . . $ .35 $ .38 $ .82 $ 1.19
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
9
<PAGE>
Form 10-Q Part I Cincinnati Bell Inc.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(9) BUSINESS SEGMENT INFORMATION - The Company operates primarily in three
industry segments, Communications Services, Information Management, and
Customer Management. 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. The Company's business
segment information is as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Millions of Dollars Ended September 30, Ended September 30,
------------------- ----------------------- -----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
Communications services . . . . . . . . . . $ 222.6 $ 211.0 $ 658.6 $ 618.0
Information management. . . . . . . . . . . 147.9 137.2 437.9 401.7
Customer management . . . . . . . . . . . . 231.4 103.0 620.4 329.4
Intersegment. . . . . . . . . . . . . . . . (23.5) (18.0) (63.2) (53.3)
-------- -------- -------- --------
$ 578.4 $ 433.2 $1,653.7 $1,295.8
-------- -------- -------- --------
-------- -------- -------- --------
INTERSEGMENT REVENUES
Communications services . . . . . . . . . . $ 2.5 $ 4.0 $ 7.9 $ 12.1
Information management. . . . . . . . . . . 18.0 11.6 46.9 35.6
Customer management . . . . . . . . . . . . 3.0 2.4 8.4 5.6
-------- -------- -------- --------
$ 23.5 $ 18.0 $ 63.2 $ 53.3
-------- -------- -------- --------
-------- -------- -------- --------
SPECIAL ITEMS (see MD&A)
Communications services . . . . . . . . . . $ - $ - $ - $ (21.0)
Information management. . . . . . . . . . . - - - -
Customer management . . . . . . . . . . . . - - 42.6 -
-------- -------- -------- --------
- - $ 42.6 $ (21.0)
-------- -------- -------- --------
-------- -------- -------- --------
OPERATING INCOME
Communications services . . . . . . . . . . $ 50.5 $ 45.8 $ 141.0 $ 152.5
Information management. . . . . . . . . . . 28.9 28.2 83.5 76.4
Customer management . . . . . . . . . . . . 17.1 6.2 2.9 33.4
Corporate and eliminations. . . . . . . . . (1.0) 1.6 (5.6) .6
-------- -------- -------- --------
$ 95.5 $ 81.8 $ 221.8 $ 262.9
-------- -------- -------- --------
-------- -------- -------- --------
ASSETS
Communications services . . . . . . . . . . $ 844.2 $1,105.4
Information management. . . . . . . . . . . 280.5 264.0
Customer management . . . . . . . . . . . . 988.5 300.3
Corporate and eliminations. . . . . . . . . 179.2 82.4
$2,292.4 $1,752.1
-------- --------
-------- --------
CAPITAL ADDITIONS (including acquisitions)
Communications services . . . . . . . . . . $ 30.8 $ 37.6 $ 115.7 $ 126.8
Information management. . . . . . . . . . . 9.5 5.9 31.1 15.8
Customer management . . . . . . . . . . . . 15.3 7.5 697.0 24.5
Corporate . . . . . . . . . . . . . . . . . 2.0 .3 2.5 5.4
-------- -------- -------- --------
$ 57.6 $ 51.3 $ 846.3 $ 172.5
-------- -------- -------- --------
-------- -------- -------- --------
DEPRECIATION AND AMORTIZATION
Communications services . . . . . . . . . . $ 28.1 $ 31.4 $ 81.6 $ 92.6
Information management. . . . . . . . . . . 7.7 9.1 21.8 24.8
Customer management . . . . . . . . . . . . 20.1 6.8 50.7 19.5
Corporate . . . . . . . . . . . . . . . . . .3 .1 .8 .3
-------- -------- -------- --------
$ 56.2 $ 47.4 $ 154.9 $ 137.2
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
10
<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: November 23, 1998 /s/ Kevin W. Mooney
----------------- -----------------------------------
Kevin W. Mooney
Chief Financial Officer
11
