08/14/2024 | Press release | Distributed by Public on 08/14/2024 13:41
1
UNITED STATES
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, 2024
☐ |
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.
Ohio |
31-1056105 |
|
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
221 East Fourth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
(513) 397-9900
(Registrant's telephone number, including area code)
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 ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ( §232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
|
Non-accelerated filer |
☒ |
Smaller reporting company |
☐ |
|
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒
Securities Registered Pursuant to Section 12(b) of the Act:
As of June 30, 2024, there were 100common shares of the Company outstanding, all of which were held by Red Fiber Parent LLC. The Company is filing this Form 10-K with the SEC on a voluntary basis.
TABLE OF CONTENTS
PART I. Financial Information
Description |
Page |
|||
Item 1. |
Financial Statements |
|||
Condensed Consolidated Statements of Operations (Unaudited) |
1 |
|||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) |
2 |
|||
Condensed Consolidated Statements of Equity (Deficit) (Unaudited) |
3 |
|||
Condensed Consolidated Balance Sheets (Unaudited) |
4 |
|||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
5 |
|||
Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 |
|||
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
26 |
||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
37 |
||
Item 4. |
Controls and Procedures |
37 |
||
PART II. Other Information |
||||
Item 1. |
Legal Proceedings |
38 |
||
Item 1A. |
Risk Factors |
38 |
||
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
38 |
||
Item 3. |
Default upon Senior Securities |
38 |
||
Item 4. |
Mine Safety Disclosure |
38 |
||
Item 5. |
Other Information |
38 |
||
Item 6. |
Exhibits |
39 |
||
Signatures |
40 |
Cincinnati Bell Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions)
(Unaudited)
Three Months Ended |
Six Months Ended |
||||||||||||||
2024 |
2023 |
2024 |
2023 |
||||||||||||
Revenue |
$ |
272.8 |
$ |
275.3 |
$ |
544.4 |
$ |
551.2 |
|||||||
Costs and expenses |
|||||||||||||||
Cost of services and products, excluding items below |
132.1 |
130.9 |
265.6 |
267.3 |
|||||||||||
Selling, general and administrative, excluding items below |
62.9 |
61.9 |
126.1 |
127.7 |
|||||||||||
Depreciation and amortization |
80.3 |
90.4 |
157.7 |
203.3 |
|||||||||||
Restructuring and severance related charges |
(0.3 |
) |
- |
(0.1 |
) |
- |
|||||||||
Transaction costs |
- |
0.1 |
0.1 |
0.1 |
|||||||||||
Total operating costs and expenses |
275.0 |
283.3 |
549.4 |
598.4 |
|||||||||||
Operating loss |
(2.2 |
) |
(8.0 |
) |
(5.0 |
) |
(47.2 |
) |
|||||||
Interest expense |
45.3 |
41.0 |
86.9 |
76.2 |
|||||||||||
Other components of pension and postretirement benefit plans (benefit) expense |
(1.0 |
) |
- |
(1.5 |
) |
0.4 |
|||||||||
Other income, net |
(6.5 |
) |
(27.6 |
) |
(36.5 |
) |
(24.4 |
) |
|||||||
Loss from continuing operations before income taxes |
(40.0 |
) |
(21.4 |
) |
(53.9 |
) |
(99.4 |
) |
|||||||
Income tax (benefit) expense |
(2.6 |
) |
(1.9 |
) |
31.2 |
(6.5 |
) |
||||||||
Loss from continuing operations |
(37.4 |
) |
(19.5 |
) |
(85.1 |
) |
(92.9 |
) |
|||||||
Income from discontinued operations (net of tax) |
3.1 |
9.4 |
9.9 |
12.9 |
|||||||||||
Net loss |
$ |
(34.3 |
) |
$ |
(10.1 |
) |
$ |
(75.2 |
) |
$ |
(80.0 |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
1
Cincinnati Bell Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
(Unaudited)
Three Months Ended |
Six Months Ended |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Net loss |
$ |
(34.3 |
) |
$ |
(10.1 |
) |
$ |
(75.2 |
) |
$ |
(80.0 |
) |
||||
Other comprehensive (loss) income, net of tax: |
||||||||||||||||
Foreign currency translation (loss) gain |
(1.0 |
) |
2.4 |
(3.6 |
) |
2.4 |
||||||||||
Defined benefit plans: |
||||||||||||||||
Net loss arising from remeasurement during the period, net of tax of ($0.9), ($0.9) |
(2.8 |
) |
- |
(2.8 |
) |
- |
||||||||||
Amortization of prior service benefits included in net income, net of tax of $0.0, $0.0, ($0.1), ($0.1) |
(0.2 |
) |
(0.2 |
) |
(0.3 |
) |
(0.3 |
) |
||||||||
Amortization of net actuarial gain included in net income, net of tax of ($0.3), ($0.4), ($0.5), ($0.6) |
(0.8 |
) |
(1.0 |
) |
(1.5 |
) |
(1.8 |
) |
||||||||
Reclassification adjustment for pension settlement benefits included in net income, net of tax of ($0.1), ($0.1) |
(0.3 |
) |
- |
(0.3 |
) |
- |
||||||||||
Total other comprehensive (loss) income |
(5.1 |
) |
1.2 |
(8.5 |
) |
0.3 |
||||||||||
Total comprehensive loss |
$ |
(39.4 |
) |
$ |
(8.9 |
) |
$ |
(83.7 |
) |
$ |
(79.7 |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
Cincinnati Bell Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)
(Dollars in millions)
(Unaudited)
Additional Paid-in |
Accumulated Other |
|||||||||||||||
Capital |
Accumulated Deficit |
Income (Loss) |
Total |
|||||||||||||
Balance at March 31, 2024 |
$ |
2,116.1 |
$ |
(391.7 |
) |
$ |
24.8 |
$ |
1,749.2 |
|||||||
Net loss |
- |
(34.3 |
) |
- |
(34.3 |
) |
||||||||||
Other comprehensive loss |
- |
- |
(5.1 |
) |
(5.1 |
) |
||||||||||
Balance at June 30, 2024 |
$ |
2,116.1 |
$ |
(426.0 |
) |
$ |
19.7 |
$ |
1,709.8 |
|||||||
Balance at March 31, 2023 |
$ |
1,716.1 |
$ |
(228.0 |
) |
$ |
18.6 |
$ |
1,506.7 |
|||||||
Net loss |
- |
(10.1 |
) |
- |
(10.1 |
) |
||||||||||
Other comprehensive income |
- |
- |
1.2 |
1.2 |
||||||||||||
Balance at June 30, 2023 |
$ |
1,716.1 |
$ |
(238.1 |
) |
$ |
19.8 |
$ |
1,497.8 |
|||||||
Additional Paid-in |
Accumulated Other |
|||||||||||||||
Capital |
Accumulated Deficit |
Income (Loss) |
Total |
|||||||||||||
Balance at December 31, 2023 |
$ |
2,116.1 |
$ |
(350.8 |
) |
$ |
28.2 |
$ |
1,793.5 |
|||||||
Net loss |
- |
(75.2 |
) |
- |
(75.2 |
) |
||||||||||
Other comprehensive loss |
- |
- |
(8.5 |
) |
(8.5 |
) |
||||||||||
Balance at June 30, 2024 |
$ |
2,116.1 |
$ |
(426.0 |
) |
$ |
19.7 |
$ |
1,709.8 |
|||||||
Balance at December 31, 2022 |
$ |
1,716.1 |
$ |
(158.1 |
) |
$ |
19.5 |
$ |
1,577.5 |
|||||||
Net loss |
- |
(80.0 |
) |
- |
(80.0 |
) |
||||||||||
Other comprehensive income |
- |
- |
0.3 |
0.3 |
||||||||||||
Balance at June 30, 2023 |
$ |
1,716.1 |
$ |
(238.1 |
) |
$ |
19.8 |
$ |
1,497.8 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
Cincinnati Bell Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(Unaudited)
June 30, 2024 |
December 31, 2023 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
4.7 |
$ |
7.8 |
||||
Receivables, less allowances of $14.8and $14.8 |
94.1 |
94.1 |
||||||
Inventory, materials and supplies |
82.9 |
88.6 |
||||||
Prepaid expenses |
28.6 |
25.7 |
||||||
Other current assets |
20.8 |
20.7 |
||||||
Current assets held for sale from discontinued operations |
333.3 |
460.0 |
||||||
Total current assets |
564.4 |
696.9 |
||||||
Property, plant and equipment, net |
2,518.8 |
2,385.7 |
||||||
Operating lease right-of-use assets |
69.0 |
63.9 |
||||||
Goodwill |
566.7 |
566.7 |
||||||
Intangible assets, net |
383.4 |
415.7 |
||||||
Deferred income tax assets |
0.1 |
3.5 |
||||||
Other noncurrent assets |
161.4 |
52.9 |
||||||
Noncurrent assets held for sale from discontinued operations |
581.7 |
570.2 |
||||||
Total assets |
$ |
4,845.5 |
$ |
4,755.5 |
||||
Liabilities and Shareowners' Equity |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ |
25.4 |
$ |
20.4 |
||||
Accounts payable |
143.6 |
188.9 |
||||||
Unearned revenue and customer deposits |
47.6 |
46.7 |
||||||
Accrued taxes |
9.6 |
8.9 |
||||||
Accrued interest |
3.3 |
3.6 |
||||||
Accrued payroll and benefits |
31.3 |
35.0 |
||||||
Other current liabilities |
29.2 |
42.0 |
||||||
Current liabilities held for sale from discontinued operations |
268.8 |
338.5 |
||||||
Total current liabilities |
558.8 |
684.0 |
||||||
Long-term debt, less current portion |
2,004.5 |
1,830.1 |
||||||
Operating lease liabilities |
64.7 |
60.2 |
||||||
Pension and postretirement benefit obligations |
126.7 |
127.9 |
||||||
Pole license agreement obligation |
39.4 |
40.8 |
||||||
Deferred income tax liability |
35.9 |
5.4 |
||||||
Other noncurrent liabilities |
222.7 |
127.9 |
||||||
Noncurrent liabilities held for sale from discontinued operations |
83.0 |
85.7 |
||||||
Total liabilities |
3,135.7 |
2,962.0 |
||||||
Shareowners' equity |
||||||||
Additional paid-in capital |
2,116.1 |
2,116.1 |
||||||
Accumulated deficit |
(426.0 |
) |
(350.8 |
) |
||||
Accumulated other comprehensive income |
19.7 |
28.2 |
||||||
Total shareowners' equity |
1,709.8 |
1,793.5 |
||||||
Total liabilities and shareowners' equity |
$ |
4,845.5 |
$ |
4,755.5 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
Cincinnati Bell Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited)
Six Months Ended June 30, |
||||||||
2024 |
2023 |
|||||||
Cash flows from operating activities |
||||||||
Net loss |
$ |
(75.2 |
) |
$ |
(80.0 |
) |
||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
163.4 |
244.9 |
||||||
Provision for loss on receivables |
4.8 |
5.0 |
||||||
Unrealized gain on interest rate swaps |
(15.4 |
) |
(12.8 |
) |
||||
Noncash portion of interest expense |
5.3 |
3.3 |
||||||
Deferred income taxes |
30.1 |
(25.7 |
) |
|||||
Pension and other postretirement payments in excess of expense |
(5.5 |
) |
(3.6 |
) |
||||
Other, net |
(5.3 |
) |
(0.5 |
) |
||||
Changes in operating assets and liabilities: |
||||||||
Decrease (increase) in receivables |
115.4 |
(1.5 |
) |
|||||
Decrease (increase) in inventory, materials, supplies, prepaid expenses and other current assets |
12.2 |
(1.4 |
) |
|||||
Decrease in accounts payable |
(92.3 |
) |
(84.8 |
) |
||||
Decrease in accrued and other current liabilities |
(4.3 |
) |
(20.7 |
) |
||||
Increase in other noncurrent assets |
(6.7 |
) |
(1.8 |
) |
||||
Increase (decrease) in other noncurrent liabilities |
2.2 |
(3.8 |
) |
|||||
Net cash provided by operating activities |
128.7 |
16.6 |
||||||
Cash flows from investing activities |
||||||||
Capital expenditures |
(296.6 |
) |
(303.3 |
) |
||||
Acquisition of businesses, net of cash acquired |
- |
(3.0 |
) |
|||||
Insurance proceeds received for damage to equipment |
3.3 |
0.2 |
||||||
Other, net |
(1.1 |
) |
(3.1 |
) |
||||
Net cash used in investing activities |
(294.4 |
) |
(309.2 |
) |
||||
Cash flows from financing activities |
||||||||
Proceeds from issuance of long-term debt |
306.0 |
205.2 |
||||||
Net (decrease) increase in corporate credit facility with initial maturities less than 90 days |
(105.5 |
) |
68.0 |
|||||
Proceeds from borrowings on receivables facilities |
761.3 |
1,110.6 |
||||||
Payments on receivables facilities |
(772.0 |
) |
(1,055.1 |
) |
||||
Repayment of debt |
(15.5 |
) |
(33.9 |
) |
||||
Payment of debt issuance costs |
(3.7 |
) |
(3.3 |
) |
||||
Net cash provided by financing activities |
170.6 |
291.5 |
||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
- |
- |
||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
4.9 |
(1.1 |
) |
|||||
Cash, cash equivalents and restricted cash at beginning of period |
12.5 |
12.9 |
||||||
Cash, cash equivalents and restricted cash at end of period |
$ |
17.4 |
$ |
11.8 |
||||
Noncash investing and financing transactions: |
||||||||
Acquisition of property by assuming debt and other noncurrent liabilities |
$ |
3.6 |
$ |
3.4 |
||||
Acquisition of property on account |
$ |
61.8 |
$ |
95.6 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Description of Business and Accounting Policies
Description of Business- Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell," "we," "our," "us" or the "Company") provides diversified telecommunications and technology services. The Company generates a large portion of its revenue by serving customers in Cincinnati, Ohio, Dayton, Ohio and the islands of Hawaii. An economic downturn or natural disaster occurring in these, or a portion of these, limited operating territories could have a disproportionate effect on our business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas. As of June 30, 2024, we operate our business through one segment, Network. All revenue reported in the Network segment is generated from U.S. operations.
Basis of Presentation -The Condensed Consolidated Financial Statements of the Company have been prepared pursuant to the rules and regulations of the SEC and, in the opinion of management, include all adjustments necessary for a fair statement of the results of operations, other comprehensive income, financial position and cash flows for each period presented.
The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted pursuant to SEC rules and regulations for interim reporting.
The Company's Condensed Consolidated Balance Sheet as of June 30, 2024 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. These Condensed Consolidated Financial Statements should be read in conjunction with the Company's 2023 Annual Report on Form 10-K.
The pending sale of the CBTS and OnX businesses (the "Disposal Group") represents a strategic shift in our business. Therefore, assets, liabilities and results of operations from the Disposal Group will be reported as discontinued operations in our financial statements. Accordingly, the Company has recast its prior period financial position and results of operations to be comparable with the current discontinued operations presentation with the exception of the Condensed Consolidated Statements of Cash Flows. See Note 2 for all required disclosures.
Business Combinations -In accounting for business combinations, we apply the accounting requirements of Accounting Standards Codification 805 ("ASC 805"), "Business Combinations," which requires the recording of net assets of acquired businesses at fair value. In developing fair value estimates for acquired assets and assumed liabilities, management analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets. In addition, any contingent consideration is presented at fair value at the date of acquisition, and transaction costs are expensed as incurred. The Company reports in its Condensed Consolidated Financial Statements provisional amounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period. See Note 3 for disclosures related to mergers and acquisitions.
Use of Estimates -Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with U.S. GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.
Accounting Policies- The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Variable Interest Entity-The Company holds an interest in a limited liability company, Digital Access Ohio LLC ("DAO"), that is considered a variable interest entity ("VIE") in accordance with the guidance of ASC 810 "Consolidation." DAO is considered a VIE as it has insufficient equity capital to finance its activities without additional financial support. The Company is the primary beneficiary of DAO as it has the power over the activities that most significantly impact the economic performance of DAO and has the obligation to absorb expected losses and the right to receive expected benefits that could be significant to DAO. As a result, the Company consolidated DAO, and all significant intercompany accounts have been eliminated. For the three and six months ended June 30, 2024 and 2023, results of operations of DAO were nominal.
Funding of DAO is provided in the form of cash contributions, debt issuance and grants that include a free standing warrant that allows the holder of the warrant at its option to convert the warrant into a class A-2 share of DAO at any time during the period commencing on the 2ndanniversary of the funding agreement and ending on the 10th anniversary of the funding agreement date. The Company has recorded the fair value associated with the warrant to "Other noncurrent liabilities" on the Condensed Consolidated Balance Sheets. The Company will continue to assess whether it has a controlling financial interest and whether it is the primary beneficiary at each reporting period.
6
Cash, Cash Equivalents and Restricted Cash - Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less. Restricted cash as of June 30, 2024 and December 31, 2023 consists of funds held by DAO. Restricted cash is included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Condensed Consolidated Statements of Cash Flows. A reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets follows:
(dollars in millions) |
June 30, 2024 |
December 31, 2023 |
|||||
Cash and cash equivalents |
$ |
4.7 |
$ |
7.8 |
|||
Cash and cash equivalents included in Current assets held for sale from discontinued operations |
5.4 |
1.3 |
|||||
Restricted cash included in Other noncurrent assets |
7.3 |
3.4 |
|||||
Cash, cash equivalents and restricted cash per Condensed Consolidated Statements of Cash Flows |
$ |
17.4 |
$ |
12.5 |
Goodwill - Goodwill represents the excess of the purchase price consideration over the fair value of net assets acquired and recorded in connection with business acquisitions. Goodwill is allocated at the business segment level. Goodwill is tested for impairment on an annual basis or when events or changes in circumstances indicate that such assets may be impaired. If the net book value of the reporting unit exceeds its fair value, an impairment loss is recognized. An impairment loss is measured as the excess of the carrying value of goodwill of a reporting unit over its fair value.
Indefinite-Lived Intangible Assets -Intangible assets represent purchased assets that lack physical substance but can be separately distinguished from goodwill because of contractual or legal rights, or because the asset is capable of being separately sold or exchanged. Federal Communications Commission ("FCC") licenses for wireless spectrum and other perpetual licenses represent indefinite-lived intangible assets. The Company may renew the wireless licenses in a routine manner every ten years for a nominal fee, provided the Company continues to meet the service and geographic coverage provisions required by the FCC. Intangible assets not subject to amortization are tested for impairment annually, or when events or changes in circumstances indicate that the asset might be impaired.
Long-Lived Assets - Management reviews the carrying value of property, plant and equipment and other long-lived assets, including intangible assets with definite lives, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition is less than its carrying amount. An impairment loss is measured as the amount by which the asset's carrying value exceeds its estimated fair value. Long-lived intangible assets are amortized based on the estimated economic value generated by the asset in future years.
7
Accounting for Impacts of Involuntary Events and Contingencies- Assets destroyed or damaged as a result of involuntary events are written off or reduced in carrying value to their salvage value. When recovery of all or a portion of the amount of property damage loss or other covered expenses through insurance proceeds is demonstrated to be probable, a receivable is recorded and offsets the loss or expense up to the amount of the total loss or expense. Proceeds ultimately received from insurance claims for business interruption, direct expenditures and amounts for capital assets in excess of net book value will be recorded to results of operations when collected. No gain is recorded until all contingencies related to the insurance claim have been resolved.
In August 2023, wildfires ignited on Maui and Hawaii islands and spread rapidly due to extreme wind conditions caused in part by Hurricane Dora which traveled 800 miles offshore west of Maui. The fires caused widespread damage to Lahaina town on the island of Maui and the surrounding area, including physical loss and damage to certain of the Company's fiber and copper assets and Company owned equipment located on customer premises. The Company experienced the loss of business income immediately following the fires and is expected to continue to experience loss of business income for an unknown amount of time. The Company has filed insurance claims for the physical loss and damages experienced in Lahaina and for business income losses resulting from the matter. In the first quarter of 2024, the Company received insurance reimbursements of $3.0million related to the physical loss and damage claims and recorded the amount to "Other income, net" on the Condensed Consolidated Statements of Operations.
The Company's Hawaiian Telcom subsidiary, along with many other parties, including governmental entities, landowners, utilities and other telecommunication providers, has been named as a defendant in multiple civil lawsuits brought by individual plaintiffs, a putative class, and subrogation plaintiffs in state and federal court in Hawaii arising out of the August 2023 windstorm and wildfires on the island of Maui. Among other things, the lawsuits allege that the defendants were responsible for, and/or were negligent in failing to prevent, the wildfires that led to severe destruction of property and loss of life. Hawaiian Telcom has denied any responsibility for the damages caused by the wildfires.
The parties to the litigations, including Hawaiian Telcom, have engaged in confidential mediation and discussions regarding a global settlement of the litigations. On August 2, 2024, the defendants, individual plaintiffs, and class plaintiffs entered into a term sheet that contemplates a global resolution of all claims arising out of the August 2023 windstorm and wildfires on Maui that does not include any admission of liability in which the defendants would collectively pay an aggregate of $4.037billion. The settlement also would resolve all claims among the defendants. Hawaiian Telcom's contribution is a total of $100million and includes the $2.5million previously contributed for the One 'Ohana Fund. Settlement payments are expected to be made no earlier than mid to late 2025 following necessary judicial review and approvals. However, until final settlement documents are signed by all the parties to the term sheet, there can be no assurances that a settlement will be completed, or that Hawaiian Telcom will be able to settle the lawsuits against it on the terms set forth in the term sheet. If the settlement is not completed, Hawaiian Telcom intends to vigorously defend the lawsuits in which it is named as defendant.
As a result, the Company concluded that, with the agreement to the term sheet related to the August 2023 wildfires on Maui, the global settlement was probable, and the related loss was reasonably estimable. Accordingly, the Company recognized an incremental liability of $93.5million recorded to "Other Noncurrent liabilities" in the Condensed Consolidated Balance Sheets as of June 30, 2024. This charge is offset by an insurance receivable included in "Other noncurrent assets" as of June 30, 2024. The Company had recorded a general claims liability of $4.0million related to the matter as of December 31, 2023.
As of June 30, 2024, the Company has a general liability of $97.5million related to this matter recorded in "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets. As of December 31, 2023, the Company had a general liability recorded related to this matter of $4.0million, of which $2.0million was recorded in "Other current liabilities" and $2.0million was recorded in "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets. As of June 30, 2024 an offsetting receivable of $1.5million and $96.6million associated with amounts expected to be reimbursed by insurance has been recorded in "Receivables" and "Other noncurrent assets," respectively, in the Condensed Consolidated Balance Sheets. As of December 31, 2023, the Company had recorded $2.0million to "Other noncurrent assets" on the Condensed Consolidated Balance Sheets.
Legal expenses of $3.4million related to this matter have been recorded in the six months ended June 30, 2024.
Income and Operating Taxes
Income taxes -In accordance with ASC 740-270, the Company's income tax provision for interim periods is determined through the use of an estimated annual effective tax rate applied to year-to-date ordinary income/loss plus or minus the tax effects of discrete items. The income tax provision for the three months ended June 30, 2024 for continuing operations was a benefit of $2.6million. The tax benefit reported is lower than the $8.4million benefit expected at the statutory rate due most notably to additional federal and state valuation allowances recorded against net operating loss deferred tax assets. The tax benefit reported in the three months ended June 30, 2024 for continuing operations is higher than the tax benefit in the comparable period of 2023 for continuing operations due to a higher loss before tax, with valuation allowances recorded against net operating loss deferred tax assets recorded in both periods.
8
The income tax provision recorded for the six months ended June 30, 2024 for continuing operations was an expense of $31.2million, despite a loss before tax of $53.9million, due most notably to amounts recorded related to the accounting for the planned divestiture of the Disposal Group. A discrete tax expense item of $17.1million has been recorded in the six months ended June 30, 2024 for continuing operations to record a deferred tax liability for the tax effect of the difference between book basis and tax basis of the Disposal Group. In addition, $27.1million of tax expense, of which $18.0million was discrete, was recorded in the six-month reporting period to increase valuation allowances on deferred tax assets related to federal and state net operating loss carryforwards. In the comparable period of 2023, the tax effect of the difference between book basis and tax basis of the Disposal Group was not yet reported.
Operating taxes -Certain operating taxes such as property, sales, use, and gross receipts taxes are reported as expenses in operating income primarily within cost of services. These taxes are not included in income tax expense because the amounts to be paid are not dependent on our level of income. Liabilities for audit exposures are established based on management's assessment of the probability of payment. The provision for such liabilities is recognized as either property, plant and equipment, operating tax expense, or depreciation expense depending on the nature of the audit exposure. Upon resolution of an audit, any remaining liability not paid is released against the account in which it was originally recorded. Certain telecommunication taxes and surcharges that are collected from customers are also recorded as revenue; however, in accordance with ASC 606, revenue associated with these charges is excluded from the transaction price.
Derivative Financial Instruments -The Company accounts for derivative financial instruments by recognizing derivative instruments as either assets or liabilities in the Condensed Consolidated Balance Sheets at fair value and recognizing the resulting gains or losses as adjustments to the Condensed Consolidated Statements of Operations or "Accumulated other comprehensive income." The Company does not hold or issue derivative financial instruments for trading or speculative purposes.
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of "Accumulated other comprehensive income" in stockholder's equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. Derivatives that do not qualify as hedges are adjusted to fair value through earnings in the current period. All cash flows associated with the Company's derivative instruments are classified as operating activities in the Condensed Consolidated Statements of Cash Flows.
Segments -The Company provides products and services that can be categorized as Data, Video, Voice or Other that represent 100% of the Company's consolidated sales from continuing operations. Since the February 2, 2024 definitive purchase agreement with TowerBrook (Note 2), the Company aggregates its products and services delivered across all geographical markets into one reportable segment due to the products and services having similar economic characteristics with similar long-term financial performance. In addition, the Company's geographical markets offer customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of capital required to build the network to deliver the services from similar (and in many cases identical) vendors, and serve similar types of customers. Operating divisions are organized primarily on a legal entity basis so that the operating division management team can be responsive to local needs and can execute company strategic plans and initiatives throughout the locations in their operating division. The legal entity basis of organization reflects how the business is managed and how the Company's Chief Executive Officer, who acts as the Company's chief operating decision maker, assesses performance internally. All of the Company's continuing operations are domestic.
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for public business entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments within ASU 2023-07 are required to be applied on a retrospective basis. The Company will adopt and apply the guidance as prescribed by this ASU to segment reporting that occurs after the effective date. We do not anticipate this ASU will materially affect our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires reporting entities to disclose disaggregated information about the entity's effective tax rate reconciliation as well as information on income taxes paid. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, although early adoption is permitted. The amendments in this ASU will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating the effects of this standard on its consolidated financial statements and related disclosures.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's consolidated financial statements upon adoption.
9
2. Discontinued Operations
On February 2, 2024, the Company entered into a definitive purchase agreement (the "Purchase Agreement") with TowerBrook Capital Partners ("TowerBrook") in which TowerBrook will acquire the Disposal Group from the Company for a purchase price of $670.0million. The Purchase Agreement is subject to customary closing conditions and is expected to close in the second half of 2024, although there can be no assurance that the Purchase Agreement will close by that date.
Management evaluated the criteria to report a disposal group as held for sale and concluded that all of the criteria were met as of February 2024. As a result, the Company reported, and continues to report, the assets and the liabilities that are included in the Disposal Group as held for sale and the operations as discontinued starting in the first quarter of 2024. The revenue and operating income contributed by Hawaii operations and certain Communications customers, as well as the associated assets and liabilities, that were previously reported in the IT Services and Hardware Segment that will be retained by the continuing operation and excluded from the Disposal Group have been reported in the Network segment for the three and six months ended June 30, 2024 and 2023.
All depreciation and amortization expense associated with intangible assets, property, plant and equipment and right of use assets associated with the Disposal Group ceased as of February 2, 2024.
Financial results of the Disposal Group for the three and six months ended June 30, 2024 and 2023 reported as Income from discontinued operations (net of tax) on the Condensed Consolidated Statements of Operations are as follows:
Three Months Ended |
Six Months Ended |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Revenue |
$ |
176.7 |
$ |
186.7 |
$ |
361.0 |
$ |
364.0 |
||||||||
Costs and expenses |
||||||||||||||||
Cost of services and products, excluding items below |
123.9 |
122.2 |
246.2 |
243.3 |
||||||||||||
Selling, general and administrative, excluding items below |
40.9 |
40.4 |
84.8 |
80.0 |
||||||||||||
Depreciation and amortization |
- |
21.2 |
5.7 |
41.6 |
||||||||||||
Restructuring and severance related charges |
1.9 |
1.2 |
2.3 |
1.4 |
||||||||||||
Transaction costs |
6.2 |
- |
10.3 |
- |
||||||||||||
Total operating costs and expenses |
172.9 |
185.0 |
349.3 |
366.3 |
||||||||||||
Operating income (loss) |
3.8 |
1.7 |
11.7 |
(2.3 |
) |
|||||||||||
Interest expense |
0.3 |
0.2 |
0.7 |
0.5 |
||||||||||||
Other (income) expense, net |
(0.4 |
) |
0.5 |
(1.3 |
) |
0.4 |
||||||||||
Income (loss) before income taxes |
3.9 |
1.0 |
12.3 |
(3.2 |
) |
|||||||||||
Income tax expense (benefit) |
0.8 |
(8.4 |
) |
2.4 |
(16.1 |
) |
||||||||||
Net income from discontinued operations |
$ |
3.1 |
$ |
9.4 |
$ |
9.9 |
$ |
12.9 |
10
The Disposal Group's assets and liabilities presented as discontinued operations as of June 30, 2024 and December 31, 2023 are as follows:
June 30, 2024 |
December 31, 2023 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ |
5.4 |
$ |
1.3 |
||||
Receivables, less allowances of $3.0and $2.9 |
278.3 |
400.9 |
||||||
Inventory, materials and supplies |
9.4 |
18.8 |
||||||
Prepaid expenses |
28.3 |
27.6 |
||||||
Other current assets |
11.9 |
11.4 |
||||||
Total current assets from discontinued operations |
333.3 |
460.0 |
||||||
Property, plant and equipment, net |
81.9 |
73.4 |
||||||
Goodwill |
153.2 |
154.3 |
||||||
Intangible assets, net |
294.9 |
300.2 |
||||||
Deferred income tax assets |
2.5 |
2.8 |
||||||
Other noncurrent assets |
49.2 |
39.5 |
||||||
Total noncurrent assets from discontinued operations |
581.7 |
570.2 |
||||||
Total assets from discontinued operations |
$ |
915.0 |
$ |
1,030.2 |
||||
Liabilities |
||||||||
Current liabilities |
||||||||
Current portion of long-term debt |
$ |
6.3 |
$ |
6.7 |
||||
Accounts payable |
185.1 |
264.9 |
||||||
Unearned revenue and customer deposits |
26.8 |
25.3 |
||||||
Accrued taxes |
2.0 |
4.3 |
||||||
Accrued payroll and benefits |
30.3 |
16.5 |
||||||
Other current liabilities |
18.3 |
20.8 |
||||||
Total current liabilities from discontinued operations |
268.8 |
338.5 |
||||||
Long-term debt, less current portion |
5.4 |
6.3 |
||||||
Deferred income tax liability |
46.0 |
52.3 |
||||||
Other noncurrent liabilities |
31.6 |
27.1 |
||||||
Total noncurrent liabilities from discontinued operations |
83.0 |
85.7 |
||||||
Total liabilities from discontinued operations |
$ |
351.8 |
$ |
424.2 |
The following is selected operating and investing cash flow activity from discontinued operations included in the Condensed Consolidated Statements of Cash Flows:
Six Months Ended |
||||||||
2024 |
2023 |
|||||||
Depreciation and amortization |
$ |
5.7 |
$ |
41.6 |
||||
Capital expenditures |
$ |
(9.5 |
) |
$ |
(10.5 |
) |
11
3. Mergers and Acquisitions
Acquisition of Bridgewired Fiber Assets
In the third quarter of 2023, the Company acquired fiber network assets from Bridgewired, LLC ("Bridgewired") for an aggregate purchase price of $6.7million, consisting of $6.2million in cash and $0.5million in contingent consideration. The Company accounted for the Bridgewired fiber asset acquisition as an asset acquisition under ASC 805-10-55 "Business Combinations" because the assets acquired do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in ASC 805-10-55-5A related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the fiber infrastructure assets) and, thus, the assets are not considered a business. The fiber network assets will help to support and expand the Company's existing network. The assets are recorded as network equipment in "Property, plant and equipment, net" on the Condensed Consolidated Balance Sheets.
Acquisition of Ohio Transparent Telecom Inc.
On April 17, 2023 ("OTT Acquisition Date"), the Company acquired 100% of Ohio Transparent Telecom Inc. ("OTT"), a private company that provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Ohio and Michigan for an aggregate purchase price of $3.3million, consisting of $3.2million in cash and $0.1million in contingent consideration. Theservices and solutions provided by OTT will complement the services offered by Agile, which the Company acquired in the second quarter of 2022.
The valuation of the assets acquired and liabilities assumed was based on estimated fair values at the OTT Acquisition Date. The allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed reflects various fair value estimates and analyses, including work performed by third-party valuation specialists. The determination of the final purchase price allocation to specific assets acquired and liabilities assumed is complete.
In connection with this acquisition, the Company recorded goodwill of $1.1million attributable to an acquired workforce with industry expertise in addition to other expected synergies with Agile. The amount of goodwill related to this acquisition is deductible for income tax purposes.
Acquisition of Lawrenceburg Fiber Assets
In the first quarter of 2023, the Company acquired fiber network assets from the City of Lawrenceburg for an aggregate purchase price of $3.0million consisting of $2.8million in cash and $0.2million in contingent consideration. The Company accounted for the Lawrenceburg fiber asset acquisition as an asset acquisition under ASC 805-10-55 "Business Combinations" because the assets acquired do not include an assembled workforce, and the gross value of the assets acquired meets the screen test in ASC 805-10-55-5A related to substantially all of the fair value being concentrated in a single asset or group of assets (i.e., the fiber infrastructure assets) and, thus, the assets are not considered a business. The fiber network assets will help to support and expand the Company's existing network. The assets are recorded as network equipment in "Property, plant and equipment, net" on the Condensed Consolidated Balance Sheets.
12
4. Revenue
The Network segment provides products and services to both residential and commercial customers that can be categorized as Strategic, Legacy and Other. In the first quarter of 2024, the Company realigned the classification of products and services to these categories within the Network segment to better align revenue across geographies as well as reclass certain nonrecurring revenue to Other. The products and services within the Strategic and Legacy categories can be further categorized as either Data, Video or Voice. Strategic and Legacy revenue include both residential and commercial customers.
As a result of the Purchase Agreement, revenue contributed by Hawaii operations and certain Communications revenue previously reported in the IT Services and Hardware segment are now reported in the Network segment.
Residential customers have implied month-to-month contracts. Commercial customers, with the exception of contracts associated with the Southeast Asia to United States ("SEA-US") trans-Pacific submarine cable system, typically have contracts with an initial duration of oneto five yearsand automatically renew on a month-to-month basis. Customers are invoiced on a monthly basis for services rendered. Contracts for projects that are included within the Other revenue stream are typically short in duration and less than one year. Contracts associated with the SEA-US cable system typically range from 15to 25 yearsand payment is prepaid.
The Company has elected the practical expedient described in ASC 606-10-32-18 that allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects that the period of time between the transfer of a promised good or service to the customer and when the customer pays for such good or service will be one year or less. Customers are typically billed immediately upon the rendering of services or the delivery of products. Payment terms for customers are between 30and 120days. Subsequent to the acquisition of Hawaiian Telcom Holdco., Inc. ("Hawaiian Telcom"), the Company began recognizing a financing component associated with the up-front payments for services to be delivered under indefeasible right of use ("IRU") contracts for fiber circuit capacity. The IRU contracts typically have a duration ranging from 15to 25 years.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, or a series of distinct goods or services, and is the unit of account defined in ASC Topic 606. The transaction price identified in the contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Contract modifications for changes to services provided are routine throughout the term of our contracts. In most instances, contract modifications are for the addition or reduction of services that are distinct, and price changes are based on the stand-alone selling price of the service and, as such, are accounted for on a prospective basis as a new contract.
Goods and services are sold individually, or a contract may include multiple goods or services. For contracts with multiple goods and services, the transaction price identified in the contract is allocated to each performance obligation using the stand-alone selling price of each distinct good or service in the contract.
Performance obligations are satisfied either over time as services are performed or at a point in time. Substantially all of our service revenue is recognized over time. For services transferred over time, the Company has elected the practical expedient to recognize revenue based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are provided evenly over the month and are substantially the same over the life of the contract. As the Company has elected the practical expedients detailed at ASC 606-10-50-13, revenue for these unsatisfied performance obligations that will be billed in future periods has not been disclosed.
13
As of June 30, 2024, our estimated revenue, including a financing component, expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially unsatisfied) is $173.0million. Certain IRU contracts extend for periods of up to 30years and are invoiced at the beginning of the contract term. The revenue from such contracts is recognized over time as services are provided over the contract term. The expected revenue to be recognized for existing customer contracts is as follows:
(dollars in millions) |
||||
Sixmonths ended December 31, 2024 |
$ |
8.9 |
||
2025 |
18.2 |
|||
2026 |
18.6 |
|||
2027 |
18.8 |
|||
2028 |
9.5 |
|||
Thereafter |
99.0 |
Network
The Company has identified four distinct performance obligations in the Network segment, namely Data, Video, Voice and Other. For each of the Data, Video and Voice services, service is delivered to the customer continuously and in a substantially similar manner for each period of the agreement, the customer takes full control over the services as the service is delivered, and as such, Data, Video and Voice are identified to be a series of distinct services. Services provided by the Network segment can be categorized into three main categories that include Strategic, Legacy and Other. The Strategic and Legacy categories may include one or more of the aforementioned performance obligations. Data services include internet access, digital subscriber lines, ethernet, routed network services, SONET (Synchronous Optical Network), dedicated internet access, wavelength, digital signal, IRU revenue and revenue associated with the SEA-US cable system. Video services are offered through our fiber network to residential and commercial customers based on various standard plans with the opportunity to add premium channels. To receive video services, customers are required to use the Company's set top boxes that are billed as part of the monthly recurring service. Set top boxes are not considered a separate performance obligation from video because the equipment is necessary for the service to operate and the customer has no alternative use for the equipment. Voice services include traditional and fiber voice lines, switched access, digital trunking, consumer and business long distance calling, and, as a result of the Purchase Agreement, certain communications services including data and VoIP services, tailored solutions that include converged IP communications of data, voice and mobility applications, MPLS (Multi-Protocol Label Switching) and conferencing services.
Services and products not included in Data, Voice or Video are included in Other revenue and are comprised of wire care, time and materials projects, advertising, management of distributed antenna systems, certain pass through fees such franchise fees and regulatory fees, subsidized fiber build projects and other fees that are generally nonrecurring in nature. As a result of the Purchase Agreement, Other revenue also includes revenue contributed by Hawaiian Telcom for the sale of hardware and maintenance contracts as well as installation projects and cloud services which include storage, SLA-based monitoring and management, cloud computing and cloud consulting. The sale of hardware and maintenance contracts is recognized at a point in time while transfer of control of the other services and products is evaluated on an individual project basis and can occur over time or at a point in time.
The Company uses multiple methods to determine stand-alone selling prices in the Network segment. For Internet products categorized as Strategic, included within the Data performance obligation, and Video, market rate is the primary method used to determine stand-alone selling prices. For Enterprise Fiber products categorized as Strategic, included within the Data performance obligation, and Voice, Legacy Data and Other performance obligations, stand-alone selling prices are determined based on a list price, discount off of list price, a tariff rate, a margin percentage range, or a minimum margin percentage.
For the sale of hardware, the Company evaluated whether it is the principal or the agent. The Company has concluded it acts as an agent because it does not control the inventory before it is transferred to customers, it does not have the ability to direct the product to anyone besides the purchasing customer, and it does not integrate the hardware with any of its own goods or services. Based on this assessment, the performance obligation is to arrange a sale of hardware between the vendor and the customer. In the instance where there is an issue with the hardware, the Company coordinates with the manufacturer to facilitate a return in accordance with the standard manufacturer warranty. Hardware returns are not significant to the Company.
For hardware sales, revenue is recognized net of the cost of product and is recognized when the hardware is either shipped or delivered in accordance with the terms of the contract. For certain projects within Voice and Other, revenue is recognized when the customer communicates acceptance of the services performed. For contracts with freight on board shipping terms, management has elected to account for shipping and handling as activities to fulfill the promise to transfer the good, and, therefore, has not evaluated whether shipping and handling activities are promised services to its customers.
14
Contract Balances
The Company recognizes incremental fulfillment costs as an asset when installation expenses are incurred as part of performing the agreement for Data, Voice and Video product offerings in the Network segment in which the contract life is longer than one year. These fulfillment costs are amortized ratably over the expected life of the customer, which is representative of the expected period of benefit of the asset capitalized. The expected life of the customer is determined utilizing the average churn rate for each product. The Company calculates average churn based on the historical average customer life. We also recognize an asset for incremental fulfillment costs for certain Voice services that require us to incur installation and provisioning expenses and are amortized over the average contract term. Customer churn rates and average contract term assumptions are reviewed on an annual basis. Fulfillment costs are capitalized to "Other noncurrent assets." The related amortization expense is recorded to "Cost of services and products."
The Company recognizes an asset for the incremental costs of acquiring a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs related to Data, Voice and Video services meet the requirements to be capitalized. The contract asset established for the costs of acquiring a contract is recorded to "Other noncurrent assets." Sales incentives are amortized ratably over the period that services are delivered using either an average churn rate or average contract term, both representative of the expected period of benefit of the asset capitalized. Customer churn rates and average contract term assumptions are reviewed on an annual basis. The related amortization expense is recorded to "Selling, general and administrative."
Management has elected to use the practical expedient detailed in ASC 340-40-25-4 to expense any costs to fulfill a contract and costs to obtain a contract as they are incurred when the amortization period would have been one year or less. This practical expedient has been applied to fulfillment costs that include installation costs associated with wiring projects. In addition, this practical expedient has been applied to acquisition costs associated with revenue from certain Voice projects.
The following table presents the activity for the Company's contract assets:
(dollars in millions) |
Fulfillment Costs |
Costs of Acquisition |
Total |
|||||||||
Balance as of December 31, 2023* |
$ |
4.8 |
$ |
18.6 |
$ |
23.4 |
||||||
Additions |
0.6 |
2.7 |
3.3 |
|||||||||
Amortization |
(0.4 |
) |
(1.7 |
) |
(2.1 |
) |
||||||
Balance as of March 31, 2024 |
5.0 |
19.6 |
24.6 |
|||||||||
Additions |
0.6 |
3.4 |
4.0 |
|||||||||
Amortization |
(0.4 |
) |
(1.9 |
) |
(2.3 |
) |
||||||
Balance as of June 30, 2024 |
$ |
5.2 |
$ |
21.1 |
$ |
26.3 |
*The beginning balance includes amounts transferred from the Disposal Group for fulfillment costs and costs of acquisition of $0.9million and $0.3million, respectively.
The Company recognizes a liability for cash received up-front for IRU contracts. At June 30, 2024 and December 31, 2023,$4.2million and $4.1million, respectively, of contract liabilities were included in "Other current liabilities." At June 30, 2024 and December 31, 2023, $78.9million and $79.5million, respectively, of contract liabilities were included in "Other noncurrent liabilities."
Disaggregated Revenue
The following table presents revenues disaggregated by product and service lines:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(dollars in millions) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
Data |
$ |
143.3 |
$ |
136.9 |
$ |
284.8 |
$ |
272.6 |
||||||||
Video |
44.7 |
45.0 |
89.9 |
90.5 |
||||||||||||
Voice |
57.6 |
64.7 |
116.9 |
131.4 |
||||||||||||
Other |
27.2 |
28.7 |
52.8 |
56.7 |
||||||||||||
Total Revenue |
$ |
272.8 |
$ |
275.3 |
$ |
544.4 |
$ |
551.2 |
15
5. Goodwill and Intangible Assets
Goodwill
As of June 30, 2024 and December 31 2023, the goodwill balance totaled $566.7million. The goodwill balance as of December 31, 2023 is adjusted to reflect the goodwill reclassified to the Network segment from the Disposal Group based on the relative fair value of the retained operations for all comparable periods. Noimpairment losses were recognized in goodwill for the three and six months ended June 30, 2024 and 2023.
Intangible Assets
The Company's intangible assets consisted of the following:
June 30, 2024 |
December 31, 2023 |
|||||||||||||||||||||||
Gross Carrying |
Accumulated |
Net |
Gross Carrying |
Accumulated |
Net |
|||||||||||||||||||
(dollars in millions) |
Amount |
Amortization |
Amount |
Amount |
Amortization |
Amount |
||||||||||||||||||
Intangible assets subject to amortization |
||||||||||||||||||||||||
Customer relationships |
$ |
545.0 |
$ |
(179.4 |
) |
$ |
365.6 |
$ |
545.0 |
$ |
(150.6 |
) |
$ |
394.4 |
||||||||||
Trade names |
22.4 |
(19.4 |
) |
3.0 |
22.4 |
(15.8 |
) |
6.6 |
||||||||||||||||
Technology |
1.1 |
(0.3 |
) |
0.8 |
1.1 |
(0.3 |
) |
0.8 |
||||||||||||||||
Total |
568.5 |
(199.1 |
) |
369.4 |
568.5 |
(166.7 |
) |
401.8 |
||||||||||||||||
Intangible assets not subject to amortization |
||||||||||||||||||||||||
FCC licenses and spectrum usage rights |
7.2 |
- |
7.2 |
7.1 |
- |
7.1 |
||||||||||||||||||
Perpetual licenses |
6.8 |
- |
6.8 |
6.8 |
- |
6.8 |
||||||||||||||||||
Total intangible assets |
$ |
582.5 |
$ |
(199.1 |
) |
$ |
383.4 |
$ |
582.4 |
$ |
(166.7 |
) |
$ |
415.7 |
The finite-lived intangible assets are amortized over their useful lives based on a number of assumptions, including the estimated period of economic benefit and utilization.
Amortization expense for finite-lived intangible assets was $16.2million and $32.4million for the three and six months ended June 30, 2024, respectively. Amortization expense for finite-lived intangible assets was $17.3million and $34.6million for the three and six months ended June 30, 2023, respectively. Noimpairment losses were recognized on intangible assets for the three and six months ended June 30, 2024 and 2023.
The estimated useful lives for each finite-lived intangible asset class are as follows:
Customer relationships |
15years |
|
Trade names |
3to 10 years |
|
Technology |
7years |
The annual estimated amortization expense for future years is as follows:
(dollars in millions) |
||||
Six months ended June 30, 2024 |
$ |
30.1 |
||
2025 |
53.5 |
|||
2026 |
48.9 |
|||
2027 |
44.4 |
|||
2028 |
39.8 |
|||
Thereafter |
152.7 |
|||
Total |
$ |
369.4 |
16
6. Debt and Other Financing Arrangements
The Company's debt consists of the following:
(dollars in millions) |
June 30, 2024 |
December 31, 2023 |
||||||
Current portion of long-term debt: |
||||||||
Credit Agreement - Term B-1 Loans |
$ |
5.0 |
$ |
5.0 |
||||
Credit Agreement - Term B-2 Loans |
9.6 |
6.5 |
||||||
Credit Agreement - Term B-3 Loans |
2.0 |
2.0 |
||||||
Paniolo Fiber Assets Financing Arrangement |
0.5 |
0.5 |
||||||
Finance lease liabilities |
8.3 |
6.4 |
||||||
Current portion of long-term debt |
25.4 |
20.4 |
||||||
Long-term debt, less current portion: |
||||||||
Network Receivables Facility |
24.8 |
36.1 |
||||||
CBTS Receivables Facility |
210.2 |
209.9 |
||||||
Credit Agreement - Revolving Credit Facility |
47.0 |
152.5 |
||||||
Credit Agreement - Term B-1 Loans |
482.5 |
485.0 |
||||||
Credit Agreement - Term B-2 Loans |
923.4 |
630.5 |
||||||
Credit Agreement - Term B-3 Loans |
196.0 |
197.0 |
||||||
Various Cincinnati Bell Telephone notes (1) |
94.4 |
95.1 |
||||||
Paniolo Fiber Assets Financing Arrangement |
21.1 |
21.4 |
||||||
Digital Access Ohio Advance |
10.3 |
6.3 |
||||||
Finance lease liabilities |
35.8 |
36.4 |
||||||
2,045.5 |
1,870.2 |
|||||||
Net unamortized discount |
(6.4 |
) |
(5.5 |
) |
||||
Unamortized note issuance costs |
(34.6 |
) |
(34.6 |
) |
||||
Long-term debt, less current portion |
2,004.5 |
1,830.1 |
||||||
Total debt |
$ |
2,029.9 |
$ |
1,850.5 |
17
Credit Agreement
In May 2024, the Company entered into an amendment (the "Amendment No. 3") to the Credit Agreement to provide for(i) a $300million incremental increase to the existing Term B-2 Loans (as defined in the Credit Agreement) (the "Incremental Term B-2 Loans") and (ii) the extension of the maturity date for the commitments under the Company's Revolving Credit Facility to August 2028. The Incremental Term B-2 Loans are part of the same class of Loans as the existing Term B-2 Loans and have the same terms as such Term B-2 Loans. The proceeds of the Incremental Term B-2 Loans were used (a) to repay the outstanding loans under the Revolving Credit Facility, (b) to repay a portion of borrowings under the Company's accounts receivable securitization facility, (c) to pay fees, expenses and other transaction costs related to Amendment No. 3 and the transactions contemplated thereby and (d) for working capital and other general corporate purposes. The other material terms, conditions and covenants of the Credit Agreement were unchanged by Amendment No. 3.
As a result of Amendment No.3, the Company incurred deferred financing costs of $2.4million related to the Incremental Term B-2 Loans and capitalized the amounts as a reduction to the outstanding debt balance. In addition, the Company incurred deferred financing costs of$0.9million related to the extension of the maturity date of the Revolving Credit Facility to August 2028 and capitalized the amounts to "Other noncurrent assets" on the Condensed Consolidated Balance Sheets as of June 30, 2024.
In June 2024, the Company entered into an amendment (the "Amendment No. 4") to the Credit Agreement to provide for a reduction in the interest rate margin applicable to the Term B-3 Loans under the Credit Agreement. The other material terms, conditions and covenants of the Credit Agreement were unchanged by Amendment No. 4. As a result of Amendment No. 4, the Company incurred deferred financing costs of $0.7million related to the Term B-3 Loans and capitalized the amounts as a reduction to the outstanding debt balance.
The May and June 2024 amendments were accounted for as modifications of the original Term Loan B-2 and Revolving Credit Facility. Accordingly, no loss was recorded and new financing costs deferred are being amortized over the new and amended maturities of the term loan and revolver.
The Company had $47.0million of outstanding borrowings on the Credit Agreement's revolving credit facility, leaving $353.0million available for borrowings as of June 30, 2024.The revolving credit facility matures in August 2028, and the Term B-1 Loans, Term B-2 Loans and Term B-3 Loans under the Credit Agreement mature in November 2028.
Accounts Receivable Securitization Facility
As of June 30, 2024, the Company had $24.8million in borrowings and $25.0million of letters of credit outstanding under the Network Receivables Facility, leaving $0.5million remaining availability on the total borrowing capacity of $50.3million. As of June 30, 2024, the Company had $210.2million in borrowings and $0.2million of letters of credit outstanding under the CBTS Receivables Facility, leaving $8.2million remaining availability on the total borrowing capacity of $218.6million. The maximum borrowing limit for loans and letters of credit under the Network Receivables Facility and the CBTS Receivables Facility is $55.0million and $225.0million, respectively, in the aggregate. The available borrowing capacity on each facility is calculated monthly based on the quantity and quality of outstanding accounts receivable, and thus may be lower than the maximum borrowing limit. The Network Receivables Facility is subject to renewal in January 2025 and has a termination date in January 2026. In the first quarter of 2024, the Company executed an amendment to the CBTS Receivables Facility to extend the renewal date of the facility to April 2025 and replace CDOR, the benchmark rate of interest for borrowings denominated in Canadian dollars, with the Canadian Overnight Repo Rate Average ("CORRA"). As a result of the amendment, borrowings denominated in Canadian dollars under the CBTS Receivables Facility will bear interest based on CORRA plus 1.6%. All other material terms and conditions of the CBTS Receivables Facility were unchanged by the amendment.
Under the Network Receivables Facility and the CBTS Receivables Facility, certain U.S. and Canadian subsidiaries, as originators, sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC ("CBF"), Cincinnati Bell Funding Canada Ltd. ("CBFC"), or CBTS Funding LLC ("CBTSF"), wholly-owned consolidated subsidiaries of the Company. Although CBF, CBFC and CBTSF are wholly-owned consolidated subsidiaries of the Company, CBF, CBFC and CBTSF are legally separate from the Company and each of the Company's other subsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF, CBFC or CBTSF, such accounts receivable are legally assets of CBF, CBFC and CBTSF and, as such, are not available to creditors of other subsidiaries or the parent company. The CBTS Receivables Facility includes an option for CBTSF to sell, rather than borrow against, certain receivables on a non-recourse basis. As of June 30, 2024, there was no outstanding balance for accounts receivable sold.
18
7. Leases
Lessee Disclosures
The Company primarily leases real estate for offices, retail stores and central offices, as well as equipment, cell towers, designated space on third party towers and fleet vehicles. Upon adoption of ASC 842, the Company elected not to recognize leases with terms of one-year or less on the balance sheet.
Supplemental balance sheet information related to the Company's leases is as follows:
(dollars in millions) |
Balance Sheet Location |
June 30, 2024 |
December 31, 2023 |
|||||||
Operating lease assets, net of amortization |
Operating lease right-of-use assets |
$ |
69.0 |
$ |
63.9 |
|||||
Finance lease assets, net of amortization |
Property, plant and equipment, net |
14.2 |
9.2 |
|||||||
Operating lease liabilities: |
||||||||||
Current operating lease liabilities |
Other current liabilities |
9.8 |
9.5 |
|||||||
Noncurrent operating lease liabilities |
Operating lease liabilities |
64.7 |
60.2 |
|||||||
Total operating lease liabilities |
74.5 |
69.7 |
||||||||
Finance lease liabilities: |
||||||||||
Current finance lease liabilities |
Current portion of long-term debt |
8.3 |
6.4 |
|||||||
Noncurrent finance lease liabilities |
Long-term debt, less current portion |
35.8 |
36.4 |
|||||||
Total finance lease liabilities |
$ |
44.1 |
$ |
42.8 |
.
Supplemental cash flow information related to leases is as follows:
Six Months Ended June 30, |
||||||||
(dollars in millions) |
2024 |
2023 |
||||||
Supplemental Cash Flows Information * |
||||||||
Cash paid for amounts included in the measurement of lease liabilities: |
||||||||
Operating cash flows from finance leases |
$ |
2.1 |
$ |
2.0 |
||||
Operating cash flows from operating leases |
$ |
5.7 |
$ |
6.9 |
||||
Financing cash flows from finance leases |
$ |
7.6 |
$ |
5.7 |
||||
Right-of-use assets obtained in exchange for lease obligations: |
||||||||
New operating leases |
$ |
12.1 |
$ |
7.6 |
||||
New finance leases |
$ |
7.2 |
$ |
7.1 |
*Supplemental cash flows information includes cash flows from discontinued operations.
19
8. Financial Instruments and Fair Value Measurements
Fair Value Measurements
The Company defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements, the Company uses a three-level hierarchy that prioritizes the use of observable inputs. The three levels are:
Level 1 - Quoted market prices for identical instruments in an active market;
Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and
Level 3 - Unobservable inputs that reflect management's determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including our own data.
The determination of where an asset or liability falls in the hierarchy requires significant judgment.
Cash Flow Hedging
Cash Flow Hedges Not Designated as Hedging Instruments
The Company uses non-designated cash flow hedges including interest rate swap agreements and interest rate cap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate swaps involve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the underlying notional amounts between parties. Interest rate caps provide that the counterparty will pay the purchaser at the end of each contractual period in which the index interest rate exceeds the contractually agreed upon cap rate.
In the first quarter of 2024, the Company entered into a forward starting non-amortizing interest rate swap to convert variable rate debt to fixed rate debt. The interest rate swap has a notional amount of $200.0million resulting in interest payments based on an average fixed rate per swap of 4.3030%, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swap expires in July 2025.
In the first quarter of 2023, the Company entered into three forward starting non-amortizing interest rate swaps to convert variable rate debt to fixed rate debt. The interest rate swaps have notional amounts of $150.0million, $150.0million and $100.0million resulting in interest payments based on an average fixed rate per swap of 3.6875%, 3.6500% and 3.5095%, respectively, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swaps expire in March 2027.
In the second quarter of 2022, the Company entered into three forward starting non-amortizing interest rate swaps to convert variable rate debt to fixed rate debt. The interest rate swaps have notional amounts of $175.0million, $115.0million and $85.0million resulting in interest payments based on an average fixed rate per swap of 2.9185%, 2.8520% and 2.8605%, respectively, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swaps expire in May 2026.
In the second quarter of 2022, the Company entered into two interest rate cap agreements to limit exposure to interest rate risk on variable rate debt. The interest rate caps each have a cap rate of 3.0% with notional amounts of $200.0million and $175.0million and deferred premiums of $6.7million and $5.3million, respectively. The deferred premiums will be paid on a monthly basis over the term of the respective interest rate cap. The interest rate caps expire in May 2026.
The fair value of the Company's interest rate swaps and interest rate caps are impacted by the credit risk of both the Company and its counterparties. The Company has agreements with its derivative financial instrument counterparties that contain provisions providing that if the Company defaults on the indebtedness associated with its derivative financial instruments, then the Company could also be declared in default on its derivative financial instruments obligations. In addition, the Company minimizes nonperformance risk on its derivative instruments by evaluating the creditworthiness of its counterparties, which are limited to major banks and financial institutions.
The Company does not apply hedge accounting to the interest rate swaps and interest rate caps and records all mark-to-market adjustments directly to "Other income, net" in the Condensed Consolidated Statements of Operations. The fair values of the interest rate swaps and interest rate caps are categorized as Level 2 in the fair value hierarchy as they are based on well-recognized financial principles and available market data.
20
As of June 30, 2024, the fair values of the interest rate swaps and interest rate caps are recorded in the Condensed Consolidated Balance Sheets as follows:
(dollars in millions) |
Balance Sheet Location |
June 30, 2024 |
Quoted Prices in |
Significant |
Significant |
|||||||||||||
Assets: |
||||||||||||||||||
Interest Rate Swap |
Other current assets |
$ |
14.3 |
$ |
- |
$ |
14.3 |
$ |
- |
|||||||||
Interest Rate Swap |
Other noncurrent assets |
$ |
5.4 |
$ |
- |
$ |
5.4 |
$ |
- |
|||||||||
Interest Rate Cap |
Other current assets |
$ |
4.3 |
$ |
- |
$ |
4.3 |
$ |
- |
|||||||||
Interest Rate Cap |
Other noncurrent assets |
$ |
0.8 |
$ |
- |
$ |
0.8 |
$ |
- |
|||||||||
As of December 31, 2023, the fair values of the interest rate swaps and interest rate caps are recorded in the Condensed Consolidated Balance Sheets as follows:
(dollars in millions) |
Balance Sheet Location |
December 31, 2023 |
Quoted Prices in |
Significant |
Significant |
|||||||||||||
Assets: |
||||||||||||||||||
Interest Rate Swap |
Other current assets |
$ |
10.7 |
$ |
- |
$ |
10.7 |
$ |
- |
|||||||||
Interest Rate Swap |
Other noncurrent assets |
$ |
1.8 |
$ |
- |
$ |
1.8 |
$ |
- |
|||||||||
Interest Rate Cap |
Other current assets |
$ |
3.2 |
$ |
- |
$ |
3.2 |
$ |
- |
|||||||||
Liabilities: |
||||||||||||||||||
Interest Rate Swap |
Other noncurrent liabilities |
$ |
3.8 |
$ |
- |
$ |
3.8 |
$ |
- |
|||||||||
Interest Rate Cap |
Other noncurrent liabilities |
$ |
2.6 |
$ |
- |
$ |
2.6 |
$ |
- |
|||||||||
The following table summarizes the location of (gains) losses in the Condensed Consolidated Statements of Operations that were recognized during the three and six months ended June 30, 2024 and 2023, in addition to the derivative contract type:
Three Months Ended |
Six Months Ended |
|||||||||||||||||
(dollars in millions) |
Statement of Operations Location |
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Interest Rate Swap |
Other income, net |
$ |
(4.7 |
) |
$ |
(19.4 |
) |
$ |
(19.8 |
) |
$ |
(13.6 |
) |
|||||
Interest Rate Cap |
Other income, net |
$ |
(1.7 |
) |
$ |
(8.3 |
) |
$ |
(7.5 |
) |
$ |
(5.9 |
) |
Disclosure on Financial Instruments
The carrying values of the Company's financial instruments approximate the estimated fair values as of June 30, 2024 and December 31, 2023, except for the Company's long-term debt and other financing arrangements. The carrying and fair values of these items are as follows:
June 30, 2024 |
December 31, 2023 |
|||||||||||||||
(dollars in millions) |
Carrying Value |
Fair Value |
Carrying Value |
Fair Value |
||||||||||||
Long-term debt, including current portion* |
$ |
2,020.4 |
$ |
2,010.1 |
$ |
1,842.3 |
$ |
1,815.1 |
||||||||
Other financing arrangements |
42.2 |
37.6 |
43.6 |
37.7 |
*Excludes finance leases, other financing arrangements and note issuance costs
The fair value of our long-term debt was based on closing or estimated market prices of the Company's debt at June 30, 2024 and December 31, 2023, which is considered Level 2 of the fair value hierarchy. The fair value of the other financing arrangements was calculated using a discounted cash flow model that incorporates current borrowing rates for obligations of similar duration, which is considered Level 3 of the fair value hierarchy. As of June 30, 2024, the current borrowing rate was estimated by applying the Company's credit spread to the risk-free rate for a similar duration borrowing.
21
9. Pension and Postretirement Plans
As of June 30, 2024, the Company sponsors threenoncontributory defined benefit plans and a postretirement health and life insurance plan in Cincinnati (collectively, the "Cincinnati Plans"), and one noncontributory defined benefit plan for union employees and two postretirement health and life insurance plans for Hawaiian Telcom employees (collectively, the "Hawaii Plans").
In the second quarter of 2024, the Hawaii defined benefit plan for union employees made lump sum payments of $5.5million resulting in a reduction of the benefit obligation of $5.5million. The Company recorded a pension settlement gain of $0.4million in the second quarter of 2024 as a result of the lump sum payments to the plan participants exceeding the sum of the service cost and the interest cost component of the net pension cost.
On December 31, 2023, the cash balance pension plan for nonunion employees ("HTMPP") under the Hawaii plans was merged into the management pension plan ("CBMPP") under the Cincinnati Plans. Pension plan assets and liabilities in the HTMPP were transferred to the CBMPP and remeasured at December 31, 2023.
In accordance with ASC 715, only the service cost component of net benefit cost is eligible for capitalization, which was immaterial for the three and six months ended June 30, 2024 and 2023.
Pension and postretirement (benefits) costs are as follows:
Three Months Ended June 30, |
||||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
(dollars in millions) |
Pension Benefits |
Postretirement and Other Benefits |
||||||||||||||
Service cost |
$ |
- |
$ |
- |
$ |
0.1 |
$ |
0.1 |
||||||||
Other components of pension and postretirement benefit plans expense: |
||||||||||||||||
Interest cost on projected benefit obligation |
5.0 |
5.5 |
1.3 |
1.3 |
||||||||||||
Expected return on plan assets |
(5.6 |
) |
(5.2 |
) |
- |
- |
||||||||||
Amortization of: |
||||||||||||||||
Prior service benefit |
- |
- |
(0.2 |
) |
(0.2 |
) |
||||||||||
Actuarial gain |
(0.1 |
) |
- |
(1.0 |
) |
(1.4 |
) |
|||||||||
Pension settlement gain |
(0.4 |
) |
- |
- |
- |
|||||||||||
Pension / postretirement (benefit) cost |
$ |
(1.1 |
) |
$ |
0.3 |
$ |
0.2 |
$ |
(0.2 |
) |
Six Months Ended June 30, |
||||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
(dollars in millions) |
Pension Benefits |
Postretirement and Other Benefits |
||||||||||||||
Service cost |
$ |
- |
$ |
- |
$ |
0.2 |
$ |
0.2 |
||||||||
Other components of pension and postretirement benefit plans expense: |
||||||||||||||||
Interest cost on projected benefit obligation |
10.1 |
11.0 |
2.5 |
2.6 |
||||||||||||
Expected return on plan assets |
(11.3 |
) |
(10.4 |
) |
- |
- |
||||||||||
Amortization of: |
||||||||||||||||
Prior service benefit |
- |
- |
(0.4 |
) |
(0.4 |
) |
||||||||||
Actuarial gain |
(0.1 |
) |
(0.1 |
) |
(1.9 |
) |
(2.3 |
) |
||||||||
Pension settlement gain |
(0.4 |
) |
- |
- |
- |
|||||||||||
Pension / postretirement (benefit) cost |
$ |
(1.7 |
) |
$ |
0.5 |
$ |
0.4 |
$ |
0.1 |
Amortization of prior service benefit and actuarial gain in the three and six months ended June 30, 2024 and 2023 represent reclassifications from accumulated other comprehensive income.
For the six months ended June 30, 2024, there were nocontributions to the qualified pension plans, and contributions to the non-qualified pension plans were $0.8million. For the six months ended June 30, 2023, there were nocontributions to the qualified pension plans, and contributions to the non-qualified pension plans were $0.8million. Based on current assumptions, contributions are expected to be approximately $1million to the qualified pension plans and approximately $2million to the non-qualified pension plans in 2024.
For the six months ended June 30, 2024 and 2023, contributions to our postretirement plans were $3.4million and $3.0million, respectively. Management expects to make total cash payments of approximately $7million related to its postretirement health plans in 2024.
22
10. Equity
Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component were as follows:
(dollars in millions) |
Unrecognized |
Foreign |
Total |
|||||||||
Balance as of March 31, 2024 |
$ |
32.4 |
$ |
(7.6 |
) |
$ |
24.8 |
|||||
Remeasurement of benefit obligations |
(2.8 |
) |
- |
(2.8 |
) |
|||||||
Reclassifications, net |
(1.3 |
) |
(a) |
- |
(1.3 |
) |
||||||
Foreign currency loss |
- |
(1.0 |
) |
(1.0 |
) |
|||||||
Balance as of June 30, 2024 |
$ |
28.3 |
$ |
(8.6 |
) |
$ |
19.7 |
|||||
Balance as of March 31, 2023 |
$ |
26.2 |
$ |
(7.6 |
) |
$ |
18.6 |
|||||
Reclassifications, net |
(1.2 |
) |
(a) |
- |
(1.2 |
) |
||||||
Foreign currency gain |
- |
2.4 |
2.4 |
|||||||||
Balance as of June 30, 2023 |
$ |
25.0 |
$ |
(5.2 |
) |
$ |
19.8 |
|||||
(dollars in millions) |
Unrecognized |
Foreign |
Total |
|||||||||
Balance as of December 31, 2023 |
$ |
33.2 |
$ |
(5.0 |
) |
$ |
28.2 |
|||||
Remeasurement of benefit obligations |
(2.8 |
) |
- |
(2.8 |
) |
|||||||
Reclassifications, net |
(2.1 |
) |
(a) |
- |
(2.1 |
) |
||||||
Foreign currency loss |
- |
(3.6 |
) |
(3.6 |
) |
|||||||
Balance as of June 30, 2024 |
$ |
28.3 |
$ |
(8.6 |
) |
$ |
19.7 |
|||||
Balance as of December 31, 2022 |
$ |
27.1 |
$ |
(7.6 |
) |
$ |
19.5 |
|||||
Reclassifications, net |
(2.1 |
) |
(a) |
- |
(2.1 |
) |
||||||
Foreign currency gain |
- |
2.4 |
2.4 |
|||||||||
Balance as of June 30, 2023 |
$ |
25.0 |
$ |
(5.2 |
) |
$ |
19.8 |
23
11. Restructuring and Severance
Liabilities have been established for employee separations. A summary of activity in the restructuring and severance liability is shown below:
(dollars in millions) |
Network |
Corporate |
Total |
|||||||||
Balance as of December 31, 2023 |
$ |
9.7 |
$ |
0.5 |
$ |
10.2 |
||||||
Charges |
0.2 |
- |
0.2 |
|||||||||
Utilizations |
(6.3 |
) |
(0.1 |
) |
(6.4 |
) |
||||||
Balance as of March 31, 2024 |
$ |
3.6 |
$ |
0.4 |
$ |
4.0 |
||||||
Reversals |
(0.3 |
) |
- |
(0.3 |
) |
|||||||
Utilizations |
(3.2 |
) |
(0.3 |
) |
(3.5 |
) |
||||||
Balance as of June 30, 2024 |
$ |
0.1 |
$ |
0.1 |
$ |
0.2 |
Restructuring and severance charges recorded as of December 31, 2023 and in the three months ended March 31, 2024 are related to a severance program as the Company continues to reduce costs and identify efficiencies that can be achieved by further integrating operations between Cincinnati and Hawaii. Programs are materially completed as of June 30, 2024.
At June 30, 2024 and December 31, 2023, $0.2million and $10.2million, respectively, of the restructuring liabilities were included in "Other current liabilities" on the Condensed Consolidated Balance Sheets.
24
12. Business Segment Information
The Network segment serves customers in the Greater Cincinnati region through our altafiber brand and services customers in Hawaii through our Hawaiian Telcom brand. In May 2022, the Company acquired Agile and includes Agile's financial results in the Network segment. As of June 30, 2024, we operate our business through one segment. The Network segment is a strategic business unit that offer distinct products and services and is aligned with the Company's internal management structure and reporting.
The Network segment provides products and services that can be categorized as Data, Video, Voice or Other. Data products include high-speed internet access, digital subscriber lines, ethernet, SONET, dedicated internet access, wavelength, digital signal and IRU. Video services provide our customers access to over 400 entertainment channels, over 150 high-definition channels, parental controls, HD DVR, Video On-Demand and access to a live TV streaming application. Voice represents traditional voice lines as well as fiber voice lines, consumer and business long distance, switched access and digital trunking. Other services consist of revenue generated from wiring projects for enterprise customers, advertising, directory assistance, maintenance, information services, net hardware sales in Hawaii and subsidized fiber build project revenue related to extending the Company's fiber network in the Greater Cincinnati territory subsidized through our UniCity program and in Hawaii subsidized through a customer contract.
Certain corporate administrative expenses have been allocated to the Network segment based upon the nature of the expense.
Selected financial data for the Company's business segment information is as follows:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
(dollars in millions) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
Revenue |
||||||||||||||||
Network |
$ |
272.8 |
$ |
275.3 |
$ |
544.4 |
$ |
551.2 |
||||||||
Total revenue |
$ |
272.8 |
$ |
275.3 |
$ |
544.4 |
$ |
551.2 |
||||||||
Operating (loss) income |
||||||||||||||||
Network |
$ |
4.2 |
$ |
(4.0 |
) |
$ |
8.0 |
$ |
(33.8 |
) |
||||||
Corporate |
(6.4 |
) |
(4.0 |
) |
(13.0 |
) |
(13.4 |
) |
||||||||
Total operating loss |
$ |
(2.2 |
) |
$ |
(8.0 |
) |
$ |
(5.0 |
) |
$ |
(47.2 |
) |
||||
Expenditures for long-lived assets* |
||||||||||||||||
Network |
$ |
132.7 |
$ |
153.4 |
$ |
288.0 |
$ |
295.4 |
||||||||
Corporate |
- |
0.1 |
- |
0.2 |
||||||||||||
Total expenditures for long-lived assets |
$ |
132.7 |
$ |
153.5 |
$ |
288.0 |
$ |
295.6 |
||||||||
Depreciation and amortization |
||||||||||||||||
Network |
$ |
80.2 |
$ |
90.3 |
$ |
157.6 |
$ |
203.1 |
||||||||
Corporate |
0.1 |
0.1 |
0.1 |
0.2 |
||||||||||||
Total depreciation and amortization |
$ |
80.3 |
$ |
90.4 |
$ |
157.7 |
$ |
203.3 |
* Includes cost of acquisitions
(dollars in millions) |
June 30, 2024 |
December 31, 2023 |
||||||
Assets |
||||||||
Network |
$ |
3,701.5 |
$ |
3,597.2 |
||||
Total assets from discontinued operations |
915.0 |
1,030.2 |
||||||
Corporate and eliminations |
229.0 |
128.1 |
||||||
Total assets |
$ |
4,845.5 |
$ |
4,755.5 |
25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements regarding future events and results that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "predicts," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," "will," "proposes," "potential," "could," "should," "outlook" or variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, anticipated growth and trends in businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the caption "Risk Factors" in Part II, Item 1A, and those discussed in other documents the Company filed with the Securities and Exchange Commission ("SEC"). Actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements for any reason.
Introduction
This Management's Discussion and Analysis section provides an overview of Cincinnati Bell Inc.'s financial condition as of June 30, 2024 and the results of operations for the three and six months ended June 30, 2024 and 2023. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and accompanying notes as well as the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Results for interim periods may not be indicative of results for the full year or any other interim period.
Sale of IT Services Business
On February 2, 2024, the Company entered into a definitive purchase agreement (the "Purchase Agreement") with TowerBrook Capital Partners ("TowerBrook") in which TowerBrook will acquire the CBTS and OnX businesses from the Company for a purchase price of $670.0 million (the "Divestiture"). The Purchase Agreement is subject to customary closing conditions and is expected to close in the second half of 2024, although there can be no assurance that the Purchase Agreement will close by that date.
altafiber Brand
In March 2022, the Company announced that we would begin doing business as "altafiber" in Ohio, Kentucky and Indiana as we continue to expand our geographic reach and invest in our fiber network that delivers broadband connectivity. The branding change will not impact our Hawaiian Telcom business.
Executive Summary
Cincinnati Bell Inc. and its consolidated subsidiaries ("altafiber," "Cincinnati Bell," "we," "our," "us" or the "Company") provide integrated communications that keep consumer and enterprise customers connected with each other and with the world. Through our Network segment, the Company provides Data, Video, and Voice solutions to consumer and enterprise customers over an expanding fiber network and a legacy copper network.
Consolidated revenue totaling $272.8 million and $544.4 million for the three and six months ended June 30, 2024 decreased $2.5 million and $6.8 million, respectively, compared to the same periods in 2023 as increased Strategic revenue was more than offset by decreases in Legacy and Other revenue. For the three and six months ended June 30, 2024, Strategic revenue increased $15.0 million and $26.9 million, respectively, compared to the comparable periods in the prior year primarily due to the increase in the Strategic Internet subscriber base while Legacy revenue decreased $16.0 million and $29.8 million, respectively, compared to the same periods in 2023. In addition, Other revenue decreased $1.5 million and $3.9 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year primarily due to decreases in Hawaii hardware sales and revenue associated with nonrecurring subsidized fiber build projects which more than offset increased revenue from professional services projects.
Operating loss for the three and six months ended June 30, 2024 was $2.2 million and $5.0 million, respectively, compared to operating loss for the three and six months ended June 30, 2023 of $8.0 million and $47.2 million, respectively. Lower operating loss for the three and six months ended June 30, 2024 compared to the same periods in 2023 is primarily due to lower depreciation and amortization expenses due to certain assets that were given a shorter useful life when recorded at fair value on the Company's merger date, September 7, 2021, and were fully depreciated by March 31, 2023, as well as declining amortization expense on certain intangibles. In addition, Corporate SG&A costs in the six months ended June 30, 2023 include $3.1 million related to employee contract termination costs.
26
Interest expense increased $4.3 million and $10.7 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year primarily due to higher interest rates on the Company's variable-rate borrowings in addition to interest expense incurred on the Incremental Term B-2 Loans entered into in the second quarter of 2024, the Term B-3 Loans entered into in the second quarter of 2023 and increased borrowings on the CBTS Receivables Facility. The increase in interest expense was partially offset by decreased borrowings on the Revolving Credit Facility due 2028 in the three and six months ended June 30, 2024 compared to the same periods in 2023.
Other components of pension and postretirement benefit plans expense decreased for the three and six months ended June 30, 2024 compared to the same periods in 2023 due to the annual remeasurement of the pension and postretirement projected benefit obligations that resulted in decreased expense due to lower interest cost on projected benefit obligations and increased benefit from expected return on plan assets.
Other income, net totaled $6.5 million and $36.5 million for the three and six months ended June 30, 2024, respectively, primarily due to recording gains associated with the Company's interest rate swap agreements and interest rate cap agreements of $6.4 million and $27.3 million in the three and six months ended June 30, 2024, respectively. In addition, in the six months ended June 30, 2024, the Company recorded a patronage distribution of $6.1 million from one of the syndicated lenders of the Term B-1 Loans and Term B-3 Loans in the Company's Credit Agreement and received insurance reimbursements of $3.0 million related to the physical loss and damage claims filed as a result of the wildfires in Hawaii.
Other income, net totaled $27.6 million and $24.4 million for the three and six months ended June 30, 2023, respectively, primarily due to recording gains associated with the Company's interest rate swap agreements and interest rate cap agreements of $27.7 million and $19.5 million in the three and six months ended June 30, 2023, respectively. In addition, in the six months ended June 30, 2023, the Company recorded a patronage distribution of $5.0 million from one of the syndicated lenders of the Term B-1 Loans and Term B-3 Loans in the Company's Credit Agreement.
Loss from continuing operations before income taxes totaled $40.0 million for the three months ended June 30, 2024 resulting in an increase in the loss of $18.6 million compared to the same period in 2023 as the decrease in operating loss was more than offset by the unfavorable change to other income, net and higher interest expense in the three months ended June 30, 2024 compared to the same period in the prior year.
Loss from continuing operations before income taxes totaled $53.9 million for the six months ended June 30, 2024 resulting in a decrease in the loss of $45.5 million compared to the same period in 2023 as the decrease in operating loss and favorable change to other income, net more than offset higher interest expense in the six months ended June 30, 2024 compared to the same period in the prior year.
The income tax provision for the three months ended June 30, 2024 for continuing operations was a benefit of $2.6 million. The tax benefit reported is lower than the $8.4 million benefit expected at the statutory rate due most notably to additional federal and state valuation allowances recorded against net operating loss deferred tax assets. The tax benefit reported in the three months ended June 30, 2024 for continuing operations is higher than the tax benefit in the comparable period of 2023 for continuing operations due to a higher loss before tax, with valuation allowances recorded against net operating loss deferred tax assets recorded in both periods.
The income tax provision recorded for the six months ended June 30, 2024 for continuing operations was an expense of $31.2 million, despite a loss before tax of $53.9 million, due most notably to amounts recorded related to the accounting for the planned divestiture of the Disposal Group. A discrete tax expense item of $17.1 million has been recorded in the six months ended June 30, 2024 for continuing operations to record a deferred tax liability for the tax effect of the difference between book basis and tax basis of the Disposal Group. In addition, $45.1 million of tax expense, of which $18.0 million was discrete, was recorded in the six months ended June 30, 2024 to increase valuation allowances on deferred tax assets related to federal and state net operating loss carryforwards. In the comparable period of 2023, the tax effect of the difference between book basis and tax basis of the Disposal Group was not yet reported.
27
Network
The Network segment provides products and services that are categorized as Strategic, Legacy or Other. In the first quarter of 2024, the Company realigned the classification of products and services to these categories within the Network segment to better align revenue across geographies as well as reclass certain nonrecurring revenue to Other. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of the Company, is the incumbent local exchange carrier ("ILEC") for a geography that covers a radius of approximately 25 miles around Cincinnati, Ohio, and includes parts of northern Kentucky and southeastern Indiana. CBT has operated in this territory for over 150 years. In 2022, the Company announced that we will be doing business as "altafiber" and started our network expansion outside of this territory to provide fiber services to adjacent markets. Voice and data services that are delivered beyond the Company's ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended Territories LLC ("CBET"), a subsidiary of CBT. On July 2, 2018, the Company acquired Hawaiian Telcom. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest full-service provider of communications services and products in the state. Originally incorporated in Hawaii in 1883 as Mutual Telephone Company, Hawaiian Telcom has a strong heritage of over 140 years as Hawaii's communications carrier. Its services are offered on all of Hawaii's major islands, except its video service, which currently is only available on the island of Oahu. On May 2, 2022, the Company acquired Agile, based in Canton, Ohio. Agile leases wireless infrastructure assets to third parties and provides connectivity through hybrid fiber wireless data networks primarily to customers in Ohio and Pennsylvania. On April 17, 2023, the Company acquired Ohio Transparent Telecom Inc. ("OTT"). OTT provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Ohio and Michigan.
As a result of the Purchase Agreement, revenue contributed by Hawaii operations and certain Communications revenue previously reported in the IT Services and Hardware segment are now reported in the Network segment for the three and six months ended June 30, 2024 and 2023.
Strategic products include internet access for speeds that meet or exceed 100 megabits per second and Enterprise Fiber, each categorized below as Data, as well as video. The Company is able to deliver speeds of up to one gigabit per second to nearly 80% of the Cincinnati ILEC operating territory and approximately 55% of Hawaii's total addressable market. Enterprise Fiber products include metro-ethernet, dedicated internet access, wavelength, IRU contracts, connectivity services provided by Agile, and wireless backhaul to macro-towers and small cell. Hawaiian Telcom Enterprise Fiber revenue also includes revenue from the SEA-US cable system. As enterprise customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the preferred method of transport due to its ability to support multiple applications on a single physical connection.
Legacy products include internet access for speeds of less than 100 megabits per second, traditional voice lines, consumer and business long distance, switched access, digital trunking, DSL, DS0, DS1, DS3 and other value-added services such as caller identification, voicemail, call waiting and call return. As a result of the Purchase Agreement, Legacy products also include certain communications services including data and VoIP services, tailored solutions that include converged IP communications of data, voice and mobility applications, MPLS (Multi-Protocol Label Switching) and conferencing services.
Other revenue is comprised of wire care, time and materials projects, advertising, management of distributed antenna systems, certain pass through fees such as franchise fees and regulatory fees, other fees that are not billed on a monthly recurring basis, and subsidized fiber build project revenue related to extending the Company's fiber network in the Greater Cincinnati territory subsidized through our UniCity program and in Hawaii subsidized through a customer contract. As a result of the Purchase Agreement, Other revenue also includes revenue contributed by Hawaiian Telcom for the sale of hardware and maintenance contracts as well as installation projects and cloud services which include storage, SLA-based monitoring and management, cloud computing and cloud consulting.
28
Network, continued
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
(dollars in millions) |
2024 |
2023 |
Change |
% Change |
2024 |
2023 |
Change |
% Change |
||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Data |
$ |
143.3 |
$ |
136.9 |
$ |
6.4 |
5 |
% |
$ |
284.8 |
$ |
272.6 |
$ |
12.2 |
4 |
% |
||||||||||||||||
Video |
44.7 |
45.0 |
(0.3 |
) |
(1 |
)% |
89.9 |
90.5 |
(0.6 |
) |
(1 |
)% |
||||||||||||||||||||
Voice |
57.6 |
64.7 |
(7.1 |
) |
(11 |
)% |
116.9 |
131.4 |
(14.5 |
) |
(11 |
)% |
||||||||||||||||||||
Other |
27.2 |
28.7 |
(1.5 |
) |
(5 |
)% |
52.8 |
56.7 |
(3.9 |
) |
(7 |
)% |
||||||||||||||||||||
Total Revenue |
272.8 |
275.3 |
(2.5 |
) |
(1 |
)% |
544.4 |
551.2 |
(6.8 |
) |
(1 |
)% |
||||||||||||||||||||
Operating costs and expenses: |
||||||||||||||||||||||||||||||||
Cost of services and products |
132.1 |
130.9 |
1.2 |
1 |
% |
265.6 |
267.3 |
(1.7 |
) |
(1 |
)% |
|||||||||||||||||||||
Selling, general and administrative |
56.6 |
58.1 |
(1.5 |
) |
(3 |
)% |
113.3 |
114.6 |
(1.3 |
) |
(1 |
)% |
||||||||||||||||||||
Depreciation and amortization |
80.2 |
90.3 |
(10.1 |
) |
(11 |
)% |
157.6 |
203.1 |
(45.5 |
) |
(22 |
)% |
||||||||||||||||||||
Restructuring and severance related charges |
(0.3 |
) |
- |
(0.3 |
) |
n/m |
(0.1 |
) |
- |
(0.1 |
) |
n/m |
||||||||||||||||||||
Total operating costs and expenses |
268.6 |
279.3 |
(10.7 |
) |
(4 |
)% |
536.4 |
585.0 |
(48.6 |
) |
(8 |
)% |
||||||||||||||||||||
Operating income (loss) |
$ |
4.2 |
$ |
(4.0 |
) |
$ |
8.2 |
n/m |
$ |
8.0 |
$ |
(33.8 |
) |
$ |
41.8 |
n/m |
||||||||||||||||
Operating margin |
0.1 |
% |
4.7 |
% |
(4.6) pts |
1.5 |
% |
(6.1 |
)% |
7.6 pts |
||||||||||||||||||||||
Capital expenditures |
$ |
131.9 |
$ |
153.3 |
$ |
(21.4 |
) |
(14 |
)% |
$ |
287.1 |
$ |
292.6 |
$ |
(5.5 |
) |
(2 |
)% |
June 30, |
||||||||||||||||
Metrics information (in thousands): |
2024 |
2023 |
Change |
% Change |
||||||||||||
Cincinnati |
||||||||||||||||
Strategic |
||||||||||||||||
Internet* |
350.8 |
305.1 |
45.7 |
15 |
% |
|||||||||||
Video |
119.3 |
121.5 |
(2.2 |
) |
(2 |
)% |
||||||||||
Enterprise Fiber - Ethernet Bandwidth |
14,513 |
11,992 |
2,521 |
21 |
% |
|||||||||||
Units passed FTTP** |
809.6 |
759.9 |
49.7 |
7 |
% |
|||||||||||
Legacy |
||||||||||||||||
Internet*** |
29.2 |
52.4 |
(23.2 |
) |
(44 |
)% |
||||||||||
Voice Lines |
207.2 |
224.4 |
(17.2 |
) |
(8 |
)% |
* Internet speeds of 100mbps or more
** Fiber-to-the-Premise (FTTP). In the first quarter of 2024, the Company updated the definition and reporting method used to calculate units passed in Cincinnati. Units passed as of June 30, 2023 has also been updated to reflect the change in definition and reporting method.
*** Internet speeds of less than 100mbps
29
Network, continued
June 30, |
||||||||||||||||
Metrics information (in thousands): |
2024 |
2023 |
Change |
% Change |
||||||||||||
Hawaii |
||||||||||||||||
Strategic |
||||||||||||||||
Internet* |
95.8 |
78.4 |
17.4 |
22 |
% |
|||||||||||
Video |
33.2 |
34.8 |
(1.6 |
) |
(5 |
)% |
||||||||||
Enterprise Fiber - Ethernet Bandwidth |
7,571 |
5,681 |
1,890 |
33 |
% |
|||||||||||
Units passed FTTP** |
368.4 |
305.4 |
63.0 |
21 |
% |
|||||||||||
Legacy |
||||||||||||||||
Internet*** |
27.0 |
33.4 |
(6.4 |
) |
(19 |
)% |
||||||||||
Voice Lines |
131.8 |
143.7 |
(11.9 |
) |
(8 |
)% |
* Internet speeds of 100mbps or more
** Fiber-to-the-Premise (FTTP); includes units passed for both consumer and business on Oahu and neighboring islands
*** Internet speeds of less than 100mbps
Revenue
Three Months Ended June 30, |
||||||||||||||||||||||||
2024 |
2023 |
|||||||||||||||||||||||
(dollars in millions) |
Cincinnati |
Hawaii |
Total |
Cincinnati |
Hawaii |
Total |
||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Strategic |
||||||||||||||||||||||||
Internet |
$ |
68.0 |
$ |
15.6 |
$ |
83.6 |
$ |
57.6 |
$ |
12.5 |
$ |
70.1 |
||||||||||||
Enterprise Fiber |
23.8 |
13.8 |
37.6 |
23.9 |
11.9 |
35.8 |
||||||||||||||||||
Video |
37.7 |
7.0 |
44.7 |
37.3 |
7.7 |
45.0 |
||||||||||||||||||
Total Strategic |
129.5 |
36.4 |
165.9 |
118.8 |
32.1 |
150.9 |
||||||||||||||||||
Legacy |
||||||||||||||||||||||||
Voice |
34.2 |
23.4 |
57.6 |
39.5 |
25.2 |
64.7 |
||||||||||||||||||
Internet |
6.0 |
3.8 |
9.8 |
9.8 |
4.6 |
14.4 |
||||||||||||||||||
Data |
7.2 |
5.1 |
12.3 |
10.0 |
6.6 |
16.6 |
||||||||||||||||||
Total Legacy |
47.4 |
32.3 |
79.7 |
59.3 |
36.4 |
95.7 |
||||||||||||||||||
Other |
10.7 |
16.5 |
27.2 |
10.5 |
18.2 |
28.7 |
||||||||||||||||||
Total Network revenue |
$ |
187.6 |
$ |
85.2 |
$ |
272.8 |
$ |
188.6 |
$ |
86.7 |
$ |
275.3 |
30
Network, continued
Six Months Ended June 30, |
||||||||||||||||||||||||
2024 |
2023 |
|||||||||||||||||||||||
(dollars in millions) |
Cincinnati |
Hawaii |
Total |
Cincinnati |
Hawaii |
Total |
||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Strategic |
||||||||||||||||||||||||
Internet |
$ |
133.2 |
$ |
30.0 |
$ |
163.2 |
$ |
112.9 |
$ |
24.2 |
$ |
137.1 |
||||||||||||
Enterprise Fiber |
47.8 |
27.5 |
75.3 |
50.0 |
23.9 |
73.9 |
||||||||||||||||||
Video |
75.6 |
14.3 |
89.9 |
74.9 |
15.6 |
90.5 |
||||||||||||||||||
Total Strategic |
256.6 |
71.8 |
328.4 |
237.8 |
63.7 |
301.5 |
||||||||||||||||||
Legacy |
||||||||||||||||||||||||
Voice |
69.8 |
47.1 |
116.9 |
80.6 |
50.8 |
131.4 |
||||||||||||||||||
Internet |
12.9 |
7.9 |
20.8 |
20.5 |
9.4 |
29.9 |
||||||||||||||||||
Data |
14.7 |
10.8 |
25.5 |
18.4 |
13.3 |
31.7 |
||||||||||||||||||
Total Legacy |
97.4 |
65.8 |
163.2 |
119.5 |
73.5 |
193.0 |
||||||||||||||||||
Other |
19.7 |
33.1 |
52.8 |
21.2 |
35.5 |
56.7 |
||||||||||||||||||
Total Network revenue |
$ |
373.7 |
$ |
170.7 |
$ |
544.4 |
$ |
378.5 |
$ |
172.7 |
$ |
551.2 |
Strategic
Strategic revenue for the three and six months ended June 30, 2024 increased $15.0 million and $26.9 million, respectively, compared to the same periods in 2023 primarily due to the increase in the subscriber base for internet. The internet subscriber base continues to increase as we focus attention on growing the strategic internet subscriber base adding 20,300 strategic internet subscribers in Cincinnati and 8,400 strategic internet subscribers in Hawaii in the six months ended June 30, 2024. In Hawaii, we continue to build fiber at an accelerated pace which enabled us to pass 14,000 and 29,400 FTTP addresses during the three and six months ended June 30, 2024. In Cincinnati, we passed 9,500 and 18,000 FTTP addresses in the three and six months ended June 30, 2024, respectively, primarily to multi-dwelling units and in markets adjacent to Cincinnati. The Average Revenue Per User ("ARPU") for the three and six months ended June 30, 2024 increased for internet in both Cincinnati and Hawaii compared to the comparable periods in 2023 primarily due to price increases and more customers subscribing to higher broadband tiers.
Enterprise Fiber revenue for the three and six months ended June 30, 2024 increased $1.8 million and $1.4 million, respectively, compared to the same periods in the prior year primarily due to increased revenue in Hawaii of $1.9 million and $3.6 million, respectively, due to increased revenue associated with an IRU contract and the SEA-US cable system. In addition, revenue was favorably impacted in each geography as a result of customers migrating from legacy product offerings to higher bandwidth fiber solutions as evidenced by the 21% and 33% increases in Ethernet Bandwidth in Cincinnati and Hawaii, respectively. The increases in revenue were partially offset by decreased revenue in Cincinnati as a result of pricing pressures to provide higher speeds at a lower cost. This was partially offset by increased revenue contributed by Agile of $0.5 million in the six months ended June 30, 2024 compared to the same period in 2023.
Legacy
Legacy revenue decreased $16.0 million and $29.8 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 due to the decline in voice lines and internet subscribers. Voice lines declined 8% in both Cincinnati and Hawaii as the traditional voice lines become less relevant. Legacy internet subscribers continue to decrease in Cincinnati and Hawaii as subscribers demand the higher speeds that can be provided by fiber. In addition, declines in DS1, DS3 and digital trunking have contributed to the Legacy revenue decline for the three and six months ended June 30, 2024 compared to the same periods in 2023 as customers migrate away from these solutions to fiber-based solutions.
Other
Other revenue decreased $1.5 million for the three months ended June 30, 2024 compared to the same period in the prior year as increased revenue from professional services projects of $2.1 million was more than offset by decreased revenue from subsidized fiber build projects of $2.3 million and Hawaii hardware sales of $2.0 million.
Other revenue decreased $3.9 million for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to decreased revenue from subsidized fiber build projects of $3.6 million and Hawaii hardware sales of $5.5 million. These decreases were partially offset by increased revenue from professional services projects of $3.9 million and nonrecurring rent revenue billing adjustments of $1.3 million.
31
Network, continued
Operating Costs and Expenses
Cost of services and products increased $1.2 million for the three months ended June 30, 2024 compared to the same period in the prior year primarily due to increases in operating taxes of $1.5 million, contract services costs of $1.1 million, payroll related costs of $0.6 million and video content costs $0.5 million. The increase in operating taxes is due to higher regulatory fees while increased contract services costs are due to higher utilization of outside contractors on certain specialized projects including the expansion of our fiber network. These increases were partially offset by decreases in network related expenses and operating materials. Network related costs decreased $1.8 million primarily related to the decommissioning of certain copper assets as customers continue to migrate from copper-based services to fiber-based services while operating materials decreased $1.2 million primarily due to decreased purchases associated with the expansion of our fiber network.
Cost of services and products decreased $1.7 million for the six months ended June 30, 2024 compared to the same period in 2023 primarily due to decreases in network related expenses of $2.4 million operating materials and $2.2 million which more than offset increases in contract services costs of $2.1 million and operating taxes of $2.0 million primarily due to similar trends that impacted the quarter. In addition, the increase in operating taxes due to higher regulatory fees was partially offset by a decrease in general excise tax. Payroll related costs also decreased for the six months ended June 30, 2024 compared to the same period in the prior year as higher payroll benefits costs and employee commissions were more than offset by a change in policy related to accrued vacation for union employees in Hawaii that resulted in a favorable impact to expense.
SG&A expenses decreased $1.5 million for the three months ended June 30, 2024 compared to the comparable period in the prior year primarily due to decreased advertising costs due to decreased marketing campaigns and promotional events in addition to a favorable adjustment of $2.5 million related to previously recorded expenses that will now be reimbursed by insurance that more than offset legal expense incurred in the second quarter related to the Maui wildfires of $1.5 million and increased software development expenses due to higher software support fees.
SG&A expenses decreased $1.3 million for the six months ended June 30, 2024 compared to the same period in 2023 as favorable advertising expenses of $1.7 million due to similar trends that impacted the quarter and decreased payroll related costs of $1.5 million more than offset increases in contract services costs of $1.3 million and software development expenses of $0.9 million. The decrease in payroll related costs is primarily due to headcount reductions made during restructuring initiatives that were executed in the fourth quarter of 2023. Increased contract services costs is due to legal expenses as well as general liability insurance expenses incurred in the six months ended June 30, 2024 related to the wildfires in Hawaii that exceeded the favorable insurance adjustment recorded in the second quarter of 2024 while software development expenses increased due to higher software support fees.
Depreciation and amortization expense decreased $10.1 million and $45.5 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 primarily due to certain assets that were given a shorter useful life when recorded at fair value on the Company's merger date, September 7, 2021, and were fully depreciated by March 31, 2023 in addition to declining amortization expense on certain intangibles.
32
Network, continued
Capital Expenditures
Three Months Ended June 30, |
||||||||||||||||||||||||
2024 |
2023 |
|||||||||||||||||||||||
(dollars in millions) |
Cincinnati |
Hawaii |
Total |
Cincinnati |
Hawaii |
Total |
||||||||||||||||||
Fiber Network Capital Expenditures |
||||||||||||||||||||||||
Construction |
$ |
27.3 |
$ |
13.5 |
$ |
40.8 |
$ |
51.2 |
$ |
18.4 |
$ |
69.6 |
||||||||||||
Installation |
24.6 |
6.2 |
30.8 |
21.9 |
7.8 |
29.7 |
||||||||||||||||||
Other |
3.1 |
0.8 |
3.9 |
3.0 |
1.0 |
4.0 |
||||||||||||||||||
Total Fiber Network |
55.0 |
20.5 |
75.5 |
76.1 |
27.2 |
103.3 |
||||||||||||||||||
Enterprise Fiber |
10.7 |
5.4 |
16.1 |
9.2 |
8.8 |
18.0 |
||||||||||||||||||
Other |
14.6 |
25.7 |
40.3 |
15.6 |
16.4 |
32.0 |
||||||||||||||||||
Total Network Capital Expenditures |
$ |
80.3 |
$ |
51.6 |
$ |
131.9 |
$ |
100.9 |
$ |
52.4 |
$ |
153.3 |
Six Months Ended June 30, |
||||||||||||||||||||||||
2024 |
2023 |
|||||||||||||||||||||||
(dollars in millions) |
Cincinnati |
Hawaii |
Total |
Cincinnati |
Hawaii |
Total |
||||||||||||||||||
Fioptics Capital Expenditures |
||||||||||||||||||||||||
Construction |
$ |
60.7 |
$ |
30.4 |
$ |
91.1 |
$ |
90.9 |
$ |
33.8 |
$ |
124.7 |
||||||||||||
Installation |
47.7 |
13.7 |
61.4 |
43.3 |
16.7 |
60.0 |
||||||||||||||||||
Other |
18.0 |
1.9 |
19.9 |
10.1 |
1.5 |
11.6 |
||||||||||||||||||
Total Fioptics |
126.4 |
46.0 |
172.4 |
144.3 |
52.0 |
196.3 |
||||||||||||||||||
Enterprise Fiber |
18.7 |
13.6 |
32.3 |
14.6 |
14.1 |
28.7 |
||||||||||||||||||
Other |
28.9 |
53.5 |
82.4 |
30.7 |
36.9 |
67.6 |
||||||||||||||||||
Total Network Capital Expenditures |
$ |
174.0 |
$ |
113.1 |
$ |
287.1 |
$ |
189.6 |
$ |
103.0 |
$ |
292.6 |
Capital expenditures in Cincinnati are incurred to expand our fiber network, upgrade and increase capacity for our networks, and to maintain our fiber and copper networks. The Company is focused on building FTTP addresses, and during the three and six months ended June 30, 2024, we passed 9,500 and 18,000 FTTP addresses, respectively, primarily in markets adjacent to Cincinnati as well as multi-dwelling units. As of June 30, 2024, the Company is able to deliver internet speeds up to one gigabit or more to 809,600 residential and commercial addresses, or nearly 80% of our ILEC operating territory in Cincinnati.
Cincinnati construction capital expenditures for the three and six months ended June 30, 2024 decreased $23.9 million and $30.2 million, respectively, compared to the same periods in 2023 due to passing fewer doors in the three and six months ended June 30, 2024 compared to the same periods in 2023. Cincinnati installation capital expenditures increased $2.7 million and $4.4 million for the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year primarily due to higher costs to install.
Enterprise Fiber capital expenditures in Cincinnati are related to success-based fiber builds, including associated equipment, for enterprise and carrier projects to provide ethernet services as well as network refresh projects that ensure we continue to grow our capacity and services within the network core. Cincinnati Enterprise Fiber capital expenditures increased $1.5 million and $4.1 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in the prior year primarily due to increased capital expenditures contributed by Agile of $2.0 and $4.4 million for the three and six months ended June 30, 2024, respectively, compared to the comparable periods in 2023. Other capital expenditures are related to IT projects, cable and equipment maintenance and capacity additions, real estate upgrades and maintenance, plus other minor capital purchases.
Hawaii construction capital expenditures for the three and six months ended June 30, 2024 decreased $4.9 million and $3.4 million, respectively, compared to the same periods in the prior year due to the timing of capital expenditures, which does not necessarily coincide with the timing of when addresses become available, as well as higher costs to pass addresses. Hawaii installation capital expenditures decreased $1.6 million and $3.0 million for the three and six months ended June 30, 2024, respectively, compared to the comparable periods in 2023 primarily due to the timing of expenditures for customer premise equipment ("CPE") utilized for installations which were partially offset by higher costs to install in the six months ended June 30, 2024 compared to the same period in the prior year. Enterprise Fiber capital in Hawaii is primarily driven by new ethernet customers as well as upgrades to Ethernet Bandwidth for large carriers across the network due to a significant contracts signed in 2022 and 2023. Hawaii capital expenditures classified as Other include IT projects, real estate projects, road jobs or plant damage projects, and network upgrades or optimization projects.
33
Financial Condition, Liquidity, and Capital Resources
As of June 30, 2024, the Company had an accumulated deficit of $426.0 million and $2,029.9 million of outstanding indebtedness, excluding capital leases and other financing arrangements of $11.7 million that are reported as held for sale at June 30, 2024.
The Company's primary source of cash is generated by operations. The Company generated $128.7 million and $16.6 million of cash flows from operations during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had $371.8 million of short-term liquidity, comprised of $4.7 million of cash and cash equivalents, $5.4 million of cash and cash equivalents included in "Current assets held for sale from discontinued operations," $353.0 million of undrawn capacity on our Revolving Credit Facility due 2028, $0.5 million available under the Network Receivables Facility and $8.2 million available under the CBTS Receivables Facility.
The Network Receivables Facility and CBTS Receivables Facility permit maximum borrowings of up to $55.0 million and $225.0 million, respectively. As of June 30, 2024, the Company had borrowings of $24.8 million and $25.0 million of letters of credit outstanding under the Network Receivables Facility on a borrowing capacity of $50.3 million. As of June 30, 2024, the Company had borrowings of $210.2 million and $0.2 million of letters of credit outstanding under the CBTS Receivables Facility on a borrowing capacity of $218.6 million.
Capacity on the Network Receivables Facility and the CBTS Receivables Facility is calculated and will continue to be calculated based on the quantity and quality of outstanding accounts receivables. Therefore if the Company experiences declines in revenue or extends discounts to customers, the capacity could be negatively impacted and reduce our short term liquidity. While we expect to continue to renew the Network Receivables Facility and CBTS Receivables Facility, we would be required to use cash, our Revolving Credit Facility due 2028, or other sources to repay any outstanding balances on the facilities if they were not renewed.
In May 2024, the Company entered into an amendment (the "Amendment No. 3") to the Credit Agreement to provide for (i) a $300 million incremental increase to the existing Term B-2 Loans (as defined in the Credit Agreement) (the "Incremental Term B-2 Loans") and (ii) the extension of the maturity date for the commitments under the Company's Revolving Credit Facility to August 2028. The Incremental Term B-2 Loans are part of the same class of Loans as the existing Term B-2 Loans and have the same terms as such Term B-2 Loans. The proceeds of the Incremental Term B-2 Loans were used (a) to repay the outstanding loans under the Revolving Credit Facility, (b) to repay a portion of borrowings under the Company's accounts receivable securitization facility, (c) to pay fees, expenses and other transaction costs related to Amendment No. 3 and the transactions contemplated thereby and (d) for working capital and other general corporate purposes. The other material terms, conditions and covenants of the Credit Agreement were unchanged by Amendment No. 3.
In June 2024, the Company entered into an amendment (the "Amendment No. 4") to the Credit Agreement to provide for a reduction in the interest rate margin applicable to the Term B-3 Loans under the Credit Agreement. The other material terms, conditions and covenants of the Credit Agreement were unchanged by Amendment No. 4.
One of the syndicated lenders of the Term B-1 Loans and Term B-3 Loans in the Credit Agreement is a cooperative bank owned by its customers. Annually, this bank distributes patronage in the form of cash and stock in the cooperative based on the Company's average outstanding loan balance. The Company will recognize the patronage, generally as declared, in "Other income, net." The stock component will be recognized at its stated cost basis. The Company received $6.1 million and $5.0 million in patronage dividends in the six months ended June 30, 2024 and 2023, respectively.
The Company's primary uses of cash are for working capital requirements, capital expenditures and debt service and, to a lesser extent, to fund pension and retiree medical obligations. The Company believes that cash on hand, operating cash flows, its Revolving Credit Facility due 2028, its Network Receivables Facility and CBTS Receivables Facility, and the expectation that the Company will continue to have access to capital markets to refinance debt and other obligations as they mature and come due, should allow the Company to meet its cash requirements for the foreseeable future.
As of June 30, 2024, the Company was in compliance with the Credit Agreement covenants and ratios.
34
Cash Flows
Cash provided by operating activities during the six months ended June 30, 2024 totaled $128.7 million, an increase of $112.1 million compared to the same period in the prior year. The increase is due to changes in the amount of accounts receivable sold on the CBTS Receivables Facility which resulted in increased cash flows of $52.6 million in the six months ended June 30, 2024 compared to the same period in 2023 in addition to increased cash inflow due to improved working capital associated with the Disposal Group. These increases were partially offset by higher interest payments of $8.3 million primarily due to higher interest rates and restructuring payments of $9.9 million in the six months ended June 30, 2024 associated with initiatives executed in the fourth quarter of 2023.
Cash used in investing activities during the six months ended June 30, 2024 totaled $294.4 million, a decrease of $14.8 million compared to the same period in the prior year due to the decrease in capital expenditures primarily associated with extending the Company's fiber network in addition to insurance reimbursements of $3.0 million received in the six months ended June 30, 2024 related to the physical loss and damage claims filed as a result of the wildfires in Hawaii.
Cash provided by financing activities during the six months ended June 30, 2024 totaled $170.6 million primarily due to the issuance of $300.0 million of Incremental Term B-2 Loans which was partially offset by net payments on the Revolving Credit Facility due 2028 and receivables facilities of $105.5 million and $10.7 million, respectively. Cash provided by financing activities during the six months ended June 30, 2023 totaled $291.5 million primarily due to the issuance of $200.0 million of Term B-3 Loans and net borrowings on the Revolving Credit Facility due 2028 and receivables facilities of $68.0 million and $55.5 million, respectively. These increases were partially offset by the repayment of the remaining $22.3 million outstanding principal amount of its 7 1/4% Notes due 2023 upon the maturity date of the notes in the second quarter of 2023.
35
Regulatory Matters
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a complete description of regulatory matters. There are no material changes for the six months ended June 30, 2024.
Contingencies
In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with accounting principles generally accepted in the United States. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.
Critical Accounting Policies
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements and information available as of the date of the financial statements. As this information changes, the financial statements could reflect different estimates or judgments.
The Company's most critical accounting policies and estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Issued Accounting Standards
The adoption of new accounting standards did not have a material impact on the Company's financial results for the six months ended June 30, 2024. Furthermore, accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company's condensed consolidated financial statements upon adoption.
36
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a description of the Company's market risks.
Item 4. Controls and Procedures
Cincinnati Bell Inc.'s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in SEC Rule 13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, Cincinnati Bell Inc.'s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, such controls and procedures were effective.
Cincinnati Bell Inc.'s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Company's internal control over financial reporting that occurred during the second quarter of 2024 and have concluded that there were no changes to Cincinnati Bell Inc.'s internal control over financial reporting during the second quarter of 2024 that materially affect, or are reasonably likely to materially affect, Cincinnati Bell Inc.'sinternal control over financial reporting.
37
PART II. OTHERINFORMATION
Item 1. Legal Proceedings
Cincinnati Bell and its subsidiaries are involved in a number of legal proceedings. Liabilities are established for legal claims when losses associated with the claims are judged to be probable and the loss can be reasonably estimated. In many lawsuits and arbitrations, including most class action lawsuits, it is not possible to determine whether a liability has been incurred or to estimate the amount of the liability until the case is close to resolution, in which case a liability will not be recognized until that time. Based on information currently available, consultation with counsel, available insurance coverage and recognized liabilities, the Company believes that except as otherwise described in Note 1 of the Notes to Condensed Consolidated Financial Statements (Unaudited) included in Item 1 of Part I of this Form 10-Q the eventual outcome of all claims will not, individually or in the aggregate, have a material effect on the Company's financial position or results of operations.
Item 1A. Risk Factors
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for a comprehensive listing of the Company's risk factors. There are no material changes for the six months ended June 30, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosure
None.
Item 5. Other Information
No reportable items.
38
Item 6. Exhibits
Incorporated by Reference |
||||||
Exhibit Number |
Exhibit Description |
Form |
Filing Date |
Exhibit No. |
SEC File No. |
Filed Herewith |
Second Amended Articles of Incorporation of Cincinnati Bell Inc. |
10-K |
5/19/2022 |
3.1 |
1-8519 |
||
Second Amended and Restated Regulations of Cincinnati Bell Inc. |
8-K |
9/7/2021 |
3.1 |
1-8519 |
||
Amendment No. 3 to Credit Agreement by and among Red Fiber Parent LLC, Cincinnati Bell Inc., each of the Guarantors party hereto, Goldman Sachs Bank USA, as administrative agent for the Lenders, the Incremental Term B-2 Lender and each of the 2024 Extended Revolving Credit Lenders. |
8-K |
5/31/2024 |
10.1 |
1-8519 |
||
Amendment No. 4 to Credit Agreement by and among Red Fiber Parent LLC, Cincinnati Bell Inc., each of the Guarantors party hereto, and the Term B-3 Lender, and acknowledged by Goldman Sachs Bank USA, as administrative agent for the Lenders. |
8-K |
6/14/2024 |
10.1 |
1-8519 |
||
31.1 |
Certificate of the Chief Executive Officer Pursuant to Rule 15d-14(a) |
+ |
||||
31.2 |
Certificate of the Chief Financial Officer Pursuant to Rule 15d-14(a). |
+ |
||||
101 |
The following financial statements from Cincinnati Bell Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 were formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Equity (Deficit), (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
|||||
104 |
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
The Company's reports on Form 10-K, 10-Q, 8-K and other information are available free of charge at the following website: http://www.altafiber.com. The Company has ceased to be a registrant but continues to voluntarily file annual, quarterly and certain other information with the SEC due to contractual provisions included in certain indentures.
39
SIGNATURES
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 14, 2024 |
/s/ Joshua T. Duckworth |
|
Joshua T. Duckworth |
|||
Chief Financial Officer |
|||
Date: |
August 14, 2024 |
/s/ Suzanne E. Maratta |
|
Suzanne E. Maratta |
|||
Chief Accounting Officer |
40