Cincinnati Bell 2005 Annual Report Download - page 69

The Company opened a new data center facility in 2005, increasing the Company’s managed service and
hardware revenues. Sales of information technology (“IT”) and computer-related hardware totaled $80.2 million
during 2005, which was a 55% increase over 2004 hardware sales.
Results of Operations
Consolidated Overview
The financial results for 2005, 2004, and 2003 referred to in this discussion should be read in conjunction
with the Consolidated Statements of Operations and Note 14 to the Consolidated Financial Statements.
2005 Compared to 2004
Consolidated revenue totaled $1,209.6 million in 2005, an increase of $2.5 million, compared to 2004. The
increase was primarily due to the following:
•$6.1 million lower revenues in the Local segment due to losses of access lines, partially offset by
increased data and DSL revenues;
•$24.2 million lower revenues in the Wireless segment due to lower service revenue;
•$38.0 million increased revenues in the HMS segment primarily due to increased IT and computer-related,
telephony and other equipment sales; and
•$0.9 million lower revenues in the Other segment, as $6.2 million of increased long distance revenues
partially offset $7.1 million of decreases from businesses which the Company has exited.
Operating income for 2005 was $258.8 million, a decrease of $40.5 million compared to 2004. The decrease
was primarily due to the following:
•$3.0 million decrease in Local operating income primarily as a result of lower revenue discussed above,
$22.7 million increased pension, postretirement benefits and medical expenses, and an increase of
$5.4 million in network and other related expenses from the out-of-territory expansion, partially offset by
lower operating taxes of $11.9 million, lower depreciation of $9.0 million, and lower restructuring charges
of $8.9 million;
•$50.3 million decrease in Wireless operating income primarily due to decreased revenue discussed above
and increased impairment charges of $36.4 million associated with TDMA assets, partially offset by
decreases in roaming expense of $8.9 million and $5.9 million of decreased depreciation and amortization,
primarily associated with the accelerated amortization in 2004 of certain intangibles;
•$0.7 million increase in HMS operating income primarily due to the margin on increased hardware
revenues; and
•$8.6 million increase in the Other segment primarily related to an increase at CBAD in long distance
revenue, and lower long distance costs resulting from the installation of a long distance switch in June
2004.
The minority interest caption relates to the 19.9% minority interest of Cingular in the net income of
Cincinnati Bell Wireless LLC . The TDMA asset impairment charges discussed above gave rise to CBW losses
in 2005, and the minority interest income add back of $11.0 million in 2005 represents Cingular’s portion of the
CBW losses. As a result of the Company’s purchase of Cingular’s 19.9% interest in CBW on February 14, 2006,
the Company will recognize minority interest expense or income through this date of purchase, but no further
minority interest expense or income will be recorded after this date as CBW will be wholly-owned.
Interest expense decreased to $184.4 million for 2005 compared to $203.3 million in 2004. This decrease is
primarily a result of the net decrease of $16 million from the extinguishment of the 16% Notes in August 2005,
partially offset by interest on the corporate credit facility, which funded the repayment of the 16% Notes.
The loss on extinguishment of debt of $99.8 million for 2005 was comprised of a $91.9 million loss related
to the repurchase of the 16% Notes and $7.9 million associated with the repayment of previously existing credit
facilities. See Note 6 to the Consolidated Financial Statements for further details.
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