Cincinnati Bell 2006 Annual Report Download - page 149

Cash utilized in investing activities in 2006 was $260.0 million, an increase of $117.3 million compared to
the $142.7 million utilized in 2005. The increase predominately relates to the acquisitions of ATI and the 19.9%
minority interest in CBW for $86.7 million and the purchase of wireless licenses in the FCC auction for $37.1
million. Capital expenditures increased slightly in 2006 compared to last year. Proceeds from the sale of
broadband fiber assets were $4.7 million during 2006. Proceeds from the sale of an investment were $5.7 million
in 2006.
Cash flows used in financing activities decreased $157.8 million to a net outflow of $21.0 million in 2006
from an outflow of $178.8 million during 2005. During 2006, the Company funded the acquisitions of Cingular’s
19.9% interest in CBW and ATI and the purchase of the wireless licenses, which decreased the Company’s
repayment of debt as compared to 2005. The Company repaid $13.3 million in debt in 2006. During 2005, the
Company received $752.1 million of cash proceeds from the issuance of the 7% Senior Notes, additional 8
3
⁄ 8 %
Notes and new bank term notes. In addition, during 2005, the Company repaid $903.3 million in borrowings,
substantially all of which was the prepayment of borrowings under its term and revolving credit facilities and its
16% Notes, using the net cash proceeds discussed above. In conjunction with the debt issuance and repayments
in 2005, the Company incurred debt issuance costs and consent fees of $21.9 million. Preferred stock dividends
of $10.4 million were paid during each of 2006 and 2005.
2005 Compared to 2004
Cash provided by operating activities for 2005 totaled $322.3 million, an increase of $21.6 million
compared to the $300.7 million provided by operating activities during 2004. This increase resulted primarily
from an increase in cash earnings (net income less non-cash items) and favorable changes in working capital.
Refer to the Consolidated Statements of Cash Flows for further details.
The Company’s 2005 capital expenditures of $143.0 million were $9.1 million higher than 2004 capital
expenditures of $133.9 million. The increase was primarily due to business transformation projects associated
with the Company’s 2004 restructuring charge and mandated wireless investments, partially offset by decreased
CBTS expenditures due to higher 2004 additions for data center facilities. In 2004, the Company received $3.3
million from the sale of certain assets of CBTS and Public, generally consisting of operating assets outside its
current operating area.
During 2005, the Company received $352.1 million of cash proceeds from the issuance of the new 7%
Notes and the 8
3
⁄ 8 % Notes and $400.0 million from the Tranche B Term Loan issued under the Corporate credit
facility in August 2005. The Company repaid $903.3 million of borrowings during 2005, most of which was the
$438.8 million prepayment of borrowings under its previous credit facilities in February 2005 and the $440.1
million repurchase of the 16% Notes in August 2005. Debt issuance costs and consent fees totaled $21.9 million
in 2005. Preferred stock dividends of $10.4 million were paid during both 2005 and 2004.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements requires the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue, and expenses. Additionally, the
Company’s senior management has discussed the critical accounting policies and estimates with the Audit and
Finance Committee. The Company’s significant accounting policies are summarized in Note 1 to the
Consolidated Financial Statements.
The discussion below addresses major judgments used in:
•revenue recognition;
•accounting for allowances for uncollectible accounts receivable;
•reviewing the carrying values of goodwill and indefinite-lived intangible assets;
•reviewing the carrying values of property, plant, and equipment;
•accounting for business combinations;
•accounting for taxes; and
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