Cincinnati Bell 2008 Annual Report Download - page 133

Reasons for Debt and Accumulated Deficit
As of December 31, 2008, the Company had $2.0 billion of outstanding indebtedness and an accumulated
deficit of $3.4 billion. The Company incurred a significant amount of indebtedness and accumulated deficit from
the purchase and operation of a broadband business over the period of 1999 to 2002, which caused outstanding
indebtedness and accumulated deficit to reach their respective year-end peaks of $2.6 billion and $4.9 billion at
December 31, 2002. This broadband business was sold in 2003.
Cash Flow
2008 Compared to 2007
Cash provided by operating activities in 2008 totaled $403.9 million, an increase of $95.1 million compared
to the $308.8 million provided by operating activities in 2007. The increase was primarily due to lower payments
for interest and operating taxes totaling approximately $60 million and an early pension contribution made in
2007 of approximately $20 million.
Cash flow utilized for investing activities decreased $13.0 million to $250.5 million during 2008 as
compared to $263.5 million for 2007. In 2008, the Company paid $21.6 million related to the acquisitions of
businesses, $18.1 million of which related to the purchase of eGIX. Cash flows utilized for investing activities in
2007 included payments of $23.6 million for the acquisition of a local telecommunications business and
GramTel, a data center business in South Bend, Indiana. Capital expenditures were $2.9 million lower for 2008
versus 2007. In 2007, the Company deposited $4.4 million with the FCC to participate in the wireless spectrum
auction in early 2008 and used $2.8 million of the deposit to purchase spectrum. The remainder of the deposit
was returned in 2008.
Cash flow used in financing activities for 2008 was $172.8 million compared to $98.6 million during 2007.
In 2008, the Company purchased and extinguished $108.1 million of 8
3
⁄ 8 % Subordinated Notes, 7
1
⁄ 4 % Senior
Notes due 2013 and 7% Senior Notes at an average discount of 14% and repurchased $76.8 million of the
Company’s common stock as part of its two-year $150 million common stock repurchase plan. Borrowings under
the Corporate credit facility increased $18.0 million during 2008. At December 31, 2008, $20 million of the
revolver facility had initial maturities greater than 90 days and therefore is presented under “Issuance of long-
term debt” in the Consolidated Statement of Cash Flows in accordance with the applicable accounting rules.
During 2007, the Company repaid $184.0 million of the Tranche B Term Loan, utilizing $75.0 million from
borrowings under the accounts receivables securitization facility and available cash. Also in 2007, the Company
repaid $26.4 million of the 7
1
⁄ 4 % Senior Notes due 2013 and $5.0 million of 8
3
⁄ 8 % Subordinated Notes and
borrowed $55.0 million on the Corporate credit facility. For both 2008 and 2007, the Company paid preferred
stock dividends of $10.4 million.
2007 Compared to 2006
In 2007, cash provided by operating activities totaled $308.8 million, a decrease of $25.9 million compared
to the $334.7 million provided by operating activities during 2006. The decrease was due to payments of $56.0
million for operating taxes and early pension contributions partially offset by a customer prepayment of $21.5
million for data center services and increased operating cash generated by the Wireless segment due to service
revenue growth.
Cash flow utilized for investing activities increased $3.5 million to $263.5 million during 2007 as compared
to $260.0 million for 2006. Capital expenditures were $233.8 million, an increase of $82.5 million compared to
2006, which resulted mostly from data center expansion. In addition to the increase in capital expenditures for
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Form 10-K