Cincinnati Bell 2010 Annual Report Download - page 133

Reasons for Debt and Accumulated Deficit
As of December 31, 2010, the Company had $2.5 billion of outstanding indebtedness and an accumulated
deficit of $3.2 billion. The Company incurred a significant amount of indebtedness and accumulated deficit from
the purchase and operation of a national 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
2010 Compared to 2009
Cash provided by operating activities in 2010 totaled $300.0 million, an increase of $34.4 million compared
to the $265.6 million provided by operating activities in 2009. The increase was driven by a 2009 cash
contribution of $58.4 million to the Company’s pension and postretirement plans and a one-time 2009
prepayment of $24.2 million to the medical trust for active employees. These increases were partially offset by
higher interest payments of $40.4 million as result of higher debt balances for the CyrusOne acquisition and
higher interest rates on the debt refinancings, and $13.2 million received in 2009 related to the settlement and
termination of interest rate swaps in 2009.
Cash flow utilized for investing activities increased by $581.7 million to $675.5 million during 2010 as
compared to $93.8 million for 2009. The increase was primarily due to cash paid for the acquisition of CyrusOne
in June of approximately $526 million. In 2009, the Company sold substantially all of its wireless towers for
$99.9 million. The Company also sold almost all of its owned wireless licenses for areas outside of its Cincinnati
and Dayton operating territories in 2009 for $6.0 million. Capital expenditures were $45.4 million lower for 2010
versus 2009 due to lower Wireless and Wireline network spending.
Cash flow provided by financing activities for 2010 was $429.8 million compared to a use of $155.5 million
during 2009. In the first quarter of 2010, the Company issued $625 million of 83/4% Senior Subordinated Notes
due 2018. The net proceeds of $616.2 million were used in April 2010 to redeem the $560 million outstanding
83/8% Senior Subordinated Notes due 2014 plus accrued and unpaid interest and call premium. In the second
quarter of 2010, the Company entered into a $760 million secured term loan credit facility (“Tranche B Term
Loan”) due 2017. The net proceeds from the Tranche B Term Loan of $737.2 million were used to repay the
Company’s previous credit facility of $204.3 million, to fund the acquisition of CyrusOne, and to pay related fees
and expenses. In the fourth quarter of 2010, the Company issued $775 million of 83/8% Senior Notes due 2020.
The net proceeds of $779.3 million including debt premium were used to repay the secured term loan facility
totaling $756.2 million and to pay related fees and expenses. The Company paid $42.6 million of debt issuance
costs related to the various issuances of these debt instruments in 2010. The Company also repaid $85.9 million
of borrowings under the Receivables Facility in 2010 and repurchased approximately 4 million shares of
common stock for $10.0 million in 2010.
In 2009, the Company issued $500 million of 81/4% Senior Notes. The net proceeds were used in part to
redeem the outstanding 71/4% Senior Notes due 2013 of $439.9 million plus accrued and unpaid interest and
related call premium. The Company also purchased and extinguished $32.5 million of the Cincinnati Bell
Telephone Notes and the 71/4% Senior Notes due 2023 at an average discount of 24%. The Company paid $15.3
million of debt issuance costs related to the issuance of the 81/4% Senior Notes and to amend and extend the term
of the Corporate revolving credit facility. In 2009, the Company also repurchased $73.2 million of the
Company’s common stock as part of its two-year $150 million common stock repurchase plan. Borrowings under
the Corporate credit and receivables facilities decreased $62.1 million in 2009. For both 2010 and 2009, the
Company paid preferred stock dividends of $10.4 million.
2009 Compared to 2008
Cash provided by operating activities in 2009 totaled $265.6 million, a decrease of $138.3 million compared
to the $403.9 million provided by operating activities in 2008. The decrease was primarily due to $58.4 million
of early contributions made to its pension and postretirement plans and a prepayment of $24.2 million to its
medical trust for its active employees in 2009, a customer prepayment of $21.5 million received in 2008 for data
center services and an increase in working capital, mainly due to timing of year-end payments. This decrease was
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Form 10-K