Cincinnati Bell 2009 Annual Report Download - page 105

In February 2010, the Board of Directors approved an additional plan for the repurchase of the Company’s
outstanding common stock in an amount up to $150 million. This new plan does not have a stated end date. The
Company plans to repurchase shares to the extent its available cash is not needed for data center growth and other
opportunities.
The Company believes that its operating cash flows, together with its revolving credit facility and other
available debt and equity financing, will be adequate to meet investing and financing needs for 2010.
Long-term view
In addition to the uses of cash described in the Short-term view above, the Company has significant future
debt maturities and other obligations that come due after 2010 (see Contractual Obligations table below),
including $195 million of estimated cash contributions to its qualified pension plans during the years 2011 to
2017 based on current legislation and current actuarial assumptions.
The Corporate credit facility (including the revolving credit facility), which expires in August 2012,
contains financial covenants that require the Company to maintain certain leverage, interest coverage, and fixed
charge ratios. The facility also has certain covenants which, among other things, limit the Company’s ability to
incur additional debt or liens, pay dividends, repurchase Company common stock, sell, transfer, lease, or dispose
of assets, and make investments or merge with another company. If the Company were to violate any of its
covenants and were unable to obtain a waiver, it would be considered a default. If the Company were in default
under its credit facility, no additional borrowings under the credit facility would be available until the default was
waived or cured. The Company believes it is in compliance and expects to remain in compliance with its
Corporate credit facility covenants.
Various issuances of the Company’s public debt, which include the 8 3/8% Senior Subordinated Notes due
2014 (“8 3/8% Subordinated Notes”), the 7% Senior Notes due 2015 (“7% Senior Notes”), and the 8
1
⁄ 4 % Senior
Notes contain covenants that, among other things, limit the Company’s ability to incur additional debt or liens,
pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make investments
or merge with another company. The Company believes it is in compliance and expects to remain in compliance
with its public debt indentures.
The Company believes that cash provided by operations and its revolving credit facility, and the likelihood
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.
However, uncertainties related to the global and U.S. economies and the financial markets, particularly if the
global and U.S. economies and financial markets are in disarray when the debt matures and other obligations are
due, could prevent the Company from refinancing those liabilities at terms that are as favorable as those
previously enjoyed, at terms that are acceptable to the Company, or at all.
Reasons for Debt and Accumulated Deficit
As of December 31, 2009, the Company had $2.0 billion of outstanding indebtedness and an accumulated
deficit of $3.3 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
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
partially offset by $13.2 million received related to the termination and settlement of interest rate swaps and
$13.0 million in lower interest payments primarily due to lower short-term interest rates and debt balances.
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Form 10-K