Cincinnati Bell reports strong fourth-quarter and 1994 results; expects first-quarter charge

Business Wire, Jan 25, 1995

CINCINNATI--(BUSINESS WIRE)--Jan. 25, 1995--Cincinnati Bell Inc. (NYSE: CSN) said today that strong performances by all of its businesses led to a sharp increase in revenues and net income for the fourth quarter and for 1994, compared with the prior year.

The improved results helped Cincinnati Bell reduce its debt and strengthen its balance sheet during the year.

Net income for the fourth quarter ended December 31 was $21.1 million, or 32 cents per share. For 1994, net income was $72.6 million, or $1.11 per share. Fourth-quarter revenues were $323.4 million, an increase of 13 percent from $287.2 million a year ago. Revenues for 1994 were $1.23 billion, compared with 1993 revenues of $1.09 billion. The 13 percent annual increase is the company's strongest revenue growth since 1989.

Cincinnati Bell's net income for the fourth quarter and for 1994 includes special charges totaling $5.7 million. These charges result from a non-recurring charge for a non-qualified pension plan and from the separation incentive offer to Cincinnati Bell Telephone officers. These were partly offset by the favorable settlement of contracts reflected in prior-year special charges.

For the first time, more than half of Cincinnati Bell's annual revenues came from businesses started since the company adopted its diversification strategy in 1983. These businesses also contributed 40 percent of Cincinnati Bell's operating income, also a record.

Our strategy of diversification, and our persistence and hard work, have driven us to an important milestone, Cincinnati Bell President and CEO John T. LaMacchia said. In 1994, the businesses that our strategy inspired became bigger in revenues than our telephone business.

In 1993, Cincinnati Bell reported a loss of $106.8 million, or $1.69 per share per share for the fourth quarter, and a loss of $56.8 million, or 93 cents per share for the year. That loss resulted primarily from a decision to restructure Cincinnati Bell Information Systems (CBIS), its information management company.

The decision led to special charges totaling $102 million pre-tax, the largest of which was an $86 million charge for costs and expenses associated with the sale of CBIS Federal. Several other charges related to CBIS and to Cincinnati Bell Telephone are included in 1993 results.

Cincinnati Bell Telephone's revenues increased 4 percent to $599.7 million because of record-breaking growth in access lines and because of price increases for basic local telephone services in Ohio. Operating income increased 6 percent to $99.5 million.

In November, Cincinnati Bell Telephone announced a separation incentive offer to 18 officers, 12 of whom accepted the offer.

Plans for the next phase of Cincinnati Bell Telephone's multi-year business transition will be completed and submitted for approval soon. The program is designed to improve its ability to provide customers with affordable, high quality telecommunications services in a more efficient way. The plans include workforce reductions to be achieved primarily via voluntary separation incentives.

If approved, the plans would result in a significant charge to Cincinnati Bell's results for the first quarter of 1995, most likely in a range of $75 to $100 million before taxes.

CBIS had a very strong year. Operating income for 1994 improved significantly to $27.1 million, CBIS's highest since 1990. Although CBIS's reported revenues for the year decreased 4 percent to $343.8 million, after excluding revenues from businesses CBIS sold in 1994 revenues increased about 20 percent over 1993. Growth in CBIS's core business of bill processing for cellular communications companies, improved cost management, and new and extended client contracts, contributed to the turnaround in its results.

In the fourth quarter, CBIS completed the last major elements of its restructuring by selling its CBIS Federal business to DynCorp of Reston, Va., and its banking software unit to FIserv, Inc. of Brookfield, Wis.

With a full year of results from its WATS Marketing acquisition, plus strong internal growth, MATRIXX Marketing also had a strong year. Operating income increased $20.6 million to $22.6 million. Revenues increased 109 percent, to $226.1 million. Results from WATS are included in MATRIXX's results as of November 1993. MATRIXX's revenues would have increased about 20 percent in 1994 if WATS had been part of MATRIXX throughout 1993.

MATRIXX's results benefited from growth in each of its divisions, from continuing cost management, and from completion of the integration of WATS. The successful launch of a customer's new digital television service, DirecTV, supported by MATRIXX, contributed to a strong fourth quarter.

Cincinnati Bell Directory, Cincinnati Bell Long Distance and Cincinnati Bell Supply all contributed to the company's gain in operating income. Cincinnati Bell Directory's contribution was particularly strong.

Another positive result of Cincinnati Bell's strong 1994 performance is its impact on the company's balance sheet. Cincinnati Bell's cash increased $70 million and its short-term debt decreased $44 million during 1994. This net gain of $114 million resulted in cash in excess of short-term debt of $10 million at the end of the year, the company's first positive net cash position since 1988.