Cincinnati Bell 2004 Annual Report Download - page 144

3. Senior Executive Bonuses and Termination Benefits
During 2003, the Company recorded a charge of $11.2 million related to four senior executives for
certain success-based incentives and termination benefits in accordance with their employment contracts,
including all of the benefits related to its former Chief Executive Officer who resigned effective July 31,
2003. Substantially all of these benefits were paid upon termination. The charge was required as the success
plan, as defined in the senior executive employment agreements, was completed upon the first stage closing
of the sale of substantially all of the broadband assets on June 13, 2003. Three of the senior executives,
excluding the former Chief Executive Officer, were required to remain with the Company for 180 days
following the completion of the success plan. The charge included $0.8 million of non-cash expenses
related to the accelerated vesting of stock options.
4. Goodwill and Intangible Assets
As previously discussed in Note 1, the Company adopted SFAS 142 on January 1, 2002. The Company
completed the initial impairment test for its Wireless and Broadband segments (parts of which were later
moved to the Hardware and Managed Services segment) during the first quarter of 2002, which indicated that
the goodwill of its Broadband and Hardware and Managed Services segments was impaired as of January 1,
2002. An impairment charge of $2,008.7 million, net of taxes, was recorded as of January 1, 2002. The
impairment charge is reflected as a cumulative effect of change in accounting principle, net of taxes, in the
Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2004 and
December 31, 2003, goodwill totaled $40.9 million, of which $40.1 million related to the Wireless segment
and the remaining $0.8 million related to the Other segment.
The following table details the components of the carrying amount of other intangible assets.
Indefinite-lived intangible assets consist of FCC licenses of the Wireless segment. Intangible assets subject
to amortization consist of licensed trademarks and wireless roaming agreements. As a result of the merger
between Cingular Wireless and AT&T Wireless, consummated on October 26, 2004, the roaming and trade
name agreements were no longer operative. Accordingly, the remaining estimated useful lives of these assets
were shortened effective July 1, 2004. This change resulted in additional amortization expense of $7.4 million
during 2004. In addition, during the third quarter of 2004, the Company determined certain intangible assets
were impaired and recorded a charge of $2.4 million in the Consolidated Statements of Operations and
Comprehensive Income (Loss) under the caption “Asset impairments and other charges”:
December 31,
(dollars in millions) 2004 2003
Indefinite-lived intangible assets, excluding
goodwill .......................................... $ 35.7 $35.7
Intangible assets subject to amortization:
Gross carrying amount .............................. 11.6 14.3
Accumulated amortization .......................... (11.5) (2.8)
Net carrying amount ................................ 0.1 11.5
Total other intangible assets ......................... $ 35.8 $47.2
Year Ended December 31,
2004 2003 2002
Amortization expense of finite-lived other
intangible assets .................................. $9.1 $0.6 $25.3
The estimated intangible asset amortization expense for each of the fiscal years 2005 through 2009 is zero.
5. Restructuring and Other Charges
December 2004 Restructuring Plan
In December 2004, the Company initiated a restructuring intended to improve operating efficiencies and
reduce operating expenses. The plan includes a workforce reduction that will be implemented in stages, which
began in the fourth quarter 2004 and will continue in stages through December 31, 2006. The workforce
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