Cincinnati Bell 2006 Annual Report Download - page 195

Accumulated Other Comprehensive Loss
The Company’s shareowners’ deficit includes an accumulated other comprehensive loss and is comprised of
pension and postretirement unrecognized prior service cost, unrecognized transition (asset) obligation and
unrecognized actuarial losses, net of taxes, of $174.5 million and $49.6 million at December 31, 2006 and 2005,
respectively. The increase from December 31, 2005 was primarily due to the adoption of SFAS 158. Refer to
Note 9 for further discussion.
12. Commitments and Contingencies
Commitments
The Company leases certain circuits, facilities and equipment used in its operations. Operating lease
expense was $22.9 million, $21.2 million and $24.8 million in 2006, 2005, and 2004, respectively. Operating
leases include tower site leases that provide for renewal options with fixed rent escalations beyond the initial
lease term. In 2004, the Company recorded a $3.2 million adjustment related to prior periods to account for
certain rent escalations associated with its tower site leases on a straight-line basis. These rent escalations are
associated with lease renewal options that were deemed to be reasonably assured of renewal, thereby extending
the initial term of the leases. The adjustment was not considered material to the 2004 earnings or to any prior
years’ earnings, earnings trends or individual financial statement line items.
At December 31, 2006, future minimum lease payments required under operating leases, excluding certain
data center leases which are recorded as a restructuring liability (refer to Note 3), having initial or remaining
non-cancelable lease terms in excess of one year are as follows:
(dollars in millions)
2007 .............................. $ 16.5
2008 .............................. 15.1
2009 .............................. 14.2
2010 .............................. 13.9
2011 .............................. 14.1
Thereafter .......................... 179.3
Total ............................ $253.1
Vendor Concentration
In 1998, the Company entered into a ten-year contract with Convergys Corporation (“Convergys”), a
provider of billing, customer service and other services, which, in 2004, was extended to December 31, 2010.
The contract states that Convergys will be the primary provider of certain data processing, professional and
consulting and technical support services for the Company within CBT’s operating territory. In return, the
Company will be the exclusive provider of local telecommunications services to Convergys. The contract
extension reduced the Company’s annual commitment in 2004 and 2005 to $35.0 million from $45.0 million.
Beginning in 2006, the minimum commitment is reduced 5% annually. The Company paid $34.3 million, $36.1
million and $37.5 million under the contract in 2006, 2005 and 2004, respectively.
Contingencies
In the normal course of business, the Company is subject to various regulatory and tax proceedings,
lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted
and unasserted claims in accordance with accounting principles generally accepted in the United States. Such
matters are subject to many uncertainties and outcomes that are not predictable with assurance.
In re Broadwing Inc. Securities Class Action Lawsuits, (Gallow v. Broadwing Inc., et al), U.S. District Court,
Southern District of Ohio, Western Division, Case No. C-1-02-795
Between October and December 2002, five virtually identical class action lawsuits were filed against
Broadwing Inc. and two of its former Chief Executive Officers in U.S. District Court for the Southern District
of Ohio.
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