Cincinnati Bell 2010 Annual Report Download

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2010 Annual Report
Letter to
Shareholders
Notice of
2011 Annual Meeting
and Proxy Statement
Report on
Form 10-K

Table of contents

  • Page 1
    2010 Annual Report Letter to Shareholders Notice of 2011 Annual Meeting and Proxy Statement Report on Form 10-K

  • Page 2
    Contents Letter to Shareholders from the Chairman, the President & Chief Executive Officer and the Chief Financial Officer Financial Highlights Board of Directors and Company Officers Notice of Annual Meeting of Shareholders Proxy Statement Report on Form 10-K

  • Page 3
    ... driving shareholder value in the future. • • • Cincinnati Bell exceeded all its financial targets for 2010 as we continued our long history of providing unparalleled customer service combined with reliable Wireline and Wireless networks. Over the past five years, the Company has...

  • Page 4
    ... in Cincinnati Bell's positive results is the growth in the Data Center Colocation business. In June 2010, the Company acquired CyrusOne, a premier provider of colocation and data center services to Fortune 1000 companies. CyrusOne provides increased scale and scope of data center operations by...

  • Page 5
    ... is a fiber-to-the-home suite of services that provides entertainment, high-speed internet, and traditional 3 28 27 15 12 5 5 5 17 14 2008 Voice 2009 Entertainment Internet 2010 The Company expects the number of Fioptics customers to increase in 2011 and plans to expand its fiber network to...

  • Page 6
    ...and Wireless businesses, will produce long-term value for the shareholders of Cincinnati Bell. We all have a commitment to the traditions of our Company that built the legacy we have today. These traditions include a strong work ethic, commitment to customer service, and involvement in our community...

  • Page 7
    ... financial information available as described above reconciles free cash flow to the net increase (decrease) in cash and cash equivalents. 3 Adjusted EBITDA margin provides a useful measure of operational performance. The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue...

  • Page 8
    ...in the company's back-office information technology systems, including its billing system; the company's ability to integrate successfully the business of Cyrus Networks, LLC with the company's existing operations and to achieve the anticipated benefits of the acquisition of Cyrus Networks, LLC; and...

  • Page 9
    ...Chief Executive Officer Cox Financial Corporation Bruce L. Byrnes (2, 3, 4*) Retired Vice Chairman of the Board The Procter & Gamble Company John F. Cassidy (3) President and Chief Executive Officer Cincinnati Bell Inc. Jakki L. Haussler (1, 4) Chairman and Chief Executive Officer Opus Capital Group...

  • Page 10
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  • Page 11
    ... an advisory vote on executive compensation; To approve the Cincinnati Bell Inc. 2011 Short-Term Incentive Plan; and To consider any other matters that may properly come before the meeting. Proxy Statement The Board of Directors has established the close of business on March 4, 2011 as the record...

  • Page 12
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  • Page 13
    INFORMATION FOR SHAREHOLDERS THAT PLAN TO ATTEND THE 2011 ANNUAL MEETING OF SHAREHOLDERS The Marriott at Legacy Town Center is located at 7120 Dallas Parkway, Plano, Texas 75024. Below are directions to the Marriott at Legacy Town Center. From: Sam Rayburn Tollway Northbound From: Sam Rayburn ...

  • Page 14
    ... Vote on Executive Compensation - Item 4 on Proxy Card ...Proposal to approve of the Cincinnati Bell Inc. 2011 Short-Term Incentive Plan - Item 5 on Proxy Card ...Equity Compensation Plan Information ...Audit and Finance Committee Report ...Independent Accountants ...Stock Ownership of Certain...

  • Page 15
    ... to the shareholders of Cincinnati Bell Inc., an Ohio corporation (the "Company"), in connection with the solicitation of proxies by the Board of Directors for use at the 2011 Annual Meeting of Shareholders. The Annual Meeting will be held on Tuesday, May 3, 2011, at 11:00 a.m., Central Time, at the...

  • Page 16
    ...in the Greater Cincinnati and Dayton areas primarily on its owned wireline and wireless networks with a well-regarded brand name and reputation for service. The Company also provides business customers with outsourced data center operations including related managed services in world class, state-of...

  • Page 17
    ... name with Cincinnati Bell's transfer agent, Computershare Investor Services, LLC, you are considered the shareholder of record for those shares. As a shareholder of record, you may grant your voting proxy over the internet, by mail, by telephone or you may vote your shares in person at the meeting...

  • Page 18
    ...name or credited to your account under a Company employee or director plan, cannot be voted at the Annual Meeting unless you obtain a signed proxy from the shareholder of record authorizing you to vote these shares. Q: How can I vote my shares without attending the meeting? A: The methods for voting...

  • Page 19
    ... the internet, by telephone or by mail; (ii) if you are a shareholder of record, notifying the Company's Secretary in writing that you want to revoke your earlier proxy; or (iii) if you are a shareholder of record, attending the Annual Meeting, giving notice of your proxy revocation in open meeting...

  • Page 20
    ...than 5% of the issued and outstanding common shares of the Company: BlackRock, Inc., GAMCO Investors, Inc. and affiliates, LSV Asset Management, Marathon Asset Management LLP, Peninsula Capital Advisors, LLC, Pinnacle Associates, LTD, The Vanguard Group, Inc, and Wells Fargo and Company. See page 29...

  • Page 21
    ... informed of our business through discussions with our President and Chief Executive Officer and other officers, by reviewing materials provided to them, by visiting our offices and by participating in meetings of the Board and its committees. General Information and Corporate Governance The Company...

  • Page 22
    ... to the full Board on risk oversight matters. In performing its duties, the Audit and Finance Committee meets as often as necessary and at least once each calendar quarter with members of management, the Company's internal audit staff and the Independent Registered Public Accounting Firm. An agenda...

  • Page 23
    ... meets at least three times each calendar year. The Compensation Committee also meets separately with the Company's Chief Executive Officer and other corporate officers, as it deems appropriate, to establish and review the performance criteria and compensation of the Company's executive officers...

  • Page 24
    ... contribute to the gender, racial and/or geographical diversity of the Board. While the Company has not adopted a formal process or policy for making sure that diversity exists on the Board, the selection criteria used by the Governance and Nominating Committee when considering director nominees, as...

  • Page 25
    ... options that he or she chooses. In addition, annually each non-employee director of the Company on the first business day of the year has his or her account under the Directors Deferred Compensation Plan credited on such date with an amount equal to the value of 6,000 common shares of the Company...

  • Page 26
    ... to the current terms of such plan, each non-employee director of the Company, at the discretion of the Board, may be granted a stock option for a number of common shares and/ or a number of restricted common shares (as determined by the Board) on the date of each annual meeting, if such director...

  • Page 27
    ... of the option, the price to be paid for the common shares that are being purchased under the option will be equal to 100% of the fair market value of such shares as determined at the time the option is granted. With certain exceptions provided in the 2007 Directors Stock Option Plan, a non-employee...

  • Page 28
    ... As of December 31, 2010, the non-employee directors held an aggregate of 271,436 unvested stock awards and an aggregate of 299,175 option awards (granted in years prior to 2008), as set forth below: Number of Stock Awards Outstanding as of December 31, 2010 Number of Option Awards Outstanding as of...

  • Page 29
    ... persons has or will have a direct or indirect interest: Proxy Statement • an executive officer, director or director nominee of the Company; • any person who is known to be the beneficial owner of more than 5% of the Company's common shares; • any person who is an immediate family member...

  • Page 30
    ... number to be fixed and determined by resolution of the Board or by resolution of the shareholders at any annual or special meeting of shareholders. The Board has determined that the Board shall consist of nine members. The Board presently has eight members, one of whom is an officer of the Company...

  • Page 31
    ...brief biographies of each director of the Company, including those nominated for election. NOMINEES FOR DIRECTORS (Terms Expire in 2012) Mr. Cox has been President and Chief Executive Officer of Cox Financial Corporation (a financial planning services company) since 1972. He is a current director of...

  • Page 32
    ... products distributor) from 2007 to 2008. Prior to joining BlueLinx, she was, most recently, Vice President and Chief Financial Officer for BellSouth Corporation's Communications Group and held various other positions at BellSouth from 1985 to 2007. She is a certified public accountant and a member...

  • Page 33
    ... and Chief Operating Officer of Cincinnati Bell Telephone Company since May 2001, and President of Cincinnati Bell Wireless Company since 1997. Director since 2002. Age 56. Having served as the Company's Chief Executive Officer since 2003, and having served in various other senior-level management...

  • Page 34
    ...on the Company, the Compensation Committee or the Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we...

  • Page 35
    ... by shorter-term marketplace issues. • A vote once every three years will give our shareholders the opportunity to more fully and effectively assess our long-term compensation strategies and the related business outcomes. Proxy Statement • A three-year cycle gives the Board of Directors...

  • Page 36
    ... SHORT-TERM INCENTIVE PLAN (Item 5 on the Proxy Card) The Board has approved, effective as of April 1, 2011, the terms of the annual incentive compensation plan, the Cincinnati Bell Inc. 2011 Short-Term Incentive Plan (the "2011 Short Term Incentive Plan"). The 2011 Short Term Incentive Plan changes...

  • Page 37
    ... no later than the 15th day of the third month that follows the end of their award year. Any award granted under the 2011 Short Term Incentive Plan to a key employee generally will specify a target payment amount (the award's "target") and assign a percent of the award's target to each award part of...

  • Page 38
    ...; total shareholder returns; profit targets; revenue targets; profitability targets as measured by return ratios; net income; return on sales; return on assets; return on equity; and corporate performance indicators (indices based on the level of certain services provided to customers). The company...

  • Page 39
    .... Our Recommendation Proxy Statement Approval of the Cincinnati Bell Inc. 2011 Short-Term Incentive Plan, requires the affirmative vote of the shareholders of a majority of the Common Shares and Preferred Shares, voting as one class, present or represented at the annual meeting, in person or by...

  • Page 40
    ... of January 1, 2005, upon termination of Board service, non-employee directors are required to take distribution of all annual phantom stock awards in cash. Therefore, the number of actual shares of common stock to be issued pursuant to the plan as of December 31, 2010 is approximately 16,000. This...

  • Page 41
    ... the management of the Company and has reviewed a report from management assessing the Company's internal controls. The Audit and Finance Committee has discussed with Deloitte & Touche LLP, the Company's Independent Registered Public Accounting Firm for the fiscal year ended December 31, 2010, the...

  • Page 42
    ... fees The audit related fees for the years ended December 31, 2010 and 2009 were for professional services rendered for the audits of the Company's employee benefit plans filed with the SEC, securities and debt offerings, due diligence services and various accounting consultations. Tax fees Tax...

  • Page 43
    ... known by the Company. No beneficial owner owns more than five percent (5%) of the 6 3⁄ 4% Cumulative Convertible Preferred Shares. Name and Address of Beneficial Owner Common Shares Beneficially Owned Percent of Common Shares GAMCO Investors, Inc. and affiliates ...One Corporate Center Rye, NY...

  • Page 44
    ... all directors and executive officers of the Company as a group. Unless otherwise indicated, the address of each director and executive officer is c/o Cincinnati Bell at the Company's address. Common Shares Beneficially Owned as of March 4, 2011 (a) Convertible Preferred Shares Beneficially Owned as...

  • Page 45
    ... our review and discussions with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Cincinnati Bell Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2010...

  • Page 46
    ... to the Company's executive compensation program: • Fixed compensation - Base salary. • "At-risk" annual compensation - Annual incentives paid in cash. • "At-risk" long-term compensation - Long-term incentives that are equity awards generally delivered in the form of stock options, stock...

  • Page 47
    ...Corp. Leap Wireless International Inc. Frontier Communications Corp. PAETEC Holding Corp. Global Crossing Ltd. Windstream Corporation Mediacom Communications Corp. Qwest Communications International Sprint Nextel Corp. Telephone & Data Systems Time Warner United States Cellular USA Mobility Inc...

  • Page 48
    ... the following from both peer groups' data: • Base pay. • Total target cash compensation - the sum of base pay plus target annual bonus opportunity. • Total target direct compensation - the sum of base pay plus target annual bonus opportunity plus target long-term incentive opportunity. 34

  • Page 49
    ... pay data of the two peer groups to take into account differences in revenue among companies using a statistical technique called "regression analysis." Using this technique, for each executive officer position whose compensation is assessed and set by the Compensation Committee (or the full Board...

  • Page 50
    ... EBITDA and revenues. In conjunction with such review, they may adjust the calculated result or goal amount to reflect a change in business direction, reallocation of Company resources or an unanticipated event. For 2010, the Compensation Committee generally allocated the annual incentive targets as...

  • Page 51
    ... as Chief Executive Officer, and to ensure his retention during the next few years of transformative growth in the Technology Solutions/Data Center segment, the Compensation Committee recommended and the Board approved a retention bonus payment of $2,100,000 in January 2010. If Mr. Cassidy retires...

  • Page 52
    ... scheduled meeting in January 2010, the Compensation Committee decided, as a further means to reduce share usage, it would make use of SARs, payable in both stock and cash, and cash target awards as it deems appropriate and necessary. A portion of the Chief Executive Officer's annual stock option...

  • Page 53
    ... each executive. In order to preserve shares available to be issued in future periods, and in light of the 1,000,000 share annual individual award limitation, it was determined to make the Chief Executive Officer's target award payable in cash under the 2009 - 2011 and 2010 - 2012 performance plan...

  • Page 54
    ... other businesses, and a change in control of the Company. Pursuant to the terms of the Technology Solutions/Data Center Program, no executive may receive performance units in any calendar year with a value in excess of $5,000,000. It should be noted that the Company's Chief Executive Officer does...

  • Page 55
    ... do not play a role in determining retirement benefits. Each executive participates in a broad set of other benefit plans and programs, including medical, dental, vision, life and short- and long-term disability plans and home telephone service price discount programs, on the 41 Proxy Statement

  • Page 56
    ... salary, annual bonus and long-term incentive compensation - with the Compensation Committee. In addition, the Compensation Committee reviewed a tally sheet showing the value or cost of participation in the Company's various benefits, retirement and perquisite plans for each named executive officer...

  • Page 57
    ...the peer group benchmark. For the 2011 - 2013 performance period, the Compensation Committee approved a maximum grant of units (assumes incremental value created is at or in excess of $1,000,000,000) under the new Technology Solutions/ Data Center Program to the following named executive officers as...

  • Page 58
    ... of the Company's compensation programs; The compensation of other chief executive officers in the company peer groups; The overall results achieved by the Company in a highly competitive market environment; and Mr. Cassidy's personal performance, including development of strategic plans, business...

  • Page 59
    ..., 2010 the Compensation Committee adopted a policy that, effective immediately, the Company will not enter into any new or materially amended employment agreements with named executive officers providing for excise tax gross-up provisions with respect to payments contingent upon a change in control...

  • Page 60
    ...and a highly compensated person and former executive officer (Brian A. Ross) who resigned in August 2010 (collectively, the "Named Executive Officers"): Summary Compensation Table - Fiscal 2010 Change in Pension Value and Non-Equity Non-Qualified Incentive Deferred Stock Option Plan Compensation All...

  • Page 61
    ... 2010, Mr. Torbeck joined the Company as President and General Manager for the Cincinnati Bell Communications Group. (j) On March 23, 2009, Ms. Khoury joined the Company as Senior Vice President and Chief Marketing Officer. (k) Includes $2,100,000 retention bonus paid in 2010. If Mr. Cassidy retires...

  • Page 62
    ... 2007 Long Term Incentive Plan, the maximum would only be obtained if the Company's closing stock price on January 30, 2012 would equal or exceed $16.67 and the adjusted free cash flow targets were achieved. See the Summary Compensation Table for the amount earned in 2010 and paid in 2011 related to...

  • Page 63
    ... During 2010, all of the Named Executive Officers were employed pursuant to agreements with the Company. Each employment agreement sets forth, among other things, the Named Executive Officer's base salary, bonus opportunities, entitlement to participate in the Company's benefit and pension plans and...

  • Page 64
    ... its long-term business strategy. The long-term incentives granted to the Named Executive Officers are described in the Compensation Discussion and Analysis that begins on page 32. In order to preserve shares available under the 2007 Long Term Incentive Plan, Mr. Cassidy was granted a cash-payment...

  • Page 65
    installation and monthly fees for home security, adoption fees, purchase of software designed to provide or assist with tax planning/preparation, and financial, estate and legal planning/documents. Executives had to pay first for eligible services and submit an invoice and evidence of payment in ...

  • Page 66
    ... at Fiscal Year End The following table sets forth information concerning options and other equity awards held by the Named Executive Officers at December 31, 2010: Option Awards Stock Awards Equity Equity Incentive Incentive Plan Awards: Equity Plan Awards: Market or Incentive Plan Market Number of...

  • Page 67
    ...following table sets forth information concerning the exercise of options and the vesting of stock held by the Named Executive Officers during the year ended December 31, 2010: Option Exercises and Stock Vested in 2010 Proxy Statement Name Option Awards Number of Shares Value Realized Acquired on...

  • Page 68
    ...ERISA Excess Provisions of the Cincinnati Bell Management Pension Plan. See page 41 for further details on the SERP. Additional pension benefit from employment agreement between the Company and Mr. Cassidy. None of the executive officers have been granted additional years of service under any of the...

  • Page 69
    ...'s total plan compensation for 2010 that exceeds the Social Security old-age retirement taxable wage base for 2010. Proxy Statement A participant's account under the Management Pension Plan is also generally credited with assumed interest for each calendar year at a certain interest rate. Such...

  • Page 70
    ... prior to 2010. The 1997 Cincinnati Bell Inc. Executive Deferred Compensation Plan (the "Executive Deferred Compensation Plan") generally permits under its current policies, for any calendar year, each employee who has an annual base rate of pay and target bonus above a certain high dollar amount...

  • Page 71
    ... - Proxy Statement Name John F. Cassidy Executive Payment on Termination Base Salary ...Annual Incentive Target Opportunity ...Long Term Incentives - Options ...Long Term Incentives - Performance Restricted Shares ...Long Term Incentives - Non-Equity Incentive Compensation (d) ...Basic Benefits...

  • Page 72
    ...(a) These amounts are meant to defray related tax liabilities related to a change in control. The discount rate used for retiree benefit parachute values was 4.90%, consistent with the rate determined for the Company's financial statements under Accounting Standards Codification Topic 960. On April...

  • Page 73
    ... Pension Plan, a payment equal to the present value of an additional one year (two years for Mr. Cassidy) of participation in the Plan as though the executive had remained employed at the same base rate of pay and target bonus; • Continued medical, dental, vision and life insurance coverage...

  • Page 74
    ... to exercise such vested options so long as the disabling conditions exists; • Continued participation by the disabled executive in any outstanding long-term incentive plans; and • Continued consideration of the disabled executive as an employee for all other benefits so long as the disabling...

  • Page 75
    ...inadvertently reported late by the Company on January 11, 2011. Shareholder Proposals for Next Year's Annual Meeting Shareholder proposals intended for inclusion in next year's Proxy Statement should be sent to Christopher J. Wilson, Vice President, General Counsel and Secretary, Cincinnati Bell Inc...

  • Page 76
    Financial Statements and Corporate Governance Documents Available The Company has elected to provide access to its Proxy Statement, Annual Report on Form 10-K and Summary Annual Report over the internet. We sent the Notice to our shareholders and beneficial owners, which provides information and ...

  • Page 77
    ... Street, Cincinnati, Ohio 45202, and identify the intended recipient or recipients. All communications addressed to the Board or any identified director or directors will be forwarded to the identified person or persons. By Order of the Board of Directors Proxy Statement Christopher J. Wilson Vice...

  • Page 78
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  • Page 79
    ... changed by CBI, a CBI Tax Year is a calendar year. 2.4 "CEO" means, as of any point in time, the person then designated by CBI as its Chief Executive Officer. 2.5 "Change in Control" means the occurrence of any of the events described in subsection 10.2 hereof. 2.6 "Code" means the Internal Revenue...

  • Page 80
    ... rule that is issued under such section as of the Effective Date or as of a later date. 2.12 "Participant" means a person who, as a Key Employee, was granted an award under the Plan. 2.13 "Plan" means this document, named the "Cincinnati Bell Inc. 2011 Short Term Incentive Plan," as set forth herein...

  • Page 81
    ... an amount payable based on satisfaction of Company performance goals. (b) The Committee (or, when the applicable award is granted to the CEO, the Board) may set, in the terms of an award granted under the Plan to a Participant, a limit on the reduction that can be made under A-3 Proxy Statement

  • Page 82
    ... Disability Benefits Plan or any similar type of disability plan), his or her retirement (as defined in subsection 5.5(a) hereof), or his or her death; and (b) has had at least three months of active service for the Company during the award's Award Year (not including any time the Participant...

  • Page 83
    ... payments and proceeds from the issuance of equity securities, and proceeds from the sale of assets); (b) earnings before interest, taxes, depreciation, and amortization; (c) earnings per share; (d) operating income; (e) total shareholder returns; Proxy Statement (f) profit targets; (g) revenue...

  • Page 84
    ..., seizure, business interruption, or regulatory requirements; (10) retained and uninsured losses from natural catastrophes; (11) currency fluctuations; (12) an expense relating to the issuance of stock options and/or other stock-based compensation; (13) an expense relating to the early retirement of...

  • Page 85
    ...the first day of the CBI Tax Year in which the Change in Control occurs and the denominator of which shall equal the number of months in such CBI Tax Year. 10.2 Definition of Change in Control. For purposes of the Plan, a "Change in Control" means the occurrence of any one of the events described in...

  • Page 86
    ...Voting Securities among the holders thereof immediately prior to the Reorganization or Sale; (2) no person (other than any employee benefit plan sponsored or maintained by the Surviving Entity or the Parent Entity or the related trust of any such plan) is or becomes the beneficial owner, directly or...

  • Page 87
    ...the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the CBI Voting Securities as a result of the acquisition of CBI Voting Securities by CBI which reduces the number of CBI Voting Securities outstanding; provided...

  • Page 88
    other pension, profit sharing, or other benefit plan, of the Company unless such plan expressly or clearly indicates that the payments or other benefits provided under an award granted under the Plan shall be considered part of the Participant's compensation for purposes of such plan or unless ...

  • Page 89
    ..., computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2010, the last trading day of the registrant's most recently completed second fiscal quarter. The Company has no non-voting common shares. At February 1, 2011, there were 198,771,550...

  • Page 90
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  • Page 91
    ..., Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...112...

  • Page 92
    ...local telephone service, switched access, and value-added services such as caller identification, voicemail, call waiting, and call return. Data services include high-speed internet using digital subscriber line ("DSL") technology, fiber to the home, dial-up internet access, dedicated network access...

  • Page 93
    ... business customers; (3) increasing the sale of VoIP services; and (4) increasing entertainment revenue with more Fioptics fiber-to-the-home subscribers and higher commissions from more DirecTV© subscribers. Data Data revenue consists of data transport, DSL high-speed internet access, Fioptics high...

  • Page 94
    ... fiber optic cable allows the Company to provide customers with its Fioptics product suite of services, which include entertainment, high-speed internet and voice services, in areas that the fiber optic cable is laid. The Company has first focused its fiber network expenditures on high traffic areas...

  • Page 95
    ...a 3G Universal Mobile Telecommunications System ("3G") network overlay, which is able to provide high-speed data services such as streaming video. Wireless services are provided to customers in the Company's licensed service territory, which includes Greater Cincinnati and Dayton, Ohio, and areas of...

  • Page 96
    ... 74% of 2010 segment revenue. A variety of monthly rate plans are available to postpaid subscribers, and these plans can include a fixed or unlimited number of national minutes, an unlimited number of Cincinnati Bell mobile-to-mobile (calls to and from the Company's other Wireless subscribers), an...

  • Page 97
    ...customers, resulting in an 88% utilization rate of the available data center space. Data Center Colocation services are offered through the Company's Cincinnati Bell Data Center Inc., GramTel, Inc., and Cyrus Networks, LLC subsidiaries. On June 11, 2010, the Company purchased CyrusOne, a data center...

  • Page 98
    ... Company works to locate in high traffic but affordable areas, with a distance between each store that considers optimal returns per store and customer convenience. As stores are added or closed from time to time, certain stores may be transitioned to local agents for their marketing of our products...

  • Page 99
    ... offer VoIP and long distance services in Cincinnati and Dayton. Partially as a result of wireless substitution and increased competition, the Company's access lines decreased by 7% and long distance subscribers decreased by 5% in 2010 compared to 2009. In addition, the high-speed internet market is...

  • Page 100
    ... services and 10% of data services. In 2010 data services increased 16 points to 26% of total Wireless service revenues. Additionally, the Company's mix of business and consumer customers is changing, as many of the Company's growth products, such as data center services and data transport services...

  • Page 101
    ...flow from operations to pay principal and interest on its debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements; • the Company's interest rate on its revolving...

  • Page 102
    ... into agreements that restrict dividends or other payments from subsidiaries; issue or sell capital stock of certain of its subsidiaries; and consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis. In addition, the Company...

  • Page 103
    ... offer VoIP and long distance services in Cincinnati and Dayton. Partially as a result of wireless substitution and increased competition, the Company's access lines decreased by 7% and long distance subscribers decreased by 5% in 2010 compared to 2009. In addition, the high-speed internet market is...

  • Page 104
    ... and IT Services and Hardware segments compete against numerous other data center colocation, information technology consulting, web-hosting, and computer system integration companies, many of which are larger, national and/or international in scope, and better financed. This market is rapidly...

  • Page 105
    ... on the Company's market share and its ability to generate revenue. Maintenance of CBW's wireless network, growth in the wireless business, or the addition of new wireless products and services may require CBW to obtain additional spectrum and transmitting sites which may not be available or be...

  • Page 106
    ... data center colocation provider. If the markets for outsourced information technology services decline, there may be insufficient demand for the Company's services and, as a result, the Company's business strategy and objectives may fail. The Company's solutions are designed to enable a customer...

  • Page 107
    ... to generate revenues, profits and cash flows. The long sales cycle for data center services may materially affect the data center business and results of its operations. A customer's decision to lease cabinet space in one of the Company's data centers and to purchase additional services typically...

  • Page 108
    ... condition. The efficient operation of the Company's business depends on back-office information technology systems. The Company relies on back-office information technology systems to effectively manage customer billing, business data, communications, supply chain, order entry and fulfillment and...

  • Page 109
    ... services use encryption and authentication technology licensed from third parties to provide the protections necessary for secure transmission of confidential information, including credit card information from customers. We also rely on personnel in our network operations centers, data centers...

  • Page 110
    ... increase significantly, the Company would expect to face even higher annual net pension and postretirement costs. Refer to Note 10 to the Consolidated Financial Statements for further information. Adverse changes in the value of assets or obligations associated with the Company's employee benefit...

  • Page 111
    ... its wireless business in the Greater Cincinnati and Dayton, Ohio operating areas, and 17 data center facilities. Each of the Company's subsidiaries maintains some investment in furniture and office equipment, computer equipment and associated operating system software, application system software...

  • Page 112
    ...14,000 13,000 639,000 The data centers provide 24-hour monitoring of the customer's computer equipment in the data center, power, environmental controls, and high-speed, high-bandwidth point-to-point optical network connections. The Company's lease of data center facilities represents the "lease of...

  • Page 113
    ...(a) Market Information The Company's common shares (symbol: CBB) are listed on the New York Stock Exchange. The high and low closing sale prices during each quarter for the last two fiscal years are listed below: First Quarter Second Quarter Third Quarter Fourth Quarter 2010 2009 High Low High Low...

  • Page 114
    ... information regarding the Company's purchases of its common stock during the quarter ended December 31, 2010: Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs* Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans...

  • Page 115
    .... (dollars in millions, except per share amounts) 2010 2009 2008 2007 2006 Operating Data Revenue ...Cost of services and products, selling, general and administrative, depreciation and amortization expense ...Restructuring charges, acquisition costs, loss on sale of asset and asset impairments...

  • Page 116
    ...The Company's revenue increase of $41.0 million from 2009 resulted primarily from the CyrusOne acquisition and higher revenues from IT Services and Hardware, offset by revenue decreases due to continued access line loss in the Wireline segment and fewer subscribers in the Wireless segment. Operating...

  • Page 117
    ...long distance and VoIP revenue and increased entertainment revenue. The Company ended the year with 674,100 total access lines, a loss of 7% compared to 723,500 access lines at December 31, 2009 and consistent with the 2009 losses. In 2009, the Company launched its Fioptics fiber-to-the-home product...

  • Page 118
    ... Services and Hardware segment primarily due to increased telecom and IT equipment sales; • $20.6 million lower revenues in the Wireline segment primarily due to lower voice revenue from access line losses partially offset by increased revenue from more VoIP and Fioptics product suite subscribers...

  • Page 119
    ... interest on securities originally issued to acquire its broadband business (the "Broadband Securities") or securities that the Company has subsequently issued to refinance the Broadband Securities. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory...

  • Page 120
    ... Statements for more information on Business Segments. Wireline The Wireline segment provides local voice telephone service and custom calling features, and data services, including high-speed internet access, dedicated network access, ATM - Gig-E based data transport, and dial-up internet access...

  • Page 121
    ... 9% 256.1 Fioptics entertainment subscribers Fiber ...Cable ...Long distance lines ...2010 Compared to 2009 Revenue Voice local service revenue includes local service, value added services, digital trunking, switched access, and information services. Voice revenue decreased in 2010 compared to 2009...

  • Page 122
    ... from Fioptics high-speed internet services. The Company's Fioptics high-speed internet subscriber base increased from 4,500 at December 31, 2008 to 13,800 at December 31, 2009. Long distance and VoIP revenue decreased $1.2 million in 2009 compared to 2008. Lower minutes of use for long distance and...

  • Page 123
    ... payroll cost decreases related to initiatives implemented in 2008 and lower operating taxes of $3.4 million were partially offset by an increase in network costs of $5.6 million, primarily to support the growth in VoIP, broadband and Fioptics services, and additional pension expense of $7.2 million...

  • Page 124
    ...advanced digital voice and data communications services through the operation of a regional wireless network in the Company's licensed service territory, which surrounds Cincinnati and Dayton, Ohio and includes areas of northern Kentucky and southeastern Indiana. Although Wireless does not market to...

  • Page 125
    ... below. Equipment revenue for 2010 decreased $2.9 million from $22.7 million in 2009 to $19.8 million in 2010 primarily due to lower subscriber activations and less handset upgrades. Costs and Expenses Cost of services and products consists largely of network operation costs, interconnection...

  • Page 126
    ...wireless network that was launched in late 2008. The decrease in amortization expense from the prior year is due to the Company's accelerated amortization methodology. During 2009, the Company recognized a loss of $4.8 million on sale of spectrum assets for areas outside of its Cincinnati and Dayton...

  • Page 127
    ...The Company funded the purchase with borrowings and available cash. See Note 2 to the Consolidated Financial Statements for further information. The Data Center Colocation segment provides large enterprise customers with outsourced data center operations, including all necessary redundancy, security...

  • Page 128
    ... restructuring charge of $1.4 million was incurred in 2010 for payments to be made in order to conform the Cincinnati-based operation's commission incentive program to the CyrusOne program. 2009 Compared to 2008 Revenue Data center services revenue increased $16.0 million in 2009 as compared to 2008...

  • Page 129
    ... and data security management. Managed services revenue increased by $5.7 million in 2010 versus 2009, due primarily to an increase in services provided to one of the Company's largest customers of $5.2 million. Professional services revenue consists of long-term and short-term IT outsourcing and...

  • Page 130
    ...IT equipment distribution revenue. Selling, general and administrative expenses increased by $4.1 million in 2009 compared to 2008. The increase in 2009 was primarily due to an increase in payroll and employee related costs to support the growing operations and contract services. Corporate Corporate...

  • Page 131
    ...are available to it, including access to public debt or equity markets. Uses of cash include capital expenditures, repayments and repurchases of debt and related interest, repurchases of common shares, dividends on preferred stock, and business acquisitions. In 2010, 2009, and 2008, the Company made...

  • Page 132
    ... a Credit Agreement basket providing full access to the Corporate revolving credit facility. Also, the Company's ability to make restricted payments would be limited, including common stock dividend payments or repurchasing outstanding Company shares. As of December 31, 2010, the Company was below...

  • Page 133
    ... 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...

  • Page 134
    ...'s Fioptics fiber-to-the-home products, which offers one of the fastest internet speeds in the Company's operating territory. At year-end 2010, the Company had 27,200 Fioptics high-speed internet subscribers which represents an increase of 13,400 subscribers from the prior year. However, the number...

  • Page 135
    ... as business customers look for alternatives to traditional ILEC-based operations and the VoIP technology continues to improve. Wireless Wireless postpaid revenue in the future is likely to be affected by data ARPU increases, as more customers begin using data services and smartphones. The Company...

  • Page 136
    ... Cincinnati, Ohio and, to a lesser extent, Fioptics construction, such that growth in 2011 in managed services and professional services will likely be limited. Business and Consumer Customers As noted previously in Item 1 under "Customers," the Company's revenue from consumer access line customers...

  • Page 137
    ..., the Company makes certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These include (a) intellectual property indemnities to customers in connection with the use, sales, and/or license of products and services...

  • Page 138
    ... - Revenue from local telephone, special access, and internet product services, which are billed monthly prior to performance of service, is not recognized upon billing or cash receipt but rather is deferred until the service is provided. Long distance and switched access are billed monthly in...

  • Page 139
    ... costs of products sold upon sale of the related equipment to the customer. The Company often is contracted to install the IT equipment that it sells. The revenue recognition guidance in ASC 985, "Software," is applied, which requires vendor specific objective evidence ("VSOE") in order to recognize...

  • Page 140
    ...A one-year change in the useful life of these assets would increase or decrease annual depreciation expense by approximately $25 million. The Company reviews the carrying value of long-lived assets, other than goodwill and indefinite-lived intangible assets discussed above, when events or changes in...

  • Page 141
    ... be avoided in the operating business as a result of owning the respective asset or technology. Changes to the assumptions the Company used to estimate fair value could impact the recorded amounts for acquired assets and liabilities, including property, plant and equipment, intangible assets, and...

  • Page 142
    ... taxes collected from customers on a net basis. In the fourth quarter of 2008, the Company settled certain operating tax issues and as a result recorded $10.2 million of income, which is presented as an "Operating tax settlement" in the Consolidated Statements of Operations. Accounting for Pension...

  • Page 143
    ... the Company estimates the timing and expected future benefit payment, and applies a yield curve developed to reflect yields available on high-quality bonds. Based on the analysis, the discount rate was set at 4.90% for the pension plans and 4.50% for the postretirement plans as of December 31, 2010...

  • Page 144
    ... exchange carriers while increasing opportunities for new competitive entrants and new services by applying minimal regulation. While the Company has expanded beyond its incumbent local exchange operations by offering wireless, long distance, broadband, Internet access, VoIP and out-of-territory...

  • Page 145
    ... grouped into four key areas: (1) accelerating universal broadband access and adoption, (2) fostering competition and maximizing consumer benefits, (3) promoting world-leading mobile broadband infrastructure and innovation, and (4) advancing robust and secure public safety communications networks...

  • Page 146
    ... most direct impact on the Company as a result of USF reform. Broadband Internet Access/Net Neutrality In an order adopted in 2005, the FCC provided wireline carriers the option of offering broadband Internet access as a non-regulated information service (comparable treatment to cable modem Internet...

  • Page 147
    ... is required in Kentucky. The Company initiated discussions with local jurisdictions in Kentucky in 2008 and has reached agreement with seven franchising authorities. Recently Issued Accounting Standards In September 2009, new accounting guidance under ASC 605 related to revenue arrangements with...

  • Page 148
    ... Company's retiree pension and healthcare plans; changes in the Company's relationships with current large customers, a small number of whom account for a significant portion of Company revenue; • disruption in the Company's back-office information technology systems, including its billing system...

  • Page 149
    ...Consolidated Financial Statements Consolidated Financial Statements: Management's Report on Internal Control over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Statements of Operations ...Consolidated Balance Sheets ...Consolidated Statements of Cash...

  • Page 150
    ... of the Company's internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report included herein. February 28, 2011 /s/ John F. Cassidy John F. Cassidy President and Chief Executive Officer /s/ Gary...

  • Page 151
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareowners of Cincinnati Bell Inc. Cincinnati, Ohio We have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal Control...

  • Page 152
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareowners of Cincinnati Bell Inc. Cincinnati, Ohio We have audited the accompanying consolidated balance sheets of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 2010 and 2009, and the related consolidated statements...

  • Page 153
    Cincinnati Bell Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Millions of Dollars, Except Per Share Amounts) Year Ended December 31, 2010 2009 2008 Revenue Services ...Products ...Total revenue ...Costs and expenses Cost of services, excluding items below ...Cost of products sold, excluding items ...

  • Page 154
    ...-term debt ...Accounts payable ...Unearned revenue and customer deposits ...Accrued taxes ...Accrued interest ...Accrued payroll and benefits ...Deposit received for sale of wireless towers ...Other current liabilities ...Total current liabilities ...Long-term debt, less current portion ...Pension...

  • Page 155
    ...Acquisitions of businesses, net of cash acquired ...Proceeds/deposits from sale of wireless towers ...Proceeds from sale of wireless licenses ...Return of deposit of wireless licenses ...Other, net ...Net cash used in investing activities ...Cash flows from financing activities Issuance of long-term...

  • Page 156
    ......Comprehensive income ...Shares issued under employee plans ...Shares purchased under employee plans and other ...Restricted stock and stock options amortization ...Repurchase and retirement of shares ...Dividends on preferred stock ...Balance at December 31, 2010 . . 3.1 - - - $129.4 - - - 256...

  • Page 157
    ...the Technology Solutions segment was separated into the Data Center Colocation segment and the IT Services and Hardware segment. The changes to the Company's management reporting have been made primarily as a result of the June 2010 acquisition of Cyrus Networks, LLC ("CyrusOne"). Prior year amounts...

  • Page 158
    ...renew the wireless licenses in a routine manner every ten years for a nominal fee, provided the Company continues to meet the service and geographic coverage provisions required by the FCC. Intangible assets not subject to amortization are tested for impairment annually, or when events or changes in...

  • Page 159
    ... - Revenue from local telephone, special access, and internet product services, which are billed monthly prior to performance of service, is not recognized upon billing or cash receipt but rather is deferred until the service is provided. Long distance and switched access are billed monthly in...

  • Page 160
    ... costs of products sold upon sale of the related equipment to the customer. The Company often is contracted to install the IT equipment that it sells. The revenue recognition guidance in ASC 985, "Software," is applied, which requires vendor specific objective evidence ("VSOE") in order to recognize...

  • Page 161
    ... is determined using the Black-Scholes option-pricing model using assumptions such as volatility, risk-free interest rate, holding period and dividends. The fair value of stock awards is based on the Company's closing share price on the date of grant. For all share-based payments, an assumption...

  • Page 162
    ..., the Company makes certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These include (a) intellectual property indemnities to customers in connection with the use, sales, and/or license of products and services...

  • Page 163
    ...Cyrus Networks, LLC On June 11, 2010 (the "Acquisition Date"), the Company purchased CyrusOne, a data center operator based in Texas, for approximately $526 million, net of cash acquired. CyrusOne is the largest data center colocation provider in Texas, servicing primarily large businesses. CyrusOne...

  • Page 164
    .... and Cintech LLC In 2009, for a total acquisition price of $2.5 million, Cincinnati Bell Technology Solutions, Inc. ("CBTS") purchased the assets of Toronto, Canada-based Virtual Blocks Inc., a leading software developer in the area of data center virtualization, and Cincinnati, Ohio-based Cintech...

  • Page 165
    ...," "Network equipment," and "Office software, furniture, fixtures and vehicles." See Note 7 for further discussion regarding capital leases related to wireless towers. The Company currently has capital leases for five data center facilities with an option to extend the initial lease term and...

  • Page 166
    ..., 2010 December 31, 2009 Average Life in Gross Carrying Accumulated Gross Carrying Accumulated Years Amount Amortization Amount Amortization (dollars in millions) Customer relationships Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Trademark - Data Center Colocation...

  • Page 167
    ...adjusted for the unamortized called amounts received on terminated interest rate swaps. Capital lease obligations are addressed in Note 7. Corporate Credit Facilities On June 11, 2010, the Company entered into a new Corporate credit facility agreement, which included a new revolving credit facility...

  • Page 168
    ... December 2010 the Company amended the Receivables Facility to add its subsidiary Cincinnati Bell Data Centers Inc. ("CBDC"). Under the amended Receivables Facility, CBT, CBET, Cincinnati Bell Wireless Company ("CBW"), Cincinnati Bell Any Distance, Inc. ("CBAD"), CBTS, eVolve Business Solutions LLC...

  • Page 169
    ... Company's subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock...

  • Page 170
    ... Company's subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock...

  • Page 171
    ... Company's subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock...

  • Page 172
    ... Senior Notes due 2013, the amendment of the Corporate credit facility and the purchase and extinguishment of a portion of the Cincinnati Bell Telephone notes. In 2008, the Company wrote-off deferred financing costs of $1.6 million related to the purchase and extinguishment of the 71/4% Senior Notes...

  • Page 173
    ...2015 and amounts under the Corporate credit facility were used to repay and terminate the prior credit facility. All of the 83/8% Subordinated Notes constitute a single class of security with the same terms and are fixed rate bonds to maturity. During 2008, the Company purchased and extinguished $75...

  • Page 174
    ... is party to three agreements to lease operations facility space (the "CyrusOne Leased Facilities"). CyrusOne made structural changes to this leased space in excess of normal tenant improvements in order to equip the space for data center operations. For accounting purposes, in accordance with...

  • Page 175
    ... were sold with purchase price contingencies related to collection of net tower rents from other tenants for amounts represented by the Company and on which the purchase price was based. Contingencies on these 48 sites were resolved subsequent to the sale with no change to the purchase price, and...

  • Page 176
    ...Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Corporate ... $ 8.2 1.0 1.4 2.8 0.3 $13.7 $5.0 - - - - $5.0 $27.1 0.5 - 0.7 (0.2) $28.1 Employee Separation and Related Charges In 2010, the Company incurred an $8.7 million employee separation charge for payments made...

  • Page 177
    ... 10-K Other 2010 restructuring charges primarily consist of $1.4 million for payments to be made in order to conform the Company's commission incentive program for the Data Center Colocation segment. 10. Employee Benefit Plans and Postretirement Benefits Savings Plans The Company sponsors several...

  • Page 178
    ... In the first quarter of 2008, as a result of the early retirement special termination benefits, the Company remeasured its non-management pension and postretirement obligations using revised assumptions, including modified retiree benefit payment assumptions and a revised discount rate. As a result...

  • Page 179
    ... following information relates to all Company noncontributory defined benefit pension plans, postretirement health care plans, and life insurance benefit plans. Approximately 8% in 2010, 10% in 2009, and 9% in 2008 of these costs were capitalized to property, plant and equipment related to network...

  • Page 180
    ... pension plans at December 31, 2010, as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securities primarily include holdings of funds which generally invest in a variety of intermediate and long-term investment grade corporate...

  • Page 181
    ... its qualified pension plans during the period 2011 to 2017, of which $23.4 million is expected to be paid in 2011. Contributions to non-qualified pension plans in 2011 are expected to be approximately $2.0 million. The Company expects to make cash payments of approximately $22.1 million related to...

  • Page 182
    ... assumptions used in accounting for the pension and postretirement benefit cost: Pension Benefits 2010 2009 2008 Postretirement and Other Benefits 2010 2009 2008 Discount rate ...Expected long-term rate of return on pension and health and life plan assets ...Future compensation growth rate ... 5.50...

  • Page 183
    ... to 3,105,000 depositary shares. Shares of this preferred stock can be converted at any time at the option of the holder into common stock of the Company at a conversion rate of 1.44 shares of the Company common stock per depositary share of 63/4% convertible preferred stock. Annual dividends of $10...

  • Page 184
    ... Statements of Shareowners' Deficit and Comprehensive Income consists of the following: (dollars in millions) Year Ended December 31, 2010 2009 2008 Income tax provision (benefit) related to: Continuing operations ...Other comprehensive income (loss) ...Excess tax benefits or stock option...

  • Page 185
    ... to U.S. federal, state or local examinations for years before 2007. In 2010, the Internal Revenue Service commenced an examination of the Company's U.S. federal income tax return for 2008. The Company recognizes accrued penalties related to unrecognized tax benefits in income tax expense. The...

  • Page 186
    ... Compensation Plans The Company grants stock options, stock appreciation rights, performance-based awards, and time-based restricted shares. Shares authorized and available for grant under these plans were 30.1 million and 8.1 million, respectively, at December 31, 2010. Stock Options and Stock...

  • Page 187
    ...pricing model was based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected holding period was estimated using the historical exercise behavior of employees and adjusted for abnormal activity. Expected dividends...

  • Page 188
    ... compensation expense related to these shares, which is expected to be recognized over a weighted average period of approximately two years. Other Awards In the fourth quarter of 2010, the Company's Board of Directors approved a new long-term incentive program for certain Corporate and Data Center...

  • Page 189
    ... call waiting, and call return. Data services include Fioptics and DSL high-speed internet access, dial-up internet access, dedicated network access, and Gig-E-ATM based data transport. Long distance and VoIP services include long distance voice, audio conferencing, VoIP and other broadband services...

  • Page 190
    ... of the segment. Intercompany transactions between segments have been eliminated. The Company's business segment information is as follows: (dollars in millions) Year Ended December 31, 2010 2009 2008 Revenue Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Intersegment...

  • Page 191
    ...millions) Year Ended December 31, 2010 2009 2008 Per Consolidated Statement of Cash Flows: Capital expenditures ...Acquisitions of businesses, net of cash acquired ...Return of deposit of wireless licenses ...Total expenditure for long-lived assets ...15. Supplemental Cash Flow Information (dollars...

  • Page 192
    ... data center customer, CBI has guaranteed the performance obligations of CBTS in relation to providing the data center space and managed services under that long-term contract. In addition, CBI has also guaranteed capital leases, mainly for CBTS, totaling $20.9 million. In December 2010, the Company...

  • Page 193
    ... and expenses ...Operating income (loss) ...Interest expense ...Other expense (income), net ...Income (loss) before equity in earnings of subsidiaries and income taxes ...Income tax expense (benefit) ...Equity in earnings of subsidiaries, net of tax ...Net income ...Preferred stock dividends ...Net...

  • Page 194
    ... Consolidating Statements of Cash Flows Parent (Guarantor) Year Ended December 31, 2010 Other CBT (Non-guarantors) Eliminations (dollars in millions) Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Acquisitions of businesses, net of cash acquired ...Other...

  • Page 195
    ... ...Acquisition of businesses, net of cash acquired ...Proceeds/deposits from sales of wireless licenses and towers ...Other investing activities ...Cash flows provided by (used in) investing activities ...Funding between Parent and subsidiaries, net ...Issuance of long-term debt ...Net change in...

  • Page 196
    ... LLC, Cincinnati Bell Wireless LLC, GramTel Inc, CBTS Software LLC, Cyrus Networks LLC, Cincinnati Bell Shared Services LLC, Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Any Distance of Virginia LLC, eVolve Business Solutions LLC and Cincinnati Bell Data Centers Inc. CBI owns directly...

  • Page 197
    ... and expenses ...Operating income (loss) ...Interest expense ...Other expense (income), net ...Income (loss) before equity in earnings of subsidiaries and income taxes ...Income tax expense (benefit) ...Equity in earnings of subsidiaries, net of tax ...Net income ...Preferred stock dividends ...Net...

  • Page 198
    ...Condensed Consolidating Statements of Cash Flows Year Ended December 31, 2010 (dollars in millions) Parent (Issuer) Guarantors Non-guarantors Eliminations Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Acquisitions of businesses, net of cash acquired ...Other...

  • Page 199
    ... ...Acquisitions of businesses, net of cash acquired . . Proceeds/deposits from sales of wireless licenses and towers ...Other investing activities ...Cash flows provided by (used in) investing activities ...Funding between Parent and subsidiaries, net ...Issuance of long-term debt ...Net change in...

  • Page 200
    18. Quarterly Financial Information (Unaudited) First Quarter Second Quarter 2010 Third Quarter Fourth Quarter (dollars in millions, except per common share amounts) Total Revenue ...Operating income ...Net income (loss) ...Basic earnings (loss) per common share ...Diluted earnings (loss) per ...

  • Page 201
    ... generally accepted accounting principles. Cincinnati Bell Inc.'s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Company's internal control over financial reporting that occurred during the fourth quarter of 2010, and...

  • Page 202
    ...; Vice President, Sales and Marketing, Ericsson Mobile Communications from 1990-1992; Vice President, Sales and Marketing, General Electric Company from 1988-1990. THEODORE H. TORBECK, President and General Manager of Cincinnati Bell Communications Group since September 2010; Chief Executive Officer...

  • Page 203
    ... 19962000. Items 11 and 12. Executive Compensation and Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by these items can be found in the Proxy Statement for the 2011 Annual Meeting of Shareholders and is incorporated herein by...

  • Page 204
    ... 27, 1993 by and among Cincinnati Bell Telephone Company LLC (as successor entity to Cincinnati Bell Telephone Company), as Issuer, Cincinnati Bell Inc. as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(ii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File...

  • Page 205
    ... Bell Telephone Company LLC (as successor entity Cincinnati Bell Telephone Company), as Issuer, Cincinnati Bell Inc. as Guarantor, and The Bank of New York, as Trustee (Exhibit (4)(c)(iii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519). Warrant Agreement...

  • Page 206
    ... 19, 2009, to the Purchase and Sale Agreement dated as of March 23, 2007, among Cincinnati Bell Technology Solutions Inc. as a New Originator, the Originators identified therein, Cincinnati Bell Funding LLC, and Cincinnati Bell Inc. as Servicer (Exhibit 99.2 to Current Report on Form 8-K, date of...

  • Page 207
    ...2010 among Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Inc., Cy-One Parent LLC, Cy-One Holdings LLC, the interest holders of Cy-One Holdings LLC and Cyrus Networks LLC. (Exhibit 2.1 to Current Report on Form 8-K, date of Report May 13, 2010, File No. 1-8519). Short Term Incentive Plan...

  • Page 208
    ...Inc. 1997 Stock Option Plan for Non-Employee Directors effective as of May 27, 2003 (Exhibit (10)(iii)(A)(6.1) to Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-8519). Cincinnati Bell Inc. 2007 Long Term Incentive Plan (Appendix A to the Company's 2007 Proxy Statement on...

  • Page 209
    ...No. 1-8519). Cincinnati Bell Inc. Form of Stock Appreciation Rights Agreement (Employees). (Exhibit (10)(iii)(A)(21) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519). Cincinnati Bell Inc. Form of Stock Option Agreement (2007 Long Term Incentive Plan). (Exhibit (10...

  • Page 210
    ...). Cincinnati Bell Inc. Form of 2008-2010 Performance Share Agreement (2007 Long Term Incentive Plan). (Exhibit (10)(iii)(A)(24) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519). Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends...

  • Page 211
    ... Cincinnati Bell Inc. VALUATION AND QUALIFYING ACCOUNTS (Millions of Dollars) Beginning of Period Charge (Benefit) to Expenses To (from) Other Accounts Deductions End of Period Allowance for Doubtful Accounts Year 2010 ...Year 2009 ...Year 2008 ...Deferred Tax Valuation Allowance Year 2010 ...Year...

  • Page 212
    ... BELL INC. February 28, 2011 By /s/ Gary J. Wojtaszek Gary J. Wojtaszek Chief Financial Officer By /s/ Kurt A. Freyberger Kurt A. Freyberger Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 213
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  • Page 215
    ...or the Stock Purchase Plan should be directed to Cincinnati Bell's transfer agent and registrar: Computershare Investor Services, LLC Shareholder Services 7530 Lucerne Drive, Suite 100 Cleveland, Ohio 44130-6503 Phone: (888) 294-8217 Fax: (866) 204-6049 www.computershare.com Note: If your shares of...

  • Page 216
    221 East Fourth Street P.O. Box 2301 Cincinnati, Ohio 45202 513.397.9900 www.cincinnatibell.com