Cincinnati Bell 2010 Annual Report Download - page 174

7. Leasing Arrangements
Operating Leases
The Company leases certain circuits, facilities, and equipment used in its operations. Operating lease
expense was $16.2 million, $19.3 million, and $20.8 million in 2010, 2009, and 2008, respectively. Certain
facilities leases and tower site leases provide for renewal options with fixed rent escalations beyond the initial
lease term.
At December 31, 2010, future minimum lease payments required under operating leases, excluding certain
leases which are recorded as a restructuring liability (refer to Note 9), having initial or remaining non-cancelable
lease terms in excess of one year are as follows:
(dollars in millions)
2011 ............................................... $11.7
2012 ............................................... 9.5
2013 ............................................... 8.2
2014 ............................................... 7.5
2015 ............................................... 4.0
Thereafter ........................................... 1.9
Total ............................................... $42.8
The Company is the lessor on building lease contracts on which it received rental income of $83.4 million,
$49.4 million, and $38.6 million, in 2010, 2009, and 2008, respectively. The increase from 2009 to 2010 was
primarily due to the acquisition of CyrusOne in June 2010. Contractual minimum rental income, assuming no
renewals, is $97.0 million in 2011, $73.9 million in 2012, $59.3 million in 2013, $35.3 million in 2014, and
$26.2 million in 2015. These amounts exclude monthly recurring payments for certain subleases which are
recorded as an offset against data center lease restructuring liabilities (refer to Note 9).
Capital Lease Obligations
The Company leases facilities and equipment used in its operations, some of which are required to be
treated as capital leases in accordance with ASC 840, “Leases.” The Company had $133.4 million and $125.1
million in capital lease obligations at December 31, 2010 and 2009, respectively, of which $117.4 million and
$111.7 million, respectively, was long-term debt. For 2010, 2009, and 2008, the Company recorded $10.3
million, $4.3 million, and $3.1 million, respectively, of interest expense related to capital lease obligations.
CyrusOne Leased Facilities
CyrusOne 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 ASC 840, CyrusOne is
considered to be the owner of these facilities as the tenant improvements are considered structural in nature. In
the opening balance sheet, the CyrusOne Leased Facilities have been presented at fair value in property, plant
and equipment with a corresponding credit to noncurrent liabilities for amounts totaling $32.1 million. Due to
CyrusOne’s continuing involvement, the obligation for leased facilities will remain until the end of the lease term
for each facility, and at December 31, 2010, this noncurrent liability totals $32.5 million.
Certain CyrusOne Leased Facilities agreements contain renewal options and fixed rent escalations. Future
minimum payments for the next five years are as follows:
(dollars in millions)
2011 ................................................ $2.8
2012 ................................................ 3.2
2013 ................................................ 3.4
2014 ................................................ 3.4
2015 ................................................ 3.4
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