Cincinnati Bell 2012 Annual Report Download

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2012 Annual Report
Letter to
Shareholders
Notice of
2013 Annual Meeting
and Proxy Statement
Report on
Form 10-K

Table of contents

  • Page 1
    2012 Annual Report Letter to Shareholders Notice of 2013 Annual Meeting and Proxy Statement Report on Form 10-K

  • Page 2
    Contents Letter to Shareholders from the Chairman, the Vice 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
    ... products, services and experiences to customers where they live and work. We grew our Fioptics customer base by approximately 40% from 2011 as part of our continuing, long-term plan for growth. We also solidified contracts with key business customers while managing costs and improving operational...

  • Page 4
    ... 28% market share in the areas that we pass and, in areas we have passed for more 2 2010 DSL 2011 Fioptics (Including Cable) 2012 Fiber optics connectivity continues to be an enabling technology that allows Cincinnati Bell to deliver business customers an end-to-end experience with one trusted...

  • Page 5
    ... metro-fiber investments will remain focused on wireless backhaul projects and last-mile access for metro-Ethernet. The Company currently generates combined revenue of approximately $80 million annually associated with these services. Our Fioptics and strategic business data and VoIP product lines...

  • Page 6
    ... the great employees who will execute that strategy to benefit our shareholders. We believe in the future of Cincinnati Bell and thank you for your investment in our Company. 4 John F. Cassidy Vice Chairman of the Board Theodore H. Torbeck President and Chief Executive Officer Kurt A. Freyberger...

  • Page 7
    ... EBITDA provides a useful measure of operational performance. The Company defines Adjusted EBITDA as GAAP operating income plus depreciation, amortization, restructuring charges, asset impairments, components of pension and other retirement plan costs related to interest costs, asset returns, and...

  • Page 8
    ...conjunction with the Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K included in this document. Safe Harbor Statement This annual report and the documents incorporated...

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

  • Page 10
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 11
    ... internet. By Order of the Board of Directors Christopher J. Wilson Vice President, General Counsel and Secretary March 22, 2013 IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 3, 2013: The Proxy Statement and Annual Report are available...

  • Page 12
    ... Proxy Materials and the Annual Meeting ...Board Structure and Corporate Governance ...Director Compensation ...Compensation Committee Interlocks and Insider Participation ...Code of Business Conduct and Codes of Ethics ...Certain Relationships and Related Party Transactions ...Election of Directors...

  • Page 13
    ... 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 2013 Annual Meeting of Shareholders. The Annual Meeting will be held on Friday, May 3, 2013, at 11:00 a.m., Eastern Time, at the...

  • Page 14
    ... voice communications services over wireline and wireless networks, a provider of managed services, and a reseller of information technology ("IT") and telephony equipment. The Company provides telecommunications service to businesses and consumers in the Greater Cincinnati and Dayton, Ohio, areas...

  • Page 15
    ... the close of business on the Record Date. This includes: (i) shares held directly in your name as the shareholder of record, including common shares purchased through the Cincinnati Bell Employee Stock Purchase Plan; (ii) shares that are held by a trust used in connection with a Company employee or...

  • Page 16
    ... record or the beneficial owner of the shares. Shareholder of Record If you are a shareholder of record and (i) you indicate when voting on the internet or by telephone that you wish to vote as recommended by the Board, or (ii) you sign and return a proxy without giving specific voting instructions...

  • Page 17
    ... and outstanding. Q: What is the quorum requirement for the meeting? A: The quorum requirement for holding the meeting and transacting business is the presence, in person or by proxy, of a majority of the common and preferred shares issued and outstanding on the Record Date and entitled to vote at...

  • Page 18
    ... any internet access charges you may incur. In addition to the costs of mailing the proxy materials, the Company may also incur costs to provide additional copies of these proxy materials (if requested) and for its directors, officers and employees to solicit proxies or votes in person, by telephone...

  • Page 19
    ... 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 20
    ... the Independent Registered Public Accounting Firm, the Company's internal auditors, General Counsel or members of management. The Audit and Finance Committee Charter provides a more detailed description of the responsibilities and duties of the Audit and Finance Committee. For information on how to...

  • Page 21
    ... rules and listing standards of the NYSE. Executive Committee: The Executive Committee consists of five persons, one of whom is the President and Chief Executive Officer of the Company. The Committee held no meetings during 2012. The Executive Committee acts on behalf of the Board in certain matters...

  • Page 22
    ... a candidate to serve on the Board, please see page 57. The Governance and Nominating Committee reviews forwarded materials relating to prospective candidates in the event of a director vacancy. A candidate selected from the review is interviewed by each member of the Governance and Nominating...

  • Page 23
    ...of the Company ("non-employee directors") receive compensation from the Company for their service on the Board. The table below sets forth the annual compensation for non-employee directors in 2012. Compensation Element 2012 Proxy Statement Chairman of the Board Annual Retainer (a) ...Annual Board...

  • Page 24
    ... account under the Directors Deferred Compensation Plan are not funded or otherwise secured, and all payments under the plan are made from the general assets of the Company. The Directors Deferred Compensation Plan must comply with the requirements of the American Jobs Creation Act of 2004 in order...

  • Page 25
    ... be granted a number of restricted common shares and/or a stock option for a number of common shares (as determined by the Board) on the date of each annual meeting, if such director first became a non-employee director of the Company before the date of such annual meeting and continues in office as...

  • Page 26
    ...No Board member elected to defer fees or annual retainers in fiscal 2012. (b) The values reflect the aggregate grant-date fair value of the 151,352 time-based restricted share awards granted on May 1, 2012 computed in accordance with Accounting Standards Codification Topic 718, "Compensation - Stock...

  • Page 27
    ... has one or more executive officers serving on the Company's Board or Compensation Committee. CODE OF BUSINESS CONDUCT AND CODES OF ETHICS The Company has a Code of Business Conduct applicable to all officers and employees that describes requirements related to ethical conduct, conflicts of interest...

  • Page 28
    ...) The Company's Amended Regulations provide that the Board shall consist of not less than nine nor more than 17 persons, with the exact 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...

  • Page 29
    ... strategic and operational initiatives that resulted in the launch and growth of Cincinnati Bell Wireless Company, CyrusOne Inc., Fioptics and other products. After the Company's successful initial public offering of CyrusOne, he was elected both Vice Chairman of the Company's Board and Chairman of...

  • Page 30
    ... is a consultant. He was Chairman of the Public Utilities Commission of Ohio from 1999 to 2010. He also served as Chairman of the Ohio Power Siting Board from 1999 to 2010. Prior to his public service, Dr. Schriber was President of ARS Broadcasting Corp., an owner and operator of radio stations in...

  • Page 31
    ... joined Cincinnati Bell in 2010 as President and General Manager of Cincinnati Bell Communications Group. Prior to joining Cincinnati Bell, Mr. Torbeck was Chief Executive Officer of the Freedom Group and also worked more than 25 years for the General Electric Co. ("GE"), where he served as the Vice...

  • Page 32
    ... of the Securities Exchange Act of 1934, as amended, the Company is submitting to its shareholders a vote for the advisory approval of the Company's executive compensation ("say-on-pay vote"). The Board of Directors determined that it would submit a say-onpay vote to our shareholders annually. This...

  • Page 33
    ... registered public accounting firm to audit the financial statements of the Company for the fiscal year ending December 31, 2013. One or more members of the firm of Deloitte & Touche LLP will attend the Annual Meeting, will have an opportunity to make a statement and will be available to answer...

  • Page 34
    ... The Audit and Finance Committee of the Board has reviewed and discussed the Company's audited financial statements with 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...

  • Page 35
    ... 31, 2012 were for professional services rendered for CyrusOne's debt and common stock offerings and various accounting consultations. The audit related fees for the year ended December 31, 2011 were for professional services rendered for the audits of the Company's employee benefit plans filed with...

  • Page 36
    ... 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 10580 BlackRock, Inc...40 East 52nd Street New York, NY 10022 Marcato Capital Management LLC ...One...

  • Page 37
    ... common shares for all other executive officers as a group. Effective January 31, 2013, the Company updated its Insider Trading Policy to expressly bar ownership of financial instruments or participation in investment strategies that hedge the economic risk of owning the Company's common shares and...

  • Page 38
    ... and Analysis with management. Based on 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...

  • Page 39
    ... J. Wilson ...President and Chief Executive Officer Chief Financial Officer President and General Manager, Cincinnati Bell Communications Group President of CyrusOne Vice President, General Counsel and Secretary Proxy Statement (a) Effective January 31, 2013, John F. Cassidy retired and Theodore...

  • Page 40
    ... of our Fioptics, strategic enterprise data and VoIP, and data center offerings. The additional revenue generated from these growth products more than offset the lower revenue from declining access line and wireless subscribers, and, as a result, the Company's total revenue in 2012 increased by...

  • Page 41
    ... in 2012. 2012 Say-on-Pay Vote More than 90% of the shares that were voted at our 2012 annual shareholder meeting approved the compensation of the Company's NEOs. Continuing a program begun after the 2011 annual shareholders meeting, during the summer and fall of 2012, the Company again reached out...

  • Page 42
    ... Practices The Company reviews and modifies its executive compensation programs and practices regularly to address changes in the Company's short- and long-term business objectives and strategies, new regulatory standards and to implement evolving best practices. Listed below are some of the...

  • Page 43
    ...-term and long-term, as well as aligning the interests of the Company's executive management with its shareholders. Compensation Program Objectives The executive compensation program's primary objectives are: Proxy Statement • To attract and retain high-quality executives by offering competitive...

  • Page 44
    ... in value of the stock options and SARs are dependent on improvements in stock price Motivate executive to contribute to Company's achievement of its long-term financial goals and strategic objectives Facilitate executive equity ownership thereby aligning executive and shareholder interests Company...

  • Page 45
    ...the Company's strategy to sustain operating cash flows and profitability to drive growth in its business. Adjusted EBITDA is a common measure of profitability employed in the telecommunications and other capital-intensive industries. The Board and Compensation Committee review and approve the annual...

  • Page 46
    ...considered include: operational and financial performance, succession planning, development of the Company leadership team, development of business opportunities and community involvement/relationships. The Compensation Committee has discretion in evaluating the Chief Executive Officer's performance...

  • Page 47
    ...Company to compensate executive management based upon a combination of stock price appreciation and operating results that are consistent with its long-term business strategy. Stock options/SARs directly align the executive's interest with the shareholders' interest because any actual realized value...

  • Page 48
    ... Plan in 2012. See further discussion of the Data Center Performance Plan on page 37. Stock Options and SARs Stock options and SARs are used to align the interests of management with those of the Company's shareholders because they are designed to provide long-term equity-based compensation...

  • Page 49
    ... other businesses, and a change in control of the Company. Pursuant to the terms of the Data Center Performance Plan, no executive may receive performance units in any calendar year under such program with a value in excess of $5,000,000. For the 2011 and 2012 performance periods, the Compensation...

  • Page 50
    ... set of other benefit plans and programs, including medical, dental, vision, life, short- and long-term disability plans and home telephone service price discount programs, on the same basis as all other salaried employees. The Company believes that the various benefit plans and programs provided...

  • Page 51
    ... competitive compensation information. This information covers two peer groups. The first peer group consists of 20 telecommunications companies. The Company, in consultation with Towers Watson and Mr. Mazza, annually reviews the list of companies in this group to make certain that the group is...

  • Page 52
    ... Corporation Parsons Corporation Phoenix Companies Plexus Polaris Industries Polymer Group PolyOne Rayonier Revlon SAS Institute • Bob Evans Farm • Brady • Carmeuse North America Group • Carpenter Technology Catalent Pharma Solutions CEC Educational Services, LLC Century Aluminum Cloud...

  • Page 53
    ...risk." Using the benchmark data and input from its own independent consultant as well as from Company management (primarily the Chief Executive Officer and the Vice President of Human Resources & Administration), the Compensation Committee allocates total target direct compensation among base salary...

  • Page 54
    ... Committee with detailed information, as of a given date, about each executive's current compensation (including the value of any applicable benefit programs) and wealth accumulation, including the value of accrued and vested pay, such as shares of Company stock, vested stock options and other...

  • Page 55
    Employment Agreements, Severance and Change in Control Payments and Benefits The Company generally enters into employment agreements with the named executive officers for several reasons. Employment agreements give the Company flexibility to make changes in key executive positions with or without a ...

  • Page 56
    ... - - 1,015,000 Executive Officer 2010 645,000 2,100,000 - 720,136 Kurt A. Freyberger (h) ...2012 347,885 Vice President and Chief 2011 293,460 Financial Officer Theodore H. Torbeck (i) ...2012 726,000 President and General 2011 724,850 Manager, Cincinnati Bell 2010 161,538 Communications Group Gary...

  • Page 57
    ...of the program. (h) Mr. Freyberger was appointed Chief Financial Officer on August 5, 2011. Prior to this date, Mr. Wojtaszek served as Chief Financial Officer. (i) On September 7, 2010, Mr. Torbeck joined the Company as President and General Manager for the Cincinnati Bell Communications Group. 45

  • Page 58
    ...period reflect the grant-date fair value assuming the target number of shares is earned and the executive remains with the Company through the applicable vesting dates. The amount related to the restricted share grant for Mr. Torbeck is based on the Company's closing stock price on the date of grant...

  • Page 59
    ...of the base wages and annual bonus payment that exceeds the maximum compensation that can be used in determining benefits under a qualified defined benefit pension plan. Except as noted below, all eligible salaried employees of the Company participate in the Management Pension Plan on the same basis...

  • Page 60
    ... based on their compensation and service after December 31, 2011 by approximately one-half from the prior accrual rate. The Management Pension Plan is described in further detail on page 51. Finally, Mr. Cassidy is also covered under a nonqualified Cincinnati Bell Pension Program (the "SERP"). The...

  • Page 61
    ...number of shares is earned, amounts represent the equity incentive plan awards not yet vested. The value is based on the closing price of the Company's common shares as of December 31, 2012 ($5.48). (f) Mr. Cassidy retired effective January 31, 2013 but will continue to vest in his options and stock...

  • Page 62
    ... on January 14, 2011. The amounts shown for Messrs. Freyberger, Wojtaszek and Wilson represent shares issued in January 2012 upon vesting of long-term performance plan awards. (d) The amounts represent the value realized upon vesting based on the closing price of a share of our common stock on the...

  • Page 63
    ... our Annual Report on Form 10-K for the year ended December 31, 2012. (g) If any of the executive officers had retired on December 31, 2012, they would have been entitled to a benefit equal to the balance then credited to them, without any reduction, under the Cincinnati Bell Management Pension Plan...

  • Page 64
    ... total plan compensation for 2012 that exceeds the Social Security old-age retirement taxable wage base for 2012. 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 interest rate for 2012...

  • Page 65
    ... price of the Company's stock ($3.03) on December 31, 2011 and the closing price of the Company's stock ($5.48) on December 31, 2012 with respect to deferrals made prior to 2012. The 1997 Cincinnati Bell Inc. Executive Deferred Compensation Plan (the "Executive Deferred Compensation Plan") generally...

  • Page 66
    ... contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios involving a change in control or termination of employment, assuming a December 31, 2012 termination or change in control date and, where applicable, using the closing price of our common shares...

  • Page 67
    ...Torbeck, and 1.65 times his base salary in the case of Mr. Wilson. • A payment equal to the present value of an additional one year of participation in the Company's Management Pension Plan, if applicable, as though the executive had remained employed at the same base rate of pay and target bonus...

  • Page 68
    ... terminated within the one-year period following a change in control, the executive will be entitled to the following: • A payment equal to two times the sum of their base salary plus target bonus; • If eligible to participate in the Management Pension Plan, a payment equal to the present value...

  • Page 69
    ...Wilson, Vice President, General Counsel and Secretary, Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202, and must be received no later than November 22, 2013 for the 2014 Annual Meeting of Shareholders. Other Matters to Come Before the Meeting At the time this Proxy Statement was...

  • Page 70
    ...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 of Internet Availability to our shareholders and beneficial owners, which provides information and...

  • Page 71
    .... The Company has established procedures for such shareholder communications. Shareholders and other interested parties should send any communications to Christopher J. Wilson, Vice President, General Counsel and Secretary, Cincinnati Bell Inc., 221 East Fourth Street, Cincinnati, Ohio 45202...

  • Page 72
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  • Page 73
    ..., see the Company's Current Reports on Form 8-K filed with the SEC on February 27, 2013 and February 9, 2012. This information is also available in the "Investor Relations" section of the Company's website, www.cincinnatibell.com. Twelve Months Ended December 31, 2012 2011 Proxy Statement (dollars...

  • Page 74
    ..., components of pension and other retirement plan costs related to interest costs, asset returns, and amortization of actuarial gains and losses, and other special items. Free Cash Flow provides a useful measure of operational performance, liquidity and financial health. The Company defines free...

  • Page 75
    ... Yes ' No È The aggregate market value of the voting common shares owned by non-affiliates of the registrant was $0.7 billion, computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2012, the last trading day of the registrant's most recently...

  • Page 76
    ... Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...129 130 130 130 130 PART IV Item 15. Exhibits and Financial Statement Schedules ...Signatures ...This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc...

  • Page 77
    ... include 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 and over fiber using its gigabit passive optical network...

  • Page 78
    ... of data transport, DSL high-speed internet access, Fioptics high-speed internet access, and LAN interconnection services. The Company's wireline network includes the use of fiber optic cable, with SONET rings linking Cincinnati's downtown with other area business centers. These SONET rings offer...

  • Page 79
    ...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 in which fiber optic cable is laid. In 2011, the Company launched its IPTV platform. This technology generally involves...

  • Page 80
    ... and business customers in the Greater Cincinnati area. Wireless Cincinnati Bell Wireless LLC ("CBW") provides advanced digital wireless voice and data communications services through the operation of a Global System for Mobile Communications/General Packet Radio Service ("GSM") network with a 3G...

  • Page 81
    ...also available as bolt-ons to voice rate plans for both postpaid and prepaid subscribers. The Company has focused its efforts for the past several years on increasing its subscribers that use smartphones, which are able to browse the internet and use high-speed data services and high-level operating...

  • Page 82
    ... services Cincinnati Bell Inc. Managed services include products and services that combine assets, either customer-owned or owned by the Company, with management and monitoring from its network operations center, and skilled technical resources to provide a suite of offerings around voice and data...

  • Page 83
    ..., Executive Officers and Other Employees of CyrusOne 4.7% Common Stock 86.7% Common Stock 8.6% Common Stock Cincinnati Bell Inc. CyrusOne Inc. (the REIT) 100% Beneficial Ownership Interest 33.0% Limited Partnership Interest 66.0% Limited Partnership Interest CyrusOne GP (sole general Partner...

  • Page 84
    ... large enterprises will allow it to capitalize on the growing demand for outsourced data center facilities in existing as well as new markets where its customers are located or plan to be located in the future. As of December 31, 2012, CyrusOne's property portfolio included 24 operating data centers...

  • Page 85
    ...to time, certain stores may be transitioned to local agents for marketing of the Company's products and services. Wireline and Wireless also utilize a business-to-business sales force and a call center organization to reach business customers in its operating territory. Larger business customers are...

  • Page 86
    ... and long distance voice services in the Company's operating areas. Partially as a result of wireless substitution and increased competition, the Company's access lines decreased by 8% and long distance subscribers decreased by 7% in 2012 compared to 2011. In addition, the high-speed internet market...

  • Page 87
    ...Customers Cincinnati Bell Inc. Over the past five years, revenues from data center colocation services, business data transport and wireline entertainment has continued to grow, while revenue from the Company's legacy products, such as wireline residential voice service and wireless voice services...

  • Page 88
    ...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 89
    ...debt instruments could: • limit the Company's ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company's activities or business plans; and • adversely affect the Company's ability to finance its operations, strategic acquisitions, investments or...

  • Page 90
    ... the Company's liquidity and the trading price of the Company's common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation, or reorganization. Risk Factors Related to our Communications Business and Operations The Company's access lines, which...

  • Page 91
    ... as VoIP and long distance voice services in the Company's operating areas. Partially as a result of wireless substitution and increased competition, CBT's access lines decreased by 8% and long distance subscribers decreased by 7% in 2012 compared to 2011. In addition, the high-speed internet market...

  • Page 92
    ...revenue. The Company has improved its wireline network over the past several years through increased capital expenditures for fiber optic cable in limited areas of its operating network. In 2011 and 2012, the Company also upgraded a portion of its wireless network to 4G, using HSPA+ technologies. 18

  • Page 93
    ... business, carrier, and residential customers. The Company seeks to meet these needs through new product introductions, service quality, and technological superiority. New products are not always available to the Company, as other competitors may have exclusive agreements for those new products. New...

  • Page 94
    ... and financial 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...

  • Page 95
    ... on a timely basis; sale of the available data center space to enable appropriate returns; recruiting and maintaining a motivated work force; and installing and implementing new financial and other systems, procedures and controls to support a standalone public company and its expansion plan with...

  • Page 96
    ... in excess of expenses, scheduled principal payments on debt and capital expenditure requirements. Events and conditions generally applicable to owners and operators of real property that are beyond its control may decrease cash available for distribution and the value of its properties. These...

  • Page 97
    ... as gain from the sale or exchange of such stock. Other Risk Factors The trading price of the Company's common stock may be volatile, and the value of an investment in the Company's common stock may decline. Form 10-K The market price of the Company's common stock has been volatile and could...

  • Page 98
    ... condition, results of operations, and cash flows. In addition, investment returns of the Company's pension funds depend largely on trends in the U.S. and world securities markets and the U.S. and world economies in general. Future investment losses could cause a decline in the value of plan...

  • Page 99
    Form 10-K Part I Cincinnati Bell Inc. may not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions against development and sale of certain of its products. Further, the Company often relies on licenses of third-party ...

  • Page 100
    ...and administrative offices are located in rented facilities, some of which are recorded as capital leases. The Company's out-of-territory Wireline network assets include a fiber network plant, internet protocol and circuit switches and integrated access terminal equipment. In its wireless operations...

  • Page 101
    ... director defendants breached their duty of loyalty in connection with 2010 executive compensation decisions and the officer defendants were unjustly enriched. On March 1, 2012, the parties to the case captioned: NECA-IBEW Pension Fund (The Decatur Plan) v. Cox, et al., Case No. 11-cv00451, United...

  • Page 102
    ... II Cincinnati Bell Inc. Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (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...

  • Page 103
    ... Purchases of Equity Securities The following table provides information regarding the Company's purchases of its common stock during the quarter ended December 31, 2012: Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs* Approximate Dollar Value of Shares...

  • Page 104
    ... an operating tax settlement. (c) Total long-term obligations comprise long-term debt less current portion, pension and postretirement benefit obligations, and other noncurrent liabilities. See Notes 7, 10 and 11 to the Consolidated Financial Statements for discussions related to 2012 and 2011. 30

  • Page 105
    ... and voice communications services over wireline and wireless networks, a full-service provider of data center colocation and related managed services, and a reseller of IT and telephony equipment. In 2012, we continued to execute on our plan to expand our growth products, comprised of our Fioptics...

  • Page 106
    ...outsourcing and consulting projects. These increases were partially offset by lower wireless service revenue which declined by $27.9 million in 2012 compared to 2011. Growth in Wireline Fioptics, VoIP and audio conferencing service revenue was offset by declines in local voice, long distance and DSL...

  • Page 107
    ... contract terminations. Such costs were lower in 2012 as we completed certain restructuring activities begun in the prior year. In 2011, the Company ratified a new labor agreement which curtails future pension service credits for certain employees. As a result of this event, the bargained employees...

  • Page 108
    ... Networks in 2010. Network costs increased by $7.2 million in 2011 due to growth in Fioptics, audio conferencing and VoIP services, and increased data usage. Contract services increased by $2.3 million in 2011 primarily due to a large number of telephony installations and out-of-territory support...

  • Page 109
    ...wireline networks. Local voice services include 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 DSL technology and over fiber using its GPON. Data services also...

  • Page 110
    ...expenses ...Operating income ...Operating margin ...Capital expenditures ...Metrics information (in thousands): Local access lines ...High-speed internet subscribers DSL subscribers ...Fioptics internet subscribers ...Long distance lines ...Fioptics entertainment subscribers ...2012 Compared to 2011...

  • Page 111
    ... product suite, and upgrade its DSL network. Capital expenditures were $114.2 million in 2012, an increase of $1.6 million compared to 2011. As of December 31, 2012, the Company's Fioptics service passed 205,000 homes and businesses, representing approximately 26% of the Greater Cincinnati market...

  • Page 112
    ...increase in VoIP and audio conferencing services provided to additional subscribers. This increase was partially offset by a $4.1 million decrease in long distance residential revenue. As of December 31, 2011, long distance subscriber lines were 447,400, a 7% decline from 2010. Entertainment revenue...

  • Page 113
    ...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 114
    ...The number of prepaid subscribers at December 31, 2012 was 146,500, a decrease of 1% compared to the prior year. During 2012, higher data usage by prepaid smartphone users was largely offset by lower voice rates resulting in a prepaid ARPU of $28.48, comparable to $28.58 generated in 2011. Equipment...

  • Page 115
    ... for employee separation costs. Capital Expenditures Form 10-K Capital expenditures were $17.6 million in 2011, up $5.9 million, or 50%, compared to 2010. During 2011, Wireless deployed software upgrades and incurred additional fiber costs to begin its network upgrade to 4G using HSPA+ technology...

  • Page 116
    ... factors, the timing of customers' capital spend, the size of customers' capital budgets, as well as general economic conditions. Managed and professional services revenue consists of managed VoIP solutions and IT services that include network management, electronic data storage, disaster recovery...

  • Page 117
    ..., an increase of $31.1 million, or 18%, compared to 2010. The increase in 2011 versus 2010 was primarily attributable to higher equipment sales arising from increased capital spending by enterprise customers. In 2011, managed and professional services revenue was $94.5 million, an increase of $14...

  • Page 118
    ... revenue for installation of customer equipment. Data center revenue was $221.3 million in 2012, up $36.6 million, or 20%, compared to 2011 primarily due to sales of additional space, power, and related colocation products to new and existing customers. Our data center capacity increased to 932...

  • Page 119
    ... increase in revenue was primarily related to the acquisition of Cyrus Networks in June 2010 and new business earned in 2011. Changes to presentation of certain customers' utility billings in 2011 also added $7.6 million to revenue for the year. The Data Center Colocation business had 763,000 square...

  • Page 120
    ... placed in service to increase data center capacity. A 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 Cyrus Networks program. Capital Expenditures Capital expenditures were...

  • Page 121
    ... to fund our pension obligations, to pay preferred stock dividends, and also to repurchase shares of common stock as and when the stock price offers an attractive valuation. Cash contributions to our qualified pension plans were $23.9 million, $18.1 million and $5.6 million in 2012, 2011 and 2010...

  • Page 122
    ...of 2012, the Company's $210 million revolving credit facility, previously expiring in June 2014, was replaced with a new $200 million Corporate Credit Agreement that expires in July 2017. Proceeds from this new facility may be used for ongoing working capital and for other general corporate purposes...

  • Page 123
    ...this account to fund construction of a data center. Proceeds from sales of assets were $1.6 million in 2012, primarily from sales of copper cable. In 2011, the sale of substantially all of the home security monitoring business assets provided cash of $11.5 million, and in June 2010, the Company used...

  • Page 124
    ... of preferred stock dividends. Future Operating Trends Wireline The Company expects to increase revenues from its Fioptics suite of products, high speed data transmission, managed voice and data, cloud computing and professional services. Fioptics is a fiber-based product offering that provides...

  • Page 125
    ...these capital purchases and, instead, use its existing equipment for a longer period of time. As such, IT and telephony equipment sales in 2013 are somewhat dependent on the business economy and outlook in 2013. In 2013, we plan to integrate our IT Services and Hardware sales, service, marketing and...

  • Page 126
    ... maintenance, outsourced services and data center construction; and other purchase commitments. (4) Included in pension and postretirement benefit obligations are payments for postretirement benefits, qualified pension plans, non-qualified pension plan and other employee retirement agreements...

  • Page 127
    ... such as software maintenance, outsourced services; and other purchase commitments. (4) Included in pension and postretirement benefit obligations are payments for postretirement benefits, qualified pension plans, non-qualified pension plan and other employee retirement agreements. Amounts for 2013...

  • Page 128
    ...business, 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, sale, and/or license of products and services...

  • Page 129
    ...accordance with generally accepted accounting principles in the United States. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as...

  • Page 130
    ... of accounting. Wireline - Revenues from local telephone, special access, and internet product services, which are billed monthly prior to performance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance and switched access...

  • Page 131
    ... II Cincinnati Bell Inc. IT Services and Hardware - Professional services, including product installations, are recognized as the service is provided. Maintenance services on telephony equipment are deferred and recognized ratably over the term of the underlying customer contract, generally one...

  • Page 132
    ...goodwill and indefinite-lived intangible assets. The most critical assumptions are projected future growth rates, operating margins, capital expenditures, terminal values, and discount rate selection. These assumptions are subject to change as the Company's long-term plans and strategies are updated...

  • Page 133
    Form 10-K Part II Cincinnati Bell Inc. Reviewing the Carrying Values of Long-Lived Assets - Depreciation of our Wireline telephone plant is determined on a straight-line basis using the group depreciation method. Depreciation of other property, except for leasehold improvements, is based on the ...

  • Page 134
    ... from our most recent long-term business plan and other updated assumptions. Management estimated the cash flows of this asset group considering projected declines in wireless subscribers, and included estimates of future expenses, capital expenditures and an estimated terminal value. As the cash...

  • Page 135
    .... In 2011, the Company entered into a new labor agreement with its bargained employees which eliminated future pension credits for certain employees effective January 1, 2012. As a result of this event, we remeasured the projected benefit obligation of the non-management benefit plan and recognized...

  • Page 136
    ...pension plans was 3.30% and 3.90%, respectively, while the discount rate used to value the postretirement plans was 3.10% and 3.60%. Lower rates of interest available on high-quality corporate bonds drove the decrease in the discount rates in 2012. Expected rate of return The expected long-term rate...

  • Page 137
    ... average remaining service period of active employees for the pension and bargained postretirement plans (approximately 10-14 years) and average life expectancy of retirees for the management postretirement plan (approximately 17 years). Accounting for Termination Benefits - The Company has written...

  • Page 138
    ...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 competitive local exchange services, a significant portion of...

  • Page 139
    ...is a bill-and-keep system under which all per-minute intercarrier charges are eliminated. Beginning in 2012, terminating switched access and reciprocal compensation rates are phased out over a sixyear period for CBT and other price cap carriers and over a nine-year period for rate-of-return carriers...

  • Page 140
    ... on other retail services. The caps on basic local exchange service prices expired in July 2011 and CBT increased rates for basic local exchange service for residential lines in December 2011 and January 2013 and business lines in January 2012. Ohio and Kentucky Cable Franchises The states...

  • Page 141
    ...on its market share and 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 available only...

  • Page 142
    ... long-term impact on the Company's business; • the Company depends on a number of third party providers, and the loss of, or problems with, one or more of these providers may impede the Company's growth or cause it to lose customers; • a failure of back-office information technology systems...

  • Page 143
    ... by our field operations group, and network and building materials, such as steel, fiber and copper, used in the construction of our networks. As of December 31, 2012, CyrusOne had a contract to purchase 14 MW of electricity at fixed prices for use in one of its Houston data centers through March 31...

  • Page 144
    ... Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Consolidated Financial Statements: Cincinnati Bell Inc. Page Management's Report on Internal Control over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated...

  • Page 145
    ... reliable financial statements in conformity with accounting principles generally accepted in the United States. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2012. In making this assessment, management used the criteria set forth...

  • Page 146
    ... 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, 2012, based on criteria established in Internal Control - Integrated Framework issued...

  • Page 147
    ...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, 2012 and 2011, and the related consolidated statements of...

  • Page 148
    ...31, 2012 and 2011; liquidation preference $1,000 per share ($50 per depositary share) ...Common shares, $.01 par value; 480,000,000 shares authorized; 202,960,430 and 196,322,649 shares issued; 202,468,710 and 195,721,796 shares outstanding at December 31, 2012 and 2011 ...Additional paid-in capital...

  • Page 149
    Form 10-K Part II Cincinnati Bell Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share amounts) Cincinnati Bell Inc. Year Ended December 31, 2012 2011 2010 Revenue Services ...Products ...Total revenue ...Costs and expenses Cost of services, excluding items below ......

  • Page 150
    ... Bell Inc. Cincinnati Bell Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Dollars in millions) Year Ended December 31, 2012 2011 2010 Net income ...$11.2 $ 18.6 $ 28.3 Other comprehensive income/(loss), net of tax: Foreign currency translation loss ...- (0.1) - Defined benefit plans...

  • Page 151
    ...Balance at December 31, 2011 . . Net income ...Other comprehensive loss ...Shares issued under employee plans ...Shares purchased under employee plans and other ...Stock-based compensation ...Exercise of warrants ...Retirement of shares ...Dividends on preferred stock ...Balance at December 31, 2012...

  • Page 152
    ... income tax expense, including valuation allowance change ...21.6 Pension and other postretirement benefits in excess of expense ...(28.4) Stock-based compensation ...5.2 Excess tax benefit for share based payments ...(2.4) Other, net ...(1.4) Changes in operating assets and liabilities, net of...

  • Page 153
    ... 31, 2012, the Company managed its business by product and service offerings in four segments: Wireline, Wireless, IT Services and Hardware and Data Center Colocation. On January 24, 2013, we completed the IPO of CyrusOne Inc. ("CyrusOne"), which owns and operates our former Data Center Colocation...

  • Page 154
    ... are capitalized and depreciated over the asset's remaining life. The majority of the Wireline network property, plant and equipment used to generate its voice and data revenue is depreciated using the group method, which develops a depreciation rate annually based on the average useful life of...

  • Page 155
    ... of accounting. Wireline - Revenues from local telephone, special access, and internet product services, which are billed monthly prior to performance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance and switched access...

  • Page 156
    ...customer, as this is considered to be a separate earnings process from the sale of wireless services. Wireless equipment costs are also recognized upon handset sale and are generally in excess of the related handset and activation revenue. Revenue from termination fees are recognized when collection...

  • Page 157
    ..., 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 is also made for the estimated forfeiture rate based on the historical behavior of employees...

  • Page 158
    ...'s expectation of future separations. Special termination benefits are recognized upon acceptance by an employee of a voluntary termination offer. For terminations involving a large group of employees, we consider whether a pension and postretirement curtailment event has occurred. We define...

  • Page 159
    ... LLC On June 11, 2010, the Company purchased Cyrus Networks, LLC ("Cyrus Networks"), a data center operator based in Texas, for approximately $526 million, net of cash acquired, which was subsequently merged into its subsidiary CyrusOne. The purchase of Cyrus Networks was accounted for as a business...

  • Page 160
    .... Disposition of Cincinnati Bell Complete Protection Inc. Assets On August 1, 2011, we sold substantially all of the assets associated with our home security monitoring business for $11.5 million. The pre-tax gain recognized on the sale of these assets was $8.4 million. The operating results of this...

  • Page 161
    ...Year Ended December 31, 2012 2011 2010 Numerator: Net income ...Preferred stock dividends ...Income applicable to common shareowners - basic and diluted ...Denominator: Weighted-average common shares outstanding - basic ...Warrants ...Stock-based compensation arrangements ...Weighted-average common...

  • Page 162
    ...2010. As of December 31, 2012 and 2011, buildings and leasehold improvements, network equipment, and office software, furniture, fixtures and vehicles include $244.1 million and $222.7 million, respectively, of assets accounted for as capital leases or financing arrangements. Amortization of capital...

  • Page 163
    ... Life in Years December 31, 2012 Gross Carrying Accumulated Amount Amortization December 31, 2011 Gross Carrying Accumulated Amount Amortization (dollars in millions) Customer relationships Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Trademarks Wireless ...Data...

  • Page 164
    ...of the Corporate Credit Agreement will be permitted at any time without prepayment penalty, other than breakage and redeployment costs in the case of prepayment of LIBOR rate loans. All existing and future subsidiaries of the Company (other than Cincinnati Bell Telephone Company LLC, Cincinnati Bell...

  • Page 165
    ...under the CyrusOne Credit Agreement will be used for working capital, capital expenditures and other general corporate purposes of CyrusOne LLC, the operating subsidiary of CyrusOne LP, the borrower and the other subsidiaries of CyrusOne, including for acquisitions, dividends and other distributions...

  • Page 166
    ...LLC ("CBW"), Cincinnati Bell Any Distance Inc. ("CBAD"), Cincinnati Bell Any Distance of Virginia LLC, CBTS, and eVolve Business Solutions LLC ("eVolve") all participate in this facility. The available borrowing capacity is calculated monthly based on the quantity and quality of outstanding accounts...

  • Page 167
    ... 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 168
    ... 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 169
    ...including wireless towers, data center facilities and various equipment. These leases generally contain renewal options. As of December 31, 2012, CyrusOne held a purchase option on one leased data center facility. Other Financing Arrangements CyrusOne leases certain buildings used in its data center...

  • Page 170
    ... the term of the related indebtedness or credit agreement. Amortization of deferred financing costs, included in "Interest expense" in the Consolidated Statements of Operations, totaled $7.2 million in 2012, $7.0 million in 2011, and $6.6 million in 2010. Debt Covenants Credit Facility The Corporate...

  • Page 171
    ... providing full access to the Corporate Credit Agreement. Also, the Company's ability to make Restricted Payments (as defined by the individual indentures) would be limited, including common stock dividend payments or repurchasing outstanding Company shares. As of December 31, 2012, the Company was...

  • Page 172
    ... economic penalty incurred by the lessee to exercise its termination right and to relocate its equipment. The future minimum lease payments expected to be received under noncancelable operating leases, excluding month-to-month arrangements and submetered power, for the next five years are as follows...

  • Page 173
    ... Cincinnati Bell Inc. During the normal course of business, 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...

  • Page 174
    ... Contingent Compensation Plan In 2010, the Company's Board of Directors approved new long-term incentive programs for certain members of management. Payment is contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business, as...

  • Page 175
    ... the assistance of a third-party valuation specialist. Management estimated the fair value using the income approach, which discounted the expected future earnings attributable to the acquired customer contracts, and included estimates of future expenses, capital expenditures and a discount rate of...

  • Page 176
    .... In 2010, contract terminations included charges to terminate a sales commission plan to conform sales commission programs between our data center operations. A summary of restructuring activity by business segment is presented below: (dollars in millions) Wireline Wireless Data Center Colocation...

  • Page 177
    ... 2011, and 8% in 2010 of these costs were capitalized to property, plant and equipment related to network construction in the Wireline segment. Pension and postretirement benefit costs for these plans were comprised of: Pension Benefits 2012 2011 2010 Postretirement and Other Benefits 2012 2011 2010...

  • Page 178
    ... Benefits 2012 2011 2010 Discount rate ...Expected long-term rate of return ...Future compensation growth rate ... 3.90% 7.75% 3.00% 4.90% 8.25% 3.00% 5.50% 8.25% 3.00% 3.60% 0% - 4.50% 0% - 5.10% 0% - The expected long-term rate of return on plan assets, developed using the building block...

  • Page 179
    ...-K Part II Cincinnati Bell Inc. The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below: December 31, 2012 2011 Healthcare cost trend ...Rate to which the cost trend is assumed to decline (ultimate trend rate) ...Year the rates reach the...

  • Page 180
    ... pension plans at December 31, 2012 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
    ...by the fund managers, which are based on estimated fair values of the real estate investments using independent appraisal. The group insurance contract is valued at contract value plus accrued interest, which approximates fair value. The Level 3 investments had the following changes in 2012 and 2011...

  • Page 182
    ...in preferred stock dividends in 2012, 2011, and 2010. Warrants In March 2003, the Company entered into a series of recapitalization transactions which included the issuance of 17.5 million warrants that expire on March 26, 2013. Each warrant allows the holder to purchase one share of Cincinnati Bell...

  • Page 183
    ... income tax provision (benefit) was charged to continuing operations, accumulated other comprehensive income/ (loss) or additional paid-in capital as follows: (dollars in millions) Year Ended December 31, 2012 2011 2010 Income tax provision (benefit) related to: Continuing operations ...$24.7 $ 25...

  • Page 184
    ... local examinations for years before 2009. 14. Stock-Based and Deferred Compensation Plans The Company may grant stock options, stock appreciation rights, performance-based awards, and timebased restricted shares to officers and key employees under the 2007 Long Term Incentive Plan and stock options...

  • Page 185
    ...The Company generally issues new shares when options to purchase common shares or stock appreciation rights are exercised. The following table summarizes stock options and stock appreciation rights activity: 2012 WeightedAverage Exercise Price Per Shares Share 2011 WeightedAverage Exercise Price Per...

  • Page 186
    ...10-K Part II Cincinnati Bell Inc. The fair values at the date of grant were estimated using the Black-Scholes pricing model with the following assumptions: 2012 2011 2010 Expected volatility ...Risk-free interest rate ...Expected holding period (in years) ...Expected dividends ...Weighted-average...

  • Page 187
    ...'s stock price from the date of grant. In 2012, 2011 and 2010, we recorded expense of $4.4 million, $1.8 million, and $0.1 million, respectively, related to these awards. The Company granted an award of 300,000 common shares in 2010 to the newly-hired president of Cincinnati Bell Communications...

  • Page 188
    ... 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 technology and over fiber using its gigabit passive optical network. Data services...

  • Page 189
    ... provides a range of fully managed and outsourced IT and telecommunications services along with the sale, installation, and maintenance of major branded IT and telephony equipment. During 2011 and 2010, the IT Services and Hardware segment incurred employee separation charges of $1.9 million and...

  • Page 190
    Form 10-K Part II Our business segment information is as follows: (dollars in millions) Cincinnati Bell Inc. Year Ended December 31, 2012 2011 2010 Revenue Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Intersegment ...Total revenue ...Intersegment revenue Wireline ...

  • Page 191
    ... in millions) Cincinnati Bell Inc. Year Ended December 31, 2012 2011 2010 Service revenue Wireline ...Wireless ...Data Center Colocation ...IT Services and Hardware ...Total service revenue ...Product revenue Handsets and accessories ...IT, telephony and other equipment ...Total product revenue...

  • Page 192
    ...-K Part II Condensed Consolidating Statements of Operations and Comprehensive Income Parent (Guarantor) Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2012 CBT Other (Issuer) Non-guarantors Eliminations Total Revenue ...Operating costs and expenses ...Operating income (loss...

  • Page 193
    ...-K Part II Condensed Consolidating Statements of Operations and Comprehensive Income Parent (Guarantor) Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2010 CBT Other (Issuer) Non-guarantors Eliminations Total Revenue ...Operating costs and expenses ...Operating income (loss...

  • Page 194
    ...) Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Proceeds from sale of assets ...Other investing activities ...Cash flows used in investing activities ...Issuance of long-term debt ...Funding between Parent and subsidiaries, net ...Increase in receivables...

  • Page 195
    ... Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Acquisition of businesses ...Other investing activities ...Cash flows used in investing activities ...Funding between Parent and subsidiaries, net ...Proceeds from issuance of long-term debt, net of financing...

  • Page 196
    ... Wireless LLC, CBTS Software LLC, Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Any Distance of Virginia LLC, eVolve Business Solutions LLC, Data Center Investments Inc., Data Center Investments Holdco LLC, Data Centers South Inc. and Data Centers South Holdings LLC. The Parent Company...

  • Page 197
    ...Statements of Operations and Comprehensive Income Cincinnati Bell Inc. Year Ended December 31, 2012 (dollars in millions) Parent (Issuer) Guarantors Non-guarantors Eliminations Total Revenue ...Operating costs and expenses ...Operating... ...Preferred stock dividends ...Net income applicable to...

  • Page 198
    ...Parent (Issuer) Cincinnati Bell Inc. Year Ended December 31, 2010 (dollars in millions) Guarantors Non-guarantors Eliminations Total Revenue ...Operating costs and expenses ...Operating...income ...Net income ...Preferred stock dividends ...Net income applicable to common shareowners ......

  • Page 199
    ... Form 10-K Cash flows provided by (used in) operating activities ...$(144.8) Capital expenditures ...- Proceeds from sale of assets ...- Other investing activities ...- Cash flows used in investing activities ...- Issuance of long-term debt ...- Funding between Parent and subsidiaries, net ...433...

  • Page 200
    ... Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Acquisitions of businesses ...Other investing activities ...Cash flows used in investing activities ...Funding between Parent and subsidiaries, net ...Proceeds from issuance of long-term debt, net of financing...

  • Page 201
    ... loss arose from declines in revenues and wireless subscribers. Form 10-K 20. Subsequent Events On January 24, 2013, CyrusOne, our data center colocation business, closed its initial public offering of 18,975,000 shares of common stock at a price of $19.00 per share, which included a 2,475,000...

  • Page 202
    ... Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Part II, Item 8 of this Annual Report on Form 10-K. (c) Changes in internal control over financial reporting. There were no changes to Cincinnati Bell Inc.'s internal...

  • Page 203
    ... Executive Officer of The Freedom Group, Inc. from 2008 to August 2010. KURT A. FREYBERGER, Chief Financial Officer of the Company since August 2011; Chief Financial Officer of Cincinnati Bell Communications Group from March 2011 to July 2011; Vice President, Investor Relations and Controller of...

  • Page 204
    ...Relationships and Related Transactions, and Director Independence The information required by this item can be found in the Proxy Statement for the 2013 Annual Meeting of Shareholders and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by...

  • Page 205
    ...Cincinnati Bell Inc. Financial Statement Schedule II - Valuation and Qualifying Accounts is included on page 124. All other schedules are not required under the related instructions or are not applicable. Exhibits 2 Exhibits identified in parenthesis below, on file with the Securities and Exchange...

  • Page 206
    ... Indenture dated as of November 30, 1998 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)(iii)(3) to Annual Report on Form 10-K for the year ended...

  • Page 207
    ...limited partnership and Data Centers South, Inc., a Delaware corporation. (Exhibit 10.4 to Current Report on Form 8-K, date of report November 20, 2012, File No. 1-8519). Cincinnati Bell Inc. 2011 Short Term Incentive Plan (Appendix A to the Company's 2010 Proxy Statement on Schedule 14A filed March...

  • Page 208
    ... to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519). Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors (Appendix B to the Company's 2007 Proxy Statement on Schedule 14A filed on March 14, 2007, File No. 1-8519). Executive Compensation Recoupment...

  • Page 209
    ...)(A)(8) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519). Amended and Restated Receivables Purchase Agreement dated as of June 6, 2011, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein...

  • Page 210
    ... with this report. The Company's reports on Form 10-K, 10-Q, 8-K, proxy and other information are available free of charge at the following website: http://www.cincinnatibell.com. Upon request, the Company will furnish a copy of the Proxy Statement to its security holders without charge, portions of...

  • Page 211
    Schedule II VALUATION AND QUALIFYING ACCOUNTS Beginning of Period Additions Charge (Benefit) To (from) Other to Expenses Accounts Cincinnati Bell Inc. (dollars in millions) Deductions End of Period Allowance for Doubtful Accounts Year 2012 ...Year 2011 ...Year 2010 ...Deferred Tax Valuation ...

  • Page 212
    ... Cincinnati Bell Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 28, 2013 /s/ Kurt A. Freyberger Kurt A. Freyberger Chief Financial Officer...

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  • Page 215
    ... Cincinnati Bell's transfer agent and registrar: Computershare Investor Services, LLC Shareholder Services 7530 Lucerne Drive, Suite 305 Cleveland, Ohio 44130-6557 Phone: (888) 294-8217 Fax: (866) 204-6049 www.computershare.com Note: If your shares of Cincinnati Bell common stock are held in trust...

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