Cincinnati Bell 2013 Annual Report Download - page 130

In 2014, we plan to continue the integration of our IT Services and Hardware functions into our Wireline
business markets operations. We expect the integration of these operations to reduce costs, improve technical and
customer services, and drive back-office efficiencies.
Data Center Colocation
On January 24, 2013, we completed the IPO of CyrusOne, which owns and operates our former Data Center
Colocation business. We currently own approximately 1.9 million shares, or 8.6%, of CyrusOne’s common stock
and are a limited partner in CyrusOne LP, owning approximately 42.6 million, or 66%, of its partnership units.
CyrusOne LP units are exchangeable into common stock of CyrusOne on a one-to-one basis, or cash at the fair
value of a share of CyrusOne common stock, at the option of CyrusOne, commencing on January 24, 2014, and
subject to volume restrictions estimated at 0.9 million shares over any 3 month period. The restrictions lapse
upon the effectiveness of CyrusOne Inc.’s registration statement, to be filed by March 24, 2014.
Although we effectively own approximately 69% of the economic interests of CyrusOne through our
ownership of its common stock and partnership units of CyrusOne LP, we no longer control its operations as we
are a limited partner in CyrusOne LP and own less than 10% of CyrusOne’s common stock. Upon completion of
the IPO, we deconsolidated CyrusOne’s assets and liabilities and recognized our investment as an equity method
investment, and we will recognize our share of CyrusOne’s net income (loss) as non-operating income (loss).
It is management’s intent to sell down the Company’s interests in CyrusOne over time and use such
proceeds to further de-leverage the Company. The Company’s amended Corporate Credit Agreement requires
85% of the proceeds to be used for debt repayments. As of December 31, 2013, the Company’s investment in
CyrusOne was valued at $993.2 million and the Company’s tax basis in CyrusOne was approximately $600
million.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2013.
Payments due by Period
(dollars in millions) Total < 1 Year 1-3 Years 3-5 Years Thereafter
Long-term debt, excluding capital leases (1) ............ $2,169.0 $ 5.7 $117.3 $676.0 $1,370.0
Capital leases .................................... 102.5 6.9 12.9 6.7 76.0
Interest payments on long-term debt, capital leases, and
other financing arrangements (2) ................... 1,023.0 154.2 306.7 273.4 288.7
Non-cancellable operating lease obligations ............ 28.3 10.9 12.6 3.7 1.1
Purchase obligations (3) ............................ 116.8 108.7 8.1 — —
Pension and postretirement benefits obligations (4) ...... 141.6 48.4 53.5 30.6 9.1
Unrecognized tax benefits (5) ........................ 24.1 — — — 24.1
Other liabilities (6) ................................ 41.4 12.2 17.3 1.1 10.8
Total ........................................... $3,646.7 $347.0 $528.4 $991.5 $1,779.8
(1) Long-term debt excludes net unamortized discounts and premiums.
(2) Interest payments on both fixed and variable rate long-term debt, capital leases, and other financing
arrangements assuming no early payment of debt in future periods. The interest rate applied on variable rate
borrowings is the rate in effect as of December 31, 2013.
(3) Purchase obligations primarily consist of amounts under open purchase orders and open blanket purchase
orders for purchases of network, IT and telephony equipment, and other goods; contractual obligations for
services 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 2014
include approximately $13 million expected to be contributed for postretirement benefits. Although the
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Form 10-K Part II Cincinnati Bell Inc.