Cincinnati Bell 2015 Annual Report Download - page 205

Form 10-K Part II Cincinnati Bell Inc.
indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of
December 31, 2015 or 2014.
Purchase Commitments
The Company has noncancellable purchase commitments related to certain goods and services. These
agreements typically range from one to three years. As of December 31, 2015 and 2014, the minimum
commitments for these arrangements were approximately $166 million and $178 million, respectively. The
Company generally has the right to cancel open purchase orders prior to delivery and to terminate the contracts
without cause.
Litigation
Cincinnati Bell and its subsidiaries are subject to various lawsuits, actions, proceedings, claims and other
matters asserted under laws and regulations in the normal course of business. We believe the liabilities accrued
for legal contingencies in our consolidated financial statements, as prescribed by GAAP, are adequate in light of
the probable and estimable contingencies. However, there can be no assurances that the actual amounts required
to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, and to
comply with applicable laws and regulations, will not exceed the amounts reflected in our consolidated financial
statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31,
2015, cannot be reasonably determined.
Contingent Compensation Plan
In 2010, the Company’s Board of Directors approved long-term incentive programs for certain members of
management. Payment was contingent upon the completion of a qualifying transaction and attainment of an
increase in the equity value of the data center business, as defined in the plans.
The CyrusOne IPO completed on January 24, 2013 was a qualifying transaction and triggered payments
under this contingent compensation plan. For the year ended December 31, 2013, compensation expense of $42.6
million was recognized for these awards and other transaction-related incentives, of which $20.0 million was
associated with CyrusOne employees. This expense has been presented as transaction-related compensation in
our Consolidated Statement of Operations for the year ended December 31, 2013.
10. Financial Instruments and Fair Value Measurements
Fair Value of Financial Instruments
The carrying values of our financial instruments do not materially differ from the estimated fair values as of
December 31, 2015 and 2014, except for the Company’s investment in CyrusOne and long-term debt.
The carrying value and fair value of the Company’s financial instruments are as follows:
December 31, 2015 December 31, 2014
(dollars in millions) Carrying Value Fair Value Carrying Value Fair Value
Investment in CyrusOne ........................... $ 55.5 $ 257.9 $ 273.6 $ 785.0
Long-term debt, including current portion* ............ 1,178.0 1,155.6 1,686.1 1,717.4
* Excludes capital leases.
The fair value of our investment in CyrusOne was based on the closing market price of CyrusOne’s
common stock on December 31, 2015 and 2014. This fair value measurement is considered Level 1 of the fair
value hierarchy.
The fair value of debt instruments was based on closing or estimated market prices of the Company’s debt at
December 31, 2015 and 2014, which is considered Level 2 of the fair value hierarchy.
89
Form 10-K