Cincinnati Bell 2006 Annual Report Download - page 177

3. Restructuring Charges
2006 Restructuring
In September 2006, the Company incurred employee separation expense of $3.0 million related to the
outsourcing of certain supply chain functions to improve operating efficiencies. Substantially all of the expense
was associated with the Local segment and will be paid by 2008. The current portion of the restructuring reserve
of $1.5 million was included in “Other current liabilities” and the long-term portion of $0.4 million was included
in “Other noncurrent liabilities” in the Consolidated Balance Sheets at December 31, 2006.
The following table illustrates the activity in this reserve since inception:
Type of costs (dollars in millions) Initial Charge Utilizations
Balance
December 31,
2006
Employee separation obligations ................................ $3.0 $(1.1) $1.9
2005 Restructuring
In late 2005, the Company incurred employee separation expense of $1.6 million related to the outsourcing
of its directory assistance services. Substantially all of the expense was associated with the Local segment, and
the remaining amounts will be paid in 2007. The restructuring reserve balance of $0.1 million and $1.5 million
was included in “Other current liabilities” in the Consolidated Balance Sheets at December 31, 2006 and 2005,
respectively.
The following table illustrates the activity in this reserve since inception:
Type of costs (dollars in millions) Initial Charge Utilizations
Balance
December 31,
2005 Utilizations Income
Balance
December 31,
2006
Employee separation obligations . . . $1.6 $(0.1) $1.5 $(1.2) $(0.2) $0.1
2004 Restructuring
In December 2004, the Company initiated a restructuring intended to improve operating efficiencies and
reduce operating expenses. The 2004 restructuring charge of $11.2 million was comprised of $10.5 million in
special termination benefits and $0.7 million in employee separation benefits. The Local, Wireless and
Technology Solutions segments incurred charges of $10.5 million, $0.1 million, and $0.6 million, respectively.
The Company paid $0.4 million and $0.3 million of the employee separation benefits in 2005 and 2004,
respectively.
The following table illustrates the activity in this reserve since inception:
Type of costs (dollars in millions) Initial Charge Utilizations
Balance
December 31,
2004 Utilizations
Balance
December 31,
2005
Employee separation obligations ........... $0.7 $(0.3) $0.4 $(0.4) $—
2001 Restructuring
In 2001, the Company adopted a restructuring plan which included initiatives to consolidate data centers,
reduce the Company’s expense structure, exit the network construction business, eliminate other non-strategic
operations and merge the digital subscriber line (“DSL”) and certain dial-up Internet operations into the
Company’s other operations. Impairment charges of $148.1 million and restructuring costs of $84.2 million were
recorded in 2001 related to these initiatives. The cumulative restructuring charges incurred through December 31,
2006 for this plan total $94.7 million, composed of $71.9 million related to lease and other contract terminations,
$22.4 million for employee separations, and $0.4 million for other exit costs. The Company completed the plan
prior to 2003, except for certain lease obligations, which are expected to continue through 2015. Including
amounts incurred to date, lease and other contract termination amounts are expected to total approximately $73.2
million.
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