Cincinnati Bell 2012 Annual Report Download - page 153

Form 10-K Part II Cincinnati Bell Inc.
Cincinnati Bell Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Accounting Policies
Description of Business — Cincinnati Bell Inc. and its consolidated subsidiaries (“Cincinnati Bell”, “we”
,“our”,“us” or the “Company”) provides diversified telecommunications and technology services. The Company
generates a large portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio and
Texas areas. An economic downturn or natural disaster occurring in this, or a portion of this, limited operating
territory could have a disproportionate effect on our business, financial condition, results of operations and
cash flows compared to similar companies of a national scope and similar companies operating in different
geographic areas. Revenue derived from foreign operations is less than 1% of consolidated revenue.
As of December 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
business. CyrusOne conducts its data center business through CyrusOne LP, an operating partnership. Effective
with the IPO, we now 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. The
Company may redeem its CyrusOne LP units into common stock of CyrusOne on a one-to-one basis, or for cash
at the fair value of a share of CyrusOne common stock, at the option of CyrusOne, commencing on January 17,
2014. Although we effectively own approximately 69% of CyrusOne through our ownership of its common stock
and partnership units of CyrusOne LP, we no longer control its operations.
Basis of Presentation — The consolidated financial statements of the Company have been prepared
pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in the
opinion of management, include all adjustments necessary for a fair presentation of the results of operations,
comprehensive income/(loss), financial position, and cash flows for each period presented.
Basis of Consolidation — The consolidated financial statements include the consolidated accounts of
Cincinnati Bell Inc. and its majority-owned subsidiaries over which it exercises control. Intercompany accounts
and transactions have been eliminated in the consolidated financial statements. Investments over which the
Company exercises significant influence are recorded under the equity method. As of December 31, 2012 and
2011, the Company had no equity method investments. Investments in which we own less than 20% of the
ownership interests and cannot exercise significant influence over the investee’s operations are recorded at cost.
Use of Estimates — The preparation of financial statements in conformity with generally accepted
accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the
amounts reported. Actual results could differ from those estimates. Significant items subject to such estimates
and judgments include: the carrying value of property, plant and equipment; the valuation of insurance and
claims liabilities; the valuation of allowances for receivables and deferred income taxes; reserves recorded for
income tax exposures; the valuation of asset retirement obligations; assets and liabilities related to employee
benefits; the valuation of goodwill and intangibles. In the normal course of business, the Company is also subject
to various regulatory and tax proceedings, lawsuits, claims, and other matters. The Company believes adequate
provision has been made for all such asserted and unasserted claims in accordance with GAAP. Such matters are
subject to many uncertainties and outcomes that are not predictable with assurance.
Cash and Cash Equivalents — Cash consists of funds held in bank accounts. Cash equivalents consist of
short-term, highly liquid investments with original maturities of three months or less.
Receivables — Receivables consist principally of trade receivables from customers and are generally
unsecured and due within 21—90 days. The Company has receivables with one large customer that exceed 10%
of the outstanding accounts receivable balance at December 31, 2012 and 2011. Unbilled receivables arise from
services rendered but not yet billed. As of December 31, 2012 and 2011, unbilled receivables totaled $26.0
million and $26.8 million, respectively. Expected credit losses related to trade receivables are recorded as an
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Form 10-K