UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 20172018
 
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number 1-8519
CINCINNATI BELL INC.
 
Ohio 31-1056105
(State of Incorporation) (I.R.S. Employer Identification No.)
221 East Fourth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
(513) 397-9900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filerx  Accelerated filero
     
Non-accelerated filero  Smaller reporting companyo
     
Emerging growth companyo   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  o No  o
APPLICABLE ONLY TO CORPORATE ISSUERS


At July 31, 2017,2018, there were 42,175,27750,157,168 common shares outstanding.
 

Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

TABLE OF CONTENTS

PART I. Financial Information
Description Page
Item 1.Financial Statements 
 
Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months Ended June 30, 20172018 and 20162017
1
   
 
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Three and Six Months Ended June 30, 20172018 and 20162017
2
   
 
Condensed Consolidated Balance Sheets (Unaudited) June 30, 20172018 and December 31, 20162017
3
   
 
Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 20172018 and 20162017
4
   
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
5
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1627
   
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
3240
   
Item 4.
Controls and Procedures
3240
   
 
PART II. Other Information
 
   
Item 1.
Legal Proceedings
3341
   
Item 1A.
Risk Factors
3341
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3741
   
Item 3.
Default upon Senior Securities
3741

   
Item 4.
Mine Safety Disclosure
3741

   
Item 5.
Other Information
3741

   
Item 6.
Exhibits
3842
   
 
Signatures
3944

Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
 
Three Months Ended Six Months Ended
Three Months Ended Six Months EndedJune 30, June 30,
June 30, June 30,2018 2017 2018 2017
2017 2016 2017 2016       
Revenue       $296.8
 $259.4
 $592.5
 $509.0
Services$248.6
 $244.9
 $490.5
 $486.4
Products45.4
 54.3
 81.7
 101.7
Total revenue294.0
 299.2
 572.2
 588.1
       
Costs and expenses              
Cost of services, excluding items below126.7
 124.8
 252.2
 248.0
Cost of products sold, excluding items below38.7
 46.0
 68.0
 85.5
Cost of services and products, excluding items below152.3
 128.9
 301.7
 253.0
Selling, general and administrative, excluding items below55.4
 56.2
 112.1
 109.4
66.1
 53.8
 134.5
 109.1
Depreciation and amortization47.0
 44.8
 92.8
 88.2
50.9
 47.0
 102.1
 92.8
Restructuring and severance related charges3.6
 —
 29.2
 —
4.6
 3.6
 4.9
 29.2
Other1.7
 —
 2.3
 —
Transaction and integration costs2.7
 1.7
 4.9
 2.3
Total operating costs and expenses273.1
 271.8
 556.6
 531.1
276.6
 235.0
 548.1
 486.4
Operating income20.9
 27.4
 15.6
 57.0
20.2
 24.4
 44.4
 22.6
Interest expense18.1
 19.9
 36.1
 40.2
31.8
 18.1
 62.6
 36.1
Loss on extinguishment of debt, net—
 5.2
 —
 2.8
Loss on extinguishment of debt1.3
 —
 1.3
 —
Other components of pension and postretirement benefit plans expense3.2
 3.2
 6.5
 6.4
Gain on sale of Investment in CyrusOne—
 (118.6) (117.7) (118.6)—
 —
 —
 (117.7)
Other income, net(0.6) (1.1) (1.0) (1.1)(0.8) (0.6) (1.2) (1.0)
Income before income taxes3.4
 122.0
 98.2
 133.7
Income tax expense1.3
 44.4
 35.7
 49.1
Net income2.1
 77.6
 62.5
 84.6
(Loss) income before income taxes(15.3) 3.7
 (24.8) 98.8
Income tax (benefit) expense(1.5) 1.4
 (2.7) 35.9
Net (loss) income(13.8) 2.3
 (22.1) 62.9
Preferred stock dividends2.6
 2.6
 5.2
 5.2
2.6
 2.6
 5.2
 5.2
Net (loss) income applicable to common shareowners$(0.5) $75.0
 $57.3
 $79.4
$(16.4) $(0.3) $(27.3) $57.7
              
Basic net (loss) earnings per common share$(0.01) $1.79
 $1.36
 $1.89
$(0.39) $(0.01) $(0.64) $1.37
Diluted net (loss) earnings per common share$(0.01) $1.78
 $1.35
 $1.89
$(0.39) $(0.01) $(0.64) $1.36

The accompanying notes are an integral part of the condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Dollars in millions)
(Unaudited)

 Three Months Ended Six Months Ended
 June 30, June 30,
 2017 2016 2017 2016
Net income$2.1
 $77.6
 $62.5
 $84.6
Other comprehensive income (loss), net of tax:       
Unrealized gains on Investment in CyrusOne, net of tax of $4.4—
 —
 8.3
 —
Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, net of tax of ($41.3)—
 —
 (76.4) —
Foreign currency translation loss—
 —
 —
 (0.1)
Defined benefit plans:       
   Amortization of prior service benefits included in net income, net of tax of ($0.4), ($1.3), ($0.8), ($2.7)(0.7) (2.4) (1.4) (4.7)
   Amortization of net actuarial loss included in net income, net of tax of $2.0, $2.2, $4.0, $4.33.6
 3.9
 7.1
 7.8
Total other comprehensive income (loss)2.9
 1.5
 (62.4) 3.0
Total comprehensive income$5.0
 $79.1
 $0.1
 $87.6

 Three Months Ended Six Months Ended
 June 30, June 30,
 2018 2017 2018 2017
Net (loss) income$(13.8) $2.3
 $(22.1) $62.9
Other comprehensive (loss) income, net of tax:       
Unrealized gains on Investment in CyrusOne, net of tax of $4.4—
 —
 —
 8.3
Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, net of tax of ($41.3)—
 —
 —
 (76.4)
Foreign currency translation loss(2.5) —
 (4.3) —
Unrealized loss on cash flow hedge arising during the period, net of tax of ($0.4), ($0.4)(1.5) —
 (1.5) —
Defined benefit plans:       
   Amortization of prior service benefits included in net income, net of tax of ($0.2), ($0.4), ($0.4), ($0.8)(0.6) (0.7) (1.2) (1.4)
   Amortization of net actuarial loss included in net income, net of tax of $1.2, $2.0, $2.4, $4.04.1
 3.6
 8.2
 7.1
Total other comprehensive (loss) income(0.5) 2.9
 1.2
 (62.4)
Total comprehensive (loss) income$(14.3) $5.2
 $(20.9) $0.5

The accompanying notes are an integral part of the condensed consolidated financial statements.

2
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share amounts)
(Unaudited) 
June 30, December 31,
June 30,
2017		 December 31,
2016		2018 2017
Assets      
Current assets      
Cash and cash equivalents$58.2
 $9.7
$30.3
 $17.8
Receivables, less allowances of $9.7 and $9.9166.5
 178.6
Restricted Cash366.5
 378.7
Receivables, less allowances of $8.7 and $10.4241.3
 239.8
Inventory, materials and supplies23.4
 22.7
31.9
 44.3
Prepaid expenses19.9
 15.0
22.0
 22.2
Other current assets5.3
 3.9
7.3
 7.6
Total current assets273.3
 229.9
699.3
 710.4
Property, plant and equipment, net1,111.7
 1,085.5
1,125.8
 1,129.0
Investment in CyrusOne—
 128.0
Goodwill18.6
 14.3
149.4
 151.0
Deferred income taxes, net55.1
 64.5
Intangible assets, net124.7
 132.3
Deferred income tax assets

14.2
 12.2
Other noncurrent assets23.0
 18.8
52.7
 52.7
Total assets$1,481.7
 $1,541.0
$2,166.1
 $2,187.6
Liabilities and Shareowners’ Deficit      
Current liabilities      
Current portion of long-term debt$10.8
 $7.5
$16.8
 $18.4
Accounts payable121.5
 105.9
205.1
 185.6
Unearned revenue and customer deposits33.4
 36.3
40.3
 36.3
Accrued taxes12.2
 12.9
17.5
 21.2
Accrued interest21.8
 12.7
26.7
 29.9
Accrued payroll and benefits27.3
 25.7
30.6
 28.7
Other current liabilities34.9
 31.9
31.2
 37.2
Total current liabilities261.9
 232.9
368.2
 357.3
Long-term debt, less current portion1,116.1
 1,199.1
1,727.3
 1,729.3
Pension and postretirement benefit obligations190.2
 197.7
168.6
 177.5
Deferred income tax liabilities11.4
 11.2
Other noncurrent liabilities37.5
 33.0
34.0
 30.2
Total liabilities1,605.7
 1,662.7
2,309.5
 2,305.5
Shareowners’ deficit      
Preferred stock, 2,357,299 shares authorized, 155,250 shares (3,105,000 depositary shares) of 6 3/4% Cumulative Convertible Preferred Stock issued and outstanding at June 30, 2017 and December 31, 2016; liquidation preference $1,000 per share ($50 per depositary share)
129.4
 129.4
Common shares, $.01 par value; 96,000,000 shares authorized; 42,173,872 and 42,056,237 shares issued; 42,173,872 and 42,056,237 shares outstanding at June 30, 2017 and December 31, 20160.4
 0.4
Preferred stock, 2,357,299 shares authorized, 155,250 shares (3,105,000 depositary shares) of 6 3/4% Cumulative Convertible Preferred Stock issued and outstanding at June 30, 2018 and December 31, 2017; liquidation preference $1,000 per share ($50 per depositary share)
129.4
 129.4
Common shares, $.01 par value; 96,000,000 shares authorized; 42,440,157 and 42,197,965 shares issued and outstanding at June 30, 2018 and December 31, 20170.4
 0.4
Additional paid-in capital2,568.5
 2,570.9
2,561.0
 2,565.6
Accumulated deficit(2,669.6) (2,732.1)(2,661.7) (2,639.6)
Accumulated other comprehensive loss(152.7) (90.3)(172.5) (173.7)
Total shareowners’ deficit(124.0) (121.7)(143.4) (117.9)
Total liabilities and shareowners’ deficit$1,481.7
 $1,541.0
$2,166.1
 $2,187.6

The accompanying notes are an integral part of the condensed consolidated financial statements.

3
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(Unaudited) 
Six Months EndedSix Months Ended
June 30,June 30,
2017 20162018 2017
Cash flows from operating activities      
Net income$62.5
 $84.6
Adjustments to reconcile net income to net cash provided by operating activities:   
Net (loss) income$(22.1) $62.9
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization92.8
 88.2
102.1
 92.8
Loss on extinguishment of debt, net—
 2.8
Loss on extinguishment of debt1.3
 —
Gain on sale of Investment in CyrusOne(117.7) (118.6)—
 (117.7)
Provision for loss on receivables3.5
 4.3
2.6
 3.5
Noncash portion of interest expense1.1
 1.7
2.1
 1.1
Deferred income taxes35.2
 48.6
(3.8) 35.4
Pension and other postretirement payments less than (in excess of) expense1.5
 (2.8)
Pension and other postretirement payments less than expense0.3
 1.5
Stock-based compensation3.9
 3.5
2.6
 3.9
Other, net(3.0) (3.8)(1.4) (3.0)
Changes in operating assets and liabilities, net of effects of acquisitions:      
Decrease (increase) in receivables25.4
 (5.5)
Increase in inventory, materials, supplies, prepaid expenses and other current assets(5.9) (5.0)
(Increase) decrease in receivables(2.8) 25.4
Decrease (increase) in inventory, materials, supplies, prepaid expenses and other current assets10.6
 (5.9)
Increase in accounts payable9.9
 14.0
3.0
 9.9
Increase (decrease) in accrued and other current liabilities9.0
 (17.0)
Decrease (increase) in other noncurrent assets0.9
 (0.6)
Increase in other noncurrent liabilities3.8
 3.5
(Decrease) increase in accrued and other current liabilities(6.3) 9.0
Decrease in other noncurrent assets1.8
 0.3
(Decrease) increase in other noncurrent liabilities(0.1) 3.8
Net cash provided by operating activities122.9
 97.9
89.9
 122.9
Cash flows from investing activities      
Capital expenditures(105.2) (121.6)(71.0) (105.2)
Proceeds from sale of Investment in CyrusOne140.7
 142.5
—
 140.7
Acquisitions of businesses(9.6) —
(2.8) (9.6)
Dividends received from Investment in CyrusOne—
 4.9
Other, net0.4
 (0.7)—
 0.4
Net cash provided by investing activities26.3
 25.1
Net cash (used in) provided by investing activities(73.8) 26.3
Cash flows from financing activities      
Net (decrease) increase in corporate credit and receivables facilities with initial maturities less than 90 days(89.5) 15.4
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days—
 (89.5)
Repayment of debt(4.2) (124.6)(5.9) (4.2)
Debt issuance costs(0.7) (1.9)(2.5) (0.7)
Dividends paid on preferred stock(5.2) (5.2)(5.2) (5.2)
Common stock repurchase—
 (4.6)
Other, net(1.1) 0.1
(2.0) (1.1)
Net cash used in financing activities(100.7) (120.8)(15.6) (100.7)
Net increase in cash and cash equivalents48.5
 2.2
Cash and cash equivalents at beginning of period9.7
 7.4
Cash and cash equivalents at end of period$58.2
 $9.6
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.2) —
Net increase in cash, cash equivalents and restricted cash0.3
 48.5
Cash, cash equivalents and restricted cash at beginning of period396.5
 9.7
Cash, cash equivalents and restricted cash at end of period

$396.8
 $58.2
      
Noncash investing and financing transactions:      
Accrual of CyrusOne dividends$—
 $1.5
Acquisition of property by assuming debt and other noncurrent liabilities$6.9
 $10.1
$6.1
 $6.9
Acquisition of property on account$24.8
 $34.2
$28.3
 $24.8

The accompanying notes are an integral part of the condensed consolidated financial statements.

4
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

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") providesprovide diversified telecommunications and technology services. The Company generates a large portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio 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.
The Company has receivables with one large customer, General Electric Company that makesmake up 17% and 21%10% of the outstanding accounts receivable balance atas of June 30, 20172018 and December 31, 2016, respectively. This same customer represented2017. The Company also has receivables with Verizon Communications Inc. that make up 12% and 11%of the outstanding accounts receivable balance as of June 30, 2018. Revenue derived from foreign operations is approximately 6% of consolidated revenue for the three and six months ended June 30, 2016, respectively.
Merger and Acquisition Activity — On July 9, 2017, the Company and Hawaiian Telcom Holdco, Inc., a Delaware corporation (“Hawaiian Telcom”), entered into an Agreement and Plan of Merger (the "Hawaiian Telcom Merger Agreement") providing for the merger of Hawaiian Telcom with a wholly-owned subsidiary of the Company in exchange for the consideration described below. Hawaiian Telcom is a fiber-centric technology leader providing voice, video, broadband, data center and cloud solutions to consumer, business and wholesale customers on the Hawaiian islands.  
At the effective time of the merger, each share of Hawaiian Telcom common stock, par value of $0.01 per share, issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the holder’s election and subject to proration as set forth in the Hawaiian Telcom Merger Agreement (1) 1.6305 common shares, par value $0.01 per share, of the Company (the “Company Common Shares”) (the “Share Consideration”); (2) 0.6522 Company Common Shares and $18.45 in cash, without interest (the “Mixed Consideration”); or (3) $30.75 in cash, without interest (the “Cash Consideration”). Hawaiian Telcom stockholders who elect to receive the Share Consideration or the Cash Consideration will be subject to proration to ensure that the aggregate number of Company Common Shares to be issued by the Company in the Hawaiian Telcom Merger and the aggregate amount of cash to be paid in the Hawaiian Telcom Merger will be the same as if all electing stockholders received the Mixed Consideration.
The total value of the consideration to be exchanged is approximately $360 million, exclusive of debt of Hawaiian Telcom of approximately $290 million as of March 31, 2017.  
The merger is subject to standard closing conditions including the approval of Hawaiian Telcom's stockholders, the approval of the listing of additional shares of Cincinnati Bell common stock to be issued to Hawaiian Telcom’s stockholders, required federal and state regulatory approvals and other customary closing conditions. We expect the merger to close in the second half of 2018.
On July 9, 2017, we also entered into a definitive Agreement and Plan of Merger with OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutions to enterprise customers in the U.S., Canada and the U.K., in exchange for cash consideration of $201 million. The merger is subject to customary closing conditions and is expected to close in the fourth quarter of 2017.
In connection with the mergers with Hawaiian Telcom and OnX, we secured financing commitments for $1,130 million in senior secured credit facilities, as described in Note 3, that, in addition to cash on hand and other sources of liquidity, are expected to be used to repay the existing indebtedness of Hawaiian Telcom, pay the cash consideration for both mergers, repay certain indebtedness of the Company and pay the fees and expenses in connection with both mergers. The Company is also exploring the possibility of replacing a portion of the secured committed term loan with unsecured senior notes, subject to market conditions.
Basis of Presentation — The Condensed 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, other comprehensive income, financial position and cash flows for each period presented.
The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations for interim reporting.

5
TableEffective January 1, 2018, the Company adopted the requirements of Contents
Form 10-Q Part ICincinnati Bell Inc.
Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers and ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards. Certain prior period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, as a result of adopting the new standards.

On October 4, 2016,January 1, 2018, the Company filed an amendment to its Amended and Restated Articles of Incorporation to affect a one-for-five reverse splitchanged the composition of its issued common stock (the “Reverse Split”operating segments to align more closely with the Company's broader strategy and how it manages business operations. With the exception of consumer long distance revenue, this strategy groups Competitive Local Exchange Carrier ("CLEC") revenue, which had the effect of reducing the number of issued shares of common stock from 210,275,005 to 42,055,001. Any fractional shares of common stock resulting from the Reverse Split were settled in cash equal to the fraction of a share to which the holder was entitled. As a resultpreviously included as part of the Reverse Split,Entertainment and Communications segment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. Accordingly, the Company reduced total par value from common stock by $1.7 million and increasedrecast the additional paid-in capital by the same amount.  previously reported 2017 segment disclosures. See Note 11 for further disclosures.

The Condensed Consolidated Balance Sheet as of December 31, 20162017 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s 20162017 Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 20172018 are not necessarily indicative of the results expected for the full year or any other interim period.
Business Combinations — In accounting for business combinations, we apply the accounting requirements of ASC 805, “Business Combinations,” which requires the recording of net assets of acquired businesses at fair value. In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets. In addition, any contingent consideration is presented at fair value at the date of acquisition. Transactionacquisition, and transaction costs are expensed as incurred. See Note 4 for disclosures related to mergers and acquisitions.
On February 28, 2017 we acquired SunTel Services, a private company that provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cash consideration
5
Table of $10.0 million. Based on final fair value assessment, the acquired assets and liabilities assumed consisted primarily of property plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1 million and goodwill of $4.3 million. These assets and liabilities are included in the IT Services and Hardware segment.Contents
Form 10-Q Part ICincinnati Bell Inc.

Use of Estimates — Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. In the normal course of business, the Company is 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 U.S. GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.
Investment in CyrusOne — As of December 31, 2016, "Investment in CyrusOne" on the Condensed Consolidated Balance Sheets was recorded at fair value, which was determined based on closing market price of CyrusOne Inc. at December 31, 2016. This investment is classified as Level 1 in the fair value hierarchy. Unrealized gains and losses on our investment in CyrusOne are included in "Accumulated other comprehensive loss", net of taxes on the Condensed Consolidated Balance Sheets. When evaluating the investments for other-than-temporary impairment, the Company reviews such factors as the financial condition of the issuer, severity and duration of the fair value decline and evaluation of factors that could cause the investment to have an other-than-temporary decline in fair value.
In the first quarter of 2017, wethe Company sold ourits remaining 2.8 million shares of CyrusOne Inc. common stock for net proceeds totaling $140.7 million that resulted in a realized gain of $117.7 million. As of March 31, 2017, we no longer havehad an investment in CyrusOne Inc.
Income and Operating Taxes
Income taxes — The Company’s income tax provision for interim periods is determined through the use of an estimated annual effective tax rate applied to year-to-date ordinary income as well as the tax effects associated with discrete items. The Company expects its effective rate to exceed statutory rates primarily due to non-deductible expenses.
During 2016,2017, the Company reclassed $14.5re-classed $14.9 million of Alternative Minimum Tax ("AMT") refundable tax credits from "Deferred income taxes, net" to "Receivables" as these credits were expected to be utilized during 2017. In the first two quarters of 2017, the Company reclassed an additional $7.8 million from "Deferred income taxes, net" to "Receivables." In the second quarter the Company received $14.5 million of payments related to the 2016 AMT tax credits.2018. Acceleration of the AMT refundable tax credits was the result of the Company's decision to make an election on its 20162017 federal income tax return to claim the credits in lieu of claiming bonus depreciation. NewThe Company received the $14.9 million of payments during the second quarter of 2018. In addition, new tax legislation enacted in 2015 increased the amount2017 repealed AMT for corporate tax payers.  The balance of any remaining AMT credits that canwill be claimedrefunded over the next 5 years beginning with the 2016 tax year. return filed in 2019. In the first quarter of 2018, the Company re-classed $0.7 million from "Deferred income taxes, net" to "Receivables" as it expects to receive this portion of the remaining AMT credits in 2019.
The Company plans to make the same election on itsfiled our 2017 federal income tax return.return during the quarter ended June 30, 2018 and confirms that the accounting for the income tax effects of the Tax Cuts and Jobs Act signed into law on December 22, 2017 is now complete.
Operating taxes — The Company elected to record certain operating taxes such as property, sales, use, and gross receipts taxes including telecommunications surcharges as expenses, primarily within cost of services and products. These taxes are not included in income tax expense because the amounts to be paid are not dependent on our level of income. Liabilities for audit exposures are established based on management's assessment of the probability of payment. The provision for such liabilities is recognized as either property, plant and equipment, operating tax expense, or depreciation expense depending on the nature of the audit exposure. Upon resolution of an audit, any remaining liability not paid is released against the account in which it was originally recorded. Certain telecommunication taxes and surcharges that are collected from customers are also recorded as revenue; however, with the adoption of ASC 606, revenue associated with these charges is excluded from the transaction price.  This approach is consistent with how these taxes were previously recorded under ASC Topic 605.
Derivative Financial Instruments — The Company accounts for derivative financial instruments by recognizing derivative instruments as either assets or liabilities in the Condensed Consolidated Balance Sheets at fair value and recognizing the resulting gains or losses as adjustments to the Condensed Consolidated Statements of Operations or "Accumulated Other Comprehensive Income (Loss)". The Company does not hold or issue derivative financial instruments for trading or speculative purposes.
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of "Accumulated Other Comprehensive Income (Loss)" in stockholder's equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. Derivatives that do not qualify as hedges are adjusted to fair value through earnings in the current period.

Recently Issued Accounting Standards
In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, Compensation - Stock Compensation (Topic 718), which improves financial reporting for non-employee share-based payments by making the guidance consistent with the accounting for employee share-based compensation. The ASU is effective for public entities for annual reporting periods beginning after December 15, 2018, and for interim periods with those fiscal years. Early adoption is permitted. The Company early adopted the guidance effective June 30, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

Recently IssuedIn February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows entities to elect to make a one-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The ASU is effective for public entities for annual reporting periods beginning after December 15, 2018, and for interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this guidance effective December 31, 2017, resulting in a reclassification adjustment of $32.2 million to "Accumulated deficit" from "Other comprehensive loss" on the Condensed Consolidated Balance Sheets. The amount of the reclassification is calculated on the basis of the difference between the historical and newly enacted tax rates on deferred taxes related to our pension and postretirement benefit plans.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting Standards — for Hedging Activities, which improves the hedge accounting model to facilitate financial reporting that more closely reflects a company’s risk management activities. The FASB’s new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of the update. The Company early adopted the guidance effective April 1, 2018.

In May 2017, the Financial Accounting Standards Board ("FASB")FASB issued Accounting Standards Update ("ASU")ASU 2017-09, Compensation - Stock Compensation, which amends the scope of modification accounting for share-based payment arrangements. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to prospectively adoptadopted the standard effective January 1, 2018 and will applyhas applied the amended guidance to any awards modified on or after this date.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net PeriodPeriodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends the requirements in Accounting Standards Codification ("ASC")ASC 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The ASU requires entities to disaggregate the current-service-costcurrent service cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and present thestatement. The other components shall be presented elsewhere in the income statement and outside of income from operations, if such a subtotal is presented, on a retrospective basis as of the date of adoption. In addition, only the service-costservice cost component of net benefit cost is eligible for capitalization.capitalization on a prospective basis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact of adoption of this ASU and plans to adoptretrospectively adopted the standard effective January 1, 2018.
In January 2017, The Company re-classed $1.6 million of other components of net benefit cost from both "Cost of services and products" and "Selling, general and administrative," to a new line below Operating income, "Other components of pension and postretirement benefit plans expense," on the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Under the amended guidance, the Company shall now recognize an impairment chargeCondensed Consolidated Statements of Operations for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,three months ended June 30, 2017. The Company early adoptedre-classed $3.3 million and $3.1 million of other components of net benefit cost from "Cost of services and products" and "Selling, general and administrative," respectively, to a new line below Operating income, "Other components of pension and postretirement benefit plans expense," on the amended guidance effective January 1, 2017 and will applyCondensed Consolidated Statements of Operations for the guidance when performing the annual impairment test in the fourth quarter ofsix months ended June 30, 2017.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with the intent of reducing diversity in practice. The new standardASU is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption ofadopted this ASU on the Company’s consolidated statement of cash flows and plans to adopt the standard effective January 1, 2018.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. Theadoption of this standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The new standard was adopted effective January 1, 2017.
The primary impact of adoption is the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital starting in the first quarter of fiscal year 2017.  Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of the date of adoption. Effective January 1, 2017, we adopted a prospective company-wide policy change due to the change in accounting principle and now record forfeitures as they are incurred on a go forward basis. As a result of the change in accounting principle the cumulative-effect adjustment to retained earnings to account for the accounting policy election was immaterial to the financial statements.

The presentation requirements for cash flows related to excess tax benefits were applied retrospectively to all periods presented and did not result inhave a material impact to prior period net cash provided by operations and net cash used in financing. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to anyeffect on the Company’s Consolidated Statement of the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity.

Cash Flows.

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Form 10-Q Part I Cincinnati Bell Inc.

In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee model that brings most leases on the balance sheet, as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The new standardASU is effective for public entities for fiscal years beginning after December 15, 2018,2018. As issued, the standard requires lessors and lessees and lessors are required to use a modified retrospective transition method for existing leases. ASU 2016-02 was amended in January 2018 by the provisions of ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” and in July 2018 by the provisions of ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11, “Targeted Improvements.” We plan to adopt ASU 2016-02, as amended, effective January 1, 2019.
As of the second quarter of 2018 the Company has substantially completed procedures to identify the existing lease population to which the new standard is applicable. The Company is also in the process of evaluatingimplementing changes to accounting policies, processes, systems, and internal controls. The Company procured a third-party lease accounting software solution to facilitate the impactongoing accounting and financial reporting requirements of adoption of this ASUthe ASU. The new standard will result in increases to the assets and liabilities on the Company’s consolidated financial statements.

The FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments in January 2016. The amended guidance requires entities to carry all investments in equity securities at fair value through net income unless the entity has elected the practicability exception to fair value measurement. This standard will be effective for the fiscal year ending December 31, 2018 and will require a cumulative-effect adjustment to beginning retained earnings on this date.balance sheets. The Company is currently in the process of evaluating the full impact of adoption of this ASU onadopting the consolidated financial statements.new standard.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. In August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company will adoptadopted the new standard and all subsequent amendments inas of January 1, 2018. The Company utilized the first quarter of the fiscal year ending December 31, 2018.
The guidance permits two methods of adoption: retrospectively tofull retrospective method; therefore, each prior reporting period presented (full retrospective method), or retrospectivelywas adjusted beginning with the cumulative effectissuance of initially applying the guidance recognized at the dateCompany’s 2018 interim financial statements.
The most significant impact of initial application (the cumulative catch-up transition method). We currently anticipate adopting the new standard usingis the full retrospective methodchange to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is dependent on the successful and timely implementation of a revenue software application that has been procured from a third-party provider and the completion of our analysis of information necessary to restate prior period financial statements.

While we are continuing to assess all potential impacts of the standard, we currently believe the standard will not have a material impact on our consolidated financial statements with the possible exception of our gross treatment of hardware revenue.revenue in the Infrastructure Solutions category from recording hardware revenue as a principal (gross) to recording revenue as an agent (net). Based on our assessment of ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016, the Company acts as an agent and as such will record hardware sales net of the related cost of products. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations focusing on a control model rather than a risk and reward model. WeAs a result of adopting ASU 2014-09, revenue and cost of products for the three and six months ended June 30, 2017, decreased by $34.6 million and $63.2 million, respectively. Changes in accounting policies related to variable consideration or rebates did not have a material effect on the Company's financial statements. Fulfillment and acquisition costs that are in the process of evaluating whether the standard will havenow recorded as an impact on our historical practice of recording our hardware salesasset and amortized on a gross basis.monthly basis decreased expense for the three and six months ended June 30, 2017 by $0.3 million and $0.6 million, respectively, and increased basic earnings per share for the six months ended June 30, 2017 by $0.01. Adoption of ASU 2014-09 did not result in a change to basic earnings per share for three months ended June 30, 2017. An incremental asset related to fulfillment and acquisition costs of $32.3 million was recorded on the balance sheet as of December 31, 2017, with an offsetting reduction in "Accumulated deficit." As a result of the entry, total contract asset related to fulfillment and acquisition costs was $32.4 million as of December 31, 2017. The impact of these adjustments resulted in a decrease of $7.1 million to "Deferred income tax assets" as of December 31, 2017, with the offset to "Accumulated deficit." See Note 3 for additional disclosures as a result of adopting ASC Topic 606.

No other newOther accounting pronouncementstandards that have been issued or effective duringproposed by the year had,FASB or isother standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements.statements upon adoption.



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Form 10-Q Part I Cincinnati Bell Inc.

2.    Earnings Per Common Share
Basic earnings per common share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur upon the issuance of common shares for awards under stock-based compensation plans the exercise of warrants or the conversion of preferred stock, but only to the extent that they are considered dilutive.
The following table shows the computation of basic and diluted EPS:
Three Months EndedThree Months Ended Six Months Ended
June 30,June 30, June 30,
(in millions, except per share amounts)2017 20162018 2017 2018 2017
Numerator:          
Net income$2.1
 $77.6
Net (loss) income$(13.8) $2.3
 $(22.1) $62.9
Preferred stock dividends2.6
 2.6
2.6
 2.6
 5.2
 5.2
Net (loss) income applicable to common shareowners - basic and diluted$(0.5) $75.0
$(16.4) $(0.3) $(27.3) $57.7
Denominator:          
Weighted average common shares outstanding - basic42.2
 42.0
42.4
 42.2
 42.4
 42.1
Stock-based compensation arrangements—
 0.1
—
 —
 —
 0.2
Weighted average common shares outstanding - diluted42.2
 42.1
42.4
 42.2
 42.4
 42.3
Basic (loss) earnings per common share$(0.01) $1.79
Diluted (loss) earnings per common share$(0.01) $1.78
Basic net (loss) earnings per common share$(0.39) $(0.01) $(0.64) $1.37
Diluted net (loss) earnings per common share$(0.39) $(0.01) $(0.64) $1.36

 Six Months Ended
 June 30,
(in millions, except per share amounts)2017 2016
Numerator:   
Net income$62.5
 $84.6
Preferred stock dividends5.2
 5.2
Net income applicable to common shareowners - basic and diluted$57.3
 $79.4
Denominator:   
Weighted average common shares outstanding - basic42.1
 42.0
Stock-based compensation arrangements0.2
 0.1
Weighted average common shares outstanding - diluted42.3
 42.1
Basic earnings per common share$1.36
 $1.89
Diluted earnings per common share$1.35
 $1.89

For the three and six months ended June 30, 2018, the Company had a net loss available to common shareholders and, as a result, all common stock equivalents were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For the three months ended June 30, 2017, the Company had a net loss available to common shareholders and, as a result, all common stock equivalents were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For the six months ended June 30, 2017, awards under the Company's stock-based compensation plans for common shares of 0.3 million were excluded from the computation of diluted EPS as the inclusion would have been anti-dilutive. For the three and six months ended June 30, 2016, awards under the Company's stock-based compensation plans for common shares of 0.4 million and 0.5 million, respectively, were excluded from the computation of diluted EPS as the inclusion would have been anti-dilutive. For all periods presented, preferred stock convertible into 0.9 million common shares was excluded as it was anti-dilutive.


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Form 10-Q Part I Cincinnati Bell Inc.

3.    Revenue
The Entertainment and Communications segment provides products and services to both consumer and enterprise customers that can be categorized as either Fioptics, Enterprise Fiber or Legacy. The products and services within these three categories can be further categorized as either Data, Voice, Video or Other. Fioptics and Legacy revenue include both consumer and enterprise customers. Enterprise Fiber revenue includes ethernet and dedicated internet access services that are provided to enterprise customers. Consumer customers have implied month-to-month contracts, while enterprise customers typically have contracts with a duration of one to five years and automatically renew on a month to month basis. Customers are invoiced on a monthly basis for services rendered. Contracts for projects that are included within the Other revenue stream are typically short in duration and less than one year.

The IT Services and Hardware segment provides a full range of Information Technology ("IT") solutions, including Communications, Cloud and Consulting services. IT Services and Hardware customers enter into contracts that have a typical duration of one to five years, with renewal options at the end of the term. Customers are invoiced on a monthly basis for services rendered. The IT Services and Hardware segment also provides enterprise customers with Infrastructure Solutions, which includes the sale of hardware and maintenance contracts. These contracts are typically satisfied in less than twelve months and revenue is recognized at a point in time.

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018, using the full retrospective method. See below for further discussion of the adoption, including the impact on our 2017 financial statements.

The Company has elected the practical expedient described in ASC 606-10-32-18 that allows an entity to not adjust the promised amount of consideration for the effects of a significant financing component if the entity expects that the period of time between the transfer of a promised good or service to the customer and when the customer pays will be one year or less. Customers are typically billed immediately upon the rendering of services or the delivery of products. Payment terms for customers are between 30 and 180 days. In the instance that payment terms are greater than twelve months, the guidance in ASC 606-10-32-15 will be applied to determine the transaction price.
Method of Adoption
The Company adopted ASC Topic 606 on January 1, 2018, using the full retrospective method. The comparative periods for 2018 and 2017 are reported in accordance with ASC Topic 606. The adoption of ASC Topic 606 primarily affected product revenue and cost of products on our Consolidated Financial Statements. Based on the Company’s assessment of ASC Topic 606 as it relates to the sale of hardware within the Infrastructure Solutions category, the Company considers itself an agent (net) versus as a principal (gross). Based on our assessment of ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016, the Company acts as an agent and as such will record revenue associated with the sale of hardware net of the related cost of products. This conclusion is based on the Company not obtaining control of the inventory since in most cases the Company does not take possession of the inventory, does not have the ability to direct the product to anyone besides the purchasing customer, and does not integrate the hardware with any of our own goods or services. In situations where the Company does take possession, the Company assesses if we act as the principal or the agent. While the Company does perform installation services in certain cases, those services involve installing the hardware into the customer’s existing technology. Installation is considered a separate performance obligation as it is capable of being distinct, and is distinct, within the context of the contract. The reduction to "Revenue" and "Cost of services and products" related to recording these contracts on a net basis is $34.6 million and $63.2 million for the three and six months ended June 30, 2017, respectively.

In addition to the changes discussed above as result of recognizing hardware revenue on a net basis, additional contract assets related to fulfillment costs and costs of acquisition of $32.3 million were recorded to "Other noncurrent assets" as of December 31, 2017, with an offsetting reduction in "Accumulated deficit." As a result of the entry, total contract assets related to fulfillment and acquisition costs were $32.4 million as of December 31, 2017. Under the new standard, the Company defers all incremental sales incentives and other costs incurred in order to obtain a contract with a customer. The Company amortizes the contract asset related to both fulfillment costs and cost of acquisition over the period of time the services under the contract are expected to be delivered to the customer.


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Form 10-Q Part ICincinnati Bell Inc.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, or a series of distinct goods or services, and is the unit of account defined in ASC Topic 606. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Contract modifications for changes to services provided are routine throughout the term of our contracts. In most instances, contract modifications are for the addition or reduction of services that are distinct, and price changes are based on the stand-alone selling price of the service and, as such, are accounted for on a prospective basis as a new contract.

Goods and services are sold individually, or a contract may include multiple goods or services. For contracts with multiple goods and services, the contract's transaction price is allocated to each performance obligation using the stand-alone selling price of each distinct good or service in the contract.

Certain customers of the Company may receive cash-based rebates based on volume of sales, which are accounted for as variable consideration. Potential rebates are considered at contract inception in our estimate of transaction price based on the forecasted volume of sales. Estimates are reassessed quarterly.

Performance obligations are either satisfied over time as services are performed or at a point in time. Substantially all of our service revenue is recognized over time. For services transferred over time, the Company has elected the practical expedient to recognize revenue based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are provided evenly over the month and are substantially the same over the life of the contract. As the Company has elected the practical expedients detailed at ASC 606-10-50-13, revenue for unsatisfied performance obligations that will be billed in future periods has not been disclosed.

Entertainment and Communications

The Company has identified four distinct performance obligations in the Entertainment and Communications segment, namely Data, Voice, Video and Other. For each of the Data, Voice and Video services, service is delivered to the customer continuously and in a substantially similar manner for each period of the agreement, the customer takes full control over the services as the service is delivered, and as such Data, Voice and Video are identified to be a series of distinct services. Services provided by the Entertainment and Communications segment can be categorized into three main categories that include Fioptics, Enterprise Fiber and Legacy, each of which may include one or more of the aforementioned performance obligations. Data services include high-speed internet access, digital subscriber lines, ethernet, SONET (Synchronous Optical Network), dedicated internet access, wavelength and digital signal. Voice services include traditional and Fioptics voice lines, switched access, digital trunking and consumer long distance calling. Video services are offered through our fiber network to consumer and enterprise customers based on various standard plans with the opportunity to add premium channels. To receive video services, customers are required to use Cincinnati Bell set top boxes that are billed as part of the monthly recurring service. Set top boxes are not considered a separate performance obligation from video because the equipment is necessary for the service to operate and the customer has no alternative use for the equipment.
Services and products not included in Data, Voice or Video are included in Other revenue and are comprised of wire care, wire time and materials projects, and advertising. Transfer of control of these services and products is evaluated on an individual project basis and can occur over time or at a point in time.
The Company uses multiple methods to determine stand-alone selling prices in the Entertainment and Communications segment. For Fioptics Data, Video and Voice, market rate is the primary method used to determine stand-alone selling prices. For Enterprise Fiber Data and Legacy Voice, Data, and Other, stand-alone selling prices are determined based on a list price, discount off of list price, a tariff rate, a margin percentage range, or a minimum margin percentage.
IT Services and Hardware
The Company has identified four distinct performance obligations in the IT Services and Hardware segment. These performance obligations are Communications, Cloud, Consulting, and Infrastructure Solutions. Communications services are monthly services that include data and VoIP services, tailored solutions that include converged IP communications of data, voice, video and mobility applications, enterprise long distance, MPLS (Multi-Protocol Label Switching) and conferencing services. Cloud services includes storage, backup, disaster recovery, SLA-based monitoring and management, cloud computing and cloud consulting. Consulting services provide customers with IT staffing, consulting, emerging technology solutions and installation projects. Infrastructure Solutions includes the sale of hardware and maintenance contracts.

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Form 10-Q Part ICincinnati Bell Inc.

For the sale of hardware, the Company evaluated whether it is the principal or the agent. The Company has concluded it acts as an agent because it does not control the inventory before it is transferred to customers, it does not have the ability to direct the product to anyone besides the purchasing customer, and it does not integrate the hardware with any of its own goods or services. Based on this assessment, the performance obligation is to arrange a sale of hardware between the manufacturer and the customer. In the instance where there is an issue with the hardware, the Company coordinates with the manufacturer to facilitate a return in accordance with the standard manufacturer warranty. Hardware returns are not significant to the Company.

Stand-alone selling prices for the four performance obligations within the IT Services and Hardware segment were determined based on a margin percentage range, minimum margin percentage or standard price list.

Revenue recognized at a point in time includes revenue recognized net of the cost of product for hardware sales within Infrastructure Solutions as well as for certain projects within Communications and Consulting. Revenue generated from these contracts is recognized when the hardware is shipped to the customer, in the case of Infrastructure Solutions when we act as the agent, or when the customer communicates acceptance of services performed, in the case of Communications and Consulting. For contracts with freight on board shipping terms, management has elected to account for shipping and handling as activities to fulfill the promise to transfer the good, and therefore, has not evaluated whether shipping and handling activities are promised services to its customers.
Contract Balances 
The Company recognizes an asset for incremental fulfillment costs that include installation costs associated with Voice, Video, and Data product offerings in the Entertainment and Communications segment for which the contract life is longer than one year. These fulfillment costs are amortized ratably over the expected life of the customer, which is representative of the expected period of benefit of the asset capitalized. The expected life of the customer is determined utilizing the average churn rate for each product. The Company calculates average churn based on the historical average customer life. We recognize an asset for incremental fulfillment costs that include installation and provisioning costs for certain Communications services in the IT Services and Hardware segment. The asset recognized for Communication services is amortized over the average contract life. Churn rates and average contract life are reviewed on an annual basis. Fulfillment costs are capitalized to “Other noncurrent assets.” The related amortization expense is recorded to “Cost of services and products.”
The Company recognizes an asset for the incremental costs of acquiring a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs related to Voice, Video, Data and certain Communications and Cloud services meet the requirements to be capitalized. The contract asset established for the costs of acquiring a contract are recorded to “Other noncurrent assets.” Sales incentives are amortized ratably over the period that services are delivered using either an average churn rate or average contract term, both representative of the expected period of benefit of the asset capitalized. Customer churn rates and average contract term assumptions are reviewed on an annual basis. The related amortization expense is recorded to “Selling, general and administrative.”
Management has elected to use the practical expedient detailed in ASC 340-40-25-4 to expense any costs to fulfill a contract and costs to obtain a contract as they are incurred when the amortization period would have been one year or less. This practical expedient has been applied to fulfillment costs that include installation costs associated with wiring projects and certain Cloud services. In addition, this practical expedient has been applied to acquisition costs associated with revenue from certain Communications projects.

The following table presents the activity for the Company’s contract assets:
 Fulfillment Costs Cost of Acquisition Total Contract Assets
(dollars in millions)Entertainment and Communications IT Services and Hardware Total Company Entertainment and Communications IT Services and Hardware Total Company Entertainment and Communications IT Services and Hardware Total Company
Balance as of December 31, 2017$17.5
 $2.0
 $19.5
 $11.6
 $1.3
 $12.9
 $29.1
 $3.3
 $32.4
Additions3.1
 0.4
 3.5
 1.6
 0.4
 2.0
 4.7
 0.8
 5.5
Amortization(3.3) (0.3) (3.6) (1.7) (0.2) (1.9) (5.0) (0.5) (5.5)
Balance as of March 31, 201817.3
 2.1
 19.4
 11.5
 1.5
 13.0
 28.8
 3.6
 32.4
Additions3.0
 0.4
 3.4
 1.8
 0.3
 2.1
 4.8
 0.7
 5.5
Amortization(3.3) (0.3) (3.6) (1.6) (0.2) (1.8) (4.9) (0.5) (5.4)
Balance as of June 30, 2018$17.0
 $2.2
 $19.2
 $11.7
 1.6
 $13.3
 $28.7
 $3.8
 $32.5

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Form 10-Q Part ICincinnati Bell Inc.

Disaggregated Revenue
The following table presents revenues disaggregated by product and service lines.
 Three Months Ended Six Months Ended
 June 30, June 30,
(dollars in millions)2018 2017 2018 2017
Data$84.4
 $90.1
 $169.3
 $174.5
Video39.7
 36.9
 78.9
 72.8
Voice46.0
 50.5
 93.0
 102.2
Other3.8
 3.5
 6.9
 6.6
Total Entertainment and Communications173.9
 181.0
 348.1
 356.1
Consulting39.8
 16.5
 77.9
 33.2
Cloud23.0
 19.2
 45.6
 40.1
Communications41.5
 40.3
 82.1
 76.8
Infrastructure Solutions24.0
 8.8
 50.3
 15.7
Total IT Services and Hardware128.3
 84.8
 255.9
 165.8
Intersegment revenue(5.4) (6.4) (11.5) (12.9)
Total revenue$296.8
 $259.4
 $592.5
 $509.0
The following table presents revenues disaggregated by contract type.
 Three Months Ended June 30,
(dollars in millions)Entertainment and Communications IT Services and Hardware Intersegment revenue elimination  Total
 2018 2017 2018 2017 2018 2017 2018 2017
Products and Services transferred at a point in time$5.6
 $5.1
 $32.1
 $13.6
 $—
 $—
 $37.7
 $18.7
Products and Services transferred over time163.6
 170.6
 95.5
 70.1
 —
 —
 259.1
 240.7
Intersegment revenue4.7
 5.3
 0.7
 1.1
 (5.4) (6.4) —
 —
Total revenue$173.9
 $181.0
 $128.3
 $84.8
 $(5.4) $(6.4) $296.8
 $259.4
 Six Months Ended June 30,
(dollars in millions)Entertainment and Communications IT Services and Hardware Intersegment revenue elimination  Total
 2018 2017 2018 2017 2018 2017 2018 2017
Products and Services transferred at a point in time$10.4
 $10.2
 $67.4
 $24.3
 $—
 $—
 $77.8
 $34.5
Products and Services transferred over time327.8
 335.2
 186.9
 139.3
 —
 —
 514.7
 474.5
Intersegment revenue9.9
 10.7
 1.6
 2.2
 (11.5) (12.9) —
 —
Total revenue$348.1
 $356.1
 $255.9
 $165.8
 $(11.5) $(12.9) $592.5
 $509.0




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Form 10-Q Part ICincinnati Bell Inc.

4.    Mergers and Acquisitions
Acquisition of OnX Holdings LLC
On October 2, 2017, the Company acquired 100% of OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutions to enterprise customers in the United States, Canada and the United Kingdom. The acquisition extends the IT Services and Hardware segment's geographic footprint and accelerates its initiatives in IT cloud migration.
The purchase price for OnX consisted of the following:
(dollars in millions) 
Cash consideration$241.2
Debt repayment(77.6)
Working capital adjustment2.8
Total purchase price$166.4
The cash portion of the purchase price was funded through borrowings under the Credit Agreement (see Note 6). The cash consideration includes $77.6 million related to existing debt that was repaid in conjunction with the close of the acquisition. In addition, a working capital adjustment of $2.8 million was paid in the first quarter of 2018. The Company spent $8.6 million in acquisition expenses related to the OnX acquisition, of which no expense was recorded in three months ended June 30, 2018 and $0.5 million was recorded in the six months ended June 30, 2018. No expenses were recorded in the prior year comparable periods related to the OnX acquisition. These expenses are recorded in "Transaction and integration costs" on the Condensed Consolidated Statements of Operations.
Purchase Price Allocation and Other Items
Based on fair value estimates, the purchase price for OnX has been allocated to individual assets acquired and liabilities assumed as follows:
(dollars in millions) 
Assets acquired 
     Cash$6.5
     Receivables69.9
     Prepaid expenses and other current assets11.8
     Property, plant and equipment11.6
     Goodwill133.1
     Intangible assets134.0
     Other noncurrent assets3.2
Total assets acquired370.1
Liabilities assumed 
     Accounts payable63.6
Current portion of long-term debt1.3
     Accrued expenses and other current liabilities18.3
     Deferred income tax liabilities42.3
Long-term debt, less current portion76.7
     Other noncurrent liabilities1.5
Total liabilities assumed203.7
Net assets acquired$166.4

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During the first quarter of 2018, the Company recorded a purchase price allocation adjustment of $0.2 million to "Goodwill" related to the payment of the working capital adjustment. Also in the first quarter of 2018, the Company recorded purchase price allocation adjustments of $0.1 million to "Deferred income tax liabilities" and $0.4 million to "Other noncurrent liabilities" related to the finalization of certain tax aspects of the acquisition. The offset of these adjustments were recorded as an increase to "Goodwill."
The estimated fair value of identifiable intangible assets and their estimated useful lives are as follows:
(dollars in millions)Fair Value Useful Lives
Customer relationships$108.0
 15 years
Trade name16.0
 10 years
Technology10.0
 10 years
Total identifiable intangible assets$134.0
  
Identifiable intangible assets are amortized over their useful lives based on a number of assumptions including the estimated period of economic benefit and utilization. The weighted-average amortization period for identifiable intangible assets acquired in the OnX acquisition is 14 years.
The goodwill for OnX is attributable to increased access to a diversified customer base and acquired workforce in the United States, Canada and the United Kingdom. The amount of goodwill related to OnX that is expected to be deductible for income tax purposes is $2.3 million.
Pro Forma Information (Unaudited)
The following table provides the unaudited pro forma results of operations for the three and six months ended June 30, 2017 as if OnX had been acquired as of the beginning of fiscal year 2016. Revenue has been retrospectively adjusted for the adoption of ASC 606 to reflect hardware revenue in the Infrastructure Solutions category net of related cost of products. These results include adjustments related to the financing of the acquisition, to increase depreciation and amortization associated with the higher values of property, plant and equipment and intangible assets, to increase interest expense for the additional debt incurred to complete the acquisition, and to reflect the related income tax effect and change in tax status. The pro forma information does not necessarily reflect the actual results of operations had the acquisition been consummated at the beginning of the annual reporting period indicated nor is it necessarily indicative of future operating results. The pro forma information does not include any (i) potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition or (ii) transaction or integration costs relating to the acquisition.
 Three Months EndedSix Months Ended
 June 30,June 30,
(dollars in millions, except per share amounts)20172017
Revenue$313.1
$611.6
Net (loss) income applicable to common shareholders(5.5)48.6
Earnings per share:  
         Basic and diluted earnings (loss) per common share(0.13)1.15
Other Acquisition Activity
On February 28, 2017, the Company acquired 100% of SunTel Services ("SunTel"), a private company that provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cash consideration of $10.0 million. Based on final fair value assessment and the finalization of the working capital adjustment, the acquired assets and liabilities assumed consisted primarily of property, plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1 million and goodwill of $4.6 million. These assets and liabilities are included in the IT Services and Hardware segment.

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Form 10-Q Part ICincinnati Bell Inc.

5.    Goodwill and Intangible Assets
Goodwill
The changes in the Company's goodwill consisted of the following:
  IT Services and Hardware Entertainment and Communications Total Company
(dollars in millions)      
Goodwill, balance as of December 31, 2017 $148.8
 $2.2
 $151.0
Activity during the year      
Adjustments to prior year acquisitions 0.7
 —
 0.7
Currency translations (2.3) —
 (2.3)
Goodwill, balance as of June 30, 2018 $147.2
 $2.2
 $149.4
On January 1, 2018, the Company changed the composition of its operating segments to align more closely with the Company's broader strategy and how it manages business operations. This strategy groups CLEC revenue, which was previously included as part of the Entertainment and Communications segment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. As a result of the change, $9.7 million of goodwill related to CBTS Technology Solutions LLC ("CBTS TS") was reclassified from the Entertainment and Communications segment to the IT Services and Hardware segment for the period ending December 31, 2017. For further information related to these business segments see Note 11.

No impairment losses were recognized in goodwill for the three and six months ended June 30, 2018 and 2017.
Intangible Assets
The Company’s intangible assets consisted of the following:
  June 30, 2018 December 31, 2017
  Gross Carrying Accumulated Net Gross Carrying Accumulated Net
(dollars in millions) 
Amount (a)
 Amortization Amount 
Amount (a)
 Amortization Amount
Customer relationships $114.3
 $(12.6) $101.7
 $116.0
 $(8.9) $107.1
Trade names 15.0
 (1.1) 13.9
 15.9
 (0.4) 15.5
Technology 9.8
 (0.7) 9.1
 9.9
 (0.2) 9.7
Total $139.1
 $(14.4) $124.7
 $141.8
 $(9.5)
$132.3
(a) Change in gross carrying amounts is due to foreign currency translation.

Amortization expense for intangible assets subject to amortization was $2.3 million and $4.9 million for the three and six months ended June 30, 2018, respectively. Amortization expense for the three and six months ended June 30, 2017 was insignificant. No impairment losses were recognized for the three and six months ended June 30, 2018 and 2017.


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6.    Debt and Other Financing Arrangements
The Company’s debt consists of the following:
 
June 30, December 31,
(dollars in millions)June 30,
2017		 December 31,
2016		2018 2017
Current portion of long-term debt:      
Credit Agreement - Tranche B Term Loan due 2024$4.5
 $6.0
Capital lease obligations and other debt$10.8
 $7.5
12.3
 12.4
Current portion of long-term debt10.8
 7.5
16.8
 18.4
Long-term debt, less current portion:      
Receivables Facility—
 89.5
Corporate Credit Agreement - Tranche B Term Loan315.8
 315.8
Credit Agreement - Tranche B Term Loan due 2024595.5
 594.0
7 1/4% Senior Notes due 2023

22.3
 22.3
22.3
 22.3
7% Senior Notes due 2024
625.0
 625.0
7% Senior Notes due 2024

625.0
 625.0
8% Senior Notes due 2025350.0
 350.0
Cincinnati Bell Telephone Notes87.9
 87.9
87.9
 87.9
Capital lease obligations and other debt67.9
 62.0
65.6
 70.5
1,118.9
 1,202.5
1,746.3
 1,749.7
Net unamortized premium8.2
 8.5
1.8
 1.9
Unamortized note issuance costs(11.0) (11.9)(20.8) (22.3)
Long-term debt, less current portion1,116.1
 1,199.1
1,727.3
 1,729.3
Total debt$1,126.9
 $1,206.6
$1,744.1
 $1,747.7

Corporate Credit Agreement

There were no outstanding borrowings on the Corporate Credit Agreement's revolving credit facility, leaving $150.0$200.0 million available for borrowings as of June 30, 2017.2018. This revolving credit facility expires in January 2020.October 2022.

In April 2018, the Company amended its Credit Agreement dated as of October 2, 2017 to reduce the applicable margin on the Tranche B Term Loan due 2024 and revolving credit facility with respect to LIBOR borrowings from the previous 3.75% per annum to 3.25% per annum and, with respect to adjusted base rate borrowings, from the previous 2.75% per annum to 2.25% per annum. The letter of credit fees were reduced from the previous 3.75% per annum to 3.25% per annum. As a result of amending the Credit Agreement, a loss on extinguishment of debt is recorded in the second quarter of $1.3 million.

Accounts Receivable Securitization Facility

As of June 30, 2017,2018, the Company had no borrowings and $6.3$6.7 million of letters of credit outstanding under the accounts receivable securitization facility ("Receivables Facility"), leaving $100.1$154.2 million remaining availability on the total borrowing capacity of $106.4$160.9 million. In the second quarter of 2017,2018, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase the credit availability and renew the facility, which is subject to renewal every 364 days, until May 2018.2019. The facility'samended Receivables Facility extends the termination date is into May 20192021 and wasincludes an option to sell certain receivables on a non-recourse basis. As of June 30, 2018, the Company has not changed by this amendment.exercised its option to sell such accounts receivable. In the event the Receivables Facility is not renewed, the Company has the ability to refinance any outstanding borrowings with borrowings under the Corporate Credit Agreement. Under the terms of the Receivables Facility, the Company could obtain up to $120.0$250.0 million depending on the quantity and quality of accounts receivable. Under this agreement, certain U.S. and Canadian subsidiaries, oras originators, sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC (“CBF”) or Cincinnati Bell Funding Canada Ltd. ("CBFC"). Although CBF is aand CBFC are wholly-owned consolidated subsidiarysubsidiaries of the Company, CBF isand CBFC are legally separate from the Company and each of the Company’s other subsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF or CBFC, such accounts receivable are legally assets of CBF and CBFC and, as such, are not available to creditors of the Company's other subsidiaries or the Company.

Cincinnati Bell Telephone Notes
In April 2017, the Company filed Form 15 with the SEC to de-list the Cincinnati Bell Telephone Notes ("CBT Notes") due to the number of registrants no longer exceeding 300. Therefore, the Company is no longer required to prepare supplemental guarantor information related to the CBT Notes.parent company.


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Commitment LetterOther Financing Arrangements
On July 9, 2017, in connection with the execution of the merger agreement with Hawaiian Telcom
The IT Services and the execution of the merger agreement with OnX, the Company alsoHardware segment entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc. (the “Committed Party”). Pursuantlease in June 2018 for a building to the Commitment Letter, the Committed Party has committeduse in its data center operations. Structural improvements were made to provide the Company with $1,100 million senior secured credit facilities (the “Credit Facilities”), consisting of (i) a $150 million revolving credit facility with a maturity of five years and (ii) term loanthese leased facilities in an aggregate amount equalexcess of normal tenant improvements and, as such, we are deemed the accounting owner of these facilities. As of June 30, 2018, the liability related to $950these financing arrangements was $5.2 million, with a maturity of seven years, to be made available to the Company to finance the transactions contemplated by the OnX Merger Agreement and the Hawaiian Telcom Merger Agreement upon the closings thereof, subject to certain terms and conditions set forthwhich was recognized within "Other noncurrent liabilities" in the Commitment Letter. Proceeds from the Credit Facilities will be used to repay Hawaiian Telcom’s existing indebtedness, refinance the Company’s existing revolving credit facility and term loan facility, pay the cash portion of the consideration for the Hawaiian Telcom Merger, pay the cash consideration for OnX Merger on a cash-free, debt-free basis, pay fees and expenses incurred in connection with the OnX Merger and the Hawaiian Telcom Merger and finance ongoing working capital and other general corporate needs. On July 27, 2017, the Commitment Letter was amended to include additional Lenders and to increase the total commitment to $1,130 million consisting of a $180 million revolving credit facility and $950 million term loan. The Company is also exploring the possibility of replacing a portion of the secured committed term loan with unsecured senior notes, subject to market conditions.
The Credit Facilities are subject to the negotiation of mutually acceptable credit or loan agreements and other mutually acceptable definitive documentation, which will include certain representations and warranties, affirmative and negative covenants, financial covenants, events of default and collateral and guarantee agreements that are customarily required for similar financings. Additionally, the Committed Party’s obligation to provide the financing is subject to the satisfaction of specified conditions and the accuracy of specified representations. 
The documentation governing the Credit Facilities has not been finalized and accordingly the actual terms may differ from the description of such terms in the foregoing summary of the Commitment Letter.

Condensed Consolidated Balance Sheets.


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4.7.    Restructuring and Severance
Liabilities have been established for employee separations and lease abandonment. A summary of activity in the restructuring and severance liability is shown below:
(dollars in millions)
Employee
Separation
 
Lease
Abandonment
 Total
Employee
Separation
 
Lease
Abandonment
 Total
Balance as of December 31, 2016$11.0
 $0.2
 $11.2
Balance as of December 31, 2017$14.4
 $0.1
 $14.5
Charges25.6
 —
 25.6
0.3
 —
 0.3
Utilizations(12.7) —
 (12.7)(7.3) —
 (7.3)
Balance as of March 31, 201723.9
 0.2
 24.1
Balance as of March 31, 20187.4
 0.1
 7.5
Charges3.6
 —
 3.6
3.8
 0.8
 4.6
Utilizations(4.4) —
 (4.4)(0.9) —
 (0.9)
Balance as of June 30, 2017$23.1
 $0.2
 $23.3
Balance as of June 30, 2018$10.3
 $0.9
 $11.2

InHeadcount related restructuring and severance charges of $3.8 million recorded in the second quarter of 2017, the Company initiated reorganizations within both segments of the business2018 are related to costs incurred in order to more appropriately alignrecognize future synergies as the Company for future growth. Ascontinues to identify efficiencies with the integration of OnX. In addition, a result, head count reductions were made resultingrestructuring charge associated with lease abandonment of $0.8 million was recorded in a $3.6 million severance charge. In the firstsecond quarter of 2017, the Company finalized a voluntary severance program for certain bargained employees2018 related to an initiativeoffice space that will no longer be utilized. During the three and six months ended June 30, 2018, the Company made severance payments related to employee separations associated with initiatives to reduce field and network costs within our legacy copper network. As a result, a severance charge of $25.6 million was recorded to the Entertainmentnetwork and Communicationsheadcount reductions in our IT Services and Hardware segment. The Company made severance payments during the six months ended June 30, 2017 for employee separations associated with the previously discussed initiatives.
Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Lease payments on abandoned facilities will continue through 2019.2020.
A summary of restructuring activity by business segment is presented below:
(dollars in millions)Entertainment and Communications IT Services and Hardware Corporate TotalEntertainment and Communications IT Services and Hardware Corporate Total
Balance as of December 31, 2016$7.5
 $3.0
 $0.7
 $11.2
Balance as of December 31, 2017$12.3
 $2.2
 $—
 $14.5
Charges25.6
 —
 —
 25.6
—
 0.3
 —
 0.3
Utilizations(9.8) (2.3) (0.6) (12.7)(5.7) (1.6) —
 (7.3)
Balance as of March 31, 201723.3
 0.7
 0.1
 24.1
Balance as of March 31, 20186.6
 0.9
 —
 7.5
Charges1.3
 2.3
 —
 3.6
—
 4.6
 —
 4.6
Utilizations(3.6) (0.8) —
 (4.4)(0.3) (0.6) —
 (0.9)
Balance as of June 30, 2017$21.0
 $2.2
 $0.1
 $23.3
Balance as of June 30, 2018$6.3
 $4.9
 $—
 $11.2
At June 30, 20172018 and December 31, 2016, $12.72017, $8.8 million and $7.4$12.0 million, respectively, of the restructuring and severance liabilities were included in “Other current liabilities.” At June 30, 20172018 and December 31, 2016, $10.62017, $2.4 million and $3.8$2.5 million, wasrespectively, were included in "Other noncurrent liabilities,liabilities." respectively.

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8.    Financial Instruments and Fair Value Measurements
Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements, the Company uses a three-level hierarchy that prioritizes the use of observable inputs. The three levels are:

Level 1 — Quoted market prices for identical instruments in an active market;

Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets
or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable
market data by correlation or other means (market corroborated inputs); and

Level 3 — Unobservable inputs that reflect management's determination of assumptions that market participants
would use in pricing the asset or liability. These inputs are developed based on the best information available,
including our own data.

The determination of where an asset or liability falls in the hierarchy requires significant judgment.

Interest Rate Swaps
The Company uses interest rate swap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate swaps involve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the underlying notional amounts between parties. The Company has one forward starting non-amortizing interest rate swap with a total notional amount of $300.0 million to convert variable rate debt to fixed rate debt. The interest rate swap became effective in June 2018 and expires in June 2023. The interest rate swap results in interest payments based on an average fixed rate of 2.938% plus the applicable margin per the requirements in the Credit Agreement (see Note 6). During the next twelve months, the Company estimates that $1.6 million will be reclassified as an increase to interest expense.

The Company has agreements with its derivative financial instrument counter-parties that contain provisions where if the Company defaults on the indebtedness associated with its derivative financial instruments, then the Company could also be declared in default on its derivative financial instrument obligations. The Company minimizes this risk by evaluating the creditworthiness of our counter-parties, which are limited to major banks and financial institutions.

Upon inception, the interest rate swaps were designated as a cash flow hedge under ASC 815, with gains and losses, net of tax, measured on an ongoing basis recorded in accumulated other comprehensive income (loss). As of June 30, 2018, the fair value of the interest rate swap was $1.9 million and is recorded in "Other current liabilities" on the Condensed Consolidated Balance Sheet. The fair value of the interest rate swap is categorized as Level 2 in the fair value hierarchy as it is based on well recognized financial principles and available market data.
 June 30, 2018
(dollars in millions)June 30, 2018 Quoted Prices in active markets Level 1 Significant observable inputs Level 2 Significant unobservable inputs Level 3
Liabilities:       
Interest Rate Swap$1.9
 $—
 $1.9
 $—






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5.Disclosure on Financial Instruments and Fair Value Measurements
The carrying values of the Company's financial instruments approximate the estimated fair values as of June 30, 20172018 and December 31, 20162017, except for the Company's long-term debt.debt, certain other financing arrangements and interest rate swap. The carrying and fair values of these financial instrumentsitems are as follows: 
June 30, 2017 December 31, 2016June 30, 2018 December 31, 2017
(dollars in millions)Carrying Value Fair Value Carrying Value Fair ValueCarrying Value Fair Value Carrying Value Fair Value
Long-term debt, including current portion*$1,059.3
 $1,083.6
 $1,149.2
 $1,177.9
$1,687.0
 $1,607.7
 $1,687.1
 $1,687.5
Other financing arrangements5.2
 5.3
 —
 —
Interest Rate Swap1.9
 1.9
 —
 —
*Excludes capital leases and note issuance costs.              

The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at June 30, 20172018 and December 31, 2016,2017, which is considered Level 2 of the fair value hierarchy. The fair value of other financing arrangements was calculated using a discounted cash flow model that incorporates current borrowing rates for obligations of similar duration, which is considered level 3 of the fair value hierarchy. As of June 30, 2018, the current borrowing rate was estimated by applying Cincinnati Bell's credit spread to the risk-free rate for a similar duration borrowing.


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Form 10-Q Part ICincinnati Bell Inc.

9.    Pension and Postretirement Plans
The Company sponsors three noncontributory defined benefit plans and a postretirement health and life insurance plan. For the three and six months ended June 30, 2017, approximately 14% and 13% of the costs, respectively, were capitalized as a component of property, plant and equipment related to construction of our copper and fiber networks. ForIn accordance with ASU 2017-07, retrospectively adopted effective January 1, 2018, only the service cost component of net benefit cost is eligible for capitalization on a prospective basis, which was immaterial for the three and six months ended June 30, 2016, approximately 10% of the costs were capitalized as a component of property, plant and equipment related to construction of our copper and fiber networks.2018.
For the three and six months ended June 30, 20172018 and 2016,2017, pension and postretirement benefit costs (benefits) were as follows:
Three Months Ended June 30,Three Months Ended June 30, 2018
2017 2016 2017 20162018 2017 2018 2017
(dollars in millions)Pension Benefits 
Postretirement and
Other Benefits
Pension Benefits 
Postretirement and
Other Benefits
Service cost$—
 $—
 $—
 $—
$—
 $—
 $—
 $—
Other components of pension and postretirement benefit plans expense:       
Interest cost on projected benefit obligation4.9
 4.8
 0.8
 0.9
4.1
 4.9
 0.8
 0.8
Expected return on plan assets(6.5) (6.8) —
 —
(6.2) (6.5) —
 —
Amortization of:              
Prior service benefit—
 —
 (1.1) (3.7)—
 —
 (0.8) (1.1)
Actuarial loss4.4
 4.8
 1.2
 1.3
4.2
 4.4
 1.1
 1.2
Total amortization4.4
 4.8
 0.1
 (2.4)4.2
 4.4
 0.3
 0.1
Pension / postretirement costs (benefits)$2.8
 $2.8
 $0.9
 $(1.5)
Pension / postretirement costs$2.1
 $2.8
 $1.1
 $0.9
Six Months Ended June 30,Six Months Ended June 30, 2018
2017 2016 2017 20162018 2017 2018 2017
(dollars in millions)Pension Benefits 
Postretirement and
Other Benefits
Pension Benefits 
Postretirement and
Other Benefits
Service cost$—
 $—
 $0.1
 $0.1
$—
 $—
 $0.1
 $0.1
Other components of pension and postretirement benefit plans expense:       
Interest cost on projected benefit obligation9.7
 9.6
 1.6
 1.7
8.3
 9.7
 1.6
 1.6
Expected return on plan assets(13.0) (13.6) —
 —
(12.4) (13.0) —
 —
Amortization of:              
Prior service benefit—
 —
 (2.2) (7.4)—
 —
 (1.6) (2.2)
Actuarial loss8.8
 9.6
 2.3
 2.5
8.5
 8.8
 2.1
 2.3
Total amortization8.8
 9.6
 0.1
 (4.9)8.5
 8.8
 0.5
 0.1
Pension / postretirement costs (benefits)

$5.5
 $5.6
 $1.8
 $(3.1)
Pension / postretirement costs$4.4
 $5.5
 $2.2
 $1.8

Amortizations of prior service benefit and actuarial loss represent reclassifications from accumulated other comprehensive income.


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Form 10-Q Part ICincinnati Bell Inc.

Based on current assumptions, contributions to qualified and non-qualified pension plans in 20172018 are expected to be approximately $2$4 million each.and $3 million, respectively. Management expects to make cash payments of approximately $9 million related to its postretirement health plans in 2017.2018.

For the six months ended June 30, 2017,2018, contributions to the pension plans were $1.8$2.8 million and contributions to the postretirement plan were $4.0$3.5 million.



7.10.    Shareowners' Deficit
Accumulated Other Comprehensive Loss
For the six months ended June 30, 2017,2018, the changes in accumulated other comprehensive loss by component were as follows:
(dollars in millions)Unrecognized Net Periodic Pension and Postretirement Benefit Cost Unrealized gain on Investment in CyrusOne Foreign Currency Translation Loss Total
Balance as of December 31, 2016$(157.6) $68.1
 $(0.8) $(90.3)
Unrealized gain on Investment in CyrusOne, net—
 8.3
(a)—
 8.3
Reclassifications, net5.7
(b)(76.4)(c)—
 (70.7)
Balance as of June 30, 2017$(151.9) $—
 $(0.8) $(152.7)
(dollars in millions)Unrecognized Net Periodic Pension and Postretirement Benefit Cost Unrealized Loss on Cash Flow Hedge Foreign Currency Translation Loss Total
Balance as of December 31, 2017$(173.1) $—
 $(0.6) $(173.7)
Reclassifications, net7.0
(a)—
 —
 7.0
Unrealized loss on cash flow hedge arising during the period, net—
 (1.5)(b)—
 (1.5)
Foreign currency loss—
 —
 (4.3) (4.3)
Balance as of June 30, 2018$(166.1) $(1.5) $(4.9) $(172.5)
(a)The unrealized gain on Investment in CyrusOne, net of tax, represents changes in the fair value of CyrusOne shares of common stock owned by the company during the period, before any subsequent sales of those shares.
(b)These reclassifications are included in the other components of net periodic pension and postretirement benefit costsplans expense and represent amortization of prior service benefit and actuarial loss, net of tax (see Note 69 for additional details). The other components of net periodic pension and postretirement benefit costplans expense are reported within "Costrecorded in "Other components of services," "Cost of products sold,"pension and "Selling, general and administrative" expensespostretirement benefit plans expense" on the Condensed Consolidated Statements of Operations. See Note 9 for further disclosures.
(c)(b)These reclassifications are reported within "GainIn June 2018, the Company entered into an interest rate swap agreement to minimize its exposure to interest rate fluctuations on salevariable rate debt. The interest rate swap is considered a derivative instrument and qualifies for cash flow hedge accounting in accordance with ASC 815. The unrealized loss on cash flow hedge represents the change in the fair value of Investmentthe derivative instrument that occurred during the period, net of tax. This unrealized loss is recorded in CyrusOne""Other noncurrent liabilities" on the Condensed Consolidated Statements of Operations.Balance Sheets.

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Form 10-Q Part I Cincinnati Bell Inc.

8.11.    Business Segment Information
On January 1, 2018, the Company changed the composition of its operating segments to align more closely with the Company's broader strategy and how it manages business operations. This strategy groups CLEC revenue, which was previously included as part of the Entertainment and Communications segment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. Accordingly, the Company recast the previously reported 2017 segment disclosures to conform to the new segmentation.

Effective January 1, 2018, we adopted the requirements of ASU 2014-09, Revenue from Contracts with Customers, and ASU 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost. As a result of adopting these standards, certain prior period amounts reported below have been restated to conform to current period presentation.

The Company’s segments are strategic business units that offer distinct products and services and are aligned with itsthe Company's internal management structure and reporting. The Entertainment and Communications segment provides products and services suchthat can be categorized as data transport,Data, Video, Voice or Other. Data products include high-speed internet video, localaccess, digital subscriber lines, ethernet, SONET, dedicated internet access, wavelength and digital signal. These products are used to transport large amounts of data over private networks. Video services provide our Fioptics customers access to over 400 entertainment channels, over 140 high-definition channels, parental controls, HD DVR, Video On-Demand and access to a Fioptics live TV streaming application. Voice represents traditional voice lines as well as Fioptics voice lines, consumer long distance, voice over internet protocol ("VoIP")switched access and otherdigital trunking. Other services consists of revenue generated from wiring projects for enterprise customers, advertising, directory assistance, maintenance and information services.

The IT Services and Hardware segment provides a range of fully managedend-to-end solutions from consulting to implementation to ongoing optimization. These solutions include Cloud, Communications and outsourced IT and telecommunicationsConsulting services along with the sale, installation and maintenance of major branded Telecom and IT hardware.hardware reported as Infrastructure Solutions.

Certain corporate administrative expenses have been allocated to the segments based upon the nature of the expense and the relative size of the segment. Intercompany transactions between segments have been eliminated.


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Form 10-Q Part ICincinnati Bell Inc.

Selected financial data for the Company’s business segment information is as follows:

Three Months Ended Six Months EndedThree Months Ended Six Months Ended
June 30, June 30,June 30, June 30,
(dollars in millions)2017
2016 2017 20162018
2017 2018 2017
Revenue              
Entertainment and Communications$201.4
 $192.5
 $396.7
 $382.8
$173.9
 $181.0
 $348.1

$356.1
IT Services and Hardware96.0
 109.8
 182.2
 212.3
128.3
 84.8
 255.9
 165.8
Intersegment(3.4) (3.1) (6.7) (7.0)(5.4) (6.4) (11.5) (12.9)
Total revenue$294.0
 $299.2
 $572.2
 $588.1
$296.8
 $259.4
 $592.5
 $509.0
Intersegment revenue              
Entertainment and Communications$0.5
 $0.2
 $0.9
 $0.6
$4.7
 $5.3
 $9.9
 $10.7
IT Services and Hardware2.9
 2.9
 5.8
 6.4
0.7
 1.1
 1.6
 2.2
Total intersegment revenue$3.4
 $3.1
 $6.7
 $7.0
$5.4
 $6.4
 $11.5
 $12.9
Operating income       
Operating income (loss)       
Entertainment and Communications$26.4
 $27.2
 $24.8
 $54.9
$25.5
 $31.4
 $54.1
 $34.5
IT Services and Hardware0.6
 6.9
 3.1
 14.1
(0.2) (1.5) 1.2
 (0.6)
Corporate(6.1) (6.7) (12.3) (12.0)(5.1) (5.5) (10.9) (11.3)
Total operating income$20.9
 $27.4
 $15.6
 $57.0
Expenditures for long-lived assets       
Total operating income (loss)$20.2
 $24.4
 $44.4
 $22.6
Expenditures for long-lived assets*       
Entertainment and Communications$48.0
 $55.3
 $97.5
 $115.6
$31.8
 $45.5
 $59.4
 $92.3
IT Services and Hardware2.5
 3.8
 17.3
 5.8
6.5
 5.0
 14.4
 22.5
Corporate—
 0.1
 —
 0.2
Total expenditures for long-lived assets$50.5
 $59.2
 $114.8
 $121.6
$38.3
 $50.5
 $73.8
 $114.8
Depreciation and amortization              
Entertainment and Communications$43.2
 $41.6
 $85.2
 $81.8
$41.0
 $40.4
 $81.9
 $79.8
IT Services and Hardware3.7
 3.2
 7.5
 6.4
9.9
 6.5
 20.1
 12.9
Corporate0.1
 —
 0.1
 —
—
 0.1
 0.1
 0.1
Total depreciation and amortization$47.0
 $44.8
 $92.8
 $88.2
$50.9
 $47.0
 $102.1
 $92.8
* Includes cost of acquisitions

       
       June 30, December 31,    
June 30,
2017		 December 31,
2016		    
(dollars in millions)2018 2017    
Assets              
Entertainment and Communications$1,111.8
 $1,093.5
    $1,103.8
 $1,111.4
    
IT Services and Hardware94.7
 60.0
    395.9
 482.7
    
Corporate and eliminations275.2
 387.5
    666.4
 593.5
    
Total assets$1,481.7
 $1,541.0
 

 

$2,166.1
 $2,187.6
    


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Form 10-Q Part I Cincinnati Bell Inc.

12.    Subsequent Events
On July 2, 2018, the Company completed its previously announced merger of Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom") for total consideration totaling $657.7 million consisting of $536.5 million in cash, and $121.2 million in stock consideration. In order to fund the acquisition on July 2, 2018, the Company utilized its proceeds from the 8% Senior Notes due 2025 and drew $35.0 million and $154.0 million on the revolving credit facility and the accounts receivable securitization facility, respectively. With the merger, the Company gains access to both Honolulu, a well-developed, fiber-rich city, as well as the growing neighbor islands. The companies' combined fiber networks will exceed 14,000 fiber route miles. In addition, Hawaiian Telcom provides the Company with direct access to the 2.6TB of Trans-Pacific fiber cable capacity linking Asia and the U.S., which expands the Company's route diversity and gives the combined company exposure to demographics on both sides of the Pacific.

The initial accounting for the business combination was not complete at the time the financial statements were issued due to the timing of the acquisition and the filing of this Quarterly Report on Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, are not possible at this time.



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Form 10-Q Part ICincinnati Bell Inc.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain forward-looking statements regarding future events and results that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” or variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, anticipated growth and trends in businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the caption “Risk Factors” in Part II, Item 1A, and those discussed in other documents the Company filed with the Securities and Exchange Commission (“SEC”). Actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements for any reason.

Introduction
This Management’s Discussion and Analysis section provides an overview of Cincinnati Bell Inc.'s financial condition as of June 30, 20172018, and the results of operations for the three and six months ended June 30, 20172018 and 2016.2017. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and accompanying notes, as well as the Company’s Annual Report on Form 10-K for the year ended December 31, 20162017. Results for interim periods may not be indicative of results for the full year or any other interim period.


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Form 10-Q Part ICincinnati Bell Inc.

Executive Summary

Segment results described in the Executive Summary and Consolidated Results of Operations sections are net of intercompany eliminations.
Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provides integrated communications and IT solutions that keep residentialconsumer and businessenterprise customers connected with each other and with the world. Through its Entertainment and Communications segment, the Company provides high speed data, video,Data, Video, and voiceVoice solutions to consumersconsumer and businessesenterprise customers over an expanding fiber network and a legacy copper network. In addition, businessenterprise customers across the United States, Canada and Europe rely on Cincinnati Bell Technology Solutions Inc. ("CBTS"), a wholly-owned subsidiary, reported as the IT Services and Hardware segment for the sale and service of efficient, end-to-end communications and IT systems and solutions.
Consolidated revenue totaling $294.0$296.8 million and $572.2$592.5 million for the three and six months ended June 30, 2017,2018, respectively, decreasedincreased $37.4 million and $83.5 million compared to the prior year primarilysame periods in 2017 due to the $8.7 million and $19.6 million decline in Telecom and IT hardware salesdemand for both our fiber offerings, as well as declining serviceIT services, which includes results from acquisitions completed in 2017. The acquisition of OnX Holdings LLC ("OnX") contributed $45.3 million and $90.6 million of revenue as our customers continued to in-source IT professionals. Forin the three and six months ended June 30, 2017,2018. Fioptics revenue from our strategic products totaled $171.5increased $8.3 million and $336.1 million, respectively, up 9% from both prior year comparable periods. These increases were offset by declining legacy sales and the above mentioned changes in the IT Services and Hardware segment.
Operating income was $20.9 million and $15.6$17.6 million for the three and six months ended June 30, 2017,2018, respectively, compared to the same periods in 2017.
Operating income was $20.2 million for the three months ended June 30, 2018, down from$4.2 million compared to the prior yearyear. The contribution from incremental OnX revenue was offset by increased depreciation, amortization, and Selling, General and Administrative ("SG&A") expense, also related to the acquisition of OnX. Operating income was $44.4 million for the six months ended June 30, 2018, up $21.8 million compared to the same period in 2017 primarily due to the acquisition of OnX as well as a decrease in large part to restructuring and severance related charges. Restructuring and severance related charges were incurred for the three months ended March 31, 2017 in order to reduce field and network costs associated with our legacy copper network, reorganizations within both segments of the business in order to adjust to the increased in-sourcing of IT professionals by our customers, as well as appropriately aligning the Company for future growth. Netnetwork.
Loss before income taxes totaled $2.1$15.3 million and $62.5$24.8 million for the three and six months ended June 30, 2018, respectively, down compared to the same periods in 2017. Decrease in both comparable periods is primarily due to increased interest expense due to additional debt acquired in the third quarter of 2017 respectively, includingto fund the $117.7 millionacquisition of OnX in October 2017 and the merger with Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom") that closed on July 2, 2018. In addition, a gain recognized on the sale of 2.8our investment in CyrusOne of $117.7 million CyrusOne Inc. common shareswas recorded in the first quarter of 2017, contributing to the $123.6 million decrease for the six months ended June 30, 2018 as compared to the same period in 2017.


16
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Form 10-Q Part I Cincinnati Bell Inc.

Consolidated Results of Operations
On January 1, 2018, the Company changed the composition of its operating segments to align more closely with the Company's broader strategy and how it manages business operations. This strategy groups Competitive Local Exchange Carrier ("CLEC") revenue, which was previously included as part of the Entertainment and Communications segment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. Accordingly, the Company recast the previously reported 2017 segment disclosures. See Note 11 to the Condensed Consolidated Financials for all required disclosures.

Effective January 1, 2018, the Company adopted the requirements of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, and ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As a result of adopting these standards, certain prior period amounts reported below have been restated to conform to current period presentation. Refer to the Notes of the Condensed Consolidated Financial Statements for further explanation of these amounts.
Revenue
Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Service revenue               
Revenue               
Entertainment and Communications$200.0
 $191.2
 $8.8
 5 % $394.2
 $380.2
 $14.0
 4 %$169.2
 $175.7
 $(6.5) (4)% $338.2
 $345.4 $(7.2) (2)%
IT Services and Hardware48.6
 53.7
 (5.1) (9)% 96.3
 106.2
 (9.9) (9)%127.6
 83.7
 43.9
 52 % 254.3
 163.6
 90.7
 55 %
Total service revenue$248.6
 $244.9
 $3.7
 2 % $490.5
 $486.4
 $4.1
 1 %
Total revenue$296.8
 $259.4
 $37.4
 14 % $592.5
 $509.0
 $83.5
 16 %
Entertainment and Communications revenue increased asdecreased due to a one time project in Enterprise Fiber completed in the growthsecond quarter of 2017 for $5.4 million. Additionally, declines in Legacy revenue exceeded increases in Fioptics and other strategic services offset legacy declines. Fioptics revenue totaled $77.0 million for the three months ended June 30, 2017 and $150.6 million for the six months then ended, up 24% and 25% from prior yearin both comparable periods, respectively.periods. IT Services and Hardware revenue declinedincreased primarily due to decreasesthe acquisition of OnX that closed in billable headcount as a resultthe fourth quarter of increased in-sourcing of IT professionals by our customers.
 Three months ended June 30, Six months ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change
Product revenue               
Entertainment and Communications$0.9
 $1.1
 $(0.2) (18)% $1.6
 $2.0
 $(0.4) (20)%
IT Services and Hardware44.5
 53.2
 (8.7) (16)% 80.1
 99.7
 (19.6) (20)%
Total product revenue$45.4
 $54.3
 $(8.9) (16)% $81.7
 $101.7
 $(20.0) (20)%
Product revenue is primarily driven by the volume of Telecom and IT hardware sales reflecting capital spending fluctuations by our enterprise customers in our IT Services and Hardware segment.2017.
Operating Costs
Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Cost of services               
Cost of services and products               
Entertainment and Communications$92.4
 $85.1
 $7.3
 9 % $182.4
 $168.9
 $13.5
 8 %$77.8
 $77.0
 $0.8
 1% $154.2
 $151.4
 $2.8
 2%
IT Services and Hardware34.3
 39.7
 (5.4) (14)% 69.8
 79.1
 (9.3) (12)%74.5
 51.9
 22.6
 44% 147.5
 101.6
 45.9
 45%
Total cost of services$126.7
 $124.8
 $1.9
 2 % $252.2
 $248.0
 $4.2
 2 %
Total cost of services and products$152.3
 $128.9
 $23.4
 18% $301.7
 $253.0
 $48.7
 19%
Entertainment and Communications costs increased primarilywere relatively flat compared to the same periods in the prior year. Increases in video content costs due to programming costs associated with our growing Fioptics video subscriber base, in addition to higher rates charged by our content providers, was offset by lower payroll and higher programming rates.benefits costs. In addition, there was a reduction in costs due to the one-time project that was recorded in the second quarter of the prior year. Lower payroll and benefits costs are related to headcount reductions made during restructuring initiatives that were executed in 2017. IT Services and Hardware costs declinedincreased due to fewer billable resources driven byhigher headcount as a result of the professional servicesacquisition of OnX, which contributed revenue reductions.
 Three months ended June 30, Six months ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change
Cost of products               
Entertainment and Communications$0.5
 $0.4
 $0.1
 25 % $1.0
 $0.9
 $0.1
 11 %
IT Services and Hardware38.2
 45.6
 (7.4) (16)% 67.0
 84.6
 (17.6) (21)%
Total cost of products$38.7
 $46.0
 $(7.3) (16)% $68.0
 $85.5
 $(17.5) (20)%
Cost of products are primarily impacted by changes in Telecom$45.3 million and IT hardware sales.$90.6 million for the three and six months ended June 30, 2018, respectively.

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Form 10-Q Part I Cincinnati Bell Inc.


Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Selling, general, and administrative               
Selling, general and administrative               
Entertainment and Communications$34.7
 $35.5
 $(0.8) (2)% $70.7
 $70.0
 $0.7
 1 %$29.0
—
$29.8
 $(0.8) (3)% $56.1
 $61.1
 $(5.0) (8)%
IT Services and Hardware16.8
 14.0
 2.8
 20 % 31.9
 27.4
 4.5
 16 %34.8
 20.4
 14.4
 71 % 72.5
 39.2
 33.3
 85 %
Corporate3.9
 6.7
 (2.8) (42)% 9.5
 12.0
 (2.5) (21)%2.3
 3.6
 (1.3) (36)% 5.9
 8.8
 (2.9) (33)%
Total selling, general and administrative$55.4
 $56.2
 $(0.8) (1)% $112.1
 $109.4
 $2.7
 2 %$66.1
 $53.8
 $12.3
 23 % $134.5
 $109.1
 $25.4
 23 %
Entertainment and Communications SG&A costs were down in the three and six months ended June 30, 2018 compared to the same periods in the prior year primarily due to lower payroll costs that are a result of headcount reductions from restructuring initiatives that were executed in 2017 and 2016. IT Services and Hardware SG&A costs were up primarily due to OnX contributing additional headcount, at branch office locations to support the expansion of our national footprint. Corporate SG&A decreased from a year ago largely driven by lower consulting expenses, as well as by additional stock-based compensation expense recorded in 2016other costs such as a result of changes in our stock price.rent and professional fees.
Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Depreciation and amortization expense                              
Entertainment and Communications$43.2
 $41.6
 $1.6
 4% $85.2
 $81.8
 $3.4
 4%$41.0
 $40.4
 $0.6
 1% $81.9
 $79.8
 $2.1
 3%
IT Services and Hardware3.7
 3.2
 0.5
 16% 7.5
 6.4
 1.1
 17%9.9
 6.5
 3.4
 52% 20.1
0.0
12.9
 7.2
 56%
Corporate0.1
 —
 0.1
 n/m
 0.1
 —
 0.1
 n/m
—
 0.1
 (0.1) n/m
 0.1
 0.1
 0.0
 n/m
Total depreciation and amortization expense$47.0

$44.8
 $2.2
 5% $92.8
 $88.2
 $4.6
 5%$50.9
 $47.0
 $3.9
 8% $102.1
 $92.8
 $9.3
 10%
The increase inEntertainment and Communications depreciation and amortization expense is primarily due to an increaseincreased in Entertainment and Communications depreciationboth comparable periods as a result of expanding our fiber-based network.
The increase in IT Services and Hardware depreciation and amortization expense in both comparable periods is primarily related to the amortization of intangible assets acquired as part of the SunTel and OnX acquisitions, as well as depreciation expense related to the property, plant and equipment obtained in these acquisitions.
Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Other operating costs                           
Restructuring and severance related charges$3.6
 $—
 $3.6
 n/m $29.2
 $—
 $29.2
 n/m$4.6
 $3.6
 $1.0
 28% $4.9
 $29.2
 $(24.3) (83)%
Other1.7
 —
 1.7
 n/m 2.3
 —
 2.3
 n/m
Total other$5.3
 $—
 $5.3
 n/m $31.5
 $—
 $31.5
 n/m
Transaction and integration costs2.7
 1.7
 1.0
 59% 4.9
 2.3
 2.6
 n/m
Total other operating costs$7.3
 $5.3
 $2.0
 38% $9.8
 $31.5
 $(21.7) (69)%
Headcount-related restructuring and severance charges of $3.8 million recorded in the second quarter of 2018 are related to costs incurred in order to recognize future synergies as the Company continues to identify efficiencies with the integration of OnX. In addition, a restructuring charge associated with lease abandonment of $0.8 million was recorded in the second quarter of 2018 related to an office space that will no longer be utilized. Restructuring and severance relatedseverance-related charges incurred by both segments in the second quarter of 2017 relate to company initiated reorganizations of the business in order to more appropriately align the Company for future growth. RestructuringAdditionally, restructuring and severance relatedseverance-related charges incurred by the Entertainment and Communications segment during the first quarter ofsix months ended June 30, 2017 were related to a voluntary severance program for certain bargained employees to reduce field and network costs associated with our legacy copper network. Other
Transaction costs recorded in the Corporate segment in 2018 are due to transactionthe acquisition of OnX that closed in the fourth quarter of 2017, as well as the merger with Hawaiian Telcom that closed on July 2, 2018. Transaction and integration costs resulting fromrecorded in 2017 are primarily due to costs associated with the acquisition of SunTel Services in the first quarter of 2017, as well as the pending merger agreements with Hawaiian Telcom and OnX committed to in July 2017. The combinations with OnX and Hawaiian Telcom are expected to close in the fourth quarter of 2017 and second half of 2018, respectively.

1830
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

Non-operating Costs
Three months ended June 30, Six months ended June 30,Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2017 2016 $ Change % Change 2017 2016 $ Change % Change2018 2017 $ Change % Change 2018 2017 $ Change % Change
Non-operating costs                              
Interest expense$18.1
 $19.9
 $(1.8) (9)% $36.1
 $40.2
 $(4.1) (10)%$31.8
 $18.1
 $13.7
 76% $62.6
 $36.1
 $26.5
 73%
Loss on extinguishment of debt, net—
 5.2
 (5.2) n/m
 —
 2.8
 (2.8) n/m
Gain on sale of CyrusOne investment—
 (118.6) 118.6
 n/m
 (117.7) (118.6) 0.9
 (1)%
Loss on extinguishment of debt1.3
 —
 1.3
 n/m
 1.3
 —
 1.3
 n/m
Other components of pension and postretirement benefit plans expense3.2
 3.2
 —
 —
 6.5
 6.4
 0.1
 2%
Gain on sale of Investment in CyrusOne—
 —
 —
 n/m
 —
 (117.7) 117.7
 n/m
Other income, net(0.6) (1.1) 0.5
 (45)% (1.0) (1.1) 0.1
 (9)%(0.8) (0.6) (0.2) 33% (1.2) (1.0) (0.2) 20%
Income tax expense1.3
 44.4
 (43.1) n/m
 35.7
 49.1
 (13.4) (27)%
Income tax (benefit) expense(1.5) 1.4
 (2.9) n/m
 (2.7) 35.9
 (38.6) n/m
Interest expense continuedincreased for the three and six months ended June 30, 2018 compared to decreasethe same periods in the prior year due to the Company primarily usingentering into the $600.0 million Tranche B Term Loan due 2024, as well as issuing $350.0 million 8% Senior Notes in the fourth quarter of 2017. The Company repaid the remaining $315.8 million Tranche B Term Loan due 2020 outstanding under its old Corporate Credit Agreement with the proceeds from the sale of a portion of its CyrusOne investment to repay debt in 2016.$600.0 million Tranche B Term Loan due 2024.
The Company recognized a realized gain of $117.7 million on the sale of 2.8 million CyrusOne common shares in the first quarter of 2017. In the second quarter of 2016, the Company recognized a realized gain of $118.6 million on the sale of 3.1 million shares of CyrusOne Inc. common stock.
Income tax expense decreased year over year primarily due to lower income before tax.tax, as well as the lower federal statutory tax rate due to tax reform. The Company expects to use federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities in 2017.2018.

1931
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Form 10-Q Part I Cincinnati Bell Inc.

Entertainment and Communications
The Entertainment and Communications segment provides products and services suchthat can be categorized as data transport, high-speed internet, video, local voice, long distance, VoIP and other services.either Fioptics, Enterprise Fiber or Legacy. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of the Company, is the incumbent local exchange carrier ("ILEC") for a geography that covers a radius of approximately 25 miles around Cincinnati, Ohio, and includes parts of northern Kentucky and southeastern Indiana. CBT has operated in this territory for over 140145 years. Voice and data services in the Enterprise Fiber and Legacy categories that are delivered beyond itsthe Company's ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended Territories LLC ("CBET"), a competitive local exchange carrier ("CLEC") and subsidiary of CBT.

Fioptics products are delivered to both consumer and enterprise customers and include high-speed internet access, voice lines and video. The Company providesis able to deliver speeds of up to 30 megabits or more to approximately 72% of Greater Cincinnati.
Enterprise Fiber products include metro-ethernet, dedicated internet access, wavelength and small cell. As enterprise customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the preferred method due to its ability to support multiple applications on a single physical connection.
Legacy products include traditional voice lines, consumer long distance, switched access, digital trunking, DSL, DS0, DS1, DS3 and VoIPother value-added services primarily through its Cincinnati Bell Any Distance Inc. ("CBAD").such as caller identification, voicemail, call waiting and call return.

 Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2018 2017 Change % Change 2018 2017 Change % Change
Revenue:               
Data$84.4
 $90.1
 $(5.7) (6)% $169.3
 $174.5
 $(5.2) (3)%
Video39.7
 36.9
 2.8
 8 % 78.9
 72.8
 6.1
 8 %
Voice46.0
 50.5
 (4.5) (9)% 93.0
 102.2
 (9.2) (9)%
Other3.8
 3.5
 0.3
 9 % 6.9
 6.6
 0.3
 5 %
Total Revenue173.9
 181.0
 (7.1) (4)% 348.1
 356.1
 (8.0) (2)%
Operating costs and expenses:      

        
Cost of services and products78.4
 78.3
 0.1
 —
 156.0
 154.0
 2.0
 1 %
Selling, general and administrative29.0
 29.8
 (0.8) (3)% 56.1
 61.1
 (5.0) (8)%
Depreciation and amortization41.0
 40.4
 0.6
 1 % 81.9
 79.8
 2.1
 3 %
Restructuring and severance charges—
 1.1
 (1.1) n/m
 —
 26.7
 (26.7) n/m
Total operating costs and expenses148.4
 149.6
 (1.2) (1)% $294.0
 321.6
 (27.6) (9)%
Operating income$25.5
 $31.4
 $(5.9) (19)% $54.1
 $34.5
 $19.6
 57 %
Operating margin14.7% 17.3%   (2.6) pts
 15.5% 9.7%   6.0 pts
Capital expenditures$31.8
 $45.5
 $(13.7) (30)% $59.4
 $92.3
 $(32.9) (36)%

2032
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

Entertainment and Communications, continued

 Three Months Ended June 30, Six Months Ended June 30, 
(dollars in millions)2017 2016 Change % Change 2017 2016 Change % Change 
Revenue:    
 

     
 

 
Data$87.7
 $86.8
 $0.9
 1 % $175.3
 $172.0
 $3.3
 2 % 
Voice67.1
 69.1
 (2.0) (3)% 134.8
 139.3
 (4.5) (3)% 
Video37.2
 30.9
 6.3
 20 % 73.2
 59.9
 13.3
 22 % 
Services and Other9.4
 5.7
 3.7
 65 % 13.4
 11.6
 1.8
 16 % 
Total revenue201.4
 192.5
 8.9
 5 % 396.7
 382.8
 13.9
 4 % 
Operating costs and expenses:                
Cost of services and products95.8
 88.3
 7.5
 8 % 189.1
 176.1
 13.0
 7 % 
Selling, general and administrative34.7
 35.4
 (0.7) (2)% 70.7
 70.0
 0.7
 1 % 
Depreciation and amortization43.2
 41.6
 1.6
 4 % 85.2
 81.8
 3.4
 4 % 
Restructuring and severance charges1.3
 —
 1.3
 n/m
 26.9
 —
 26.9
 n/m
 
Total operating costs and expenses175.0
 165.3
 9.7
 6 % 371.9
 327.9
 44.0
 13 % 
Operating income$26.4
 $27.2
 $(0.8) (3)% $24.8
 $54.9
 $(30.1) (55)% 
Operating margin13.1% 14.1%   (1.0)pts6.3% 14.3%   (8.0)pts
Capital expenditures$48.0
 $55.3
 $(7.3) (13)% $97.5
 $115.6
 $(18.1) (16)% 
                 
Metrics information (in thousands):                
Fioptics units passed556.7
 478.7
 78.0
 16 %     
 

 
                 
Internet subscribers:                
DSL93.0
 121.7
 (28.7) (24)%     

 

 
Fioptics214.1
 175.0
 39.1
 22 %     

 

 
Total internet subscribers307.1
 296.7
 10.4
 4 % 

 

 

 

 
                 
Fioptics video subscribers142.8
 126.8
 16.0
 13 %     

 

 
                 
Residential voice lines:                
Legacy voice lines104.9
 131.7
 (26.8) (20)%         
Fioptics voice lines87.0
 77.4
 9.6
 12 %         
Total residential voice lines191.9
 209.1
 (17.2) (8)%         
Business voice lines                
Legacy voice lines177.3
 203.2
 (25.9) (13)%         
VoIP lines*146.2
 112.7
 33.5
 30 %         
Total business voice lines323.5
 315.9
 7.6
 2 %         
Total voice lines515.4
 525.0
 (9.6) (2)%     

 

 
                 
Long distance lines    

 

         
   Residential180.9
 193.8
 (12.9) (7)%         
   Business123.4
 135.5
 (12.1) (9)%         
Total Long Distance Lines304.3
 329.3
 (25.0) (8)%         
                 
* VoIP lines include Fioptics voice lines.

             
 Three Months Ended June 30, 
Metrics information (in thousands):2018 2017 Change % Change 
Fioptics        
Data    

 

 
Internet FTTP192.7
 168.1
 24.6
 15 % 
Internet FTTN42.6
 46.0
 (3.4) (7)% 
Total Fioptics Internet235.3
 214.1
 21.2
 10 % 
Video        
Video FTTP118.1
 112.8
 5.3
 5 % 
Video FTTN27.0
 30.0
 (3.0) (10)% 
Total Fioptics Video145.1
 142.8
 2.3
 2 % 
Voice        
Consumer Voice Lines89.1
 87.0
 2.1
 2 % 
Enterprise Voice Lines18.5
 15.2
 3.3
 22 % 
Total Fioptics Voice Lines107.6
 102.2
 5.4
 5 % 
Fioptics Units Passed    

 

 
Units passed FTTP449.3
 415.4
 33.9
 8 % 
Units passed FTTN139.9
 141.3
 (1.4) (1)% 
Total Fioptics units passed589.2
 556.7
 32.5
 6 % 
         
Enterprise Fiber        
Data        
Ethernet Bandwidth (Gb)4,133
 3,638
 495
 14 % 
         
Legacy        
Data        
DSL75.2
 93.0
 (17.8) (19)% 
Voice        
Consumer Voice Lines85.9
 104.9
 (19.0) (18)% 
Enterprise Voice Lines154.7
 177.3
 (22.6) (13)% 
Total Legacy Voice Lines240.6
 282.2
 (41.6) (15)% 
         
*Fiber to the Premise (FTTP), Fiber to the Node (FTTN)     




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Form 10-Q Part I Cincinnati Bell Inc.

Entertainment and Communications, continued

Revenue
Revenue
 Three Months ended June 30, Six Months ended June 30,  Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)(dollars in millions)2017 2016 2017 2016(dollars in millions) 2018 2017 2018 2017
Revenue:Revenue:       Revenue:        
Consumer       Fioptics        
 Strategic        Data $35.6
 $31.3
 $70.0
 $60.9
 Data$31.2
 $25.2
 $61.0
 $48.7
 Video 39.7
 36.9
 78.9
 72.8
 Voice6.1
 5.4
 12.0
 10.6
 Voice 9.5
 8.3
 18.6
 16.2
 Video36.5
 30.4
 71.9
 58.9
 Other 0.3
 0.3
 0.6
 0.6
 Services and other0.4
 0.9
 0.8
 1.8
 85.1
 76.8
 168.1
 150.5
 74.2
 61.9
 145.7
 120.0
Enterprise Fiber        
 Legacy        Data 21.0
 25.3
 41.8
—
45.0
 Data9.0
 11.8
 18.6
 24.0
Legacy        
 Voice16.9
 18.7
 34.7
 38.5
 Data 27.8
 33.5
 57.5
 68.6
 Services and other0.7
 1.1
 1.5
 2.2
 Voice 36.5
 42.2
 74.4
 86.0
 26.6
 31.6
 54.8
 64.7
 Other 3.5
 3.2
 6.3
 6.0
 Integration        67.8
 78.9
 138.2
 160.6
 Services and other—
 1.0
 0.1
 2.1
Total consumer revenue$100.8
 $94.5
 $200.6
 $186.8
        
Business       
 Strategic       
 Data$24.9
 $24.0
 $49.8
 $47.6
 Voice15.4
 12.5
 30.0
 24.5
 Video0.7
 0.5
 1.3
 1.0
 Services and other0.6
 0.5
 1.1
 0.9
 41.6
 37.5
 82.2
 74.0
 Legacy       
 Data4.7
 5.1
 9.2
 10.5
 Voice24.7
 28.4
 50.1
 57.4
 Services and other0.2
 0.3
 0.5
 0.6
 29.6
 33.8
 59.8
 68.5
 Integration       
 Services and other0.4
 0.5
 0.7
 0.9
Total business revenue$71.6
 $71.8
 $142.7
 $143.4
        
Carrier       
 Strategic       
 Data$10.1
 $11.6
 $20.8
 $22.6
 Services and other5.4
 —
 5.4
 —
 15.5
 11.6
 26.2
 22.6
 Legacy       
 Data7.8
 9.1
 15.9
 18.6
 Voice4.0
 4.1
 8.0
 8.3
 Services and other1.7
 1.4
 3.3
 3.1
 13.5
 14.6
 27.2
 30.0
Total carrier revenue$29.0
 $26.2
 $53.4
 $52.6
        
Total Entertainment and Communications revenueTotal Entertainment and Communications revenue$201.4
 $192.5
 $396.7
 $382.8
Total Entertainment and Communications revenue $173.9
 $181.0
 $348.1
 $356.1
Fioptics
Fioptics revenue has increased by $8.3 million for the three months ended June 30, 2018, compared to the same period a year ago due to increases in the subscriber base of voice, video and internet of 5%, 2% and 10%, respectively. An increase in rate has also contributed to increased revenue as Average Revenue Per User ("ARPU") has increased for voice, video and internet by 7%, 5% and 3%, respectively, compared to the prior year. ARPU increases are related to price increases for voice, video and internet, as well as the change in the mix of subscribers for video. Fioptics revenue has increased $17.6 million for the six months ended June 30, 2018, compared to the same period in the prior year as a result of the same trends impacting the quarter.
Enterprise Fiber
Enterprise Fiber revenue decreased year over year primarily due to a one-time project that was completed in the second quarter of 2017. Excluding prior year revenue of $5.4 million attributable to this project, Enterprise Fiber revenue increased slightly year over year. Increases in revenue related to enterprise customers migrating from legacy product offerings to higher bandwidth fiber solutions are offset with declines as carriers continue to groom their networks.
Legacy
Legacy revenue has decreased $11.1 million for the three months ended June 30, 2018, compared to the same period a year ago due to declines in both voice lines and DSL subscribers. Voice lines have declined 15% compared to the three months ended June 30, 2017, as the traditional voice lines become less relevant. DSL subscribers for the three months ended June 30, 2018 have decreased by 19% as subscribers demand the the higher speeds that can be provided by fiber, as evidenced by the 10% growth in our Fioptics internet subscribers. Legacy revenue decreased $22.4 million for the six months ended June 30, 2018 due to the same trends impacting the quarter. In addition, declines in DS0, DS1, DS3 and digital trunking have contributed to the revenue decline in both comparable periods as customers migrate away from these solutions to fiber-based solutions. Switched access also continues to decline in part due to the Federal Communications Commission mandated reductions in rates for terminating switched access.

2234
Table of Contents
Form 10-Q Part I Cincinnati Bell Inc.

Entertainment and Communications, continued
ConsumerOperating Costs and Expenses
Consumer market revenue has increased from the comparable periodsCost of services and products was relatively flat in the previous year due to Fioptics growth offsetting legacy access line, DSL subscriberthree months ended June 30, 2018 and long-distance line loss. Our Fioptics internet subscriber base increased 21% and average revenue per user ("ARPU") was up 4%1% for the six months ended June 30, 2018 compared to the second quarter of 2016. Fioptics video subscribers as ofprior comparable periods. In the end of the secondfirst quarter of 2017, costs associated with a large one-time project were recognized, causing the year over year decline. In addition, lower payroll related costs were offset by higher video content costs. Video content costs increased 13%$8.8 million for the six months ended June 30, 2018 and payroll related costs decreased $4.3 million compared to the same period a year ago, in addition to a 4%the prior year. Higher video content costs are the result of the increase in ARPU.
The Company continuesvideo subscribers, as well as higher rates charged by content providers. Payroll related costs are down due to lose access and long distance linesreduced headcount as a result of among other factors, customers electing to solely use wireless servicethe restructuring that took place in lieuthe first quarter of traditional local wireline service2017.
SG&A expenses decreased by $0.8 million and customers electing other service providers. The Company also continues to experience DSL subscriber loss as a result of customers migrating to Fioptics or an alternative internet provider, particularly$5.0 million in areas that have not been upgraded to Fioptics.
Business
Business market revenue has remained consistent for the three and six months ended June 30, 2017 as the growth in strategic revenue continues to partially offset declines realized by our legacy and integration products and services. Data revenue from our business customers has increased as customers migrate from our legacy product offerings to higher bandwidth fiber solutions. Voice revenue declined for the three and six months ended June 30, 2017, respectively, as the growth in VoIP lines continues to partially mitigate legacy voice and long distance lines loss.
Carrier
For the three and six months ended June 30, 2017, data revenue declined by $2.8 million and $4.5 million, respectively, as carriers increased focus on improving the efficiency of their networks as they migrate from legacy product offerings to higher bandwidth fiber solutions. Voice revenue continues to decrease in 2017 in part due to Federal Communications Commission ("FCC") mandated reductions of terminating switched access rates. Strategic services and other revenue of $5.4 million is related to a one time project that was completed in the second quarter of 2017.
Operating costs and expenses
Cost of services and products has increased primarily due to higher programming costs of $4.0 million in the three months ended June 30, 2017 and $8.6 million in the six months ended June 30, 20172018 compared to the same periods during 2016. These increases arein the prior year primarily due to decreased payroll related costs as a result of the growing number of Fioptics video subscribers combined with higher programming rates. Additional network costs were incurred in both comparative periods of 2017 for the completion of a one time carrier projectrestructuring that was completedtook place in the secondfirst quarter of 2017 as well as costs related to the new product, Hosted Communications Solution, that was launched in the fourth quarter of 2016.2017.
Depreciation and amortization expenses for the three and six months ended June 30, 20172018 increased compared to the prior year primarily due to assets placed in service in connection with the expansion of our fiber network.
Restructuring and severance charges recorded in the secondfirst quarter of 2017 are related to realigning each of our business segments. Restructuring and severance charges recorded for the six months ended June 30, 2017 include costs related to a voluntary severance program for certain bargained employees to reduce field and network costs associated with our legacy copper network in addition to the costs described above.

23
Table of Contents
Form 10-Q Part ICincinnati Bell Inc.

Entertainment and Communications, continued

network.
Capital Expenditures
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2017 2016 2017 2016 2018 2017 2018 2017
Fioptics capital expenditures                
Construction $16.2
 $20.6
 $31.4
 $37.4
 $9.3
 $16.2
 $15.4
 $31.4
Installation 13.1
 8.3
 28.4
 21.2
 10.0
 13.1
 17.5
 28.4
Other 1.3
 3.9
 6.5
 11.0
 1.6
 1.3
 5.2
 6.5
Total Fioptics 30.6
 32.8
 66.3
 69.6
 20.9
 30.6
 38.1
 66.3
                
Other strategic 8.5
 10.8
 15.9
 26.3
Maintenance 8.9
 11.7
 15.3
 19.7
Enterprise Fiber 3.2

4.8
 7.7
 8.7
Other 7.7
 10.1
 13.6
 17.3
Total capital expenditures $48.0
 $55.3
 $97.5
 $115.6
 $31.8
 $45.5
 $59.4
 $92.3
Capital expenditures are incurred to expand our Fioptics product suite, upgrade and increase capacity for our networks, and to maintainextend the life of our fiber and copper networks. In the second quarter of 2017,2018, we passed an additional 11,500 addresses with Fioptics.8,800 FTTP addresses. As of June 30, 2017,2018, the Company is able to provide its Fioptics services to 556,700 residential589,200 consumer and businessenterprise addresses, or approximately 70%72% of our operating territory. Construction costscapital expenditures decreased $6.9 million and $16.0 million in the three and six months ended June 30, 2018, respectively, compared to the prior yearsame periods in 2017 primarily due to slowingpassing fewer addresses with Fioptics. Installation capital expenditures decreased $3.1 million and $10.9 million in the build process partially offset bythree and six months ended June 30, 2018, respectively, compared to the timing of cash disbursements in addition to increased costs associated with building to less densely populated areas. Fioptics installation costs increasedsame periods in 2017 due to fewer activations in 2018 as a result of the timing of purchases of set-top boxes and modems. Other Fioptics related costs include costs to expand core network capacity and for enhancements to the customer experience.reduced build out.
Other strategicEnterprise Fiber capital expenditures are forrelated to success-based fiber builds, and relatedincluding associated equipment, for businessenterprise and carrier projects in order to provide ethernet services. Other capital expenditures are related to IT projects, cable and equipment maintenance and capacity additions, real estate upgrades and maintenance, plus other minor capital purchases.



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Form 10-Q Part I Cincinnati Bell Inc.

IT Services and Hardware
The IT Services and Hardware segment provides a full rangeend-to-end solutions from consulting to implementation to ongoing optimization. These solutions include Cloud, Communications and Consulting services along with the sale and maintenance of managed IT solutions, including managed infrastructure services, telephonymajor branded Telecom and IT equipment sales, and professional IT staffing services.hardware reported as Infrastructure Solutions. These services and products are provided through the Company's subsidiaries in various geographic areas throughout the United States, Canada and United Kingdom.Europe. By offering a full range of equipment and outsourcedstrategic services in conjunction with the Company’s fiber and copper networks, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure managementour customers personalized solutions designed to reduce costmeet their business objectives.

Cloud services include the design, implementation and mitigateon-going management of the customer’s infrastructure. This includes on-premise, public cloud and private cloud solutions. The Company assists customers with the risk while optimizing performanceassessment phase through an in-depth understanding of the customer’s business, as well as building and designing a solution using either the customer's existing infrastructure or new cloud based options that transform the way the customer does business.

Communications solutions help to transform the way our customers do business by connecting employees, customers, and business partners. By upgrading legacy technologies through customized build projects and reducing customer costs, the Company helps to transform the customer’s business. These services include Unified Communications as a Service ("UCaaS"), Software-Defined WAN ("SD-WAN"), Network as a Service ("NaaS"), Contact Center and Collaboration.

Using our experience and expertise, Infrastructure Solutions are tailored to our customers’ organizational goals. We offer a complete portfolio of services that provide customers with efficient and optimized IT solutions that are agile and responsive to their business and are integrated, simplified and manageable. Through consulting with customers, the Company will build a solution using standard manufacturer equipment to meet our customers’ specific requirements. Prior to the adoption of Accounting Standards Codification Topic ("ASC") 606, the Company recorded hardware revenue on a gross basis. Effective January 1, 2018 with the adoption of ASC 606, the Company now considers ourselves an agent in the sale of hardware and records hardware revenue on a net basis. Prior periods have been restated for its customers.comparability.

 Three Months Ended June 30, Six Months Ended June 30, 
(dollars in millions)2017 2016 Change % Change 2017 2016 Change % Change 
Revenue:    
 

     
 
 
Professional Services$23.5
 $27.2
 $(3.7) (14)% $45.2
 $53.4
 $(8.2) (15)% 
Management and Monitoring5.1
 7.9
 (2.8) (35)% 10.1
 16.0
 (5.9) (37)% 
Unified Communications11.0
 10.1
 0.9
 9 % 20.9
 20.2
 0.7
 3 % 
Cloud Services11.6
 10.8
 0.8
 7 % 25.3
 21.0
 4.3
 20 % 
Telecom and IT hardware44.8
 53.8
 (9.0) (17)% 80.7
 101.7
 (21.0) (21)% 
Total revenue96.0
 109.8
 (13.8) (13)% 182.2
 212.3
 (30.1) (14)% 
Operating costs and expenses:                
Cost of services and products72.7
 85.5
 (12.8) (15)% 137.4
 164.1
 (26.7) (16)% 
Selling, general and administrative16.7
 14.2
 2.5
 18 % 31.9
 27.7
 4.2
 15 % 
Depreciation and amortization3.7
 3.2
 0.5
 16 % 7.5
 6.4
 1.1
 17 % 
Restructuring and severance related charges2.3
 —
 2.3
 n/m
 2.3
 —
 2.3
 n/m
 
Total operating costs and expenses95.4

102.9
 (7.5) (7)% 179.1
 198.2
 (19.1) (10)% 
Operating income$0.6
 $6.9
 $(6.3) (91)% $3.1
 $14.1
 $(11.0) (78)% 
Operating margin0.6% 6.3%   (5.7)pts1.7% 6.6%   (4.9)pts
Capital expenditures$2.1
 $3.8
 $(1.7) (45)% $7.7
 $5.8
 $1.9
 33 % 
Consulting services help customers assess their business and technology needs and provide the talent needed to ensure success. The Company is the premier provider of application services and IT staffing.

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Form 10-Q Part I Cincinnati Bell Inc.

IT Services and Hardware, continued
 Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions)2018 2017 Change % Change 2018 2017 Change % Change
Revenue:               
Consulting$39.8
 $16.5
 $23.3
 n/m
 $77.9
 $33.2
 $44.7
 n/m
Cloud23.0
 19.2
 3.8
 20 % 45.6
 40.1
 5.5
 14 %
Communications41.5
 40.3
 1.2
 3 % 82.1
 76.8
 5.3
 7 %
Infrastructure Solutions24.0
 8.8
 15.2
 n/m
 50.3
 15.7
 34.6
 n/m
Total revenue128.3
 84.8
 43.5
 51 % 255.9
 165.8
 90.1
 54 %
Operating costs and expenses:      

        
Cost of services and products79.0
 56.7
 22.3
 39 % 156.7
 111.4
 45.3
 41 %
Selling, general and administrative35.0
 20.6
 14.4
 70 % 73.0
 39.6
 33.4
 84 %
Depreciation and amortization9.9
 6.5
 3.4
 52 % 20.1
 12.9
 7.2
 56 %
Restructuring and severance related charges4.6
 2.5
 2.1
 84 % 4.9
 2.5
 2.4
 96 %
Total operating costs and expenses128.5

86.3
 42.2
 49 % 254.7
 166.4
 88.3
 53 %
Operating (loss) income$(0.2) $(1.5) $1.3
 (87)% $1.2
 $(0.6) $1.8
 n/m
Operating margin(0.2)% (1.8)%


 1.6 pts
 0.5% (0.4)%   0.9 pts
Capital expenditures$6.5
 $4.6
 $1.9
 41 % $11.6
 $12.9
 $(1.3) (10)%
  
Metrics information: (as of June 30, 2018)Consulting Communications Communications Communications
 Billable Heads NaaS Locations SD - WAN Locations Hosted UCaaS Profiles
 926 782 310 192,715
Revenue
The following IT Services and Hardware servicessegment revenue increased $43.5 million and products have either been classified as strategic or integration:
  Three months ended June 30, Six months ended June 30,
(dollars in millions) 2017 2016 2017 2016
Strategic business revenue        
   Professional Services $18.4
 $23.1
 $36.7
 $45.4
   Management and Monitoring 5.1
 7.9
 10.1
 16.0
   Unified Communications 7.4
 7.3
 14.5
 14.8
   Cloud Services 11.6
 10.8
 25.3
 21.0
Total strategic business revenue 42.5
 49.1
 86.6
 97.2
         
Integration business revenue        
   Professional Services 5.1
 4.1
 8.5
 8.0
   Unified Communications 3.6
 2.8
 6.4
 5.4
   Telecom and IT hardware 44.8
 53.8
 80.7
 101.7
Total integration business revenue 53.5
 60.7
 95.6
 115.1
Total IT Services and Hardware revenue $96.0
 $109.8
 $182.2
 $212.3
For$90.1 million for the three and six months ended June 30, 2017, strategic professional services2018, respectively, as compared to the comparable periods in 2017. Consulting and management and monitoringInfrastructure Solutions are the primary contributors to this revenue decreasedincrease, primarily due to declinesthe acquisition of OnX. OnX contributed $25.6 million in billable headcount as a result of increased IT in-sourcing by our customers. Increased cloud servicesConsulting revenue has primarily been driven byand $13.3 million in Infrastructure Solutions revenue for the increasethree months ended June 30, 2018 and contributed $49.6 million in virtual machines within our current customer base.Consulting revenue and $28.0 million in Infrastructure Solutions revenue for the six months ended June 30, 2018.
Integration revenue is primarily driven by the volume of Telecom and IT hardware sales reflecting the reduction in capital spending by our enterprise customers. The change in spending by our customers may be influenced by many factors, including the timing of customers' capital spend, the size of their capital budgets and general economic conditions.
Operating Costs and Expenses
Cost of services and products is primarilypredominantly impacted by changesfluctuations in Telecomthe headcount and IT hardware salescontractors required to deliver the services within Consulting, Cloud and reductionsCommunications. The increase of $22.3 and $45.3 million in headcount-related costs associated with professional services. ForCost of services and products for the three and six months ended June 30, 2017, costs of goods sold related2018 as compared to Telecom and IT hardware sales decreased $9.3 million and $19.5 million, respectively, from the prior year dueis related to lower Telecomthe acquisition of OnX and IT hardware sales. Changes in billable resources driven byconsists primarily of payroll and contract services costs.
SG&A increased $14.4 million and $33.4 million for the professional services revenue reductionsthree and six months ended June 30, 2018, respectively, as compared to the prior year. The acquisition of OnX contributed to payroll costs decreasing $2.4an increase of $16.7 million infor the three months ended June 30, 20172018 and $4.9$37.0 million infor the six months ended June 30, 2017 compared to the same periods during 2016. The remaining decrease for both comparable periods is due to lower contract service costs as a result2018.



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Table of the decrease in professional services revenue.Contents
SG&A costs increased due to additional headcount at branch locations to support the expansion of our national footprint.
Form 10-Q Part ICincinnati Bell Inc.

Restructuring and severance related charges of $2.3$3.8 million recorded in the second quarter of 2018 are related to costs incurred in order to recognize future synergies as the reorganization initiatedCompany continues to better alignidentify efficiencies with the segment for future growth.integration of OnX. In addition, a restructuring charge of $0.8 million was recorded in the second quarter of 2018 associated with a lease abandonment related to an office space that will no longer be utilized.
Capital Expenditures
Capital expenditures increased during the six months ended June 30, 2017 due to projects supporting the growth of our strategic products. Capital expenditures decreased during the three months ended June 30, 2017 due toare dependent on the timing of completion of certain customer related projectssuccess-based projects. The increase in the firstsecond quarter of 2017 as2018 compared to the same quarterperiod in the prior year, and decrease in the first half of 2016.2018 compared to the same period in the prior year, is due to the change in the volume of these types of projects.

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Form 10-Q Part I Cincinnati Bell Inc.

Financial Condition, Liquidity, and Capital Resources

As of June 30, 2017,2018, the Company had $1,126.9$1,744.1 million of outstanding indebtedness and an accumulated deficit of $2,669.6$2,661.7 million. A significant amount of the Company's indebtedness and accumulated deficit resulted from the purchase and operation of a national broadband business, which was sold in 2003.

The Company’s primary source of cash is generated by operations. The Company generated $122.9$89.9 million and $97.9$122.9 million of cash flows from operations during the six months ended June 30, 20172018 and 2016,2017, respectively. As of June 30, 2017,2018, the Company had $308.3$384.5 million of short-term liquidity, comprised of $58.2$30.3 million of cash and cash equivalents, $150.0$200.0 million of undrawn capacity on our Corporate Credit Agreement, and $100.1$154.2 million available under the Receivables Facility. On July 2, 2018, the Company utilized a portion of this liquidity to fund part of the cash consideration for the Hawaiian Telcom merger.

The Receivables Facility permits maximum borrowings of up to $250.0 million and is subject to annual renewal. As of June 30, 2017,2018, the Company had no borrowings and $6.3$6.7 million of letters of credit outstanding under the Receivables Facility on a borrowing capacity of $106.4$160.9 million. In the second quarter of 2017, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase the credit availability, renew the facility, which is subject to renewal every 364 days, until May 2018, and extend the facility's termination date to May 2019. While we expect to continue to renew this facility, we would be required to use cash, our CorporateRevolving Credit AgreementFacility, or other sources to repay any outstanding balance on the Receivables Facility if it werewas not renewed.

The Company’s primary uses of cash are for capital expenditures and debt service and, to a lesser extent, to fund pension and retiree medical obligations and preferred stock dividends. In 2017, cash was also utilized to fund merger and acquisition activity. The Company believes that its cash on hand, cash generated from operations, and available funding under its credit facilities will be adequate to meet its cash requirements for the next twelve months. In addition, management expects that the Company will continue to have access to the capital markets to refinance debt and other obligations should such a need arise in the near future.
Cash Flows

Cash provided by operating activities during the six months ended June 30, 20172018 totaled $122.9$89.9 million, an increasea decrease of $25.0$33.0 million compared to the same period in 2016.2017. The increasedecrease is due primarily to a $15.3 million decrease inhigher interest payments resulting from the Company refinancing the 8 3/4% Senior Notes due 2020, with 7% senior notes due 2024 in the third quarter of 2016 and due to a decrease in borrowings under the Tranche B Term Loan Facility. The remaining increase is due to the Company's discontinued wireless operations, including the decommissioning of wireless towers, using $6.7 million of cash in the first half of 2016, and improved working capital.$37.3 million.

Cash flows providedused by investing activities during the six months ended June 30, 20172018 totaled $26.3 million, an increase of $1.2$73.8 million, compared to $26.3 million of cash flows provided by investing activities in the same periodprior year. The decrease in 2016.cash flows provided by investing activities was largely driven by the $140.7 million of cash proceeds received in the first quarter of 2017 from the sale of the Company's investment in CyrusOne. The increase is due todecline in cash flows associated with CyrusOne were partially offset with a $16.4 million decrease in capital expenditures year-over-year. This increase was partially offset by $9.6of $34.2 million of net cash useddue to acquire SunTel Servicesdeclines in 2017,construction and a $4.9 million decrease in dividends received from CyrusOne compared to the prior year.installation capital for Fioptics.

Cash flows used byin financing activities during the six months ended June 30, 20172018 totaled $15.6 million as compared to $100.7 million compared to $120.8 millionof cash flows used in the prior year. In the first halfquarter of 2017, wethe Company repaid $89.5 million on the Receivables Facility as compared to borrowing $15.4 million in the prior year. Debt repayments totaled $4.2 million for the six months ended June 30, 2017, a decrease of $120.4 million over the prior year. We also repurchased and retired approximately 0.2 million shares of the Company's common stock for $4.6 million in the prior year.

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Form 10-Q Part ICincinnati Bell Inc.

Debt Covenants
Corporate Credit Agreement
The Corporate Credit Agreement contains financial covenants that require we maintain certain leverage and interest coverage ratios. The facility also contains certain covenants which, among other things, limit the Company’s ability to incur additional debtno borrowings or liens, pay dividends, repurchase Company common stock, sell, transfer, lease, or dispose of assets, and make certain investments or merge with another company. If the Company was to violate any of its covenants and was unable to obtain a waiver, it would be considered in default. If the Company was in default under its Corporate Credit Agreement, no additional borrowings under the Corporate Credit Agreement would be available until the default was waived or cured. The Company was in compliance with all of the financial covenants under the Corporate Credit Agreement as of June 30, 2017.

The Company's ability to make restricted payments, which include share repurchases and common stock dividends, is limited to a total of $15 million given that our Consolidated Total Leverage Ratio, as defined in the Corporate Credit Agreement, exceeds 3.50 to 1.00 as of June 30, 2017.  The Company may make restricted payments of $45 million annually when the Consolidated Total Leverage Ratio is less than or equal to 3.50 to 1.00. There are no dollar limits on restricted payments when the Consolidated Total Leverage Ratio is less than or equal to 3.00 to 1.00. These restricted payment limitations do not impact the Company's ability to make regularly scheduled dividend payments on its 6 3/4% Cumulative Convertible Preferred Stock. Furthermore, the Company may make restricted payments in the form of share repurchases or dividends, subject to a $35 million annual cap with carryovers, subject to terms and conditions set forth in the Corporate Credit Agreement. The Corporate Credit Agreement provides that the Tranche B Term Loan participates in mandatory prepayments subject to the terms and conditions (including with respect to payment priority) set forth in the restated Corporate Credit Agreement. Other revisions were also affected pursuant to the amended agreement, including with respect to financial covenant compliance levels.2018.
Indentures

In order to continue to have access to the amounts available to it under the Corporate Credit Agreement, the Company must remain in compliance with all of the covenants. The following table presents the calculations of the most restrictive debt covenant, the Consolidated Total Leverage Ratio, as of and for the twelve month period ended June 30, 2017:
(dollars in millions) 
Consolidated Total Leverage Ratio3.99
Maximum ratio permitted for compliance5.00
Consolidated Total Funded Indebtedness additional availability$275.4
Consolidated EBITDA clearance over compliance threshold$55.1

Definitions and components of these calculations are detailed in our Corporate Credit Agreement and can be found in the Company's Form 8-K filed on May 17, 2016.
Bond Indentures
The Company’s debt, which includes the 7% Senior Notes due 2024, containsare governed by indentures which contain covenants that, among other things, limit the Company’s ability to incur additional debt or liens, pay dividends or make other restricted payments, sell, transfer, lease or dispose of assets and make investments or merge with another company. The Company is in compliance with all of its debt indentures.

One of the financial covenants permits the issuance of additional indebtedness up to a 5:00 to 1:00 Consolidated Adjusted Senior Debt to EBITDA Ratio (as defined by the individual indentures). Once the Company exceeds this ratio, the Company is not in default under the terms of the indentures; however, additional indebtedness may only be incurred in specified permitted baskets, including a basket which allows $750 million of total Corporate Credit Agreement debt (Revolver and Term Loans). We also have baskets for capital lease incurrences, borrowings against the Receivables Facility, refinancings of existing debt, and other debt incurrences. In addition, the Company's ability to make restricted payments, which include share repurchases and common stock dividends, would be limited to specific allowances. Asindentures as of June 30, 2017, the Company was below the 5:00 to 1:00 Consolidated Adjusted Senior Debt to EBITDA ratio.

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Form 10-Q Part ICincinnati Bell Inc.
2018.

Share Repurchase Plan

In 2010, the Board of Directors approved a plan for the repurchase of the Company's outstanding common stock in an amount up to $150.0 million. In prior years, the companyCompany repurchased and retired a total of 1.7 million shares at a total cost of $25.6 million.million dollars. As of June 30, 2017,2018, the Company has the authority to repurchase its common stock with a value of up to $124.4 million under the plan approved by its Board of Directors, subject to satisfaction of the requirements under its bond indentures.

Regulatory Matters

Refer to the Company’s Annual Report on Form 10-K for the year ended 20162017 for a complete description of regulatory matters. Certain regulatory matters changed as a result of changes that occurred in the first and second quarter of 2017 which are described below.
Special Access/Business Data Services
In April 2017, the FCC adopted an Order finding that the market for all packet-based services, Ethernet services, TDM services above the DS3 level, and DS1 and DS3 transport services are competitive in all geographic markets and will no longer be subject to price regulation. Price regulation of TDM services of DS3 or below terminating to end users will depend upon the competitive status of the county in which the service is provided. The FCC will designate counties as competitive or non-competitive for these TDM end user services based upon historical data submitted by providers and purchasers of BDS in response to a mandatory data request issued in 2012 and supplemented with cable broadband deployment data submitted by providers in the FCC’s semi-annual broadband deployment report. Price regulation will be eliminated for these TDM end user services in competitive counties and in non-competitive counties price regulation will continue although carriers will be permitted to offer contract tariffs and volume and term discounts. The list of competitive and non-competitive counties released by the FCC in May 2017 designated all but two of the counties in the Company’s ILEC territory as competitive. Nearly all of the Company’s current special access revenue is derived from the competitive counties. The Company is currently in the process of evaluating the impact to the business.
IP Transition
During the second quarter of 2017, the FCC opened several proceedings aimed at removing barriers to wireline and wireless broadband deployment. Among the proposals being considered are rule changes that would streamline the ILEC copper retirement process and the approval process for discontinuing legacy TDM service to speed the transition from legacy copper-based TDM services to IP services; reform the pole attachment rules to make it easier for providers to attach equipment necessary for next-generation networks; and streamline and speed up the state and local infrastructure review process.  The final rules and timing of FCC adoption of such rules remains uncertain.

Broadband Internet Access/Net Neutrality
In March 2017, Congress adopted a resolution under the Congressional Review Act to invalidate the new broadband privacy and security rules approved by the FCC in November 2016.  As a result of this action, rather than implementing the restrictive measures mandated in the 2016 Order, Internet service providers will continue to abide by the privacy rules in effect prior to adoption of the 2016 Order. In May 2017, the FCC opened a new proceeding in which it proposed reinstating the information service classification of broadband Internet access service that existed prior to 2015 when the FCC adopted the current Title II classification. If the FCC moves forward with the proposed reclassification, it is unknown at this time what, if any, standards they would attempt to apply to Internet service provider practices.


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Form 10-Q Part ICincinnati Bell Inc.

Contingencies
In the normal course of business, the Company is 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 accounting principles generally accepted in the United States. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.

Future Operating Trends
Refer to the Company’s Annual Report on Form 10-K for the year ended 2016December 31, 2017 for a complete description of future operating trends for our business.

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Form 10-Q Part ICincinnati Bell Inc.

Critical Accounting Policies
The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the accompanying condensed consolidated financial statementsCondensed Consolidated Financial Statements and information available as of the date of the financial statements. As this information changes, the financial statements could reflect different estimates or judgments.
Revenue Recognition — Effective January 1, 2018, the Company adheres to revenue recognition principles described in Financial Accounting Standards Board (“FASB”) ASC 606, “Revenue Recognition.” Under ASC 606, revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
For the sale of hardware within the Infrastructure Solutions category, we evaluate whether we are the principal and report revenues on a gross basis, or an agent and report revenues on a net basis. In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer as well as other indicators such as the party primarily responsible for fulfillment, inventory risk and discretion in establishing price. Based on these criteria, the Company acts as an agent and, as such, will record revenue associated with the sale of hardware net of the related cost of products.
Please see Note 1 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies.

The Company’s most critical accounting policies and estimates are described in its Annual Report on Form 10-K for the year ended December 31, 20162017. With the exception of the change in revenue recognition as discussed above, there have been no other material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2017.

Recently Issued Accounting Standards
Refer to Note 1 of the Condensed Consolidated Financial Statements for further information on recently issued accounting standards. The adoptionstandards and the impact to the Condensed Consolidated Financial Statements as a result of new accounting standards did not have a material impact on the Company’s financial results for the threeadopting ASU 2014-09 and six months ended June 30, 2017.ASU 2017-07 effective January 1, 2018.

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Form 10-Q Part I Cincinnati Bell Inc.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 20162017 for a description of the Company's market risks.

Item 4.Controls and Procedures
(a)Evaluation of disclosure controls and procedures.
Cincinnati Bell Inc.’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in SEC Rule 13-a 15(e)13a-15(e)) as of the end of the period covered by this report. Based on this evaluation, Cincinnati Bell Inc.’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, such controls and procedures were effective.
(b)Changes in internal control over financial reporting.
Cincinnati Bell Inc.’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, have evaluated any changes in the Company’s internal control over financial reporting that occurred during the second quarter of 20172018 and have concluded that there were no changes to Cincinnati Bell Inc.’s internal control over financial reporting during the second quarter of 20172018 that materially affect, or are reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.


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Form 10-Q Part II Cincinnati Bell Inc.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings
Cincinnati Bell and its subsidiaries are involved in a number of legal proceedings. Liabilities are established for legal claims when losses associated with the claims are judged to be probable and the loss can be reasonably estimated. In many lawsuits and arbitrations, including most class action lawsuits, it is not possible to determine whether a liability has been incurred or to estimate the amount of the liability until the case is close to resolution, in which case a liability will not be recognized until that time. Based on information currently available, consultation with counsel, available insurance coverage and recognized liabilities, the Company believes that the eventual outcome of all claims will not, individually or in the aggregate, have a material effect on the Company’s financial position or results of operations.


Item 1A. Risk Factors
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 20162017 for a comprehensive listing of the Company’s risk factors. There are no material changes for the three months ending June 30, 2018.

Risks Relating to the Merger with Hawaiian Telcom
The merger (the “merger”) of Hawaiian Telcom Holding, Inc. (“Hawaiian Telcom”) into a wholly owned subsidiary of the Company is subject to the expiration or termination of waiting periods and receipt of clearances or approvals from various regulatory authorities, which may impose conditions that could have an adverse effect on the Company following the closing of the merger (the “combined company”) or, if not obtained, could prevent completion of the merger.
Before the merger may be completed, the applicable waiting period must expire or terminate under the Hart-Scott-Rodino Act and clearances or approvals must be obtained from various regulatory entities, including the FCC, the State of Hawaii Department of Commerce and Consumer Affairs and the Hawaii Public Utilities Commission. There can be no assurance that all of these required consents, orders, approvals and clearances will be obtained, or will be obtained on a timely basis. In deciding whether to grant antitrust or regulatory clearances, the relevant governmental entities will consider, among other things, the effect of the merger on competition within their relevant jurisdiction. The terms and conditions of the approvals that are granted may impose requirements, limitations or costs or place restrictions on the conduct of the combined company’s business. The merger agreement may require the Company and Hawaiian Telcom to comply with conditions imposed by regulatory entities, even if these conditions adversely affect the Company or Hawaiian Telcom. On the other hand, although the Company and Hawaiian Telcom must use reasonable best efforts to obtain the applicable regulatory approvals, neither company is required to take any action with respect to obtaining regulatory approval that, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect (as defined in the agreement and plan of merger date July 9, 2017 (the “merger agreement”), among Hawaiian Telcom, the Company and Twin Acquisition Corp.) on either Hawaiian Telcom or the Company. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the merger, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger. In addition, the Company cannot provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger.
The merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all. Any delay in completing the merger may reduce or eliminate the benefits expected.
In addition to the required stockholder approval and regulatory clearances and approvals, the merger is subject to certain other conditions beyond the control of the Company that may prevent, delay, or otherwise materially adversely affect completion of the merger. The Company cannot predict whether and when these other conditions will be satisfied. The requirements for satisfying such conditions could delay completion of the merger for a period of time, reducing or eliminating some anticipated benefits of the merger, or prevent completion of the merger from occurring at all.

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The pendency of the merger could materially adversely affect the future business and operations of the Company and/or result in a loss of employees for the Company.
In connection with the pending merger, while it is not expected by the management of the Company, it is possible that some customers, suppliers and other persons with whom the Company has a business relationship may delay or defer certain business decisions, which could negatively impact revenues, earnings and cash flows of the Company, as well as the market prices of the Company’s common shares, regardless of whether the merger is completed. Similarly, current and prospective employees of the Company may experience uncertainty about their future roles within the combined company following completion of the merger, which may materially adversely affect the ability of the Company to attract and retain key employees.
The pursuit of the merger and the preparation for the integration may place a significant burden on the Company’s management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect the Company’s financial results.
In addition, the merger agreement restricts the Company, on the one hand, and Hawaiian Telcom, on the other, without the other party’s consent, from making certain acquisitions and dispositions and taking other specified actions while the merger is pending. These restrictions may prevent the Company from pursuing attractive business opportunities and making other changes to its business prior to completion of the merger or termination of the merger agreement.
The Company’s shareholders will be diluted by the merger.
The merger will dilute the ownership position of the Company’s current shareholders. The Company expects to issue approximately 7.8 million of the Company’s common shares to Hawaiian Telcom stockholders in the merger (including common shares of the Company to be issued in connection with outstanding Hawaiian Telcom equity awards). As a result of these issuances, the Company’s current shareholders and Hawaiian Telcom’s stockholders are expected to hold approximately 85% and 15%, respectively, of the Company’s outstanding common stock immediately following completion of the merger.
Risks Relating to the Combined Company Upon Completion of the Merger
If completed, the merger may not achieve its intended results, and the Company and Hawaiian Telcom may be unable to successfully integrate their operations.
The Company and Hawaiian Telcom entered into the merger agreement with the expectation that the merger will result in various benefits, including, among other things, expanding the Company’s asset base and creating synergies and opportunities for cost savings. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether the businesses of the Company and Hawaiian Telcom can be integrated in an efficient and effective manner.
It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger. The combined company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the combined company’s future business, financial condition, operating results and prospects.
The combined company is expected to incur expenses related to the integration of the Company and Hawaiian Telcom.
The combined company is expected to incur expenses in connection with the integration of the Company and Hawaiian Telcom. There are a number of back-office information technology systems, processes and policies that will need to be addressed during the integration. While the Company and Hawaiian Telcom have assumed that a certain level of expenses will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These integration expenses likely will result in the combined company taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present.

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The future results of the combined company will suffer if the combined company does not effectively manage its expanded operations following the merger.
Following the merger, the size of the business of the combined company will increase significantly beyond the current size of either the Company’s or Hawaiian Telcom’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which could pose substantial challenges for management. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits currently anticipated from the merger.
Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.
The Company and Hawaiian Telcom are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. The Company’s success until the merger and the combined company’s success after the merger will depend in part upon the ability of the Company and Hawaiian Telcom to retain key management personnel and other key employees. Current and prospective employees of the Company and Hawaiian Telcom may experience uncertainty about their roles within the combined company following the merger, which may have an adverse effect on the ability of the Company and Hawaiian Telcom to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of the Company and Hawaiian Telcom to the same extent that the Company and Hawaiian Telcom have previously been able to attract or retain their own employees.
The combined company will have substantial indebtedness following the merger and the credit ratings of the combined company or its subsidiaries may be different from what the companies currently expect.
The Company expects to obtain new credit facilities in order to provide funds to (i) refinance its existing credit facilities, (ii) finance in part the cash portion of the merger consideration, (iii) refinance existing indebtedness of Hawaiian Telcom and (iv) pay other costs and expenses incurred in connection with the merger and related transactions. The receipt of financing by the Company, however, is not a condition to completion of the merger. In addition to the new credit facilities, the Company may incur other indebtedness, including senior indebtedness, to finance the merger and related transactions. Following completion of the merger, the combined company will have substantial indebtedness and the credit ratings of the combined company and its subsidiaries may be different from what the companies currently expect.
This substantial indebtedness may adversely affect the business, financial condition and operating results of the combined company, including:
making it more difficult for the combined company to satisfy its debt service obligations;
requiring the combined company to dedicate a substantial portion of its cash flows to debt service obligations, thereby potentially reducing the availability of cash flows to pay cash dividends and to fund working capital, capital expenditures, acquisitions, investments and other general operating requirements;
limiting the ability of the combined company to obtain additional financing to fund its working capital requirements, capital expenditures, acquisitions, investments, debt service obligations and other general operating requirements;
restricting the combined company from making strategic acquisitions or taking advantage of favorable business opportunities;
placing the combined company at a relative competitive disadvantage compared to competitors that have less debt;
limiting flexibility to plan for, or react to, changes in the businesses and industries in which the combined company operates, which may adversely affect the combined company’s operating results and ability to meet its debt service obligations;
increasing the vulnerability of the combined company to adverse general economic and industry conditions, including changes in interest rates; and
limiting the ability of the combined company to refinance its indebtedness or increasing the cost of such indebtedness.
If the combined company incurs additional indebtedness following the merger, the risks related to the substantial indebtedness of the combined company may intensify.

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The merger may involve unexpected costs, unexpected liabilities or unexpected delays.
The Company currently expects to incur substantial costs and expenses relating directly to the merger, including debt refinancing costs, fees and expenses payable to financial advisors, professional fees and expenses, insurance premium costs, fees and costs relating to regulatory filings and notices, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. In addition, the merger and post-merger integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of possible litigation or other claims, which may significantly increase the related costs and expenses incurred by the combined company.
Risks Related to the Acquisition of OnX
The acquisition of OnX Holdings LLC (“OnX”) is subject to conditions, including regulatory approval under the Hart-Scott-Rodino Act and certain conditions that may not be satisfied or completed on a timely basis, if at all. Any delay in completing the acquisition of OnX may reduce or eliminate the benefits expected.
Before the acquisition of OnX may be completed, the applicable waiting period must expire or terminate under the Hart-Scott-Rodino Act. In addition to this regulatory approval, the acquisition of OnX is subject to certain other conditions beyond the control of the Company that may prevent, delay, or otherwise materially adversely affect completion of the acquisition. The Company cannot predict whether and when these other conditions will be satisfied. The requirements for satisfying such conditions could delay completion of the acquisition of OnX for a period of time, reducing or eliminating some anticipated benefits of the acquisition, or prevent completion of the acquisition from occurring at all.
The pursuit of the acquisition of OnX and the preparation for the integration may place a significant burden on the Company’s management and internal resources.
The pursuit of the acquisition of OnX and the preparation for the integration may place a significant burden on the Company’s management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect the Company’s financial results.
If completed, the acquisition of OnX may not achieve its intended results, and the Company may be unable to successfully integrate OnX's operations.
The Company entered into the merger agreement with OnX with the expectation that the acquisition will result in various benefits, including, among other things, expanding the Company’s asset base and creating synergies and opportunities for cost savings. Achieving the anticipated benefits of the acquisition of OnX is subject to a number of uncertainties, including whether the businesses of the Company and OnX can be integrated in an efficient and effective manner.
It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the Company’s ability to achieve the anticipated benefits of the acquisition of OnX. The Company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the acquisition. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the Company’s future business, financial condition, operating results and prospects.


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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
During the six month period ended June 30, 2017,2018, the Company had no unregistered sales of equity securities. The Company also had no purchases of its common stock for the six months ended June 30, 2017.2018.


Item 3.        Defaults upon Senior Securities
None.

Item 4.        Mine Safety Disclosure
None.

Item 5.        Other Information
No reportable items.


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Item 6.        Exhibits
Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto.

Exhibit 
NumberDescription
(2.1)
Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Acquisition Corp. and Hawaiian Telcom Holdco, Inc. (Exhibit 2.1 to Current Report of Form 8-K, date of Report July 10, 2017, File No. 1-8519).(3.1)

(2.2)
Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Yankee Acquisition LLC, OnX Holdings LLC and MLN Holder Rep LLC (Exhibit 2.2 to Current Report of Form 8-K, date of Report July 10, 2017, File No. 1-8519).

(3.1)Amended and Restated Articles of Incorporation of Cincinnati Bell Inc. (Exhibit 3.1 to Current Report on Form 8-K, Date of Report April 25, 2008, File No. 1-8519).
(3.2)
Amendment to the Amended and Restated Articles of Incorporation of Cincinnati Inc. (Exhibit 3.1 to Current Report on Form 8-K, dateDate of Report October 4, 2016, File No. 1-8519).
(3.3)+
Amended and Restated Regulations of Cincinnati Bell Inc.
(10.1)
Amendment No. 1 to Credit Agreement dated as of April 5, 2018, by and among Cincinnati Bell Inc., the subsidiary guarantors thereto, Morgan Stanley Senior Funding, Inc. and the tranche B term lenders party thereto (Exhibit 3.210.1 to Current Report on Form 8-K, Date of Report April 25, 2008,5, 2018, File No. 1-8519).
(4.1)
(10.2)
First Supplemental IndentureAmendment No. 2 to Credit Agreement dated as of April 3, 20175, 2018, by and among Cincinnati Bell Inc., SunTel Services LLCthe subsidiary guarantors thereto, Morgan Stanley Senior Funding, Inc. and Regions Bank, as Trustee (Exhibit 99.1 to Current Report of Form 8-K, date of Report April 3, 2017, File No. 1-8519).

(4.2)Second Supplemental Indenture dated May 31, 2017, among Cincinnati Bell Inc., Cincinnati Bell Telephone Company LLC, Cincinnati Bell Extended Territories LLC, and Regions Bank, as Trustee.the revolving lenders party thereto (Exhibit 10.1 to Current Report on Form 8-K, dateDate of Report May 31, 2017,April 5, 2018, File No. 1-8519).
(10.1)
(10.3)
Tenth AmendmentCincinnati Bell Inc. Form of 2018-2023 Business Value Award Agreement (Exhibit 10.1 to Current Report on Form 8-K, Date of Report May 7, 2018, File No. 1-8519).
(10.4)
Second Amended and Restated Receivables Purchase and Sale Agreement dated as of May 26, 2017,10, 2018, among Cincinnati Bell Inc., as Servicer, Cincinnati Bell Funding LLC and the Originators identified therein (Exhibit 99.1 to Current Report on Form 8-K, Date of Report May 10, 2018, File No. 1-8519).
(10.5)
Canadian Purchase and Sale Agreement dated as of May 10, 2018, among Cincinnati Bell Funding Canada Ltd., a Purchase, OnX Enterprise Solutions Ltd., as Servicer, and the Originators identified therein (Exhibit 99.2 to Current Report on Form 8-K, Date of Report May 10, 2018, File No. 1-8519).
(10.6)
Receivables Financing Agreement dated as of May 10, 2018, among Cincinnati Bell Funding LLC and Cincinnati Bell Funding Canada Ltd., as Borrowers, Cincinnati Bell Inc. and OnX Enterprise Solutions Ltd., as ServicerServicers, the Lenders, Letter of Credit Participants and as Performance Guarantor,Group Agents from time to time party thereto, PNC Bank, National Association, as Administrator for each Purchaser Group, as LCand Letter of Credit Bank, and the Swingline PurchaserPNC Capital Markets LLC, as Structuring Agent (Exhibit 10.299.3 to Current Report on Form 8-K, dateDate of Report May 31, 2017,10, 2018, File No. 1-8519).
(10.2)
(10.7)
VotingReceivables Purchase Agreement dated as of July 9, 2017,May 10, 2018, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., Twin Havenas Servicer, PNC Bank, National Association, as Buyer, and PNC Capital Partners, L.L.C. and the affiliates of Twin Haven Capital Partners, L.L.C. party theretoMarkets LLC, as Structuring Agent (Exhibit 10.199.4 to Current Report ofon Form 8-K, dateDate of Report JulyMay 10, 2017,2018, File No. 1-8519).
(21)+
Subsidiaries of the Registrant.

(10.3)
Commitment Letter, dated as of July 9, 2017, between Cincinnati Bell Inc. and Morgan Stanley Senior Funding, Inc. (Exhibit 10.2 to Current Report of Form 8-K, date of Report July 10, 2017, File No. 1-8519).

(31.1)+Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2)+
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1)+
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)+
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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(101.INS)**XBRL Instance Document.
(101.SCH)**XBRL Taxonomy Extension Schema Document.
(101.CAL)**XBRL Taxonomy Extension Calculation Linkbase Document.
(101.DEF)**XBRL Taxonomy Extension Definition Linkbase Document.
(101.LAB)**XBRL Taxonomy Extension Label Linkbase Document.
(101.PRE)**XBRL Taxonomy Extension Presentation Linkbase Document.
    
+ Filed herewith.
** Submitted electronically with this report.

The Company's reports on Form 10-K, 10-Q, and 8-K are available free of charge in the Investor Relations section of the Company's website: http://www.cincinnatibell.com. The Company will furnish any other exhibit at cost.


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SIGNATURES
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.


   Cincinnati Bell Inc. 
     
Date:August 4, 20178, 2018 
/s/ Andrew R. Kaiser

 
   
Andrew R. Kaiser

 
   Chief Financial Officer 
     
Date:August 4, 20178, 2018 /s/ Joshua T. DuckworthShannon M. Mullen 
   Joshua T. DuckworthShannon M. Mullen 
   Chief Accounting Officer 

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