UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~June 30, 2018~~March 31, 2019



o	TRANSITION 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 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 filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

		Emerging growth company	o

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~~Securities Registered Pursuant to ~~be filed by~~ Section ~~12, 13 or 15(d)~~12(b) of the ~~Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes~~ o No oAct:

~~APPLICABLE ONLY TO CORPORATE ISSUERS~~



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Shares ($0.01 par value)	CBB	New York Stock Exchange
Depositary Shares, each representing 1/20 interest in a Share of 6 ¾% Cumulative Convertible Preferred Stock, without par value	CBB.PB	New York Stock Exchange

At ~~July 31, 2018,~~April 30, 2019, there were ~~50,157,168~~50,367,297 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,~~March 31, 2019 and 2018 ~~and 2017~~	1

	Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss (Unaudited) Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	2

	Condensed Consolidated ~~Balance Sheets~~Statements of Shareowners' Deficit (Unaudited) ~~June 30,~~Three Months Ended March 31, 2019 and 2018 ~~and December 31, 2017~~	3

	Condensed Consolidated Balance Sheets (Unaudited) March 31, 2019 and December 31, 2018	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	45

	Notes to Condensed Consolidated Financial Statements (Unaudited)	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2729

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4044

Item 4.	Controls and Procedures	4044

	PART II. Other Information

Item 1.	Legal Proceedings	4145

Item 1A.	Risk Factors	4145

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4145

Item 3.	Default upon Senior Securities	4145

Item 4.	Mine Safety Disclosure	4145

Item 5.	Other Information	4145

Item 6.	Exhibits	4246

	Signatures	4447

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
	June 30,						June 30,						March 31,
	2018			2017			2018			2017			2019			2018

Revenue	$	296.8		$	259.4		$	592.5		$	509.0		$	379.6		$	295.7

Costs and expenses
Cost of services and products, excluding items below	152.3			128.9			301.7			253.0			197.7			149.4
Selling, general and administrative, excluding items below	66.1			53.8			134.5			109.1			86.1			68.4
Depreciation and amortization	50.9			47.0			102.1			92.8			79.4			51.2
Restructuring and severance related charges	4.6			3.6			4.9			29.2			3.3			0.3
Transaction and integration costs	2.7			1.7			4.9			2.3			3.0			2.2
Total operating costs and expenses	276.6			235.0			548.1			486.4			369.5			271.5
Operating income	20.2			24.4			44.4			22.6			10.1			24.2
Interest expense	31.8			18.1			62.6			36.1			35.1			30.8
Loss on extinguishment of debt	1.3			—			1.3			—
Other components of pension and postretirement benefit plans expense	3.2			3.2			6.5			6.4			2.6			3.3
Gain on sale of Investment in CyrusOne	—			—			—			(117.7		)
Other income, net	(0.8		)	(0.6		)	(1.2		)	(1.0		)	(1.0		)	(0.4		)
(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
Loss before income taxes													(26.6		)	(9.5		)
Income tax expense (benefit)													0.3			(1.2		)
Net loss													(26.9		)	(8.3		)
Preferred stock dividends	2.6			2.6			5.2			5.2			2.6			2.6
Net (loss) income applicable to common shareowners	$	(16.4	)	$	(0.3	)	$	(27.3	)	$	57.7
Net loss applicable to common shareowners													$	(29.5	)	$	(10.9	)

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
Basic and diluted net loss per common share													$	(0.59	)	$	(0.26	)

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(Dollars in millions)

(Unaudited)

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, $4.0 4.1
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



	Three Months Ended
	March 31,
	2019			2018
Net loss	$	(26.9	)	$	(8.3	)
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)	1.6			(1.8		)
Cash flow hedges:
Unrealized loss on cash flow hedges arising during the period, net of tax of ($1.0)	(3.1		)	—
Reclassification adjustment for net losses included in net income, net of tax of $0.1	0.2			—
Defined benefit plans:
Amortization of prior service benefits included in net income, net of tax of ($0.1), ($0.2)	(0.5		)	(0.6		)
Amortization of net actuarial loss included in net income, net of tax of $0.8, $1.2	3.0			4.1
Total other comprehensive income	1.2			1.7
Total comprehensive loss	$	(25.7	)	$	(6.6	)

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

CONDENSED CONSOLIDATED STATEMENTS OF SHAREOWNERS' DEFICIT

2(Dollars in millions)

(Unaudited)



	6 ³/₄% Cumulative Convertible Preferred Shares			Common Shares			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss
	Shares	Amount		Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at December 31, 2018	3.1	$	129.4	50.2	$	0.5	$	2,680.0		$	(2,709.4	)	$	(175.5	)	$	(75.0	)
Net loss	—	—		—	—		—			(26.9		)	—			(26.9		)
Other comprehensive income	—	—		—	—		—			—			1.2			1.2
Shares issued under employee plans	—	—		0.2	—		—			—			—			—
Shares purchased under employee plans and other	—	—		—	—		(0.8		)	—			—			(0.8		)
Stock-based compensation	—	—		—	—		1.8			—			—			1.8
Dividends on preferred stock	—	—		—	—		(2.6		)	—			—			(2.6		)
Balance at March 31, 2019	3.1	$	129.4	50.4	$	0.5	$	2,678.4		$	(2,736.3	)	$	(174.3	)	$	(102.3	)



	6 ³/₄% Cumulative Convertible Preferred Shares			Common Shares			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss
	Shares	Amount		Shares	Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance at December 31, 2017	3.1	$	129.4	42.2	$	0.4	$	2,565.6		$	(2,639.6	)	$	(173.7	)	$	(117.9	)
Net loss	—	—		—	—		—			(8.3		)	—			(8.3		)
Other comprehensive income	—	—		—	—		—			—			1.7			1.7
Shares issued under employee plans	—	—		0.2	—		—			—			—			—
Shares purchased under employee plans and other	—	—		—	—		(2.0		)	—			—			(2.0		)
Stock-based compensation	—	—		—	—		1.2			—			—			1.2
Dividends on preferred stock	—	—		—	—		(2.6		)	—			—			(2.6		)
Balance at March 31, 2018	3.1	$	129.4	42.4	$	0.4	$	2,562.2		$	(2,647.9	)	$	(172.0	)	$	(127.9	)

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

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,			March 31,			December 31,
	2018			2017			2019			2018
Assets
Current assets
Cash and cash equivalents	$	30.3		$	17.8		$	3.9		$	15.4
Restricted Cash	366.5			378.7
Receivables, less allowances of $8.7 and $10.4	241.3			239.8
Receivables, less allowances of $13.1 and $13.0							260.0			342.8
Inventory, materials and supplies	31.9			44.3			38.9			46.5
Prepaid expenses	22.0			22.2			31.7			30.7
Other current assets	7.3			7.6			9.9			10.5
Total current assets	699.3			710.4			344.4			445.9
Property, plant and equipment, net	1,125.8			1,129.0			1,832.8			1,844.0
Operating lease right-of-use assets							37.2			—
Goodwill	149.4			151.0			158.6			157.0
Intangible assets, net	124.7			132.3			165.2			168.1
Deferred income tax assets	14.2			12.2			47.4			47.5
Other noncurrent assets	52.7			52.7			63.7			67.7
Total assets	$	2,166.1		$	2,187.6		$	2,649.3		$	2,730.2
Liabilities and Shareowners’ Deficit
Current liabilities
Current portion of long-term debt	$	16.8		$	18.4		$	22.4		$	20.2
Accounts payable	205.1			185.6			259.3			331.9
Unearned revenue and customer deposits	40.3			36.3			49.3			55.9
Accrued taxes	17.5			21.2			18.2			24.8
Accrued interest	26.7			29.9			24.8			26.8
Accrued payroll and benefits	30.6			28.7			42.3			42.9
Other current liabilities	31.2			37.2			44.5			39.2
Total current liabilities	368.2			357.3			460.8			541.7
Long-term debt, less current portion	1,727.3			1,729.3			1,909.9			1,909.6
Operating lease liabilities							34.5			—
Pension and postretirement benefit obligations	168.6			177.5			226.7			230.6
Pole license agreement obligation							38.8			39.1
Deferred income tax liabilities	11.4			11.2			12.4			11.4
Other noncurrent liabilities	34.0			30.2			68.5			72.8
Total liabilities	2,309.5			2,305.5			2,751.6			2,805.2
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, 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, 2017	0.4			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 March 31, 2019 and December 31, 2018; liquidation preference $1,000 per share ($50 per depositary share)							129.4			129.4
Common shares, $.01 par value; 96,000,000 shares authorized; 50,360,602 and 50,184,114 shares issued and outstanding at March 31, 2019 and December 31, 2018							0.5			0.5
Additional paid-in capital	2,561.0			2,565.6			2,678.4			2,680.0
Accumulated deficit	(2,661.7		)	(2,639.6		)	(2,736.3		)	(2,709.4		)
Accumulated other comprehensive loss	(172.5		)	(173.7		)	(174.3		)	(175.5		)
Total shareowners’ deficit	(143.4		)	(117.9		)	(102.3		)	(75.0		)
Total liabilities and shareowners’ deficit	$	2,166.1		$	2,187.6		$	2,649.3		$	2,730.2

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

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)(Unaudited)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2018			2017			2019			2018
Cash flows from operating activities
Net (loss) income	$	(22.1	)	$	62.9
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net loss							$	(26.9	)	$	(8.3	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	102.1			92.8			79.4			51.2
Loss on extinguishment of debt	1.3			—
Gain on sale of Investment in CyrusOne	—			(117.7		)
Provision for loss on receivables	2.6			3.5			2.9			1.0
Noncash portion of interest expense	2.1			1.1			1.9			0.8
Deferred income taxes	(3.8		)	35.4			0.5			(1.2		)
Pension and other postretirement payments less than expense	0.3			1.5
Pension and other postretirement payments (in excess of) less than expense							(0.3		)	0.4
Stock-based compensation	2.6			3.9			1.8			1.2
Other, net	(1.4		)	(3.0		)	(1.3		)	(2.0		)
Changes in operating assets and liabilities, net of effects of acquisitions:
(Increase) decrease in receivables	(2.8		)	25.4
Decrease in receivables							82.3			6.5
Decrease (increase) in inventory, materials, supplies, prepaid expenses and other current assets	10.6			(5.9		)	7.5			(4.4		)
Increase in accounts payable	3.0			9.9
(Decrease) increase in accounts payable							(74.8		)	3.6
(Decrease) increase in accrued and other current liabilities	(6.3		)	9.0			(17.9		)	9.6
Decrease in other noncurrent assets	1.8			0.3			2.3			0.5
(Decrease) increase in other noncurrent liabilities	(0.1		)	3.8
Decrease in other noncurrent liabilities							(0.6		)	(0.4		)
Net cash provided by operating activities	89.9			122.9			56.8			58.5
Cash flows from investing activities
Capital expenditures	(71.0		)	(105.2		)	(56.5		)	(32.7		)
Proceeds from sale of Investment in CyrusOne	—			140.7
Acquisitions of businesses	(2.8		)	(9.6		)	—			(2.8		)
Other, net	—			0.4			(0.1		)	(0.1		)
Net cash (used in) provided by investing activities	(73.8		)	26.3
Net cash used in investing activities							(56.6		)	(35.6		)
Cash flows from financing activities
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days	—			(89.5		)	(3.8		)	—
Repayment of debt	(5.9		)	(4.2		)	(4.5		)	(3.0		)
Debt issuance costs	(2.5		)	(0.7		)	(0.1		)	(0.4		)
Dividends paid on preferred stock	(5.2		)	(5.2		)	(2.6		)	(2.6		)
Other, net	(2.0		)	(1.1		)	(0.8		)	(2.0		)
Net cash used in financing activities	(15.6		)	(100.7		)	(11.8		)	(8.0		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.2		)	—			0.1			0.8
Net increase in cash, cash equivalents and restricted cash	0.3			48.5
Net (decrease) increase in cash, cash equivalents and restricted cash							(11.5		)	15.7
Cash, cash equivalents and restricted cash at beginning of period	396.5			9.7			15.4			396.5
Cash, cash equivalents and restricted cash at end of period	$	396.8		$	58.2		$	3.9		$	412.2

Noncash investing and financing transactions:
Acquisition of property by assuming debt and other noncurrent liabilities	$	6.1		$	6.9		$	9.8		$	—
Acquisition of property on account	$	28.3		$	24.8		$	33.2		$	17.6

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

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") provide diversified telecommunications and technology services. The Company generates a large portion of its revenue by serving customers in ~~the Greater~~ Cincinnati, ~~and~~Ohio, Dayton, Ohio ~~areas.~~and the islands of Hawaii. An economic downturn or natural disaster occurring in ~~this,~~these, or a portion of ~~this,~~these, limited operating ~~territory~~territories 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~~had receivables with ~~General Electric Company that make~~one customer, Verizon Communications Inc., which made up 18% of the outstanding accounts receivable balance at December 31, 2018. At March 31, 2019, no individual customer exceeded 10% of the outstanding accounts receivable balance as of June 30, 2018 and December 31, 2017. The Company also has receivables with Verizon Communications Inc. that make up 12% of the outstanding accounts receivable balance as of June 30, 2018.balance. Revenue derived from foreign operations iswas approximately 5% and 6% of consolidated revenue for the three ~~and six~~ months ended ~~June 30, 2018.~~March 31, 2019 and 2018, respectively.

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.

Effective January 1, 2018, the Company adopted the requirements of 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 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. With the exception of consumer long distance revenue, 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 for further disclosures.

The Condensed Consolidated Balance Sheet as of December 31, ~~2017~~2018 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 ~~2017~~2018 Annual Report on Form 10-K. Operating results for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 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, and transaction costs are expensed as incurred. See Note 4 for disclosures related to mergers and acquisitions.

~~Table of Contents~~



~~Form 10-Q Part I~~		~~Cincinnati 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~~Business Combinations — In accounting for business combinations, we apply the ~~first quarter~~accounting requirements of ~~2017,~~Accounting Standards Codification ("ASC") 805, “Business Combinations,” which requires the recording of net assets of acquired businesses at fair value. In developing fair value estimates for 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. The Company reports in its consolidated financial statements provisional amounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period. See Note 4 for disclosures related to mergers and acquisitions.

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Form 10-Q Part I		Cincinnati Bell Inc.

Leases - The Company determines if an arrangement is a lease at inception based on the facts and circumstances present. In lease transactions where the Company ~~sold its remaining 2.8 million shares~~acts as the lessor, the lease component is accounted for in accordance with ASC 842, and the non-lease component is accounted for in accordance with ASC 606. Although separation of ~~CyrusOne Inc. common stock~~lease and non-lease components is required, certain practical expedients are available that release the Company from this requirement. Adoption of the practical expedient allows the Company to account for ~~net proceeds totaling $140.7 million~~each lease component and the related non-lease component together as a single component provided that ~~resulted~~the timing and patterns of revenue recognition for the components are the same and the combined, single unit of account would be classified as an operating lease. The Company's operating leases for certain services that include Customer Premise Equipment, including handsets and set-top boxes, have lease and non-lease components. In these arrangements, management has concluded that the non-lease components are the predominant characteristic and as a result the Company has elected to account for these arrangements as one single non-lease component recorded as "Revenue" on the Condensed Consolidated Statements of Operations in accordance with ASC 606.

Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

The Company's lease terms include options to extend, terminate or buyout the lease when it is reasonably certain that we will exercise that option. Leases that have contract prices based on variable factors, such as power usage, are recognized as variable lease expense in the period in which the obligation for those payments are incurred. Lease expense for variable lease payments is recognized on a ~~realized gain of $117.7 million. As of March 31, 2017, we no longer had an investment in CyrusOne Inc.~~straight-line basis over the lease term.

Income and Operating Taxes

Income taxes — ~~The~~In accordance with ASC 740-270, 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~~income/loss plus or minus the tax effects ~~associated with~~of discrete items.

~~During 2017, the~~ The Company ~~re-classed $14.9 million of Alternative Minimum Tax ("AMT") refundable~~expects its annual effective tax ~~credits from "Deferred income taxes, net" to "Receivables" as these credits were expected~~rate to be ~~utilized during 2018. Acceleration of the AMT refundable tax credits was the~~lower than statutory rates as a result of ~~the Company's decision to make an election on its 2017 federal income tax return to claim the credits in lieu of claiming bonus depreciation.~~permanent items and current items requiring a valuation allowance. The Company received the $14.9 million of payments during the second quarter of 2018. In addition, new tax legislation enacted in 2017 repealed AMT for corporate tax payers. The balance of any remaining AMT credits will be refunded over the next 5 years beginning with the 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 filed our 2017 federal income tax 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,~~of 2017 limits the Company’s interest deduction to 30% of tax earnings before interest, tax, depreciation and amortization for years beginning before January 1, 2022. Thereafter, the interest deduction is ~~now complete.~~limited to 30% of tax earnings before interest and taxes. Any disallowed interest in a year becomes a separate deferred tax asset with an indefinite carryforward period that can be utilized by the Company in a future tax year by an amount equal to its interest limitation in excess of its interest expense for that year. As the Company does not anticipate utilizing the current excess interest expense in the foreseeable future, the Company is establishing a valuation allowance for this excess interest in the estimated annual rate, which in turn lowers the effective tax rate.

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, in accordance 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)"~~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)"~~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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~~Form 10-Q Part I~~		~~Cincinnati Bell Inc.~~

In 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 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 FASB issued 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 prospectively adopted the standard effective January 1, 2018 and has 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 Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends the requirements in 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 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. 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 cost component of net benefit cost is eligible for capitalization on a prospective basis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company retrospectively adopted the standard effective January 1, 2018. 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 Condensed Consolidated Statements of Operations for the three months ended June 30, 2017. The Company re-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 Condensed Consolidated Statements of Operations for the six 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 ASU is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted this standard effective January 1, 2018. The adoption of this standard did not have a material effect on the Company’s Consolidated Statement of Cash Flows.

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Form 10-Q Part I		Cincinnati Bell Inc.

Recently Issued Accounting Standards

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, Intangibles-Goodwill and Other-Internal-Use Software, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the requirements in ASC 350-40 for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU also require the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted in any interim period after issuance of the update. The Company early adopted this standard prospectively effective January 1, 2019. The adoption of this standard is not expected to have a material effect on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. Since that date, the FASB has issued additional ASUs clarifying certain aspects of ASU 2016-02 but did not change the core principal. The standard introduces a lessee model that brings most leases ononto the balance sheet, as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The ASU is effective for public entities for fiscal years beginning after December 15, 2018. ~~As issued,~~The Company adopted the standard ~~requires lessors~~ and ~~lessees to use a~~all subsequent amendments effective January 1, 2019, using the modified retrospective transition method, which did not require the Company to adjust comparative periods.

The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition to the package of practical expedients, the Company elected the practical expedients of using hindsight in determining the lease term and in assessing impairment of the entity’s right-of-use assets as well as not to assess whether existing or expired land easements that were not previously accounted for ~~existing leases.~~as leases under ASC 840 are or contain a lease under ASC 842.

Upon adoption of this standard, the Company recognized operating lease right-of-use assets of $38.3 million and operating lease liabilities of $46.2 million in the Condensed Consolidated Balance Sheets. The Company elected the practical expedient outlined in ASU 2018-11 allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The adoption of ASU 2016-02 ~~was amended in January 2018 by the provisions of ASU 2018-01, “Land Easement Practical Expedient for Transition~~had no impact 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.retained earnings.

~~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 implementing changes to accounting policies, processes, systems,~~implemented internal controls and ~~internal controls. The Company~~ procured a third-party lease accounting software solution to facilitate the ongoing accounting and financial reporting requirements of the ASU. The ~~new~~ standard ~~will result in increases to the assets and liabilities on the Company’s consolidated balance sheets. The Company is currently evaluating the full impact of adopting the 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. The Company adopted the new standard and all subsequent amendments as of January 1, 2018. The Company utilized the full retrospective method; therefore, each prior reporting period presented was adjusted beginning with the issuance of the Company’s 2018 interim financial statements.

The most significant impact of adopting the new standard is the change to the treatment of hardware 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. As 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~~impact on our Condensed Consolidated Statement of Operations. The most significant impact was the ~~Company's financial statements. Fulfillment~~recognition of right-of-use assets and ~~acquisition costs that are now recorded as an asset and amortized on a monthly basis decreased expense~~lease liabilities 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~~operating leases, while our accounting 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."finance leases remained substantially unchanged. See Note 37 for ~~additional~~required disclosures as a result of adopting ASC ~~Topic 606.~~842.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s condensed consolidated financial 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 issuance of common shares for awards under stock-based compensation plans or 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 Ended						Six Months Ended					Three Months Ended
	June 30,						June 30,					March 31,
(in millions, except per share amounts)	2018			2017			2018			2017		2019			2018
Numerator:
Net (loss) income	$	(13.8	)	$	2.3		$	(22.1	)	$	62.9
Net loss												$	(26.9	)	$	(8.3	)
Preferred stock dividends	2.6			2.6			5.2			5.2		2.6			2.6
Net (loss) income applicable to common shareowners - basic and diluted	$	(16.4	)	$	(0.3	)	$	(27.3	)	$	57.7
Net loss applicable to common shareowners - basic and diluted												$	(29.5	)	$	(10.9	)
Denominator:
Weighted average common shares outstanding - basic	42.4			42.2			42.4			42.1		50.3			42.3
Stock-based compensation arrangements	—			—			—			0.2		—			—
Weighted average common shares outstanding - diluted	42.4			42.2			42.4			42.3		50.3			42.3
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
Basic and diluted net loss per common share												$	(0.59	)	$	(0.26	)

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 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 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 in Cincinnati or Consumer/SMB in Hawaii (collectively, "Consumer/SMB"), Enterprise Fiber or Legacy. The products and services within these three categories can be further categorized as either Data, Voice, Video or Other. ~~Fioptics~~Consumer/SMB 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.~~ customers, as well as revenue associated with the trans-Pacific submarine cable ("SEA-US").

Consumer customers have implied month-to-month contracts, while enterprise customers, with the exception of contracts associated with the SEA-US, typically have contracts with a duration of one to five years and automatically renew on a ~~month to month~~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. Contracts associated with the SEA-US typically range from 15 to 25 years and payment is prepaid.

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 varied 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 for such good or service 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 relatesSubsequent to the ~~sale~~acquisition of ~~hardware within the Infrastructure Solutions category,~~Hawaiian Telcom Holdco., Inc. ("Hawaiian Telcom"), the Company ~~considers itself an agent (net) versus as~~began recognizing 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~~financing component 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 installationup-front payments for 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 under indefeasible right of use ("IRU") contracts for fiber circuit capacity. The IRU contracts are primarily associated with the SEA-US. The IRU contracts typically have a duration ranging from 15 to ~~the customer.~~

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~~Form 10-Q Part I~~		~~Cincinnati Bell Inc.~~

25 years.

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~~The transaction price identified in the contract 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 identified in the contract 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~~estimated projection of ~~sales.~~sales volume. Estimates are reassessed quarterly.

Performance obligations are satisfied 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 these unsatisfied performance obligations that will be billed in future periods has not been disclosed.

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Form 10-Q Part I		Cincinnati Bell Inc.

As of March 31, 2019, our estimated revenue, including a financing component, expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially unsatisfied) is $39.3 million. Approximately 80% of this revenue is related to IRU contracts associated with the SEA-US. Certain IRU contracts extend for periods of up to 30 years and are invoiced at the beginning of the contract term. The revenue from such contracts is recognized over time as services are provided over the contract term. The expected revenue to be recognized for existing IRU contracts is as follows:



(dollars in millions)
Nine months ended December 31, 2019	$	2.0
2020	2.6
2021	2.5
2022	2.6
2023	2.5
Thereafter	27.1

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,~~Consumer/SMB, 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, routed network services, SONET (Synchronous Optical Network), dedicated internet access, wavelength, digital signal and ~~digital signal.~~IRU revenue. Voice services include traditional and ~~Fioptics~~fiber 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~~the Company's 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 products in Consumer/SMB, market rate is the primary method used to determine stand-alone selling prices. For Data performance obligations under the Enterprise Fiber ~~Data~~category, and ~~Legacy~~ Voice, Data and Other performance obligations under the Legacy category, 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~~include storage, backup, disaster recovery, SLA-based monitoring and management, cloud computing and cloud consulting. Consulting services provide customers with IT staffing, consulting and emerging technology ~~solutions and installation projects.~~solutions. Infrastructure Solutions includes the sale of hardware and maintenance ~~contracts.~~

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~~Form 10-Q Part I~~		~~Cincinnati Bell Inc.~~

contracts as well as installation projects.

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~~

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Form 10-Q Part I		Cincinnati Bell Inc.

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

~~Revenue recognized at a point in time includes~~For hardware sales, revenue is recognized net of the cost of ~~product for~~product. For hardware sales within Infrastructure Solutions, ~~as well as for certain projects within Communications and Consulting. Revenue generated from these contracts~~revenue is recognized when the hardware is ~~shipped to the customer, in the case of Infrastructure Solutions when we act as the agent, or~~shipped. For certain projects within Communications and Consulting, revenue is recognized when the customer communicates acceptance of the services ~~performed, in the case of Communications and Consulting.~~performed. 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~~as an asset when installation ~~costs associated with~~expenses are incurred as part of performing the agreement for Voice, Video and Data product offerings in the Entertainment and Communications segment ~~for~~in 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 also recognize an asset for incremental fulfillment ~~costs that include installation and provisioning~~ costs for certain Communications services in the IT Services and Hardware ~~segment.~~segment that require us to incur installation and provisioning expenses. 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~~is 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									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			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
Balance as of December 31, 2018																												$	14.5		$	2.5		$	17.0		$	13.0		$	2.0		$	15.0		$	27.5		$	4.5		$	32.0
Additions	3.1			0.4			3.5			1.6			0.4			2.0			4.7			0.8			5.5			0.9			0.7			1.6			2.5			0.4			2.9			3.4			1.1			4.5
Amortization	(3.3		)	(0.3		)	(3.6		)	(1.7		)	(0.2		)	(1.9		)	(5.0		)	(0.5		)	(5.5		)	(2.9		)	(0.4		)	(3.3		)	(2.1		)	(0.3		)	(2.4		)	(5.0		)	(0.7		)	(5.7		)
Balance as of March 31, 2018	17.3			2.1			19.4			11.5			1.5			13.0			28.8			3.6			32.4
Additions	3.0			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
Balance as of March 31, 2019																												$	12.5		$	2.8		$	15.3		$	13.4		$	2.1		$	15.5		$	25.9		$	4.9		$	30.8

The Company recognizes a liability for cash received upfront for IRU contracts. At March 31, 2019 and December 31, 2018, $1.5 million and $1.4 million, respectively, of contract liabilities were included in "Other current liabilities." At March 31, 2019 and December 31, 2018, $27.8 million and $28.0 million, respectively, of contract liabilities were included in "Other noncurrent liabilities."

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Form 10-Q Part I		Cincinnati Bell Inc.

Disaggregated Revenue

The following table presents revenues disaggregated by product and service lines.


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
(dollars in millions)	2018			2017			2018			2017			2019			2018
Data	$	84.4		$	90.1		$	169.3		$	174.5		$	117.5		$	84.9
Video	39.7			36.9			78.9			72.8			51.7			39.2
Voice	46.0			50.5			93.0			102.2			73.4			47.0
Other	3.8			3.5			6.9			6.6			7.7			3.1
Total Entertainment and Communications	173.9			181.0			348.1			356.1			250.3			174.2
Consulting	39.8			16.5			77.9			33.2			38.9			31.3
Cloud	23.0			19.2			45.6			40.1			24.4			22.6
Communications	41.5			40.3			82.1			76.8			47.4			40.6
Infrastructure Solutions	24.0			8.8			50.3			15.7			25.6			33.1
Total IT Services and Hardware	128.3			84.8			255.9			165.8			136.3			127.6
Intersegment revenue	(5.4		)	(6.4		)	(11.5		)	(12.9		)	(7.0		)	(6.1		)
Total revenue	$	296.8		$	259.4		$	592.5		$	509.0		$	379.6		$	295.7

In the first quarter of 2019, the Company determined that certain revenue in the IT Services and Hardware segment associated with nonrecurring projects is better aligned with Infrastructure Solutions, rather than Consulting, where it was previously reported. As a result, the Company reclassed revenue of $6.8 million from Consulting to Infrastructure Solutions for the three months ended March 31, 2018. This reclassification of revenue had no impact on the Condensed Consolidated Statements of Operations.

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 time 163.6
170.6
95.5
70.1
—
—
259.1
240.7
Intersegment revenue 4.7
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,																		Three Months Ended March 31,
(dollars in millions)	Entertainment and Communications				IT Services and Hardware				Intersegment revenue elimination						Total				Entertainment and Communications				IT Services and Hardware				Intersegment revenue elimination						Total
	2018		2017		2018		2017		2018			2017			2018		2017		2019		2018		2019		2018		2019			2018			2019		2018
Products and Services transferred at a point in time	$	10.4	$	10.2	$	67.4	$	24.3	$	—		$	—		$	77.8	$	34.5	$	8.1	$	4.8	$	27.5	$	35.3	$	—		$	—		$	35.6	$	40.1
Products and Services transferred over time	327.8		335.2		186.9		139.3		—			—			514.7		474.5		236.2		164.2		107.8		91.4		—			—			344.0		255.6
Intersegment revenue	9.9		10.7		1.6		2.2		(11.5		)	(12.9		)	—		—		6.0		5.2		1.0		0.9		(7.0		)	(6.1		)	—		—
Total revenue	$	348.1	$	356.1	$	255.9	$	165.8	$	(11.5	)	$	(12.9	)	$	592.5	$	509.0	$	250.3	$	174.2	$	136.3	$	127.6	$	(7.0	)	$	(6.1	)	$	379.6	$	295.7

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Form 10-Q Part I		Cincinnati Bell Inc.

4. Mergers and Acquisitions

Acquisition of ~~OnX Holdings LLC~~Hawaiian Telcom Holdco, Inc.

On ~~October~~July 2, ~~2017,~~2018, the Company acquired ~~100%~~Hawaiian Telcom Holdco, Inc. for cash consideration of ~~OnX Holdings LLC ("OnX"), a privately held company that provides technology~~$218.3 million, stock consideration of $121.2 million and debt repayments, including accrued interest, of $318.2 million. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest full service provider of communication services and ~~solutions to enterprise customers~~products in the ~~United States, Canada and~~state. With the ~~United Kingdom.~~acquisition, the Company gains access to both Honolulu, a well-developed, fiber-rich city, as well as the growing neighbor islands. The ~~acquisition extends the IT Services and Hardware segment's geographic footprint and accelerates its initiatives in IT cloud migration.~~companies' combined fiber networks are approximately 16,700 fiber route miles.

The purchase price for ~~OnX~~Hawaiian Telcom consisted of the following:


(dollars in millions)
Cash consideration	$	241.2
Cash consideration plus debt assumed				$	536.5
Cincinnati Bell Inc. stock issued				121.2
Debt repayment	(77.6		)	(318.2		)
Working capital adjustment	2.8
Total purchase price	$	166.4		$	339.5

~~The cash portion~~In order to fund the acquisition, the Company utilized proceeds of $350.0 million from the 8% Senior Notes due 2025 ("8% Notes"), $16.5 million of the ~~purchase price~~cash that was ~~funded through borrowings under~~previously restricted to fund interest payments on the ~~Credit Agreement~~8% Notes, drew $35.0 million on the revolving credit facility and $154.0 million on the accounts receivable securitization facility (see Note 6). ~~The cash consideration includes $77.6 million related to existing debt that was repaid in~~In conjunction with the ~~close~~acquisition, the Company issued 7.7 million Common Shares at a price of ~~the acquisition. In addition, a working capital adjustment of $2.8 million was paid in the first quarter of 2018.~~$15.70 per share as stock consideration. The Company ~~spent $8.6~~recorded a total of $27.7 million in acquisition expenses related to the ~~OnX~~ acquisition of Hawaiian Telcom, 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~~and $1.6 million were recorded in the ~~prior year comparable periods related to the OnX acquisition.~~three months ended March 31, 2019 and 2018, respectively. 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 determination of the final purchase price ~~for OnX has been allocated~~allocation to ~~individual~~specific assets acquired and liabilities assumed is incomplete for the Hawaiian Telcom transaction. The purchase price allocations, based on fair value estimates, may change in future periods as ~~follows:~~

(dollars in millions)
Assets acquired
     Cash $ 6.5
     Receivables 69.9
     Prepaid expenses and other current assets 11.8
     Property, plant and equipment 11.6
     Goodwill 133.1
     Intangible assets 134.0
     Other noncurrent assets 3.2
Total assets acquired 370.1
Liabilities assumed
     Accounts payable 63.6
Current portion of long-term debt 1.3
     Accrued expenses and other current liabilities 18.3
     Deferred income tax liabilities 42.3
Long-term debt, less current portion 76.7
     Other noncurrent liabilities 1.5
Total liabilities assumed 203.7
Net assets acquired $ 166.4
customary post-closing reviews are concluded during the measurement period, and the fair value estimates of assets and liabilities and certain tax aspects of the transaction are finalized.

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

The purchase price for Hawaiian Telcom has been currently allocated to individual assets acquired and liabilities assumed as follows:



(dollars in millions)	Hawaiian Telcom
Assets acquired
Cash	$	4.3
Receivables	25.5
Inventory, materials and supplies	6.9
Prepaid expenses and other current assets	5.9
Property, plant and equipment	701.5
Goodwill	9.6
Intangible assets	52.0
Deferred income tax asset	43.8
Other noncurrent assets	2.1
Total assets acquired	851.6
Liabilities assumed
Accounts payable	59.2
Current portion of long-term debt	10.2
Unearned revenue and customer deposits	13.5
Accrued expenses and other current liabilities	21.8
Long-term debt, less current portion	304.5
Pension and postretirement benefit obligations	68.9
Other noncurrent liabilities	34.0
Total liabilities assumed	512.1
Net assets acquired	$	339.5

During the first quarter of ~~2018,~~2019, 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 allocationimmaterial measurement period 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.~~for Hawaiian Telcom. The offset of these adjustments were recorded as an ~~increase~~increases to "Goodwill."

The estimated fair value of identifiable intangible assets and their estimated useful lives are as follows:


				Hawaiian Telcom
(dollars in millions)	Fair Value		Useful Lives	Fair Value		Useful Lives
Customer relationships	$	108.0	15 years	$	26.0	15 years
Trade name	16.0		10 years	26.0		15 years
Technology	10.0		10 years
Total identifiable intangible assets	$	134.0		$	52.0

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~~March 31, 2018 as if ~~OnX~~the acquisition of Hawaiian Telcom had ~~been acquired~~taken place 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.~~2017. These proforma results include adjustments related to the financing of the acquisition, an increase to ~~increase~~ depreciation and amortization associated with the higher values of property, plant and equipment and intangible assets, an increase to ~~increase~~ interest expense for the additional debt incurred to complete the acquisition, and ~~to reflect the~~other various related income tax ~~effect and change in tax status.~~ effects.

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Form 10-Q Part I		Cincinnati Bell Inc.

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 Ended			Six Months Ended		Three Months Ended
	June 30,					March 31,
(dollars in millions, except per share amounts)	2017					2018
Revenue	$	313.1		$	611.6	$	384.9
Net (loss) income applicable to common shareholders	(5.5		)	48.6
Net loss applicable to common shareholders						(14.3		)
Earnings per share:
Basic and diluted earnings (loss) per common share	(0.13		)	1.15
Basic and diluted loss per common share						$	(0.29	)

~~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.

1516

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Form 10-Q Part I		Cincinnati 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.



	IT Services and Hardware		Entertainment and Communications		Total Company
(dollars in millions)
Goodwill, balance as of December 31, 2018	$	146.0	$	11.0	$	157.0
Activity during the year:
Adjustments to prior year acquisitions	—		0.8		0.8
Currency translations	0.8		—		0.8
Goodwill, balance as of March 31, 2019	$	146.8	$	11.8	$	158.6

No impairment losses were recognized in goodwill for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Intangible Assets

The Company’s intangible assets consisted of the following:


	June 30, 2018							December 31, 2017							March 31, 2019							December 31, 2018
	Gross Carrying		Accumulated			Net		Gross Carrying		Accumulated			Net		Gross Carrying		Accumulated			Net		Gross Carrying		Accumulated			Net
(dollars in millions)	Amount (a)		Amortization			Amount		Amount (a)		Amortization			Amount		Amount (a)		Amortization			Amount		Amount (a)		Amortization			Amount
Customer relationships	$	114.3	$	(12.6	)	$	101.7	$	116.0	$	(8.9	)	$	107.1	$	140.0	$	(20.5	)	$	119.5	$	139.4	$	(17.8	)	$	121.6
Trade names	15.0		(1.1		)	13.9		15.9		(0.4		)	15.5		40.9		(3.5		)	37.4		40.7		(2.8		)	37.9
Technology	9.8		(0.7		)	9.1		9.9		(0.2		)	9.7		9.8		(1.5		)	8.3		9.9		(1.3		)	8.6
Total	$	139.1	$	(14.4	)	$	124.7	$	141.8	$	(9.5	)	$	132.3	$	190.7	$	(25.5	)	$	165.2	$	190.0	$	(21.9	)	$	168.1

(a) Change in gross carrying amounts is due to foreign currency ~~translation.~~translation on certain intangible assets.

Amortization expense for intangible assets ~~subject to amortization~~ was ~~$2.3~~$3.6 million and ~~$4.9~~$2.6 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 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~~March 31, 2019 and ~~2017.~~2018.

The estimated useful lives for each intangible asset class are as follows:



Customer relationships	8	to	15	years
Trade names	10	to	15	years
Technology			10	years

The annual estimated amortization expense for future years is as follows:



(dollars in millions)
Nine months ended December 31, 2019	$	11.0
2020	14.4
2021	14.1
2022	13.9
2023	13.5
Thereafter	98.3
Total	$	165.2

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Form 10-Q Part I		Cincinnati Bell Inc.

6. Debt and Other Financing Arrangements

The Company’s debt consists of the following:


	June 30,			December 31,			March 31,			December 31,
(dollars in millions)	2018			2017			2019			2018
Current portion of long-term debt:
Credit Agreement - Tranche B Term Loan due 2024	$	4.5		$	6.0		$	6.0		$	6.0
Capital lease obligations and other debt	12.3			12.4
Other financing arrangements							1.1			0.8
Capital lease obligations							15.3			13.4
Current portion of long-term debt	16.8			18.4			22.4			20.2
Long-term debt, less current portion:
Receivables Facility							175.8			176.6
Credit Agreement - Revolving Credit Facility							15.0			18.0
Credit Agreement - Tranche B Term Loan due 2024	595.5			594.0			591.0			592.5
7 1/4% Senior Notes due 2023	22.3			22.3			22.3			22.3
7% Senior Notes due 2024	625.0			625.0			625.0			625.0
8% Senior Notes due 2025	350.0			350.0			350.0			350.0
Cincinnati Bell Telephone Notes	87.9			87.9
Capital lease obligations and other debt	65.6			70.5
Various Cincinnati Bell Telephone notes							87.9			87.9
Other financing arrangements							2.0			2.3
Capital lease obligations							65.4			60.5
	1,746.3			1,749.7			1,934.4			1,935.1
Net unamortized premium	1.8			1.9			1.6			1.7
Unamortized note issuance costs	(20.8		)	(22.3		)	(26.1		)	(27.2		)
Long-term debt, less current portion	1,727.3			1,729.3			1,909.9			1,909.6
Total debt	$	1,744.1		$	1,747.7		$	1,932.3		$	1,929.8

Credit Agreement

~~There were no~~The Company had $15.0 million of outstanding borrowings on the Credit Agreement's revolving credit facility, leaving ~~$200.0~~$185.0 million available for borrowings as of ~~June 30, 2018.~~March 31, 2019. This revolving credit facility expires in 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

AsUnder the terms of ~~June 30, 2018, the Company had no borrowings and $6.7 million of letters of credit outstanding under~~ the accounts receivable securitization facility ("Receivables Facility"), ~~leaving $154.2~~the maximum borrowing limit for loans and letters of credit is $225.0 million ~~remaining availability~~in the aggregate. The available borrowing capacity is calculated monthly based on the quantity and quality of outstanding accounts receivable, and thus may be lower than the maximum borrowing limit. As of March 31, 2019, the available borrowing capacity was $187.1 million. Of the total borrowing capacity of ~~$160.9 million. In~~$187.1 million at March 31, 2019, there were $175.8 million of outstanding borrowings and $9.9 million of outstanding letters of credit, leaving $1.4 million remaining availability from the ~~second quarter of 2018, the Company executed an amendment of its~~total borrowing capacity. The 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 2019. The amended Receivables Facility extends the~~and has a termination date to May ~~2021 and includes an option~~2021. The Company expects to ~~sell certain receivables on a non-recourse basis. As of June 30, 2018,~~complete the Company has not 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. next renewal period in May 2019.

Under the ~~terms of the Receivables Facility, the Company could obtain up to $250.0 million depending on the quantity and quality of accounts receivable. Under this~~ agreement, certain U.S. and Canadian subsidiaries, as originators, sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC (“CBF”) or Cincinnati Bell Funding Canada Ltd. ("CBFC")., wholly-owned consolidated subsidiaries of the Company. Although CBF and CBFC are wholly-owned consolidated subsidiaries of the Company, CBF and 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 other subsidiaries or the parent company. The Receivables Facility includes an option to sell certain receivables on a non-recourse basis. As of March 31, 2019, the Company sold approximately $16.3 million of certain accounts receivables.

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Form 10-Q Part I		Cincinnati Bell Inc.

Other Installment Financing Arrangements

The Company has other installment financing arrangements that are recorded in "Other current liabilities" and "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets.

The IT Services and Hardware segment entered into a lease in June 2018 for a building to use in its data center operations. Structural improvements were made to ~~these~~the leased ~~facilities~~facility in excess of normal tenant improvements and, as such, we are deemed the accounting owner of ~~these facilities.~~this facility. As of ~~June 30,~~March 31, 2019 and December 31, 2018, the liability related to ~~these~~this financing ~~arrangements~~arrangement was ~~$5.2~~$4.5 million, which was recognized within "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets.

Prior to the acquisition of Hawaiian Telcom in July 2018, Hawaiian Telcom had an open dispute related to jointly-owned utility poles. In October 2018, the Company entered into the Pole License Agreement that provided for the transfer of the Company's ownership responsibility of the utility poles to Hawaiian Electric Company (HEC) and for the Company to pay a fixed annual fee to HEC for continued use of the poles. Due to the continuing involvement by the Company, this transaction did not meet the requirements to be accounted for as a sale-leaseback, and therefore it has been treated as a financing obligation. As of March 31, 2019, the Company has a liability recorded of $39.8 million, of which $1.0 million is recognized within "Other current liabilities" and $38.8 million is recognized within "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets. As of December 31, 2018, the Company has a liability recorded of $40.1 million, of which $1.0 million is recognized within "Other current liabilities" and $39.1 million is recognized within "Other noncurrent liabilities" in the Condensed Consolidated Balance Sheets.

1819

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Form 10-Q Part I		Cincinnati Bell Inc.

7. ~~Restructuring~~Leases

Lessee Disclosures

The Company primarily leases real estate for offices, retail stores and ~~Severance~~central offices, as well as equipment, cell towers and fleet vehicles. The Company leases its real estate for terms between 1 and 55 years, its equipment for terms between 1 and 6 years, its cell towers for terms between 4 and 21 years and its vehicles for terms of 5 years. Our leases have various expiration dates through 2066, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases within one year.

~~Liabilities have been established for employee separations~~Upon adoption, the Company elected not to recognize leases with terms of one-year or less on the balance sheet. The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease ~~abandonment. A summary~~liabilities. The incremental borrowing rate represents an estimate of ~~activity in~~ the ~~restructuring and severance liability is shown below:~~interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Supplemental unaudited balance sheet information relate to the Company's leases were as follows:

(dollars in millions)
Employee
Separation

Lease
Abandonment
Total
Balance as of December 31, 2017 $ 14.4
$ 0.1
$ 14.5
Charges 0.3
—
0.3
Utilizations (7.3 ) —
(7.3 )
Balance as of March 31, 2018 7.4
0.1
7.5
Charges 3.8
0.8
4.6
Utilizations (0.9 ) —
(0.9 )
Balance as of June 30, 2018 $ 10.3
$ 0.9
$ 11.2



(dollars in millions)	Balance Sheet Location	March 31, 2019
Operating lease assets, net of amortization	Operating lease right-of-use assets	$	37.2
Finance lease assets, net of amortization	Property, plant and equipment, net	28.1
Operating lease liabilities:
Current operating lease liabilities	Other current liabilities	9.8
Noncurrent operating lease liabilities	Operating lease liabilities	34.5
Total operating lease liabilities		44.3

Finance lease liabilities:
Current finance lease liabilities	Current portion of long-term debt	15.3
Noncurrent finance lease liabilities	Long-term debt, less current portion	65.4
Total finance lease liabilities		$	80.7

~~Headcount~~The components of lease expense was as follows:



	Three Months Ended
(dollars in millions)	March 31, 2019
Operating lease cost	$	3.1
Short-term lease cost	0.1
Variable lease cost	0.5
Finance lease cost:
Depreciation on leased assets	1.9
Interest on lease liabilities	1.2
Total lease cost	$	6.8

Under ASC 840 the Company recorded lease expense of $3.3 million for the three months ended March 31, 2018.

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Form 10-Q Part I		Cincinnati Bell Inc.

Other information related ~~restructuring and severance charges~~to leases were as follows:



	Three Months Ended
(dollars in millions)	March 31, 2019
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	1.2
Operating cash flows from operating leases	3.2
Financing cash flows from finance leases	3.0
Right-of-use assets obtained in exchange for lease obligations:
New operating leases	1.3
New finance leases	9.8
Weighted Average Remaining Lease Term
Operating leases	8.21 years
Finance leases	7.59 years
Weighted Average Discount Rate
Operating leases	7.08		%
Finance leases	6.86		%

Future minimum lease payments under non-cancellable leases as of ~~$3.8 million recorded~~March 31, 2019 are as follows:



(dollars in millions)	Operating Leases			Finance Leases
Nine months ended December 31, 2019	$	12.7		$	19.5
2020	10.3			17.3
2021	6.3			13.2
2022	4.7			8.1
2023	4.2			7.4
Thereafter	23.0			40.9
Total future minimum lease payments	61.2			106.4
Less imputed interest	(15.6		)	(25.7		)
Total	$	45.6		$	80.7

As of March 31, 2019, we have additional operating leases for buildings that have not yet commenced for $1.3 million. These operating leases will commence in the second quarter of ~~2018 are~~2019 with lease terms of up to 5 years.

Lessor Disclosures

The Company has operating leases related to ~~costs incurred in order~~its dark fiber arrangements for terms between 3 and 29 years. Our leases have various expiration dates through 2046, some of which include options to ~~recognize future synergies as~~extend 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.lease. During the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, the Company ~~made severance payments~~recorded $0.8 million in lease income related to ~~employee separations~~operating lease payments.

The Company owns the underlying assets associated with ~~initiatives to reduce costs within our legacy copper network~~its operating leases and ~~headcount reductions~~records them in ~~our IT Services~~"Property, plant and ~~Hardware segment.~~equipment, net" on the Condensed Consolidated Balance Sheets.

~~Lease abandonment costs represent future~~

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Form 10-Q Part I		Cincinnati Bell Inc.

Future minimum lease ~~obligations, net~~payments to be received under non-cancellable leases as of ~~expected sublease income, for abandoned facilities. Lease payments on abandoned facilities will continue through 2020.~~

~~A summary of restructuring activity by business segment is presented below:~~March 31, 2019 are as follows:

(dollars in millions) Entertainment and Communications IT Services and Hardware Corporate Total
Balance as of December 31, 2017 $ 12.3
$ 2.2
$ —
$ 14.5
Charges —
0.3
—
0.3
Utilizations (5.7 ) (1.6 ) —
(7.3 )
Balance as of March 31, 2018 6.6
0.9
—
7.5
Charges —
4.6
—
4.6
Utilizations (0.3 ) (0.6 ) —
(0.9 )
Balance as of June 30, 2018 $ 6.3
$ 4.9
$ —
$ 11.2



(dollars in millions)	Operating Leases
Nine months ended December 31, 2019	$	2.4
2020	3.1
2021	2.4
2022	1.7
2023	1.7
Thereafter	18.6
Total future minimum lease payments	29.9
Less imputed interest	(11.0		)
Total	$	18.9

At June 30, 2018 and December 31, 2017, $8.8 million and $12.0 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” At June 30, 2018 and December 31, 2017, $2.4 million and $2.5 million, respectively, were included in "Other noncurrent liabilities."

1922

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Form 10-Q Part I		Cincinnati Bell Inc.

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~~

In the second quarter of 2018, the Company ~~has~~entered into 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).

In the three months ended March 31, 2019, the Company entered into three forward starting non-amortizing interest rate swaps, with a notional amount of $89.0 million each, to convert variable rate debt to fixed rate debt. The interest rate swaps became effective in March 2019 and expire in March 2024. The interest rate swaps result in interest payments based on an average fixed rate per swap of 2.275%, 2.244% and 2.328% 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~~$1.4 million will be reclassified as an increase to interest expense.

The fair value of the Company's interest rate swaps are impacted by the the credit risk of both the Company and its counter-parties. The Company has agreements with its derivative financial instrument counter-parties that contain provisions ~~where~~providing that 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~~instruments obligations. ~~The~~In addition, the Company minimizes ~~this~~nonperformance risk on its derivative instruments by evaluating the creditworthiness of ~~our~~its counter-parties, which are limited to major banks and financial institutions.

Upon inception, the interest rate swaps were designated as a cash flow ~~hedge~~hedges 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.~~loss. The fair value of the interest rate ~~swap is~~swaps are categorized as Level 2 in the fair value hierarchy as ~~it is~~they are based on ~~well recognized~~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
$ —

2023

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Form 10-Q Part I		Cincinnati Bell Inc.

As of March 31, 2019, the fair value of the interest rate swaps was $8.8 million and is recorded in the Condensed Consolidated Balance Sheets as of March 31, 2019 as follows:



(dollars in millions)	Balance Sheet Location	March 31, 2019		Quoted Prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Assets:
Interest Rate Swap	Other current assets	$	0.3	$	—	$	0.3	$	—
Liabilities:
Interest Rate Swap	Other current liabilities	$	1.7	$	—	$	1.7	$	—
Interest Rate Swap	Other noncurrent liabilities	$	7.4	$	—	$	7.4	$	—

As of December 31, 2018, the fair value of the interest rate swap liability was $5.0 million and is recorded in the Condensed Consolidated Balance Sheets as of December 31, 2018 as follows:



(dollars in millions)	Balance Sheet Location	December 31, 2018		Quoted Prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Liabilities:
Interest Rate Swap	Other current liabilities	$	1.2	$	—	$	1.2	$	—
Interest Rate Swap	Other noncurrent liabilities	$	3.8	$	—	$	3.8	$	—

The amount of losses recognized in Accumulated Other Comprehensive Income ("AOCI") net of reclassifications into earnings is as follows:



	Three Months Ended
	March 31,
(dollars in millions)	2019
Interest Rate Swap	$	3.8

The amount of losses reclassified from AOCI into earnings is as follows:



		Three Months Ended
		March 31,
(dollars in millions)	Statement of Operations Location	2019
Interest Rate Swap	Interest expense	$	(0.3	)

Disclosure on Financial Instruments

The carrying values of the Company's financial instruments approximate the estimated fair values as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018, except for the Company's long-term debt ~~certain~~and other installment financing ~~arrangements and interest rate swap.~~arrangements. The carrying and fair values of these items are as follows:

June 30, 2018 December 31, 2017
(dollars in millions) Carrying Value Fair Value Carrying Value Fair Value
Long-term debt, including current portion* $ 1,687.0
$ 1,607.7
$ 1,687.1
$ 1,687.5
Other financing arrangements 5.2
5.3
—
—
Interest Rate Swap 1.9
1.9
—
—
*Excludes capital leases and note issuance costs.



	March 31, 2019				December 31, 2018
(dollars in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion*	$	1,874.6	$	1,772.7	$	1,880.0	$	1,673.6
Other installment financing arrangements	44.3		46.8		44.6		43.6
*Excludes capital leases, other financing arrangements 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, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, which is considered Level 2 of the fair value hierarchy. The fair value of the other installment

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Form 10-Q Part I		Cincinnati Bell Inc.

financing arrangements was calculated using a discounted cash flow model that incorporates current borrowing rates for obligations of similar duration, which is considered ~~level~~Level 3 of the fair value hierarchy. As of ~~June 30, 2018,~~March 31, 2019, the current borrowing rate was estimated by applying ~~Cincinnati Bell's~~the Company's credit spread to the risk-free rate for a similar duration borrowing.

9. Pension and Postretirement Plans

As of March 31, 2019, the Company sponsors three noncontributory defined benefit plans and a postretirement health and life insurance plan in Cincinnati (collectively the "Cincinnati Plans"), and one noncontributory defined benefit plan for union employees, one cash balance pension plan for nonunion employees, and two postretirement health and life insurance plans for Hawaiian Telcom employees (collectively the "Hawaii Plans").

In accordance with ASC 715, only the service cost component of net benefit cost is eligible for capitalization, which was immaterial for the three months ended March 31, 2019 and 2018.

For the three months ended March 31, 2019 and 2018, pension and postretirement benefit costs (benefits) were as follows:



	Three Months Ended March 31,
	2019			2018			2019			2018
(dollars in millions)	Pension Benefits						Postretirement and Other Benefits
Service cost	$	—		$	—		$	0.2		$	0.1
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation	6.0			4.2			1.2			0.8
Expected return on plan assets	(7.8		)	(6.2		)	—			—
Amortization of:
Prior service benefit	—			—			(0.6		)	(0.8		)
Actuarial loss	3.4			4.3			0.4			1.0
Total amortization	3.4			4.3			(0.2		)	0.2
Pension / postretirement costs	$	1.6		$	2.3		$	1.2		$	1.1

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

Based on current assumptions, contributions are expected to be approximately $3 million to both the qualified and non-qualified pension plans in 2019. Management expects to make cash payments of approximately $11 million related to its postretirement health plans in 2019.

For the three months ended March 31, 2019, contributions to the pension plans were $1.1 million and contributions to the postretirement plans were $1.9 million. For the three months ended March 31, 2018, contributions to the pension plans were $1.3 million and contributions to the postretirement plan were $1.6 million.

2125

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Form 10-Q Part I		Cincinnati Bell Inc.

~~9. Pension~~10. Restructuring and ~~Postretirement Plans~~Severance

~~The Company sponsors three noncontributory defined benefit plans~~Liabilities have been established for employee separations and ~~a postretirement health~~lease abandonment. A summary of activity in the restructuring 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. In accordance with ASU 2017-07, retrospectively adopted effective January 1, 2018, only the service cost component of net benefit costseverance liability is ~~eligible for capitalization on a prospective basis, which was immaterial for the three and six months ended June 30, 2018.~~

~~For the three and six months ended June 30, 2018 and 2017, pension and postretirement benefit costs (benefits) were as follows:~~shown below:

Three Months Ended June 30, 2018
2018 2017 2018 2017
(dollars in millions) Pension Benefits
Postretirement and
Other Benefits
Service cost $ —
$ —
$ —
$ —
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation 4.1
4.9
0.8
0.8
Expected return on plan assets (6.2 ) (6.5 ) —
—
Amortization of:
Prior service benefit —
—
(0.8 ) (1.1 )
Actuarial loss 4.2
4.4
1.1
1.2
Total amortization 4.2
4.4
0.3
0.1
Pension / postretirement costs $ 2.1
$ 2.8
$ 1.1
$ 0.9



(dollars in millions)	Employee Separation			Lease Abandonment			Total
Balance as of December 31, 2018	$	9.5		$	0.7		$	10.2
Hawaiian Telcom opening balance sheet adjustment	0.1			—			0.1
Charges	3.3			—			3.3
Utilizations	(6.7		)	(0.1		)	(6.8		)
Balance as of March 31, 2019	$	6.2		$	0.6		$	6.8

Restructuring and severance charges recorded in the first quarter of 2019 are related to a voluntary severance program ("VSP") for certain management employees in the Entertainment and Communications segment as the Company continues its efforts to realize synergies that can be achieved due to the acquisition of Hawaiian Telcom.

Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Lease payments on abandoned facilities will continue through 2020.

A summary of restructuring activity by business segment is presented below:

Six Months Ended June 30, 2018
2018 2017 2018 2017
(dollars in millions) Pension Benefits
Postretirement and
Other Benefits
Service cost $ —
$ —
$ 0.1
$ 0.1
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation 8.3
9.7
1.6
1.6
Expected return on plan assets (12.4 ) (13.0 ) —
—
Amortization of:
Prior service benefit —
—
(1.6 ) (2.2 )
Actuarial loss 8.5
8.8
2.1
2.3
Total amortization 8.5
8.8
0.5
0.1
Pension / postretirement costs $ 4.4
$ 5.5
$ 2.2
$ 1.8



(dollars in millions)	Entertainment and Communications			IT Services and Hardware			Corporate		Total
Balance as of December 31, 2018	$	8.6		$	1.3		$	0.3	$	10.2
Hawaiian Telcom opening balance sheet adjustment	0.1			—			—		0.1
Charges	3.3			—			—		3.3
Utilizations	(6.3		)	(0.5		)	—		(6.8		)
Balance as of March 31, 2019	$	5.7		$	0.8		$	0.3	$	6.8

At March 31, 2019 and December 31, 2018, $6.4 million and $9.6 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” At March 31, 2019 and December 31, 2018, $0.4 million and $0.6 million, respectively, were included in "Other noncurrent liabilities."

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

Based on current assumptions, contributions to qualified and non-qualified pension plans in 2018 are expected to be approximately $4 million and $3 million, respectively. Management expects to make cash payments of approximately $9 million related to its postretirement health plans in 2018.

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

~~10.~~11. Shareowners' Deficit

Accumulated Other Comprehensive Loss

For the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, the changes in accumulated other comprehensive loss by component were as follows:

(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, net 7.0
(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 )



(dollars in millions)	Unrecognized Net Periodic Pension and Postretirement Benefit Cost				Unrealized Loss on Cash Flow Hedges, Net				Foreign Currency Translation Loss			Total
Balance as of December 31, 2018	$	(164.5	)		$	(3.9	)		$	(7.1	)	$	(175.5	)
Reclassifications, net	2.5			(a)	0.2			(b)	—			2.7
Unrealized loss on cash flow hedges arising during the period, net	—				(3.1		)	(c)	—			(3.1		)
Foreign currency gain	—				—				1.6			1.6
Balance as of March 31, 2019	$	(162.0	)		$	(6.8	)		$	(5.5	)	$	(174.3	)

(a)

These reclassifications are included in the other components of net periodic pension and postretirement benefit plans expense and represent amortization of prior service benefit and actuarial loss, net of ~~tax (see Note 9 for additional details).~~tax. The other components of net periodic pension and postretirement benefit plans expense are recorded in "Other components of pension and postretirement benefit plans expense" on the Condensed Consolidated Statements of Operations. See Note 9 for further disclosures.

(b)

~~In June 2018,~~These reclassifications are reported within "Interest expense" on the Company entered into an interest rate swap agreement to minimize its exposure to interest rate fluctuations on variable rate debt. The interest rate swap is considered a derivative instrument and qualifies for cash flow hedge accounting in accordance with ASC 815. Condensed Consolidated Statements of Operations when the hedged transactions impact earnings.


(c)	The unrealized loss, net on cash flow ~~hedge~~hedges represents the change in the fair value of the derivative ~~instrument~~instruments that occurred during the period, net of tax. This unrealized gain or loss is recorded in "Other current assets," "Other current liabilities" and "Other noncurrent liabilities" on the Condensed Consolidated Balance Sheets. See Note 8 for further disclosures.

2327

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Form 10-Q Part I		Cincinnati Bell Inc.

~~11.~~12. 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 the Company's internal management structure and reporting. The Company operates two business segments identified as Entertainment and Communications and IT Services and Hardware.

The Entertainment and Communications segment provides products and services that can be categorized as Data, Video, Voice or Other. Data products include high-speed internet access, digital subscriber lines, ethernet, SONET, dedicated internet access, wavelength, digital signal and ~~digital signal. These products are used to transport large amounts of data over private networks.~~IRU. 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~~fiber voice lines, consumer long distance, switched access and digital 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 end-to-end solutions from consulting to implementation to ongoing optimization. These solutions include Cloud, Communications and Consulting services along with the sale, installation and maintenance of major branded Telecom and IT 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.

2428

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Form 10-Q Part I		Cincinnati Bell Inc.

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


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
(dollars in millions)	2018			2017			2018			2017			2019			2018
Revenue
Entertainment and Communications	$	173.9		$	181.0		$	348.1		$	356.1		$	250.3		$	174.2
IT Services and Hardware	128.3			84.8			255.9			165.8			136.3			127.6
Intersegment	(5.4		)	(6.4		)	(11.5		)	(12.9		)	(7.0		)	(6.1		)
Total revenue	$	296.8		$	259.4		$	592.5		$	509.0		$	379.6		$	295.7
Intersegment revenue
Entertainment and Communications	$	4.7		$	5.3		$	9.9		$	10.7		$	6.0		$	5.2
IT Services and Hardware	0.7			1.1			1.6			2.2			1.0			0.9
Total intersegment revenue	$	5.4		$	6.4		$	11.5		$	12.9		$	7.0		$	6.1
Operating income (loss)
Entertainment and Communications	$	25.5		$	31.4		$	54.1		$	34.5		$	24.5		$	28.6
IT Services and Hardware	(0.2		)	(1.5		)	1.2			(0.6		)	(6.8		)	1.4
Corporate	(5.1		)	(5.5		)	(10.9		)	(11.3		)	(7.6		)	(5.8		)
Total operating income (loss)	$	20.2		$	24.4		$	44.4		$	22.6
Total operating income													$	10.1		$	24.2
Expenditures for long-lived assets*
Entertainment and Communications	$	31.8		$	45.5		$	59.4		$	92.3		$	51.1		$	27.6
IT Services and Hardware	6.5			5.0			14.4			22.5			5.4			7.9
Total expenditures for long-lived assets	$	38.3		$	50.5		$	73.8		$	114.8		$	56.5		$	35.5
Depreciation and amortization
Entertainment and Communications	$	41.0		$	40.4		$	81.9		$	79.8		$	62.7		$	40.9
IT Services and Hardware	9.9			6.5			20.1			12.9			16.7			10.2
Corporate	—			0.1			0.1			0.1			—			0.1
Total depreciation and amortization	$	50.9		$	47.0		$	102.1		$	92.8		$	79.4		$	51.2
* Includes cost of acquisitions
	June 30,			December 31,									March 31,			December 31,
(dollars in millions)	2018			2017									2019			2018
Assets
Entertainment and Communications	$	1,103.8		$	1,111.4								$	1,907.4		$	1,898.8
IT Services and Hardware	395.9			482.7									460.7			468.1
Corporate and eliminations	666.4			593.5									281.2			363.3
Total assets	$	2,166.1		$	2,187.6								$	2,649.3		$	2,730.2

~~Table of Contents~~



~~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.

~~Table of Contents~~



~~Form 10-Q Part I~~		~~Cincinnati 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, 2018~~March 31, 2019, and the results of operations for the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018. 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, ~~2017~~2018. 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 I		Cincinnati 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~~provide integrated communications and IT solutions that keep consumer and enterprise customers connected with each other and with the world. Through its Entertainment and Communications segment, the Company provides Data, Video, and Voice solutions to consumer and enterprise customers over an expanding fiber network and a legacy copper network. In addition, enterprise customers across the United States, Canada and Europe rely on the IT Services and Hardware segment for the sale and service of efficient, end-to-end communications and IT systems and solutions.

On July 2, 2018, the Company acquired Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom"). The Unified Communications as a Service ("UCaaS"), hardware, and enterprise long distance products and services provided by the Hawaiian Telcom business are included within the IT Services and Hardware Segment. The Entertainment and Communications segment includes products delivered by Hawaiian Telcom such as high-speed internet access, digital subscriber lines, ethernet, dedicated internet access, indefeasible right of use ("IRU") contracts, video, voice lines, consumer long distance and digital trunking.

Consolidated revenue totaling ~~$296.8 million and $592.5~~$379.6 million for the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, increased ~~$37.4 million and $83.5~~$83.9 million compared to the same ~~periods~~period in ~~2017~~2018 primarily due to ~~demand for both our fiber offerings, as well as IT services, which includes results from acquisitions completed in 2017.~~the acquisition of Hawaiian Telcom. The acquisition of ~~OnX Holdings LLC ("OnX")~~Hawaiian Telcom contributed ~~$45.3 million and $90.6~~$86.6 million of revenue in the three ~~and six~~ months ended ~~June 30, 2018.~~March 31, 2019. Revenue growth from the acquisition was partially offset due to declines in Legacy revenue exceeding the growth in revenue from our fiber offerings. Fioptics revenue in Cincinnati increased ~~$8.3 million and $17.6 million for the three and six months ended June 30, 2018, respectively, compared to the same periods in 2017.~~

~~Operating income was $20.2~~$4.1 million for the three months ended ~~June 30, 2018,~~March 31, 2019, compared to the same period in 2018. Legacy revenue in Cincinnati decreased $7.9 million for the three months ended March 31, 2019 compared to the same period in 2018.

Operating income was $10.1 million for the three months ended March 31, 2019, down ~~$4.2~~$14.1 million compared to the prior year. The contribution from incremental ~~OnX~~Hawaiian Telcom revenue was offset by increased depreciation, amortization, and Selling, General and Administrative ("SG&A") expense, also related to the acquisition of ~~OnX. Operating~~Hawaiian Telcom.

Loss before income ~~was $44.4~~taxes totaled $26.6 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 restructuring and severance related charges. Restructuring and severance related charges were incurred for the three months ended March 31, ~~2017~~2019, resulting in ~~order~~an increase in the loss as compared to ~~reduce field and network costs associated with our legacy copper network.~~

~~Loss~~the comparable period in 2018. In addition to the items impacting operating income, the increased loss before income taxes ~~totaled $15.3 million and $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~~related to additional debt acquired ~~in the third quarter of 2017~~ to fund the acquisition 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 on the sale of our investment in CyrusOne of $117.7 million was 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.Telcom.

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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 March 31,
(dollars in millions)	2018		2017		$ Change			% Change		2018		2017		$ Change			% Change		2019		2018		$ Change		% Change
Revenue
Entertainment and Communications	$	169.2	$	175.7	$	(6.5	)	(4	)%	$	338.2	$345.4		$	(7.2	)	(2	)%	$	244.3	$	169.0	$	75.3	45	%
IT Services and Hardware	127.6		83.7		43.9			52	%	254.3		163.6		90.7			55	%	135.3		126.7		8.6		7	%
Total revenue	$	296.8	$	259.4	$	37.4		14	%	$	592.5	$	509.0	$	83.5		16	%	$	379.6	$	295.7	$	83.9	28	%

Entertainment and Communications revenue ~~decreased~~increased for the three months ended March 31, 2019, primarily due to ~~a one time project~~the acquisition of Hawaiian Telcom. Hawaiian Telcom revenue of $77.8 million, along with growth in ~~Enterprise Fiber completed~~Fioptics in Cincinnati, offset the ~~second quarter of 2017 for $5.4 million. Additionally,~~ declines experienced in Legacy revenue ~~exceeded increases~~ in ~~Fioptics in both comparable periods.~~Cincinnati. IT Services and Hardware revenue increased primarily due to the acquisition of ~~OnX that closed~~Hawaiian Telcom, which contributed $8.8 million primarily in the ~~fourth quarter of 2017.~~Communications and the Cloud practices. Consulting revenue also increased in the three months ended March 31, 2019, but this growth was more than offset by declines in Infrastructure Solutions.

Operating Costs


	Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended March 31,
(dollars in millions)	2018		2017		$ Change		% Change		2018		2017		$ Change		% Change		2019		2018		$ Change		% Change
Cost of services and products
Entertainment and Communications	$	77.8	$	77.0	$	0.8	1	%	$	154.2	$	151.4	$	2.8	2	%	$	113.8	$	76.5	$	37.3	49	%
IT Services and Hardware	74.5		51.9		22.6		44	%	147.5		101.6		45.9		45	%	83.9		72.9		11.0		15	%
Total cost of services and products	$	152.3	$	128.9	$	23.4	18	%	$	301.7	$	253.0	$	48.7	19	%	$	197.7	$	149.4	$	48.3	32	%

Entertainment and Communications costs ~~were relatively flat~~increased compared to the same ~~periods~~period in the prior ~~year. Increases~~year as a result of the acquisition of Hawaiian Telcom. In addition, increases in video content costs due ~~to our growing Fioptics video subscriber base, in addition~~ to higher rates charged by our content providers ~~was~~were offset by lower payroll related costs and ~~benefits costs. In addition, there was a reduction in costs due~~lower operating taxes related to ~~the one-time project that was recorded in the second quarter of the prior year.~~Cincinnati-based operations. Lower payroll ~~and benefits~~related costs are related to headcount reductions made during restructuring initiatives that were executed in ~~2017.~~2017 and 2018. IT Services and Hardware costs increased due to ~~higher headcount as a result~~payroll related and contractor costs associated with resources utilized to support the revenue growth of $7.6 million in the ~~acquisition of OnX, which contributed revenue of $45.3 million and $90.6 million~~Consulting practice for the three ~~and six~~ months ended ~~June 30, 2018, respectively.~~March 31, 2019, as compared to the prior year. In addition, Hawaiian Telcom contributed $4.9 million to cost of services and products for the three months ended March 31, 2019.



	Three Months Ended March 31,
(dollars in millions)	2019		2018		$ Change			% Change
Selling, general and administrative
Entertainment and Communications	$	44.5	$	27.1	$	17.4		64	%
IT Services and Hardware	37.0		37.7		(0.7		)	(2	)%
Corporate	4.6		3.6		1.0			28	%
Total selling, general and administrative	$	86.1	$	68.4	$	17.7		26	%

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Form 10-Q Part I		Cincinnati Bell Inc.

Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2018 2017 $ Change % Change 2018 2017 $ Change % Change
Selling, general and administrative
Entertainment and Communications $ 29.0
—
$ 29.8
$ (0.8 ) (3 )% $ 56.1
$ 61.1
$ (5.0 ) (8 )%
IT Services and Hardware 34.8
20.4
14.4
71 % 72.5
39.2
33.3
85 %
Corporate 2.3
3.6
(1.3 ) (36 )% 5.9
8.8
(2.9 ) (33 )%
Total selling, general and administrative $ 66.1
$ 53.8
$ 12.3
23 % $ 134.5
$ 109.1
$ 25.4
23 %

Entertainment and Communications SG&A costs ~~were down~~increased in the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019, compared to the same ~~periods~~period in the prior year, primarily due to ~~lower payroll costs~~the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed SG&A expense of $16.0 million. The remaining increase is due to an increase in the bad debt reserve for certain receivables with a carrier customer that ~~are a result~~filed for bankruptcy in the first quarter of ~~headcount reductions from restructuring initiatives that were executed in 2017 and 2016.~~2019 whose collectibility is uncertain. IT Services and Hardware SG&A costs ~~were up primarily~~decreased in the three months ended March 31, 2019 compared to the prior year due to ~~OnX contributing~~a decrease in payroll costs resulting from headcount reductions carried out in 2018. The decline in payroll costs more than offset additional ~~headcount, as well as other costs such as rent and professional fees.~~

SG&A of $2.5 million contributed by Hawaiian Telcom.


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
(dollars in millions)	2018		2017		$ Change			% Change		2018			2017		$ Change		% Change		2019		2018		$ Change			% Change
Depreciation and amortization expense
Entertainment and Communications	$	41.0	$	40.4	$	0.6		1	%	$	81.9		$	79.8	$	2.1	3	%	$	62.7	$	40.9	$	21.8		53	%
IT Services and Hardware	9.9		6.5		3.4			52	%	20.1		0.0	12.9		7.2		56	%	16.7		10.2		6.5			64	%
Corporate	—		0.1		(0.1		)	n/m		0.1			0.1		0.0		n/m		—		0.1		(0.1		)	n/m
Total depreciation and amortization expense	$	50.9	$	47.0	$	3.9		8	%	$	102.1		$	92.8	$	9.3	10	%	$	79.4	$	51.2	$	28.2		55	%

Entertainment and Communications depreciation and amortization expense increased due to increased property, plant, and equipment and intangible assets obtained in ~~both comparable periods as a result~~the acquisition of ~~expanding our fiber-based network.~~Hawaiian Telcom. The increase in IT Services and Hardware depreciation and amortization expense ~~in both comparable periods~~ is primarily related to ~~the amortization of intangible~~accelerated depreciation for certain network assets ~~acquired as part of the SunTel and OnX acquisitions, as well as depreciation expense related~~that were determined to ~~the property, plant and equipment obtained~~have a shorter useful life due to a change in ~~these acquisitions.~~customer requirements.


	Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended March 31,
(dollars in millions)	2018		2017		$ Change		% Change		2018		2017		$ Change			% Change		2019		2018		$ Change		% Change
Other operating costs
Restructuring and severance related charges	$	4.6	$	3.6	$	1.0	28	%	$	4.9	$	29.2	$	(24.3	)	(83	)%	$	3.3	$	0.3	$	3.0	n/m
Transaction and integration costs	2.7		1.7		1.0		59	%	4.9		2.3		2.6			n/m		3.0		2.2		0.8		36	%
Total other operating costs	$	7.3	$	5.3	$	2.0	38	%	$	9.8	$	31.5	$	(21.7	)	(69	)%	$	6.3	$	2.5	$	3.8	n/m

Headcount-related restructuring and severance charges of ~~$3.8~~$3.3 million recorded in the ~~second quarter of 2018~~three months ended March 31, 2019 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~~Hawaiian Telcom.

Transaction and integration costs incurred in the ~~second~~first quarter of 2019, recorded as a Corporate expense, are primarily due to the continued integration of Hawaiian Telcom. Transaction and integration costs incurred in the first quarter of 2018, related to an office space that will no longer be utilized. Restructuring and severance-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. Additionally, restructuring and severance-related charges incurred by the Entertainment and Communications segment during the six months ended June 30, 2017 were related torecorded as a ~~voluntary severance program for certain bargained employees to reduce field and network costs associated with our legacy copper network.~~

~~Transaction costs recorded in the~~ Corporate ~~segment in 2018~~expense, are due to the 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 ~~recorded in 2017 are primarily due~~incurred leading up to ~~costs associated with~~ the acquisition of ~~SunTel Services~~Hawaiian Telcom.

Non-operating Costs



	Three Months Ended March 31,
(dollars in millions)	2019			2018			$ Change			% Change
Non-operating costs
Interest expense	$	35.1		$	30.8		$	4.3		14	%
Other components of pension and postretirement benefit plans expense	2.6			3.3			(0.7		)	(21	)%
Other income, net	(1.0		)	(0.4		)	(0.6		)	n/m
Income tax expense (benefit)	0.3			(1.2		)	1.5			n/m

Interest expense increased for the three months ended March 31, 2019 compared to the same period in the ~~first quarter~~prior year due to interest incurred on the amounts outstanding on the Receivables Facility and the Revolving Credit Facility used to partially fund the cash portion of ~~2017, as well as~~ the ~~merger agreements with~~acquisition of Hawaiian ~~Telcom and OnX committed to in July 2017.~~Telcom. At March 31, 2018, there was no balance outstanding on the Receivables Facility or the Revolving Credit Facility.

3032

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Form 10-Q Part I		Cincinnati Bell Inc.

~~Non-operating Costs~~

Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2018 2017 $ Change % Change 2018 2017 $ Change % Change
Non-operating costs
Interest expense $ 31.8
$ 18.1
$ 13.7
76 % $ 62.6
$ 36.1
$ 26.5
73 %
Loss on extinguishment of debt 1.3
—
1.3
n/m
1.3
—
1.3
n/m
Other components of pension and postretirement benefit plans expense 3.2
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 (0.8 ) (0.6 ) (0.2 ) 33 % (1.2 ) (1.0 ) (0.2 ) 20 %
Income tax (benefit) expense (1.5 ) 1.4
(2.9 ) n/m
(2.7 ) 35.9
(38.6 ) n/m

Interest expense increased for the three and six months ended June 30, 2018 compared to the same periods in the prior year due to the Company entering 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 $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.~~

Income tax expense ~~decreased~~increased year over year primarily due to ~~lower income~~an increase in the valuation allowance against nondeductible interest expense that the Company does not anticipate the ability to utilize in future years. This increase is partially offset by an increase in the loss before ~~tax, as well as the lower federal statutory tax rate due to tax reform.~~tax. The Company expects to use federal and state net operating loss carryforwards to substantially defray payment of federal and state tax liabilities in ~~2018.~~2019.

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Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications

The Entertainment and Communications segment provides products and services that can be categorized as either Fioptics in Cincinnati or Consumer/SMB Fiber in Hawaii (collectively, "Consumer/SMB Fiber"), 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 145 years. Voice and data services in the Enterprise Fiber and Legacy categories that are delivered beyond the Company's ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended Territories LLC ("CBET"), a subsidiary of CBT. On July 2, 2018, the Company acquired Hawaiian Telcom. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest full service provider of communications services and products in the state. Originally incorporated in Hawaii in 1883 as Mutual Telephone Company, Hawaiian Telcom has a strong heritage of over 135 years as Hawaii’s communications carrier. Its services are offered on all of Hawaii’s major islands, except its video service, which currently is only available on the island of Oahu.

~~Fioptics~~Consumer/SMB Fiber products ~~are delivered to both consumer and enterprise customers and~~ include high-speed internet access, voice lines and video. The Company is able to deliver speeds of up to 30 megabits or more to approximately ~~72%~~76% of Greater ~~Cincinnati.~~Cincinnati and to approximately 35% of Hawaii's total addressable market.

Enterprise Fiber products include metro-ethernet, dedicated internet access, wavelength, IRU contracts, and small cell. As enterprise customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the preferred method of transport 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 other value-added services such as caller identification, voicemail, call waiting and call return.


	Three Months Ended June 30,											Six Months Ended June 30,											Three Months Ended March 31,
(dollars in millions)	2018			2017			Change			% Change		2018			2017			Change			% Change		2019			2018			Change			% Change
Revenue:
Data	$	84.4		$	90.1		$	(5.7	)	(6	)%	$	169.3		$	174.5		$	(5.2	)	(3	)%	$	117.5		$	84.9		$	32.6		38	%
Video	39.7			36.9			2.8			8	%	78.9			72.8			6.1			8	%	51.7			39.2			12.5			32	%
Voice	46.0			50.5			(4.5		)	(9	)%	93.0			102.2			(9.2		)	(9	)%	73.4			47.0			26.4			56	%
Other	3.8			3.5			0.3			9	%	6.9			6.6			0.3			5	%	7.7			3.1			4.6			n/m
Total Revenue	173.9			181.0			(7.1		)	(4	)%	348.1			356.1			(8.0		)	(2	)%	250.3			174.2			76.1			44	%
Operating costs and expenses:
Cost of services and products	78.4			78.3			0.1			—		156.0			154.0			2.0			1	%	115.3			77.6			37.7			49	%
Selling, general and administrative	29.0			29.8			(0.8		)	(3	)%	56.1			61.1			(5.0		)	(8	)%	44.5			27.1			17.4			64	%
Depreciation and amortization	41.0			40.4			0.6			1	%	81.9			79.8			2.1			3	%	62.7			40.9			21.8			53	%
Restructuring and severance charges	—			1.1			(1.1		)	n/m		—			26.7			(26.7		)	n/m		3.3			—			3.3			n/m
Total operating costs and expenses	148.4			149.6			(1.2		)	(1	)%	$	294.0		321.6			(27.6		)	(9	)%	225.8			145.6			80.2			55	%
Operating income	$	25.5		$	31.4		$	(5.9	)	(19	)%	$	54.1		$	34.5		$	19.6		57	%	$	24.5		$	28.6		$	(4.1	)	(14	)%
Operating margin	14.7		%	17.3		%				(2.6) pts		15.5		%	9.7		%				6.0 pts		9.8		%	16.4		%				(6.6) pts
Capital expenditures	$	31.8		$	45.5		$	(13.7	)	(30	)%	$	59.4		$	92.3		$	(32.9	)	(36	)%	$	51.1		$	27.6		$	23.5		85	%

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Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications, continued

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

Internet FTTP 192.7
168.1
24.6
15 %
Internet FTTN 42.6
46.0
(3.4 ) (7 )%
Total Fioptics Internet 235.3
214.1
21.2
10 %
Video
Video FTTP 118.1
112.8
5.3
5 %
Video FTTN 27.0
30.0
(3.0 ) (10 )%
Total Fioptics Video 145.1
142.8
2.3
2 %
Voice
Consumer Voice Lines 89.1
87.0
2.1
2 %
Enterprise Voice Lines 18.5
15.2
3.3
22 %
Total Fioptics Voice Lines 107.6
102.2
5.4
5 %
Fioptics Units Passed

Units passed FTTP 449.3
415.4
33.9
8 %
Units passed FTTN 139.9
141.3
(1.4 ) (1 )%
Total Fioptics units passed 589.2
556.7
32.5
6 %

Enterprise Fiber
Data
Ethernet Bandwidth (Gb) 4,133
3,638
495
14 %

Legacy
Data
DSL 75.2
93.0
(17.8 ) (19 )%
Voice
Consumer Voice Lines 85.9
104.9
(19.0 ) (18 )%
Enterprise Voice Lines 154.7
177.3
(22.6 ) (13 )%
Total Legacy Voice Lines 240.6
282.2
(41.6 ) (15 )%

*Fiber to the Premise (FTTP), Fiber to the Node (FTTN)



	March 31,
Metrics information (in thousands):	2019	2018	Change		% Change
Cincinnati
Fioptics
Data
Internet FTTP*	207.6	187.8	19.8		11	%
Internet FTTN*	35.7	45.0	(9.3	)	(21	)%
Total Fioptics Internet	243.3	232.8	10.5		5	%
Video
Video FTTP	115.2	118.1	(2.9	)	(2	)%
Video FTTN	24.0	28.2	(4.2	)	(15	)%
Total Fioptics Video	139.2	146.3	(7.1	)	(5	)%
Voice
Fioptics Voice Lines	109.0	106.9	2.1		2	%
Fioptics Units Passed
Units passed FTTP	477.6	440.5	37.1		8	%
Units passed FTTN	138.5	140.3	(1.8	)	(1	)%
Total Fioptics units passed	616.1	580.8	35.3		6	%

Enterprise Fiber
Data
Ethernet Bandwidth (Gb)	4,540	4,046	494		12	%

Legacy
Data
DSL	69.6	78.1	(8.5	)	(11	)%
Voice
Legacy Voice Lines	218.0	251.4	(33.4	)	(13	)%

*Fiber to the Premise (FTTP), Fiber to the Node (FTTN)

3335

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications, continued



	March 31,
Metrics information (in thousands):	2019
Hawaii
Consumer / SMB Fiber
Data
Internet FTTP*	52.7
Internet FTTN*	13.9
Total Consumer / SMB Fiber Internet	66.6
Video
Video FTTP	33.5
Video FTTN	14.3
Total Consumer / SMB Fiber Video	47.8
Voice
Consumer / SMB Fiber Voice Lines	30.3
Consumer / SMB Fiber Units Passed **
Units passed FTTP	168.1
Units passed FTTN	73.4
Total Consumer / SMB Fiber units passed	241.5

Enterprise Fiber
Data
Ethernet Bandwidth (Gb)	2,413

Legacy
Data
DSL	47.2
Voice
Legacy Voice Lines	192.8

*Fiber to the Premise (FTTP), Fiber to the Node (FTTN)
** Includes units passed for both consumer and business on Oahu and neighboring islands.

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications, continued

Revenue

Three Months Ended June 30, Six Months Ended June 30,
(dollars in millions) 2018 2017 2018 2017
Revenue:
Fioptics
Data $ 35.6
$ 31.3
$ 70.0
$ 60.9
Video 39.7
36.9
78.9
72.8
Voice 9.5
8.3
18.6
16.2
Other 0.3
0.3
0.6
0.6
85.1
76.8
168.1
150.5
Enterprise Fiber
Data 21.0
25.3
41.8
—
45.0
Legacy
Data 27.8
33.5
57.5
68.6
Voice 36.5
42.2
74.4
86.0
Other 3.5
3.2
6.3
6.0
67.8
78.9
138.2
160.6
Total Entertainment and Communications revenue $ 173.9
$ 181.0
$ 348.1
$ 356.1



			Three Months Ended March 31,
			2019						2018
			Cincinnati		Hawaii		Total		Cincinnati		Hawaii		Total
	Revenue
		Consumer / SMB Fiber *
		Data	$	37.4	$	7.9	$	45.3	$	34.4	$	—	$	34.4
		Video	40.2		11.5		51.7		39.2		—		39.2
		Voice	9.2		2.8		12.0		9.1		—		9.1
		Other	0.3		0.2		0.5		0.3		—		0.3
			87.1		22.4		109.5		83.0		—		83.0
		Enterprise Fiber
		Data	21.1		9.2		30.3		20.8		—		20.8
		Legacy
		Data	26.0		15.9		41.9		29.7		—		29.7
		Voice	33.0		28.4		61.4		37.9		—		37.9
		Other	3.5		3.7		7.2		2.8		—		2.8
			62.5		48.0		110.5		70.4		—		70.4
	Total Entertainment and Communications revenue		$	170.7	$	79.6	$	250.3	$	174.2	$	—	$	174.2

* Represents Fioptics in Cincinnati

Cincinnati Fioptics and Hawaii Consumer/SMB Fiber (collectively, "Consumer/SMB Fiber")

~~Fioptics~~Consumer/SMB Fiber revenue ~~has~~ increased by ~~$8.3~~$26.5 million for the three months ended ~~June 30, 2018,~~March 31, 2019 compared to the same period a year ago primarily due to revenue contributed by Hawaiian Telcom of $22.4 million. Hawaiian Telcom adds 47,800 video subscribers, 66,600 internet subscribers and 30,300 voice subscribers to the existing base of subscribers. The remaining revenue increase is due to increases in the subscriber base offor internet and voice, as well as rate favorability for internet and video ~~and~~in Cincinnati. The internet ~~of 5%, 2% and 10%, respectively. An~~subscriber base in Cincinnati continues to increase ~~in rate has also contributed to increased revenue~~ as we focus our attention on growing the internet FTTP subscriber base. The Average Revenue Per User ("ARPU") ~~has~~on a year to date basis increased for ~~voice,~~internet and video by 3% and ~~internet by 7%, 5% and 3%~~8%, respectively, compared to the prior year. ARPU increases are related to price increases for ~~voice,~~internet and video, ~~and internet,~~ as well as the change in the mix of subscribers for video. ~~Fioptics~~

Enterprise Fiber

Enterprise Fiber revenue ~~has~~ increased ~~$17.6 million~~ for the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019 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~~incremental revenue of ~~$5.4~~$9.2 million ~~attributable to this project, Enterprise Fiber~~from Hawaiian Telcom, which includes revenue from the SEA-US cable, metro-ethernet and dedicated internet access. In addition, revenue increased ~~slightly year over year. Increases in revenue related~~due to enterprise customers migrating from legacy product offerings to higher bandwidth fiber solutions, ~~are offset with declines~~ as ~~carriers continue~~evidenced by the 12% increase in Ethernet Bandwidth in Cincinnati compared to ~~groom their networks.~~the comparable period in the prior year.

Legacy

Legacy revenue ~~has decreased $11.1 million~~increased for the three months ended ~~June 30, 2018,~~March 31, 2019 compared to the same period a year ago due to incremental revenue from Hawaiian Telcom of $48.0 million. Hawaiian Telcom adds 47,200 DSL subscribers and 192,800 voice subscribers to the existing base of subscribers. Increased revenue generated by Hawaiian Telcom was partially offset by declines in revenue from both voice lines and DSL ~~subscribers.~~subscribers in Cincinnati. Voice lines ~~have~~in Cincinnati declined ~~15% compared to the three months ended June 30, 2017,~~13% as the traditional voice lines become less relevant. DSL subscribers ~~for the three months ended June 30, 2018 have~~in Cincinnati decreased by ~~19%~~11% 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.~~fiber. In addition, declines in DS0, DS1, DS3 and digital trunking have contributed to the revenue decline for these products in ~~both comparable periods~~2019 compared to the same period in the prior year 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.~~

3437

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Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications, continued

Operating Costs and Expenses

Cost of services and products ~~was relatively flat~~increased in the three months ended ~~June 30,~~March 31, 2019 compared to same period in 2018 primarily due to the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed $38.8 million to cost of services and ~~increased 1% for~~products in the ~~six~~three months ended ~~June 30, 2018 compared to~~March 31, 2019. Excluding the ~~prior comparable periods. In the first quarter of 2017, costs~~increase associated with ~~a large one-time project were recognized, causing~~ the ~~year over year decline. In addition, lower payroll related costs were offset~~acquisition of Hawaiian Telcom, cost of services and products decreased by ~~higher video content costs. Video content costs increased $8.8 million for~~$1.1 million. This decrease in the ~~six~~three months ended ~~June 30, 2018 and payroll related costs decreased $4.3 million~~March 31, 2019 compared to the same period in ~~the prior year. Higher video content~~2018 is primarily due to lower payroll costs ~~are the result of the increase in video subscribers, as well as higher rates charged by content providers. Payroll related costs are down~~ due to reduced headcount asand lower overtime driven by efficiencies in the installation process. The reduced headcount is a result of the restructuring that took place in the ~~first quarter~~prior two years. Payroll related decreases are partially offset by higher programming costs. Higher programming costs are the result of ~~2017.~~higher rates charged by content providers.

SG&A expenses ~~decreased~~increased by ~~$0.8 million and $5.0~~$17.4 million in the three ~~and six~~ months ended ~~June 30, 2018~~March 31, 2019 compared to the same ~~periods~~period in the prior year primarily due to ~~decreased payroll related costs~~the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed $16.0 million of SG&A expense in 2019. In addition to the increase contributed by Hawaiian Telcom, there were also increases in bad debt expense and advertising expense. The increase in bad debt expense is due to a reserve for certain receivables with a carrier customer that filed for bankruptcy in the first quarter of 2019. The increase in advertising expense is due to timing. These increases were partially offset by savings in contract services for synergies realized on certain contracts as a result of the ~~restructuring that took place~~acquisition of Hawaiian Telcom.

Depreciation and amortization expenses were up in the three months ended March 31, 2019 compared to the same period in the prior year due to the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed $22.3 million of depreciation and amortization expense in the first quarter of ~~2017.~~

Depreciation and amortization expenses for the three and six months ended June 30, 2018 increased compared to the prior year primarily due to assets placed in service in connection with the expansion of our fiber network.2019.

Restructuring and severance charges recorded in the ~~first quarter of 2017~~three months ended March 31, 2019 are related to ~~a voluntary severance program for certain bargained employees~~costs incurred in order to ~~reduce field and network costs associated~~recognize future synergies as the Company continues to identify efficiencies with ~~our legacy copper network.~~the integration of Hawaiian Telcom.

Capital Expenditures


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(dollars in millions)	2018		2017		2018		2017
Fioptics capital expenditures
									2019						2018
									Cincinnati		Hawaii		Total		Cincinnati		Hawaii		Total
Consumer / SMB Fiber capital expenditures *
Construction	$	9.3	$	16.2	$	15.4	$	31.4	$	9.2	$	2.2	$	11.4	$	6.1	$	—	$	6.1
Installation	10.0		13.1		17.5		28.4		11.5		4.1		15.6		7.5		—		7.5
Other	1.6		1.3		5.2		6.5		1.8		0.7		2.5		3.6		—		3.6
Total Fioptics	20.9		30.6		38.1		66.3
Total Consumer / SMB Fiber									22.5		7.0		29.5		17.2		—		17.2

Enterprise Fiber	3.2		4.8		7.7		8.7		2.2		1.7		3.9		4.5		—		4.5
Other	7.7		10.1		13.6		17.3		6.1		11.6		17.7		5.9		—		5.9
Total capital expenditures	$	31.8	$	45.5	$	59.4	$	92.3
Total Entertainment and Communications capital expenditures									$	30.8	$	20.3	$	51.1	$	27.6	$	—	$	27.6
* Represents Fioptics in Cincinnati

Capital expenditures in Cincinnati are incurred to expand our Fioptics product suite, upgrade and increase capacity for our networks, and to extend the life of our fiber and copper networks. In the ~~second~~first quarter of ~~2018,~~2019, we passed an additional ~~8,800~~5,300 FTTP ~~addresses.~~addresses in Cincinnati. As of ~~June 30, 2018,~~March 31, 2019, the Company is able to provide its Fioptics services to ~~589,200~~616,100 consumer and enterprise addresses, or ~~72%~~76% of our operating ~~territory. Construction~~territory in Cincinnati. Cincinnati construction capital expenditures ~~decreased $6.9 million and $16.0~~increased $3.1 million in the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019, compared to the same ~~periods~~period in ~~2017 primarily~~2018 due to ~~passing fewer addresses with Fioptics. Installation~~the timing of capital expenditures, ~~decreased $3.1 million and $10.9~~which does not necessarily coincide with the timing of when the door becomes available. Cincinnati installation capital expenditures increased $4.0 million in the three ~~and six~~ months ended ~~June 30, 2018, respectively,~~March 31, 2019 compared to the same ~~periods~~period in ~~2017~~2018 due to ~~fewer activations in 2018 as a result~~the timing of ~~the reduced build out.~~expenditures for customer premise equipment utilized for installations.

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

Entertainment and Communications, continued

Enterprise Fiber capital expenditures in Cincinnati are related to success-based fiber builds, including associated equipment, for enterprise and carrier projects 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.

Capital expenditures in Hawaii for the three months ended March 31, 2019 were $20.3 million. Hawaii construction capital expenditures of $2.2 million relate to building out 1,000 new doors. Hawaii installation capital expenditures of $4.1 million primarily relate to new video and internet installations. Enterprise fiber capital in Hawaii is primarily driven by new ethernet customers. Hawaii capital expenditures classified as other include IT projects, real estate projects, road jobs or plant damage projects, and network upgrades or optimization projects.

3539

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Form 10-Q Part I		Cincinnati Bell Inc.

IT Services and Hardware

The IT Services and Hardware segment provides end-to-end IT solutions, ranging from consulting to implementation to ongoing ~~optimization.~~optimization of existing technology. These solutions include Cloud, Communications and Consulting services along with the sale and maintenance of major branded Telecom and IT 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 Europe. By offering a full range of equipment and strategic services in conjunction with the Company’s fiber and copper networks, the IT Services and Hardware segment provides our customers personalized solutions designed to meet their business objectives.

Cloud services include the design, implementation and on-going management of the customer’s infrastructure. This includes on-premise, public cloud and private cloud solutions. The Company assists customers with the risk assessment 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 comparability.

Consulting services help customers assess their business and technology needs and provide the talent needed to ensure success. The Company is ~~the~~a premier provider of application services and IT staffing.

3640

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

IT Services and Hardware, continued


	Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended March 31,
(dollars in millions)	2018			2017			Change		% Change		2018			2017			Change			% Change		2019			2018			Change			% Change
Revenue:
Consulting	$	39.8		$	16.5		$	23.3	n/m		$	77.9		$	33.2		$	44.7		n/m		$	38.9		$	31.3		$	7.6		24	%
Cloud	23.0			19.2			3.8		20	%	45.6			40.1			5.5			14	%	24.4			22.6			1.8			8	%
Communications	41.5			40.3			1.2		3	%	82.1			76.8			5.3			7	%	47.4			40.6			6.8			17	%
Infrastructure Solutions	24.0			8.8			15.2		n/m		50.3			15.7			34.6			n/m		25.6			33.1			(7.5		)	(23	)%
Total revenue	128.3			84.8			43.5		51	%	255.9			165.8			90.1			54	%	136.3			127.6			8.7			7	%
Operating costs and expenses:
Cost of services and products	79.0			56.7			22.3		39	%	156.7			111.4			45.3			41	%	89.2			77.7			11.5			15	%
Selling, general and administrative	35.0			20.6			14.4		70	%	73.0			39.6			33.4			84	%	37.2			38.0			(0.8		)	(2	)%
Depreciation and amortization	9.9			6.5			3.4		52	%	20.1			12.9			7.2			56	%	16.7			10.2			6.5			64	%
Restructuring and severance related charges	4.6			2.5			2.1		84	%	4.9			2.5			2.4			96	%	—			0.3			(0.3		)	n/m
Total operating costs and expenses	128.5			86.3			42.2		49	%	254.7			166.4			88.3			53	%	143.1			126.2			16.9			13	%
Operating (loss) income	$	(0.2	)	$	(1.5	)	$	1.3	(87	)%	$	1.2		$	(0.6	)	$	1.8		n/m
Operating income																						$	(6.8	)	$	1.4		$	(8.2	)	n/m
Operating margin	(0.2		)%	(1.8		)%			1.6 pts		0.5		%	(0.4		)%				0.9 pts		(5.0		)%	1.1		%				(6.1) pts
Capital expenditures	$	6.5		$	4.6		$	1.9	41	%	$	11.6		$	12.9		$	(1.3	)	(10	)%	$	5.4		$	5.1		$	0.3		6	%

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




Metrics information: (as of March 31, 2019)	Communications	Communications	Communications	Consulting
	Hosted UCaaS Profiles*	NaaS Locations	SD - WAN Locations	Billable Resources
	244,482	2,550	1,002	1,039
* Includes Hawaii Hosted UCaaS Profiles

Revenue

IT Services and Hardware segment revenue increased $43.5 million and $90.1 million for the three and six months ended June 30, 2018, respectively, as compared to the comparable periods in 2017. Consulting and Infrastructure Solutions are the primary contributors to this revenue increase, primarily due the acquisition of OnX. OnX contributed $25.6 million in Consulting revenue and $13.3 million in Infrastructure Solutions revenue for the three months ended June 30, 2018 and contributed $49.6 million in Consulting revenue and $28.0 million in Infrastructure Solutions revenue for the six months ended June 30, 2018.

~~Operating Costs and Expenses~~

Cost of services and products is predominantly impacted by fluctuations in the headcount and contractors required to deliver the services within Consulting, Cloud and Communications. The increase of $22.3 and $45.3 million in Cost of services and products for the three and six months ended June 30, 2018 as compared to the prior year is related to the acquisition of OnX and consists primarily of payroll and contract services costs.

~~SG&A increased $14.4 million and $33.4 million for the three and six months ended June 30, 2018, respectively, as compared to the prior year. The acquisition of OnX contributed an increase of $16.7~~$8.7 million for the three months ended ~~June 30, 2018~~March 31, 2019, as compared to the same period in the prior year. Consulting and ~~$37.0~~Communications are the main contributors to this revenue increase in 2019. Consulting revenue increased compared to the prior year due to obtaining significant new customers and projects throughout 2018. Communications revenue increased primarily due to the acquisition of Hawaiian Telcom, which contributed $5.9 million of revenue in the quarter. These increases are partially offset by lower Infrastructure Solutions revenue due to variability associated with the hardware reseller business.

Operating Costs and Expenses

IT Services and Hardware cost of services and products increased $11.5 million for the ~~six~~three months ended ~~June 30,~~March 31, 2019, as compared to the same period in the prior year. In the three months ended March 31, 2019, Hawaiian Telcom contributed $6.8 million of additional expense to cost of services and products. The remaining increase in cost of services and products is primarily due to payroll and contractor costs associated with the incremental consulting revenue of $7.6 million.

SG&A decreased $0.8 million for the three months ended March 31, 2019, as compared to the same period in the prior year. Payroll costs decreased $3.6 million compared to the prior year due to restructuring initiatives that were carried out in 2018. This decrease was partially offset by expenses of $2.5 million contributed by Hawaiian Telcom.

Depreciation and amortization expenses increased $6.5 million for the three months ended March 31, 2019, as compared to the same period in the prior year due to accelerated depreciation expense for certain network assets designated for use by a specific customer. The network assets for which accelerated depreciation expense was incurred were determined to have a shorter useful life due to a change in the customer's requirements in the first quarter of 2019.

3741

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Form 10-Q Part I		Cincinnati Bell Inc.

~~Restructuring~~IT Services 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 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.Hardware, continued

Capital Expenditures

Capital expenditures are dependent on the timing of success-based projects. ~~The increase in the second quarter of 2018 compared to the same period in the prior year, and decrease~~Capital expenditures in the first ~~half~~quarter of ~~2018 compared~~2019 were primarily related to projects supporting the ~~same period in the prior year, is due to the change in the volume of these types of~~Cloud and Communications practices as well as $0.9 million for implementation work associated with internal software projects.

Table of Contents



Form 10-Q Part I		Cincinnati Bell Inc.

Financial Condition, Liquidity, and Capital Resources

As of ~~June 30, 2018,~~March 31, 2019, the Company had ~~$1,744.1~~$1,932.3 million of outstanding indebtedness and an accumulated deficit of ~~$2,661.7~~$2,736.3 million. A significant amount of the Company's 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 ~~$89.9~~$56.8 million and ~~$122.9~~$58.5 million of cash flows from operations during the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. As of ~~June 30, 2018,~~March 31, 2019, the Company had ~~$384.5~~$190.3 million of short-term liquidity, comprised of ~~$30.3~~$3.9 million of cash and cash equivalents, ~~$200.0~~$185.0 million of undrawn capacity on our ~~Corporate~~Revolving Credit ~~Agreement,~~Facility, and ~~$154.2~~$1.4 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~~$225.0 million and is subject to annual renewal. As of ~~June 30, 2018,~~March 31, 2019, the Company had no borrowings of $175.8 million and ~~$6.7~~$9.9 million of letters of credit outstanding under the Receivables Facility on a borrowing capacity of ~~$160.9~~$187.1 million. While we expect to continue to renew this facility, we would be required to use cash, our Revolving Credit Facility, or other sources to repay any outstanding balance on the Receivables Facility if it was 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,~~2018, 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~~three months ended ~~June 30, 2018~~March 31, 2019 totaled ~~$89.9~~$56.8 million, a decrease of ~~$33.0~~$1.7 million compared to the same period in ~~2017. The decrease is due primarily to~~2018. Hawaiian Telcom contributed operating cash flow of approximately $18 million, which was offset with higher interest payments ~~of $37.3 million.~~

associated with the incremental debt obtained to fund the acquisition, as well as lower working capital compared to the same period in the prior year.

Cash flows used byin investing activities during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 totaled ~~$73.8~~$56.6 million, an increase of $21.0 million compared to ~~$26.3 million of cash flows provided by investing activities~~the same period in ~~the prior year.~~2018. The ~~decrease~~increase in cash flows ~~provided by~~used in investing activities was ~~largely~~primarily 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 decline in cash flows associated with CyrusOne were partially offset with a decrease in capital expenditures ~~of $34.2 million due~~related to ~~declines in construction and installation capital for Fioptics.~~

Hawaiian Telcom.

Cash flows used in financing activities during the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 totaled ~~$15.6~~$11.8 million as compared to ~~$100.7~~$8.0 million of cash flows used in the prior year. In the first quarter of ~~2017,~~2019, the Company repaid ~~$89.5~~$3.0 million on the Revolving Credit Facility and $0.8 million on the Receivables Facility as compared to no ~~borrowings~~payments on either the Revolving Credit Facility or ~~payments~~the Receivables Facility in the first quarter of 2018.

Indentures

The Company’s Senior Notes are 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 as of ~~June 30, 2018.~~

March 31, 2019.

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 Company repurchased and retired a total of 1.7 million shares at a total cost of $25.6 million dollars. As of ~~June 30, 2018,~~March 31, 2019, 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 ~~2017~~2018 for a complete description of regulatory matters.

Table of Contents



Form 10-Q Part I		Cincinnati 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 ~~December 31, 2017~~2018 for a complete description of future operating trends for our business.

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 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, ~~2017~~2018. 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 and the impact to the Condensed Consolidated Financial Statements as a result of adopting ASU ~~2014-09 and ASU 2017-07~~2016-02 effective January 1, ~~2018.~~2019.

~~Table of Contents~~



~~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, ~~2017~~2018 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 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~~first quarter of ~~2018~~2019 and have concluded that there were no changes to Cincinnati Bell Inc.’s internal control over financial reporting during the ~~second~~first quarter of ~~2018~~2019 that materially affect, or are reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.

4044

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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, ~~2017~~2018 for a comprehensive listing of the Company’s risk factors. There are no material changes for the three months ending ~~June 30, 2018.~~March 31, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the ~~six~~three month period ended ~~June 30, 2018~~March 31, 2019, the Company had no unregistered sales of equity securities. The Company also had no purchases of its common stock for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosure

None.

Item 5. Other Information

No reportable items.

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Form 10-Q Part II		Cincinnati Bell Inc.

Item 6. Exhibits

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



Exhibit
Number	Description
(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, Date of Report October 4, 2016, File No. 1-8519).
(~~(3.3)+~~3.3)	Amended and Restated Regulations of Cincinnati Bell Inc.
~~(10.1)~~	~~Amendment No. 1~~ (Exhibit 3.3 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 10.1 to CurrentQuarterly Report on Form ~~8-K,~~10-Q, Date of Report ~~April 5,~~August 8, 2018, File No. 1-8519).
~~(10.2)~~	Amendment No. 2 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 revolving lenders party thereto (Exhibit 10.1 to Current Report on Form 8-K, Date of Report April 5, 2018, File No. 1-8519).
~~(10.3)~~(10.1)+	Cincinnati Bell Inc. Form of ~~2018-2023 Business Value~~Restricted Stock Unit Award Agreement ~~(Exhibit 10.1 to Current Report on Form 8-K, Date of Report May 7, 2018, File No. 1-8519).~~(2017 Long Term Incentive Plan) - 2019 version.
~~(10.4)~~(10.2)+	Second Amended and Restated Purchase and Sale Agreement dated as of May 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 Servicers, the Lenders, Letter~~Form of Credit Participants and Group Agents from time to time party thereto, PNC Bank, National Association, as Administrator and Letter of Credit Bank, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 99.3 to Current Report on Form 8-K, Date of Report May 10, 2018, File No. 1-8519).
~~(10.7)~~	~~Receivables Purchase~~2019-2021 Share-Based Performance Unit Award Agreement dated as of May 10, 2018, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, PNC Bank, National Association, as Buyer, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 99.4 to Current Report on Form 8-K, Date of Report May 10, 2018, File No. 1-8519)(2017 Long Term Incentive Plan).
~~(21)+~~	~~Subsidiaries of the Registrant.~~
(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.

~~Table of Contents~~



~~Form 10-Q Part II~~		~~Cincinnati Bell Inc.~~



(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.

4346

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Form 10-Q Part II		Cincinnati Bell Inc.

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~~May 8, ~~2018~~2019	/s/ Andrew R. Kaiser
		Andrew R. Kaiser
		Chief Financial Officer

Date:	~~August~~May 8, ~~2018~~2019	/s/ Shannon M. Mullen
		Shannon M. Mullen
		Chief Accounting Officer

4447



	Three Months Ended June 30, 2018
	2018			2017			2018			2017
(dollars in millions)	Pension Benefits						Postretirement and Other Benefits
Service cost	$	—		$	—		$	—		$	—
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation	4.1			4.9			0.8			0.8
Expected return on plan assets	(6.2		)	(6.5		)	—			—
Amortization of:
Prior service benefit	—			—			(0.8		)	(1.1		)
Actuarial loss	4.2			4.4			1.1			1.2
Total amortization	4.2			4.4			0.3			0.1
Pension / postretirement costs	$	2.1		$	2.8		$	1.1		$	0.9



	Six Months Ended June 30, 2018
	2018			2017			2018			2017
(dollars in millions)	Pension Benefits						Postretirement and Other Benefits
Service cost	$	—		$	—		$	0.1		$	0.1
Other components of pension and postretirement benefit plans expense:
Interest cost on projected benefit obligation	8.3			9.7			1.6			1.6
Expected return on plan assets	(12.4		)	(13.0		)	—			—
Amortization of:
Prior service benefit	—			—			(1.6		)	(2.2		)
Actuarial loss	8.5			8.8			2.1			2.3
Total amortization	8.5			8.8			0.5			0.1
Pension / postretirement costs	$	4.4		$	5.5		$	2.2		$	1.8



(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, net	7.0			(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	)