UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20142016
 
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number 1-8519
CINCINNATI BELL INC.
 
Ohio 31-1056105
(State of Incorporation) (I.R.S. Employer Identification No.)
221 East Fourth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
(513) 397-9900
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
Common Shares (par value $0.01 per share) New York Stock Exchange
6 3/4% Cumulative Convertible Preferred Shares
 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  x    No  o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o     No  x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 
   Yes  x    No  o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  xo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerx  Accelerated filero
     
Non-accelerated filero  Smaller reporting companyo
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
The aggregate market value of the voting common shares owned by non-affiliates of the registrant was $0.8$1.0 billion,, computed by reference to the closing sale price of the common stock on the New York Stock Exchange on June 30, 2014,2016, the last trading day of the registrant’s most recently completed second fiscal quarter. The Company has no non-voting common shares.

At January 31, 2015,2017, there were 209,570,77642,128,999 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to the Company’s 20152017 Annual Meeting of Shareholders are incorporated by reference into Part III of this report to the extent described herein.

 







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

TABLE OF CONTENTS
 
PART I
 
  Page
Item 1.
Business
4
   
Item 1A.
Risk Factors
1211
   
Item 1B.
Unresolved Staff Comments
2321
   
Item 2.
Properties
2321
   
Item 3.
Legal Proceedings
2321
   
Item 4.
Mine Safety Disclosures
2321
   
 
PART II
 
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
2422
   
Item 6.
Selected Financial Data
2724
   
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
2927
   
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk
6657
   
Item 8.
Financial Statements and Supplementary Data
6758
   
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
129126
   
Item 9A.
Controls and Procedures
129126
   
Item 9B.
Other Information
129126
   
 
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance
130127
   
Item 11.
Executive Compensation
131129
   
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
131129
   
Item 13.
Certain Relationships and Related Transactions, and Director Independence
131129
   
Item 14.
Principal Accountant Fees and Services
131129
   
 
PART IV
 
Item 15.
Exhibits and Financial Statement Schedules
132130
   
 
Signatures
138136
This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc., as indicated.

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

Part I
Item 1. Business
Overview and Strategy
Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provides integrated communications solutions - including high-speed internet, data, video, and local and long distance voice -IT solutions that keep residential and business customers in Greater Cincinnati connected with each other and with the world. Through its Entertainment and Communications segment, the company provides high speed data, video, and voice solutions to consumers and businesses over an expanding fiber network and a legacy copper network. In addition, business customers across the United States rely on CBTS,Cincinnati Bell Technology Solutions Inc. ("CBTS"), a wholly-owned subsidiary reported as the IT Services and Hardware segment, for the sale and service of efficient, end-to-end communications and IT systems and solutions. Cincinnati Bell also owns approximately 44% of CyrusOne Inc. (NASDAQ: CONE) ("CyrusOne"), which specializes in highly reliable enterprise-class, carrier-neutral data center properties.
Our goal is to transformcontinue the transformation of Cincinnati Bell from a legacy copper-based telecommunications company into a fiber-based entertainment, communicationstechnology company with state of the art fiber assets servicing customers with data, video, voice and IT solutions to meet their evolving needs. To this end, leveraging our past and future investments creates a company with a healthy balance sheet, growing revenue, growing profitsprofitability and sustainable cash flows.
In an effort to meetachieve our goal,objectives, we identifiedcontinue to focus on the following key initiatives:
•continue the expansion ofto expand our local fiber network
evaluate opportunities to thoughtfully •grow our IT Services and Hardware segment
•monetize our remaining CyrusOne investment in order to reduce leverage
manage the wireless business for cash flows and profitability as we wind down operations

Continue the expansion ofto expand our local fiber network
We invested $130.0$230.6 million of capital in ourEntertainment and Communications' strategic products during 2014.2016. Revenue from these high demand products totaled $435.6$449.5 million, up 21%23% over the prior year, and more than offset the decline in our legacy products. The primary focus of our strategic investments is the expansion of our Fioptics suite of products which is designed to compete directly with the cable Multiple System Operators (MSO)("MSO") serving the Company’s ILEC market area. Weoperating territory. In 2016 we invested $93.1$180.3 million in 2014 for Fioptics as demand for the products remains strong. Year-over-year growth is outlined in the table:table below:
2014 2013 20122016 2015 2014
Fioptics Revenue (in millions):$142.4 $100.8 $68.2
Fioptics revenue (in millions):$254.1 $190.8 $142.4
Fioptics subscribers (in thousands):          
High-speed internet113.7
 79.9
 56.8
197.6
 153.7
 113.7
Entertainment91.4
 74.2
 55.1
Video137.6
 114.4
 91.4
Voice61.0
 53.3
 40.8
96.2
 77.4
 61.0
During the year we passed an additional 59,000101,400 addresses with Fioptics and as of December 31, 20142016, the product is available to approximately 335,000533,400 customer locations, or 41%67% of Greater Cincinnati. In the third quarterOur goal is to pass an additional 35,000 addresses during 2017.
Included in capital for strategic products is $50.3 million of 2014, we announced a plan to further accelerate the build-out of Fioptics to capitalize on the heightened demand for the product as well as the unique opportunity created by the pending acquisition of the cable provider in our market.
The Company also invested $25.0 millioninvestment in fiber and IP-based core network technology to meet increased enterprisebusiness and carrier demand primarily within its ILEC geographyGreater Cincinnati and in contiguous markets in the Midwest region for high-bandwidth data transport products, such as metro-ethernet and VoIP. We continue to evolve and optimize network assets to support the migration of legacy products to new technology and as of December 31, 2014,2016, the Company has:

connected approximately 5,8007,200 commercial buildingsaddresses with fiber-based services (also referred to as a lit building), including more than 550 multi-tenant units ("MTU's")address) during 2016 increasing the total number of lit with fiber;addresses to 15,800 (included in Fioptics addresses);
•expanded the fiber network to span more than 6,6009,600 route miles; and
provided cell site back-haul services to more than 70% of the 1,100 cell sites in-market, of which approximately 500 are lit with fiber.

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


provided cell site back-haul services to more than 70% of the 1,100 cell sites in-market, of which approximately 500 are lit with fiber.
As a result of our strategic investments, we generated year-over-year wirelineEntertainment and Communications revenue growth for the first timeeach year since 2007. Wireline strategic revenue totaled $305.0 million (net of intercompany), up 23% compared to the prior year, primarily due to growth in our Fioptics suite of products. Strategic revenue from business customers was also up 12% in 2014 due to increased2013. Customer demand for metro-ethernetfaster data speed and VoIP products.
In addition tobroadband usage is accelerating. We believe our fiber investments we also invested $11.9 million inare a long-term solution for our customers bandwidth needs.
Grow our IT Services and Hardware strategicSegment
Cincinnati Bell continues to develop high-demand products generating an 18% increasefor business customers through our investments in fiber and other success-based technology, such as unified communications and cloud services. Our ability to migrate customers from legacy copper-based products to higher speed fiber-based offerings while being innovative as the technology demands of our customers change is important to the growth of our IT Services and Hardware segment. During 2016, the IT Services and Hardware segment generated 10% strategic revenue asgrowth on continued strong demand for staffing solutionscloud services. Our goal is to foster our current enterprise relationships while increasing our number of small to mid-size customers both within and managed telephony service offerings remains robust. Revenue growthoutside the Cincinnati market. As a company with a long history of managing customer network and technology needs, we combine the management of the network, whether owned by Cincinnati Bell or leased from Telecomother carriers out of territory, with integrated voice and IT equipment sales increased 29% year-over-year,offerings. We supply the architecture and remains an important value added productintegration intelligence, labor and hardware, as well as any combination of these services. These projects can be established based on hourly billing rates, service-level driven agreements or utility-based usage models. Customers are attracted to our existing customer base.ability to combine our historic knowledge, unique assets and talented workforce.
Evaluate opportunities to monetizeMonetize our remaining CyrusOne investment
On June 25, 2014, we consummatedWe completed the sale of 16.0 million operating partnership unitsinitial public offering ("IPO") of CyrusOne LP to CyrusOne, Inc. at a price("CyrusOne") during the first quarter of $22.26 per unit. The sale generated proceeds of $355.9 million and resulted in a gain of $192.8 million. Proceeds from2013. At the sale were used to redeem $325.0 milliontime of the outstanding 8 3/4% Senior Subordinated Notes due 2018 at a redemption rate of 104.375%, reducing annual interest expense by approximately $28 million.
As of December 31, 2014,IPO, we effectively own 44%owned 69% of CyrusOne which is held in the form of 1.9 million unregistered common shares of CyrusOne common stock and 26.642.6 million economically equivalent partnership units in its underlying operating entity CyrusOne LP partnership units.LP. The fair value of thisour ownership as of the IPO date was approximately $943 million. Beginning in the second quarter of 2014, we have opportunistically monetized approximately 94% of our original investment for proceeds totaling $1,189.5 million, which have primarily been used to repay debt. Our total debt as of December 31, 2012, prior to the IPO, was $785.0$2,666.0 million compared to $1,206.6 million as of December 31, 2016. Interest payments have decreased from $179.5 million in 2013 to $71.1 million in 2016.
As of December 31, 2016, we owned 2.8 million CyrusOne common shares with a fair value of $128.0 million based on the quoted market price of CyrusOne's common stock at December 31, 2014.prices on that date. In determining the appropriate time to further monetize our CyrusOne investment, we will give due consideration to, among other factors:factors, CyrusOne's stock price, market performance of other real estate investment trusts ("REIT"REITS") and overall market indicators. We will balance our objectives of reducing the risk associated with owning any equity security, with the upside appreciation potential for our investment in CyrusOne. Proceeds from any future monetization event will be primarily used for debt repayment, in accordance with the terms in our amended Corporate Credit Agreement, in an effortSubsequent to achieve leverage ratios in line with other telecom companies.
Manage the Wireless business for cash flows and profitability asDecember 31, 2016 we wind down operations
Our Wireless operating territory is saturated with national carriers that are able to offer customers nation-wide family talk and data plans using premier handsets on more technologically advanced LTE networks. As a result, our postpaid subscriber base decreased, on average, 20% in 2012 and 2013. In the first quarter of 2013, we announced that we were exploring strategic alternatives for our wireless operations and on April 6, 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets. The agreement to sell our wireless spectrum licenses closed on September 30, 2014sold approximately 2 million CyrusOne common shares for cash proceeds totaling $194.4of approximately $100 million. Simultaneously, a separate agreement to use certain spectrum licenses until we discontinue providing wireless service became effective. We plan to provide wireless service until no later than April 6, 2015 as we migrate the remaining 82,400 subscribers to other carriers, at which time we will transfer the tower leases being assumed and other assets being acquired.


5



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

Operations
As of December 31, 2014,2016, the Company operated threetwo segments: Wireline, IT ServicesEntertainment and Hardware, and Wireless; and generally classifies the products and services from its WirelineCommunications and IT Services and Hardware segmentsHardware. We generally classify our products and services into three distinct categories: Strategic, Legacy and Integration. WirelineThe table below demonstrates how our products are categorized within the Entertainment and Communications and IT Services and Hardware products and services have been categorized based primarily on the underlying technology, as noted in the chart below:segments:
Entertainment and Communications
 StrategicLegacyIntegration
VoiceFioptics VoiceSwitched AccessMaintenance
Digital TrunkingInformation Services
DataFioptics Internet
DSL (< 10 meg)
 
 
DWDMDSL (1)
Dial up Internet
Data
DSL (2)(> (> 10 meg)
TDMDS0 (5)
Metro-Ethernet
DSO (6), DS1, DS3
 
 Dedicated InternetEthernet
TDM (6)
 
 
VoIP (3)
Long Distance
Long Distance/VoIPPrivate Line  
 
MPLS (4)(2)
SONET (3)
Dedicated Internet Access
Wavelength  
 Audio Conferencing  
EntertainmentVoiceFioptics VoiceTraditional Voice
VoIP (4)
Long Distance
Switched Access
Digital Trunking
VideoFioptics Video  
Managed/Professional Services and Other
Managed Services
  - Monitoring/Management
  - Data Storage
  - Data Security
  - Virtual Data Center

Professional Services
  - Staff Augmentation
  - IT Consulting


Wiring Projects		AdvertisingMaintenance
 Directory AssistanceInformation Services
   Hardware
Telecom & IT EquipmentInstallation
MaintenanceWireless Handsets and Accessories
(1) Dense Wavelength Division Multiplexing
(2) Digital Subscriber Line
(2) Multi-Protocol Label Switching
(3)Synchronous Optical Network
(4) Voice over Internet Protocol
(4)(5) Multi-Protocol Label SwitchingDigital Signal
(5)(6) Time Division Multiplexing
(6) Digital Signal
Wireline
IT Services and Hardware
StrategicIntegration
Professional ServicesConsultingInstallation
Staff Augmentation
Unified CommunicationsVoice MonitoringMaintenance
Managed IP Telephony Solutions
Cloud ServicesVirtual Data Centers
Storage
Backup
Management and MonitoringNetwork Management/Monitoring
Security
Telecom & IT HardwareHardware
Software Licenses

Table of Contents
Form 10-K Part ICincinnati Bell Inc.

Entertainment and Communications
The WirelineEntertainment and Communications segment provides products and services such as data transport, high-speed internet, entertainment,data transport, local voice, long distance, VoIP, video and other services. 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 140 years. The segment also provides voice and data services beyond its ILEC territory, particularly in Dayton and Mason, Ohio, through the operations of Cincinnati Bell Extended Territories LLC ("CBET"), a competitive local exchange carrier ("CLEC") and subsidiary of CBT. The WirelineEntertainment and Communications segment provides long distance and VoIP services primarily through its Cincinnati Bell Any Distance Inc. ("CBAD") and eVolve Business Solutions LLC ("eVolve") subsidiaries.



6
Table of Contents
Form 10-K Part ICincinnati Bell Inc.

The key products and services provided by the WirelineEntertainment and Communications segment include the following:
Data Services
The Company's data service products include high-speed internet access, data transport and interconnection services. Consumer demand for increased internet speeds is accelerating and more customers are opting for higher bandwidth solutions such as Fioptics. To address this demand, we are able to provide internet speeds of 1030 megabits or more to nearly 490,000approximately 67% of Greater Cincinnati, of which approximately 392,000 addresses or 60%are capable of our operating territory with the coverage expected to increase to approximately 80% by the end of 2016.receiving gigabit service.
As business customers migrate from legacy products and networkcopper-based technology, our metro-ethernet product becomes the access method of choice due to its ability to support multiple applications on a single physical connection. The Company continues to build out fiber to MTU'smulti-tenant units ("MTU's") in greaterGreater Cincinnati to meet growing demand for these services. We are also expanding our metro-ethernet platform to deliver services across a wider geography to target business customers beyond our ILEC footprint. The Company’s regional network connects the greaterGreater Cincinnati, Columbus, and Dayton, areas in Ohio, as well as Indianapolis, Indiana; Chicago, Illinois; and Louisville, Kentucky.
Voice - Local Service
Voice represents local service, revenueincluding Fioptics voice lines. It also includes local service,VoIP, long distance, digital trunking, switched access information services, and other value-added services such as caller identification, voicemail, call waiting and call return.
The Company's voice access lines continue to decrease as our customers have increasingly employed wireless technologies in lieu of wireline voice services ("wireless substitution"), or migrated to competitors, or were disconnected due to credit problems. The Wireline segment has been able to increasingly offset the effect of access line loss on revenue by:
bundling two or more of the Company's other services at a lower price than if they were purchased individually; and
increasing the sale of VoIP services and other fiber-based products to business customers (reported under the caption Long Distance and VoIP).

Long Distance and VoIP

The Company's investment in its VoIP network has created a platform capable of supporting a variety of customers ranging from small shops to large enterprise customers. Our VoIP products provide our customers access to widely disbursed communication platforms and access to our cloud based services and hosted unified communications product.competitors.
Residential and business customers electingpurchasing traditional long-distance lineslong distance service can choose from a variety of long distance plans, which include unlimited long distance for a flat fee, purchase of minutes at a per-minute-of-use rate, or a fixed number of minutes for a flat fee. The Company's long distance lines and related minutes of use have continued to decline over the past several years as a result of wireless substitution and the migration to VoIP technology. Our VoIP products provide access to widely disbursed communication platforms and access to our cloud based services and hosted unified communications products for customers ranging from small businesses to large enterprise customers.
EntertainmentVideo
In 2009, theThe Company launched Fioptics in 2009 and initially focused our fiber network expendituresinvestment on densely populated areas, such as apartments and condominiums. At the end of 2009,Since that time, Fioptics was available to only 5% of Greater Cincinnatihas been deployed over a much broader base and had 11,100 entertainment subscribers. Today, Fioptics is now available to approximately 41%67% of Greater Cincinnati and asCincinnati. As of December 31, 2014,2016, we have 91,400 entertainment137,600 video subscribers. Our Fioptics customers enjoy access to over 400 entertainment channels including digital music, local, movie and sports programing, as well as Indian and Spanish-language packages,programming with over 120140 high-definition channels, parental controls, HD DVR and video On-Demand.
In addition, we offer features that deliver high customer satisfaction including Fioptics TV Everywhere ™MyTV which provides a more customized packaging of channels resulting in lower prices for our customers and a Fioptics live TV streaming application.

Services and Other
Other Revenues
OtherServices and other revenue consists of revenue generated from wiring projects for business customers, Fioptics advertising, revenue,directory assistance, maintenance and commissions received as authorized sales agents for DirecTV® and Verizon Wireless. In addition, CBT’s subsidiary, Cincinnati Bell Telecommunications Services LLC, generates revenue operating the National Payphone Clearinghouse ("NPC") in an agency capacity.information services.

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

IT Services and Hardware
The IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructure services, ITtelephony and telephonyIT equipment sales, and professional IT staffing services. These services and products are provided through the Company's subsidiaries in multiplevarious geographic areas throughthroughout the Company’s subsidiaries, CBTS, CBTSUnited States, Canada Inc., CBTS Software LLC and Cincinnati Bell Technology Solutions UK Limited.Europe. By offering a full range of equipment and outsourced services in conjunction with the Company’s wireline network services,fiber and copper networks, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure management designed to reduce cost and mitigate risk while optimizing performance for its customers.
The key products and services provided by the IT Services and Hardware segment include the following:
Managed and Professional Services
Managed Services include productsThe Company's professional services offerings consist of consulting, staffing, installation and services that combine assets, either owned by the customer or by the Company, with managementproject-based engagements, including engineering and monitoring from its network operations centerinstallation of voice, connectivity and skilled technical resources to provide a suiteIT technologies, development of offerings around voiceapplication solutions and data infrastructure management. Service offerings include, but are not limited to, network management, electronic data storage management, disaster recovery, data security management, telephony management and server management. These services can be purchased individually or bundled by combining multiple products, services, and assets into a utility or as a service model for enterprise customers.
Professional Services include staff augmentation and professional IT consulting by highly skilled and industry-certified technical certified employees. These engagementsresources. Engagements can be short-term IT implementation and project-based work as well as longer term staffing and permanent placement assignments. The Company utilizes a team of experienced recruiting and hiring personnel to provide its customers with a wide range of skilled IT professionals at competitive hourly rates.professionals.
TelecomUnified Communications
CBTS offers a complete portfolio of hosted solutions that include converged IP communications platforms of data, voice, video and IT equipmentmobility applications. We offer our customers expert management for all hardware and software components, including maintenance contracts and service level agreement ("SLA") based services. Fully hosted and managed, these voice platforms and applications can also be delivered as cloud services for a monthly utility fee.
The Company maintains premium resale relationshipssolutions offered include communications as a service model in a cloud environment. We provide hosted communications and certifications with a varietysolutions that deliver the efficiencies of branded technology vendors which allows it to competitively sellnext-generation VoIP services. Our conferencing solutions offer cloud-based audio, video, and install a wide array of telecommunicationsweb conferencing services accessible from any connected device. Our cloud call center application offering features speech-enabled Interactive Voice Response ("IVR"), call-back services, call analytics and computer equipment to meet the needs of its customers. This segmentsurveys. The cloud call recording application features speech analytics, alerts and notification, and improved customer satisfaction and productivity. Additionally, we also managesmanage the maintenance of a large base of local customers with traditional voice systems as well as converged VoIP systems.
WirelessCloud Services
Cincinnati Bell Wireless LLCVirtual data center ("CBW"VDC") is a robust and scalable virtual infrastructure consisting of equipment, security, people and processes. This offering is provided in three different models: private cloud, dedicated cloud or public cloud; and provides digital wireless voicecustomers with either a long-term or a short-term flexible solution that is fully managed by CBTS and monitored around the clock from our Enterprise Network Operations Center ("ENOC").
CBTS storage is a flexible, on-demand storage solution that enables businesses to eliminate capital expenditures and ongoing asset management with SLA-based services. CBTS offers Tier I, Tier II and Tier III storage to meet its customers availability, accessibility, protection, performance and capacity needs.
CBTS backup is a scalable solution that allows businesses to eliminate capital outlay and ongoing equipment management with SLA-based services and includes virtual data communicationscenter, hardware, software, monitoring and support.
Management & Monitoring
CBTS provides SLA-based managed services through theutilizing our ENOC. The ENOC includes highly certified engineers and operation experts that proactively monitor and manage our customers’ technology environments and applications. Standalone monitoring services provide customers with scheduled and automatic checks of a Global System for Mobile Communications/General Packet Radio Service ("GSM")customers' servers, routers, switches, load balancers and firewalls. We also provide customers with advance trouble shooting, repair and changes of customers' servers, routers, switches, load balancers and other network with a 3G Universal Mobile Telecommunications System ("UMTS") and 4G High Speed Packet Access+ ("HSPA+") network overlay, which is able to provide high-speed datadevices from our ENOC. These services such as streaming video. The Company's digital wireless network utilizes approximately 460 cell sites in its operating territory. Wireless services arecan be provided to customers in the Company’s licensed service territory, which includes Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana. The Company’s customers are also able to place and receive wireless calls nationally and internationally due to roaming agreements the Company has with other carriers.
On April 6, 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and relatedCBTS provided equipment or customer-owned equipment and other assets. The agreement to sell our spectrum licenses closed on September 30, 2014. Prior to this date, the Company's digital wireless network utilized 50 MHz of licensed spectrum in the Cincinnati areado not have geographical constraints. Services can be purchased individually or bundled by combining multiple products, services, and 40 MHz of licensed spectrum in the Dayton area. Simultaneous with the close of the spectrum sale, the Company enteredassets into a separate agreement to use certain wireless spectrum licenses in order to provide wirelessutility or service until no later than April 6, 2015.model.
Equity Method Investment in CyrusOne
On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne, a former subsidiary that provides full data center colocation services to enterprise customers through its facilities currently located in the Midwest, Texas, Arizona, London and Singapore. Effective with the IPO, we no longer consolidate CyrusOne in our financial statements and now account for our ownership in CyrusOne as an equity method investment.

8
Table of Contents
Form 10-K Part I Cincinnati Bell Inc.

CyrusOne isTelecom and IT Hardware
The Company maintains premium resale relationships and certifications with a real estate investment trust ("REIT") that conductsvariety of branded technology vendors which allows it to competitively sell, architect and install a wide array of telecommunications and IT infrastructure equipment to meet the needs of its data center business through CyrusOne LP, an operating partnership. Cincinnati Bell owns approximately 44% of the economic interests of CyrusOne (NASDAQ: CONE), through the ownership of 1.9 million shares of CyrusOne's common stock and 26.6 million partnership units of CyrusOne LP. At December 31, 2014, the fair value of this investment was $785.0 million based on the quoted market price of CyrusOne's common stock.customers.
Sales and Distribution Channels
The Company’s WirelineEntertainment and Wireless segments utilizeCommunications segment utilizes a number of distribution channels to acquire customers. Subsequent to the agreement to sell our wireless spectrum, we significantly reduced our sales effort for wireless service and products and rebranded our retail stores to market and distribute our Fioptics suite of products. As of December 31, 2014,2016, the Company operated eight retail stores in its operating territory up from seven in the prior year.to market and distribute our Fioptics suite of products. The Company works to locate retail stores in high traffic but affordable areas, with a distance between each store that considers optimal returns per store and customer convenience. The Company also offers fully-automated, end-to-end web-based sales of various other Company services and accessories. In addition, the Company utilizes a call center as well as a door-to-door sales force that targetsto target the sale of Fiopticsour consumer products to residents.
During 2014, there were approximately 130 third-party agent locations that sold Wireline and Wireless products and services at their retail locations. The Company supported these agents with discounted prices for equipment and commission structures. In conjunction with the completion of the wireless spectrum sale on September 30, 2014, the Company has discontinued third-party agent relationships. The Company also sells wireline capacity on a wholesale basis to independent companies, including competitors that resell these services to end-users.
Within each segment,For both operating segments, we utilize a business-to-business sales force and a call center organization to reach business customers in our operating territory. Larger business customers are often supported by sales account representatives who may go to the customer premises tothat understand the businesscustomer's technology needs and recommend solutions the Company offers.offered solutions. Smaller business customers are supported through a telemarketing sales force, customer representatives and store locations.
Suppliers and Product Supply Chain
The Company generally subjects purchases to competitive bids and selects its vendors based on price, service level, delivery terms, quality of product and terms and conditions.
Wireline’sEntertainment and Communication’s primary purchases are for network equipment, software, and fiber cable to maintain and support the growth of Fioptics, as well as copper-based electronics and cable.Fioptics. The Company maintains facilities and operations for storing cable and other equipment, product distribution and customer fulfillment.
IT Services and Hardware primarily purchases IT and telephony equipment that is either sold to a customer or used to provide service to the customer. The Company is a certified distributor of Cisco, EMC, Avaya and Oracle equipment. Most of this equipment is shipped directly to the customer from vendor locations, but the Company does maintain warehouse facilities for replacement parts and equipment testing and staging.
In addition, we have long-term commitments to outsource various services, such as certain information technology functions, cash remittance and accounts payable functions, call center operations and maintenance services.
Competition
The telecommunications industry is very competitive, and the Company competes against larger, well-capitalized national providers.
The WirelineEntertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, as well as cable, broadband, and internet service providers. The Company has lost, and will likely continue to lose, access lines as a part of its customer base utilizes the services of competitive wireline or wireless providers in lieu of the Company’s services. Wireless providers, particularly those that provide unlimited wireless service plans with no additional fees for long distance, offer customers a substitution service for the Company’s local voice and long-distance services. The Company believes thiswireless substitution is the reason for the largest portion of the Company’s access line and long-distance line losses.

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Our strategic products also face intense competition from cable operators, other telecom companies and niche fiber companies. Many of our competitors have lower operating costs and access to resources that provide economies of scale allowing them to more aggressively price products which they are able to provide on a much broader scale given their expanded geographic operations. Our competitors are expected to continuously upgrade their service quality and offerings which could substantially erode the competitive advantage we currently have with our fiber-based products. These competitive factors could limit the Company's ability to grow revenue and cash flows despite the strategic initiatives implemented.
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The Fioptics suite of products also face competition from a number of different sources, including companies that deliver movies, television shows and other video programming over broadband Internet connections. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers, some without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices. Increased customer migration to these non-traditional entertainment products could result in increased Fioptics churn and decreased penetration.
The IT Services and Hardware segment competes against numerous other information technology consulting, web-hosting, and computer system integration companies, many of which are larger in scope and well-financed. The Company believes that participants in this market must grow rapidly and achieve significant scale to compete effectively. Other competitors may consolidate with larger companies or acquire software application vendors or technology providers, enabling them to more effectively compete. This consolidation could affect prices and other competitive factors in ways that could impede the ability of these businesses to compete successfully in the market.
Customers
The following table demonstrates how the Company’s revenue portfolio has changed over the past three years, excluding CyrusOne, which is no longer consolidated in our financial results. During 2012, CyrusOne represented 15% of our revenue.years.
Percentage of revenue 2014 2013 2012 2014 vs 2013 Change  2013 vs 2012 Change 
Data 26% 25% 24% 1
pt 1
pt
Voice - local service 16% 18% 20% (2)
 (2)
Long distance and VoIP 8% 9% 9% (1)  —
 
Entertainment 6% 4% 2% 2
  2
 
Other Wireline 1% 1% 1% —
  —
 
Total Wireline 57% 57% 56% —
  1
 
Managed and professional services 11% 10% 9% 1
  1
 
Telecom and IT equipment sales 22% 17% 16% 5
  1
 
Total IT Services and Hardware 33% 27% 25% 6
  2
 
Wireless 10% 16% 19% (6)  (3) 
Total (excluding CyrusOne) 100% 100% 100% —
  —
 
Percentage of revenue 2016 2015 2014 2016 vs 2015 Change  2015 vs 2014 Change 
Strategic 54% 46% 38% 8
pts 8
pts
Legacy 26% 31% 35% (5)  (4) 
Integration 20% 23% 27% (3)  (4) 
Total 100% 100% 100% 

  
 
In 2014, the Company’s revenue mix was 66% to business customers and 34% to residential customers. By comparison, the Company’s 2013 revenues were comprised of 63% to business customers and 37% to residential customers, excluding CyrusOne. Excluding Wireless, our revenue mix would be 72% to business customers and 28% to residential customers in 2014, and strategic revenues would account for 38% of our total revenue. During 2014, strategic Wireline revenue accounted for 42% of total Wireline revenue compared to 35% in 2013.
Percentage of revenue 2016 2015 2014 2016 vs 2015 Change  2015 vs 2014 Change 
Consumer 32% 29% 27% 3
pts 2
pts
Business 59% 61% 62% (2)  (1) 
Carrier 9% 10% 11% (1)  (1) 
Total 100% 100% 100%      
The Company has sales with one large customer, General Electric Company ("GE"), that contributed 14%to 12% of the Company’s 2014 annual revenue. The same customer had receivablesrevenue in each of 26%2016 and 19% of the outstanding accounts receivable balance as of2015.
Employees
At December 31, 2014 and 2013, respectively.

Employees
At December 31, 2014,2016, the Company had approximately 3,1003,400 employees and approximately 30% of its employees are covered under a collective bargaining agreement with the Communications Workers of America (“CWA”), which is affiliated with the AFL-CIO. This agreement expiredThe current contract with the CWA was ratified on August 9, 2014February 27, 2015 and the parties are currentlyis in negotiations to renew the contract.effect through May 12, 2018.

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Website Access and Other Information
The Company was incorporated under the laws of Ohio in 1983 with its headquarters at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number (513) 397-9900 and website address http://www.cincinnatibell.com). The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC") under the Exchange Act of 1934 (the "Exchange Act"). These reports and other information filed by the Company may be read and copied at the Public Reference Room of the SEC, 100 F Street N.E., Washington D.C., 20549. Information about the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy statements, and other information about issuers, like the Company, which file electronically with the SEC. The address of that site is http://www.sec.gov. The Company makes available its reports on Form 10-K, 10-Q, and 8-K (as well as all amendments to these reports), proxy statements and other information, free of charge, at the Investor Relations section of its website.
Executive Officers
Refer to Part III, Item 10. "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K for information regarding executive officers of the registrant.
Business Segment Information
The amounts of revenue, intersegment revenue, operating income, expenditures for long-lived assets, and depreciation and amortization attributable to each of the Company’s business segments for the years ended December 31, 2014, 2013,2016, 2015, and 2012,2014, and assets as of December 31, 20142016 and 20132015 are set forth in Note 1514 to the consolidated financial statements.


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Item 1A. Risk Factors
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating us. Our business, financial condition, liquidity or results of operations could be materially affected by any of these risks.

Risks Related to our Indebtedness
The Company’s substantial debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a material adverse effect on its businesses and prospects generally.
The Company has a substantial amount of debt and has significant debt service obligations. As of December 31, 2014, the Company and its subsidiaries had outstanding indebtedness of $1,784.2 million, on which it incurred $148.7 million of interest expense in 2014, and had total shareowners’ deficit of $648.5 million. At December 31, 2014, the Company and its subsidiaries had $90.7 million of borrowing availability under its accounts receivable securitization facility ("Receivables Facility"), and had the ability to borrow up to an additional $150.0 million under the Corporate Credit Agreement's revolving credit facility, subject to compliance with certain conditions. In addition, the Company's ability to incur additional debt from time to time is subject to the restrictions contained in its credit facilities and other debt instruments.
The Company’s substantial debt has important consequences, including the following:
•the Company is required to use a substantial portion of its cash flow from operations to pay principal and interest on its debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements;
•there is a variable interest rate on a portion of its debt which could increase if the market rates increase;
•the Company’s substantial debt increases its vulnerability to adverse changes in the credit markets, which adverse changes could increase the Company's borrowing costs and limit the availability of financing;
•the Company’s debt service obligations limit its flexibility to plan for, or react to, changes in its business and the industries in which it operates;
•the Company’s level of debt and shareowners’ deficit may restrict it from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements; and
•the Company’s debt instruments require the Company to comply with specified financial ratios and other restrictive covenants. Failure to comply with these covenants, if not cured or waived, could limit availability to the cash required to fund the Company's operations and general obligations and could result in the Company’s dissolution, bankruptcy, liquidation, or reorganization.
The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of the Company's common stock. Accordingly, in the event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company and its subsidiaries, then preferred stockholders, and finally, if amounts are available, to holders of the Company's common stock.

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The Corporate Credit Agreement and other indebtedness impose significant restrictions on the Company.
The Company’s debt instruments impose, and the terms of any future debt may impose, operating and other restrictions on the Company. These restrictions affect, and in many respects limit or prohibit, among other things, the Company’s ability to:
•incur additional indebtedness;
•create liens;
•make investments;
•enter into transactions with affiliates;
•sell assets;
•guarantee indebtedness;
•declare or pay dividends or other distributions to shareholders;
•repurchase equity interests;
•redeem debt that is junior in right of payment to such indebtedness;
•enter into agreements that restrict dividends or other payments from subsidiaries;
•issue or sell capital stock of certain of its subsidiaries; and
•consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis.
In addition, the Company’s Corporate Credit Agreement and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepay debt and redeem preferred stock. The agreements governing the Corporate Credit Agreement also require the Company to achieve and maintain compliance with specified financial ratios.
The restrictions contained in the terms of the Corporate Credit Agreement and its other debt instruments could:
•
limit the Company’s ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company’s activities or business plans; and
•adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or alliances, or other capital needs, or to engage in other business activities that would be in its interest.
A breach of any of the debt's restrictive covenants or the Company’s inability to comply with the required financial ratios would result in a default under some or all of the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. Additionally, under the Corporate Credit Agreement, the lenders may elect not to provide loans until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, which generally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any other debt instrument. Failure to comply with these covenants, if not cured or waived, would limit the cash required to fund operations and its general obligations and could result in the Company’s dissolution, bankruptcy, liquidation, or reorganization.
The Company depends on its Corporate Credit Agreement and Receivables Facility to provide for its short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited.
The Company depends on the revolving credit facility under its Corporate Credit Agreement and Receivables Facility to provide for short-term financing requirements in excess of amounts generated by operations.
As of December 31, 2014, the Company had no outstanding borrowings under the Corporate Credit Agreement's revolving credit facility, leaving $150.0 million in additional borrowing availability under this facility. The $150.0 million available under the Corporate Credit Agreement's revolving credit facility is funded by various financial institutions. If one or more of these banks is not able to fulfill its funding obligations, the Company’s financial condition would be adversely affected.
Effective with the sale of our 16.0 million partnership units to CyrusOne, Inc. on June 25, 2014 for $355.9 million, the amount available under the Corporate Credit Agreement's revolving credit facility was reduced to $150.0 million from its original capacity of $200.0 million. In addition, the original revolving commitments will be further reduced to $125.0 million on December 31, 2015.

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In addition, the Company's ability to borrow under its Corporate Credit Agreement is subject to the Company's compliance with covenants, including covenants requiring compliance with specified financial ratios. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under these facilities.

As of December 31, 2014, the Company had $19.2 million of borrowings and $6.9 million of letters of credit that were outstanding under its Receivables Facility. At that date, the Company had a borrowing capacity under this Receivables Facility of $116.8 million and a maximum borrowing limit of $120.0 million. 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. If the quality of the Company’s accounts receivables deteriorates, this will negatively impact the available capacity under this facility. As of December 31, 2014, the Company had $90.7 million of borrowing capacity remaining under its Receivables Facility.

The servicing of the Company’s indebtedness requires a significant amount of cash, and its ability to generate cash depends on many factors beyond its control.

The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, additional sources of debt financing will be available, or future borrowings will be available under its Corporate Credit Agreement or Receivables Facility, in each case, in amounts sufficient to enable the Company to service its indebtedness or to fund other liquidity needs. If the Company cannot service its indebtedness, it will have to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, or selling assets, including its investment in CyrusOne, restructuring or refinancing indebtedness, or seeking additional equity capital, which may adversely affect its shareholders, debt holders, and customers. The Company may not be able to negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict the Company from adopting any of these alternatives. The Company’s inability to generate the necessary cash flows could result in its dissolution, bankruptcy, liquidation, or reorganization.

The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments.

Virtually all of the Company's operations are conducted through its subsidiaries and most of the Company's debt is held at the parent company. Certain of the Company's material subsidiaries are subject to regulatory authority which may potentially limit the ability of such subsidiaries to distribute funds or assets. If any of the Company's subsidiaries were to be prohibited from paying dividends or making distributions, the Company may not be able to make the scheduled interest and principal repayments on its debt. This failure would have a material adverse effect on the Company's liquidity and the trading price of the Company's common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation, or reorganization.

Risk Factors Related to our Business and Operations

The Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing in number. If the Company continues to experience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted.

The Company generates a substantial portion of its revenues by delivering voice and data services over access lines. The Company's local telecommunications subsidiary, CBT, has experienced substantial access line losses over the past several years due to a number of factors, including increased competition and wireless and broadband substitution. The Company expects access line losses to continue into the foreseeable future. Failure to retain access lines without replacing such losses with an alternative source of revenue would adversely impact the Company's revenues, earnings and cash flow from operations.

Some of our strategic products generate lower profit margins than our traditional services, and some can be expected to experience slowing growth as increasing numbers of our existing or potential customers subscribe to these newer products. Moreover, we cannot provide assurance that the revenues generated from our new offerings will offset revenue losses from the reduced sales of our legacy products or that our new strategic offerings will be as successful as anticipated.

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The Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share.
The telecommunications industry is very competitive and the Company competes against larger, well-capitalized national providers. Competitors may reduce pricing, create new bundled offerings, or develop new technologies, products or services. If the Company cannot continue to offer reliable, competitively priced, value-added services, or if the Company does not keep pace with technological advances, competitive forces could adversely affect it through a loss of market share or a decrease in revenue and profit margins. The Company has lost, and will likely continue to lose, access lines as a part of its customer base utilizes the services of competitors or wireless providers.competitors.
The WirelineEntertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, and cable, broadband and internet service providers. Wireless providers, particularly those that provide unlimited wireless servicevoice and data plans with no additional fees for long distance, offer customers a substitution service for the Company’s access lines and long distance lines.services. The Company believes wireless substitution accounts for the largest portion of its access line losses. Also, cable competitors that have existing service relationships with CBT’s customers also offer substitution services, such as VoIP and long distance voice services in the Company's operating areas. Partially as a result of wireless substitution and increased competition, CBT’s accesslegacy voice lines decreased by 9%15% and long distance subscribers decreased by 8%7% in 20142016 compared to 2013.2015.
Our strategic products also face intense competition from cable operators, other telecom companies and niche fiber companies. Many of our competitors have lower operating costs and access to resources that provide economies of scale allowing them to more aggressively price products, which they are able to provide on a much broader scale given their expanded geographic operations. Our competitors are expected to continuously upgrade their service quality and offerings, which could substantially erode the competitive advantage we currently have with our fiber-based products. These competitive factors could limit the Company's ability to grow revenue and cash flows despite the strategic initiatives implemented.
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The Fioptics suite of products also facefaces competition from a number of different sources, including companies that deliver movies, television shows and other video programming over broadband Internet connections. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers, some without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobile devices. Increased customer migration to these non-traditional entertainment products could result in increased Fioptics churn and decreased penetration. If the Company is unable to effectively implement strategies to attract and retain Fioptics video and high-speed internet subscribers, retain access lines and long distance subscribers, or replace such customers with other sources of revenue, the Company's WirelineEntertainment and Communications business will be adversely affected.
The IT Services and Hardware segment competes against numerous other information technology consulting, web-hosting, and computer system integration companies, many of which are large in scope and well-financed. This market is rapidly evolving and highly competitive. Other competitors may consolidate with larger companies or acquire software application vendors or technology providers, which may provide competitive advantages. The Company believes that many of the participants in this market must grow rapidly and achieve significant scale to compete effectively. This consolidation could affect prices and other competitive factors in ways that could impede our ability to compete successfully in the market.
The competitive forces described above could have a material adverse impact on the Company’s business, financial condition, results of operations and cash flows.
The Company may be unable to grow our revenues and cash flows despite the initiatives we have implemented.
We must produce adequate revenues and cash flows that, when combined with cash on hand and funds available under our revolving credit facilities, will be sufficient to service our debt, fund our capital expenditures, pay our taxes, fund our pension and other employee benefit obligations and pay preferred dividends pursuant to our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives, including increasing marketing promotions and related expenditures and launching new products and services with a focus on areas that are growing such as Fioptics, other fiber-based service offerings and IT solutions. We cannot be assured that these opportunities will be successful or that these initiatives will improve our financial position or our results of operations.

Failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company’s success in the telecommunications industry.
The Company’s success depends, in part, on being able to anticipate the needs of current and future business, carrier and residential customers. The Company seeks to meet these needs through new product introductions, service quality and technological improvements. New products and services are important to the Company’s success because its industry is technologically driven, such that new technologies can offer alternatives to the Company’s existing services. The development of new technologies and products could accelerate the Company’s loss of access lines or limit the growth from its strategic products, which would have a material adverse effect on the Company’s revenue, results of operations, financial condition and cash flows.

The Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing in number. If the Company continues to experience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted.
15The Company generates a substantial portion of its revenues by delivering voice and data services over access lines. The Company's local telecommunications subsidiary, CBT, has experienced substantial access line losses over the past several years due to a number of factors, including wireless and broadband substitution and increased competition. The Company expects access line losses to continue into the foreseeable future. Failure to retain access lines without replacing such losses with an alternative source of revenue would adversely impact the Company's revenues, earnings and cash flow from operations.
Some of our strategic products generate lower profit margins than our traditional services, and some can be expected to experience slowing growth as increasing numbers of our existing or potential customers subscribe to these newer products. Moreover, we cannot provide assurance that the revenues generated from our new offerings will offset revenue losses from the reduced sales of our legacy products or that our new strategic offerings will be as successful as anticipated.
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Form 10-K Part I Cincinnati Bell Inc.

Accelerating the pace of investment in our Fioptics suite of products could have a negative impact on our financial results.
In order to take advantage of a unique opportunity in our market, and due to a progressive change in customer expectations of increased internet speeds, beginning in 2014 we began accelerating the pace of investment in our Fioptics suite of products, and intend to continue such accelerated investments through 2016. There are several factors that could result in a negative effect on our revenue, operating income and cash flows, such as:
•our costs could significantly exceed expectations
•the acceleration may not generate the expected increase in subscribers
•it may be inefficient to build out the additional fiber at an accelerated rate
•there may be a lack of workforce to achieve our construction, sales, and installation targets
•access to the fiber required for our construction plans may be limited
The Company may be unable to grow our revenues and cash flows despite the initiatives we have implemented.
We must produce adequate revenues and cash flows that, when combined with cash on hand and funds available under our Corporate Credit Agreement and Receivables Facility, will be sufficient to service our debt, fund our capital expenditures, pay our taxes, fund our pension and other employee benefit obligations and pay preferred dividends pursuant to our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives, including increasing marketing promotions and related expenditures and launching new products and services with a focus on areas that are growing such as Fioptics and enterprise fiber-based service offerings. We cannot assure you that these opportunities will be successful or that these initiatives will improve our financial position or our results of operations.
The Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company or customers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs.
The Company's agreements with its customers contain various requirements regarding performance and levels of service. If the Company fails to provide the levels of service or performance required by its agreements, customers may be able to receive service credits forto their accounts and other financial compensation, and also may be able to terminate their relationship with the Company. In order to provide these levels of services, the Company is required to protect against human error, natural disasters, equipment failure, power failure, sabotage and vandalism, and have disaster recovery plans available for disruption of services. The failure to address these or other events may result in a disruption of services. In addition, any inability to meet service level commitments or other performance standards could reduce the confidence of customers and could consequently impair the Company's ability to attract and retain customers, which wouldcould adversely affect both the Company's ability to generate revenues and operating results.
The Company generates a substantial portion of its revenue by serving a limited geographic area.
The Company generates a substantial portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas.Ohio. An economic downturn or natural disaster occurring in this limited operating territory would have a disproportionate effect on the Company's 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.
A large customer accounts for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in business from this customer would cause operating revenues to decline significantly and have a materially adverse long-termcould negatively impact on the Company’s business.profitability and cash flows.
As of December 31, 20142016 and 2013,2015, the Company had receivables with one large customerfrom GE that makes up 26%account for 21% and 19%22% of the outstanding accounts receivable balance, respectively. This same customerGE contributed 14%12% to consolidated revenue for each of the years ended 2016 and 2015, respectively, and 14% for the year endedend 2014. Contracts with this customer may not sufficiently reduce the inherent risk that the customer may terminate or fail to renew their relationships with the Company. As a result of customerthis concentration, the Company's results of operations and financial condition could be materially affected if the Company lost this customer or if services purchased were significantly reduced. If this customerGE were to default on its accounts receivable obligations, the Company would be exposed to potentially significant losses in excess of the provisions established. This would also negatively impact the available borrowing capacity under the accounts receivable securitization facility ("Receivables Facility.Facility").

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Maintaining the Company's telecommunications networks requires significant capital expenditures, and its inability or failure to maintain its telecommunications networks wouldcould have a material impact on its market share and ability to generate revenue.
Over the past several years, the Company has improved its wireline network through increased capital expenditures for fiber optic cable in limited areas of its operating network. The Company is accelerating the pace of investment in its Fioptics suite of services and intends to continue to increase its capital expenditures for fiber optic cable through 2016.2017.
In order to provide appropriate levels of service to the Company's customers, the network infrastructure must be protected against damage from human error, natural disasters, unexpected equipment failure, power loss or telecommunications failures, terrorism, sabotage or other intentional acts of vandalism. The Company's networks may not address all of the problems that may be encountered in the event of a disaster or other unanticipated problems, which may result in disruption of service to customers.
The Company may also incur significant additional capital expenditures as a result of unanticipated developments, regulatory changes and other events that impact the business.
Increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers.
Video streaming services and peer-to-peer file sharing applications use significantly more bandwidth than traditional Internet activity such as web browsing and email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use much more bandwidth than in the past. If this occurs, we could be required to make significant capital expenditures to increase network capacity in order to avoid service disruptions or reduced capacity for customers.
We may not be able to recover the costs of the necessary network investments. This wouldcould result in an adverse impact to our results of operations and financial condition.
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Form 10-K Part ICincinnati Bell Inc.

We may be liable for the material that content providers distribute over our networks.
The law relating to the liability of private network operators for information carried on, stored or disseminated through their networks is still unsettled. As such, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our network or could involve matters such as defamation, invasion of privacy or copyright infringement. If we need to take costly measures to reduce our exposure to these risks or are required to defend ourselves against such claims, our financial results would be negatively affected.
Cyber attacks or other breaches of network or other information technology security could have an adverse effect on our business.
Cyber attacks or other breaches of network or information technology security may cause equipment failures or disruptions to our operations. Our inability to operate our wireline networks as a result of such events, even for a limited period of time, may result in significant expenses and/or loss of market share to other communications providers. In addition, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Cyber attacks, which include the use of malware, computer viruses and other means for disruption or unauthorized access, have increased in frequency, scope and potential harm in recent years. While, to date, we have not been subject to cyber attacks or other cyber incidents which, individually or in the aggregate, have been material to our operations or financial condition, the preventative actions we take to reduce the risk of cyber incidents and protect our information technology and networks may be insufficient to repel a major cyber attack in the future. The costs associated with a major cyber attack could include expensive incentives offered to existing customers and business partners to retain their business, increased expenditures on cyber security measures, lost revenues from business interruption, litigation and damage to our reputation. If we fail to prevent the theft of valuable information such as financial data, sensitive information about the Company and intellectual property, or if we fail to protect the privacy of customer and employee confidential data against breaches of network or information technology security, it wouldcould result in damage to our reputation, which could adversely impact customer and investor confidence. Any of these occurrences could result in a material adverse effect on our results of operations and financial condition.

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Natural disasters, terrorist acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations.
Our business operations are subject to interruption by natural disasters, power outages, terrorist attacks, other hostile acts and events beyond our control. Such events could cause significant damage to our infrastructure, resulting in degradation or disruption of service to our customers. While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Our system redundancy may be ineffective or inadequate and our disaster recovery planning may not be sufficient for all eventualities. These events could also damage the infrastructure of suppliers that provide us with the equipment and services we need to operate our business and provide products to our customers. A natural disaster or other event causing significant physical damage would cause us to experience substantial losses resulting in significant recovery time and expenditures to resume operations. In addition, these occurrences could result in lost revenues from business interruption as well as damage to our reputation.
The regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services, and threaten its operating licenses.
Several of the Company’s subsidiaries are subject to regulatory oversight of varying degrees at both the state and federal levels, which may differ from the regulatory scrutiny faced by the Company’s competitors. A significant portion of CBT’s revenue is derived from pricing plans that requireare subject to regulatory overviewreview and approval. These regulated pricing plans limit the rates CBT charges for some services while the competition has typically been able to set rates for services with limited or no restriction. In the future, regulatory initiatives that would put CBT at a competitive disadvantage or mandate lower rates for its services would result in lower profitability and cash flows for the Company. In addition, different regulatory interpretations of existing regulations or guidelines may affect the Company’s revenues and expenses in future periods.
At the federal level, CBT is subject to the Telecommunications Act of 1996 (the "1996 Act"), including the rules subsequently adopted by the FCCFederal Communications Commission ("FCC") to implement the 1996 Act, which has impacted CBT’s in-territory local exchange operations in the form of greater competition. At the state level, CBT conducts local exchange operations in portions of Ohio, Kentucky, and Indiana, and, consequently, is subject to regulation by the Public Utilities Commissions in those states. Various regulatory decisions or initiatives at the federal or state level may from time to time have a negative impact on CBT’s ability to compete in its markets.
From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance with the respective regulations. The Company could be subject to fines and penalties if found to be out
Table of compliance with these regulations, and these fines and penalties could be material to the Company’s financial condition.Contents
Form 10-K Part ICincinnati Bell Inc.

There are currently many regulatory actions under way and being contemplated by federal and state authorities regarding issues that could result in significant changes to the business conditions in the telecommunications industry. In addition, in connection with our Internet access offerings, we could become subject to laws and regulations as they are adopted or applied to the Internet. There is currently only limited regulation applicable to these services. As the significance of the Internet continues to grow, federal, state and local governments may pass laws and adopt rules and regulations or apply existing laws and regulations to the Internet (including Internet access services), and related. Related matters are currently under consideration in both federal and state legislative and regulatory bodies. We cannot provide any assurances that changes in current or future regulations adopted by the FCC or state regulators, or other legislative, administrative, or judicial initiatives relating to the telecommunications industry, will not have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.
From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance with the respective regulations. The Company could be subject to fines and penalties if found to be out of compliance with these regulations, and these fines and penalties could be material to the Company’s financial condition.
The Company depends on a number of third-party providers, and the loss of, or problems with, one or more of these providers may impede the Company's growth or cause it to lose customers.
The Company depends on third-party providers to supply products and services. For example, many of the Company's information technology and call center functions are performed by third-party providers, and network equipment is purchased from and maintained by vendors. The loss of or problems with one or more of these third-party providers may result in an adverse effect on our ability to provide products and services to our customers and on our results of operations and financial condition.

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Form 10-K Part ICincinnati Bell Inc.

A failure of back-office information technology systems could adversely affect the Company’s results of operations and financial condition.
The efficient operation of the Company’s business depends on back-office information technology systems. The Company relies on back-office information technology systems to effectively manage customer billing, business data, communications, supply chain, order entry and fulfillment and other business processes. A failure of the Company’s information technology systems to perform as anticipated could disrupt the Company’s business and result in a failure to collect accounts receivable, transaction errors, processing inefficiencies, and the loss of sales and customers, causing the Company’s reputation and results of operations to suffer. In addition, information technology systems may be vulnerable to damage or interruption from circumstances beyond the Company’s control, including fire, natural disasters, systems failures, security breaches and viruses. Any such damage or interruption could have a material adverse effect on the Company’s business.
If the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire or if its unionized employees were to engage in a strike or other work stoppage, the Company’s business and operating results could be materially harmed.
The Company is a party to collective bargaining agreements with its labor union, which represents a significant numberapproximately 30% of its employees, and these collective bargaining agreements expired in August 2014. At that time, the Company reached a tentative agreement with the CWA on a new labor contract. This contract was not ratified by local members of the union on two separate occasions and the two parties have resumed negotiations. If a resolution is not achieved, a work force stoppage could occur resulting in a negative effect on our revenue, operating income and cash flows.
employees. No assurance can be given that the Company will be able to successfully extend or renegotiate its collective bargaining agreements.agreements in the future. If the Company fails to extend or renegotiate its collective bargaining agreements, if disputes with its union arise, or if its unionized workers engage in a strike or a work stoppage, the Company could experience a significant disruption of operations or incur higher ongoing labor costs, either of which wouldcould have a material adverse effect on the business.
The loss of any of the senior management team or attrition among key sales associates could adversely affect the Company’s business, financial condition, results of operations and cash flows.
The Company’s success will continue to depend, to a significant extent, on its senior management team and key sales associates. Senior management has specific knowledge relating to the Company and the industry that would be difficult to replace. The loss of key sales associates could hinder the Company’s ability to continue to benefit from long-standing relationships with customers. The Company cannot provide any assurance that it will be able to retain the current senior management team or key sales associates. The loss of any of these individuals could adversely affect the Company’s business, financial condition, results of operations and cash flows.
Risk Factors
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Form 10-K Part ICincinnati Bell Inc.

Risks Related to Our Investment in CyrusOneour Indebtedness
The Company no longer controls theCompany’s debt could limit its ability to fund operations, of CyrusOne.raise additional capital, and fulfill its obligations, which, in turn, would have a material adverse effect on its businesses and prospects generally.
As of January 24, 2013, CyrusOne is an independent public company whichDecember 31, 2016, the Company does not control. As a result,and its subsidiaries had outstanding indebtedness of $1,206.6 million, on which it incurred $75.7 million of interest expense in 2016, and had total shareowners’ deficit of $121.7 million. At December 31, 2016, the Company no longer setsand its subsidiaries had $24.2 million of borrowing availability under its Receivables Facility and had the strategies, selectsability to borrow up to an additional $150.0 million under the management team, or controlsCorporate Credit Agreement's revolving credit facility, subject to compliance with certain conditions. In addition, the operations of CyrusOne. CyrusOne may chooseCompany's ability to pursue strategies which conflict with our business strategies,incur additional debt from time to time is subject to the restrictions contained in its credit facilities and if this were to occur, the CyrusOne Board is required to act for the benefit of its shareholders.other debt instruments.
The Company’s debt has important consequences, including the following:
•the Company is required to use a substantial portion of its cash flow from operations to pay principal and interest on its debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements;
•there is a variable interest rate on a portion of its debt which could increase if the market interest rates increase;
•the Company’s debt increases its vulnerability to adverse changes in the credit markets, which adverse changes could increase the Company's borrowing costs and limit the availability of financing;
•the Company’s debt service obligations limit its flexibility to plan for, or react to, changes in its business and the industries in which it operates;
•the Company’s level of debt and shareowners’ deficit may restrict it from raising additional financing on satisfactory terms to fund working capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements; and
•the Company’s debt instruments require the Company to comply with specified financial ratios and other restrictive covenants. Failure to comply with these covenants, if not cured or waived, could limit availability to the cash required to fund the Company's operations and general obligations and could result in the Company’s dissolution, bankruptcy, liquidation or reorganization.
The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of the Company's common stock. Accordingly, in the event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company executed a non-compete agreement with CyrusOne under which both parties agreed notand its subsidiaries, then preferred stockholders, and finally, if amounts are available, to enter each other's linesholders of business, subject to certain exceptions, for a periodthe Company's common stock.
The Corporate Credit Agreement and other indebtedness impose significant restrictions on the Company.
The Company’s debt instruments impose, and the terms of four years. CyrusOneany future debt may choose to compete with us afterimpose, operating and other restrictions on the expiration of this non-compete agreement which could have an adverse effect on our telecommunications business.Company. These restrictions affect, and in many respects limit or prohibit, among other things, the Company’s ability to:

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•incur additional indebtedness;
•create liens;
•make investments;
•enter into transactions with affiliates;
•sell assets;
•guarantee indebtedness;
•declare or pay dividends or other distributions to shareholders;
•repurchase equity interests;
•redeem debt that is junior in right of payment to such indebtedness;
•enter into agreements that restrict dividends or other payments from subsidiaries;
•issue or sell capital stock of certain of its subsidiaries; and
•consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis.
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Form 10-K Part I Cincinnati Bell Inc.

In addition, the Company’s Corporate Credit Agreement and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepay debt and redeem preferred stock. The agreements governing the Corporate Credit Agreement also require the Company to achieve and maintain compliance with specified financial ratios.
The Company has a significant investment in CyrusOne.
As of December 31, 2014, we effectively own 44% of CyrusOne, which is heldrestrictions contained in the formterms of 1.9 million sharesthe Corporate Credit Agreement and its other debt instruments could:
•limit the Company’s ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company’s activities or business plans; and
•adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or alliances, other capital needs, or to engage in other business activities that would be in its interest.
A breach of CyrusOne common stock and 26.6 million CyrusOne LP partnership units. The valueany of our investment is subjectthe debt's restrictive covenants or the Company’s inability to CyrusOne executing on their strategic plan and other factors beyond CyrusOne's control, such as stock market volatility and fluctuationscomply with the required financial ratios would result in the valuation of companies perceived by investors to be comparable to CyrusOne, all of which could cause significant changes in the market price of CyrusOne's common stock. The fair value of our investment in CyrusOne may decline which may adversely affect the realization of our investment. As a result, we may be unable to monetize anydefault under some or all of our investment in CyrusOne,the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable. Additionally, under the Corporate Credit Agreement, the lenders may elect not to provide loans until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, which would thereforegenerally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any other debt instrument. Failure to comply with these covenants, if not allow us to repay debt and achieve a leverage ratio comparable to our peers thereby limiting our opportunity to significantly increase cash flow. Our inability to liquidate our investment in CyrusOne could ultimatelycured or waived, would limit the cash available to the Company required to fund operations and ourits general obligations and could result in the Company'sCompany’s dissolution, bankruptcy, liquidation or reorganization.
ReferThe Company depends on its Corporate Credit Agreement and Receivables Facility to provide for its short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited.
The Company depends on the revolving credit facilities under its Corporate Credit Agreement and its Receivables Facility to provide for short-term financing requirements in excess of amounts generated by operations. The Corporate Credit Agreement revolving credit facility has a maturity date of January 2020. The Receivables Facility has a termination date of May 2019, and is subject to renewal every 364 days, with the next renewal occurring in May 2017.
The Company's ability to borrow under its Corporate Credit Agreement is subject to the Company's compliance with covenants, including covenants requiring compliance with specified financial ratios. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under these facilities.
As of December 31, 2016, the Company had no outstanding borrowings under the Corporate Credit Agreement's revolving credit facility, leaving $150.0 million in additional borrowing availability under this facility. The $150.0 million available under the Corporate Credit Agreement's revolving credit facility is funded by various financial institutions. If one or more of these banks is not able to fulfill its funding obligations, the Company’s financial condition could be adversely affected.
As of December 31, 2016, the Company had $89.5 million of borrowings and $6.3 million of letters of credit that were outstanding under its Receivables Facility. At that date, the Company had a borrowing capacity under this Receivables Facility of $120.0 million and a maximum borrowing limit of $120.0 million. The available borrowing capacity is calculated monthly based on the amount and quality of outstanding accounts receivable and thus may be lower than the maximum borrowing limit. If the quality of the Company’s accounts receivables deteriorates, this will negatively impact the available capacity under this facility. As of December 31, 2016, the Company had $24.2 million of borrowing capacity remaining under its Receivables Facility.
The servicing of the Company’s indebtedness is dependent on its ability to generate cash, which could be impacted by many factors beyond its control.
The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, that additional sources of debt financing will be available, or that future borrowings will be available under its Corporate Credit Agreement or Receivables Facility, in each case, in amounts sufficient to enable the Company to service its indebtedness or to fund other liquidity needs. If the Company cannot service its indebtedness, it will have to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, or selling assets, including its investment in CyrusOne, 2014 Form 10-K forrestructuring or refinancing indebtedness, or seeking additional risk disclosures specificequity capital, which may adversely affect its shareholders, debt holders and customers. The Company may not be able to that entity.negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict the Company from adopting any of these alternatives. The Company’s inability to generate the necessary cash flows could result in its dissolution, bankruptcy, liquidation or reorganization.

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Form 10-K Part ICincinnati Bell Inc.

The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments.
Virtually all of the Company's operations are conducted through its subsidiaries and most of the Company's debt is held at the parent company. Certain of the Company's material subsidiaries are subject to regulatory authority which may potentially limit the ability of such subsidiaries to distribute funds or assets. If any of the Company's subsidiaries were to be prohibited from paying dividends or making distributions, the Company may not be able to make the scheduled interest and principal repayments on its debt. This failure would have a material adverse effect on the Company's liquidity and the trading price of the Company's common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation or reorganization.

Other Risk Factors
The Company has a significant investment in CyrusOne.
As of December 31, 2016, we held 2.8 million shares of CyrusOne common stock valued at $128.0 million. The value of our investment is subject to CyrusOne executing on their strategic plan and other factors beyond CyrusOne's control, such as volatility in equity markets and fluctuations in the valuation of companies perceived by investors to be comparable to CyrusOne, all of which could cause significant changes in the market price of CyrusOne's common stock. The fair value of our investment in CyrusOne may decline which may adversely affect the realization of our investment. As a result, we may be unable to monetize any or all of our investment in CyrusOne, which would therefore limit our ability to repay debt, repurchase equity interests, pursue strategic acquisitions or alliances, reduce the cash available to fund operations and our general obligations, and could result in the Company's dissolution, bankruptcy, liquidation or reorganization.
The trading price of the Company's common stock may be volatile, and the value of an investment in the Company's common stock may decline.
The market price of the Company's common stock has been volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described in this report and other factors beyond the Company's control, such as stock market volatility in equity markets and fluctuations in the valuation of companies perceived by investors to be comparable to the Company.
The stockEquity markets have experienced price and volume fluctuations that have affected the Company's stock price and the market prices of equity securities of many other companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, may negatively affect the market price of the Company's stock.
Companies that have experienced volatility in the market price of their stockcommon shares have periodically been subject to securities class action litigation. The Company may be the target of this type of litigation in the future. Securities litigation could result in substantial costs and/or damages and divert management's attention from other business concerns.
The Company's failure to remove all subscribers from its wireless network may result in a fine or a penalty adversely affecting revenues, earnings and cash flows.

On September 30, 2014, we closed the agreement to sell our wireless spectrum licenses which requires us to cease wireless operations no later than April 6, 2015. Should we still have wireless subscribers at that time, we would be subject to penalty per terms of the agreement. Subsequent to discontinuing wireless operations, we will start the process of decommissioning the network and removing assets and equipment from our remaining tower leases. Any unforeseen complications or delays could negatively impact profitability and cash flows.

The uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business and financial condition.
The uncertain economic environment could have an adverse effect on the Company's business and financial liquidity. The Company's primary source of cash is customer collections. If economic conditions were to worsen, some customers may cancel services or have difficulty paying.paying their accounts receivable. These conditions would result in lower revenues and increases in the allowance for doubtful accounts, which would negatively affect the results of operations. Furthermore, the sales cycle would be further lengthened if business customers slow spending or delay decision-making on the Company's products and services, which would adversely affect revenues. If competitors lower prices as a result of economic conditions, the Company would also experience pricing pressure. If the economies of the U.S. and the world deteriorate, this could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows.

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Form 10-K Part ICincinnati Bell Inc.

The Company’s future cash flows wouldcould be adversely affected if it is unable to fully realize its deferred tax assets.
As of December 31, 2014,2016, the Company had net deferred income taxes of $369.6$64.5 million, which are primarily composed of deferred tax assets associated with U.S. federal net operating loss carryforwards of $232.8$76.8 million and state, local and foreign net operating loss carryforwards of $53.7$48.2 million. The Company has recorded valuation allowances against deferred tax assets related to certain state, local and foreign net operating losses and other deferred tax assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period. The use of the Company’s deferred tax assets enables it to satisfy current and future tax liabilities without the use of the Company’s cash resources. If the Company is unable for any reason to generate sufficient taxable income to fully realize its deferred tax assets, or if the use of its net operating loss carryforwards is limited by Internal Revenue Code Section 382 or similar state statute, the Company’s net income, shareowners’ deficit and future cash flows would be adversely affected.
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Form 10-K Part ICincinnati Bell Inc.

Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowners’ deficit and liquidity.
The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain former executives. The Company also provides healthcare and group life insurance benefits for eligible retirees. The Company’s Consolidated Balance Sheets indirectly reflect the value of all plan assets and benefit obligations under these plans. The accounting for employee benefit plans is complex, as is the process of calculating the benefit obligations under the plans. Adverse changes in interest rates or market conditions, among other assumptions and factors, could cause a significant increase in the Company’s benefit obligations or a significant decrease of the asset values, without necessarily impacting the Company’s net income. In addition, the Company’s benefit obligations could increase significantly if it needs to unfavorably revise the assumptions used to calculate the obligations. These adverse changes could have a further significant negative impact on the Company’s shareowners’ deficit. In addition, with respect to the Company’s pension plans, the Company expects to make approximately $30$27 million of estimated aggregate cash contributions to its qualified pension plans for the years 20152017 to 2018, of which $13 million is expected to be contributed in 2015.2020. Additionally, the Company’s postretirement costs are adversely affected by increases in medical and prescription drug costs. Further, if there are adverse changes to plan assets or if medical and prescription drug costs increase significantly, the Company could be required to contribute additional material amounts of cash to the planplans or could accelerate the timing of required payments.
Third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation or licensing expenses or be prevented from selling products.
The Company may be unaware of intellectual property rights of others that may cover some of its technology, products or services. Any litigation growing out of third-party patents or other intellectual property claims could be costly and time-consuming and would divert the Company’s management and key personnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Resolution of claims of intellectual property infringement might also require the Company to enter into costly license agreements. Likewise, the Company may not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions against the development and sale of certain of its products or services. Further, the Company often relies on licenses of third-party intellectual property for its businesses. The Company cannot ensure these licenses will be available in the future on favorable terms or at all.
We could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements.
Our business faces a substantial amount of litigation, including, from time to time, patent infringement lawsuits, antitrust class actions, securities class actions, wage and hour class actions, personal injury claims and lawsuits relating to our advertising, sales, billing and collection processes. In addition, as we wind down our wireless business, we also face personal injury and consumer class action lawsuits relating to alleged health effects of wireless phones or radio frequency transmitters, and class action lawsuits that challenge marketing practices and disclosures relating to alleged adverse effects of handheld wireless phones. We may incur significant expenses in defending these lawsuits. In addition, we may be required to pay significant awards and settlements.

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Form 10-K Part ICincinnati Bell Inc.

Third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffer competitive injury.
The Company’s success depends in significant part on the competitive advantage it gains from its proprietary technology and other valuable intellectual property assets. The Company relies on a combination of patents, copyrights, trademarks and trade secrets protections, confidentiality provisions and licensing arrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce its intellectual property rights, its competitive position could suffer, which could harm its operating results.
The Company may also be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able to detect third-party infringements and its competitive position may be harmed before the Company does so. In addition, competitors may design around the Company’s technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to other companies, allowing them to compete with the Company using that intellectual property.
We could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements.
Our business faces a substantial amount of litigation, including, from time to time, patent infringement lawsuits, antitrust class actions, securities class actions, wage and hour class actions, personal injury claims and lawsuits relating to our advertising, sales, billing and collection processes. We may incur significant expenses in defending these lawsuits. In addition, we may be required to pay significant awards and settlements.
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Form 10-K Part ICincinnati Bell Inc.

The Company could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws.
The Company’s operations are subject to laws and regulations relating to the protection of the environment, health, and human safety, including those governing the management and disposal of, and exposure to, hazardous materials and the cleanup of contamination, and the emission of radio frequency.frequencies. While the Company believes its operations are in substantial compliance with environmental, health, and human safety laws and regulations, as an owner or operator of property, and in connection with the current and historical use of hazardous materials and other operations at its sites, the Company could incur significant costs resulting from complying with or violations of such laws, the imposition of cleanup obligations and third-party suits. For instance, a number of the Company’s sites formerly contained underground storage tanks for the storage of used oil and fuel for back-up generators and vehicles.

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Form 10-K Part I Cincinnati Bell Inc.

Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2014,2016, we owned or maintained properties in Ohio, Kentucky and Indiana. Principal office locations are in Cincinnati, Ohio.
Our property comprisesproperties include copper and fiber plantplants and associated equipment in our local operating market. Each of the Company’s subsidiaries maintains some investment in furniture and office equipment, computer equipment and associated operating system software, application system software, leasehold improvements and other assets.
With regard to its local WirelineEntertainment and Communications operations, the Company owns substantially all of the central office switching stations and the land upon which they are situated. Some business and administrative offices are located in rentedleased facilities, someall of which are recorded as capitaloperating leases. The Company’s out-of-territory Wireline network assets include a fiber network plant, internet protocol and circuit switches and integrated access terminal equipment. In addition, as of year-end, we lease eight Company-run retail locations. Those locations were historically used by the wireless operations but have been converted to sell our Fioptics suite of products.
Our wireless operation is currently leasing spectrum to provide service until April 6, 2015 in conjunction with the agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business. CBW also leases locations that contain its switching and messaging equipment as well as all of its tower sites. Certain tower leases and the related assets will be assumed by the acquiring company.
For additional information about the Company’s properties, see Note 54 to the consolidated financial statements.

Item 3. Legal Proceedings
We are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. We believe that the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by generally accepted accounting principles ("GAAP"), are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2014,2016, cannot be reasonably determined.
Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes the eventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures
Not applicable.

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Form 10-K Part II Cincinnati Bell Inc.

PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a) Market Information
The Company’s common shares (symbol: CBB) are listed on the New York Stock Exchange. The Company filed an amendment to its Amended and Restated Articles of Incorporation to affect a one-for-five reverse split of its issued common stock ("the Reverse Split") effective 11:59 p.m. October 4, 2016. The following table shows the high and low closing sale prices during each quarter for the last two fiscal years are listed below:after consideration of the Reverse Split:
  First Second Third Fourth
  Quarter Quarter Quarter Quarter
2014High$3.75
 $3.95
 $4.10
 $3.71
 Low$3.25
 $3.19
 $3.35
 $2.97
2013High$5.57
 $3.66
 $3.51
 $3.63
 Low$2.94
 $2.92
 $2.72
 $2.63
  First Second Third Fourth
  Quarter Quarter Quarter Quarter
2016High$19.45
 $23.05
 $25.10
 $22.75
 Low$14.50
 $18.00
 $19.55
 $17.90
2015High$18.40
 $20.45
 $19.85
 $19.85
 Low$14.65
 $16.70
 $15.40
 $15.70
(b) Holders
As of January 31, 2015,2017, the Company had 9,2864,644 holders of record of the 209,570,776 outstanding42,128,999 common shares outstanding and 155,250 shares outstanding shares of the 6 3/4% Cumulative Convertible Preferred Stock.
(c) Dividends
In 20142016 and 2013,2015, the Company paid $10.4$10.4 million of dividends on its 6 3/4% Cumulative Convertible Preferred Stock. In 20142016 and 2013,2015, the Company did not pay any dividends on its common stock and does not intend to pay any common stock dividends in 2015.2017.
(d) Securities Authorized For Issuance Under Equity Compensation PlansStock Performance
The following table provides information asgraph matches Cincinnati Bell Inc.'s cumulative five-year total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the S&P Integrated Telecommunication Services index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2014 regarding securities of the Company2011 to be issued and remaining available for issuance under the equity compensation plans of the Company:December 31, 2016.
Plan CategoryNumber of securities to be issued upon exercise of outstanding stock options, awards, warrants and rights Weighted-average exercise price of outstanding stock options, awards, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 (a) (b) (c)
Equity compensation plans approved by security holders7,653,877
(1)$3.84
 1,551,558
Equity compensation plans not approved by security holders166,721
(2)—
 294,701
Total7,820,598
 $3.84
 1,846,259
(1)
Includes 5,224,346 outstanding stock options and stock appreciation rights not yet exercised, 683,903 shares of time-based restricted stock, and 1,745,628 shares of performance-based awards, restrictions on which have not expired as of December 31, 2014. Awards were granted under various incentive plans approved by Cincinnati Bell Inc. shareholders. The number of performance-based awards assumes the maximum awards that can be earned if the performance conditions are achieved.

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Form 10-K Part II Cincinnati Bell Inc.

(2)
The shares to be issued relate to deferred compensation in the form of previously received special awards and annual awards to non-employee directors pursuant to the “Deferred Compensation Plan for Outside Directors.” From 1997 through 2011, the directors received an annual award of phantom stock equivalent to a number of common shares. In 2014 and 2013, no such awards were granted. As a result of a plan amendment effective as of January 1, 2005, upon termination of Board service, non-employee directors are required to take distribution of all annual phantom stock awards in cash. Therefore, the number of actual shares of common stock to be issued pursuant to the plan as of December 31, 2014 is approximately 11,500. This plan also provides that no awards are payable until such non-employee director completes at least five years of active service as a non-employee director, except if he or she dies while serving as a member of the Board of Directors.
(e) Stock Performance
The graph below shows the cumulative total shareholder return assuming the investment
 Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16
Cincinnati Bell Inc.$100$181$117$105$119$148
S&P 500$100$116$154$175$177$198
S&P Integrated Telecommunication Services$100$115$128$130$134$167

Copyright © 2017 Standard & Poor's, a division of $100 on December 31, 2009 (and the reinvestment of dividends thereafter) in each of (i) the Company’s common shares, (ii) the S&P 500 ® Stock Index, and (iii) the S&P® Integrated Telecommunications Services Index.

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Global. All rights reserved.
Form 10-K Part IICincinnati Bell Inc.


(f)(e) Issuer Purchases of Equity Securities
The following table provides information regarding the Company’s purchases of its common stock during the quarter ended December 31, 2014:2016:
Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs * Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (in millions)* Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs * Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (in millions)*
10/1/2014 - 12/31/2014 —
 $—
 —
 $129.2
10/1/2016 - 12/31/2016 —
 $—
 —
 $124.4
*In February 2010, the Board of Directors approved an additional plan for the repurchase of the Company’s outstanding common stock in an amount up to $150.0 million. The Company may repurchase shares when management believes the share price offers an attractive value and to the extent its available cash is not needed for growth opportunities. This repurchase plan does not have a stated maturity.

26
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Item 6. Selected Financial Data
As further discussed in Note 16 to our consolidated financial statements, we ceased operations of our wireless business as of March 2015. As a result, wireless financial results are now presented as discontinued operations. Therefore, we have recast the financial information, except as noted, for all periods presented.

All shares of common stock and per share information presented in the following table have been adjusted to reflect the Reverse Split on a retroactive basis for all periods presented.

Accounting Standard Update ("ASU") 2015-03 Simplifying the Presentation of Debt Issuance Costs was adopted effective January 1, 2016. As a result, certain note issuance costs were reclassed from "Other noncurrent assets" to "Long-term debt, less current portion." All periods presented in the following table have been recast to present the impact of ASU 2015-03, respectively.

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

The selected financial data should be read in conjunction with the consolidated financial statements and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in this document.
(dollars in millions, except per share amounts) 2014 2013 (a) 2012 2011 2010 (b) 2016 2015 2014 2013 (a) 2012 (a)
Operating Data                    
Revenue $1,278.2
 $1,256.9
 $1,473.9
 $1,462.4
 $1,377.0
 $1,185.8
 $1,167.8
 $1,161.5
 $1,073.4
 $1,251.5
Cost of services and products, selling, general and administrative, depreciation, and amortization expense 1,153.2
 1,033.4
 1,181.5
 1,139.9
 1,054.9
Cost of services and products, selling, general and administrative, depreciation and amortization expense 1,079.8
 1,031.3
 979.5
 877.6
 1,018.0
Other operating costs and losses (c)(b) 9.2
 59.7
 22.3
 63.0
 22.8
 13.0
 8.5
 5.1
 56.0
 20.3
Operating income 115.8
 163.8
 270.1
 259.5
 299.3
 93.0
 128.0
 176.9
 139.8
 213.2
Interest expense 148.7
 182.0
 218.9
 215.0
 185.2
 75.7
 103.1
 145.9
 176.0
 211.2
Loss on extinguishment of debt 19.6
 29.6
 13.6
 —
 46.5
Loss from CyrusOne equity method investment (d) 7.0
 10.7
 —
 —
 —
Gain on sale of CyrusOne equity method investment (e) (192.8) —
 —
 —
 —
Loss on extinguishment of debt, net 19.0
 20.9
 19.6
 29.6
 13.6
Loss from CyrusOne investment (c) —
 5.1
 7.0
 10.7
 —
Gain on sale of CyrusOne investment (157.0) (449.2) (192.8) —
 —
Income (loss) from continuing operations 101.8
 290.8
 117.7
 (64.9) (18.8)
Income (loss) from discontinued operations, net of tax 0.3
 62.9
 (42.1) 10.2
 30.0
Net income (loss) $75.6
 $(54.7) $11.2
 $18.6
 $28.3
 102.1
 353.7
 75.6
 (54.7) 11.2
Basic and diluted earnings (loss) per common share $0.31
 $(0.32) $ 0.00
 $0.04
 $0.09
Basic earnings (loss) per common share from continuing operations $2.17
 $6.69
 $2.57
 $(1.83) $(0.74)
Basic earnings (loss) per common share from discontinued operations

 $0.01
 $1.50
 $(1.01) $0.25
 $0.76
Basic earnings (loss) per common share

 $2.18
 $8.19
 $1.56
 $(1.58) $0.02
Diluted earnings (loss) per common share from continuing operations
 $2.17
 $6.68
 $2.56
 $(1.83) $(0.74)
Diluted earnings (loss) per common share from discontinued operations

 $0.01
 $1.49
 $(1.00) $0.25
 $0.76
Diluted earnings (loss) per common share $2.18
 $8.17
 $1.56
 $(1.58) $0.02
Dividends declared per common share $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Weighted-average common shares outstanding                    
Basic 208.5
 205.9
 197.0
 196.8
 201.0
 42.0
 41.9
 41.7
 41.2
 39.4
Diluted 209.6
 205.9
 204.7
 200.0
 204.0
 42.1
 42.0
 41.9
 41.2
 39.4
                    
Financial Position                    
Property, plant and equipment, net $859.5
 $902.8
 $1,587.4
 $1,400.5
 $1,264.4
 $1,085.5
 $975.5
 $815.4
 $756.8
 $1,415.4
Total assets 1,819.7
 2,107.3
 2,872.4
 2,714.7
 2,653.6
Total long-term obligations (f) 2,058.4
 2,529.7
 3,215.2
 3,073.5
 2,992.7
Total assets (d) 1,541.0
 1,446.4
 1,807.0
 2,088.2
 2,850.4
Total long-term obligations (e) 1,429.8
 1,485.4
 2,044.7
 2,509.5
 3,191.8
                    
Other Data                    
Cash flow provided by operating activities $175.2
 $78.8
 $212.7
 $289.9
 $300.0
 $173.2
 $110.9
 $175.2
 $78.8
 $212.7
Cash flow provided by (used in) investing activities (g) 392.6
 (185.4) (371.8) (244.7) (675.5)
Cash flow (used in) provided by financing activities (h) (514.5) 87.6
 109.0
 (48.8) 429.8
Capital expenditures (182.3) (196.9) (367.2) (255.5) (149.7)
Cash flow (used in) provided by investing activities (95.5) 383.2
 392.6
 (185.4) (371.8)
Cash flow (used in) provided by financing activities (75.4) (544.6) (514.5) 87.6
 109.0
Capital expenditures (f) (286.4) (283.6) (182.3) (196.9) (367.2)

27
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

(a)Results for 20132012 include the revenues and expenses of CyrusOne, our former data center business,business. During 2013, CyrusOne results are included for the period January 1, 2013 through January 23, 2013. Effective January 24, 2013, the date of the CyrusOne IPO, we no longer include CyrusOne's operating results in our consolidated financial statements. See Notes 1 and 315 to the consolidated financial statements.
  
(b)Results for 2010 include the acquisition of CyrusOne from the acquisition date of June 11, 2010 to the end of the year.
(c)Other operating costs and losses consist of restructuring and severance related charges (reversals), transaction-related compensation, curtailment (gains) loss (gain), loss (gain) on disposal of assets - net, amortization of deferred gains, impairment of goodwill and other assets and transaction costs.
  
(d)(c)We account for our investment in CyrusOne using the equity method as we no longer control its operations. These losses from CyrusOneLosses represent our equity method share of CyrusOne's losses.losses from the date of the IPO through December 31, 2015. Effective January 1, 2016, our ownership in CyrusOne is no longer accounted for using the equity method.
(d)Total assets include current and noncurrent assets from discontinued operations.
  
(e)In 2014, we recorded a gain resulting from the sale of 16.0 million partnership units of CyrusOne LP to CyrusOne, Inc.
(f)
Total long-term obligations comprise long-term debt less current portion, pension and postretirement benefit obligations, and other noncurrent liabilities. liabilities and noncurrent liabilities from discontinued operations.
See Notes 6, 7, 8, 109, 13 and 1116 to the consolidated financial statements for discussions related to 20142016 and 2013.2015.
  
(g)(f)In 2014, cashCapital expenditures include capital expenditures from investing activities included $355.9 million of proceeds from the sale of 16.0 million partnership units of CyrusOne LP to CyrusOne Inc. and $194.4 million proceeds from the sale of Wireless spectrum licenses.
(h)
Cash used in financing activities for 2014 includes the repayment of $325.0 million 8 3/4% Senior Subordinated Note due 2020 and repayment of $22.7 million 8 3/8% Senior Notes due 2018.
discontinued operations.

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Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K 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. See "Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement,"Statement" for further information on forward-looking statements.

Executive Summary
Segment results described in the Executive Summary and Consolidated Results of Operations section are net of intercompany eliminations.

The Company is a full-service regional provider of data, entertainment, and voice communications services over wireline and wireless networks, a provider of managed and professional information technology services, and a reseller of information technology ("IT") and telephony equipment. In addition, enterprise customers across the United States rely on Cincinnati Bell Technology Solutions Inc. ("CBTS"), a wholly-owned subsidiary, for efficient, scalable communication systems and end-to-end IT solutions.
Consolidated revenue totaled $1,278.2totaling $1,185.8 million for 2014, up 2%,the year ended December 31, 2016 increased $18.0 million compared to the prior year as thestrategic revenue growth from our strategic products, combined with increased telecom and IT equipment sales, more than offset declines from wirelesslegacy and legacyintegration products. Revenue from our strategic products totaled $435.6$637.5 million in 2014,2016, up 21%19% compared to 2013.2015.
Operating income in 20142016 was $115.8$93.0 million, down from the prior year due in large part to increased depreciation expense associated with the impact of accelerating the construction of our fiber network and reducing the estimated useful life of certain set-top boxes and the related software as we upgrade customers to new technology. We also reduced the estimated useful life of our copper assets in the fourth quarter of 2015. Income from continuing operations totaled $101.8 million for the year ended December 31, 2016, primarily due to increased costs associated with winding down wireless operations. Wireless restructuring charges totaled $16.3the $157.0 million in addition to an asset impairment of $7.5 million and $62.2 million additional depreciation and amortization expense due to reducing the useful lives of certain wireless assets. These cost increases were partially offset by accelerated deferred gain amortization and one-time IPO transaction related compensation in the prior year.
Net income for the year equaled $75.6 million resulting in basic and diluted earnings per share of $0.31 due largely to the gain on the initial monetizationsale of a portion of our CyrusOne equity method investment.
On January 24, 2013, we completedThe Company sold a combined 4.1 million CyrusOne common shares for cash totaling $189.7 million during 2016. The cash generated from these transactions was primarily used to manage our debt and fund the initial public offering ("IPO")expansion of CyrusOne, our former Data Center Colocation segment. Asfiber network. In the third quarter of 2016 the Company issued $425.0 million of 7% senior notes due 2024. The proceeds of the datedebt were primarily used to repay the remaining $397.1 million of 8 3/8% senior unsecured notes due 2020. In the fourth quarter of 2016, the Company issued an additional $200.0 million of 7% senior notes due 2024 at 105.000% and the proceeds were used to repay $208.0 million of the IPO, we owned approximately 1.9 million shares, or 8.6%, of CyrusOne's common stock and were limited partners in CyrusOne LP, owning approximately 42.6 million, or 66% of its partnership units. We effectively owned 69% of CyrusOne and continued to have significant influence over the entity, but we did not control its operations. Therefore, effective with the completion of the IPO, we no longer include the accounts of CyrusOne in our consolidated financial statements, but account for our ownership in CyrusOne as an equity method investment.Corporate Credit Agreement - Tranche B Term Loan.
Commencing January 17, 2014, we are permitted to exchange the partnership units of CyrusOne LP into cash or shares of common stock of CyrusOne, as determined by CyrusOne, on a one-for-one basis based upon the fair value of a share of CyrusOne common stock, subject to certain limitations which restricted the volume of shares we are permitted to sell. The registration statement filed by CyrusOne on March 24, 2014 became effective on April 4, 2014 and eliminated all prior limitations restricting the volume of shares we are allowed to sell.
On June 25, 2014, we consummated the sale of 16.0 million partnership units of CyrusOne LP to CyrusOne, Inc. at a price of $22.26 per unit. The sale generated proceeds of $355.9 million and resulted in a gain of $192.8 million. As of December 31, 2014, we effectively own 44% of CyrusOne, which is held in the form of 1.9 million shares of CyrusOne common stock and 26.6 million CyrusOne LP partnership units.


29



Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

InConsolidated Results of Operations
Revenue
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Service revenue    

 

   

 

 
Entertainment and Communications$763.0
 $735.0
 $28.0
 4% $728.8
 $6.2
 1% 
IT Services and Hardware215.7
 198.0
 17.7
 9% 161.4
 36.6
 23% 
Total service revenue$978.7
 $933.0
 $45.7
 5% $890.2
 $42.8
 5% 
Entertainment and Communications revenue increased as the second quartergrowth in Fioptics and other strategic services offset the combined impact of legacy declines and no longer providing backhaul services to our discontinued wireless operations effective March 31, 2015. Fioptics revenue totaled $254.1 million, $190.8 million and $142.4 million for the years ended December 31, 2016, 2015 and 2014, respectively, up 33% in 2016 and up 34% in 2015 from the comparable prior year. IT Services and Hardware increased during 2015 primarily due to growth from our strategic services. During 2016, the growth was primarily associated with cloud services as professional services and management and monitoring revenue were only up 1% and 3%, respectively, compared to 2015.
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Product revenue              
Entertainment and Communications$4.5
 $7.4
 $(2.9) (39)% $10.7
 $(3.3) (31)% 
IT Services and Hardware202.6
 227.4
 (24.8) (11)% 260.6
 (33.2) (13)% 
Total product revenue$207.1
 $234.8
 $(27.7) (12)% $271.3
 $(36.5) (13)% 
Product revenue is primarily driven by the volume of Telecom and IT hardware sales reflecting the cyclical fluctuation in capital spending by our enterprise customers in our IT Services and Hardware segment. In 2014, we entered into agreements to sell ourVerizon wireless spectrum licenseshandsets and certain other assets related to our wireless business. This agreement to sell our wireless spectrum license closed on September 30, 2014, for cash proceeds of $194.4 million. As a result, we derecognized the $88.2 million carrying value of the licenses previously reported as "Intangible assets, net" in the Consolidated Balance Sheets. Also on September 30, 2014, we entered into a separate agreement to use certain spectrum licenses until we no longer provide wireless service. We recorded the fair value of the lease of the spectrum of $6.4 million, in "Prepaid expenses" in the Consolidated Balance Sheets. This fair value is considered a Level 3 measurement based on other comparable transactions. The asset is being amortized over a six month period and had a net carrying value of $3.2 million as of December 31, 2014. In addition, as we continue to use the licenses, we deferred the gain of $112.6 million related to the sale of the spectrum, which is presented in the Consolidated Balance Sheets. We plan to operate and generate cash from our wireless operations until no later than April 6, 2015. At that time, we will transfer certain leases and other assets valued at approximately $25 million to the acquiring company.
Negotiations with the Communications Workers of America (“CWA”) have been ongoing since the tentative agreement reached on August 4, 2014 was not ratified by local members of the union. We reached another tentative agreement on January 23, 2015 that is pending ratification by the local union's members.

Consolidated Results of Operations
2014 Compared to 2013
Service revenue was $999.6 million in 2014, a decrease of $39.7 million compared to 2013. Of this decrease, $15.2 million was due to the deconsolidation of CyrusOne's results of operations from our consolidated financial statements. Excluding the impact of CyrusOne, service revenue in 2014 decreased by $24.5 million year-over-year, primarily driven by lower Wireless service revenue of $59.4 million as the postpaid and prepaid subscriber base continues to decline as a result of the wind down of the business. This decrease was partially offset by strong demand for strategic products that resulted in an additional $12.2 million of Wireline service revenue and $22.7 million of IT Services and Hardware revenue.
Product revenue totaled $278.6 million in 2014, up 28% compared to 2013 due largely to $64.8 million higher sales of telecommunications and IT hardware. Wireline equipment sales were up $4.9 million as a result of sales generated through an agreement with Verizon Wireless to sell their products and servicesaccessories at our retail locations. Increased sales were partially offset by lower Wireless handsetlocations generating revenue of $3.1 million and accessory sales.$5.7 million in 2015 and 2014, respectively. In 2016, the Entertainment and Communications segment is no longer selling Verizon wireless handsets at our retail locations.
Operating costs
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Cost of services              
Entertainment and Communications$344.7
 $319.9
 $24.8
 8% $290.2
 $29.7
 10% 
IT Services and Hardware161.7
 152.6
 9.1
 6% 126.0
 26.6
 21% 
Total cost of services$506.4
 $472.5
 $33.9
 7% $416.2
 $56.3
 14% 
Cost of services was $454.2 millionincreased in 2014, up $23.8 million compared to 2013both periods due to the growth in our strategic products. WirelineEntertainment and IT ServicesCommunications costs were up $17.3 million and $17.6 million, respectively. These increases were partially offset by Wireless cost of services which are down $6.5 million as a result of a declining subscriber base. CyrusOne cost of services was $4.6 million in 2013.
Cost of products sold was $244.9 million in 2014 up from $215.9 million in the prior year,also increased due to a $52.6 million increase ofprogramming costs fromassociated with our growing Fioptics video subscriber base and higher telecommunications and IT hardware sales. Wireline cost of products increased by $3.8 million primarily related to sales generated through an agreement with Verizon Wireless to sell their products and services at our retail locations. These increases were partially offset by lower Wireless cost of products sold equaling $27.4 million, due to lower handset and accessory sales as a result of the planned wind down of the wireless segment.programming rates.
Selling, general and administrative (“SG&A”) expenses were $223.1 million in 2014, an increase of $2.3 million compared to the same period in 2013. CyrusOne SG&A expenses were $2.4 million prior to the IPO. Excluding CyrusOne, SG&A expenses increased $4.7 million compared to the prior year. Wireline and IT Services and Hardware costs were up $2.1 million and $6.9 million, respectively, to support growth in our strategic products. Wireline costs were also up due to outsourcing certain IT functions. Partially offsetting this increase was a $14.9 million decrease in Wireless SG&A expenses due primarily to cost containment efforts as we begin to wind down operations. Corporate costs were up $10.6 million from the prior year primarily as a result of an increase in stock compensation expense due to less mark to market benefit on plans indexed to changes in our stock price as well as increases in other employee related costs.

30
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Depreciation
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Cost of products              
Entertainment and Communications$2.5
 $6.3
 $(3.8) (60)% $8.3
 $(2.0) (24)% 
IT Services and Hardware170.0
 191.8
 (21.8) (11)% 223.2
 (31.4) (14)% 
Total cost of products$172.5
 $198.1
 $(25.6) (13)% $231.5
 $(33.4) (14)% 
Cost of products are primarily impacted by changes in Telecom and amortization was $231.0IT hardware sales. Entertainment and Communications cost of products decreased primarily due to lower sales of Verizon handsets at our retail locations.
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Selling, general, and administrative              
Entertainment and Communications$141.5
 $146.2
 $(4.7) (3)% $133.0
 $13.2
 10 % 
IT Services and Hardware57.5
 53.5
 4.0
 7 % 51.0
 2.5
 5 % 
Corporate19.7
 19.4
 0.3
 2 % 20.2
 (0.8) (4)% 
Total selling, general and administrative$218.7
 $219.1
 $(0.4) 0%
 $204.2
 $14.9
 7 % 
Entertainment and Communications SG&A costs were down primarily in 2016 due to a one-time pension charge of $3.8 million incurred in the second quarter of 2015 related to our excess benefit plan. In addition to the one-time pension charge, Entertainment and Communications SG&A costs were up in 2015 compared to 2014, primarily due to retail store costs and an increase of $61.4 million comparedin our sales force to support our fiber acceleration strategy. IT Services and Hardware SG&A costs were up primarily related to increased payroll and headcount-related costs to support the prior year. growth for our strategic products. Corporate SG&A costs decreased during 2015 as increased stock-based compensation expense was more than offset by lower contract services.
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Depreciation and amortization expense              
Entertainment and Communications$168.6
 $129.2
 $39.4
 30% $115.7
 $13.5
 12 % 
IT Services and Hardware13.5
 12.3
 1.2
 10% 11.7
 0.6
 5 % 
Corporate0.1
 0.1
 —
 0% 0.2
 (0.1) (50)% 
Total depreciation and amortization expense$182.2
 $141.6
 $40.6
 29% $127.6
 $14.0
 11 % 
The increase in depreciation and amortization expense is primarily due to an increase in Entertainment and Communications depreciation as a result of expanding our fiber-based network, reducing the estimated useful life of certain set-top boxes and the related software as we upgrade customers to new technology. We also reduced the estimated useful life of our long-lived wirelesscopper assets as a result of a continued decline in our subscriber base and the agreement to sell our wireless spectrum licenses and certain other assets. Wireless depreciation and amortization expense totaled $103.4 million in 2014, up $62.2 million compared to the prior year. Wireline depreciation and amortization increased by $3.5 million due to the expansion of our fiber-based network. IT Services and Hardware was $1.2 million higher than the prior year as a result of new assets placed in service to support growth in managed and professional service revenue. These increases were offset by a $5.2 million reduction due to the deconsolidation of CyrusOne.
Restructuring charges were $15.9 million in 2014 compared to $13.7 million in the prior year. In 2014, restructuring charges represented severance associated with employee separations, consulting fees related to a workforce optimization initiative and lease abandonments. Charges incurred in 2014 include $4.2 million of severance cost for employee separations related to the wireless segment and outsourcing certain aspects of our IT department and $13.1 million of contract termination fees related to winding down wireless operations. These charges were partially offset by a $1.4 million reduction to the lease abandonment reserve related to certain leased space being reoccupied during the third quarter of 2014. Charges incurred during the comparative periods of 2013 represented severance costs, expenses related to lease abandonments and fees associated with a workforce optimization initiative.
Transaction-related compensation was $42.6 million in 2013, of which $20.0 million was related to CyrusOne employees. In 2010, the Company's Board of Directors approved a long-term incentive program for certain members of management under which payments were contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business, as defined in the plan. The completion of the IPO during 2013 resulted in a qualifying transaction requiring payment of compensation to the employees covered under this plan. No such transaction-related compensation has occurred in 2014.
During the three months ended June 30, 2013, the Company amended the management pension plan to eliminate all future pension service credits effective July 1, 2013. As a result, the Company remeasured its projected benefit obligation for this plan, and the Wireline segment recognized a curtailment gain of $0.6 million in the second quarter of 2013.
The gain on sale or disposal of assets totaled $0.3 million in 2014 compared to a loss on sale or disposal of assets of $2.4 million recorded in 2013. The Wireline segment recorded gains on the sale of copper cabling that was no longer in use totaling $0.4 million and $1.1 million in 2014 and 2013, respectively. The Corporate segment recorded a loss on sale or disposal of assets of $0.1 million in 2014 partially offsetting the gain. In 2013, Wireless recorded a $3.5 million loss on disposal of assets for equipment that had no resale market or has either been disconnected from the wireless network, abandoned or demolished.
Amortization of the deferred gain totaled $22.9 million in 2014 compared to $3.3 million in 2013. The change in the useful life of our long-lived wireless assets, excluding the spectrum licenses, resulted in the acceleration of the amortization of the deferred gain in 2014. In December 2009, the Company sold 196 wireless towers for $99.9 million in cash proceeds and leased back a portion of the space on these towers for a term of 20 years, which resulted in a deferred gain of $35.1 million.
Impairment charges totaling $12.1 million in 2014 included $7.5 million for certain construction-in-progress projects that will no longer be completed due to the wind down of the wireless business and $4.6 million for the abandonment of an internal use software project that was written off in the Wireline segment. No impairment charges were recorded in 2013.
Transaction costs of $4.4 million were incurred in 2014, up from $1.6 million incurred in 2013. In 2014, these costs primarily represent fees associated with the sale of our wireless spectrum licenses. In 2013, these costs represented legal and consulting costs incurred to restructure our legal entities in preparation for the proposed IPO of the common stock of CyrusOne and to prepare CyrusOne to be a real estate investment trust.
Interest expense was $148.7 million in 2014 compared to $182.0 million in 2013. The decrease was primarily due to the Company amending its Corporate Credit Agreement to include a $540.0 million Tranche B Term Loan and using the proceeds to redeem all of the Company's $500.0 million 8 1/4% Senior Notes on October 15, 2013. In addition, in the third quarter of 2014, the Company redeemed $325.0 million outstanding 8 ¾% Senior Subordinated Notes due 2018 at a redemption price of 104.375%. The deconsolidation of CyrusOne in January 2013 also resulted in a $2.5 million decrease compared to the prior year.
The Company recorded a loss on extinguishment of debt totaling $19.4 million in the third quarter of 2014 related to the redemption of $325.0 million 8 ¾% Senior Subordinated Notes due 2018. In the fourth quarter of 2014, the Company redeemed $22.7 million of its outstanding 8 3/8% Senior Notes due 2020 at par and recognized a loss on extinguishment of debt totaling $0.2 million.2015.

31
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Restructuring and severance related charges (reversals)

              
Entertainment and Communications$7.7
 $1.6
 $6.1
 n/m
 $(0.5) $2.1
 n/m 
IT Services and Hardware3.3
 2.8
 0.5
 18 % —
 2.8
 n/m 
Corporate0.9
 1.6
 (0.7) (44)% 0.1
 1.5
 n/m 
Total restructuring and severance related charges (reversals)$11.9
 $6.0
 $5.9
 98 % $(0.4) $6.4
 n/m 
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.


In 2016, restructuring and severance related charges were associated with increased in-sourcing of IT professionals in our operating territory and initiatives to reduce costs associated with our legacy copper network group, including a voluntary severance program for certain management employees. In 2015, restructuring charges represented severance associated with employee separations, consulting fees related to a workforce optimization initiative and lease abandonments.
Loss from CyrusOneOther operating costs
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Other operating costs              
Curtailment loss$—
 $0.3
 $(0.3) n/m
 $—
 $0.3
 n/m
 
Loss (gain) on sale of disposal of assets, net

1.1
 0.8
 0.3
 38 % (0.3) 1.1
 n/m
 
Impairment of assets—
 —
 —
 n/m
 4.6
 (4.6) n/m
 
Transaction costs—
 1.4
 (1.4) n/m
 1.2
 0.2
 17 % 
Total other operating costs$1.1
 $2.5
 $(1.4) (56)% $5.5
 $(3.0) (55)% 
Impairment charges totaling $4.6 million in 2014 were recorded for the abandonment of an internal use software project related to the Entertainment and Communications segment.
Transaction costs incurred in 2015 primarily represent fees for exploring opportunities to increase the scale of our IT Services and Hardware Segment. Transaction costs incurred in 2014 represent legal fees associated with the sale of our wireless assets and fees associated with new equity method investments.
Non-operating expenses (income)
     $ Change % Change   $ Change % Change 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Non-operating costs              
Interest expense$75.7
 $103.1
 $(27.4) (27)% $145.9
 $(42.8) (29)% 
Loss on extinguishment of debt, net19.0
 20.9
 (1.9) (9)% 19.6
 1.3
 7 % 
Gain on Sale of CyrusOne investment(157.0) (449.2) 292.2
 (65)% (192.8) (256.4) n/m
 
Other (income) expense, net

(7.6) 2.6
 (10.2) n/m
 5.1
 (2.5) (49)% 
Income tax expense61.1
 159.8
 (98.7) (62)% 81.4
 78.4
 96 % 
Income (loss) from discontinued operations, net of tax

0.3
 62.9
 (62.6) n/m
 (42.1) 105.0
 n/m
 
Interest expense continued to decrease due to the Company primarily using proceeds from the sale of a portion of its CyrusOne investment totaled $7.0to repay debt in 2015 and 2014. During 2016, 2015 and 2014, we reduced our total debt by $31.0 million, $449.7 million and $451.0 million, respectively. Certain debt repayments in 2014, down from $10.7each period resulted in a loss on extinguishment of debt.
In 2016, the Company recognized a gain of $157.0 million in 2013, foron the Company's sharesale of CyrusOne's net loss.4.1 million CyrusOne common shares. In 2015, the second quarterCompany recognized a gain of $412.9 million on the sale of 20.3 million CyrusOne LP partnership units and a gain of $36.3 million on the sale of 1.4 million CyrusOne common shares. In 2014, the Company recognized a $192.8 million gain on the sale of 16.0 million CyrusOne LP partnership units.
Income tax expense Effective December 31, 2015, we exchanged our remaining 6.3 million operating partnership units in CyrusOne LP for an equal number of $57.4 million in 2014 was up compared to the prior year due primarily to higher pre-tax income. In 2013, the tax benefit was a resultnewly issued shares of loss before income taxes offset by a valuation allowance provisioncommon stock of $10.7 million for Texas margin credits, which effective with CyrusOne's IPO, are uncertain of being realized before their expiration date.
The Company has certain non-deductible expenses, including interest on securities originally issued to acquire its broadband business (the "Broadband Securities") or securities that the Company has subsequently issued to refinance the Broadband Securities. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the Broadband Securities. The Company uses federal and state net operating losses to defray payment of federal and state tax liabilities.CyrusOne Inc. As a result, at December 31, 2015, we owned approximately 9.5% of CyrusOne's common shares and no longer had significant influence over the Company had cash income tax payments, net of refunds, of $9.1 millionentity. Effective January 1, 2016, our investment in 2014.
2013 Compared to 2012
Service revenueCyrusOne was $1,039.3 million in 2013, a decrease of $233.5 million compared to 2012, primarily due to the deconsolidation of CyrusOne, whichno longer accounted for $199.7 million ofusing the decline. Wireless service revenue was down $39.6 million from the prior year as a result of continued postpaid subscriber losses. Wireline service revenue declinedequity-method.
Dividends declared by only $2.7 million compared to 2012 as the growthCyrusOne in our strategic products continues to increasingly mitigate the loss from access line, long-distance and DSL subscriber declines. IT Services and Hardware service revenue was up $8.5 million from a year ago due to strong demand from enterprise customers for managed and professional services.
Product revenue2016 totaled $217.6 million in 2013, up 8% compared to 2012. The increase was largely due to a $17.9 million increase in sales of telecommunications and IT hardware. These increases were partially offset by slight declines in both Wireline and Wireless product revenue.
Cost of services was $430.4 million in 2013, compared to $492.2 million in 2012, which included CyrusOne cost of services totaling $73.0 million. Excluding CyrusOne, cost of services increased year-over-year primarily to support the growth in Fioptics and managed and professional services. Wireline cost of services was up $7.5 million compared to the prior year and IT Services and Hardware costs were up $8.9 million. Wireless cost of services was down $9.8 million as a result of a declining subscriber base.
Cost of products sold was $215.9 million in 2013 compared to $204.7 million in the prior year, an increase of $11.2 million due to a $16.9 million increase as a result of higher telecommunications and IT hardware sales. Wireline and Wireless cost of products sold were down $2.6$6.4 million and $3.1were included in Other (income) expense, net. For 2015 and 2014, Other (income) expense, net includes the Company's share of CyrusOne's net loss recorded under the equity method of accounting totaling $5.1 million respectively, compared to the prior year.
SG&A expenses were $220.8 million in 2013, a decrease of $48.7 million, or 18%, compared to 2012. The decrease is partially the result of no longer consolidating CyrusOne, which accounted for $28.5and $7.0 million, of the decrease. Corporate costs were down $20.7 million from the prior year, primarily as a result of recognizing a $5.6 million stock compensation mark-to-market gain in 2013 compared to a $7.9 million stock compensation mark-to-market expense in 2012. The remaining decrease is due to a $4.7 million decrease in bonus expense and a $2.5 million decrease in payroll and other headcount related costs as a result of cost-out initiatives. Wireline and IT Services and Hardware SG&A expenses were up $1.1 and $2.4 million, respectively, primarily to support the growth of our strategic products. Wireless SG&A expenses were down $3.0 million as a result of cost-out initiatives as we focus on operating the segment for cash flow and profitability.respectively.
Depreciation and amortization was $169.6 million in 2013, a decrease of $47.8 million compared to the prior year, primarily due to the deconsolidation of CyrusOne. In 2012, CyrusOne's depreciation and amortization expense totaled $70.6 million compared to $5.2 million in 2013. Wireline depreciation and amortization increased by $6.2 million due to the expansion of Fioptics and our fiber-based network. IT Services and Hardware was $1.9 million higher than the prior year as a result of new assets placed in service to support growth in managed and professional service revenue. Wireless depreciation and amortization expense totaled $41.2 million in 2013, up $9.3 million compared to the prior year. In the first quarter of 2013, the useful lives assigned to network software were shortened resulting in $8.5 million of higher depreciation charges. In the fourth quarter of 2013, the remaining useful life for all property, plant and equipment, and finite-lived intangible assets was reduced to 30 months as of December 31, 2013. This change in estimate resulted in additional depreciation and amortization expense of $3.0 million in the fourth quarter. The useful life change in the fourth quarter of 2013 also resulted in the acceleration of the deferred gain associated with the 2009 tower sale. In 2013, the amortization of the deferred gain associated with the tower sale totaled $3.3 million compared to $2.3 million in 2012.

32
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Restructuring charges were $13.7 millionIncome tax expense fluctuates accordingly based on changes in 2013 comparedIncome from continuing operations before income taxes. The Company uses federal and state net operating loss carryforwards to $3.4 million in the prior year. In 2013, restructuring charges represented severance associated with employee separations, consulting fees related to a workforce optimization initiativesdefray payment of federal and lease abandonments. Employee severance costs associated with the Wireline and IT Services and Hardware segment are related to workforce initiatives associated with the continued integration of the Wireline business market with the IT Services and Hardware segment. Corporate employee severance costs were associated with the consulting fees and cost-out initiatives as a result of our smaller size due to the IPO of CyrusOne. Lease abandonment costs for the Wireline segment totaled $3.9 million as we consolidated office space. The Wireless segment recorded a $0.2 million lease abandonment charge due to the closure of a retail store. In 2012, restructuring costs were incurred for employee separations totaling $2.5 million primarily related to Wireline and Wireless. Lease abandonment charges were $0.9 million in 2012.
In 2010, the Company's Board of Directors approved long-term incentive programs for certain members of management. Payment was contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business, as defined in the plans. On January 24, 2013, the IPO of CyrusOne was completed, which represented a qualifying transaction requiring payment under these plans. Transaction-related compensation expense of $42.6 million was recognized for these awards at the Corporate level and not allocated to the segments. Payments to CyrusOne employees amounted to $20.0 million of the associated expense.
During the three months ended June 30, 2013, the Company amended the management pension plan to eliminate all future pension service credits effective July 1, 2013.state tax liabilities. As a result, the Company remeasuredhad cash income tax payments, net of refunds, totaling $1.7 million in 2016.
In periods without tax law changes, the Company expects its projected benefit obligation for this plan,effective tax rate to exceed statutory rates due to non-deductible expenses. Non-deductible expenses were higher in prior years due to non-deductible interest expense on securities originally issued to acquire its broadband business (the "Broadband Securities"). The Broadband Securities were repaid in full during 2015.
Effective March 31, 2015, we discontinued operating our wireless business as there were no subscribers remaining on the network. As a result, we no longer required the use of the spectrum being leased. Therefore, the $112.6 million gain on sale of wireless spectrum licenses, which had previously been deferred, was recognized during the three months ended March 31, 2015. On April 1, 2015, we transferred certain other wireless assets to the purchaser, including leases to certain wireless towers and the Wireline segment recognizedrelated equipment and other assets, which resulted in a curtailment gain of $0.6$15.9 million in the second quarter of 2013.
The loss on sale or disposal2015. These gains were partially offset by operating losses as we continued to incur costs during the wind down of assets totaled $2.4 million in 2013 compared to a gain on sale or disposal of assets of $1.6 million recorded in 2012. The Wireline segment recorded gains primarily on the sale of copper cabling that was no longer in use totaling $1.1 million and $1.8 million in 2013 and 2012, respectively, and the Corporate segment recorded a loss on sale or disposal of assets of $0.4 million in 2012. In 2013, Wireless recorded a $3.5 million loss on disposal of assets for equipment that had no resale market or has either been disconnected from the wireless network, abandoned or demolished. CyrusOne recorded a $0.2 million gain on the sale of assets in 2012.business.
There were no asset impairments recorded in 2013 compared to $14.2 million in 2012. In 2012, CyrusOne recorded impairment losses of $13.3 million on a customer relationship intangible asset and property and equipment. Wireline and Wireless asset impairments were $0.5 million and $0.4 million, respectively, during 2012.
Transaction costs of $1.6 million were incurred in 2013, down from $6.3 million incurred in 2012. In 2013, these costs represent expenses incurred for exploring strategic alternatives for our Wireless business and legal and consulting costs associated with the CyrusOne IPO. In 2012, these costs represented legal and consulting costs incurred to restructure our legal entities in preparation for the proposed IPO of the common stock of CyrusOne and to prepare CyrusOne to be a real estate investment trust.
Interest expense was $182.0 million in 2013 compared to $218.9 million in 2012, a decrease of $36.9 million. The deconsolidation of CyrusOne resulted in a $7.0 million decrease and the November 2012 redemptions of the 7% Senior Notes due 2015, certain CBT Notes and a portion of the 8 3/8% Senior Notes due 2020 reduced interest expense by $27.3 million year-over-year. In the fourth quarter of 2013, the Company redeemed all of the $500.0 million of 8 1/4% Senior Notes due 2017 at a redemption price of 104.125% using proceeds from the $540.0 million Tranche B Term Loan facility that was issued on September 10, 2013. The refinancing of the 81/4% Senior Notes with the more economical Tranche B Term Loan resulted in $1.8 million additional interest savings in 2013. The remaining difference was primarily due to lower amortization of note issuance costs.
The redemption of the 8 1/4% Senior Notes due 2017 in the fourth quarter of 2013 resulted in loss on extinguishment of debt totaling $29.6 million. Redemptions of the 7% Senior Notes due 2015, certain CBT Notes and a portion of the 8 3/8% Senior Notes due 2020 in the fourth quarter of 2012 resulted in a loss on extinguishment of debt totaling $13.6 million.
Loss from CyrusOne equity method investment totaled $10.7 million in 2013 and represents the Company's share of CyrusOne's net loss which, effective with the CyrusOne IPO, is now recorded using the equity method.
Other income of $1.3 million in 2013 primarily related to tax refund claims received on assets that had previously been disposed or abandoned. Other expense of $1.7 million recorded in 2012, primarily related to a loss recorded on the termination of a lease financing arrangement.

33
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

An income tax benefit of $2.5 million in 2013 was the result of pre-tax losses. In 2013, income tax expense includes a valuation allowance provision of $10.7 million for Texas margin credits which, effective with CyrusOne's IPO, are uncertain of being realized before their expiration date. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the Broadband Securities. The Company uses federal and state net operating losses to defray payment of federal and state tax liabilities. As a result, the Company had cash income tax payments, net of refunds, of $2.8 million in 2013.
Discussion of Operating Segment Results
The Company manages its business based upon productsproduct and service offerings. AtFor the years ended December 31, 2012,2016, 2015, and 2014, we operated fourtwo business segments: Wireline,Entertainment and Communications and IT Services and Hardware, Wireless and Data Center Colocation. Effective January 24, 2013, the dateHardware. The closing of the CyrusOne IPO, we no longer include CyrusOne, our former Data Center Colocation segment,wireless operations, effective March 31, 2015, represented a strategic shift in our consolidatedbusiness. Therefore, certain wireless assets, liabilities and results of operations are reported as discontinued operations in our financial statementsstatements. For further details of Discontinued Operations, see Note 1 and now account for our ownership in CyrusOne as an equity method investment. Therefore, at December 31, 2014 and 2013, we operated three business segments: Wireline, IT Services and Hardware and Wireless.Note 16 of Notes to Consolidated Financial Statements.
Certain corporate administrative expenses have been allocated to our business segments based upon the nature of the expense and the relative size of the segment. Intercompany transactions between segments have been eliminated.

34
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

WirelineEntertainment and Communications
The WirelineEntertainment and Communications segment provides products and services such as data transport, high-speed internet, entertainment,video, local voice, long distance, VoIP, data transport and other services. Cincinnati Bell Telephone Company LLC (CBT),CBT, a subsidiary of the Company, is the Incumbent Local Exchange Carrier (ILEC)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 140 years. Voice and data services beyond its ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended Territories LLC ("CBET"),CBET, a competitive local exchange carrier ("CLEC")CLEC and subsidiary of CBT. The Company provides long distance and VoIP services primarily through its Cincinnati Bell Any Distance Inc. ("CBAD")CBAD and eVolve Business Solutions LLC ("eVolve") subsidiaries.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Entertainment and Communications, continued
    $ Change % Change   $ Change % Change     $ Change % Change   $ Change % Change 
(dollars in millions, except for operating metrics)2014 2013 2014 vs. 2013 2014 vs. 2013 2012 2013 vs. 2012 2013 vs. 2012 
(dollars in millions)2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Revenue:              

 

 

 

 

 

 

 
Data$334.9
 $317.8
 $17.1
 5 % $306.9
 $10.9
 4 % $344.8
 $322.8
 $22.0
 7 % $309.6
 $13.2
 4 % 
Voice - local service203.5
 229.1
 (25.6) (11)% 255.4
 (26.3) (10)% 
Long distance and VoIP107.3
 107.2
 0.1
 0 % 113.9
 (6.7) (6)% 
Entertainment76.0
 55.2
 20.8
 38 % 35.4
 19.8
 56 % 
Other19.0
 15.5
 3.5
 23 % 18.9
 (3.4) (18)% 
Voice275.0
 291.9
 (16.9) (6)% 313.5
 (21.6) (7)% 
Video125.7
 96.6
 29.1
 30 % 75.5
 21.1
 28 % 
Services and Other23.3
 32.4
 (9.1) (28)% 42.1
 (9.7) (23)% 
Total revenue740.7
 724.8
 15.9
 2 % 730.5
 (5.7) (1)% 768.8
 743.7
 25.1
 3 % 740.7
 3.0
 0 % 
Operating costs and expenses:                            
Cost of services and products306.9
 287.2
 19.7
 7 % 283.8
 3.4
 1 % 359.5
 331.5
 28.0
 8 % 306.2
 25.3
 8 % 
Selling, general and administrative131.9
 127.8
 4.1
 3 % 125.6
 2.2
 2 % 141.6
 150.9
 (9.3) (6)% 136.2
 14.7
 11 % 
Depreciation and amortization115.7
 112.2
 3.5
 3 % 106.0
 6.2
 6 % 168.6
 129.2
 39.4
 30 % 115.7
 13.5
 12 % 
Restructuring (reversals) charges(0.5) 9.1
 (9.6) n/m
 3.5
 5.6
 n/m
 
Curtailment gain—
 (0.6) 0.6
 n/m
 —
 (0.6) n/m
 
Gain on sale or disposal of assets(0.4) (1.1) 0.7
 (64)% (1.8) 0.7
 39 % 
Asset impairments4.6
 —
 4.6
 n/m
 0.5
 (0.5) n/m
 
Restructuring and severance charges (reversals)7.7
 1.6
 6.1
 n/m
 (0.5) 2.1
 n/m
 
Other0.8
 0.6
 0.2
 33 % 4.2
 (3.6) (86)% 
Total operating costs and expenses558.2
 534.6
 23.6
 4 % 517.6
 17.0
 3 % 678.2
 613.8
 64.4
 10 % 561.8
 52.0
 9 % 
Operating income$182.5
 $190.2
 $(7.7) (4)% $212.9
 $(22.7) (11)% $90.6
 $129.9
 $(39.3) (30)% $178.9
 $(49.0) (27)% 
Operating margin24.6% 26.2%   (1.6)
pts29.1%   (2.9)
pts11.8% 17.5%   (5.7)
 24.2%   (6.7)
 
Capital expenditures$163.7
 $162.6
 $1.1
 1 % $114.2
 $48.4
 42 % $272.5
 $269.5
 $3.0
 1 % $163.7
 $105.8
 65 % 
Metrics information (in thousands):              
              
Metrics (in thousands):              
Fioptics units passed335.0
 276.0
 59.0
 21 % 205.0
 71.0
 35 % 533.4
 432.0
 101.4
 23 % 335.0
 97.0
 29 % 
Internet subscribers              
              
Internet subscribers:              
DSL156.2
 188.5
 (32.3) (17)% 202.6
 (14.1) (7)% 105.6
 133.7
 (28.1) (21)% 156.2
 (22.5) (14)% 
Fioptics113.7
 79.9
 33.8
 42 % 56.8
 23.1
 41 % 197.6
 153.7
 43.9
 29 % 113.7
 40.0
 35 % 
Total internet subscribers269.9
 268.4
 1.5
 1 % 259.4
 9.0
 3 % 303.2
 287.4
 15.8
 5 % 269.9
 17.5
 6 % 
              
Fioptics video subscribers91.4
 74.2
 17.2
 23 % 55.1
 19.1
 35 % 137.6
 114.4
 23.2
 20 % 91.4
 23.0
 25 % 
Local access lines480.6
 530.7
 (50.1) (9)% 573.9
 (43.2) (8)% 
Long distance lines362.8
 394.1
 (31.3) (8)% 417.9
 (23.8) (6)% 
              
Residential voice lines:    
 
   

 

 
Legacy117.5
 146.4
 (28.9) (20)%
181.6

(35.2)
(19)%
Fioptics83.8
 71.4
 12.4
 17 % 56.7
 14.7
 26 % 
Total residential voice lines201.3

217.8

(16.5)
(8)%
238.3

(20.5)
(9)% 
Business voice lines:    
 
   

 

 
Legacy190.7
 215.4
 (24.7) (11)% 238.0
 (22.6) (9)% 
VoIP*131.7
 89.5
 42.2
 47 % 70.0
 19.5
 28 % 
Total business voice lines322.4
 304.9
 17.5
 6 % 308.0
 (3.1) (1)% 
Total voice lines523.7

522.7

1.0

0%
 546.3
 (23.6) (4)% 
              
Long distance lines:              
Residential187.6
 199.4
 (11.8) (6)% 212.5
 (13.1) (6)% 
Business129.7
 140.3
 (10.6) (8)% 150.3
 (10.0) (7)% 
Total long distance lines:317.3
 339.7
 (22.4) (7)% 362.8
 (23.1) (6)% 
              
* VoIP lines include Fioptics voice lines* VoIP lines include Fioptics voice lines
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Revenue
The following table illustrates our revenue by market: Consumer, Business and Carrier. Our products within each market have been classified as either Strategic, Legacy or Integration.

35
    Year ended December 31,
(dollars in millions)2016 2015 2014
Revenue:     
 Consumer     
  Strategic     
   Data$103.0
 $72.7
 $48.4
   Voice21.7
 19.7
 17.7
   Video123.6
 94.8
 73.9
   Services and other3.4
 3.7
 4.0
    251.7
 190.9
 144.0
  Legacy     
   Data44.2
 49.5
 58.5
   Voice73.8
 86.1
 101.1
   Services and other4.1
 6.7
 7.7
    122.1
 142.3
 167.3
  Integration     
   Services and other3.9
 7.7
 11.2
 Total consumer revenue$377.7
 $340.9
 $322.5
         
 Business     
  Strategic     
   Data$96.5
 $89.6
 $83.6
   Voice51.7
 42.5
 35.9
   Video2.1
 1.8
 1.6
   Services and other2.5
 3.2
 3.8
    152.8
 137.1
 124.9
  Legacy     
   Data20.3
 23.2
 27.6
   Voice111.5
 123.6
 134.2
   Services and other1.3
 1.3
 1.2
    133.1
 148.1
 163.0
  Integration     
   Services and other1.8
 2.6
 4.7
 Total business revenue$287.7
 $287.8
 $292.6
         
 Carrier     
  Strategic     
   Data$45.0
 $37.7
 $41.6
  Legacy     
   Data35.8
 50.1
 49.9
   Voice16.3
 20.0
 24.6
   Services and other6.3
 7.2
 9.5
    58.4
 77.3
 84.0
 Total carrier revenue$103.4
 $115.0
 $125.6
         
Total Entertainment and Communications revenue$768.8
 $743.7
 $740.7
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Consumer
Consumer market revenue has increased each of the previous two years due to Fioptics growth offsetting legacy access line and DSL subscriber losses. Our Fioptics internet subscriber base increased 27% and average revenue per user ("ARPU") was up 9% in 2016. During 2015, the Fioptics internet subscriber base increased 35% with ARPU growing 14%. Fioptics video subscribers increased 21% and 27% in 2016 and 2015, respectively, in addition to a 4% and 1% increase in ARPU. Video ARPU growth rates increased in 2016 as a result of price increases partially being offset by the popularity of MyTV.
The Company continues to lose access and long distance lines as a result of, among other factors, customers electing to solely use wireless service in lieu of traditional local wireline service. The Company also continues to experience DSL subscriber loss as a result of customers migrating to Fioptics or an alternative internet provider, particularly in areas that have not been upgraded to Fioptics.
Higher Integration revenue in 2014 is primarily due to $5.7 million of revenue generated through an agreement to sell Verizon wireless products and services at our retail locations. Revenue from selling these products totaled $3.1 million in 2015. We discontinued the sale of Verizon handsets at our retail locations effective January 31, 2016.
Business
Data revenue from our business customers has increased as customers migrate from our legacy product offerings. Voice revenue declined $2.9 million in 2016 and $4.0 million in 2015 as the growth in VoIP lines continues to mitigate legacy voice line loss and the migration of certain customers to national providers. In total, business voice lines increased 6% during 2016 in comparison to a decrease of 1% in 2015. However, the increase in lines was more than offset by lower ARPU per VoIP line compared to legacy access lines' ARPU. In addition, service and other revenue has declined each year primarily due to lower maintenance and service center revenue.
Carrier
Carrier data revenue declined in 2016 compared to prior year as national carriers increased their focus on improving network efficiencies. In addition, we no longer provided backhaul services to our discontinued wireless operations effective March 31, 2015. Data revenue declined in 2015 as a result of the same trends impacting 2016, partially offset by $4.7 million of one-time revenue associated with the construction of small cell site locations completed in 2015. Voice revenue declines are primarily due to FCC mandated reductions of terminating switched access rates. These declines are expected to continue in 2017.
Operating costs and expenses
Cost of services and products has increased primarily due to higher programming costs of $17.9 million and $17.4 million in 2016 and 2015, respectively. These increases are the result of the growing number of Fioptics video subscribers combined with higher programming rates. In 2016, payroll related costs increases were primarily driven by increased headcount and overtime to support the growth of our fiber-based network. Network and materials costs increased in both 2016 and 2015 as we continue to accelerate our fiber investment. In 2015, rent expense increased $2.7 million as a result of signing a new lease in the second half of 2014 for additional floor space at our corporate headquarters. Costs associated with selling Verizon handsets and accessories totaled $2.8 million in 2015 and totaled $4.3 million in 2014.
SG&A expenses were down in 2016 compared to the prior year primarily due to lower payroll related charges as well as a one-time charge related to our excess pension benefit plan totaling $3.8 million incurred during 2015. These decreases were partially offset by $1.5 million of increased advertising costs for Fioptics during 2016. SG&A expenses were up in 2015 compared to 2014 primarily as a result of increased costs absorbed from shutting down our wireless operations and accelerating the build-out of Fioptics in addition to the one-time pension charge. Retail center costs and additions to our sales force increased costs $7.1 million in 2015. Marketing and advertising costs increased $1.6 million compared to 2014 as we increased our Fioptics promotional efforts. The remaining increase was primarily due to increased payroll benefits.
Depreciation and amortization expenses were up in 2016 compared to the prior year primarily due to assets placed in service in connection with the expansion of our fiber network in 2016 and 2015, reducing the estimated useful life of certain set-top boxes and the related software as we upgrade customers to new technology. We also reduced the useful life of our copper assets in the fourth quarter of 2015.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Severance charges in 2016 were primarily related to a voluntary severance program to reduce costs associated with our legacy copper network. Restructuring charges in 2015 were primarily related to employee severance as we identified opportunities to integrate the business markets within each of our segments. The reversal of restructuring charges in 2014 was due to re-occupying certain office space previously vacated.
Other includes impairment charges totaling $4.6 million during 2014 were for the abandonment of an internal use software project.
Capital Expenditures
(dollars in millions) 2016 2015 2014
Fioptics capital expenditures      
   Construction $89.8
 $86.5
 $50.0
   Installation 68.7
 50.2
 24.3
   Other 21.8
 42.8
 18.8
Total Fioptics 180.3
 179.5
 93.1
       
Other strategic 50.3
 44.4
 26.9
Legacy maintenance 41.9
 45.6
 43.7
Total capital expenditures $272.5
 $269.5
 $163.7
Capital expenditures are incurred to expand our Fioptics product suite, upgrade and increase capacity for our networks, and to maintain our fiber and copper networks. During 2016, 2015 and 2014, we passed 101,400, 97,000 and 59,000 addresses with Fioptics, respectively. As of December 31, 2016, the Company is able to provide its Fioptics services to 533,400 residential and business addresses, or 67% of our operating territory. Fioptics installation costs increased in both 2016 and 2015 due to increased Fioptics internet and video activations combined with upgrading set-top boxes and wireless modems. Other Fioptics related investments include costs to expand core network capacity and for enhancements to the customer experience.
Other strategic capital expenditures are for success-based fiber builds for business and carrier projects.







Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

2014 Compared to 2013
Revenues
Data revenue consists of Fioptics high-speed and DSL internet access, data transport, and interconnection services. Data revenue was $334.9 million in 2014, an increase of $17.1 million compared to 2013. Strategic data revenue was $151.1 million in 2014, up $29.0 million compared to the prior year. Revenue from Fioptics high-speed internet service increased to $45.7 million in 2014, up 64% compared to the prior year. The increase is primarily due to a growing subscriber base totaling 113,700 accounts at December 31, 2014 and an increase in monthly ARPU of approximately $4.00, up 12% compared to the prior year. Strategic revenue from DSL customers subscribing to at least a10 megabit internet product totaled $6.2 million. Strategic business revenue totaled $102.7 million, including $3.5 million from Fioptics, up 9% from the prior year. Legacy data revenue was $183.8 million, a decrease of $11.9 million from the prior year. This decrease is primarily due to our business customers migrating to higher bandwidth data transport products and a 17% decline in DSL customers as a result of switching to higher speed internet products.
Voice local service revenue includes local service, digital trunking, switched access, information services, and other value-added services such as caller identification, voicemail, call waiting, and call return. Voice local service revenue was $203.5 million in 2014, down $25.6 million compared to 2013. Strategic voice service revenue was $21.0 million in 2014, up $3.1 million compared to 2013, primarily due to an increase in Fioptics voice lines, which totaled 61,000 at December 31, 2014. Legacy voice service revenue was $175.8 million in 2014, down $28.4 million compared to 2013. The segment continues to lose access lines as a result of, among other factors, customers electing to solely use wireless service in lieu of traditional local wireline service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. In 2014, legacy voice service revenue also experienced increased access line churn as a result of the wind down of the wireless segment due to customers electing to discontinue their local voice service that had been bundled with their wireless subscription. Integration voice revenue totaled $6.7 million in 2014, down $0.3 million compared to the prior year.
Long distance and VoIP revenue was $107.3 million in 2014, consistent with the prior year as the growth in strategic products offset legacy declines. Strategic revenue was $58.1 million in 2014, an increase of $7.0 million compared to the prior year due largely to the growth in VoIP and private line services. Legacy revenue was $47.0 million in 2014, a decrease of $5.1 million compared to 2013 primarily due to an 8% decrease in long distance lines as both consumers and business customers are migrating to VoIP or wireless services. Integration revenue was down $1.8 million totaling $2.2 million 2014.
Entertainment revenue was $76.0 million in 2014, up $20.8 million compared to the prior year and was driven by the growth in Fioptics. The higher entertainment revenue was directly related to the 23% increase in Fioptics entertainment subscribers and the 9% increase in monthly ARPU. As of December 31, 2014, the segment had 91,400 Fioptics entertainment subscribers. The Company continues to expand its Fioptics service area due to strong consumer demand for this service.
Other revenue was $19.0 million in 2014, an increase of $3.5 million compared to the prior year. This increase was primarily the result of $5.7 million of revenue generated through an agreement to sell Verizon Wireless product and services at our retail locations. This increase was partially offset by lower revenue from wiring projects.
Costs and Expenses
Cost of services and products was $306.9 million in 2014, an increase of $19.7 million compared to 2013, primarily due to $14.1 million of additional programming costs as a result of an increase in the number of Fioptics subscribers and increased programming rates. Other costs of services and products were up $1.3 million as we prepare to accelerate our fiber investment. Operating tax expenses increased by $6.6 million due to an increase in Universal Service Fund ("USF") taxes and property taxes. Cost of services and expenses was also up $4.3 million in 2014 due to cost associated with the agreement to sell Verizon Wireless product and services at our retail locations. These increases were partially offset by a $6.6 million decline in payroll related costs due to lower pension and post-retirement expense.
SG&A expenses were $131.9 million in 2014, an increase of $4.1 million compared to the prior year due to increased software development costs and consulting fees totaling $3.8 million related primarily to outsourcing certain IT functions. Payroll related costs were up $2.7 million due to increased commission and increased headcount to support the acceleration of our fiber investments. These increases were offset by lower advertising, bad debt and other miscellaneous expenses.
Depreciation and amortization was $115.7 million in 2014, reflecting an increase of $3.5 million compared to the prior year primarily due to assets placed in service in connection with the expansion of our fiber network.

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Form 10-K Part IICincinnati Bell Inc.


Restructuring reversal of $0.5 million in 2014 relates to a lease abandonment reserve for vacant floors totaling $1.4 million that were reoccupied offset by severance charges recorded for outsourcing certain functions of our IT department. Restructuring charges in 2013 totaled $9.1 million including employee separation costs of $4.6 million, lease abandonment charges of $3.9 million and contract termination charges of $0.6 million.
Asset impairments of $4.6 million in 2014 relate to the abandonment of an internal use software project that was written off in the fourth quarter. No such impairments occurred in 2013.
Capital Expenditures
Capital expenditures are incurred to expand our Fioptics product suite, upgrade and increase capacity for our internet and data networks, and to maintain our wireline network. Capital expenditures totaled $163.7 million in 2014, an increase of $1.1 million compared to 2013. We invested $93.1 million in Fioptics, including $50.0 million for construction to pass 59,000 addresses, $24.3 million for installation costs and $18.8 million in other Fioptics projects primarily to increase core network capacity. As of December 31, 2014, the Company is able to provide Fioptics services to 335,000 residential and business addresses, an increase of 21% compared to 2013.
2013 Compared to 2012
Revenues
Data revenue was $317.8 million in 2013, up $10.9 million compared to 2012. Strategic data revenue was $122.1 million in 2013, up 24% compared to the prior year. Revenue from Fioptics high-speed internet service increased to $27.9 million in 2013, up from $18.1 million in the prior year due to a 41% increase in subscribers. The remaining increase is primarily due to increases in strategic data for business customers which was up 17% year-over-year and totaled $94.2 million in 2013. Legacy data revenue was $195.7 million in 2013, down $12.5 million compared to the prior year. This is primarily due to our business customers migrating to higher bandwidth data transport products and a 7% decrease in our legacy DSL subscriber base.
Voice local service revenue was $229.1 million in 2013, down $26.3 million compared to 2012. Strategic voice service revenue was $17.9 million in 2013, up $4.3 million compared to 2012, primarily due to the 31% growth in Fioptics voice lines, which totaled 53,300 at December 31, 2013. Legacy voice service revenue was $204.2 million in 2013, down $29.9 million compared to 2012. The decrease in revenue is primarily due to fewer local access lines compared to a year ago. Access lines within the segment’s ILEC territory decreased by 35,000, or 7%, to 476,000 at December 31, 2013 from 511,000 at December 31, 2012. The Company had 54,700 CLEC access lines at December 31, 2013 compared to 62,900 access lines at December 31, 2012. The segment continues to lose access lines as a result of, among other factors, customers electing to solely use wireless service in lieu of traditional local wireline service, Company-initiated disconnections of customers with credit problems, and customers electing to use service from other providers. The remaining decrease is due to a $0.7 million reduction in integration voice service revenue in 2013 compared to 2012.
Long distance and VoIP revenue was $107.2 million in 2013, a decrease of $6.7 million compared to 2012. Strategic revenue was $51.1 million in 2013, relatively flat compared to the prior year. Growth in private-line and VoIP services totaled $2.1 million, but was more than offset by a decrease in audio conferencing revenue primarily as a result of the loss of one large customer. Legacy revenue was $52.1 million in 2013, a decrease of $5.0 million compared to 2012 primarily due to a 6% decrease in long distance lines as both consumers and business customers are migrating to VoIP or wireless services. The remaining decrease is due to a $1.2 million decrease in integration services compared to the prior year.
Entertainment revenue was $55.2 million in 2013, up $19.8 million compared to the prior year and was driven by the growth in Fioptics. Fioptics entertainment revenue grew by $19.4 million in 2013, primarily due to a 35% increase in Fioptics entertainment subscribers. As of December 31, 2013, the segment had 74,200 Fioptics entertainment subscribers.
Other revenue was $15.5 million in 2013, a decrease of $3.4 million compared to the prior year. This decrease was primarily the result of a reduction of $2.3 million and $0.8 million in legacy and integration other revenue compared to 2012.

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Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Costs and Expenses
Cost of services and products was $287.2 million in 2013, an increase of $3.4 million compared to 2012. This increase was largely attributable to an $8.6 million increase in programming rates and higher payroll costs of $5.8 million to support strategic revenue growth. These increases were partially offset by a $5.6 million reduction in operating taxes due primarily to a reduction in Universal Service Fund ("USF") charges, a $1.2 million reduction in benefit costs driven by the pension amendments, a $1.8 million reduction in call center costs associated with outsourcing that function and $2.8 million due to lower network costs associated with decreased long distance and VoIP revenue.
SG&A expenses were $127.8 million in 2013, an increase of $2.2 million compared to the prior year. This increase was mainly driven by higher Fioptics advertising costs and non-employee commission fees.
Depreciation and amortization was $112.2 million in 2013, reflecting an increase of $6.2 million compared to the prior year primarily due to assets placed in service in connection with the expansion of our fiber network.
Restructuring charges were $9.1 million in 2013 compared to $3.5 million in the prior year. The Company continues to manage and reduce the legacy cost structure of this business. Employee separation costs amounted to $4.6 million and $3.2 million in 2013 and 2012, respectively, while lease abandonment costs were $3.9 million in 2013 and $0.3 million in 2012. Contract termination costs were $0.6 million in 2013, with no such costs incurred in 2012.
The curtailment gain of $0.6 million was due to the remeasurement of the Company's projected benefit obligation following an amendment to the management pension plan during the second quarter of 2013 that eliminated all future pension service credits as of July 1, 2013. The gain on sale of assets of $1.1 million in 2013 was due to a $2.0 million gain from the sale of copper cabling that was no longer in use, partially offset by a $0.9 million loss on network equipment with no resale value that was removed from service. During 2012, the segment recognized a gain on sale of assets of $1.8 million primarily from the sale of copper cabling that was no longer in use.
Asset impairments of $0.5 million in 2012 relate primarily to the write-off of an out-of-territory fiber network. No such impairments occurred in 2013.
Capital Expenditures
Capital expenditures incurred to expand the Company's strategic fiber network and maintain its legacy copper-based network totaled $162.6 million in 2013, an increase of $48.4 million compared to 2012. During 2013, we invested $113.0 million in our strategic products, of which $79.5 million was used for Fioptics as we passed an additional 71,000 units.

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Table of Contents
Form 10-K Part IICincinnati Bell Inc.

IT Services and Hardware
The IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructure services, ITtelephony and telephonyIT equipment sales and professional IT staffing services. These services and products are provided through the Company's subsidiaries in multiplevarious geographic areas including locations inthroughout the U.S.,United States, Canada and Europe. By offering a full range of equipment and outsourced services in conjunction with the Company’s wireline network,fiber and copper networks, the IT Services and Hardware segment provides end-to-end IT and telecommunications infrastructure management designed to reduce cost and mitigate risk while optimizing performance for its customers.
    $ Change % Change   $ Change % Change     $ Change % Change   $ Change % Change 
(dollars in millions)2014 2013 2014 vs. 2013 2014 vs. 2013 2012 2013 vs. 2012 2013 vs. 2012 2016 2015 2016 vs. 2015 2016 vs. 2015 2014 2015 vs. 2014 2015 vs. 2014 
Revenue:              

 

 

 

 

 

 

 
Telecom and IT equipment distribution$287.7
 $222.6
 $65.1
 29% $204.6
 $18.0
 9 % 
Managed and professional services145.3
 121.5
 23.8
 20% 111.1
 10.4
 9 % 
Professional Services$106.7
 $105.5
 $1.2
 1 % $86.6
 $18.9
 22 % 
Management and Monitoring32.0
 31.0
 1.0
 3 % 25.2
 5.8
 23 % 
Unified Communications39.8
 37.8
 2.0
 5 % 35.1
 2.7
 8 % 
Cloud Services46.5
 30.9
 15.6
 50 % 20.8
 10.1
 49 % 
Telecom and IT hardware205.7
 230.2
 (24.5) (11)% 265.3
 (35.1) (13)% 
Total revenue433.0
 344.1
 88.9
 26% 315.7
 28.4
 9 % 430.7
 435.4
 (4.7) (1)% 433.0
 2.4
 1 % 
Operating costs and expenses:                            
Cost of services and products350.0
 279.8
 70.2
 25% 255.7
 24.1
 9 % 332.4
 345.2
 (12.8) (4)% 350.0
 (4.8) (1)% 
Selling, general and administrative51.5
 44.6
 6.9
 15% 42.3
 2.3
 5 % 58.0
 54.0
 4.0
 7 % 51.5
 2.5
 5 % 
Depreciation and amortization11.7
 10.5
 1.2
 11% 8.6
 1.9
 22 % 13.5
 12.3
 1.2
 10 % 11.7
 0.6
 5 % 
Restructuring charges (reversals)—
 0.7
 (0.7) n/m
 (1.2) 1.9
 n/m
 
Restructuring and severance related charges3.3
 2.8
 0.5
 18 % —
 2.8
 n/m
 
Other0.3
 0.5
 (0.2) (40)% —
 0.5
 n/m
 
Total operating costs and expenses413.2
 335.6
 77.6
 23% 305.4
 30.2
 10 % 407.5
 414.8
 (7.3) (2)% 413.2
 1.6
 0 % 
Operating income$19.8
 $8.5
 $11.3
 n/m
 $10.3
 $(1.8) (17)% $23.2
 $20.6
 $2.6
 13 % $19.8
 $0.8
 4 % 
Operating margin4.6% 2.5%   2.1
pts3.3%   (0.8)pts5.4% 4.7%   0.7
pts4.6%   0.1
pts
Capital expenditures$11.9
 $10.6
 $1.3
 12% $9.0
 $1.6
 18 % $13.7
 $14.0
 $(0.3) (2)% $11.9
 $2.1
 18 % 
2014 Compared to 2013
Revenue
Managed and professional services revenue consists of managed VoIP solutions and IT services that include network management, electronic data storage, disaster recovery and data security management, as well as both long and short-term IT outsourcing and consulting engagements. Revenue from telecom and IT equipment distribution represents the sale, installation, and maintenance of major, branded IT and telephony equipment.
Strategic managed and professional services revenue totaled $138.7 million in 2014, up $20.6 million compared to the prior year largely as a result of higher demand for our managed services from the Company's largest customer. Integration services totaled $294.3 million, up from $226.0 million in 2013. The increase is due to increased telecom and IT equipment distribution revenue reflecting the cyclical fluctuation in capital spending by our enterprise customers which may be influenced by many factors, including the timing of customers' capital spend, the size of capital budgets and general economic conditions. Integration managed and professional services totaled $6.6 million in 2014 compared to $3.4 million in 2013.
Costs and Expenses
Cost of services and products was $350.0 million in 2014, an increase of $70.2 million compared to 2013. The increase was largely driven by a $52.6 million increase in cost of goods sold related to higher equipment sales. Payroll and contract services costs were up $16.6 million to support the growth in managed and professional services.
SG&A expenses were $51.5 million in 2014, an increase of $6.9 million from the prior year. Employee related and contract services costs were up $4.5 million to support the growth in strategic revenue. Commissions were up $2.2 million due to increased sales.
Depreciation and amortization expense for 2014 of $11.7 million was higher than 2013 due to an increased asset base used to support the growing managed service business.


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Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Capital Expenditures
Capital expenditures were $11.9Revenue
The following IT services and hardware products have been classified as either strategic or integration:
  Year ended December 31,
(dollars in millions) 2016 2015 2014
Strategic business revenue      
   Professional services $89.2
 $90.4
 $70.2
   Management and monitoring 32.0
 31.0
 24.8
   Unified communications 29.4
 27.1
 22.9
   Cloud services 46.5
 30.9
 20.8
Total strategic business revenue 197.1
 179.4
 138.7
       
Integration business revenue      
   Professional services 17.5
 15.1
 16.4
   Management and monitoring —
 —
 0.4
   Unified communications 10.4
 10.7
 12.2
   Telecom and IT hardware 205.7
 230.2
 265.3
Total integration business revenue 233.6
 256.0
 294.3
Total IT Services and Hardware revenue $430.7
 $435.4
 $433.0
The growth in strategic management and monitoring, unified communications and cloud services has primarily been driven by the increase in devices monitored, voice profiles and virtual machines within our current customer base. A new end user support project also contributed $2.4 million to the growth in 2014cloud services revenue in 2016 compared to $10.6 million2015. Revenue growth in 2013. Capital expenditures were higher in 2014 due to increased spend on equipment to support managed service projects.

2013 Compared to 2012
Revenue2015 was impacted by signing new contracts with enterprise customers and expanding an existing statewide unified communications engagement with a government entity.
Strategic managed and professional services revenue totaled $118.1 million in 2013, up 8%decreased from the prior year due largelyas increased billable headcount was more than offset by the $4.3 million decline in one-time build projects. Professional services revenue growth in 2015 was attributable to increased customer demandbillable headcount and utilization. Additionally, revenue in 2015 includes one-time charges of $5.3 million for virtual data center productsthe design and staff augmentation resources. build of new customers' managed service infrastructure.
Integration services totaled $226.0 million, up from $206.7 million in 2012. The increaserevenue is primarily due to an $18.0 million increase in telecomdriven by the volume of Telecom and IT equipment distribution revenue which primarily reflectshardware sales reflecting the cyclical fluctuation in capital spending by our enterprise customers, which may be influenced by many factors, including the timing of customers' capital spend, the size of their capital budgets and general economic conditions. Integration managed and professional services totaled $3.4 million in 2013 compared to $2.1 million in 2012.
Operating Costs and Expenses
Cost of services and products was $279.8is primarily impacted by changes in Telecom and IT hardware sales and headcount related costs. In 2016, costs of Telecom and IT hardware sales decreased $21.8 million in 2013, an increase of $24.1 million, or 9%, compared to 2012. The increase was largely driven2015. These costs decreased $32.0 million in 2015 as compared to 2014. These decreases are partially offset by increasedincreases in the cost of goods sold related to the increased equipment sales and higher payroll costs incurred to support the growth of our strategic products in managedboth periods, primarily related to payroll costs.
Selling, general and professional services revenue.
SG&Aadministrative expenses were $44.6 million in 2013, an increase of $2.3 million, or 5%, from the prior year. This increase is largely attributablealso increased during both periods due to higherincreased payroll and headcount related costs to support strategic revenue growth.
DepreciationRestructuring and amortization expenseseverance related charges in 2016 were primarily related to increased in-sourcing of IT professionals by our customers. In 2015, restructuring charges consisted of employee severance and project related costs for 2013the integration of $10.5 million was higher than 2012 due to an increased asset base usedeach segment's business markets and the discontinuation of our advanced cyber-security product offering in the first quarter of 2015. We also abandoned office space in Canada that is no longer in use.
Capital Expenditures
The variance in capital expenditures is driven by the nature of customer related projects and spending on equipment to support the growing managed service business.
In 2013, $0.7 milliongrowth of expense was recognized to account for future employee separations. In 2012, a reversal of previously recognized expense of $1.2 million was recorded due to changes in estimates of employee separation costs recognized in the prior year.our strategic products.
Capital Expenditures
Capital expenditures were $10.6 million in 2013 compared to $9.0 million in 2012. Capital expenditures were higher in 2013 due to increased managed service projects.

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Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Wireless
On April 6,Corporate
Corporate is comprised primarily of general and administrative costs that have not been allocated to the business segments. Corporate costs totaled $20.8 million in 2016, $22.5 million in 2015 and $21.8 million in 2014.
Corporate costs decreased by $1.7 million in 2016 compared to 2015 primarily due to lower transaction costs of $1.4 million. Corporate costs increased by $0.7 million in 2015 compared to 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets. The agreement to sell our spectrum licenses closed on September 30, 2014. Simultaneously, the agreement to use certain wireless spectrum licenses became effective. We plan to provide wireless service until no later than April 6, 2015.
  
    $ Change % Change   $ Change % Change 
(dollars in millions, except for operating metrics)2014 2013 2014 vs. 2013 2014 vs. 2013 2012 2013 vs. 2012 2013 vs. 2012 
Revenue:              
Postpaid service$93.5
 $139.1
 $(45.6) (33)% $174.6
 $(35.5) (20)% 
Prepaid service31.6
 45.8
 (14.2) (31)% 49.9
 (4.1) (8)% 
Equipment and other7.7
 16.6
 (8.9) (54)% 17.3
 (0.7) (4)% 
Total revenue132.8
 201.5
 (68.7) (34)% 241.8
 (40.3) (17)% 
Operating costs and expenses:              
Cost of services and products66.2
 101.4
 (35.2) (35)% 115.3
 (13.9) (12)% 
Selling, general and administrative25.4
 40.3
 (14.9) (37)% 43.7
 (3.4) (8)% 
Depreciation and amortization103.4
 41.2
 62.2
 n/m
 31.9
 9.3
 29 % 
Restructuring charges16.3
 0.2
 16.1
 n/m
 1.6
 (1.4) (88)% 
Asset impairment7.5
 —
 7.5
 n/m
 0.4
 (0.4) n/m
 
Transaction costs3.2
 —
 3.2
 n/m
 —
 —
 n/m
 
Loss on sale or disposal of assets—
 3.5
 (3.5) n/m
 —
 3.5
 n/m
 
Amortization of deferred gain(22.9) (3.3) (19.6) n/m
 (2.3) (1.0) 43 % 
Total operating costs and expenses199.1
 183.3
 15.8
 9 % 190.6
 (7.3) (4)% 
Operating (loss) income$(66.3) $18.2
 $(84.5) n/m
 $51.2
 $(33.0) (64)% 
Operating margin(49.9)% 9.0%   n/m
 21.2%
  (12.2)pts
Capital expenditures$6.5
 $16.0
 $(9.5) (59)% $15.8
 $0.2
 1 % 
Metrics information:              
Postpaid ARPU*$54.44
 $51.90
 $2.54
 5 % $51.29
 $0.61
 1 % 
Prepaid ARPU*$25.26
 $26.08
 $(0.82) (3)% $28.48
 $(2.40) (8)% 
Postpaid subscribers (in thousands)43.5
 197.4
 (153.9) (78)% 251.3
 (53.9) (21)% 
Prepaid subscribers (in thousands)38.9
 142.3
 (103.4) (73)% 146.5
 (4.2) (3)% 
Average postpaid churn8.8 % 2.6%   n/m
 2.5%   0.1
pts
*The Company has presented certain information regarding monthly average revenue per user (“ARPU”) because the Company believes ARPU provides a useful measure of the operational performance of the wireless business. ARPU is calculated by dividing service revenue by the average subscriber base for the period.
2014 Operations
Asdriven largely by $1.7 million in additional stock-based compensation expense as a result of the agreements entered into and our intention to no longer operate a wireless business beyond April 6, 2015, current year results are not comparable to prior periods. In addition, effective July 1, 2014, we eliminated our lifeline program, and, in August we eliminated early termination fees allowing postpaid customers to switch wireless carriers without penalty.
The year over year decline in revenue is directly related to the accelerated declinechanges in our subscriber base due to the planned shut down of our network prior to April 6, 2015. Despite the significant decline in postpaid subscribers, ARPU has increased from the prior year due to a higher percentage of our remaining customers using a smartphone data plan as compared to the customer mix in the prior year. During 2014, we lost 153,900 postpaid subscribersstock price and 103,400 prepaid subscribers and we have notified our remaining subscribers to switch to another provider prior to April 6, 2015 in order to avoid a gap in service. The loss of subscribers is consistent with our expectations, and the remaining subscriber base is expected to churn during the first quarter of 2015.additional restructuring charges. These increases were partially offset by lower legal expenses.

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Form 10-K Part II Cincinnati Bell Inc.

The cost of services and products decrease is largely due to significantly fewer subscribers and lower roaming charges and handset subsidies. In the fourth quarter of 2014, we entered into an agreement to lease back the spectrum license for $8.00. As the agreement does not represent fair value of the lease the Company estimated fair value and records a monthly expense to cost of services and products. As a result, we recognized $3.2 million in cost of services and products to use the spectrum licenses. SG&A expenses are down as we are aggressively identifying opportunities to minimize costs as we wind down operations. Restructuring charges of $16.3 million were incurred in 2014 and relate to $13.1 million for contract termination fees and $3.2 million for employee severance charges. Wireless also incurred $3.2 million in transaction costs related to the agreements. Additional one-time charges related to shutting down operations are expected to range between $5 and $10 million and will be reported when incurred.

The increase in depreciation and amortization expense is the result of reducing the useful life of our long-lived assets in conjunction with the agreement to sell our wireless spectrum licenses and certain other assets. The combined changes in the estimated useful life of the remaining property, plant and equipment resulted in increased depreciation expense of $62.2 million for 2014 compared to 2013.

Asset impairment charges of $7.5 million incurred in 2014 were related to the write-off of certain construction-in-progress projects that will no longer be completed due to the wind down of the business.

The amortization of the deferred gain recorded in 2014 totaled $22.9 million compared to $3.3 million recorded in 2013. The changes in the useful life of our long-lived wireless assets, excluding the spectrum licenses, resulted in the acceleration of the amortization of the deferred gain in 2014. In December 2009, the Company sold 196 wireless towers for $99.9 million in cash proceeds, and leased back a portion of the space on these towers for a term of 20 years, which resulted in a deferred gain of $35.1 million.

2013 Compared to 2012
Revenue
Postpaid service revenue was $139.1 million in 2013, a decrease of $35.5 million, or 20%, compared to the prior year. The decrease in postpaid service revenue was driven by a 21% decrease in postpaid subscribers due to continued intense competitive pressure from larger national carriers. Total postpaid ARPU for 2013 increased to $51.90 from $51.29 in 2012 driven primarily by higher data ARPU, but partially offset by a 5% year-over-year decrease in voice ARPU due to fewer minutes used by postpaid subscribers.
At December 31, 2013, the Company had 96,000 postpaid smartphone subscribers, which represents 49% of the total postpaid subscriber base, up from 40% at the end of 2012. The higher smartphone penetration drove a data ARPU of $19.48 for 2013, up 14% compared to 2012.
Prepaid service revenue was $45.8 million in 2013, a decrease of $4.1 million compared to the prior year. The number of prepaid subscribers at December 31, 2013 was 142,300, a decrease of 3% compared to the prior year. During 2013, data usage was lower by $1.4 million and voice usage was lower by $2.7 million resulting in a prepaid ARPU of $26.08, down 8% compared to 2012.
Equipment and other revenue for 2013 decreased by $0.7 million to $16.6 million in 2013 primarily as a result of the continued postpaid subscriber losses which drove fewer activations and upgrades in 2013.
Costs and Expenses
Cost of services and products consists largely of network operation costs, interconnection expenses with other telecommunications providers, roaming expense (which is incurred for subscribers to use their handsets in the territories of other wireless service providers), and cost of handsets and accessories sold. The total cost of services and products was $101.4 million in 2013, a decrease of $13.9 million compared to 2012. This decrease was primarily due to $7.9 million of lower network related costs resulting from reduced roaming rates due to reduced minutes of use and lower network access expenses as a result of fewer subscribers. Cost of goods sold decreased by $2.1 million over the prior year, driven largely by the impact of fewer sales of wireless handsets and related accessories. Operating taxes decreased $2.1 million due to lower voice revenues and reduced rates. Handset subsidies decreased $1.0 million compared to the prior year due to fewer smartphone sales.
SG&A expense in 2013 decreased by $3.4 million year-over-year to $40.3 million. Cost containment efforts led to a $3.6 million reduction in payroll, advertising, and sales and marketing costs.

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Form 10-K Part IICincinnati Bell Inc.

Depreciation and amortization was $41.2 million in 2013, an increase of $9.3 million from 2012. During the first quarter of 2013, we changed the estimated useful lives assigned to network software which resulted in a one-time depreciation charge of $8.5 million. In the fourth quarter, we determined the estimate of our useful lives of all our assets should be shortened to 30 months as of December 31, 2013 to take into consideration the continued reduction in our subscriber base and the potential for the asset lives to be limited. This change resulted in an additional depreciation expense of $3.0 million in the fourth quarter of 2013.
Restructuring charges of $0.2 million incurred in 2013 were related to lease abandonments from the closing of one retail store in 2013. The restructuring charges in 2012 related to lease abandonments for the closing of three retail stores and employee separation costs. The loss on the disposal of assets totaled $3.5 million in 2013, largely the result of wireless network equipment that was removed from service. In 2012, other asset impairment charges of $0.4 million were related to the write-off of canceled or abandoned capital projects.

The amortization of the deferred gain recorded in 2013 totaled $3.3 million compared to $2.3 million recorded in 2012, due to accelerating the deferred gain associated with the 2009 tower sale as a result of reducing the useful lives of our wireless assets to 30 months as of December 31, 2013.

Capital Expenditures
Capital expenditures were $16.0 million in 2013, comparable to $15.8 million in 2012, as the Company continued to support increasing data usage on its network.

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Form 10-K Part IICincinnati Bell Inc.

Data Center Colocation
The Data Center Colocation segment provided enterprise customers with outsourced data center operations, including necessary redundancy, security, power, cooling, and interconnection. Upon completion of the IPO of CyrusOne on January 24, 2013, we no longer control the operations of CyrusOne and account for our investment in CyrusOne using the equity method. For the year ended December 31, 2013, revenues and expenses represent revenues earned and operating expenses incurred during the period January 1, 2013 to January 23, 2013 when CyrusOne's results were included in our consolidated financial statements.

  
    $ Change % Change   $ Change % Change 
(dollars in millions, except for operating metrics)2014 2013 2014 vs. 2013 2014 vs. 2013 2012 2013 vs. 2012 2013 vs. 2012 
Revenue$—
 $15.6
 $(15.6) n/m $221.3
 $(205.7) n/m 
Operating costs and expenses:              
Cost of services—
 4.8
 (4.8) n/m 75.7
 (70.9) n/m 
Selling, general and administrative—
 2.4
 (2.4) n/m 31.0
 (28.6) n/m 
Depreciation and amortization—
 5.2
 (5.2) n/m 70.6
 (65.4) n/m 
Restructuring charges—
 —
 —
 n/m 0.5
 (0.5) n/m 
Gain on sale of assets—
 —
 —
 n/m (0.2) 0.2
 n/m 
Asset impairments—
 —
 —
 n/m 13.3
 (13.3) n/m 
Total operating costs and expenses—
 12.4
 (12.4) n/m 190.9
 (178.5) n/m 
Operating income$—
 $3.2
 $(3.2) n/m $30.4
 $(27.2) n/m 
Operating margin

 20.5%   n/m 13.7%   n/m 
Capital expenditures$—
 $7.7
 $(7.7) n/m $228.2
 $(220.5) n/m 


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Form 10-K Part IICincinnati Bell Inc.

Corporate
Corporate is comprised primarily of general and administrative costs that have not been allocated to the business segments. Corporate costs totaled $20.2 million in 2014, $56.3 million in 2013, and $34.7 million in 2012.

2014 Compared to 2013

Corporate costs decreased by $36.1 million compared to the prior year, driven largely by the $42.6 million of transaction related compensation payments recorded in 2013 as a result of the successful IPO of CyrusOne. Restructuring charges were down $3.6 million in 2014 due primarily to severance and consulting fees incurred during 2013 associated with a workforce optimization initiative. The decrease was partially offset by $4.5 million in additional stock-based compensation expense as a result of changes in our stock price. Employee related costs were also up in 2014 as a result of increased healthcare, disability and insurance costs.

2013 Compared to 2012

Corporate costs increased by $21.6 million compared to the prior year, driven largely by the $42.6 million of transaction related compensation payments as a result of the successful IPO of CyrusOne. Transaction costs were down $4.7 million in 2013 as the costs in 2012 related to legal and consulting fees incurred in preparation for the IPO of CyrusOne. In 2013, transaction costs related to finalizing the CyrusOne IPO and investigating strategic alternatives for our Wireless business. The increase was also partially offset by a $5.6 million stock compensation mark-to-market gain in 2013 compared to a $7.9 million stock compensation mark-to-market expense in 2012. The remaining offset is primarily due to decreased headcount related costs as a result of cost-out initiatives.

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Form 10-K Part IICincinnati Bell Inc.

Financial Condition, Liquidity, and Capital Resources
Capital Investment, Resources and Liquidity

Short-term view

Our primary source of cash is generated by operations. In 2014, 20132016, 2015 and 2012,2014, we generated $173.2 million, $110.9 million and $175.2 million,$78.8 million, and $212.7 million, respectively, of cash flows from operations. In 2016, 2015 and 2014,, we proceeds from the monetization of our CyrusOne investment totaled $189.7 million, $643.9 million and $355.9 million, respectively. The Company also received cash proceeds totaling $355.9$194.4 million from the sale of CyrusOne partnership units and $194.4 million as a result of the completedits wireless spectrum sale.licenses in 2014. Dividends of $28.4$7.4 million, $22.2 million and $21.3$28.4 million were received from our equity method investment in CyrusOne in 20142016, 2015 and 2013,2014, respectively.

Our primary uses of cash are capital expenditures and debt service. In 2014, 20132016, 2015 and 2012,2014, capital expenditures were $286.4 million, $283.6 million and $182.3 million, $196.9 million,respectively. Capital expenditures were higher in 2016 and $367.2 million, respectively. The lower capital2015 primarily due to increased expenditures in 2014 are primarily the result of lower Wireless capital spend as we shut-down operations combined with the deconsolidation of CyrusOne on January 24, 2013. These decreases were partially offset by increased strategic capital expenditures totaling $130.0 million in 2014.for expanding our fiber network. Based on the continued demand for our fiber-based products and the acceleration of our fiber investment,IT solutions, we expect 20152017 total capital expenditures to berange between $270 and $280$180 - $210 million. In 2014, 20132016, 2015 and 2012,2014, debt repayments were $376.5$759.3 million, $530.8$531.7 million and $442.4$376.5 million, respectively. In 2014,2016, the company redeemed $325.0 million of the 8 3/4% Senior Subordinated Notes due 2018 and $22.7Company repaid $478.5 million of the outstanding 8 3/8% Senior Notes due 2020.
Interest payments were $153.12020, $212.1 million $179.5 million and $217.9 million in 2014, 2013 and 2012, respectively. The decrease is primarily due to the extinguishment of the 8outstanding Corporate Credit Agreement Tranche B Term Loan, $40.8 million of the outstanding Cincinnati Bell Telephone Notes and $4.0 million of the outstanding 7 1/4% Senior Notes due 2017 on October 15, 2013, partially offset by interest on2023.
Interest payments were $71.1 million, $108.5 million and $153.1 million in 2016, 2015 and 2014, respectively. Interest payments have declined as we have primarily used cash proceeds from the Tranche B Term Loan facility.monetization of our CyrusOne investment and sale of wireless spectrum licenses to repay debt. Our contractual debt maturities in 2017, including capital lease obligations, in 2015, are $13.2$7.5 million and associated contractual interest payments are expected to be approximately $120$70 million.

To a lesser extent, cash is also used to fund our pension obligations, to pay preferred stock dividends, and also to repurchase shares of common stock when the stock price offers an attractive valuation. Cash contributions to our qualified pension plans were $3.1 million, $10.3 million and $19.7 million $42.1 millionin 2016, 2015 and $23.9 million in 2014,, 2013 and 2012, respectively. Contributions toCash contributions for our qualified pension plans for 2015 are expected to be approximately $13 million.$2 million in 2017. Dividends paid on preferred stock were $10.4 million in each of 2014, 20132016, 2015 and 2012.2014. We do not currently pay dividends on our common shares, nor do we plan to pay dividends on such shares in 2015.2017. In 2012, cash used to repurchase2016, the Company repurchased 0.2 million common shares was $0.3for $4.8 million,. No with no common shares were repurchased in 20132015 or 2014.2014. As of December 31, 2014,2016, management has authority to repurchase additional common shares with a value of up to $129.2$124.4 million under the most recent plan approved by the Board of Directors. This plan does not have a stated maturity date. Management may purchase additional shares in the future to the extent that it is not limited by restrictions in the Corporate Credit Agreement, cash is available, and management believes the share price offers an attractive value.

As of December 31, 2014,2016, we had $298.6$183.9 million of short-term liquidity, comprised of $57.9$9.7 million of cash and cash equivalents, $150.0 million of undrawn capacity on our Corporate Credit Agreement's revolving credit facility and $90.7$24.2 million available under the Receivables Facility. The Receivables Facility permits maximum borrowings of up to $120.0$120.0 million and is subject to annual renewal. As of December 31, 2014,2016, the Company had $19.2$89.5 million of borrowings and $6.9$6.3 million of letters of credit outstanding under the Receivables Facility on a borrowing capacity of $116.8$120.0 million. While we expect to continue to renew this facility, we would be required to use cash, our Corporate Credit Agreement, or other sources to repay any outstanding balance on the Receivables Facility if it werewas not renewed.

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 12 months.

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Form 10-K Part II Cincinnati Bell Inc.

Long-term view, including debt covenants

As of December 31, 2014,2016, the Company had $1.8$1.2 billion of outstanding indebtedness and an accumulated deficit of $3.2 billion. A significant amount of indebtedness was previously incurred from the purchase and operation of a national broadband business, which was sold in 2003.$2.7 billion. In addition to the uses of cash described in the Short-term view section above, the Company has to satisfy the above-mentionedits long-term debt obligations. The Company has no significant debt maturities until 2018.2020. Contractual debt maturities, including capital leases, are $13.2 million in 2015, $31.9 million in 2016, $9.7$7.5 million in 2017, $308.7$6.4 million in 2018, $9.1$95.8 million in 2019, $320.2 million in 2020, $3.5 million in 2021 and $1,414.8$776.6 million thereafter. Effective with the sale of our wireless spectrum licenses, we expect to transfer approximately $25 million of capital leases and related liabilities to the acquirer prior to April 6, in 2015. In addition, we have ongoing obligations to fund our qualified pension plans. Based on current legislation and current actuarial assumptions, we estimate theseare required to make approximately $2 million in contributions to our qualified pension plans in 2017. Funding requirements for subsequent years are uncertain and will approximate $30 million over the period from 2015 to 2018.significantly depend on future actuarial assumption changes. It is also possible that we will use a portion of our cash flows generated from operations for common share repurchases or de-leveraging in the future, including discretionary, opportunistic repurchases of debt prior to the scheduled maturities.

On January 24, 2013, we completed the IPO of CyrusOne, our former data center colocation business. As of December 31, 2014,2016, the fair value of our ownership interest in CyrusOne was $785.0 million.$128.0 million. We intend to sell down the Company's ownership interest in CyrusOne and use the proceeds to primarily repay long-termmanage our debt to reduce our leverage ratios and for other general corporate purposes. Our amended Corporate Credit Agreement obligates us to use 85% of the proceeds towards debt repayments, subject to the terms and conditions within the amended agreement.
  
On November 20,In the fourth quarter of 2012, the Company entered into a new Corporate Credit Agreement which provided for a $200.0 million revolving credit facility, with a sublimit of $30.0 million for letters of credit and a $25.0 million sublimit for swingline loans. In the fourth quarter of 2014, the Company amended and restated its Corporate Credit Agreement to, among other things, modify certain financial covenants governing leverage ratios and capital expenditures. Effective with the sale of our 16.0 million partnership units toof CyrusOne, Inc. on June 25,LP in the second quarter of 2014, for $355.9 million, the amount available under the Corporate Credit Agreement's revolving credit facility was reduced to $150.0 million. In addition,The Company entered into an Incremental Assumption Agreement to the original revolving commitments will be further reduced to $125.0Company's existing Corporate Credit Agreement in the second quarter of 2015. Effective with the sale of 14.3 million CyrusOne LP operating partnership units in the second quarter of 2015, the aggregate available borrowings on December 31, 2015. Thethe Corporate Credit Agreement's revolving credit facility has aincreased to $175.0 million for the remainder of the term. In the second quarter of 2016, the Company amended its Corporate Credit Agreement. This amendment reduces the aggregate revolving commitments available under the revolving credit facility to $150.0 million, modifies certain financial covenants and related definitions governing leverage ratios and capital expenditures, and extends the maturity date of July 15, 2017.the revolving credit facility to January 2020. Capital expenditures are permitted subject to predetermined annual thresholds which are not to exceed $498.6 million in the aggregate over the next three years. Borrowings under the Corporate Credit Agreement will be used to provide ongoing working capital and for other general corporate purposes of the Company. The Corporate Credit Agreement contains financial covenants that require us to maintain certain leverage and interest coverage ratios and limits our capital expenditures on an annual basis. Capital expenditures are permitted subject to predetermined annual thresholds which are not to exceed $937.7 million in the aggregate over the next four years. The facility also has certain covenants, which, among other things, limit our ability to incur additional debt or liens, pay dividends, sell, transfer, lease, or dispose of assets, and make certain investments or merge with another company. If the Company werewas to violate any of its covenants and werewas unable to obtain a waiver, it would be considered in default. If the Company werewas in default under its Corporate Credit Agreement, no additional borrowings under the credit facility would be available until the default was waived or cured. As of December 31, 2014,2016, the Company was in compliance with the Corporate Credit Agreement covenants.

The Company’s most restrictive covenants are generally included in its Corporate Credit Agreement. In order to continue to have access to the amounts available to it under the Corporate Credit Agreement, the Company must remain in compliance with all covenants. The following table presents the calculation of the most restrictive debt covenant, the Consolidated Total Leverage Ratio, as of and for the year ended December 31, 2014:2016:
(dollars in millions)  
Consolidated Total Leverage Ratio5.10
4.05
Maximum ratio permitted for compliance7.00
5.50
Consolidated Funded Indebtedness additional availability$638.3
Consolidated Total Funded Indebtedness additional availability$432.3
Consolidated EBITDA clearance over compliance threshold$91.2
$78.6
Definitions and components of this calculation are detailed in our credit agreement and can be found in the Company's Form 8-K filed on September 10, 2013.May 17, 2016.

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Form 10-K Part II Cincinnati Bell Inc.

The Company's ability to make restricted payments, which include share repurchases and common stock dividends, is limited to a total of $15$15.0 million because itsgiven that our Consolidated Total Leverage Ratio, as defined in the Corporate Credit Agreement, exceeds 3.50 to 1.00 as of December 31, 2014.2016.  The Company may make restricted payments of $45$45.0 million annually when the Consolidated Total Leverage Ratio is less than or equal to 3.50 to 1.00. There are no dollar limits on restricted payments when the Consolidated Total Leverage Ratio is less than or equal to 3.00 to 1.00. These restricted payment limitations do not impact the Company's ability to make regularly scheduled dividend payments on its 6 3/4% Cumulative Convertible Preferred Stock. Furthermore, the Company may make restricted payments in the form of share repurchases or dividends up to 15% of CyrusOne sale proceeds, subject to a $35$35.0 million annual cap with carryovers.carryovers and subject to terms and conditions set forth in the Corporate Credit Agreement.

The Corporate Credit Agreement was also modified to provideprovides that the Tranche B Term Loan participates in mandatory prepayments subject to the terms and conditions (including with respect to payment priority) set forth in the restated Corporate Credit Agreement. In addition,As of December 31, 2016, the Company was above the 4:00 to 1:00 Consolidated Leverage Ratio (as defined by the Corporate Credit Agreement provides thatAgreement). Therefore, until the Company is below the 4:00 to 1:00 Consolidated Leverage Ratio, the requirements to use 85% of proceeds from a CyrusOne monetization towards debt repayments are applied to mandatory prepayments under the restated Corporate Credit Agreement, subject to the terms and conditions set forth therein. Other revisions were also effected pursuant to the amended agreement, including with respect to financial covenant compliance levels.currently applicable.

Public Bond Indentures

The Company’s public debt is governed by indentures which includes the 8 3/4% Senior Subordinated Notes due 2018 and the 8 3/8% Senior Notes due 2020, containscontain 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 public debt indentures as of December 31, 2014.2016.

One of the financial covenants permits the issuance of additional indebtedness up to a 4:5:00 to 1:00 Consolidated Adjusted Senior Debt to EBITDA Ratio (as defined by the individual indentures). Once the Company exceeds this ratio, the Company is not in default under the terms of the indentures; however, additional indebtedness may only be incurred in specified permitted baskets, including a basket which allows $900$750 million of total Corporate Credit Agreement debt (Revolver and Term Loans). We also have baskets for capital lease incurrences, borrowings against the Receivables Facility, refinancings of existing debt, and other debt incurrences. In addition, the Company's ability to make restricted payments, which include share repurchases, repayment of subordinated notes, preferred stock redemptions and common stock dividends, would be limited to specific allowances. As of December 31, 2014,2016, the Company was below the 4:5:00 to 1:00 Consolidated Adjusted Senior Debt to EBITDA ratio, and the Company hashad access to the restricted payments basket which exceeded $500 million as of December 31, 2014.exceeds $1 billion.

Management believes that cash on hand, operating cash flows, its Corporate Credit Agreement and its Receivables Facility, and the expectation that the Company will continue to have access to capital markets to refinance debt and other obligations as they mature and come due, should allow the Company to meet its cash requirements for the foreseeable future.

Cash Flows

Cash flows from operating activities

Cash provided by operating activities during 20142016 was $175.2$173.2 million,, an increase of $96.4$62.3 million compared to 2013. This2015. The increase was largely driven byis primarily due to $37.4 million of lower interest payments and a decreasedecline in pension and postretirement payments of $30.8$7.3 million. In addition, the Company's discontinued wireless operations used $28.0 million of cash in 2015, compared to $5.1 million used in 2016. These increases were partially offset by higher usage of working capital in 2016, primarily associated with the growth of our strategic products.

Cash provided by operating activities during 2015 was $110.9 million, a decrease of $64.3 million compared to 2014. The decrease is primarily due to the Company using $28.0 million of cash in 2015 for shutting down wireless operations compared to the wireless business generating $28.2 million of cash from operations in 2014. The remaining decrease is due to higher usage of working capital, primarily associated with the growth of our strategic products. These decreases were offset by a $44.6 million decline in interest payments and pension and postretirement payments being $10.8 million lower than 2014.
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Form 10-K Part IICincinnati Bell Inc.

Cash flows from investing activities

Cash flows used by investing activities totaled $95.5 million in 2016, compared to $383.2 million provided by investing activities in 2015. The decrease is primarily driven by the year-over-year decrease in proceeds received on the sale of the Company's CyrusOne investment. In addition, CyrusOne dividends classified as investing activities decreased by $20.1 million and a decreasecapital expenditures increased by $2.8 million during 2016.

Cash flows provided by investing activities in cash interest payments of $26.42015 were down $9.4 million compared to the prior year. The decrease in 2015 was driven by a $101.3 million increase in capital expenditures, primarily related to the acceleration of our fiber investment, and the $194.4 million of cash proceeds received on the sale of wireless spectrum licenses in the third quarter of 2014. Dividends received from CyrusOne were down $6.2 million compared to the prior year. These decreases were offset by a $288.0 million increase in the cash proceeds from the sale of the Company's CyrusOne investment in 2015 compared to the proceeds received in 2014.

Other cash used by investing activities includes proceeds from the sale of assets totaling $1.0 million in 2015 and $2.0 million in 2014. These were offset by contributions to equity method investments totaling $0.9 million, $0.3 million and $5.8 million in 2016, 2015 and 2014, respectively.

Cash flows from financing activities

Cash flows used by financing activities were $75.4 million in 2016. The Company issued $625.0 million of 7% Senior Notes at a $10.0 million premium. Debt repayments totaling $759.3 million were primarily due to the repayment of $478.5 million of the outstanding 8 3/8% Senior Notes due 2020 at an average rate of 103.328%, $212.1 million of the outstanding Tranche B Term Loan, $40.8 million of the outstanding Cincinnati Bell Telephone Notes at an average rate of 92.232% and $4.0 million of the outstanding 7 1/4% Senior Notes due 2023 at an average rate of 100.750%. In 2016, the Company repurchased 0.2 million common shares for $4.8 million. Debt issuance costs totaled $11.1 million for the year. In addition, the increase is due toCompany borrowed $71.9 million on the paymentReceivables Facility in 2016 and proceeds from the exercise of $42.6 million of transaction related compensation in 2013.options totaled $3.8 million.

Cash providedflows used by operatingfinancing activities during 2013 was $78.8were $544.6 million, a decrease in 2015. Debt repayments totaling $531.7 million were primarily due to the redemption of $133.9 million compared to 2012. This decrease was largely driven by the deconsolidation of CyrusOne in January 2013, the $42.6 million payment of transaction related compensation, $16.0$300.0 million of higher pensionthe outstanding 8 3/4% Senior Subordinated Notes due 2018 at 102.188%, $182.7 million of the outstanding 8 3/8% Senior Notes due 2020 at an average rate of 105.543%, $13.7 million of the outstanding
7 1/4% Notes due 2023 at 99.853% and postretirement payments$5.8 million of the outstanding CBT Notes at an average rate of 90.840%. In 2015, we repaid $1.6 million of the outstanding balances on the revolving credit facility.
Cash flows used by financing activities were $514.5 million in 2014. Debt repayments totaling $376.5 million were primarily due to the redemption of $325.0 million of the outstanding 8 3/4% Senior Subordinated Notes due 2018 at 104.375% and increased working capital usage.$22.7 million of the outstanding 8 3/8% Senior Note due 2020 at par. In addition, cash proceeds from the sale of the wireless spectrum licenses were used to repay $127.0 million on the revolving credit facility.

48Dividends paid on preferred stock totaled $10.4 million in 2016, 2015 and 2014.
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Form 10-K Part II Cincinnati Bell Inc.

Cash flows from investing activities

Cash flows provided by investing activities were $392.6 million in 2014, compared to cash used by investing activities of $185.4 million in 2013 and $371.8 million in 2012. The increase in 2014 compared to the prior year is primarily due to the $355.9 million of proceeds received on the sale of CyrusOne partnership units, in addition to cash proceeds totaling $194.4 million that were received on September 30, 2014 as a result of the completed wireless spectrum sale. The deconsolidation of CyrusOne in 2013 increased cash used in investing activities by $19.5 million for the period January 1, 2013 through January 23, 2013. Excluding CyrusOne, capital expenditures were down $6.9 million from the prior year largely due to a decreased investment in the wireless network. Dividends received from CyrusOne were up $7.1 million compared to the prior year.

Capital expenditures were $196.9 million for 2013, which was $170.3 million lower than 2012 due primarily to the deconsolidation of CyrusOne, offset by increased investment in our strategic fiber products. As a result of the CyrusOne IPO, we received dividends of $21.3 million from CyrusOne in 2013. In 2012, we deposited $11.1 million of cash into an escrow account and released $4.9 million from this account to fund construction of a data center.

Proceeds from the sale of assets, primarily copper cable, were $2.0 million in 2014 and 2013 compared to $1.6 million in 2012. Other cash from investing activities in 2014 totaled $5.8 million as a result of two additional equity method investments.

Cash flows from financing activities

Cash flows used by financing activities were $514.5 million in 2014. Debt repayments totaling $376.5 million were primarily due to the redemption of $325.0 million 8 3/4% Senior Subordinated Notes due 2018 at 104.375% and the $22.7 million repayment of 8 3/8% Senior Note due 2020 at par. In addition, cash proceeds from the sale of wireless spectrum were used to repay $127.0 million on the Corporate Credit Agreement's revolving credit facility and Receivables Facility.
Cash flows provided by financing activities were $87.6 million in 2013. The Company received $529.8 million in net proceeds from the Tranche B Term Loan on September 10, 2013. In 2013, the Company also had net borrowings of $54.2 million under its Receivables Facility and $40.0 million on its Corporate Credit Agreement's revolving credit facility. We also received cash proceeds of $7.1 million from the exercise of stock options and warrants. Proceeds of the Tranche B Term Loan were used to redeem all of the Company's $500.0 million 8 1/4% Senior Notes on October 15, 2013 at a redemption price of 104.125%.

Cash flows provided by financing activities were $109.0 million in 2012. During 2012, CyrusOne LP and CyrusOne Finance Corp. issued $525.0 million of 6 3/8% Senior Notes due 2022 and used $480.0 million of the $511.0 million net proceeds to repay intercompany payables. The Company repaid $442.4 million of debt during the year, largely with the net proceeds received from CyrusOne, including the redemption of the $247.5 million of 7% Senior Notes due 2015, $91.1 million of 8 3/8% Senior Notes due 2020, purchased pursuant to a tender offer completed in the fourth quarter of 2012, and $73.0 million of various series of CBT Notes due 2023. The Company also used the net proceeds received from CyrusOne to pay the redemption premiums, debt issuance and other costs associated with this series of transactions and to repay the outstanding borrowings on our prior credit facility of $40.0 million. In 2012, the Company also borrowed $52.0 million under its Receivables Facility and received cash proceeds of $12.1 million from the exercise of stock options and warrants. In 2012, cash was used to fund $5.7 million of costs associated with the CyrusOne IPO.

Dividends paid on preferred stock totaled $10.4 million in 2014, 2013 and 2012.
Future Operating Trends
WirelineEntertainment and Communications
For the first time since 2007, we generatedWe continue to generate year-over-year wirelineEntertainment and Communications revenue growth as demand for Fioptics and fiber-based products for business customers more than offset revenue declines from our legacy products. During 2014,2016, we invested $118.1$230.6 million in our strategic wireline productsEntertainment and revenueCommunications products. Revenue from these products increased 23%, totaling $310.5$449.5 million for the year.

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Form 10-K Part IICincinnati Bell Inc.

The Company's primary strategic product for residential customers is Fioptics, which is available to 335,000533,400 addresses or approximately 41%67% of Greater Cincinnati. In 2014,2016, we invested $50.0$89.8 million to pass 59,000 thousand homes101,400 addresses with Fioptics and capital expenditures related to customer installationinstallations totaled $24.3$68.7 million. In addition, we invested $18.8$21.8 million to enhance the user experience as well as upgrade the network core and related equipment to support increased subscriber growth. Fioptics revenue totaled $142.4$254.1 million in 2014,2016, up 41%33% compared to the prior year as demand for the product remains strong. Our Fioptics high-speed internet subscribers increased by more than 40%29% from a year ago, totaling 113,700197,600 as of December 31, 2014.2016. Fioptics video subscribers totaled 91,400137,600 at year-end, up 23%20% from 2013. In2015.
During 2017, we expect continued competition for consumer data, voice and video services as the third quarter of 2014, we announced plans to accelerate the investment in Fioptics to capitalize on the growing demand for the product and capture market share due to the unique market opportunity resulting from the primary cable competitor in our operating territory being acquired by a competitor. During 2015,market completes its re-branding initiative. In 2017, we plan to spend approximately $160 to $165invest between $90 million onand $110 million for Fioptics, including construction, installation and expectvalue-added services. Our goal is to pass an additional 100,000 units by year end. Our goal is35,000 addresses during the year. We expect that Fioptics revenue growth will continue to provide Fioptics to between 70% - 80% of our operating territory. We also anticipate incurring increased operating expenses by approximately $15 million in 2015 to support the acceleration. In addition, Wireline will absorb approximately $25 million of costs as a result of shutting down our wireless operations.offset legacy revenue declines.
Strategic revenue for business customers totaled $166.4 million (including $7.6 million from Fioptics), up 12% from a year ago. For our business and carrier customers, strategic products include: dedicatedhigh-speed internet metro-ethernet, DWDM,and data transport, audio conferencing, as well as VoIP and other broadband services, including private line and MPLS. In 20142016, we invested $25.0$50.3 million in capital expenditures for fiber builds, which bringsbring measurable deal driven returns from our business customers. The Company has connected approximately 5,800 business buildings7,200 commercial addresses with fiber-basedfiber based services in 2016 (also referred to as a lit building)address), including more than 550 multi-tenant units (MTU's)increasing the total number of lit with fiber, expandedaddresses to 15,800 (included in Fioptics addresses) expanding the fiber network to span more than 6,6009,600 route miles, and providedmiles. We also provide cell site back-haul services to more than 70% of the 1,100 cell sites in-market, of which approximately 500 are lit with fiber. We expect to continue to light additional MTU'scommercial addresses and towers with fiber during 20152017 to address customer demand.
Strategic revenue from business customers totaled $152.8 million (including $14.5 million from Fioptics), up 11% from a year ago. Total business revenue was consistent with the prior year, and we expect this trend to continue as we transition customers off the legacy copper network and onto fiber-based solutions. Strategic revenue from carrier customers totaled $45.0 million, up 19% compared to the prior year. Total carrier revenue declined in 2016, due primarily to on-going FCC mandated switched access rate reductions in combination with national carriers increased focus on improving network efficiencies in our market. We expect similar trends to continue in 2017 as we position ourselves to be the preferred wholesale fiber infrastructure provider for 5G, small cell and all other technologies.
In 2015,2017, including our Fioptics capital expenditures, we expect to invest approximately $210$130 million to $220$155 million in our strategic products, and weproducts. We believe the growth in our strategic product revenue will continue to more than offset the decline from our legacy products, which include local voice, DSL, long distance and low-bandwidth data transport services. Revenue from legacy products totaled $414.3$313.6 million in 2014,2016, down 10%15% compared to the prior year due to a 9%15% loss of accesslegacy voice lines and an 8%a 7% loss of long distance lines as wireless substitution continues. DSL subscribers also decreased in 2014,2016, and the trend is expected to continue as customers switch to higher speed services, such as our Fioptics product.
IT Services and Hardware

Revenue for strategic managed services and professionalIT services was $138.7$197.1 million in 2014,2016, up 17%, driven by higher10% due to growth in management and monitoring services, unified communications and cloud services. Professional services revenue growth slowed in 2016 as a result of increased in-sourcing of IT professionals in our market, a trend that we expect to continue to put pressure on revenue in 2017. We will continue to foster ongoing relationships with our customers, as we are also focused on enhancing our presence with small and mid-size businesses located in and around Greater Cincinnati. As we successfully migrate customers from legacy solutions onto our fiber network, our results indicate we are able to increase average revenue per customer demandonce this transition occurs.
Demand for staffing solutionsTelecom and managed telephony service offerings. We expect similar growth rates in 2015 within those same areas of the business.
Demand for IT hardware is cyclical in nature. That is, in periods of fiscal restraint, a customer may defer these capital purchases and, instead, use its existing equipment for a longer period of time. Consequently, Telecom and IT and telephony equipmentHardware sales in 20152017 are somewhat dependent on the business economy and outlook in 2015.2017.
In 2015, we plan to continue the integration of our IT Services and Hardware functions into our Wireline business markets operations. We expect the integration of these operations to reduce costs, improve technical and customer services, and drive back-office efficiencies.
Wireless
On April 6, 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets. The agreement to sell our wireless spectrum licenses closed on September 30, 2014 for cash proceeds of $194.4 million. Simultaneously, a separate agreement to use certain spectrum licenses until we discontinue providing wireless service became effective. As of December 31, 2014 we maintained 82,400 wireless subscribers that we are required to migrate to other carriers. We plan to operate our wireless operations until no later than April 6, 2015, at which time we will transfer the tower leases being assumed and other assets being acquired.
Data Center Colocation
On January 24, 2013, we completed the IPO of CyrusOne, which owns and operates our former Data Center Colocation business. Commencing January 17, 2014, we were permitted to exchange the partnership units of CyrusOne LP into cash or shares of common stock of CyrusOne, as determined by CyrusOne, on a one-for-one basis based upon the fair value of a share

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of CyrusOne common stock. On April 24, 2014, the limitations restricting the volumes of common shares we are allowed to sell terminated.
On June 25, 2014, we consummated the sale of 16.0 million operating partnership units of CyrusOne LP to CyrusOne, Inc. at a price of $22.26 per unit. The sale generated proceeds of $355.9 million and resulted in a gain of $192.8 million. Prior to the sale of our 16.0 million partnership units of CyrusOne LP, we accounted for our 68% effective ownership of CyrusOne as an equity method investment. As of December 31, 2014, we effectively own 44% of CyrusOne, which is held in the form of 1.9 million shares of CyrusOne common stock and approximately 26.6 million CyrusOne LP partnership units.
It is management's intent to sell down the Company's interests in CyrusOne over time and use such proceeds to further de-leverage the Company. The Company's amended Corporate Credit Agreement requires 85% of the proceeds to be used for debt repayments. As of December 31, 2014, the Company's investment in CyrusOne was valued at $785.0 million and the Company's tax basis in CyrusOne was approximately $450 million.

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Form 10-K Part IICincinnati Bell Inc.

Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 20142016:
 Payments due by Period Payments due by Period
(dollars in millions) Total < 1 Year 1-3 Years 3-5 Years Thereafter Total < 1 Year 1-3 Years 3-5 Years Thereafter
Long-term debt, excluding capital leases (1) $1,689.3
 $6.0
 $30.6
 $310.8
 $1,341.9
 $1,140.7
 $0.2
 $89.5
 $315.8
 $735.2
Capital leases (2) 98.1
 7.2
 11.0
 7.0
 72.9
 69.3
 7.3
 12.7
 7.9
 41.4
Interest payments on long-term debt, capital leases, and other financing arrangements (3) 750.0
 121.2
 240.5
 199.1
 189.2
Interest payments on long-term debt and capital leases (3) 490.3
 69.7
 137.2
 117.4
 166.0
Non-cancellable operating lease obligations 50.4
 10.3
 11.6
 6.9
 21.6
 33.9
 4.1
 5.5
 4.5
 19.8
Purchase obligations (4) 178.1
 157.9
 20.2
 —
 —
 190.6
 175.3
 14.7
 0.6
 —
Pension and postretirement benefits obligations (5) 63.3
 27.5
 22.4
 4.1
 9.3
 81.4
 13.8
 21.3
 20.1
 26.2
Unrecognized tax benefits (6) 27.1
 —
 —
 —
 27.1
 31.4
 —
 —
 —
 31.4
Other liabilities (7) 46.4
 31.1
 2.1
 1.0
 12.2
 28.1
 12.4
 5.1
 0.9
 9.7
Total $2,902.7
 $361.2
 $338.4
 $528.9
 $1,674.2
 $2,065.7
 $282.8
 $286.0
 $467.2
 $1,029.7
(1)Long-term debt excludesExcludes net unamortized discounts and premiums.
  
(2)Includes capital lease obligations and the associated asset retirement obligations primarily related to our wireless towers and vehicle fleetsvehicles used in the deployment of our fiber network. Wireless tower leasesnetwork and asset retirement obligations are $83.2 million of which approximately $25 million will be transferred to the acquirer ofwireless towers assumed from our wireless spectrum licenses no later than April 6, 2015.discontinued operations.
  
(3)Interest payments on both fixed and variable rate long-term debt, capital leases, and other financing arrangements assumingAssumes no early payment of debt in future periods. The interest rate applied on variable rate borrowings is the rate in effect as of December 31, 2014.2016.
  
(4)Purchase obligations primarily consist ofIncludes amounts under open purchase orders and open blanket purchase orders for purchases of network, IT and telephony equipment, and other goods; contractual obligations for services such as software maintenance and outsourced services; and other purchase commitments.
  
(5)Included in pension and postretirement benefit obligations areIncludes payments for postretirement benefits, qualified pension plans, non-qualified pension plan and other employee retirement agreements. Amounts for 20152017 include approximately $12$9 million expected to be contributed for postretirement benefits. Although the Company expects to continue operating the plans past 2015,2017, its contractual obligation related to postretirement obligations only extends through 2015.2017. Amounts for 20152017 through 20222024 include approximately $30$53 million of estimated cash contributions to its qualified pension plans, with approximately $13 million expected to be contributed in 2015.plans. Expected qualified pension plan contributions are based on current plan design, legislation and current actuarial assumptions. Any changes in plan design, legislation or actuarial assumptions may also affect the expected contribution amount.
  
(6)Includes the portion of liabilities related to unrecognized tax benefits. If the timing of payments cannot be reasonably estimated for unrecognized tax benefits, these liabilities are included in the "Thereafter" column of the table above.
  
(7)Includes contractual obligations primarily related to restructuring and employee severance reserves, asset removal obligations, long-term disability obligations, workers compensation liabilities and long-term incentive plan obligations.
The contractual obligations table is presented as of December 31, 20142016. The amount of these obligations can be expected to change over time as new contracts are initiated and existing contracts are completed, terminated, or modified.


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Form 10-K Part II Cincinnati Bell Inc.

Contingencies
We are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. We believe that the amounts provided in our consolidated financial statements, as prescribed by GAAP,generally accepted accounting principles are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, including the matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 2014,2016, cannot be reasonably determined.
Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes that the eventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results of operations or cash flows.
Off-Balance Sheet Arrangements
Indemnifications
During the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These includeinclude: (a) intellectual property indemnities to customers in connection with the use, sale, and/or license of products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities to vendors and service providers pertaining to claims based on negligence or willful misconduct, (d) indemnities involving the representations and warranties in certain contracts, and (e) outstanding letters of credit which totaled $6.9$6.3 million as of December 31, 20142016. In addition, the Company has made contractual commitments to several employees providing for payments upon the occurrence of certain prescribed events. The majority of these indemnities, commitments, and guarantees do not provide for any limitation on the maximum potential for future payments.
On November 20, 2012, certain subsidiaries of the Company (the “Contributors”) entered into contribution agreements (the “Contribution Agreements”) with CyrusOne LP, pursuant to which, on November 20, 2012, the Contributors contributed direct or indirect interests in a portfolio of properties and certain other assets related to such properties to CyrusOne LP in exchange for units of limited partnership interest in CyrusOne LP and the assumption of liabilities by CyrusOne LP.

The Contribution Agreements provide that CyrusOne LP assumed or succeeded to all of the Contributors' rights, liabilities and obligations with respect to the property entity, property interests and assets contributed. The Contribution Agreements contain customary representations and warranties by the Contributors with respect to the property entity, property interests and assets contributed to CyrusOne LP, such as title to any owned property, compliance with laws (including environmental laws), enforceability of certain material contracts and leases and certain other matters. In the event of a breach of such representations and warranties, the Contributors will indemnify CyrusOne LP for any resulting losses.

No Contributor will be liable unless and until the amount of losses exceeds 1% of the aggregate value of the units of limited partnership interest in CyrusOne LP received by the Contributor that contributed the property to which such losses relate. The liability of each Contributor will be limited to 10% of the aggregate value of the units of limited partnership interest in CyrusOne LP received by such Contributor in connection with the contribution transactions, and, with respect to any liability that arises from a specific contributed property, such indemnification will be limited to 10% of the aggregate value of the units of limited partnership interest in CyrusOne LP issued in respect of such contributed property. The foregoing limitations on the Contributors' indemnification obligations will not apply to the Contributors' representations and warranties with respect to title to any owned property contributed to CyrusOne LP until such time as CyrusOne LP obtains title insurance policies with respect to such properties.

The representations and warranties made by the Contributors expired on November 20, 2013 without a claim of breach being filed. As such, CyrusOne LP has no further recourse against the Contributors.

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Form 10-K Part IICincinnati Bell Inc.

Warrants
As part of the March 2003 issuance of the 16% Senior Subordinated Discount Notes due 2009 ("16% Notes"), the purchasers of the 16% Notes received 17.5 million common stock warrants, which expired in March 2013, to purchase one share of Cincinnati Bell Inc. common stock at $3.00 each. During the first quarter of 2013, warrant holders exercised 14.3 million warrants. As a result, the Company issued 4.4 million shares of common stock and received cash proceeds of $5.1 million for the 1.7 million cash settled warrants. During 2012, warrant holders exercised 3.2 million warrants, primarily on a cashless basis, and received 1.5 million shares of common stock. As of December 31, 2014 and 2013, no warrants remained unexercised or unexpired.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. Application of these principles requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates or judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, and, as such, have a greater possibility of producing results that could be materially different than originally reported.
Our most significant accounting policies are presented in Note 1 to the consolidated financial statements. Management views critical accounting policies to be those policies that are highly dependent on subjective or complex judgments, estimates or assumptions, and where changes in those estimates and assumptions could have a significant impact on the consolidated financial statements. We have discussed our most critical accounting policies, judgments and estimates with our Audit and Finance Committee.
The discussion below addresses major judgments used in:
• revenue recognition;
   
• accounting for allowances for uncollectible accounts receivable;
•reviewing the carrying values of goodwill and indefinite-lived intangible assets;
•reviewing the carrying values of long-lived assets;
   
• accounting for business combinations;
•accounting for income taxes; and
   
• accounting for pension and postretirement expenses; andexpenses.
   
Table of Contents
•
Form 10-K Part II accounting for termination benefits.Cincinnati Bell Inc.

Revenue Recognition — The Company adheres to revenue recognition principles described in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic ("ASC") 605, "Revenue Recognition".Recognition." Under ASC 605, revenue is recognized when there is persuasive evidence of a sale arrangement, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
With respect to arrangements with multiple deliverables, we determine whether more than one unit of accounting exists in an arrangement. To the extent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based on their relative fair value determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit of accounting as delivered, or as service is performed, depending on the nature of the deliverable comprising the unit of accounting.

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Form 10-K Part IICincinnati Bell Inc.

WirelineEntertainment and Communications — Revenues from local telephone, special access,data transport, internet productproducts and entertainmentvideo services, which are billed monthly prior to performance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance, switched access and video usage pay-per-view are billed monthly in arrears. WirelineEntertainment and Communications bills service revenue in regular monthly cycles, which are spread throughout the days of the month. As the last day of each billing cycle rarely coincides with the end of the reporting period for usage-based services such as long distance and switched access, we must estimate service revenues earned but not yet billed. Our estimates are based upon historical usage, and we adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.
Initial billings for Wireline service connection and activation are deferred and amortized into revenue on a straight-line basis over the average customer life. The associated connection and activation costs, to the extent of the upfront fees, are also deferred and amortized on a straight-line basis over the average customer life.
Pricing of local voice services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services, competition and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.
IT Services and Hardware — Professional services, including product installations,Services are generally recognized as the service is provided. Maintenance services on telephony equipment areis deferred and recognized ratably over the term of the underlying customer contract, generally one to three years.
Equipment revenue is recognized upon the completion of our contractual obligations, such as delivery or customer acceptance. Installation service revenue is generally recognized when installation is complete. We sell equipment and installation services on both a combined and standalone basis.
The Company is a reseller of IT and telephony equipment. For these transactions, we consider the gross versus net revenue recording criteria of ASC 605. Based on this criteria, these equipment revenues and associated costs have generally been recorded on a gross basis, rather than recording the revenues net of the associated costs. Vendor rebates are earned on certain equipment sales. When the rebate is earned and the amount is determinable, we recognize the rebate as an offset to cost of products sold.
Wireless — Postpaid wireless and reciprocal compensation are billed monthly in arrears. Wireless bills service revenue in regular monthly cycles, which are spread throughout the days of the month. As the last day of each billing cycle rarely coincides with the end of the reporting period for usage-based services such as postpaid wireless, we estimate service revenues earned but not yet billed. Our estimates are based upon historical usage, and we adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.
Revenue from prepaid wireless service, which is collected in advance, is not recognized upon billing or cash receipt, but rather is deferred until the service is provided.
Wireless handset revenue and the related activation revenue are recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. Wireless equipment costs are also recognized upon handset sale and are generally in excess of the related handset and activation revenue. Termination fees are recognized as revenue to the extent collection is deemed reasonably assured.
Data Center Colocation — Data center colocation rentals were generally billed monthly in advance and some contracts had escalating payments over the non-cancellable term of the contract. If rents escalated without the lessee gaining access to or control over additional leased space or power, and the lessee took possession of, or controlled the physical use of the property (including all contractually committed power) at the beginning of the lease term, the rental payments by the lessee were recognized as revenue on a straight-line basis over the term of the lease. If rents escalated because the lessee gained access to and control over additional leased space or power, revenue was recognized in proportion to the additional space or power in the years that the lessee has control over the use of the additional space or power.

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Some of the leases were structured on a full-service gross basis in which the customer paid a fixed amount for both colocation rental and power. Other leases provided that the customer would be billed for power based upon actual usage which was separately metered. In both cases, this revenue was presented on a gross basis in the accompanying Consolidated Statements of Operations. Power was generally billed one month in arrears and an estimate of this revenue was accrued in the month that the associated costs were incurred. We generally were not entitled to reimbursements for real estate taxes, insurance or other operating expenses.
Revenue was recognized for services or products that were deemed separate units of accounting. When a customer made an advance payment which was not deemed a separate unit of accounting, deferred revenue was recorded. This revenue was recognized ratably over the expected term of the customer relationship, unless the pattern of service suggested otherwise.
Certain customer contracts required specified levels of service or performance. If we failed to meet these service levels, our customers may have been eligible to receive credits on their contractual billings. These credits were recognized against revenue when an event occurred that gave rise to such credits.
Accounting for Allowances for Uncollectible Accounts Receivable — The allowance for uncollectible accounts is determined using historical percentages of credit losses applied to outstanding aged receivables, as well as specific provisions for certain identifiable, potentially uncollectible balances. Management believes its allowance for uncollectible accounts represents a reasonable estimate of future credit losses. However, if one or more of our larger customers were to default on its accounts receivable obligations, or if general economic conditions in our operating area deteriorated, our future credit losses could exceed the amount recognized in the allowance for uncollectible accounts receivable. Most of our outstanding accounts receivable balances are with companies located within our geographic operating areas. As of December 31, 2014 and 2013, receivables with one large customer comprised 26% and 19%, respectively, of the Company's total accounts receivable. Our Wireline, IT Services and Hardware, and Wireless segments comprise 88%, 8%, and 4% of the allowance for uncollectible accounts receivable as of December 31, 2014, respectively.
Reviewing the Carrying Values of Goodwill and Indefinite-Lived Intangible Assets — The Company adheres to the amended guidance under ASC 350-20 in testing goodwill for impairment. Under this revised guidance, the Company has the option of performing a qualitative assessment for impairment prior to performing the quantitative tests. A qualitative analysis was performed in 2014. In 2013, a quantitative analysis was performed. The Company performs impairment testing of goodwill and indefinite-lived intangible assets on an annual basis or when events or changes in circumstances indicate that an asset may be impaired. We perform our annual impairment tests in the fourth quarter when our five-year plan is updated.
Management estimates the fair value of each reporting unit using a combination of valuation methods, including both income-based and market-based methods. The income-based approach utilizes a discounted cash flow model using projected cash flows derived from the five-year plan, adjusted to reflect market participants' assumptions. Expected future cash flows are discounted at the weighted average cost of capital applying a market participant approach. The market-based approach utilizes earnings multiples from comparable publicly-traded companies. No goodwill impairment losses were recognized in 2014, 2013 or 2012.
The Company adheres to the amended guidance under ASC 350-30 when testing indefinite-lived intangible assets, other than goodwill, for impairment, allowing us to perform a qualitative assessment before performing quantitative tests. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not impaired, the entity would not need to perform the quantitative tests.
Prior to September 30, 2014 Wireless owned wireless spectrum licenses which were indefinite-lived intangible assets. Effective September 30, 2014 the licenses were sold; therefore, no impairment test was performed in 2014. Simultaneous with the spectrum license sale, the company entered into agreements to use certain spectrum licenses until we are able to shut-down our wireless operations. Therefore, the deferred gain totaling $112.6 million was recorded in the Consolidated Balance Sheets as of December 31, 2014. The company plans to provide wireless service until no later than April 6, 2015.

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In 2013, a quantitative approach was utilized to test these licenses for potential impairment. The fair value of these licenses in 2013 was determined by using both the “Greenfield” method and the "Auction" method. The Greenfield method is an income approach technique that presents the expected economics of an actual asset using a hypothetical set of operating assumptions. Specifically, in this approach, a hypothetical start-up of a business is assumed wherein the only asset of the business is the spectrum being analyzed. The Auction method measures the value of the spectrum by examining transactions in the marketplace involving the sale of spectrum with attributes similar to those of the subject. The Greenfield method was weighted more heavily than the Auction method due to limited transactions in the market. As of December 31, 2013, the fair value of these licenses exceeded the carrying value of this asset by more than 25%. No impairment was recognized on these licenses in 2014, 2013 or 2012.
Changes in certain assumptions could have a significant impact on the impairment tests for goodwill and indefinite-lived intangible assets. The most critical assumptions are projected future growth rates, operating margins, capital expenditures, terminal values, and discount rate selection. These assumptions are subject to change as the Company's long-term plans and strategies are updated each year.
Reviewing the Carrying Values of Long-Lived Assets — Depreciation of our WirelineEntertainment and Communications telephone plant is determined on a straight-line basis using the group depreciation method. Depreciation of other property, except for leasehold improvements, is based on the straight-line method over the estimated economic useful life. Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economic useful life or term of the lease, including option renewal periods if renewal of the lease is reasonably assured. Repair and maintenance expense items are charged to expense as incurred.
The useful lives of plant and equipment are estimated in order to determine the amount of depreciation expense to be recorded during any reporting period. The majority of Wireline'sEntertainment and Communications' plant and equipment is depreciated using the group method, which develops a depreciation rate annually based on the average useful life of a specific group of assets rather than for each individual asset as would be utilized under the unit method. The estimated life of the group changes as the composition of the group of assets and their related lives change. Such estimated life of the group is based on historical experience with similar assets, as well as taking into account anticipated technological or other changes.
If technological changes were to occur more rapidly than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected, the life of the group could be extended based on the life assigned to new assets added to the group. This could result in a reduction of depreciation expense in future periods. Competition from new or more cost effective technologies could affect our ability to generate cash flow from our network-based services. This competition could ultimately result in an impairment of certain of our tangible or intangible assets. This couldassets and have a substantial impact on our future operating results. Excluding the results of CyrusOne, aA one-year change in the useful life of these assets would increase or decrease annual depreciation expense by approximately $17$33 million.
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Form 10-K Part IICincinnati Bell Inc.

In 2016, we reduced the estimated useful life of certain set-top boxes and the related software as we upgraded to new technology. In the fourth quarter of 2015, we reduced the estimated remaining useful life of our copper plant from 15 years to 7 years as customers are increasingly migrating to fiber-based service offerings from those previously provided by our copper network.
Management reviews the carrying value of long-lived assets other than goodwill and indefinite-lived intangible assets discussed above, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition is less than its carrying amount. An impairment loss is measured as the amount by which the asset’s carrying value exceeds its estimated fair value. Long-lived intangible assets are amortized based on the estimated economic value generated by the asset in future years.
In 2012, management identified impairment indicators for a customer relationship intangible and long-lived assets primarily associated with our former Data Center Colocation segment. As a result of the analysis, management recorded an impairment loss of $13.3 million on a customer relationship intangible and certain long lived assets. In the fourth quarter of 2014, an impairment loss of $4.6 million was recordedincurred by the WirelineEntertainment and Communications segment to account for an abandoned internal use software project. In 2012, the Wireline segment recognized an impairment loss of $0.5 million on an out-of-territory fiber network that was not expected to generate sufficient future cash flows to recover the carrying value.
In 2014, 2013 and in 2012, management identified impairment indicators for its Wireless long-lived assets resulting from continued subscriber losses. We performed step one of the impairment test using cash flow projections from our most recent long-term business plan and other updated assumptions. Management estimated the cash flows of this asset group considering projected declines in wireless subscribers and included estimates of future expenses, capital expenditures and an estimated terminal value. As the cash flows exceeded the carrying value of this asset group, no impairment loss was recognized in 2014, 2013 or 2012. The gross cash flows exceeded the carrying value of this asset group by less than 10%.

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During the first quarter of 2013, we changed the estimated useful lives assigned to the wireless network software which resulted in a one-time depreciation charge of $8.5 million. In the fourth quarter of 2013, during our annual asset impairment testing, we determined the estimate of our useful lives of all wireless assets should be shortened to 30 months to take into consideration the continued reduction in our subscriber base and the potential for the asset lives to be limited. In the second quarter of 2014, following the agreement to sell our wireless spectrum licenses and certain other assets, we further reduced the remaining useful life of those assets not included in the sale to be fully depreciated as of March 31, 2015. As a result of these changes in estimate, wireless depreciation and amortization expense increased by $62.2 million in 2014 compared to the prior year. In the third quarter of 2014, the Wireless segment recorded an asset impairment charge of $7.5 million related to the write-off of certain construction-in-process projects that will no longer be completed due to the wind down of the Wireless business.
Accounting for Business Combinations — In accounting for business combinations, we follow 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 significant estimates and assumptions, especially with respect to the intangible assets. Transaction costs associated with acquisitions are expensed as incurred.
There were no business combinations in 2012, 2013, or 2014. However, in determining the fair value of the assets acquired, management has historically utilized several valuation methods:
Excess earnings method: This method estimates the present value of future cash flows attributable to the customer base and requires estimates of the expected future earnings and remaining useful lives of the customer relationships.
Cost method: This method indicates value based on the amount that currently would be required to replace the service capacity of the asset and considers the cost of a buyer to acquire or construct a substitute asset of comparable utility, adjusted for deterioration and obsolescence.
Relief-from-royalty: This method estimates the present value of royalty expense that could be avoided as a result of owning the respective asset or technology.
Accounting for Income Taxes — The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various foreign, state and local jurisdictions. The Company’s previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires. With a few exceptions, the Company is no longer subject to U.S. federal, state or local examinations for years prior to 2011.2013.
The Company has net operating loss carryforwards at the federal, state, local and foreign levels. Federal tax loss carryforwards are available to offset taxable income in current and future periods. The majority of these tax loss carryforwards will expire in 2023 and are not currently limited under U.S. tax laws. The ultimate realization of the deferred income tax assets depends upon our ability to generate future taxable income during the periods in which basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards. Based on current income levels and anticipated future reversal of existing temporary differences, management expects to fully utilize its federal net operating loss carryforwards within their expiration periods. However, realization of certain state, local and foreign net operating losses, as well as other deferred tax assets, is not certain.
A valuation allowance of $64.4$54.4 million and $68.3$58.4 million has been recognized as of December 31, 20142016 and 2013,2015, respectively. While the valuation allowance is primarily against state, local, and foreign net operating losses, it also includes $10.7$10.2 million of allowances against Texas margin credits, which effective with CyrusOne's IPO on January 24, 2013, are unlikely to be realized before their expiration date. In 2014 we reduced valuation allowances by $3.9 million for expiring net operating losses, state rate changes and the release of a $0.7 million federal valuation allowance on an investment in which sufficient capital gains are now available to offset any potential capital losses.
As of December 31, 20142016 and 2013,2015, the liability for unrecognized tax benefits was $27.1$31.4 million and $24.1$27.6 million, respectively. As of December 31, 2014,2016, the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $26.3$31.0 million. Accrued interest related to unrecognized tax benefits is recognized in interest expense.
Accounting for Pension and Postretirement Expenses — In accounting for pension and postretirement expenses, we apply ASC 715, "Compensation — Retirement Benefits." A liability has been recognized on the Consolidated Balance Sheets for the unfunded status of the pension and postretirement plans. Actuarial gains (losses) and prior service costs (benefits) that arise during the period are recognized as a component of accumulated"Accumulated other comprehensive lossloss" on the Consolidated Balance Sheets.

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The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain former senior executives. We also provide healthcare and group life insurance benefits for eligible retirees. The measurement date for our pension and postretirement obligations is as of December 31. When changes to the plans occur during interim periods, management reviews the changes and determines if a remeasurement is necessary.
Pension plan amendments were approved in May 2013 and the Company remeasured the associated pension obligations. As a result of the pension plan amendment, the Company recorded a curtailment gain of $0.6 million and a $10.3 million reduction to the associated pension obligations in the second quarter of 2013. Also, in August 2013, the Company approved several amendments to the postretirement plan that required a remeasurement of the associated benefit obligations. As a result, the Company recorded a $26.1 million reduction to the postretirement liability in the third quarter of 2013. No amendments to the plan were proposedentered in 2014.2014 and 2016. During the second quarter of 2015, the bargained pension plan was amended to eliminate all future pension credits and transition benefits. As a result, the Company recognized a curtailment loss of $0.3 million in the three months ended June 30, 2015 and remeasured the associated pension obligation. This remeasurement resulted in a decrease of the pension liability by $1.7 million.
The measurement of our pension and postretirement projected benefit obligations involves significant assumptions and estimates. Each time we remeasure our projected benefit obligations, we reassess the significant assumptions and estimates. The actuarial assumptions attempt to anticipate future events and are used in calculating the expenses and liabilities related to these plans. The most significant of these numerous assumptions, which are reviewed annually, include the discount rate, expected long-term rate of return on plan assets and healthcare cost trend rates.
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Form 10-K Part IICincinnati Bell Inc.

Discount rate
A discount rate is used to measure the present value of projected benefit obligations. The discount rate for each plan is individually calculated based upon the timing of expected future benefit payments. Our discount rates are derived based upon a yield curve developed to reflect yields available on high-quality corporate bonds as of the measurement date. As of December 31, 20142016 and 2013,2015, the discount rate used to value the pension plans was 3.40%4.00% and 4.20%3.80%, respectively, while the discount rate used to value the postretirement plans was 3.40%4.00% and 4.10%3.70%, respectively. LowerHigher rates of interest available on high-quality corporate bonds drove the decreaseincrease in the discount rates in 2014.2016.
Expected rate of return
The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by the plans and the current view of expected future returns, which is influenced by historical averages. The required use of an expected versus actual long-term rate of return on plan assets may result in recognized pension expense or income that is greater or less than the actual returns of those plan assets in any given year. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns. As of December 31, 20142016 and 2013,2015, the estimated long-term rate of return on pension plan assets was 7.50% and 7.75%., respectively. The long-term rate of return on postretirementpost-retirement plan assets was estimated to be zero in both periods as these plans have minimal assets with a low rate of return. Actual asset returns for the pension trusts which represent over 90% of invested assets, were gains of 12%9% in 2014, 16%2016 and a loss of 2% in 2013 and 15% in 2012.2015. In our pension calculations, we utilized the market-related value of plan assets, which is a calculated asset value that recognizes changes in asset fair values in a systematic and consistent manner. Differences between actual and expected returns are recognized in the market-related value of plan assets over five years.
Healthcare cost trend
Our healthcare cost trend rate is developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. As of both December 31, 20142016 and 2013,2015, the healthcare cost trend rate used to measure the postretirement health benefit obligation was 6.5%. As of December 31, 2014,2016, the healthcare cost trend rate is assumed to decrease gradually to 4.5% by the year 2018.2021.
The actuarial assumptions used may differ materially from actual results due to the changing market and economic conditions and other changes. Revisions to and variations from these estimates would impact assets, liabilities, equity, cash flow, costs of services and products and selling, general and administrative expenses.

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The following table represents the sensitivity of changes in certain assumptions related to the pension and postretirement plans as of December 31, 2014:2016:
    Pension Benefits Postretirement and Other Benefits
    Increase/(Decrease)/ Increase/(Decrease)/ Increase/(Decrease)/ Increase/(Decrease)/
  % Point (Decrease)Increase in (Decrease)Increase in (Decrease)Increase in (Decrease)Increase in
(dollars in millions) Change Obligation Expense Obligation Expense
Discount rate +/- 0.5% ($28.9)/$28.5/($28.5)28.9 ($1.6)/$0.9/($0.9)1.6 ($3.4)/$5.1/($4.6)3.7 $0.1/($0.1)/$0.1
Expected return on assets +/- 0.5% n/a $1.8/($1.8) n/a $0.1/($0.1)
Healthcare cost trend rate +/- 1.0% n/a n/a $5.0/3.2/($4.5)2.9) $0.2/($0.1)0.2)
At December 31, 20142016 and 2013,2015, unrecognized actuarial net losses were $332.4$277.9 million and $284.7$312.1 million, respectively. The unrecognized net losses have been primarily generated by differences between assumed and actual rates of return on invested assets, changes in discount rates and healthcare costs. Because gains and losses reflect refinements in estimates as well as real changes in economic values and because some gains in one period may be offset by losses in another or vice versa, we are not required to recognize these gains and losses in the periodperiods that they occur. Instead, if the gains and losses exceed a 10% corridor defined in the accounting literature, we amortize the excess over the average remaining service periodexpected future working lifetime of active employeesplan participants for the pension and bargained postretirement plans (approximately 10-149-13 years) and average life expectancy of retirees for the management postretirement plan (approximately 1617 years).
Accounting for Termination Benefits — The Company has written severance plans covering both its management and union employees and, as such, accrues probable and estimable employee separation liabilities in accordance with ASC 712, "Compensation — Nonretirement Postemployment Benefits". These liabilities are based on our historical termination rates, historical severance costs, as well as management’s expectation of future severance events. As of December 31, 2014 and 2013, accrued employee separation liabilities were $5.9 million and $9.7 million, respectively, resulting largely from projected headcount reductions primarily in our Wireline and Wireless segments.
When employee terminations occur, management also considers the guidance in ASC 715 to determine if employee terminations give rise to a pension and postretirement curtailment charge. Our accounting policy is that terminations in a calendar year involving 10% or more of the plan future service years are deemed to be a plan curtailment.
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Form 10-K Part IICincinnati Bell Inc.

Regulatory Matters and Competitive Trends
Federal- The Telecommunications Act of 1996 (the "Act""1996 Act") was enacted with the goal of establishing a pro-competitive, deregulatory framework to promote competition and investment in advanced telecommunications facilities and services to all Americans. From 1996 to 2008, federal regulators considered a multitude of proceedings ostensibly aimed at promoting competition and deregulation. Although the 1996 Act called for a deregulatory framework, the FCC's approach has beenFCC continued to maintain significant regulatory restraints on the traditional incumbent local exchange carriersILECs while increasing opportunities for new competitive entrants and new services by applying minimal regulation. Since 2009 federal regulators have devoted considerable attention to initiatives aimed at promoting investment in and adoption of advanced telecommunications services, particularly broadband Internet access services. In addition, more recently the FCC has been focusing on effortsservices while simultaneously adopting measures it believes willbelieved would promote competition, consumer protection,protect consumers, reform universal service, and enhance public safety and national security. We will continue to monitor the regulatory environment including any potential impact on the following proceedings.
The financial impact of the various federal proceedings will depend on many factors including the extent of competition, the timing of the FCC's decisions, and the outcome of any appeals of those decisions.
Universal Service
The federal Universal Service Fund ("USF") is funded via an assessment on the interstate end-user revenue of all telecommunications carriers and interconnected VoIP providers. The assessment is used to support high cost, low income, rural healthcare, and schoolschools and librarylibraries programs.

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In October 2011, the FCC adopted new rules (Report and Order in WC Docket No. 10-90, FCC 11-161, the "Order") aimed at controlling the size of the high-cost portion of the fund and transitioning it from supporting legacy circuit-switched networks to broadband. The OrderThese rules capped the high-cost fund and established a framework for transitioning support to the new Connect America Fund ("CAF") to bring broadband to unserved areas. Phase I reforms froze existing high-cost support and provided a mechanism for distributing additional support for qualifying price cap companies. Under Phase II, $1.8 billion of annual support will beis available forto expand broadband in unserved areas served by price cap ILECs. The cost model that will be used to set the Phase II support amountsA separate funding mechanism for eachrate-of-return companies was finalized in 2016. In August 2015, price cap area has been finalized and the FCC is expecting to announce support amounts for eligible price cap carriers in early 2015. Price cap ILECs, will havewhich had the right of first refusal, foraccepted over $1.5 billion of the support. If the price cap carrier declinesannual Phase II support which was available to make the state-level commitment associated with thethem. The remaining support the support will eventually be distributed via a competitive bidding process. OnceCarriers accepting the Phase II support is available, the Phase I support will be phased out and carriers accepting the Phase II commitment will have the funds available for a six yearsix-year period. The price cap carrier changes adopted in 2011 froze CBT's high cost support at approximately $0.8 million. CBT is eligible to receive this frozen support until the Phase II program is implemented. CBT anticipates it will be eligible foraccepted approximately $2 million in annual Phase II support beginning in 2015 if it choosesin exchange for a commitment to accept it.
During 2013expand broadband to 6,339 Kentucky locations and 745 Ohio locations by the FCC took several steps to reform the low income support program adopted in 2012 in order to control the costend of this portion of the fund. The reforms, aimed primarily at eliminating waste, fraud and abuse in the Lifeline program require participating carriers to access the National Lifeline Accountability Database before enrolling any new Lifeline subscribers. Until July 1, 2014 both CBT and CBW participated in the Lifeline program. However, effective July 1, 2014, CBW relinquished its eligible telecommunications carrier status and withdrew from the Lifeline program. CBT remains a Lifeline provider and currently serves approximately 5,500 Lifeline customers.2020.
During 2014, the FCC adopted two orders reforming the Schools and Libraries component of the Universal Service Fund. The first order adopted a plan for phasing out support for voice services and allotted $1 billion per year for the next two yearsthrough 2016 for funding Wi-Fi and other services to provide connectivity within schools and libraries. The second order, adopted in late 2014, increased the cap on the Schools and Libraries fund to $3.9 billion per year. These decisions may result in changes inhave changed the mix of services schools and libraries purchase from the Company and will increase the USF assessment on carriers to pay for the increased funding levels. However,levels, however, because the assessments are generally fully passed on to consumers, theany increased assessment should beis neutral for the Company.
During 2016, the FCC adopted a comprehensive reform of the Lifeline program, which included among other things classifying broadband as a Lifeline eligible service and phasing out support for voice service. Although CBT remains a Lifeline provider, its Lifeline subscriber base has dropped to fewer than 3,000 due to stricter recertification requirements adopted in 2013 and customer migration to wireless Lifeline providers. CBT does not expect the inclusion of broadband in the program to change its downward enrollment trend.
Intercarrier Compensation
In October 2011, in conjunction with its reform of the USF high cost support program, the FCC adopted comprehensive reforms to the switched access and reciprocal compensation rules which govern the means by which carriers compensate one another for use of their networks. The end point of the reforms is a bill-and-keep system under which all per-minute intercarrier charges are eliminated.
Beginning in 2012, terminating
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Form 10-K Part IICincinnati Bell Inc.

Terminating switched access and reciprocal compensation rates are being phased out over a six-year period concluding in 2018 for CBT and other price cap carriers and over a nine-year period for rate-of-return carriers. The plan establishescontains a mechanism wherebythat enables ILECs are permitted to recover some of the lost revenue from increased end-user charges and support from the newly created Connect America Fund.charges. The transition and recovery mechanism for originating access and transport rates has not yet been established by the FCC. The impact of these reforms for the Company will primarily fallfalls on CBT. The impact of the reforms will increaseCBT and increases each year during the six-year transition to bill-and-keep. The Company's terminating switched access and reciprocal compensation revenue subject to these rules was estimated to be less than $7 million in total at the beginning of the transition and will be phased out to zero overat the six-year transition period.end of the transition. The potential to offset these losses via increased end-user charges will primarily dependdepends on competitive conditions in the ILEC operating area.
Special AccessAccess/Business Data Services
In 2005, the FCC opened a proceeding to review the current special accessSpecial Access (aka Business Data Services or "BDS") pricing rules. Under the existing rules, special access services are subject to price cap regulation with no earnings cap, and ILECs are entitled tohave pricing flexibility in certain metropolitan statistical areas served by a sufficient number of competitors. The special access review proceeding examines the entire special access pricing structure, including whether or not to reinstate an earnings cap and whether the pricing flexibility rules should be modified. During 2012, the FCC suspended the grant of any new pricing flexibility requests and issued a mandatory data request. Responses to the data request are duewere provided in the first quarter of 20152015. During second quarter of 2016, the FCC proposed a new framework for identifying competitive markets and regulating rates in non-competitive markets, including potentially resetting rates in non-competitive markets to reflect productivity growth over the past decade. The draft order has been withdrawn from consideration and we remain uncertain how these proceedings will be analyzed byaddressed in the FCC. The impact of any action by the FCC in this proceeding is still uncertain and likely several years away.future.



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IP Transition
In late 2013, the FCC opened a proceeding to explore how to transition from the legacy circuit-switched Time-division Multiplexing (“TDM”) networks to Internet Protocol (“IP”) networks. Examination of the myriad of technical, legal and policy issues surrounding the IP transition moved to the forefront during 2014, and is likelyduring 2015 and 2016 the FCC adopted several orders imposing additional requirements on service providers seeking to receive increasing prominence ontransition their networks from copper to fiber. We remain uncertain how these proceedings will be addressed in the FCC’s agenda over the next several years. The outcome of this examination and any regulations adopted setting parameters for how carriers must transition from TDM to IP-based networks could have positive and/or negative consequences for virtually all providers of TDM and IP-based services.future.
Broadband Internet Access/Net Neutrality
In an order adopted in 2005, the FCC provided wireline carriers the option of offering broadband Internet access as a non-regulated information service (comparable treatment to cable modem Internet access)access at that time) or as a regulated telecommunications service. In 2007, CBT elected the non-regulated information service designation for its broadband Internet access service. The FCC also ruled that wireless broadband service iswas a non-regulated information service, placing it on the same regulatory footing as other broadband services such as cable modem service and wireline DSL service.
In conjunction with the adoption of the 2005 wireline broadband Internet access order, the FCC adopted a policy statement intended to ensure that broadband networks are widely deployed, open, affordable, and accessible to all consumers. In 2009, the FCC opened a proceeding to codify the “net neutrality” principles established in the 2005 policy statement. However, in April 2010, the D.C. Circuit Court of Appeals issued an opinion finding that an FCC enforcement action regarding Comcast's network management practices exceeded the FCC's authority, causing the FCC to reassess its approach to crafting net neutrality rules. In December 2010, the FCC adopted net neutrality rules that requirerequired broadband providers to publicly disclose network management practices, restrictrestricted them from blocking Internet content and applications, and prohibitprohibited fixed broadband providers from engaging in unreasonable discrimination in transmitting traffic. The rules took effect in 2011, and although appeals of these rules were filed, most broadband providers, including our Wireline and Wireless operations, implemented procedures to comply with the rules. In January 2014, the D.C. Circuit Court of Appeals vacated the net neutrality order’s anti-blocking and anti-discrimination requirements finding that they arewere akin to common carrier regulation. However, the Court upheld the transparency and disclosure requirements and found that the FCC has general authority under Section 706 of the Communications Act to promulgate rules to encourage broadband deployment. During 2014,In response to the Court’s decision, the FCC opened aadopted new proceeding to revise the net neutrality rules in light of the D.C. Court’s decision. Although the initial proposal sought to reinstate rules using a commercially reasonable standardFebruary 2015 under authority of Section 706,which it now appears that the Commission is likely to move forward in early 2015 by reclassifyingreclassified broadband Internet access as a telecommunications service under Title II of the Communications Act. AlthoughThese new rules were appealed by numerous parties, but in June 2016 the D.C. Circuit Court of Appeals upheld the FCC’s new rules in their entirety. In November 2016 the FCC Chairman has indicated that the Commission will forbear from applying many of the Title II regulations toadopted an order establishing broadband privacy and security requirements for Internet access, the potential for more onerous regulation will add uncertainty regarding the ultimate regulatory treatment of broadband Internet access if the FCC moves forwardservice providers using its authority under Title II. However,The restrictive new privacy rules diverged from the Federal Trade Commission framework that had for years set the standard for protecting Internet users’ privacy. All of the requirements of the new rules are currently in effect, but the near-term,majority of the Companyrecently adopted privacy rules are not yet effective. CBT foresees little near-term impact from the expected decision.current rules.
FCC Safeguards to Protect Customer Proprietary Network Information ("CPNI")
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In 2007, the FCC released an order implementing new CPNI rules designed to prevent pretexting to gain access to customer information. The rules, which became effective in December 2007, require carriers to implement security protections limiting the manner in which certain customer information may be released and requiring notice to customers regarding certain types of changes to their account and CPNI breaches. Carriers must file an annual certification with the FCC that they are compliant with the rules, including a summary of actions taken in response to customer complaints.
Form 10-K Part IICincinnati Bell Inc.

State - CBT has operated under alternative regulation plans for its local services since 1994. These plans restrict the ability to increase the price of basic local service and related services but, in return, prevent CBT from being subject to an earnings cap. Under alternative regulation, price increases and enhanced flexibility for some services partially offset the effect of fixed pricing for basic local service and reduced pricing for other, primarily wholesale services.


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Statutory changes enacted by the Ohio General Assembly in August 2005 gave the Public Utilities Commission of Ohio ("PUCO") the authority to provide ILECs with pricing flexibility for basic local rates upon a showing that consumers have sufficient competitive alternatives (House Bill 218). Under these rules, CBT applied for and received authority from the PUCO to increase its rates for basic local exchange service in eight of its Ohio exchanges. In September 2010, the Ohio General Assembly enacted Substitute Senate Bill 162, which revised state policy concerning the provision of telecommunications service, repealed Ohio's existing alternative regulation legislation, and authorized pricing flexibility for ILEC basic local exchange service upon a competitive showing by the ILEC. In December 2010, CBT filed an application with the PUCOPublic Utilities Commission of Ohio ("PUCO") under the new rules to receive pricing flexibility in its four Ohio exchanges that did not have pricing flexibility under alternative regulation. The application was approved in January 2011. Furthermore, the legislation provided cost savings and revenue opportunities resulting from revision of the PUCO's retail rules and service standards that were effective in January 2011. TheOn June 30, 2015, state budget bill HB 64 was signed. HB 64 included provisions that could relieve ILECs from their carrier of last resort obligations, pending the outcome of the FCC’s IP Transition proceeding. As part of the provisions of HB 64, the PUCO is currently reviewingconducting a process that would assist in the identification of Basic Local Exchange Service ("BLES") customers that might not have a competitive alternative should the ILEC withdraw BLES as part of its retailtransitioning from a circuit-switched TDM network to an IP Network. The new rules and service standardshave the potential to provide CBT with completion anticipatedsubstantial regulatory relief in late 2015.  Depending onOhio in the PUCO’s actions, additional savings and revenue opportunities may result.future; however, there is no impact in the near-term.
CBT entered into its existing alternative regulation plan in Kentucky in July 2006 under terms established by the Kentucky General Assembly in House Bill No. 337. Under this plan, basic local exchange service prices were capped in exchange for earnings freedom and pricing flexibility on other retail services. The caps on basic local exchange service prices expired in July 2011 providing CBT with flexibility to increase rates for basic local exchange service.

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Ohio, Kentucky and Indiana Cable Franchises
The states of Ohio and Indiana permit statewide video service authorization. The Company is now authorized by Ohio and Indiana to provide service in our self-described territory with only 10-day notification to the local government entity and other providers. The authorization can be amended to include additional territory upon notification to the state. A franchise agreement with each local franchising authority is required in Kentucky. The Company has reached an agreementagreements with eighttwenty-five franchising authorities in Kentucky.

Recently Issued Accounting Standards
Refer to Note 2 of the consolidated financial statements for further information on recently issued accounting standards. TheWith the exception of adopting ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, ASC 205 Presentation of Financial Statements - Discontinued Operations and ASU 2015-17 Balance Sheet Classification of Deferred Taxes, the adoption of new accounting standards did not have a material impact on the Company’s financial results for the years ended December 31, 20142016, 20132015 or 2012.2014.
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Form 10-K Part ICincinnati Bell Inc.


Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement
This Form 10-K contains "forward-looking" statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on our current expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements about the beliefs, expectations and future plans and strategies of the Company, are forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements. The following important factors, among other things, could cause or contribute to actual results being materially and adversely different from those described or implied by such forward-looking statements including, but not limited to:
•the Company’s substantial debt could limit its abilityCompany operates in highly competitive industries, and customers may not continue to fund operations, raise additional capital,purchase products or services, which would result in reduced revenue and fulfill its obligations, which, in turn, would have a material adverse effect on its businesses and prospects generally;
•the Corporate Credit Agreement and other indebtedness impose significant restrictions on the Company;loss of market share;
  
•the Company depends on its Corporate Credit Agreement's revolving credit facility and Receivables Facility to provide for its short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited;
unable to grow our revenues and cash flows despite the initiatives we have implemented;
•failure to anticipate the servicing ofneed for and introduce new products and services or to compete with new technologies may compromise the Company's indebtedness requires a significant amount of cash, and its ability to generate cash depends on many factors beyond its control;
•success in the Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments;telecommunications industry;
  
•the Company’s access lines, which generate a significant portion of its cash flows and profits, are decreasing in number. If the Company continues to experience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted;
  
•the Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share;
•failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company's success in the telecommunications industry;
•accelerating the pace of investment in our Fioptics suite of products could have a negative impact on our financial results;
•the Company may be unable to grow our revenue and cash flows despite the initiatives we have implemented;
  
•the Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company or customers being entitled to receive financial compensation, which couldwould lead to reduced revenues and/or increased costs;
  
•the Company generates a substantial portion of its revenue by serving a limited geographic area;
  
•a large customer accounts for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in business from this customer couldwould cause operating revenues to decline significantly and have a materially adverse long-termcould negatively impact on the Company's business;profitability and cash flows;
  
•maintaining the Company's telecommunications networks requires significant capital expenditures, and its inability or failure to maintain its telecommunications networks wouldcould have a material impact on its market share and ability to generate revenue;
  

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Form 10-K Part IICincinnati Bell Inc.

•increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers;
  
•we may be liable for material that content providers distribute on our networks;
  
•cyber attacks or other breaches of network or other information technology security could have an adverse effect on our business;
  
•
natural disasters, terrorists acts or acts of war could cause damage to our infrastructure and result in significant
disruptions to our operations;
  
•the regulation of the Company's businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services and threaten its operating licenses;
  
•the Company depends on a number of third party providers, and the loss of, or problems with, one or more of these providers may impede the Company's growth or cause it to lose customers;
  
•a failure of back-office information technology systems could adversely affect the Company's results of operations and financial condition;
  
•if the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire or if its unionized employees were to engage in a strike or other work stoppage, the Company's business and operating results could be materially harmed;
  
•the loss of any of the senior management team or attrition among key sales associates could adversely affect the Company's business, financial condition, results of operations and cash flows;
  
•the Company’s debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a material adverse effect on its businesses and prospects generally;
•the Corporate Credit Agreement and other indebtedness impose significant restrictions on the Company;
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

•the Company no longer controls CyrusOne, but effectively maintainsdepends on its Corporate Credit Agreement and Receivables Facility to provide for its short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited;
•the servicing of the Company's indebtedness is dependent on its ability to generate cash, which could be impacted by many factors beyond its control;
•the Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments;
•the Company has a 44% ownership interest with a fair value of $785.0 million as of December 31, 2014;significant investment in CyrusOne;
  
•the trading price of the Company's common stock may be volatile, and the value of an investment in the Company's common stock may decline;
•the Company's failure to remove all subscribers from the wireless network may result in a fine or a penalty adversely affecting revenues, earnings and cash flows;
  
•the uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business and financial condition;
  
•the Company's future cash flows could be adversely affected if it is unable to fully realize its deferred tax assets;
  
•adverse changes in the value of assets or obligations associated with the Company's employee benefit plans could negatively impact shareowners' deficit and liquidity;
  
•third parties may claim that the Company is infringing upon their intellectual property, and the Company could suffer significant litigation or licensing expenses or be prevented from selling products;
  
•we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements;
•third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffer competitive injury;
•we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements; and
  
•the Company could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company does not undertake any obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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Form 10-K Part II Cincinnati Bell Inc.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company has exposure to interest rate risk, primarily in the form of variable-rate borrowings from its Corporate Credit Agreement and Receivables Facility and changes in current rates compared to that of its fixed rate debt. The Company's management periodically employs derivative financial instruments to manage exposure to interest rate risk. At December 31, 20142016 and 20132015, the Company held no derivative financial instruments. As of December 31, 20142016, the Company had variable-rate borrowings of $533.2$315.8 million under the Tranche B Term Loan Facility, $19.289.5 million under the Receivables Facility, and no borrowings under the Corporate Credit Agreement's revolving credit facility. The interest on these debt arrangements varies with changes in the LIBOR rate. A hypothetical increase or decrease of one percentage point in the LIBOR rate would increase or decrease our annual interest expense on these variable-rate borrowings by approximately $5.5$4.1 million, assuming no additional borrowings or repayments are made under these agreements.
The following table sets forth the face amounts, maturity dates, and average interest rates at December 31, 20142016 for our fixed and variable-rate debt, excluding capital leases and other debt, and unamortized discounts:
(dollars in millions) 2015 2016 2017 2018 2019 Thereafter Total Fair Value 2017 2018 2019 2020 2021 Thereafter Total Fair Value
Fixed-rate debt: $—
 $—
 $—
 $300.0
 $—
 $835.7
 $1,135.7
 $1,170.3
 $—
 $—
 $—
 $—
 $—
 $735.2
 $735.2
 $772.0
Weighted average interest rate on fixed-rate debt —
 —
 —
 8.8% —
 8.0% 8.2% —
 —
 —
 —
 —
 —
 6.9% 6.9%  
Variable-rate debt: $5.4
 $24.6
 $5.4
 $5.4
 $5.4
 $506.2
 $552.4
 $545.8
 $—
 $—
 $89.5
 $315.8
 $—
 $—
 $405.3
 $405.7
Average interest rate on variable-rate debt 4.0% 1.4% 4.0% 4.0% 4.0% 4.0% 3.9% —
 —
 —
 1.3% 4.0% —
 —
 3.4%  
At December 31, 2013,2015, the carrying value and fair value of fixed-rate debt was $1,483.4$633.5 million and $1,562.5$628.5 million, respectively.
Equity Risk - Investment in CyrusOne
Our investment in CyrusOne is subject to a variety of risk factors encompassed under the umbrella of market risk. General economic swings influence the performance of the stock. Industry- and company-specific risks also have the potential to substantially affect the value of our investment.


The table below summarizes the effect of hypothetical changes in market prices on fair value of our equity portfolio.
(dollars in millions) Effect from market price change in percent
  -30% -20% -10% —
 10% 20% 30%
At December 31, 2016 $89.6
 $102.4
 $115.2
 $128.0
 $140.8
 $153.6
 $166.4
Our investment in CyrusOne represented $128.0 million in fair value and accounted for the net unrealized gains at year-end 2016 in accumulated other comprehensive loss. 

Foreign Currency Risk
Substantially all of our revenue and expenses are denominated in U.S. dollars. We do not currently employ forward contracts or other financial instruments to mitigate foreign currency risk.
Commodity Price Risk
Certain of our operating costs are subject to price fluctuations caused by the volatility of the underlying commodity prices, such as gas utilized primarily by our field operations group, and network and building materials, such as steel, fiber and copper, used in the construction of our networks.

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Form 10-K Part II Cincinnati Bell Inc.

Item 8. Financial Statements and Supplementary Data 
   
Index to Consolidated Financial StatementsPage
   
Consolidated Financial Statements: 
   
 
Management’s Report on Internal Control over Financial Reporting
6859
   
 
Reports of Independent Registered Public Accounting Firm
6960
   
 
Consolidated Balance Sheets
7162
   
 
Consolidated Statements of Operations
7263
   
 
Consolidated Statements of Comprehensive Income
7364
   
 
Consolidated Statements of Shareowners’ Deficit
7465
   
 
Consolidated Statements of Cash Flows
7566
   
 
Notes to Consolidated Financial Statements
7667
   
Financial Statement Schedule: 
   
 For each of the three years in the period ended December 31, 2014:2016: 
   
 
II — Valuation and Qualifying Accounts
137135
   
Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not required or applicable.

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Form 10-K Part II Cincinnati Bell Inc.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Cincinnati Bell Inc. and its subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system is designed to produce reliable financial statements in conformity with accounting principles generally accepted in the United States.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 20142016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on this assessment, management has concluded that, as of December 31, 20142016, the Company’s internal control over financial reporting is effective based on those criteria.
The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report included herein.

February 26, 201524, 2017
/s/ Theodore H. Torbeck

 
Theodore H. Torbeck 
President and Chief Executive Officer
  
/s/ LeighAndrew R. FoxKaiser 
LeighAndrew R. FoxKaiser 
Chief Financial Officer 

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Form 10-K Part II Cincinnati Bell Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners of Cincinnati Bell Inc.
Cincinnati, Ohio
We have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 20142016, based on criteria established in Internal Control —- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’sCompany's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’sCompany's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’scompany's internal control over financial reporting is a process designed by, or under the supervision of, the company’scompany's principal executive and principal financial officers, or persons performing similar functions, and effected by the company’scompany's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 20142016 of the Company and our report dated February 26, 201524, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP
Cincinnati, Ohio
February 26, 201524, 2017

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Form 10-K Part II Cincinnati Bell Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareowners of Cincinnati Bell Inc.
Cincinnati, Ohio
We have audited the accompanying consolidated balance sheets of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 20142016 and 2013,2015, and the related consolidated statements of operations, comprehensive income, shareowners’shareowners' deficit, and cash flows for each of the three years in the period ended December 31, 2014.2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cincinnati Bell Inc. and subsidiaries at December 31, 20142016 and 2013,2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014,2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014,2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 201524, 2017 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
Cincinnati, Ohio
February 26, 201524, 2017



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Cincinnati Bell Inc.
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share amounts)
December 31,
2014		 December 31,
2013		December 31,
2016		 December 31,
2015
Assets      
Current assets      
Cash and cash equivalents$57.9
 $4.6
$9.7
 $7.4
Receivables, less allowances of $12.4 and $12.2159.8
 145.6
Receivable from CyrusOne7.7
 9.2
Receivables, less allowances of $9.9 and $12.4178.6
 157.1
Inventory, materials and supplies25.0
 23.8
22.7
 20.6
Deferred income taxes68.9
 55.3
Prepaid expenses15.3
 11.0
15.0
 13.1
Other current assets2.0
 1.6
3.9
 2.2
Total current assets336.6
 251.1
229.9
 200.4
Property, plant and equipment, net859.5
 902.8
1,085.5
 975.5
Investment in CyrusOne273.6
 471.0
128.0
 55.5
Goodwill14.4
 14.4
14.3
 14.3
Intangible assets, net1.0
 91.7
Deferred income taxes300.7
 339.7
Deferred income taxes, net64.5
 182.9
Other noncurrent assets33.9
 36.6
18.8
 17.8
Total assets$1,819.7
 $2,107.3
$1,541.0
 $1,446.4
Liabilities and Shareowners’ Deficit      
Current liabilities      
Current portion of long-term debt$13.2
 $12.6
$7.5
 $13.8
Accounts payable135.6
 89.4
105.9
 128.9
Payable to CyrusOne0.4
 0.5
Unearned revenue and customer deposits31.7
 32.5
36.3
 29.2
Accrued taxes10.6
 12.9
12.9
 14.5
Accrued interest22.1
 31.6
12.7
 11.2
Accrued payroll and benefits37.3
 38.0
25.7
 31.2
Deferred gain on sale of wireless spectrum licenses112.6
 —
Other current liabilities46.3
 36.8
31.9
 25.0
Other current liabilities from discontinued operations—
 5.4
Total current liabilities409.8
 254.3
232.9
 259.2
Long-term debt, less current portion1,771.0
 2,252.6
1,199.1
 1,223.8
Pension and postretirement benefit obligations240.1
 202.7
197.7
 225.0
Other noncurrent liabilities47.3
 74.4
33.0
 36.6
Total liabilities2,468.2
 2,784.0
1,662.7
 1,744.6
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 December 31, 2014 and 2013; liquidation preference $1,000 per share ($50 per depositary share)
129.4
 129.4
Common shares, $.01 par value; 480,000,000 shares authorized; 209,571,138 and 208,656,995 shares issued; 209,296,068 and 208,165,275 shares outstanding at December 31, 2014 and 20132.1
 2.1
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 December 31, 2016 and 2015; liquidation preference $1,000 per share ($50 per depositary share)
129.4
 129.4
Common shares, $.01 par value; 96,000,000 shares authorized; 42,056,237 and 42,003,600 shares issued; 42,056,237 and 41,975,390 shares outstanding at December 31, 2016 and 20150.4
 0.4
Additional paid-in capital2,582.9
 2,590.6
2,570.9
 2,577.7
Accumulated deficit(3,187.9) (3,263.5)(2,732.1) (2,834.2)
Accumulated other comprehensive loss(173.9) (133.3)(90.3) (171.0)
Common shares in treasury, at cost(1.1) (2.0)—
 (0.5)
Total shareowners’ deficit(648.5) (676.7)(121.7) (298.2)
Total liabilities and shareowners’ deficit$1,819.7
 $2,107.3
$1,541.0
 $1,446.4
The accompanying notes are an integral part of the consolidated financial statements.

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Form 10-K Part II Cincinnati Bell Inc.

Cincinnati Bell Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)

 
Year Ended December 31,Year Ended December 31,
2014 2013 20122016 2015 2014
Revenue          
Services$999.6
 $1,039.3
 $1,272.8
$978.7
 $933.0
 $890.2
Products278.6
 217.6
 201.1
207.1
 234.8
 271.3
Total revenue1,278.2
 1,256.9
 1,473.9
1,185.8
 1,167.8
 1,161.5
Costs and expenses          
Cost of services, excluding items below454.2
 430.4
 492.2
506.4
 472.5
 416.2
Cost of products sold, excluding items below244.9
 215.9
 204.7
172.5
 198.1
 231.5
Selling, general and administrative223.1
 220.8
 269.5
218.7
 219.1
 204.2
Depreciation and amortization231.0
 169.6
 217.4
182.2
 141.6
 127.6
Restructuring charges15.9
 13.7
 3.4
Transaction-related compensation—
 42.6
 —
Curtailment gain—
 (0.6) —
(Gain) loss on sale or disposal of assets, net(0.3) 2.4
 (1.6)
Amortization of deferred gain(22.9) (3.3) (2.3)
Impairment of assets12.1
 —
 14.2
Transaction costs4.4
 1.6
 6.3
Restructuring and severance related charges (reversals)11.9
 6.0
 (0.4)
Other1.1
 2.5
 5.5
Total operating costs and expenses1,162.4
 1,093.1
 1,203.8
1,092.8

1,039.8

984.6
Operating income115.8
 163.8
 270.1
93.0

128.0
 176.9
Interest expense148.7
 182.0
 218.9
75.7
 103.1
 145.9
Loss on extinguishment of debt19.6
 29.6
 13.6
Loss from CyrusOne equity method investment7.0
 10.7
 —
Gain on sale of CyrusOne equity method investment(192.8) —
 —
Other expense (income), net0.3
 (1.3) 1.7
Income (loss) before income taxes133.0
 (57.2) 35.9
Income tax expense (benefit)57.4
 (2.5) 24.7
Net income (loss)75.6
 (54.7) 11.2
Loss on extinguishment of debt, net19.0
 20.9
 19.6
Gain on sale of CyrusOne investment(157.0) (449.2) (192.8)
Other (income) expense, net(7.6) 2.6
 5.1
Income from continuing operations before income taxes162.9

450.6

199.1
Income tax expense61.1
 159.8
 81.4
Income from continuing operations101.8

290.8

117.7
Income (loss) from discontinued operations, net of tax0.3
 62.9
 (42.1)
Net income102.1

353.7

75.6
Preferred stock dividends10.4
 10.4
 10.4
10.4
 10.4
 10.4
Net income (loss) applicable to common shareowners$65.2
 $(65.1) $0.8
Basic and diluted earnings (loss) per common share$0.31
 $(0.32) $0.00
Net income applicable to common shareowners$91.7

$343.3

$65.2
Basic net earnings per common share     
Basic earnings per common share from continuing operations$2.17
 $6.69
 $2.57
Basic earnings (loss) per common share from discontinued operations$0.01
 $1.50
 $(1.01)
Basic net earnings per common share$2.18
 $8.19

$1.56
Diluted net earnings per common share     
Diluted earnings per common share from continuing operations$2.17
 $6.68
 $2.56
Diluted earnings (loss) per common share from discontinued operations$0.01
 $1.49
 $(1.00)
Diluted net earnings per common share$2.18
 $8.17
 $1.56
          
Weighted-average common shares outstanding (millions)          
Basic208.5
 205.9
 197.0
42.0
 41.9
 41.7
Diluted209.6
 205.9
 204.7
42.1
 42.0
 41.9

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

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Form 10-K Part II Cincinnati Bell Inc.

Cincinnati Bell Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
 Year Ended December 31,
 2014 2013 2012
Net income (loss)$75.6
 $(54.7) $11.2
Other comprehensive (loss) income , net of tax:     
Foreign currency translation loss(0.1) (0.1) —
Defined benefit plans:     
Net (loss) gain arising from remeasurement during the period, net of tax of ($25.0), $30.7, ($5.1)(45.4) 56.8
 (9.2)
Net prior service credit, net of tax of $6.1—
 11.3
 —
Amortization of prior service benefits included in net income (loss), net of tax of ($5.4), ($5.2), ($4.8)(9.8) (8.7) (8.3)
Amortization of net actuarial loss included in net income (loss), net of tax of $8.0, $10.1, $9.514.7
 17.5
 16.7
Reclassification adjustment for curtailment gain included in net income (loss), net of tax of ($0.2)—
 (0.4) —
Total other comprehensive (loss) income, net of tax(40.6) 76.4
 (0.8)
Total comprehensive income$35.0
 $21.7
 $10.4
 Year Ended December 31,
 2016 2015 2014
Net income$102.1
 $353.7
 $75.6
Other comprehensive income (loss), net of tax:     
Unrealized gains on Investment in CyrusOne, net of tax of $36.968.1
 —
 —
Foreign currency translation loss(0.1) (0.4) (0.1)
Defined benefit plans:     
Net gain (loss) arising from remeasurement during the period, net of tax of $3.6, ($3.4), ($25.0)6.6
 (6.6) (45.4)
Amortization of prior service benefits included in net income, net of tax of ($5.2), ($5.5), ($5.4)(9.4) (9.8) (9.8)
Amortization of net actuarial loss included in net income, net of tax of $8.5, $10.8, $8.015.5
 19.5
 14.7
Reclassification adjustment for curtailment loss included in net income, net of tax of $0.1—
 0.2
 —
Total other comprehensive income (loss), net of tax80.7

2.9
 (40.6)
Total comprehensive income$182.8

$356.6
 $35.0

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


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Form 10-K Part II Cincinnati Bell Inc.

Cincinnati Bell Inc.
CONSOLIDATED STATEMENTS OF SHAREOWNERS' DEFICIT
(in millions)


 
6 3/4% Cumulative
Convertible
Preferred Shares
 Common Shares 
Additional
Paid-in Capital
 Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Shares   
6 3/4% Cumulative
Convertible
Preferred Shares
 Common Shares 
Additional
Paid-in Capital
 Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Shares  
 Shares Amount Shares Amount Shares Amount Total
Balance at December 31, 20113.1
 $129.4
 196.3
 $2.0
 $2,584.6
 $(3,220.0) $(208.9) (0.6) $(2.3) $(715.2)
Net income —
 —
 —
 —
 —
 11.2
 —
 —
 —
 11.2
Other comprehensive loss —
 —
 —
 —
 —
 —
 (0.8) —
 —
 (0.8)
Shares issued under employee plans —
 —
 5.2
 —
 14.5
 —
 —
 —
 —
 14.5
Shares purchased under employee plans and other —
 —
 —
 —
 (2.8) —
 —
 —
 —
 (2.8)
Stock-based compensation —
 —
 —
 —
 5.2
 —
 —
 —
 —
 5.2
Exercise of warrants —
 —
 1.5
 —
 0.1
 —
 —
 —
 —
 0.1
Repurchase and retirement of shares —
 —
 —
 —
 (0.3) —
 —
 0.1
 0.3
 —
Dividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)
                    
Balance at December 31, 20123.1
 129.4
 203.0
 2.0
 2,590.9
 (3,208.8) (209.7) (0.5) (2.0) (698.2)
Net loss —
 —
 —
 —
 —
 (54.7) —
 —
 —
 (54.7)
Other comprehensive income —
 —
 —
 —
 —
 —
 76.4
 —
 —
 76.4
Shares issued under employee plans —
 —
 1.6
 —
 2.4
 —
 —
 —
 —
 2.4
Shares purchased under employee plans and other —
 —
 (0.3) —
 (2.3) —
 —
 —
 —
 (2.3)
Stock-based compensation —
 —
 —
 —
 4.9
 —
 —
 —
 —
 4.9
Exercise of warrants —
 —
 4.4
 0.1
 5.1
 —
 —
 —
 —
 5.2
Dividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)
                     Shares Amount Shares Amount 
Additional
Paid-in Capital
 Accumulated Deficit Accumulated Other Comprehensive Loss Shares Amount Total
Balance at December 31, 2013Balance at December 31, 20133.1
 129.4
 208.7
 2.1
 2,590.6
 (3,263.5) (133.3) (0.5) (2.0) (676.7)Balance at December 31, 20133.1
 $129.4
 41.7
 $0.4
 (0.1) $(2.0) $(676.7)
Net incomeNet income —
 —
 —
 —
 —
 75.6
 —
 —
 —
 75.6
Net income —
 —
 —
 —
 —
 75.6
 —
 —
 —
 75.6
Other comprehensive lossOther comprehensive loss —
 —
 —
 —
 —
 —
 (40.6) —
 —
 (40.6)Other comprehensive loss —
 —
 —
 —
 —
 —
 (40.6) —
 —
 (40.6)
Shares issued under employee plansShares issued under employee plans —
 —
 1.1
 —
 1.4
 —
 —
 —
 —
 1.4
Shares issued under employee plans —
 —
 0.2
 —
 1.4
 —
 —
 —
 —
 1.4
Shares purchased under employee plans and otherShares purchased under employee plans and other —
 —
 (0.2) —
 (2.0) —
 —
 0.2
 0.9
 (1.1)Shares purchased under employee plans and other —
 —
 —
 —
 (2.0) —
 —
 —
 0.9
 (1.1)
Stock-based compensationStock-based compensation —
 —
 —
 —
 3.3
 —
 —
 —
 —
 3.3
Stock-based compensation —
 —
 —
 —
 3.3
 —
 —
 —
 —
 3.3
Dividends on preferred stockDividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)Dividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)
Balance at December 31, 2014Balance at December 31, 20143.1
 $129.4
 209.6
 $2.1
 $2,582.9
 $(3,187.9) $(173.9) (0.3) $(1.1) $(648.5)Balance at December 31, 20143.1
 129.4
 41.9
 0.4
 2,584.6
 (3,187.9) (173.9) (0.1) (1.1) (648.5)
Net incomeNet income —
 —
 —
 —
 —
 353.7
 —
 —
 —
 353.7
Other comprehensive incomeOther comprehensive income —
 —
 —
 —
 —
 —
 2.9
 —
 —
 2.9
Shares issued under employee plansShares issued under employee plans —
 —
 0.1
 —
 0.1
 —
 —
 —
 —
 0.1
Shares purchased under employee plans and otherShares purchased under employee plans and other —
 —
 —
 —
 (0.7) —
 —
 —
 0.6
 (0.1)
Stock-based compensationStock-based compensation —
 —
 —
 —
 4.1
 —
 —
 —
 —
 4.1
Dividends on preferred stockDividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)
Balance at December 31, 2015Balance at December 31, 20153.1
 129.4
 42.0
 0.4
 2,577.7
 (2,834.2) (171.0) (0.1) (0.5) (298.2)
Net incomeNet income —
 —
 —
 —
 —
 102.1
 —
 —
 —
 102.1
Other comprehensive incomeOther comprehensive income —
 —
 —
 —
 —
 —
 80.7
 —
 —
 80.7
Shares issued under employee plansShares issued under employee plans —
 —
 0.3
 —
 3.6
 —
 —
 —
 —
 3.6
Shares purchased under employee plans and otherShares purchased under employee plans and other —
 —
 —
 —
 (0.3) —
 —
 0.1
 0.5
 0.2
Stock-based compensationStock-based compensation —
 —
 —
 —
 5.1
 —
 —
 —
 —
 5.1
Repurchase and retirement of sharesRepurchase and retirement of shares —
 —
 (0.2) —
 (4.8) —
 —
 —
 —
 (4.8)
Dividends on preferred stockDividends on preferred stock —
 —
 —
 —
 (10.4) —
 —
 —
 —
 (10.4)
Balance at December 31, 2016Balance at December 31, 20163.1

$129.4

42.1

$0.4

$2,570.9

$(2,732.1)
$(90.3)
—

$—

$(121.7)


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

74
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Cincinnati Bell Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
 Year Ended December 31,
 2014 2013 2012
Cash flows from operating activities     
Net income (loss)$75.6
 $(54.7) $11.2
Adjustments to reconcile net income (loss) to net cash provided by operating activities:     
Depreciation and amortization231.0
 169.6
 217.4
Loss on extinguishment of debt19.6
 29.6
 13.6
Loss from CyrusOne equity method investment7.0
 10.7
 —
Gain on sale of CyrusOne equity method investment(192.8) —
 —
(Gain) loss on sale of assets(0.3) 2.4
 (1.6)
Impairment of assets12.1
 —
 14.2
Provision for loss on receivables10.4
 11.3
 13.9
Noncash portion of interest expense6.2
 7.5
 7.8
Deferred income tax expense, including valuation allowance change47.4
 (2.7) 21.6
Pension and other postretirement payments in excess of expense(25.7) (49.7) (28.4)
Amortization of deferred gain(22.9) (3.3) (2.3)
Stock-based compensation3.3
 4.9
 5.2
Excess tax benefit for share based payments(0.1) (0.5) (2.4)
Other, net3.9
 (3.4) 0.9
Changes in operating assets and liabilities, net of effects of divestitures:     
(Increase) decrease in receivables(23.7) 0.5
 (33.6)
Increase in inventory, materials, supplies, prepaid expenses and other current assets(7.2) (0.8) (14.5)
Increase (decrease) in accounts payable38.7
 (17.7) (6.9)
Decrease in accrued and other current liabilities(0.8) (18.1) (10.0)
Decrease in other noncurrent assets0.7
 0.8
 4.6
(Decrease) increase in other noncurrent liabilities(7.2) (7.6) 2.0
Net cash provided by operating activities175.2
 78.8
 212.7
Cash flows from investing activities     
Capital expenditures(182.3) (196.9) (367.2)
Proceeds from sale of CyrusOne equity method investment355.9
 —
 —
Dividends received from CyrusOne28.4
 21.3
 —
Proceeds from sale of Wireless spectrum licenses194.4
 —
 —
Proceeds from sale of assets2.0
 2.0
 1.6
Increase in restricted cash—
 —
 (11.1)
       Release of restricted cash—
 0.4
 4.9
Cash divested from deconsolidation of CyrusOne—
 (12.2) —
Other, net(5.8) —
 —
Net cash provided by (used in) investing activities392.6
 (185.4) (371.8)
Cash flows from financing activities     
Proceeds from issuance of long-term debt—
 536.0
 525.0
Net (decrease) increase in corporate credit and receivables facilities with initial maturities less than 90 days(127.0) 94.2
 52.0
Repayment of debt(376.5) (530.8) (442.4)
Debt issuance costs(0.9) (6.7) (20.9)
Dividends paid on preferred stock(10.4) (10.4) (10.4)
CyrusOne stock issuance costs—
 —
 (5.7)
Common stock repurchase—
 —
 (0.3)
Proceeds from exercise of options and warrants1.3
 7.1
 12.1
Excess tax benefit for share based payments0.1
 0.5
 2.4
Financing obligations and other, net(1.1) (2.3) (2.8)
Net cash (used in) provided by financing activities(514.5) 87.6
 109.0
Net increase (decrease) in cash and cash equivalents53.3
 (19.0) (50.1)
Cash and cash equivalents at beginning of year4.6
 23.6
 73.7
Cash and cash equivalents at end of year$57.9
 $4.6
 $23.6
 Year Ended December 31,
 2016 2015 2014
Cash flows from operating activities     
Net income$102.1
 $353.7
 $75.6
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization182.2
 170.2
 231.0
Loss on extinguishment of debt19.0
 20.9
 19.6
Gain on sale of CyrusOne investment(157.0) (449.2) (192.8)
Impairment of assets—
 —
 12.1
Provision for loss on receivables9.4
 8.5
 10.4
Noncash portion of interest expense3.3
 4.6
 6.2
Deferred income tax expense, including valuation allowance change59.4
 184.5
 47.4
Pension and other postretirement payments in excess of expense(8.3) (11.5) (25.7)
Deferred gain on sale of wireless spectrum licenses - discontinued operations

—
 (112.6) —
Amortization of deferred gain - discontinued operations—
 (6.5) (22.9)
Stock-based compensation5.1
 4.1
 3.3
Gain on transfer of lease obligations - discontinued operations

—
 (15.9) —
Other, net(3.7) 3.1
 10.5
Changes in operating assets and liabilities:     
Increase in receivables(18.3) (1.9) (23.7)
(Increase) decrease in inventory, materials, supplies, prepaid expenses and other current assets(6.2) 3.6
 (7.2)
(Decrease) increase in accounts payable(13.1) (17.0) 38.7
Decrease in accrued and other current liabilities(3.0) (30.6) (0.8)
(Increase) decrease in other noncurrent assets(1.3) 1.5
 0.7
Increase (decrease) in other noncurrent liabilities3.6
 1.4
 (7.2)
Net cash provided by operating activities173.2
 110.9
 175.2
Cash flows from investing activities     
Capital expenditures(286.4) (283.6) (182.3)
Proceeds from sale of Investment in CyrusOne189.7
 643.9
 355.9
Dividends received from Investment in CyrusOne (equity method investment)2.1
 22.2
 28.4
Proceeds from sale of wireless spectrum licenses - discontinued operations—
 —
 194.4
Other, net(0.9) 0.7
 (3.8)
Net cash (used in) provided by investing activities(95.5) 383.2
 392.6
Cash flows from financing activities     
Proceeds from issuance of long-term debt635.0
 —
 —
Net increase (decrease) in corporate credit and receivables facilities with initial maturities less than 90 days71.9
 (1.6) (127.0)
Repayment of debt(759.3) (531.7) (376.5)
Debt issuance costs(11.1) (0.4) (0.9)
Dividends paid on preferred stock(10.4) (10.4) (10.4)
Common stock repurchase(4.8) —
 —
Other, net3.3
 (0.5) 0.3
Net cash used in financing activities(75.4) (544.6) (514.5)
Net increase (decrease) in cash and cash equivalents2.3
 (50.5) 53.3
Cash and cash equivalents at beginning of year7.4
 57.9
 4.6
Cash and cash equivalents at end of year$9.7
 $7.4
 $57.9
The accompanying notes are an integral part of the consolidated financial statements. 

75
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Cincinnati Bell Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.Description of Business and Accounting Policies
Description of Business — Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provides diversified telecommunications and technology services. The Company generates a large portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this, or a portion of this, limited operating territory could have a disproportionate effect on our business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas. Revenue derived from foreign operations is less than 1% of consolidated revenue.
As of December 31, 2014,2016, we operate our business through the Company managed its business by productfollowing segments: Entertainment and service offerings in three segments: Wireline,Communications and IT Services and Hardware, and Wireless. On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operates our former Data Center Colocation business. CyrusOne conducts its data center business through CyrusOne LP, an operating partnership. Effective with the IPO, we retained ownership of approximately 1.9 million shares, or 8.6%, of CyrusOne's common stock and were a limited partner in CyrusOne LP, owning approximately 42.6 million, or 66%, of its partnership units. We effectively owned 69% of CyrusOne and continued to have significant influence over the entity, but we did not control its operations. Therefore, effective January 24, 2013, we no longer include the accounts of CyrusOne in our consolidated financial statements, but account for our ownership in CyrusOne as an equity method investment.Hardware.
On June 25, 2014, we consummated the sale of 16.0 million partnership units of CyrusOne LP to CyrusOne, Inc. at a price of $22.26 per unit. As of December 31, 2014, we effectively own 44% of CyrusOne, which is held in the form of 1.9 million shares of CyrusOne common stock and approximately 26.6 million CyrusOne LP partnership units. We continue to account for our investment in CyrusOne using the equity method.
In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business. This agreement to sell our wireless spectrum license closed on September 30, 2014, for cash proceeds of $194.4 million. As a result, we derecognized the $88.2 million carrying value of the licenses previously reported as "Intangible assets, net" in the Consolidated Balance Sheets. Also on September 30, 2014, we entered into a separate agreement to use certain spectrum licenses for $8.00 until we no longer provide wireless service. We recorded the fair value of the leased spectrum of $6.4 million in "Prepaid expenses" in the Consolidated Balance Sheets. This fair value is considered a Level 3 measurement based on other comparable transactions. The asset is being amortized over a six month period and had a net carrying value of $3.2 millioncompany has 3,400 employees as of December 31, 2014. In addition, as we continue to use the licenses, we deferred the gain2016, and approximately 30% of $112.6 million related to the saleits employees are covered by a collective bargaining agreement with Communications Workers of the spectrum. We plan to operate and generate cash from our wireless operations until no later than April 6, 2015. AtAmerica (“CWA”) that time, we will transfer certain leases and other assets to the acquiring company valued at approximately $25 million.

be in effect through May 12, 2018.
Basis of Presentation — The consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") and, in the opinion of management, include all adjustments necessary for a fair presentation of the results of operations, comprehensive income, financial position and cash flows for each period presented.
On October 4, 2016, the Company filed an amendment to its Amended and Restated Articles of Incorporation to affect a one-for-five reverse split of its issued common stock (the “Reverse Split”) which had the effect of reducing the number of issued shares of common stock from 210,275,005 to 42,055,001, effective as of 11:59 pm on October 4, 2016. Any fractional shares of common stock resulting from the Reverse Split were settled in cash equal to the fraction of a share to which the holder was entitled. As a result of the Reverse Split, the Company reduced total par value from common stock by $1.7 million and increased the additional paid-in capital by the same amount for the reporting periods.  
All shares of common stock, stock options, the conversion rate of preferred stock and per share information presented in the consolidated financial statements have been adjusted to reflect the Reverse Split on a retroactive basis for all periods presented and all share information is rounded down to the nearest whole share after reflecting the Reverse Split.
Basis of Consolidation — The consolidated financial statements include the consolidated accounts of Cincinnati Bell Inc. and its majority-owned subsidiaries over which it exercises control. Intercompany accounts and transactions have been eliminated in the consolidated financial statements. Investments over which the Company exercises significant influence are recorded under the equity method. Investments
Recast of Financial Information for Discontinued Operations — In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business. The agreement to sell our wireless spectrum licenses closed on September 30, 2014, for cash proceeds of $194.4 million. Simultaneously, we entered into a separate agreement to use certain spectrum licenses for $8.00 until we no longer provided wireless service. Effective March 31, 2015, all wireless subscribers were migrated off our network and we ceased providing wireless services and operations. Certain wireless tower lease obligations and other assets were transferred to the acquiring company on April 1, 2015.
The closing of our wireless operations represents a strategic shift in which we own less than 20%our business. Therefore, certain wireless assets, liabilities and results of operations are reported as discontinued operations in our financial statements. Accordingly, the Company recast 2015 and 2014 results with the exception of the ownership interestsConsolidated Statements of Comprehensive Income, Consolidated Statements of Shareowners' Deficit and cannot exercise significant influence over the investee’s operations are recorded at cost.Consolidated Statements of Cash Flows. See Note 16 for all required disclosures.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. Significant items subject to such estimates and judgments include: the carrying value of property, plant and equipment; the valuation of insurance and claims liabilities; the valuation of allowances for receivables and deferred income taxes; reserves recorded for income tax exposures; the valuation of asset retirement obligations; assets and liabilities related to employee benefits; and the valuation of goodwill and intangibles.goodwill. In the normal course of business, the Company is also subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate

76
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

provision has been made for all such asserted and unasserted claims in accordance with GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.
Cash and Cash Equivalents — Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.
Receivables — Receivables consist principally of trade receivables from customers and are generally unsecured and due within 21 - 90 days. The Company has receivables with one large customer, General Electric Company ("GE"), that makes up 26%21% and 19%22% of the outstanding accounts receivable balance at December 31, 20142016 and 2013,2015, respectively. Unbilled receivables arise from services rendered but not yet billed. As of December 31, 20142016 and 2013,2015, unbilled receivables totaled $15.6$14.5 million and $23.2$14.0 million,, respectively. Expected credit losses related to trade receivables are recorded as an allowance for uncollectible accounts in the Consolidated Balance Sheets. The Company establishes the allowances for uncollectible accounts using percentages of aged accounts receivable balances to reflect the historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectible balances. When internal collection efforts on accounts have been exhausted, the accounts are written off and the associated allowance for uncollectible accounts is reduced.
Inventory, Materials and Supplies — Inventory, materials and supplies consists of wireline network components, various telephony and IT equipment to be sold to customers, wireless handsets to support our agreement with Verizon Wireless to sell their products and services in our retail stores, maintenance inventories, and other materials and supplies, which are carried at the lower of average cost or market. As of December 31, 2013, the Wireless segment maintained handsets to support the wireless business.
Property, Plant and Equipment — Property, plant and equipment is stated at original cost and presented net of accumulated depreciation and impairment losses. Maintenance and repairs are charged to expense as incurred while improvements, which extend an asset's useful life or increase its functionality, are capitalized and depreciated over the asset's remaining life. The majority of the WirelineEntertainment and Communications network property, plant and equipment used to generate its voice and data revenue is depreciated using the group method, which develops a depreciation rate annually based on the average useful life of a specific group of assets rather than for each individual asset as would be utilized under the unit method. The estimated life of the group changes as the composition of the group of assets and their related lives change. Provision for depreciation of other property, plant and equipment, except for leasehold improvements, is based on the straight-line method over the estimated economic useful life. Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economic useful life of the asset or the term of the lease, including optional renewal periods if renewal of the lease is reasonably assured.
Additions and improvements, including interest and certain labor costs incurred during the construction period, are capitalized. The Company records the fair value of a legal liability for an asset retirement obligation in the period it is incurred. The estimated removal cost is initially capitalized and depreciated over the remaining life of the underlying asset. The associated liability is accreted to its present value each period. Once the obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as gain or loss on disposition.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill — Goodwill represents the excess of the purchase price consideration over the fair value of net assets acquired and recorded in connection with business acquisitions. Goodwill is generally allocated to reporting units one level below business segments. Goodwill is tested for impairment on an annual basis or when events or changes in circumstances indicate that such assets may be impaired. If the net book value of the reporting unit exceeds its fair value, an impairment loss may be recognized. An impairment loss is measured as the excess of the carrying value of goodwill of a reporting unit over its implied fair value. The implied fair value of goodwill represents the difference between the fair value of the reporting unit and the fair value of all the assets and liabilities of that unit, including any unrecognized intangible assets.
Intangible assets not subject to amortization — Intangible assets represent purchased assets that lack physical substance but can be separately distinguished from goodwill because of contractual or legal rights, or because the asset is capable of being separately sold or exchanged. Intangible assets not subject to amortization are tested for impairment annually, or when events or changes in circumstances indicate that the asset might be impaired. Prior to completing the sale of our wireless spectrum licenses, Federal Communications Commission ("FCC") licenses for wireless spectrum represented indefinite-lived intangible assets and were renewed annually for a nominal fee based on meeting service and geographic coverage requirements.

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Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Long-Lived Assets — Management reviews the carrying value of property, plant and equipment and other long-lived assets, including intangible assets with definite lives, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition is less than its carrying amount. An impairment loss is measured as the amount by which the asset’s carrying value exceeds its estimated fair value. Long-lived intangible assets are amortized based on the estimated economic value generated by the asset in future years.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Equity Method InvestmentsInvestment in CyrusOne— - EffectiveOn January 24, 2013, we completed the completion dateinitial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operates our former Data Center Colocation business. CyrusOne conducts its data center business through CyrusOne LP, an operating partnership. Effective with the IPO, we retained ownership of approximately 1.9 million shares, or 8.6%, of CyrusOne's IPO,common stock and were a limited partner in CyrusOne LP, owning approximately 42.6 million, or 66%, of its partnership units. We effectively owned 69% of CyrusOne and continued to have significant influence over the entity, but we did not control its operations. Therefore, effective January 24, 2013, we no longer included the accounts of CyrusOne in our consolidated financial statements, but accounted for our ownership in CyrusOne is accounted for as an equity method investment. From thatthe date of IPO, we recognizerecognized our proportionate share of CyrusOne's net income or loss as non-operating income or expense in our Consolidated Statement of Operations.Operations through December 31, 2015. For the period January 1, 2013 through January 23, 2013, we consolidated CyrusOne's operating results. For
On December 31, 2015, we exchanged our remaining 6.3 million operating partnership units in CyrusOne LP for an equal number of newly issued shares of common stock of CyrusOne Inc. As a result, our 9.5% ownership in CyrusOne, which consisted of 6.9 million common shares, no longer constituted significant influence over the entity. Effective January 1, 2016, our investment in CyrusOne was no longer accounted for using the equity method. Dividends declared by CyrusOne in 2016 totaled $6.4 million and were included in "Other (income) expense, net" in the Consolidated Statement of Operations. As of December 31, 2016, we held 2.8 million shares of CyrusOne Inc. common stock valued at $128.0 million which are accounted for as available-for-sale securities.
As of December 31, 2016, "Investment in CyrusOne" on the Consolidated Balance Sheets has been recorded at fair value, which was determined based on closing market price of CyrusOne at December 31, 2016. This investment is classified as Level 1 in the fair value hierarchy. Unrealized gains and losses on our investment in CyrusOne are included in "Accumulated other comprehensive loss", net of taxes on the Consolidated Balance Sheets. At December 31, 2016, gross unrealized gains totaled $105.0 million. When evaluating the investments for other-than-temporary impairment, the Company reviews such factors as the financial condition of the issuer, severity and duration of the fair value decline and evaluation of factors that could cause the investment to have an other-than-temporary decline in fair value. During the year ended December 31, 2014 and December 31, 2013,2016 the Company received cash dividends from CyrusOne totaling $28.4 million and $21.3 million, respectively. Dividends from CyrusOne are recognized as a reduction of our investment.did not recognize any impairment charges related to Investment in CyrusOne.
Equity Method Investments — During 2014, we invested a total of $5.5 million in other entities, which are accounted for as equity method investments and the carrying value has been recorded within “Other noncurrent assets” in the Consolidated Balance Sheets. The Company's proportionate share of the investments’ net loss had a minimal impact on our Consolidated Statement of Operations.
Our equityOperations in 2014, 2015 and 2016. Equity method investments are tested for impairment on an annual basis or when events or changes in circumstances indicate that such assets may be impaired.
Cost Method Investments — Certain of our cost method investments do not have readily determinable fair values. The carrying value of these investments was $2.9$3.4 million and $2.5$3.0 million as of December 31, 20142016 and 2013,2015, respectively, and was included in “Other"Other noncurrent assets”assets" in the Consolidated Balance Sheets. Investments are reviewed annually for impairment, or sooner if changes in circumstances indicate the carrying value may not be recoverable. If the carrying value of the investment exceeds its estimated fair value and the decline in value is determined to be other-than-temporary, an impairment loss is recognized for the difference. The Company estimates fair value using external information and discounted cash flow analysis.
Leases — Certain property and equipment are leased. At lease inception, the lease terms are assessed to determine if the transaction should be classified as a capital or operating lease.
Several of the buildings used in our former data center operations were leased facilities. When we were involved in the construction of structural improvements to the leased property, we were deemed the accounting owner of leased real estate. In these instances, we bore substantially all the construction period risk, such as managing or funding construction. These transactions generally did not qualify for sale-leaseback accounting due to our continued involvement in these data center operations. As construction progressed, the value of the asset and obligation was increased by the fair value of the structural improvements. When construction was completed, the asset was placed in service and depreciation commenced. Leased real estate was depreciated to the lesser of (i) its estimated fair value at the end of the term or (ii) the expected amount of the unamortized obligation at the end of the term.
Treasury Shares — The repurchase of common shares is recorded at purchase cost as treasury shares. Our policy is to retire, either formally or constructively, treasury shares that management anticipates will not be reissued. Upon retirement, the purchase cost of the treasury shares that exceeds par value is recorded as a reduction to “Additional paid-in capital” in the Consolidated Balance Sheets.
Revenue Recognition — We apply the revenue recognition principles described in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic ("ASC") 605, “Revenue Recognition.” Under ASC 605, revenue is recognized when there is persuasive evidence of a sale arrangement, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
With respect to arrangements with multiple deliverables, management determines whether more than one unit of accounting exists in an arrangement. To the extent that the deliverables are separable into multiple units of accounting, total consideration is allocated to the individual units of accounting based on their relative fair value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is recognized for each unit of accounting as delivered, or as service is performed, depending on the nature of the deliverable comprising the unit of accounting.
The Company has sales with one large customer that contributed 14% to consolidated revenue in 2014. The same customer had receivables of 26% and 19% of the outstanding accounts receivable balance as of December 31, 2014 and 2013, respectively.

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Form 10-K Part II Cincinnati Bell Inc.

The Company has sales with one customer, GE, that contributed 12% to total revenue in each of 2016 and 2015, and 14% in 2014. Revenue derived from foreign operations is less than 1% of consolidated revenue.
WirelineEntertainment and Communications — Revenues from local telephone, special access, internet product and entertainmentvideo services, which are billed monthly prior to performance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long distance, switched access and other usage based charges are billed monthly in arrears. WirelineEntertainment and Communications bills service revenue in regular monthly cycles, which are spread throughout the days of the month. As the last day of each billing cycle rarely coincides with the end of the reporting period for usage-based services such as long distance and switched access, we must estimate service revenues earned but not yet billed. These estimates are based upon historical usage, and we adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.
Initial billings for Wireline service connection and activation are deferred and amortized into revenue on a straight-line basis over the average customer life. The associated connection and activation costs, to the extent of the upfront fees, are also deferred and amortized on a straight-line basis over the average customer life.
Pricing of local voice services is generally subject to oversight by both state and federal regulatory commissions. Such regulation also covers services, competition, and other public policy issues. Various regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.
IT Services and Hardware — Professional services, including product installations,Services are generally recognized as the service is provided. Maintenance services on telephony equipment areis deferred and recognized ratably over the term of the underlying customer contract, generally one to three years.
Equipment revenue is recognized upon the completion of our contractual obligations, such as shipment, delivery, installation, or customer acceptance. Installation service revenue is generally recognized when installation is complete. We sell equipment and installation services on both a combined and standalone basis.
The Company is a reseller of IT and telephony equipment. For these transactions, we consider the gross versus net revenue recording criteria of ASC 605. Based on this criteria, these equipment revenues and associated costs have generally been recorded on a gross basis rather than recording the revenues net of the associated costs. Vendor rebates are earned on certain equipment sales. When the rebate is earned and the amount is determinable, we recognize the rebate as an offset to cost of products sold.
WirelessDiscontinued Operations — Postpaid wireless and reciprocal compensation arewere billed monthly in arrears. Wireless bills serviceService revenue was billed in regular monthly cycles, which arewere spread throughout the days of the month. As the last day of each billing cycle rarely coincidescoincided with the end of the reporting period for usage-based services such as postpaid wireless, we estimateestimated service revenues earned but not yet billed. Our estimates arewere based upon historical usage, and we adjustadjusted these estimates during the period in which actual usage iswas determinable, typically in the following reporting period.
Revenue from prepaid wireless service, which iswas collected in advance, iswas not recognized upon billing or cash receipt but rather is deferred until the service iswas provided.
Wireless handset revenue and the related activation revenue arewere recognized when the products arewere delivered to and accepted by the customer, as this iswas considered to be a separate earnings process from the sale of wireless services. Wireless equipment costs arewere also recognized upon handset sale and arewere generally in excess of the related handset and activation revenue. Revenue from termination fees iswas recognized when collection iswas deemed reasonably assured.
Data Center Colocation— During the period of time in which we included the accounts of CyrusOne in our consolidated financial statements, data center colocation rentals were generally billed monthly in advance and some contracts had escalating payments over the non-cancellable term of the contract. If rents escalated without the lessee gaining access to or control over additional leased space or power, and the lessee took possession of, or controlled the physical use of the property (including all contractually committed power) at the beginning of the lease term, the rental payments by the lessee were recognized as revenue on a straight-line basis over the term of the lease. If rents escalated because the lessee gained access to and control over additional leased space or power, revenue was recognized in proportion to the additional space or power in the years that the lessee had control over the use of the additional space or power.
Some of our leases were structured on a full-service gross basis in which the customer paid a fixed amount for both colocation rental and power. Other leases provided that the customer would be billed for power based upon actual usage which was separately metered. In both cases, this revenue is presented on a gross basis in the accompanying Consolidated Statements of Operations. Power was generally billed one month in arrears and an estimate of this revenue was accrued in the month that the associated costs were incurred. We generally were not entitled to reimbursements for real estate taxes, insurance or other operating expenses.

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Revenue was recognized for services or products that were deemed separate units of accounting. When a customer made an advance payment which was not deemed a separate unit of accounting, deferred revenue was recorded. This revenue was recognized ratably over the expected term of the customer relationship, unless the pattern of service suggested otherwise.
Certain customer contracts required specified levels of service or performance. If we failed to meet these service levels, our customers may have been eligible to receive credits on their contractual billings. These credits were recognized against revenue when an event occurred that gave rise to such credits.
Advertising Expenses — Costs related to advertising are expensed as incurred. Advertising costs were $8.9$9.5 million,, $12.2 $8.3 million,, and $16.6$7.2 million in 2014, 2013,2016, 2015, and 2012,2014, respectively.
Legal Expenses — In the normal course of business, the Company is involved in various claims and legal proceedings. Legal costs incurred in connection with loss contingencies are expensed as incurred. Legal claim accruals are recorded once determined to be both probable and estimable.
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Form 10-K Part IICincinnati Bell Inc.

Income, Operating, and Regulatory Taxes
Income taxes — The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various foreign, state and local jurisdictions. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return. The income tax provision consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. Deferred investment tax credits are amortized as a reduction of the provision for income taxes over the estimated useful lives of the related property, plant and equipment. Deferred income taxes are provided for temporary differences between financial statement and income tax assets and liabilities. Deferred income taxes are recalculated annually at rates then in effect. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than not to be realized. The ultimate realization of the deferred income tax assets depends upon the ability to generate future taxable income during the periods in which basis differences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards.
Previous tax filings are subject to normal reviews by regulatory agencies until the related statute of limitations expires.
Operating taxes — Certain operating taxes such as property, sales, use, and gross receipts taxes are reported as expenses in operating income primarily within cost of services. 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.
Regulatory taxes — The Company incurs federal and state regulatory taxes on certain revenue producing transactions. We are permitted to recover certain of these taxes by billing the customer; however, collections cannot exceed the amount due to the federal regulatory agency. These federal regulatory taxes are presented in sales and cost of services on a gross basis because, while the Company is required to pay the tax, it is not required to collect the tax from customers and, in fact, does not collect the tax from customers in certain instances. The amounts recorded as revenue for 2016, 2015, and 2014 2013, and 2012 were $17.9$16.3 million, $18.9$15.5 million, and $22.2$15.2 million, respectively. The amounts expensed for 2016, 2015, and 2014 2013, and 2012 were $19.6$17.5 million, $19.2$17.9 million, and $24.4$16.4 million, respectively. We record all other federal taxes collected from customers on a net basis.
Stock-Based Compensation — Compensation cost is recognized for all share-based awards to employees and non-employee directors. We value all share-based awards to employees at fair value on the date of grant and expense this amount over the required service period, generally defined as the applicable vesting period. For awards which contain a performance condition, compensation expense is recognized over the service period, when achievement of the performance condition is deemed probable. The fair value of stock options and stock appreciation rights is determined using the Black-Scholes option-pricing model using assumptions such as volatility, risk-free interest rate, holding period and dividends. The fair value of stock awards is based on the Company’s closing share price on the date of grant. For all share-based payments, an assumption is also made for the estimated forfeiture rate based on the historical behavior of employees. The forfeiture rate reduces the total fair value of the awards to be recognized as compensation expense. Our accounting policy for graded vesting awards is to recognize compensation expense on a straight-line basis over the vesting period. We have also granted employee awards to be ultimately paid in cash which are indexed to the change in the Company’s common stock price. These awards are adjusted to the fair value of the Company's common stock, and the adjusted fair value is expensed on a pro-rata basis over the vesting period. When an award is granted to an employee who is retirement eligible, the compensation cost is recognized over the service period up to the date that the employee first becomes eligible to retire.

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Form 10-K Part IICincinnati Bell Inc.

Pension and Postretirement Benefit Plans — The Company maintains qualified and non-qualified defined benefit pension plans, and also provides postretirement healthcare and life insurance benefits for eligible employees. We recognize the overfunded or underfunded status of the defined benefit pension and other postretirement benefit plans as either an asset or liability. Changes in the funded status of these plans are recognized as a component of comprehensive income (loss) in the year they occur. Pension and postretirement healthcare and life insurance benefits earned during the year and interest on the projected benefit obligations are accrued and recognized currently in net periodic benefit cost. Prior service costs and credits are amortized over the average life expectancy of participants or remaining service period, based upon whether plan participants are mostly retirees or active employees. Net gains or losses resulting from differences between actuarial experience and assumptions or from changes in actuarial assumptions are recognized as a component of annual net periodic benefit cost. Unrecognized actuarial gains or losses that exceed 10% of the projected benefit obligation are amortized on a straight-line basis over the average remaining service life of active employees for the pension and bargained postretirement plans (approximately 10-149-13 years) and average life expectancy of retirees for the management postretirement plan (approximately 1617 years).
Termination Benefits — The Company has written severance plans covering both its management and union employees and, as such, accrues probable and estimable employee separation liabilities in accordance with ASC 712, “Compensation — Nonretirement Postemployment Benefits.” These liabilities are based on the Company’s historical experience
Table of severance, historical severance costs, and management’s expectation of future separations.Contents
Special termination benefits are recognized upon acceptance by an employee of a voluntary termination offer. For terminations involving a large group of employees, we consider whether a pension and postretirement curtailment event has occurred. We define a curtailment as an event that reduces the expected years of future service of present employees by 10% or more.
Form 10-K Part IICincinnati Bell Inc.

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, contingent consideration is presented at fair value at the date of acquisition. Transaction costs are expensed as incurred.
Fair Value Measurements — Fair value of financial and non-financial assets and liabilities is defined as the price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is utilized to measure certain investments on a recurring basis. Fair value measurements are also utilized to determine the initial value of assets and liabilities acquired in a business combination, to perform impairment tests, and for disclosure purposes.
Management uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted market prices or observable inputs, fair value is determined using valuation models that incorporate assumptions that a market participant would use in pricing the asset or liability.
Fair value measurements are classified within one of three levels, which prioritize the inputs used in the methodologies of measuring fair value for assets and liabilities, as follows:
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.
Foreign Currency Translation and Transactions — The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end of the period, while revenues and expenses are translated at average rates of exchange during the period. Gains or losses from translation of foreign operations where the local currency is the functional currency are included as components of accumulated other comprehensive income (loss).income. Gains and losses arising from foreign currency transactions are recorded in other income (expense) in the period incurred.

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Form 10-K Part II Cincinnati Bell Inc.

2.    Recently Issued Accounting Standards
In July 2013,May 2014, the FASB issued new guidance under Accounting Standards Update ("ASU") 2013-11 regarding the presentation of unrecognized tax benefits in financial statements. This new standard requires the netting in the balance sheet of unrecognized tax benefits against a deferred tax asset for a same-jurisdiction loss or other carryforward that would apply in settlement of the uncertain tax positions. To the extent a net operating loss ("NOL") or tax credit carryforward is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit would be presented in the balance sheet as a liability. This standard went into effect for annual and interim periods beginning after December 15, 2013. We adopted this new guidance beginning with our interim financial statements for the three months ended March 31, 2014. The adoption of this standard did not have a material impact on our financial statements for the year ended December 31, 2014.
In February 2013, the FASB amended the guidance in ASC 220 on comprehensive income. The new guidance requires additional information to be disclosed about the amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amounts reclassified are required under GAAP to be reclassified in their entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, cross references to other disclosures will be required. As we adopted this new guidance beginning with our interim financial statements for the three months ended March 31, 2013, all years presented are comparable. See Note 12 for our disclosures.
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.  The amendments in this update increased the threshold for a disposal to qualify as a discontinued operation and require new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation.  The standard will be effective for us on January 1, 2015.  The adoption of this pronouncement may affect our presentation and disclosure of any future dispositions.
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. ThisIn August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company will adopt the standard will be effective for usand all subsequent amendments in the first quarter of the fiscal year ending December 31, 2017. 2018.
The Companyguidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is currently in the process of evaluating the impact of adoption of this ASUdependent on the company’s consolidatedsuccessful and timely implementation of a revenue software application that has been procured from a third-party provider and the completion of our analysis of information necessary to restate prior period financial statements.

In August 2014,While we are continuing to assess all potential impacts of the standard, we currently believe the standard will not have a material impact on our consolidated financial statements with the possible exception of our gross treatment of hardware revenue. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations and was not intended to change the historical presentation of value added resellers as gross, however there appears to be diversity in opinion based on facts and circumstances. We will continue to monitor discussions by the Transition Resource Group and the FASB throughout 2017.

The FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern.  The amendments provideConcern in August 2014.  This standard update provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will beis effective for us for the fiscal year ending December 31, 2016.  The adoption of this pronouncement did not have a material impact on our financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements.  Specifically, this amendment requires that costs associated with the issuance of debt be presented on the balance sheet as a direct deduction from the related debt liability. The Company retrospectively adopted the amended standard effective January 1, 2016. The adoption resulted in a prior period adjustment due to a change in accounting principle. The Consolidated Balance Sheet for the period ending December 31, 2015 has been restated to reflect this change in accounting principle. Note issuance costs of $8.0 million were reclassed from “Other noncurrent assets” to “Long-term debt, less current portion.” On the effective date of ASU 2015-03, the Company made a one-time policy election to record costs incurred in connection with obtaining revolving credit agreements as an asset and to amortize these costs ratably over the term of the agreement. This accounting treatment is consistent with how deferred financing costs were accounted for prior to adoption of ASU 2015-03. Note 6 has been updated to reflect the adjustment.
The FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance in GAAP on the classification and measurement of financial instruments in January 2016. The amended guidance requires entities to carry all investments in equity securities at fair value through net income unless the entity has elected the practicability exception to fair value measurement. This standard will be effective for the fiscal year ending December 31, 2018 and will require a cumulative-effect adjustment to beginning retained earnings on this date. The Company is currently in the process of evaluating the impact of adoption of this pronouncementASU on the consolidated financial statements.
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Form 10-K Part IICincinnati Bell Inc.

In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee model that brings most leases on the balance sheet as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The new standard is effective for public entities for fiscal years beginning after December 15, 2018, and lessees and lessors are required to use a modified retrospective transition method for existing leases. The Company is in the process of evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The new standard is effective for us beginning January 1, 2017.
The primary impact of adoption will be the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital starting in the first quarter of fiscal year 2017.  Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements will have no impact to retained earnings at January 1, 2017, where the cumulative effect of these changes are required to be recorded. We have elected to adopt a company-wide policy change due to the change in accounting principle and will record forfeitures as they are incurred on a go forward basis. As a result of the change in accounting principle the cumulative-effect adjustment to retained earnings to account for the accounting policy election is immaterial to the financial statements.

We plan to apply the presentation requirements for cash flows related to excess tax benefits retrospectively to all periods presented which is not expected to have a material impact onto 2016 net cash provided by operations and 2016 net cash used in financing when presented in 2017. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in our financial statements.consolidated cash flows statements since such cash flows have historically been presented as a financing activity.
On January 9, 2015,
In August 2016, the FASB issued ASU 2015-01, Income Statement-Extraordinary2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Unusual Items. The updated standard will no longer allow for transactions that are unusual in natureCash Payments, which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and occur infrequently to be presented net-of-tax after income from continuing operations as an extraordinary itempayments in the Consolidated Statementsstatement of Operations. Undercash flows. The FASB issued the ASU with the intent of reducing diversity in practice. The new guidance, these transactions will be separately presented within income from continuing operations similar to current guidance for transactions that are unusual in nature or occur infrequently. The standard will beis effective for us on January 1, 2016.public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption of this pronouncement is not expected to have a material impact on our financial statements as there are no transactions presented as an extraordinary itemASU on the Consolidated StatementsCompany’s consolidated statement of Operations.cash flows and plans to adopt the standard effective January 1, 2018.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Under the amended guidance, the Company shall now recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company plans to early adopt the amended guidance effective January 1, 2017 and does not anticipate a significant impact to the financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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Form 10-K Part III Cincinnati Bell Inc.

3.
Investment in CyrusOne
On January 24, 2013, we completed the IPO of CyrusOne, our former Data Center Colocation segment. As of this date, we no longer control CyrusOne's operations and we removed the following assets and liabilities of CyrusOne from our consolidated financial statements:
(dollars in millions)  
Cash $12.2
Receivables 41.5
Other current assets 13.4
Property, plant and equipment 736.2
Goodwill and intangibles 377.7
Other noncurrent assets 44.0
Total assets 1,225.0
   
Current portion of long-term debt 6.3
Accounts payable 29.4
Unearned revenue and customer deposits 24.1
Other current liabilities 12.9
Long-term debt 550.3
Other noncurrent liabilities 92.3
Total liabilities 715.3
   
Net assets $509.7

Commencing January 17, 2014, we are permitted to exchange the partnership units of CyrusOne LP into cash or shares of common stock of CyrusOne, as determined by CyrusOne, on a one-for-one basis based upon the fair value of a share of CyrusOne common stock, subject to certain limitations which restricted the volume of shares we are permitted to sell. On April 4, 2014, the registration statement filed by CyrusOne on March 24, 2014 became effective and eliminated all prior limitations restricting the volume of shares we are allowed to sell.
On June 25, 2014, we consummated the sale of 16.0 million operating partnership units of CyrusOne LP to CyrusOne, Inc. at a price of $22.26 per unit. The sale generated proceeds of $355.9 million and resulted in a gain of $192.8 million.
Prior to the sale of our 16.0 million partnership units of CyrusOne LP, we accounted for our 68% effective ownership of CyrusOne as an equity method investment. As of December 31, 2014, we effectively owned 44% of CyrusOne, which was held in the form of 1.9 million shares of CyrusOne common stock and approximately 26.6 million CyrusOne LP partnership units. As we continue to have significant influence over CyrusOne, we account for this investment using the equity method. For the year ended December 31, 2014, our equity method share of CyrusOne's net loss was $7.0 million. For the year ended December 31, 2013, our equity method share of CyrusOne's net loss was $10.7 million.
As of December 31, 2014, the fair value of this investment was $785.0 million based on the quoted market price of CyrusOne's common stock, which is considered a Level 1 measurement in the fair value hierarchy.

Summarized financial information for CyrusOne is as follows:
(dollars in millions) Year Ended December 31, 2014 January 24, 2013 to December 31, 2013
Revenue $330.9
 $248.4
Operating income 40.0
 28.9
Net loss (14.5) (15.6)

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(dollars in millions) December 31, 2014 December 31, 2013
Net investment in real estate $1,051.4
 $883.8
Total assets 1,586.5
 1,506.8
Total liabilities 869.5
 729.2

Transactions with CyrusOne
Revenues - The Company records service revenue from CyrusOne under contractual service arrangements which include, among others, providing services such as fiber transport, network support, service calls, monitoring and management, storage and back-up, and IT systems support.
Operating Expenses - We lease data center and office space from CyrusOne at certain locations in our operating territory under operating leases and are also billed for other services provided by CyrusOne under contractual service arrangements. In the normal course of business, the Company also provides certain administrative services to CyrusOne which are billed based on agreed-upon rates. These expense recoveries from CyrusOne are credited to the expense account in which they were initially recorded.
For the year ended December 31, 2013, we recognized transaction-related compensation of $20.0 million associated with payments made to CyrusOne employees in April 2013. See Note 8 for further discussion of this compensation plan.
Revenues and operating costs and expenses from transactions with CyrusOne were as follows:
(dollars in millions) Year Ended December 31, 2014 January 24, 2013 to December 31, 2013
Revenue:    
Services provided to CyrusOne $1.7
 $2.1
     
Operating costs and expenses:    
Transaction-related compensation to CyrusOne employees $—
 $20.0
Charges for services provided by CyrusOne 9.1
 8.8
Administrative services provided to CyrusOne (0.5) (0.6)
Total operating costs and expenses $8.6
 $28.2
Dividends of $28.4 million and $21.3 million were received in 2014 and 2013, respectively. In addition, on November 4, 2014, CyrusOne declared dividends of $0.21 per share payable on its common shares and CyrusOne LP partnership units. This dividend was paid on January 9, 2015 to holders of record as of December 26, 2014.
In addition to the agreements noted above, the Company entered into a tax sharing agreement with CyrusOne.  Under the terms of the agreement, CyrusOne will reimburse the Company for the Texas Margin Tax liability that CyrusOne would have incurred if they filed a Texas Margin Tax return separate from the consolidated filing.  The agreement will remain in effect until terminated by the mutual written consent of the parties or when the Company is no longer required to file the Texas Margin Tax return on a consolidated basis with CyrusOne.  As of December 31, 2014 and 2013, the receivable for prior periods covered by this agreement amounted to $1.7 million and $1.5 million, respectively. These balances are included in Receivable from CyrusOne. 

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At December 31, 2014, amounts receivable from and payable to CyrusOne were as follows:
(dollars in millions) December 31, 2014 December 31, 2013
Accounts receivable $1.7
 $2.1
Dividends receivable 6.0
 7.1
Receivable from CyrusOne $7.7
 $9.2
     
Accounts payable $0.4
 $0.5
Payable to CyrusOne $0.4
 $0.5

4.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, exercise of warrants, 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:EPS after consideration of the 1-for-5 reverse stock split that became effective 11:59 p.m. October 4, 2016:
Year Ended December 31,Year Ended December 31, 2016
(in millions, except per share amounts)2014 2013 2012Continuing Operations Discontinued Operations Total
Numerator:          
Net income (loss)$75.6
 $(54.7) $11.2
Net income$101.8
 $0.3
 $102.1
Preferred stock dividends10.4
 10.4
 10.4
10.4
 —
 10.4
Net income (loss) applicable to common shareowners - basic and diluted$65.2
 $(65.1) $0.8
Net income applicable to common shareowners - basic and diluted$91.4
 $0.3
 $91.7
Denominator:          
Weighted-average common shares outstanding - basic208.5
 205.9
 197.0
42.0
 42.0
 42.0
Warrants—
 —
 4.5
Stock-based compensation arrangements1.1
 —
 3.2
0.1
 0.1
 0.1
Weighted-average common shares outstanding - diluted209.6
 205.9
 204.7
42.1
 42.1
 42.1
Basic and diluted earnings (loss) per common share$0.31
 $(0.32) $0.00
Basic and diluted earnings per common share$2.17
 $0.01
 $2.18
 Year Ended December 31, 2015
(in millions, except per share amounts)Continuing Operations Discontinued Operations Total
Numerator:     
Net income$290.8
 $62.9
 $353.7
Preferred stock dividends10.4
 —
 10.4
Net income applicable to common shareowners - basic and diluted$280.4
 $62.9
 $343.3
Denominator:     
Weighted-average common shares outstanding - basic41.9
 41.9
 41.9
Stock-based compensation arrangements0.1
 0.1
 0.1
Weighted-average common shares outstanding - diluted42.0
 42.0
 42.0
Basic earnings per common share$6.69
 $1.50
 $8.19
Diluted earnings per common share$6.68
 $1.49
 $8.17
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Form 10-K Part ICincinnati Bell Inc.

 Year Ended December 31, 2014
(in millions, except per share amounts)Continuing Operations Discontinued Operations Total
Numerator:     
Net income$117.7
 $(42.1) $75.6
Preferred stock dividends10.4
 —
 10.4
Net income applicable to common shareowners - basic and diluted$107.3
 $(42.1) $65.2
Denominator:     
Weighted-average common shares outstanding - basic41.7
 41.7
 41.7
Stock-based compensation arrangements0.2
 0.2
 0.2
Weighted-average common shares outstanding - diluted41.9
 41.9
 41.9
Basic earnings per common share$2.57
 $(1.01) $1.56
Diluted earnings per common share$2.56
 $(1.00) $1.56
For the yearyears ended December 31, 2016, 2015 and 2014, awards under the Company’s stock-based compensation plans for common shares of 3.60.4 million, were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For the year ended December 31, 2013, the Company had a net loss available to common shareholders0.7 million 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 year ended December 31, 2012, awards under our stock-based compensation plans for common shares of 5.30.7 million, respectively, were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For all periods presented, preferred stock convertible into 4.50.9 million common shares was excluded as it was anti-dilutive.


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5.4.     Property, Plant and Equipment
Property, plant and equipment is comprised of the following:
December 31, 
Depreciable
Lives (Years)
December 31, 
Depreciable
Lives (Years)
(dollars in millions)2014 2013 2016 2015 
Land and rights-of-way$4.3
 $4.3
 20-Indefinite$4.3
 $4.3
 20-Indefinite
Buildings and leasehold improvements174.0
 172.8
 2-40173.7
 165.0
 3-40
Network equipment3,028.6
 2,897.7
 2-503,165.7
 2,959.3
 2-50
Office software, furniture, fixtures and vehicles157.9
 152.9
 2-14150.6
 131.4
 2-14
Construction in process25.7
 20.7
 n/a 17.0
 29.2
 n/a 
Gross value3,390.5
 3,248.4
 3,511.3
 3,289.2
 
Accumulated depreciation(2,531.0) (2,345.6) (2,425.8) (2,313.7) 
Property, plant and equipment, net$859.5
 $902.8
 $1,085.5
 $975.5
 
Depreciation expense on property, plant and equipment was $228.5totaled $182.0 million, $166.0141.3 million, and $198.8127.2 million in 20142016, 20132015, and 20122014, respectively. Approximately 89%In 2016, approximately 85%, 85%,compared to approximately 79% in 2015 and 87%81% in 2014, of "Depreciation," as presented in the Consolidated Statements of Operations, in 2014, 2013, and 2012, respectively, was associated with the cost of providing services. There are numerous assets included within network equipment resulting in a range of depreciable lives between 2 and 50 years, the majority of which fall within the range of 97 to 22 years. In 2016, we reduced the estimated useful life of certain set-top boxes and the related software as we upgraded to new technology. In the fourth quarter of 2015, we reduced the useful life of our copper assets from 15 years to 7 years as customers have continued to migrate to services provided by our fiber network.

No asset impairment losses were recognized in 2016 or 2015. During the year ended December 31, 2014, an asset impairment loss of $7.5 million was recognized for the write-off of certain construction-in-progress projects that will no longer be completed due to the wind down of wireless operations. Additionally, the WirelineEntertainment and Communications segment recognized an asset impairment loss of $4.6 million for the abandonment of an internal use software project.No asset impairment losses were recognized in 2013. During the year ended December 31, 2012, an asset impairment loss of $11.8 million was recognized in the Data Center Colocation segment on certain leasehold improvements. Also during 2012, asset impairment losses of $0.4 million and $0.5 million were recognized in the Wireless and Wireline segments, respectively. The Wireless impairment loss was associated with abandoned assets that have no resale market, and the Wireline impairment loss was associated with an out-of-territory fiber network.
In the first quarter of 2013, and in connection with our review of the estimated remaining useful lives of property, plant and equipment, we shortened the estimated useful lives assigned to wireless network software to three years.  This change resulted from smartphone-driven technology upgrades, enhancements and projected retirements. As a result of this change in estimate, we recorded depreciation expense of $8.5 million in the first quarter of 2013 which increased basic and diluted loss per share by approximately $0.03 per share.
In conjunction with our long-lived asset analysis conducted in the fourth quarter of 2013, we reassessed the useful lives of all of our Wireless property, plant and equipment. The remaining useful lives for all Wireless property, plant, and equipment assets were reduced to 30 months as of December 31, 2013, resulting in additional depreciation expense of $3.0 million in the quarter. The additional depreciation expense in the fourth quarter of 2013 had the impact of increasing basic2016 and diluted loss per share for the year by $0.01 per share.
Following the agreement to sell our wireless spectrum licenses and certain other assets in the second quarter of 2014, we further reduced the remaining useful lives of those assets not included in the sale to be fully depreciated as of March 31, 2015. As a result of the combined changes in estimate, depreciation and amortization expense increased by $62.2 million for the year ended December 31, 2014 and reduced both basic and diluted earnings per share by approximately $0.17 per share. In addition, adjusting the useful lives of our Wireless property, plant and equipment also required that we reduce the amortization period of the deferred gain associated with the 2009 tower sale in a similar manner. Amortization of the deferred gain associated with the tower sale totaled $22.9 million in 2014, an increase of $19.6 million, with an effective impact on both basic and diluted earnings per share of approximately $0.05 per share. Amortization of deferred gain of $3.3 million and $2.3 million was recorded for the years ended December 31, 2013, and 2012, respectively.
As of December 31, 2014 and 2013,2015, buildings and leasehold improvements, network equipment, and office software, furniture, fixtures and vehicles include $124.4$96.8 million and $126.8$91.2 million,, respectively, of assets accounted for as capital leases. Concurrent with the shut-down of our wireless network as of March 31, 2015, $57.7 million of fully depreciated capital lease assets were transferred to continuing operations as these assets were retained by the Company. These leases or financing arrangements.were previously reported in discontinued operations as they were still being utilized in our wireless operations. Depreciation of capital lease assets is included in "Depreciation and amortization" in the Consolidated Statements of Operations.

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6.5.    Goodwill and Intangible Assets
Goodwill
At December 31, 20142016 and 20132015, the gross value of goodwill was $64.7$14.3 million. AccumulatedA $0.1 million reduction in carrying value was recorded for the year ended December 31, 2015. No impairment losses totaling $50.3 million as of December 31, 2014 and 2013were related to the Wireless segment. The deconsolidation of CyrusOnerecognized in January 2013 resulted in the divestiture of $276.2 million of goodwill. The changes in the carrying amount of goodwill for the years ended December 31, 20142016 or 2015. and 2013 were as follows:
(dollars in millions)Wireline IT Services and Hardware Wireless Data Center Colocation Total
Balance as of December 31, 2012$11.8
 $2.6
 $—
 $276.2
 $290.6
Goodwill divested from deconsolidation of CyrusOne—
 —
 —
 (276.2) (276.2)
Balance as of December 31, 201311.8
 2.6
 —
 —
 14.4
Impairment—
 —
 —
 —
 —
Balance as of December 31, 2014$11.8
 $2.6
 $—
 $—
 $14.4
Intangible Assets Not Subject to Amortization
As of December 31, 2014, the Company had no intangible assets not subject to amortization due to the agreement to sell our FCC wireless spectrum licenses which closed on September 30, 2014. As of December 31, 2013, intangible assets not subject to amortization consisted solely of FCC wireless spectrum licenses with a carrying value of $88.2 million.
Intangible Assets Subject to Amortization
As of December 31, 20142016 and 20132015, intangible assets subject to amortization consisted of customer relationships and trademarks.relationships. For the years ended December 31, 20142016, 2015, and 2013,2014, no impairment losses were recognized on intangible assets subject to amortization. For the year ended December 31, 2012, an impairment loss of $1.5 million was recognized by our former Data Center Colocation segment on a customer relationship intangible.
Summarized below are the carrying values for the major classes of intangible assets subject to amortization:
 Weighted-        
 Average December 31, 2014 December 31, 2013
 Life in Gross Carrying Accumulated Gross Carrying Accumulated
(dollars in millions)Years Amount Amortization Amount Amortization
Customer relationships         
     Wireline10 $7.0
 $(6.6) $7.0
 (6.1)
     Wireless9 8.7
 (8.6) 8.7
 (8.5)
   15.7
 (15.2) 15.7
 (14.6)
Trademarks         
     Wireless6 6.2
 (5.7) 6.2
 (3.8)
          
   21.9
 $(20.9) $21.9
 $(18.4)
 Weighted-        
 Average December 31, 2016 December 31, 2015
 Life in Gross Carrying Accumulated Gross Carrying Accumulated
(dollars in millions)Years Amount Amortization Amount Amortization
Customer relationships - Entertainment and Communications10 $7.0
 $7.0
 $7.0
 $6.8
Amortization expense for intangible assets subject to amortization was $2.50.2 million in 2016, $0.3 million in 2015, and $0.4 million in 2014, $3.6 million in 2013, and $18.6 million in 2012. The deconsolidation of CyrusOne in January 2013 resulted in the divestiture of customer relationships, trademarks and a favorable leasehold interest with net book values of $91.7 million, $6.1 million and $3.7 million, respectively. In the fourth quarter of 2013, the remaining useful life for the Wireless trademark was reduced to 30 months as of December 31, 2013. Additionally, in the second quarter of 2014, following the agreement to sell our wireless spectrum licenses and certain other assets, we further reduced the remaining useful life of the Wireless trademark to be fully amortized as of March 31, 2015. The change in the useful life resulted in approximately $1 million of additional expense in 2014.


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The following table presents estimated amortization expense for the assets' remaining useful lives:
(dollars in millions) 
2015$0.8
20160.2

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7.6.Debt and Other Financing Arrangements
The Company’s debt consists of the following:
December 31,December 31,
(dollars in millions)2014 20132016 2015
Current portion of long-term debt:      
Corporate Credit Agreement - Tranche B Term Loan$5.4
 $5.4
$—
 $5.4
Capital lease obligations and other debt7.8
 7.2
7.5
 8.4
Current portion of long-term debt13.2
 12.6
7.5
 13.8
Long-term debt, less current portion:      
Corporate Credit Agreement—
 40.0
Receivables facility19.2
 106.2
8 3/4% Senior Subordinated Notes due 2018
300.0
 625.0
Receivables Facility89.5
 17.6
Corporate Credit Agreement - Tranche B Term Loan527.8
 533.2
315.8
 522.5
8 3/8% Senior Notes due 2020
661.2
 683.9
—
 478.5
7 1/4% Notes due 2023
40.0
 40.0
7 1/4% Senior Notes due 2023
22.3
 26.3
7% Senior Notes due 2024
625.0
 —
Various Cincinnati Bell Telephone notes134.5
 134.5
87.9
 128.7
Capital lease obligations and other debt91.5
 96.1
62.0
 59.9
1,774.2
 2,258.9
1,202.5
 1,233.5
Net unamortized discount(3.2) (6.3)
Net unamortized premium (discount)8.5
 (1.7)
Unamortized note issuance costs(11.9) (8.0)
Long-term debt, less current portion1,771.0
 2,252.6
1,199.1
 1,223.8
Total debt$1,784.2
 $2,265.2
$1,206.6
 $1,237.6
Corporate Credit Agreement
Revolving Credit Facility
On November 20,In the fourth quarter of 2012, the Company entered into a new credit agreement ("Corporate Credit Agreement") which provided for a $200.0 million revolving credit facility, with a sublimit of $30.0 million for letters of credit and a $25.0 million sublimit for swingline loans. Effective with the sale of our 16.0 million partnership units toof CyrusOne, Inc. on June 25,LP in the second quarter of 2014, for $355.9 million, the amount available under the Corporate Credit Agreement's revolving credit facility was reduced to $150.0 million. In addition,However, the original revolving commitments will be further reducedCompany entered into an Incremental Assumption Agreement to $125.0the Company's existing Corporate Credit Agreement in the second quarter of 2015, and effective with the sale of 14.3 million CyrusOne LP operating partnership units in the second quarter of 2015, the aggregate available borrowings on December 31, 2015. Thethe Corporate Credit Agreement's revolving credit facility has awas adjusted to $175.0 million. In the second quarter of 2016, the Company amended the Corporate Credit Agreement to reduce the aggregate revolving commitments available under the revolving credit facility to $150.0 million, modify certain financial covenants and related definitions governing leverage ratios and capital expenditures, and extend the maturity date of July 15, 2017.the revolving credit facility to January 2020. As a result of the amendment, the Company recorded a $1.7 million loss on extinguishment of debt in the second quarter of 2016. Borrowings under the Corporate Credit Agreement's revolving credit facility will be used to provide ongoing working capital and for other general corporate purposes of the Company. Upon issuance of the Corporate Credit Agreement, the Company's former revolving credit facility was terminated. Availability under the Corporate Credit AgreementAgreement's revolving credit facility is subject to customary borrowing conditions.
Borrowings under the Corporate Credit Agreement's revolving credit facility bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR plus the applicable margin or (ii) the base rate plus the applicable margin. The applicable margin for advances under the revolving facility is based on certain financial ratios and ranges between 3.50%3.00% and 4.25%3.50% for LIBOR rate advances and 2.50%2.00% and 3.25%2.50% for base rate advances. As of December 31, 2014,2016, the applicable margin was 4.00%3.50% for LIBOR rate advances and 3.00%2.50% for base rate advances. Base rate is the higher of (i) the bank prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%. At December 31, 2014,2016, there were no outstanding borrowings under the Corporate Credit Agreement's revolving credit facility.
Amendment for Tranche B Term Loan Facility
On September 10,In the third quarter of 2013, the Company amended and restated its Corporate Credit Agreement originally dated as of November 20, 2012, to include a $540.0 million Tranche B Term Loan facility ("Tranche B Term Loan") that matures on September 10,in the third quarter of 2020.

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Form 10-K Part IICincinnati Bell Inc.

The Company received $529.8 million in net proceeds from the Tranche B Term Loan after deducting the original issue discount, fees and expenses. These proceeds were used to redeem all of the Company's $500.0 million 8 1/4% Senior Notes due

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2017 ("8 1/4% Senior Notes") on October 15,in the fourth quarter of 2013 at a redemption price of 104.125%, including payment of accrued interest thereon totaling $20.6 million.

The Tranche B Term Loan was issued with 0.75% of original issue discount and requires quarterly principal payments of 0.25% of the original principal amount.discount. Loans under the Tranche B Term Loan bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR (subject to a 1.00% floor) plus 3.00% or (ii) the base rate plus 2.00%. Base rate is the greatest of (a) the bank prime rate, (b) the one-month LIBOR rate plus 1.00% and (c) the federal funds rate plus 0.5%. At December 31, 2014,2016, the interest rate on the outstanding Tranche B Term Loan was 4.00%.

In the fourth quarter of 2016, the Company repaid $208.0 million of its outstanding Tranche B Term Loan which resulted in a loss on debt extinguishment of $2.2 million.

In accordance with the terms of the amended Corporate Credit Agreement, the Company's ability to make restricted payments, which include share repurchases and common stock dividends, is limited to a total of $15.0 million, with certain permitted exceptions, given that its Consolidated Total Leverage Ratio, as defined by the Corporate Credit Agreement, exceeds 3.50 to 1.00 as of December 31, 2014.2016.  The Company may make restricted payments of $45.0 million annually when the Consolidated Total Leverage Ratio is less than or equal to 3.50 to 1.00.  There are no dollar limits on restricted payments when the Consolidated Total Leverage Ratio is less than or equal to 3.00 to 1.00. These restricted payment limitations do not impact the Company's ability to make regularly scheduled dividend payments on its 6 3/4% Cumulative Convertible Preferred Stock. Furthermore, the Company may make restricted payments in the form of share repurchases or dividends up to 15% of CyrusOne sale proceeds, subject to a $35.0 million annual cap with carryovers.carryovers subject to the terms and conditions set forth therein.

The Corporate Credit Agreement was also modified to provide that the Tranche B Term Loan participates in mandatory prepayments, subject to the terms and conditions (including with respect to payment priority) set forth in the restated Corporate Credit Agreement. In addition, the Corporate Credit Agreement was modified to provide that 85%, rather than 100%, of proceeds from monetizing any portion of our CyrusOne common stock or CyrusOne LP partnership units, are applied to mandatory prepayments under the restated Corporate Credit Agreement, subject to the terms and conditions set forth therein. Other revisions were also effected pursuant to the amended agreement, including with respect to financial covenant compliance levels.

Effective November 5, 2014, the Company amended its Corporate Credit Agreement to, among other things, modify certain financial covenants governing leverage ratios and capital expenditures.

Guarantors and Security Interests, Corporate Credit Agreement (Including Tranche B Term Loan)
All existing and future subsidiaries of the Company (other than Cincinnati Bell Telephone Company LLC, Cincinnati Bell Funding LLC (and any other similar special purpose receivables financing subsidiary), Cincinnati Bell Shared Services LLC, Cincinnati Bell Extended Territories LLC, CBMSM Inc. and its direct and indirect subsidiaries, and the Company's joint ventures, subsidiaries prohibited by applicable law from becoming guarantors and foreign subsidiaries) are required to guarantee borrowings under the Corporate Credit Agreement. Debt outstanding under the Corporate Credit Agreement is secured by perfected first priority pledges of and security interests in (i) substantially all of the equity interests of the Company's U.S. subsidiaries (other than subsidiaries of non-guarantors of the Corporate Credit Agreement) and 66% of the equity interests in the first-tier foreign subsidiaries held by the Company and the guarantors under the Corporate Credit Agreement, (ii) certain personal property and intellectual property of the Company and its subsidiaries (other than that of non-guarantors of the Corporate Credit Agreement and certain other excluded property) and (iii) the Company's equity interests in CyrusOne and CyrusOne LP, both of which, together with their respective subsidiaries, are treated as non-subsidiaries of the Company and are not guarantors for purposes of the Corporate Credit Agreement.
Borrowings and Commitment Fees, Corporate Credit Agreement
As of December 31, 2014,2016, the Company had no outstanding borrowings under the Corporate Credit Agreement's revolving credit facility, leaving $150.0 million available. As of December 31, 2013,2015, the Company had $40.0 million ofno outstanding borrowings under the Corporate Credit Agreement's revolving credit facility, leaving $160.0$175.0 million available.
The Company pays commitment fees for the unused amount of borrowings on the Corporate Credit Agreement and letter of credit fees on outstanding letters of credit. The commitment fees are calculated based on the total leverage ratio and range between 0.500%0.250% and 0.625%0.500% of the actual daily amount by which the aggregate revolving commitments exceed the sum of outstanding revolving loans and letter of credit obligations. These fees were $0.8 million in 2016 and $0.9 million in 2014, $1.0 million in 2013,2015 and $1.6 million in 2012.2014.

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Accounts Receivable Securitization Facility
Cincinnati Bell Inc. and certain of its subsidiaries have an accounts receivable securitization facility ("Receivables Facility"), which permits maximum borrowings of up to $120.0$120.0 million as of December 31, 2014. On June 3, 2013, the Company executed an amendment of its Receivables Facility which, in addition to modifying some of the defined terms and purchaser parties under the prior agreement, provided for an increase in the maximum credit availability under the Receivables Facility from $105.0 million to $120.0 million and extended the facility's expiration through June 2016.2016. CBT, CBET, Cincinnati Bell Wireless, LLC ("CBW"), Cincinnati Bell Any Distance Inc. ("CBAD"),CBAD, Cincinnati Bell Any Distance of Virginia LLC, CBTS, and eVolve Business Solutions LLC ("eVolve") all participate in this facility. On October 1, 2012,Cincinnati Bell Wireless ("CBW") also participated in the Company and CBF amended the Receivables Facility to remove CyrusOne as an originator and to remove the CyrusOne receivablesfacility until it was withdrawn from the financing provided underagreement during the Receivables Facility.second quarter of 2015. 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. At December 31, 2014,2016, the available borrowing capacity was $116.8$120.0 million.
The transferors sell their respective trade receivables on a continuous basis to CBF,Cincinnati Bell Funding LLC ("CBF"), a wholly-owned limited liability company. In turn, CBF grants, without recourse, a senior undivided interest in the pooled receivables to various purchasers, including commercial paper conduits, in exchange for cash while maintaining a subordinated undivided interest in the form of over-collateralization in the pooled receivables. The transferors have agreed to continue servicing the receivables for CBF at market rates; accordingly, no servicing asset or liability has been recorded. The Receivables Facility is subject to bank renewal every 364 days, and in any event expires in JuneIn the second quarter of 2016,. On June 2, 2014, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase the credit availability, renew the facility, which is subject to renewal every 364 days, until May 2017, and also extend the termfacility's termination date to June 1, 2015.May 2019. During the second quarter of 2015, the Company amended the Receivables Facility to allow CBW to withdraw as a party from the agreement and to be relieved of all of its rights and obligations thereunder. CBW was required to purchase certain receivables that it previously sold to Cincinnati Bell Funding LLC, amounting to $1.7 million.
Although CBF is a wholly-owned consolidated subsidiary of the Company, CBF is 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, such accounts receivable are legally assets of CBF, and, as such, are not available to creditors of other subsidiaries or the parent company.
For the purposes of consolidated financial reporting, the Receivables Facility is accounted for as secured financing. Because CBF has the ability to prepay the Receivables Facility at any time by making a cash payment and effectively repurchasing the receivables transferred pursuant to the facility, the transfers do not qualify for "sale" treatment on a consolidated basis under ASC 860, "Transfers and Servicing."
Of the total borrowing capacity of $116.8$120.0 million at December 31, 2014, $19.22016, $89.5 million consisted of outstanding borrowings and $6.9$6.3 million consisted of outstanding letters of credit. Interest on the Receivables Facility is based on the LIBOR rate plus 0.5%1.1%. The average interest rate on the Receivables Facility was 0.7%1.3% in 2014.2016. The Company pays letter of credit fees on the securitization facility and also pays commitment fees on the unused portion of the total facility. These fees were $0.8 million in 2014 and $0.7 million in 2013 and 2012.
8 3/4% Senior Subordinated Notes due 2018
In March 2010, the Company issued $625.0 million of 8 3/4% Senior Subordinated Notes due 2018 (“8 3/4% Senior Subordinated Notes”), which are fixed rate bonds to maturity.
Interest on the 8 3/4% Senior Subordinated Notes is payable semi-annually in cash in arrears on March 15 and September 15 of each year, commencing September 15, 2010. The 8 3/4% Senior Subordinated Notes are unsecured senior subordinated obligations ranking junior to all existing and future senior debt, ranking equally to all existing and future senior subordinated indebtedness, and ranking senior to all existing and future subordinated indebtedness. Each of the Company’s current and future subsidiaries that is a guarantor under the Corporate Credit Agreement is also a guarantor of the 8 3/4% Senior Subordinated Notes on an unsecured senior subordinated basis, with certain immaterial exceptions. The indenture governing the 8 3/4% Senior Subordinated Notes contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are generally not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 8 3/4% Senior Subordinated Notes provides for customary events of default, including for nonpayment at final maturity and for a default of any other existing debt instrument that exceeds $35.0 million.

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In the third quarter of 2014, the Company redeemed $325.0 million of its 8 3/4% Senior Subordinated Notes at a redemption price of 104.375%. As a result of the redemption, the Company recorded a debt extinguishment loss of $19.4 million. The Company may redeem the 8 3/4% Senior Subordinated Notes for a redemption price of 102.188% and 100.000% on or after March 15,2016, 2015 and 2016, respectively.
8 3/8% Senior Notes due 2020
In the fourth quarter of 2010, the Company issued $775.0 million of 8 3/8% Senior Notes due 2020 ("8 3/8% Senior Notes"), which are fixed rate bonds to maturity. Interest on the 8 3/8% Senior Notes is payable semi-annually in cash in arrears on April 15 and October 15 of each year, commencing April 15, 2011. The 8 3/8% Senior Notes are unsecured senior obligations ranking equally with all existing and future senior debt and ranking senior to all existing and future senior subordinated indebtedness and subordinated indebtedness. Each of the Company’s current and future subsidiaries that is a guarantor under the Corporate Credit Agreement is also a guarantor of the 8 3/8% Senior Notes on an unsecured senior basis, with certain immaterial exceptions. The indenture governing the 8 3/8% Senior Notes contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 8 3/8% Senior Notes provides for customary events of default, including for nonpayment at final maturity and for a default of any other existing debt instrument that exceeds $35.0 million.
In the fourth quarter of 2014, the Company redeemed $22.7 million of its outstanding 8 3/8% Senior Notes due 2020 at par. As a result of the redemption, the Company recorded a debt extinguishment loss of $0.2 million. In the fourth quarter of 2012, the Company conducted a tender offer and redeemed $91.1 million of the 8 3/8% Senior Notes. The Company may redeem the 8 3/8% Senior Notes for a redemption price of 104.188%, 102.792%, 101.396% and 100.000% on or after October 15, 2015, 2016, 2017, and 2018, respectively. At any time prior to October 15, 2015, the Company may redeem all or part of the 8 3/8% Senior Notes at a redemption price equal to the sum of (1) 100% of the principal, plus (2) the greater of (a) 1% of the face value of the 8 3/8% Senior Notes or (b) the excess over the principal amount of the sum of the present values of (i) 104.188% of the face value of the 8 3/8% Senior Notes, and (ii) interest payments due from the date of redemption to October 15, 2015, in each case discounted to the redemption date on a semi-annual basis at the applicable U.S. Treasury rates plus 0.5%, plus (3) accrued and unpaid interest, if any, to the date of redemption.2014.
7 1/4% Notes due 2023
In 1993, the Company issued $50.0$50.0 million of 7 1/4% Notes due 2023 ("7 1/4% Notes"). The 7 1/4% Notes rank ratably to the 8 3/8% Senior Notes7% senior notes due 2024 and senior to the 8 3/4% Senior Subordinated Notes and the CBT Notes. The indenture related to the 7 1/4% Notes does not subject the Company to restrictive financial covenants, but it does contain a covenant providing that if the Company incurs certain liens on its property or assets, the Company must secure the outstanding 7 1/4% Notes equally and ratably with the indebtedness or obligations secured by such liens. The liens under the Corporate Credit Agreement have resulted in the debt outstanding under the 7 1/4% Notes being secured equally and ratably with the obligations secured under the Corporate Credit Agreement. Interest on the
7 1/4% Notes is payable semi-annually on June 15 and December 15. The Company may not call the 7 1/4% Notes prior to maturity. The indenture governing the 7 1/4% Notes provides for customary events of default, including for failure to make any payment when due and for one or more defaults of any other existing debt instruments that exceeds $20.0 million, in the aggregate.
During 2015, the Company redeemed $13.7 million of its outstanding 7 1/4% Notes at an average redemption price of 99.853% which resulted in a loss on extinguishment of debt of $0.1 million. The Company also repaid $4.0 million of its 7 1/4% Notes at a redemption price of 100.750% which resulted in a $0.1 million loss on extinguishment of debt during 2016.




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Form 10-K Part IICincinnati Bell Inc.

7% Senior Notes due 2024
In the third quarter of 2016, the Company issued in a private offering $425.0 million aggregate principal amount of 7% senior notes due 2024 ("7% Senior Notes") at par. The Company issued an additional $200.0 million aggregate principal amount of 7% Senior Notes at a price of 105.000% in the fourth quarter of 2016. The 7% Senior Notes are senior unsecured obligations of the Company, which rank equally in right of payment with all existing and future unsecured senior debt of the Company. The 7% Senior Notes will be effectively subordinated to all existing and future secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness. The 7% Senior Notes are guaranteed on a joint and several basis by certain of the Company’s existing and future domestic subsidiaries. Each such guarantee is a senior unsecured obligation of the applicable guarantor, ranking equally with all existing and future unsecured senior debt of such guarantor and effectively subordinated to all existing and future secured indebtedness of such guarantor to the extent of the value of the assets securing that indebtedness. The 7% Senior Notes are structurally subordinated to all liabilities (including trade payables) of each subsidiary of the Company that does not guarantee the 7% Senior Notes.
The 7% Senior Notes bear interest at a rate of 7% per annum, payable semi-annually on January 15 and July 15 of each year, beginning on January 15, 2017, to persons who are registered holders of the 7% Senior Notes on the immediately preceding January 1 and July 1, respectively.
The 7% Senior Notes will mature on July 15, 2024. However, prior to September 15, 2019, the Company may, at its option, redeem some or all of the 7% Senior Notes at a redemption price equal to 100% of the principal amount of the 7% Senior Notes, together with accrued and unpaid interest, if any, plus a “make-whole” premium. On or after September 15, 2019, the Company may, at its option, redeem some or all of the 7% Senior Notes at any time at declining redemption prices equal to (i) 105.250% beginning on September 15, 2019, (ii) 103.500% beginning on September 15, 2020, (iii) 101.750% beginning on September 15, 2021 and (iv) 100.000% beginning on September 15, 2022 and thereafter, plus, in each case, accrued and unpaid interest, if any, to the applicable redemption date. In addition, before September 15, 2019, and subject to certain conditions, the Company may, at its option, redeem up to 40% of the aggregate principal amount of 7% Senior Notes with the net proceeds of certain equity offerings at 107.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that (i) at least 60% of the aggregate principal amount of 7% Senior Notes remains outstanding and (ii) the redemption occurs within 180 days of the closing of any such equity offering.
The indenture governing the 7% Senior Notes contains covenants including but not limited to the following: limitations on dividends to shareowners and other restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are generally not permitted to enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the 7% Senior Notes provides for customary events of default, including a cross-default provision for both nonpayment at final maturity or acceleration due to a default of any other existing debt instrument that equals or exceeds $20.0 million.$35 million.
Cincinnati Bell Telephone Notes
CBTIn 1998, CBT's predecessor issued $150.0$150.0 million in aggregate principal of 6.30% unsecured senior notes due 2028 (the "CBT Notes"), which isare guaranteed on a subordinated basis by Cincinnati Bell Inc.the Company but not its subsidiaries. The indenture related to thesethe CBT Notes does not subject the Company or CBT to restrictive financial covenants, but it does contain a covenant providing that if the CompanyCBT incurs certain liens on its property or assets, the CompanyCBT must secure the outstanding CBT Notes equally and ratably with the indebtedness or obligations secured by such liens. The maturity date of thesethe CBT notes is in 2028, and theythe CBT Notes may not be called priorredeemed at any time at a redemption price equal to maturity.the greater of 100% of the principal amount of the CBT Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest to maturity, plus accrued interest to the redemption date. The indenturesindenture governing these notes providethe CBT Notes provides for customary events of default, including for failure to make any payment when due and for a defaultone or more defaults of any other existing debt instrumentinstruments of Cincinnati Bell Inc.the Company or CBT that exceeds $20.0$20.0 million,. At both December 31, 2014 and 2013, in the amountaggregate.
During 2015, the Company redeemed $5.8 million of its outstanding under these senior notes was $134.5CBT Notes at an average redemption price of 90.840% which resulted in a gain on extinguishment of debt of $0.5 million.
Capital Lease Obligations
Capital lease obligations represent our obligation for certain leased assets, including wireless towers and various equipment. These leases generally contain renewal or buyout options. During 2016, the periodCompany redeemed $40.8 million of timeits CBT Notes at an average redemption price of 92.232% which resulted in which we included the accountsa gain on extinguishment of debt of $2.8 million.

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CyrusOne in our consolidated financial statements, capitalCapital Lease Obligations
Capital lease obligations also included liabilitiesrepresent our obligation for certain leased data center facilities, which alsoassets, including vehicles and various equipment. These leases generally includedcontain renewal or buyout options.
Debt Maturity Schedule
The following table summarizes our annual principal maturities of debt and capital leases for the five years subsequent to December 31, 2014,2016, and thereafter:
  Capital Total  Capital Total
(dollars in millions)Debt Leases DebtDebt Leases Debt
Year ended December 31,          
2015$6.0
 $7.2
 $13.2
201625.1
 6.8
 31.9
20175.5
 4.2
 9.7
$0.2
 $7.3
 $7.5
2018305.4
 3.3
 308.7
—
 6.4
 6.4
20195.4
 3.7
 9.1
89.5
 6.3
 95.8
2020315.8
 4.4
 320.2
2021—
 3.5
 3.5
Thereafter1,341.9
 72.9
 1,414.8
735.2
 41.4
 776.6
1,689.3
 98.1
 1,787.4
1,140.7
 69.3
 1,210.0
Net unamortized discount(3.2) —
 (3.2)
Net unamortized premium8.5
 —
 8.5
Unamortized note issuance costs(11.9) —
 (11.9)
Total debt$1,686.1
 $98.1
 $1,784.2
$1,137.3
 $69.3
 $1,206.6
Total capital lease payments including interest are expected to be $14.0 million for 2015, $13.2 million for 2016, $10.2$11.8 million for 2017, $9.1$10.5 million for 2018, $9.2$10.0 million for 2019, $7.9 million for 2020, $6.7 million for 2021 and $108.2$55.7 million thereafter. Once we no longer provide
As of March 31, 2015, $54.5 million of capital lease obligations were retained by the Company in conjunction with discontinuing wireless service, capital leases with a carrying value of approximately $25 million as of December 31, 2014 will be transferred to the company that acquired our wireless spectrum licenses. We plan to provide wireless service until no later than April 6, 2015.operations.
Deferred Financing Costs
Deferred financing costs are costs incurred in connection with obtaining long-term financing. In 2014, deferred financing costs of $0.9 million were incurred related to amending the Corporate Credit Agreement and renewing the Receivables Facility. In 2013, deferred financing costs of $6.7 million were incurred related to amending the Corporate Credit Agreement for the issuance of the $540.0 million Tranche B Term Loan facility and amending the Receivables Facility. As of December 31, 2014 and 2013, deferred financing costs totaled $18.5 million and $26.1 million, respectively. The deconsolidation of CyrusOne in January 2013 resulted in the divestiture of $16.9 million of deferred financing costs.revolving credit agreements. Deferred financing costs are amortized overon the termeffective interest method. The Company incurred deferred financing costs of $9.7 million in 2016 related to the issuance of the related indebtedness or7% Senior Notes. In 2016 and 2015, deferred financing costs incurred for amending and renewing revolving credit agreement.agreements were $2.0 million and $0.4 million, respectively. The Company wrote-off deferred financing costs associated with the extinguishment of debt of $5.9 million, $3.7 million and $3.4 million in 2016, 2015 and 2014, respectively.
The Company retrospectively adopted ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, effective January 1, 2016. At the time of adoption the Company made a one-time policy election to record costs incurred in connection with obtaining revolving credit agreements as an asset. As of December 31, 2016 and 2015, deferred financing costs recorded to "Other non-current assets" totaled $2.1 million and $3.2 million, respectively. Amortization of deferred financing costs, included in "Interest expense" in the Consolidated Statements of Operations, totaled $3.0 million in 2016, $4.1 million in 2015, and $5.1 million in 2014, $5.9 million in 2013, and $7.2 million in 2012.2014.
Debt Covenants
Corporate Credit Agreement
The Corporate Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios and comply with annual limitations on capital expenditures. As of December 31, 2014,2016, these ratios and limitations include a maximum consolidated total leverage ratio of 7.00,5.50, a maximum consolidated senior secured leverage ratio of 3.50, a minimum consolidated interest coverage ratio of 1.50 and a 20142016 maximum capital expenditure limitation of $210.0$301.4 million. Capital expenditures are permitted subject to predetermined annual thresholds which are not to exceed $937.7$498.6 million in the aggregate over the next fourthree years. In 2014,2016, capital expenditures for the Company totaled $182.3$286.4 million. In addition, the Corporate Credit Agreement contains customary affirmative and negative covenants including, but not limited to, restrictions on the Company's ability to incur additional indebtedness, create liens, pay dividends, make certain investments, prepay other indebtedness, sell, transfer, lease, or dispose of assets and enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions.
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Form 10-K Part IICincinnati Bell Inc.

The Corporate Credit Agreement contains customary events of default (which are in some cases subject to certain exceptions, thresholds and grace periods), including, but not limited to, nonpayment of principal or interest, failure to perform or observe covenants, breaches of representations and warranties, cross-defaults with certain other indebtedness, certain bankruptcy-related events or proceedings, final monetary judgments or orders, ERISA defaults, invalidity of loan documents or guarantees, and certain change of control events. If the Company were to violate any of its covenants and were unable to obtain a waiver, it would be considered a default. If the Company were in default under the Corporate Credit Agreement, no additional borrowings under this facility would be available until the default was waived or cured.

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The Tranche B Term Loan is subject to the same affirmative and negative covenants and events of default as the Corporate Credit Agreement, except that a breach of the financial covenants will not result in an event of default under the Tranche B Term Loan unless and until the agent or a majority in interest of the lenders under the Corporate Credit Agreement have terminated the commitments under the Corporate Credit Agreement or accelerated the loans then outstanding under the Corporate Credit Agreement in response to such breach.
Public Indentures
The Company’s public debt which includes the 8 3/4% Senior Subordinated Notes due 2018 and 8 3/8% Senior Notes due 2020, is 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.
One of the financial covenants permits the issuance of additional Indebtedness up to a 4:5:00 to 1:00 Consolidated Adjusted Senior Debt to EBITDA ratio (as defined by the individual indentures)indenture). Once this ratio exceeds 4:5:00 to 1:00, the Company is not in default; however, additional indebtedness may only be incurred in specified permitted baskets, including a credit agreement basket providing full access to the $150.0which allows $750.0 million revolving credit facility of thetotal Corporate Credit Agreement plus an additional $216.8 million of secured debt. Also, the Company’s ability to make Restricted Payments (as defined by the individual indentures)indenture) would be limited, including common stock dividend payments or repurchasing outstanding Company shares. If the Company is under the 4:5:00 to 1:00 ratio on a pro forma basis, the Company may access its restricted payments basket, which provides the ability to repurchase shares or pay dividends. In addition, the Company may designate one or more of its subsidiaries as Unrestricted (as defined in the various indentures) such that any Unrestricted Subsidiary (as defined in the various indentures) would generally not be subject to the restrictions of these various indentures. However, certain provisions which govern the Company's relationship with Unrestricted Subsidiaries would begin to apply.
CyrusOne Credit Agreement, 6 3/8% Senior Notes due 2022, Capital Lease Obligations, and Other Financing Arrangements
On November 20, 2012, CyrusOne entered into a credit agreement (the “CyrusOne Credit Agreement”) which provided for a $225.0 million senior secured revolving credit facility, with a sublimit of $50.0 million for letters of credit and a $30.0 million sublimit for swingline loans. Also on November 20, 2012, CyrusOne LP and CyrusOne Finance Corp. (the “Issuers”) issued $525.0 million of 6 3/8% Senior Notes due 2022.
In 2013, upon completion of the IPO of CyrusOne, we removed CyrusOne's debt from our consolidated financial statements. The Company no longer has any obligations related to CyrusOne's indebtedness which includes CyrusOne's $525.0 million of 6 3/8% Senior Notes due 2022 (“CyrusOne 6 3/8% Senior Notes”), capital lease obligations and other financing arrangements. In addition, the Company no longer has access to the $225.0 million CyrusOne Credit Agreement.
Extinguished Notes
In the fourth quarter of 2013,During 2014, the Company redeemed all of the $500.0$22.7 million of its outstanding 8 13/48% Senior Notes due 20172020 ("8 13/48% Senior Notes") at par which resulted in a $0.2 million loss on extinguishment of debt associated with discontinued operations. During 2015, the Company purchased $182.7 million of its outstanding 8 3/8% Senior Notes at an average redemption price of 104.125% using proceeds from the Corporate Credit Agreement Tranche B Term Loan facility that was issued on September 10, 2013. As a result, the Company recorded a debt extinguishment loss of $29.6 million for the year ended December 31, 2013.
In the fourth quarter of 2012, the Company redeemed its 7% Senior Notes due 2015 ("7% Senior Notes") with a principal balance of $247.5 million. The Company also repaid certain CBT unsecured notes,105.543% which had various final maturity dates occurringresulted in 2023 and fixed rates ranging from 7.18% to 7.27%, with a remaining principal balance of $73.0 million. The Company had previously terminated an interest rate swap related to the 7% Senior Notes. For the year ended December 31, 2012,recording a loss on debt extinguishment of $13.6debt of $10.9 million. During 2016, the Company repaid the remaining $478.5 million was recognizedoutstanding on these redemptions and the $91.1 million redemption of the 8 3/8% Senior Notes at an average price of 103.328%, resulting in a $17.8 million loss on extinguishment of debt.
In 2014, the Company redeemed $325.0 million of its 8 ¾% Senior Subordinated Notes due 2020.2018 at a redemption price of 104.375%. As a result of the redemption, the Company recorded a debt extinguishment loss of $19.4 million. Additionally, in 2015, the Company redeemed the remaining $300.0 million of outstanding 8 ¾% Senior Subordinated Notes due 2018 at a redemption rate of 102.188%. As a result, the Company recorded a loss on extinguishment of debt of $10.4 million.

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8.7.     Commitments and Contingencies
Operating Lease Commitments
The Company leases certain circuits, facilities, and equipment used in its operations. Operating lease expense was $14.0$9.6 million, $13.410.1 million, and $19.37.4 million in 20142016, 20132015, and 20122014, respectively. In 2013, $0.3 million2015, our retail stores, which were previously used to support our wireless operations, were re-branded to support the growth of the operating leaseour Fioptics suite of products. Rent expense was associated with CyrusOne as it was included for the first 23 days of January prior to its IPO. In 2012, CyrusOne operating lease expense was $5.9 million.our retail locations totaled $0.6 million and $0.8 million in 2016 and 2015, respectively. Certain facility leases and tower site leases provide for renewal options with fixed rent escalations beyond the initial lease term. Future minimum payments for certain operating leases that will be transferred to the acquirer no later than April 6, 2015, due to shutting down wireless operations, have been excluded beyond the transfer date.
At December 31, 2014,2016, future minimum lease payments required under operating leases having initial or remaining non-cancellable lease terms for the next five years are as follows:
(dollars in millions)  
2015$10.3
20166.5
20175.1
$4.1
20183.7
2.9
20193.2
2.6
20202.3
20212.2
Thereafter21.6
19.8
Total$50.4
$33.9
Asset Retirement Obligations
Asset retirement obligations exist for leasedcertain other assets. As of March 31, 2015, certain asset retirement obligations related to our wireless towers and certain other assets.were reclassified to continuing operations as the obligations relate to tower leases retained by the Company. The following table presents the activity for the Company’s asset retirement obligations, which are included in "Other noncurrent liabilities" in the Consolidated Balance Sheets:
December 31,December 31,
(dollars in millions)2014 20132016 2015
Balance, beginning of period$8.5
 $7.1
$4.8
 $1.6
Asset retirement obligations reclassified from discontinued operations—
 10.9
Liabilities settled(0.2) (0.1)(2.0) (5.0)
Liabilities incurred—
 0.1
Revisions to estimated cash flow0.3
 1.1
Revision to estimated cash flow(1.1) (2.9)
Accretion expense0.5
 0.5
0.1
 0.2
Deconsolidation of CyrusOne—
 (0.2)
Balance, end of period$9.1
 $8.5
$1.8
 $4.8
Indemnifications
During the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These include (a) intellectual property indemnities to customers in connection with the use, sale, and/or license of products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities to vendors and service providers pertaining to claims based on negligence or willful misconduct of the Company, (d) indemnities involving the representations and warranties in certain contracts, and (e) outstanding letters of credit which totaled $6.9$6.3 million as of December 31, 20142016. In addition, the Company has made contractual commitments to several employees providing for payments upon the occurrence of certain prescribed events. The majority of these indemnities, commitments, and guarantees do not provide for any limitation on the maximum potential for future payments that the Company could be obligated to make.

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As permitted under Ohio law, the Company has agreements whereby the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company's request in such capacity. The term of the indemnification period is for the lifetime of the officer or director. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits the Company's exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company's insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 20142016 or 20132015.
Purchase Commitments
The Company has noncancellable purchase commitments related to certain goods and services. These agreements typically range from one to three years. As of December 31, 20142016 and 2013,2015, the minimum commitments for these arrangements were approximately $178$191 million and $117$166 million, respectively. The Company generally has the right to cancel open purchase orders prior to delivery and to terminate the contracts without cause.
Litigation
Cincinnati Bell and its subsidiaries are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. We believe the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by GAAP, are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of December 31, 20142016, cannot be reasonably determined.
Contingent Compensation Plan
In 2010, the Company's Board of Directors approved long-term incentive programs for certain members of management. Payment was contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business, as defined in the plans.
The CyrusOne IPO completed on January 24, 2013 was a qualifying transaction and triggered payments under this contingent compensation plan. For the year ended December 31, 2013, compensation expense of $42.6 million was recognized for these awards and other transaction-related incentives, of which $20.0 million was associated with CyrusOne employees. This expense has been presented as transaction-related compensation in our Consolidated Statement of Operations for the year ended December 31, 2013.

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9.8.Financial Instruments and Fair Value Measurements
Fair Value of Financial Instruments
The carrying values of our financial instruments do not materially differ from the estimated fair values as of December 31, 20142016 and 20132015, except for the Company's investment in CyrusOne and long-term debt.
The carrying value and fair value of the Company’s financial instruments arelong-term debt is as follows:
 December 31, 2014 December 31, 2013
(dollars in millions)Carrying Value Fair Value Carrying Value Fair Value
Investment in CyrusOne$273.6
 $785.0
 $471.0
 $993.2
Long-term debt, including current portion*1,686.1
 1,717.4
 2,162.7
 2,248.3
   *Excludes capital leases.       
The fair value of our investment in CyrusOne was based on the closing market price of CyrusOne's common stock on December 31, 2014 and 2013. This fair value measurement is considered Level 1 of the fair value hierarchy.

 December 31, 2016 December 31, 2015
(dollars in millions)Carrying Value Fair Value Carrying Value Fair Value
Long-term debt, including current portion*1,149.2
 1,177.9
 1,178.0
 1,155.6
   *Excludes capital leases and note issuance costs.       
The fair value of debt instruments was based on closing or estimated market prices of the Company’s debt at December 31, 20142016 and 20132015, which is considered Level 2 of the fair value hierarchy.

Non-Recurring Fair Value Measurements
Certain long-lived assets, intangibles, and goodwill are required to be measured at fair value on a non-recurring basis subsequent to their initial measurement. These non-recurring fair value measurements generally occur when evidence of impairment has occurred.
In 2016 and 2015, no assets were remeasured at fair value. During 2014, the following assets were remeasured at fair value in connection with impairment tests:
  Fair Value Measurements Using    Fair Value Measurements Using  
(dollars in millions)
Year Ended
December 31, 2014
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Impairment Losses
Year Ended
December 31, 2014
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Impairment Losses
Property:                  
Office software, furniture, fixtures, & vehicles (Wireline)—
 —
 —
 —
 $(4.6)
Office software, furniture, fixtures, & vehicles (Wireless)—
 —
 —
 —
 (7.5)
Office software, furniture, fixtures, & vehicles (Entertainment and Communications)—
 —
 —
 —
 $(4.6)
Impairment of assets        $(12.1)        $(4.6)
In 2014, certain software projects onfor our WirelineEntertainment and Wireless segmentsCommunications segment were abandoned. These assets had no fair value, as they were no longer being used, or would not be placed into service, resulting in an impairment loss of $12.1$4.6 million in 2014. Historically, management used the income approach to determine fair value of the assets, but since the assets will not be used in the future, there are no expected future earnings attributable and the entire value of the assets was impaired. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs. In 2013, no assets were remeasured at fair value.

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During 2012, the following assets were remeasured at fair value in connection with impairment tests:
   Fair Value Measurements Using  
(dollars in millions)
Year Ended
December 31, 2012
 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Impairment Losses
Customer relationship intangible2.8
 —
 —
 2.8
 (1.5)
Property:         
   Leasehold improvements2.4
 —
 —
 2.4
 (11.8)
   Network equipment0.4
 —
 —
 0.4
 (0.5)
   Other—
 —
 —
 —
 (0.4)
Impairment of assets        (14.2)
In 2012, a data center customer relationship intangible was deemed impaired. The fair value of this asset was estimated at $2.8 million, resulting in an impairment loss of $1.5 million. The fair value of this asset was estimated by management with the assistance of a third-party valuation specialist. Management estimated the fair value using the income approach, which discounted the expected future earnings attributable to the acquired customer contracts, and included estimates of future expenses, capital expenditures and a discount rate of 12%. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs.
In addition, certain leasehold improvements in our former data center colocation segment were deemed impaired. Prior to recognizing the impairment, these assets had a net book value of $14.2 million as of June, 30, 2012. The fair value of the assets was written down to the estimated fair value of $2.4 million, resulting in an impairment loss of $11.8 million. The fair value of these assets was estimated by management with the assistance of a third-party valuation specialist. Management estimated the fair value using an income approach. Projected discounted cash flows utilized under the income approach included estimates regarding future revenues and expenses, projected capital expenditures and a discount rate of 12%. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs.
In 2012, property associated with an out-of-territory fiber network was deemed impaired. The fair value of this asset was estimated at $0.4 million, resulting in an impairment loss of $0.5 million. Management estimated the fair value using an income approach. Projected discounted cash flows utilized under the income approach included estimates regarding future revenues and expenses, projected capital expenditures and a discount rate of 12%. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs. In addition, properties associated with abandoned assets having no resale market were deemed impaired, resulting in an impairment loss of $0.4 million.

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Form 10-K Part IICincinnati Bell Inc.

10.
Restructuring Charges
Restructuring liabilities have been established for employee separations, lease abandonment and contract terminations. A summary of activity in the restructuring liability is shown below:
(dollars in millions)
Employee
Separation
 
Lease
Abandonment
 Contract Terminations Total
Balance as of December 31, 2011$14.2
 $8.1
 $1.7
 $24.0
Charges2.5
 0.9
 —
 3.4
Utilizations(8.9) (3.5) (1.5) (13.9)
Balance as of December 31, 2012$7.8
 $5.5
 $0.2
 $13.5
Charges9.0
 4.1
 0.6
 13.7
Utilizations(7.1) (3.6) (0.7) (11.4)
Balance as of December 31, 2013$9.7
 $6.0
 $0.1
 $15.8
Charges/(Reversals)4.2
 (1.4) 13.1
 15.9
Utilizations(8.0) (2.7) (0.7) (11.4)
Balance as of December 31, 2014$5.9
 $1.9
 $12.5
 $20.3
Employee separation costs consist of severance to be paid pursuant to the Company's written severance plan. In 2014, employee separation costs included charges attributable to outsourcing a portion of our IT function, charges for the wind down of our Wireless business as well as consulting fees related to a workforce optimization initiative. During 2013, employee separation costs also included consulting fees related to a workforce optimization initiative. A voluntary termination program was offered in 2012 to certain Wireline call center employees and included in employee separation costs. Severance payments are expected to be paid through 2015.
Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Reversals in 2014 were related to leased space that was previously reserved that was reoccupied in the third quarter. Lease payments on abandoned facilities will continue through 2015.
In 2014, contract terminations consisted of wireless contracts that will no longer be utilized once the wireless business ceases operations. Additional restructuring charges associated with the shutdown of our wireless operations will be recognized once the accounting criteria are achieved. For 2013, contract terminations consisted of amounts due to a distributor to terminate a contractual agreement. Contract terminations are expected to be paid out through 2015.
A summary of restructuring activity by business segment is presented below:
(dollars in millions)Wireline IT Services and Hardware Wireless Data Center Colocation Corporate Total
Balance as of December 31, 2011$15.1
 $2.5
 $0.7
 $—
 $5.7
 $24.0
Charges3.5
 (1.2) 1.6
 0.5
 (1.0) 3.4
Utilizations(10.0) (0.8) (0.7) (0.5) (1.9) (13.9)
Balance as of December 31, 2012$8.6
 $0.5
 $1.6
 $—
 $2.8
 $13.5
Charges9.1
 0.7
 0.2
 —
 3.7
 13.7
Utilizations(7.2) (0.4) (0.3) —
 (3.5) (11.4)
Balance as of December 31, 2013$10.5
 $0.8
 $1.5
 $—
 $3.0
 $15.8
Charges/(Reversals)(0.5) —
 16.3
 —
 0.1
 15.9
Utilizations(6.1) (0.5) (2.4) —
 (2.4) (11.4)
Balance as of December 31, 2014$3.9
 $0.3
 $15.4
 $—
 $0.7
 $20.3
At December 31, 2014 and 2013, $20.3 million and $7.8 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” At December 31, 2013, $8.0 million was included in "Other noncurrent liabilities."

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Form 10-K Part IICincinnati Bell Inc.

11.
9.		Pension and Postretirement Plans
Savings Plans
The Company sponsors several defined contribution plans covering substantially all employees. The Company's contributions to the plans are based on matching a portion of the employee contributions. Both employer and employee contributions are invested in various investment funds at the direction of the employee. Employer contributions to the defined contribution plans were $6.78.4 million, $6.67.0 million, and $6.96.4 million in 20142016, 20132015, and 20122014, respectively.
Pension and Postretirement Plans
The Company sponsors three noncontributory defined benefit pension plans: one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain former senior executives. The management pension plan is a cash balance plan in which the pension benefit is determined by a combination of compensation-based credits and annual guaranteed interest credits. Pension plan amendments were approved in May 2013, and the Company remeasured the associated pension obligations. As a result of the pension plan amendment, the Company recorded a curtailment gain of $0.6 million and a $10.3 million reduction to the associated pension obligations during the second quarter of 2013. The non-management pension plan is also a cash balance plan in which the combination of service and job-classification-based credits and annual interest credits determine the pension benefit. Effective January 1, 2012,During the second quarter of 2015, the non-management pension plan was amended to eliminate all future pension service credits were eliminated for certain non-management employees.and transition benefits. As a result, we recognized a curtailment loss of $0.3 million and a $1.7 million reduction to the associated pension obligations. Benefits for the supplemental plan are based on eligible pay, adjusted for age and service upon retirement. We fund both the management and non-management plans in an irrevocable trust through contributions, which are determined using the traditional unit credit cost method. We also use the traditional unit credit cost method for determining pension cost for financial reporting purposes.
The Company also provides healthcare and group life insurance benefits for eligible retirees. We fund healthcare benefits and other group life insurance benefits using Voluntary Employee Benefit Association ("VEBA") trusts. It is our practice to fund amounts as deemed appropriate from time to time. Contributions are subject to Internal Revenue Service ("IRS") limitations developed using the traditional unit credit cost method. The actuarial expense calculation for our postretirement health plan is based on numerous assumptions, estimates, and judgments including healthcare cost trend rates and cost sharing with retirees. Retiree healthcare benefits are being phased out for both management and certain retirees. In August 2013, several amendments to the postretirement plan required a remeasurement of the associated benefit obligations. As a result, the Company recorded a $26.1 million reduction to the postretirement liability in the third quarter of 2013.
Components of Net Periodic Cost
The following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans. Approximately 8%13% in 20142016, 10%12% in 20132015, and 11%8% in 20122014 of these costs were capitalized to property, plant and equipment related to network construction in the WirelineEntertainment and Communications segment. Pension and postretirement benefit costs for these plans were comprised of:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits
(dollars in millions)2014 2013 2012 2014 2013 20122016 2015 2014 2016 2015 2014
Service cost$1.0
 $2.1
 $2.6
 $0.3
 $0.4
 $0.5
$—
 $0.3
 $1.0
 $0.3
 $0.3
 $0.3
Interest cost on projected benefit obligation21.0
 18.8
 21.3
 4.0
 4.0
 5.6
19.3
 19.0
 21.0
 3.3
 3.3
 4.0
Expected return on plan assets(28.1) (25.7) (26.1) —
 —
 —
(27.3) (29.2) (28.1) —
 —
 —
Amortization of:

 
 
 
 
 
           
Prior service cost (benefit)0.2
 0.2
 0.1
 (15.4) (14.1) (13.2)0.1
 0.1
 0.2
 (14.7) (15.4) (15.4)
Actuarial loss17.3
 22.0
 19.4
 5.4
 5.6
 6.8
19.1
 24.9
 17.3
 4.9
 5.4
 5.4
Curtailment gain—
 (0.6) —
 —
 —
 —
Pension/postretirement costs$11.4
 $16.8
 $17.3
 $(5.7) $(4.1) $(0.3)
Curtailment loss—
 0.3
 —
 —
 —
 —
Pension/postretirement cost (benefit)$11.2
 $15.4
 $11.4
 $(6.2) $(6.4) $(5.7)

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The following are the weighted-average assumptions used in measuring the net periodic cost of the pension and postretirement benefits:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits 
2014 2013 2012 2014 2013 20122016 2015 2014 2016 2015 2014 
Discount rate4.20% 3.30%*3.90% 4.10% 3.40%**3.60%3.80% 3.40%*4.20% 3.70% 3.40% 4.10% 
Expected long-term rate of return7.75% 7.75% 7.75% —
 —
 —
7.50% 7.75% 7.75% —
 —
 —
 
Future compensation growth rate—
 3.00% 3.00% —
 —
 —
—
 —
 —
 —
 —
 —
 
* Discount rate used for the remeasurement of the managementnon-management pension plan in May 2013April 2015 was consistent with the discount rate previously established.
** For the period January 1, 2013 through July 31, 2013, the date of the remeasurement, we used a 3.10% discount rate. From that date through December 31, 2013, we used a 3.90% discount rate.
The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by the plans and the current view of expected future returns, which is influenced by historical averages. Changes in actual asset return experience and discount rate assumptions can impact the Company’s operating results, financial position and cash flows.
Benefit Obligation and Funded Status
Changes in the plans' benefit obligations and funded status are as follows:
    Postretirement and Other Benefits    Postretirement and Other Benefits
Pension Benefits Pension Benefits 
(dollars in millions)2014 2013 2014 20132016 2015 2016 2015
Change in benefit obligation:              
Benefit obligation at January 1,$523.0
 $584.9
 $101.5
 $152.4
$530.5
 $577.3
 $93.1
 $109.0
Service cost1.0
 2.1
 0.3
 0.4
—
 0.3
 0.3
 0.3
Interest cost21.0
 18.8
 4.0
 4.0
19.3
 19.0
 3.3
 3.3
Prior service credit—
 —
 —
 (17.4)
Actuarial loss (gain)73.5
 (38.2) 13.3
 (19.6)
Actuarial gain(2.7) (18.8) (4.7) (10.9)
Benefits paid(41.2) (44.6) (15.2) (23.9)(41.5) (47.3) (13.1) (12.7)
Retiree drug subsidy received—
 —
 0.5
 0.5
—
 —
 0.6
 0.2
Other—
 —
 4.6
 5.1
—
 —
 3.1
 3.9
Benefit obligation at December 31,$577.3
 $523.0
 $109.0
 $101.5
$505.6
 $530.5
 $82.6
 $93.1
              
Change in plan assets:              
Fair value of plan assets at January 1,$399.3
 $343.8
 $11.3
 $11.7
$378.1
 $424.3
 $10.3
 $11.0
Actual return on plan assets44.2
 55.1
 0.4
 0.4
Actual return (loss) on plan assets30.3
 (10.5) 0.3
 0.1
Employer contributions22.0
 45.0
 14.0
 22.6
5.4
 11.6
 10.6
 11.7
Retiree drug subsidy received—
 —
 0.5
 0.5
—
 —
 0.6
 0.2
Benefits paid(41.2) (44.6) (15.2) (23.9)(41.5) (47.3) (13.1) (12.7)
Fair value of plan assets at December 31,424.3
 399.3
 11.0
 11.3
372.3
 378.1
 8.7
 10.3
Unfunded status$(153.0) $(123.7)
$(98.0)
$(90.2)$(133.3) $(152.4)
$(73.9)
$(82.8)

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The following are the weighted-average assumptions used in accounting for and measuring the projected benefit obligations:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits
December 31, December 31,December 31, December 31,
2014 2013 2014 20132016 2015 2016 2015
Discount rate3.40% 4.20% 3.40% 4.10%4.00% 3.80% 4.00% 3.70%
Expected long-term rate of return7.75% 7.75% —
 —
7.50% 7.75% —
 —
Future compensation growth rate—
 —
 —
 —
—
 —
 —
 —
The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below:
December 31,December 31,
2014 20132016 2015
Healthcare cost trend6.5% 6.5%6.5% 6.5%
Rate to which the cost trend is assumed to decline (ultimate trend rate)4.5% 4.5%4.5% 4.5%
Year the rates reach the ultimate trend rate2018
 2017
2021
 2020
A one-percentage point change in assumed healthcare cost trend rates would have the following effect on the postretirement benefit costs and obligation:
(dollars in millions)1% Increase 1% Decrease
Service and interest costs for 2014$0.2
 $(0.1)
Postretirement benefit obligation at December 31, 20145.0
 (4.5)
(dollars in millions)1% Increase 1% Decrease
Service and interest costs for 2016$0.2
 $(0.1)
Postretirement benefit obligation at December 31, 20163.2
 (2.9)
The projected benefit obligation is recognized in the Consolidated Balance Sheets as follows:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits
December 31, December 31,December 31, December 31,
(dollars in millions)2014 2013 2014 20132016 2015 2016 2015
Accrued payroll and benefits (current liability)$2.2
 $2.1
 $12.0
 $12.7
$2.1
 $2.1
 $9.4
 $10.1
Pension and postretirement benefit obligations (noncurrent liability)150.8
 121.6
 86.0
 77.5
131.2
 150.3
 64.5
 72.7
Total$153.0
 $123.7
 $98.0
 $90.2
$133.3
 $152.4
 $73.9
 $82.8
Amounts recognized in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets which have not yet been recognized in net pension costs consisted of the following:
    Postretirement and Other Benefits    Postretirement and Other Benefits
Pension Benefits Pension Benefits 
December 31, December 31,December 31, December 31,
(dollars in millions)2014 2013 2014 20132016 2015 2016 2015
Prior service (cost) benefit, net of tax of ($0.2), ($0.3), $21.3, $26.8$(0.5) $(0.6) $38.5
 $48.4
Actuarial loss, net of tax of ($91.5), ($77.2), ($29.3), ($26.6)(160.7) (134.8) (50.9) (46.1)
Prior service (cost) benefit, net of tax of ($0.1), ($0.1), $10.6, $15.8$(0.1) $(0.2) $19.1
 $28.6
Actuarial loss, net of tax of ($81.6), ($90.4), ($19.7), ($23.0)(141.8) (157.8) (34.8) (40.9)
Total$(161.2) $(135.4) $(12.4) $2.3
$(141.9) $(158.0) $(15.7) $(12.3)

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Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and the Consolidated Statements of Comprehensive Income are shown below:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits
(dollars in millions)2014
2013 2014 20132016 2015 2016 2015
Prior service cost recognized:              
Reclassification adjustments$0.2
 $(0.4) $(15.4) $(14.1)$0.1
 $0.4
 $(14.7) $(15.4)
Prior service credit—
 —
 —
 17.4
Actuarial (loss) gain recognized:              
Reclassification adjustments17.3
 22.0
 5.4
 5.6
19.1
 24.9
 4.9
 5.4
Actuarial (loss) gain arising during the period(57.5) 67.5
 (12.9) 20.0
Actuarial gain (loss) arising during the period5.7
 (20.9) 4.5
 10.9
The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 20152017 as a component of net periodic pension and postretirement cost:
Pension Benefits Postretirement and Other BenefitsPension Benefits Postretirement and Other Benefits
(dollars in millions)  
Prior service cost (benefit)$0.2
 $(15.4)
Prior service benefit$—
 $(4.5)
Actuarial loss20.9
 6.2
16.5
 4.3
Total$21.1
 $(9.2)$16.5
 $(0.2)
Plan Assets, Investment Policies and Strategies
The primary investment objective for the trusts holding the assets of the pension and postretirement plans is preservation of capital with a reasonable amount of long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities. The target allocations for the pension plan assets are 65% equity securities and 35% investment grade fixed income securities. Equity securities are primarily held in the form of passively managed funds that seek to track the performance of a benchmark index. Equity securities include investments in growth and value common stocks of companies located in the United States, which represents approximately 78%60% of the equity securities held by the pension plans at December 31, 20142016 as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securities primarily include holdings of funds, which generally invest in a variety of intermediate and long-term investment grade corporate bonds from diversified industries. The postretirement plan assets are currently invested in a group insurance contract.
The fair values of the pension and postretirement plan assets at December 31, 20142016 and 20132015 by asset category are as follows:
(dollars in millions)December 31, 2014 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
December 31, 2016 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 Significant
unobservable
inputs
Level 3
Mutual funds              
U.S. equity index funds$212.3
 $212.3
 $—
 $—
$142.7
 $142.7
 $—
 $—
International equity index funds61.1
 61.1
 —
 —
95.6
 95.6
 —
 —
Fixed income bond funds150.9
 150.9
 —
 —
123.9
 123.9
 —
 —
Fixed income short-term money market funds10.1
 10.1
 —
 —
Group insurance contract11.0
 —
 —
 11.0
8.7
 —
 —
 —
Total$435.3
 $424.3
 $—
 $11.0
$381.0
 $372.3
 $—
 $—


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(dollars in millions) December 31, 2013 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
 December 31, 2015 
Quoted Prices
in active
markets
Level 1
 
Significant
observable
inputs
Level 2
 
Significant
unobservable
inputs
Level 3
Mutual funds                
U.S. equity index funds $201.4
 $201.4
 $—
 $—
 $147.8
 $147.8
 $—
 $—
International equity index funds 57.0
 57.0
 —
 —
 97.0
 97.0
 —
 —
Fixed income bond funds 109.8
 109.8
 —
 —
 133.3
 133.3
 —
 —
Fixed income short-term money market funds 0.3
 0.3
 —
 —
Real estate pooled funds 30.8
 —
 —
 30.8
Group insurance contract 11.3
 —
 —
 11.3
 10.3
 —
 —
 —
Total $410.6
 $368.5
 $—
 $42.1
 $388.4
 $378.1
 $—
 $—
The fair values of Level 1 investments are based on quoted prices in active markets. The fair values of Level 2 investments, which consist of funds that hold securities in active markets, are determined based on the net asset value as reported by the fund manager.
The Level 3 investment consists of a group insurance contract as of December 31, 2014 and 2013. The contract is valued at contract value plus accrued interest which approximates fair value.
Duringand has not been included in the fourth quarter of 2014, the Company liquidated the real estate pooled funds within the pension plan master trust that had been categorized as Level 3 investments. The proceeds from the sale were reinvested in equity securities and investment grade fixed income securities similar to those currently held by the pension plan master trust. These new investments are classified as Level 1 investments.
The real estate pooled funds were valued at the net asset values disclosed by the fund managers, which were based on estimated fair values of the real estate investments using independent appraisal. The funds invested primarily in commercial real estate and included mortgage loans which were backed by the associated properties. The investments were sensitive to changes in commercial real estate market values. They focused on properties that returned both lease income and appreciation of the buildings’ marketable value. In estimating fair value of the investments in level 3, the fund managers used independent appraisers. The generally accepted methods usedhierarchy, but is included in the valuation of real estate are the income, cost, and sales comparison approaches of estimating property value. Key inputs and assumptions used to determine fair value include among others, rental revenue and expense amounts and related revenue and expense growth rates, terminal capitalization rates and discount rates. In the event that total withdrawal requests exceeded the total cash available to honor such requests, available cash would have been pro-rated among those contract-holders eligible for withdrawals.totals above.

The Level 3 investments had the following changes in 2014 and 2013:
 Pension Postretirement and Other Benefits
(dollars in millions)2014 2013 2014 2013
Balance, beginning of year$30.8
 $27.8
 $11.3
 $11.7
Realized gains, net3.2
 1.0
 0.4
 0.4
Unrealized gains, net—
 2.7
 —
 —
Purchases, sales, issuances and settlements, net(34.0) (0.7) (0.7) (0.8)
Balance, end of year$—
 $30.8
 $11.0
 $11.3
Contributions to our qualified pension plans were $19.7$3.1 million in 2014, $42.12016, $10.3 million in 2013,2015, and $23.9$19.7 million in 2012.2014. Contributions to our non-qualified pension plan were $2.3 million in 2014, $2.9 million in 2013, and $2.0$2.3 million in 2012.2016, $2.2 million in 2015 and $2.3 million in 2014.
Based on current assumptions, management believes it will make contributions of approximately $13 million to the qualified pension plan in 2015. Contributions toand non-qualified pension plans in 20152017 are expected to be approximately $2 million.million each. Management expects to make cash payments of approximately $12$9 million related to its postretirement health plans in 2015.2017.

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Form 10-K Part IICincinnati Bell Inc.

Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years:
(dollars in millions)
Pension
Benefits
 
Postretirement
and Other
Benefits
 
Medicare
Subsidy
Receipts
Pension
Benefits
 
Postretirement
and Other
Benefits
 
Medicare
Subsidy
Receipts
2015$41.3
 $12.6
 $(0.6)
201641.3
 11.7
 (0.6)
201741.1
 10.7
 (0.5)$42.1
 $9.9
 $(0.5)
201841.0
 10.0
 (0.5)41.8
 9.2
 (0.5)
201939.5
 8.2
 (0.5)40.2
 7.8
 (0.4)
Years 2020 - 2024182.7
 33.7
 (2.0)
202039.8
 7.0
 (0.4)
202138.1
 6.7
 (0.4)
Years 2022 - 2026169.5
 28.1
 (1.4)

12.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

10.     Shareowners’ Deficit
Common Shares
The par value of the Company’s common shares is $0.01$0.01 per share. At December 31, 20142016 and 2013,2015, common shares outstanding were 209,296,06842,056,237 and 208,165,275,41,975,390, respectively.
In 2010, the Board of Directors approved a plan for repurchase of up to $150.0$150.0 million of the Company's common shares. In 20142016, the Company repurchased and 2013,retired approximately 0.2 million shares of its common stock for $4.8 million at an average price of $19.67 per share. In 2015 and 2014, no shares were repurchased or retired under this plan. In 2012, no shares were repurchased under this plan and the Company retired 0.1 million shares of common stock. As of December 31, 2014,2016, the Company had the authority to repurchase $129.2$124.4 million of its common stock.
The Company previously had a deferred compensation plan for certain executives of the Company.  The executive deferred compensation plan was terminated in the fourth quarter of 2015.  At December 31, 2014,2015, treasury shares of common stock held under certain management deferred compensation arrangementsthe plan were 0.3 million,nominal, with a total cost of $1.1 million. At December 31, 2013, treasury shares$0.5 million. In the fourth quarter of common stock held2016, all amounts due under certain management deferred compensation arrangementsthe plan were 0.5 million, with a total cost of $2.0 million.distributed to plan participants.  
Preferred Shares
The Company is authorized to issue 1,357,299 shares of voting preferred stock without par value and 1,000,000 shares of nonvoting preferred stock without par value. The Company issued 155,250 voting shares of 6 3/4% cumulative convertible preferred stock at stated value. These shares were subsequently deposited into a trust in which the underlying 155,250 shares are equivalent to 3,105,000 depositary shares. Shares of this preferred stock can be converted at any time at the option of the holder into common stock of the Company at a conversion rate of 1.445.7676 shares of the Company common stock per depositaryone share of 6 3/4% cumulative convertible preferred stock. Annual dividends of $67.50 per share (or $3.3752 per depositary share) on the outstanding 6 3/4% convertible preferred stock are payable quarterly in arrears in cash, or in common stock in certain circumstances if cash payment is not legally permitted. The liquidation preference on the 6 3/4% cumulative convertible preferred stock is $1,000 per share (or $50 per depositary share). The Company paid $10.4 million in preferred stock dividends in 20142016, 20132015, and 20122014.
Warrants
In March 2003, the Company entered into a series of recapitalization transactions which included the issuance of 17.5 million warrants that expired on March 26, 2013. Each warrant allowed the holder to purchase one share of Cincinnati Bell common stock at an exercise price of $3.00 each. During the first quarter of 2013, warrant holders elected to exercise a total of 14.3 million warrants. As a result, the Company issued a total of 4.4 million shares of common stock and received $5.1 million of cash proceeds for the 1.7 million of such warrants which were cash settled. During 2012, warrant holders elected to exercise a total of 3.2 million warrants, primarily on a cashless basis, and received a total of 1.5 million shares of common stock. Cash proceeds received upon exercise were $0.1 million. There were no warrants outstanding as of December 31, 2014 and 2013.
Accumulated Other Comprehensive Loss
Shareowners’ deficit includes an accumulated other comprehensive loss that is comprised of pension and postretirement unrecognized prior service cost and unrecognized actuarial losses, unrealized gains on Investment in CyrusOne and foreign currency translation losses.

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Form 10-K Part II Cincinnati Bell Inc.


For the yearyears ended December 31, 20142016, and 2015, the changes in accumulated other comprehensive loss by component were as follows:
(dollars in millions)Unrecognized Net Periodic Pension and Postretirement Benefit Cost Foreign Currency Translation Loss TotalUnrecognized Net Periodic Pension and Postretirement Benefit Cost Unrealized gain on Investment in CyrusOne Foreign Currency Translation Loss Total
Balance as of December 31, 2013$(133.1) $(0.2) $(133.3)
Foreign currency loss—
 (0.1) (0.1)
Balance as of December 31, 2014$(173.6) $—
 $(0.3) $(173.9)
Remeasurement of benefit obligations(45.4) —
 (45.4)(6.6) —
 —
 (6.6)
Reclassifications, net4.9
(a)—
 4.9
9.9
(a)—
 (0.4) 9.5
Balance as of December 31, 2014$(173.6) $(0.3) $(173.9)
Balance as of December 31, 2015(170.3) —
 (0.7) (171.0)
Remeasurement of benefit obligations6.6
 —
 —
 6.6
Reclassifications, net6.1
(a)—
 (0.1) 6.0
Unrealized gain on Investment in CyrusOne—
 68.1
(b)—
 68.1
Balance as of December 31, 2016$(157.6) $68.1
 $(0.8) $(90.3)
(a) These reclassifications are included in the components of net period pension and postretirement benefit costs (see Note 119 for additional details). The components of net period pension and postretirement benefit cost are reported within "Cost of services", "Cost of products sold", and "Selling, general and administrative" expenses on the Consolidated Statements of Operations.

(b) The unrealized gain on the investment in CyrusOne was recorded in 2016 as the investment is no longer accounted for using the equity-method and is recorded as an available-for-sale security on the Consolidated Balance Sheets at fair value.
13.     Income Taxes

Income tax expense consisted of the following:
 Year Ended December 31,
(dollars in millions)2014 2013 2012
Current:     
    Federal$8.0
 $—
 $1.8
    State and local1.6
 —
 1.6
    Total current9.6
 —
 3.4
Investment tax credits(0.2) (0.2) (0.3)
Deferred:     
    Federal48.4
 (13.0) 21.8
    State and local0.7
 (3.7) 2.0
    Foreign—
 0.3
 (0.5)
    Total deferred49.1
 (16.4) 23.3
Valuation allowance(1.1) 14.1
 (1.7)
Total$57.4
 $(2.5) $24.7

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Form 10-K Part II Cincinnati Bell Inc.

11.     Income Taxes

Income tax expense for continuing operations consisted of the following:
 Year Ended December 31,
(dollars in millions)2016 2015 2014
Current:     
    Federal$(14.0) $9.2
 $9.3
    State and local0.5
 1.7
 1.9
    Total current(13.5) 10.9
 11.2
Investment tax credits(0.1) (0.2) (0.2)
Deferred:     
    Federal72.6
 149.4
 69.6
    State and local5.7
 5.2
 1.9
    Total deferred78.3
 154.6
 71.5
Valuation allowance(3.6) (5.5) (1.1)
Total$61.1
 $159.8
 $81.4
The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year:
Year Ended December 31,Year Ended December 31,
2014 2013 20122016 2015 2014
U.S. federal statutory rate35.0 % 35.0 % 35.0 %35.0 % 35.0 % 35.0 %
State and local income taxes, net of federal income tax0.4
 1.5
 3.9
0.2
 0.7
 0.8
Change in valuation allowance, net of federal income tax(3.0) (15.8) (2.3)(1.4) (0.8) (2.0)
State net operating loss adjustments2.9
 2.7
 3.7
0.9
 0.3
 1.9
Nondeductible interest expense4.0
 (11.4) 18.1
—
 —
 2.7
Unrecognized tax benefit changes2.1
 (2.1) 2.2
2.3
 0.2
 1.4
Nondeductible compensation1.0
 (2.5) 2.7
0.2
 0.1
 0.7
Foreign—
 (0.7) 3.5
Other differences, net0.8
 (2.3) 2.0
0.3
 —
 0.4
Effective tax rate43.2 % 4.4 % 68.8 %37.5 % 35.5 % 40.9 %
The income tax provision (benefit) provision was charged to continuing operations, discontinued operations, accumulated other comprehensive income or additional paid-in capital as follows:
Year Ended December 31,Year Ended December 31,
(dollars in millions)2014 2013 20122016 2015 2014
Income tax (benefit) provision related to:     
Income tax provision (benefit) related to:     
Continuing operations$57.4
 $(2.5) $24.7
$61.1
 $159.8
 $81.4
Accumulated other comprehensive (loss) income(22.4) 42.1
 (0.4)
Discontinued operations—
 34.8
 (24.0)
Accumulated other comprehensive income (loss)43.8
 2.0
 (22.4)
Excess tax benefits on stock option exercises(0.1) (0.5) (2.4)0.1
 (0.1) (0.1)


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Form 10-K Part II Cincinnati Bell Inc.

The components of our deferred tax assets and liabilities were as follows:
December 31,December 31,
(dollars in millions)2014 20132016 2015
Deferred tax assets:      
Net operating loss carryforwards$286.5
 $452.3
$125.2
 $142.0
Pension and postretirement benefits95.5
 81.9
78.7
 89.1
Equity method investment in CyrusOne64.5
 41.5
Deferred gain on sale of wireless spectrum licenses42.2
 —
Investment in CyrusOne—
 68.9
Employee benefits12.2
 15.2
AMT Credit Carryforward24.7
 16.5
17.4
 32.7
Texas Margin Credit10.7
 10.7
Other47.4
 46.7
19.1
 17.9
Total deferred tax assets560.8
 638.9
263.3
 376.5
Valuation allowance(64.4) (68.3)(54.4) (58.4)
Total deferred tax assets, net of valuation allowance$496.4
 $570.6
$208.9
 $318.1
Deferred tax liabilities:      
Property, plant and equipment$121.9
 $171.8
$135.0
 $134.9
Investment in CyrusOne9.1
 —
Other4.9
 3.8
0.3
 0.3
Total deferred tax liabilities126.8
 175.6
144.4
 135.2
Net deferred tax assets$369.6
 $395.0
$64.5
 $182.9

As of December 31, 2014,2016, the Company had approximately $665.2$219.4 million of federal tax operating loss carryforwards with a deferred tax asset value of $232.8$76.8 million,, alternative minimum tax credit carryforwards of $24.7$17.4 million,, state tax credits of $10.8$10.7 million,, and $53.7$48.2 million in deferred tax assets related to state, local, and foreign tax operating loss carryforwards. The majority of the remaining federal tax loss carryforwards will generally expire in 2023.2023. U.S. tax laws limit the annual utilization of tax loss carryforwards of acquired entities. These limitations should not materially impact the utilization of the tax carryforwards.
The ultimate realization of the deferred income tax assets depends upon the Company’s ability to generate future taxable income during the periods in which basis differences and other deductions become deductible, and prior to the expiration of the net operating loss carryforwards. Due to its historical and future projected earnings, management believes it will utilize future federal deductions and available net operating loss carryforwards prior to their expiration. Management also concluded that it was more likely than not that certain state and foreign tax loss carryforwards would not be realized based upon the analysis described above and therefore provided a valuation allowance.
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $26.3$31.0 million and $27.3 million at December 31, 20142016 and $23.5 million at December 31, 20132015., respectively. Accrued interest and penalties on income tax uncertainties were immaterial as of December 31, 20142016 and 2013.2015.
A reconciliation of the unrecognized tax benefits is as follows:
Year Ended December 31,Year Ended December 31,
(dollars in millions)2014 2013 20122016 2015 2014
Balance, beginning of year$24.1
 $22.8
 $21.8
$27.6
 $27.1
 $24.1
Change in tax positions for the current year3.0
 1.3
 1.4
1.2
 0.5
 3.0
Change in tax positions for prior years—
 —
 (0.4)2.6
 —
 —
Balance, end of year$27.1
 $24.1
 $22.8
$31.4
 $27.6
 $27.1
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign, state and local jurisdictions. With a few exceptions, the Company is no longer subject to U.S. federal, state or local examinations for years before 2011.2013.

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Form 10-K Part II Cincinnati Bell Inc.

14.12.     Stock-Based and Deferred Compensation Plans

The Company may grant stock options, stock appreciation rights, performance-based awards, and time-based restricted shares to officers and key employees under the 2007 Long Term Incentive Plan and stock options, restricted shares, and restricted stock units to directors under the 2007 Stock Option Plan for Non-Employee Directors. The maximum number of shares authorized under these plans is 19.05.1 million. Shares available for award under the plans at December 31, 20142016 were 1.80.9 million.
Stock Options and Stock Appreciation Rights
Generally, the awards of stock options and stock appreciation rights fully vest three years from grant date and expire ten years from grant date. Beginning in 2012, some of the stock options and stock appreciation rights vested over a three year period based on the achievement of certain performance objectives. The Company generally issues new shares when options to purchase common shares or stock appreciation rights are exercised. The following table summarizes stock options and stock appreciation rights activity:
2014 2013 20122016 2015 2014
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
(in thousands, except per share amounts)Shares Shares Shares Shares Shares Shares 
Outstanding at January 1,6,128
 $3.66
 9,538
 $4.04
 14,152
 $3.70
776
 $19.27
 1,045
 $19.27
 1,225
 $18.31
Granted *998
 3.41
 595
 4.75
 994
 3.41
—
 —
 —
 —
 200
 17.02
Exercised(725) 1.73
 (804) 2.41
 (4,854) 2.80
(236) 16.12
 (7) 9.15
 (145) 8.65
Forfeited(215) 3.99
 (361) 3.39
 (6) 2.91
(11) 16.16
 (100) 18.71
 (43) 19.95
Expired(962) 3.73
 (2,840) 5.56
 (748) 4.87
(139) 22.79
 (162) 20.05
 (192) 18.69
Outstanding at December 31,5,224
 $3.85
 6,128
 $3.66
 9,538
 $4.04
390
 $20.00
 776
 $19.27
 1,045
 $19.27
Expected to vest at December 31,5,224
 $3.85
 6,128
 $3.66
 9,538
 $4.04
390
 $20.00
 776
 $19.27
 1,045
 $19.27
Exercisable at December 31,3,477
 $3.98
 5,064
 $3.61
 8,486
 $4.13
330
 $20.56
 635
 $19.65
 695
 $19.91
                      
(dollars in millions)                      
Compensation expense for the year$0.3
   $0.6
   $1.1
  $0.4
   $—
   $0.3
  
Tax benefit related to compensation expense$(0.1)   $(0.2)   $(0.4)  $(0.1)   $—
   $(0.1)  
Intrinsic value of awards exercised$1.5
   $1.2
   $10.6
  $1.8
   $0.1
   $1.5
  
Cash received from awards exercised$1.3
   $2.4
   $5.5
  $3.8
   $0.1
   $1.3
  
Grant date fair value of awards vested$0.4
   $0.4
   $0.5
  $0.5
   $0.7
   $0.4
  
                      
* Assumes the maximum number of awards that can be earned if the performance conditions are achieved.
The following table summarizes our outstanding and exercisable awards at December 31, 20142016:
 Outstanding Exercisable
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
(in thousands, except per share amounts)Shares  Shares 
$1.67 to $2.91596
 $2.46
 596
 $2.46
$3.40 to $4.002,882
 3.57
 1,389
 3.75
$4.20 to $5.311,746
 4.80
 1,492
 4.80
Total5,224
 $3.85
 3,477
 $3.98
 Outstanding Exercisable
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
(in thousands, except per share amounts)Shares  Shares 
$8.3526
 $8.35
 26
 $8.35
$12.40 to $17.05174
 17.01
 114
 17.03
$23.10 to $26.55190
 24.35
 190
 24.35
Total390
 $20.00
 330
 $20.56

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Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

As of December 31, 20142016, the aggregate intrinsic value for awards outstanding and exercisable was approximately $0.41.3 million. and $1.0 million, respectively. The weighted-average remaining contractual life for awards outstanding and exercisable is approximately five years and threefour years, respectively. As of December 31, 20142016, there was $1.40.2 million of unrecognized stock compensation expense, which is expected to be recognized over a weighted-average period of approximately two years.one year.
The fair values at the date of grant were estimated using the Black-Scholes pricing model with the following assumptions:
201420132012201620152014
Expected volatility35.5%43.6%43.5%—
—
35.5%
Risk-free interest rate1.5%0.8%0.8%—
—
1.5%
Expected holding period (in years)5
5
5
—
—
5
Expected dividends0.0%0.0%0.0%—
—
0.0%
Weighted-average grant date fair value$1.14
$1.84
$1.32
$—
$—
$5.71
The expected volatility assumption used in the Black-Scholes pricing model was based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected holding period was estimated using the historical exercise behavior of employees and adjusted for abnormal activity. Expected dividends are based on the Company’s history of not paying dividends.
Performance-Based Restricted Awards
Awards granted generally vest over three years and upon the achievement of certain performance-based objectives. Performance-based awards are expensed based on their grant date fair value if it is probable that the performance conditions will be achieved.
The following table summarizes our outstanding performance-based restricted award activity:
2014 2013 20122016 2015 2014
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
(in thousands, except per share amounts)Shares Shares Shares Shares Shares Shares 
Non-vested at January 1,1,537
 $3.97
 1,687
 $3.13
 1,839
 $2.90
721
 $16.77
 349
 $19.28
 307
 $19.88
Granted*1,085
 3.56
 1,067
 4.56
 808
 3.40
307
 15.45
 538
 15.46
 217
 17.80
Vested(635) 3.71
 (703) 3.07
 (552) 2.85
(51) 22.75
 (89) 19.00
 (127) 18.55
Forfeited(241) 3.65
 (514) 3.67
 (408) 2.79
(23) 22.35
 (77) 16.44
 (48) 18.33
Non-vested at December 31,1,746
 $3.85
 1,537
 $3.97
 1,687
 $3.13
954
 $15.89
 721
 $16.77
 349
 $19.28
                      
(dollars in millions)                      
Compensation expense for the year$1.4
   $2.6
   $2.7
  $3.6
   $3.1
   $1.4
  
Tax benefit related to compensation expense$(0.5)   $(1.0)   $(1.0)  $(1.3)   $(1.1)   $(0.5)  
Grant date fair value of awards vested$2.3
   $2.2
   $1.6
  $1.2
   $1.7
   $2.3
  
                      
* Assumes the maximum number of awards that can be earned if the performance conditions are achieved.
As of December 31, 20142016, unrecognized compensation expense related to performance-based awards was $3.68.1 million, which is expected to be recognized over a weighted-average period of approximately two years.one year.


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Form 10-K Part II Cincinnati Bell Inc.

Time-Based Restricted Awards

Awards granted to employees in 2016 vest at the end of a three year period. Awards granted to employees prior to 2016 generally vest in one-third increments over a period of three years. Awards granted to directors in 20122016, 2015 and in prior years vest on the third anniversary of the grant date. Awards granted to directors in 2013 vest on the second anniversary of the grant date. Awards granted in 2014 vest on the first anniversary of the grant date.

The following table summarizes our time-based restricted award activity: 
2014 2013 20122016 2015 2014
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
  
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
   
Weighted-
Average
Exercise
Price Per
Share
(in thousands, except per share amounts)Shares Shares Shares Shares Shares Shares 
Non-vested at January 1,1,044
 $3.55
 1,298
 $3.11
 872
 $2.89
47
 $19.59
 137
 $18.44
 209
 $17.73
Granted176
 3.19
 279
 4.72
 725
 3.26
106
 16.75
 36
 17.35
 35
 16.04
Vested(514) 3.25
 (454) 3.03
 (299) 2.83
(47) 19.59
 (126) 17.70
 (103) 16.22
Forfeited(22) 3.19
 (79) 3.40
 —
 —
—
 —
 —
 —
 (4) 17.55
Non-vested at December 31,684
 $3.70
 1,044
 $3.55
 1,298
 $3.11
106
 $16.75
 47
 $19.59
 137
 $18.44
                      
(dollars in millions)                      
Compensation expense for the year$1.6
   $1.7
   $1.5
  $1.1
   $1.0
   $1.6
  
Tax benefit related to compensation expense$(0.6)   $(0.6)   $(0.6)  $(0.4)   $(0.3)   $(0.6)  
Grant date fair value of awards vested$1.7
   $1.4
   $0.8
  $0.9
   $2.2
   $1.7
  
           

As of December 31, 20142016, there was $0.60.9 million of unrecognized compensation expense related to these restricted stock awards, which is expected to be recognized over a weighted-average period of approximately one year.two years.
Cash SettledCash-Settled and Other Awards
The Company granted 531,000grants cash-settled stock appreciation rights awardsand performance awards. Beginning in 2012, with some of the stock appreciation rights vested over a grant date valuethree year period based on the achievement of $0.8 million. A Black-Scholes pricing model was utilized to determine the fair value of these awards at the date of grant. For awards granted in 2012, the weighted-average fair value per share was $1.32.certain performance objectives. The final payments of these awards will be indexed to the percentage change in the Company’s stock price from the date of grant. At
No cash-payment awards were issued in 2016 or 2015.  The Company granted cash-payment performance awards of $3.6 million in 2014. For the year ended December 31, 2014,2016, expense incurred for cash-payment awards was $2.2 million. For the amountyears ended December 31, 2015 and 2014, expense of $0.6 million related to cash-payment awards was incurred. 
At December 31, 2016 there was $1.2 million remaining unrecognized compensation expense for cash-settled stock appreciation rights was nominal.and other awards, which will primarily be recognized during 2017, assuming the maximum cash payout that can be earned if the performance conditions are achieved.  The aggregate intrinsic value of outstanding and exercisable awardscash-settled stock appreciation rights at December 31, 20142016 was $0.3 million and $0.4 million, respectively.$0.1 million.  
The Company also granted cash-payment performance awards in 2014 and 2012 with base awards of $3.6 million and $2.3 million, respectively, with the final award payment indexed to the percentage change in the Company’s stock price from the date of grant. No cash-payment awards were issued in 2013. In 2014, we recorded $0.6 million of expense related to these awards, a $0.2 million benefit in 2013 and $4.4 million of expense in 2012.
Deferred Compensation Plans
The Company currently has a deferred compensation plansplan for both the Board of Directors and certain executives of the Company.Directors. Under the directors deferred compensation plan, each director can defer receipt of all or a part of their director fees and annual retainers, which can be invested in various investment funds including the Company’s common stock. In years prior to 2012, the Company granted 6,0001,200 phantom shares to each non-employee director on the first business day of each year, which are fully vested once a director has five years of service. No phantom shares were granted to non-employee directors in 20142016. Distributions to the directors are generally in the form of cash.
The Company previously had a deferred compensation plan for certain executives of the Company.  The executive deferred compensation plan allowswas terminated in the fourth quarter of 2015.  In the fourth quarter of 2016, all amounts due under the plan were distributed to plan participants.   

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

At December 31, 2016, the number of director deferred common shares was nominal. At December 31, 2015, there were 0.1 million common shares deferred in total for both the director and executive plans. As these awards can be settled in cash, compensation costs each period are based on the change in the Company’s stock price. We recognized compensation expense of $0.1 million and $0.2 million in 2016 and 2015, respectively. A benefit of $0.3 million was recognized in 2014.
13.Restructuring and Severance
Liabilities have been established for employee separations, lease abandonment and contract terminations. A summary of activity in the restructuring and severance liability is shown below:
(dollars in millions)
Employee
Separation
 
Lease
Abandonment
 Other Total
Balance as of December 31, 2013$8.4
 $5.8
 $0.1
 $14.3
Charges/(Reversals)1.0
 (1.4) —
 (0.4)
Utilizations(6.4) (2.6) —
 (9.0)
Balance as of December 31, 20143.0
 1.8
 0.1
 4.9
Charges3.3
 0.3
 2.4
 6.0
Utilizations(6.1) (1.3) (2.4) (9.8)
Balance as of December 31, 20150.2
 0.8
 0.1
 1.1
Charges/(Reversals)12.5
 (0.5) (0.1) 11.9
Utilizations(1.7) (0.1) —
 (1.8)
Balance as of December 31, 2016$11.0
 $0.2
 $—
 $11.2
In 2016, employee severance costs were associated with initiatives to reduce costs associated with our legacy copper network, including a voluntary severance program for certain executivesmanagement employees. Employee severance costs were also due to deferincreased in-sourcing of IT professionals by our customers which resulted in headcount reductions in our IT Services and Hardware segment. In 2015, employee severance charges were associated with discontinuing our cyber-security product offering and integrating each of our segments' business markets. In 2014, employee separation charges included charges attributable to outsourcing a portion of their annual base pay, bonus, or stock awards. Underour IT function and incurring consulting fees related to a workforce optimization initiative.
Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Reversals in 2014 were related to previously abandoned leased space that was reoccupied. Lease payments on abandoned facilities will continue through 2019.
Other charges in 2015 represent project related expenses as we identified opportunities to integrate the executive deferred compensation plan, participants can electbusiness markets within our Entertainment and Communications and IT Services & Hardware segments.
A summary of restructuring activity by business segment is presented below:
(dollars in millions)Entertainment and Communications IT Services and Hardware Corporate Total
Balance as of December 31, 2013$10.5
 $0.8
 $3.0
 $14.3
Charges/(Reversals)(0.5) —
 0.1
 (0.4)
Utilizations(6.1) (0.5) (2.4) (9.0)
Balance as of December 31, 20143.9
 0.3
 0.7
 4.9
Charges1.6
 2.8
 1.6
 6.0
Utilizations(4.7) (2.8) (2.3) (9.8)
Balance as of December 31, 20150.8
 0.3
 —
 1.1
Charges7.7
 3.3
 0.9
 11.9
Utilizations(1.0) (0.6) (0.2) (1.8)
Balance as of December 31, 2016$7.5
 $3.0
 $0.7
 $11.2
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

At December 31, 2016 and 2015, $7.4 million and $0.9 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” At December 31, 2016 and 2015, $3.8 million and $0.2 million was included in "Other noncurrent liabilities," respectively.
Subsequent to receive distributionsDecember 31, 2016 the Company finalized a voluntary severance program for certain bargained employees related to an initiative to reduce costs associated with our copper field and network operations. As a result, a severance charge of approximately $25 million will be recorded in the formfirst quarter of either cash or common shares.2017.

111
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

At December 31, 2014 and 2013, there were 0.4 million and 0.7 million common shares deferred in these plans, respectively. As these awards can be settled in cash, we record compensation costs each period based on the change in the Company’s stock price. We recognized a compensation benefit of $0.3 million in 2014, a benefit of $1.4 million in 2013, and expense of $1.8 million in 2012.

112
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

15.14.Business Segment Information
As ofFor the years ended December 31, 2012, and for the period January 1, 2013 through January 23, 2013, we operated four business segments: Wireline, IT Services and Hardware, Wireless, and Data Center Colocation. Effective January 24, 2013, the date of the CyrusOne IPO, we no longer include CyrusOne, our former Data Center Colocation segment, in our consolidated financial statements and now account for our ownership in CyrusOne as an equity method investment. Therefore, as of December 31, 20132016, 2015, and 2014, we operated threetwo business segments: Wireline,Entertainment and Communications and IT Services and Hardware,Hardware. The closing of our wireless operations, effective March 31, 2015, represented a strategic shift in our business. Therefore, certain wireless assets, liabilities and Wireless.results of operations are reported as discontinued operations in our financial statements. For further details of the CyrusOne IPO,Discontinued Operations, see NoteNotes 1 and Note 316 of Notes to Consolidated Financial Statements.
The WirelineEntertainment and Communications segment provides products and services such as data, transport, high-speed internet, entertainment, localvideo, voice long distance, VoIP, and other services. These services are primarily provided to customers in southwestern Ohio, northern Kentucky and southeastern Indiana. Data services include Fiopticsincludes products such as high-speed internet access, digital subscriber lines, private line, multi-protocol label switching, SONET, dedicated internet access, wavelength, audio conferencing and DSL internet access. Data services also provide data transport for businesses, including local area network services, dedicated network access, metro-ethernet and Dense Wavelength Division Multiplexing ("DWDM"), which principallydigital signal. These products are used to transport large amounts of data over private networks. EntertainmentVideo services are comprised of television media throughprovide our Fioptics product suite.customers access to over 400 entertainment channels, over 140 high-definition channels, parental controls, HD DVR and video On-Demand. In addition, we offer features that deliver high customer satisfaction including Fioptics MyTV and a Fioptics live TV streaming application. Voice represents local service, revenueincluding Fioptics voice lines. It also includes local service,VoIP, long distance, digital trunking, switched access information services, and other value-added services such as caller identification, voicemail, call waiting, and call return. Long distanceVoIP products provide our customers access to widely disbursed communication platforms and VoIPaccess to cloud based services include long distance voice, audio conferencing, VoIP and other broadband services including private line and multi-protocol label switching, a technology that enables a business customer to privately interconnect voice and data services at its locations.hosted unified communications products. Other services primarily include inside wire installationconsists of revenue generated from wiring projects for business enterprises, rentalcustomers, advertising, directory assistance, maintenance and information services.
Entertainment and Communications revenue increased during 2016 and revenue under2015 due to the agreementdemand for selling Verizon Wireless handsetsstrategic fiber products more than offsetting legacy copper declines. Operating income for Entertainment and service.
In 2014, Wireline reversedCommunications for 2016 was down compared to a year ago due in large part to increased depreciation expense associated with the impact of accelerating construction of our fiber network and reducing the estimated useful life of certain set-top boxes and the related software as we upgrade to new technology. We also reduced the useful life of our copper assets in the fourth quarter of 2015. Operating income decreased during 2015 primarily due to additional operating expenses associated with the continued acceleration of our fiber investment and costs absorbed as a result of shutting down wireless operations. Entertainment and Communications recognized restructuring and severance related charges totaling $1.4of $7.7 million in 2016 primarily related to abandoned office space that was reoccupied. This was offset by $0.9 million of restructuring charges for employee severance. Wireline also recognized restructuring charges of $9.1 million and $3.5 million in 2013 and 2012, respectively, forinitiatives to reduce costs associated with employee separation, lease abandonmentsour legacy copper network. Entertainment and contract termination costs. AnCommunications recognized restructuring and severance related charges of $1.6 million in 2015 and reversed restructuring and severance related charges of $0.5 million in 2014. In 2014, Entertainment and Communications recorded an asset impairment charge of $4.6 million was recorded in 2014 related to the abandonment of an internal use software project that was written off in the fourth quarter. There were no impairment charges recorded in 20132016 or 2015. Capital expenditures are incurred to expand our Fioptics product suite, upgrade and $0.5 million of charges in 2012.increase capacity for our internet and data networks, and to maintain our wireline network.
The IT Services and Hardware segment provides a range of fully managed and outsourced IT and telecommunications services along with the sale, installation, and maintenance of major branded IT and telephony equipment. IT Services and Hardware revenue increased $88.9decreased $4.7 million from the prior year2015 as a result of $65.1an increase in strategic revenue of $17.7 million additionalin 2016 which was more than offset by the $24.5 million decrease in telecom and IT equipmenthardware sales in 2014. Managed and professional service revenue was also up $23.8 million in 20142016 compared to the prior year.
The Wireless segment provides digital wireless voice IT Services and data communications servicesHardware revenue increased $2.4 million from 2014 to 2015 as a result of an increase of $40.7 million in strategic revenue. This was partially offset by the $35.1 million decrease in telecom and salesIT hardware sales. Restructuring and severance related charges of $3.3 million were recognized in 2016 primarily related handset equipment to a reduction in force as customers increased internal IT staff, therefore reducing the need for our professional services. In 2015, restructuring and severance related charges of $2.8 million consisted of employee severance and project related costs for the integration of each segment's business markets and the discontinuation of our advanced cyber-security product offering in the Greater Cincinnati and Dayton, Ohio operating areas. In the secondfirst quarter of 2014, the Company agreed to sell its wireless spectrum licenses and certain other assets. As a result, Wireless recognized restructuring charges of $16.3 million, asset impairments of $7.5 million, and transaction costs of $3.2 million during 2014. Wireless2015. We also incurred restructuring charges of $0.2 millionabandoned office space in 2013 and $1.6 million in 2012. In addition, the agreement to sell the spectrum licenses coincided with reducing the useful life of all long-lived assets (excluding the spectrum licenses) to 30 months as of December 31, 2013 resulting in depreciation and amortization expense increasing by $62.2 million in 2014. These changes also resulted in accelerating the amortization of deferred gain on the tower sale by $19.6 million in 2014. In 2013, Wireless recorded a $3.5 million loss on disposal of assets for equipmentCanada that had no resale market or had either been disconnected from the wireless network, abandoned or demolished.
The Data Center Colocation segment provided data center colocation services to primarily large businesses. The Data Center Colocation results for 2013 shown in the accompanying table reflect the revenues and expenses of our former data center business for the period January 1, 2013 through January 23, 2013. Effective January 24, 2013, weis no longer include CyrusOne's operating results in our consolidated financial statements. In 2014use. There were no restructuring and 2013, we recognized losses of $7.0 million and $10.7 million, respectively, from our investmentseverance related charges recorded in CyrusOne which represented our equity method share of CyrusOne's losses. These losses from CyrusOne were recognized as a component of non-operating income. 2014.
As of December 31, 20142016 and 2013, the carrying value of2015, our investment in CyrusOne was $273.6 million and $471.0 million, respectively, and is included as an asset of the Corporate segment. In 2012,Deferred tax assets totaling $64.5 million and $182.3 million as of December 31, 2016 and 2015, respectively, are also reported as assets in the Data Center ColocationCorporate segment.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Our business segment recognized impairment lossesinformation is as follows:
 Year Ended December 31,
(dollars in millions)2016 2015 2014
Revenue     
Entertainment and Communications$768.8
 $743.7
 $740.7
IT Services and Hardware430.7
 435.4
 433.0
Intersegment(13.7) (11.3) (12.2)
Total revenue$1,185.8
 $1,167.8
 $1,161.5
Intersegment revenue     
Entertainment and Communications$1.3
 $1.3
 $1.2
IT Services and Hardware12.4
 10.0
 11.0
Total intersegment revenue$13.7
 $11.3
 $12.2
Operating income     
Entertainment and Communications$90.6
 $129.9
 $178.9
IT Services and Hardware23.2
 20.6
 19.8
Corporate(20.8) (22.5) (21.8)
Total operating income$93.0
 $128.0
 $176.9
Expenditures for long-lived assets     
Entertainment and Communications$272.5
 $269.5
 $163.7
IT Services and Hardware13.7
 14.0
 11.9
Corporate0.2
 0.1
 0.2
Total expenditures for long-lived assets$286.4
 $283.6
 $175.8
Depreciation and amortization     
Entertainment and Communications$168.6
 $129.2
 $115.7
IT Services and Hardware13.5
 12.3
 11.7
Corporate0.1
 0.1
 0.2
Total depreciation and amortization$182.2
 $141.6
 $127.6
      
  
As of December 31,  
(dollars in millions)2016 2015  
Assets     
Entertainment and Communications$1,093.5
 $982.5
  
IT Services and Hardware60.0
 58.0
  
Corporate and eliminations387.5
 405.9
  
Total assets$1,541.0
 $1,446.4
  


Table of $13.3 million on long-lived assetsContents
Form 10-K Part IICincinnati Bell Inc.

Details of our service and a customer relationship intangible asset.product revenues including eliminations are as follows:
In 2013, Corporate operating results include compensation expense of $42.6 million associated with awards and other transaction-related incentives associated with the IPO of CyrusOne on January 24, 2013. Other transaction costs were $1.2 million in 2014, $1.6 million in 2013, and $6.3 million in 2012. Corporate recognized restructuring charges of $0.1 million and $3.7 million in 2014 and 2013, respectively, and reversed restructuring costs of $1.0 million in 2012.

113
 Year Ended December 31,
(dollars in millions)2016 2015 2014
Service revenue     
Entertainment and Communications$763.0
 $735.0
 $728.8
IT Services and Hardware215.7
 198.0
 161.4
Total service revenue$978.7
 $933.0
 $890.2
Product revenue     
Handsets and accessories$4.5
 $7.4
 $10.7
Telecom and IT hardware202.6
 227.4
 260.6
Total product revenue$207.1
 $234.8
 $271.3

Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

15.Investment in CyrusOne
On January 24, 2013, we completed the IPO of CyrusOne, which owns and operates our former data center business through CyrusOne LP, an operating partnership. Effective with the IPO, our 69% ownership was held in the form of 1.9 million shares of unregistered common stock of CyrusOne and 42.6 million of economically equivalent partnership units in its underlying operating entity, CyrusOne LP. Therefore, effective January 24, 2013, we no longer included the accounts of CyrusOne in our consolidated financial statements and accounted for our ownership as an equity method investment as we no longer controlled the operations but maintained significant influence.
In 2014, we sold 16.0 million operating partnership units for net proceeds totaling $355.9 million that resulted in a gain of $192.8 million. During 2015, we sold 20.3 million operating partnership units and 1.4 million shares of CyrusOne's common stock that combined generated proceeds of $643.9 million and resulted in a gain of $449.2 million.
From the date of the IPO, we recognized our proportionate share of CyrusOne's net loss as "Other (income) expense, net" in our statement of operations through December 31, 2015. For 2015 and 2014, our equity method share of CyrusOne's net loss was $5.1 million and $7.0 million, respectively. Dividends received totaling $22.2 million and $28.4 million, in 2015 and 2014, respectively, were recorded as reduction of our investment.
Our remaining 6.3 million operating partnership units in CyrusOne LP were exchanged for an equal number of newly issued shares of common stock of CyrusOne on December 31, 2015. As a result, our 9.5% ownership in CyrusOne, which consisted of 6.9 million common shares, no longer constituted significant influence over the entity. Effective January 1, 2016, our investment in CyrusOne was no longer accounted for using the equity-method. Dividends declared by CyrusOne in 2016 totaled $6.4 million and were included in "Other (income) expense, net" in the Consolidated Statement of Operations.
We sold 4.1 million shares of CyrusOne's common stock for net proceeds totaling $189.7 million in 2016 that resulted in a gain of $157.0 million. As of December 31, 2016, we held 2.8 million shares of CyrusOne Inc. common stock valued at $128.0 million.
Subsequent to the end of the year, we sold approximately 2 million shares of CyrusOne Inc. common stock for net proceeds totaling approximately $100 million that resulted in a gain of approximately $83 million. The proceeds were primarily used to repay amounts outstanding on Receivables Facility.
Transactions with CyrusOne
Revenues - The Company records service revenue from CyrusOne under contractual service arrangements which include, among others, providing services such as fiber transport, network support, service calls, management and monitoring, storage and back-up, and IT systems support.
Operating Expenses - We lease data center and office space from CyrusOne at certain locations in our operating territory under operating leases and are also billed for other services provided by CyrusOne under contractual service arrangements. In the normal course of business, segment information isthe Company also provides certain administrative services to CyrusOne which are billed based on agreed-upon rates.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Revenues and operating costs and expenses from transactions with CyrusOne were as follows:
 Year Ended December 31,
(dollars in millions)2014 2013 2012
Revenue     
Wireline$740.7
 $724.8
 $730.5
IT Services and Hardware433.0
 344.1
 315.7
Wireless132.8
 201.5
 241.8
Data Center Colocation—
 15.6
 221.3
Intersegment(28.3) (29.1) (35.4)
Total revenue$1,278.2
 $1,256.9
 $1,473.9
Intersegment revenue     
Wireline$15.6
 $16.8
 $19.1
IT Services and Hardware11.0
 9.6
 7.6
Wireless1.7
 2.3
 2.3
Data Center Colocation—
 0.4
 6.4
Total intersegment revenue$28.3
 $29.1
 $35.4
Operating income (loss)     
Wireline$182.5
 $190.2
 $212.9
IT Services and Hardware19.8
 8.5
 10.3
Wireless(66.3) 18.2
 51.2
Data Center Colocation—
 3.2
 30.4
Corporate(20.2) (56.3) (34.7)
Total operating income$115.8
 $163.8
 $270.1
Expenditures for long-lived assets     
Wireline$163.7
 $162.6
 $114.2
IT Services and Hardware11.9
 10.6
 9.0
Wireless6.5
 16.0
 15.8
Data Center Colocation—
 7.7
 228.2
Corporate0.2
 —
 —
Total expenditures for long-lived assets$182.3
 $196.9
 $367.2
Depreciation and amortization     
Wireline$115.7
 $112.2
 $106.0
IT Services and Hardware11.7
 10.5
 8.6
Wireless103.4
 41.2
 31.9
Data Center Colocation—
 5.2
 70.6
Corporate0.2
 0.5
 0.3
Total depreciation and amortization$231.0
 $169.6
 $217.4
      
  
As of December 31,  
(dollars in millions)2014 2013  
Assets     
Wireline$832.2
 $780.8
  
IT Services and Hardware61.4
 48.9
  
Wireless122.7
 247.5
  
Corporate and eliminations803.4
 1,030.1
  
Total assets$1,819.7
 $2,107.3
  
  Year Ended December 31,
(dollars in millions) 2016 2015 2014
Revenue:      
Services provided to CyrusOne $1.2
 $1.3
 $1.7
       
Operating costs and expenses:      
Charges for services provided by CyrusOne $10.2
 $10.2
 $9.1
Administrative services provided to CyrusOne (0.3) (0.4) (0.5)
Total operating costs and expenses $9.9
 $9.8

$8.6


Amounts receivable from and payable to CyrusOne were as follows:

114
(dollars in millions) December 31, 2016 December 31, 2015
Accounts receivable $—
 $0.1
Dividends receivable 1.1
 2.1
Receivable from CyrusOne $1.1
 $2.2
     
Payable to CyrusOne $0.9
 $1.5
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Details
16.Discontinued Operations
Cincinnati Bell Wireless LLC ("CBW"), our former Wireless segment, provided digital wireless voice and data communications services to customers in the Company’s licensed service territory, which included Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky and southeastern Indiana. The Company’s customers were also able to place and receive wireless calls nationally and internationally due to roaming agreements the Company had with other carriers.
In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets. The agreement to sell our spectrum licenses closed on September 30, 2014 for cash proceeds of $194.4 million. Prior to this date, the Company's digital wireless network utilized 50 MHz of licensed spectrum in the Cincinnati area and 40 MHz of licensed spectrum in the Dayton area, which had a carrying value of $88.2 million. Simultaneous with the close of the spectrum sale, the Company entered into a separate agreement to use certain wireless spectrum for $8.00 until we no longer provided wireless services. We ceased providing wireless service effective March 31, 2015. The fair value of the lease, which is considered a Level 3 measurement based on other comparable transactions, totaled $6.4 million and product revenueswas recorded as a prepaid expense and amortized over a six month period ending March 31, 2015.
As of March 31, 2015, there were no subscribers remaining on the network and we no longer required the use of the spectrum being leased. Therefore, the $112.6 million gain on the sale of the wireless spectrum licenses, which had been previously deferred, was recognized in Income (loss) from discontinued operations, net of tax during the three months ended March 31, 2015. On April 1, 2015, we transferred certain other wireless assets to the acquirer, including eliminationsleases to certain wireless towers and related equipment and other assets, which resulted in a gain of $15.9 million in the second quarter of 2015.


Table of Contents
Form 10-K Part IICincinnati Bell Inc.


Wireless financial results for the twelve months ended December 31, 2016, 2015 and 2014 reported as "Income (loss) from discontinued operations, net of tax" on the Consolidated Statements of Operations are as follows:
 Year Ended December 31,
(dollars in millions)2014 2013 2012
Service revenue     
Wireline$714.5
 $702.3
 $705.0
IT Services and Hardware161.4
 138.7
 130.2
Wireless123.7
 183.1
 222.7
Data Center Colocation—
 15.2
 214.9
Total service revenue$999.6
 $1,039.3
 $1,272.8
Product revenue     
Handsets and accessories$18.0
 $21.8
 $23.2
IT, telephony and other equipment260.6
 195.8
 177.9
Total product revenue$278.6
 $217.6
 $201.1
 Twelve Months Ended
 December 31,
(dollars in millions)2016 2015 2014
Revenue$—
 $4.4
 $132.8
Costs and expenses     
Cost of products and services—
 12.0
 66.9
Selling, general and administrative—
 2.2
 19.5
Depreciation and amortization expense—
 28.6
 103.4
Restructuring charges—
 3.3
 16.3
Impairment of assets—
 —
 7.5
     Transaction costs—
 —
 3.2
Gain on sale or disposal of assets—
 (0.4) —
Amortization of deferred gain—
 (6.5) (22.9)
Total operating costs and expenses—
 39.2
 193.9
Operating loss—
 (34.8) (61.1)
Interest (income) expense—
 (1.7) 2.8
Other (income) expense(0.3) (2.3) 2.2
Gain on transfer of tower lease obligations and other assets—
 15.9
 —
Gain on sale of wireless spectrum licenses—
 112.6
 —
Income (loss) before income taxes0.3
 97.7
 (66.1)
Income tax expense (benefit)—
 34.8
 (24.0)
Income (loss) from discontinued operations, net of tax$0.3
 $62.9
 $(42.1)

16.     Supplemental Cash Flow InformationWireless liabilities presented as discontinued operations as of December 31, 2016 and December 31, 2015 are as follows:
 Year Ended December 31,
(dollars in millions)2014 2013 2012
Capitalized interest expense$0.8
 $0.6
 $2.7
Cash paid for:     
Interest153.1
 179.5
 217.9
Income taxes, net of refunds9.1
 2.8
 0.1
Noncash investing and financing activities:     
Investment in CyrusOne resulting from deconsolidation—
 509.7
 —
Accrual of CyrusOne dividends6.0
 7.1
 —
Acquisition of property by assuming debt and other financing arrangements4.7
 7.6
 19.9
Acquisition of property on account24.8
 13.3
 30.7
Accrued CyrusOne stock issuance costs—
 —
 2.2
(dollars in millions)

December 31, 2016 December 31, 2015
Current liabilities   
Restructuring liability$—
 $4.7
Other current liabilities—
 0.7
Total current liabilities from discontinued operations$—
 $5.4
Restructuring liabilities were established for employee separations, lease abandonments and contract terminations charges. In 2015, restructuring charges were for tower operating leases that were abandoned. During 2014, restructuring charges included $13.1 million in contract termination charges for wireless contracts that were no longer utilized and $3.2 million in employee separation charges.
An asset impairment loss of $7.5 million was also recognized in 2014 for the write-off of certain construction-in-progress projects that were not completed due to the wind down of wireless operations.
In the fourth quarter of 2014, we repaid $22.7 million 8 3/8% Senior Notes due 2020 using proceeds from the sale of our wireless spectrum licenses.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.


Following is selected operating, investing and financing cash flow activity from discontinued operations included in Consolidated Statements of Cash Flows:
115
 Twelve Months Ended
 December 31,
(dollars in millions)2016 2015 2014
Depreciation and amortization$—
 $28.6
 $103.4
Gain on sale of assets—
 (0.4) —
Impairment of assets—
 —
 7.5
Deferred gain on sale of spectrum licenses—
 (112.6) —
Amortization of deferred gain on sale of towers—
 (6.5) (22.9)
Gain on transfer of tower lease obligations and other assets—
 (15.9) —
Non-cash spectrum lease—
 3.2
 3.2
Restructuring payments(4.4) (14.5) (2.4)
Capital expenditures—
 —
 (6.5)
Proceeds from sale of wireless spectrum licenses—
 —
 194.4
Repayment of debt—
 (0.3) (23.5)

Operating Lease Commitments

The Company's discontinued operations leased certain facilities and equipment. Operating lease expense was $1.4 million and $6.4 million, in 2015 and 2014, respectively.



Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

17.     Quarterly Financial Information (Unaudited)
 2016
 First Second Third Fourth  
(in millions, except per common share amounts)Quarter Quarter Quarter Quarter Total
Revenue$288.9
 $299.2
 $312.4
 $285.3
 $1,185.8
Operating income29.6
 27.4
 25.5
 10.5
 93.0
Income (loss) from continuing operations7.0
 77.6
 18.8
 (1.6) 101.8
Income from discontinued operations, net of tax—
 —
 —
 0.3
 0.3
Net income (loss)7.0
 77.6
 18.8
 (1.3) 102.1
          
Basic earnings (loss) per common share from continuing operations$0.10
 $1.79
 $0.39
 $(0.10) $2.17
Basic earnings per common share from discontinued operations$—
 $—
 $—
 $0.01
 $0.01
Net basic earnings (loss) per common share$0.10
 $1.79
 $0.39
 $(0.09) $2.18
          
Diluted earnings (loss) per common share from continuing operations$0.10
 $1.78
 $0.38
 $(0.10) $2.17
Diluted earnings per common share from discontinued operations$—
 $—
 $—
 $0.01
 $0.01
Net diluted earnings (loss) per common share$0.10
 $1.78
 $0.38
 $(0.09) $2.18
          
 2015
 First Second Third Fourth  
(in millions, except per common share amounts)Quarter Quarter Quarter Quarter Total
Revenue$292.9
 $285.8
 $299.8
 $289.3
 $1,167.8
Operating income37.1
 29.7
 36.2
 25.0
 128.0
Income from continuing operations0.3
 180.7
 79.3
 30.5
 290.8
Income from discontinued operations, net of tax48.9
 10.9
 1.0
 2.1
 62.9
Net income49.2
 191.6
 80.3
 32.6
 353.7
          
Basic earnings (loss) per common share from continuing operations$(0.06) $4.25
 $1.83
 $0.66
 $6.69
Basic earnings per common share from discontinued operations$1.17
 $0.26
 $0.02
 $0.05
 $1.50
Net basic earnings per common share$1.11
 $4.51
 $1.85
 $0.71
 $8.19
          
Diluted earnings (loss) per common share from continuing operations$(0.06) $4.15
 $1.83
 $0.66
 $6.68
Diluted earnings per common share from discontinued operations$1.17
 $0.26
 $0.02
 $0.05
 $1.49
Net diluted earnings per common share$1.11
 $4.41
 $1.85
 $0.71
 $8.17
The effects of assumed common share conversions are determined independently for each respective quarter and year and may not be dilutive during every period due to variations in operating results. Therefore, the sum of quarterly per share results will not necessarily equal the per share results for the full year.
Restructuring and employee severance charges totaled $11.9 million in the fourth quarter of 2016. Restructuring and employee severance charges totaled $3.4 million, $2.3 million and $0.3 million in the first, second and third quarters of 2015, respectively.
In 2016, Income from continuing operations includes gains from the sale of our CyrusOne investment of $118.6 million, $33.3 million, and $5.1 million in the second, third, and fourth quarters, respectively. Income from continuing operations in 2015 includes gains from the sale of our CyrusOne investment of $295.2 million, $117.7 million, and $36.3 million in the second, third, and fourth quarters, respectively.
In the first quarter of 2016, the Company recognized a gain on the extinguishment of debt of $2.4 million. The Company recognized losses on the extinguishment of debt of $5.2 million, $11.4 million, and $4.8 million in the second, third, and fourth quarters, respectively. The Company recognized losses on the extinguishment of debt of $13.5 million and $7.8 million in the second and third quarters of 2015, respectively. In the fourth quarter of 2015, the Company recognized a gain on the extinguishment of debt of $0.4 million.
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

As of March 31, 2015, no subscribers remained on the network, and we no longer required the use of the leased spectrum. Therefore, the $112.6 million gain on the sale of the wireless spectrum licenses, which had been previously deferred, was recognized in Income from discontinued operations, net of tax in the first quarter of 2015. During the second quarter, we transferred certain other assets related to our wireless business, including leases to certain wireless towers and related equipment and other assets, resulting in a gain of $15.9 million in the second quarter of 2015 which was recognized in Income from discontinued operations, net of tax.
18.     Supplemental Cash Flow Information
 Year Ended December 31,
(dollars in millions)2016 2015 2014
Capitalized interest expense$0.7
 $1.1
 $0.8
Cash paid for:     
Interest71.1
 108.5
 153.1
Income taxes, net of refunds1.7
 8.8
 9.1
Noncash investing and financing activities:     
Accrual of CyrusOne dividends1.1
 2.1
 6.0
Acquisition of property by assuming debt and other financing arrangements12.0
 5.8
 4.7
Acquisition of property on account23.8
 34.6
 24.8

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

17.19.Supplemental Guarantor Information - Cincinnati Bell Telephone Notes
CBT,As of December 31, 2016, Cincinnati Bell Telephone Company LLC ("CBT"), a wholly-owned subsidiary of Cincinnati Bell Inc. (the "Parent Company"), had $134.5$87.9 million in notes outstanding at December 31, 2014 that are guaranteed by the Parent Company and no other subsidiaries of the Parent Company. The guarantee is full and unconditional. The Parent Company’s subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet the Parent Company’s debt service obligations.
The following information sets forth the Condensed Consolidating Balance Sheets of the Company as of December 31, 20142016 and 20132015 and the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) and Cash Flows for the years ended December 31, 20142016, 20132015, and 20122014 of (1) the Parent Company, as the guarantor, (2) CBT, as the issuer, and (3) the non-guarantor subsidiaries on a combined basis.

116Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
  
Year Ended December 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $677.8
 $547.8
 $(39.8) $1,185.8
Operating costs and expenses20.7
 592.5
 519.4
 (39.8) 1,092.8
Operating income (loss)(20.7) 85.3
 28.4
 —
 93.0
Interest expense (income), net94.4
 4.5
 (23.2) —
 75.7
Other expense (income), net20.3
 4.9
 (170.8) —
 (145.6)
Income (loss) before equity in earnings of subsidiaries and income taxes(135.4) 75.9
 222.4
 —
 162.9
Income tax expense (benefit)(46.5) 27.1
 80.5
 —
 61.1
Equity in earnings of subsidiaries, net of tax191.0
 —
 —
 (191.0) —
Income from continuing operations102.1
 48.8
 141.9
 (191.0) 101.8
Income from discontinued operations, net of tax—
 —
 0.3
 —
 0.3
Net income102.1
 48.8
 142.2
 (191.0) 102.1
Other comprehensive income12.7
 —
 68.0
 —
 80.7
Total comprehensive income$114.8
 $48.8
 $210.2
 $(191.0) $182.8
          
Net income102.1
 48.8
 142.2
 (191.0) 102.1
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$91.7
 $48.8
 $142.2
 $(191.0) $91.7
          
          
 Year Ended December 31, 2015
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $660.1
 $546.3
 $(38.6) $1,167.8
Operating costs and expenses22.4
 538.6
 517.4
 (38.6) 1,039.8
Operating income (loss)(22.4) 121.5
 28.9
 —
 128.0
Interest expense (income), net112.7
 (0.9) (8.7) —
 103.1
Other expense (income), net19.5
 7.0
 (452.2) —
 (425.7)
Income (loss) before equity in earnings of subsidiaries and income taxes(154.6) 115.4
 489.8
 —
 450.6
Income tax expense (benefit)(53.3) 41.1
 172.0
 —
 159.8
Equity in earnings of subsidiaries, net of tax455.0
 —
 —
 (455.0) —
Income from continuing operations353.7
 74.3
 317.8
 (455.0) 290.8
Income from discontinued operations, net of tax—
 —
 62.9
 —
 62.9
Net income353.7
 74.3
 380.7
 (455.0) 353.7
Other comprehensive income (loss)3.3
 —
 (0.4) —
 2.9
Total comprehensive income$357.0
 $74.3
 $380.3
 $(455.0) $356.6
          
Net income353.7
 74.3
 380.7
 (455.0) 353.7
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$343.3
 $74.3
 $380.7
 $(455.0) $343.3

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
  
Year Ended December 31, 2014
(dollars in millions)Parent
(Guarantor)		 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $659.6
 $541.0
 $(39.1) $1,161.5
Operating costs and expenses21.5
 488.0
 514.2
 (39.1) 984.6
Operating income (loss)(21.5) 171.6
 26.8
 —
 176.9
Interest expense (income), net142.6
 (4.5) 7.8
 —
 145.9
Other expense (income), net17.6
 7.4
 (193.1) —
 (168.1)
Income (loss) before equity in earnings of subsidiaries and income taxes(181.7) 168.7
 212.1
 —
 199.1
Income tax expense (benefit)(55.8) 61.7
 75.5
 —
 81.4
Equity in earnings of subsidiaries, net of tax201.5
 —
 —
 (201.5) —
Income from continuing operations75.6
 107.0
 136.6
 (201.5) 117.7
Loss from discontinued operations, net of tax—
 —
 (42.1) —
 (42.1)
Net income75.6
 107.0
 94.5
 (201.5) 75.6
Other comprehensive loss(40.5) —
 (0.1) —
 (40.6)
Total comprehensive income$35.1
 $107.0
 $94.4
 $(201.5) $35.0
          
Net income75.6
 107.0
 94.5
 (201.5) 75.6
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$65.2
 $107.0
 $94.5
 $(201.5) $65.2
Table of Contents
Form 10-K Part IICincinnati Bell Inc.


Condensed Consolidating Balance Sheets         
  
As of December 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash and cash equivalents$7.8
 $1.4
 $0.5
 $—
 $9.7
Receivables, net17.8
 —
 160.8
 —
 178.6
Other current assets1.1
 22.3
 18.2
 —
 41.6
Total current assets26.7
 23.7
 179.5
 —
 229.9
Property, plant and equipment, net0.3
 1,029.6
 55.6
 —
 1,085.5
Investment in CyrusOne—
 —
 128.0
 —
 128.0
Goodwill—
 2.2
 12.1
 —
 14.3
Investments in and advances to subsidiaries816.7
 —
 914.5
 (1,731.2) —
Other noncurrent assets179.1
 1.6
 47.4
 (144.8) 83.3
Total assets$1,022.8
 $1,057.1
 $1,337.1
 $(1,876.0) $1,541.0
Current portion of long-term debt$—
 $5.0
��$2.5
 $—
 $7.5
Accounts payable0.7
 71.4
 33.8
 —
 105.9
Other current liabilities42.9
 53.9
 22.7
 —
 119.5
Total current liabilities43.6
 130.3
 59.0
 —
 232.9
Long-term debt, less current portion960.3
 98.2
 140.6
 —
 1,199.1
Other noncurrent liabilities207.9
 166.8
 0.8
 (144.8) 230.7
Intercompany payables—
 89.1
 —
 (89.1) —
Total liabilities1,211.8
 484.4
 200.4
 (233.9) 1,662.7
Shareowners’ (deficit) equity(189.0) 572.7
 1,136.7
 (1,642.1) (121.7)
Total liabilities and shareowners’ equity (deficit)$1,022.8
 $1,057.1
 $1,337.1
 $(1,876.0) $1,541.0

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Balance Sheets
  
As of December 31, 2015
(dollars in millions)Parent
(Guarantor)		 CBT
(Issuer)		 Other
Non-guarantors		 Eliminations Total
Cash and cash equivalents$4.6
 $1.0
 $1.8
 $—
 $7.4
Receivables, net0.7
 —
 156.4
 —
 157.1
Other current assets1.6
 20.2
 14.1
 —
 35.9
Total current assets6.9
 21.2
 172.3
 —
 200.4
Property, plant and equipment, net0.3
 921.5
 53.7
 —
 975.5
Investment in CyrusOne—
 —
 55.5
 —
 55.5
Goodwill—
 2.2
 12.1
 —
 14.3
Investments in and advances to subsidiaries844.6
 63.9
 647.2
 (1,555.7) —
Other noncurrent assets207.2
 3.0
 136.8
 (146.3) 200.7
Total assets$1,059.0
 $1,011.8
 $1,077.6
 $(1,702.0) $1,446.4
Current portion of long-term debt$5.4
 $5.0
 $3.4
 $—
 $13.8
Accounts payable0.7
 84.8
 43.4
 —
 128.9
Other current liabilities41.6
 45.3
 24.2
 —
 111.1
Other current liabilities from discontinued operations—
 —
 5.4
 —
 5.4
Total current liabilities47.7
 135.1
 76.4
 —
 259.2
Long-term debt, less current portion1,018.6
 134.3
 70.9
 —
 1,223.8
Other noncurrent liabilities235.5
 168.3
 4.0
 (146.2) 261.6
Intercompany payables54.7
 —
 —
 (54.7) —
Total liabilities1,356.5
 437.7
 151.3
 (200.9) 1,744.6
Shareowners’ (deficit) equity(297.5) 574.1
 926.3
 (1,501.1) (298.2)
Total liabilities and shareowners’ equity (deficit)$1,059.0
 $1,011.8
 $1,077.6
 $(1,702.0) $1,446.4

Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Statements of Cash Flows
  
Year Ended December 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows provided by (used in) by operating activities$(61.1) $203.1
 $31.2
 $—
 $173.2
Capital expenditures(0.2) (260.8) (25.4) —
 (286.4)
Dividends received from CyrusOne (equity method investment)—
 —
 2.1
 —
 2.1
Proceeds from sale of investment in CyrusOne—
 —
 189.7
 —
 189.7
Distributions received from subsidiaries12.0
 —
 —
 (12.0) —
Funding between Parent and subsidiaries, net152.0
 —
 (188.8) 36.8
 —
Other investing activities(0.9) —
 —
 —
 (0.9)
Cash flows provided by (used in) investing activities162.9
 (260.8) (22.4) 24.8
 (95.5)
Funding between Parent and subsidiaries, net—
 103.0
 (66.2) (36.8) —
Distributions paid to Parent—
 —
 (12.0) 12.0
 —
Proceeds from issuance of long-term debt635.0
 —
 —
 —
 635.0
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days—
 —
 71.9
 —
 71.9
Repayment of debt(710.9) (44.9) (3.5) —
 (759.3)
Debt issuance costs(10.8) —
 (0.3) —
 (11.1)
Other financing activities(11.9) —
 —
 —
 (11.9)
Cash flows provided by (used in) financing activities(98.6) 58.1
 (10.1) (24.8) (75.4)
Increase (decrease) in cash and cash equivalents3.2
 0.4
 (1.3) —
 2.3
Beginning cash and cash equivalents4.6
 1.0
 1.8
 —
 7.4
Ending cash and cash equivalents$7.8
 $1.4
 $0.5
 $—
 $9.7
          
 Year Ended December 31, 2015
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows provided by (used in) operating activities$(19.3) $198.7
 $(68.5) $—
 $110.9
Capital expenditures(0.1) (260.7) (22.8) —
 (283.6)
Dividends received from CyrusOne (equity method investment)—
 —
 22.2
 —
 22.2
Proceeds from sale of investment in CyrusOne—
 —
 643.9
 —
 643.9
Distributions received from subsidiaries11.3
 —
 —
 (11.3) —
Funding between Parent and subsidiaries, net—
 71.9
 (555.5) 483.6
 —
Other investing activities(0.3) 0.1
 0.9
 —
 0.7
Cash flows provided by (used in) investing activities10.9
 (188.7) 88.7
 472.3
 383.2
Funding between Parent and subsidiaries, net486.4
 —
 (2.8) (483.6) —
Distributions paid to Parent—
 —
 (11.3) 11.3
 —
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days—
 —
 (1.6) —
 (1.6)
Repayment of debt(518.5) (10.0) (3.2) —
 (531.7)
Debt issuance costs(0.2) —
 (0.2) —
 (0.4)
Other financing activities(10.9) —
 —
 —
 (10.9)
Cash flows provided by (used in) financing activities(43.2) (10.0) (19.1) (472.3) (544.6)
Increase (decrease) in cash and cash equivalents(51.6) —
 1.1
 —
 (50.5)
Beginning cash and cash equivalents56.2
 1.0
 0.7
 —
 57.9
Ending cash and cash equivalents$4.6
 $1.0
 $1.8
 $—
 $7.4
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Statements of Cash Flows
 Year Ended December 31, 2014
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows provided by (used in) operating activities$(56.3) $226.3
 $5.2
 $—
 $175.2
Capital expenditures(0.2) (152.5) (29.6) —
 (182.3)
Dividends received from CyrusOne (equity method investment)—
 —
 28.4
 —
 28.4
Proceeds from sale of investment in CyrusOne—
 —
 355.9
 —
 355.9
Proceeds from sale of wireless spectrum licenses - discontinued operations—
 —
 194.4
 —
 194.4
Distributions received from subsidiaries12.8
 —
 —
 (12.8) —
Funding between parent and subsidiaries, net—
 (71.0) (545.0) 616.0
 —
Other investing activities(0.3) 0.3
 (3.8) —
 (3.8)
Cash flows provided by (used in) investing activities12.3
 (223.2) 0.3
 603.2
 392.6
Funding between Parent and subsidiaries, net516.2
 —
 99.8
 (616.0) —
Distributions paid to Parent—
 —
 (12.8) 12.8
 —
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days(40.0) —
 (87.0) —
 (127.0)
Repayment of debt(367.3) (3.9) (5.3) —
 (376.5)
Debt issuance costs(0.7) —
 (0.2) —
 (0.9)
Other financing activities(10.1) —
 —
 —
 (10.1)
Cash flows provided by (used in) financing activities98.1
 (3.9) (5.5) (603.2) (514.5)
Increase (decrease) in cash and cash equivalents54.1
 (0.8) —
 —
 53.3
Beginning cash and cash equivalents2.1
 1.8
 0.7
 —
 4.6
Ending cash and cash equivalents$56.2
 $1.0
 $0.7
 $—
 $57.9
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
  
Year Ended December 31, 2014
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $659.6
 $673.8
 $(55.2) $1,278.2
Operating costs and expenses19.9
 484.4
 713.3
 (55.2) 1,162.4
Operating (loss) income(19.9) 175.2
 (39.5) —
 115.8
Interest expense (income), net144.0
 (4.5) 9.2
 —
 148.7
Other expense (income), net17.6
 7.4
 (190.9) —
 (165.9)
(Loss) income before equity in earnings of subsidiaries and income taxes(181.5) 172.3
 142.2
 —
 133.0
Income tax (benefit) expense(55.6) 62.9
 50.1
 —
 57.4
Equity in earnings of subsidiaries, net of tax201.5
 —
 —
 (201.5) —
Net income75.6
 109.4
 92.1
 (201.5) 75.6
Other comprehensive loss(40.5) —
 (0.1) —
 (40.6)
Total comprehensive income$35.1
 $109.4
 $92.0
 $(201.5) $35.0
          
Net income$75.6
 $109.4
 $92.1
 $(201.5) $75.6
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$65.2
 $109.4
 $92.1
 $(201.5) $65.2
          
 Year Ended December 31, 2013
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $644.2
 $669.0
 $(56.3) $1,256.9
Operating costs and expenses55.4
 459.1
 634.9
 (56.3) 1,093.1
Operating (loss) income(55.4) 185.1
 34.1
 —
 163.8
Interest expense (income), net164.3
 (2.7) 20.4
 —
 182.0
Other expense, net28.2
 6.5
 4.3
 —
 39.0
(Loss) income before equity in earnings of subsidiaries and income taxes(247.9) 181.3
 9.4
 —
 (57.2)
Income tax (benefit) expense(79.8) 66.1
 11.2
 —
 (2.5)
Equity in earnings of subsidiaries, net of tax113.4
 —
 —
 (113.4) —
Net (loss) income(54.7) 115.2
 (1.8) (113.4) (54.7)
Other comprehensive income (loss)76.5
 —
 (0.1) —
 76.4
Total comprehensive income (loss)$21.8
 $115.2
 $(1.9) $(113.4) $21.7
          
Net (loss) income$(54.7) $115.2
 $(1.8) $(113.4) $(54.7)
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net (loss) income applicable to common shareowners$(65.1) $115.2
 $(1.8) $(113.4) $(65.1)


117
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
  
Year Ended December 31, 2012
(dollars in millions)Parent
(Guarantor)		 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Revenue$—
 $642.8
 $893.3
 $(62.2) $1,473.9
Operating costs and expenses33.9
 436.3
 795.8
 (62.2) 1,203.8
Operating (loss) income(33.9) 206.5
 97.5
 —
 270.1
Interest expense (income), net164.8
 (1.5) 55.6
 —
 218.9
Other expense (income), net11.5
 5.9
 (2.1) —
 15.3
(Loss) income before equity in earnings of subsidiaries and income taxes(210.2) 202.1
 44.0
 —
 35.9
Income tax (benefit) expense(68.3) 73.8
 19.2
 —
 24.7
Equity in earnings of subsidiaries, net of tax153.1
 —
 —
 (153.1) —
Net income11.2
 128.3
 24.8
 (153.1) 11.2
Other comprehensive loss(0.8) —
 —
 —
 (0.8)
Total comprehensive income$10.4
 $128.3
 $24.8
 $(153.1) $10.4
          
Net income$11.2
 $128.3
 $24.8
 $(153.1) $11.2
Preferred stock dividends10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$0.8
 $128.3
 $24.8
 $(153.1) $0.8

118
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

Condensed Consolidating Balance Sheets         
  
As of December 31, 2014
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash and cash equivalents$56.2
 $1.0
 $0.7
 $—
 $57.9
Receivables, net2.6
 —
 164.9
 —
 167.5
Other current assets4.7
 29.3
 78.4
 (1.2) 111.2
Total current assets63.5
 30.3
 244.0
 (1.2) 336.6
Property, plant and equipment, net0.2
 764.0
 95.3
 —
 859.5
Investment in CyrusOne—
 —
 273.6
 —
 273.6
Goodwill and intangibles, net—
 2.2
 13.2
 —
 15.4
Investments in and advances to subsidiaries1,066.1
 236.1
 244.7
 (1,546.9) —
Other noncurrent assets294.2
 4.9
 190.5
 (155.0) 334.6
Total assets$1,424.0
 $1,037.5
 $1,061.3
 $(1,703.1) $1,819.7
          
Current portion of long-term debt$5.4
 $3.9
 $3.9
 $—
 $13.2
Accounts payable1.0
 73.2
 61.8
 —
 136.0
Deferred gain on sale of wireless spectrum licenses—
 —
 112.6
 —
 112.6
Other current liabilities52.3
 52.8
 42.8
 0.1
 148.0
Total current liabilities58.7
 129.9
 221.1
 0.1
 409.8
Long-term debt, less current portion1,526.1
 141.2
 103.7
 —
 1,771.0
Other noncurrent liabilities254.1
 166.7
 23.0
 (156.4) 287.4
Intercompany payables233.4
 —
 —
 (233.4) —
Total liabilities2,072.3
 437.8
 347.8
 (389.7) 2,468.2
Shareowners’ (deficit) equity(648.3) 599.7
 713.5
 (1,313.4) (648.5)
Total liabilities and shareowners’ equity (deficit)$1,424.0
 $1,037.5
 $1,061.3
 $(1,703.1) $1,819.7
          
 As of December 31, 2013
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash and cash equivalents$2.1
 $1.8
 $0.7
 $—
 $4.6
Receivables, net2.6
 —
 152.2
 —
 154.8
Other current assets4.4
 24.1
 63.9
 (0.7) 91.7
Total current assets9.1
 25.9
 216.8
 (0.7) 251.1
Property, plant and equipment, net0.1
 706.5
 196.2
 —
 902.8
Investment in CyrusOne—
 —
 471.0
 —
 471.0
Goodwill and intangibles, net—
 2.3
 103.8
 —
 106.1
Investments in and advances to subsidiaries1,406.6
 247.7
 —
 (1,654.3) —
Other noncurrent assets359.1
 6.1
 178.9
 (167.8) 376.3
Total assets$1,774.9
 $988.5
 $1,166.7
 $(1,822.8) $2,107.3
          
Current portion of long-term debt$5.4
 $3.9
 $3.3
 $—
 $12.6
Accounts payable1.5
 45.9
 42.5
 —
 89.9
Other current liabilities67.7
 49.4
 34.6
 0.1
 151.8
Total current liabilities74.6
 99.2
 80.4
 0.1
 254.3
Long-term debt, less current portion1,916.1
 141.8
 194.7
 —
 2,252.6
Other noncurrent liabilities214.5
 172.2
 59.0
 (168.6) 277.1
Intercompany payables246.4
 —
 199.7
 (446.1) —
Total liabilities2,451.6
 413.2
 533.8
 (614.6) 2,784.0
Shareowners’ (deficit) equity(676.7) 575.3
 632.9
 (1,208.2) (676.7)
Total liabilities and shareowners’ equity (deficit)$1,774.9
 $988.5
 $1,166.7
 $(1,822.8) $2,107.3


119
Table of Contents
Form 10-K Part IICincinnati Bell Inc.


Condensed Consolidating Statements of Cash Flows
  
Year Ended December 31, 2014
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows (used in) provided by operating activities$(56.3) $228.7
 $2.8
 $—
 $175.2
Capital expenditures(0.2) (152.5) (29.6) —
 (182.3)
Proceeds received from sale of CyrusOne—
 —
 355.9
 —
 355.9
Dividends received from CyrusOne—
 —
 28.4
 —
 28.4
Proceeds from sale of assets—
 0.3
 196.1
 —
 196.4
Distributions received from subsidiaries12.8
 —
 —
 (12.8) —
Funding between Parent and subsidiaries, net—
 (73.4) (542.6) 616.0
 —
Other investing activities(0.3) —
 (5.5) —
 (5.8)
Cash flows provided by (used in) investing activities12.3
 (225.6) 2.7
 603.2
 392.6
Funding between Parent and subsidiaries, net516.2
 —
 99.8
 (616.0) —
Distributions paid to Parent—
 —
 (12.8) 12.8
 —
Debt issuance costs(0.7) —
 (0.2) —
 (0.9)
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days(40.0) —
 (87.0) —
 (127.0)
Repayment of debt(367.3) (3.9) (5.3) —
 (376.5)
Proceeds from exercise of options and warrants1.3
 —
 —
 —
 1.3
Other financing activities(11.4) —
 —
 —
 (11.4)
Cash flows provided by (used in) financing activities98.1
 (3.9) (5.5) (603.2) (514.5)
Increase (decrease) in cash and cash equivalents54.1
 (0.8) —
 —
 53.3
Beginning cash and cash equivalents2.1
 1.8
 0.7
 —
 4.6
Ending cash and cash equivalents$56.2
 $1.0
 $0.7
 $—
 $57.9
          
 Year Ended December 31, 2013
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows (used in) provided by operating activities$(218.1) $239.0
 $57.9
 $—
 $78.8
Capital expenditures—
 (153.1) (43.8) —
 (196.9)
Dividends received from CyrusOne—
 —
 21.3
 —
 21.3
Proceeds from sale of assets—
 2.0
 —
 —
 2.0
Cash divested from deconsolidation of CyrusOne—
 —
 (12.2) —
 (12.2)
Other investing activities—
 —
 0.4
 —
 0.4
Cash flows used in investing activities—
 (151.1) (34.3) —
 (185.4)
Issuance of long-term debt536.0
 —
 —
 —
 536.0
Funding between Parent and subsidiaries, net174.2
 (84.3) (89.9) —
 —
Debt issuance costs(6.7) —
 —
 —
 (6.7)
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days40.0
 —
 54.2
 —
 94.2
Repayment of debt(522.0) (3.7) (5.1) —
 (530.8)
Proceeds from exercise of options and warrants7.1
 —
 —
 —
 7.1
Other financing activities(12.2) —
 —
 —
 (12.2)
Cash flows provided by (used in) financing activities216.4
 (88.0) (40.8) —
 87.6
Decrease in cash and cash equivalents(1.7) (0.1) (17.2) —
 (19.0)
Beginning cash and cash equivalents3.8
 1.9
 17.9
 —
 23.6
Ending cash and cash equivalents$2.1
 $1.8
 $0.7
 $—
 $4.6



120
Table of Contents
Form 10-K Part IICincinnati Bell Inc.


Condensed Consolidating Statements of Cash Flows
 Year Ended December 31, 2012
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 Eliminations Total
Cash flows (used in) provided by operating activities$(144.8) $250.4
 $107.1
 $—
 $212.7
Capital expenditures—
 (108.8) (258.4) —
 (367.2)
Proceeds from sale of assets—
 1.4
 0.2
 —
 1.6
Other investing activities—
 —
 (6.2) —
 (6.2)
Cash flows used in investing activities—
 (107.4) (264.4) —
 (371.8)
Issuance of long-term debt—
 —
 525.0
 —
 525.0
Funding between Parent and subsidiaries, net433.6
 (66.0) (367.6) —
 —
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days—
 —
 52.0
 —
 52.0
Repayment of debt(352.0) (76.5) (13.9) —
 (442.4)
Debt issuance costs(3.6) —
 (17.3) —
 (20.9)
Common stock issuance costs—
 —
 (5.7) —
 (5.7)
Common stock repurchase(0.3) —
 —
 —
 (0.3)
Proceeds from exercise of options and warrants12.1
 —
 —
 —
 12.1
Other financing activities(10.8) —
 —
 —
 (10.8)
Cash flows provided by (used in) financing activities79.0
 (142.5) 172.5
 —
 109.0
   (Decrease) increase in cash and cash equivalents(65.8) 0.5
 15.2
 —
 (50.1)
   Beginning cash and cash equivalents69.6
 1.4
 2.7
 —
 73.7
   Ending cash and cash equivalents$3.8
 $1.9
 $17.9
 $—
 $23.6

121
Table of Contents
Form 10-K Part IICincinnati Bell Inc.

18.20.
Supplemental Guarantor Information - 8 3/8% Senior Notes due 2020 and 8 3/4%7% Senior Subordinated Notes due 20182024
As of December 31, 2014,2016, the Parent Company’s 8 3/8%7% Senior Notes due 2020 and 8 3/4% Senior Subordinated Notes due 20182024 are guaranteed by the following subsidiaries: Cincinnati Bell Entertainment Inc., Cincinnati Bell Any Distance Inc., Cincinnati Bell Telecommunications Services LLC, Cincinnati Bell Wireless LLC, CBTS Software LLC, Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Any Distance of Virginia LLC, eVolve Business Solutions LLC, Data Center Investments Inc., Data Center Investments Holdco LLC,and Data Centers South Inc. and Data Centers South Holdings LLC.
During the fourth quarter of 2016, the Company redeemed the remaining $84.6 million of outstanding 8 3/8% Senior Notes due 2020.
The Parent Company owns directly or indirectly 100% of each guarantor and each guarantee is full and unconditional, and joint and several. In certain customary circumstances, a subsidiary may be released from its guarantee obligation. These circumstances are defined as follows:
upon the sale of all of the capital stock of a subsidiary,
if the Company designates the subsidiary as an unrestricted subsidiary under the terms of the indentures, or
if the subsidiary is released as a guarantor from the Company's Corporate Credit Agreement.
On September 30,In the third quarter of 2014, the Company entered into an Amendment to the Corporate Credit Agreement giving the Company the right to provide written notice to the administrative agent on or after the closing of the wireless sale of spectrum assets to remove any designated Wirelesswireless subsidiary as a guarantor subsidiary.
AsIn compliance with certain regulations of November 20, 2012, the following subsidiaries were released from their guarantee obligation on these notes:Federal Communications Commission (the “FCC”), the Company’s wholly-owned regulated  subsidiary, Cincinnati Bell Shared ServiceTelephone Company LLC, CyrusOnehas historically accounted for certain of its non-regulated operations through its non-regulated subsidiary, Cincinnati Bell Telecommunications Services LLC, which is a guarantor of the Notes (as defined below). Through an agreement with the FCC, the Company is no longer obligated to segregate these non-regulated operations and CyrusOne Foreign Holdings LLC. Thehas discontinued this accounting practice.  Effective December 31, 2016, the Company merged Cincinnati Bell Telecommunications Services LLC into another subsidiary, Cincinnati Bell Entertainment Inc., which is also a guarantor of the Notes. These condensed consolidated financial statements shown below have been retroactively restated to reflect these subsidiaries as non-guarantors. In addition, CyrusOne and CyrusOne Foreign Holdings LLC were designated as unrestricted subsidiaries.this change.

The Parent Company’s subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet the Parent Company’s debt service obligations. The following information sets forth the Condensed Consolidating Balance Sheets of the Company as of December 31, 20142016 and 20132015 and the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) and Cash Flows for the years ended December 31, 20142016, 20132015, and 20122014 of (1) the Parent Company, as the issuer, (2) the guarantor subsidiaries on a combined basis, and (3) the non-guarantor subsidiaries on a combined basis.

122
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2014Year Ended December 31, 2016
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations TotalParent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Revenue$—
 $731.9
 $601.5
 $(55.2) $1,278.2
$—
 $539.0
 $686.6
 $(39.8) $1,185.8
Operating costs and expenses19.9
 766.6
 431.1
 (55.2) 1,162.4
20.7
 510.7
 601.2
 (39.8) 1,092.8
Operating (loss) income(19.9) (34.7) 170.4
 —
 115.8
Operating income (loss)(20.7) 28.3
 85.4
 —
 93.0
Interest expense (income), net144.0
 7.8
 (3.1) —
 148.7
94.4
 (25.2) 6.5
 —
 75.7
Other expense (income), net17.6
 (171.2) (12.3) —
 (165.9)20.3
 (150.4) (15.5) —
 (145.6)
(Loss) income before equity in earnings of subsidiaries and income taxes(181.5) 128.7
 185.8
 —
 133.0
Income tax (benefit) expense(55.6) 45.4
 67.6
 —
 57.4
Income (loss) before equity in earnings of subsidiaries and income taxes(135.4) 203.9
 94.4
 —
 162.9
Income tax expense (benefit)(46.5) 74.0
 33.6
 —
 61.1
Equity in earnings of subsidiaries, net of tax201.5
 —
 —
 (201.5) —
191.0
 —
 —
 (191.0) —
Income from continuing operations102.1
 129.9
 60.8
 (191.0) 101.8
Income from discontinued operations, net of tax—
 0.3
 —
 —
 0.3
Net income75.6
 83.3
 118.2
 (201.5) 75.6
102.1
 130.2
 60.8
 (191.0) 102.1
Other comprehensive loss(40.5) (0.1) —
 —
 (40.6)
Other comprehensive income (loss)12.7
 68.1
 (0.1) —
 80.7
Total comprehensive income$35.1
 $83.2
 $118.2
 $(201.5) $35.0
$114.8
 $198.3
 $60.7
 $(191.0) $182.8
                  
Net income$75.6
 $83.3
 $118.2
 $(201.5) $75.6
102.1
 130.2
 60.8
 (191.0) 102.1
Preferred stock dividends10.4
 —
 —
 —
 10.4
10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$65.2
 $83.3
 $118.2
 $(201.5) $65.2
$91.7
 $130.2
 $60.8
 $(191.0) $91.7
                  
Year Ended December 31, 2013Year Ended December 31, 2015
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations TotalParent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Revenue$—
 $704.6
 $608.6
 $(56.3) $1,256.9
$—
 $532.4
 $674.0
 $(38.6) $1,167.8
Operating costs and expenses55.4
 667.5
 426.5
 (56.3) 1,093.1
22.4
 503.9
 552.1
 (38.6) 1,039.8
Operating (loss) income(55.4) 37.1
 182.1
 —
 163.8
Interest expense, net164.3
 14.9
 2.8
 —
 182.0
Operating income (loss)(22.4) 28.5
 121.9
 —
 128.0
Interest expense (income), net112.7
 (10.2) 0.6
 —
 103.1
Other expense (income), net28.2
 17.4
 (6.6) —
 39.0
19.5
 (432.9) (12.3) —
 (425.7)
(Loss) income before equity in earnings of subsidiaries and income taxes(247.9) 4.8
 185.9
 —
 (57.2)
Income tax (benefit) expense(79.8) 9.7
 67.6
 —
 (2.5)
Income (loss) before equity in earnings of subsidiaries and income taxes(154.6) 471.6
 133.6
 —
 450.6
Income tax expense (benefit)(53.3) 165.5
 47.6
 —
 159.8
Equity in earnings of subsidiaries, net of tax113.4
 0.7
 —
 (114.1) —
455.0
 —
 —
 (455.0) —
Net (loss) income(54.7) (4.2) 118.3
 (114.1) (54.7)
Income from continuing operations353.7
 306.1
 86.0
 (455.0) 290.8
Income from discontinued operations, net of tax—
 62.9
 —
 —
 62.9
Net income353.7
 369.0
 86.0
 (455.0) 353.7
Other comprehensive income (loss)76.5
 —
 (0.1) —
 76.4
3.3
 —
 (0.4) —
 2.9
Total comprehensive income (loss)$21.8
 $(4.2) $118.2
 $(114.1) $21.7
Total comprehensive income$357.0
 $369.0
 $85.6
 $(455.0) $356.6
                  
Net (loss) income$(54.7) $(4.2) $118.3
 $(114.1) $(54.7)
Net income353.7
 369.0
 86.0
 (455.0) 353.7
Preferred stock dividends10.4
 —
 —
 —
 10.4
10.4
 —
 —
 —
 10.4
Net (loss) income applicable to common shareowners$(65.1) $(4.2) $118.3
 $(114.1) $(65.1)
Net income applicable to common shareowners$343.3
 $369.0
 $86.0
 $(455.0) $343.3

123
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2012Year Ended December 31, 2014
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations TotalParent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Revenue$—
 $713.4
 $822.7
 $(62.2) $1,473.9
$—
 $532.0
 $668.6
 $(39.1) $1,161.5
Operating costs and expenses33.9
 646.5
 585.6
 (62.2) 1,203.8
21.5
 505.4
 496.8
 (39.1) 984.6
Operating (loss) income(33.9) 66.9
 237.1
 —
 270.1
Interest expense, net164.8
 7.8
 46.3
 —
 218.9
Operating income (loss)(21.5) 26.6
 171.8
 —
 176.9
Interest expense (income), net142.6
 6.2
 (2.9) —
 145.9
Other expense (income), net11.5
 9.1
 (5.3) —
 15.3
17.6
 (171.6) (14.1) —
 (168.1)
(Loss) income before equity in earnings of subsidiaries and income taxes(210.2) 50.0
 196.1
 —
 35.9
Income tax (benefit) expense(68.3) 19.2
 73.8
 —
 24.7
Income (loss) before equity in earnings of subsidiaries and income taxes(181.7) 192.0
 188.8
 —
 199.1
Income tax expense (benefit)(55.8) 68.3
 68.9
 —
 81.4
Equity in earnings of subsidiaries, net of tax153.1
 (11.8) —
 (141.3) —
201.5
 —
 —
 (201.5) —
Income from continuing operations75.6
 123.7
 119.9
 (201.5) 117.7
Loss from discontinued operations, net of tax—
 (42.1) —
 —
 (42.1)
Net income11.2
 19.0
 122.3
 (141.3) 11.2
75.6
 81.6
 119.9
 (201.5) 75.6
Other comprehensive loss(0.8) —
 —
 —
 (0.8)(40.5) (0.1) —
 —
 (40.6)
Total comprehensive income$10.4
 $19.0
 $122.3
 $(141.3) $10.4
$35.1
 $81.5
 $119.9
 $(201.5) $35.0
                  
Net income$11.2
 $19.0
 $122.3
 $(141.3) $11.2
75.6
 81.6
 119.9
 (201.5) 75.6
Preferred stock dividends10.4
 —
 —
 —
 10.4
10.4
 —
 —
 —
 10.4
Net income applicable to common shareowners$0.8
 $19.0
 $122.3
 $(141.3) $0.8
$65.2
 $81.6
 $119.9
 $(201.5) $65.2

124
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Balance Sheets                  
As of December 31, 2014As of December 31, 2016
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations TotalParent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Cash and cash equivalents$56.2
 $0.2
 $1.5
 $—
 $57.9
$7.8
 $0.3
 $1.6
 $—
 $9.7
Receivables, net2.6
 6.1
 158.8
 —
 167.5
17.8
 1.7
 159.1
 —
 178.6
Other current assets4.7
 74.6
 33.1
 (1.2) 111.2
1.1
 17.9
 22.6
 —
 41.6
Total current assets63.5
 80.9
 193.4
 (1.2) 336.6
26.7
 19.9
 183.3
 —
 229.9
Property, plant and equipment, net0.2
 94.9
 764.4
 —
 859.5
0.3
 54.4
 1,030.8
 —
 1,085.5
Investment in CyrusOne—
 273.6
 —
 —
 273.6
—
 128.0
 —
 —
 128.0
Goodwill and intangibles, net—
 13.2
 2.2
 —
 15.4
Investments in and advances to subsidiaries1,066.1
 387.8
 214.6
 (1,668.5) —
Other noncurrent assets294.2
 191.6
 3.8
 (155.0) 334.6
Total assets$1,424.0
 $1,042.0
 $1,178.4
 $(1,824.7) $1,819.7
Current portion of long-term debt$5.4
 $3.9
 $3.9
 $—
 $13.2
Accounts payable1.0
 80.8
 54.2
 —
 136.0
Deferred gain on sale of wireless spectrum licenses—
 112.6
 —
 —
 112.6
Other current liabilities52.3
 46.3
 49.3
 0.1
 148.0
Total current liabilities58.7
 243.6
 107.4
 0.1
 409.8
Long-term debt, less current portion1,526.1
 84.5
 160.4
 —
 1,771.0
Other noncurrent liabilities254.1
 25.7
 164.0
 (156.4) 287.4
Intercompany payables233.4
 —
 131.9
 (365.3) —
Total liabilities2,072.3
 353.8
 563.7
 (521.6) 2,468.2
Shareowners’ (deficit) equity(648.3) 688.2
 614.7
 (1,303.1) (648.5)
Total liabilities and shareowners’ equity (deficit)$1,424.0
 $1,042.0
 $1,178.4
 $(1,824.7) $1,819.7
         
As of December 31, 2013
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Cash and cash equivalents$2.1
 $0.3
 $2.2
 $—
 $4.6
Receivables, net2.6
 7.2
 145.0
 —
 154.8
Other current assets4.4
 60.7
 27.3
 (0.7) 91.7
Total current assets9.1
 68.2
 174.5
 (0.7) 251.1
Property, plant and equipment, net0.1
 194.1
 708.6
 —
 902.8
Investment in CyrusOne—
 471.0
 —
 —
 471.0
Goodwill and intangibles, net—
 103.8
 2.3
 —
 106.1
Goodwill—
 12.1
 2.2
 —
 14.3
Investments in and advances to subsidiaries1,406.6
 (1.6) 218.2
 (1,623.2) —
816.7
 972.2
 —
 (1,788.9) —
Other noncurrent assets359.1
 179.9
 5.1
 (167.8) 376.3
179.1
 43.9
 5.1
 (144.8) 83.3
Total assets$1,774.9
 $1,015.4
 $1,108.7
 $(1,791.7) $2,107.3
$1,022.8
 $1,230.5
 $1,221.4
 $(1,933.7) $1,541.0
Current portion of long-term debt$5.4
 $3.0
 $4.2
 $—
 $12.6
$—
 $2.5
 $5.0
 $—
 $7.5
Accounts payable1.5
 72.3
 16.1
 —
 89.9
0.7
 33.1
 72.1
 —
 105.9
Other current liabilities67.7
 36.9
 47.1
 0.1
 151.8
42.9
 22.5
 54.1
 —
 119.5
Total current liabilities74.6
 112.2
 67.4
 0.1
 254.3
43.6
 58.1
 131.2
 —
 232.9
Long-term debt, less current portion1,916.1
 87.0
 249.5
 —
 2,252.6
960.3
 51.1
 187.7
 —
 1,199.1
Other noncurrent liabilities214.5
 61.3
 169.9
 (168.6) 277.1
207.9
 0.7
 166.9
 (144.8) 230.7
Intercompany payables246.4
 149.9
 33.2
 (429.5) —
—
 —
 147.7
 (147.7) —
Total liabilities2,451.6
 410.4
 520.0
 (598.0) 2,784.0
1,211.8
 109.9
 633.5
 (292.5) 1,662.7
Shareowners’ (deficit) equity(676.7) 605.0
 588.7
 (1,193.7) (676.7)(189.0) 1,120.6
 587.9
 (1,641.2) (121.7)
Total liabilities and shareowners’ equity (deficit)$1,774.9
 $1,015.4
 $1,108.7
 $(1,791.7) $2,107.3
$1,022.8
 $1,230.5
 $1,221.4
 $(1,933.7) $1,541.0



125
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Statements of Cash Flows
 Year Ended December 31, 2014
(dollars in millions)
Parent
(Issuer)
 Guarantors Non-guarantors Eliminations Total
Cash flows (used in) provided by operating activities$(56.3) $(1.4) $232.9
 $—
 $175.2
Capital expenditures(0.2) (29.6) (152.5) —
 (182.3)
Proceeds received from sale of CyrusOne—
 355.9
 —
 —
 355.9
Dividends received from CyrusOne—
 28.4
 —
 —
 28.4
Proceeds from sale of assets—
 194.4
 2.0
 —
 196.4
Distributions received from subsidiaries12.8
 —
 —
 (12.8) —
Funding between Parent and subsidiaries, net—
 (539.3) (78.0) 617.3
 —
Other investing activities(0.3) (5.5) —
 —
 (5.8)
Cash flows provided by (used in) investing activities12.3
 4.3
 (228.5) 604.5
 392.6
Funding between Parent and subsidiaries, net516.2
 —
 101.1
 (617.3) —
Distributions paid to Parent—
 —
 (12.8) 12.8
 —
Debt issuance costs(0.7) —
 (0.2) —
 (0.9)
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days(40.0) —
 (87.0) —
 (127.0)
Repayment of debt(367.3) (3.0) (6.2) —
 (376.5)
Proceeds from exercise of options and warrants1.3
 —
 —
 —
 1.3
Other financing activities(11.4) —
 —
 —
 (11.4)
Cash flows provided by (used in) financing activities98.1
 (3.0) (5.1) (604.5) (514.5)
Increase (decrease) in cash and cash equivalents54.1
 (0.1) (0.7) —
 53.3
Beginning cash and cash equivalents2.1
 0.3
 2.2
 —
 4.6
Ending cash and cash equivalents$56.2
 $0.2
 $1.5
 $—
 $57.9
          
 Year Ended December 31, 2013
(dollars in millions)
Parent
(Issuer)
 Guarantors Non-guarantors Eliminations Total
Cash flows (used in) provided by operating activities$(218.1) $26.2
 $270.7
 $—
 $78.8
Capital expenditures—
 (36.1) (160.8) —
 (196.9)
Dividends received from CyrusOne—
 21.3
 —
 —
 21.3
Proceeds from sale of assets—
 —
 2.0
 —
 2.0
Cash divested from deconsolidation of CyrusOne—
 —
 (12.2) —
 (12.2)
Other investing activities—
 —
 0.4
 —
 0.4
Cash flows used in investing activities—
 (14.8) (170.6) —
 (185.4)
Issuance of long-term debt536.0
 —
 —
 —
 536.0
Funding between Parent and subsidiaries, net174.2
 (7.4) (166.8) —
 —
Debt issuance costs(6.7) —
 —
 —
 (6.7)
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days40.0
 —
 54.2
 —
 94.2
Repayment of debt(522.0) (4.0) (4.8) —
 (530.8)
Proceeds from exercise of options and warrants7.1
 —
 —
 —
 7.1
Other financing activities(12.2) —
 —
 —
 (12.2)
Cash flows provided by (used in) financing activities216.4
 (11.4) (117.4) —
 87.6
Decrease in cash and cash equivalents(1.7) —
 (17.3) —
 (19.0)
Beginning cash and cash equivalents3.8
 0.3
 19.5
 —
 23.6
Ending cash and cash equivalents$2.1
 $0.3
 $2.2
 $—
 $4.6
Condensed Consolidating Balance Sheets
 As of December 31, 2015
(dollars in millions)Parent
(Issuer)		 Guarantors Non-guarantors Eliminations Total
Cash and cash equivalents$4.6
 $0.4
 $2.4
 $—
 $7.4
Receivables, net0.7
 2.8
 153.6
 —
 157.1
Other current assets1.6
 13.9
 20.4
 —
 35.9
Total current assets6.9
 17.1
 176.4
 —
 200.4
Property, plant and equipment, net0.3
 53.4
 921.8
 —
 975.5
Investment in CyrusOne—
 55.5
 —
 —
 55.5
Goodwill—
 12.1
 2.2
 —
 14.3
Investments in and advances to subsidiaries844.6
 772.1
 63.9
 (1,680.6) —
Other noncurrent assets207.2
 132.6
 7.1
 (146.2) 200.7
Total assets$1,059.0
 $1,042.8
 $1,171.4
 $(1,826.8) $1,446.4
Current portion of long-term debt$5.4
 $3.4
 $5.0
 $—
 $13.8
Accounts payable0.7
 42.8
 85.4
 —
 128.9
Other current liabilities41.6
 23.9
 45.6
 —
 111.1
Other current liabilities from discontinued operations—
 5.4
 —
 —
 5.4
Total current liabilities47.7
 75.5
 136.0
 —
 259.2
Long-term debt, less current portion1,018.6
 53.3
 151.9
 —
 1,223.8
Other noncurrent liabilities235.5
 3.8
 168.5
 (146.2) 261.6
Intercompany payables54.7
 —
 125.7
 (180.4) —
Total liabilities1,356.5
 132.6
 582.1
 (326.6) 1,744.6
Shareowners’ (deficit) equity(297.5) 910.2
 589.3
 (1,500.2) (298.2)
Total liabilities and shareowners’ equity (deficit)$1,059.0
 $1,042.8
 $1,171.4
 $(1,826.8) $1,446.4


126
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

Condensed Consolidating Statements of Cash Flows
Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2012Year Ended December 31, 2016
(dollars in millions)Parent (Issuer) Guarantors Non-guarantors Eliminations Total
Parent
(Issuer)
 Guarantors Non-guarantors Eliminations Total
Cash flows (used in) provided by operating activities$(144.8) $51.3
 $306.2
 $—
 $212.7
Cash flows provided by (used in) operating activities$(61.1) $25.0
 $209.3
 $—
 $173.2
Capital expenditures—
 (30.2) (337.0) —
 (367.2)(0.2) (25.4) (260.8) —
 (286.4)
Proceeds from sale of assets—
 —
 1.6
 —
 1.6
Dividends received from CyrusOne (equity method investment)—
 2.1
 —
 —
 2.1
Proceeds from sale of investment in CyrusOne—
 189.7
 —
 —
 189.7
Distributions received from subsidiaries12.0
 —
 —
 (12.0) —
Funding between Parent and subsidiaries, net152.0
 (188.0) —
 36.0
 —
Other investing activities—
 —
 (6.2) —
 (6.2)(0.9) —
 —
 —
 (0.9)
Cash flows used in investing activities—
 (30.2) (341.6) —
 (371.8)
Issuance of long-term debt—
 —
 525.0
 —
 525.0
Cash flows provided by (used in) investing activities162.9
 (21.6) (260.8) 24.0
 (95.5)
Funding between Parent and subsidiaries, net433.6
 (16.9) (416.7) —
 —
—
 —
 36.0
 (36.0) —
Distributions paid to Parent—
 —
 (12.0) 12.0
 —
Proceeds from issuance of long-term debt635.0
 —
 —
 —
 635.0
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days—
 —
 52.0
 —
 52.0
—
 —
 71.9
 —
 71.9
Repayment of debt(352.0) (4.6) (85.8) —
 (442.4)(710.9) (3.5) (44.9) —
 (759.3)
Debt issuance costs(3.6) —
 (17.3) —
 (20.9)(10.8) —
 (0.3) —
 (11.1)
Common stock issuance costs—
 —
 (5.7) —
 (5.7)
Common stock repurchase(0.3) —
 —
 —
 (0.3)
Proceeds from exercise of options and warrants12.1
 —
 —
 —
 12.1
Other financing activities(10.8) —
 —
 —
 (10.8)(11.9) —
 —
 —
 (11.9)
Cash flows provided by (used in) financing activities79.0
 (21.5) 51.5
 —
 109.0
(98.6) (3.5) 50.7
 (24.0) (75.4)
(Decrease) increase in cash and cash equivalents(65.8) (0.4) 16.1
 —
 (50.1)
Increase (decrease) in cash and cash equivalents3.2
 (0.1) (0.8) —
 2.3
Beginning cash and cash equivalents69.6
 0.7
 3.4
 —
 73.7
4.6
 0.4
 2.4
 —
 7.4
Ending cash and cash equivalents$3.8
 $0.3
 $19.5
 $—
 $23.6
$7.8
 $0.3
 $1.6
 $—
 $9.7
         
Year Ended December 31, 2015
(dollars in millions)
Parent
(Issuer)
 Guarantors Non-guarantors Eliminations Total
Cash flows provided by (used in) operating activities$(19.3) $(86.8) $217.0
 $—
 $110.9
Capital expenditures(0.1) (22.5) (261.0) —
 (283.6)
Dividends received from CyrusOne (equity method investment)—
 22.2
 —
 —
 22.2
Proceeds from sale of investment in CyrusOne—
 643.9
 —
 —
 643.9
Distributions received from subsidiaries11.3
 —
 —
 (11.3) —
Funding between Parent and subsidiaries, net—
 (554.3) 71.9
 482.4
 —
Other investing activities(0.3) 0.9
 0.1
 —
 0.7
Cash flows provided by (used in) investing activities10.9
 90.2
 (189.0) 471.1
 383.2
Funding between Parent and subsidiaries, net486.4
 —
 (4.0) (482.4) —
Distributions paid to Parent—
 —
 (11.3) 11.3
 —
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days—
 —
 (1.6) —
 (1.6)
Repayment of debt(518.5) (3.2) (10.0) —
 (531.7)
Debt issuance costs(0.2) —
 (0.2) —
 (0.4)
Other financing activities(10.9) —
 —
 —
 (10.9)
Cash flows provided by (used in) financing activities(43.2) (3.2) (27.1) (471.1) (544.6)
Increase (decrease) in cash and cash equivalents(51.6) 0.2
 0.9
 —
 (50.5)
Beginning cash and cash equivalents56.2
 0.2
 1.5
 —
 57.9
Ending cash and cash equivalents$4.6
 $0.4
 $2.4
 $—
 $7.4


127
Table of Contents
Form 10-K Part II Cincinnati Bell Inc.

19.     Quarterly Financial Information (Unaudited)
 2014
 First Second Third Fourth  
(dollars in millions, except per common share amounts)Quarter Quarter Quarter Quarter Total
Revenue$322.5
 $319.9
 $327.5
 $308.3
 $1,278.2
Operating income56.9
 35.6
 16.0
 7.3
 115.8
Net income (loss)7.0
 114.2
 (27.3) (18.3) 75.6
Basic earnings (loss) per common share$0.02
 $0.54
 $(0.14) $(0.10) $0.31
Diluted earnings (loss) per common share$0.02
 $0.53
 $(0.14) $(0.10) $0.31
          
 2013
 First Second Third Fourth  
(dollars in millions, except per common share amounts)Quarter Quarter Quarter Quarter Total
Revenue$325.7
 $312.0
 $310.8
 $308.4
 $1,256.9
Operating income19.2
 46.8
 57.7
 40.1
 163.8
Net (loss) income(36.7) 0.8
 9.3
 (28.1) (54.7)
Basic and diluted (loss) earnings per common share$(0.19) $(0.01) $0.03
 $(0.15) $(0.32)
Condensed Consolidating Statements of Cash Flows
 Year Ended December 31, 2014
(dollars in millions)Parent (Issuer) Guarantors Non-guarantors Eliminations Total
Cash flows provided by (used in) operating activities$(56.3) $5.6
 $225.9
 $—
 $175.2
Capital expenditures(0.2) (29.6) (152.5) —
 (182.3)
Dividends received from CyrusOne (equity method investment)—
 28.4
 —
 —
 28.4
Proceeds from sale of investment in CyrusOne—
 355.9
 —
 —
 355.9
Proceeds from sale of wireless spectrum licenses - discontinued operations—
 194.4
 —
 —
 194.4
Distributions received from subsidiaries12.8
 —
 —
 (12.8) —
Funding between Parent and subsidiaries, net—
 (546.3) (71.0) 617.3
 —
Other investing activities(0.3) (5.5) 2.0
 —
 (3.8)
Cash flows provided by (used in) investing activities12.3
 (2.7) (221.5) 604.5
 392.6
Funding between Parent and subsidiaries, net516.2
 —
 101.1
 (617.3) —
Distributions paid to parent—
 —
 (12.8) 12.8
 —
Net decrease in corporate credit and receivables facilities with initial maturities less than 90 days(40.0) —
 (87.0) —
 (127.0)
Repayment of debt(367.3) (3.0) (6.2) —
 (376.5)
Debt issuance costs(0.7) —
 (0.2) —
 (0.9)
Other financing activities(10.1) —
 —
 —
 (10.1)
Cash flows provided by (used in) financing activities98.1
 (3.0) (5.1) (604.5) (514.5)
Increase (decrease) in cash and cash equivalents54.1
 (0.1) (0.7) —
 53.3
Beginning cash and cash equivalents2.1
 0.3
 2.2
 —
 4.6
Ending cash and cash equivalents$56.2
 $0.2
 $1.5
 $—
 $57.9
The effects of assumed common share conversions are determined independently for each respective quarter and year and may not be dilutive during every period due to variations in operating results. Therefore, the sum of quarterly per share results will not necessarily equal the per share results for the full year.
In the second quarter of 2014, operating income includes a $6.4 million restructuring charge related to employee severance as well as contracts that will no longer be utilized once the wireless business ceases to exist. Net income in the second quarter of 2014 includes a $192.8 million gain on sale of our CyrusOne equity method investment.
Third quarter of 2014 operating income includes a $9.0 million restructuring charge attributable to contract termination fees on our wireless segment offset by the reversal of a Wireline lease abandonment reserve associated with leased space that was reoccupied. Operating income also includes a $7.5 million impairment charge for the write-off of certain construction-in-progress projects that will no longer be completed due to the wind down of the wireless business in addition to $3.0 million of transaction costs related to the wireless spectrum sale. Also in the third quarter, the Company redeemed $325.0 million of the outstanding 8 3/4% Senior Subordinated Notes due 2018 at a redemption price of 104.375%. As a result of the redemption, the Company recorded a loss on the extinguishment of debt totaling $19.4 million.
Operating income in the fourth quarter of 2014 includes an impairment charge of $4.6 million related to the abandonment of an internal use software project that was written off in the fourth quarter.
On January 24, 2013, we completed the IPO of CyrusOne, which owns and operates our former data center colocation business. Effective January 24, 2013, we no longer consolidate the accounts of CyrusOne in our consolidated financial statements, but account for our ownership in CyrusOne as an equity method investment.
In the fourth quarter of 2013, the Company redeemed all of the $500.0 million of 8 1/4% Senior Notes due 2017 at a redemption price of 104.125% using proceeds from the Tranche B Term Loan facility that was issued on September 10, 2013. As a result, the Company recorded a debt extinguishment loss of $29.6 million.
20.21.     Subsequent Events
On January 22, 2015,
In February 2017, the Company signed an agreement valued atto acquire SunTel Services, based in Troy, Michigan, for approximately $10 million for a third partymillion. SunTel Services provides network security, data connectivity, and unified communications solutions to decommission our wireless towers that are not being assumed bycommercial and enterprise customers across multiple sectors throughout Michigan. The acquisition is expected to close in the acquirer. Asfirst quarter of December 31, 2014 we had $3.3 million of asset retirement obligations included in capital lease obligations and $7.5 million included in other non-current liabilities.2017.
Negotiations with the CWA have been ongoing since the tentative agreement reached on August 4, 2014 was not ratified by local members of the union. Both sides reached a tentative agreement on January 23, 2015 that is pending ratification by local union members.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
No reportable information under this item.

Item 9A. 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) Management's annual report on internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are set forth in Part II, Item 8 of this Annual Report on Form 10-K.
(c) Changes in internal control over financial reporting.
There were no changes to Cincinnati Bell Inc.'s internal control over financial reporting during the fourth quarter of 20142016 that materially affect, or are reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.


Item 9B. Other Information
No reportable information under this item.


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Form 10-K Part IIICincinnati Bell Inc.


PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 401, Item 405, Item 406 and 407 (c)(3), (d)(4) and (d)(5) of Regulation S-K regarding directors of Cincinnati Bell Inc. can be found in the Proxy Statement for the 20152017 Annual Meeting of Shareholders and is incorporated herein by reference.
The Company’s Code of Ethics for Senior Financial Officers that applies to its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer is posted on the Company’s website at http://www.cincinnatibell.com. Within the time period required by the SEC and the New York Stock Exchange ("NYSE"), the Company will post on its website any amendment to the Code of Ethics for Senior Financial Officers and any waiver of such code relating to such senior executive officers of the Company.
In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 and filed as exhibits to this Annual Report on Form 10-K, in May 20142016 the Company’s Chief Executive Officer submitted to the NYSE the certification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303 A.12 of the NYSE Listed Company Manual.
Executive Officers of the Registrant:
The names, ages and positions of the executive officers of the Company as of February 26, 201524, 2017 are as follows:
Name Age Title
Theodore H. Torbeck (a) 5860 President and Chief Executive Officer
Leigh R. Fox 4244President and Chief Operating Officer
Andrew R. Kaiser48 Chief Financial Officer
Thomas E. Simpson 4244 Chief Technology Officer
Christopher J. Wilson 4951 Vice President and General Counsel and Secretary
Joshua T. Duckworth 3638 Vice President, Investor Relations and Controller
     
(a) Member of the Board of Directors  
Officers are elected annually but are removable at the discretion of the Board of Directors.
The business experiences of our executive officers during the past five years are as follows:
THEODORE H. TORBECK, President and Chief Executive OfficeOfficer since February 1, 2013; President and General Manager of Cincinnati Bell Communications Group from September 2010 to February 2013; Chief Executive Officer of The Freedom Group, Inc. from 2008 to August 2010.
LEIGH R. FOX, President and Chief Operating Officer of the Company since September 2016; Chief Financial Officer of the Company sincefrom October 2013;2013 to September 2016; Chief Administrative Officer of the Company from July 2013 to October 2013; Senior Vice President of Finance and Operations from December 2012 to July 2013; Vice President of Finance at Cincinnati Bell Technology Solutions Inc. (CBTS) from October 2008 to December 2012.
ANDREW R. KAISER, Chief Financial Officer of the Company since September 2016; Vice President Consumer Marketing and Data Analytics of the Company from December 2015 to September 2016; Vice President Corporate Finance of the Company from January 2014 to December 2015; Partner at Howard Roark Consulting, LLC from 2005 to January 2014.
THOMAS E. SIMPSON, Senior Vice President and Chief Technology Officer of the Company since January 2015; Vice President and Chief Technology Officer at Cincinnati Bell Technology Solutions (CBTS) since 2014;from 2014 to 2015; Vice President, Research and Development at CBTS since 2010;from 2010 to 2014; Director, Technical Operations at CBTS since 2008.from 2008 to 2010.
CHRISTOPHER J. WILSON, Vice President and General Counsel and Secretary of the Company since August 2003.



JOSHUA T. DUCKWORTH, Vice President, Investor Relations and Controller of the Company since July 2013; Assistant Treasurer and Director of Investor Relations for Cincinnati Bell Inc. from August 2012 to July 2013; Assistant Controller for Cincinnati Bell Inc. from August 2010 to August 2012; Deloitte & Touche LLP's audit practice from October 2004 to August 2010.


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Form 10-K Part ICincinnati Bell Inc.


Items 11. Executive Compensation
The information required by this item can be found in the Proxy Statement for the 20152017 Annual Meeting of Shareholders and is incorporated herein by reference.
Items 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item can be found in the Proxy Statement for the 20152017 Annual Meeting of Shareholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item can be found in the Proxy Statement for the 20152017 Annual Meeting of Shareholders and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item can be found in the Proxy Statement for the 20152017 Annual Meeting of Shareholders and is incorporated herein by reference.

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Form 10-K Part IVCincinnati Bell Inc.


PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
Consolidated financial statements are included beginning on page 67.58.
Financial Statement Schedules
Financial Statement Schedule II — Valuation and Qualifying Accounts is included on page 137.135. All other schedules are not required under the related instructions or are not applicable.
Exhibits 2
Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission, 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) Amended and Restated Regulations of Cincinnati Bell Inc. (Exhibit 3.2 to Current Report on Form 8-K, date of Report April 25, 2008, File No. 1-8519).
(4.1) 
Indenture dated July 1, 1993, between Cincinnati Bell Inc., as Issuer, and The Bank of New York, as Trustee, relating to Cincinnati Bell Inc.’s 71/4% Notes Due June 15, 2023 (Exhibit 4-A to Current Report on Form 8-K, date of Report July 12, 1993, File No. 1-8519).
(4.2) 
Indenture dated as of March 15, 2010, by and among Cincinnati Bell Inc., as Issuer, the subsidiaries of Cincinnati Bell Inc. party thereto, as Guarantors, and The Bank of New York Mellon, as Trustee, relating to Cincinnati Bell Inc.’s 8 3/4% Senior Subordinated Notes due 2018 (Exhibit 4.1 to Current Report on Form 8-K, date of Report March 15, 2010, File No. 1-8519).
(4.3)
Indenture dated as of October 13, 2010, by and among Cincinnati Bell Inc., as Issuer, the subsidiaries of Cincinnati Bell Inc. party thereto, as Guarantors, and The Bank of New York Mellon, as Trustee, relating to Cincinnati Bell Inc.’s 8 3/8% Senior Notes due 2020 (Exhibit 4.1 to Current Report on Form 8-K, date of Report October 13, 2010, File No. 1-8519).
(4.4)(4.3) Indenture dated as of November 30, 1998, among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4-A to Current Report on Form 8-K, date of Report November 30, 1998, File No. 1-8519).
(4.5)(4.4) First Supplemental Indenture dated as of December 31, 2004 to the Indenture dated as of November 30, 1998, among Cincinnati Bell Telephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(iii)(2) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4.6)(4.5) Second Supplemental Indenture dated as of January 10, 2005 to the Indenture dated as of November 30, 1998, among Cincinnati Bell Telephone Company LLC (as successor entity to Cincinnati Bell Telephone Company), as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit (4)(c)(iii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4.7)(4.6) 
Indenture, dated as of November 20, 2012, by andSeptember 22, 2016, among CyrusOne LP, CyrusOne Finance Corp.Cincinnati Bell Inc., guarantors partythe guarantor parties thereto and Wells FargoRegions Bank, N.A., as Trustee, relating to CyrusOne Inc.'s 6 3/8% Senior Notes due 2022trustee (Exhibit 4.1 to Current Report on Form 8-K date of Report November 20, 2012, File No. 1-8519).
(4.8)Warrant Agreement dated as of March 26, 2003, by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers (Exhibit (4)(c)(vii) to Annual Report on Form 10-K for the year ended December 31, 2002,September 22, 2016, File No. 1-8519).
(4.9)Equity Registration Rights Agreement dated as of March 26, 2003, by and between Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers (Exhibit (4)(c)(ix) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).
(4.10)Purchase Agreement dated as of December 9, 2002, by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Discount Notes due 2009 (Exhibit (4)(c)(x)(1) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).

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Form 10-K Part IVCincinnati Bell Inc.

(4.11)First Amendment to Purchase Agreement dated as of March 26, 2003, by and among Broadwing Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Discount Notes due 2009 (Exhibit (4)(c)(x)(2) to Annual Report on Form 10-K for the year ended December 31, 2002, File No. 1-8519).
(4.12)Second Amendment to Purchase Agreement dated as of April 30, 2004, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Discount Notes due 2009 (Exhibit (4)(c)(x)(3) to Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, File No. 1-8519).
(4.13)Third Amendment to Purchase Agreement dated April 30, 2004, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Discount Notes due 2009 (Exhibit 4(c)(viii)(4) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4.14)Fourth Amendment to Purchase Agreement dated January 31, 2005, by and among Cincinnati Bell Inc., GS Mezzanine Partners II, L.P., GS Mezzanine Partners II Offshore, L.P., and any other affiliate purchasers of Senior Subordinated Discount Notes due 2009 (Exhibit 4(c)(viii)(5) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).
(4.15)(4.7) No other instrument which defines the rights of holders of long term debt of the registrant is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request.
(10.1) Credit Agreement dated as of November 20, 2012, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report November 20, 2012, File No. 1-8519).
(10.2) First Amendment to Credit Agreement dated as of September 10, 2013, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 10, 2013, File No. 1-8519).
(10.3) Annex I to First Amendment to Credit Agreement dated as of September 10, 2013, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.2 to Current Report on Form 8-K, date of Report September 10, 2013, File No. 1-8519).

(10.4) + Second Amendment to Credit Agreement dated as of June 23, 2014, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.4 to Annual Report on Form 10-K, date of Report February 26, 2015, File No. 1-8519).
(10.5) Third Amendment to Credit Agreement dated as of September 30, 2014, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 30, 2014, File No. 1-8519).
(10.6) Fourth Amendment to Credit Agreement dated as of November 5, 2014, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report November 5, 2014, File No. 1-8519).
(10.7) Fifth Amendment to Credit Agreement dated as of May 11, 2016, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K date of Report May 11, 2016, File No. 1-8519).
(10.8)Amended and Restated Purchase and Sale Agreement dated as of June 6, 2011, among the Originators identified therein, Cincinnati Bell Funding LLC, and Cincinnati Bell Inc., as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to Current Report on Form 8-K, date of Report June 6, 2011, File No. 1-8519).
(10.8)(10.9) First Amendment to Purchase and Sale Agreement dated as of August 1, 2011, among the Originators identified therein, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to Current Report on Form 8-K, date of Report August 1, 2011, File No. 1-8519).
(10.9)(10.10) Second Amendment to Amended and Restated Purchase and Sale Agreement dated as of October 1, 2012, among the Originators identified therein, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell Funding LLC. (Exhibit 99.2 to Current Report on Form 8-K, date of Report October 1, 2012, File No. 1-8519).
(10.10)(10.11)Third Amendment to Amended and Restated Purchase and Sale Agreement, dated as of June 1, 2015, among Cincinnati Bell Wireless, LLC, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. (Exhibit 10.2 to Current Report on Form 8-K date of Report June 1, 2015, File No. 1-8519).
(10.12) Amended and Restated Receivables Purchase Agreement dated as of June 6, 2011, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, National Association, as Administrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 6, 2011, File No. 1-8519).
(10.11)(10.13) First Amendment to Amended and Restated Receivables Purchase Agreement dated as of August 1, 2011, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report August 1, 2011, File No. 1-8519).

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Form 10-K Part IVCincinnati Bell Inc.

(10.12)(10.14) Second Amendment to Amended and Restated Receivables Purchase Agreement dated as of June 4, 2012, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, National Association, as Administrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 4, 2012, File No. 1-8519).
(10.13)(10.15) Third Amendment to Amended and Restated Receivables Purchase Agreement dated as of October 1, 2012, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, National Association, as Administrator and LC Bank. (Exhibit 99.1 to Current Report on Form 8-K, date of Report October 1, 2012, File No. 1-8519).
(10.14)(10.16) Fourth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 3, 2013, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 3, 2013, File No. 1-8519).
(10.15)(10.17) Fifth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 13, 2013, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator (Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.16)(10.18) Sixth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 2, 2014, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 2, 2014, File No. 1-8519).
(10.17) +

(10.19) Seventh Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 30, 2014, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator.Administrator (Exhibit 10.17 to Annual Report on Form 10-K, date of Report February 26, 2015, File No. 1-8519).
(10.18)(10.20)Eighth Amendment to Amended and Restated Receivables Purchase Agreement, dated June 1, 2015, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator (Exhibit 10.1 to Current Report on Form 8-K, date of Report June 1, 2015, File No. 1-8519).
(10.21)Ninth Amendment to Amended and Restated Receivables Purchase Agreement, dated May 27, 2016, among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identified therein, PNC Bank, National Association, as Administrator, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 10.1 to Current Report on Form 8-K, date of Report May 27, 2016, File No. 1-8519).
(10.22) License Purchase Agreement dated as of April 6, 2014 among Cincinnati Bell Wireless, LLC, an Ohio limited liability company, and Cellco Partnership, a Delaware general partnership doing business as Verizon Wireless (Exhibit 10.1 to Current Report on Form 8-K, date of Report April 7, 2014, File No. 1-8519).
(10.19)(10.23) Network Asset Purchase Agreement dated as of April 6, 2014 among Cincinnati Bell Wireless, LLC, an Ohio limited liability company, and Cellco Partnership, a Delaware general partnership doing business as Verizon Wireless (Exhibit 10.2 to Current Report on Form 8-K, date of Report April 7, 2014, File No. 1-8519).
(10.20)(10.24)Incremental Assumption Agreement dated April 6, 2015 among Cincinnati Bell Inc. an Ohio corporation, the subsidiary guarantors thereto, Bank of America, N.A., and the additional lenders thereto (Exhibit 10.1 to Current Report on Form 8-K, date of Report April 6, 2015, File No. 1-8519).
(10.25)Assignment Agreement, dated as of June 1, 2015, among Cincinnati Bell Funding LLC, Cincinnati Bell Wireless, LLC, and PNC Bank, National Association (Exhibit 10.3 to Current Report on Form 8-K, date of Report June 1, 2015, File No. 1-8519).
(10.26)* Cincinnati Bell Inc. Pension Program, as amended and restated effective January 1, 2005 (Exhibit (10)(iii)(A)(3) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.21)(10.27)* Amendment to Cincinnati Bell Inc. Pension Program, effective December 31, 2011 (Exhibit 10.12 to Annual Report on Form 10-K for the year ended December 31, 2011, File No. 1-8519).
(10.22)*(10.28) + Restatement of the Cincinnati Bell Management Pension Plan executed January 17, 2011 (Exhibit 10.13 to Annual Report on Form 10-K for the year ended December 31, 2011, File No. 1-8519).22, 2016.
(10.23)*(10.29) + Restatement of the Cincinnati Bell Pension Plan executed January 25, 2011 (Exhibit 10.14 to Annual Report on Form 10-K for the year ended December 31, 2011, File No. 1-8519).22, 2016.
(10.24)*(10.30) + Amendment to Cincinnati Bell Management Pension Plan executed December 20, 2013 (Exhibit 10.21 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).22, 2016.
(10.25)*(10.31) + Amendment to Cincinnati Bell Management Pension Plan executed May 16, 2013 (Exhibit 10.22 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.26)*Amendment to Cincinnati Bell Management Pension Plan executed April 17, 2012 (Exhibit 10.23 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.27)*Amendment to Cincinnati Bell Management Pension Plan executed December 20, 2011 (Exhibit 10.24 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.28)*Amendment to Cincinnati Bell Pension Plan executed on December 20, 2013 (Exhibit 10.25 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).22, 2016.
(10.29)*Amendment to Cincinnati Bell Pension Plan executed on April 17, 2012 (Exhibit 10.26 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.30)*Amendment to Cincinnati Bell Pension Plan executed on November 29, 2011 (Exhibit 10.27 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519).
(10.31)(10.32)* Cincinnati Bell Inc. 2011 Short Term Incentive Plan (Appendix AII to the Company's 20112016 Proxy Statement on Schedule 14A filed March 21, 2011,17, 2016, File No. 1-8519).
(10.32)(10.33)* Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors, as amended and restated as of January 1, 2005 (Exhibit (10)(iii)(A)(2) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).

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Form 10-K Part IV(10.34)* Amendment to Cincinnati Bell Inc.

Deferred Compensation Plan for Outside Directors, as of November 7, 2016 (Exhibit 10.2 to Current Report on Form 8-K, date of Report November 7, 2016, File No. 1-8519).
(10.33)(10.35)* Cincinnati Bell Inc. Executive Deferred Compensation Plan, as amended and restated effective January 1, 2005 (Exhibit (10)(iii)(A)(4) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.34)(10.36)*Amendment to Cincinnati Bell Inc. Executive Deferred Compensation Plan, as of November 7, 2016 (Exhibit 10.1 to Current Report on Form 8-K, date of Report November 7, 2016, File No. 1-8519).
(10.37)* Cincinnati Bell Inc. 2007 Long Term Incentive Plan, as amended (Appendix AI to the Company's 20072014 Proxy Statement on Schedule 14A filed March 14, 2007,20, 2015, File No. 1-8519).
(10.35)*Amendment to Cincinnati Bell Inc. 2007 Long Term Incentive Plan effective as of May 1, 2009 (Appendix A to the Company's 2009 Proxy Statement on Schedule 14A filed March 17, 2009, File No. 1-8519).
(10.36)*Form of Award Agreement to be implemented under the 2007 Long Term Incentive Plan dated as of December 7, 2010 (Exhibit 10.1 to Current Report on Form 8-K, date of Report December 7, 2010, File No. 1-8519).
(10.37)(10.38)* Cincinnati Bell Inc. Form of Stock Option Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(22) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.38)(10.39)* Cincinnati Bell Inc. Form of Performance Restricted Stock Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(23) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.39)*

(10.40) + Cincinnati Bell Inc. Form of 2008-20102016 - 2018 Share-Based Performance ShareUnit Award Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(24) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.40)(10.41)* Cincinnati Bell Inc. Form of Stock Appreciation Rights Agreement (Employees) (Exhibit (10)(iii)(A)(21) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.41)(10.42)*Cincinnati Bell Inc. Form of Restricted Stock Unit Award Agreement (2007 Long Term Incentive Plan)(Exhibit 10.45 to Annual Report for the year ended December 31, 2015, File No. 1-8519).
(10.43)* Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors, as amended (Appendix BI to the Company's 20072016 Proxy Statement on Schedule 14A filed on March 14, 2007,17, 2016, File No. 1-8519).
(10.42)(10.44)* Executive Compensation Recoupment/Clawback Policy effective as of January 1, 2011 (Exhibit 99.1 to Current Report on Form 8-K, date of Report October 29, 2010, File No. 1-8519).
(10.43)(10.45)* Amended and Restated Employment Agreement effective January 1, 2005, between Cincinnati Bell Inc. and Christopher J. Wilson (Exhibit (10)(iii)(A)(10) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).
(10.44)(10.46)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson effective July 26, 2013 (Exhibit 10.1 to Current Report on Form 8-K, date of Report July 26, 2013, File No. 1-8519).
(10.45)(10.47)*Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson effective January 1, 2015 (Exhibit 10.51 to Current Report on Form 10-K, date of report February 26, 2015, File No. 1-8519).
(10.48)* Amended and Restated Employment Agreement dated September 7, 2010 between Cincinnati Bell Inc. and Theodore H. Torbeck (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 7, 2010, File No. 1-8519).
(10.46)(10.49)* Employment Agreement dated as of February 6, 2013 between Cincinnati Bell Inc. and Theodore H. Torbeck (Exhibit 10.1 to Current Report on Form 8-K, date of Report January 31, 2013, File No. 1-8519).
(10.47)(10.50)* Amended and Restated Employment Agreement effective July 26, 2013 between Cincinnati Bell Inc. and Leigh R. Fox (Exhibit 10.2 to Current Report on Form 8-K, date of Report July 26, 2013, File No. 1-8519).
(10.48)(10.51)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and David L. Heimbach datedLeigh R. Fox effective as of November 20, 2013September 1, 2016 (Exhibit 10.1 to Current Report on Form 8-K, date of earliest event reported November 20, 2013,Report September 1, 2016, File No. 1-8519).
(10.49)(10.52)* Employment Agreement dated as of May 5, 2014 between Cincinnati Bell Inc. and Joshua T. Duckworth (Exhibit 10.1 to Current Report on Form 8-K, date of Report May 5, 2014, 2014, File No. 1-8519).
(10.50) +(10.53)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson dated as of January 27, 2015.2015 (Exhibit 10.50 to Annual Report on Form 10-K, date of report February 26, 2015, File No. 1-8519).
(10.51) +(10.54)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson datedThomas E. Simpson effective as of JanuarySeptember 1, 2015.2016 (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 9, 2016, File No. 1-8519).
(10.55)*Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2016 (Exhibit 10.2 to Current Report on Form 8-K, date of Report September 1, 2016, File No. 1-8519).
(12.1) + Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.
(14) Code of Ethics for Senior Financial Officers, as adopted pursuant to Section 406 of Regulation S-K (Exhibit (10)(iii)(A)(15) to Annual Report on Form 10-K for the year ended December 31, 2003, File No. 1-8519).
(21) + Subsidiaries of the Registrant.
(23) + Consent of Independent Registered Public Accounting Firm.
(24) + Powers of Attorney.
(31.1) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Form 10-K Part IVCincinnati Bell Inc.

(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) +(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.
 (32.2) +

 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 (101.INS)** XBRL Instance Document.
 (101.SCH)** XBRL Taxonomy Extension Schema Document.
 (101.CAL)** XBRL Taxonomy Calculation Linkbase Document.
 (101.DEF)** XBRL Taxonomy Extension Definition Linkbase Document.
 (101.LAB)** XBRL Taxonomy Label Linkbase Document.
 (101.PRE)** XBRL Taxonomy Presentation Linkbase Document.
 ______________
 + Filed herewith.
 * Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 15(a)(3) of the Instruction to Form 10-K.
 ** Submitted electronically with this report.
 
The Company's reports on Form 10-K, 10-Q, 8-K, proxy and other information are available free of charge at the following website: http://www.cincinnatibell.com. Upon request, the Company will furnish a copy of the Proxy Statement to its security holders without charge, portions of which are incorporated herein by reference. The Company will furnish any other exhibit at cost.
 

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Schedule II Cincinnati Bell Inc.


VALUATION AND QUALIFYING ACCOUNTS
   Additions       Additions    
(dollars in millions) Beginning of Period Charge (Benefit) to Expenses To (from) Other Accounts Deductions End of Period Beginning of Period Charge (Benefit) to Expenses (To) From Other Accounts Deductions End of Period
Allowance for Doubtful Accounts                    
Year 2016 $12.4
 $9.4
 $(2.0) $9.9
 $9.9
Year 2015 $12.4
 $8.5
 $—
 $8.5
 $12.4
Year 2014 $12.2
 $10.4
 $—
 $10.2
 $12.4
 $12.2
 $10.4
 $—
 $10.2
 $12.4
Year 2013 $13.3
 $11.3
 $—
 $12.4
 $12.2
Year 2012 $11.6
 $13.9
 $—
 $12.2
 $13.3
                    
Deferred Tax Valuation Allowance                    
Year 2016 $58.4
 $(3.6) $(0.4) $—
 $54.4
Year 2015 $64.4
 $(5.5) $(0.5) $—
 $58.4
Year 2014 $68.3
 $(1.1) $(2.8) $—
 $64.4
 $68.3
 $(1.1) $(2.8) $—
 $64.4
Year 2013 $56.8
 $14.1
 $(2.6) $—
 $68.3
Year 2012 $58.4
 $(1.7) $0.1
 $—
 $56.8

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Form 10-K Part IV Cincinnati Bell Inc.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
     
Date:February 26, 201524, 2017 /s/ LeighAndrew R. FoxKaiser 
   LeighAndrew R. FoxKaiser 
   Chief Financial Officer 
     
Date:February 26, 201524, 2017 /s/ Joshua T. Duckworth 
   Joshua T. Duckworth 
   Chief Accounting Officer 

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Form 10-K Part IV Cincinnati Bell Inc.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date 
      
/s/ Theodore H. Torbeck President, Chief Executive Officer and Director February 26, 201524, 2017 
Theodore H. Torbeck    
      
Phillip R. Cox* Chairman of the Board and Director February 26, 201524, 2017 
Phillip R. Cox     
      
John W. Eck* Director February 26, 201524, 2017 
John W. Eck
Russel P. Mayer*DirectorFebruary 26, 2015
Russel P. Mayer     
      
Jakki L. Haussler* Director February 26, 201524, 2017 
Jakki L. Haussler     
      
Craig F. Maier* Director February 26, 201524, 2017 
Craig F. Maier     
      
Alan R. Schriber*Russel P. Mayer* Director February 26, 201524, 2017 
Alan R. SchriberRussel P. Mayer     
      
Lynn A. Wentworth* Director February 26, 201524, 2017 
Lynn A. Wentworth
Martin J. Yudkovitz*DirectorFebruary 24, 2017
Martin J. Yudkovitz     
      
John M. Zrno* Director February 26, 201524, 2017 
John M. Zrno     
      
      
*By: /s/ Theodore H. Torbeck     
Theodore H. Torbeck     
as attorney-in-fact and on his behalf   
as Principal Executive Officer, President, Chief Executive Officer and Director 
      


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