Cincinnati Bell Inc.
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from to Commission File Number 1-8519CINCINNATI 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 registeredCommon Shares (par value $0.01 per share) New York Stock Exchange6 3/4% Cumulative Convertible Preferred Shares New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No oIndicate 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 xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation 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 suchfiles). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405 of this chapter) is not contained herein, and willnot 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 orany amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company"in Rule 12b-2 of the Exchange Act: Large accelerated filerx Accelerated filero Non-accelerated filero Smaller reporting companyo Emerging growth companyo If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xThe aggregate market value of the voting common shares owned by non-affiliates of the registrant was $0.7 billion, computed by reference to the closing saleprice of the common stock on the New York Stock Exchange on June 30, 2018, the last trading day of the registrant’s most recently completed second fiscalquarter. The Company has no non-voting common shares.At January 31, 2019, there were 50,337,778 common shares outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement relating to the Company’s 2019 Annual Meeting of Shareholders are incorporated by reference into Part III of thisreport to the extent described herein. Table of ContentsForm 10-K Part I Cincinnati Bell Inc.TABLE OF CONTENTS PART I PageItem 1.Business4 Item 1A.Risk Factors12 Item 1B.Unresolved Staff Comments23 Item 2.Properties23 Item 3.Legal Proceedings23 Item 4.Mine Safety Disclosures23 PART II Item 5.Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities24 Item 6.Selected Financial Data26 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations29 Item 7A.Quantitative and Qualitative Disclosure About Market Risk61 Item 8.Financial Statements and Supplementary Data62 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure125 Item 9A.Controls and Procedures125 Item 9B.Other Information125 PART III Item 10.Directors, Executive Officers and Corporate Governance126 Item 11.Executive Compensation127 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters127 Item 13.Certain Relationships and Related Transactions, and Director Independence127 Item 14.Principal Accountant Fees and Services127 PART IV Item 15.Exhibits and Financial Statement Schedules128 Signatures135This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc., as indicated.Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Part IItem 1. BusinessOverview and StrategyCincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provide integrated communications and ITsolutions that keep consumer and business customers 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 businessesover an expanding fiber network and a legacy copper network. During 2018, the Company acquired Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom"), thelargest full service provider of communication services on all of Hawaii's major islands. This acquisition added operational scale to our business by addingaccess to both Honolulu, a well-developed, fiber-rich city, as well as the growing neighbor islands. After the acquisition the Company's combined fibernetwork is nearly 16,500 fiber route miles.Through its IT Services and Hardware segment, business customers across the U.S., Canada and Europe rely on the Company for the sale and service ofefficient, end-to-end communications and IT systems and solutions. During 2017, the Company expanded the geographic footprint of its IT Services andHardware segment as a result of the acquisitions of SunTel Services LLC ("SunTel") and OnX Holdings LLC ("OnX"), transforming the segment into a NorthAmerican hybrid-cloud services provider. In addition, the acquisition of Hawaiian Telcom in 2018 also expanded the IT Services and Hardware segment toHawaii.Our goal is to continue the transformation of Cincinnati Bell from a legacy copper-based telecommunications company into a technology company withstate-of-the-art fiber assets servicing customers with data, video, voice and IT solutions to meet their evolving needs. To this end, we believe that, byleveraging our past and future investments, we have created a company with a healthy balance sheet, growing revenue, growing profitability and sustainablecash flows.In an effort to achieve our objectives, we continue to focus on the following key initiatives:•expand our fiber network; and•grow our IT Services and Hardware segment.Expand our fiber networkWe invested $118.1 million of capital in the Entertainment and Communications segment in products that can be categorized as either Fioptics in Cincinnatior Consumer/SMB Fiber in Hawaii (collectively, "Consumer/SMB Fiber") during 2018. Revenue from these high demand products totaled $383.5 million, up24% over the prior year including the contribution from Hawaii, and up 10% over the prior year in Cincinnati, mitigating the decline in legacy products. Theprimary focus of these investments is the expansion of high-speed internet and video products which are designed to compete directly with the cableMultiple System Operators, such as Charter Communications, serving the Company’s operating territories. Year-over-year growth in these products isoutlined in the table below:Cincinnati Operating Territory 2018 2017 2016Consumer / SMB Fiber Revenue (in millions): $341.2 $309.9 $254.1Subscribers (in thousands): High-speed internet 239.0 226.6 197.6Video 139.9 146.5 137.6Voice 107.6 105.9 96.24Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Hawaii Operating Territory 2018Consumer / SMB Fiber Revenue (in millions): $42.3Subscribers (in thousands): High-speed internet 65.9Video 48.8Voice 30.3During the year, we passed an additional 38,800 addresses in the Greater Cincinnati area with Fioptics, which included a reduction in Fiber to the Node("FTTN") addresses of 2,200 as we upgraded these addresses to Fiber to the Premise ("FTTP") addresses as FTTP is becoming a more relevant solution for ourcustomers. As of December 31, 2018, the Fioptics products are now available to approximately 611,000 customer locations or 75% of the Greater Cincinnatioperating territory. During the six months ended December 31, 2018, we passed an additional 6,900 addresses in Hawaii. The Consumer/SMB Fiber productsare now available to 240,500 addresses, or 49% of the operating territory in Hawaii, including Oahu and the neighbor islands.In 2018, the Company also invested $25.1 million in Enterprise Fiber products, which includes fiber and IP-based core network technology. Theseinvestments position the Company to meet increased business and carrier demand within Greater Cincinnati and in contiguous markets in the Midwestregion. In Hawaii expenditures are for high-bandwidth data transport products, such as metro-ethernet, including the Southeast Asia to United States ("SEA-US") cable. We continue to evolve and optimize network assets to support the migration of legacy products to new technology, and as of December 31, 2018,the Company has:•increased the total number of commercial addresses with fiber-based services (referred to as a lit address) to 26,600 in Greater Cincinnati and 19,100in Hawaii by connecting approximately 4,000 additional lit addresses in Greater Cincinnati during the twelve months ended December 31, 2018 and1,500 additional lit addresses in Hawaii during the six months ended December 31, 2018;•expanded the fiber network to span more than 11,900 route miles in Greater Cincinnati and 4,600 route miles in Hawaii; and•provided cell site back-haul services to approximately 90% of the 1,000 cell sites in the Greater Cincinnati market, of which approximately 97% ofthese sites are lit with fiber, and 69% of the 900 cell sites in Hawaii, all of which are lit with fiber.As a result of our investments, we have generated year-over-year Entertainment and Communications revenue growth each year since 2013. The Company'sexpanding fiber assets allow us to support the ever-increasing demand for data, video and internet devices with speed, agility and security. We believe ourfiber investments are a long-term solution for our customers' bandwidth needs.Grow our IT Services and Hardware SegmentCincinnati Bell continues to grow the IT Services and Hardware segment by developing new products, as well as expanding its reach to new customers.During 2017, the Company completed the acquisitions of SunTel and OnX, which enabled us to extend our geographic footprint across the U.S., Canada andEurope, diversify our customer base, and expand our product portfolio. During 2018, the acquisition of Hawaiian Telcom helped to expand the segment evenfurther across the U.S. to Hawaii. The Company continues to develop high-demand products for business customers through our investments in unifiedcommunications and cloud services. Our ability to be innovative and to react to the changing technology demands of our customers is important to thegrowth of our IT Services and Hardware segment. Our offerings under the Infrastructure Solutions practice provide a platform for buyer engagement and anopportunity for bridging the customer to higher value professional and managed services. In 2018, the Company saw significant increases in revenue fromCommunications solutions, specifically Unified Communications as a Service ("UCaaS"), Software-Defined Wide Area Network ("SD-WAN") and Network asa Service ("NaaS"), to customers that historically have purchased our hardware offerings.5Table of ContentsForm 10-K Part I Cincinnati Bell Inc.As a company with a long history of managing customers' network and technology needs, we combine the management of the network, whether owned orleased from other carriers out of territory, with integrated voice and IT offerings. We supply the architecture and integration intelligence, labor and hardwareas well as any combination of these services. These projects can be established based on hourly billing rates, service-level driven agreements or utility-basedmanaged service models. Customers are attracted to our ability to combine our historic knowledge, unique assets and talented workforce in order to helpthem improve their operational efficiency, mitigate risk and reduce costs.OperationsAs of December 31, 2018, the Company operated two segments: Entertainment and Communications and IT Services and Hardware.The Entertainment and Communications segment provides products and services that can be categorized as either Consumer/SMB Fiber, Enterprise Fiber orLegacy. The table below demonstrates how our products and services are categorized:Entertainment and Communications Consumer / SMB FiberEnterprise FiberLegacyDataHigh-Speed InternetEthernet (>10Mb)DSL (< 10 Mb) (2) Dedicated Internet AccessDS0 (3), DS1, DS3 WavelengthTDM (4) IRUEthernet (<10 Mb) Small Cell SONET (1) VoiceVoice (Fiber) Traditional Voice Consumer Long Distance Switched Access Digital TrunkingVideoTelevision Service Other Maintenance Information Services Connect America Fund support Directory Assistance Advertising Wireless Handsets and Accessories Wireless Services Wiring Projects (1) Synchronous Optical Network(2) Digital Subscriber Line(3) Digital Signal(4) Time Division Multiplexing6Table of ContentsForm 10-K Part I Cincinnati Bell Inc.We classify the products and services of our IT Services and Hardware segment into four distinct practices: Consulting, Cloud, Communications andInfrastructure Solutions. The table below demonstrates how our products and services are categorized:IT Services and HardwareConsultingIT Staffing Application ServicesCloudVirtual Data Centers Storage Backup Network Management/Monitoring Security Data Center Cloud ConsultingCommunicationsUnified Communications as a Services ("UCaaS") Contact Center Software Defined Wide Area Networking ("SD-WAN") Networking Solutions Multi-Protocol Label Switching ("MPLS") Network as a Service ("NaaS")Infrastructure SolutionsHardware Software Licenses MaintenanceEntertainment and CommunicationsThe Entertainment and Communications segment provides products and services such as high-speed internet, data transport, local voice, video and otherservices. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of the Company, is the incumbent local exchange carrier ("ILEC") for a geographythat covers a radius of approximately 25 miles around Cincinnati, Ohio, and includes parts of northern Kentucky and southeastern Indiana. CBT has operatedin this territory for over 145 years. Voice and data services in the Enterprise Fiber and Legacy categories that are delivered beyond the Company's ILECterritory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended Territories LLC ("CBET"), a subsidiary ofCBT. On July 2, 2018, the Company acquired Hawaiian Telcom. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest full service provider ofcommunications services and products in that state. Originally incorporated in Hawaii in 1883 as Mutual Telephone Company, Hawaiian Telcom has astrong heritage of over 135 years as Hawaii’s communications carrier. Its services are offered on all of Hawaii’s major islands, except its video service, whichcurrently is only available on the island of Oahu. The key products and services provided by the Entertainment and Communications segment include thefollowing:DataThe Company's data products include high-speed internet access, data transport and interconnection services. Consumer demand for increased internet speedsis accelerating, and more customers are opting for higher bandwidth solutions. To address this demand, the Company is focused on building out FTTPaddresses, enabling these addresses to receive speeds up to one gigabit per second ("Gbps"). FTTP addresses now cover 58% of the market in GreaterCincinnati and 34% of the market in Hawaii. The Company is now able to provide internet speeds of 30 megabits per second ("Mbps") or more toapproximately 75% of Greater Cincinnati and 68% of homes and businesses on the island of Oahu, of which approximately 472,000 and 167,000 addressesare capable of receiving speeds up to one Gbps in Greater Cincinnati and Hawaii, respectively.7Table of ContentsForm 10-K Part I Cincinnati Bell Inc.As business customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the access method of choice due toits ability to support multiple applications on a single physical connection. We are also expanding our metro-ethernet platform to deliver services across awider geography to target business customers beyond our ILEC footprint. The Company’s regional network connects Greater Cincinnati, Columbus, andDayton, Ohio, as well as Indianapolis, Indiana, Chicago, Illinois, and Louisville, Kentucky.As a result of the acquisition of Hawaiian Telcom the Company gained access to the SEA-US trans Pacific submarine cable system connecting Indonesia, thePhilippines, Guam, Hawaii and the mainland United States. The system provides an initial 20 Terabytes per second ("Tbps") of capacity using state-of-the-art100Gbps technology to accommodate the increase in data consumption.VoiceVoice represents local service over both copper and fiber. It also includes consumer long distance, digital trunking, switched access and other value-addedservices such as caller identification, voicemail, call waiting and call return.The Company's voice access lines over copper continue to decrease as our customers have increasingly employed wireless technologies in lieu of wirelinevoice services ("wireless substitution"), migrated to competitors, or migrated to VoIP services provided by the Company and others.Customers purchasing traditional long 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 havecontinued to decline as a result of wireless substitution.VideoIn the Greater Cincinnati territory, the Company launched Fioptics in 2009 and initially focused our fiber network investment on densely populated areas,such as apartments and condominiums. Since that time, Fioptics has been deployed over a much broader base and is now available to approximately 75% ofGreater Cincinnati. As of December 31, 2018, we have 139,900 video subscribers in Greater Cincinnati. Our Fioptics customers enjoy access to over 400entertainment channels, including digital music, local, movie and sports programming with over 150 high-definition channels, parental controls, HD DVRand video On-Demand.In Hawaii, the Company launched its next-generation television service on the island of Oahu in July 2011. The TV service is 100% digital with hundreds oflocal, national, international and music channels, including high-definition, premium, pay-per-view channels and video on-demand service. TV service hasbeen deployed to 48,800 subscribers in Hawaii as of the end of 2018.OtherOther revenue consists of revenue generated from wiring projects for business customers, Connect America Fund support (see “—Regulation” for furtherdiscussion of universal service), advertising, directory assistance, maintenance and information services.IT Services and HardwareThe IT Services and Hardware segment provides a full range of managed IT solutions, telephony and IT equipment sales, and professional IT staffing services.These services and products are provided through the Company's subsidiaries in various geographic areas throughout the U.S., Canada and Europe. Byoffering a full range of Infrastructure Solutions in addition to Cloud, Communications and Consulting services, the IT Services and Hardware segmentprovides end-to-end IT solutions 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:ConsultingThe Company's consulting services offerings consist of IT staffing and project-based engagements, including engineering and installation of voice,connectivity and IT technologies, development of digital application solutions and staff augmentation by highly skilled and industry-certified technicalresources. 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.8Table of ContentsForm 10-K Part I Cincinnati Bell Inc.CommunicationsThe Company offers a complete portfolio of hosted solutions that include converged IP communications platforms of data, voice, video and mobilityapplications. We offer our customers expert management for all hardware and software components, including maintenance contracts and service levelagreement ("SLA") based services. Fully hosted and managed, these voice platforms and applications can also be delivered as a service for a monthly utilityfee allowing our customers to scale without a large capital investment.The solutions offered in the Communications practice include UCaaS, SD-WAN, NaaS, Contact Center and other Networking Solutions. UCaaS provides aportfolio of solutions that includes VoIP, room-based video, mobile solutions, chat/presence, messaging, web conferencing, audio conferencing, socialmedia, contact center solutions, and more in order to serve a customer's collaboration needs. Cloud delivered SD-WAN is a revolutionary, agile platform todeploy, manage and monitor hybrid public, private, wireline and wireless networks. NaaS is a fully managed networking solution with cloud integration,security, switching, Wi-Fi, management, monitoring and SD-WAN. Our Contact Center offering features speech-enabled Interactive Voice Response ("IVR"),call-back services, call analytics and surveys, speech analytics, alerts and notification, and improved customer satisfaction and productivity. Additionally, wemanage the maintenance of a large base of customers with traditional voice systems as well as converged VoIP systems under Networking Solutions.CloudVirtual data center ("VDC") is a robust and scalable virtual infrastructure consisting of equipment, security, people and processes. This offering is provided inthree different models - private cloud, dedicated cloud or public cloud - and provides customers with either a long-term or a short-term flexible solution thatis fully managed by the Company and monitored around the clock from our Enterprise Network Operations Center ("ENOC").Storage is a flexible, on-demand solution that enables businesses to eliminate capital expenditures and ongoing asset management with SLA-based services.The Company offers Tier I, Tier II and Tier III storage to meet its customers' availability, accessibility, protection, performance and capacity needs.Backup is a scalable solution that allows businesses to eliminate capital outlay and ongoing equipment management with SLA-based services and includesvirtual data center, hardware, software, monitoring and support.The Company provides SLA-based monitoring and management services utilizing our ENOC. The ENOC includes highly certified engineers and operationexperts that proactively monitor and manage our customers’ technology environments and applications. Standalone monitoring services provide customerswith scheduled and automatic checks of customers' servers, routers, switches, load balancers and firewalls. We also provide customers with advance troubleshooting, repair and changes of customers' servers, routers, switches, load balancers and other network devices from our ENOC. These services can beprovided to customers with equipment provided by the Company, or customer-owned equipment, and do not have geographical constraints. Services can bepurchased individually or bundled by combining multiple products, services, and assets into a utility or service model.Infrastructure SolutionsThe Company maintains premium resale relationships and certifications with a variety 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 customers.Sales and Distribution ChannelsThe Company’s Entertainment and Communications segment utilizes a number of distribution channels to acquire customers. As of December 31, 2018, theCompany operated nine retail stores in the Cincinnati operating territory to market and distribute our Fioptics suite of products. The Company works tolocate 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 for both the Cincinnati operatingterritory and the Hawaii operating territory. In addition, the Company utilizes a call center, as well as a door-to-door sales force, to target the sale of ourconsumer products to residents.9Table of ContentsForm 10-K Part I Cincinnati Bell Inc.For both operating segments, we utilize a business-to-business sales force and a call center organization to reach business customers in our operatingterritories. Larger business customers are supported by sales account representatives and solution architects located in our branch offices across the U.S.,Canada and Europe that understand the customer's technology needs and recommend Company offered solutions. Smaller business customers are supportedthrough a telemarketing sales force, customer representatives and store locations.The IT Services and Hardware segment utilizes an indirect distribution channel to sell services, primarily focused on Communications. Compensation to thedistributor is success-based and typically involves a residual payment based on revenue from customers.Suppliers and Product Supply ChainThe Company generally subjects purchases to competitive bids and selects its vendors based on price, service level, delivery terms, quality of product andterms and conditions.The Entertainment and Communications segment's primary purchases are for video content, network equipment, software, fiber cable and contractors tomaintain and support the growth of the fiber network. The Company maintains facilities and operations for storing cable and other equipment, productdistribution and customer fulfillment.The IT Services and Hardware segment primarily purchases IT and telephony equipment that is either sold to a customer, or used to provide service to thecustomer. The Company is a certified distributor of leading technology and software solutions including, but not limited to, Cisco, EMC, Avaya and Oracle.Most of this equipment is shipped directly to the customer from vendor locations, but the Company does maintain warehouse facilities for replacement partsand equipment testing and staging.In addition, we have long-term commitments to outsource various services, such as certain information technology functions, cash remittance and accountspayable functions, call center operations and maintenance services.CompetitionThe telecommunications industry is very competitive, and the Company competes against larger, well-capitalized national providers.The Entertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, aswell as cable, broadband, and internet service providers. The Company has lost, and will likely continue to lose access lines as a portion of the customer basemigrates to competitive wireline or wireless providers in lieu of the Company’s services. Wireless providers, particularly those that provide unlimited wirelessservice plans with no additional fees for long distance, offer customers a substitution service for the Company’s local voice and long-distance services. TheCompany believes wireless substitution and competition is the reason for the largest portion of the Company’s access line and long-distance line losses.Our Consumer/SMB Fiber and Enterprise Fiber products also face intense competition from cable operators, other telecom companies and niche fibercompanies. Many of our competitors have lower operating costs and access to resources that provide economies of scale that allow them to more aggressivelyprice products, as well as provide products on a much broader scale given their expanded geographic operations. Our competitors continuously upgrade theirservice quality and offerings which could substantially erode the competitive advantage we currently have with our fiber-based products. These competitivefactors could limit the Company's ability to grow revenue and cash flows despite the strategic initiatives implemented.The Company's video product also faces competition from a number of different sources, including companies that deliver movies, television shows andother video programming over broadband Internet connections. Increasingly, content owners are utilizing Internet-based delivery of content directly toconsumers, some without charging a fee for access to the content. Furthermore, due to consumer electronics innovations, consumers are able to watch suchInternet-delivered content on television sets and mobile devices. Increased customer migration to these non-traditional entertainment products could result inincreased churn and decreased penetration for video; however, this trend could also drive increased demand for our high speed internet product.10Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The IT Services and Hardware segment competes against numerous information technology consulting, web-hosting, and computer system integrationcompanies, many of which are larger in scope and well-financed. The Company believes that participants in this market must grow rapidly and achievesignificant scale to compete effectively. Other competitors may consolidate with larger companies or acquire software application vendors or technologyproviders, enabling them to more effectively compete. This consolidation could affect prices and other competitive factors in ways that could impede theability of these businesses to compete successfully in the market. In addition, as more customers migrate to the public cloud, we will see declines in thedemand for Infrastructure Solutions. However, this trend could provide an opportunity in Consulting, Communications and Cloud Services as the Companyhas IT professionals that can assist customers through this migration to the public cloud.CustomersThe Company had no customers whose revenue comprised greater than 10% of total revenue in 2018 and 2017. The Company had sales with one customer,GE, which contributed 11% to total revenue in 2016.EmployeesAt December 31, 2018, the Company had approximately 4,300 employees. Approximately 35% of its employees are covered by collective bargainingagreements. Approximately 20% of total employees are covered by a collective bargaining agreement with the Communications Workers of America(“CWA”), which is affiliated with the AFL-CIO, and approximately 15% of total employees are covered by a collective bargaining agreement with theInternational Brotherhood of Electrical Workers (IBEW) Local 1357. The collective bargaining agreements with the CWA and IBEW are effective throughthe second quarter of 2021 and third quarter of 2022, respectively.Website Access and Other InformationThe 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 otherinformation with the Securities and Exchange Commission (the "SEC") under the Exchange Act of 1934 (the "Exchange Act"). The SEC maintains an internetsite that contains reports, proxy statements, and other information about issuers, like the Company, which file electronically with the SEC. The address of thatsite is http://www.sec.gov. The Company makes available its reports on Forms 10-K, 10-Q, and 8-K (as well as all amendments to these reports), proxystatements and other information, free of charge, at the Investor Relations section of its website.Executive OfficersRefer to Part III, Item 10. "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K for information regarding executiveofficers of the registrant.Business Segment InformationThe amounts of revenue, intersegment revenue, operating income, expenditures for long-lived assets, and depreciation and amortization attributable to eachof the Company’s business segments for the years ended December 31, 2018, 2017, and 2016, and assets as of December 31, 2018 and 2017 are set forth inNote 16 to the consolidated financial statements.11Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Item 1A. Risk FactorsIn 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.Risk Factors Related to our Business and OperationsThe Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result in reducedrevenue and loss of market share.The telecommunications industry is very competitive and the Company competes against larger, well-capitalized national providers. Competitors mayreduce pricing, create new bundled offerings, or develop new technologies, products or services that they can offer in expanded geographic regions. Ourcompetitors are expected to continuously upgrade their service quality and offerings. If the Company cannot continue to offer reliable, competitively priced,value-added services, or if the Company does not keep pace with technological advances and upgrades, competitive forces could adversely affect it through aloss of market share or a decrease in revenue and profit margins. The Company has lost access lines, and will likely continue to lose them as part of thecustomer base migrates to competitors or alternative products of the Company. These competitive factors could limit the Company's ability to grow revenueand cash flows despite the strategic initiatives implemented.The Entertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers,cable, broadband and internet service providers, other telecom companies, niche fiber companies and companies that deliver movies, television shows andother video programming over broadband Internet connections. Wireless providers, particularly those that provide unlimited wireless voice and data planswith no additional fees for long distance, offer customers a substitution for the Company’s services. The Company believes wireless substitution accounts forthe largest portion of its access line losses. Also, cable competitors that have existing service relationships with the Company's customers in theEntertainment and Communications segment offer substitution services, such as VoIP and long distance voice services in the Company's operating areas. As aresult of wireless substitution and increased competition, legacy voice lines decreased by 14% in Cincinnati in 2018 compared to 2017.In addition, our strategic products, particularly our fiber-based products, face competition from a number of different sources including cable operators, othertelecom companies, niche fiber companies, and companies that deliver movies, television shows and other video programming over broadband Internetconnections. Increasingly, content owners are utilizing Internet-based delivery of content directly to consumers, some without charging a fee for access to thecontent. Furthermore, due to consumer electronics innovations, consumers are able to watch such Internet-delivered content on television sets and mobiledevices. Increased customer migration to these non-traditional entertainment products could result in increased churn and decreased penetration in ourConsumer/SMB Fiber products. If the Company is unable to effectively implement strategies to attract and retain 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 Entertainment and Communicationssegment will be adversely affected.The IT Services and Hardware segment competes against numerous other information technology consulting, web-hosting, and computer system integrationcompanies, many of which are large in scope and well-financed. Other competitors may consolidate with larger companies or acquire software applicationvendors or technology providers, which may provide competitive advantages. The Company believes that many of the participants in this market must growrapidly and achieve significant scale to compete effectively. This consolidation could affect prices and other competitive factors in ways that could impedeour ability to compete successfully in the market. The competitive forces described above could adversely affect the Company’s IT Services and Hardwaresegment and 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 besufficient to service our debt, fund our capital expenditures, fund our pension and other employee benefit obligations and pay preferred dividends pursuantto our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives. We cannot be assured that theseopportunities will be successful or that these initiatives will improve our financial position or our results of operations.12Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Failure to anticipate the need to introduce new products and services, or to compete with new technologies, may compromise the Company’s success in thetelecommunications industry.The Company’s success depends, in part, on being able to anticipate the needs of current and future business, carrier and consumer customers. The Companyseeks to meet these needs through new product introductions, service quality and technological improvements. New products and services are important tothe 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, whichwould 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 toexperience 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 localtelecommunications subsidiaries have experienced substantial access line losses over the past several years due to a number of factors, including wireless andbroadband substitution and increased competition. The Company expects access line losses to continue into the foreseeable future. Failure to retain accesslines without replacing such losses with an alternative source of revenue would adversely impact the Company's revenues, earnings and cash flow fromoperations.The Company has provided alternative sources of revenue by way of our strategic products; however, these products may generate lower profit margins thanour traditional services. In addition, as a larger portion of our customer base has already migrated to these new product offerings, a decreased growth rate ofstrategic products can be expected. Moreover, we cannot provide assurance that the revenues generated from our new offerings will mitigate revenue lossesfrom the reduced sales of our legacy products or that our new strategic offerings will be as successful as anticipated. Negotiations with the providers of content for our video programming may not be successful, potentially resulting in our inability to carry certainprogramming channels, which could result in the loss of subscribers. In addition, due to the influence of some content providers, we may be forced to payhigher rates for some content, resulting in increased costs. We must negotiate with the content owners of the programming that we carry. These content owners are the exclusive provider of the channels they offer. Ifwe are unable to reach a mutually-agreed upon contract with a content owner, our existing agreements to carry this content may not be renewed, resulting inthe blackout of these channels. The loss of content could result in our loss of customers who place a high value on the particular content that is lost. Inaddition, many content providers own multiple channels. As a result, we typically have to negotiate the pricing for multiple channels rather than one, andcarry and pay for content for which customers do not associate much value, in order to have access to other content that customers do associate value. Someof our competitors have materially larger scale than we do, and may, as a result, be better positioned than we are in such negotiations. As a result of thesefactors, the expense of content may continue to increase, and have a material adverse impact on the Company’s results of operations and cash flows.The Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with the Company, orcustomers being entitled to receive financial compensation, leading 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 thelevels of service or performance required by its agreements, customers may be able to receive financial compensation, or may be able to terminate theirrelationship with the Company. In order to provide these levels of service, the Company is required to protect against human error, natural disasters,equipment failure, power failure, sabotage and vandalism, and have disaster recovery plans available in the event of disruption of service. The failure toaddress these or other events may result in a disruption of service. In addition, any inability to meet service level commitments, or other performancestandards, could reduce the confidence of customers. Decreased customer confidence could impair the Company's ability to attract and retain customers,which could adversely affect the Company's ability to generate revenues and operating results.13Table of ContentsForm 10-K Part I Cincinnati Bell Inc.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 Cincinnati, Ohio, Dayton, Ohio and the islands of Hawaii. Furthermore,because of Hawaii’s geographic isolation, the successful operation and growth of the business in Hawaii is dependent on favorable economic and regulatoryconditions in the state. An economic downturn or natural disaster occurring in any of these limited operating territories would have a disproportionate effecton the Company's business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similarcompanies operating in different geographic areas.The customer base for telecommunications services in Hawaii is small and geographically concentrated. The population of Hawaii is approximately 1.4million, approximately 70% of whom live on the island of Oahu. Any adverse economic conditions affecting Oahu, or Hawaii generally, could materiallyimpair our ability to operate our business. Labor shortages or increased labor costs in Hawaii could also have a material adverse effect on our business. Inaddition, we may be subject to increased costs for goods and services that the Company is unable to control or defray as a result of operating in this limitedterritory. Increased expenses including, but not limited to, energy and health care could have a material adverse effect on our business and results ofoperations.Two large customers account for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction in businessfrom either one of these customers would cause operating revenues to decline and could negatively impact profitability and cash flows.As of December 31, 2018 Verizon comprised 18% of consolidated accounts receivable. As of December 31, 2017, GE comprised 10% of consolidatedaccounts receivable. During 2016, GE contributed 11% to consolidated revenue. As a result of these concentrations, the Company's results of operations andfinancial condition could be materially affected if the Company lost these customers or if services purchased were significantly reduced. In addition, ifVerizon or GE were to default on their accounts receivable obligations, the Company would be exposed to potentially significant losses in excess of theprovisions established. This would also negatively impact the available borrowing capacity under the Company's accounts receivable securitization facility("Receivables Facility").Maintaining the Company's telecommunications networks requires significant capital expenditures, and the Company's inability or failure to maintain itstelecommunications networks could 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 areas of itsoperating network. The Company intends to continue its capital expenditures for fiber optic cable.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. TheCompany'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 resultin 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 thatimpact 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 browsingand email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use much more bandwidth than inthe past. If this occurs, we could be required to make significant capital expenditures to increase network capacity in order to avoid service disruptions orreduced capacity for customers. We may not be able to recover the costs of the necessary network investments. This could result in an adverse impact to ourresults of operations and financial condition.14Table of ContentsForm 10-K Part I Cincinnati 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. Assuch, we could be exposed to legal claims relating to content disseminated on our networks. Claims could challenge the accuracy of materials on our networkor could involve matters such as defamation, invasion of privacy or copyright infringement. If we need to take costly measures to reduce our exposure tothese risks or are required to defend ourselves against such claims, our financial results would be negatively affected.An IT and/or network security breach or cyber-attack may lead to unauthorized use or disabling of our network, theft of customer data, unauthorized useor publication of our confidential business information and could have a material 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 tooperate 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. Inaddition, the potential liabilities associated with these events could exceed the insurance coverage we maintain. Cyber attacks, which include the use ofmalware, computer viruses and other means for disruption or unauthorized access, have increased in frequency, scope and potential harm in recent years.These risks may be heightened as we expand our managed services, data center services and cloud-based services. While, to date, we have not been subject tocyber attacks or other cyber incidents which, individually or in the aggregate, have been material to our operations or financial condition, the preventativeactions 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 inthe future. Significant security failures could result in the unauthorized use or disabling of our network elements. The costs associated with a major cyberattack could include material incentives offered to existing customers and business partners to retain their business, increased expenditures on cyber securitymeasures, lost revenues from business interruption, litigation, fines from regulatory authorities and damage to our reputation. If we fail to prevent the theft ofvaluable information such as financial data, sensitive information about the Company and intellectual property, or if we fail to protect the privacy ofcustomer and employee confidential data against breaches of network or information technology security, it could result in damage to our reputation, whichcould adversely impact customer and investor confidence. Any of these occurrences could result in a material adverse effect on our results of operations andfinancial condition.Weather conditions, natural disasters, terrorist acts or acts of war could cause damage to our infrastructure and result in significant disruptions to ouroperations.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. The potential liabilitiesassociated with these events could exceed the insurance coverage we maintain. Our system redundancy may be ineffective or inadequate and our disasterrecovery planning may not be sufficient for all eventualities. These events could also damage the infrastructure of suppliers that provide us with theequipment and services we need to operate our business and provide products to our customers. A natural disaster or other event causing significant physicaldamage could cause us to experience substantial losses resulting in significant recovery time and expenditures to resume operations. In addition, theseoccurrences could result in lost revenues from business interruption as well as damage to our reputation.In particular, from time to time the islands of Hawaii experience severe weather conditions such as high winds and heavy rainfall, and natural disasters such asearthquakes, volcanic eruptions and tsunami, which can overwhelm our employees, disrupt our services and severely damage our property. Such disruptionsin service and damage to property could materially harm our business, financial condition, results of operations, liquidity and/or market price of oursecurities. Moreover, it is impossible to predict the extent to which climate change could cause extreme weather conditions to become more frequent or moreextreme.15Table of ContentsForm 10-K Part I Cincinnati Bell Inc.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 competitively, 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 theregulatory scrutiny faced by the Company’s competitors. A significant portion of the Company's revenue is derived from pricing plans that are subject toregulatory review and approval. These regulated pricing plans limit the rates the Company can charge for some services while the competition has typicallybeen able to set rates for services with limited or no restriction. In the future, regulatory initiatives that would put the Company at a competitive disadvantageor mandate lower rates for its services would result in lower profitability and cash flows for the Company. In addition, different regulatory interpretations ofexisting regulations or guidelines may affect the Company’s revenues and expenses in future periods.At the federal level, the Company’s telecommunications services are subject to the Communications Act of 1934 as amended by the Telecommunications Actof 1996 (the "Act"), including rules adopted by the Federal Communications Commission ("FCC"). At the state level, CBT operates as the incumbent localexchange carrier (“ILEC”) and carrier of last resort in portions of Ohio, Kentucky, and Indiana, while Hawaiian Telcom, Inc. ("HTI") serves as the ILEC andcarrier of last resort in Hawaii. As the ILEC in these states, these entities are subject to regulation by the Public Utilities Commissions in those states. Variousregulatory decisions or initiatives at the federal or state level may from time to time have a negative impact on CBT’s and HTI’s ability to compete in theirrespective markets. In addition, although less heavily regulated than the Company’s ILEC operations, other subsidiaries are authorized to providecompetitive local exchange service, long distance, and cable television service in various states, and are consequently also subject to various state andfederal telecommunications and cable regulations that could adversely impact their operations.There are currently many regulatory actions under way and being contemplated by federal and state authorities regarding issues that could result insignificant changes to the business conditions in the telecommunications industry. In addition, in connection with our Internet access offerings, we couldbecome subject to laws and regulations as they are adopted or applied to the Internet. There is currently only limited regulation applicable to these servicesalthough court decisions and/or legislative action could lead to greater regulation of the Internet (including Internet access services). We cannot provide anyassurances that changes in current or future regulations adopted by the FCC or state regulators, or other legislative, administrative, or judicial initiativesrelating to the telecommunications industry, will not have a material adverse effect on the Company’s business, financial condition, results of operations andcash flows.From time to time, different regulatory agencies conduct audits to ensure that the Company is in compliance with the respective regulations. The Companycould 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 theCompany’s financial condition.The inability of the Company to renew its license from the FCC to use the Hawaii Inter-Island Cable System (“HICS Cable”) on economically reasonableterms may negatively impact its ability to provide telecommunication services to the islands of Hawaii.As a part of providing telecommunication services to the islands of Hawaii, the Company uses the Hawaii Inter-Island Cable System (“HICS Cable”) which isregulated by the FCC. The Company’s license to use the HICS Cable expires in July 2019. Although the Company is seeking an extension of its license toaccess the HICS Cable, it cannot guarantee that either its license will be renewed or that any renewal terms of cost or scope of access will not be materiallydetrimental to continued use of the HICS Cable by the Company. If the Company’s license for the HICS Cable is not renewed on terms reasonable to theCompany, the Company may not be able to provide its telecommunication services to the islands of Hawaii in a cost-efficient manner, which may have anadverse effect on the Company’s customer relations and revenues.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'sgrowth 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 centerfunctions are performed by third-party providers, and network equipment is purchased from and maintained by vendors. The loss of, or problems with, one ormore 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 ofoperations and financial condition.16Table of ContentsForm 10-K Part I Cincinnati 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 informationtechnology systems to effectively manage customer billing, business data, communications, supply chain, order entry and fulfillment and other businessprocesses. A failure of the Company’s information technology systems to perform as anticipated could disrupt the Company’s business and result in a failureto collect accounts receivable, transaction errors, processing inefficiencies, and the loss of sales and customers, causing the Company’s reputation and resultsof operations to suffer. In addition, information technology systems may be vulnerable to damage or interruption from circumstances beyond the Company’scontrol, including fire, natural disasters, systems failures, security breaches and viruses. Any such damage or interruption could have a material adverse effecton the Company’s business.If the Company fails to extend or renegotiate its collective bargaining agreements with its labor unions when they expire, or if its unionized employeeswere 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 unions in both the Cincinnati and Hawaii operating territories, which representsapproximately 35% of its employees. No assurance can be given that the Company will be able to successfully extend or renegotiate its collective bargainingagreements in the future. If the Company fails to extend or renegotiate its collective bargaining agreements, if disputes with its union arise, or if its unionizedworkers 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 could 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 on its senior management team and key sales associates and the Company’s ability to retain such keymanagement personnel and other key employees. Senior management has specific knowledge relating to the Company and the industry that would bedifficult to replace. In particular, the success of the Company’s acquisition of Hawaiian Telcom will depend in part on the ability of the Company to retainkey management and other key personnel of Hawaiian Telcom after the acquisition and to continue to attract such persons to the Company. The loss of keysales associates could hinder the Company’s ability to continue to benefit from long-standing relationships with customers. The Company cannot provideany assurance that it will be able to retain the current senior management team or key sales associates nor any key management personnel or other keyemployees from Hawaiian Telcom. The loss of any of these individuals could adversely affect the Company’s business, financial condition, results ofoperations and cash flows.The Company may not achieve its intended results from recent acquisitions if the Company is unable to successfully integrate the operations from theacquired companies with the Company.The Company completed the acquisition of OnX in October 2017 and Hawaiian Telcom in July 2018. The acquisitions were made with the expectation thatthey would result in various benefits, including, among other things, expanding the Company’s asset base and creating synergies and opportunities for costsavings. Achieving the anticipated benefits of the acquisition is subject to a number of uncertainties, including whether the businesses of the Company, OnXand Hawaiian Telcom can be fully integrated in an efficient and effective manner.While the Company continues to actively effectuate this integration, it is possible that the integration process could take longer than anticipated and couldresult in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards,controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the Company’s ability to achieve theanticipated benefits of the acquisitions of OnX and Hawaiian Telcom. The Company’s results of operations could also be adversely affected by any issuesattributable to an acquired company’s operations that arose or are based on events or actions that occurred prior to the closing of the acquisition. Theintegration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, thetiming of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues andcould adversely affect the Company’s future business, financial condition, operating results and prospects.17Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Company may incur expenses related to the integration of acquired operations, including OnX and Hawaiian Telcom, into the Company.The Company is incurring expenses in connection with the integration of the Company and the operations of acquired companies, in particular OnX andHawaiian Telcom. There are a number of back-office information technology systems, processes and policies that are being addressed during the integration.While the Company has assumed that a certain level of expenses will be incurred and have been incurred, there are many factors beyond their control thatcould affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult toestimate accurately. These integration expenses likely will result in the Company taking charges against earnings in the future, and the amount and timing ofsuch charges are uncertain at present.The future results of the Company will suffer if the Company does not effectively manage its expanded operations following the acquisitions of OnX andHawaiian Telcom.The size of the Company has increased significantly as a result of the acquisitions of OnX and Hawaiian Telcom. The Company’s future success depends, inpart, upon its ability to manage this expanded business, which could pose substantial challenges for management. There can be no assurances that theCompany will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements and other benefits anticipatedderiving from these acquisitions.Risks Related to our IndebtednessThe Company’s debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a materialadverse effect on its businesses and prospects generally.As of December 31, 2018, the Company and its subsidiaries had outstanding indebtedness of $1,929.8 million, on which it incurred $131.5 million of interestexpense in 2018, and had a total shareowners’ deficit of $75.0 million. In October 2017, the Company entered into a new Credit Agreement. The CreditAgreement provides for (i) a five year $200 million senior secured revolving credit facility including both a letter of credit subfacility of up to $30 millionand a swingline loan subfacility of up to $25 million (the "Revolving Credit Facility") and (ii) a seven-year $600 million senior secured term loan facility(the "Tranche B Term Loan due 2024"). At December 31, 2018, the Company and its subsidiaries had $9.1 million of borrowing availability under itsReceivables Facility and had the ability to borrow up to an additional $182.0 million under the Revolving Credit Facility, subject to compliance with certainconditions.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, therebyreducing 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 will 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 theCompany'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 itoperates;• the Company’s level of debt and shareowners’ deficit may restrict it from raising additional financing on satisfactory terms to fundworking capital, capital expenditures, strategic acquisitions, investments and alliances, and other general corporate requirements; and• the Company’s debt instruments contain limitations on the Company and require the Company to comply with specified financialratios and other restrictive covenants. Failure to comply with these covenants, if not cured or waived, could limit availability to thecash required to fund the Company's operations and general obligations and could result in the Company’s dissolution, bankruptcy,liquidation or reorganization.In addition, certain of our variable rate debt uses LIBOR as a benchmark for establishing the rate of interest and may be hedged with LIBOR-based interestrate derivatives. LIBOR is the subject of recent regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to bereplaced with a new benchmark or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but couldinclude an increase in the cost of our variable rate indebtedness.18Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The Company’s creditors and preferred stockholders have claims that are superior to claims of the holders of the Company's common stock. Accordingly, inthe event of the Company’s dissolution, bankruptcy, liquidation, or reorganization, payment is first made on the claims of creditors of the Company and itssubsidiaries, then preferred stockholders, and finally, if amounts are available, to holders of the Company's common stock.The Credit Agreement, the indenture governing the Company's notes due 2024, the indenture governing the Company's notes due 2025 and otherindebtedness 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 restrictionsaffect, 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 make 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;• consolidate, merge, or transfer all or substantially all of its assets and the assets of its subsidiaries on a consolidated basis; and• change its fiscal yearIn addition, the Company’s Credit Agreement and debt instruments include restrictive covenants that may materially limit the Company’s ability to prepaydebt and redeem preferred stock. The agreements governing the Credit Agreement also require the Company to achieve and maintain compliance withspecified financial ratios.The restrictions contained in the terms of the 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’sactivities or business plans; and• adversely affect the Company’s ability to finance its operations, strategic acquisitions, investments or alliances, other capital needs, orto 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 undersome or all of the debt agreements. During the occurrence and continuance of a default, lenders may elect to declare all outstanding borrowings, together withaccrued interest and other fees, to be immediately due and payable. Additionally, under the Credit Agreement, the lenders may elect not to provide loansunder the Revolving Credit Facility until such default is cured or waived. The Company’s debt instruments also contain cross-acceleration provisions, whichgenerally cause each instrument to be subject to early repayment of outstanding principal and related interest upon a qualifying acceleration of any otherdebt instrument. Failure to comply with these covenants, if not cured or waived, would limit the cash available to the Company required to fund operationsand its general obligations and could result in the Company’s dissolution, bankruptcy, liquidation or reorganization.The Company depends on its Revolving Credit Facility and Receivables Facility to provide for its short-term financing requirements in excess of amountsgenerated by operations, and the availability of those funds may be reduced or limited.The Company depends on the Revolving Credit Facility and its Receivables Facility to provide for short-term financing requirements in excess of amountsgenerated by operations. The Revolving Credit Facility has a maturity date of October 2022. The Receivables Facility has a termination date of May 2021,and is subject to renewal every 364 days, with the next renewal occurring in May 2019.The Company's ability to borrow under its Revolving Credit Facility is subject to the Company's compliance with covenants, including covenants requiringcompliance with specified financial ratios. Failure to satisfy these covenants would constrain or prohibit its ability to borrow under these facilities.19Table of ContentsForm 10-K Part I Cincinnati Bell Inc.As of December 31, 2018, the Company had $18.0 million of outstanding borrowings under the Revolving Credit Facility, leaving $182.0 million inadditional borrowing availability under this facility. The $200.0 million available under the Revolving Credit Facility is funded by various financialinstitutions. 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, 2018, the Company had a total borrowing capacity of $193.7 million on a maximum borrowing capacity of $225.0 million on itsReceivables Facility. At that date, there were $176.6 million of outstanding borrowings and $8.0 million of outstanding letters of credit. The availableborrowing capacity is calculated monthly based on the amount, and quality, of outstanding accounts receivable, and thus may be lower than the maximumborrowing limit. If the quality of the Company’s accounts receivables deteriorates, this will negatively impact the available capacity under this facility. As ofDecember 31, 2018, the Company had $9.1 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 arebeyond its control. The Company cannot provide assurance that its business will generate sufficient cash flow from operations, that additional sources of debtfinancing will be available, or that future borrowings will be available under its Revolving Credit Facility Credit or Receivables Facility, in each case, inamounts sufficient to enable the Company to service its indebtedness or to fund other liquidity needs. If the Company cannot service its indebtedness, it willhave to take actions such as reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, selling assets, restructuring orrefinancing indebtedness, or seeking additional equity capital, which may adversely affect its shareholders, debt holders and customers. The Company maynot be able to negotiate remedies on commercially reasonable terms, or at all. In addition, the terms of existing or future debt instruments may restrict theCompany 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 theCompany's material subsidiaries are subject to regulatory authority which may potentially limit the ability of such subsidiaries to distribute funds or assets. Ifany of the Company's subsidiaries were to be prohibited from paying dividends or making distributions, the Company may not be able to make the scheduledinterest and principal repayments on its debt. This failure would have a material adverse effect on the Company's liquidity and the trading price of theCompany's common stock, preferred stock, and debt instruments, which could result in its dissolution, bankruptcy, liquidation or reorganization.Other Risk FactorsThe 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 riskfactors described in this report and other factors beyond the Company's control, such as volatility in equity markets and fluctuations in the valuation ofcompanies perceived by investors to be comparable to the Company.Equity markets have experienced price and volume fluctuations that have affected the Company's stock price and the market prices of equity securities ofmany other companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, may negatively affectthe market price of the Company's stock.Companies that have experienced volatility in the market price of common shares have periodically been subject to securities class action litigation. TheCompany may be the target of this type of litigation in the future. Securities litigation could result in substantial costs and/or damages and divertmanagement's attention from other business concerns.20Table of ContentsForm 10-K Part I Cincinnati Bell Inc.The uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business and financialcondition.The uncertain economic environment could have an adverse effect on the Company's business and financial liquidity. The Company's primary source of cashis customer collections. If economic conditions were to worsen, some customers may cancel services or have difficulty 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 ofoperations. Furthermore, the sales cycle would be further lengthened if business customers slow spending or delay decision-making on the Company'sproducts and services, which would adversely affect revenues. If competitors lower prices as a result of economic conditions, the Company would alsoexperience 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.The Company’s future cash flows could be adversely affected if it is unable to fully realize its deferred tax assets.As of December 31, 2018, the Company had deferred tax assets of $244.2 million, which are primarily composed of deferred tax assets associated with U.S.federal net operating loss carryforwards of $124.4 million, state and local net operating loss carryforwards of $58.3 million, and foreign net operating losscarryforwards of $1.3 million. The Company has recorded a valuation allowance against deferred tax assets related to certain state, local and foreign netoperating losses and other deferred tax assets due to the uncertainty of the Company’s ability to utilize the assets within the statutory expiration period. Inaddition the Company has recorded a valuation allowance against the portion of interest expense that is not currently deductible for domestic federal incometax due to the The Tax Cuts and Jobs Act of 2017 (the "Tax Act") effective December 31, 2017. The use of the Company’s deferred tax assets enables it tosatisfy current and future tax liabilities without the use of the Company’s cash resources. If the Company is unable for any reason to generate sufficienttaxable 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 orsimilar state statutes, the Company’s net income, shareowners’ deficit and future cash flows would be adversely affected.Changes in tax laws and regulations, and actions by federal, state and local taxing authorities related to the interpretation and application of such taxlaws and regulations, could have a negative impact on the Company's financial results and cash flows.The Company calculates, collects and remits various federal, state, and local taxes, surcharges, and regulatory fees to numerous federal, state and localgovernmental authorities, including but not limited to federal Universal Service Fund contributions, sales tax, regulatory fees and use tax on purchases ofgoods and services used in our business. Tax laws are subject to change, and new interpretations of how various statutes and regulations should be adhered toare frequently issued. In many cases, the application of tax laws are uncertain and subject to differing interpretations, especially when evaluated against newtechnologies and telecommunications services, such as broadband internet access and cloud services. In the event that we have incorrectly calculated,assessed, or remitted amounts due to governmental authorities, or if revenue and taxing authorities disagree with positions we have taken, we could besubject to additional taxes, fines, penalties, or other adverse actions. In the event that federal, state, or local municipalities were to significantly increase taxeson goods and services used to construct and maintain our network, operations, or provision of services, or seek to impose new taxes, there could be a materialadverse impact on financial results.The Company's interpretation of the Tax Cuts and Jobs Act of 2017 could change, and have an adverse impact on financial results.The Tax Act signed into law on December 22, 2017 has resulted in significant changes to the U.S. Corporate income tax system. These changes include afederal statutory rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and elimination of thecorporate alternative minimum tax. The final impact of the Tax Act may differ from what the Company has currently recorded, possibly materially, due to,among other things, changes in interpretations of the Tax Act, any legislative action taken to address questions that arise because of the Tax Act, any changesin accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to amounts recorded to calculate thetransition impacts.21Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans could negatively impact shareowners’ deficitand liquidity.The Company sponsors noncontributory defined benefit pension plans for eligible management employees, non-management employees and certain formerexecutives. The Company also provides healthcare and group life insurance benefits for eligible retirees. The Company’s Consolidated Balance Sheetsindirectly reflect the value of all plan assets and benefit obligations under these plans. The accounting for employee benefit plans is complex, as is theprocess 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 theCompany’s net income. In addition, the Company’s benefit obligations could increase significantly if it needs to unfavorably revise the assumptions used tocalculate the obligations. These adverse changes could have a further significant negative impact on the Company’s shareowners’ deficit. Additionally, theCompany’s postretirement costs are adversely affected by increases in medical and prescription drug costs. Further, if there are adverse changes to plan assetsor if medical and prescription drug costs increase significantly, the Company could be required to contribute additional material amounts of cash to theplans, or to 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 licensingexpenses 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 growingout of third-party patents or other intellectual property claims could be costly and time-consuming and would divert the Company’s management and keypersonnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increases theserisks. Resolution of claims of intellectual property infringement might also require the Company to enter into costly license agreements. Likewise, theCompany may not be able to obtain license agreements on acceptable terms. The Company also may be subject to significant damages or injunctions againstthe development and sale of certain of its products or services. Further, the Company often relies on licenses of third-party intellectual property for itsbusinesses. The Company cannot ensure these licenses will be available in the future on favorable terms or at all.Third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffercompetitive injury.The Company’s success significantly depends on the competitive advantage it gains from its proprietary technology and other valuable intellectual propertyassets. The Company relies on a combination of patents, copyrights, trademarks and trade secrets protections, confidentiality provisions and licensingarrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce its intellectual property rights, itscompetitive 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 todetect third-party infringements and its competitive position may be harmed before the Company does so. In addition, competitors may design around theCompany’s technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to other companies, allowing them tocompete with the Company using that intellectual property.The Company could be subject to a significant amount of litigation, which could require the Company to pay significant damages or settlements.The industry that the Company operates in faces a substantial risk of litigation, including, from time to time, patent infringement lawsuits, antitrust classactions, securities class actions, wage and hour class actions, personal injury claims and lawsuits relating to our advertising, sales, billing and collectionprocesses. We may incur significant expenses in defending these lawsuits. In addition, we may be required to pay significant awards and settlements.22Table of ContentsForm 10-K Part I Cincinnati 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 thosegoverning the management and disposal of, and exposure to, hazardous materials and the cleanup of contamination, and the emission of radio frequencies.While the Company believes its operations are in substantial compliance with environmental, health, and human safety laws and regulations, as an owner oroperator of property, and in connection with the current and historical use of hazardous materials and other operations at its sites, the Company could incursignificant costs resulting from complying with or violations of such laws, the imposition of cleanup obligations and third-party suits. For instance, a numberof the Company’s sites formerly contained underground storage tanks for the storage of used oil and fuel for back-up generators and vehicles.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAs of December 31, 2018, the Company owned or maintained properties throughout the U.S. and Canada. Our headquarters is located in Cincinnati, Ohiowhere we lease approximately 240,000 square feet for executive, administrative and business offices for the Company. In addition to the space in Cincinnati,we own a building with approximately 465,000 square feet of office space in Honolulu, Hawaii for the Hawaiian Telcom operations. We lease office space inmultiple locations in Canada for operations to support our Canadian operations.Our properties include copper and fiber warehouses and associated equipment in each of our local operating markets. Each of the Company’s subsidiariesmaintains 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 Cincinnati Entertainment and Communications operations, the Company owns substantially all of the central office switching stations andthe land upon which they are situated. Some business and administrative offices are located in leased facilities, which are recorded as operating leases. TheCompany’s network assets include a fiber network warehouse, internet protocol and circuit switches and integrated access terminal equipment. In addition, asof year-end, we lease nine Company-run retail locations.With regard to its Hawaii Entertainment and Communications operations, the Company has properties consisting of both owned and leased properties,including our administrative facilities and facilities for call centers, customer service sites for the television business, switching equipment, fiber opticnetworks, cable head‑end equipment, coaxial distribution networks, routers and servers used in our telecommunications business. Leased properties arerecorded as operating leases.With regard to the IT Services and Hardware operations, the majority of business and administrative offices are located in leased facilities, which are recordedas either capital or operating leases depending on respective terms.For additional information about the Company’s properties, see Note 6 to the consolidated financial statements.Item 3. Legal ProceedingsThe Company is subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course ofbusiness. We believe that the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by generally acceptedaccounting principles ("GAAP"), are adequate in light of those contingencies that are probable and able to be estimated. However, there can be no assurancesthat the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply withapplicable laws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred inexcess of those amounts provided as of December 31, 2018, cannot be reasonably determined.Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes theeventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results ofoperations or cash flows.Item 4. Mine Safety DisclosuresNot applicable.23Table of ContentsForm 10-K Part II Cincinnati Bell Inc.PART IIItem 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities(a) Market InformationThe Company’s common shares (symbol: CBB) are listed on the New York Stock Exchange. The Company filed an amendment to its Amended and RestatedArticles 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.(b) HoldersAs of January 31, 2019, the Company had 4,971 holders of record of the 50,337,778 common shares outstanding and 155,250 shares outstanding of the 63/4% Cumulative Convertible Preferred Stock.(c) DividendsIn both 2018 and 2017, the Company paid $10.4 million of dividends on its 6 3/4% Cumulative Convertible Preferred Stock. In 2018 and 2017, the Companydid not pay any dividends on its common stock and does not intend to pay any common stock dividends in 2019.(d) Stock PerformanceThe following graph compares Cincinnati Bell Inc.'s cumulative five-year total shareholder return on common stock with the cumulative total returns of theS&P 500 index and the S&P Integrated Telecommunication Services index. The graph tracks the performance of a $100 investment in our common stock andin each index (with the reinvestment of all dividends) from December 31, 2013 to December 31, 2018. Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Cincinnati Bell Inc.$100$90$101$126$117$44S&P 500$100$114$115$129$157$150S&P Integrated Telecommunication Services$100$102$105$131$130$121Copyright © 2019 Standard & Poor's, a division of S&P Global. All rights reserved.24Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(e) Issuer Purchases of Equity SecuritiesThe following table provides information regarding the Company’s purchases of its common stock during the quarter ended December 31, 2018:Period Total Number of Shares(or Units) Purchased Average Price Paid perShare (or Unit) Total Number of Shares(or Units) Purchased asPart of PubliclyAnnounced Plans orPrograms * Approximate Dollar Valueof Shares that May Yet BePurchased Under PubliclyAnnounced Plans orPrograms (in millions)*10/1/2018 - 12/31/2018 — $— — $124.4*In February 2010, the Board of Directors approved an additional plan for the repurchase of the Company’s outstanding common stock inan amount up to $150.0 million. This repurchase plan does not have a stated maturity.25Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 6. Selected Financial DataWe ceased operations of our wireless business as of March 2015. As a result, wireless financial results during 2015 and 2014 are presented as discontinuedoperations.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 basisfor 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 followingtable have been recast to present the impact of ASU 2015-03.ASU 2016-09 Compensation - Stock Compensation was adopted effective January 1, 2017. As a result, cash flows related to excess tax benefits werereclassed from "Cash flows from operating activities" to "Cash flows from financing activities." All periods presented in the following table have beenrecast to present the impact of ASU 2016-09.ASU 2014-09 Revenue from Contracts with Customers, was adopted effective January 1, 2018. As a result, there was a change to the treatment of hardwarerevenue in the Infrastructure Solutions category from recording hardware revenue as a principal (gross) to recording revenue as an agent (net), and as suchrecorded hardware sales net of the related cost of products. Additionally, contract assets related to fulfillment costs and costs of acquisition were recordedto "Other noncurrent assets." The periods ending in 2018, 2017 and 2016 have been recast to present the impact of ASU 2014-09, respectively. Financialdata for the periods ending in 2015 and 2014, have not been adjusted to reflect the adoption of ASU 2014-09. See Note 3 of Notes to ConsolidatedFinancial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our adoption of AccountingStandards Codification ("ASC") 606. ASU 2017-07 Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, was adopted effective January 1, 2018.As a result, expenses related to other components of net benefit cost were reclassed from, "Cost of Services," "Selling, general and administrative" and"Other operating costs and losses" to a new line below Operating income, "Other components of pension and postretirement benefit plans expense." Allperiods presented in the following table have been recast to present the impact of ASU 2017-07.26Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The selected financial data should be read in conjunction with the consolidated financial statements and "Management’s Discussion and Analysis ofFinancial Condition and Results of Operations" included in this document.(dollars in millions, except per share amounts) 2018 (f) 2017 (g) 2016 2015 2014Operating Data Revenue $1,378.2 $1,065.7 $1,017.6 $1,167.8 $1,161.5Cost of services and products, selling, general and administrative,depreciation and amortization expense 1,264.1 959.1 905.8 1,023.4 976.4Other operating costs and losses (a) 30.8 51.2 13.0 8.2 5.1Operating income 83.3 55.4 98.8 136.2 180.0Interest expense 131.5 85.2 75.7 103.1 145.9Loss on extinguishment of debt, net 1.3 3.2 19.0 20.9 19.6Loss from CyrusOne investment (b) — — — 5.1 7.0Gain on sale of CyrusOne investment — (117.7) (157.0) (449.2) (192.8)(Loss) income from continuing operations (60.4) 66.7 164.4 290.8 117.7Income (loss) from discontinued operations, net of tax — — 0.3 62.9 (42.1)Net (loss) income (69.8) 40.0 103.0 353.7 75.6Basic (loss) earnings per common share from continuing operations $(1.73) $0.70 $2.19 $6.69 $2.57Basic earnings (loss) per common share from discontinued operations $— $— $0.01 $1.50 $(1.01)Basic (loss) earnings per common share $(1.73) $0.70 $2.20 $8.19 $1.56Diluted (loss) earnings per common share from continuing operations $(1.73) $0.70 $2.19 $6.68 $2.56Diluted earnings (loss) per common share from discontinued operations $— $— $0.01 $1.49 $(1.00)Diluted (loss) earnings per common share $(1.73) $0.70 $2.20 $8.17 $1.56Dividends declared per common share $— $— $— $— $—Weighted-average common shares outstanding Basic 46.3 42.2 42.0 41.9 41.7 Diluted 46.3 42.4 42.1 42.0 41.9 Financial Position Property, plant and equipment, net $1,844.0 $1,129.0 $1,085.5 $975.5 $815.4Total assets (c) 2,730.2 2,187.6 1,561.3 1,446.4 1,807.0Total long-term obligations (d) 2,263.5 1,948.2 1,429.8 1,485.4 2,044.7 Other Data Cash flow provided by operating activities $214.7 $203.4 $173.1 $111.0 $175.3Cash flow (used in) provided by investing activities (437.4) (236.8) (95.5) 383.2 392.6Cash flow (used in) provided by financing activities (158.1) 420.2 (75.3) (544.7) (514.6)Capital expenditures (e) (220.6) (210.5) (286.4) (283.6) (182.3)(a)Other operating costs and losses consist of restructuring and severance related charges (reversals), loss (gain) on disposal of assets - net,impairment of assets and transaction and integration costs.27Table of ContentsForm 10-K Part II Cincinnati Bell Inc.(b)Losses represent our equity method share of CyrusOne's losses from the date of the IPO through December 31, 2015. Effective January 1, 2016, ourownership in CyrusOne was no longer accounted for using the equity method. (c)Total assets include current and noncurrent assets from discontinued operations. (d)Total long-term obligations are comprised of long-term debt, less current portion, deferred income tax liabilities, pension and postretirementbenefit obligations, pole license agreement obligations, other noncurrent liabilities and noncurrent liabilities from discontinued operations. SeeNotes 1, 8, 9 and 11 to the consolidated financial statements for discussions related to 2018 and 2017. (e)Capital expenditures include capital expenditures from discontinued operations. (f)Operating data includes Hawaiian Telcom results beginning with the date of acquisition in July 2018. (g)Operating data includes OnX results beginning with the date of acquisition in October 2017.28Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis Annual Report on Form 10-K and the documents incorporated by reference herein contain forward-looking statements regarding future events andresults that are subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements ofhistorical facts, are statements that could be deemed forward-looking statements. See "Private Securities Litigation Reform Act of 1995 Safe HarborCautionary Statement" for further information on forward-looking statements.29Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Executive SummarySegment results described in the Executive Summary and Consolidated Results of Operations section are net of intercompany and intersegmenteliminations.On July 2, 2018, the Company acquired Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom"). The Unified Communications as a Service ("UCaaS"), hardware,and enterprise long distance products and services provided by the Hawaiian Telcom business are included within the IT Services and Hardware Segment.The Entertainment and Communications segment includes products delivered by Hawaiian Telcom such as high-speed internet access, digital subscriberlines, ethernet, dedicated internet access, IRU, video, voice lines, consumer long distance and digital trunking.Consolidated revenue totaled $1,378.2 million for the year ended December 31, 2018 an increase of $312.5 million compared to the same period in 2017,primarily due to the acquisitions completed in 2018 and 2017. The acquisition of Hawaiian Telcom contributed $175.0 million of revenue in 2018. Theacquisition of OnX Holdings LLC ("OnX") completed in the fourth quarter of 2017 contributed $199.0 million of revenue in 2018, an increase ofapproximately $146.0 million as compared to 2017. In addition to revenue growth from these acquisitions, the increase in revenue due to the demand for ourfiber offerings was offset by a decline in Legacy revenue. Fioptics revenue in Cincinnati increased $31.3 million for 2018 compared to the same period in2017. Legacy revenue in Cincinnati decreased $41.4 million for 2018, compared to the same period in 2017.The increases in Cost of services and products, Selling, general and administrative, and Depreciation and amortization expenses are primarily related to theacquisitions of OnX and Hawaiian Telcom.Operating income in 2018 was $83.3 million, up $27.9 million from the prior year primarily due to a reduction in restructuring and severance related chargesof $24.4 million as compared to 2017.Loss before income taxes totaled $60.4 million for the year ended December 31, 2018, down $127.1 million from 2017. The loss before income taxes isprimarily due to increased interest expense of $46.3 million due to additional debt acquired to fund the acquisitions of OnX in October 2017 and HawaiianTelcom in July 2018. In addition, the Company recognized a Gain on Sale of CyrusOne investment of $117.7 million in 2017.30Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Consolidated Results of OperationsRevenue $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Revenue Entertainment and Communications$831.1 $684.9 $146.2 21% $670.3 $14.6 2%IT Services and Hardware547.1 380.8 166.3 44% 347.3 33.5 10%Total revenue$1,378.2 $1,065.7 $312.5 29% $1,017.6 $48.1 5%Entertainment and Communications revenue increased in 2018 compared to 2017 primarily due to the acquisition of Hawaiian Telcom, which contributed$155.1 million in 2018. In Cincinnati, the growth in Fioptics partially mitigated the decline in Legacy revenue. Revenue increased $14.6 million in 2017compared to 2016 primarily due to growth in Fioptics in Cincinnati. Fioptics revenue in Cincinnati totaled $341.2 million, $309.9 million and $254.1million for the years ended December 31, 2018, 2017 and 2016, respectively, up 10% in 2018 and up 22% in 2017 from the comparable prior year.IT Services and Hardware revenue increased in 2018 compared to 2017 primarily due to the acquisition of OnX that closed in the fourth quarter of 2017, andto a lesser extent, the acquisition of Hawaiian Telcom. Revenue increased $33.5 million in 2017 compared to 2016 due to the acquisition of OnX in thefourth quarter of 2017, which was offset by declines in revenue related to decreased billable headcount as a key customer pursued cost saving initiatives byin-sourcing IT professionals.Operating costs $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Cost of services and products Entertainment and Communications$384.1 $304.6 $79.5 26% $291.2 $13.4 5%IT Services and Hardware314.6 226.4 88.2 39% 216.1 10.3 5%Total cost of services and products$698.7 $531.0 $167.7 32% $507.3 $23.7 5%Entertainment and Communications costs increased in 2018 compared to 2017 as a result of the acquisition of Hawaiian Telcom as well as increases in videocontent costs due to higher rates charged by our content providers. Increases were partially offset by lower payroll and benefits costs related to Cincinnati-based operations. Lower payroll and benefits costs were related to headcount reductions made during restructuring initiatives that were executed in 2017.Costs increased in 2017 compared to 2016 primarily due to increased programming costs associated with the increased video subscriber base in 2017compared to 2016 as well as rising programming rates.IT Services and Hardware costs increased in 2018 compared to the prior year comparable period primarily due to expense associated with headcount in placefor twelve months in 2018 versus three months in 2017 as a result of the acquisition of OnX, and to a lesser extent, the acquisition of Hawaiian Telcom. Costsincreased in 2017 compared to 2016 due to the acquisition of OnX and primarily included payroll and contractor expense supporting Consulting Services.31Table of ContentsForm 10-K Part II Cincinnati Bell Inc. $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Selling, general, and administrative Entertainment and Communications$148.0 $120.1 $27.9 23 % $125.4 $(5.3) (4)%IT Services and Hardware151.1 97.7 53.4 55 % 73.2 24.5 33 %Corporate14.3 17.3 (3.0) (17)% 17.7 (0.4) (2)%Total selling, general and administrative$313.4 $235.1 $78.3 33 % $216.3 $18.8 9 %Entertainment and Communications selling, general, and administrative ("SG&A") expenses were up in 2018 compared to 2017 primarily due to theacquisition of Hawaiian Telcom. Hawaiian Telcom contributed SG&A expense of $32.9 million in 2018. This increase was partially offset by lower payrollcosts in Cincinnati that are a result of headcount reductions from restructuring initiatives that were executed in 2017 and 2016. Entertainment andCommunications SG&A expenses were down in 2017 compared to 2016 due to lower payroll costs related to reduced headcount in addition to reductions inbad debt, reflecting changes to our credit policies.IT Services and Hardware SG&A costs were up in 2018 as compared to 2017 primarily due to expense associated with headcount in place for twelve monthsin 2018 versus three months in 2017 as a result of the acquisition of OnX. The acquisition of OnX was also the reason for the increase in SG&A expense in2017 as compared to 2016.Corporate SG&A costs decreased in 2018 driven largely by lower payroll related costs. In 2018, certain functions previously allocated to Corporate werebetter aligned with the segment these functions support and expenses allocated to those segments. $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Depreciation and amortization expense Entertainment and Communications$210.8 $163.7 $47.1 29% $159.1 $4.6 3%IT Services and Hardware41.0 29.1 11.9 41% 23.0 6.1 27%Corporate0.2 0.2 — 0% 0.1 0.1 100%Total depreciation and amortization expense$252.0 $193.0 $59.0 31% $182.2 $10.8 6%The increase in Entertainment and Communications depreciation and amortization expense in 2018 is due to the acquisition of Hawaiian Telcom and therelated increase in intangibles and property, plant and equipment. The increase in 2017 versus the prior year comparable period is a result of expanding ourfiber-based network.The increase in IT Services and Hardware depreciation and amortization expense in 2018 and 2017 versus the prior year comparable periods is primarilyrelated to the amortization of intangible assets acquired as part of the SunTel Services LLC ("SunTel") and OnX acquisitions, as well as depreciation expenserelated to acquired property, plant and equipment.32Table of ContentsForm 10-K Part II Cincinnati Bell Inc. $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Restructuring and severance related charges Entertainment and Communications$3.1 $27.6 $(24.5) (89)% $7.7 $19.9 n/mIT Services and Hardware4.9 5.1 (0.2) (4)% 3.3 1.8 55%Corporate0.3 — 0.3 n/m 0.9 (0.9) n/mTotal restructuring and severance related charges$8.3 $32.7 $(24.4) (75)% $11.9 $20.8 n/mRestructuring and severance charges recorded in 2018 are primarily related to continued efforts to realize synergies following the acquisitions of HawaiianTelcom and OnX. In the fourth quarter of 2018, there was a voluntary severance program ("VSP") for certain management employees in the Entertainment andCommunications segment, as well as Corporate. In the second quarter of 2018, the Company incurred severance costs associated with initiatives to reducecosts in the IT Services and Hardware segment. In addition, a restructuring charge associated with lease abandonment of $0.8 million was recorded in thesecond quarter of 2018 related to an office space that will no longer be utilized.In 2017, restructuring and severance related charges were associated with the Company-initiated reorganizations within both segments of the business thatresulted in headcount reductions. The reorganizations were intended to more appropriately align the Company for future growth and reduce field andnetwork costs within our legacy copper network.In 2016, restructuring and severance related charges were associated with headcount reductions that resulted due to increased in-sourcing of IT professionalsby a significant customer, as well as initiatives to reduce costs associated with our legacy copper network group, including a voluntary severance program forcertain management employees. Other operating costs $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs. 2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs.2016Other operating costs Transaction and integration costs$22.5 $18.5 $4.0 22% $— $18.5 n/mLoss on sale of disposal of assets, net— — — n/m 1.1 (1.1) n/mTotal other operating costs$22.5 $18.5 $4.0 22% $1.1 $17.4 n/mTransaction and integration costs incurred in 2018, recorded as a Corporate expense, are due to the acquisition of Hawaiian Telcom that closed in the thirdquarter of 2018. Transaction and integration costs incurred in 2017 are due to the acquisition of SunTel in the first quarter of 2017, the acquisition of OnXthat closed in the fourth quarter of 2017, and costs incurred leading up to the acquisition of Hawaiian Telcom.33Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Non-operating expenses (income) $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Non-operating costs Interest expense$131.5 $85.2 $46.3 54 % $75.7 $9.5 13 %Loss on extinguishment of debt, net1.3 3.2 (1.9) (59)% 19.0 (15.8) (83)%Other components of pension and postretirementbenefit plans expense12.5 16.6 (4.1) (25)% 4.3 12.3 n/mGain on Sale of CyrusOne investment— (117.7) 117.7 n/m (157.0) 39.3 (25)%Other (income) expense, net(1.6) 1.4 (3.0) n/m (7.6) 9.0 n/mIncome tax expense9.4 26.7 (17.3) (65)% 61.7 (35.0) (57)%Income from discontinued operations, net of tax— — — n/m 0.3 (0.3) n/mInterest expense increased in 2018 and 2017 compared to comparable periods in the prior year due to financing transactions that took place during the fourthquarter of 2017. The Company entered into the $600.0 million Tranche B Term Loan due 2024, issued $350.0 million 8% Senior Notes, and repaid theremaining $315.8 million Tranche B Term Loan due 2020 outstanding under its previous Corporate Credit Agreement with the proceeds from the $600.0million Tranche B Term Loan due 2024. In addition, the increase in interest expense in 2017 compared to 2016 is attributable to a full year of expense on the7.0% Senior Notes due 2024 that were issued in the third quarter of 2016.Other components of pension and postretirement benefit plans expense was lower in 2018 compared to 2017 primarily due to a $4.0 million pensionsettlement charge for the Cincinnati Bell Pension Plan ("CBPP") in 2017 as a result of the lump sum payments to CBPP plan participants exceeding the sumof the service cost and interest cost component of net pension cost for the year. Expense was higher in 2017 compared to 2016 primarily due to the pensionsettlement charge as well as amortization of the prior service benefit related to the postretirement plans producing a smaller benefit in 2017.In 2017, the Company recognized a gain of $117.7 million on the sale of 2.8 million CyrusOne common shares. In 2016, the Company recognized a gain of$157.0 million on the sale of 4.1 million CyrusOne common shares.Dividends declared by CyrusOne in 2016 totaled $6.4 million and were included in Other (income) expense, net.Income tax expense fluctuates based on changes in income from continuing operations before income taxes, adjusted for non-deductible expenses, as well asrate changes. In periods without tax law changes, the Company expects its effective tax rate to exceed statutory rates due to non-deductible expenses. Non-deductible expenses related to the acquisitions of Hawaiian Telcom and OnX were incurred during 2018 and 2017 in the amount of $9.0 million and $10.4million, respectively. In addition, changes in the valuation allowance impact income tax expense. In 2018 the Company recorded a valuation against non-deductible interest in the amount of $15.3 million and increased valuation allowances on state NOLs by $5.9 million. The Company uses federal and state net operating loss carryforwards to defray payment of federal and state tax liabilities. The Company also had significantAlternative Minimum Tax (“AMT”) refundable tax credit carryforwards available to offset future income tax liabilities. The Company made an election onthe 2016 income tax return to claim the available portion of these credits in lieu of claiming bonus depreciation and as a result had cash income tax refunds(net of payments) totaling $12.9M in 2017. The same election was made on the 2017 income tax return and as a result, the Company had cash income taxrefunds (net of payments), totaling $13.8 million in 2018.34Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Discussion of Operating Segment ResultsThe Company manages its business based upon product and service offerings. For the years ended December 31, 2018, 2017, and 2016, we operated twobusiness segments: Entertainment and Communications and IT Services and Hardware.Certain corporate administrative expenses have been allocated to our business segments based upon the nature of the expense and the relative size of thesegment. Intercompany transactions between segments have been eliminated.35Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and CommunicationsThe Entertainment and Communications segment provides products and services that can be categorized as either Fioptics in Cincinnati or Consumer/SMBFiber in Hawaii (collectively, "Consumer/SMB Fiber"), Enterprise Fiber or Legacy. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of theCompany, is the incumbent local exchange carrier ("ILEC") for a geography that covers a radius of approximately 25 miles around Cincinnati, Ohio, andincludes parts of northern Kentucky and southeastern Indiana. CBT has operated in this territory for over 145 years. Voice and data services in the EnterpriseFiber and Legacy categories that are delivered beyond the Company's ILEC territory, particularly in Dayton and Mason, Ohio, are provided through theoperations of Cincinnati Bell Extended Territories LLC ("CBET"), a subsidiary of CBT. On July 2, 2018, the Company acquired Hawaiian Telcom. HawaiianTelcom is the ILEC for the State of Hawaii and the largest full service provider of communications services and products in the state. Originally incorporatedin Hawaii in 1883 as Mutual Telephone Company, Hawaiian Telcom has a strong heritage of over 135 years as Hawaii’s communications carrier. Its servicesare offered on all of Hawaii’s major islands, except its video service, which currently is only available on the island of Oahu.Consumer/SMB Fiber products include high-speed internet access, voice lines and video. The Company is able to deliver speeds of up to 30 megabits ormore to approximately 75% of Greater Cincinnati and to approximately 65% of the island of Oahu.Enterprise Fiber products include metro-ethernet, dedicated internet access, wavelength, indefeasible right of use ("IRU") contracts, and small cell. Asenterprise customers migrate from legacy products and copper-based technology, our metro-ethernet product becomes the preferred method of transport dueto its ability to support multiple applications on a single physical connection.Legacy products include traditional voice lines, consumer long distance, switched access, digital trunking, DSL, DS0, DS1, DS3 and other value-addedservices such as caller identification, voicemail, call waiting and call return. $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs. 2017 2018 vs. 2017 2016 2017 vs. 2016 2017 vs. 2016Revenue: Data$402.6 $344.5 $58.1 17 % $333.0 $11.5 3 %Video183.3 148.9 34.4 23 % 125.6 $23.3 19 %Voice244.9 199.0 45.9 23 % 217.9 $(18.9) (9)%Other22.6 13.7 8.9 65 % 14.8 $(1.1) (7)%Total Revenue853.4 706.1 147.3 21 % 691.3 $14.8 2 %Operating costs and expenses: Cost of services and products388.2 308.6 79.6 26 % 298.2 $10.4 3 %Selling, general and administrative148.0 120.1 27.9 23 % 125.4 $(5.3) (4)%Depreciation and amortization210.8 163.7 47.1 29 % 159.1 $4.6 3 %Restructuring and severance charges3.1 27.6 (24.5) (89)% 7.7 $19.9 n/mOther— — — n/m 0.8 $(0.8) n/mTotal operating costs and expenses750.1 620.0 130.1 21 % 591.2 28.8 5 %Operating income$103.3 $86.1 $17.2 20 % $100.1 $(14.0) (14)%Operating margin12.1% 12.2% (6.5) pts 14.5% 1.3 ptsCapital expenditures$194.0 $186.3 $7.7 4 % $260.8 $(74.5) (29)%36Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continued Change % Change Change % ChangeMetrics information (in thousands):2018 2017 2018 vs. 2017 2018 vs. 2017 2016 2017 vs. 2016 2017 vs. 2016Cincinnati Fioptics Data Internet FTTP*201.5 179.6 21.9 12 % 151.8 27.8 18 %Internet FTTN*37.5 47.0 (9.5) (20)% 45.8 1.2 3 %Total Fioptics Internet239.0 226.6 12.4 5 % 197.6 29.0 15 %Video Video FTTP115.0 116.5 (1.5) (1)% 108.0 8.5 8 %Video FTTN24.9 30.0 (5.1) (17)% 29.6 0.4 1 %Total Fioptics Video139.9 146.5 (6.6) (5)% 137.6 8.9 6 %Voice Fioptics Voice Lines107.6 105.9 1.7 2 % 96.2 9.7 10 %Fioptics Units Passed Units passed FTTP472.3 431.3 41.0 10 % 392.2 39.1 10 %Units passed FTTN138.7 140.9 (2.2) (2)% 141.2 (0.3) —Total Fioptics units passed611.0 572.2 38.8 7 % 533.4 38.8 7 % Enterprise Fiber Data Ethernet Bandwidth (Gb)4,565 3,919 646 16 % 3,368 551 16 % Legacy Data DSL72.0 82.1 (10.1) (12)% 105.6 (23.5) (22)%Voice Legacy Voice Lines226.2 262.0 (35.8) (14)% 308.2 (46.2) (15)% *Fiber to the Premise (FTTP), Fiber to the Node (FTTN) 37Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continued Year Ended December 31,Metrics information (in thousands):2018Hawaii Consumer / SMB Fiber Data Internet FTTP*51.6Internet FTTN*14.3Total Consumer / SMB Fiber Internet65.9Video Video FTTP33.8Video FTTN15.0Total Consumer / SMB Fiber Video48.8Voice Consumer / SMB Fiber Voice Lines30.3Consumer / SMB Fiber Units Passed ** Units passed FTTP167.0Units passed FTTN73.5Total Consumer / SMB Fiber units passed240.5 Enterprise Fiber Data Ethernet Bandwidth (Gb)2,091 Legacy Data DSL48.7Voice Legacy Voice Lines197.8 *Fiber to the Premise (FTTP), Fiber to the Node (FTTN)** Includes units passed for both consumer and business on Oahu and neighbor islands.38Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continued Twelve Months Ended December 31, 2018 2017 2016 Cincinnati Hawaii Total Cincinnati Hawaii Total Cincinnati Hawaii Total Revenue Consumer / SMB Fiber* Data$142.5 $13.5 $156.0 $126.3 $— $126.3 $99.4 $— $99.4 Video160.1 23.2 183.3 148.9 — 148.9 125.6 — 125.6 Voice37.4 5.4 42.8 33.6 — 33.6 28.4 — 28.4 Other1.2 0.2 1.4 1.1 — 1.1 0.7 — 0.7 Total Consumer / SMBFiber341.2 42.3 383.5 309.9 — 309.9254.1—— 254.1 Enterprise Fiber Data84.3 17.7 102.0 86.1 — 86.1 78.2 — 78.2 Legacy Data111.8 32.8 144.6 132.1 — 132.1 155.4 — 155.4 Voice143.4 58.7 202.1 165.4 — 165.4 189.5 — 189.5 Other13.5 7.7 21.2 12.6 — 12.6 14.1 — 14.1 Total Legacy268.7 99.2 367.9 310.1 — 310.1359.0—— 359.0Total Entertainment andCommunications revenue$694.2 $159.2 $853.4 $706.1 $— $706.1$691.3$— $691.3 * Represents Fioptics in Cincinnati. Cincinnati Fioptics and Hawaii Consumer/SMB Fiber (collectively, "Consumer/SMB Fiber")Consumer/SMB Fiber revenue increased by $73.6 million in 2018 compared to the same period in 2017 primarily due to revenue contributed by HawaiianTelcom of $42.3 million. Hawaiian Telcom adds 48,800 video subscribers, 65,900 internet subscribers and 30,300 voice subscribers to the existing base ofsubscribers. The remaining revenue increase is due to increases in the subscriber base for internet and voice, as well as rate favorability across all products inCincinnati. The internet subscriber base in Cincinnati increased by 5% and the voice subscriber base increased by 2%. The video subscriber base decreasedby 5%; however, rate increases mitigated the impact of this decline on revenue. The Average Revenue Per User ("ARPU") on a year to date basis increased forinternet, voice, and video by 3%, 6% and 6%, respectively, compared to the prior year. ARPU increases are related to price increases for internet, voice, andvideo, as well as the change in the mix of subscribers for video.Consumer/SMB Fiber revenue increased in 2017 compared to 2016 due to both rate and volume favorability in Cincinnati across all products. Our Fiopticsinternet subscriber base increased by 15% and ARPU was up 4% compared to 2016. Fioptics video subscribers increased 6% in 2017 in addition to a 5%increase in ARPU. Fioptics voice subscribers increased by 10% in 2017 and ARPU increased 1%.Enterprise FiberEnterprise Fiber revenue increased year over year primarily due to incremental revenue of $17.7 million from Hawaiian Telcom, which includes revenue fromthe SEA-US cable, metro-ethernet and dedicated internet access. In addition, revenue increased due to enterprise customers migrating from legacy productofferings to higher bandwidth fiber solutions, as evidenced by the 16% increase in Ethernet Bandwidth in Cincinnati in both 2018 and 2017 compared to thecomparable period in the prior years. The increase in revenue in 2018 contributed by Hawaiian Telcom and migration of customers was partially offset due toa one-time project that was completed in the second quarter of 2017 in the amount of $5.4 million. The one-time project completed in 2017 combined withenterprise customers migrating to higher bandwidth fiber solutions both contributed to the increase of revenue in 2017 compared to 2016.39Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continuedLegacyLegacy revenue increased in 2018 compared to 2017 due to incremental revenue from Hawaiian Telcom of $99.2 million. Hawaiian Telcom adds 48,700 DSLsubscribers and 197,800 voice subscribers to the existing base of subscribers. Increased revenue generated by Hawaiian Telcom was partially offset due todeclines in both voice lines and DSL subscribers in Cincinnati. Declines in voice lines and DSL subscribers in 2018 and 2017 have contributed to thedeclining revenue in both of those years. Voice lines in Cincinnati declined 14% in 2018 compared to 2017, and 15% in 2017 compared to 2016, as thetraditional voice lines become less relevant. DSL subscribers in Cincinnati decreased by 12% in 2018 compared to 2017, and 22% in 2017 compared to2016, as subscribers demand the higher speeds that can be provided by fiber. In addition, declines in DS0, DS1, DS3 and digital trunking have contributed tothe revenue decline in both 2018 and 2017 compared to the same periods in the prior year as customers migrate away from these solutions to fiber-basedsolutions.Operating Costs and ExpensesCost of services and products increased in 2018 compared to 2017 primarily due to the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed $80.2million to cost of services and products in 2018. After considering the impact of the acquisition, costs of services and products decreased by $0.6 million.This decrease in 2018 compared to 2017 is primarily due to lower payroll costs due to reduced headcount. Payroll related costs are down due to reducedheadcount as a result of the restructuring that took place in the first quarter of 2017. Network costs are also down due to a large one-time project recognizedin the second quarter of 2017. These decreases were partially offset by higher programming costs. Higher programming costs are the result of higher ratescharged by content providers.Cost of services and products increased by $10.4 million in 2017 compared to 2016 primarily due to higher programming costs of $16.6 million. Theseincreases were the result of the growing number of Fioptics video subscribers combined with rising programming rates. Additionally, in the second quarter of2017, costs associated with a large one-time project were recognized. These increases were offset by the reversal of a $2.5 million contingent liability inwhich we received a favorable result, as well as lower payroll costs due to reduced headcount.SG&A expenses increased by $27.9 million in 2018 compared to the prior year due to the acquisition of Hawaiian Telcom. Hawaiian Telcom contributed$32.9 million of SG&A expense in 2018. The increase contributed by Hawaiian Telcom was partially offset by decreased payroll related costs as a result ofthe restructuring that took place in the first quarter of 2017. Payroll related costs were down $5.7 million in 2018 compared to 2017. SG&A expenses weredown in 2017 compared to the prior year primarily due to lower payroll related charges as well as reductions in bad debt, reflecting changes to our creditpolicies. These decreases were partially offset by $1.7 million of increased advertising costs for Fioptics during 2017.Depreciation and amortization expenses were up in 2018 compared to the prior year primarily due to the acquisition of Hawaiian Telcom, as well as the assetsplaced in service in connection with the expansion of our fiber network in Cincinnati. Hawaiian Telcom contributed $44.7 million of depreciation andamortization expense in 2018. Depreciation and amortization expenses were up in 2017 compared to the prior year primarily due to assets placed in servicein connection with the expansion of our fiber network.Restructuring and severance charges recorded in 2018 are related to a VSP for certain management employees in Cincinnati. The VSP that took place in thefourth quarter of 2018 related to the Company's continued efforts to find efficiencies that can be achieved due to the acquisition of Hawaiian Telcom.Restructuring and severance charges recorded in 2017 are related to a VSP for certain bargained employees to reduce field and network costs associated withour legacy copper network. Restructuring and severance related charges in 2016 were primarily related to a VSP to reduce costs associated with our legacycopper network.40Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continuedCapital Expenditures Twelve Months Ended December 31, 2018 Cincinnati Hawaii TotalConsumer / SMB Fiber capital expenditures * Construction$39.1 $5.1 $44.2 Installation47.8 12.4 60.2 Other12.2 1.5 13.7Total Consumer / SMB Fiber99.1 19.0 118.1 Enterprise Fiber14.9 10.2 25.1Other37.3 13.5 50.8Total Entertainment and Communications capital expenditures$151.3 $42.7 $194.0 Twelve Months Ended December 31, 2017 Cincinnati Hawaii TotalConsumer / SMB Fiber capital expenditures * Construction$53.8 $— $53.8 Installation55.1 — 55.1 Other15.7 — 15.7Total Consumer / SMB Fiber124.6 — 124.6 Enterprise Fiber19.6 — 19.6Other42.1 — 42.1Total Entertainment and Communications capital expenditures$186.3 $— $186.3* Represents Fioptics in Cincinnati Twelve Months Ended December 31, 2016 Cincinnati Hawaii TotalConsumer / SMB Fiber capital expenditures * Construction$89.8 $— $89.8 Installation68.8 — 68.8 Other21.8 — 21.8Total Consumer / SMB Fiber180.4 — 180.4 Enterprise Fiber27.6 — 27.6Other52.8 — 52.8Total Entertainment and Communications capital expenditures$260.8 $— $260.8* Represents Fioptics in Cincinnati 41Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications, continuedCapital expenditures in Cincinnati are incurred to expand our Fioptics product suite, upgrade and increase capacity for our networks, and to extend the life ofour fiber and copper networks. The Company is focused on building FTTP addresses and during 2018 we passed 41,000 FTTP addresses in Cincinnati. As ofDecember 31, 2018, the Company is able to provide its Fioptics services to 611,000 consumer and enterprise addresses, or 75% of our operating territory inCincinnati. Cincinnati construction capital expenditures decreased $14.7 million in 2018 compared to 2017 even though we passed 38,800 doors in both2018 and 2017 due to more efficient capital spending. In addition, construction costs incurred for Connect America Fund ("CAF") doors totaled $5.5 millionin 2017 compared to $1.4 million in 2018. Cincinnati installation capital expenditures decreased $7.3 million for 2018 compared to 2017 due to fewer videoand internet activations in 2018. In addition, the Company implemented self-installations in Cincinnati which has led to a decrease in the average cost perinstall. Finally, the timing of expenditures, primarily for set top boxes, causes variances in capital expenditures year over year.Enterprise Fiber capital expenditures in Cincinnati are related to success-based fiber builds, including associated equipment, for enterprise and carrierprojects to provide ethernet services. Other capital expenditures are related to IT projects, cable and equipment maintenance and capacity additions, realestate upgrades and maintenance, plus other minor capital purchases.Capital expenditures in Hawaii for 2018 were $42.7 million. The Construction capital of $5.1 million relates to building out the fiber network to newaddresses. Installation capital of $12.4 million primarily relates to new video installations. Enterprise fiber capital includes $0.8 million for light-up fees ofadditional SEA-US cable bandwidth, and the remaining is for new ethernet customers. Capital expenditures classified as Other include IT projects, real estateprojects, and network upgrades or optimization projects.The decrease in construction costs in 2017 is a result of the Company passing 62,600 fewer doors in 2017 relative to 2016. Fioptics installation costs alsodecreased in 2017 as there were fewer activations due to fewer doors being passed.42Table of ContentsForm 10-K Part II Cincinnati Bell Inc.IT Services and HardwareThe IT Services and Hardware segment provides end-to-end solutions from consulting to implementation to ongoing optimization. These solutions includeCloud, Communications and Consulting services along with the sale and maintenance of major branded Telecom and IT hardware reported as InfrastructureSolutions. These services and products are provided through the Company's subsidiaries in various geographic areas throughout the United States, Canadaand Europe. By offering a full range of equipment in addition to Cloud, Communications and Consulting services, the IT Services and Hardware segmentprovides our customers personalized solutions designed to meet their business objectives.Cloud services include the design, implementation and on-going management of the customer’s infrastructure. This includes on-premise, public cloud andprivate cloud solutions. The Company assists customers with the risk assessment phase through an in-depth understanding of the customer’s business, as wellas building and designing a solution using either the customer's existing infrastructure or new cloud based options that transform the way the customer doesbusiness.Communications solutions help to transform the way our customers do business by connecting employees, customers, and business partners. By upgradinglegacy technologies through customized build projects and reducing customer costs, the Company helps to transform the customer’s business. These servicesinclude Unified Communications as a Service ("UCaaS"), Software-Defined WAN ("SD-WAN"), Network as a Service ("NaaS"), Contact Center andCollaboration.Using our experience and expertise, Infrastructure Solutions are tailored to our customers’ organizational goals. We offer a complete portfolio of services thatprovide customers with efficient and optimized IT solutions that are agile and responsive to their business and are integrated, simplified and manageable.Through consulting with customers, the Company will build a solution using standard manufacturer equipment to meet our customers’ specific requirements.Prior to the adoption of Accounting Standards Codification Topic ("ASC") 606, the Company recorded hardware revenue on a gross basis. Effective January1, 2018 with the adoption of ASC 606, the Company now considers ourselves an agent in the sale of hardware and records hardware revenue net of theassociated cost of the hardware. The standard was adopted using the full retrospective method.Consulting services help customers assess their business and technology needs and provide the talent needed to ensure success. The Company is a premierprovider of application services and IT staffing. $ Change % Change $ Change % Change(dollars in millions)2018 2017 2018 vs.2017 2018 vs. 2017 2016 2017 vs.2016 2017 vs. 2016Revenue: Consulting$165.3 $89.3 $76.0 85 % $86.7 $2.6 3 %Cloud98.0 81.0 17.0 21 % 85.5 $(4.5) (5)%Communications178.5 160.6 17.9 11 % 144.3 $16.3 11 %Infrastructure Solutions109.1 54.2 54.9 n/m 36.2 $18.0 50 %Total revenue550.9 385.1 165.8 43 % 352.7 32.4 9 %Operating costs and expenses: Cost of services and products335.7 247.0 88.7 36 % 234.5 12.5 5 %Selling, general and administrative152.1 98.6 53.5 54 % 74.2 24.4 33 %Depreciation and amortization41.0 29.1 11.9 41 % 23.0 6.1 27 %Restructuring and severance related charges4.9 5.1 (0.2) (4)% 3.3 1.8 55 %Loss on disposal of assets— — — n/m 0.3 (0.3) n/mTotal operating costs and expenses533.7 379.8 153.9 41 % 335.3 44.5 13 %Operating income$17.2 $5.3 $11.9 n/m $17.4 $(12.1) (70)%Operating margin3.1% 1.4% 1.7 pts 4.9% (3.5) ptsCapital expenditures$26.4 $24.2 $2.2 9 % $25.4 $(1.2) (5)%43Table of ContentsForm 10-K Part II Cincinnati Bell Inc.IT Services and Hardware, continued Metrics information: (as of December 31, 2018)Communications Communications Communications Consulting Hosted UCaaSProfiles* NaaS Locations SD - WANLocations Billable Resources 239,581 2,257 803 1,039* Includes 23,700 profiles from Hawaii RevenueIT Services and Hardware segment revenue increased $165.8 million and $32.4 million in 2018 and 2017, respectively, compared to the comparable prioryear periods. Consulting and Infrastructure Solutions are the main contributors to this revenue increase in 2018, primarily due the acquisition of OnX in thefourth quarter of 2017. OnX contributed $108.2 million in Consulting revenue and $64.1 million in Infrastructure Solutions revenue for the year ended 2018compared to $25.3 million in Consulting revenue and $21.6 million in Infrastructure Solutions for the year ended 2017. OnX also provided contributions inCloud revenue, driving the $17.0 million increase in Cloud revenue in 2018 as compared to 2017. Additionally, Hawaiian Telcom contributed $20.0 millionin revenue in 2018, predominantly in Communications. Increased revenue generated by OnX and Hawaiian Telcom was partially offset by declines inConsulting in 2018 as compared to 2017 due to one significant customer in-sourcing more work rather than outsourcing it to the Company. Communicationsrevenue experienced growth in both 2018 and 2017 compared to the comparable prior year periods. After consideration of revenue of $11.5 milliongenerated from Hawaiian Telcom, Communications revenue increased $6.4 million in 2018, compared to 2017. This increased revenue is primarily due to a26% growth in strategic products offset by a 7% decline in legacy offerings. Growth in 2017 was primarily due to the same trends impacting 2018 as well as acontribution of $11.6 million from the acquisition of Suntel in the first quarter of 2017.Operating Costs and ExpensesCost of services and products is predominantly impacted by fluctuations in the headcount and contractors required to deliver the services within Consulting,Cloud and Communications. The increase of $88.7 million and $12.5 million in "Cost of services and products" for 2018 and 2017, respectively, ascompared to the same periods in the prior year is related to the acquisitions of OnX and Hawaiian Telcom and consists primarily of payroll and contractservices costs.SG&A increased $53.5 million and $24.4 million for 2018 and 2017, respectively, as compared to the same periods in the prior year. The acquisition of OnXcontributed an increase of $51.3 million and $21.1 million for 2018 and 2017, respectively, as compared to the same periods in the prior year. Theacquisition of Hawaiian Telcom contributed an increase of $5.4 million for 2018. Increases in SG&A related to the acquisitions were partially offset by lowerpayroll costs due to restructuring initiatives executed in 2018 and 2017.Restructuring and severance charges of $4.1 million recorded in 2018 are related to costs incurred in order to recognize future synergies as the Companycontinues to identify efficiencies with the integration of OnX. In addition, a restructuring charge of $0.8 million was recorded in the second quarter of 2018associated with a lease abandonment related to an office space that will no longer be utilized. Restructuring and severance related charges incurred in 2017related to the reorganization initiated by the Company to better align the segment for future growth.Capital ExpendituresCapital expenditures are dependent on the timing of success-based projects. The increase in capital expenditures of $2.2 million in 2018 is primarily due toadditional capital spend for OnX projects in the Cloud practice compared to 2017.44Table of ContentsForm 10-K Part II Cincinnati Bell Inc.CorporateCorporate is comprised primarily of general and administrative costs that have not been allocated to the business segments and transaction and integrationcosts related to acquisition transactions. Corporate costs totaled $37.2 million in 2018, $36.0 million in 2017 and $18.7 million in 2016.Corporate costs increased by $1.2 million in 2018 compared to 2017 primarily due to higher transaction and integration costs of $4.0 million compared to2017 partially offset by lower payroll related costs. Corporate costs increased in 2017 primarily due to higher transaction and integration costs of $18.5million.45Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Financial Condition, Liquidity, and Capital ResourcesCapital Investment, Resources and LiquidityShort-term viewOur primary source of cash is generated by operations. In 2018, 2017 and 2016, we generated $214.7 million, $203.4 million and $173.1 million,respectively, of cash flows from operations. In 2017 and 2016, proceeds from the monetization of our CyrusOne investment totaled $140.7 million and$189.7 million, respectively. Dividends of $1.1 million and $7.4 million were received from our investment in CyrusOne in 2017 and 2016, respectively.The Company’s primary uses of cash are for capital expenditures and debt service. To a lesser extent, cash is also used to fund our pension obligations, retireemedical obligations, and pay preferred stock dividends. In 2017 and 2018, cash was also utilized to fund merger and acquisition activity.Capital expenditures increased in 2018 compared to 2017 by $10.1 million. An increase in expenditures of $42.7 million in 2018 related to investmentsmade by Hawaiian Telcom, and was offset by a $35.0 million reduction in expenditures by the Entertainment and Communications segment in Cincinnatidue to lower construction and installation capital expenditures. Capital expenditures decreased in 2017 compared to 2016 by $75.9 million primarily due topassing fewer addresses with Fioptics as well as completing fewer installations.In July 2018, the Company completed the acquisition of Hawaiian Telcom. Net proceeds received from the $350 million 8% Senior Notes in the fourthquarter of 2017, combined with a draw on the Credit and Receivable Facilities in the third quarter of 2018, were utilized to finance in part the cash portion ofthe merger agreement and the payoff of the Hawaiian Telcom debt of $314.7 million. In the fourth quarter of 2017, net proceeds totaling $577.0 millionrelated to the issuance of the Tranche B Term Loan due 2024 were used to repay the remaining $315.8 million outstanding principal amount of the TrancheB Term Loan due 2020, as well as the related accrued interest. The remaining proceeds of the Tranche B Term Loan due 2024 were used to fund theacquisition of OnX that closed in October, 2017. The proceeds covered the purchase price, $77.6 million for repayment of outstanding debt, and associatedtransaction costs. Interest payments were $131.7 million, $65.7 million and $71.1 million in 2018, 2017 and 2016, respectively. Interest payments have increased due toadditional debt incurred to fund the acquisitions completed in 2018 and 2017, respectively. Additionally, payments in 2018 included $3.5 million ofaccrued interest related to Hawaiian Telcom. Our contractual debt maturities in 2019, including capital lease obligations and other financing arrangements,are $21.0 million and associated contractual interest payments are expected to be approximately $130 million.As of December 31, 2018, we had $206.5 million of short-term liquidity, comprised of $15.4 million of cash and cash equivalents, $182.0 million of undrawncapacity on our Revolving Credit Facility and $9.1 million available under the Receivables Facility. While we expect to continue to renew this facility, wewould be required to use cash, our Revolving Credit Facility, or other sources to repay any outstanding balance on the Receivables Facility if it was notrenewed.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 cashrequirements for the next 12 months.Long-term view, including debt covenantsAs of December 31, 2018, the Company had $1.9 billion of outstanding indebtedness and an accumulated deficit of $2.7 billion. In addition to the uses ofcash described in the Short-term view section above, the Company has to satisfy its long-term debt obligations. The Company has no significant debtmaturities until 2024. In addition, we have ongoing obligations to fund our qualified pension plans. Funding requirements for future years are uncertain andwill significantly depend on changes in future actuarial assumptions. It is also possible that we will use a portion of our cash flows generated from operationsfor common share repurchases or de-leveraging in the future, including discretionary, opportunistic repurchases of debt prior to the scheduled maturities.46Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In the fourth quarter of 2017, the Company entered into a new Credit Agreement (the "Credit Agreement") and terminated the existing Corporate CreditAgreement. The Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios. As ofDecember 31, 2018, these ratios and limitations include a maximum consolidated secured total leverage ratio of 3.50 to 1.00 and a minimum consolidatedinterest coverage ratio of 1.50 to 1.00. See Note 8 to the accompanying consolidated financial statements contained in “Part II. Item 8. Financial Statementsand Supplementary Data” for further details regarding our outstanding debt and other financing arrangements, including certain information about maturities,covenants and restrictions related to such debt and financing arrangements. The agreements and instruments governing our debt and financing arrangementsare complicated and you should consult such agreements and instruments which are filed with the SEC for more detailed information.As of December 31, 2018, the Company was in compliance with the Credit Agreement covenants and ratios.IndenturesThe Company’s Senior Notes are governed by indentures which contain covenants that, among other things, limit the Company’s ability to incur additionaldebt or liens, pay dividends or make other restricted payments, sell, transfer, lease, or dispose of assets and make investments or merge with another company.The Company is in compliance with all of its debt indentures as of December 31, 2018.Management believes that cash on hand, operating cash flows, its Revolving Credit Facility and its Receivables Facility, and the expectation that theCompany will continue to have access to capital markets to refinance debt and other obligations as they mature and come due, should allow the Company tomeet its cash requirements for the foreseeable future.Cash FlowsCash flows from operating activitiesCash provided by operating activities during 2018 was $214.7 million, an increase of $11.3 million compared to 2017. The increase is primarily due tocontributions from recent acquisitions, lower restructuring payments of $13.0 million compared to 2017, and improved working capital. These increases werepartially offset by increased interest payments of $66.0 million and increased payments for transaction and integrations costs of $24.8 million in 2018compared to 2017.Cash provided by operating activities during 2017 was $203.4 million, an increase of $30.3 million compared to 2016. The increase is primarily due tofavorable changes in working capital combined with $13.0 million of operating cash flow generated by the OnX acquisition. These increases in operatingcash flow were partially offset by increased payments for restructuring and severance payments and transaction costs of $29.4 million and $16.1 million,respectively.Cash flows from investing activitiesCash used by investing activities totaled $437.4 million in 2018, an increase of $200.6 million compared to the prior year, primarily due to the acquisition ofHawaiian Telcom. In 2017, cash used for the acquisition of OnX was partially offset by cash provided by the sale of our remaining 2.8 million shares ofCyrusOne Inc.Cash used by investing activities totaled $236.8 million in 2017, an increase of $141.3 million compared to the prior year, primarily due to the acquisitionsof OnX and SunTel. In addition, during the first quarter of 2017, we sold our remaining 2.8 million shares of CyrusOne Inc. common stock for net proceedstotaling $140.7 million. In 2016, proceeds from the sale of our investment in CyrusOne totaled $189.7 million. These increases in cash used by investingactivities in 2017 were partially offset by a $75.9 million decrease in capital expenditures as a result of passing fewer doors with Fioptics in 2017 ascompared to the prior year.47Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cash flows from financing activitiesCash used in financing activities was $158.1 million in 2018. In 2018, the Company borrowed $194.6 million on the Credit Facility and the ReceivablesFacility. Proceeds were used to partially fund the cash portion of the acquisition of Hawaiian Telcom. This increase in cash flow was offset by the repaymentof debt of $328.7 million in 2018, which included the payoff of the Hawaiian Telcom debt of $314.7 million.Cash provided by financing activities was $420.2 million in 2017. In the fourth quarter of 2017, the Company terminated its existing Corporate CreditAgreement and entered into a new Credit Agreement that provides for a seven-year $600 million Tranche B Term Loan due 2024 with proceeds totaling $593million, net of discounts, and a $200 million Revolving Credit Facility. Also in the fourth quarter of 2017, CB Escrow Corp., an Ohio corporation and whollyowned subsidiary of Cincinnati Bell Inc., closed the private offering of $350 million aggregate principal amount of 8% Senior Notes at par. The proceeds ofthe note issuance were deposited into an escrow account and subsequently utilized at the time of closing of the acquisition of Hawaiian Telcom. Debtrepayments totaling $403.0 million related to the repayment of the remaining $315.8 million outstanding principal amount of the Tranche B Term Loan due2020, including the related accrued and unpaid interest, as well as $77.6 million paid for OnX outstanding debt at the time of acquisition. Debt issuance costspaid totaled $19.1 million for the year. In addition, the Company repaid $89.5 million on the Receivables Facility in 2017.Cash used by financing activities was $75.3 million in 2016. The Company issued $625.0 million of 7% Senior Notes at a $10.0 million premium. Debtrepayments 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 averagerate 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 averagerate 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 0.2million common shares for $4.8 million. Debt issuance costs totaled $11.1 million for the year. In addition, the Company borrowed $71.9 million on theReceivables Facility in 2016 and proceeds from the exercise of options totaled $3.8 million.Dividends paid on preferred stock totaled $10.4 million in each of 2018, 2017 and 2016.Future Operating TrendsEntertainment and CommunicationsWe continue to mitigate the revenue decline experienced with our legacy products with increases in revenue of our fiber-based products. In addition, themerger with Hawaiian Telcom has allowed us to build scale and fiber density to help capitalize on the growing demands for speeds that only a fiber networkcan provide. We expect the desire by customers for increased speeds will only continue as evidenced by the fact that more than 50% of Cincinnati’s internetcustomers subscribe to speeds greater than 100 megabits, compared to 2 years ago when only 20% subscribed to such speeds.During 2019, we expect continued competition for internet, voice and video services as the cable competitor in the Cincinnati market continues to targetareas where we have copper and fiber to the node. Due to this competition, as well as customers migrating to obtaining video programming over broadbandInternet connections, we expect to see a decline in video subscribers and FTTN internet subscribers. In the Hawaii market, we also expect continuedcompetition for internet, voice and video services as the cable competitor has increased advertising subsequent to the acquisition of Hawaiian Telcom. In2019, we plan to invest between $100 million and $115 million for Consumer/SMB Fiber, including construction, installation and value-added services. Ourfocus for 2019 in both the Cincinnati and Hawaii markets is to identify opportunities to expand our FTTP footprint to residential and commercial addresseswith the highest return profile, increase penetration, and drive operational efficiencies. We will take a FTTP internet-based focus due to the increasedrelevance of this product and the high return profile that it provides.For our enterprise fiber customers, we expect to continue to see a migration from legacy products and copper-based technology to higher bandwidth fibersolutions, as evidenced by the 16% increase in Ethernet Bandwidth in Cincinnati in 2018 compared to 2017.48Table of ContentsForm 10-K Part II Cincinnati Bell Inc.IT Services and HardwareThe Company's strategy for future growth is to diversify the geographies in which it operates. As a part of executing this strategy, in February 2017 theCompany completed the acquisition of SunTel, a regional provider of network security, data connectivity, and unified communications solutions based inTroy, Michigan, and in October 2017 completed the acquisition of OnX, with locations throughout the U.S., Canada and Europe. The expectation is thatthese acquisitions will provide future growth opportunities in the IT Services and Hardware segment by providing additional geographies to operate within,and an expanded customer base in which to sell our products and services. In addition, the acquisitions can create synergies and opportunities for costsavings.In 2019, the Company will focus on infiltrating our customer base with our full stack of products from simple hardware sales through managed voice andsoftware defined network management, creating contractual recurring revenue streams. We expect budget constraints by certain customers will continue toput pressure on our revenue and operating income in the future, increasing the need to diversify. In addition, as more customers migrate to the public cloud,we will see declines in the demand for Infrastructure products. However, this trend can provide an opportunity in the form of consulting as we have ITprofessionals that can develop the strategy to guide customers through this migration.49Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Contractual ObligationsThe following table summarizes our contractual obligations as of December 31, 2018: Payments due by Period(dollars in millions) Total < 1 Year 1-3 Years 3-5 Years ThereafterLong-term debt, excluding capital leases and other financing arrangements (1) $1,878.3 $6.0 $188.6 $52.3 $1,631.4Capital leases (2) 73.9 13.4 17.6 8.8 34.1Interest payments on long-term debt and capital leases (3) 770.0 126.6 246.6 232.5 164.3Non-cancellable operating lease obligations 58.5 10.9 15.5 8.4 23.7Purchase obligations (4) 157.1 157.1 — — —Pension and postretirement benefits obligations (5) 89.1 17.0 19.8 27.8 24.5Unrecognized tax benefits (6) 22.0 — — — 22.0Other liabilities (7) 117.4 18.3 8.4 13.2 77.5Total $3,166.3 $349.3 $496.5 $343.0 $1,977.5(1)Excludes net unamortized discounts and premiums. (2)Includes capital lease obligations primarily related to vehicles, network equipment used in the deployment of our fibernetwork, and wireless towers assumed from our discontinued operations. (3)Assumes no early payment of debt in future periods. The interest rate applied on variable rate borrowings is the rate in effect asof December 31, 2018. (4)Includes amounts under open purchase orders and open blanket purchase orders for purchases of network, IT and telephonyequipment, and other goods; contractual obligations for services such as software maintenance and outsourced services; andother purchase commitments. (5)Includes payments for Cincinnati and Hawaii Pension and Postretirement Plans as well as other employee retirementagreements. Amounts for 2019 include approximately $11 million expected to be contributed for postretirement benefits.Although the Company expects to continue operating the plans past 2019, its contractual obligation related to postretirementobligations only extends through 2019. Amounts for 2019 through 2026 include approximately $57 million of estimated cashcontributions to the qualified pension 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 affectthe expected contribution amount. (6)Includes the portion of liabilities related to unrecognized tax benefits. If the timing of payments cannot be reasonablyestimated 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, liabilities related to the pole license agreement obligation, adeferred vendor rebate, and other financing arrangements.The contractual obligations table is presented as of December 31, 2018. The amount of these obligations can be expected to change over time as newcontracts are initiated and existing contracts are completed, terminated, or modified.50Table of ContentsForm 10-K Part II Cincinnati Bell Inc.ContingenciesWe are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in the normal course of business. Webelieve that the amounts provided in our consolidated financial statements, as prescribed by generally accepted accounting principles are adequate in lightof the those contingencies that are probable and able to be estimated. However, there can be no assurances that the actual amounts required to satisfy allegedliabilities from various legal proceedings, claims, tax examinations, and other matters, including the matters discussed below, and to comply with applicablelaws and regulations, will not exceed the amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess ofthose amounts provided as of December 31, 2018, cannot be reasonably determined.Based on information currently available, consultation with counsel, available insurance coverage and established reserves, management believes that theeventual outcome of all outstanding claims will not, individually or in the aggregate, have a material effect on the Company's financial position, results ofoperations or cash flows.Off-Balance Sheet ArrangementsIndemnificationsDuring the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to makepayments in relation to certain transactions. These include: (a) intellectual property indemnities to customers in connection with the use, sale, and/or licenseof products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities tovendors and service providers pertaining to claims based on negligence or willful misconduct, (d) indemnities involving the representations and warranties incertain contracts, and (e) outstanding letters of credit which totaled $8.2 million as of December 31, 2018. In addition, the Company has made contractualcommitments 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.Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. Application of theseprinciples requires management to make estimates or judgments that affect the amounts reported in the financial statements and accompanying notes. Theseestimates are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statementscould reflect different estimates or judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, and, as such, have agreater 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 tobe those policies that are highly dependent on subjective or complex judgments, estimates or assumptions, and where changes in those estimates andassumptions could have a significant impact on the consolidated financial statements. We have discussed our most critical accounting policies, judgmentsand estimates with our Audit and Finance Committee.The discussion below addresses major judgments used in:• business combinations; • reviewing the carrying values of goodwill; • accounting for income taxes; and • accounting for pension and postretirement expenses.51Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Business Combinations — In accounting for business combinations, we apply the accounting requirements of FASB ASC 805, “Business Combinations,”which requires the recording of net assets of acquired businesses at fair value. The Company utilizes management estimates and an independent third-partyvaluation firm to assist in determining the fair values of acquired assets and assumed liabilities. In developing estimates of the fair value of net assets, theCompany analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, currentreplacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significantestimates and assumptions, particularly with respect to the intangible assets. The Company reports in its consolidated financial statements provisionalamounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period.Reviewing the Carrying Values of Goodwill — The Company adheres to the guidance under ASC 350-20 in testing goodwill for impairment. Under thisguidance, the Company has the option of performing a qualitative assessment for impairment prior to performing the quantitative tests. A quantitativeanalysis was performed in 2018 and 2016 and a qualitative analysis was performed in 2017. The Company performs impairment testing of goodwill on anannual basis or when events or changes in circumstances indicate that an asset may be impaired. We perform our annual impairment tests in the fourth quarterwhen 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-basedmethods. The income-based approach utilizes a discounted cash flow model using projected cash flows derived from the five-year plan, adjusted to reflectmarket 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 2018,2017 or 2016.Changes in certain assumptions could have a significant impact on the impairment tests for goodwill. The most critical assumptions are projected futuregrowth rates, operating margins, capital expenditures, terminal values, and discount rate selection and market multiples. These assumptions are subject tochange as the Company's long-term plans and strategies are updated each year. As of December 31, 2018, each reporting unit had a fair value that exceededit's carrying value in the goodwill impairment test.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 andlocal 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 2015.The Company has net operating loss carryforwards at the federal, state, local and foreign levels. Federal tax loss carryforwards are available to offset taxableincome in current and future periods. Federal tax loss carryforwards of $125.6 million 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 basisdifferences and other deductions become deductible and prior to the expiration of the net operating loss carryforwards. Based on current income levels andanticipated future reversal of existing temporary differences, management expects to fully utilize its federal net operating loss carryforwards within theirexpiration periods. However, realization of certain state, local and foreign net operating losses, as well as other deferred tax assets, is not certain as changes inour current estimates, due to unanticipated market conditions, governmental legislative actions or events, could have a material effect on our ability to utilizedeferred tax assets.A valuation allowance of $58.2 million and $45.5 million has been recognized as of December 31, 2018 and 2017, respectively. While the valuationallowance is primarily against state, local, and foreign net operating losses, it also includes $15.3 million against non-deductible interest and $6.7 millionagainst Texas margin credits which are unlikely to be realized. As of December 31, 2018 and 2017, the liability for unrecognized tax benefits was $22.0 million and $22.2 million, respectively. The liability isrepresentative of governmental authorities' interpretation of tax law differing from the Company's interpretation. As of December 31, 2018, the amount ofunrecognized tax benefits that, if recognized, would affect the effective tax rate is $21.9 million. Accrued interest related to unrecognized tax benefits isrecognized in interest expense.52Table of ContentsForm 10-K Part II Cincinnati Bell Inc.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 other comprehensiveloss" on the Consolidated Balance Sheets.The Company sponsors noncontributory defined benefit pension plans for eligible management employees, non-management employees, and certain formersenior executives. We also provide healthcare and group life insurance benefits for eligible retirees. The measurement date for our pension and postretirementobligations is as of December 31. When changes to the plans occur during interim periods, management reviews the changes and determines if aremeasurement is necessary. No amendments to the plan were made during 2018 or 2017.The measurement of our pension and postretirement projected benefit obligations involves significant assumptions and estimates. Each time we remeasureour projected benefit obligations, we reassess the significant assumptions and estimates. The actuarial assumptions attempt to anticipate future events and areused 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 and healthcare cost trend rates.Discount rateA discount rate is used to measure the present value of projected benefit obligations. The discount rate for each plan is individually calculated based uponthe timing of expected future benefit payments. Our discount rates are derived based upon a yield curve developed to reflect yields available on high-qualitycorporate bonds as of the measurement date. As of December 31, 2018 and 2017, the average discount rate used to value the Cincinnati pension plans was4.20% and 3.60%, respectively, while the average discount rate used to value the Cincinnati postretirement plans was 4.30% and 3.60%, respectively. As ofDecember 31, 2018, the average discount rate used to value the Hawaii pension plans was 4.20%, while the average rate used to value the Hawaiipostretirement plans was 4.40%. Higher rates of interest available on high-quality corporate bonds drove the increase in the discount rates in 2018.Expected rate of returnThe 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 theplans and the current view of expected future returns, which is influenced by historical averages. The required use of an expected versus actual long-term rateof 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 givenyear. Over time, however, the expected long-term returns are designed to approximate the actual long-term returns. As of December 31, 2018 and 2017, theestimated long-term rate of return on the Cincinnati pension plan assets was 7.00% and 7.25%, respectively. As of December 31, 2018, the estimated long-term rate of return on the Hawaii pension plan assets was 7.00%. The long-term rate of return on the Cincinnati and Hawaii post-retirement plan assets wasestimated to be zero for the disclosed periods as these plans have minimal assets with a low rate of return. Actual asset returns for the Cincinnati pension trustswere losses of 7.92% in 2018 and gains of 20% in 2017. Actual asset returns for the Hawaii pension trusts were losses of 4.44% in 2018. In our pensioncalculations, we utilized the market-related value of plan assets, which is a calculated asset value that recognizes changes in asset fair values in a systematicand consistent manner. Differences between actual and expected returns are recognized in the market-related value of plan assets over five years.Healthcare cost trendOur 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 bothDecember 31, 2018 and 2017, the healthcare cost trend rate used to measure the Cincinnati postretirement health benefit obligations was 6.5%. As ofDecember 31, 2018, the healthcare cost trend rate used to measure the Hawaii postretirement health benefit obligations was 6.8%. As of December 31, 2018,the healthcare cost trend rate is assumed to decrease gradually to 4.5% and 5.0% by the year 2023 and 2026 for the Cincinnati and Hawaii plans,respectively.The actuarial assumptions used may differ materially from actual results due to the changing market and economic conditions and other changes. Revisionsto and variations from these estimates would impact liabilities, equity, cash flow and other components of pension and postretirement benefit plans expense.53Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The following table represents the sensitivity of changes in certain assumptions related to the Cincinnati pension and postretirement plans as of December31, 2018: Pension Benefits Postretirement and Other Benefits (Decrease)/ (Decrease)/ (Decrease)/ (Decrease)/ % Point Increase in Increase in Increase in Increase in(dollars in millions) Change Obligation Expense Obligation ExpenseDiscount rate +/- 0.5% ($22.8)/$22.8 ($1.5)/$1.5 ($3.2)/$3.5 ($0.1)/$0.2Expected return on assets +/- 0.5% n/a ($1.8)/$1.8 n/a ($0)/$0Healthcare cost trend rate +/- 1.0% n/a n/a ($1.7)/$1.8 ($0.1)/$0.1The following table represents the sensitivity of changes in certain assumptions related to the Hawaii pension and postretirement plans as of December 31,2018: Pension Benefits Postretirement and Other Benefits (Decrease)/ (Decrease)/ (Decrease)/ (Decrease)/ % Point Increase in Increase in Increase in Increase in(dollars in millions) Change Obligation Expense Obligation ExpenseDiscount rate +/- 0.5% ($5.8)/$6.3 ($0.5)/$0.5 ($2.5)/$2.8 ($0)/$0.1Expected return on assets +/- 0.5% n/a ($0.7)/$0.7 n/a n/aHealthcare cost trend rate +/- 1.0% n/a n/a n/a n/aAt December 31, 2018 and 2017, unrecognized actuarial net losses were $234.0 million and $248.1 million, respectively. The unrecognized net losses havebeen 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 bylosses in another or vice versa, we are not required to recognize these gains and losses in the periods that they occur. Instead, if the gains and losses exceed a10% corridor defined in the accounting literature, we amortize the excess over the average expected future working lifetime of active plan participants for theCincinnati and Hawaii pension and bargained postretirement plans (approximately 8-12 years and 8 years, respectively) and average life expectancy ofretirees for the Cincinnati and Hawaii management postretirement plans (approximately 15 years and 21 years, respectively). The accumulated gains or lossesassociated with the Hawaii plans do not exceed the corridor requiring amortization in 2018.54Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Regulatory Matters and Competitive TrendsFederal - The Telecommunications Act of 1996 (the "1996 Act") was enacted with the goal of establishing a pro-competitive, deregulatory framework topromote competition and investment in advanced telecommunications facilities and services to all Americans. From 1996 to 2008, federal regulatorsconsidered a multitude of proceedings aimed at promoting competition and deregulation. Although the 1996 Act called for a deregulatory framework, theFCC continued to maintain significant regulatory restraints on the traditional ILECs while increasing opportunities for new competitive entrants and newservices 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. Simultaneously, the FCC has been adoptingmeasures that it believes would promote competition, protect consumers, reform universal service, and enhance public safety and national security. SinceJanuary 2017 the FCC has focused on eliminating burdensome and unnecessary regulations that impede broadband investment. We expect this trend tocontinue and we will monitor the changing regulatory environment for any potential impacts, particularly on the following proceedings.Universal ServiceThe federal Universal Service Fund ("USF") is funded via an assessment on the interstate end-user revenue of all telecommunications carriers andinterconnected VoIP providers. The assessment is used to support high cost, low income, rural healthcare, and schools and libraries programs.In October 2011, the FCC adopted new rules aimed at controlling the size of the high-cost portion of the fund and transitioning it from supporting legacycircuit-switched networks to broadband. These rules capped the high-cost fund and established a framework for transitioning support to the new ConnectAmerica Fund ("CAF") to bring broadband to unserved areas. Phase I reforms froze existing high-cost support and provided a mechanism for distributingadditional support for qualifying price cap companies. Hawaiian Telcom received $1.4 million in Phase I support and has completed its Phase I buildout.Under Phase II, $1.8 billion of annual support was made available to expand broadband in unserved areas served by price cap ILECs. In August 2015, pricecap ILECs, which had the right of first refusal, accepted over $1.5 billion of the annual Phase II support that was available to them. Carriers accepting thePhase II support commitment have the funds available for a six-year period. Cincinnati Bell Telephone (“CBT”) accepted approximately $2 million in annualPhase II support beginning in 2015 in exchange for a commitment to expand broadband to 6,339 Kentucky locations and 745 Ohio locations by the end of2020. Hawaiian Telcom accepted $4.4 million to build to 11,081 locations in Hawaii over the six-year award period. A separate funding mechanism for rate-of-return companies was finalized in 2016.In August 2018, bidding concluded in the FCC’s Connect America Fund Phase II auction. Under this reverse auction up to $2 billion in support over a 10-year period was available to expand fixed broadband service into additional unserved high-cost areas of the country. There were 103 winning bidders and thetotal amount of support that will be provided to these bidders over the 10-year term is $1.5 billion. Winning bidders must build out their broadband networkswithin the winning geographic areas (specific census block groups covering 713,176 locations in 45 states) within the first six years of the support term.Cincinnati Bell and Hawaiian Telcom were both winning bidders. As a result, Cincinnati Bell will receive $1.1 million to extend its broadband service to 342unserved locations and Hawaiian Telcom will receive $18.1 million to build to 3,936 unserved locations. It is uncertain at this time when the Phase II auctionsupport distributions for the winning bidders will begin.Intercarrier CompensationIn October 2011, in conjunction with its reform of the USF high cost support program, the FCC adopted comprehensive reforms to the switched access andreciprocal compensation rules that govern the means by which carriers compensate one another for use of their networks. The end point of the reforms is abill-and-keep system under which all per-minute intercarrier charges are eliminated.55Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Terminating switched access and reciprocal compensation rates were phased out over a six-year period that concluded in 2018 for price cap carriers includingCBT and Hawaiian Telcom. The plan contains a mechanism that enables ILECs to recover some of the lost revenue from increased end-user charges, whichCBT and Hawaiian Telcom have utilized to the fullest extent possible. The transition and recovery mechanism for originating access and transport rates hasnot yet been established by the FCC. However, during 2018 the FCC released its proposal for transitioning originating access charges for 8XX calls to billand keep. Although the public comment period on this proposal has concluded, the FCC has not yet issued a decision. The Company is monitoring thisproceeding, but will not know the full impact until the FCC adopts final rules, particularly as it relates to any recovery mechanism to offset proposed ratereductions.Special Access/Business Data ServicesIn 2005, the FCC opened a proceeding to review its Special Access (aka Business Data Services or "BDS") pricing rules. Under the rules in effect at that time,special access services were subject to price cap regulation with no earnings cap, and ILECs had pricing flexibility in certain metropolitan statistical areasserved by a sufficient number of competitors. During 2012, the FCC suspended the grant of any new pricing flexibility requests and issued a mandatory datarequest. Responses to the data request were provided in the first quarter of 2015.In April 2017, the FCC adopted a Report and Order finding that the market for all packet-based services, Ethernet services, TDM services above the DS3level, and DS1 and DS3 transport services is competitive in all geographic markets and should no longer be subject to price regulation. Price regulation ofTDM services of DS3 or below terminating to end users depends upon the competitive status of the county in which the service is provided. The FCCdesignated counties as competitive or non-competitive for these TDM end user services based upon historical data submitted by providers and purchasers ofBDS in response to a mandatory data request issued in 2012 and supplemented with cable broadband deployment data submitted by providers in the FCC’ssemi-annual broadband deployment report. Price regulation will be eliminated for these TDM end user services in competitive counties. In non-competitivecounties price regulation will continue, although carriers are permitted to offer contract tariffs and volume and term discounts. The Order requires all pricecap companies to remove all competitive BDS services from their tariffs by August 2020. The list of competitive and non-competitive counties released bythe FCC in May 2017 designated all but two of the counties in the Company’s CBT ILEC territory as competitive, and in Hawaii four of the five countieswere deemed competitive. In November 2017, Hawaiian Telcom filed an application with the FCC to discontinue offering BDS services in Kalawao County(the non-competitive county). This application was granted in January 2018 and Hawaiian Telcom subsequently filed to detariff all BDS services statewide.At this time, CBT’s BDS services remain under tariffs, but those BDS services offered in the competitive counties will be detariffed prior to the 2020 deadline.Nearly all of the Company’s current special access revenue is derived from the competitive counties. In August 2018, the US Court of Appeals for the EighthCircuit vacated and remanded the ex ante deregulation of DS1 and DS3 transport services. As a result, the FCC has opened another proceeding to considerwhether to deregulate these TDM transport services. The Company does not anticipate any impact as a result of the Court’s decision pending the FCC’s newexamination of the issue.Unbundled Network ElementsUnder rules adopted pursuant to the Telecommunications Act of 1996, ILECs have been required to unbundle the components of their network and providethe unbundled network elements ("UNE's") to requesting competitive local exchange carriers at cost-based rates set by state public utility commissions in the1990’s. In May 2018, the USTelecom Association (“USTA”) filed a petition with the FCC seeking forbearance from the unbundling rules for all ILECs. TheFCC is required to rule on the petition within 15 months, or, if it fails to issue a decision by that time, the petition is automatically deemed granted. Ifgranted, the forbearance would positively impact the Company’s ILEC operations while its competitive carrier operations could potentially see increasedprices for facilities currently purchased from other ILECs, and may be forced to find other suppliers or deploy its own facilities in areas where it would be costeffective to do so. The Company is exploring the options available to it should the petition be granted and will pursue the most cost effective solution whichwould likely involve a combination of approaches. USTA has proposed to the FCC that if the forbearance petition is granted, UNE’s should remain availableuntil February 2021, so that carriers have ample time to transition to alternative arrangements.56Table of ContentsForm 10-K Part II Cincinnati Bell Inc.IP TransitionIn late 2013, the FCC opened a proceeding to explore how to transition from the legacy circuit-switched 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 during 2015 and 2016the FCC adopted several orders imposing additional requirements on service providers seeking to transition their networks from copper to fiber. However,during the second quarter of 2017, the FCC opened several proceedings aimed at removing barriers to wireline and wireless broadband deployment andproposed reversing several of the additional requirements imposed in 2015 and 2016. Following this review, in November 2017 the FCC revised its rules tostreamline the ILEC copper retirement process and the approval process for discontinuing legacy TDM service to speed the transition from legacy copper-based TDM services to IP services. It also reformed the pole attachment rules to make it easier for providers to attach equipment necessary for next-generationnetworks. In 2018 the FCC adopted additional changes aimed at streamlining the pole attachment process and preempting state and local processesconsidered to be detrimental to broadband deployment, particularly the small cells that will be used for 5G networks. The 2018 orders have been challengedby many parties and have not yet taken effect. The Company does not anticipate any significant financial impact due to these proceedings.Broadband Internet Access/Net NeutralityIn 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 at that time) or as a regulated telecommunications service. In 2007, CBT and Hawaiian Telcom electedthe non-regulated information service designation for broadband Internet access service. The FCC also ruled that wireless broadband service was 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 thatbroadband networks are widely deployed, open, affordable, and accessible to all consumers. In April 2010, the D.C. Circuit Court of Appeals issued anopinion finding that an FCC enforcement action regarding Comcast's network management practices exceeded the FCC's authority, causing the FCC toreassess its approach to crafting net neutrality rules. In December 2010, the FCC adopted net neutrality rules that required broadband providers to publiclydisclose network management practices, restricted them from blocking Internet content and applications, and prohibited fixed broadband providers fromengaging in unreasonable discrimination in transmitting traffic. 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 were akin to common carrier regulation. However, the Court upheld the transparency anddisclosure requirements and found that the FCC has general authority under Section 706 of the Communications Act to promulgate rules to encouragebroadband deployment. In response to the Court’s decision, the FCC adopted new rules in February 2015 under which it reclassified broadband Internetaccess as a telecommunications service under Title II of the Communications Act. Although these new rules were appealed by numerous parties, in June 2016the D.C. Circuit Court of Appeals upheld the FCC’s new rules in their entirety. In November 2016, the FCC adopted an order establishing broadband privacyand security requirements for Internet service providers using its authority under Title II. The restrictive new privacy rules diverged from the Federal TradeCommission framework that had for years set the standard for protecting Internet users’ privacy.In March 2017, Congress adopted a resolution under the Congressional Review Act to invalidate the new broadband privacy and security rules approved bythe FCC in November 2016. In December 2017, the FCC issued a Declaratory Ruling restoring the information service classification of broadband Internetaccess service that existed prior to 2015 and affirmed that broadband consumer protection authority resides with the Federal Trade Commission. Anaccompanying Report and Order requires that Internet service providers disclose information about their practices relative to blocking, throttling, paidprioritization, or affiliated prioritization. The impact of this decision is neutral for the Company.State - Ohio and Kentucky - CBT, the Company’s ILEC in Ohio and Kentucky, moved from rate of return regulation to alternative regulation plans for itslocal services in 1994. These alternative regulation plans restricted CBT’s ability to increase the price of basic local service and related services, buteliminated any earnings cap associated with traditional rate of return regulation. Under alternative regulation, price increases and enhanced flexibility forsome services partially offset the effect of fixed pricing for basic local service and reduced pricing for other, primarily wholesale services.57Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In Ohio, statutory changes enacted by the Ohio General Assembly in 2005 gave the Public Utilities Commission of Ohio (“PUCO”) the authority to provideILECs with pricing flexibility for basic local rates upon a showing that consumers have sufficient competitive alternatives (House Bill 218). As a result ofthat legislation, the Company received authority from the PUCO to increase its rates for basic local exchange service in eight of its Ohio exchanges. InSeptember 2010, the Ohio General Assembly passed Substitute Senate Bill 162, which revised state policy concerning the provision of telecommunicationsservice, repealed Ohio's alternative regulation legislation, and authorized additional pricing flexibility for ILEC basic local exchange service (“BLES” - astandalone access line not bundled with other services) upon a competitive showing by the ILEC. CBT filed an application for pricing flexibility under thenew rules and in January 2011 received authority to increase the monthly rate for a standalone local service line throughout its Ohio serving area by $1.25annually. Nearly all other retail services were removed from rate regulation, including local service lines bundled with other services. Substitute SB 162 alsoprovided cost savings and revenue opportunities resulting from revision of the PUCO's retail rules and service standards beginning in January 2011. In June2015, House Bill 64 was enacted, which included provisions that could relieve ILECs from their carrier of last resort obligations, pending the outcome of theFCC’s IP Transition proceeding. As part of the provisions of HB 64, the PUCO is currently conducting a process that would assist in the identification ofBLES customers that might not have a competitive alternative should the ILEC withdraw BLES as part of its transitioning from a circuit-switched TDMnetwork to an IP Network. The 2015 rules have the potential to provide CBT with substantial regulatory relief in Ohio in the future; however, there is noimpact in the near-term. Finally, in December 2018, the General Assembly passed House Bill 402 giving ILECs the ability to increase the monthly BLES rateby $2.00 annually. Beginning in 2022, BLES rate regulation will cease entirely in exchanges in which the ILEC demonstrates that it has lost more than 50%of its access lines. The 2018 legislation also limited the PUCO’s authority over other aspects of telecom regulation, including eliminating the PUCO’sauthority to review and approve mergers and acquisitions for telecom companies.In Kentucky, CBT entered into an alternative regulation plan in July 2006 under terms established by the Kentucky General Assembly in House Bill No. 337.Under this plan, BLES prices were capped in exchange for earnings freedom and pricing flexibility on other retail services. The caps on BLES prices expiredin July 2011 providing CBT with flexibility to increase rates for basic local exchange service. In March 2015, the General Assembly passed House Bill 152,which removed the Public Service Commission's authority to regulate terms, conditions, rates or availability of any retail service in urban exchanges (greaterthan 15,000 Households) for a modifying utility. In March 2017, the General Assembly passed Senate Bill 10, which extended the same privileges as HB 152to all exchanges, thus providing CBT with nearly complete deregulation for all retail services in Kentucky.Hawaii - In Hawaii, the legislature and the Hawaii Public Utilities Commission (“HPUC”) have taken steps to reduce rate regulation of some of the services ofthe Company’s Hawaiian Telcom subsidiaries, however, many services offered by Hawaiian Telcom’s ILEC remain under a traditional cost-of-serviceregulatory framework. The HPUC classifies telecommunications services as fully competitive, partially competitive, or non‑competitive.In 2009 and 2010, the Hawaii State Legislature required the HPUC to treat all intrastate retail telecommunications services, including intrastate toll (i.e., interisland), central exchange (Centrex), most residential and business local exchange services, integrated service digital network (ISDN) private lines and specialassemblies, and directory assistance, as “fully competitive” under the HPUC’s rules with certain qualifications. As a result, HPUC approval and cost supportfilings are no longer required to establish or reduce rates or to bundle service offerings; however, all service offerings must be priced above the service’s longrun incremental cost, and the HPUC can require cost support demonstrating compliance with its costing rules at any time. The HPUC retains the ability tosuspend and investigate any offering. In 2012, the Hawaii State Legislature passed legislation that gave Hawaiian Telcom pricing flexibility to increasetariffed intrastate rates for any retail telecommunications service without approval from the HPUC, with the exception of basic exchange service (i.e., singleline residential and single line business services), which continues to require HPUC approval. Based on these regulatory reforms, the Company can nowcompete more effectively by making decisions based on marketplace dynamics and other economic information. For example, it can offer a competitivelypriced bundle that includes retail local exchange intrastate services and other fully or partially competitive services, or other services that are not within theHPUC’s jurisdiction.Cable Franchises - Ohio, Kentucky and Indiana - The states of Ohio and Indiana permit statewide video service authorization. The Company is nowauthorized by Ohio and Indiana to provide service in its self-described territory with only 10-day notification to the local government entity and otherproviders. The authorization can be amended to include additional territory upon notification to the state. A franchise agreement with each local franchisingauthority is required in Kentucky. The Company has agreements with fifty-three franchising authorities in Kentucky.Hawaii - In Hawaii, cable franchises must be approved by the Hawaii Department of Commerce and Consumer Affairs. Since 2011, the Company’s HawaiianTelcom Services Company, Inc. subsidiary has held a cable franchise authorizing it to provide video services throughout the island of Oahu.58Table of ContentsForm 10-K Part I Cincinnati Bell Inc.Recently Issued Accounting StandardsRefer to Note 2 of the consolidated financial statements for further information on recently issued accounting standards.Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary StatementThis 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 thebeliefs, expectations and future plans and strategies of the Company, are forward-looking statements. Actual results may differ materially from thoseexpressed in any forward-looking statements. The following important factors, among other things, could cause or contribute to actual results beingmaterially and adversely different from those described or implied by such forward-looking statements including, but not limited to:•The Company operates in highly competitive industries, and customers may not continue to purchase products or services, which would result inreduced revenue and loss of market share; •The Company may be unable to grow our revenues and cash flows despite the initiatives we have implemented; •Failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise the Company'ssuccess in the 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 toexperience access line losses similar to the past several years, its revenues, earnings and cash flows from operations may be adversely impacted; •Negotiations with the providers of content for our video programming may not be successful, potentially resulting in our inability to carry certainprogramming channels, which could result in the loss of subscribers. In addition, due to the influence of some content providers, we may be forced topay higher rates for some content, resulting in increased costs; •The Company's failure to meet performance standards under its agreements could result in customers terminating their relationships with theCompany, or customers being entitled to receive financial compensation, leading to reduced revenues and/or increased costs; •The Company generates a substantial portion of its revenue by serving a limited geographic area; •Two large customers accounts for a significant portion of the Company’s revenues and accounts receivable. The loss or significant reduction inbusiness from either one of these customers would cause operating revenues to decline and could negatively impact profitability and cash flows; •Maintaining the Company's telecommunications networks requires significant capital expenditures, and the Company's inability or failure to maintainits telecommunications networks could have a material impact on its market share and ability to generate revenue; •Increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers; •We may be liable for the material that content providers distribute over our networks; •An IT and/or network security breach or cyber-attack may lead to unauthorized use or disabling of our network, theft of customer data, unauthorizeduse or publication of our confidential business information and could have a material adverse effect on our business; •Weather conditions, natural disasters, terrorist acts or acts of war could cause damage to our infrastructure and result in significant disruptions to ouroperations; •The regulation of the Company’s businesses by federal and state authorities may, among other things, place the Company at a competitivedisadvantage, restrict its ability to price its products and services, and threaten its operating licenses; •The inability of the Company to renew its license from the FCC to use the Hawaii Inter-Island Cable System ("HICS Cable") on economicallyreasonable terms may negatively impact its ability to provide telecommunication services to the islands of Hawaii; •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 theCompany'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; 59Table of ContentsForm 10-K Part II Cincinnati Bell Inc.•If the Company fails to extend or renegotiate its collective bargaining agreements with its labor union when they expire or if its unionized employeeswere 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, financialcondition, results of operations and cash flows; •The Company may not achieve its intended results from recent acquisitions if the Company is unable to successfully integrate the operations from theacquired companies with the Company; •The Company may incur expenses related to the integration of acquired operations, including OnX and Hawaiian Telcom, into the Company; •The future results of the Company will suffer if the Company does not effectively manage its expanded operations following the acquisitions of OnXand Hawaiian Telcom; •The Company’s debt could limit its ability to fund operations, raise additional capital, and fulfill its obligations, which, in turn, would have a materialadverse effect on its businesses and prospects generally; •The Credit Agreement, the indenture governing the Company's notes due 2024, the indenture governing the Company's notes due 2025 and otherindebtedness impose significant restrictions on the Company; •The Company depends on its Revolving Credit Facility and Receivables Facility to provide for its short-term financing requirements in excess ofamounts 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 itscontrol; •The Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments; •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 uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact the Company's business andfinancial condition; •The Company’s future cash flows could be adversely affected if it is unable to fully realize its deferred tax assets; •Changes in tax laws and regulations, and actions by federal, state and local taxing authorities related to the interpretation and application of such taxlaws and regulations, could have a negative impact on the Company's financial results and cash flows; •The Company's interpretation of the Tax Cuts and Jobs Act of 2017 could change, and have an adverse impact on financial results; •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 orlicensing expenses or be prevented from selling products; •Third parties may infringe upon the Company’s intellectual property, and the Company may expend significant resources enforcing its rights or suffercompetitive injury; •The Company could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements; •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 notundertake any obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.60Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Item 7A. Quantitative and Qualitative Disclosures about Market RiskInterest Rate RiskThe Company borrows funds at a combination of fixed and variable rates. The Company has exposure to interest rate risk, primarily in the form of variable-rate borrowings from its Credit Agreement and Receivables Facility, as well as changes in current rates compared to that of its fixed rate debt. The interest rateon these debt arrangements varies with changes in the LIBOR rate, which may cease to be an available rate in 2021. Our financing documents describeprocesses for identifying an alternate rate to LIBOR. Until such alternate rates have been identified, the consequences of the possible termination of LIBORcannot be entirely predicted but could result in an increase in the cost of our variable rate debt. The Company's management periodically employs interestrate hedge contracts, such as swaps, to manage exposure to interest rate risk. The use of these types of instruments to hedge a portion of our exposure tochanges in interest rates carries additional risks, such as counterparty credit risk and the legal enforceability of hedging contracts.The Company had $1,085.2 million principal amount of fixed rate debt outstanding as of December 31, 2018 and 2017, excluding debt with a variable ratethat is effectively fixed by related interest rate hedge contracts. The estimated aggregate fair market value of this debt was $904.4 million and $1,081.5million as of December 31, 2018 and 2017 respectively. At December 31, 2018, the weighted average interest rate on fixed-rate debt is 7.3%.At December 31, 2018, the Company had variable-rate borrowings of $298.5 million under the Tranche B Term Loan due 2024 not protected by interest ratehedge contracts, $176.6 million of borrowings under the Receivables Facility, and $18.0 million of borrowings under the Credit Agreement's RevolvingCredit Facility. The estimated aggregate fair market value of this debt was $481.2 million as of December 31, 2018. At December 31, 2017, the Company hadvariable-rate borrowings of $600.0 million under the Tranche B Term Loan due 2024 with an estimated aggregate fair market value of $606.0 million. AtDecember 31, 2018, the weighted average interest rate on variable-rate debt is 5.0%. A hypothetical increase or decrease of one hundred basis points in theLIBOR rate would increase or decrease our annual interest expense by $3.9 million.At December 31, 2018, the Company had $300.0 million of variable rate debt outstanding under the Tranche B Term Loan due 2024 with $300.0 million ofrelated floating-to-fixed interest rate swaps. These swaps effectively fix the underlying one-month LIBOR rate at a weighted average rate of 2.938% plus theapplicable margin per the requirements in the Credit Agreement. If the underlying LIBOR interest rate increases or decreases by 100 basis points, theaggregate fair market value of the swaps at December 31, 2018 would increase by $11.5 million or decrease by $11.0 million. These swaps expire in June2023. For further information, see Footnote 10 to the accompanying consolidated financial statements contained in “Part II. Item 8. Financial Statements andSupplementary Data.” At December 31, 2017, the Company held no derivative financial instruments.Foreign Currency RiskIT Services and Hardware currently has business operations in Canada, the U.K. and India, and foreign currency risk might arise in the future. We do notcurrently employ forward contracts or other financial instruments to mitigate foreign currency risk.Commodity Price RiskCertain of our operating costs are subject to price fluctuations caused by the volatility of the underlying commodity prices, such as gas utilized primarily byour field operations group, and network and building materials, such as steel, fiber and copper, used in the construction of our networks.61Table of ContentsForm 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 Reporting63 Reports of Independent Registered Public Accounting Firm64 Consolidated Balance Sheets67 Consolidated Statements of Operations68 Consolidated Statements of Comprehensive Income69 Consolidated Statements of Shareowners’ Deficit70 Consolidated Statements of Cash Flows71 Notes to Consolidated Financial Statements72 Financial Statement Schedule: For each of the three years in the period ended December 31, 2018: II — Valuation and Qualifying Accounts134 Financial statement schedules other than those listed above have been omitted because the required information is contained in the financial statements andnotes thereto, or because such schedules are not required or applicable.62Table of ContentsForm 10-K Part II Cincinnati Bell Inc.MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGThe management of Cincinnati Bell Inc. and its subsidiaries (the "Company") is responsible for establishing and maintaining adequate internal control overfinancial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system is designed to producereliable 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, 2018. 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, 2018, the Company’s internal control overfinancial reporting is effective based on those criteria. Management’s assessment of and conclusion on the effectiveness of internal control over financialreporting did not include an assessment of certain elements of internal controls over financial reporting of Hawaiian Telcom, Inc. acquired on July 2, 2018,which is included in the consolidated financial statements of the Company for the year ended December 31, 2018. Hawaiian Telcom accounts for 31.3% oftotal assets and 12.7% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2018.The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered publicaccounting firm, as stated in their report included herein.February 22, 2019/s/ Leigh R. Fox Leigh R. Fox Chief Executive Officer /s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer 63Table of ContentsForm 10-K Part II Cincinnati Bell Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareowners and Board of Directors of Cincinnati Bell Inc.Opinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the “Company”) as of December 31, 2018, based oncriteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, basedon criteria established in Internal Control - Integrated Framework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements and financial statement schedule as of and for the year ended December 31, 2018, of the Company and our report dated February 22,2019, expressed an unqualified opinion on those financial statements and included an explanatory paragraph related to the Company’s change in method ofaccounting for revenue from contracts with customers due to the adoption of Accounting Standards Update 2014-09, Revenue from Contracts withCustomers, during 2018.As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control overfinancial reporting at Hawaiian Telcom, Inc., which was acquired on July 2, 2018 and whose financial statements constitute 31.3% of total assets and 12.7%of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2018. Accordingly, our audit did not include theinternal control over financial reporting at Hawaiian Telcom, Inc.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.64Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ Deloitte & Touche LLPCincinnati, OhioFebruary 22, 201965Table of ContentsForm 10-K Part II Cincinnati Bell Inc.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Shareowners and Board of Directors of Cincinnati Bell Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 2018 and 2017,the related consolidated statements of operations, comprehensive income, shareowners’ deficit and cash flows, for each of the three years in the period endedDecember 31, 2018, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In ouropinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and theresults of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principlesgenerally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2019, expressed an unqualified opinion on theCompany's internal control over financial reporting.Change in Accounting PrinciplesAs discussed in Note 2 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers due to theadoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), during 2018. The Company adopted ASU2014-09 using the full retrospective method.Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPCincinnati, OhioFebruary 22, 2019We have served as the Company's auditor since 2005.66Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED BALANCE SHEETS(Dollars in millions, except share amounts) December 31, 2018 December 31, 2017Assets Current assets Cash and cash equivalents$15.4 $17.8Restricted cash— 378.7Receivables, less allowances of $13.0 and $10.4342.8 239.8Inventory, materials and supplies46.5 44.3Prepaid expenses30.7 22.2Other current assets10.5 7.6Total current assets445.9 710.4Property, plant and equipment, net1,844.0 1,129.0Goodwill157.0 151.0Intangible assets, net168.1 132.3Deferred income tax assets47.5 12.2Other noncurrent assets67.7 52.7Total assets$2,730.2 $2,187.6Liabilities and Shareowners’ Deficit Current liabilities Current portion of long-term debt$20.2 $18.4Accounts payable331.9 185.6Unearned revenue and customer deposits55.9 36.3Accrued taxes24.8 21.2Accrued interest26.8 29.9Accrued payroll and benefits42.9 28.7Other current liabilities39.2 37.2Total current liabilities541.7 357.3Long-term debt, less current portion1,909.6 1,729.3Pension and postretirement benefit obligations230.6 177.5Pole license agreement obligation39.1 —Deferred income tax liabilities11.4 11.2Other noncurrent liabilities72.8 30.2Total liabilities2,805.2 2,305.5Shareowners’ deficit Preferred stock, 2,357,299 shares authorized; 155,250 shares (3,105,000 depositary shares) of 63/4% Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2018 and2017; liquidation preference $1,000 per share ($50 per depositary share)129.4 129.4Common shares, $.01 par value; 96,000,000 shares authorized; 50,184,114 and 42,197,965shares issued and outstanding at December 31, 2018 and 2017, respectively0.5 0.4Additional paid-in capital2,680.0 2,565.6Accumulated deficit(2,709.4) (2,639.6)Accumulated other comprehensive loss(175.5) (173.7)Total shareowners’ deficit(75.0) (117.9)Total liabilities and shareowners’ deficit$2,730.2 $2,187.6The accompanying notes are an integral part of the consolidated financial statements.67Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in millions, except per share amounts) Year Ended December 31, 2018 2017 2016 Revenue1,378.2 1,065.7 1,017.6 Costs and expenses Cost of services and products, excluding items below698.7 531.0 507.3Selling, general and administrative313.4 235.1 216.3Depreciation and amortization252.0 193.0 182.2Restructuring and severance related charges8.3 32.7 11.9Transaction and integration costs22.5 18.5 —Other— — 1.1Total operating costs and expenses1,294.91,010.3918.8Operating income83.355.4 98.8Interest expense131.5 85.2 75.7Loss on extinguishment of debt, net1.3 3.2 19.0Other components of pension and postretirement benefit plans expense12.5 16.6 4.3Gain on sale of CyrusOne investment— (117.7) (157.0)Other (income) expense, net(1.6) 1.4 (7.6)(Loss) income from continuing operations before income taxes(60.4)66.7164.4Income tax expense9.4 26.7 61.7(Loss) income from continuing operations(69.8)40.0102.7Income from discontinued operations, net of tax— — 0.3Net (loss) income(69.8)40.0103.0Preferred stock dividends10.4 10.4 10.4Net (loss) income applicable to common shareowners$(80.2)$29.6$92.6Basic net (loss) earnings per common share Basic (loss) earnings per common share from continuing operations$(1.73) $0.70 $2.19Basic (loss) earnings per common share from discontinued operations$— $— $0.01Basic net (loss) earnings per common share$(1.73) $0.70$2.20Diluted net (loss) earnings per common share Diluted (loss) earnings per common share from continuing operations$(1.73) $0.70 $2.19Diluted (loss) earnings per common share from discontinued operations$— $— $0.01Diluted net (loss) earnings per common share$(1.73) $0.70 $2.20 Weighted-average common shares outstanding (millions) Basic46.3 42.2 42.0Diluted46.3 42.4 42.1The accompanying notes are an integral part of the consolidated financial statements.68Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Dollars in millions) Year Ended December 31, 2018 2017 2016Net (loss) income$(69.8) $40.0 $103.0Other comprehensive income (loss), net of tax: Unrealized gains on Investment in CyrusOne, net of tax of $4.4, $36.9— 8.3 68.1Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, net of tax of($41.3)— (76.4) —Foreign currency translation (loss) gain(6.5) 0.2 (0.1)Cash flow hedge: Unrealized loss on cash flow hedge arising during the period, net of tax of ($1.4)(4.8) — —Reclassification adjustment for net losses included in net income, net of tax of $0.30.9 — —Defined benefit plans: Net (loss) gain arising from remeasurement during the period, net of tax of ($1.6), $0.8, $3.6(5.5) 2.8 6.6Amortization of prior service benefits included in net income, net of tax of ($0.7), ($1.6), ($5.2)(2.4) (2.9) (9.4)Amortization of net actuarial loss included in net income, net of tax of $4.7, $7.9, $8.516.4 14.3 15.5Reclassification adjustment for pension settlement charges included in net income, net of tax of $0.0, $1.50.1 2.5 —Total other comprehensive (loss) income, net of tax(1.8)(51.2) 80.7Total comprehensive (loss) income$(71.6)$(11.2) $183.7The accompanying notes are an integral part of the consolidated financial statements.69Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF SHAREOWNERS' DEFICIT(in millions) 6 3/4% CumulativeConvertiblePreferred Shares Common Shares AdditionalPaid-inCapital AccumulatedDeficit Accumulated OtherComprehensive Loss Treasury Shares Shares Amount Shares Amount Shares Amount TotalBalance 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)Cumulative effect ofadopting ASC Topic606 — — — — — 19.4 — — — 19.4Net income — — — — — 103.0 — — — 103.0Other comprehensiveincome — — — — — — 80.7 — — 80.7Shares issued underemployee plans — — 0.3 — 3.6 — — — — 3.6Shares purchased underemployee plans andother — — — — (0.3) — — 0.1 0.5 0.2Stock-basedcompensation — — — — 5.1 — — — — 5.1Repurchase andretirement of shares — — (0.2) — (4.8) — — — — (4.8)Dividends on preferredstock — — — — (10.4) — — — — (10.4)Balance at December 31,20163.1 129.4 42.1 0.4 2,570.9 (2,711.8) (90.3) — — (101.4)Net income — — — — — 40.0 — — — 40.0Reclassificationadjustment toaccumulated deficit forstranded othercomprehensive incometaxes arising from taxreform (a) — — — — — 32.2 (32.2) — — —Other comprehensiveloss, excludingreclassificationadjustment toaccumulated deficit forstranded othercomprehensive incometaxes arising from taxreform — — — — — — (51.2) — — (51.2)Shares issued underemployee plans — — 0.1 — 0.5 — — — — 0.5Shares purchasedunder employee plansand other — — — — (1.3) — — — — (1.3)Stock-basedcompensation — — — — 5.9 — — — — 5.9Dividends onpreferred stock — — — — (10.4) — — — — (10.4)Balance at December 31,20173.1 129.4 42.2 0.4 2,565.6 (2,639.6) (173.7) — — (117.9)Net loss — — — — — (69.8) — — — (69.8)Other comprehensiveloss — — — — — — (1.8) — — (1.8)Shares issued underemployee plans — — 0.3 — 0.2 — — — — 0.2Shares purchased underemployee plans andother — — — — (2.1) — — — — (2.1)Stock-basedcompensation — ——— — 5.6 — — — — 5.6Dividends on preferredstock — — — — (10.4) — — — — (10.4)Stock considerationfor acquisition ofHawaiian Telcom — — 7.7 0.1 121.1 — — — — 121.2Balance at December 31,20183.1 $129.4 50.2 $0.5 $2,680.0 $(2,709.4) $(175.5) — $— $(75.0)(a) Per ASU 2018-02, entities can elect to make a one-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting fromnewly enacted corporate tax rates under the Tax Cuts and Jobs Act. The Company elected to make the change and recorded the adjustment in 2017.The accompanying notes are an integral part of the consolidated financial statements.70Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in millions) Year Ended December 31, 2018 2017 2016Cash flows from operating activities Net (loss) income$(69.8) $40.0 $103.0Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization252.0 193.0 182.2Loss on extinguishment of debt1.3 3.2 19.0Gain on sale of Investment in CyrusOne— (117.7) (157.0)Provision for loss on receivables8.4 6.9 9.4Noncash portion of interest expense5.4 2.8 3.3Deferred income taxes6.9 26.3 60.0Pension and other postretirement payments (in excess of) less than expense(7.2) 6.4 (8.3)Stock-based compensation5.6 5.9 5.1Other, net(3.5) 2.5 (3.8)Changes in operating assets and liabilities: (Increase) decrease in receivables(83.1) 21.3 (18.3)Decrease (increase) in inventory, materials, supplies, prepaid expenses and other current assets2.2 (16.6) (6.2)Increase (decrease) in accounts payable95.1 22.4 (13.1)Increase (decrease) in accrued and other current liabilities10.5 16.2 (3.0)(Increase) decrease in other noncurrent assets(0.9) 1.4 (2.8)(Decrease) increase in other noncurrent liabilities(8.2) (10.6) 3.6Net cash provided by operating activities214.7 203.4 173.1Cash flows from investing activities Capital expenditures(220.6) (210.5) (286.4)Proceeds from sale of Investment in CyrusOne— 140.7 189.7Acquisitions of businesses, net of cash acquired(216.8) (167.0) —Dividends received from Investment in CyrusOne (equity method investment)— — 2.1Other, net— — (0.9)Net cash used in investing activities(437.4) (236.8) (95.5)Cash flows from financing activities Proceeds from issuance of long-term debt— 943.0 635.0Net increase (decrease) in corporate credit and receivables facilities with initial maturities less than 90 days194.6 (89.5) 71.9Repayment of debt(328.7) (403.0) (759.3)Debt issuance costs(11.7) (19.1) (11.1)Dividends paid on preferred stock(10.4) (10.4) (10.4)Common stock repurchase— — (4.8)Other, net(1.9) (0.8) 3.4Net cash (used in) provided by financing activities(158.1) 420.2 (75.3)Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.3) — —Net (decrease) increase in cash, cash equivalents and restricted cash(381.1) 386.8 2.3Cash, cash equivalents and restricted cash at beginning of year396.5 9.7 7.4Cash, cash equivalents and restricted cash at end of year$15.4 $396.5 $9.7The accompanying notes are an integral part of the consolidated financial statements. 71Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cincinnati Bell Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Description of Business and Accounting PoliciesDescription of Business — Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell," "we," "our," "us" or the "Company") provides diversifiedtelecommunications and technology services. The Company generates a large portion of its revenue by serving customers in Cincinnati, Ohio, Dayton, Ohioand the islands of Hawaii. An economic downturn or natural disaster occurring in these, or a portion of these, limited operating territories could have adisproportionate effect on our business, financial condition, results of operations and cash flows compared to similar companies of a national scope andsimilar companies operating in different geographic areas.As of December 31, 2018, we operate our business through the following segments: Entertainment and Communications and IT Services and Hardware.The Company has approximately 4,300 employees as of December 31, 2018. Approximately 35% of total employees are covered by collective bargainingagreements with the Communications Workers of America (“CWA”) and the International Brotherhood of Electrical Workers ("IBEW)" Local 1357. Theeffective dates for collective bargaining agreements with the CWA and IBEW range through the second quarter of 2021 and third quarter of 2022,respectively.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 ofoperations, comprehensive income, financial position and cash flows for each period presented.Basis of Consolidation — The consolidated financial statements include the consolidated accounts of Cincinnati Bell Inc. and its majority-ownedsubsidiaries over which it exercises control. Intercompany accounts and transactions have been eliminated in the consolidated financial statements.Discontinued Operations — In the second quarter of 2014, we entered into agreements to sell our wireless spectrum licenses and certain other assets relatedto our wireless business. The agreement to sell our wireless spectrum licenses closed on September 30, 2014. Effective March 31, 2015, all wirelesssubscribers were migrated off our network and we ceased providing wireless services and operations. The results of operations attributable to our wirelessoperations are reported in discontinued operations in the Consolidated Statements of Income. Other income of $0.3 million was recorded in 2016 related toan individual tower sale. Restructuring payments associated with our discontinued operations of $4.4 million were included in operating cash flow in theConsolidated Statements of Cash Flows for 2016.Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management tomake estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. Significant items subject to such estimatesand judgments include: the carrying value of property, plant and equipment; the valuation of insurance and claims liabilities; the valuation of allowances forreceivables and deferred income taxes; reserves recorded for income tax exposures; the valuation of asset retirement obligations; assets and liabilities relatedto employee benefits; the valuation of deferred costs under Accounting Standards Codification ("ASC") 606; purchase price allocation for acquiredbusinesses; and the valuation of intangible assets and goodwill. In the normal course of business, the Company is also subject to various regulatory and taxproceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims inaccordance with GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. We periodically review ourestimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statementsprospectively from the date of the change in estimate.72Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Cash, Cash Equivalents and Restricted Cash — Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquidinvestments with original maturities of three months or less. Restricted cash at December 31, 2017, represents the proceeds from the issuance of the 8% SeniorNotes due 2025 (the “8% Senior Notes”). Proceeds were placed into an escrow account along with Company cash that was sufficient to pay all interest thataccrued on the 8% Senior Notes up to, but not including, October 9, 2018. The amounts held in escrow were contractually restricted as to their withdrawal oruse and were used to fund the cash portion of the acquisition of Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom") in July 2018, and to fund semi-annualinterest payments associated with this debt. As of December 31, 2017, $378.7 million is classified as "Restricted Cash." As of December 31, 2018, no cash isclassified as "Restricted Cash."Receivables — Receivables consist principally of trade receivables from customers and are generally unsecured and due within 21 - 90 days. The Companyhas receivables with one customer, Verizon Communications Inc., which make up 18% of the outstanding accounts receivable balance at December 31, 2018.The Company had receivables with one customer, General Electric Company ("GE"), which made up 10% of the outstanding accounts receivable balance atDecember 31, 2017. Unbilled receivables arise from services rendered but not yet billed. As of December 31, 2018 and 2017, unbilled receivables totaled$19.0 million and $14.2 million, respectively. Expected credit losses related to trade receivables are recorded as an allowance for uncollectible accounts inthe Consolidated Balance Sheets. The Company establishes the allowances for uncollectible accounts using percentages of aged accounts receivablebalances to reflect the historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectible balances. Wheninternal collection efforts on accounts have been exhausted, the accounts are written off and the associated allowance for uncollectible accounts is reduced. Factoring Arrangements — In the second quarter of 2018, the Company executed an amendment of its Receivables Facility that includes an option forCincinnati Bell Funding LLC (“CBF”) to sell certain receivables, on a non-recourse basis, directly to PNC Bank. The terms of the factoring arrangementprovides for the factoring of certain receivables, which are purchased at the face amount of the receivable discounted at the annual rate of LIBOR plus a bankdetermined spread on the purchase date. Such sales of accounts receivable are reflected as a reduction of "Receivables, less allowances" in the ConsolidatedBalance Sheets as they meet the applicable criteria in Financial Accounting Standards Board (“FASB”) ASC 860, "Transfers and Servicing." The fees paid inrelation to such sales of accounts receivable were $0.1 million in 2018 and are included in "Selling, general, and administrative" in the ConsolidatedStatements of Operations. Approximately $20 million of receivables were sold under the terms of the factoring agreement in 2018. See Note 8 for furtherinformation related to the Receivables Facility.Inventory, Materials and Supplies — Inventory, materials and supplies consists of network components, various telephony and IT equipment to be sold tocustomers, maintenance inventories, and other materials and supplies, which are carried at the lower of average cost or market.Property, Plant and Equipment — Property, plant and equipment is stated at original cost and presented net of accumulated depreciation and impairmentlosses. Property, plant and equipment acquired in conjunction with the acquisition of Hawaiian Telcom was stated at fair value in accordance with ASC 805.Maintenance and repairs are charged to expense as incurred while improvements, which extend an asset's useful life or increase its functionality, arecapitalized and depreciated over the asset's remaining life. The majority of the Entertainment and Communications network property, plant and equipmentused to generate its voice and data revenue is depreciated using the group method, which develops a depreciation rate annually based on the average usefullife of a specific group of assets rather than for each individual asset as would be utilized under the unit method. 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 ofleasehold 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 optionalrenewal 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 fairvalue of a legal liability for an asset retirement obligation in the period it is incurred. The estimated removal cost is initially capitalized and depreciated overthe remaining life of the underlying asset. The associated liability is accreted to its present value each period. Once the obligation is ultimately settled, anydifference between the final cost and the recorded liability is recognized as gain or loss on disposition.73Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Goodwill — Goodwill represents the excess of the purchase price consideration over the fair value of net assets acquired and recorded in connection withbusiness acquisitions. Goodwill is generally allocated to reporting units one level below business segments. Goodwill is tested for impairment on an annualbasis 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 is recognized. An impairment loss is measured as the excess of the carrying value of goodwill of a reporting unit over its fair value.Long-Lived Assets — Management reviews the carrying value of property, plant and equipment and other long-lived assets, including intangible assets withdefinite lives, when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss isrecognized when the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and its eventual disposition isless 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-livedintangible assets are amortized based on the estimated economic value generated by the asset in future years.Investment in CyrusOne — On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operatesour former Data Center Colocation business.In 2016, we sold 4.1 million shares of CyrusOne's common stock for net proceeds totaling $189.7 million that resulted in a gain of $157.0 million. In the firstquarter of 2017, we sold our remaining 2.8 million shares of CyrusOne Inc. common stock for net proceeds totaling $140.7 million that resulted in a realizedgain of $117.7 million. As of December 31, 2017, we no longer have an investment in CyrusOne Inc. Dividends declared by CyrusOne in 2016 totaled $6.4million and were included in "Other (income) expense, net" in the Consolidated Statement of Operations.Equity Method Investments — The Company records equity method investments at carrying value within “Other noncurrent assets” in the ConsolidatedBalance Sheets. The Company's proportionate share of the investments’ net loss had a minimal impact on our Consolidated Statements of Operations in 2018,2017 and 2016. Equity method investments are tested for impairment on an annual basis or when events or changes in circumstances indicate that such assetsmay be impaired. In the third quarter of 2017, the entire carrying value of $4.7 million of an equity method investment was impaired and recorded to "Other(income) expense, net" in the Consolidated Statements of Operations.Cost Method Investments — Certain of our cost method investments do not have readily determinable fair values. The carrying value of these investmentswas $5.8 million and $3.8 million as of December 31, 2018 and 2017, respectively, and was included in "Other noncurrent assets" in the ConsolidatedBalance 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 lossis 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 acapital or operating lease.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 recordedas a reduction to “Additional paid-in capital” in the Consolidated Balance Sheets.Revenue Recognition — Effective January 1, 2018, the Company adheres to revenue recognition principles described in FASB ASC 606, “RevenueRecognition.” Under ASC 606, revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects theconsideration to which the Company expects to be entitled in exchange for those goods or services. A good or service is considered to be transferred whenthe customer obtains control.The Company had no customers whose revenue comprised greater than 10% of total revenue in 2018 and 2017. The Company had sales with one customer,GE, which contributed 11% to total revenue in 2016. Revenue derived from foreign operations is approximately 6% and 3% of consolidated revenue in 2018and 2017, respectively. Revenue derived from foreign operations was immaterial in 2016.74Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and Communications — Revenues from local telephone, special access, internet product and video services, which are billed monthly prior toperformance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Consumer long distance, switchedaccess and other usage based charges are billed monthly in arrears. Entertainment 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-basedservices such as long distance and switched access, we must estimate service revenues earned but not yet billed. These estimates are based upon historicalusage, and we adjust these estimates during the period in which actual usage is determinable, typically in the following reporting period.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.For long-term indefeasible right of use, or IRU, contracts for fiber circuit capacity, the Company may receive up-front payments for services to be deliveredfor a period of up to 25 years. In these situations, the Company defers the revenue and amortizes it on a straight-line basis to earnings over the term of thecontract. The Company began recognizing a financing component, in accordance with ASC 606, associated with the up-front payments for services to bedelivered under IRU contracts for fiber circuit capacity. See Note 3 for further information.IT Services and Hardware — Revenue is generally recognized as the service is provided. Maintenance on telephony equipment is deferred and recognizedratably over the term of the underlying customer contract, generally one to three years.For hardware sales, revenue is recognized net of the cost of product and is recognized when the hardware is shipped. Installation service revenue is generallyrecognized when installation is complete. We sell equipment and installation services on both a combined and standalone basis.For the sale of hardware within the Infrastructure Solutions category, we evaluate whether we are the principal (in which case we report revenues on a grossbasis) or an agent (in which case we report revenues on a net basis). In this assessment, we consider if we obtain control of the specified goods or servicesbefore they are transferred to the customer as well as other indicators such as the party primarily responsible for fulfillment, inventory risk and discretion inestablishing price. Based on these criteria, the Company typically acts as an agent and, as such, will record revenue associated with the sale of hardware net ofthe related cost of products.Advertising Expenses — Costs related to advertising are expensed as incurred. Advertising costs were $14.2 million, $13.5 million, and $9.5 million in2018, 2017, and 2016, respectively.Legal Expenses — In the normal course of business, the Company is involved in various claims and legal proceedings. Legal costs incurred in connectionwith loss contingencies are expensed as incurred. Legal claim accruals are recorded once determined to be both probable and estimable.Income, Operating, and Regulatory TaxesIncome taxes — The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various foreign, state and localjurisdictions. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income taxreturn. The income tax provision consists of an amount for taxes currently payable and an amount for tax consequences deferred to future periods. Deferredinvestment tax credits are amortized as a reduction of the provision for income taxes over the estimated useful lives of the related property, plant andequipment. Deferred income taxes are provided for temporary differences between financial statement and income tax assets and liabilities. Deferred incometaxes are recalculated annually at rates then in effect. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than notto be realized. The ultimate realization of the deferred income tax assets depends upon the ability to generate future taxable income during the periods inwhich 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.75Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Operating taxes — Certain operating taxes such as property, sales, use, and gross receipts taxes are reported as expenses in operating income primarily withincost 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 foraudit exposures are established based on management's assessment of the probability of payment. The provision for such liabilities is recognized as eitherproperty, 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 ofthese taxes by billing the customer; however, collections cannot exceed the amount due to the federal regulatory agency. These federal regulatory taxes arepresented in revenue 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 fromcustomers and, in fact, does not collect the tax from customers in certain instances. The amounts recorded as revenue for 2018, 2017, and 2016 were $22.2million, $16.8 million and $16.3 million, respectively. The amounts reported as expense for 2018, 2017 and 2016 were $23.4 million, $17.7 million, and$17.5 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 applicablevesting period. For awards which contain a performance condition, compensation expense is recognized over the service period, when achievement of theperformance 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 theCompany’s closing share price on the date of grant. For all share-based payments, the Company accounts for forfeitures as they occur. Actual forfeitureactivity reduces the total fair value of the awards to be recognized as compensation expense. When an award is granted to an employee who is retirementeligible, the compensation cost is recognized over the service period up to the date that the employee first becomes eligible to retire.Pension and Postretirement Benefit Plans — The Company maintains qualified and non-qualified defined benefit pension plans, and also providespostretirement healthcare and life insurance benefits for eligible employees. We recognize the overfunded or underfunded status of the defined benefitpension and other postretirement benefit plans as either an asset or liability. Changes in the funded status of these plans are recognized as a component ofcomprehensive income (loss) in the year they occur. Pension and postretirement healthcare and life insurance benefits earned during the year and interest onthe projected benefit obligations are accrued and recognized currently in net periodic benefit cost. Prior service costs and credits are amortized over theaverage life expectancy of participants or remaining service period, based upon whether plan participants are mostly retirees or active employees. Net gainsor losses resulting from differences between actuarial estimates or from changes in actuarial assumptions are recognized as a component of annual netperiodic benefit cost. Unrecognized actuarial gains or losses that exceed 10% of the projected benefit obligation are amortized on a straight-line basis overthe average remaining service life of active employees for the Cincinnati pension and bargained postretirement plans (approximately 8-12) and average lifeexpectancy of retirees for the Cincinnati management postretirement plan (approximately 15 years). The accumulated gains or losses associated with theHawaii plans do not exceed the corridor requiring amortization.Business Combinations — In accounting for business combinations, we apply the accounting requirements of FASB ASC 805, “Business Combinations,”which requires the recording of net assets of acquired businesses at fair value. The Company utilizes management estimates and an independent third-partyvaluation firm to assist in determining the fair values of acquired assets and assumed liabilities. In developing estimates of the fair value of net assets, theCompany analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, currentreplacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significantestimates and assumptions, particularly with respect to the intangible assets. The Company reports in its consolidated financial statements provisionalamounts for the items for which accounting is incomplete. Goodwill is adjusted for any changes to provisional amounts made within the measurement period.Fair Value Measurements — Fair value of financial and non-financial assets and liabilities is defined as the price representing the amount that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is utilized to measure certaininvestments on a recurring basis. Fair value measurements are also utilized to determine the initial value of assets and liabilities acquired in a businesscombination, to perform impairment tests, and for disclosure purposes.76Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Management uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted marketprices or observable inputs, fair value is determined using valuation models that incorporate assumptions that a market participant would use in pricing theasset 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 andliabilities, 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 thatare 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 arederived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); andLevel 3 — Unobservable inputs that reflect management's determination of assumptions that market participants would use in pricing the asset orliability. These inputs are developed based on the best information available, including our own data.The determination of where an asset or liability falls in the hierarchy requires significant judgment.Foreign Currency Translation and Transactions — The financial position of foreign subsidiaries is translated at the exchange rates in effect at the end ofthe period, while revenues and expenses are translated at average rates of exchange during the period. Gains or losses from translation of foreign operationswhere the local currency is the functional currency are included as components of accumulated other comprehensive income. Gains and losses arising fromforeign currency transactions are recorded in "Other (income) expense, net" in the period incurred.77Table of ContentsForm 10-K Part II Cincinnati Bell Inc.2. Recently Issued Accounting StandardsIn May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers. The standard’s core principle is thata company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which thecompany expects to be entitled in exchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entityproviding users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arisingfrom the entity’s contracts with customers. The Company adopted the new standard and all subsequent amendments as of January 1, 2018. The Companyutilized the full retrospective method; therefore, each prior reporting period presented was adjusted beginning with the issuance of the Company’s 2018interim financial statements.The most significant impact of adopting the new standard is the change to the treatment of hardware revenue in the Infrastructure Solutions category fromrecording hardware revenue as a principal (gross) to recording revenue as an agent (net). Based on our assessment of ASU 2016-08, Revenue from Contractswith Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016, the Company acts as anagent and as such will record hardware sales net of the related cost of products. ASU 2016-08 clarifies the implementation guidance on principal versus agentconsiderations focusing on a control model rather than a risk and reward model. As a result of adopting ASU 2014-09, revenue and cost of products decreasedby $168.2 million and $222.8 million, for 2016 and 2017, respectively. Changes in accounting policies related to variable consideration or rebates did nothave a material effect on the Company's financial statements. Fulfillment and acquisition costs that are now recorded as an asset and amortized on a monthlybasis decreased expense by $1.5 million and $0.7 million, for 2016 and 2017, respectively. Additionally, as a result of the adoption of ASC 606 an increaseto tax expense of $0.5 million was recorded in 2016 and a decrease to tax expense of $4.2 million was recorded in 2017. This change to expense forfulfillment and acquisition costs and tax expense increased both basic and diluted earnings per share for 2016 by $0.02 and increased both basic and dilutedearnings per share for 2017 by $0.11 and $0.12, respectively. An incremental asset related to fulfillment and acquisition costs of $30.1 million was recordedon the balance sheet as of January 1, 2016, with an offsetting reduction in "Accumulated deficit." As a result of the entry, the total contract asset related tofulfillment and acquisition costs was $30.6 million at January 1, 2016. The impact of these adjustments resulted in a decrease of $10.8 million to "Deferredincome tax assets" as of January 1, 2016, with the offset to "Accumulated deficit." See Note 3 for additional disclosures as a result of adopting ASC Topic606.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance inGAAP on the classification and measurement of financial instruments. The amended guidance requires entities to carry all investments in equity securities atfair value and changes in fair value shall be recognized through net income unless the entity has elected the practicability exception to fair valuemeasurement. This standard is effective for the fiscal year ending December 31, 2018 and requires a cumulative-effect adjustment to beginning retainedearnings on this date. The Company adopted the standard effective January 1, 2018. The Company does not hold any equity securities as of December 31,2018.In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee modelthat 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 ASU iseffective for public entities for fiscal years beginning after December 15, 2018. As issued, the standard requires lessors and lessees to use a modifiedretrospective transition method for existing leases. ASU 2016-02 was amended in January 2018 by the provisions of ASU 2018-01, “Land Easement PracticalExpedient for Transition to Topic 842,” and in July 2018 by the provisions of ASU 2018-10, “Codification Improvements to Topic 842, Leases,” andASU 2018-11, “Targeted Improvements,” and in November 2018 by the provisions of ASU 2018-20, "Narrow-Scope Improvements for Lessors." TheCompany adopted the standard and all subsequent amendments on January 1, 2019.The Company has completed procedures to identify the existing lease population to which the new standard is applicable. The Company has implementedchanges to accounting policies, processes, systems, and internal controls. The Company procured a third-party lease accounting software solution to facilitatethe ongoing accounting and financial reporting requirements of the ASU. The new standard will result in the recognition of operating lease right-of-use assetsof approximately $35 million to $45 million on the Company’s consolidated balance sheets.78Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The new standard allows for certain practical expedients relating to the separation of lease and non-lease components, which is required under Topic 842.The Company's operating leases for certain network services that include Customer Premise Equipment, such as handsets and set-top boxes, have lease andnon-lease components which the Company has elected to account for as one single non-lease component in accordance with ASC 606. The Company alsoelected the practical expedient allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustmentto the opening balance of retained earnings in the period of adoption. The cumulative effect of adopting the standard is immaterial. The adoption of thisstandard, as amended, will not result in the restatement of comparative periods presented.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments, which amends ASC230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with theintent of reducing diversity in practice. The ASU is effective for public entities for annual reporting periods beginning after December 15, 2017, includinginterim periods within those fiscal years. The Company adopted this standard effective January 1, 2018. The adoption of this standard did not have a materialeffect on the Company’s Consolidated Statement of Cash Flows.In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, whichamends the requirements in ASC 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsoreddefined benefit pension and other postretirement plans. The ASU requires entities to disaggregate the current service cost component from the othercomponents of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement.The other components shall be presented elsewhere in the income statement and outside of income from operations, if such a subtotal is presented, on aretrospective basis as of the date of adoption. In addition, only the service cost component of net benefit cost is eligible for capitalization on a prospectivebasis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company retrospectively adopted thestandard effective January 1, 2018. The Company re-classed $1.3 million and $6.6 million of other components of net benefit cost from "Cost of services andproducts" to a new line below Operating income, "Other components of pension and postretirement benefit plans expense," on the Consolidated Statementsof Operations for 2016 and 2017, respectively. The Company re-classed $3.0 million and $6.0 million of other components of net benefit cost from "Selling,general and administrative," to "Other components of pension and postretirement benefit plans expense," on the Consolidated Statements of Operations for2016 and 2017, respectively. The Company re-classed $4.0 million of other components of net benefit cost from "Other" related to a settlement charge to"Other components of pension and postretirement benefit plans expense," on the Consolidated Statements of Operations for 2017.In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation, which amends the scope of modification accounting for share-basedpayment arrangements. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company prospectivelyadopted the standard effective January 1, 2018 and will apply the amended guidance to any awards modified on or after this date.In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, whichimproves the hedge accounting model to facilitate financial reporting that more closely reflects a company’s risk management activities. The FASB’s newguidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosurerequirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk managementstrategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. This update is effectivefor fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period afterissuance of the update. The Company early-adopted the guidance effective April 1, 2018.In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effectsfrom Accumulated Other Comprehensive Income, which allows entities to elect to make a one-time reclassification from accumulated other comprehensiveincome to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The ASU is effective for public entities for annualreporting periods beginning after December 15, 2018, and for interim periods within those fiscal years. Early adoption is permitted. The Company earlyadopted this guidance effective December 31, 2017, resulting in a reclassification adjustment of $32.2 million to "Accumulated deficit" from "Accumulatedother comprehensive loss" on the Consolidated Balance Sheets. The amount of the reclassification is calculated on the basis of the difference between thehistorical and newly enacted tax rates on deferred taxes related to our pension and postretirement benefit plans.79Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software, which aligns the accounting for implementation costsincurred in a hosting arrangement that is a service contract with the requirements in ASU 350-40 for capitalizing implementation costs incurred to develop orobtain internal-use software. The amendments in this ASU also require the entity to present the expense related to the capitalized implementation costs in thesame line item in the statement of income as the fees associated with the hosting element of the arrangement and classify payments for capitalizedimplementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The amendments inthis ASU are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Theamendments should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption ispermitted in any interim period after issuance of the update. The Company early adopted this standard prospectively effective January 1, 2019.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 dateare not expected to have a material impact on the Company’s consolidated financial statements upon adoption.80Table of ContentsForm 10-K Part II Cincinnati Bell Inc.3. RevenueThe Entertainment and Communications segment provides products and services to both consumer and enterprise customers that can be categorized as eitherFioptics in Cincinnati or Consumer/SMB Fiber in Hawaii (collectively, "Consumer/SMB Fiber"), Enterprise Fiber or Legacy. The products and serviceswithin these three categories can be further categorized as either Data, Voice, Video or Other. Consumer/SMB Fiber and Legacy revenue include bothconsumer and enterprise customers. Enterprise Fiber revenue includes ethernet and dedicated internet access services that are provided to enterprisecustomers. Enterprise Fiber also includes revenue associated with the Southeast Asia to United States ("SEA-US") trans Pacific submarine cable system, whichwas acquired in conjunction with the acquisition of Hawaiian Telcom in the third quarter of 2018, and connects Indonesia, the Philippines, Guam, Hawaiiand the mainland United States.Consumer customers have implied month-to-month contracts, while enterprise customers, with the exception of contracts associated with the SEA-US,typically have contracts with a duration of one to five years and automatically renew on a month to month basis. Customers are invoiced on a monthly basisfor services rendered. Contracts for projects that are included within the Other revenue stream are typically short in duration and less than one year. Contractsassociated with the SEA-US typically range from 15 to 25 years and payment is prepaid.The IT Services and Hardware segment provides a full range of Information Technology ("IT") solutions, including Communications, Cloud and Consultingservices. IT Services and Hardware customers enter into contracts that have a typical duration of one to five years, with varied renewal options at the end ofthe term. Customers are invoiced on a monthly basis for services rendered. The IT Services and Hardware segment also provides enterprise customers withInfrastructure Solutions, which includes the sale of hardware and maintenance contracts. These contracts are typically satisfied in less than twelve months andrevenue is recognized at a point in time.The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on January 1, 2018,using the full retrospective method. See below for further discussion of the adoption, including the impact on our 2017 and 2016 financial statements.The Company has elected the practical expedient described in ASC 606-10-32-18 that allows an entity to not adjust the promised amount of considerationfor the effects of a significant financing component if the entity expects that the period of time between the transfer of a promised good or service to thecustomer and when the customer pays for such good or service will be one year or less. Customers are typically billed immediately upon the rendering ofservices or the delivery of products. Payment terms for customers are between 30 and 180 days. Subsequent to the acquisition of Hawaiian Telcom, theCompany began recognizing a financing component associated with the up-front payments for services to be delivered under indefeasible right of use("IRU") contracts for fiber circuit capacity. The IRU contracts are associated with the SEA-US. The IRU contracts typically have a duration ranging from 15 to25 years.Method of AdoptionThe Company adopted ASC Topic 606 on January 1, 2018, using the full retrospective method. The comparative periods for 2018, 2017 and 2016 are recastand reported in accordance with ASC Topic 606. The adoption of ASC Topic 606 primarily affected product revenue and cost of products on ourConsolidated Financial Statements. Based on the Company’s assessment of ASC Topic 606 as it relates to the sale of hardware within the InfrastructureSolutions category, the Company considers itself an agent (net) versus as a principal (gross). Based on our assessment of ASU 2016-08, Revenue fromContracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016, the Companyacts as an agent and as such will record revenue associated with the sale of hardware net of the related cost of products. This conclusion is based on theCompany not obtaining control of the inventory since in most cases the Company does not take possession of the inventory, does not have the ability todirect the product to anyone besides the purchasing customer, and does not integrate the hardware with any of our own goods or services. In situations wherethe Company does take possession, the Company assesses if we act as the principal or the agent in such circumstances. While the Company does performinstallation services in certain cases, those services involve installing the hardware into the customer’s existing technology. Installation is considered aseparate performance obligation as it is capable of being distinct, and is distinct, within the context of the contract. The reduction to "Revenue" and "Cost ofservices and products" related to recording these contracts on a net basis is $222.8 million and $168.2 million for the years ended 2017 and 2016,respectively.81Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In addition to the changes discussed above, additional contract assets related to fulfillment costs and costs of acquisition of $30.1 million were recorded to"Other noncurrent assets" as of January 1, 2016, with an offsetting reduction in "Accumulated deficit." As a result of the entry, total contract assets related tofulfillment and acquisition costs were $30.6 million as of January 1, 2016. Under the new standard, the Company defers all incremental sales incentives andother costs incurred in order to obtain a contract with a customer. The Company amortizes the contract asset related to both fulfillment costs and cost ofacquisition over the period of time the services under the contract are expected to be delivered to the customer.Performance ObligationsA performance obligation is a promise in a contract to transfer a distinct good or service to the customer, or a series of distinct goods or services, and is theunit of account defined in ASC Topic 606. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenuewhen, or as, the performance obligation is satisfied. Contract modifications for changes to services provided are routine throughout the term of our contracts.In most instances, contract modifications are for the addition or reduction of services that are distinct, and price changes are based on the stand-alone sellingprice of the service and, as such, are accounted for on a prospective basis as a new contract.Goods and services are sold individually, or a contract may include multiple goods or services. For contracts with multiple goods and services, the contracttransaction price is allocated to each performance obligation using the stand-alone selling price of each distinct good or service in the contract.Certain customers of the Company may receive cash-based rebates based on volume of sales, which are accounted for as variable consideration. Potentialrebates are considered at contract inception in our estimate of transaction price based on the projected volume of sales. Estimates are reassessed quarterly.Performance obligations are satisfied either over time as services are performed, or at a point in time. Substantially all of our service revenue is recognizedover time. For services transferred over time, the Company has elected the practical expedient to recognize revenue based on amounts invoiced to thecustomer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Managementconsiders this a faithful depiction of the transfer of control as services are provided evenly over the month and are substantially the same over the life of thecontract. As the Company has elected the practical expedients detailed at ASC 606-10-50-13, revenue for these unsatisfied performance obligations that willbe billed in future periods has not been disclosed.As of December 31, 2018, our estimated revenue, including a financing component, expected to be recognized in the future related to performanceobligations associated with customer contracts that are unsatisfied (or partially unsatisfied) is $39.7 million. Approximately 80% of this revenue is related toIRU contracts associated with the SEA-US (see Note 9). Certain IRU contracts extend for periods of up to 30 years and are invoiced at the beginning of thecontract term. The revenue from such contracts is recognized over time as services are provided over the contract term. The expected revenue to berecognized for existing IRU contracts is as follows:(dollars in millions) 2019 $2.62020 2.62021 2.52022 2.62023 2.5Thereafter 26.982Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Entertainment and CommunicationsThe Company has identified four distinct performance obligations in the Entertainment and Communications segment, namely Data, Voice, Video and Other.Data, Voice and Video services are a series of distinct services because service is delivered to the customer continuously and in a substantially similar mannerfor each period of the agreement. Services provided by the Entertainment and Communications segment can be categorized into three main categories thatinclude Consumer/SMB Fiber, Enterprise Fiber and Legacy, each of which may include one or more of the aforementioned performance obligations. Dataservices include high-speed internet access, digital subscriber lines, ethernet, TDM, SONET (Synchronous Optical Network), Small Cell, dedicated internetaccess, wavelength, digital signal and IRU revenue. Voice services include traditional and fiber voice lines, switched access, digital trunking and consumerlong distance calling. Video services are offered through our fiber network to consumer and enterprise customers based on various standard plans with theopportunity to add premium channels. To receive video services, customers are required to use the Company's set top boxes that are billed as part of themonthly recurring service. Set top boxes are not considered a separate performance obligation from video because the equipment is necessary for the serviceto operate and the customer has no alternative use for the equipment.Services and products not included in Data, Voice or Video are included in Other revenue and are comprised of wire care, wire time and materials projects andadvertising. Transfer of control of these services and products is evaluated on an individual project basis and can occur over time or at a point in time.The Company uses multiple methods to determine stand-alone selling prices in the Entertainment and Communications segment. For Data, Video and Voiceproducts in Consumer/SMB Fiber, market rate is the primary method used to determine stand-alone selling prices. For Data performance obligations under theEnterprise Fiber category, and Voice, Data and Other performance obligations under the Legacy category, stand-alone selling prices are determined based ona list price, discount off of list price, a tariff rate, a margin percentage range, or a minimum margin percentage.IT Services and HardwareThe Company has identified four distinct performance obligations in the IT Services and Hardware segment. These performance obligations areCommunications, Cloud, Consulting and Infrastructure Solutions. Communications services are monthly services that include UCaaS, SD-WAN, NaaS,Contact Center, enterprise long distance, MPLS (Multi-Protocol Label Switching) and Networking Solutions. Cloud services include storage, backup, SLA-based monitoring and management, virtual data centers and cloud consulting. Consulting services provide customers with IT staffing, consulting, andapplication services. Infrastructure Solutions includes the sale of hardware, software and maintenance contracts.For the sale of hardware, the Company evaluated whether it is the principal or the agent. The Company has concluded it acts as an agent because it does notcontrol the inventory before it is transferred to customers, it does not have the ability to direct the product to anyone besides the purchasing customer, and itdoes not integrate the hardware with any of its own goods or services. Based on this assessment, the performance obligation is to arrange a sale of hardwarebetween the manufacturer and the customer. In the instance where there is an issue with the hardware, the Company coordinates with the manufacturer tofacilitate a return in accordance with the standard manufacturer warranty. Hardware returns are not significant to the Company.Within the IT Services and Hardware segment, stand-alone selling prices for the four performance obligations were determined based on either a marginpercentage range, minimum margin percentage or standard price list.For hardware sales, revenue is recognized net of the cost of product and is recognized when the hardware is shipped. For certain projects withinCommunications and Consulting, revenue is recognized when the customer communicates acceptance of the services performed. For contracts with freight onboard shipping terms, management has elected to account for shipping and handling as activities to fulfill the promise to transfer the good, and therefore, hasnot evaluated whether shipping and handling activities are promised services to its customers.83Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Contract Balances The Company recognizes incremental fulfillment costs as an asset when installation expenses are incurred as part of performing the agreement for Voice,Video and Data product offerings in the Entertainment and Communications segment when the contract life is longer than one year. These fulfillment costsare amortized ratably over the expected life of the customer, which is representative of the expected period of benefit of the asset capitalized. The expectedlife of the customer is determined utilizing the average churn rate. The Company calculates average churn based on the historical average customer life. Wealso recognize an asset for incremental fulfillment costs for certain Communications services in the IT Services and Hardware segment that require us to incurinstallation and provisioning expenses. The asset recognized for Communication services is amortized over the average contract life. Churn rates and averagecontract life are reviewed on an annual basis. Fulfillment costs are capitalized to “Other noncurrent assets.” The related amortization expense is recorded to“Cost of services and products.”The Company recognizes an asset for the incremental costs of acquiring a contract with a customer if we expect the benefit of those costs to be longer thanone year. We have determined that certain sales incentive programs related to Voice, Video, Data and certain Communications and Cloud services meet therequirements to be capitalized. The contract asset established for the costs of acquiring a contract are recorded to “Other noncurrent assets.” Sales incentivesare amortized ratably over the period that services are delivered using either an average churn rate or average contract term, both representative of theexpected period of benefit of the asset capitalized. Customer churn rates and average contract term assumptions are reviewed on an annual basis. The relatedamortization expense is recorded to “Selling, general and administrative.”Management has elected to use the practical expedient detailed in ASC 340-40-25-4 to expense any costs to fulfill a contract and costs to obtain a contract asthey are incurred when the amortization period would be one year or less. This practical expedient has been applied to fulfillment costs that includeinstallation costs associated with wiring projects and certain Cloud services. In addition, this practical expedient has been applied to acquisition costsassociated with revenue from certain Communications projects.The following table presents the activity for the Company’s contract assets: Fulfillment Costs Cost of Acquisition Total Contract Assets(dollars inmillions)Entertainment andCommunications IT Services andHardware TotalCompany Entertainment andCommunications IT Services andHardware TotalCompany Entertainment andCommunications IT Services andHardware TotalCompanyBalance as ofJanuary 1, 2016$15.0 $1.5 $16.5 $12.7 $1.4 $14.1 $27.7 $2.9 $30.6Additions14.5 1.1 15.6 7.3 0.7 8.0 21.8 1.8 23.6Amortization(12.5) (1.0) (13.5) (7.9) (0.8) (8.7) (20.4) (1.8) (22.2)Balance as ofDecember 31, 201617.0 1.6 18.6 12.1 1.3 13.4 29.1 2.9 32.0Additions13.7 1.6 15.3 6.8 1.1 7.9 20.5 2.7 23.2Amortization(13.2) (1.2) (14.4) (7.3) (1.1) (8.4) (20.5) (2.3) (22.8)Balance as ofDecember 31, 201717.5 2.0 19.5 11.6 1.3 12.9 29.1 3.3 32.4Additions9.9 1.9 11.8 7.9 1.7 9.6 17.8 3.6 21.4Amortization(12.9) (1.4) (14.3) (6.5) (1.0) (7.5) (19.4) (2.4) (21.8)Balance as ofDecember 31, 201814.5 2.5 17.0 13.0 2.0 15.0 27.5 4.5 32.0The Company recognizes a liability for cash received upfront for IRU contracts. At December 31, 2018, $1.4 million of contract liabilities were included in"Other current liabilities" and $28.0 million of contract liabilities were included in "Other noncurrent liabilities."84Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Disaggregated RevenueThe following table presents revenues disaggregated by product and service lines. Year ended December 31,(dollars in millions)2018 2017 2016Data$402.6 $344.5 $333.0Video183.3 148.9 125.6Voice244.9 199.0 217.9Other22.6 13.7 14.8Total Entertainment and Communications853.4 706.1 691.3Consulting165.3 89.3 86.7Cloud98.0 81.0 85.5Communications178.5 160.6 144.3Infrastructure Solutions109.1 54.2 36.2Total IT Services and Hardware550.9 385.1 352.7Intersegment revenue(26.1) (25.5) (26.4)Total revenue$1,378.2 $1,065.7 $1,017.6The following table presents revenues disaggregated by contract type. Year ended December 31,(dollars in millions)2018 2017 2016Entertainment and Communications Products and services transferred at a point in time$25.3 $20.6 $23.2 Products and services transferred over time805.8 664.3 647.1 Intersegment revenue22.3 21.2 21.0 Total Entertainment and Communications853.4 706.1 691.3IT Services and Hardware Products and services transferred at a point in time142.9 $80.8 $54.9 Products and services transferred over time404.2 300.0 292.4 Intersegment revenue3.8 4.3 5.4 Total IT Services and Hardware550.9 385.1 352.7Total Revenue Total products and services transferred at a point in time168.2 101.4 78.1 Total products and services transferred over time1,210.0 964.3 939.5 Total revenue$1,378.2 $1,065.7 $1,017.685Table of ContentsForm 10-K Part II Cincinnati Bell Inc.4. Mergers and AcquisitionsAcquisition of Hawaiian Telcom Holdco, Inc.On July 2, 2018, the Company acquired Hawaiian Telcom Holdco, Inc. ("Hawaiian Telcom") for cash consideration of $218.3 million, stock consideration of$121.2 million and debt repayments, including accrued interest, of $318.2 million. Hawaiian Telcom is the ILEC for the State of Hawaii and the largest fullservice provider of communication services and products in the state. With the acquisition, the Company gains access to both Honolulu, a well-developed,fiber-rich city, as well as the growing neighbor islands. The companies' combined fiber networks are nearly 16,500 fiber route miles.The purchase price for Hawaiian Telcom consisted of the following:(dollars in millions) Cash consideration plus debt assumed$536.5Cincinnati Bell Inc. stock issued121.2Debt repayment(318.2)Total purchase price$339.5In order to fund the acquisition, the Company utilized proceeds of $350.0 million from the 8% Senior Notes due 2025 ("8% Notes"), $16.5 million of the cashthat was previously restricted to fund interest payments on the 8% Notes, drew $35.0 million on the Revolving credit facility and $154.0 million on theaccounts receivable securitization facility (see Note 8). In conjunction with the acquisition, the Company issued 7.7 million Common Shares at a price of$15.70 per share as stock consideration. The Company recorded a total of $27.2 million in acquisition expenses related to the acquisition of HawaiianTelcom, of which $19.2 million and $8.0 million were recorded in 2018 and 2017, respectively. These expenses are recorded in "Transaction and integrationcosts" on the Consolidated Statements of Operations.Acquisition of OnX Holdings LLCOn October 2, 2017, the Company acquired 100% of OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutionsto enterprise customers in the U.S., Canada and the U.K. The acquisition extends the IT Services and Hardware segment's geographic footprint and acceleratesits initiatives in IT cloud migration.The purchase price for OnX consisted of the following:(dollars in millions) Cash consideration$241.2Debt repayment(77.6)Working capital adjustment2.8Total purchase price$166.4The cash portion of the purchase price was funded through borrowings under the Credit Agreement (see Note 8). The cash consideration includes $77.6million related to existing debt, including accrued interest, that was repaid in conjunction with the close of the acquisition. In addition, a working capitaladjustment of $2.8 million was paid in the first quarter of 2018. The Company recorded $8.6 million in acquisition expenses related to the OnX acquisition,of which $0.5 million and $8.1 million were recorded in 2018 and 2017, respectively. These expenses are recorded in "Transaction and integration costs" onthe Consolidated Statements of Operations.Purchase Price Allocation and Other ItemsThe determination of the final purchase price allocation to specific assets acquired and liabilities assumed are preliminary for the Hawaiian Telcomtransaction. The purchase price allocations, based on fair value estimates, may change in future periods as customary post-closing reviews are concludedduring the measurement period, and the fair value estimates of assets and liabilities and certain tax aspects of the transaction are finalized.86Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The purchase price for OnX and Hawaiian Telcom have been currently allocated to individual assets acquired and liabilities assumed as follows:(dollars in millions)HawaiianTelcom OnXAssets acquired Cash$4.3 $6.5 Receivables25.5 69.9 Inventory, materials and supplies6.9 9.0 Prepaid expenses and other current assets5.9 2.8 Property, plant and equipment701.5 11.6 Goodwill8.8 133.1 Intangible assets52.0 134.0 Deferred income tax asset43.6 1.4 Other noncurrent assets2.1 1.8Total assets acquired850.6 370.1Liabilities assumed Accounts payable58.0 63.6Current portion of long-term debt10.2 1.3Unearned revenue and customer deposits13.5 — Accrued expenses and other current liabilities21.7 18.3 Deferred income tax liabilities— 42.3Long-term debt, less current portion304.5 76.7Pension and postretirement benefit obligations68.9 — Other noncurrent liabilities34.3 1.5Total liabilities assumed511.1 203.7Net assets acquired$339.5 $166.4During the fourth quarter of 2018, the Company recorded immaterial measurement period adjustments for Hawaiian Telcom. The offset of these adjustmentswere recorded as an increase to "Goodwill."During the first quarter of 2018, the Company recorded immaterial measurement period adjustments for OnX. The offset of these adjustments were recorded asan increase to "Goodwill."The revenues and net income of OnX included in the Consolidated Statements of Operations from the acquisition date through December 31, 2017 were$53.0 million and $11.5 million, respectively. The revenues and net income of Hawaiian Telcom included in the Consolidated Statements of Operations fromthe acquisition date through December 31, 2018 were $175.0 million and $0.7 million, respectively.The estimated fair value of identifiable intangible assets and their estimated useful lives are as follows: Hawaiian Telcom OnX(dollars in millions)Fair Value UsefulLives Fair Value UsefulLivesCustomer relationships$26.0 15 years $108.0 15 yearsTrade name26.0 15 years 16.0 10 yearsTechnology— — 10.0 10 yearsTotal identifiable intangible assets$52.0 $134.0 87Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The goodwill for OnX is attributable to increased access to a diversified customer base and acquired workforce in the U.S., Canada and the U.K. The amountof goodwill related to OnX that is expected to be deductible for income tax purposes is $2.3 million. The goodwill for Hawaiian Telcom is attributable to theacquired workforce in Honolulu and the neighbor islands, deep fiber infrastructures that include direct access to the SEA-US cable linking the U.S. with Asiaand increased access to a diversified customer base.Pro Forma Information (Unaudited)The following table provides the unaudited pro forma results of operations for the year ended 2018, 2017 and 2016 as if the acquisitions of OnX andHawaiian Telcom had taken place as of the beginning of fiscal year 2016 and 2017, respectively. These proforma results include adjustments related to thefinancing of the acquisitions, an increase to depreciation and amortization associated with the higher values of property, plant and equipment and intangibleassets, an increase to interest expense for the additional debt incurred to complete the acquisitions, and reflects the related income tax effect and change intax status. Revenue has been retrospectively adjusted for the adoption of ASC 606 to reflect hardware revenue in the Infrastructure Solutions category net ofrelated cost of products. ASC 606 was not applied to the year ended December 31, 2017 for Hawaiian Telcom results because they utilized the modifiedretrospective method of adoption. Reported amounts for 2017 could be materially different if Hawaiian Telcom had adopted the standard using the fullretrospective method of adoption.The pro forma information does not necessarily reflect the actual results of operations had the acquisitions been consummated at the beginning of the annualreporting period indicated, nor is it necessarily indicative of future operating results. The pro forma information does not include any (i) potential revenueenhancements, cost synergies or other operating efficiencies that could result from the acquisitions or (ii) transaction or integration costs relating to theacquisitions. Year Ended December 31,(dollars in millions, except per share amounts)2018 2017 2016Revenue$1,556.5 $1,588.5 $1,767.5Net (loss) income applicable to common shareholders(77.7) (84.6) 91.7Earnings per share: Basic and diluted (loss) earnings per common share(1.55) (1.70) 2.18Other Acquisition ActivityOn February 28, 2017, the Company acquired 100% of SunTel Services LLC ("SunTel"), a private company that provides network security, dataconnectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cashconsideration of $10.0 million. Based on final fair value assessment and the finalization of the working capital adjustment, the acquired assets and liabilitiesassumed consisted primarily of property, plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1million and goodwill of $4.6 million. These assets and liabilities are included in the IT Services and Hardware segment.88Table of ContentsForm 10-K Part I Cincinnati Bell Inc.5. Earnings Per Common ShareBasic earnings per common share ("EPS") is based upon the weighted-average number of common shares outstanding during the period. Diluted EPS reflectsthe potential dilution that would occur upon issuance of common shares for awards under stock-based compensation plans, or conversion of preferred stock,but only to the extent that they are considered dilutive.The following table shows the computation of basic and diluted EPS: Year Ended December 31, 2018(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net loss$(69.8) $— $(69.8)Preferred stock dividends10.4 — 10.4Net loss applicable to common shareowners - basic and diluted$(80.2) $— $(80.2)Denominator: Weighted-average common shares outstanding - basic46.3 — 46.3Stock-based compensation arrangements— — —Weighted-average common shares outstanding - diluted46.3 — 46.3Basic and diluted loss per common share$(1.73) $— $(1.73) Year Ended December 31, 2017(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net income$40.0 $— $40.0Preferred stock dividends10.4 — 10.4Net income applicable to common shareowners - basic and diluted$29.6 $— $29.6Denominator: Weighted-average common shares outstanding - basic42.2 — 42.2Stock-based compensation arrangements0.2 — 0.2Weighted-average common shares outstanding - diluted42.4 — 42.4Basic and diluted earnings per common share$0.70 $— $0.70 Year Ended December 31, 2016(in millions, except per share amounts)ContinuingOperations DiscontinuedOperations TotalNumerator: Net income$102.7 $0.3 $103.0Preferred stock dividends10.4 — 10.4Net income applicable to common shareowners - basic and diluted$92.3 $0.3 $92.6Denominator: Weighted-average common shares outstanding - basic42.0 42.0 42.0Stock-based compensation arrangements0.1 0.1 0.1Weighted-average common shares outstanding - diluted42.1 42.1 42.1Basic and diluted earnings per common share$2.19 $0.01 $2.2089Table of ContentsForm 10-K Part I Cincinnati Bell Inc.In conjunction with the acquisition of Hawaiian Telcom in the third quarter of 2018, the Company issued 7.7 million Common Shares as a part of theacquisition consideration. In addition, the Company granted 0.1 million time-based restricted stock units to certain Hawaiian Telcom employees under theHawaiian Telcom 2010 Equity Incentive Plan.For the year ended December 31, 2018, the Company had a net loss available to common shareholders and, as a result, all common stock equivalents wereexcluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For the years ended December 31, 2017 and 2016, awardsunder the Company’s stock-based compensation plans for common shares of 0.2 million, 0.4 million, respectively, were excluded from the computation ofdiluted EPS as their inclusion would have been anti-dilutive. For all periods presented, preferred stock convertible into 0.9 million common shares wasexcluded as it was anti-dilutive.90Table of ContentsForm 10-K Part II Cincinnati Bell Inc.6. Property, Plant and EquipmentProperty, plant and equipment is comprised of the following: December 31, DepreciableLives (Years)(dollars in millions)2018 2017 Land and rights-of-way$117.2 $4.3 20-IndefiniteBuildings and leasehold improvements305.2 179.1 5-40Network equipment3,913.3 3,339.4 2-50Office software, furniture, fixtures and vehicles216.3 162.5 2-14Construction in process47.1 14.7 n/a Gross value4,599.1 3,700.0 Accumulated depreciation(2,755.1) (2,571.0) Property, plant and equipment, net$1,844.0 $1,129.0 Depreciation expense on property, plant and equipment totaled $239.6 million in 2018, $190.4 million in 2017 and $182.0 million in 2016. The portion ofdepreciation expense associated with cost of providing services was 85%, 84% and 85% in 2018, 2017 and 2016, respectively. There are numerous assetsincluded within network equipment resulting in a range of depreciable lives between 2 and 50 years, the majority of which fall within the range of 7 to 25years. In 2016, we reduced the estimated useful life of certain set-top boxes, as well as the related software, as we upgraded to new technology.No asset impairment losses were recognized in 2018, 2017 or 2016 on property, plant and equipment.As of December 31, 2018 and 2017, the Company had $114.9 million and $112.0 million, respectively, of assets accounted for as capital leases includingnetwork equipment, office software, furniture, fixtures, vehicles, buildings and building equipment. Depreciation of capital lease assets is included in"Depreciation and amortization" in the Consolidated Statements of Operations.7. Goodwill and Intangible AssetsGoodwillThe changes in the Company's goodwill consisted of the following: IT Services and Hardware Entertainment and Communications Total Company December 31,2018 December 31,2017 December 31, 2018 December 31, 2017 December 31,2018 December 31,2017(dollars in millions) Goodwill, beginning balance $148.8 $12.1 $2.2 $2.2 $151.0 $14.3Activity during the year Adjustments to prior yearacquisitions 0.7 — — — 0.7 —Acquisitions — 137.0 8.8 — 8.8 137.0Currency translations (3.5) (0.3) — — (3.5) (0.3)Goodwill, ending balance $146.0 $148.8 $11.0 $2.2 $157.0 $151.0On January 1, 2018, the Company changed the composition of its operating segments to align more closely with the Company's broader strategy and how itmanages business operations. This strategy groups CLEC revenue, which was previously included as part of the Entertainment and Communicationssegment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. As a result of the change, $9.7 million ofgoodwill related to CBTS Technology Solutions LLC ("CBTS TS") was reclassified from the Entertainment and Communications segment to the IT Servicesand Hardware segment for the period ending December 31, 2017. For further information related to these business segments see Note 16.During 2018, goodwill in the Entertainment and Communications segment increased by $8.8 million due to the acquisition of Hawaiian Telcom. For furtherinformation related to the acquisition see Note 4.During 2017, goodwill increased by $4.6 million and $132.4 million for the IT Services and Hardware segment related to the acquisitions of SunTel andOnX, respectively. For further information related to these acquisitions see Note 4.No impairment losses were recognized in goodwill for the years ended December 31, 2018, 2017 and 2016.Intangible AssetsThe Company’s intangible assets consisted of the following: December 31, 2018 December 31, 2017 Gross Carrying Accumulated Net Gross Carrying Accumulated Net(dollars in millions) Amount (a) Amortization Amount Amount (a) Amortization AmountCustomer relationships $139.4 $(17.8) $121.6 $116.0 $(8.9) $107.1Trade names 40.7 (2.8) 37.9 15.9 (0.4) 15.5Technology 9.9 (1.3) 8.6 9.9 (0.2) 9.7Total $190.0 $(21.9) $168.1 $141.8 $(9.5) $132.3(a) Change in gross carrying amounts is due to foreign currency translation on intangible assets related to OnX and intangible assets acquired in conjunction with the acquisition ofHawaiian Telcom. See Note 4 for further information.The intangible assets were established in connection with completed acquisitions. They are amortized over their useful lives based on a number ofassumptions including the estimated period of economic benefit and utilization. The weighted-average amortization period for intangible assets acquired in2018 and 2017 is 15 years and 14 years, respectively.The amortization expense for intangible assets was $12.4 million, $2.5 million and $0.2 million in 2018, 2017 and 2016 respectively. No impairment losseswere recognized on intangible assets for the years ended December 31, 2018, 2017 and 2016.91Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The estimated useful lives for each intangible asset class are as follows:Customer relationships 8to15yearsTrade names 10to15yearsTechnology 10yearsThe annual estimated amortization expense for future years is as follows:(dollars in millions) 2019 $14.62020 14.32021 14.12022 13.82023 13.5Thereafter 97.8Total $168.192Table of ContentsForm 10-K Part II Cincinnati Bell Inc.8. Debt and Other Financing ArrangementsThe Company’s debt consists of the following: December 31,(dollars in millions)2018 2017Current portion of long-term debt: Credit Agreement - Tranche B Term Loan due 2024$6.0 $6.0Other financing arrangements0.8 —Capital lease obligations13.4 12.4Current portion of long-term debt20.2 18.4Long-term debt, less current portion: Receivables Facility176.6 —Credit Agreement - Revolving Credit Facility18.0 —Credit Agreement - Tranche B Term Loan due 2024592.5 594.07 1/4% Senior Notes due 202322.3 22.37% Senior Notes due 2024625.0 625.08% Senior Notes due 2025350.0 350.0Various Cincinnati Bell Telephone notes87.9 87.9Other financing arrangements2.3 —Capital lease obligations60.5 70.5 1,935.1 1,749.7Net unamortized premium1.7 1.9Unamortized note issuance costs(27.2) (22.3) Long-term debt, less current portion1,909.6 1,729.3Total debt$1,929.8 $1,747.7Credit Agreement (effective 2017)In the fourth quarter of 2017, the Company entered into a new Credit Agreement (the "Credit Agreement") and terminated the existing Corporate CreditAgreement. The Credit Agreement provides for (i) a five-year $200 million senior secured revolving credit facility including both a letter of credit subfacilityof up to $30 million and a swingline loan subfacility of up to $25 million) (the “Revolving Credit Facility”) and (ii) a seven-year $600 million senior securedterm loan facility (the “Tranche B Term Loan due 2024”). The Revolving Credit Facility expires in October 2022 and the Tranche B Term Loan due 2024expires in October 2024. Borrowings under the Credit Agreement's Revolving Credit Facility will be used to provide ongoing working capital as well asother general corporate cash flow needs of the Company.Borrowings under the Credit Agreement bear interest, at the Company's election, at a rate per annum equal to (i) LIBOR plus the applicable margin or (ii) thebase rate plus the applicable margin. In the second quarter of 2018, the Company amended the Credit Agreement to reduce the applicable margin on theRevolving Credit Facility and Tranche B Term Loan due 2024. The LIBOR applicable margin for advances under the Revolving Credit Facility and TrancheB Term Loan due 2024 was changed from the previous 3.75% per annum to 3.25% per annum. The base rate applicable margin for advances under theRevolving Credit Facility and Tranche B Term Loan due 2024 was changed from 2.75% per annum to 2.25% per annum. Base rate is the higher of (i) thebank prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%. In the case of the Tranche B Term Loan due 2024, theLIBOR rate may not fall below 1.00%. In addition, the Company will be required to pay a commitment fee on any unused portion of the Revolving CreditFacility at a rate of 0.50% per annum, or, if the consolidated total leverage ratio of the Company and its restricted subsidiaries is equal to or less than 3.25 to1.00, 0.375% per annum. The Company will also pay customary letter of credit fees, including a fronting fee equal to 0.125% per annum of the dollarequivalent of the maximum amount available to be drawn under all outstanding letters of credit, as well as customary issuance and administration fees. AtDecember 31, 2018, borrowings under the Credit Agreement's Revolving Credit Facility were $18.0 million, leaving $182.0 million available.93Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The Revolving Credit Facility requires maintenance of a maximum consolidated secured leverage ratio of 3.50 to1.00 and a minimum consolidated interestcoverage ratio of 1.50 to 1.00. The Company may voluntarily repay and reborrow outstanding loans under the Revolving Credit Facility at any time withouta premium or a penalty, other than customary “breakage” costs with respect to LIBOR revolving loans.On October 2, 2017, the Credit Facilities net proceeds of $577.0 million were used to repay the remaining $315.8 million outstanding principal amount ofthe Tranche B Term Loan due 2020 and related accrued and unpaid interest. The remaining proceeds of the Tranche B Term Loan due 2024 were used to fundthe purchase price and associated transaction costs of the acquisition of OnX that closed on October 2, 2017. In the second quarter of 2018, the Companyamended the Credit Agreement resulting in a loss on extinguishment of debt of $1.3 million.Guarantors and Security Interests, Credit AgreementAll existing and future subsidiaries of the Company (other than Cincinnati Bell Funding LLC (and any other similar special purpose receivables financingsubsidiary), the Company's joint ventures, subsidiaries prohibited by applicable law from becoming guarantors, unrestricted subsidiaries and foreignsubsidiaries) are required to guarantee borrowings under the Credit Agreement. Debt outstanding under the Credit Agreement is secured by perfected firstpriority 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 Credit Agreement) and 66% of the equity interests in certain first-tier foreign subsidiaries held by the Company and the guarantors underthe Credit Agreement and (ii) certain personal property and intellectual property of the Company and its subsidiaries (other than that of non-guarantors of theCredit Agreement and certain other excluded property).Corporate Credit Agreement (2012 through 2017)Revolving Credit FacilityIn the fourth quarter of 2012 the Company entered into a credit agreement ("Corporate Credit Agreement") that remained in place until it was replaced inOctober 2017 with the new Credit Agreement. The Corporate Credit Agreement provided for a revolving credit facility, and in 2013 was amended to includethe $540 million Tranche B Term Loan due 2020. In 2016, an amendment of the Corporate Credit Agreement provided for a $150.0 million revolving creditfacility. As a result of the amendment, the Company recorded a $1.7 million loss on extinguishment of debt in the second quarter of 2016. In the fourthquarter of 2016, the Company repaid $208.0 million of its outstanding Tranche B Term Loan due 2020 which resulted in a loss on debt extinguishment of$2.2 million.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) LIBORplus the applicable margin or (ii) the base rate plus the applicable margin. The applicable margin for advances under the revolving facility is based on certainfinancial ratios and ranges between 3.00% and 3.50% for LIBOR rate advances and 2.00% and 2.50% for base rate advances. Base rate is the higher of (i) thebank prime rate, (ii) the one-month LIBOR rate plus 1.00% and (iii) the federal funds rate plus 0.5%.As a result of the Company entering into the Credit Agreement in October 2017, certain previously deferred costs and unamortized discount associated withthe Corporate Credit Agreement's Revolving Credit Facility and Tranche B Term Loan due 2020 were written off in the fourth quarter of 2017. The loss onextinguishment of debt associated with the transaction was $3.2 million.94Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Accounts Receivable Securitization FacilityCincinnati Bell Inc. and certain of its subsidiaries have an accounts receivable securitization facility ("Receivables Facility"). In the second quarter of 2018,the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase thecredit availability and renew the facility, which is subject to renewal every 364 days, until May 2019. The amended Receivables Facility extends thetermination date to May 2021 and includes an option to sell certain receivables on a non-recourse basis. As of December 31, 2018, the Company soldapproximately $20 million of certain accounts receivables. The amendment that took place in the second quarter of 2018 added OnX to the ReceivablesFacility. Due to this amendment, under the terms of the Receivables Facility during the second and third quarter of 2018, the Company could obtain up to$250.0 million depending on the quantity and quality of accounts receivable. In the fourth quarter of 2018, the Company amended its Receivables Facilityto include Hawaiian Telcom Communications, Inc. Due to this amendment, under the terms of the amended Receivables Facility during the fourth quarter of2018, the borrowing availability for loans and letters of credit was reduced from $250.0 million in the aggregate to $225.0 million in the aggregate. Theavailable borrowing capacity is calculated monthly based on the quantity and quality of outstanding accounts receivable and thus may be lower than themaximum borrowing limit. At December 31, 2018, the available borrowing capacity was $193.7 million. Of the total borrowing capacity of $193.7 million atDecember 31, 2018, there were $176.6 million of outstanding borrowings and $8.0 million of outstanding letters of credit, leaving $9.1 million available asof December 31, 2018.Interest on the Receivables Facility is based on the LIBOR rate plus 1.1%. The average interest rate on the Receivables Facility was 3.2% in 2018. TheCompany pays letter of credit fees on the securitization facility and also pays commitment fees on the unused portion of the total facility.Under this agreement, certain U.S. and Canadian subsidiaries, as originators, sell their respective trade receivables on a continuous basis to Cincinnati BellFunding LLC (“CBF”) or Cincinnati Bell Funding Canada Ltd. ("CBFC"), wholly-owned consolidated subsidiaries of the Company. Although CBF andCBFC are wholly-owned consolidated subsidiaries of the Company, CBF and CBFC are legally separate from the Company and each of the Company’s othersubsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF or CBFC, such accounts receivable are legally assets of CBF andCBFC and, as such, are not available to creditors of other subsidiaries or the parent company.The transferors sell their respective trade receivables on a continuous basis to CBF or CBFC. In turn, CBF or CBFC grants, without recourse, a seniorundivided interest in the pooled receivables to various purchasers, including commercial paper conduits, in exchange for cash while maintaining asubordinated undivided interest in the form of over-collateralization in the pooled receivables. The transferors have agreed to continue servicing thereceivables for CBF and CBFC at market rates; accordingly, no servicing asset or liability has been recorded.For the purposes of consolidated financial reporting, the Receivables Facility is accounted for as secured financing. Because CBF and CBFC have the abilityto prepay the Receivables Facility at any time by making a cash payment and effectively repurchasing the receivables transferred pursuant to the facility, thetransfers do not qualify for "sale" treatment on a consolidated basis under ASC 860, "Transfers and Servicing."7 1/4% Notes due 2023In 1993, the Company issued $50.0 million of 7 1/4% Notes due 2023 ("7 1/4% Notes"). The indenture related to the 7 1/4% Notes does not subject theCompany to restrictive financial covenants, but it does contain a covenant providing that if the Company incurs certain liens on its property or assets, theCompany must secure the outstanding 7 1/4% Notes equally and ratably with the indebtedness or obligations secured by such liens. The liens under theCredit Agreement have resulted in the debt outstanding under the 7 1/4% Notes being secured equally and ratably with the obligations secured under theCredit 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 tomaturity. The indenture governing the 7 1/4% Notes provides for customary events of default, including for failure to make any payment when due and forone or more defaults of any other existing debt instruments that exceeds $20.0 million, in the aggregate.The Company 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 debtduring 2016.95Table of ContentsForm 10-K Part II Cincinnati Bell Inc.7% Senior Notes due 2024In 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% SeniorNotes") 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 quarterof 2016. The 7% Senior Notes are senior unsecured obligations of the Company, which rank equally in right of payment with all existing and futureunsecured senior debt of the Company. The 7% Senior Notes will be effectively subordinated to all existing and future secured indebtedness of the Companyto 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 theCompany’s existing and future domestic subsidiaries. Each such guarantee is a senior unsecured obligation of the applicable guarantor, ranking equally withall existing and future unsecured senior debt of such guarantor and effectively subordinated to all existing and future secured indebtedness of such guarantorto the extent of the value of the assets securing that indebtedness. The 7% Senior Notes are structurally subordinated to all liabilities (including tradepayables) 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 decliningredemption prices equal to (i) 105.250% beginning on September 15, 2019, (ii) 103.500% beginning on September 15, 2020, (iii) 101.750% beginning onSeptember 15, 2021 and (iv) 100.000% beginning on September 15, 2022 and thereafter, plus, in each case, accrued and unpaid interest, if any, to theapplicable redemption date. In addition, before September 15, 2019, and subject to certain conditions, the Company may, at its option, redeem up to 40% ofthe aggregate principal amount of 7% Senior Notes with the net proceeds of certain equity offerings at 107.000% of the principal amount thereof, plusaccrued 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 remainsoutstanding 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 andother restricted payments; dividend and other payment restrictions affecting the Company’s subsidiaries such that the subsidiaries are generally not permittedto enter into an agreement that would limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactionswith affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenturegoverning the 7% Senior Notes provides for customary events of default, including a cross-default provision for both nonpayment at final maturity oracceleration due to a default of any other existing debt instrument that equals or exceeds $35 million.8% Senior Notes due 2025In the fourth quarter of 2017, CB Escrow Corp. (the “Issuer”), an Ohio corporation and wholly owned subsidiary of Cincinnati Bell Inc., closed the privateoffering of $350 million aggregate principal amount of 8% Senior Notes at par. The 8% Senior Notes were issued pursuant to an indenture, dated as ofOctober 6, 2017 (the “Indenture”), between the Issuer and Regions Bank, as trustee.Concurrently with the closing of the offering, the Issuer entered into an escrow agreement (the “Escrow Agreement”) pursuant to which the initial purchasersof the 8% Senior Notes on behalf (and at the direction) of the Issuer, deposited the gross proceeds of the offering into an escrow account. The Issuer depositedinto the escrow account an additional amount of cash that would be sufficient to pay all interest that accrued on the 8% Senior Notes up to, but not including,October 9, 2018.The offering of the 8% Senior Notes was part of the financing of the cash portion of the acquisition consideration for Hawaiian Telcom Holdco, Inc.(“Hawaiian Telcom”) by the Company. At the closing of the acquisition of Hawaiian Telcom, the Issuer merged with and into the Company (the “EscrowMerger”), with the Company continuing as the surviving corporation. At the time of the Escrow Merger, the Company assumed the obligations of the Issuerunder the 8% Senior Notes and the Indenture (the “Assumption”) and, the proceeds from the offering were released from the escrow account to the Company.96Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The 8% Senior Notes bear interest at a rate of 8.00% per annum, payable semi-annually on April 15 and October 15 of each year, beginning on April 15,2018, to persons who are registered holders of the 8% Senior Notes on the immediately preceding April 1 and October 1, respectively.The 8% Senior Notes will mature on October 15, 2025. However, prior to October 15, 2020, the Company may, at its option, redeem some or all of the Notesat a redemption price equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest, if any, plus a “make-whole” premium.On or after October 15, 2020, the Company may, at its option, redeem some or all of the Notes at any time at declining redemption prices equal to (i)106.000% beginning on October 15, 2020, (ii) 104.000% beginning on October 15, 2021, (iii) 102.000% beginning on October 15, 2022 and (iv) 100.000%beginning on October 15, 2023 and thereafter, plus, in each case, accrued and unpaid interest, if any, to the applicable redemption date. In addition, beforeOctober 15, 2020, and subject to certain conditions, the Company may, at its option, redeem up to 40% of the aggregate principal amount of Notes with thenet proceeds of certain equity offerings at 108.000% 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 Notes remains outstanding after such redemption and (ii) the redemption occurs within180 days of the closing of any such equity offering.Cincinnati Bell Telephone NotesIn 1998, CBT's predecessor issued $150.0 million in aggregate principal of 6.30% unsecured senior notes due 2028 (the "CBT Notes"), which are guaranteedon a subordinated basis by the Company but not its subsidiaries. The indenture related to the CBT Notes does not subject the Company or CBT to restrictivefinancial covenants, but it does contain a covenant providing that if CBT incurs certain liens on its property or assets, CBT must secure the outstanding CBTNotes equally and ratably with the indebtedness or obligations secured by such liens. In 2017, CBT pledged its assets in support of the Company's debtincurred under the Credit Agreement, and as a result, the CBT Notes became equally and ratably secured. The maturity date of the CBT notes is in 2028, andthe CBT Notes may be redeemed at any time at a redemption price equal to the greater of 100% of the principal amount of the CBT Notes to be redeemed orthe sum of the present values of the remaining scheduled payments of principal and interest to maturity, plus accrued interest to the redemption date. Theindenture governing the CBT Notes provides for customary events of default, including for failure to make any payment when due and for one or moredefaults of any other existing debt instruments of the Company or CBT that exceeds $20.0 million, in the aggregate.During 2016, the Company redeemed $40.8 million of its CBT Notes at an average redemption price of 92.232% which resulted in a gain on extinguishmentof debt of $2.8 million.Capital Lease ObligationsCapital lease obligations represent our obligation for certain leased assets, including vehicles and various equipment. These leases generally contain renewalor buyout options.Debt Maturity ScheduleThe following table summarizes our annual principal maturities of debt, other financing arrangements and capital leases for the five years subsequent toDecember 31, 2018, and thereafter: Other Capital Total(dollars in millions)Debt financing arrangements leases debtYear ended December 31, 2019$6.0 $0.8 $13.4 $20.220206.0 1.1 10.5 17.62021182.6 1.1 7.1 190.8202224.0 0.1 5.0 29.1202328.3 — 3.8 32.1Thereafter1,631.4 — 34.1 1,665.5 1,878.3 3.1 73.9 1,955.3Net unamortized premium1.7 — — 1.7Unamortized note issuance costs(27.2) — — (27.2) Total debt$1,852.8 $3.1 $73.9 $1,929.8Total capital lease payments including interest are expected to be $18.0 million for 2019, $14.4 million for 2020, $10.6 million for 2021, $8.0 million for2022, $6.5 million for 2023 and $42.6 million thereafter.97Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Deferred Financing CostsDeferred financing costs are costs incurred in connection with obtaining long-term financing and renewing revolving credit agreements. Deferred financingcosts are amortized on the effective interest method. In 2018, the Company incurred deferred financing costs of $1.0 million related to the amendment to theTranche B Term Loan due 2024 and $8.7 million related to the 8% Senior Notes due 2025 that was payable at the close of the acquisition transaction. In2017, the Company incurred deferred financing costs of $12.9 million related to the issuance of the Tranche B Term Loan due 2024 and $1.4 million relatedto the issuance of 8% Senior Notes due 2025. In 2018 and 2017, deferred financing costs incurred for amending and renewing revolving credit agreementswere $2.3 million and $4.6 million, respectively. The Company wrote-off deferred financing costs associated with the extinguishment of debt of $1.3 million,$2.1 million and $5.9 million in 2018, 2017 and 2016, respectively.The Company records costs incurred in connection with obtaining revolving credit agreements as an asset. As of December 31, 2018 and 2017, deferredfinancing costs recorded to "Other non-current assets" totaled $4.9 million and $5.1 million, respectively. Amortization of deferred financing costs, includedin "Interest expense" in the Consolidated Statements of Operations, totaled $5.7 million in 2018, $3.4 million in 2017, and $3.0 million in 2016.Debt CovenantsCredit AgreementThe Credit Agreement has financial covenants that require the Company to maintain certain leverage and interest coverage ratios. As of December 31, 2018,these ratios and limitations include a maximum secured consolidated total leverage ratio of 3.50 to 1.00 and a minimum consolidated interest coverage ratioof 1.50 to 1.00. In addition, the Credit Agreement contains customary affirmative and negative covenants, including but not limited to, restrictions onCompany's ability to incur additional indebtedness, create liens, pay dividends, make certain investments, and prepay other indebtedness, sell, transfer, lease,or dispose of assets and enter into, or undertake, certain liquidations, mergers, consolidations or acquisitions.The 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 withcertain other indebtedness, certain bankruptcy-related events or proceedings, final monetary judgments or orders, ERISA defaults, invalidity of loandocuments 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, itwould be considered a default. If the Company were in default under the Credit Agreement, no additional borrowings under this facility would be availableuntil the default was waived or cured.The Tranche B Term Loan due 2024 is subject to the same affirmative and negative covenants and events of default as the Revolving Credit Facility, exceptthat a breach of the financial covenants will not result in an event of default under the Tranche B Term Loan due 2024 unless and until the agent or amajority in interest of the lenders under the Revolving Credit Facility have terminated their commitments under the Revolving Credit Facility andaccelerated the loans then outstanding under the Revolving Credit Facility in response to such breach in accordance with the terms and conditions of theCredit Agreement.Extinguished NotesDuring 2016, the Company repaid the remaining $478.5 million outstanding on the 8 3/8% Senior Notes at an average price of 103.328%, resulting in a $17.8million loss on extinguishment of debt.In the fourth quarter of 2017, the Company repaid the remaining $315.8 million outstanding principal amount of its Tranche B Term Loan due 2020 andrelated accrued and unpaid interest. As a result, a loss on extinguishment of debt is recorded in the fourth quarter of 2017 of $2.6 million.98Table of ContentsForm 10-K Part II Cincinnati Bell Inc.9. Commitments and ContingenciesOperating Lease CommitmentsThe Company leases certain circuits, facilities, and equipment used in its operations. Operating lease expense was $18.4 million, $10.7 million and $9.6million in 2018, 2017 and 2016, respectively. Certain facility leases provide for renewal options with fixed rent escalations beyond the initial lease term.At December 31, 2018, total future minimum lease payments required under operating leases having initial or remaining non-cancellable lease terms the nextfive years and thereafter are as follows:(dollars in millions) 2019$10.920209.420216.120224.520233.9Thereafter23.7Total$58.5Other Installment Financing ArrangementsPrior to the acquisition of Hawaiian Telcom in July 2018, Hawaiian Telcom had an open dispute related to jointly-owned utility poles. Each of the electricutilities for the four counties in the State of Hawaii had separate agreements with Hawaiian Telcom for the joint ownership and maintenance of utility polesalong with other third parties, such as the State of Hawaii. The agreements set forth various circumstances requiring pole removal, installation andreplacement and the sharing of costs among the joint pole owners. The agreements allowed for the cost of work done by one joint pole owner to be shared bythe other joint pole owners based on the apportionment of costs in the agreements. Generally, the electric utilities had maintained, replaced and installed themajority of the jointly-owned poles and had billed the other joint pole owners for their respective share of the costs. Hawaiian Telcom had a disagreementwith the common owner of the utilities in three of the counties in Hawaii regarding the amount the utilities were requesting for their share of the capitalizedcosts.At the time of the acquisition, Hawaiian Telcom had negotiated a potential resolution of the dispute with the utilities; however, the resolution was pendingapproval by the Hawaii Public Utilities Commission. In October 2018 the Hawaii Public Utilities Commission approved the resolution. The agreementapproved by the Hawaii Public Utilities Commission provided for the transfer of Hawaiian Telcom’s ownership responsibility of the poles to HawaiianElectric Company (HEC) and Hawaiian Telcom to pay a fixed annual fee to HEC for continued use of the poles. The agreement, referred to as the PoleLicense Agreement, has a duration of 10 years at a fixed rate with two renewal options each for five year terms. Due to the continuing involvement by theCompany, this transaction does not meet the requirements to be accounted for as a sale-leaseback, and therefore it has been treated as a financing obligation.As of December 31, 2018, the Company has a liability recorded of $40.1 million related to the payments for the use of the poles for the next 20 years, ofwhich $1.0 million is recognized within "Other current liabilities" in the Consolidated Balance Sheets.The IT Services and Hardware segment entered into an agreement in June 2018 for a building to use in its data center operations. Structural improvementswere made to the facility in excess of normal tenant improvements and, as such, we are deemed the accounting owner of the facility. The term of theagreement for the building shell is a duration of 10 years with two renewal options each with a two-year term. As of December 31, 2018, the liability relatedto the financing arrangement was $4.5 million, which was recognized within "Other noncurrent liabilities" in the Consolidated Balance Sheets.99Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The future minimum payments under the base agreements, as well as the renewal options for each lease which the Company expects to exercise, are asfollows:(dollars in millions) 2019$0.820200.820213.520225.820235.8Thereafter58.8Total minimum financing obligation payments$75.5Trans-Pacific Submarine CableCommensurate to the acquisition of Hawaiian Telcom, the Company gained access to the SEA-US cable. In August 2014, Hawaiian Telcom joined severalother telecommunication companies to form a consortium to build and operate the SEA-US cable. The total system cost was $235.0 million and was primarilycomposed of a supply contract with the lead contractor. The Company has a fractional ownership in the system and recognizes its fractional share at cost. Inaddition, the Company constructed a cable landing station in Hawaii and provides cable landing services. The system was completed in August 2017. During2018, the Company incurred costs of $1.7 million, primarily to the cable contractor for construction, with all such costs capitalized.The Company has excess capacity on its share of the SEA-US cable that it makes available to other carriers for a fee. The Company has contracted andexpects to enter into additional IRU agreements with other carriers for use of this excess fiber circuit capacity. The Company may receive up-front paymentsfor services to be delivered over a period of up to 25 years. As of December 31, 2018, the Company has a remaining obligation related to the sale of capacityand other services of $23.0 million, which was previously received in up-front payments. The Company is recognizing revenue for the cable on a straight-linebasis over the contract term. The Company recognizes a financing component in accordance with ASC 606 associated with the upfront payments as thecontract terms range up to 25 years.Asset Retirement ObligationsAsset retirement obligations exist for certain assets. In conjunction with the acquisition of Hawaiian Telcom, the Company recognized certain assetretirement obligations related to underground tanks and environmental remediation that will occur prior to the retirement of certain assets. These obligationsare recorded in "Other noncurrent liabilities" in the Consolidated Balance Sheets. Additionally, the Company recognizes certain asset retirement obligationsrelated to data center leases which are recorded in "Accounts payable" in the Consolidated Balance Sheets. The following table presents the activity for theCompany’s asset retirement obligations: December 31,(dollars in millions)2018 2017Balance, beginning of period$2.3 $1.8Hawaiian Telcom opening balance sheet adjustment6.6 —Liabilities incurred— 0.4Liabilities settled(0.1) —Accretion expense0.3 0.1Balance, end of period$9.1 $2.3100Table of ContentsForm 10-K Part II Cincinnati Bell Inc.IndemnificationsDuring the normal course of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to makepayments in relation to certain transactions. These include (a) intellectual property indemnities to customers in connection with the use, sale, and/or licenseof products and services, (b) indemnities to customers in connection with losses incurred while performing services on their premises, (c) indemnities tovendors and service providers pertaining to claims based on negligence or willful misconduct of the Company, (d) indemnities involving the representationsand warranties in certain contracts, and (e) outstanding letters of credit which totaled $8.2 million as of December 31, 2018. In addition, the Company hasmade contractual commitments to several employees providing for payments upon the occurrence of certain prescribed events. The majority of theseindemnities, commitments, and guarantees do not provide for any limitation on the maximum potential for future payments that the Company could beobligated to make.As permitted under Ohio law, the Company has agreements whereby the Company indemnifies its officers and directors for certain events or occurrenceswhile 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 theofficer or director. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements isunlimited; however, the Company has a director and officer insurance policy that limits the Company's exposure and enables the Company to recover aportion of any future amounts paid. As a result of the Company's insurance policy coverage, the Company believes the estimated fair value of theseindemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of December 31, 2018 or 2017.Purchase CommitmentsThe Company has noncancellable purchase commitments related to certain goods and services. These agreements typically range from one to three years. Asof December 31, 2018 and 2017, the minimum commitments for these arrangements were approximately $157 million and $205 million, respectively. TheCompany generally has the right to cancel open purchase orders prior to delivery and to terminate the contracts without cause.LitigationCincinnati Bell and its subsidiaries are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations in thenormal course of business. We believe the liabilities accrued for legal contingencies in our consolidated financial statements, as prescribed by GAAP, areadequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy allegedliabilities from various legal proceedings, claims, tax examinations, and other matters, and to comply with applicable laws and regulations, will not exceedthe amounts reflected in our consolidated financial statements. As such, costs, if any, that may be incurred in excess of those amounts provided as ofDecember 31, 2018, cannot be reasonably determined.101Table of ContentsForm 10-K Part II Cincinnati Bell Inc.10. Financial Instruments and Fair Value MeasurementsInterest Rate SwapsThe Company uses interest rate swap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate swapsinvolve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the underlying notional amounts betweenparties. The Company has one forward starting non-amortizing interest rate swap with a total notional amount of $300.0 million to convert variable rate debtto fixed rate debt. The interest rate swap became effective in June 2018 and expires in June 2023. The interest rate swap results in interest payments based onan average fixed rate of 2.938% plus the applicable margin per the requirements in the Credit Agreement (see Note 8). During the next twelve months, theCompany estimates that $1.2 million will be reclassified as an increase to interest expense.The Company has agreements with its derivative financial instrument counter-parties that contain provisions providing that if the Company defaults on theindebtedness associated with its derivative financial instruments, then the Company could also be declared in default on its derivative financial instrumentobligations. The Company minimizes this risk by evaluating the creditworthiness of our counter-parties, which are limited to major banks and financialinstitutions.Upon inception, the interest rate swap was designated as a cash flow hedge under ASC 815, with gains and losses, net of tax, measured on an ongoing basisrecorded in accumulated other comprehensive income (loss). The fair value of the interest rate swap is categorized as Level 2 in the fair value hierarchy as it isbased on well-recognized financial principles and available market data. As of December 31, 2018, the fair value of the interest rate swap liability was $5.0million and is recorded in the Consolidated Balance Sheets as of December 31, 2018 as follows: December 31, 2018(dollars in millions)Balance Sheet Location December 31, 2018 Quoted Prices inactive marketsLevel 1 Significantobservable inputsLevel 2 Significantunobservable inputsLevel 3Liabilities: Interest Rate SwapOther noncurrent liabilities $3.8 $— $3.8 $—Interest Rate SwapOther current liabilities $1.2 $— $1.2 $—The amount of losses recognized in Accumulated Other Comprehensive Income ("AOCI") net of reclassifications into earnings is as follows: Year Ended December 31,(dollars in millions)2018Interest Rate Swap$(5.0)The amount of losses reclassified from AOCI into earnings is as follows: Year Ended December 31,(dollars in millions)Statement of Operations Location2018Interest Rate SwapInterest Expense$(1.2)102Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Disclosure on Financial InstrumentsThe carrying values of the Company's financial instruments approximate the estimated fair values as of December 31, 2018 and December 31, 2017, exceptfor the Company's long-term debt and other financing arrangements. The carrying and fair values of these items are as follows: December 31, 2018 December 31, 2017(dollars in millions)Carrying Value Fair Value Carrying Value Fair ValueLong-term debt, including current portion*$1,880.0 $1,673.6 $1,687.1 $1,687.5Other financing arrangements44.6 43.6 — — *Excludes capital leases and note issuance costs The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at December 31, 2018 and December 31, 2017,which is considered Level 2 of the fair value hierarchy. The fair value of other financing arrangements was calculated using a discounted cash flow modelthat incorporates current borrowing rates for obligations of similar duration, which is considered Level 3 of the fair value hierarchy. As of December 31, 2018,the current borrowing rate was estimated by applying the Company's credit spread to the risk-free rate for a similar duration borrowing.Non-Recurring Fair Value MeasurementsCertain long-lived assets, intangibles, and goodwill may be required to be measured at fair value on a non-recurring basis subsequent to their initialmeasurement. These non-recurring fair value measurements generally occur when evidence of impairment has occurred. In 2016 and 2018, no assets wereremeasured at fair value. During 2017, the following assets were remeasured at fair value in connection with impairment tests: Fair Value Measurements Using (dollars in millions)Year EndedDecember 31,2017 Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs (Level 3) Impairment LossesEquity method investment: Equity method investment— — — — $(4.7) Impairment of equity method investment $(4.7)In the third quarter of 2017, an equity method investment recorded within “Other noncurrent assets” in the Consolidated Balance Sheets was remeasured atfair value due to a triggering event identified by management. As a result of the fair value analysis, the entire carrying value of $4.7 million was impaired andrecorded to "Other expense (income), net" on the Consolidated Statements of Operations. This fair value measurement is considered a Level 3 measurementdue to the significance of its unobservable inputs.103Table of ContentsForm 10-K Part II Cincinnati Bell Inc.11. Pension and Postretirement PlansSavings PlansThe Company sponsors several defined contribution plans covering substantially all employees. The Company's contributions to the plans are based onmatching a portion of the employee contributions. Both employer and employee contributions are invested in various investment funds at the direction ofthe employee. Employer contributions to the defined contribution plans were $11.3 million, $8.2 million, and $8.4 million in 2018, 2017, and 2016,respectively.Pension and Postretirement PlansCincinnati PlansThe 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 (collectively the "Cincinnati Plans"). The management pension planis a cash balance plan in which the pension benefit is determined by a combination of compensation-based credits and annual guaranteed interest credits. Thenon-management pension plan is also a cash balance plan in which the combination of service and job-classification-based credits and annual interest creditsdetermine the pension benefit. Benefits for the supplemental plan are based on eligible pay, adjusted for age and service upon retirement. We fund both themanagement 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.During 2017, the non-management pension plan made lump sum payments of $11.0 million resulting in a reduction of the plan benefit obligation of $11.3million. The Company recorded a pension settlement cost of $4.0 million in 2017 as a result of the lump sum payments to the plan participants exceeding thesum of the service cost and the interest cost component of the net pension cost.The Company also provides healthcare and group life insurance benefits for eligible retirees. We fund healthcare benefits and other group life insurancebenefits 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 expensecalculation for our postretirement health plan is based on numerous assumptions, estimates, and judgments including healthcare cost trend rates and costsharing with retirees. Retiree healthcare benefits are being phased out for both management and certain retirees. During 2017, the Company reviewed theemployees with special death benefits only within the defined benefit pension plans and determined that the liabilities associated with the special deathbenefits would be better associated with the postretirement health plans. As a result, the Company eliminated the liability associated with the special deathbenefits in the defined benefit pension plans, and recorded a liability of $14.0 million in the postretirement health plans in 2017.Hawaii PlansThe Company sponsors one noncontributory defined benefit plan for union employees, one cash balance pension plan for nonunion employees, and twopostretirement health and life insurance plans for Hawaiian Telcom employees (collectively the "Hawaii Plans"). The noncontributory defined benefit planwas frozen as of March 1, 2012 and the cash balance pension plan was frozen as of April 1, 2007.During 2018, Hawaiian Telcom's pension plans made lump sum payments of $3.6 million resulting in a reduction of plan benefit obligation of $3.6 million.The Company recorded a pension settlement cost of $0.1 million in 2018 as a result of the lump sum payments to the plan participants exceeding the sum ofthe service cost and the interest cost component of the net pension cost.Components of Net Periodic CostThe following information relates to noncontributory defined benefit pension plans, postretirement healthcare plans, and life insurance benefit plans atDecember 31, 2018, 2017 and 2016 for the Cincinnati Plans and at December 31, 2018 for the Hawaii Plans. In both 2017 and 2016, approximately 13% ofthese costs were capitalized to property, plant and equipment related to network construction in the Entertainment and Communications segment. Inaccordance with ASU 2017-07, adopted effective January 1, 2018, only the service cost component of net benefit cost is eligible for capitalization on aprospective basis, which was immaterial for 2018.104Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Pension and postretirement benefit costs for these plans were comprised of: Pension Benefits Postretirement and Other Benefits(dollars in millions)2018 2017 2016 2018 2017 2016Service cost$— $— $— $0.6 $0.2 $0.3Interest cost on projected benefit obligation20.0 19.4 19.3 4.2 3.2 3.3Expected return on plan assets(29.8) (26.0) (27.3) — — —Amortization of: Prior service cost (benefit)— — 0.1 (3.1) (4.5) (14.7)Actuarial loss17.0 17.5 19.1 4.1 4.7 4.9Pension settlement charges0.1 4.0 — — — —Pension/postretirement cost (benefit)$7.3 $14.9 $11.2 $5.8 $3.6 $(6.2)The following are the weighted-average assumptions used in measuring the net periodic cost of the pension and postretirement benefits:Cincinnati PlansPension Benefits Postretirement and Other Benefits 2018 2017 2016 2018 2017 2016 Discount rate3.60% 4.10% 3.80% 3.60% 4.00% 3.70% Expected long-term rate of return7.00% 7.25% 7.50% — — — Future compensation growth 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 theplans and the current view of expected future returns, which is influenced by historical averages. Changes in actual asset return experience and discount rateassumptions can impact the Company’s operating results, financial position and cash flows.Hawaii PlansPension Benefits Postretirement and Other Benefits 2018 2018Discount rate4.10% 4.20%Expected long-term rate of return7.00% — Future compensation growth rate— — The expected long-term rate of return on plan assets is determined using the target allocation of assets which is based on the goal of earning the highest rateof return while maintaining risk at an acceptable level. When developing the long-term rate of return on plan assets, historical experiences, long-terminflation assumptions, economic forecasts for the types of investments held by the plans, the plans' asset allocations and past performance of the plans' assetsare all considered.105Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Benefit Obligation and Funded StatusChanges in the plans' benefit obligations and funded status are as follows: Postretirement and OtherBenefits Pension Benefits (dollars in millions)2018 2017 2018 2017Change in benefit obligation: Benefit obligation at January 1,$489.2 $505.6 $98.6 $82.6Hawaiian Telcom opening balance sheet adjustment184.1 — 51.2 —Service cost— — 0.6 0.2Interest cost20.0 19.4 4.2 3.2Actuarial (gain) loss(39.9) 28.1 (20.3) 7.6Benefits paid(43.0) (38.6) (13.1) (11.6)Retiree drug subsidy received— — 0.3 0.2Transfer of special death benefit— (14.0) — 14.0Settlements(3.6) (11.3) — —Other— — 2.2 2.4Benefit obligation at December 31,$606.8 $489.2 $123.7 $98.6 Change in plan assets: Fair value of plan assets at January 1,$392.1 $372.3 $7.5 $8.7Hawaiian Telcom opening balance sheet adjustment163.0 — — —Actual (loss) return on plan assets(37.7) 64.8 0.3 0.2Employer contributions11.6 4.6 10.8 10.0Retiree drug subsidy received— — 0.3 0.2Benefits paid(43.0) (38.6) (13.1) (11.6)Settlements(3.6) (11.0) — — Fair value of plan assets at December 31,482.4 392.1 5.8 7.5Unfunded status$(124.4) $(97.1)$(117.9)$(91.1)The following are the weighted-average assumptions used in accounting for and measuring the projected benefit obligations:Cincinnati PlansPension Benefits Postretirement and OtherBenefits December 31, December 31, 2018 2017 2018 2017Discount rate4.20% 3.60% 4.30% 3.60%Future compensation growth rate— — — —Hawaii PlansPension Benefits Postretirement and Other Benefits December 31, December 31, 2018 2018Discount rate4.20% 4.40%Future compensation growth rate— — 106Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The assumed healthcare cost trend rate used to measure the postretirement health benefit obligation is shown below:Cincinnati PlansDecember 31, 2018 2017Healthcare cost trend6.5% 6.5%Rate to which the cost trend is assumed to decline (ultimate trend rate)4.5% 4.5%Year the rates reach the ultimate trend rate2023 2022Hawaii PlansDecember 31, 2018Healthcare cost trend6.8%Rate to which the cost trend is assumed to decline (ultimate trend rate)5.0%Year the rates reach the ultimate trend rate2026A 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% DecreaseService and interest costs for 2018$0.1 $(0.1)Postretirement benefit obligation at December 31, 20181.8 (1.7)The projected benefit obligation is recognized in the Consolidated Balance Sheets as follows: Pension Benefits Postretirement and OtherBenefits December 31, December 31,(dollars in millions)2018 2017 2018 2017Accrued payroll and benefits (current liability)$2.1 $2.1 $11.0 $10.5Pension and postretirement benefit obligations (noncurrent liability)122.3 95.0 106.9 80.6Total$124.4 $97.1 $117.9 $91.1Amounts recognized in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets which have not yet been recognized in net pensioncosts consisted of the following: Pension Benefits Postretirement and OtherBenefits December 31, December 31,(dollars in millions)2018 2017 2018 2017Prior service (cost) benefit, net of tax of ($0.1), ($0.1), $4.6, $5.3$(0.1) $(0.1) $17.5 $19.9Actuarial loss, net of tax of ($45.0), ($42.5), ($7.1), ($12.7)(156.3) (148.4) (25.6) (44.5)Total$(156.4) $(148.5) $(8.1) $(24.6)107Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Amounts recognized in "Accumulated other comprehensive loss" on the Consolidated Statements of Shareowners’ Deficit and the Consolidated Statements ofComprehensive Income are shown below: Pension Benefits Postretirement and OtherBenefits(dollars in millions)2018 2017 2018 2017Prior service cost recognized: Reclassification adjustments$— $— $(3.1) $(4.5)Actuarial (loss) gain recognized: Reclassification adjustments17.1 21.5 4.1 4.7 Actuarial (loss) gain arising during the period(27.7) 11.0 20.4 (7.4)The following amounts currently included in "Accumulated other comprehensive loss" are expected to be recognized in 2019 as a component of net periodicpension and postretirement cost: Pension Benefits Postretirement andOther Benefits(dollars in millions) Prior service benefit$— $(2.5)Actuarial loss13.9 1.9Total$13.9 $(0.6)Plan Assets, Investment Policies and StrategiesCincinnati PlansThe primary investment objective for the trusts holding the assets of the pension and postretirement plans is preservation of capital with a reasonable amountof long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities. The targetallocations for the pension plan assets are 65% equity securities and 35% investment grade fixed income securities. Equity securities are primarily held in theform of passively managed funds that seek to track the performance of a benchmark index. Equity securities include investments in growth and valuecommon stocks of companies located in the United States, which represents approximately 52% of the equity securities held by the pension plans atDecember 31, 2018, as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securitiesprimarily include holdings of funds, which generally invest in a variety of intermediate and long-term investment grade corporate bonds from diversifiedindustries. The postretirement plan assets are currently invested in a group insurance contract.Hawaii PlansFrom the acquisition date to December 31, 2018, Hawaiian Telcom's overall investment strategy is to primarily invest for long-term growth with sufficientinvestments available to fund near-term benefit payments. Hawaiian Telcom aims for diversification of asset types, fund strategies and fund managers. Thetarget allocations for plan assets are 60% equity securities and 40% fixed income securities. Equity securities primarily include investments in equity funds.These investments are diversified in companies located in the United States and internationally. Equity securities that are located in the United States totaledapproximately 69%. Fixed income securities are in funds that invest in bonds of companies from diversified industries, mortgage-backed securities and U.S.Treasuries. Beginning in 2019, Hawaiian Telcom's investment strategy will follow the strategies of the Cincinnati Plans.108Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The fair values of the pension plan assets at December 31, 2018 and 2017 by asset category are as follows:(dollars in millions)December 31, 2018 Quoted Pricesin activemarketsLevel 1 SignificantobservableinputsLevel 2 SignificantunobservableinputsLevel 3Mutual funds U.S. equity index funds$165.0 $107.2 $57.8 $—International equity index funds127.2 100.7 26.5 —Fixed income bond funds183.0 119.3 63.7 —Fixed income short-term money market funds7.2 0.1 7.1 —Group insurance contract5.8 — — —Total$488.2 $327.3 $155.1 $—(dollars in millions) December 31, 2017 Quoted Pricesin activemarketsLevel 1 SignificantobservableinputsLevel 2 SignificantunobservableinputsLevel 3Mutual funds U.S. equity index funds $151.0 $151.0 $— $—International equity index funds 101.3 101.3 — —Fixed income bond funds 136.1 136.1 — —Fixed income short-term money market funds 3.7 3.7 — —Group insurance contract 7.5 — — —Total $399.6 $392.1 $— $—The fair values of Level 1 investments are based on quoted prices in active markets.Level 2 investments include certain fixed income funds, equity funds, and short term investment funds that are held by the Hawaii Plans. Investment fundsinclude commingled funds that are not open to public investment and are valued at the net asset value per share. The majority of such funds allow forredemption each trading day at the daily reported net asset value per share which is reported as the fund fair value on that trading day. There are norestrictions on fund redemptions. As the published net asset value reflects the amount at which the fund trades, the Company has concluded it is reflective ofthe fund fair value as of the end of each reporting period.The group insurance contract is valued at contract value plus accrued interest and has not been included in the fair value hierarchy, but is included in thetotals above.Contributions to our qualified pension plans were $9.3 million in 2018, $2.3 million in 2017, and $3.1 million in 2016. The 2018 contributions include a $5million contribution to the Hawaii Plans that was required by the Public Utilities Commission of the State of Hawaii in order to complete the merger.Contributions to our non-qualified pension plan were $2.3 million in 2018, $2.3 million in 2017, and $2.3 million in 2016.Based on current assumptions, contributions are expected to be approximately $3 million to both the qualified and non-qualified plans in 2019, respectively.Management expects to make cash payments of approximately $11 million related to its postretirement health plans in 2019.109Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Estimated Future Benefit PaymentsThe following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years:(dollars in millions)PensionBenefits Postretirementand OtherBenefits MedicareSubsidyReceipts2019$77.3 $11.5 $(0.4)202051.3 10.7 (0.4)202150.1 10.4 (0.3)202247.9 10.0 (0.3)202346.3 9.5 (0.3)Years 2024 - 2028196.5 41.8 (1.0)110Table of ContentsForm 10-K Part II Cincinnati Bell Inc.12. Shareowners’ DeficitCommon SharesThe par value of the Company’s common shares is $0.01 per share. At December 31, 2018 and 2017, common shares outstanding were 50,184,114 and42,197,965, respectively.In 2010, the Board of Directors approved a plan for repurchase of up to $150.0 million of the Company's common shares. In 2018 and 2017, no shares wererepurchased or retired under this plan. In 2016, the Company repurchased and retired approximately 0.2 million shares of its common stock for $4.8 millionat an average price of $19.67 per share. As of December 31, 2018, the Company had the authority to repurchase $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 wasterminated in the fourth quarter of 2015. At December 31, 2015, treasury shares of common stock held under the plan were nominal, with a total cost of $0.5million. In the fourth quarter of 2016, all amounts due under the plan were distributed to plan participants. On July 2, 2018, the Company completed its acquisition of Hawaiian Telcom. In conjunction with the acquisition, the Company issued 7.7 million commonshares as stock consideration, with a total value of $121.2 million.Preferred SharesThe 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 withoutpar value. The Company issued 155,250 voting shares of 6 3/4% cumulative convertible preferred stock at stated value. These shares were subsequentlydeposited 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 atany time at the option of the holder into common stock of the Company at a conversion rate of 5.7676 shares of the Company common stock per one share of6 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% convertiblepreferred stock are payable quarterly in arrears in cash, or in common stock in certain circumstances if cash payment is not legally permitted. The liquidationpreference on the 6 3/4% cumulative convertible preferred stock is $1,000 per share (or $50 per depositary share). The Company paid $10.4 million inpreferred stock dividends in each of 2018, 2017, and 2016.Accumulated Other Comprehensive LossShareowners’ deficit includes an accumulated other comprehensive loss that is comprised of pension and postretirement unrecognized prior service cost andunrecognized actuarial losses, unrealized gains on Investment in CyrusOne, unrealized loss on cash flow hedge arising during the period and foreigncurrency translation losses.111Table of ContentsForm 10-K Part II Cincinnati Bell Inc.For the years ended December 31, 2018 and 2017, the changes in accumulated other comprehensive loss by component were as follows:(dollars in millions)UnrecognizedNet PeriodicPension andPostretirementBenefit Cost Unrealizedgain onInvestment inCyrusOne UnrealizedLoss on CashFlow Hedge ForeignCurrencyTranslationLoss TotalBalance as of December 31, 2016$(157.6) $68.1 $— $(0.8) $(90.3)Remeasurement of benefitobligations2.8 — — — 2.8Unrealized gain on Investment inCyrusOne, net— 8.3(a)— — 8.3Reclassifications, net13.9(b)(76.4)(c)— — (62.5)Reclassification adjustment toaccumulated deficit for strandedother comprehensive incometaxes arising from tax reform(32.2)(d)— — — (32.2)Foreign currency gain— — — 0.2 0.2Balance as of December 31, 2017$(173.1) $— $— $(0.6) $(173.7)Remeasurement of benefitobligations(5.5) — — — (5.5)Reclassifications, net14.1(b)— 0.9(e)— 15.0Unrealized loss on cash flowhedge arising during the period,net— — (4.8)(f)— (4.8)Foreign currency loss— — — (6.5) (6.5)Balance as of December 31, 2018$(164.5) $— $(3.9) $(7.1) $(175.5)(a)The unrealized gain on Investment in CyrusOne, net of tax, represents changes in the fair value of CyrusOne shares of common stock owned bythe Company during the period, before any subsequent sales of those shares.(b)These reclassifications are included in the other components of net periodic pension and postretirement benefit plans expense and representamortization of prior service benefit and actuarial loss, net of tax and pension settlement charges, net of tax. The other components of netperiodic pension and postretirement benefit plans expense are recorded in "Other components of pension and postretirement benefit plansexpense" on the Consolidated Statements of Operations. See Note 11 for further disclosures.(c)These reclassifications are reported within "Gain on sale of CyrusOne investment" on the Consolidated Statements of Operations.(d)This reclassification adjustment resulted from a change in the corporate tax rate arising from tax legislation enacted in December 2017,commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). In February 2018, the FASB issued ASU 2018-02 which allows entities tomake a one-time reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from newlyenacted corporate tax rates. The Company early adopted the guidance effective December 31, 2017. The amount of the reclassification iscalculated on the basis of the difference between the historical and newly enacted tax rates on deferred taxes related to our pension andpostretirement benefit plans.(e)These reclassifications are reported within "Interest expense" on the Consolidated Statements of Operations when the hedged transactions impactearnings.(f)The unrealized loss on cash flow hedge represents the change in the fair value of the derivative instrument that occurred during the period, net oftax. This unrealized loss is recorded in "Other current liabilities" and "Other noncurrent liabilities" on the Consolidated Balance Sheets. See Note10 for further disclosures.112Table of ContentsForm 10-K Part II Cincinnati Bell Inc.13. Income TaxesAll prior year balances have been recast to present the impact of the adoption of ASC 606.Income tax expense for continuing operations consisted of the following: Year Ended December 31,(dollars in millions)2018 2017 2016Current: Federal$(0.6) $(14.8) $(14.0) State and local0.9 1.0 0.5 Foreign1.6 — — Total current1.9 (13.8) (13.5)Investment tax credits(0.1) (0.1) (0.1)Deferred: Federal(10.2) 47.1 73.2 State and local5.7 2.3 5.7 Foreign(1.0) 0.4 — Total deferred(5.5) 49.8 78.9Valuation allowance13.1 (9.2) (3.6)Total$9.4 $26.7 $61.7The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year: Year Ended December 31, 2018 2017 2016U.S. federal statutory rate21.0 % 35.0 % 35.0 %State and local income taxes, net of federal income tax1.4 0.7 0.2Change in valuation allowance, net of federal income tax(21.8) (9.1) (1.4)State net operating loss adjustments(10.1) 2.0 0.9Federal rate change— 3.5 —Transaction costs(3.1) 5.5 —Non-Deductible Meals and Entertainment(1.8) 1.3 0.4Unrecognized tax benefit changes— 1.4 2.3Other differences, net(1.1) (0.2) 0.1Effective tax rate(15.5)% 40.1 % 37.5 %The income tax provision (benefit) was charged to continuing operations, accumulated other comprehensive income (loss) or additional paid-in capital asfollows: Year Ended December 31,(dollars in millions)2018 2017 2016Income tax provision (benefit) related to: Continuing operations$9.4 $26.7 $61.7Accumulated other comprehensive income (loss)1.3 (28.3) 43.8Excess tax benefits on stock option exercises— — 0.1113Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The components of our deferred tax assets and liabilities were as follows: December 31,(dollars in millions)2018 2017Deferred tax assets: Net operating loss carryforwards$184.0 $88.9Pension and postretirement benefits55.0 46.1Employee benefits10.3 7.9Interest limitation15.3 —Texas Margin Credit12.2 10.5Other25.6 9.3Total deferred tax assets302.4 162.7 Valuation allowance(58.2) (45.5)Total deferred tax assets, net of valuation allowance$244.2 $117.2Deferred tax liabilities: Property, plant and equipment$196.1 $115.9Other12.0 0.3Total deferred tax liabilities208.1 116.2 Net deferred tax assets$36.1 $1.0As of December 31, 2018, the Company had $592.6 million of federal tax operating loss carryforwards with a deferred tax asset value of $124.4 million, $1.3million of foreign deferred tax assets related to NOLs, and $58.3 million in deferred tax assets related to state and local tax operating loss carryforwards.Federal tax loss carryforwards of $125.6 million will expire in 2023. U.S. tax laws limit the annual utilization of tax loss carryforwards of acquired entities butthe Company expects to fully utilize 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 whichbasis differences and other deductions become deductible, and prior to the expiration of the net operating loss carryforwards. Due to its historical and futureprojected taxable income from all available sources, management believes it is more likely than not it will utilize future federal deductions and available netoperating loss carryforwards prior to their expiration. Management also concluded that it was more likely than not that certain state and foreign tax losscarryforwards would not be realized based upon the analysis described above and therefore provided a valuation allowance. In addition the Company hasrecorded a valuation allowance in the amount of $15.3 million against the portion of interest expense that is not currently deductible for domestic federalincome tax due to the The Tax Cuts and Jobs Act of 2017 (the "Tax Act") effective for the first tax year beginning after December 31, 2017.The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $21.9 million and $22.0 million at December 31,2018 and December 31, 2017, respectively. Accrued interest and penalties on income tax uncertainties were immaterial as of December 31, 2018 and2017. A reconciliation of the unrecognized tax benefits is as follows: Year Ended December 31,(dollars in millions)2018 2017 2016Balance, beginning of year$22.2 $31.4 $27.6Change in tax positions for the current year— 1.0 1.2Change in tax positions for prior years(0.2) 0.3 2.6Change related to decrease in federal tax rate— (10.5) —Balance, end of year$22.0 $22.2 $31.4The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign, state and local jurisdictions. With a fewexceptions, the Company is no longer subject to U.S. federal, state or local examinations for years before 2015.114Table of ContentsForm 10-K Part II Cincinnati Bell Inc.On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). TheTax Act makes broad and complex changes to the U.S. tax code including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%,limiting the deductibility of interest and executive compensation and eliminating the corporate alternative minimum tax ("AMT"). GAAP requires that theimpact of tax legislation be recognized in the period in which the law was enacted. In addition, there are certain transitional impacts of the Tax Act. Thereduction of the U.S. corporate tax rate caused the Company to adjust our U.S. deferred tax assets and liabilities to the lower federal base rate of 21%. TheCompany was able to make a reasonable estimate of the impact; therefore, recorded a provisional net charge of $6.8 million for the quarter ended December31, 2017. This $6.8 million provisional net charge included a reduction of our uncertain tax positions of $10.5 million. The provisional amounts recorded in2017 were finalized in 2018 with no additional expense to record.U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments inforeign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings ofthese foreign subsidiaries in its operations outside the United States to support its international growth. Determination of the amount of any unrecognizeddeferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation. 115Table of ContentsForm 10-K Part II Cincinnati Bell Inc.14. Stock-Based and Deferred Compensation PlansThe Company may grant stock options, stock appreciation rights, performance-based awards, restricted stock units, and time-based restricted shares to officersand key employees under the 2017 Long-Term Incentive Plan and stock options, restricted shares, and restricted stock units to directors under the 2017 StockPlan for Non-Employee Directors. The maximum number of shares authorized and available for award under the 2017 plans at December 31, 2018 was 2.5million.On May 2, 2017, the 2007 Long Term Incentive Plan and 2007 Stock Option Plan for Non-Employee Directors both expired. Under the 2007 Long TermIncentive Plan, the Company granted stock options, stock appreciation rights, performance-based awards, and time-based restricted shares to officers and keyemployees. Under the 2007 Stock Option Plan for Non-Employee Directors, the Company granted stock options, restricted shares, and restricted stock unitsto directors. The Company no longer grants shares under the 2007 plans as of May 2, 2017.On July 2, 2018, the Company completed its acquisition of Hawaiian Telcom. In conjunction with the acquisition, the Company assumed responsibility forthe eventual payout of certain stock-based compensation awards that were previously granted to Hawaiian Telcom employees under the Hawaiian Telcom2010 Equity Incentive Plan. These awards were originally granted by Hawaiian Telcom in the first quarter of 2017 and in the first quarter of 2018, before themerger with Cincinnati Bell was completed. Going forward, all stock-based compensation awards for Hawaiian Telcom employees will be granted under the2017 Long-Term Incentive Plan.Stock Options and Stock Appreciation RightsGenerally, the awards of stock options and stock appreciation rights fully vest three years from grant date and expire ten years from grant date. Beginning in2012, some of the stock options vested over a three year period based on the achievement of certain performance objectives. The Company generally issuesnew shares when options to purchase common shares or stock appreciation rights are exercised. The following table summarizes stock options and stockappreciation rights activity: 2018 2017 2016 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Outstanding at January 1,181 $17.10 390 $20.00 776 $19.27Exercised(19) 8.68 (35) 15.76 (236) 16.12Forfeited(9) 17.05 (35) 21.58 (11) 16.16Expired(2) 8.35 (139) 24.55 (139) 22.79Outstanding at December 31,151 $18.29 181 $17.10 390 $20.00Expected to vest at December 31,151 $18.29 181 $17.10 390 $20.00Exercisable at December 31,151 $18.29 181 $17.10 330 $20.56 (dollars in millions) Compensation expense for the year$— $0.2 $0.4 Tax benefit related to compensation expense$— $(0.1) $(0.1) Intrinsic value of awards exercised$0.1 $0.2 $1.8 Cash received from awards exercised$0.2 $0.5 $3.8 Grant date fair value of awards vested$— $0.3 $0.5 116Table of ContentsForm 10-K Part II Cincinnati Bell Inc.The following table summarizes our outstanding and exercisable awards at December 31, 2018: Outstanding Exercisable Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Range of Grant Price $14.55 to $17.05123 $17.04 123 $17.04$23.75 to $26.0528 23.83 28 23.83Total151 $18.29 151 $18.29As of December 31, 2018, the aggregate intrinsic value for awards outstanding and exercisable was zero. The weighted-average remaining contractual life forawards outstanding and exercisable is approximately five years. As of December 31, 2018, there was no remaining unrecognized stock compensation expenserelated to stock options or stock appreciation rights.Performance-Based Restricted AwardsAwards granted generally vest over three years and upon the achievement of certain performance-based objectives. Performance-based awards are expensedbased 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: 2018 2017 2016 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Non-vested at January 1,871 $17.30 954 $15.89 721 $16.77Granted*288 17.60 245 22.03 307 15.45Vested(308) 15.45 (229) 16.74 (51) 22.75Forfeited(159) 15.45 (99) 16.62 (23) 22.35Non-vested at December 31,692 $18.67 871 $17.30 954 $15.89 (dollars in millions) Compensation expense for the year$2.1 $3.9 $3.6 Tax benefit related to compensation expense$(0.5) $(1.4) $(1.3) Grant date fair value of awards vested$4.7 $3.8 $1.2 * Assumes the maximum number of awards that can be earned if the performance conditions are achieved.As of December 31, 2018, unrecognized compensation expense related to performance-based awards was $7.7 million, assuming maximum performanceattainment, which is expected to be recognized over a weighted-average period of approximately one year.117Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Time-Based Restricted AwardsAwards granted to Cincinnati Bell employees in 2018, 2017 and 2016 vest at the end of a three year period. Awards granted to directors in 2018, 2017 and2016 vest on the first anniversary of the grant date.As part of the terms of the acquisition of Hawaiian Telcom, certain stock-based compensation awards granted by Hawaiian Telcom before the merger datewere converted to time-based restricted stock units. The Company assumed responsibility for the eventual payout of these time-based restricted stock units aspart of the acquisition. These awards were originally granted by Hawaiian Telcom in the first quarter of 2017 and 2018, and vest in one-fourth incrementsover a period of four years. One-fourth of the awards granted in the first quarter of 2017 vested and were distributed by Hawaiian Telcom prior to July 2, 2018.All remaining awards that vest after July 2, 2018 will be distributed by Cincinnati Bell Inc.The following table summarizes our time-based restricted award activity: 2018 2017 2016 Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare Weighted-AverageExercisePrice PerShare(in thousands, except per share amounts)Shares Shares Shares Non-vested at January 1,164 $18.57 106 $16.75 47 $19.59Granted245 17.05 96 20.78 106 16.75Awards converted pursuant to Hawaiian Telcom acquisition149 15.70 — — — —Vested(61) 18.08 (38) 19.10 (47) 19.59Non-vested at December 31,497 $17.02 164 $18.57 106 $16.75 (dollars in millions) Compensation expense for the year$3.5 $1.8 $1.1 Tax benefit related to compensation expense$(0.8) $(0.6) $(0.4) Grant date fair value of awards vested$1.1 $0.7 $0.9 As of December 31, 2018, there was $4.0 million of unrecognized compensation expense related to these restricted stock awards, which is expected to berecognized over a weighted-average period of approximately two years.118Table of ContentsForm 10-K Part II Cincinnati Bell Inc.15. Restructuring and SeveranceLiabilities have been established for employee separations, lease abandonment and contract terminations. A summary of activity in the restructuring andseverance liability is shown below(dollars in millions)EmployeeSeparation LeaseAbandonment Other TotalBalance as of December 31, 2015$0.2 $0.8 $0.1 $1.1Charges/(Reversals)12.5 (0.5) (0.1) 11.9Utilizations(1.7) (0.1) — (1.8)Balance as of December 31, 201611.0 0.2 — 11.2Charges32.7 — — 32.7Utilizations(29.3) (0.1) — (29.4)Balance as of December 31, 201714.4 0.1 — 14.5Charges7.5 0.8 — 8.3Hawaiian Telcom opening balance sheet adjustment3.8 — — 3.8Utilizations(16.2) (0.2) — (16.4)Balance as of December 31, 2018$9.5 $0.7 — $10.2An opening balance sheet adjustment of $3.8 million was recorded for certain employees who received severance due to the change of control clause withintheir employment agreements that was triggered at the time of the acquisition of Hawaiian Telcom. Restructuring and severance charges recorded in 2018 areprimarily related to a voluntary severance program ("VSP") for certain management employees in the Entertainment and Communications segment, as well asCorporate. The VSP that took place in the fourth quarter of 2018 related to the Company's continued efforts to realize synergies that can be achieved due tothe acquisition of Hawaiian Telcom. The Company also incurred employee severance costs in 2018 associated with initiatives to reduce costs and recognizefuture synergies in the IT Services and Hardware segment as a result of the acquisition of, and integration with, OnX. In addition, a restructuring chargeassociated with lease abandonment of $0.8 million was recorded in the second quarter of 2018 related to an office space that will no longer be utilized.In 2017, the Company initiated reorganizations within both segments of the business in order to more appropriately align the Company for future growth. Inaddition, during 2017 the Company finalized a voluntary severance program for certain bargained employees related to an initiative to reduce field andnetwork costs within our legacy copper network which resulted in headcount reductions.In 2016, employee severance costs were associated with initiatives to reduce costs associated with our legacy copper network, including a voluntaryseverance program for certain management employees. Employee severance costs were also incurred as a result of increased in-sourcing of IT professionals byour customers which resulted in headcount reductions in our IT Services and Hardware segment.Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Lease payments onabandoned facilities will continue through 2020.119Table of ContentsForm 10-K Part II Cincinnati Bell Inc.A summary of restructuring activity by business segment is presented below:(dollars in millions)Entertainment andCommunications IT Services andHardware Corporate TotalBalance as of December 31, 2015$0.8 $0.3 $— $1.1Charges7.7 3.3 0.9 11.9Utilizations(1.0) (0.6) (0.2) (1.8)Balance as of December 31, 20167.5 3.0 0.7 11.2Charges27.6 5.1 — 32.7Utilizations(22.8) (5.9) (0.7) (29.4)Balance as of December 31, 201712.3 2.2 — 14.5Charges3.1 4.9 0.3 8.3Hawaiian Telcom opening balance sheet adjustment3.8 — — 3.8Utilizations(10.6) (5.8) — (16.4)Balance as of December 31, 2018$8.6 $1.3 $0.3 10.2At December 31, 2018 and 2017, $9.6 million and $12.0 million, respectively, of the restructuring liabilities were included in “Other current liabilities.” AtDecember 31, 2018 and 2017, $0.6 million and $2.5 million was included in "Other noncurrent liabilities," respectively.120Table of ContentsForm 10-K Part II Cincinnati Bell Inc.16. Business Segment InformationFor the years ended December 31, 2018, 2017, and 2016, we operated two business segments: Entertainment and Communications and IT Services andHardware. On January 1, 2018, the Company changed the composition of its operating segments to align more closely with the Company's broader strategyand how it manages business operations. This strategy groups CLEC revenue, which was previously included as part of the Entertainment andCommunications segment, as part of the IT Services and Hardware segment in order to consolidate all company-wide VoIP sales. Accordingly, the Companyrecast the previously reported 2017 and 2016 segment disclosures to conform to the new segmentation.Effective January 1, 2018, we adopted the requirements of ASU 2014-09, Revenue from Contracts with Customers, and ASU 2017-07, Improving thePresentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost. As a result of adopting these standards, certain prior period amountsreported below have been recast to present the impact of adopting these standards.In July 2018, the Company acquired Hawaiian Telcom. Based on the nature of the products and services offered, financial results are presented in either theEntertainment and Communications segment or the IT Services and Hardware segment.The Entertainment and Communications segment provides products and services that can be categorized as either Fioptics in Cincinnati or Consumer/SMBFiber in Hawaii (collectively, "Consumer/SMB Fiber"), Enterprise Fiber or Legacy. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of theCompany, is the incumbent local exchange carrier ("ILEC") for a geography that covers a radius of approximately 25 miles around Cincinnati, Ohio, andincludes parts of northern Kentucky and southeastern Indiana. Voice and data services in the Enterprise Fiber and Legacy categories that are deliveredbeyond the Company's ILEC territory, particularly in Dayton and Mason, Ohio, are provided through the operations of Cincinnati Bell Extended TerritoriesLLC ("CBET"), a subsidiary of CBT. In the second quarter of 2018, the Company acquired Hawaiian Telcom. Hawaiian Telcom is the ILEC for the State ofHawaii and the largest full service provider of communications services and products in that state. Revenue in 2018 includes a contribution by HawaiianTelcom of $159.2 million. Capital expenditures in the Entertainment and Communications segment are incurred to expand our Consumer/SMB Fiber productsuite, upgrade and increase capacity for our internet and data networks, and to maintain our wireline network.The IT Services and Hardware segment provides end-to-end solutions from consulting to implementation to ongoing optimization. These solutions includeCloud, Communications and Consulting services along with the sale and maintenance of major branded hardware reported as Infrastructure Solutions. In thefourth quarter of 2017 the Company acquired OnX, a privately held company that provides technology services and solutions to enterprise customers in theU.S., Canada and the U.K. In July 2018 the Company completed the acquisition of Hawaiian Telcom and products such as UCaaS, hardware and enterpriselong distance delivered by Hawaiian Telcom are included in the IT Services and Hardware segment.Total assets for the Company increased $542.6 million as of December 31, 2018 as compared to December 31, 2017. Entertainment and Communicationsassets increased $787.4 million primarily due to net assets acquired with Hawaiian Telcom. IT Services and Hardware assets decreased by $14.6 million.Corporate assets decreased $230.2 million as a result of the utilization of restricted cash to fund the acquisition of Hawaiian Telcom. Deferred tax assets andliabilities totaled $47.5 million and $11.4 million as of December 31, 2018, respectively. Deferred tax assets and liabilities totaled $12.2 million and $11.2million as of December 31, 2017, respectively. The increase in deferred tax assets is due the acquisition of Hawaiian Telcom.121Table of ContentsForm 10-K Part II Cincinnati Bell Inc.Our business segment information is as follows: Year Ended December 31,(dollars in millions)2018 2017 2016Revenue Entertainment and Communications$853.4 $706.1 $691.3IT Services and Hardware550.9 385.1 352.7Intersegment(26.1) (25.5) (26.4)Total revenue$1,378.2 $1,065.7 $1,017.6Intersegment revenue Entertainment and Communications$22.3 $21.2 $21.0IT Services and Hardware3.8 4.3 5.4Total intersegment revenue$26.1 $25.5 $26.4Operating income Entertainment and Communications$103.3 $86.1 $100.1IT Services and Hardware17.2 5.3 17.4Corporate(37.2) (36.0) (18.7)Total operating income$83.3 $55.4 $98.8Expenditures for long-lived assets* Entertainment and Communications$408.0 $186.3 $260.8IT Services and Hardware29.2 191.2 25.4Corporate0.2 — 0.2Total expenditures for long-lived assets$437.4 $377.5 $286.4Depreciation and amortization Entertainment and Communications$210.8 $163.7 $159.1IT Services and Hardware41.0 29.1 23.0Corporate0.2 0.2 0.1Total depreciation and amortization$252.0 $193.0 $182.2 * Includes cost of acquisitions As of December 31, (dollars in millions)2018 2017 Assets Entertainment and Communications$1,898.8 $1,111.4 IT Services and Hardware468.1 482.7 Corporate and eliminations363.3 593.5 Total assets$2,730.2 $2,187.6 122Table of ContentsForm 10-K Part II Cincinnati Bell Inc.17. Quarterly Financial Information (Unaudited) 2018 First Second Third Fourth (in millions, except per common share amounts)Quarter Quarter Quarter Quarter TotalRevenue$295.7 $296.8 $386.7 $399.0 $1,378.2Operating income24.2 20.2 14.5 24.4 83.3Net (loss)(8.3) (13.8) (17.7) (30.0) (69.8) Basic (loss) earnings per common share$(0.26) $(0.39) $(0.41) $(0.65) $(1.73) Diluted (loss) earnings per common share$(0.26) $(0.39) $(0.41) $(0.65) $(1.73) 2017 First Second Third Fourth (in millions, except per common share amounts)Quarter Quarter Quarter Quarter TotalRevenue$249.6 $259.4 $255.5 $301.2 $1,065.7Operating (loss) income(1.8) 24.4 15.9 16.9 55.4Net income (loss)60.6 2.3 (11.0) (11.9) 40.0 Basic earnings (loss) per common share$1.38 $(0.01) $(0.32) $(0.34) $0.70 Diluted earnings (loss) per common share$1.37 $(0.01) $(0.32) $(0.34) $0.70The effects of assumed common share conversions are determined independently for each respective quarter and year and may not be dilutive during everyperiod 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 $0.3 million, $4.6 million and $3.4 million in the first, second and fourth quarter of 2018,respectively. Restructuring and employee severance charges totaled $25.6 million, $3.6 million and $3.5 million in the first, second and fourth quarter of2017, respectively.Transaction and integration costs totaled $2.2 million, $2.7 million, $13.3 million and $4.3 million in the first, second, third, and fourth quarter of 2018,respectively. These costs were primarily related to the acquisition of Hawaiian Telcom. Transaction and integration costs totaled $0.6 million, $1.7 million,$12.1 million and $4.1 million in the first, second, third, and fourth quarter of 2017, respectively. These costs were primarily related to the acquisitions ofSunTel and OnX as well as the planned acquisition of Hawaiian Telcom.Interest expense totaled $131.5 million in 2018 compared to $85.2 million in 2017. This increase is due to the Company entering into the $600.0 millionTranche B Term Loan due 2024, as well as issuing $350.0 million 8% Senior Notes in the fourth quarter of 2017. The Company repaid the remaining $315.8million Tranche B Term Loan due 2020 outstanding under its old Corporate Credit Agreement with the proceeds from the $600.0 million Tranche B TermLoan due 2024.2017 net income includes gains from the sale of our CyrusOne investments of $117.7 million in the first quarter.In the second quarter of 2018, the Company amended its Credit Agreement resulting in a loss on extinguishment of debt of $1.3 million being recorded. Inthe fourth quarter of 2017, the Company recognized losses on extinguishment of debt of $3.2 million.In the third quarter of 2018, the Company acquired Hawaiian Telcom, whose revenues totaled $87.1 million and $87.9 million in the third and fourth quarterof 2018, respectively. Hawaiian Telcom had a net loss of $0.5 million in the third quarter of 2018 and net income of $1.2 million in the fourth quarter of2018. For further information related to this acquisition, see Note 4 of the Notes to Consolidated Financial Statements.123Table of ContentsForm 10-K Part II Cincinnati Bell Inc.In the fourth quarter of 2017, the Company acquired OnX. The revenues and net income of OnX included in the quarterly financial information from theacquisition date through December 31, 2017 were $53.0 million and $11.5 million, respectively. Revenues totaled $45.3 million, $45.3 million, $49.3million and $59.1 million in the first, second, third, and fourth quarter of 2018, respectively. OnX had net loss of $2.7 million, $4.3 million and $1.0 millionin the first, second, and third quarter of 2018, and net income of $2.1 million in the fourth quarter of 2018. For further information related to this acquisition,see Note 4 of the Notes to Consolidated Financial Statements.In the fourth quarter of 2017, the U.S. Government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The transitional impact of the Tax Act resulted in aprovisional net charge of $6.8 million in the fourth quarter of 2017.18. Supplemental Cash Flow Information Year Ended December 31,(dollars in millions)2018 2017 2016Capitalized interest expense$1.0 $0.7 $0.7Cash paid/(received) for: Interest131.7 65.7 71.1Income taxes, net of refunds(13.8) (12.9) 1.7Noncash investing and financing activities: Stock consideration for acquisition of Hawaiian Telcom121.2 — —Accrual of CyrusOne dividends— — 1.1Acquisition of property by assuming debt and other financing arrangements51.5 17.3 12.0Acquisition of property on account35.8 12.0 23.8124Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNo 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 theeffectiveness 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 thisreport. Based on this evaluation, Cincinnati Bell Inc.’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of theperiod 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 forthin 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 2018 that materially affect, orare reasonably likely to materially affect, Cincinnati Bell Inc.’s internal control over financial reporting.Item 9B. Other InformationNo reportable information under this item.125Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe 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. canbe found in the Proxy Statement for the 2019 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 Officeris 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 tosuch 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 Actof 2002 and filed as exhibits to this Annual Report on Form 10-K, in May 2018 the Company’s Chief Executive Officer submitted to the NYSE thecertification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303 A.12 of the NYSE Listed CompanyManual.Executive Officers of the Registrant:The names, ages and positions of the executive officers of the Company as of February 22, 2019 are as follows:Name Age TitleLeigh R. Fox 46 President and Chief Executive OfficerAndrew R. Kaiser 50 Chief Financial OfficerChristi H. Cornette 63 Chief Culture OfficerThomas E. Simpson 46 Chief Operating OfficerChristopher J. Wilson 53 Vice President and General CounselJoshua T. Duckworth 40 Vice President of Treasury, Corporate Finance and Investor RelationsShannon M. Mullen 42 Vice President and Corporate Controller 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:LEIGH R. FOX, President and Chief Executive Officer since May 31, 2017; President and Chief Operating Officer of the Company from September 2016 toMay 2017; Chief Financial Officer of the Company from October 2013 to September 2016; Chief Administrative Officer of the Company from July 2013 toOctober 2013; Senior Vice President of Finance and Operations from December 2012 to July 2013; Vice President of Finance at Cincinnati Bell TechnologySolutions 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 theCompany from December 2015 to September 2016; Vice President Corporate Finance of the Company from January 2014 to December 2015; Partner atHoward Roark Consulting, LLC from 2005 to January 2014.CHRISTI H. CORNETTE, Chief Culture Officer of the Company since June 2017; Senior Vice President, Marketing of the Company from August 2013 toJune 2017; Vice President, Marketing of the Company from October 2008 to August 2013; Director of CBTS Marketing from October 2002 to October 2008.THOMAS E. SIMPSON, Chief Operating Officer since June 2017, Senior Vice President and Chief Technology Officer of the Company from January 2015to June 2017; Vice President and Chief Technology Officer at Cincinnati Bell Technology Solutions (CBTS) from 2014 to 2015; Vice President, Researchand Development at CBTS from 2010 to 2014; Director, Technical Operations at CBTS from 2008 to 2010.CHRISTOPHER J. WILSON, Vice President and General Counsel of the Company since August 2003.126Table of ContentsJOSHUA T. DUCKWORTH, Vice President of Treasury, Corporate Finance and Inventor Relations since October 2017; Vice President, Investor Relationsand Controller of the Company from July 2013 to October 2017; Assistant Treasurer and Director of Investor Relations for Cincinnati Bell Inc. from August2012 to July 2013; Assistant Controller for Cincinnati Bell Inc. from August 2010 to August 2012; Deloitte & Touche LLP's audit practice from October2004 to August 2010.SHANNON M. MULLEN, Vice President and Corporate Controller of the Company since October 2017; Vice President, Finance of the Company fromDecember 2016 to October 2017; Senior Director of Finance of the Company from October 2013 to December 2016; Director of Finance of the Companyfrom January 2008 to October 2013; Senior Financial Analyst of the Company from April 2006 to January 2008; Manager of Accounting Research andProjects of the Company from December 2004 to April 2006.Item 11. Executive CompensationThe information required by this item can be found in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein byreference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item can be found in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein byreference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item can be found in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein byreference.Item 14. Principal Accountant Fees and ServicesThe information required by this item can be found in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein byreference.127Table of ContentsPART IVItem 15. Exhibits and Financial Statement SchedulesFinancial StatementsConsolidated financial statements are included in Part II, Item 8.Financial Statement SchedulesFinancial Statement Schedule II — Valuation and Qualifying Accounts. All other schedules are not required under the related instructions or are notapplicable.Exhibits 2Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission, are incorporated herein by reference as exhibits hereto.ExhibitNumber Description(2.1) Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Acquisition Corp. and Hawaiian TelcomHoldco, Inc. (Exhibit 2.1 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519).(2.2) Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Yankee Acquisition LLC, OnX Holdings LLCand MLN Holder Rep LLC (Exhibit 2.2 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519).(3.1) Amended and Restated Articles of Incorporation of Cincinnati Bell Inc. (Exhibit 3.1 to Current Report on Form 8-K, date of ReportApril 25, 2008, File No. 1-8519).(3.2) Amendment to the Amended and Restated Articles of Incorporation of Cincinnati Bell 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 3.3 to Quarterly Report on Form 10-Q for the quarter ended June30, 2018, 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 CincinnatiBell 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 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).(4.3) First Supplemental Indenture dated as of December 31, 2004 to the Indenture dated as of November 30, 1998, among Cincinnati BellTelephone Company, as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit 4(c)(iii)(2) toAnnual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519).(4.4) Second Supplemental Indenture dated as of January 10, 2005 to the Indenture dated as of November 30, 1998, among Cincinnati BellTelephone 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).(4.5) Indenture, dated September 22, 2016, among Cincinnati Bell Inc., the guarantor parties thereto and Regions Bank, as trustee (Exhibit4.1 to Current Report on Form 8-K, date of Report September 22, 2016, File No. 1-8519).(4.6) First Supplemental Indenture dated April 3, 2017 among Cincinnati Bell Inc., SunTel Services LLC and Regions Bank, as trustee(Exhibit 99.1 to Current Report on Form 8-K, date of Report April 3, 2017, File No. 1-8519).(4.7) Second Supplemental Indenture dated May 31, 2017 among Cincinnati Bell Inc., Cincinnati Bell Telephone Company LLC,Cincinnati Bell Extended Territories LLC, and Regions Bank, as trustee (Exhibit 10.1 to Current Report on Form 8-K, date of ReportMay 31, 2017, File No. 1-8519).(4.8) Third Supplemental Indenture dated October 2, 2017 among Cincinnati Bell Inc., Cincinnati Bell Shared Services LLC, Data CenterSouth Holdings, LLC, Twin Acquisition Corp. and Regions Bank, as trustee (Exhibit 4.1 to Current Report on Form 8-K, date ofReport October 2, 2017, File No. 1-8519).(4.9) Fourth Supplemental Indenture dated as of December 22, 2017 among Cincinnati Bell Inc., CBTS Holdco LLC, and Regions Bank, astrustee (Exhibit 10.1 to Current Report on Form 8-K, date of Report December 22, 2017, File No. 1-8519).128(4.10) Fifth Supplemental Indenture, dated as of July 2, 2018, by and among Cincinnati Bell Inc., the guarantors party thereto and RegionsBank, as Trustee. (Exhibit 4.2 to Current Report on Form 8-K, date of Report July 2, 2018, File No. 1-8519).(4.11) Indenture, dated October 6, 2017, between CB Escrow Corp. and Regions Bank, as trustee (Exhibit 4.1 to Current Report on Form 8-K,date of Report October 6, 2017, File No. 1-8519).(4.12) Escrow Agreement, dated October 6, 2017, by and among CB Escrow Corp., Regions Bank, as trustee, and Regions Bank, as EscrowAgent (Exhibit 4.2 to Current Report on Form 8-K, date of Report October 6, 2017, File No. 1-8519).(4.13) Assumption Supplemental Indenture, dated as of July 2, 2018, by and among Cincinnati Bell Inc., the guarantors party thereto andRegions Bank, as Trustee. (Exhibit 4.1 to Current Report on Form 8-K, date of Report July 2, 2018, File No. 1-8519).(4.14) 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 SECupon request.(10.1) Credit Agreement dated as of November 20, 2012, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors partythereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K, date of Report November20, 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, thesubsidiary 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 Form8-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 subsidiaryguarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.4 to Annual Report on Form 10-K, date ofReport 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, thesubsidiary 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, thesubsidiary 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 subsidiaryguarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.1 to Current Report on Form 8-K date ofReport 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, CincinnatiBell Funding LLC, and Cincinnati Bell Inc., as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to CurrentReport on Form 8-K, date of Report June 6, 2011, File No. 1-8519).(10.9) First Amendment to Purchase and Sale Agreement dated as of August 1, 2011, among the Originators identified therein, CincinnatiBell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell Funding LLC (Exhibit 99.2 to CurrentReport on Form 8-K, date of Report August 1, 2011, File No. 1-8519).(10.10) Second Amendment to Amended and Restated Purchase and Sale Agreement dated as of October 1, 2012, among the Originatorsidentified therein, Cincinnati Bell Funding LLC and Cincinnati Bell Inc. as Servicer and sole member of Cincinnati Bell FundingLLC. (Exhibit 99.2 to Current Report on Form 8-K, date of Report October 1, 2012, File No. 1-8519).(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, asAdministrator and LC Bank (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 6, 2011, File No. 1-8519).(10.13) First Amendment to Amended and Restated Receivables Purchase Agreement dated as of August 1, 2011, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchasers and Purchaser Agents identified therein, and PNCBank, 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).129(10.14) Second Amendment to Amended and Restated Receivables Purchase Agreement dated as of June 4, 2012, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, NationalAssociation, 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).(10.15) Third Amendment to Amended and Restated Receivables Purchase Agreement dated as of October 1, 2012, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the Various Purchaser Groups identified therein, and PNC Bank, NationalAssociation, 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).(10.16) Fourth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 3, 2013, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 3, 2013, File No. 1-8519).(10.17) Fifth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 13, 2013, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, 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).(10.18) Sixth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of June 2, 2014, among Cincinnati BellFunding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNCBank, National Association, as Administrator (Exhibit 99.1 to Current Report on Form 8-K, date of Report June 2, 2014, File No. 1-8519).(10.19) Seventh Amendment to Amended and Restated Receivables Purchase Agreement, dated as of September 30, 2014, among CincinnatiBell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, andPNC Bank, National Association, as Administrator (Exhibit 10.17 to Annual Report on Form 10-K, date of Report February 26, 2015,File No. 1-8519).(10.20) Eighth Amendment to Amended and Restated Receivables Purchase Agreement, dated June 1, 2015, among Cincinnati Bell FundingLLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identifiedtherein, 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 FundingLLC, as Seller, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identifiedtherein, PNC Bank, National Association, as Administrator, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 10.1 toCurrent Report on Form 8-K, date of Report May 27, 2016, File No. 1-8519).(10.22) Tenth Amendment to Amended and Restated Receivables Purchase Agreement, dated May 26, 2017, among Cincinnati Bell FundingLLC, Cincinnati Bell, Inc., as Servicer and Performance Guarantor, the various Purchasers and Purchaser Agents identified therein,PNC Bank, National Association, as Administrator for each Purchaser Group, as LC Bank and the Swingline Purchaser (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report May 31, 2017, File No. 1-8519).(10.23) Second Amended and Restated Purchase and Sale Agreement dated as of May 10, 2018, among Cincinnati Bell Inc., as Servicer,Cincinnati Bell Funding LLC and the Originators identified therein (Exhibit 99.1 to Current Report on Form 8-K, date of Report May10, 2018, File No. 1-8519).(10.24) First Amendment to the Second Amended and Restated Purchase and Sale Agreement, dated as of November 21, 2018, by and amongthe Continuing Originators identified therein, Cincinnati Bell Funding, LLC, Cincinnati Bell Inc., as Servicer, and Hawaiian TelcomCommunications, Inc., Hawaiian Telcom, Inc., Hawaiian Telcom Services Company, Inc., Wavecom Solutions Corporation andSystemMetrics Corporation, as Additional Originators (Exhibit 99.1 to Current Report on Form 8-K, date of Report November 23,2018, File No. 1-8519).(10.25) Canadian Purchase and Sale Agreement date as of May 10, 2018, among Cincinnati Bell Funding Canada Ltd., as Purchaser, OnXEnterprise Solutions Ltd., as Servicer, and the Originators identified therein (Exhibit 99.2 to Current Report on Form 8-K, date ofReport May 10, 2018, 1-8519).(10.26) Credit Agreement by and among Cincinnati Bell Inc., the Guarantor parties thereto, the Lender parties thereto, PNC Bank, NationalAssociation, as the Swingline Lender, and Morgan Stanley Senior Funding, Inc., as Administrative Agent, Collateral Agent, SwinglineLender and an L\C Issuer, dated October 2, 2017 (Exhibit 10.1 to Current Report on Form 8-K, date of Report October 3, 2017, FileNo. 1-8519).(10.27) Amendment No. 1 to Credit Agreement dated as of April 5, 2018, by and among Cincinnati Bell Inc., the subsidiary guarantorsthereto, Morgan Stanley Senior Funding, Inc. and the tranche B term lenders party thereto (Exhibit 10.1 to Current Report on Form 8-K, date of Report April 5, 2018, File No. 1-8519).(10.28) Amendment No. 2 to Credit Agreement dated as of April 5, 2018, by and among Cincinnati Bell Inc., the subsidiary guarantorsthereto, Morgan Stanley Senior Funding, Inc. and the tranche B term lenders party thereto (Exhibit 10.2 to Current Report on Form 8-K, date of Report April 5, 2018, File No. 1-8519).130(10.29) Receivables Financing Agreement dated as of May 10, 2018, among Cincinnati Bell Funding LLC and Cincinnati Bell FundingCanada Ltd., as Borrowers, Cincinnati Bell Inc. and OnX Enterprise Solutions Ltd., as Servicers, the Lenders, Letter of CreditParticipants and Group Agents from time to time party thereto, PNC Bank, National Association, as Administrator and Letter of CreditBank, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 99.3 to Current Report on Form 8-K, date of Report May 10,2018, File No. 1-8519).(10.30) First Amendment to the Receivables Financing Agreement, dated as of November 21, 2018, by and among Cincinnati Bell FundingLLC and Cincinnati Bell Funding Canada Ltd., as Borrowers, Cincinnati Bell Inc. and OnX Enterprise Solutions Ltd., as Servicers, theLenders, Letter of Credit Participants and Group Agents from time to time party thereto, PNC Bank, National Association, asAdministrator and Letter of Credit Bank, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 99.2 to Current Report onForm 8-K, date of Report November 23, 2018, File No. 1-8519).(10.31) Receivables Purchase Agreement dated as of May 10, 2018 among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell Inc., asServicer, PNC Bank, National Association, as Buyer, and PNC Capital Markets LLC, as Structuring Agent (Exhibit 99.4 to CurrentReport of Form 8-K, date of Report May 10, 2018, File No. 1-8519).(10.32)* Cincinnati Bell Inc. Pension Program, as amended and restated effective January 1, 2005 (Exhibit (10)(iii)(A)(3) to Annual Report onForm 10-K for the year ended December 31, 2008, File No. 1-8519).(10.33)* Amendment to Cincinnati Bell Inc. Pension Program, effective December 31, 2011 (Exhibit 10.12 to Annual Report on Form 10-K forthe year ended December 31, 2011, File No. 1-8519).(10.34)* Restatement of the Cincinnati Bell Management Pension Plan executed December 22, 2016 (Exhibit 10.28 to Annual Report on Form10-K for the year ended December 31, 2016, File No. 1-8519).(10.35)* Restatement of the Cincinnati Bell Pension Plan executed December 22, 2016 (Exhibit 10.29 to Annual Report on Form 10-K for theyear ended December 31, 2016, File No. 1-8519).(10.36)* Amendment to Cincinnati Bell Management Pension Plan executed December 22, 2016 (Exhibit 10.30 to Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-8519).(10.37)* Amendment to the Cincinnati Bell Pension Plan executed December 22, 2016 (Exhibit 10.31 to Annual Report on Form 10-K for theyear ended December 31, 2016, File No. 1-8519).(10.38)* Cincinnati Bell Inc. 2011 Short Term Incentive Plan (Appendix II to the Company's 2016 Proxy Statement on Schedule 14A filedMarch 17, 2016, File No. 1-8519).(10.39)* 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).(10.40)* Amendment to Cincinnati Bell Inc. Deferred Compensation Plan for Outside Directors, as of November 7, 2016 (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report November 7, 2016, File No. 1-8519).(10.41)* 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).(10.42)* Amendment to Cincinnati Bell Inc. Executive Deferred Compensation Plan, as of November 7, 2016 (Exhibit 10.1 to Current Reporton Form 8-K, date of Report November 7, 2016, File No. 1-8519).(10.43)* Cincinnati Bell Inc. 2007 Long Term Incentive Plan, as amended (Appendix I to the Company's 2015 Proxy Statement on Schedule14A filed March 20, 2015, File No. 1-8519).(10.44)* Cincinnati Bell Inc. Form of Stock Option Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(22) to Annual Report onForm 10-K for the year ended December 31, 2008, File No. 1-8519).(10.45)* Cincinnati Bell Inc. Form of Performance Restricted Stock Agreement (2007 Long Term Incentive Plan) (Exhibit (10)(iii)(A)(23) toAnnual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519).(10.46)* Cincinnati Bell Inc. Form of 2016 - 2018 Share-Based Performance Unit Award Agreement (2007 Long Term Incentive Plan) (Exhibit10.40 to Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-8519).(10.47)* Cincinnati Bell Inc. Form of 2017-2019 Share-Based Performance Award Agreement (2007 Long Term Incentive Plan) (Exhibit 10.39to Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-8519).(10.48)* Cincinnati Bell Inc. Form of Stock Appreciation Rights Agreement (Employees) (Exhibit (10)(iii)(A)(21) to Annual Report on Form10-K for the year ended December 31, 2008, File No. 1-8519).131(10.49)* Cincinnati Bell Inc. Form of Restricted Stock Unit Award Agreement (2007 Long Term Incentive Plan)(Exhibit 10.45 to AnnualReport for the year ended December 31, 2015, File No. 1-8519).(10.50)* Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors, as amended (Appendix I to the Company's 2016 ProxyStatement on Schedule 14A filed on March 17, 2016, File No. 1-8519).(10.51)* Cincinnati Bell Inc. 2017 Long-Term Incentive Plan (Appendix I to the Company's 2017 Proxy Statement on Schedule 14A filed onMarch 24, 2017, File No. 1-8519).(10.52)* Cincinnati Bell Inc. Form of Restricted Stock Unit Award (2017 Long-Term Incentive Plan) (Exhibit 10.1 to Quarterly Report on Form10-Q for the quarter ended March 31, 2018, File 1-8519).(10.53)* Cincinnati Bell Inc. Form of 2018-2020 Share-Based Performance Unit Award Agreement (2017 Long-Term Incentive Plan) (Exhibit10.2 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, File 1-8519).(10.54)* Cincinnati Bell Inc. 2017 Stock Plan for Non-Employee Directors (Appendix II to the Company's 2017 Proxy Statement on Schedule14A filed on March 24, 2017, File No. 1-8519).(10.55)* Cincinnati Bell Inc. Form of 2018-2023 Business Value Award Agreement (Exhibit 10.1 to Current Report, date of Report May 7,2018, File No. 1-8519).(10.56)* 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).(10.57)* 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).(10.58)* Employment Agreement between Cincinnati Bell Inc. and Christopher J. Wilson effective as of December 1, 2017 (Exhibit 10.4 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.59)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of September 1, 2016(Exhibit 10.1 to Current Report on Form 8-K, date of Report September 1, 2016, File No. 1-8519).(10.60)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of March 1, 2017 (Exhibit10.1 to Current Report on Form 8-K, date of Report March 1, 2017, File No. 1-8519).(10.61)* Employment Agreement between Cincinnati Bell Inc. and Leigh R. Fox effective as of December 1, 2017 (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.62)* Employment Agreement dated as of May 5, 2014 between Cincinnati Bell Inc. and Joshua T. Duckworth (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report May 5, 2014, 2014, File No. 1-8519).(10.63)* Employment Agreement between Cincinnati Bell Inc. and Joshua T. Duckworth effective as of December 1, 2017 (Exhibit 10.5 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.64)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson dated as of January 27, 2015(Exhibit 10.50 to Annual Report on Form 10-K, date of report February 26, 2015, File No. 1-8519).(10.65)* Amended and Restated Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson effective as of September 1,2016 (Exhibit 10.1 to Current Report on Form 8-K, date of Report September 9, 2016, File No. 1-8519).(10.66)* Employment Agreement between Cincinnati Bell Inc. and Thomas E. Simpson effective as of December 1, 2017 (Exhibit 10.3 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.67)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2016 (Exhibit 10.2 to CurrentReport on Form 8-K, date of Report September 1, 2016, File No. 1-8519).(10.68)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2017 (Exhibit 10.1 to CurrentReport on Form 8-K, date of Report August 3, 2017, File No. 1-8519).(10.69)* Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of December 1, 2017 (Exhibit 10.2 to CurrentReport on Form 8-K, date of Report December 1, 2017, File No. 1-8519).(10.70)* Employment Agreement between Cincinnati Bell Inc. and Christi H. Cornette effective as of September 1, 2017 (Exhibit 10.2 toCurrent Report on Form 8-K, date of Report August 3, 2017, File No. 1-8519).(10.71)* Employment Agreement between Cincinnati Bell Inc. and Christi H. Cornette effective as of December 1, 2017 (Exhibit 10.6 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519).132 (10.72)* Employment Agreement between Cincinnati Bell Inc. and Shannon M. Mullen effective as of December 1, 2017 (Exhibit 10.7 toCurrent Report on Form 8-K, date of Report December 1, 2017, File No. 1-8519). (10.73)* Employment Agreement between Cincinnati Bell Inc. and Mark J. Fahner effective as of September 16, 2018 (Exhibit 10.3 toQuarterly Report on Form 10-Q for the quarter ended September 30, 2018, File 1-8519). (14) Code of Ethics for Senior Financial Officers, as adopted pursuant to Section 406 of Regulation S-K (Exhibit (10)(iii)(A)(15) to AnnualReport 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. (31.2) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (32.1) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (32.2) + Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (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 ofwhich are incorporated herein by reference. The Company will furnish any other exhibit at cost. 133Table of Contents Schedule II Cincinnati Bell Inc.VALUATION AND QUALIFYING ACCOUNTS Additions (dollars in millions) Beginning of Period Charge (Benefit) toExpenses (To) From OtherAccounts Deductions End of PeriodAllowance for Doubtful Accounts Year 2018 $10.4 $8.4 $— $5.8 $13.0Year 2017 $9.9 $6.9 $— $6.4 $10.4Year 2016 $12.4 $9.4 $(2.0) $9.9 $9.9 Deferred Tax Valuation Allowance Year 2018 $45.5 $13.1 $(0.4) $— $58.2Year 2017 $54.4 $(9.2) $0.3 $— $45.5Year 2016 $58.4 $(3.6) $(0.4) $— $54.4134Table of ContentsForm 10-K Part IV Cincinnati Bell Inc.SIGNATURESPursuant 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 itsbehalf by the undersigned thereunto duly authorized. Date:February 22, 2019 /s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer 135Table of ContentsForm 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 registrantand in the capacities and on the date indicated.Signature Title Date /s/ Leigh R. Fox President and Chief Executive Officer February 22, 2019 Leigh R. Fox (Principal Executive Officer) /s/ Andrew R. Kaiser* Chief Financial Officer February 22, 2019 Andrew R. Kaiser (Principal Financial Officer) /s/ Shannon M. Mullen* Vice President and Corporate Controller February 22, 2019 Shannon M. Mullen (Principal Accounting Officer) Phillip R. Cox* Chairman of the Board and Director February 22, 2019 Phillip R. Cox Meredith J. Ching* Director February 22, 2019 Meredith J. Ching Walter A. Dods, Jr.* Director February 22, 2019 Walter A. Dods, Jr. John W. Eck* Director February 22, 2019 John W. Eck Jakki L. Haussler* Director February 22, 2019 Jakki L. Haussler Craig F. Maier* Director February 22, 2019 Craig F. Maier Russel P. Mayer* Director February 22, 2019 Russel P. Mayer Theodore H. Torbeck* Director February 22, 2019 Theodore H. Torbeck Lynn A. Wentworth* Director February 22, 2019 Lynn A. Wentworth Martin J. Yudkovitz* Director February 22, 2019 Martin J. Yudkovitz *By: /s/ Leigh R. Fox Leigh R. Fox as attorney-in-fact and on his behalf as President and Chief Executive Officer 136Exhibit 21Subsidiaries of the Registrant(as of February 22, 2019)Subsidiary Name State or Country ofIncorporation orFormationCincinnati Bell Shared Services LLC OhioCincinnati Bell Wireless, LLC OhioCBTS LLC DelawareCincinnati Bell Entertainment Inc. OhioCincinnati Bell Funding LLC DelawareCincinnati Bell Telephone Company LLC OhioCincinnati Bell Extended Territories LLC OhioCBTS Technology Solutions LLC DelawareOnX Holdings LLC DelawareCBTS Virginia LLC VirginiaCincinnati Bell Technology Solutions UK Limited United KingdomOnX UK Limited United KingdomOnX Enterprise Solutions Ltd. OntarioOnX USA LLC DelawareOnX Managed Services Inc. IllinoisOnX Enterprise Solutions India LLP IndiaCincinnati Bell Funding Canada LTD. OntarioHawaiian Telecom Holdco, Inc. DelawareHawaiian Telcom Communications, Inc. DelawareHawaiian Telcom, Inc. HawaiiHawaiian Telcom Services Company, Inc. DelawareWavecom Solutions Corporation HawaiiSystemMetrics Corporation HawaiiExhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the following Registration Statements on Forms S-8 of Cincinnati Bell Inc. and subsidiaries (the “Company”)of our reports dated February 22, 2019, relating to the consolidated financial statements and financial statement schedule of the Company (which reportexpresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s change in method of accounting for revenue fromcontracts with customers due to the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers, during 2018), and theeffectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year endedDecember 31, 2018.Form S-8333-192225333-192226333-159160333-143089333-204562333-217839333-217840333-226027/s/ Deloitte & Touche LLPCincinnati, OhioFebruary 22, 2019Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Meredith J. ChingMeredith J. ChingDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Meredith J. Ching, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Phillip R. CoxPhillip R. CoxDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Phillip R. Cox, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019. /s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Walter A. Dods, Jr.Walter A. Dods, Jr.DirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Walter A. Dods, Jr., to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ John W. EckJohn W. EckDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me John W. Eck, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Jakki L. HausslerJakki L. HausslerDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Jakki L. Haussler, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Craig F. MaierCraig F. MaierDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Craig F. Maier, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Russel P. MayerRussel P. MayerDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Russel P. Mayer, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Theodore H. TorbeckTheodore H. TorbeckDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Theodore H. Torbeck, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Martin J. YudkovitzMartin J. YudkovitzDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Martin J. Yudkovitz, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 24POWER OF ATTORNEYWHEREAS, Cincinnati Bell Inc., an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and ExchangeCommission under the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, an annual report on Form10-K for the year ended December 31, 2018 andWHEREAS, the undersigned is a director of the Company;NOW, THEREFORE, the undersigned hereby designates and appoints Leigh R. Fox, Andrew R. Kaiser and Christopher J. Wilson, and each of them singly,his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K,and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do andperform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might orcould do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done byvirtue hereof.IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 31st day of January, 2019. /s/ Lynn A. WentworthLynn A. WentworthDirectorSTATE OF OHIO) ) SS:COUNTY OF HAMILTON)On the 31st day of January, 2019, personally appeared before me Lynn A. Wentworth, to me known and known to me to be the person described in and whoexecuted the foregoing instrument, and he duly acknowledged to me that he executed and delivered the same for the purposes therein expressed.Witness my hand and official seal this 31st day of January, 2019./s/ Connie M. VogtConnie M. VogtNotary Public, State of OhioMy commission expires 04-28-2020Exhibit 31.1CertificationsI, Leigh R. Fox, Chief Executive Officer, certify that:1.I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting.Date:February 22, 2019/s/ Leigh R. Fox Leigh R. Fox Chief Executive OfficerExhibit 31.2CertificationsI, Andrew R. Kaiser, Chief Financial Officer, certify that:1.I have reviewed this annual report on Form 10-K of Cincinnati Bell Inc;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’sinternal control over financial reporting. Date:February 22, 2019/s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2018 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Leigh R. Fox, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company./s/ Leigh R. Fox Leigh R. Fox Chief Executive Officer February 22, 2019 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Cincinnati Bell Inc. (the “Company”) on Form 10-K for the period ending December 31, 2018 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Andrew R. Kaiser, Chief Financial Officer of the Company, certify, pursuant to18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company./s/ Andrew R. Kaiser Andrew R. Kaiser Chief Financial Officer February 22, 2019 

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