10-Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2016
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 1-8519
CINCINNATI BELL INC.
 
Ohio
 
31-1056105
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
221 East Fourth Street, Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
(513) 397-9900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
  
Accelerated filer
o
 
 
 
 
 
Non-accelerated filer
o
  
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o No  x

At April 30, 2016, there were 210,060,627 common shares outstanding.
 

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

TABLE OF CONTENTS

PART I. Financial Information
Description
 
Page
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.

 
 
 
Item 4.

 
 
 
Item 5.

 
 
 
Item 6.
 
 
 
 

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
(Unaudited)
 
 
Three Months Ended
 
March 31,
 
2016
 
2015
Revenue
 
 
 
Services
$
241.5

 
$
229.8

Products
47.4

 
63.1

Total revenue
288.9

 
292.9

Costs and expenses
 
 
 
Cost of services, excluding items below
123.2

 
113.6

Cost of products sold, excluding items below
39.5

 
52.6

Selling, general and administrative, excluding items below
53.2

 
52.2

Depreciation and amortization
43.4

 
32.6

Other
—

 
4.8

Total operating costs and expenses
259.3

 
255.8

Operating income
29.6

 
37.1

Interest expense
20.3

 
32.7

Gain on extinguishment of debt
(2.4
)
 
—

Other expense, net
—

 
3.5

Income from continuing operations before income taxes
11.7

 
0.9

Income tax expense
4.7

 
0.6

Income from continuing operations
7.0

 
0.3

Income from discontinued operations, net of tax
—

 
48.9

Net income
7.0

 
49.2

Preferred stock dividends
2.6

 
2.6

Net income applicable to common shareowners
$
4.4

 
$
46.6

Basic and diluted net earnings (loss) per common share
 
 
 
Basic and diluted earnings (loss) per common share from continuing operations
$
0.02

 
$
(0.01
)
Basic and diluted earnings per common share from discontinued operations
$
—

 
$
0.23

Basic and diluted net earnings per common share
$
0.02

 
$
0.22



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

1
Table of Contents

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

 
Three Months Ended
 
March 31,
 
2016
 
2015
Net income
$
7.0

 
$
49.2

Other comprehensive income
 
 
 
Foreign currency translation loss
(0.1
)
 
(0.3
)
Defined benefit pension and postretirement plans
 
 
 
   Amortization of prior service benefits, net of tax of ($1.4), ($1.4)
(2.3
)
 
(2.4
)
   Amortization of net actuarial loss, net of tax of $2.1, $2.3
3.9

 
4.1

Other comprehensive income
1.5

 
1.4

Total comprehensive income
$
8.5

 
$
50.6



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

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

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except share amounts)
(Unaudited) 
 
March 31,
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
7.9

 
$
7.4

Receivables, less allowances of $12.4 and $12.4
138.5

 
157.1

Inventory, materials and supplies
21.7

 
20.6

Prepaid expenses
16.9

 
13.1

Other current assets
3.3

 
2.2

Total current assets
188.3

 
200.4

Property, plant and equipment, net
995.0

 
975.5

Investment in CyrusOne
52.8

 
55.5

Goodwill
14.3

 
14.3

Deferred income taxes, net
177.4

 
182.9

Other noncurrent assets
16.8

 
17.8

Total assets
$
1,444.6

 
$
1,446.4

Liabilities and Shareowners’ Deficit
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
14.8

 
$
13.8

Accounts payable
118.4

 
128.9

Unearned revenue and customer deposits
27.1

 
29.2

Accrued taxes
12.4

 
14.5

Accrued interest
23.0

 
11.2

Accrued payroll and benefits
30.6

 
31.2

Other current liabilities
24.2

 
25.0

Other current liabilities from discontinued operations
2.0

 
5.4

Total current liabilities
252.5

 
259.2

Long-term debt, less current portion
1,226.0

 
1,223.8

Pension and postretirement benefit obligations
221.4

 
225.0

Other noncurrent liabilities
36.3

 
36.6

Total liabilities
1,736.2

 
1,744.6

Shareowners’ deficit
 
 
 
Preferred stock, 2,357,299 shares authorized, 155,250 shares (3,105,000 depositary shares) of 6 3/4% Cumulative Convertible Preferred Stock issued and outstanding at March 31, 2016 and December 31, 2015; liquidation preference $1,000 per share ($50 per depositary share)
129.4

 
129.4

Common shares, $.01 par value; 480,000,000 shares authorized; 210,170,716 and 210,017,999 shares issued; 210,029,666 and 209,876,949 shares outstanding at March 31, 2016 and December 31, 2015
2.1

 
2.1

Additional paid-in capital
2,574.1

 
2,576.0

Accumulated deficit
(2,827.2
)
 
(2,834.2
)
Accumulated other comprehensive loss
(169.5
)
 
(171.0
)
Common shares in treasury, at cost
(0.5
)
 
(0.5
)
Total shareowners’ deficit
(291.6
)
 
(298.2
)
Total liabilities and shareowners’ deficit
$
1,444.6

 
$
1,446.4

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

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)(Unaudited) 
 
Three Months Ended
 
March 31,
 
2016
 
2015
Cash flows from operating activities
 
 
 
Net income
$
7.0

 
$
49.2

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
43.4

 
61.2

Gain on extinguishment of debt
(2.4
)
 
—

Provision for loss on receivables
1.9

 
2.1

Noncash portion of interest expense
1.0

 
1.4

Deferred income tax provision
4.4

 
27.8

Pension and other postretirement payments in excess of expense
(1.3
)
 
(3.6
)
Stock-based compensation
1.2

 
1.3

Deferred gain on sale of wireless spectrum licenses - discontinued operations
—

 
(112.6
)
Amortization of deferred gain - discontinued operations
—

 
(6.5
)
Other, net
(1.5
)
 
6.7

Changes in operating assets and liabilities:
 
 
 
Decrease (increase) in receivables
17.2

 
(1.9
)
(Increase) decrease in inventory, materials, supplies, prepaid expenses and other current assets
(4.7
)
 
1.2

Decrease in accounts payable
(3.2
)
 
(24.2
)
Increase in accrued and other current liabilities
2.8

 
2.4

Decrease in other noncurrent assets
0.5

 
0.1

(Decrease) increase in other noncurrent liabilities
(0.3
)
 
1.7

Net cash provided by operating activities
66.0

 
6.3

Cash flows from investing activities
 
 
 
Capital expenditures
(62.4
)
 
(57.9
)
Dividends received from CyrusOne
2.1

 
6.0

Other, net
(0.1
)
 
(0.1
)
Net cash used in investing activities
(60.4
)
 
(52.0
)
Cash flows from financing activities
 
 
 
Net increase in corporate credit and receivables facilities with initial maturities less than 90 days
28.9

 
7.5

Repayment of debt
(30.9
)
 
(3.3
)
Dividends paid on preferred stock
(2.6
)
 
(2.6
)
Other, net
(0.5
)
 
(0.4
)
Net cash (used in) provided by financing activities
(5.1
)
 
1.2

Net increase (decrease) in cash and cash equivalents
0.5

 
(44.5
)
Cash and cash equivalents at beginning of period
7.4

 
57.9

Cash and cash equivalents at end of period
$
7.9

 
$
13.4

 
 
 
 
Noncash investing and financing transactions:
 
 
 
Accrual of CyrusOne dividends
$
2.7

 
$
9.0

Acquisition of property by assuming debt and other noncurrent liabilities
$
7.1

 
$
1.3

Acquisition of property on account
$
27.3

 
$
28.9


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

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


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

1.
Description of Business and Accounting Policies
Description of Business — Cincinnati Bell Inc. and its consolidated subsidiaries ("Cincinnati Bell", "we", "our", "us" or the "Company") provides diversified telecommunications and technology services. The Company generates a large portion of its revenue by serving customers in the Greater Cincinnati and Dayton, Ohio areas. An economic downturn or natural disaster occurring in this, or a portion of this, limited operating territory could have a disproportionate effect on our business, financial condition, results of operations and cash flows compared to similar companies of a national scope and similar companies operating in different geographic areas.
As of March 31, 2016, we operate our business through the following segments: Entertainment and Communications and IT Services and Hardware.
The company has 3,300 employees as of March 31, 2016, and approximately 30% of its employees are covered by a collective bargaining agreement with Communications Workers of America (“CWA”) that will be in effect through May 12, 2018.
The Company has receivables with one large customer, General Electric Company, that makes up 22% of the outstanding accounts receivable balance at March 31, 2016 and December 31, 2015. This same customer represented 11% and 12% of consolidated revenue for the three months ended March 31, 2016 and 2015, respectively.
Basis of Presentation — The Condensed Consolidated Financial Statements of the Company have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments necessary for a fair presentation of the results of operations, other comprehensive income, financial position and cash flows for each period presented.
The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations for interim reporting.
The Condensed Consolidated Balance Sheet as of December 31, 2015 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s 2015 Annual Report on Form 10-K. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results expected for the full year or any other interim period.
The closing of our wireless operations in March 2015 represented a strategic shift in our business. Therefore, certain wireless assets, liabilities and results of operations are reported as discontinued operations in our financial statements. See Note 9 for all required disclosures.
Use of Estimates — Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with U.S. GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance.
Restructuring Liability — As of March 31, 2016, restructuring liabilities have been established for employee separations, lease abandonments and other charges. As of March 31, 2016 and December 31, 2015, $0.9 million of the restructuring liabilities was included in “Other current liabilities,” and $0.2 million was included in “Other noncurrent liabilities” in the Condensed Consolidated Balance Sheets.
Income Taxes — The Company’s income tax provision for interim periods is determined through the use of an estimated annual effective tax rate applied to year-to-date ordinary income, as well as the tax effects associated with discrete items. The Company expects its effective rate to exceed statutory rates primarily due to non-deductible expenses.

5
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Recently Issued Accounting Standards — In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. The new standard is effective for public business entities for annual reporting periods beginning after December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee model that brings most leases on the balance sheet as well as aligning certain underlying principles of the new lessor model with those in Accounting Standards Codification ("ASC") 606. The new standard is effective for public business entities for fiscal years beginning after December 15, 2018 and lessees and lessors are required to use a modified retrospective transition method for existing leases. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments, in January 2016. The amended guidance requires entities to carry all investments in equity securities at fair value through net income unless the entity has elected the practicability exception to fair value measurement. This standard will be effective for the fiscal year ending December 31, 2018 and will require a cumulative-effect adjustment to beginning retained earnings on this date. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Company's consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements.  Specifically, this amendment requires that costs associated with the issuance of debt be presented on the balance sheet as a direct deduction from the related debt liability. The Company retrospectively adopted the amended standard effective January 1, 2016. The adoption resulted in a prior period adjustment due to a change in accounting principle. The Condensed Consolidated Balance Sheet for the period ending December 31, 2015 has been restated to reflect this change in accounting principle. Note issuance costs of $8.0 million were reclassed from “Other noncurrent assets” to “Long-term debt, less current portion.” Note 3 has been updated to reflect the adjustment. On the effective date of ASU 2015-03, the Company made a one-time policy election to record costs incurred in connection with obtaining revolving credit agreements as an asset and to amortize these costs ratably over the term of the agreement. This accounting treatment is consistent with how deferred financing costs were accounted for prior to adoption of ASU 2015-03.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. In August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company has elected to adopt the standard in the first quarter of the fiscal year ending December 31, 2018. The Company is continuing to evaluate the impact of adoption of this ASU on the Company’s consolidated financial statements.
No other new accounting pronouncement issued or effective during the year had, or is expected to have, a material impact on the consolidated financial statements.

6
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

2.    Earnings Per Common Share
Basic earnings per common share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur upon issuance of common shares for awards under stock-based compensation plans, exercise of warrants or conversion of preferred stock, but only to the extent that they are considered dilutive.
The following table shows the computation of basic and diluted EPS:
 
 
Three Months Ended
 
Three Months Ended
 
March 31, 2016
 
March 31, 2015
(in millions, except per share amounts)
Continuing Operations
 
Discontinued Operations
 
Total
 
Continuing Operations
 
Discontinued Operations
 
Total
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income
$
7.0

 
$
—

 
$
7.0

 
$
0.3

 
$
48.9

 
$
49.2

Preferred stock dividends
2.6

 
—

 
2.6

 
2.6

 
—

 
2.6

Net income (loss) applicable to common shareowners - basic and diluted
$
4.4

 
$
—

 
$
4.4

 
$
(2.3
)
 
$
48.9

 
$
46.6

Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
210.0

 
210.0

 
210.0

 
209.2

 
209.2

 
209.2

Stock-based compensation arrangements
0.4

 
0.4

 
0.4

 
—

 
—

 
—

Weighted average common shares outstanding - diluted
210.4

 
210.4

 
210.4

 
209.2

 
209.2

 
209.2

Basic and diluted earnings (loss) per common share
$
0.02

 
$
—

 
$
0.02

 
$
(0.01
)
 
$
0.23

 
$
0.22



For the three months ended March 31, 2016, awards under the Company's stock-based compensation plans for common shares of 3.0 million were excluded from the computation of diluted EPS as the inclusion would have been anti-dilutive. For the three months ended March 31, 2015, the Company had a net loss available to common shareholders in continuing operations and, as a result, all common stock equivalents were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For all periods presented, preferred stock convertible into 4.5 million common shares was excluded as it was anti-dilutive.

7
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

3.    Debt
The Company’s debt consists of the following:
 
 
March 31,
 
December 31,
(dollars in millions)
2016
 
2015
Current portion of long-term debt:
 
 
 
Corporate Credit Agreement - Tranche B Term Loan
$
5.4

 
$
5.4

Capital lease obligations and other debt
9.4

 
8.4

Current portion of long-term debt
14.8

 
13.8

Long-term debt, less current portion:
 
 
 
Receivables Facility
46.5

 
17.6

Corporate Credit Agreement - Tranche B Term Loan
521.1

 
522.5

8 3/8% Senior Notes due 2020
478.5

 
478.5

       7 1/4% Senior Notes due 2023
26.3

 
26.3

Various Cincinnati Bell Telephone notes
98.9

 
128.7

Capital lease obligations and other debt
63.7

 
59.9

 
1,235.0

 
1,233.5

Net unamortized discount
(1.6
)
 
(1.7
)
Unamortized note issuance costs
(7.4
)
 
(8.0
)
         Long-term debt, less current portion
1,226.0

 
1,223.8

Total debt
$
1,240.8

 
$
1,237.6



There were no outstanding borrowings on the Corporate Credit Agreement's revolving credit facility, leaving $175.0 million available for borrowings as of March 31, 2016. This revolving credit facility expires in July 2017.

As of March 31, 2016, the Company had $46.5 million of borrowings and $6.3 million of letters of credit outstanding under the accounts receivable securitization facility ("Receivables Facility"), leaving $50.8 million remaining availability on the total borrowing capacity of $103.6 million. On June 1, 2015, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase the credit availability, renew the facility, which is subject to renewal every 364 days, until May 30, 2016, extend the facility's termination date to May 30, 2018, and include a Libor Market Index Rate floor of zero. In the event the Receivables Facility is not renewed, the Company has the ability to refinance any outstanding borrowings with borrowings under the Corporate Credit Agreement. Under the terms of the Receivables Facility, the Company could obtain up to $120.0 million depending on the quantity and quality of accounts receivable. Under this agreement, certain subsidiaries, or originators, sell their respective trade receivables on a continuous basis to Cincinnati Bell Funding LLC (“CBF”). Although CBF is a wholly-owned consolidated subsidiary of the Company, CBF is legally separate from the Company and each of the Company’s other subsidiaries. Upon and after the sale or contribution of the accounts receivable to CBF, such accounts receivable are legally assets of CBF and, as such, are not available to creditors of other subsidiaries or the Company.

During the first quarter of 2016, the Company redeemed $29.8 million of its outstanding 6.30% unsecured senior notes due 2028 (the "CBT Notes") at an average redemption price of 91.130% which resulted in a gain on extinguishment of debt of $2.4 million.



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

4.    Financial Instruments and Fair Value Measurements
The carrying values of the Company's financial instruments approximate the estimated fair values as of March 31, 2016 and December 31, 2015, except for the Company's investment in CyrusOne and long-term debt. The carrying and fair values of these financial instruments are as follows: 
 
March 31, 2016
 
December 31, 2015
(dollars in millions)
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Investment in CyrusOne
$
52.8

 
$
314.4

 
$
55.5

 
$
257.9

Long-term debt, including current portion*
1,175.7

 
1,169.2

 
1,178.0

 
1,155.6

   *Excludes capital leases and note issuance costs.
 
 
 
 
 
 
 

The fair value of our investment in CyrusOne was based on the closing market price of CyrusOne's common stock on March 31, 2016 and December 31, 2015. This fair value measurement is considered Level 1 of the fair value hierarchy.

The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at March 31, 2016 and December 31, 2015, which is considered Level 2 of the fair value hierarchy.

5.    Pension and Postretirement Plans
The Company sponsors three noncontributory defined benefit plans and a postretirement health and life insurance plan. For the three months ended March 31, 2016 and 2015, approximately 10% of the costs were capitalized as a component of property, plant and equipment related to construction of our copper and fiber networks.
For the three months ended March 31, 2016 and 2015, pension and postretirement benefit costs were as follows:
 
Three Months Ended March 31,
 
2016
 
2015
 
2016
 
2015
(dollars in millions)
Pension Benefits
 
Postretirement and
Other Benefits
Service cost
$
—

 
$
—

 
$
0.1

 
$
0.1

Interest cost on projected benefit obligation
4.8

 
4.6

 
0.8

 
0.8

Expected return on plan assets
(6.8
)
 
(7.2
)
 
—

 
—

Amortization of:
 
 
 
 
 
 
 
Prior service cost (benefit)
—

 
0.1

 
(3.7
)
 
(3.9
)
Actuarial loss
4.8

 
5.1

 
1.2

 
1.4

       Total amortization
4.8

 
5.2

 
(2.5
)
 
(2.5
)
Pension / postretirement costs (benefits)
$
2.8

 
$
2.6

 
$
(1.6
)
 
$
(1.6
)

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

Based on current assumptions, management believes it will not make any contributions to the qualified pension plan in 2016. Contributions to non-qualified pension plans in 2016 are expected to be approximately $2 million. Management expects to make cash payments of approximately $10 million related to its postretirement health plans in 2016.

For the three months ended March 31, 2016, contributions to non-qualified pension plans were $0.6 million and contributions to the postretirement plan were $1.9 million.


9
Table of Contents

6.    Stock-Based and Other Compensation Plans
The Company grants stock options, stock appreciation rights (“SARs”), long-term incentive plan performance-based awards, and time-based restricted shares, some of which are cash-settled awards with the final payment indexed to the percentage change in the Company’s stock price from the date of grant.
For the three months ended March 31, 2016, the Company recognized stock-based compensation expense of $1.9 million, inclusive of $0.3 million of mark-to-market expense on awards indexed to the Company's stock price. For the three months ended March 31, 2015, the Company recognized stock-based compensation expense of $2.0 million, inclusive of $0.4 million of mark-to-market expense on awards indexed to the Company's stock price. As of March 31, 2016, there was $14.1 million of unrecognized compensation expense related to these awards. The remaining compensation expense for the stock options, SARs and restricted awards is expected to be recognized over a weighted-average period of approximately two years, and the remaining expense for long-term incentive plan performance-based awards will be recognized within approximately two years.
The Company also has deferred compensation plans for its Board of Directors and certain executives. Under these plans, participants can elect to invest their deferrals in the Company’s common stock. In the fourth quarter of 2015, the executive deferred compensation plan was terminated. All amounts due under the executive deferred compensation plan will be distributed to plan participants during 2016. At March 31, 2016 and 2015, the number of common shares deferred under these plans was 0.3 million and 0.4 million, respectively. As these awards can be settled in cash, the Company records compensation costs each period based on the change in the Company’s stock price. For both the three months ended March 31, 2016 and 2015, the Company recognized expense of $0.1 million related to these awards.

7.    Shareowners' Deficit
Accumulated Other Comprehensive Loss
For the three months ended March 31, 2016, the changes in accumulated other comprehensive loss by component were as follows:
(dollars in millions)
Unrecognized Net Periodic Pension and Postretirement Benefit Cost
 
Foreign Currency Translation Loss
 
Total
Balance as of December 31, 2015
$
(170.3
)
 
$
(0.7
)
 
$
(171.0
)
Reclassifications, net (a)
1.6

 
(0.1
)
 
1.5

Balance as of March 31, 2016
$
(168.7
)
 
$
(0.8
)
 
$
(169.5
)
(a) These reclassifications are included in the components of net periodic pension and postretirement benefit costs (see Note 5 for additional details). The components of net periodic pension and postretirement benefit cost are reported within "Cost of services," "Cost of products sold," and "Selling, general and administrative" expenses on the Condensed Consolidated Statements of Operations.

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

8.    Investment in CyrusOne
On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operates our former Data Center Colocation business. CyrusOne conducts its data center business through CyrusOne LP, an operating partnership. Effective with the IPO, our 69% ownership was held in the form of 1.9 million shares of unregistered common stock of CyrusOne Inc. and 42.6 million economically equivalent partnership units in its underlying operating entity, CyrusOne LP. Therefore, effective January 24, 2013, we no longer included the accounts of CyrusOne in our consolidated financial statements and accounted for our ownership as an equity method investment as we no longer controlled the operations but maintained significant influence. From the date of the IPO, we recognized our proportionate share of CyrusOne's net income or loss as non-operating income or expense in our statement of operations through December 31, 2015.
Effective December 31, 2015, we exchanged our remaining 6.3 million operating partnership units in CyrusOne LP for an equal number of newly issued shares of common stock of CyrusOne Inc. As a result, we own 6.9 million shares of CyrusOne's common shares and no longer have significant influence over the entity. Therefore, as of December 31, 2015, our ownership in CyrusOne is accounted for as a cost method investment, and we no longer record our pro-rata share of CyrusOne's financial results in our statement of operations. For the three months ended March 31, 2016 and 2015, the Company received cash dividends from CyrusOne totaling $2.1 million and $6.0 million, respectively. Dividends from CyrusOne were recognized as a reduction of our investment.
Transactions with CyrusOne
Revenues - The Company records service revenue from CyrusOne under contractual service arrangements which include, among others, providing services such as fiber transport, network support, service calls, monitoring and management, storage and back-up, and IT systems support.
Operating Expenses - We lease data center and office space from CyrusOne at certain locations in our operating territory under operating leases and are also billed for other services provided by CyrusOne under contractual service arrangements. In the normal course of business, the Company also provides certain administrative services to CyrusOne which are billed based on agreed-upon rates.
Revenue and operating costs and expenses from transactions with CyrusOne were as follows:
 
Three Months Ended
 
March 31,
(dollars in millions)
2016
 
2015
Revenue:
 
 
 
Services provided to CyrusOne
$
0.3

 
$
0.3

 
 
 
 
Operating costs and expenses:
 
 
 
Charges for services provided by CyrusOne
2.6

 
2.5

Administrative services provided to CyrusOne
(0.1
)
 
(0.1
)
Total operating costs and expenses
$
2.5

 
$
2.4

At March 31, 2016 and December 31, 2015, amounts receivable from and payable to CyrusOne were as follows:
 
 
March 31,
 
December 31,
(dollars in millions)
 
2016
 
2015
Accounts receivable
 
$
0.1

 
$
0.1

Dividends receivable
 
2.7

 
2.1

  Receivable from CyrusOne
 
$
2.8

 
$
2.2

 
 
 
 
 
Payable to CyrusOne
 
$
1.4

 
$
1.5



11
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

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

Wireless financial results for the three months ended March 31, 2015 reported as Income from discontinued operations, net of tax on the Condensed Consolidated Statements of Operations are as follows:

 
Three Months Ended
(dollars in millions)
March 31, 2015
Revenue
$
4.4

Costs and expenses
 
Cost of products and services
12.0

Selling, general and administrative
1.3

Depreciation and amortization expense
28.6

Restructuring charges
6.4

Amortization of deferred gain
(6.5
)
Total operating costs and expenses
41.8

Operating loss
(37.4
)
Interest income
(0.8
)
Gain on sale of wireless spectrum licenses
112.6

Income before income taxes
76.0

Income tax expense
27.1

Income from discontinued operations
$
48.9



12
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Wireless liabilities presented as discontinued operations as of March 31, 2016 and December 31, 2015 are as follows:
(dollars in millions)
March 31, 2016
 
December 31, 2015
Current liabilities
 
 
 
Restructuring liability
$
1.4

 
$
4.7

     Other current liabilities
0.6

 
0.7

Total current liabilities from discontinued
operations
$
2.0

 
$
5.4


Following is selected operating and investing cash flow activity from discontinued operations included in the Condensed Consolidated Statements of Cash Flows:
 
Three Months Ended
 
March 31,
(dollars in millions)
2016
 
2015
Depreciation and amortization
$
—

 
$
28.6

Amortization of deferred gain on sale of towers
—

 
(6.5
)
Non-cash spectrum lease
—

 
3.2

Deferred gain on sale of spectrum licenses
—

 
(112.6
)
Restructuring payments
(3.3
)
 
(3.4
)


13
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

10.    Business Segment Information
The Company’s segments are strategic business units that offer distinct products and services and are aligned with its internal management structure and reporting. The Entertainment and Communications segment provides products and services such as data transport, high-speed internet, video, local voice, long distance, voice over internet protocol ("VoIP") and other services. The IT Services and Hardware segment provides a range of fully managed and outsourced IT and telecommunications services along with the sale, installation and maintenance of major branded Telecom and IT hardware.
Certain corporate administrative expenses have been allocated to the segments based upon the nature of the expense and the relative size of the segment. Intercompany transactions between segments have been eliminated.
Selected financial data for the Company’s business segment information is as follows:

 
Three Months Ended
 
March 31,
(dollars in millions)
2016

2015
Revenue
 
 
 
Entertainment and Communications
$
190.3

 
$
188.1

IT Services and Hardware
102.5

 
107.6

Intersegment
(3.9
)
 
(2.8
)
Total revenue
$
288.9

 
$
292.9

Intersegment revenue
 
 
 
Entertainment and Communications
$
0.4

 
$
0.3

IT Services and Hardware
3.5

 
2.5

Total intersegment revenue
$
3.9

 
$
2.8

Operating income
 
 
 
Entertainment and Communications
$
27.7

 
$
41.3

IT Services and Hardware
7.2

 
1.1

Corporate
(5.3
)
 
(5.3
)
Total operating income
$
29.6

 
$
37.1

Expenditures for long-lived assets
 
 
 
Entertainment and Communications
$
60.3

 
$
54.0

IT Services and Hardware
2.0

 
3.9

Corporate
0.1

 
—

Total expenditures for long-lived assets
$
62.4

 
$
57.9

Depreciation and amortization
 
 
 
Entertainment and Communications
$
40.2

 
$
29.5

IT Services and Hardware
3.2

 
3.1

Total depreciation and amortization
$
43.4

 
$
32.6

 
 
 
 
 
March 31,
 
December 31,
  
2016
 
2015
Assets
 
 
 
Entertainment and Communications
$
1,004.4

 
$
982.5

IT Services and Hardware
57.5

 
58.0

Corporate and eliminations
382.7

 
405.9

Total assets
$
1,444.6

 
$
1,446.4


14
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

11.    Supplemental Guarantor Information
Cincinnati Bell Telephone Notes
As of March 31, 2016, Cincinnati Bell Telephone Company LLC (“CBT”), a wholly-owned subsidiary of Cincinnati Bell Inc. (the “Parent Company”), had $98.9 million in notes outstanding that are guaranteed by the Parent Company and no other subsidiaries of the Parent Company. The guarantee is full and unconditional. The Parent Company’s subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet the Parent Company’s debt service obligations. During the first quarter of 2016 and 2015, certain entities issued dividends to the Parent Company which impacted equity and intercompany accounts on the balance sheets of certain non-guarantor entities.

The following information sets forth the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015, Condensed Consolidating Balance Sheets as of March 31, 2016 and December 31, 2015, and Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2016 and 2015 of (1) the Parent Company, as the guarantor, (2) CBT, as the issuer, and (3) the non-guarantor subsidiaries on a combined basis.

15
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
  
Three Months Ended March 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Revenue
$
—

 
$
167.7

 
$
131.6

 
$
(10.4
)
 
$
288.9

Operating costs and expenses
5.2

 
142.1

 
122.4

 
(10.4
)
 
259.3

Operating income (loss)
(5.2
)
 
25.6

 
9.2

 
—

 
29.6

Interest expense (income), net
24.1

 
0.8

 
(4.6
)
 
—

 
20.3

Other expense (income), net
(0.3
)
 
(0.2
)
 
(1.9
)
 
—

 
(2.4
)
Income (loss) before equity in earnings of subsidiaries and income taxes
(29.0
)
 
25.0

 
15.7

 
—

 
11.7

Income tax expense (benefit)
(10.0
)
 
8.9

 
5.8

 
—

 
4.7

Equity in earnings of subsidiaries, net of tax
26.0

 
—

 
—

 
(26.0
)
 
—

Net income (loss)
7.0


16.1


9.9


(26.0
)

7.0

Other comprehensive income (loss)
1.6

 
—

 
(0.1
)
 
—

 
1.5

Total comprehensive income (loss)
$
8.6

 
$
16.1

 
$
9.8

 
$
(26.0
)
 
$
8.5

 
 
 
 
 
 
 
 
 
 
Net income (loss)
7.0

 
16.1

 
9.9

 
(26.0
)
 
7.0

Preferred stock dividends
2.6

 
—

 
—

 
—

 
2.6

Net income (loss) applicable to common shareowners
$
4.4

 
$
16.1

 
$
9.9

 
$
(26.0
)
 
$
4.4

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Revenue
$
—

 
$
167.6

 
$
135.0

 
$
(9.7
)
 
$
292.9

Operating costs and expenses
5.3

 
128.9

 
131.3

 
(9.7
)
 
255.8

Operating income (loss)
(5.3
)
 
38.7

 
3.7

 
—

 
37.1

Interest expense (income), net
33.9

 
(0.8
)
 
(0.4
)
 
—

 
32.7

Other expense (income), net
(0.4
)
 
1.9

 
2.0

 
—

 
3.5

Income (loss) before equity in earnings of subsidiaries and income taxes
(38.8
)
 
37.6

 
2.1

 
—

 
0.9

Income tax expense (benefit)
(14.1
)
 
13.8

 
0.9

 
—

 
0.6

Equity in earnings of subsidiaries, net of tax
73.9

 
—

 
—

 
(73.9
)
 
—

Income (loss) from continuing operations
49.2


23.8


1.2


(73.9
)

0.3

Income (loss) from discontinued operations, net of tax
—

 
—

 
48.9

 
—

 
48.9

Net income (loss)
49.2


23.8


50.1


(73.9
)

49.2

Other comprehensive income (loss)
1.7

 
—

 
(0.3
)
 
—

 
1.4

Total comprehensive income (loss)
$
50.9

 
$
23.8

 
$
49.8

 
$
(73.9
)
 
$
50.6

 
 
 
 
 
 
 
 
 
 
Net income (loss)
49.2

 
23.8

 
50.1

 
(73.9
)
 
49.2

Preferred stock dividends
2.6

 
—

 
—

 
—

 
2.6

Net income (loss) applicable to common shareowners
$
46.6

 
$
23.8

 
$
50.1

 
$
(73.9
)
 
$
46.6


16
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Condensed Consolidating Balance Sheets
 
 
 
 
 
 
 
 
 
  
As of March 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Cash and cash equivalents
$
5.9

 
$
1.1

 
$
0.9

 
$
—

 
$
7.9

Receivables, net
1.3

 
0.4

 
136.8

 
—

 
138.5

Other current assets
2.9

 
21.0

 
18.0

 
—

 
41.9

Total current assets
10.1


22.5


155.7


—


188.3

Property, plant and equipment, net
0.4

 
941.5

 
53.1

 
—

 
995.0

Investment in CyrusOne
—

 
—

 
52.8

 
—

 
52.8

Goodwill
—

 
2.2

 
12.1

 
—

 
14.3

Investments in and advances to subsidiaries
826.0

 
43.2

 
698.4

 
(1,567.6
)
 
—

Other noncurrent assets
215.9

 
2.6

 
130.4

 
(154.7
)
 
194.2

Total assets
$
1,052.4


$
1,012.0


$
1,102.5


$
(1,722.3
)

$
1,444.6

Current portion of long-term debt
$
5.4

 
$
6.1

 
$
3.3

 
$
—

 
$
14.8

Accounts payable
0.4

 
83.4

 
34.6

 
—

 
118.4

Other current liabilities
49.3

 
45.6

 
22.4

 
—

 
117.3

Other current liabilities from discontinued operations
—

 
—

 
2.0

 
—

 
2.0

Total current liabilities
55.1


135.1


62.3


—


252.5

Long-term debt, less current portion
1,017.7

 
109.5

 
98.8

 
—

 
1,226.0

Other noncurrent liabilities
232.5

 
177.5

 
2.4

 
(154.7
)
 
257.7

Intercompany payables
37.9

 
—

 
—

 
(37.9
)
 
—

Total liabilities
1,343.2

 
422.1

 
163.5

 
(192.6
)
 
1,736.2

Shareowners’ (deficit) equity
(290.8
)
 
589.9

 
939.0

 
(1,529.7
)
 
(291.6
)
Total liabilities and shareowners’ equity (deficit)
$
1,052.4

 
$
1,012.0

 
$
1,102.5

 
$
(1,722.3
)
 
$
1,444.6


 
As of December 31, 2015
 
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Cash and cash equivalents
$
4.6

 
$
1.0

 
$
1.8

 
$
—

 
$
7.4

Receivables, net
0.7

 
—

 
156.4

 
—

 
157.1

Other current assets
1.6

 
20.2

 
14.1

 
—

 
35.9

Total current assets
6.9

 
21.2

 
172.3

 
—

 
200.4

Property, plant and equipment, net
0.3

 
921.5

 
53.7

 
—

 
975.5

Investment in CyrusOne
—

 
—

 
55.5

 
—

 
55.5

Goodwill
—

 
2.2

 
12.1

 
—

 
14.3

Investments in and advances to subsidiaries
844.6

 
63.9

 
647.2

 
(1,555.7
)
 
—

Other noncurrent assets
207.2

 
3.0

 
136.8

 
(146.3
)
 
200.7

Total assets
$
1,059.0

 
$
1,011.8

 
$
1,077.6

 
$
(1,702.0
)
 
$
1,446.4

Current portion of long-term debt
$
5.4

 
$
5.0

 
$
3.4

 
$
—

 
$
13.8

Accounts payable
0.7

 
84.8

 
43.4

 
—

 
128.9

Other current liabilities
41.6

 
45.3

 
24.2

 
—

 
111.1

Other current liabilities from discontinued operations
—

 
—

 
5.4

 
—

 
5.4

Total current liabilities
47.7

 
135.1

 
76.4

 
—

 
259.2

Long-term debt, less current portion
1,018.6

 
134.3

 
70.9

 
—

 
1,223.8

Other noncurrent liabilities
235.5

 
168.3

 
4.0

 
(146.2
)
 
261.6

Intercompany payables
54.7

 
—

 
—

 
(54.7
)
 
—

Total liabilities
1,356.5

 
437.7

 
151.3

 
(200.9
)
 
1,744.6

Shareowners’ (deficit) equity
(297.5
)
 
574.1

 
926.3

 
(1,501.1
)
 
(298.2
)
Total liabilities and shareowners’ equity (deficit)
$
1,059.0

 
$
1,011.8

 
$
1,077.6

 
$
(1,702.0
)
 
$
1,446.4


17
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Condensed Consolidating Statements of Cash Flows
  
Three Months Ended March 31, 2016
(dollars in millions)
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Cash flows provided by (used in) operating activities
$
(21.7
)
 
$
63.6

 
$
24.1

 
$
—

 
$
66.0

Capital expenditures
(0.1
)
 
(55.8
)
 
(6.5
)
 
—

 
(62.4
)
Dividends received from CyrusOne
—

 
—

 
2.1

 
—

 
2.1

Distributions received from subsidiaries
2.9

 
—

 
—

 
(2.9
)
 
—

Funding between Parent and subsidiaries, net
—

 
20.7

 
2.9

 
(23.6
)
 
—

Other investing activities
(0.1
)
 
—

 
—

 
—

 
(0.1
)
Cash flows provided by (used in) investing activities
2.7


(35.1
)

(1.5
)

(26.5
)
 
(60.4
)
Funding between Parent and subsidiaries, net
24.8

 
—

 
(48.4
)
 
23.6

 
—

Distributions paid to Parent
—

 
—

 
(2.9
)
 
2.9

 
—

Net increase (decrease) in corporate credit and receivables facilities with initial maturities less than 90 days
—

 
—

 
28.9

 
—

 
28.9

Repayment of debt
(1.4
)
 
(28.4
)
 
(1.1
)
 
—

 
(30.9
)
Other financing activities
(3.1
)
 
—

 
—

 
—

 
(3.1
)
Cash flows provided by (used in) financing activities
20.3

 
(28.4
)
 
(23.5
)
 
26.5

 
(5.1
)
Increase (decrease) in cash and cash equivalents
1.3

 
0.1

 
(0.9
)
 
—

 
0.5

Beginning cash and cash equivalents
4.6

 
1.0

 
1.8

 
—

 
7.4

Ending cash and cash equivalents
$
5.9

 
$
1.1

 
$
0.9

 
$
—

 
$
7.9

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
Parent
(Guarantor)
 
CBT
(Issuer)
 
Other
Non-guarantors
 
Eliminations
 
Total
Cash flows provided by (used in) operating activities
$
(23.5
)
 
$
35.7

 
$
(5.9
)
 
$
—

 
$
6.3

Capital expenditures
—

 
(51.8
)
 
(6.1
)
 
—

 
(57.9
)
Dividends received from CyrusOne
—

 
—

 
6.0

 
—

 
6.0

Distributions received from subsidiaries
2.7

 
—

 
—

 
(2.7
)
 
—

Funding between Parent and subsidiaries, net
—

 
17.3

 
10.9

 
(28.2
)
 
—

Other investing activities
(0.1
)
 
—

 
—

 
—

 
(0.1
)
Cash flows provided by (used in) investing activities
2.6

 
(34.5
)
 
10.8

 
(30.9
)
 
(52.0
)
Funding between Parent and subsidiaries, net
(20.4
)
 
—

 
(7.8
)
 
28.2

 
—

Distributions paid to Parent
—

 
—

 
(2.7
)
 
2.7

 
—

Net increase (decrease) in corporate credit and receivables facilities with initial maturities less than 90 days
—

 
—

 
7.5

 
—

 
7.5

Repayment of debt
(1.3
)
 
(1.0
)
 
(1.0
)
 
—

 
(3.3
)
Other financing activities
(3.0
)
 
—

 
—

 
—

 
(3.0
)
Cash flows provided by (used in) financing activities
(24.7
)
 
(1.0
)
 
(4.0
)
 
30.9

 
1.2

Increase (decrease) in cash and cash equivalents
(45.6
)
 
0.2

 
0.9

 
—

 
(44.5
)
Beginning cash and cash equivalents
56.2

 
1.0

 
0.7

 
—

 
57.9

Ending cash and cash equivalents
$
10.6

 
$
1.2

 
$
1.6

 
$
—

 
$
13.4


18
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Supplemental Guarantor Information - 8 3/8% Senior Notes due 2020
As of March 31, 2016, the Parent Company’s 8 3/8% Senior Notes due 2020 are guaranteed by the following subsidiaries: Cincinnati Bell Entertainment Inc., Cincinnati Bell Any Distance Inc., Cincinnati Bell Telecommunications Services LLC, Cincinnati Bell Wireless LLC, CBTS Software LLC, Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Any Distance of Virginia LLC, eVolve Business Solutions LLC, Data Center Investments Inc., Data Center Investments Holdco LLC, Data Centers South Inc. and Data Centers South Holdings LLC. During the first quarter of 2016 and 2015, certain entities issued dividends to the Parent Company which impacted equity and intercompany accounts on the balance sheets of certain non-guarantor entities.
The Parent Company owns directly or indirectly 100% of each guarantor, and each guarantee is full and unconditional and joint and several. In certain customary circumstances, a subsidiary may be released from its guarantee obligation. These circumstances are defined as follows:
•
upon the sale of all of the capital stock of a subsidiary,
 
 
•
if the Company designates the subsidiary as an unrestricted subsidiary under the terms of the indentures, or
 
 
•
if the subsidiary is released as a guarantor from the Company's Corporate Credit Agreement.

The Parent Company's subsidiaries generate substantially all of its income and cash flow and generally distribute or advance the funds necessary to meet the Parent Company's debt service obligations. The following information sets forth the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2016 and 2015, Condensed Consolidating Balance Sheets as of March 31, 2016 and December 31, 2015, and Condensed Consolidating Statements of Cash Flows for the three months ended March 31, 2016 and 2015 of (1) the Parent Company, as the issuer, (2) the guarantor subsidiaries on a combined basis, and (3) the non-guarantor subsidiaries on a combined basis.

19
Table of Contents
Form 10-Q Part I
 
Cincinnati Bell Inc.

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
 
Three Months Ended March 31, 2016
(dollars in millions)
Parent
(Issuer)
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Total
Revenue
$
—

 
$
153.7

 
$
145.6

 
$
(10.4
)
 
$
288.9

Operating costs and expenses
5.2

 
136.9

 
127.6

 
(10.4
)
 
259.3

Operating income (loss)
(5.2
)
 
16.8

 
18.0

 
—

 
29.6

Interest expense (income), net
24.1

 
(5.0
)
 
1.2

 
—

 
20.3

Other expense (income), net
(0.3
)
 
2.9

 
(5.0
)
 
—

 
(2.4
)
Income (loss) before equity in earnings of subsidiaries and income taxes
(29.0
)
 
18.9

 
21.8

 
—

 
11.7

Income tax expense (benefit)
(10.0
)
 
7.0

 
7.7

 
—

 
4.7

Equity in earnings of subsidiaries, net of tax
26.0

 
—

 
—

 
(26.0
)
 
—

Net income (loss)
7.0


11.9


14.1


(26.0
)

7.0

Other comprehensive income (loss)
1.6

 
—

 
(0.1
)
 
—

 
1.5

Total comprehensive income (loss)
$
8.6

 
$
11.9

 
$
14.0

 
$
(26.0
)
 
$
8.5

 
 
 
 
 
 
 
 
 
 
Net income (loss)
7.0

 
11.9

 
14.1

 
(26.0
)
 
7.0

Preferred stock dividends
2.6

 
—

 
—

 
—

 
2.6

Net income (loss) applicable to common shareowners
$
4.4

 
$
11.9

 
$
14.1

 
$
(26.0
)
 
$
4.4

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
Parent
(Issuer)
 
Guarantors
 
Non-guarantors
 
Eliminations
 
Total
Revenue
$
—

 
$
152.9

 
$
149.7

 
$
(9.7
)
 
$
292.9

Operating costs and expenses
5.3

 
147.3

 
112.9

 
(9.7
)
 
255.8

Operating income (loss)
(5.3
)
 
5.6

 
36.8

 
—

 
37.1

Interest expense (income), net
33.9

 
(0.7
)
 
(0.5
)
 
—

 
32.7

Other expense (income), net
(0.4
)
 
6.1

 
(2.2
)
 
—

 
3.5

Income (loss) before equity in earnings of subsidiaries and income taxes
(38.8
)
 
0.2

 
39.5

 
—

 
0.9

Income tax expense (benefit)
(14.1
)
 
—

 
14.7

 
—

 
0.6

Equity in earnings of subsidiaries, net of tax
73.9

 
—

 
—

 
(73.9
)
 
—

Income (loss) from continuing operations
49.2


0.2


24.8


(73.9
)

0.3

Income (loss) from discontinued operations, net of tax
—

 
48.9

 
—

 
—

 
48.9

Net income (loss)
49.2


49.1


24.8


(73.9
)

49.2

Other comprehensive income (loss)
1.7

 
—

 
(0.3
)
 
—

 
1.4

Total comprehensive income (loss)
$
50.9

 
$
49.1

 
$
24.5

 
$
(73.9
)
 
$
50.6