x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 31-1056105 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | Smaller reporting company | o | |
Emerging growth company | o |
Form 10-Q Part I | Cincinnati Bell Inc. |
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. | ||
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | |||||||||||||||
Services | $ | 244.3 | $ | 246.7 | $ | 734.8 | $ | 733.1 | |||||||
Products | 44.9 | 65.7 | 126.6 | 167.4 | |||||||||||
Total revenue | 289.2 | 312.4 | 861.4 | 900.5 | |||||||||||
Costs and expenses | |||||||||||||||
Cost of services, excluding items below | 129.0 | 127.7 | 381.2 | 375.7 | |||||||||||
Cost of products sold, excluding items below | 33.6 | 56.1 | 101.6 | 141.6 | |||||||||||
Selling, general and administrative, excluding items below | 54.5 | 55.5 | 166.6 | 164.9 | |||||||||||
Depreciation and amortization | 47.3 | 46.5 | 140.1 | 134.7 | |||||||||||
Restructuring and severance related charges | — | — | 29.2 | — | |||||||||||
Transaction and integration costs | 12.1 | — | 14.4 | — | |||||||||||
Other | — | 1.1 | — | 1.1 | |||||||||||
Total operating costs and expenses | 276.5 | 286.9 | 833.1 | 818.0 | |||||||||||
Operating income | 12.7 | 25.5 | 28.3 | 82.5 | |||||||||||
Interest expense | 18.8 | 17.9 | 54.9 | 58.1 | |||||||||||
Loss on extinguishment of debt, net | — | 11.4 | — | 14.2 | |||||||||||
Gain on sale of Investment in CyrusOne | — | (33.3 | ) | (117.7 | ) | (151.9 | ) | ||||||||
Other expense (income), net | 4.5 | (0.1 | ) | 3.5 | (1.2 | ) | |||||||||
(Loss) income before income taxes | (10.6 | ) | 29.6 | 87.6 | 163.3 | ||||||||||
Income tax expense | 0.6 | 10.8 | 36.3 | 59.9 | |||||||||||
Net (loss) income | (11.2 | ) | 18.8 | 51.3 | 103.4 | ||||||||||
Preferred stock dividends | 2.6 | 2.6 | 7.8 | 7.8 | |||||||||||
Net (loss) income applicable to common shareowners | $ | (13.8 | ) | $ | 16.2 | $ | 43.5 | $ | 95.6 | ||||||
Basic net (loss) earnings per common share | $ | (0.33 | ) | $ | 0.39 | $ | 1.03 | $ | 2.28 | ||||||
Diluted net (loss) earnings per common share | $ | (0.33 | ) | $ | 0.38 | $ | 1.03 | $ | 2.27 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net (loss) income | $ | (11.2 | ) | $ | 18.8 | $ | 51.3 | $ | 103.4 | ||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Unrealized gains on Investment in CyrusOne, net of tax of $4.4 | — | — | 8.3 | — | |||||||||||
Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, net of tax of ($41.3) | — | — | (76.4 | ) | — | ||||||||||
Foreign currency translation gain (loss) | 0.1 | — | 0.1 | (0.1 | ) | ||||||||||
Defined benefit plans: | |||||||||||||||
Amortization of prior service benefits included in net income, net of tax of ($0.4), ($1.2), ($1.2), ($3.9) | (0.8 | ) | (2.4 | ) | (2.2 | ) | (7.1 | ) | |||||||
Amortization of net actuarial loss included in net income, net of tax of $1.9, $2.1, $5.9, $6.4 | 3.6 | 3.8 | 10.7 | 11.6 | |||||||||||
Total other comprehensive income (loss) | 2.9 | 1.4 | (59.5 | ) | 4.4 | ||||||||||
Total comprehensive (loss) income | $ | (8.3 | ) | $ | 20.2 | $ | (8.2 | ) | $ | 107.8 |
Form 10-Q Part I | Cincinnati Bell Inc. |
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 43.7 | $ | 9.7 | |||
Receivables, less allowances of $10.3 and $9.9 | 170.0 | 178.6 | |||||
Inventory, materials and supplies | 19.8 | 22.7 | |||||
Prepaid expenses | 17.7 | 15.0 | |||||
Other current assets | 6.6 | 3.9 | |||||
Total current assets | 257.8 | 229.9 | |||||
Property, plant and equipment, net | 1,112.8 | 1,085.5 | |||||
Investment in CyrusOne | — | 128.0 | |||||
Goodwill | 18.6 | 14.3 | |||||
Deferred income taxes, net | 50.4 | 64.5 | |||||
Other noncurrent assets | 17.7 | 18.8 | |||||
Total assets | $ | 1,457.3 | $ | 1,541.0 | |||
Liabilities and Shareowners’ Deficit | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 12.0 | $ | 7.5 | |||
Accounts payable | 109.0 | 105.9 | |||||
Unearned revenue and customer deposits | 32.6 | 36.3 | |||||
Accrued taxes | 19.2 | 12.9 | |||||
Accrued interest | 13.4 | 12.7 | |||||
Accrued payroll and benefits | 35.3 | 25.7 | |||||
Other current liabilities | 31.2 | 31.9 | |||||
Total current liabilities | 252.7 | 232.9 | |||||
Long-term debt, less current portion | 1,120.8 | 1,199.1 | |||||
Pension and postretirement benefit obligations | 186.3 | 197.7 | |||||
Other noncurrent liabilities | 31.0 | 33.0 | |||||
Total liabilities | 1,590.8 | 1,662.7 | |||||
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 September 30, 2017 and December 31, 2016; liquidation preference $1,000 per share ($50 per depositary share) | 129.4 | 129.4 | |||||
Common shares, $.01 par value; 96,000,000 shares authorized; 42,182,031 and 42,056,237 shares issued; 42,182,031 and 42,056,237 shares outstanding at September 30, 2017 and December 31, 2016 | 0.4 | 0.4 | |||||
Additional paid-in capital | 2,567.3 | 2,570.9 | |||||
Accumulated deficit | (2,680.8 | ) | (2,732.1 | ) | |||
Accumulated other comprehensive loss | (149.8 | ) | (90.3 | ) | |||
Total shareowners’ deficit | (133.5 | ) | (121.7 | ) | |||
Total liabilities and shareowners’ deficit | $ | 1,457.3 | $ | 1,541.0 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Nine Months Ended | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 51.3 | $ | 103.4 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 140.1 | 134.7 | |||||
Loss on extinguishment of debt, net | — | 14.2 | |||||
Gain on sale of Investment in CyrusOne | (117.7 | ) | (151.9 | ) | |||
Provision for loss on receivables | 5.6 | 7.2 | |||||
Noncash portion of interest expense | 1.5 | 2.4 | |||||
Deferred income taxes | 35.9 | 59.3 | |||||
Pension and other postretirement payments less than (in excess of) expense | 2.1 | (3.9 | ) | ||||
Stock-based compensation | 5.2 | 4.8 | |||||
Other, net | 1.1 | (3.1 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||
Decrease (increase) in receivables | 20.8 | (11.0 | ) | ||||
Increase in inventory, materials, supplies, prepaid expenses and other current assets | (1.7 | ) | (6.0 | ) | |||
Increase (decrease) in accounts payable | 2.4 | (3.9 | ) | ||||
Increase (decrease) in accrued and other current liabilities | 11.1 | (3.9 | ) | ||||
Decrease (increase) in other noncurrent assets | 1.8 | (2.1 | ) | ||||
(Decrease) increase in other noncurrent liabilities | (2.7 | ) | 1.4 | ||||
Net cash provided by operating activities | 156.8 | 141.6 | |||||
Cash flows from investing activities | |||||||
Capital expenditures | (148.2 | ) | (188.8 | ) | |||
Increase in restricted cash | — | (90.7 | ) | ||||
Proceeds from sale of Investment in CyrusOne | 140.7 | 181.2 | |||||
Acquisitions of businesses | (9.6 | ) | — | ||||
Dividends received from Investment in CyrusOne | — | 6.2 | |||||
Other, net | 0.3 | (0.8 | ) | ||||
Net cash used in investing activities | (16.8 | ) | (92.9 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of long-term debt | — | 425.0 | |||||
Net (decrease) increase in corporate credit and receivables facilities with initial maturities less than 90 days | (89.5 | ) | 5.9 | ||||
Repayment of debt | (6.4 | ) | (461.0 | ) | |||
Debt issuance costs | (1.3 | ) | (8.4 | ) | |||
Dividends paid on preferred stock | (7.8 | ) | (7.8 | ) | |||
Common stock repurchase | — | (4.8 | ) | ||||
Other, net | (1.0 | ) | 3.5 | ||||
Net cash used in financing activities | (106.0 | ) | (47.6 | ) | |||
Net increase in cash and cash equivalents | 34.0 | 1.1 | |||||
Cash and cash equivalents at beginning of period | 9.7 | 7.4 | |||||
Cash and cash equivalents at end of period | $ | 43.7 | $ | 8.5 | |||
Noncash investing and financing transactions: | |||||||
Accrual of CyrusOne dividends | $ | — | $ | 1.2 | |||
Acquisition of property by assuming debt and other noncurrent liabilities | $ | 16.7 | $ | 10.9 | |||
Acquisition of property on account | $ | 19.8 | $ | 43.0 |
Form 10-Q Part I | Cincinnati Bell Inc. |
1. | Description of Business and Accounting Policies |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended | |||||||
September 30, | |||||||
(in millions, except per share amounts) | 2017 | 2016 | |||||
Numerator: | |||||||
Net (loss) income | $ | (11.2 | ) | $ | 18.8 | ||
Preferred stock dividends | 2.6 | 2.6 | |||||
Net (loss) income applicable to common shareowners - basic and diluted | $ | (13.8 | ) | $ | 16.2 | ||
Denominator: | |||||||
Weighted average common shares outstanding - basic | 42.2 | 42.0 | |||||
Stock-based compensation arrangements | — | 0.1 | |||||
Weighted average common shares outstanding - diluted | 42.2 | 42.1 | |||||
Basic (loss) earnings per common share | $ | (0.33 | ) | $ | 0.39 | ||
Diluted (loss) earnings per common share | $ | (0.33 | ) | $ | 0.38 |
Nine Months Ended | |||||||
September 30, | |||||||
(in millions, except per share amounts) | 2017 | 2016 | |||||
Numerator: | |||||||
Net income | $ | 51.3 | $ | 103.4 | |||
Preferred stock dividends | 7.8 | 7.8 | |||||
Net income applicable to common shareowners - basic and diluted | $ | 43.5 | $ | 95.6 | |||
Denominator: | |||||||
Weighted average common shares outstanding - basic | 42.1 | 42.0 | |||||
Stock-based compensation arrangements | 0.2 | 0.1 | |||||
Weighted average common shares outstanding - diluted | 42.3 | 42.1 | |||||
Basic earnings per common share | $ | 1.03 | $ | 2.28 | |||
Diluted earnings per common share | $ | 1.03 | $ | 2.27 |
Form 10-Q Part I | Cincinnati Bell Inc. |
(dollars in millions) | September 30, 2017 | December 31, 2016 | |||||
Current portion of long-term debt: | |||||||
Capital lease obligations and other debt | $ | 12.0 | $ | 7.5 | |||
Current portion of long-term debt | 12.0 | 7.5 | |||||
Long-term debt, less current portion: | |||||||
Receivables Facility | — | 89.5 | |||||
Corporate Credit Agreement - Tranche B Term Loan | 315.8 | 315.8 | |||||
7 1/4% Senior Notes due 2023 | 22.3 | 22.3 | |||||
7% Senior Notes due 2024 | 625.0 | 625.0 | |||||
Cincinnati Bell Telephone Notes | 87.9 | 87.9 | |||||
Capital lease obligations and other debt | 72.4 | 62.0 | |||||
1,123.4 | 1,202.5 | ||||||
Net unamortized premium | 8.0 | 8.5 | |||||
Unamortized note issuance costs | (10.6 | ) | (11.9 | ) | |||
Long-term debt, less current portion | 1,120.8 | 1,199.1 | |||||
Total debt | $ | 1,132.8 | $ | 1,206.6 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
(dollars in millions) | Employee Separation | Lease Abandonment | Total | ||||||||
Balance as of December 31, 2016 | $ | 11.0 | $ | 0.2 | $ | 11.2 | |||||
Charges | 25.6 | — | 25.6 | ||||||||
Utilizations | (12.7 | ) | — | (12.7 | ) | ||||||
Balance as of March 31, 2017 | 23.9 | 0.2 | 24.1 | ||||||||
Charges | 3.6 | — | 3.6 | ||||||||
Utilizations | (4.4 | ) | — | (4.4 | ) | ||||||
Balance as of June 30, 2017 | 23.1 | 0.2 | 23.3 | ||||||||
Charges | — | — | — | ||||||||
Utilizations | (9.8 | ) | (0.1 | ) | (9.9 | ) | |||||
Balance as of September 30, 2017 | $ | 13.3 | $ | 0.1 | $ | 13.4 |
(dollars in millions) | Entertainment and Communications | IT Services and Hardware | Corporate | Total | |||||||||||
Balance as of December 31, 2016 | $ | 7.5 | $ | 3.0 | $ | 0.7 | $ | 11.2 | |||||||
Charges | 25.6 | — | — | 25.6 | |||||||||||
Utilizations | (9.8 | ) | (2.3 | ) | (0.6 | ) | (12.7 | ) | |||||||
Balance as of March 31, 2017 | 23.3 | 0.7 | 0.1 | 24.1 | |||||||||||
Charges | 1.3 | 2.3 | — | 3.6 | |||||||||||
Utilizations | (3.6 | ) | (0.8 | ) | — | (4.4 | ) | ||||||||
Balance as of June 30, 2017 | 21.0 | 2.2 | 0.1 | 23.3 | |||||||||||
Charges | — | — | — | — | |||||||||||
Utilizations | (8.1 | ) | (1.7 | ) | (0.1 | ) | (9.9 | ) | |||||||
Balance as of September 30, 2017 | $ | 12.9 | $ | 0.5 | $ | — | $ | 13.4 |
Form 10-Q Part I | Cincinnati Bell Inc. |
September 30, 2017 | December 31, 2016 | ||||||||||||||
(dollars in millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Long-term debt, including current portion* | $ | 1,059.1 | $ | 1,041.0 | $ | 1,149.2 | $ | 1,177.9 | |||||||
*Excludes capital leases and note issuance costs. |
Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions) | Pension Benefits | Postretirement and Other Benefits | |||||||||||||
Service cost | $ | — | $ | — | $ | 0.1 | $ | 0.1 | |||||||
Interest cost on projected benefit obligation | 4.9 | 4.9 | 0.8 | 0.8 | |||||||||||
Expected return on plan assets | (6.5 | ) | (6.9 | ) | — | — | |||||||||
Amortization of: | |||||||||||||||
Prior service cost (benefit) | — | 0.1 | (1.2 | ) | (3.7 | ) | |||||||||
Actuarial loss | 4.3 | 4.7 | 1.2 | 1.2 | |||||||||||
Total amortization | 4.3 | 4.8 | — | (2.5 | ) | ||||||||||
Pension / postretirement costs (benefits) | $ | 2.7 | $ | 2.8 | $ | 0.9 | $ | (1.6 | ) |
Form 10-Q Part I | Cincinnati Bell Inc. |
Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars in millions) | Pension Benefits | Postretirement and Other Benefits | |||||||||||||
Service cost | $ | — | $ | — | $ | 0.2 | $ | 0.2 | |||||||
Interest cost on projected benefit obligation | 14.6 | 14.5 | 2.4 | 2.5 | |||||||||||
Expected return on plan assets | (19.5 | ) | (20.5 | ) | — | — | |||||||||
Amortization of: | |||||||||||||||
Prior service cost (benefit) | — | 0.1 | (3.4 | ) | (11.1 | ) | |||||||||
Actuarial loss | 13.1 | 14.3 | 3.5 | 3.7 | |||||||||||
Total amortization | 13.1 | 14.4 | 0.1 | (7.4 | ) | ||||||||||
Pension / postretirement costs (benefits) | $ | 8.2 | $ | 8.4 | $ | 2.7 | $ | (4.7 | ) |
(dollars in millions) | Unrecognized Net Periodic Pension and Postretirement Benefit Cost | Unrealized gain on Investment in CyrusOne | Foreign Currency Translation Loss | Total | |||||||||||
Balance as of December 31, 2016 | $ | (157.6 | ) | $ | 68.1 | $ | (0.8 | ) | $ | (90.3 | ) | ||||
Unrealized gain on Investment in CyrusOne, net | — | 8.3 | (a) | — | 8.3 | ||||||||||
Reclassifications, net | 8.5 | (b) | (76.4 | ) | (c) | — | (67.9 | ) | |||||||
Foreign currency gain | $ | — | $ | — | $ | 0.1 | $ | 0.1 | |||||||
Balance as of September 30, 2017 | $ | (149.1 | ) | $ | — | $ | (0.7 | ) | $ | (149.8 | ) |
(a) | The unrealized gain on Investment in CyrusOne, net of tax, represents changes in the fair value of CyrusOne shares of common stock owned by the Company during the period, before any subsequent sales of those shares. |
(b) | These reclassifications are included in the components of net periodic pension and postretirement benefit costs (see Note 6 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. |
(c) | These reclassifications are reported within "Gain on sale of Investment in CyrusOne" on the Condensed Consolidated Statements of Operations. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(dollars in millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Revenue | |||||||||||||||
Entertainment and Communications | $ | 196.2 | $ | 193.0 | $ | 592.9 | $ | 575.8 | |||||||
IT Services and Hardware | 96.3 | 122.9 | 278.5 | 335.2 | |||||||||||
Intersegment | (3.3 | ) | (3.5 | ) | (10.0 | ) | (10.5 | ) | |||||||
Total revenue | $ | 289.2 | $ | 312.4 | $ | 861.4 | $ | 900.5 | |||||||
Intersegment revenue | |||||||||||||||
Entertainment and Communications | $ | 0.4 | $ | 0.4 | $ | 1.3 | $ | 1.0 | |||||||
IT Services and Hardware | 2.9 | 3.1 | 8.7 | 9.5 | |||||||||||
Total intersegment revenue | $ | 3.3 | $ | 3.5 | $ | 10.0 | $ | 10.5 | |||||||
Operating income | |||||||||||||||
Entertainment and Communications | $ | 25.0 | $ | 21.1 | $ | 49.8 | $ | 76.0 | |||||||
IT Services and Hardware | 4.8 | 7.8 | 7.9 | 21.9 | |||||||||||
Corporate | (17.1 | ) | (3.4 | ) | (29.4 | ) | (15.4 | ) | |||||||
Total operating income | $ | 12.7 | $ | 25.5 | $ | 28.3 | $ | 82.5 | |||||||
Expenditures for long-lived assets | |||||||||||||||
Entertainment and Communications | $ | 41.4 | $ | 63.1 | $ | 138.9 | $ | 178.7 | |||||||
IT Services and Hardware | 1.6 | 4.1 | 18.9 | 9.9 | |||||||||||
Corporate | — | — | — | 0.2 | |||||||||||
Total expenditures for long-lived assets | $ | 43.0 | $ | 67.2 | $ | 157.8 | $ | 188.8 | |||||||
Depreciation and amortization | |||||||||||||||
Entertainment and Communications | $ | 43.9 | $ | 43.0 | $ | 129.1 | $ | 124.8 | |||||||
IT Services and Hardware | 3.4 | 3.4 | 10.9 | 9.8 | |||||||||||
Corporate | — | 0.1 | 0.1 | 0.1 | |||||||||||
Total depreciation and amortization | $ | 47.3 | $ | 46.5 | $ | 140.1 | $ | 134.7 | |||||||
September 30, 2017 | December 31, 2016 | ||||||||||||||
Assets | |||||||||||||||
Entertainment and Communications | $ | 1,114.7 | $ | 1,093.5 | |||||||||||
IT Services and Hardware | 85.9 | 60.0 | |||||||||||||
Corporate and eliminations | 256.7 | 387.5 | |||||||||||||
Total assets | $ | 1,457.3 | $ | 1,541.0 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Service revenue | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 195.0 | $ | 192.4 | $ | 2.6 | 1 | % | $ | 589.2 | $ | 572.6 | $ | 16.6 | 3 | % | |||||||||||||
IT Services and Hardware | 49.3 | 54.3 | (5.0 | ) | (9 | )% | 145.6 | 160.5 | (14.9 | ) | (9 | )% | |||||||||||||||||
Total service revenue | $ | 244.3 | $ | 246.7 | $ | (2.4 | ) | (1 | )% | $ | 734.8 | $ | 733.1 | $ | 1.7 | — | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Product revenue | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 0.8 | $ | 0.2 | $ | 0.6 | n/m | $ | 2.4 | $ | 2.2 | $ | 0.2 | 9 | % | ||||||||||||||
IT Services and Hardware | 44.1 | 65.5 | (21.4 | ) | (33 | )% | 124.2 | 165.2 | (41.0 | ) | (25 | )% | |||||||||||||||||
Total product revenue | $ | 44.9 | $ | 65.7 | $ | (20.8 | ) | (32 | )% | $ | 126.6 | $ | 167.4 | $ | (40.8 | ) | (24 | )% |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Cost of services | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 90.1 | $ | 87.1 | $ | 3.0 | 3 | % | $ | 272.5 | $ | 256.0 | $ | 16.5 | 6 | % | |||||||||||||
IT Services and Hardware | 38.9 | 40.6 | (1.7 | ) | (4 | )% | 108.7 | 119.7 | (11.0 | ) | (9 | )% | |||||||||||||||||
Total cost of services | $ | 129.0 | $ | 127.7 | $ | 1.3 | 1 | % | $ | 381.2 | $ | 375.7 | $ | 5.5 | 1 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Cost of products | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 0.3 | $ | 0.7 | $ | (0.4 | ) | (57 | )% | $ | 1.3 | $ | 1.6 | $ | (0.3 | ) | (19 | )% | |||||||||||
IT Services and Hardware | 33.3 | 55.4 | (22.1 | ) | (40 | )% | 100.3 | 140.0 | (39.7 | ) | (28 | )% | |||||||||||||||||
Total cost of products | $ | 33.6 | $ | 56.1 | $ | (22.5 | ) | (40 | )% | $ | 101.6 | $ | 141.6 | $ | (40.0 | ) | (28 | )% |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Selling, general, and administrative | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 33.8 | $ | 37.1 | $ | (3.3 | ) | (9 | )% | $ | 104.5 | $ | 107.1 | $ | (2.6 | ) | (2 | )% | |||||||||||
IT Services and Hardware | 15.7 | 15.1 | 0.6 | 4 | % | 47.6 | 42.5 | 5.1 | 12 | % | |||||||||||||||||||
Corporate | 5.0 | 3.3 | 1.7 | 52 | % | 14.5 | 15.3 | (0.8 | ) | (5 | )% | ||||||||||||||||||
Total selling, general and administrative | $ | 54.5 | $ | 55.5 | $ | (1.0 | ) | (2 | )% | $ | 166.6 | $ | 164.9 | $ | 1.7 | 1 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Depreciation and amortization expense | |||||||||||||||||||||||||||||
Entertainment and Communications | $ | 43.9 | $ | 43.0 | $ | 0.9 | 2 | % | $ | 129.1 | $ | 124.8 | $ | 4.3 | 3 | % | |||||||||||||
IT Services and Hardware | 3.4 | 3.4 | — | — | % | 10.9 | 9.8 | 1.1 | 11 | % | |||||||||||||||||||
Corporate | — | 0.1 | (0.1 | ) | n/m | 0.1 | 0.1 | — | — | % | |||||||||||||||||||
Total depreciation and amortization expense | $ | 47.3 | $ | 46.5 | $ | 0.8 | 2 | % | $ | 140.1 | $ | 134.7 | $ | 5.4 | 4 | % |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||
Other operating costs | |||||||||||||||||||||||||||
Transaction and integration costs | $ | 12.1 | $ | — | $ | 12.1 | n/m | $ | 14.4 | $ | — | $ | 14.4 | n/m | |||||||||||||
Restructuring and severance related charges | $ | — | $ | — | $ | — | n/m | $ | 29.2 | $ | — | $ | 29.2 | n/m | |||||||||||||
Loss on sale or disposal of assets, net | — | 1.1 | (1.1 | ) | n/m | — | 1.1 | (1.1 | ) | n/m |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | $ Change | % Change | 2017 | 2016 | $ Change | % Change | |||||||||||||||||||||
Non-operating costs | |||||||||||||||||||||||||||||
Interest expense | $ | 18.8 | $ | 17.9 | $ | 0.9 | 5 | % | $ | 54.9 | $ | 58.1 | $ | (3.2 | ) | (6 | )% | ||||||||||||
Loss on extinguishment of debt, net | — | 11.4 | (11.4 | ) | n/m | — | 14.2 | (14.2 | ) | n/m | |||||||||||||||||||
Gain on sale of CyrusOne investment | — | (33.3 | ) | 33.3 | n/m | (117.7 | ) | (151.9 | ) | 34.2 | (23 | )% | |||||||||||||||||
Other expense (income), net | 4.5 | (0.1 | ) | 4.6 | n/m | 3.5 | (1.2 | ) | 4.7 | n/m | |||||||||||||||||||
Income tax expense | 0.6 | 10.8 | (10.2 | ) | n/m | 36.3 | 59.9 | (23.6 | ) | (39 | )% |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||
Data | $ | 88.0 | $ | 86.4 | $ | 1.6 | 2 | % | $ | 263.3 | $ | 258.4 | $ | 4.9 | 2 | % | ||||||||||||||
Voice | 66.7 | 68.7 | (2.0 | ) | (3 | )% | 201.5 | 208.0 | (6.5 | ) | (3 | )% | ||||||||||||||||||
Video | 37.8 | 32.2 | 5.6 | 17 | % | 111.0 | 92.1 | 18.9 | 21 | % | ||||||||||||||||||||
Services and Other | 3.7 | 5.7 | (2.0 | ) | (35 | )% | 17.1 | 17.3 | (0.2 | ) | (1 | )% | ||||||||||||||||||
Total revenue | 196.2 | 193.0 | 3.2 | 2 | % | 592.9 | 575.8 | 17.1 | 3 | % | ||||||||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||||||||
Cost of services and products | 93.5 | 91.0 | 2.5 | 3 | % | 282.6 | 267.1 | 15.5 | 6 | % | ||||||||||||||||||||
Selling, general and administrative | 33.8 | 37.1 | (3.3 | ) | (9 | )% | 104.5 | 107.1 | (2.6 | ) | (2 | )% | ||||||||||||||||||
Depreciation and amortization | 43.9 | 43.0 | 0.9 | 2 | % | 129.1 | 124.8 | 4.3 | 3 | % | ||||||||||||||||||||
Restructuring and severance charges | — | 0.8 | (0.8 | ) | n/m | 26.9 | 0.8 | 26.1 | n/m | |||||||||||||||||||||
Total operating costs and expenses | 171.2 | 171.9 | (0.7 | ) | — | % | 543.1 | 499.8 | 43.3 | 9 | % | |||||||||||||||||||
Operating income | $ | 25.0 | $ | 21.1 | $ | 3.9 | 18 | % | $ | 49.8 | $ | 76.0 | $ | (26.2 | ) | (34 | )% | |||||||||||||
Operating margin | 12.7 | % | 10.9 | % | 1.8 | pts | 8.4 | % | 13.2 | % | (4.8 | ) | pts | |||||||||||||||||
Capital expenditures | $ | 41.4 | $ | 63.1 | $ | (21.7 | ) | (34 | )% | $ | 138.9 | $ | 178.7 | $ | (39.8 | ) | (22 | )% | ||||||||||||
Metrics information (in thousands): | ||||||||||||||||||||||||||||||
Fioptics units passed | 564.7 | 509.5 | 55.2 | 11 | % | |||||||||||||||||||||||||
Internet subscribers: | ||||||||||||||||||||||||||||||
DSL | 86.7 | 114.2 | (27.5 | ) | (24 | )% | ||||||||||||||||||||||||
Fioptics | 221.2 | 185.6 | 35.6 | 19 | % | |||||||||||||||||||||||||
Total internet subscribers | 307.9 | 299.8 | 8.1 | 3 | % | |||||||||||||||||||||||||
Fioptics video subscribers | 143.5 | 133.4 | 10.1 | 8 | % | |||||||||||||||||||||||||
Residential voice lines: | ||||||||||||||||||||||||||||||
Legacy voice lines | 99.5 | 124.6 | (25.1 | ) | (20 | )% | ||||||||||||||||||||||||
Fioptics voice lines | 88.1 | 80.3 | 7.8 | 10 | % | |||||||||||||||||||||||||
Total residential voice lines | 187.6 | 204.9 | (17.3 | ) | (8 | )% | ||||||||||||||||||||||||
Business voice lines | ||||||||||||||||||||||||||||||
Legacy voice lines | 172.1 | 197.7 | (25.6 | ) | (13 | )% | ||||||||||||||||||||||||
VoIP lines* | 151.9 | 121.2 | 30.7 | 25 | % | |||||||||||||||||||||||||
Total business voice lines | 324.0 | 318.9 | 5.1 | 2 | % | |||||||||||||||||||||||||
Total voice lines | 511.6 | 523.8 | (12.2 | ) | (2 | )% | ||||||||||||||||||||||||
Long distance lines | ||||||||||||||||||||||||||||||
Residential | 179.2 | 190.9 | (11.7 | ) | (6 | )% | ||||||||||||||||||||||||
Business | 119.9 | 132.8 | (12.9 | ) | (10 | )% | ||||||||||||||||||||||||
Total Long Distance Lines | 299.1 | 323.7 | (24.6 | ) | (8 | )% | ||||||||||||||||||||||||
* VoIP lines include Fioptics voice lines. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||||
(dollars in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Revenue: | ||||||||||||||||||
Consumer | ||||||||||||||||||
Strategic | ||||||||||||||||||
Data | $ | 32.2 | $ | 26.5 | $ | 93.2 | $ | 75.2 | ||||||||||
Voice | 6.2 | 5.4 | 18.2 | 16.0 | ||||||||||||||
Video | 37.2 | 31.7 | 109.1 | 90.6 | ||||||||||||||
Services and other | 0.4 | 0.8 | 1.2 | 2.6 | ||||||||||||||
76.0 | 64.4 | 221.7 | 184.4 | |||||||||||||||
Legacy | ||||||||||||||||||
Data | 8.4 | 10.4 | 27.0 | 34.4 | ||||||||||||||
Voice | 16.1 | 18.2 | 50.8 | 56.7 | ||||||||||||||
Services and other | 0.7 | 1.0 | 2.2 | 3.2 | ||||||||||||||
25.2 | 29.6 | 80.0 | 94.3 | |||||||||||||||
Integration | ||||||||||||||||||
Services and other | 0.2 | 0.9 | 0.3 | 3.0 | ||||||||||||||
Total consumer revenue | $ | 101.4 | $ | 94.9 | $ | 302.0 | $ | 281.7 | ||||||||||
Business | ||||||||||||||||||
Strategic | ||||||||||||||||||
Data | $ | 25.1 | $ | 24.3 | $ | 74.9 | $ | 71.9 | ||||||||||
Voice | 16.3 | 13.3 | 46.3 | 37.8 | ||||||||||||||
Video | 0.6 | 0.5 | 1.9 | 1.5 | ||||||||||||||
Services and other | 0.5 | 0.6 | 1.6 | 1.5 | ||||||||||||||
42.5 | 38.7 | 124.7 | 112.7 | |||||||||||||||
Legacy | ||||||||||||||||||
Data | 4.1 | 4.9 | 13.3 | 15.4 | ||||||||||||||
Voice | 24.4 | 27.7 | 74.5 | 85.1 | ||||||||||||||
Services and other | 0.1 | 0.4 | 0.6 | 1.0 | ||||||||||||||
28.6 | 33.0 | 88.4 | 101.5 | |||||||||||||||
Integration | ||||||||||||||||||
Services and other | 0.4 | 0.4 | 1.1 | 1.3 | ||||||||||||||
Total business revenue | $ | 71.5 | $ | 72.1 | $ | 214.2 | $ | 215.5 | ||||||||||
Carrier | ||||||||||||||||||
Strategic | ||||||||||||||||||
Data | $ | 10.7 | $ | 11.3 | $ | 31.5 | $ | 33.9 | ||||||||||
Services and other | — | — | 5.4 | — | ||||||||||||||
10.7 | 11.3 | 36.9 | 33.9 | |||||||||||||||
Legacy | ||||||||||||||||||
Data | 7.5 | 9.0 | 23.4 | 27.6 | ||||||||||||||
Voice | 3.7 | 4.1 | 11.7 | 12.4 | ||||||||||||||
Services and other | 1.4 | 1.6 | 4.7 | 4.7 | ||||||||||||||
12.6 | 14.7 | 39.8 | 44.7 | |||||||||||||||
Total carrier revenue | $ | 23.3 | $ | 26.0 | $ | 76.7 | $ | 78.6 | ||||||||||
Total Entertainment and Communications revenue | $ | 196.2 | $ | 193.0 | $ | 592.9 | $ | 575.8 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(dollars in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Fioptics capital expenditures | ||||||||||||||||
Construction | $ | 12.5 | $ | 21.6 | $ | 43.9 | $ | 59.0 | ||||||||
Installation | 11.1 | 19.0 | 39.5 | 40.2 | ||||||||||||
Other | 1.6 | 2.3 | 8.1 | 13.3 | ||||||||||||
Total Fioptics | 25.2 | 42.9 | 91.5 | 112.5 | ||||||||||||
Other strategic | 7.1 | 9.6 | 23.0 | 35.9 | ||||||||||||
Maintenance | 9.1 | 10.6 | 24.4 | 30.3 | ||||||||||||
Total capital expenditures | $ | 41.4 | $ | 63.1 | $ | 138.9 | $ | 178.7 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||
Professional Services | $ | 24.9 | $ | 26.5 | $ | (1.6 | ) | (6 | )% | $ | 70.1 | $ | 79.9 | $ | (9.8 | ) | (12 | )% | ||||||||||||
Management and Monitoring | 5.5 | 8.1 | (2.6 | ) | (32 | )% | 15.6 | 24.1 | (8.5 | ) | (35 | )% | ||||||||||||||||||
Unified Communications | 10.7 | 9.9 | 0.8 | 8 | % | 31.6 | 30.1 | 1.5 | 5 | % | ||||||||||||||||||||
Cloud Services | 10.9 | 12.2 | (1.3 | ) | (11 | )% | 36.2 | 33.2 | 3.0 | 9 | % | |||||||||||||||||||
Telecom and IT hardware | 44.3 | 66.2 | (21.9 | ) | (33 | )% | 125.0 | 167.9 | (42.9 | ) | (26 | )% | ||||||||||||||||||
Total revenue | 96.3 | 122.9 | (26.6 | ) | (22 | )% | 278.5 | 335.2 | (56.7 | ) | (17 | )% | ||||||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||||||||
Cost of services and products | 72.4 | 96.2 | (23.8 | ) | (25 | )% | 209.8 | 260.3 | (50.5 | ) | (19 | )% | ||||||||||||||||||
Selling, general and administrative | 15.7 | 15.2 | 0.5 | 3 | % | 47.6 | 42.9 | 4.7 | 11 | % | ||||||||||||||||||||
Depreciation and amortization | 3.4 | 3.4 | — | — | % | 10.9 | 9.8 | 1.1 | 11 | % | ||||||||||||||||||||
Restructuring and severance related charges | — | 0.3 | (0.3 | ) | n/m | 2.3 | 0.3 | 2.0 | n/m | |||||||||||||||||||||
Total operating costs and expenses | 91.5 | 115.1 | (23.6 | ) | (21 | )% | 270.6 | 313.3 | (42.7 | ) | (14 | )% | ||||||||||||||||||
Operating income | $ | 4.8 | $ | 7.8 | $ | (3.0 | ) | (38 | )% | $ | 7.9 | $ | 21.9 | $ | (14.0 | ) | (64 | )% | ||||||||||||
Operating margin | 5.0 | % | 6.3 | % | (1.3 | ) | pts | 2.8 | % | 6.5 | % | (3.7 | ) | pts | ||||||||||||||||
Capital expenditures | $ | 1.6 | $ | 4.1 | $ | (2.5 | ) | (61 | )% | $ | 9.3 | $ | 9.9 | $ | (0.6 | ) | (6 | )% |
Form 10-Q Part I | Cincinnati Bell Inc. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(dollars in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Strategic business revenue | ||||||||||||||||
Professional Services | $ | 17.5 | $ | 22.9 | $ | 54.2 | $ | 68.3 | ||||||||
Management and Monitoring | 5.5 | 8.1 | 15.6 | 24.1 | ||||||||||||
Unified Communications | 7.2 | 7.3 | 21.7 | 22.1 | ||||||||||||
Cloud Services | 10.9 | 12.2 | 36.2 | 33.2 | ||||||||||||
Total strategic business revenue | 41.1 | 50.5 | 127.7 | 147.7 | ||||||||||||
Integration business revenue | ||||||||||||||||
Professional Services | 7.4 | 3.6 | 15.9 | 11.6 | ||||||||||||
Unified Communications | 3.5 | 2.6 | 9.9 | 8.0 | ||||||||||||
Telecom and IT hardware | 44.3 | 66.2 | 125.0 | 167.9 | ||||||||||||
Total integration business revenue | 55.2 | 72.4 | 150.8 | 187.5 | ||||||||||||
Total IT Services and Hardware revenue | $ | 96.3 | $ | 122.9 | $ | 278.5 | $ | 335.2 |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Form 10-Q Part I | Cincinnati Bell Inc. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
(a) | Evaluation of disclosure controls and procedures. |
(b) | Changes in internal control over financial reporting. |
Form 10-Q Part II | Cincinnati Bell Inc. |
Item 1. | Legal Proceedings |
Form 10-Q Part II | Cincinnati Bell Inc. |
Form 10-Q Part II | Cincinnati Bell Inc. |
• | making it more difficult for the combined company to satisfy its debt service obligations; |
• | requiring the combined company to dedicate a substantial portion of its cash flows to debt service obligations, thereby potentially reducing the availability of cash flows to pay cash dividends and to fund working capital, capital expenditures, acquisitions, investments and other general operating requirements; |
• | limiting the ability of the combined company to obtain additional financing to fund its working capital requirements, capital expenditures, acquisitions, investments, debt service obligations and other general operating requirements; |
• | restricting the combined company from making strategic acquisitions or taking advantage of favorable business opportunities; |
• | placing the combined company at a relative competitive disadvantage compared to competitors that have less debt; |
• | limiting flexibility to plan for, or react to, changes in the businesses and industries in which the combined company operates, which may adversely affect the combined company’s operating results and ability to meet its debt service obligations; |
• | increasing the vulnerability of the combined company to adverse general economic and industry conditions, including changes in interest rates; and |
• | limiting the ability of the combined company to refinance its indebtedness or increasing the cost of such indebtedness. |
Form 10-Q Part II | Cincinnati Bell Inc. |
Form 10-Q Part II | Cincinnati Bell Inc. |
Form 10-Q Part II | Cincinnati Bell Inc. |
Exhibit | |
Number | Description |
Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Acquisition Corp. and Hawaiian Telcom Holdco, Inc. (Exhibit 2.1 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519). | |
Agreement and Plan of Merger, dated as of July 9, 2017, among Cincinnati Bell Inc., Yankee Acquisition LLC, OnX Holdings LLC and MLN Holder Rep LLC (Exhibit 2.2 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519). | |
Amended and Restated Articles of Incorporation of Cincinnati Bell Inc. (Exhibit 3.1 to Current Report on Form 8-K, Date of Report April 25, 2008, File No. 1-8519). | |
Amendment to the Amended and Restated Articles of Incorporation of Cincinnati Inc. (Exhibit 3.1 to Current Report on Form 8-K, date of Report October 4, 2016, File No. 1-8519). | |
Amended and Restated Regulations of Cincinnati Bell Inc. (Exhibit 3.2 to Current Report on Form 8-K, Date of Report April 25, 2008, File No. 1-8519). | |
Third Supplemental Indenture dated October 2, 2017 among Cincinnati Bell Inc., Cincinnati Bell Shared Services LLC, Data Center South Holdings, LLC, Twin Acquisition Corp. and Regions Bank, as Trustee (Exhibit 4.1 to Current Report on Form 8-K, date of Report October 2, 2017, File No. 1-8519). | |
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). | |
Escrow Agreement, dated as of October 6, 2017, among CB Escrow Corp., Regions Bank, as Trustee, and Regions Banks, as Escrow Agent (Exhibit 4.2 to Current Report on Form 8-K, date of Report October 6, 2017, File No. 1-8519). | |
Voting Agreement, dated as of July 9, 2017, among Cincinnati Bell Inc., Twin Haven Capital Partners, L.L.C. and the affiliates of Twin Haven Capital Partners, L.L.C. party thereto (Exhibit 10.1 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519). | |
Commitment Letter, dated as of July 9, 2017, between Cincinnati Bell Inc. and Morgan Stanley Senior Funding, Inc. (Exhibit 10.2 to Current Report on Form 8-K, date of Report July 10, 2017, File No. 1-8519). | |
Employment Agreement between Cincinnati Bell Inc. and Andrew R. Kaiser effective as of September 1, 2017 (Exhibit 10.1 to Current Report on Form 8-K, date of Report August 3, 2017, File No. 1-8519). | |
Employment Agreement between Cincinnati Bell Inc. and Christie C. Cornette effective as of September 1, 2017 (Exhibit 10.2 to Current Report on Form 8-K, date of Report August 3, 2017, File No. 1-8519). | |
Credit Agreement by and among Cincinnati Bell Inc., the Guarantors party thereto, the Lenders party thereto, PNC Bank, National Association, as a Swingline Lender, and Morgan Stanley Senior Funding, Inc., as Administrative Agent, Collateral Agent, a Swingline Lender and an L\C Issuer, dated October 2, 2017 (Exhibit 10.1 to Current Report on Form 8-K, date of Report October 2, 2017, File No. 1-8519). | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
Form 10-Q Part II | Cincinnati Bell Inc. |
(101.INS)** | XBRL Instance Document. |
(101.SCH)** | XBRL Taxonomy Extension Schema Document. |
(101.CAL)** | XBRL Taxonomy Extension Calculation Linkbase Document. |
(101.DEF)** | XBRL Taxonomy Extension Definition Linkbase Document. |
(101.LAB)** | XBRL Taxonomy Extension Label Linkbase Document. |
(101.PRE)** | XBRL Taxonomy Extension Presentation Linkbase Document. |
Form 10-Q Part II | Cincinnati Bell Inc. |
Cincinnati Bell Inc. | ||||
Date: | November 2, 2017 | /s/ Andrew R. Kaiser | ||
Andrew R. Kaiser | ||||
Chief Financial Officer | ||||
Date: | November 2, 2017 | /s/ Shannon M. Mullen | ||
Shannon M. Mullen | ||||
Chief Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q 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 make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the 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 in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by 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 under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 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 are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 2, 2017 | /s/ Leigh R. Fox |
Leigh R. Fox | ||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q 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 make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the 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 in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by 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 under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the 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 are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | November 2, 2017 | /s/ Andrew R. Kaiser |
Andrew R. Kaiser | ||
Chief Financial Officer |
(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 | |
President and Chief Executive Officer | |
November 2, 2017 |
(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 | |
November 2, 2017 |
Document and Entity Information Document - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
|
Document and Entity [Abstract] | ||
Entity Registrant Name | CINCINNATI BELL INC. | |
Entity Central Index Key | 0000716133 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 42,185,514 |
Condensed Consolidated Statements of Operations - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenue | ||||
Services | $ 244.3 | $ 246.7 | $ 734.8 | $ 733.1 |
Products | 44.9 | 65.7 | 126.6 | 167.4 |
Total revenue | 289.2 | 312.4 | 861.4 | 900.5 |
Costs and expenses | ||||
Cost of services, excluding items below | 129.0 | 127.7 | 381.2 | 375.7 |
Cost of products sold, excluding items below | 33.6 | 56.1 | 101.6 | 141.6 |
Selling, general and administrative, excluding items below | 54.5 | 55.5 | 166.6 | 164.9 |
Depreciation and amortization | 47.3 | 46.5 | 140.1 | 134.7 |
Restructuring and severance related charges | 0.0 | 0.0 | 29.2 | 0.0 |
Transaction and integration costs | 12.1 | 0.0 | 14.4 | 0.0 |
Other | 0.0 | 1.1 | 0.0 | 1.1 |
Total operating costs and expenses | 276.5 | 286.9 | 833.1 | 818.0 |
Operating income | 12.7 | 25.5 | 28.3 | 82.5 |
Interest expense | 18.8 | 17.9 | 54.9 | 58.1 |
Loss on extinguishment of debt, net | 0.0 | 11.4 | 0.0 | 14.2 |
Gain on sale of Investment in CyrusOne | 0.0 | (33.3) | (117.7) | (151.9) |
Other expense (income), net | 4.5 | (0.1) | 3.5 | (1.2) |
(Loss) income before income taxes | (10.6) | 29.6 | 87.6 | 163.3 |
Income tax expense | 0.6 | 10.8 | 36.3 | 59.9 |
Net (loss) income | (11.2) | 18.8 | 51.3 | 103.4 |
Preferred stock dividends | 2.6 | 2.6 | 7.8 | 7.8 |
Net (loss) income applicable to common shareowners | $ (13.8) | $ 16.2 | $ 43.5 | $ 95.6 |
Basic net (loss) earnings per common share | $ (0.33) | $ 0.39 | $ 1.03 | $ 2.28 |
Diluted net (loss) earnings per common share | $ (0.33) | $ 0.38 | $ 1.03 | $ 2.27 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Net (loss) income | $ (11.2) | $ 18.8 | $ 51.3 | $ 103.4 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized gains on Investment in CyrusOne, net of tax of $4.4 | 0.0 | 0.0 | 8.3 | 0.0 |
Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, net of tax of ($41.3) | 0.0 | 0.0 | (76.4) | 0.0 |
Foreign currency translation gain (loss) | 0.1 | 0.0 | 0.1 | (0.1) |
Defined benefit plans: | ||||
Amortization of prior service benefits included in net income, net of tax of ($0.4), ($1.2), ($1.2), ($3.9) | (0.8) | (2.4) | (2.2) | (7.1) |
Amortization of net actuarial loss included in net income, net of tax of $1.9, $2.1, $5.9, $6.4 | 3.6 | 3.8 | 10.7 | 11.6 |
Total other comprehensive income (loss) | 2.9 | 1.4 | (59.5) | 4.4 |
Total comprehensive (loss) income | $ (8.3) | $ 20.2 | $ (8.2) | $ 107.8 |
Condensed Consolidated Statements of Comprehensive Income Parenthetical - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Unrealized gains on Investment in CyrusOne, tax | $ 0.0 | $ 0.0 | $ 4.4 | $ 0.0 |
Reclassification adjustment for gain on sale of Investment in CyrusOne included in net income, tax | 0.0 | 0.0 | (41.3) | 0.0 |
Amortization of prior service benefits included in net income, tax | (0.4) | (1.2) | (1.2) | (3.9) |
Amortization of net actuarial loss included in net income, tax | $ 1.9 | $ 2.1 | $ 5.9 | $ 6.4 |
Condensed Consolidated Balance Sheets Parenthetical - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Allowance for receivables | $ 10,300,000 | $ 9,900,000 |
Preferred Stock, Shares Authorized | 2,357,299 | 2,357,299 |
Preferred Stock, 6 3/4% Cumulative Convertible, Shares Issued | 155,250 | 155,250 |
Preferred Stock, 6 3/4% Cumulative Convertible, Shares Outstanding | 155,250 | 155,250 |
Preferred Stock, Depositary Shares | 3,105,000 | 3,105,000 |
Preferred Stock, Dividend Rate, Percentage | 6.75% | 6.75% |
Preferred Stock, Liquidation Preference Per Share | $ 1,000 | $ 1,000 |
Preferred Stock Liquidation Depositary Per Share | $ 50 | $ 50 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 96,000,000 | 96,000,000 |
Common Stock, Shares, Issued | 42,182,031 | 42,056,237 |
Common Stock, Shares, Outstanding | 42,182,031 | 42,056,237 |
Description of Business and Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | 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. The Company has receivables with one large customer, General Electric Company, that makes up 14% and 21% of the outstanding accounts receivable balance at September 30, 2017 and December 31, 2016, respectively. This same customer represented 12% of consolidated revenue for the three and nine months ended September 30, 2016. Merger and Acquisition Activity — On October 2, 2017, we consummated our previously announced acquisition of OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutions to enterprise customers in the U.S., Canada and the U.K. The acquisition of OnX, originally announced on July 10, 2017, indicated that the purchase price of $201 million was subject to customary post-closing adjustments. Based on preliminary working capital adjustments, the cash consideration exchanged for the acquisition on October 2, 2017 was $242.3 million. The final purchase price is subject to completion of post-closing adjustments. The initial accounting for the business combination was not complete at the time the financial statements were issued due to the timing of the acquisition and the filing of this Quarterly Report on Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, are not possible at this time. On July 9, 2017, the Company and Hawaiian Telcom Holdco, Inc., a Delaware corporation (“Hawaiian Telcom”), entered into an Agreement and Plan of Merger (the "Hawaiian Telcom Merger Agreement") providing for the merger of Hawaiian Telcom with a wholly-owned subsidiary of the Company in exchange for the consideration described below. Hawaiian Telcom is a fiber-centric technology leader providing voice, video, broadband, data center and cloud solutions to consumer, business and wholesale customers on the Hawaiian islands. At the effective time of the merger, each share of Hawaiian Telcom common stock, par value of $0.01 per share, issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the holder’s election and subject to proration as set forth in the Hawaiian Telcom Merger Agreement (1) 1.6305 common shares, par value $0.01 per share, of the Company (the “Company Common Shares”) (the “Share Consideration”); (2) 0.6522 Company Common Shares and $18.45 in cash, without interest (the “Mixed Consideration”); or (3) $30.75 in cash, without interest (the “Cash Consideration”). Hawaiian Telcom stockholders who elect to receive the Share Consideration or the Cash Consideration will be subject to proration to ensure that the aggregate number of Company Common Shares to be issued by the Company in the Hawaiian Telcom Merger and the aggregate amount of cash to be paid in the Hawaiian Telcom Merger will be the same as if all electing stockholders received the Mixed Consideration. Based on (1) the closing price of Cincinnati Bell’s common shares of $19.45 as of October 27, 2017, (2) the number of shares of Hawaiian Telcom common stock outstanding as of August 8, 2017, (3) the number of shares of Hawaiian Telcom common stock potentially issuable in respect of RSUs under Hawaiian Telcom benefit and compensation plans between August 17, 2017 and the closing date and (4) the number of shares of Hawaiian Telcom common stock potentially issuable in respect of Annual and Retention Bonuses under Hawaiian Telcom benefit and compensation plans outstanding between August 17, 2017 and the closing date (which aggregate number of shares of Hawaiian Telcom common stock in clauses (2) through (4) equals the maximum number of shares of Hawaiian Telcom common stock that could be outstanding as of the closing date), the estimated total consideration, less Hawaiian Telcom’s existing indebtedness of approximately $310 million as of June 30, 2017 to be repaid in conjunction with the merger, is approximately $380 million. The estimated total consideration expected to be transferred may not represent what the actual total consideration transferred will be when the merger is completed. The fair value of equity securities issued as part of the total consideration transferred is required to be measured on the closing date of the merger at the then current number of Hawaiian Telcom shares of common stock outstanding and RSUs that will vest between August 17, 2017 and the closing date. This requirement will likely result in equity and cash components different from what has been estimated as of September 30, 2017. The merger is subject to standard closing conditions including the approval of Hawaiian Telcom's stockholders, the approval of the listing of additional shares of Cincinnati Bell common stock to be issued to Hawaiian Telcom’s stockholders, required federal and state regulatory approvals and other customary closing conditions. We expect the merger to close in the second half of 2018. In connection with the mergers with Hawaiian Telcom and OnX, we secured financing for $1,150 million in senior secured credit facilities and senior notes, as described in Note 3, that, in addition to cash on hand and other sources of liquidity, are expected to be used to repay the existing indebtedness of Hawaiian Telcom, pay the cash consideration for both mergers, repay certain indebtedness of the Company and pay the fees and expenses in connection with both mergers. 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, 2016 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 2016 Annual Report on Form 10-K. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for the full year or any other interim period. Business Combinations — In accounting for business combinations, we apply the accounting requirements of ASC 805, “Business Combinations,” which requires the recording of net assets of acquired businesses at fair value. In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets. In addition, contingent consideration is presented at fair value at the date of acquisition. Transaction costs are expensed as incurred. On February 28, 2017, we acquired SunTel Services, a private company that provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cash consideration of $10.0 million. Based on final fair value assessment, the acquired assets and liabilities assumed consisted primarily of property plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1 million and goodwill of $4.3 million. These assets and liabilities are included in the IT Services and Hardware segment. Use of Estimates — Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with U.S. GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. Investment in CyrusOne — As of December 31, 2016, "Investment in CyrusOne" on the Condensed Consolidated Balance Sheets was recorded at fair value, which was determined based on closing market price of CyrusOne Inc. at December 31, 2016. This investment is classified as Level 1 in the fair value hierarchy. Unrealized gains and losses on our investment in CyrusOne are included in "Accumulated other comprehensive loss", net of taxes on the Condensed Consolidated Balance Sheets. In the first quarter 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 realized gain of $117.7 million. As of March 31, 2017, we no longer have an investment in CyrusOne Inc. Income Taxes — The Company’s income tax provision for interim periods is determined through the use of an estimated annual effective tax rate applied to year-to-date ordinary income, as well as the tax effects associated with discrete items. The Company expects its effective rate to exceed statutory rates primarily due to non-deductible expenses. During 2016, the Company reclassed $14.5 million of Alternative Minimum Tax ("AMT") refundable tax credits from "Deferred income taxes, net" to "Receivables" as these credits were expected to be utilized during 2017. In the nine months ended September 30, 2017, the Company reclassed an additional $10.2 million from "Deferred income taxes, net" to "Receivables." In the second quarter of 2017, the Company received $14.5 million of payments related to the 2016 AMT tax credits. Acceleration of the AMT refundable tax credits was the result of the Company's decision to make an election on its 2016 federal income tax return to claim the credits in lieu of claiming bonus depreciation. New tax legislation enacted in 2015 increased the amount of AMT credits that can be claimed beginning with the 2016 tax year. The Company plans to make the same election on its 2017 federal income tax return. Recently Issued Accounting Standards — In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation - Stock Compensation, which amends the scope of modification accounting for share-based payment arrangements. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to prospectively adopt the standard effective January 1, 2018 and will apply the amended guidance to any awards modified on or after this date. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, which amends the requirements in Accounting Standards Codification ("ASC") 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The ASU requires entities to disaggregate the current service cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented on a retrospective basis as of the date of adoption. In addition, only the service cost component of net benefit cost is eligible for capitalization on a prospective basis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to adopt the standard effective January 1, 2018, and will be applied retrospectively for prior periods. The Company estimates approximately $2 million and $1 million of other components of net benefit cost will be reclassed from "Cost of Services" and "Selling, general and administrative," respectively, to a new line below Operating income, "Other components of pension and postretirement benefit plans expense," on the Consolidated Statements of Operations upon adoption. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Under the amended guidance, the Company shall now recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted the amended guidance effective January 1, 2017 and will apply the guidance when performing the annual impairment test in the fourth quarter of 2017. In November 2016, the FASB issued ASU 2016-16, Statement of Cash Flow - Restricted Cash, which amends ASC 230 to require that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts described as restricted cash. As a result, amounts classified as restricted cash will now be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company plans to early adopt the standard effective December 31, 2017. The adoption of this standard will not result in a prior period adjustment for the twelve months ended December 31, 2016. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with the intent of reducing diversity in practice. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The impact of adopting this standard effective January 1, 2018 is not expected to have a material affect on the Company’s consolidated statement of cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The new standard was adopted effective January 1, 2017. The primary impact of adoption is the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital starting in the first quarter of fiscal year 2017. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of the date of adoption. Effective January 1, 2017, we adopted a prospective company-wide policy change due to the change in accounting principle and now record forfeitures as they are incurred on a go-forward basis. As a result of the change in accounting principle, the cumulative-effect adjustment to retained earnings to account for the accounting policy election was immaterial to the financial statements. The presentation requirements for cash flows related to excess tax benefits were applied retrospectively to all periods presented and did not result in a material impact to prior period net cash provided by operations and net cash used in financing. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity. In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee model that brings most leases on the balance sheet as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The new standard is effective for public entities for fiscal years beginning after December 15, 2018, and lessees and lessors are required to use a modified retrospective transition method for existing leases. The Company is in the process of evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements. 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 consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. In August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company will adopt the standard and all subsequent amendments in the first quarter of the fiscal year ending December 31, 2018. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is dependent on the successful and timely implementation of a revenue software application procured from a third-party provider, as well as the completion of our analysis of information necessary to restate prior period financial statements. We have reached conclusions on our key accounting assessments related to the standard and are finalizing our accounting policies. Based on our initial assessment, we believe the timing of revenue recognition for our Entertainment and Communications segment, and certain revenue streams within our IT Services and Hardware segment, will not materially change. However, we are continuing to assess the potential impact of the standard on the treatment of Telecom and IT hardware revenue and our current practice of recording hardware revenue on a gross basis versus net. As a part of this assessment, we are analyzing ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations focusing on a control model rather than a risk and reward model. This guidance could materially change revenue and cost of products. In addition, we are still finalizing our accounting policies related to variable consideration, rebates and certain contract assets and liabilities. We are still assessing the full impact of disclosure requirements; however, upon adopting FASB ASC Topic 606, we will provide additional disclosures in the notes to the consolidated financial statements related to disaggregated revenue, contract balances and performance obligations. In preparation for adoption of the standard, we have implemented internal controls, new system functionality and revised business processes to prepare financial information in accordance with the standard. These new processes and procedures ensure data utilized for financial reporting is complete and accurate and is assessed in accordance with the guidelines of the standard. We are assessing new internal controls to address risks associated with applying the five-step model, as well as monitoring controls to identify new sales arrangements or changes in our business environment that will affect our current accounting assessment. 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. |
Earnings Per Common Share |
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Earnings Per Share [Text Block] | Earnings Per Common Share Basic earnings per common share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur upon the issuance of common shares for awards under stock-based compensation plans, the exercise of warrants or the conversion of preferred stock, but only to the extent that they are considered dilutive. The following table shows the computation of basic and diluted EPS:
For the three months ended September 30, 2017, the Company had a net loss available to common shareholders and, as a result, all common stock equivalents were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For the nine months ended September 30, 2017, awards under the Company's stock-based compensation plans for common shares of 0.2 million were excluded from the computation of diluted EPS as the inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2016, awards under the Company's stock-based compensation plans for common shares of 0.2 million and 0.4 million, respectively, were excluded from the computation of diluted EPS as the inclusion would have been anti-dilutive. For all periods presented, preferred stock convertible into 0.9 million common shares was excluded as it was anti-dilutive. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Text Block] | Debt The Company’s debt consists of the following:
Corporate Credit Agreement There were no outstanding borrowings on the Corporate Credit Agreement's revolving credit facility, leaving $150.0 million available for borrowings as of September 30, 2017. On October 2, 2017, the Company entered into a new Credit Agreement (the “Credit Agreement”) and Revolving Credit Facility that terminated the existing Corporate Credit Agreement. New Revolving Credit Facility and Term Loan Facility (Credit Agreement) In October 2017, the Company entered into a new Credit Agreement. The Credit Agreement provides for (i) a five-year $200 million senior secured revolving credit facility (including both a letter of credit subfacility of 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 secured term loan facility (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). The Revolving Credit Facility expires in October 2022 and the Term Loan Facility expires in October 2024. Borrowings under the Credit Facilities will bear interest, at the Company’s option, at a rate per annum determined by reference to either the London Interbank Offered Rate (“LIBOR”) or an adjusted base rate, in each case plus an applicable margin. In the case of the Term Loan Facility, the adjusted base rate and LIBOR will not, in any event, be less than 2.00% and 1.00%, respectively. The applicable margin for the Credit Facilities with respect to LIBOR borrowings will be 3.75% and, with respect to adjusted base rate borrowings, will be 2.75%. In addition, the Company will be required to pay a commitment fee on any unused portion of the Revolving Credit Facility at a rate of 0.50% per annum. On October 2, 2017, the Term Loan Facility net proceeds of $577.0 million, after fees, expenses and note discount, were used to repay the remaining $315.8 million outstanding principal amount of its Tranche B Term Loan and accrued and unpaid interest. As a result, a loss on extinguishment of debt will be recorded in the fourth quarter of approximately $3 million. The remaining proceeds of the Term Loan Facility were used to fund the purchase price and associated transaction costs of the acquisition of OnX that closed on October 2, 2017. As a result of the Company entering into the Credit Agreement in October 2017, certain previously deferred costs associated with the Corporate Credit Agreement's revolving credit facility will be written off in the fourth quarter. The loss on extinguishment of debt associated with the transaction is expected to be less than $1 million. Accounts Receivable Securitization Facility As of September 30, 2017, the Company had no borrowings and $6.3 million of letters of credit outstanding under the accounts receivable securitization facility ("Receivables Facility"), leaving $96.4 million remaining availability on the total borrowing capacity of $102.7 million. In the second quarter of 2017, the Company executed an amendment of its Receivables Facility, which replaced, amended and added certain provisions and definitions to increase the credit availability and renew the facility, which is subject to renewal every 364 days, until May 2018. The facility's termination date is in May 2019 and was not changed by this amendment. 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 the Company's other subsidiaries or the Company. New 8% Senior Notes due 2025 In October 2017, CB Escrow Corp. (the “Issuer”), an Ohio corporation and wholly owned subsidiary of Cincinnati Bell Inc., closed the private offering of $350 million aggregate principal amount of 8% senior notes due 2025 (the “8% Senior Notes”) at par. The 8% Senior Notes were issued pursuant to an indenture, dated as of October 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 purchasers of 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 deposited into the escrow account an additional amount of cash that will be sufficient to pay all interest that would accrue on the Notes up to, but not including, October 9, 2018. The offering of the 8% Senior Notes is part of the financing of the cash portion of the merger consideration for the previously announced acquisition of Hawaiian Telcom Holdco, Inc. (“Hawaiian Telcom”) by the Company (the “HCOM Acquisition”). At the closing of the HCOM Acquisition, the Issuer will merge with and into the Company (the “Escrow Merger”), with the Company continuing as the surviving corporation. At the time of the Escrow Merger, the Company will assume the obligations of the Issuer under the 8% Senior Notes and the Indenture (the “Assumption”) and, subject to the satisfaction of certain other conditions, the proceeds from the offering will be released from the escrow account to the Company. In the event that the HCOM Acquisition has not occurred on or prior to January 9, 2019, the Issuer has notified the escrow agent that the HCOM Acquisition will not be consummated, the Agreement and Plan of Merger, dated as of July 9, 2017, among Hawaiian Telcom, the Company and Twin Acquisition Corp. has been terminated or the Issuer fails, after receiving written notice from the escrow agent of the Issuer’s failure to timely deposit cash into the escrow account equal to 30 days of interest that would accrue on the 8% Senior Notes to deposit such amount of cash within five business days after receipt of such notice, the Issuer will be required to redeem all of the 8% Senior Notes at a redemption price equal to 100% of the initial issue price, plus accrued and unpaid interest to, but excluding, the redemption date. The 8% Senior Notes will bear interest at a rate of 8.000% 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. |
Restructuring and Severance |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities Disclosure [Text Block] | Restructuring and Severance Liabilities have been established for employee separations and lease abandonment. A summary of activity in the restructuring and severance liability is shown below:
The Company had no severance charges in the third quarter of 2017. In the second quarter of 2017, the Company initiated reorganizations within both segments of the business in order to more appropriately align the Company for future growth. As a result, head count reductions were made resulting in a $3.6 million severance charge. In the first quarter of 2017, the Company finalized a voluntary severance program for certain bargained employees related to an initiative to reduce field and network costs within our legacy copper network. As a result, a severance charge of $25.6 million was recorded to the Entertainment and Communications segment. The Company made severance payments during the nine months ended September 30, 2017 for employee separations associated with the previously discussed initiatives. Lease abandonment costs represent future minimum lease obligations, net of expected sublease income, for abandoned facilities. Lease payments on abandoned facilities will continue through 2019. A summary of restructuring activity by business segment is presented below:
At September 30, 2017 and December 31, 2016, $4.7 million and $7.4 million, respectively, of the restructuring and severance liabilities were included in “Other current liabilities.” At September 30, 2017 and December 31, 2016, $8.7 million and $3.8 million was included in "Other noncurrent liabilities," respectively. |
Financial Instruments and Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] | Financial Instruments and Fair Value Measurements The carrying values of the Company's financial instruments approximate the estimated fair values as of September 30, 2017 and December 31, 2016, except for the Company's long-term debt. The carrying and fair values of these financial instruments are as follows:
The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at September 30, 2017 and December 31, 2016, which is considered Level 2 of the fair value hierarchy. Non-Recurring Fair Value Measurements Certain long-lived assets are required to be measured at fair value on a non-recurring basis subsequent to their initial measurement. These non-recurring fair value measurements generally occur when evidence of impairment has occurred. In the third quarter of 2017 an equity method investment recorded within “Other noncurrent assets” in the Consolidated Balance Sheets was remeasured at fair 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 and recorded to "Other expense (income), net" on the Consolidated Statements of Operations. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs. |
Pension and Postretirement Plans |
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Retirement Benefits, Description [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefits Disclosure [Text Block] | Pension and Postretirement Plans The Company sponsors three noncontributory defined benefit plans and a postretirement health and life insurance plan. For the three and nine months ended September 30, 2017, approximately 13% 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 and nine months ended September 30, 2016, approximately 10% of the costs were capitalized as a component of property, plant and equipment related to construction of our copper and fiber networks. For the three and nine months ended September 30, 2017 and 2016, pension and postretirement benefit costs were as follows:
Amortizations of prior service cost (benefit) and actuarial loss represent reclassifications from accumulated other comprehensive income. Based on current assumptions, contributions to qualified and non-qualified pension plans in 2017 are expected to be approximately $2 million each. Management expects to make cash payments of approximately $9 million related to its postretirement health plans in 2017. For the nine months ended September 30, 2017, contributions to the pension plans were $3.3 million and contributions to the postretirement plan were $5.5 million. |
Shareowners' Deficit |
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Stockholders' Equity Note Disclosure [Text Block] | Shareowners' Deficit Accumulated Other Comprehensive Loss For the nine months ended September 30, 2017, the changes in accumulated other comprehensive loss by component were as follows:
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Business Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure [Text Block] | 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:
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Description of Business and Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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, 2016 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 2016 Annual Report on Form 10-K. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for the full year or any other interim period. |
Business Combinations | Business Combinations — In accounting for business combinations, we apply the accounting requirements of ASC 805, “Business Combinations,” which requires the recording of net assets of acquired businesses at fair value. In developing estimates of fair value of acquired assets and assumed liabilities, management analyzes a variety of factors including market data, estimated future cash flows of the acquired operations, industry growth rates, current replacement cost for fixed assets, and market rate assumptions for contractual obligations. Such a valuation requires management to make significant estimates and assumptions, particularly with respect to the intangible assets. In addition, contingent consideration is presented at fair value at the date of acquisition. Transaction costs are expensed as incurred. On February 28, 2017, we acquired SunTel Services, a private company that provides network security, data connectivity, and unified communications solutions to commercial and enterprise customers across multiple sectors throughout Michigan for cash consideration of $10.0 million. Based on final fair value assessment, the acquired assets and liabilities assumed consisted primarily of property plant and equipment of $0.4 million, customer relationship intangible assets of $1.2 million, working capital of $4.1 million and goodwill of $4.3 million. These assets and liabilities are included in the IT Services and Hardware segment. Merger and Acquisition Activity — On October 2, 2017, we consummated our previously announced acquisition of OnX Holdings LLC ("OnX"), a privately held company that provides technology services and solutions to enterprise customers in the U.S., Canada and the U.K. The acquisition of OnX, originally announced on July 10, 2017, indicated that the purchase price of $201 million was subject to customary post-closing adjustments. Based on preliminary working capital adjustments, the cash consideration exchanged for the acquisition on October 2, 2017 was $242.3 million. The final purchase price is subject to completion of post-closing adjustments. The initial accounting for the business combination was not complete at the time the financial statements were issued due to the timing of the acquisition and the filing of this Quarterly Report on Form 10-Q. As a result, disclosures required under ASC 805-10-50, Business Combinations, are not possible at this time. On July 9, 2017, the Company and Hawaiian Telcom Holdco, Inc., a Delaware corporation (“Hawaiian Telcom”), entered into an Agreement and Plan of Merger (the "Hawaiian Telcom Merger Agreement") providing for the merger of Hawaiian Telcom with a wholly-owned subsidiary of the Company in exchange for the consideration described below. Hawaiian Telcom is a fiber-centric technology leader providing voice, video, broadband, data center and cloud solutions to consumer, business and wholesale customers on the Hawaiian islands. At the effective time of the merger, each share of Hawaiian Telcom common stock, par value of $0.01 per share, issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive, at the holder’s election and subject to proration as set forth in the Hawaiian Telcom Merger Agreement (1) 1.6305 common shares, par value $0.01 per share, of the Company (the “Company Common Shares”) (the “Share Consideration”); (2) 0.6522 Company Common Shares and $18.45 in cash, without interest (the “Mixed Consideration”); or (3) $30.75 in cash, without interest (the “Cash Consideration”). Hawaiian Telcom stockholders who elect to receive the Share Consideration or the Cash Consideration will be subject to proration to ensure that the aggregate number of Company Common Shares to be issued by the Company in the Hawaiian Telcom Merger and the aggregate amount of cash to be paid in the Hawaiian Telcom Merger will be the same as if all electing stockholders received the Mixed Consideration. Based on (1) the closing price of Cincinnati Bell’s common shares of $19.45 as of October 27, 2017, (2) the number of shares of Hawaiian Telcom common stock outstanding as of August 8, 2017, (3) the number of shares of Hawaiian Telcom common stock potentially issuable in respect of RSUs under Hawaiian Telcom benefit and compensation plans between August 17, 2017 and the closing date and (4) the number of shares of Hawaiian Telcom common stock potentially issuable in respect of Annual and Retention Bonuses under Hawaiian Telcom benefit and compensation plans outstanding between August 17, 2017 and the closing date (which aggregate number of shares of Hawaiian Telcom common stock in clauses (2) through (4) equals the maximum number of shares of Hawaiian Telcom common stock that could be outstanding as of the closing date), the estimated total consideration, less Hawaiian Telcom’s existing indebtedness of approximately $310 million as of June 30, 2017 to be repaid in conjunction with the merger, is approximately $380 million. The estimated total consideration expected to be transferred may not represent what the actual total consideration transferred will be when the merger is completed. The fair value of equity securities issued as part of the total consideration transferred is required to be measured on the closing date of the merger at the then current number of Hawaiian Telcom shares of common stock outstanding and RSUs that will vest between August 17, 2017 and the closing date. This requirement will likely result in equity and cash components different from what has been estimated as of September 30, 2017. The merger is subject to standard closing conditions including the approval of Hawaiian Telcom's stockholders, the approval of the listing of additional shares of Cincinnati Bell common stock to be issued to Hawaiian Telcom’s stockholders, required federal and state regulatory approvals and other customary closing conditions. We expect the merger to close in the second half of 2018. In connection with the mergers with Hawaiian Telcom and OnX, we secured financing for $1,150 million in senior secured credit facilities and senior notes, as described in Note 3, that, in addition to cash on hand and other sources of liquidity, are expected to be used to repay the existing indebtedness of Hawaiian Telcom, pay the cash consideration for both mergers, repay certain indebtedness of the Company and pay the fees and expenses in connection with both mergers. |
Use of Estimates | Use of Estimates — Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates. In the normal course of business, the Company is subject to various regulatory and tax proceedings, lawsuits, claims and other matters. The Company believes adequate provision has been made for all such asserted and unasserted claims in accordance with U.S. GAAP. Such matters are subject to many uncertainties and outcomes that are not predictable with assurance. |
Investment is CyrusOne | Investment in CyrusOne — As of December 31, 2016, "Investment in CyrusOne" on the Condensed Consolidated Balance Sheets was recorded at fair value, which was determined based on closing market price of CyrusOne Inc. at December 31, 2016. This investment is classified as Level 1 in the fair value hierarchy. Unrealized gains and losses on our investment in CyrusOne are included in "Accumulated other comprehensive loss", net of taxes on the Condensed Consolidated Balance Sheets. In the first quarter 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 realized gain of $117.7 million. As of March 31, 2017, we no longer have an investment in CyrusOne Inc. |
Income Taxes | Income Taxes — The Company’s income tax provision for interim periods is determined through the use of an estimated annual effective tax rate applied to year-to-date ordinary income, as well as the tax effects associated with discrete items. The Company expects its effective rate to exceed statutory rates primarily due to non-deductible expenses. During 2016, the Company reclassed $14.5 million of Alternative Minimum Tax ("AMT") refundable tax credits from "Deferred income taxes, net" to "Receivables" as these credits were expected to be utilized during 2017. In the nine months ended September 30, 2017, the Company reclassed an additional $10.2 million from "Deferred income taxes, net" to "Receivables." In the second quarter of 2017, the Company received $14.5 million of payments related to the 2016 AMT tax credits. Acceleration of the AMT refundable tax credits was the result of the Company's decision to make an election on its 2016 federal income tax return to claim the credits in lieu of claiming bonus depreciation. New tax legislation enacted in 2015 increased the amount of AMT credits that can be claimed beginning with the 2016 tax year. The Company plans to make the same election on its 2017 federal income tax return. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards — In May 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-09, Compensation - Stock Compensation, which amends the scope of modification accounting for share-based payment arrangements. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to prospectively adopt the standard effective January 1, 2018 and will apply the amended guidance to any awards modified on or after this date. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Period Pension Cost and Net Periodic Postretirement Benefit Cost, which amends the requirements in Accounting Standards Codification ("ASC") 715 related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The ASU requires entities to disaggregate the current service cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented on a retrospective basis as of the date of adoption. In addition, only the service cost component of net benefit cost is eligible for capitalization on a prospective basis. The ASU is effective for public business entities for annual periods beginning after December 15, 2017. The Company plans to adopt the standard effective January 1, 2018, and will be applied retrospectively for prior periods. The Company estimates approximately $2 million and $1 million of other components of net benefit cost will be reclassed from "Cost of Services" and "Selling, general and administrative," respectively, to a new line below Operating income, "Other components of pension and postretirement benefit plans expense," on the Consolidated Statements of Operations upon adoption. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test. Under the amended guidance, the Company shall now recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit's fair value. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company early adopted the amended guidance effective January 1, 2017 and will apply the guidance when performing the annual impairment test in the fourth quarter of 2017. In November 2016, the FASB issued ASU 2016-16, Statement of Cash Flow - Restricted Cash, which amends ASC 230 to require that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts described as restricted cash. As a result, amounts classified as restricted cash will now be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company plans to early adopt the standard effective December 31, 2017. The adoption of this standard will not result in a prior period adjustment for the twelve months ended December 31, 2016. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow - Classification of Certain Cash Receipts and Cash Payments, which amends ASC 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The FASB issued the ASU with the intent of reducing diversity in practice. The new standard is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. The impact of adopting this standard effective January 1, 2018 is not expected to have a material affect on the Company’s consolidated statement of cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation, which simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows us to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures as they occur. The new standard was adopted effective January 1, 2017. The primary impact of adoption is the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital starting in the first quarter of fiscal year 2017. Additional amendments to the accounting for income taxes and minimum statutory withholding tax requirements had no impact to retained earnings as of the date of adoption. Effective January 1, 2017, we adopted a prospective company-wide policy change due to the change in accounting principle and now record forfeitures as they are incurred on a go-forward basis. As a result of the change in accounting principle, the cumulative-effect adjustment to retained earnings to account for the accounting policy election was immaterial to the financial statements. The presentation requirements for cash flows related to excess tax benefits were applied retrospectively to all periods presented and did not result in a material impact to prior period net cash provided by operations and net cash used in financing. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity. In February 2016, the FASB issued ASU 2016-02, Leases, which represents a wholesale change to lease accounting. The standard introduces a lessee model that brings most leases on the balance sheet as well as aligns certain underlying principles of the new lessor model with those in ASC 606. The new standard is effective for public entities for fiscal years beginning after December 15, 2018, and lessees and lessors are required to use a modified retrospective transition method for existing leases. The Company is in the process of evaluating the impact of adoption of this ASU on the Company’s consolidated financial statements. 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 consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard also includes expanded disclosure requirements that result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. In August 2015, ASU 2015-14 was issued deferring the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017 with an optional early application date for annual reporting periods beginning after December 15, 2016. The Company will adopt the standard and all subsequent amendments in the first quarter of the fiscal year ending December 31, 2018. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. Our ability to adopt using the full retrospective method is dependent on the successful and timely implementation of a revenue software application procured from a third-party provider, as well as the completion of our analysis of information necessary to restate prior period financial statements. We have reached conclusions on our key accounting assessments related to the standard and are finalizing our accounting policies. Based on our initial assessment, we believe the timing of revenue recognition for our Entertainment and Communications segment, and certain revenue streams within our IT Services and Hardware segment, will not materially change. However, we are continuing to assess the potential impact of the standard on the treatment of Telecom and IT hardware revenue and our current practice of recording hardware revenue on a gross basis versus net. As a part of this assessment, we are analyzing ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net), issued by the FASB in March 2016. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations focusing on a control model rather than a risk and reward model. This guidance could materially change revenue and cost of products. In addition, we are still finalizing our accounting policies related to variable consideration, rebates and certain contract assets and liabilities. We are still assessing the full impact of disclosure requirements; however, upon adopting FASB ASC Topic 606, we will provide additional disclosures in the notes to the consolidated financial statements related to disaggregated revenue, contract balances and performance obligations. In preparation for adoption of the standard, we have implemented internal controls, new system functionality and revised business processes to prepare financial information in accordance with the standard. These new processes and procedures ensure data utilized for financial reporting is complete and accurate and is assessed in accordance with the guidelines of the standard. We are assessing new internal controls to address risks associated with applying the five-step model, as well as monitoring controls to identify new sales arrangements or changes in our business environment that will affect our current accounting assessment. 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. |
Earnings Per Share | Basic earnings per common share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that would occur upon the issuance of common shares for awards under stock-based compensation plans, the exercise of warrants or the conversion of preferred stock, but only to the extent that they are considered dilutive. |
Fair Value Measurement | The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at September 30, 2017 and December 31, 2016, which is considered Level 2 of the fair value hierarchy. |
Earnings Per Common Share (Tables) |
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Schedule of Calculation of Numerator and Denominator in Earnings Per Share [Table Text Block] | The following table shows the computation of basic and diluted EPS:
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Debt (Tables) |
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Schedule of Long-term Debt Instruments [Table Text Block] | The Company’s debt consists of the following:
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Restructuring and Severance (Tables) |
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Restructuring and Related Costs [Table Text Block] | A summary of activity in the restructuring and severance liability is shown below:
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Schedule of Restructuring and Related Costs by Segment [Table Text Block] | A summary of restructuring activity by business segment is presented below:
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Financial Instruments and Fair Value Measurements (Tables) |
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Fair Value, by Balance Sheet Grouping [Table Text Block] | The carrying and fair values of these financial instruments are as follows:
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Pension and Postretirement Plans (Tables) |
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Schedule of Net Benefit Costs [Table Text Block] | For the three and nine months ended September 30, 2017 and 2016, pension and postretirement benefit costs were as follows:
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Shareowners' Deficit (Tables) |
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Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | For the nine months ended September 30, 2017, the changes in accumulated other comprehensive loss by component were as follows:
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Business Segment Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment [Table Text Block] | Selected financial data for the Company’s business segment information is as follows:
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Financial Instruments and Fair Value Measurements (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Equity Method Investment, Other than Temporary Impairment | $ 4.7 | |
Long-term debt, including current portion | 1,059.1 | $ 1,149.2 |
Estimate of Fair Value, Fair Value Disclosure [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt, including current portion | $ 1,041.0 | $ 1,177.9 |
Shareowners' Deficit (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
||||||||
Changes in Accumulated Other Comprehensive Loss by Component [Roll Forward] | |||||||||||
Beginning balance | $ (90.3) | ||||||||||
Unrealized gain on Investment in CyrusOne, net | $ 0.0 | $ 0.0 | 8.3 | $ 0.0 | |||||||
Reclassifications, net | (67.9) | ||||||||||
Foreign currency gain | 0.1 | $ 0.0 | 0.1 | $ (0.1) | |||||||
Ending balance | (149.8) | (149.8) | |||||||||
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | |||||||||||
Changes in Accumulated Other Comprehensive Loss by Component [Roll Forward] | |||||||||||
Beginning balance | (157.6) | ||||||||||
Unrealized gain on Investment in CyrusOne, net | 0.0 | ||||||||||
Reclassifications, net | [1] | 8.5 | |||||||||
Foreign currency gain | 0.0 | ||||||||||
Ending balance | (149.1) | (149.1) | |||||||||
Available-for-sale Securities [Member] | |||||||||||
Changes in Accumulated Other Comprehensive Loss by Component [Roll Forward] | |||||||||||
Beginning balance | 68.1 | ||||||||||
Unrealized gain on Investment in CyrusOne, net | [2] | 8.3 | |||||||||
Reclassifications, net | [3] | (76.4) | |||||||||
Foreign currency gain | 0.0 | ||||||||||
Ending balance | 0.0 | 0.0 | |||||||||
Accumulated Translation Adjustment [Member] | |||||||||||
Changes in Accumulated Other Comprehensive Loss by Component [Roll Forward] | |||||||||||
Beginning balance | (0.8) | ||||||||||
Unrealized gain on Investment in CyrusOne, net | 0.0 | ||||||||||
Reclassifications, net | 0.0 | ||||||||||
Foreign currency gain | 0.1 | ||||||||||
Ending balance | $ (0.7) | $ (0.7) | |||||||||
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