Business Segment Information

For the years ended December 31, 2017, 2016, and 2015, we operated two business segments: Entertainment and Communications and IT Services and Hardware. The closing of our wireless operations, effective March 31, 2015, represented a strategic shift in our business. Therefore, certain wireless assets, liabilities and results of operations are reported as discontinued operations in our financial statements. For further details of Discontinued Operations, see Notes 1 and 16 of Notes to Consolidated Financial Statements.

The Entertainment and Communications segment provides data, video, voice and other services. These services are primarily provided to customers in southwestern Ohio, northern Kentucky and southeastern Indiana. Data includes products such as high-speed internet access, digital subscriber lines, private line, multi-protocol label switching, SONET, dedicated internet access, wavelength, audio conferencing and digital signal. These products are used to transport large amounts of data over private networks. Video services provide our Fioptics customers access to over 400 entertainment channels, over 140 high-definition channels, parental controls, HD DVR, video On-Demand and access to a Fioptics live TV streaming application. Voice represents local service, including Fioptics voice lines. It also includes VoIP, long distance, digital trunking, switched access and other value-added services such as caller identification, voicemail, call waiting, and call return. VoIP products provide our customers access to widely disbursed communication platforms and access to cloud based services and hosted unified communications products. Other services consists of revenue generated from wiring projects for business customers, advertising, directory assistance, maintenance and information services.

Entertainment and Communications revenue increased during 2017 and 2016 due to the demand for strategic fiber products more than offsetting legacy copper declines. Cost of services and product grew during 2017 and 2016 due to the increase in revenue and related primarily to video, VOIP and MPLS. Programming costs increased both due to an increase in the number of subscribers, as well as rising rates charged by content providers. Furthermore, network and materials costs increased in 2017 as we continue to build out our fiber investment. Operating income for Entertainment and Communications for 2017 was down compared to a year ago due in large part to restructuring and severance charges of $27.9 million incurred related to a voluntary severance program to reduce costs associated with our legacy copper network. Operating income decreased during 2016 compared to 2015 primarily due to increased depreciation expense associated with the impact of accelerating construction of our fiber network and reducing the estimated useful life of certain set-top boxes, as well as the related software, as we upgrade to new technology. We also reduced the useful life of our copper assets in the fourth quarter of 2015. Entertainment and Communications recognized restructuring and severance related charges of $7.7 million in 2016 and reversed restructuring and severance related charges of $1.6 million in 2015. There were no impairment charges recorded in 2017, 2016 or 2015. Capital expenditures are incurred to expand our Fioptics product suite, upgrade and increase capacity for our internet and data networks, and to maintain our wireline network.

The IT Services and Hardware segment provides a full range of managed IT solutions, including managed infrastructure

services, telephony and IT equipment sales, and professional IT staffing services. In 2017, the IT Services and Hardware segment acquired SunTel and OnX. These acquisitions contributed $172.8 million in revenue with significant contributions from Professional services in the amount of $29.6 million, Telecom and IT hardware of $132.7 million and Cloud services of $6.8 million. These contributions helped to offset other declines experienced in these product categories as a result of reduced capital spending by our enterprise customers in Greater Cincinnati, resulting in net growth of IT Services and Hardware revenue of $81.1 million. Selling, general and administrative expenses as well as depreciation and amortization expenses increased in 2017 primarily due to the acquisitions of SunTel and OnX. IT Services and Hardware revenue decreased $4.7 million in 2016 compared to 2015 as a result of an increase in strategic revenue of $17.7 million in 2016 which was more than offset by the $24.5 million decrease in telecom and IT hardware sales in 2016. Restructuring and severance related charges of $4.8 million were recognized in 2017 primarily related to the Company initiated reorganization to better align the segment for future growth. Restructuring and severance related charges of $3.3 million were recognized in 2016 primarily related to a reduction in force as customers began to in-source IT staff, therefore reducing the need for our professional services.

Total assets for the Company increased $621.4 million as of December 31, 2017 as compared to December 31, 2016. IT Services and Hardware assets increased $384.0 million primarily due to net assets acquired with OnX and SunTel. See Note 3. Corporate assets increased $213.1 million primarily due to proceeds from the 8% Notes, as well as the first year of interest, that is held as restricted cash totaling $378.7 million. The increase in restricted cash is offset by decreases in the investment in CyrusOne and the deferred tax asset. As of December 31, 2017, we no longer held an investment in CyrusOne. As of December 31, 2016, our investment in CyrusOne is included as an asset of the Corporate segment. Deferred tax assets and liabilities totaled $19.3 million and $11.2 million as of December 31, 2017, respectively. Deferred tax assets totaled $64.5 million as of December 31, 2016.

Our business segment information is as follows:



	Year Ended December 31,
(dollars in millions)	2017			2016			2015
Revenue
Entertainment and Communications	$	789.9		$	768.8		$	743.7
IT Services and Hardware	511.8			430.7			435.4
Intersegment	(13.2		)	(13.7		)	(11.3		)
Total revenue	$	1,288.5		$	1,185.8		$	1,167.8
Intersegment revenue
Entertainment and Communications	$	1.7		$	1.3		$	1.3
IT Services and Hardware	11.5			12.4			10.0
Total intersegment revenue	$	13.2		$	13.7		$	11.3
Operating income
Entertainment and Communications	$	65.3		$	90.6		$	129.9
IT Services and Hardware	10.6			23.2			20.6
Corporate	(37.8		)	(20.8		)	(22.5		)
Total operating income	$	38.1		$	93.0		$	128.0
Expenditures for long-lived assets*
Entertainment and Communications	$	196.4		$	272.5		$	269.5
IT Services and Hardware	181.1			13.7			14.0
Corporate	—			0.2			0.1
Total expenditures for long-lived assets	$	377.5		$	286.4		$	283.6
Depreciation and amortization
Entertainment and Communications	$	174.7		$	168.6		$	129.2
IT Services and Hardware	18.1			13.5			12.3
Corporate	0.2			0.1			0.1
Total depreciation and amortization	$	193.0		$	182.2		$	141.6

* Includes cost of acquisitions
	As of December 31,
(dollars in millions)	2017			2016
Assets
Entertainment and Communications	$	1,117.8		$	1,093.5
IT Services and Hardware	444.0			60.0
Corporate and eliminations	600.6			387.5
Total assets	$	2,162.4		$	1,541.0

Details of our service and product revenues including eliminations are as follows:



	Year Ended December 31,
(dollars in millions)	2017		2016		2015
Service revenue
Entertainment and Communications	$	785.1	$	763.0	$	735.0
IT Services and Hardware	221.0		215.7		198.0
Total service revenue	$	1,006.1	$	978.7	$	933.0
Product revenue
Entertainment and Communications	$	3.1	$	4.5	$	7.4
Telecom and IT hardware	279.3		202.6		227.4
Total product revenue	$	282.4	$	207.1	$	234.8