Cincinnati Bell 2015 Annual Report Download

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2015 Annual Report
Letter to
Shareholders
Notice of
2016 Annual Meeting
and Proxy Statement
Report on
Form 10-K

Table of contents

  • Page 1
    2015 Annual Report Letter to Shareholders Notice of 2016 Annual Meeting and Proxy Statement Report on Form 10-K

  • Page 2
    Contents Letter to Shareholders from the Chairman, the President & Chief Executive Officer and the Chief Financial Officer Financial Highlights Board of Directors and Company Officers Notice of Annual Meeting of Shareholders Proxy Statement Report on Form 10-K

  • Page 3
    ... & Chief Executive Officer, and the Chief Financial Officer Dear Shareholders: 2015 was an exceptional year for Cincinnati Bell as we continued our transformation into a technology company with state-of-the-art fiber assets servicing both consumer and business customers with flexible data, video...

  • Page 4
    ...building out our fiber network while launching new initiatives, including "MyTV", which will give Fioptics video customers more choice, flexibility and value when choosing content packages. Phillip R. Cox Chairman of the Board Theodore H. Torbeck President and Chief Executive Officer Leigh R. Fox...

  • Page 5
    ... reconciles free cash flow to the net increase (decrease) in cash and cash equivalents. 3 Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term and long-term debt and unamortized premium and/or discount, offset...

  • Page 6
    ... of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K included in this document. (a) We ceased operations of our wireless business as of March 2015. As a result, wireless financial results are now presented as discontinued operations. Therefore, we...

  • Page 7
    ... of Directors and Company Officers Board of Directors Phillip R. Cox (1, 2, 3*, 4) Chairman of the Board Cincinnati Bell Inc. President and Chief Executive Officer Cox Financial Corporation John W. Eck (2, 4) Chief Operations Officer and Executive Vice President Univision Communications, Inc. Jakki...

  • Page 8
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 9
    ...us. Regardless of the number of shares you own, please vote. You can vote your shares by internet, toll-free telephone call, or, if you request that the proxy materials be mailed to you, by completing, signing and returning the proxy card enclosed with those materials. Please see page 2 of the proxy...

  • Page 10

  • Page 11
    ... proxy statement for one-year terms expiring at the 2017 annual meeting of shareholders; Approval, by non-binding advisory vote, of our executive officers' compensation; Approval of an amendment to the Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors; Re-approval of the...

  • Page 12
    ..., Cincinnati, Ohio. We are furnishing this proxy statement to our shareholders in connection with the solicitation of proxies by our Board of Directors for the 2016 annual meeting of shareholders on that date, and any adjournment or postponement of the meeting. Our 2015 annual report accompanies...

  • Page 13
    ... ...Potential Payments upon Termination or Change in Control ...ITEM 2 - ADVISORY APPROVAL OF THE COMPANY'S EXECUTIVE COMPENSATION ...ITEM 3 - APPROVAL OF AN AMENDMENT TO THE CINCINNATI BELL INC. 2007 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS ...ITEM 4 - RE-APPROVAL OF THE MATERIAL TERMS OF THE...

  • Page 14
    ... AND THE ANNUAL MEETING ...COMMUNICATIONS AND SHAREHOLDER'S PROPOSALS ...ANNEX A - RECONCILIATION OF GAAP AND NON-GAAP MEASURES ...SCHEDULE 1 - INDUSTRY PEER GROUP ...SCHEDULE 2 - TELECOMMUNICATIONS PEER GROUP ...APPENDIX I - CINCINNATI BELL INC. 2007 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS...

  • Page 15
    ... meeting, we will be voting upon: Board's Recommendation Proposal 1: Proposal 2: Election of directors for one-year terms expiring in 2017. Approval, by a non-binding advisory vote, of our executive officers' compensation. Approval to an amendment to the Cincinnati Bell Inc. 2007 Stock Option Plan...

  • Page 16
    ... Common and preferred stock shareholders of Cincinnati Bell Inc. whose shares are recorded directly in their names in our stock register ("shareholders of record") at the close of business on February 29, 2016 (the "Record Date"), may vote their shares on the matters to be acted upon at the meeting...

  • Page 17
    ... Committees Corporate Governance Overview Our business, property and affairs are managed under the direction of our Board. Members of our Board are kept informed of our business through discussions with our President and Chief Executive Officer and other officers, by reviewing materials provided to...

  • Page 18
    ... and Chief Executive Officer of the Company in 2015. The non-employee directors of the Company meet in executive session without management present at each regularly scheduled meeting of the Board. Mr. Cox presides at the meetings of the non-employee directors. Committees of the Board The Board has...

  • Page 19
    ... with senior management of the Company as well as other key employees. The updates include risk rankings and a general description of risk mitigation activities pertaining to each item. In addition, the Audit and Finance Committee receives regular updates from the Company's Chief Security Officer on...

  • Page 20
    ... once each calendar quarter with members of management, the Company's internal audit staff and the Independent Registered Public Accounting Firm. An agenda for each such meeting is provided in advance to the members of the Audit and Finance Committee. The Board determined that each member of the...

  • Page 21
    ... has one or more executive officers serving on the Company's Board or Compensation Committee. CODE OF BUSINESS CONDUCT AND CODES OF ETHICS The Company has a Code of Business Conduct applicable to all officers and employees that describes requirements related to ethical conduct, conflicts of interest...

  • Page 22
    .... In 2015, there were no related party transactions requiring disclosure, except as follows: Prior to his appointment to the Board in 2013, Mr. Mayer served as an executive officer of General Electric Co. ("GE"), a significant client of the Company. In evaluating the transactions, the Governance and...

  • Page 23
    ... compensation from the Company for their service on the Board. The table below sets forth the annual compensation for nonemployee directors in 2015. Compensation Element Chairman of the Board Annual Retainer (a) ...Annual Board Retainer ...Annual Board Equity Award (b) ...Annual Audit and Finance...

  • Page 24
    ... general assets of the Company. The Directors Deferred Compensation Plan must comply with the requirements of the American Jobs Creation Act of 2004 in order to retain its ability to defer federal income tax on certain amounts credited to a non-employee director's account under the plan. The Company...

  • Page 25
    Non-Employee Directors Plan The Company grants its non-employee directors time-based restricted shares and/or options to purchase common shares under the Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors, as amended (the "2007 Directors Plan"). Pursuant to the current terms of ...

  • Page 26
    ... to 2008), as set forth in the table below. Number of Unvested Stock Awards Outstanding as of December 31, 2015 Number of Option Awards Outstanding as of December 31, 2015 Name Phillip R. Cox ...John W. Eck ...Jakki L. Haussler ...Craig F. Maier ...Russel P. Mayer ...Lynn A. Wentworth ...Martin...

  • Page 27
    ... reputation in his/her field; Known for good business judgment; Active in business; Knowledge of business on a national/global basis; Meets high ethical standards; and Commitment to regular board/committee meeting attendance. In addition, the Board will consider the following factors: • The...

  • Page 28
    ... re-election at the expiration of his term on April 30, 2015. The Board has determined all director nominees, other than Mr. Torbeck, are independent and have no relationship with the Company other than as a shareholder and director. If, at the time of the Annual Meeting, one or more of the nominees...

  • Page 29
    ...biographies of each person nominated for election as a director of the Company. NOMINEES FOR DIRECTORS (Terms Expire in 2017) Mr. Cox has been President and Chief Executive Officer of Cox Financial Corporation (a financial planning services company) since 1972. He is a current director of The Timken...

  • Page 30
    ...experience as the chief executive officer of a large, publicly-traded corporation, Mr. Maier brings to the Board demonstrated management and leadership ability. In addition, Mr. Maier has valuable experience dealing with accounting principles, financial reporting regulations and evaluating financial...

  • Page 31
    ... Manager of Cincinnati Bell Communications Group. Prior to joining Cincinnati Bell, Mr. Torbeck was Chief Executive Officer of the Freedom Group and also worked more than 25 years for the General Electric Co. ("GE"), where he served as the Vice President of Operations for GE Industrial Business...

  • Page 32
    ... page 36, and (ii) all directors and executive officers of the Company as a group. Unless otherwise indicated, the address of each named director and executive officer is c/o Cincinnati Bell Inc. at the Company's address. 6 3/4% Percent of Convertible 6 3/4% Common Shares Preferred Shares Cumulative...

  • Page 33
    ...less than 1% of the issued and outstanding class of shares (a) As reported on Schedule 13D/A filed on December 4, 2014 by GAMCO Investors, Inc., as of December 3, 2014, Gabelli Funds, LLC has sole voting and dispositive power for 10,846,849 common shares, GAMCO Asset Management Inc. has sole voting...

  • Page 34
    ... shareholders and its executives. Our goal is to continue the transformation of Cincinnati Bell from a legacy copper-based telecommunications company into a technology company with state of the art fiber assets servicing customers with data, video, voice and IT solutions to meet their evolving needs...

  • Page 35
    ... both annual and long-term incentive plans promote achievement of current-year goals and longer-term business strategies while driving appropriate business behavior without inducing executives to take undue business risks. Named Executive Officers The Company's 2015 named executive officers ("NEOs...

  • Page 36
    Executive Summary Financial Results Consolidated revenue totaling $1,167.8 million for the year ended December 31, 2015 increased compared to the prior year as strategic revenue growth more than offset the impact of no longer providing backhaul service to our discontinued wireless operations and ...

  • Page 37
    ... on continued service and the achievement of performance goals • Facilitate executive equity ownership thereby further aligning executive and shareholder interests • Does not have value unless stock price increases following date of grant • Grants were made in the long-term equity incentive...

  • Page 38
    ... Existing employment agreements with executives incorporate a "double-trigger" requirement for vesting equity grants in the event of a change in control ("CIC"). Effective January 28, 2014, the Company amended the Cincinnati Bell Inc. 2007 Long Term Incentive Plan (the "2007 Long Term Incentive Plan...

  • Page 39
    ..., the Company believes that these changes have been well received and are generally seen as a more balanced approach to aligning management compensation with shareholder return so the same terms were used for the 2015 grants. We have engaged with our investors and based on the 2015 say-on-pay vote...

  • Page 40
    ... of current financial performance and the Company's ability to execute on its strategy of creating a technology company with state of the art fiber assets servicing customers with data, video, voice and IT solutions to meet their evolving needs. Adjusted EBITDA is given a significantly higher...

  • Page 41
    ... planning, development of the Company leadership team, development of business opportunities and community involvement/relationships. The Compensation Committee has discretion in evaluating the Chief Executive Officer's performance and may recommend to the full Board a discretionary increase...

  • Page 42
    ... amount by the closing price of a share of common stock on the day the Board approves the financial results. The Compensation Committee's policy is not to grant more than 2,000,000 shares per year in connection with long-term incentive awards under the 2007 Long Term Incentive Plan. To the extent...

  • Page 43
    ... that applies to the extent that eligible earnings or benefits exceed the applicable Internal Revenue Code limits for qualified plans. The Company makes all required contributions to this plan. However, as described on page 39, the Management Pension Plan is now frozen and no further credits, other...

  • Page 44
    ... full Board, in the case of the Chief Executive Officer), Willis Towers Watson produces a predicted level for each pay component at the 50th percentile of companies based on Cincinnati Bell's revenues. The use of regression analysis allows the Compensation Committee to compare each executive's pay...

  • Page 45
    ... target annual bonus opportunity plus target long-term incentive opportunity. The Compensation Committee compares each NEO's pay, both by pay component and in total, to the market 50th percentile of similar revenue-sized companies set forth in the peer groups. The Company does not review pay levels...

  • Page 46
    ... risk" as it reflects the allocation of total target direct compensation among base salary, annual bonus and long-term incentive compensation. Base Salary 24% Long Term Incentive 52% Long Term Incentive 29% Base Salary 39% Annual Incentive 24% Annual Incentive 32% Chief Executive Officer Other...

  • Page 47
    ... possible, future long-term incentive awards will be made in shares based on share availability to assist the executives in meeting the guidelines. Aside from the Company's actual performance from one year to the next, the price of the Company's stock may vary due to the general condition of the...

  • Page 48
    ... pay or other elements of executive compensation. The Compensation Committee has a policy that the Company will not enter into any new or materially amended employment agreements with NEOs providing for excise tax gross-up provisions with respect to payments contingent upon a change in control...

  • Page 49
    ... be included in this Proxy Statement and incorporated by reference in Cincinnati Bell Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. COMPENSATION COMMITTEE Craig F. Maier, Chairman Phillip R. Cox John W. Eck Jakki L. Haussler Lynn A. Wentworth Proxy Statement 35

  • Page 50
    ... Chief Technology Officer Christopher J. Wilson ...2015 353,600 Vice President, General Counsel and Secretary T. Duckworth (i) ...2015 206,000 Vice President, Investor Relations and Controller (a) The 2015 amounts reflect the grant-date fair value of the performance share-based awards issued in 2015...

  • Page 51
    ... 1, 2013. Mr. Simpson was appointed Chief Technology Officer of Cincinnati Bell Telephone Company, LLC on July 31, 2014. Mr. Simpson was named Chief Technology Officer of the Company on January 27, 2015. Mr. Duckworth was appointed Vice President, Investor Relations and Controller on July 9, 2013...

  • Page 52
    ... 48,543 Performance-based shares ...1/27/2015 Annual cash incentive ... (a) Amounts reflect shares issuable under the long-term performance-based incentive plan. Performance will be measured based on achievement of the defined targets over the three-year period 2015-2017. See pages 26 - 29 for...

  • Page 53
    ... life annuity or, for married participants, a 50% joint and survivor, which provides a reduced benefit for the employee in order to provide a benefit equal to 50% of that amount if the employee dies before his/her spouse. However, a 2009 amendment to the Management Pension Plan generally provided...

  • Page 54
    ...of employment as a result of death or disability, termination by the Company without cause or termination upon a change in control. The payments to the NEOs upon termination or a change in control as of December 31, 2015 are described beginning on page 44. Long-term Incentives In 2015, the NEOs long...

  • Page 55
    ... Incentive of Plan Shares Awards: or Number of Number of Units of Number of Securities Securities Stocks Securities Underlying Underlying That Underlying Unexercised Unexercised Option Have Unexercised Option (#) Unearned Exercise Option Not Option (#) Unexercisable Options (#) Price Expiration...

  • Page 56
    ...of exercise compared to the exercise or strike price of the option or stock appreciation award. (c) The amount shown for Mr. Torbeck represents vesting of one-third of the restricted shares granted on January 3, 2012 and January 2, 2013 and shares issued on January 27, 2015 upon vesting of long-term...

  • Page 57
    ... Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. (c) If any of the above-identified executive officers had retired on December 31, 2015, they would have been entitled to a benefit equal to the balance then credited to them, without...

  • Page 58
    ... Revenue Code, no new deferrals are permitted and all outstanding account balances will be distributed to the participants on November 7, 2016. The Executive Deferred Compensation Plan generally permitted under its policies, for any calendar year, each employee who had an annual base rate of pay and...

  • Page 59
    ...and group term life insurance similar to such benefits provided by the Company to other employees. In June 2014, the Company changed the benefits under the long-term disability plan to include continuation of benefits for up to 24 months after the date of disability. If any of the executives elects...

  • Page 60
    ... of an additional two years of participation in the Company's Management Pension Plan, if applicable, as though the executive had remained employed at the same base rate of pay and target bonus; Continued medical, dental, vision and life insurance benefits during the two-year period following the...

  • Page 61
    ... schedule and the ability to exercise such vested options so long as the disabling conditions exist; Continued participation by the disabled executive in any outstanding long-term incentive plans; and Continued consideration of the disabled executive as an employee for all other benefits so long...

  • Page 62
    ... on page 36. The guiding principles of the Company's compensation policies and decisions include aligning each executive's compensation with the Company's business strategy and providing incentives needed to attract, motivate and retain key executives who are important to our long-term success...

  • Page 63
    ... remaining life of the 2007 Directors Plan. The Board adopted this amendment because it believes that: • Additional shares are necessary to attract new non-employee directors; and • Additional shares are needed to provide the annual equity grant to non-employee directors. If the shareholders do...

  • Page 64
    ...a shareholder of the Company with respect to the restricted common shares, including the right to vote and to receive cash dividends. (c) Restricted stock units represent the right of the non-employee director to common shares upon the satisfaction of the vesting conditions set forth in the Plan and...

  • Page 65
    ... amended by the Board (subject to shareholder approval) to be 1,500,000 common shares. This is a change in the 2007 Directors Plan for which shareholder approval is being requested. 6. Change in Control. In the event a change in control of the Company occurs, then, in general terms and among other...

  • Page 66
    ... the Company's shareholders. 10. Federal Income Tax Consequences. The following describes, in very general terms, the federal income tax consequences arising with respect to awards granted under the 2007 Directors Plan. A stock option that is granted to a non-employee director will generally create...

  • Page 67
    ... risk of forfeiture. The plan gives several different methods that the Board can use or permit to ensure that such purchase price and tax withholding requirements are satisfied. Proxy Statement In no event shall the Company ever be obligated to issue or deliver any common shares in connection...

  • Page 68
    ... of the 2011 Short Term Incentive Plan in connection with the requested shareholder re-approval of the material terms of the plan's performance goals. To explain, Section 162(m) of the Code generally provides that any publicly traded corporation may not deduct for federal income tax purposes, with...

  • Page 69
    ... the plan's administration. However, notwithstanding that the Committee generally has the right to make awards under the 2011 Short Term Incentive Plan, any award under the plan that is set by the Committee for Cincinnati Bell Inc.'s Chief Executive Officer must be approved by the Board in order to...

  • Page 70
    ... its award parts) exceed $3,000,000. Note that the Committee (or the Board with respect to an award granted to Cincinnati Bell Inc.'s Chief Executive Officer) may, prior to any payment being made under a 2011 Short Term Incentive Plan award and in its discretion and for any reason, reduce the amount...

  • Page 71
    ...; return on sales; return on assets; return on equity; and Proxy Statement m. corporate performance indicators (indices based on the level of certain services provided to customers). The Company performance goal criteria that will apply to any award granted under the 2011 Short Term Incentive Plan...

  • Page 72
    ... of the Committee. When an award under the 2011 Short Term Incentive Plan is granted to Cincinnati Bell Inc.'s Chief Executive Officer, however, the Board will have final approval as to the determination of whether such officer has met any such individual performance criteria. Note that, to...

  • Page 73
    ...provided that no amendment may be made without approval of Cincinnati Bell Inc.'s shareholders if such amendment would make any change in the plan that is required by law to be approved by the shareholders in order to become effective. 7. Federal Income Tax Consequences. In general, any key employee...

  • Page 74
    ... incentive plans approved by Cincinnati Bell shareholders. There are no outstanding unexercised share-settled stock appreciation rights. The number of performance-based shares assumes the maximum awards that can be earned if the performance conditions are achieved. (2) The shares to be issued relate...

  • Page 75
    ... been filed under such Acts. Audit and Finance Committee Report The Audit and Finance Committee of the Board has reviewed and discussed the Company's audited financial statements with the management of the Company and has reviewed a report from management assessing the Company's internal controls...

  • Page 76
    ...459,500 Audit fees The audit fees for the years ended December 31, 2015 and 2014 were for services rendered in connection with the audit of the Company's annual financial statements, review of quarterly financial statements included in the Company's reports filed with the SEC and services related to...

  • Page 77
    ... Public Accounting Firm for the year 2016. Proxy Statement Questions and Answers about the Proxy Materials and the Annual Meeting Q: Why am I receiving these proxy materials? A: The Company's Board is providing these proxy materials to you in connection with the Annual Meeting of Shareholders...

  • Page 78
    ... by mail or at the Annual Meeting. Q: What proposals will be voted on at the meeting? A1: The election of nine directors to serve a one-year term ending in 2017; A2: The advisory approval of the Company's executive compensation; A3: The approval of an amendment to the Cincinnati Bell Inc. 2007 Stock...

  • Page 79
    ... voting proxy over the internet, by mail, by telephone or you may vote your shares in person at the meeting. Beneficial Owner If your shares are held in a stock brokerage account or by another nominee (including a trust used in connection with a Company employee or director plan), you are considered...

  • Page 80
    ... internet, by telephone or by mail; (ii) if you are a shareholder of record, notifying the Company's Secretary in writing that you want to revoke your earlier proxy; or (iii) if you are a shareholder of record attending the Annual Meeting, giving notice of your proxy revocation in open meeting and...

  • Page 81
    ... meet applicable legal requirements, (ii) to allow for the tabulation of votes and certification of the vote, or (iii) to facilitate a successful proxy solicitation by the Board. Occasionally, shareholders provide written comments on their proxy card, which are forwarded to the Company's management...

  • Page 82
    ... any internet access charges you may incur. In addition to the costs of mailing the proxy materials, the Company may also incur costs to provide additional copies of these proxy materials (if requested) and for its directors, officers and employees to solicit proxies or votes in person, by telephone...

  • Page 83
    Communications and Other Shareholder's Proposals Mailing Address of Principal Executive Office The mail address of our principal executive office is: Cincinnati Bell Inc. 221 East Fourth Street Cincinnati, OH 45202 Shareholder Proposals for Next Year's Annual Meeting Shareholder proposals intended ...

  • Page 84
    ...well as future Company communications, please contact the following: For beneficial owners, please contact your broker. For shareholders of record, please contact our transfer agent, Computershare, at the following address: Computershare Investor Services, LLC Shareholder Services 7530 Lucerne Drive...

  • Page 85
    ... at meetings of the non-management directors. The Company has established procedures for such shareholder communications. Shareholders and other interested parties should send any communications to Christopher J. Wilson, Vice President, General Counsel and Secretary, Cincinnati Bell Inc., 221...

  • Page 86
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  • Page 87
    ... is also available in the "Investor Relations" section of the Company's website, www.cincinnatibell.com. Twelve Months Ended December 31, 2015 2014 Proxy Statement (dollars in millions) Net Income (GAAP) ...Less: Income (loss) from discontinued operations, net of tax ...Income from continuing...

  • Page 88
    ...: Net increase in corporate credit and receivables facilities with initial maturities less than 90 days ...Proceeds from sale of CyrusOne investment ...Repayment of debt ...Debt issuance costs ...Decommissioning of wireless towers ...Transaction costs ...Discontinued operations* ...Free cash flow...

  • Page 89
    .... The Company defines free cash flow as cash provided by (used in) operating, financing and investing activities, adjusted for the issuance and repayment of debt, debt issuance costs, the repurchase of common stock, and the proceeds from the sale or the use of funds from the purchase of business...

  • Page 90
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  • Page 91
    Schedule 1 Cincinnati Bell Inc. General Industry Peer Group The companies comprising the General Industry Peer Group in the CD&A are set forth below: A.O. Smith Accellent Aimia* Allegion American Greetings Americas Styrenics AMSTED Industries Ansell Arby's Restaurant Armstrong World Industries Arup ...

  • Page 92
    ...Cincinnati Bell Inc. Telecommunications Peer Group The companies comprising the Telecommunications Peer Group are listed below: Atlantic-Tele-Network, Inc. Centurylink, Inc. Consolidated Communications Holdings, Inc. EarthLink Inc. Fairpoint Communications, Inc. Frontier Communications Corp. General...

  • Page 93
    ...the Plan, the following terms shall have the meanings indicated below when used in the Plan, unless the context clearly indicates otherwise. 2.1 "Board" means the Board of Directors of CBI. 2.2 "CBI" means Cincinnati Bell Inc. (and, except for purposes of determining whether a Change in Control has...

  • Page 94
    ..., named the "Cincinnati Bell Inc. 2007 Stock Option Plan for Non-Employee Directors," as set forth herein and as it may be amended. 2.11 "Regulation 1.83-3(i)" means Treasury Regulation Section 1.83-3(i) issued by the Department of the Treasury under Section 83 of the Code, as such regulation...

  • Page 95
    ... provided by a group of comparable peer group companies to their non-employee directors. 5.3 Common Shares To Be Issued Under Awards. Any Common Shares that are to be issued or paid under any award granted under the Plan may consist, in whole or in part, of Common Shares that are authorized...

  • Page 96
    ... contain the terms and conditions of the stock option (as set by the Board). 7.3 Exercise Price of Stock Option. Unless otherwise prescribed by the Board to be higher, the Exercise Price with respect to any number of Common Shares that are subject to a stock option granted under the Plan shall be...

  • Page 97
    ... the restrictions and other terms and conditions of the restricted stock (as set by the Board) and shall be referenced on the certificates representing the Common Shares that constitute such restricted stock. 8.3 Procedures for Payment of Taxes Upon Vesting of Restricted Stock. Any taxes required to...

  • Page 98
    ... agreement shall contain the vesting conditions and other terms and conditions of the restricted stock units (as set by the other provisions of this section 8A and the other sections of the Plan or, if applicable, by the Board). 8A.3 Procedures for Payment of Restricted Stock Units and of Applicable...

  • Page 99
    ... date on which trading of stocks occurred on such exchange). Notwithstanding the foregoing, if Common Shares are not listed or traded at all on the New York Stock Exchange on the date as of which a Common Share's fair market value for the subject date is to be determined under the terms of the...

  • Page 100
    ... such Common Shares under such stock option. (b) Similarly, unless the Board shall otherwise prescribe in the terms of a restricted stock unit award that was granted under the Plan to an Outside Director, in the event of a Change in Control the Board shall have discretion to cause a cash payment to...

  • Page 101
    ...the Reorganization or Sale; (2) no person (other than any employee benefit plan sponsored or maintained by the Surviving Entity or the Parent Entity or the related trust of any such plan) is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power (in respect...

  • Page 102
    ... merger, consolidation, spin-off, combination or exchange of shares, or other corporate change, or any distributions to common shareholders other than cash dividends, then, subject to the provisions of paragraph (b) of this subsection 12.1, the Board shall make such substitution or adjustment in the...

  • Page 103
    ...be made under Section 83(b) of the Code (generally to include in his or her gross income for Federal income tax purposes in the year the award is transferred to him or her the amounts specified in such Code section), make such election provided that (i) the terms and conditions of such award fail to...

  • Page 104
    ...a violation of the provisions of any applicable law (or regulation issued under such law) or the rules of any securities exchange on which Common Shares are listed and will not be subject to restrictions not generally applicable to Common Shares. In addition, with respect to any Outside Director who...

  • Page 105
    ... "CEO" means, as of any point in time, the person then designated by CBI as its Chief Executive Officer. 2.5 10.2 hereof. "Change in Control" means the occurrence of any of the events described in subsection Proxy Statement 2.6 "Code" means the Internal Revenue Code of 1986, as it exists as of the...

  • Page 106
    ..., named the "Cincinnati Bell Inc. 2011 Short Term Incentive Plan," as set forth herein and as it may be amended. 3. Administration of Plan. 3.1 Committee To Administer Plan. The Plan shall be administered by the Committee. The Committee shall be the Compensation Committee of the Board, unless and...

  • Page 107
    ...Tax Year must contain the same terms and conditions for all Participants or any group of Participants. 3.4 Board Approval Needed for CEO Awards. Notwithstanding the foregoing provisions of this section 3, any award set by the Committee for issuance to the Key Employee who is the CEO must be approved...

  • Page 108
    ... or (ii) completing at least 30 years of continuous service as an employee with the Company. (b) If the Participant receives disability benefits under the Company's Sickness and Accident Disability Benefits Plan or any similar type of disability plan for more than three months of the award's Award...

  • Page 109
    ..., dividend payments and proceeds from the issuance of equity securities, and proceeds from the sale of assets); (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) earnings before interest, taxes, depreciation, and amortization; earnings per share; operating income; total shareholder returns; profit...

  • Page 110
    ... and the direct expense incurred in connection with, the disposition of a business, in whole or in part, the sale of investments or noncore assets, or discontinued operations, categories, or segments of businesses; (5) a gain or loss from claims and/or litigation and insurance recoveries relating to...

  • Page 111
    ... the meaning of Treasury Regulations Section 1.162-27(c) as issued under Code Section 162(m), and thereby, provided all other conditions of Code Section 162(m)(4)(C) are satisfied, to be able to be deductible by the Company for Federal income tax purposes without regard to the deduction limits of...

  • Page 112
    ...the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act, being or becoming "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of CBI representing 20% or more of the combined voting power of CBI's then outstanding APP...

  • Page 113
    ...the Reorganization or Sale; (2) no person (other than any employee benefit plan sponsored or maintained by the Surviving Entity or the Parent Entity or the related trust of any such plan) is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power (in respect...

  • Page 114
    ...deferral terms and conditions meet all of the conditions of Section 409A of the Code. 14.2 No Right To Employment. Nothing contained in the Plan or any award granted under the Plan shall confer on any Participant any right to be continued in the employment of the Company or interfere in any way with...

  • Page 115
    ...Federal law, the Plan shall be subject to and construed in accordance with the laws of the State of Ohio. 14.6 Counterparts and Headings. The Plan may be executed in any number... used throughout the Plan are for convenience only and shall not be given legal significance. Proxy Statement APP-II-11

  • Page 116
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  • Page 117
    ... File Number 1-8519 CINCINNATI BELL INC. Ohio (State of Incorporation) 31-1056105 (I.R.S. Employer Identification No.) 221 East Fourth Street, Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip Code) (513) 397-9900 (Registrant's telephone number, including area code) Securities...

  • Page 118
    ... Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ...121 122 122 122 122 PART IV Item 15. Exhibits and Financial Statement Schedules ...Signatures ...This report contains trademarks, service marks and registered marks of Cincinnati Bell Inc...

  • Page 119
    ... Entertainment and Communications segment (formerly "Wireline"), the company provides high speed data, video, and voice solutions to consumers and businesses over an expanding fiber network and a legacy copper network. In addition, business customers across the United States rely on Cincinnati Bell...

  • Page 120
    ... in 2015 and Cloud Services increased 49% over 2014. Our goal is to foster our current enterprise relationships while increasing our number of small to mid-size customers both in and outside the Cincinnati market. As a company with a long history of managing customer network and technology needs, we...

  • Page 121
    ...Fioptics Video Wiring Projects Advertising Directory Assistance Maintenance Information Services Wireless Handsets and Accessories Form 10-K (1) (2) (3) (4) (5) (6) Digital Subscriber Line Multi-Protocol Label Switching Synchronous Optical Network Voice over Internet Protocol Digital Signal Time...

  • Page 122
    ... Bell Inc. The Entertainment and Communications segment provides products and services such as high-speed internet, data transport local voice, long distance, VoIP, video and other services. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of the Company, is the Incumbent Local Exchange...

  • Page 123
    ... for business customers, advertising, directory assistance, maintenance, information services and commissions received as an authorized sales agent for DirecTV® and Verizon Wireless. IT Services and Hardware IT Services and Hardware provides a full range of managed IT solutions, including managed...

  • Page 124
    ... on price, service level, delivery, quality of product and terms and conditions. Entertainment and Communication's primary purchases are for network equipment, software, and fiber cable to maintain and support the growth of Fioptics. The Company maintains facilities and operations for storing cable...

  • Page 125
    ... providers. The Entertainment and Communications segment faces competition from other local exchange carriers, wireless service providers, inter-exchange carriers, as well as cable, broadband, and internet service providers. The Company has lost, and will likely continue to lose, access lines...

  • Page 126
    ... Ohio in 1983 with its headquarters at 221 East Fourth Street, Cincinnati, Ohio 45202 (telephone number (513) 397-9900 and website address http://www.cincinnatibell.com). The Company files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange...

  • Page 127
    ... implement strategies to attract and retain Fioptics video and high-speed internet subscribers, retain access lines and long distance subscribers, or replace such customers with other sources of revenue, the Company's Entertainment and Communications business will be adversely affected. The IT...

  • Page 128
    ... employee benefit obligations and pay preferred dividends pursuant to our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives, including increasing marketing promotions and related expenditures and launching new products and services...

  • Page 129
    ... as web browsing and email. As utilization rates and availability of these services continue to grow, our high-speed Internet customers may use much more bandwidth than in the past. If this occurs, we could be required to make significant capital expenditures to increase network capacity in order to...

  • Page 130
    .... The regulation of the Company's businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services, and threaten its operating licenses. Several of the Company's subsidiaries are subject to...

  • Page 131
    ... and financial condition. The efficient operation of the Company's business depends on back-office information technology systems. The Company relies on back-office information technology systems to effectively manage customer billing, business data, communications, supply chain, order entry and...

  • Page 132
    ... customers. The Company cannot provide any assurance that it will be able to retain the current senior management team or key sales associates. The loss of any of these individuals could adversely affect the Company's business, financial condition, results of operations and cash flows. Risks Related...

  • Page 133
    ... contained in the terms of the Corporate Credit Agreement and its other debt instruments could: Form 10-K • limit the Company's ability to plan for or react to market conditions or meet capital needs or otherwise restrict the Company's activities or business plans; and • adversely affect...

  • Page 134
    ...with our sale of 14.3 million CyrusOne LP operating partnership units on April 7, 2015 for $426.0 million, the aggregate available borrowings on the Corporate Credit Agreement's revolving credit facility increased to $175.0 million for the remainder of the term. In addition, the Company's ability to...

  • Page 135
    ... in lower revenues and increases in the allowance for doubtful accounts, which would negatively affect the results of operations. Furthermore, the sales cycle would be further lengthened if business customers slow spending or delay decisionmaking on the Company's products and services, which would...

  • Page 136
    ...one for eligible management employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain former executives. The Company also provides healthcare and group life insurance benefits for eligible retirees. The Company's Consolidated Balance Sheets indirectly...

  • Page 137
    ... Our business faces a substantial amount of litigation, including, from time to time, patent infringement lawsuits, antitrust class actions, securities class actions, wage and hour class actions, personal injury claims and lawsuits relating to our advertising, sales, billing and collection processes...

  • Page 138
    ... a fiber network plant, internet protocol and circuit switches and integrated access terminal equipment. In addition, as of year-end, we lease eight Company-run retail locations. Those locations were historically used by the discontinued wireless operations but were converted to sell our Fioptics...

  • Page 139
    ... II Cincinnati Bell Inc. Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) Market Information The Company's common shares (symbol: CBB) are listed on the New York Stock Exchange. The high and low closing sale prices during...

  • Page 140
    ... of the Company's outstanding common stock in an amount up to $150.0 million. The Company may repurchase shares when management believes the share price offers an attractive value and to the extent its available cash is not needed for growth opportunities. This repurchase plan does not have...

  • Page 141
    ... and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this document. (dollars in millions, except per share amounts) 2015 2014 2013 (a) 2012 (a) 2011 (a) Operating Data Revenue ...Cost of services and products, selling, general and administrative...

  • Page 142
    ... million shares of CyrusOne's common stock. In 2014, we recorded a gain resulting from the sale of 16.0 million partnership units of CyrusOne LP to CyrusOne, Inc. (e) Total assets include current and noncurrent assets from discontinued operations. (f) Total long-term obligations comprise long-term...

  • Page 143
    ... of Operations Revenue $ Change 2015 vs. 2014 % Change 2015 vs. 2014 $ Change 2014 vs. 2013 % Change 2014 vs. 2013 Form 10-K (dollars in millions) 2015 2014 2013 Service revenue Entertainment and Communications ...$735.0 $728.8 IT Services and Hardware ...198.0 161.4 Data Center Colocation...

  • Page 144
    ... services increased in both periods due to growth in our strategic products. Entertainment and Communications costs also increased due to programming costs associated with our growing Fioptics video subscriber base and higher programming rates. $ Change 2015 vs. 2014 % Change 2015 vs. 2014 $ Change...

  • Page 145
    ... and headcount related costs to support the growth for our strategic products. Corporate SG&A stock-based compensation expense increased in both periods due to changes in our stock price. In 2015, this increase was partially offset by lower contract services. In 2014, employee related costs were...

  • Page 146
    ...to CyrusOne employees. In 2010, the Company's Board of Directors approved a long-term incentive program for certain members of management under which payments were contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business...

  • Page 147
    ...Segment Results The Company manages its business based upon product and service offerings. As of December 31, 2015, 2014, and 2013, we operated two business segments: Entertainment and Communications and IT Services and Hardware. Effective January 24, 2013, the date of the CyrusOne IPO, we no longer...

  • Page 148
    ... Bell Inc. The Entertainment and Communications segment provides products and services such as data transport, high-speed internet, video, local voice, long distance, VoIP and other services. Cincinnati Bell Telephone Company LLC ("CBT"), a subsidiary of the Company, is the incumbent local exchange...

  • Page 149
    ...vs. 2015 vs. 2014 2014 Cincinnati Bell Inc. $ Change % Change 2014 vs. 2014 vs. 2013 2013 (dollars in millions) 2015 2014 2013 Revenue ...Operating costs and expenses: Cost of services and products ...Selling, general and administrative ...Depreciation and amortization ...Restructuring charges...

  • Page 150
    ...Cincinnati Bell Inc. The following table illustrates our revenue by market: Consumer, Business and Carrier. Our products within each market have been classified as either Strategic, Legacy or Integration. (dollars in millions) Year ended December 31, 2015 2014 2013 Revenue: Consumer Strategic Data...

  • Page 151
    ...to sell Verizon wireless product and services at our retail locations. Revenue from selling these products totaled $3.1 million in 2015. We discontinued the sale of Verizon handsets at our retail locations effective January 31, 2016. Business Data revenue from our business customers has increased as...

  • Page 152
    ... to provide its Fioptics services to 432,000 residential and business addresses, or 53% of our operating territory. Fioptics installation costs increased in 2015 due to increased Fioptics internet and video activations combined with upgrading set-top boxes and wireless modems. Other Fioptics related...

  • Page 153
    ... products. During 2015 and 2014, our professional services group increased billable headcount and utilization with our existing customer base. In 2013, our professional service group began designing an infrastructure that enables secure, efficient access to data, internet, and shared and cloud...

  • Page 154
    ... factors, including the timing of customers' capital spend, the size of their capital budgets, and general economic conditions. Operating Costs and Expenses Cost of services and products is primarily impacted by changes in Telecom and IT hardware sales and headcount related costs. In 2015, costs of...

  • Page 155
    ... paid on preferred stock were $10.4 million in each of 2015, 2014 and 2013. We do not currently pay dividends on our common shares, nor do we plan to pay dividends on such shares in 2016. No common shares were repurchased in 2015, 2014 or 2013. As of December 31, 2015, management has authority to...

  • Page 156
    ...restricted payments, which include share repurchases and common stock dividends, is limited to a total of $15 million because its Consolidated Total Leverage Ratio, as defined in the Corporate Credit Agreement, exceeds 3.50 to 1.00 as of December 31, 2015. The Company may make restricted payments of...

  • Page 157
    ... Convertible Preferred Stock. Furthermore, the Company may make restricted payments in the form of share repurchases or dividends up to 15% of CyrusOne proceeds, subject to a $35 million annual cap with carryovers. The Corporate Credit Agreement was also modified to provide that the Tranche B Term...

  • Page 158
    ... Tranche B Term Loan were used to redeem all of the Company's $500.0 million 8 1⁄ 4% Senior Notes on October 15, 2013 at a redemption price of 104.125%. Dividends paid on preferred stock totaled $10.4 million in 2015, 2014 and 2013. Future Operating Trends Entertainment and Communications For the...

  • Page 159
    ... revenue from services provided to our discontinued wireless business. For our business and carrier customers, strategic products include: high-speed internet and data transport, audio conferencing, as well as VoIP and other broadband services, including private line and MPLS. In 2015, we invested...

  • Page 160
    ... the rate in effect as of December 31, 2015. (4) Purchase obligations primarily consist of amounts under open purchase orders and open blanket purchase orders for purchases of network, IT and telephony equipment, and other goods; contractual obligations for services such as software maintenance and...

  • Page 161
    ... of business, the Company makes certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain transactions. These include: (a) intellectual property indemnities to customers in connection with the use, sale, and/or license of products and...

  • Page 162
    ...of accounting. Entertainment and Communications - Revenues from local telephone, data transport, internet products and video services, which are billed monthly prior to performance of service, are not recognized upon billing or cash receipt but rather are deferred until the service is provided. Long...

  • Page 163
    ...and discount rate selection. These assumptions are subject to change as the Company's long-term plans and strategies are updated each year. Reviewing the Carrying Values of Long-Lived Assets - Depreciation of our Entertainment and Communications telephone plant is determined on a straight-line basis...

  • Page 164
    ...-based service offerings from those previously provided by our copper network. As a result of the change in estimate, Entertainment and Communications' depreciation and amortization expense is expected to increase approximately $7 million in 2016. Management reviews the carrying value of long-lived...

  • Page 165
    ... rates of interest available on high-quality corporate bonds drove the increase in the discount rates in 2015. Expected rate of return The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by the plans...

  • Page 166
    ... opportunities for new competitive entrants and new services by applying minimal regulation. Since 2009, federal regulators have devoted considerable attention to initiatives aimed at promoting investment in and adoption of advanced telecommunications services, particularly broadband Internet access...

  • Page 167
    ... losses via increased end-user charges primarily depends on competitive conditions in the ILEC operating area. Special Access In 2005, the FCC opened a proceeding to review the current special access pricing rules. Under the existing rules, special access services are subject to price cap regulation...

  • Page 168
    ... In the near-term, the Company foresees little impact from the new rules. State - CBT has operated under alternative regulation plans for its local services since 1994. These plans restrict the ability to increase the price of basic local service and related services but, in return, prevent CBT from...

  • Page 169
    ... caps on basic local exchange service prices expired in July 2011 providing CBT with flexibility to increase rates for basic local exchange service. Ohio, Kentucky and Indiana Cable Franchises The states of Ohio and Indiana permit statewide video service authorization. The Company is now authorized...

  • Page 170
    ... of the Company's businesses by federal and state authorities may, among other things, place the Company at a competitive disadvantage, restrict its ability to price its products and services and threaten its operating licenses; • the Company depends on a number of third party providers, and the...

  • Page 171
    Form 10-K Part II Cincinnati Bell Inc. • the Company depends on the receipt of dividends or other intercompany transfers from its subsidiaries and investments; • the Company has a significant investment in CyrusOne; • the trading price of the Company's common stock may be volatile, and the ...

  • Page 172
    ...Cincinnati Bell Inc. At December 31, 2014, the carrying value and fair value of fixed-rate debt was $1,135.7 million and $1,170.3 million, respectively. Foreign Currency Risk Substantially all of our revenue and expenses are denominated in U.S. dollars. We do not currently employ forward contracts...

  • Page 173
    ... Consolidated Financial Statements: Cincinnati Bell Inc. Page Management's Report on Internal Control over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of...

  • Page 174
    ... statements in conformity with accounting principles generally accepted in the United States. Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee...

  • Page 175
    ... PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareowners of Cincinnati Bell Inc. Cincinnati, Ohio We have audited the internal control over financial reporting of Cincinnati Bell Inc. and subsidiaries (the "Company") as of December 31, 2015 based on criteria established in Internal Control...

  • Page 176
    ... in all material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in...

  • Page 177
    ...from discontinued operations ...Total liabilities ...Shareowners' deficit Preferred stock, 2,357,299 shares authorized; 155,250 shares (3,105,000 depositary shares) of 6 3⁄ 4% Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2015 and 2014; liquidation preference $1,000...

  • Page 178
    ... except per share amounts) Cincinnati Bell Inc. Year Ended December 31, 2015 2014 2013 Revenue Services ...Products ...Total revenue ...Costs and expenses Cost of services, excluding items below ...Cost of products sold, excluding items below ...Selling, general and administrative ...Depreciation...

  • Page 179
    .... Cincinnati Bell Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in millions) Year Ended December 31, 2015 2014 2013 Net income (loss) ...$353.7 $ 75.6 $(54.7) Other comprehensive income (loss), net of tax: Foreign currency translation loss ...(0.4) (0.1) (0.1) Defined benefit plans...

  • Page 180
    ...employee plans ...Shares purchased under employee plans and other ...Stock-based compensation ...Dividends on preferred stock ...Balance at December 31, 2014 . . Net income ...Other comprehensive income ...Shares issued under employee plans ...Shares purchased under employee plans and other ...Stock...

  • Page 181
    ... sale of wireless spectrum licenses - discontinued operations ...Amortization of deferred gain - discontinued operations ...Stock-based compensation ...Excess tax benefit for share based payments ...Gain on transfer of lease obligations - discontinued operations ...Other, net ...Changes in operating...

  • Page 182
    ... 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...

  • Page 183
    ..., materials and supplies consists of network components, various telephony and IT equipment to be sold to customers, wireless handsets and accessories to support our agreement with Verizon to sell their products and services in our retail stores, maintenance inventories, and other materials and...

  • Page 184
    ... 10-K Part II Cincinnati Bell Inc. Equity Method Investments - On January 24, 2013, we completed the initial public offering ("IPO") of CyrusOne Inc. ("CyrusOne"), which owns and operates our former Data Center Colocation business. CyrusOne conducts its data center business through CyrusOne LP, an...

  • Page 185
    ...sales with one large customer, GE, that contributed 12% to total revenue in 2015 and 14% in 2014. Revenue derived from foreign operations is approximately 1% of consolidated revenue. Entertainment and Communications - Revenues from local telephone, special access, internet product and video services...

  • Page 186
    ..., risk-free interest rate, holding period and dividends. The fair value of stock awards is based on the Company's closing share price on the date of grant. For all share-based payments, an assumption is also made for the estimated forfeiture rate based on the historical behavior of employees...

  • Page 187
    ...straight-line basis over the average remaining service life of active employees for the pension and bargained postretirement plans (approximately 9-13 years) and average life expectancy of retirees for the management postretirement plan (approximately 17 years). Business Combinations - In accounting...

  • Page 188
    ... of Operations. The FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software, which amends ASC 350-40 to provide customers with guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software in...

  • Page 189
    ... 3. Discontinued Operations Cincinnati Bell Wireless LLC ("CBW"), our former Wireless segment, provided digital wireless voice and data communications services to customers in the Company's licensed service territory, which included Greater Cincinnati and Dayton, Ohio, and areas of northern Kentucky...

  • Page 190
    ... 10-K Part II Cincinnati Bell Inc. Wireless financial results for the twelve months ended December 31, 2015, 2014 and 2013 reported as Income (loss) from discontinued operations, net of tax on the Consolidated Statements of Operations are as follows: Twelve Months Ended December 31, 2015 2014 2013...

  • Page 191
    ... portion of long-term debt ...Accounts payable ...Restructuring liability ...Deferred gain on sale of wireless spectrum licenses ...Other current liabilities ...Total current liabilities from discontinued operations ...Long-term debt, less current portion ...Deferred gain on sale of towers ...Other...

  • Page 192
    ... that was either disconnected from the wireless network, abandoned or demolished. Restructuring liabilities were established for employee separations, lease abandonments and contract terminations charges. In 2015, restructuring charges were for tower operating leases that were abandoned. During 2014...

  • Page 193
    ...arrangements which include, among others, providing services such as fiber transport, network support, service calls, monitoring and management, storage and back-up, and IT systems support. Operating Expenses - We lease data center and office space from CyrusOne at certain locations in our operating...

  • Page 194
    Form 10-K Part II Cincinnati Bell Inc. contractual service arrangements. In the normal course of business, the Company also provides certain administrative services to CyrusOne which are billed based on agreed-upon rates. Revenues and operating costs and expenses from transactions with CyrusOne ...

  • Page 195
    ... the computation of basic and diluted EPS: Cincinnati Bell Inc. (in millions, except per share amounts) Year Ended December 31, 2015 Continuing Discontinued Operations Operations Total Numerator: Net income (loss) ...Preferred stock dividends ...Net income (loss) applicable to common shareowners...

  • Page 196
    ... II Cincinnati Bell Inc. Company had a net loss available to common shareholders from continuing operations and, as a result, all common stock equivalents were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. For all periods presented, preferred stock...

  • Page 197
    ... Cincinnati Bell Inc. At December 31, 2015 and 2014, the gross value of goodwill was $14.3 million and $14.4 million, respectively. The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 were as follows: (dollars in millions) Entertainment and Communications...

  • Page 198
    ... 10-K Part II 8. Debt and Other Financing Arrangements The Company's debt consists of the following: (dollars in millions) Cincinnati Bell Inc. December 31, 2015 2014 Current portion of long-term debt: Corporate Credit Agreement - Tranche B Term Loan ...Capital lease obligations and other debt...

  • Page 199
    ... Preferred Stock. Furthermore, the Company may make restricted payments in the form of share repurchases or dividends up to 15% of CyrusOne sale proceeds, subject to a $35.0 million annual cap with carryovers. The Corporate Credit Agreement was also modified to provide that the Tranche B Term...

  • Page 200
    .... ("CBAD"), Cincinnati Bell Any Distance of Virginia LLC, CBTS, and eVolve Business Solutions LLC ("eVolve") all participate in this facility. Cincinnati Bell Wireless ("CBW") also participated in the facility until it was withdrawn from the agreement effective June 1, 2015. The available borrowing...

  • Page 201
    ... limit their ability to make dividend payments to the parent; issuance of indebtedness; asset dispositions; transactions with affiliates; liens; investments; issuances and sales of capital stock of subsidiaries; and redemption of debt that is junior in right of payment. The indenture governing the...

  • Page 202
    ...retained by the Company in conjunction with discontinuing wireless operations. Deferred Financing Costs Deferred financing costs are costs incurred in connection with obtaining long-term financing. In 2015 and 2014, deferred financing costs incurred related to amending the Corporate Credit Agreement...

  • Page 203
    ... the Corporate Credit Agreement plus an additional $197.1 million of secured debt. Also, the Company's ability to make Restricted Payments (as defined by the individual indenture) would be limited, including common stock dividend payments or repurchasing outstanding Company shares. If the Company is...

  • Page 204
    ...-K Part II Cincinnati Bell Inc. retail stores, which were previously used to support our wireless operations, were re-branded to support the growth of our Fioptics suite of products. Rent expense associated with our retail locations totaled $0.8 million in 2015. Certain facility leases provide for...

  • Page 205
    ..., the Company's Board of Directors approved long-term incentive programs for certain members of management. Payment was contingent upon the completion of a qualifying transaction and attainment of an increase in the equity value of the data center business, as defined in the plans. The CyrusOne IPO...

  • Page 206
    ...paid pursuant to the Company's written severance plan. In 2015, employee separation charges were associated with discontinuing our cyber-security product offering and integrating each of our segments' business markets. In 2014, employee separation charges included charges attributable to outsourcing...

  • Page 207
    Form 10-K Part II Cincinnati Bell Inc. Other charges in 2015 represent project related expenses as we continue to identify opportunities to integrate the business markets within our Entertainment and Communications and IT Services & Hardware segments. For 2013, contract terminations consisted of ...

  • Page 208
    ... discount rate. The expected long-term rate of return on plan assets, developed using the building block approach, is based on the mix of investments held directly by the plans and the current view of expected future returns, which is influenced by historical averages. Changes in actual asset return...

  • Page 209
    ...as follows: Pension Benefits 2015 2014 Cincinnati Bell Inc. (dollars in millions) Postretirement and Other Benefits 2015 2014 Change in benefit obligation: Benefit obligation at January 1, ...Service cost ...Interest cost ...Actuarial (gain) loss ...Benefits paid ...Retiree drug subsidy received...

  • Page 210
    ...amount of long-term growth and income without undue exposure to risk. This is provided by a balanced strategy using fixed income and equity securities. The target allocations for the pension plan assets are 65% equity securities and 35% investment grade fixed income securities. Equity securities are...

  • Page 211
    ... plans at December 31, 2015 as well as stock of international companies located in both developed and emerging markets around the world. Fixed income securities primarily include holdings of funds, which generally invest in a variety of intermediate and long-term investment grade corporate bonds...

  • Page 212
    ... shares. Shares of this preferred stock can be converted at any time at the option of the holder into common stock of the Company at a conversion rate of 1.44 shares of the Company common stock per depositary share of 6 3⁄ 4% convertible preferred stock. Annual dividends of $67.50 per share...

  • Page 213
    ... period pension and postretirement benefit cost are reported within "Cost of services", "Cost of products sold", and "Selling, general and administrative" expenses on the Consolidated Statements of Operations. 14. Income Taxes Income tax expense for continuing operations consisted of the following...

  • Page 214
    ... Part II Cincinnati Bell Inc. The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year: Year Ended December 31, 2015 2014 2013 U.S. federal statutory rate ...State and local income taxes, net of federal income tax ...Change in valuation...

  • Page 215
    ... to officers and key employees under the 2007 Long Term Incentive Plan and stock options, restricted shares, and restricted stock units to directors under the 2007 Stock Option Plan for NonEmployee Directors. The maximum number of shares authorized under these plans is 25.0 million. Shares available...

  • Page 216
    ...The Company generally issues new shares when options to purchase common shares or stock appreciation rights are exercised. The following table summarizes stock options and stock appreciation rights activity: 2015 WeightedAverage Exercise Price Per Shares Share 2014 WeightedAverage Exercise Price Per...

  • Page 217
    ... The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected holding period was estimated using the historical exercise behavior of employees and adjusted for abnormal activity. Expected dividends are based on the Company's history of not paying...

  • Page 218
    ...five years of service. No phantom shares were granted to non-employee directors in 2015. Distributions to the directors are generally in the form of cash. The executive deferred compensation plan allows for certain executives to defer a portion of their annual base pay, bonus, or stock awards. Under...

  • Page 219
    ... generated from wiring projects for business customers, advertising, directory assistance, maintenance, information services and commissions received as an authorized sales agent for DirecTV® and Verizon Wireless. Operating income for Entertainment and Communications for 2015 was down from a year...

  • Page 220
    Form 10-K Part II Our business segment information is as follows: (dollars in millions) Cincinnati Bell Inc. Year Ended December 31, 2015 2014 2013 Revenue Entertainment and Communications ...IT Services and Hardware ...Data Center Colocation ...Intersegment ...Total revenue ...Intersegment ...

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    ... are as follows: (dollars in millions) Cincinnati Bell Inc. Year Ended December 31, 2015 2014 2013 Service revenue Entertainment and Communications ...IT Services and Hardware ...Data Center Colocation ...Total service revenue ...Product revenue Handsets and accessories ...Telecom and IT...

  • Page 222
    ... of Operations and Comprehensive Income (Loss) Parent (Guarantor) Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2015 CBT Other (Issuer) Non-guarantors Eliminations Total Revenue ...Operating costs and expenses ...Operating income (loss) ...Interest expense (income), net...

  • Page 223
    ... (benefit) ...Equity in earnings of subsidiaries, net of tax ...Income (loss) from continuing operations ...Income (loss) from discontinued operations ...Net income (loss) ...Other comprehensive income (loss) ...Total comprehensive income (loss) ...Net income (loss) ...Preferred stock dividends...

  • Page 224
    ... Consolidating Balance Sheets Parent (Guarantor) CBT (Issuer) Cincinnati Bell Inc. (dollars in millions) As of December 31, 2015 Other Non-guarantors Eliminations Total Cash and cash equivalents ...Receivables, net ...Other current assets ...Total current assets ...Property, plant and equipment...

  • Page 225
    ... Consolidating Balance Sheets Parent (Guarantor) CBT (Issuer) Cincinnati Bell Inc. (dollars in millions) As of December 31, 2014 Other Non-guarantors Eliminations Total Cash and cash equivalents ...Receivables, net ...Other current assets ...Other current assets from discontinued operations...

  • Page 226
    ...Flows Parent (Guarantor) Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2015 CBT Other (Issuer) Non-guarantors Eliminations Total Cash flows provided by (used in) by operating activities ...Capital expenditures ...Proceeds received from sale of CyrusOne ...Dividends received...

  • Page 227
    ... 10-K Part II Parent (Guarantor) Cincinnati Bell Inc. Year Ended December 31, 2014 CBT Other (Issuer) Non-guarantors Eliminations (dollars in millions) Total Cash flows provided by (used in) operating activities ...Capital expenditures ...Proceeds from sale of CyrusOne ...Dividends received from...

  • Page 228
    ...Cincinnati Bell Entertainment Inc., Cincinnati Bell Any Distance Inc., Cincinnati Bell Telecommunications Services LLC, Cincinnati Bell Wireless LLC, CBTS Software LLC, Cincinnati Bell Technology Solutions Inc., Cincinnati Bell Any Distance of Virginia LLC, eVolve Business Solutions LLC, Data Center...

  • Page 229
    ...a guarantor from the Company's Corporate Credit Agreement. On September 30, 2014, the Company entered into an Amendment to the Corporate Credit Agreement giving the Company the right to provide written notice to the administrative agent on or after the closing of the wireless sale of spectrum assets...

  • Page 230
    ... income (loss) ...$ 35.1 Net income (loss) ...$ 75.6 Preferred stock dividends ...10.4 Net income (loss) applicable to common shareowners ...$ 65.2 $ Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) Year Ended December 31, 2013 (dollars in millions) Parent...

  • Page 231
    ... Consolidating Balance Sheets As of December 31, 2015 (dollars in millions) Parent (Issuer) Guarantors Non-guarantors Cincinnati Bell Inc. Eliminations Total Cash and cash equivalents ...Receivables, net ...Other current assets ...Total current assets ...Property, plant and equipment, net...

  • Page 232
    ... Consolidating Balance Sheets Cincinnati Bell Inc. As of December 31, 2014 (dollars in millions) Parent (Issuer) Guarantors Non-guarantors Eliminations Total Cash and cash equivalents ...$ Receivables, net ...Other current assets ...Other current assets from discontinued operations ...Total...

  • Page 233
    ... Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2015 Parent (Issuer) Guarantors Non-guarantors Eliminations Total Cash flows provided by (used in) operating activities ...$ (19.3) $ (44.0) Capital expenditures ...Proceeds received from sale of CyrusOne ...Dividends received...

  • Page 234
    ... Flows Cincinnati Bell Inc. (dollars in millions) Year Ended December 31, 2013 Parent (Issuer) Guarantors Non-guarantors Eliminations Total Cash flows provided by (used in) operating activities ...$(218.1) $ 28.8 Capital expenditures ...Dividends received from CyrusOne ...Proceeds from sale of...

  • Page 235
    ... Quarter Second Quarter 2015 Third Quarter Cincinnati Bell Inc. (dollars in millions, except per common share amounts) Fourth Quarter Total Revenue ...Operating income ...Income from continuing operations ...Income from discontinued operations, net of tax ...Net income ...Basic earnings (loss...

  • Page 236
    ... Registered Public Accounting Firm are set forth in Part II, Item 8 of this Annual Report on Form 10-K. (c) Changes in internal control over financial reporting. There were no changes to Cincinnati Bell Inc.'s internal control over financial reporting during the fourth quarter of 2015 that...

  • Page 237
    ... Cincinnati Bell Inc. can be found in the Proxy Statement for the 2016 Annual Meeting of Shareholders and is incorporated herein by reference. The Company's Code of Ethics for Senior Financial Officers that applies to its Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer...

  • Page 238
    ... Controller for Cincinnati Bell Inc. from August 2010 to August 2012; Deloitte & Touche LLP's audit practice from October 2004 to August 2010. Items 11. Executive Compensation The information required by this item can be found in the Proxy Statement for the 2016 Annual Meeting of Shareholders...

  • Page 239
    ..., among Cincinnati Bell Telephone Company LLC (as successor entity to Cincinnati Bell Telephone Company), as Issuer, Cincinnati Bell Inc., as Guarantor, and The Bank of New York, as Trustee (Exhibit (4)(c)(iii)(3) to Annual Report on Form 10-K for the year ended December 31, 2004, File No. 1-8519...

  • Page 240
    ... dated as of June 23, 2014, among Cincinnati Bell Inc., an Ohio corporation, the subsidiary guarantors party thereto, the Lenders party thereto and Bank of America, N.A. (Exhibit 10.4 to Annual Report on Form 10-K, date of Report February 26, 2015, File No. 1-8519). Third Amendment to Credit...

  • Page 241
    ..., among Cincinnati Bell Funding LLC, as Seller, Cincinnati Bell, Inc., as Servicer, the various Purchasers and Purchaser Agents identified therein, and PNC Bank, National Association, as Administrator (Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 2013, File No. 1-8519...

  • Page 242
    ... 2014 among Cincinnati Bell Wireless, LLC, an Ohio limited liability company, and Cellco Partnership, a Delaware general partnership doing business as Verizon Wireless (Exhibit 10.1 to Current Report on Form 8-K, date of Report April 7, 2014, File No. 1-8519). Network Asset Purchase Agreement dated...

  • Page 243
    ... 2005 (Exhibit (10)(iii)(A)(4) to Annual Report on Form 10-K for the year ended December 31, 2008, File No. 1-8519). Cincinnati Bell Inc. 2007 Long Term Incentive Plan, as amended (Appendix I to the Company's 2014 Proxy Statement on Schedule 14A filed March 20, 2015, File No. 1-8519). Form of Award...

  • Page 244
    ... Cincinnati Bell Inc. and Thomas E. Simpson dated as of January 27, 2015 (Exhibit 10.50 to Annual Report on Form 10-K, date of report February 26, 2015, File No. 1-8519). Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends. Code of Ethics for Senior Financial Officers...

  • Page 245
    ... with this report. The Company's reports on Form 10-K, 10-Q, 8-K, proxy and other information are available free of charge at the following website: http://www.cincinnatibell.com. Upon request, the Company will furnish a copy of the Proxy Statement to its security holders without charge, portions of...

  • Page 246
    Schedule II VALUATION AND QUALIFYING ACCOUNTS Beginning of Period Additions Charge (Benefit) To (from) Other to Expenses Accounts Cincinnati Bell Inc. (dollars in millions) Deductions End of Period Allowance for Doubtful Accounts Year 2015 ...Year 2014 ...Year 2013 ...Deferred Tax Valuation ...

  • Page 247
    ... Cincinnati Bell Inc. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 25, 2016 /s/ Leigh R. Fox Leigh R. Fox Chief...

  • Page 248
    ... Cincinnati Bell Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed ...Lynn A. Wentworth* Lynn A. Wentworth Martin J. Yudkovitz* Martin J. Yudkovitz John M. Zrno* John M. Zrno President, Chief Executive Officer and Director Chairman of the Board...

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  • Page 251
    ..., Cincinnati, Ohio 45202 Investor Relations Contact Josh Duckworth Vice President, Investor Relations and Controller (513) 397-2292 Transfer Agent and Registrar Questions regarding registered shareholder accounts or the Stock Purchase Plan should be directed to Cincinnati Bell's transfer agent and...

  • Page 252
    221 East Fourth Street P.O. Box 2301 Cincinnati, Ohio 45202 513.397.9900 www.cincinnatibell.com