Cincinnati Bell 2010 Annual Report Download - page 110

the next several years under generally accepted accounting principles. Additionally, the Company’s
postretirement costs are adversely affected by increases in medical and prescription drug costs. If the Company
incurs future investment losses or future investment gains that are less than expected, or if medical and
prescription drug costs increase significantly, the Company would expect to face even higher annual net pension
and postretirement costs. Refer to Note 10 to the Consolidated Financial Statements for further information.
Adverse changes in the value of assets or obligations associated with the Company’s employee benefit plans
could negatively impact shareowners’ deficit and liquidity.
The Company sponsors three noncontributory defined benefit pension plans: one for eligible management
employees, one for non-management employees, and one supplemental, nonqualified, unfunded plan for certain
senior executives. The Company’s consolidated balance sheets indirectly reflect the value of all plan assets and
benefit obligations under these plans. The accounting for employee benefit plans is complex, as is the process of
calculating the benefit obligations under the plans. Further adverse changes in interest rates or market conditions,
among other assumptions and factors, could cause a significant increase in the Company’s benefit obligations or
a significant decrease of the asset values, without necessarily impacting the Company’s net income. In addition,
the Company’s benefit obligations could increase significantly if it needs to unfavorably revise the assumptions
used to calculate the obligations. These adverse changes could have a further significant negative impact on the
Company’s shareowners’ deficit. In addition, with respect to the Company’s pension plans, the Company expects
to make approximately $246 million of estimated cash contributions to fully fund its qualified pension plans for
the years 2011 to 2017, of which $23.4 million is currently expected to be paid in 2011. Further, adverse changes
to plan assets could require the Company to contribute additional material amounts of cash to the plan or could
accelerate the timing of required payments.
Third parties may claim that the Company is infringing upon their intellectual property, and the Company
could suffer significant litigation or licensing expenses or be prevented from selling products.
Although the Company does not believe that any of its products or services infringe upon the valid
intellectual property rights of third parties, the Company may be unaware of intellectual property rights of others
that may cover some of its technology, products, or services. Any litigation growing out of third-party patents or
other intellectual property claims could be costly and time-consuming and could divert the Company’s
management and key personnel from its business operations. The complexity of the technology involved and the
uncertainty of intellectual property litigation increase these risks. Resolution of claims of intellectual property
infringement might also require the Company to enter into costly license agreements. Likewise, the Company
may not be able to obtain license agreements on acceptable terms. The Company also may be subject to
significant damages or injunctions against development and sale of certain of its products. Further, the Company
often relies on licenses of third-party intellectual property for its businesses. The Company cannot ensure these
licenses will be available in the future on favorable terms or at all.
Third parties may infringe upon the Company’s intellectual property, and the Company may expend
significant resources enforcing its rights or suffer competitive injury.
The Company’s success depends in significant part on the competitive advantage it gains from its
proprietary technology and other valuable intellectual property assets. The Company relies on a combination of
patents, copyrights, trademarks and trade secrets protections, confidentiality provisions, and licensing
arrangements to establish and protect its intellectual property rights. If the Company fails to successfully enforce
its intellectual property rights, its competitive position could suffer, which could harm its operating results.
The Company may also be required to spend significant resources to monitor and police its intellectual
property rights. The Company may not be able to detect third-party infringements and its competitive position
may be harmed before the Company does so. In addition, competitors may design around the Company’s
technology or develop competing technologies. Furthermore, some intellectual property rights are licensed to
other companies, allowing them to compete with the Company using that intellectual property.
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