Cincinnati Bell 2015 Annual Report Download - page 136

Form 10-K Part I Cincinnati Bell Inc.
liabilities without the use of the Company’s cash resources. If the Company is unable for any reason to generate
sufficient taxable income to fully realize its deferred tax assets, or if the use of its net operating loss
carryforwards is limited by Internal Revenue Code Section 382 or similar state statute, the Company’s net
income, shareowners’ deficit and future cash flows would be adversely affected.
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
former executives. The Company also provides healthcare and group life insurance benefits for eligible retirees.
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. 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 $22 million of estimated aggregate cash contributions to its qualified pension plans for
the years 2016 to 2019. Additionally, the Company’s postretirement costs are adversely affected by increases in
medical and prescription drug costs. Further, if there are adverse changes to plan assets, or if medical and
prescription drug costs increase significantly, the Company could be required to contribute additional material
amounts of cash to the plans 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.
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 would 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 or services. 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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