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INTERDIGITAL, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.(Edgar Glimpses Via Acquire Media NewsEdge) OVERVIEW The following discussion should be read in conjunction with the unaudited, condensed consolidated financial statements and notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, in addition to our 2010 Form 10-K/A, other reports filed with the SEC and the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 - Forward-Looking Statements below. Please refer to the Glossary of Terms in our 2010 Form 10-K/A for a list and detailed descriptions of the various technical, industry and other defined terms that are used in this Quarterly Report on Form 10-Q. Exploration of Potential Strategic Alternatives On July 19, 2011, we announced that our Board of Directors has initiated a process to explore and evaluate potential strategic alternatives for the Company, which may include a sale or other transaction. There can be no assurance that this strategic review process will result in a transaction. We have not set a timetable for completion of the review process, and we do not intend to comment further regarding the review process unless a specific transaction is approved by the Board of Directors, the review process is concluded or it is otherwise determined that further disclosure is appropriate or required by law. Patent Licensing Patent licensing royalties of $68.6 million in second quarter 2011 decreased $8.4 million or 11% over first quarter 2011. This sequential decrease was primarily driven by a $4.5 million decrease in royalties from our per-unit customers, $2.8 million of which was due to a decrease in royalties from our Japanese per-unit customers. Our second quarter 2011 per-unit royalties from customers based in Japan accounted for $13.9 million of revenue and $9.2 million of cash receipts as compared to $16.7 million of revenue and $16.5 million of cash receipts in first quarter 2011. The remaining $1.7 million decrease in per-unit royalties was attributable to weaker sales from customers with concentrations in smartphones. Fixed fee revenue decreased $2.0 million due to the transition of an existing customer from a fixed fee agreement to a per-unit agreement. Past sales revenue decreased $1.9 million due to the first quarter 2011 resolution of an audit of an existing customer and signing of a new patent license agreement. Technology Solutions Technology solutions revenue in second quarter 2011 of $1.3 million decreased $0.2 million or 13% from first quarter 2011. The decrease was driven by a decrease in technology solutions royalties as a result of our ongoing arbitration proceeding related to one of our technology solutions agreements. Intellectual Property Enforcement Please see Note 4, "Litigation and Legal Proceedings," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full discussion of the following and other matters: Nokia, Huawei and ZTE U.S. International Trade Commission ("USITC" ) Proceeding and Related Delaware District Court Proceeding On July 26, 2011, InterDigital's wholly-owned subsidiaries InterDigital Communications, LLC, InterDigital Technology Corporation, and IPR Licensing, Inc. (collectively, the "Company," "InterDigital," "we," or "our" for the purposes of the discussion of this matter) filed a complaint with the USITC against Nokia Corporation and Nokia Inc. (collectively, "Nokia"), Huawei Technologies Co., Ltd. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) (collectively, "Huawei") and ZTE Corporation and ZTE (USA) Inc. (collectively, "ZTE" and together with Nokia and Huawei, "Respondents"), alleging that they engaged in unfair trade practices by making for importation into the United States, importing into the United States, and selling after importation into the United States, certain 3G wireless devices (including WCDMA and cdma2000 capable mobile phones, USB sticks, mobile hotspots, and tablets, and components of such devices) that infringe seven of InterDigital's U.S. patents (the "Asserted Patents"). The action also extends to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital's complaint with the USITC seeks an exclusion order that would bar from entry into the U.S. any infringing 3G wireless devices (and components) that are imported by or on behalf of Respondents, and also seeks a cease and desist order to bar further sales of infringing products that have already been imported into the United States. By statute, the USITC has thirty (30) days from the filing of the complaint to decide whether to formally institute an investigation. On the same date as our filing of the USITC action referenced above, we also filed a parallel action in the United States District Court for the District of Delaware ("Delaware District Court") alleging that Respondents' same 3G wireless devices infringe the same Asserted Patents identified in the USITC complaint. The Delaware complaint seeks a permanent injunction 17-------------------------------------------------------------------------------- Table of Contents and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement, and recovery of reasonable attorneys' fees and costs. If the USITC institutes the investigation referenced above, Respondents will have a statutory right (but not the obligation) to stay the Delaware District Court proceeding pending a final determination in the USITC. Nokia USITC Proceeding/Federal Circuit Appeal The United States Court of Appeals for the Federal Circuit has not yet issued a decision in our appeal of certain rulings by the USITC in connection with the USITC investigation initiated by us against Nokia in 2007. Comparability of Financial Results When comparing second quarter 2011 financial results against other periods, the following items should be taken into consideration: • Our second quarter 2011 revenue includes $0.4 million of past sales, primarily related to audits of existing customers. • Our second quarter 2011 other expense includes a charge of $0.3 million related to an impairment on our investments in other entities. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our 2010 Form 10-K/A. A discussion of our critical accounting policies, and the estimates related to them, are included in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2010 Form 10-K/A. There have been no material changes in our existing critical accounting policies from the disclosures included in our 2010 Form 10-K/A. Refer to Note 1, "Basis of Presentation," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for updates related to new accounting pronouncements. FINANCIAL POSITION, LIQUIDITY AND CAPITAL REQUIREMENTS Our primary sources of liquidity are cash, cash equivalents and short-term investments, as well as cash generated from operations. We have the ability to obtain additional liquidity through debt and equity financings. Based on our past performance and current expectations, we believe our available sources of funds, including cash, cash equivalents and short-term investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program and dividend program in the next twelve months. On April 4, 2011, we completed an offering of $230.0 million in aggregate principal amount of 2.50% Senior Convertible Notes due 2016 (the "Notes"). The net proceeds from the offering were approximately $222.0 million, after deducting the initial purchaser's discount and offering expenses. A portion of the net proceeds of the offering were used to fund the cost of the convertible note hedge transactions entered into in connection with the offering of the Notes. We expect to use the remaining net proceeds from the offering for general corporate purposes, which may include, among other things: acquisitions of intellectual property-related assets or businesses or securities in such businesses; capital expenditures; and working capital. Cash, cash equivalents and short-term investments At June 30, 2011 and December 31, 2010, we had the following amounts of cash, cash equivalents and short-term investments (in thousands): Increase / June 30, 2011 December 31, 2010 (Decrease) Cash and cash equivalents $ 379,589 $ 215,451 $ 164,138 Short-term investments 321,524 326,218 (4,694 ) Total Cash and cash equivalents and short-term investments $ 701,113 $ 541,669 $ 159,444 Our cash, cash equivalents and short-term investments increased $159.4 million in first half 2011. The increase was primarily due to the net proceeds of $222.0 million from the Notes discussed above and was partially offset by an aggregate $57.8 million used in our operating, investing, and financing activities. Cash flows from operations 18-------------------------------------------------------------------------------- Table of Contents We used or generated the following cash flows from our operating activities in first half 2011 and 2010 (in thousands): For the Six Months Ended June 30, Increase / 2011 2010 (Decrease) Cash flows (used in) provided by operating activities $ (31,257 ) $ 81,548 $ (112,805 ) Cash used in operating activities during first half 2011 was primarily due to cash operating expenses (operating expenses less depreciation of fixed assets, amortization of patents, non-cash compensation, accretion of debt discount, impairment of long-term investments, and amortization of financing costs) of $62.3 million, cash payments for short-term and long-term incentive compensation of $20.1 million, estimated federal tax payments of $19.0 million, and cash payments for foreign source withholding taxes of $4.8 million. These cash uses were partially offset by receipts of approximately $68.5 million related to patent license and technology solutions agreements. We received $16.0 million of fixed fee payments and $38.8 million of per-unit royalty payments, including past sales and prepayments, from existing customers and a new customer. Cash receipts from our technology solutions agreements totaled $13.7 million, primarily related to royalties and other license fees associated with our SlimChip modem core. Additionally, $6.5 million of activity in other working capital partially offset cash used in operating activities during second quarter 2011. The positive operating cash flow in first half 2010 arose principally from receipts of approximately $180.8 million related to patent license and technology solutions agreements. These receipts included the third of four $100.0 million installments from Samsung under our January 2009 license agreement. We also received $0.7 million of fixed fee payments and $70.1 million of per-unit royalty payments, including past sales and prepayments, from other existing and new customers. Cash receipts from our technology solutions agreements totaled $10.0 million, primarily related to royalties associated with our SlimChip modem core and new technology solutions agreements signed in first half 2010. These receipts were partially offset by cash operating expenses (operating expenses less depreciation of fixed assets, amortization of intangible assets, accretion of debt discount, impairment of long-term investments, and amortization of financing costs) of $66.1 million, cash payments for foreign source withholding taxes of $16.5 million related to the Samsung installment, an estimated federal tax payment of $16.0 million and $0.7 million in other working capital changes. Working capital We believe that working capital, adjusted to exclude cash, cash equivalents, short-term investments, current maturities of debt, and current deferred revenue provides additional information about non-cash assets and liabilities that might affect our near-term liquidity. Our adjusted working capital, a non-GAAP financial measure, reconciles to working capital, the most directly comparable GAAP financial measure, at June 30, 2011 and December 31, 2010 (in thousands) as follows: June 30, 2011 December 31, 2010 Increase / (Decrease) Current assets $ 793,451 $ 619,556 $ 173,895 Less: current liabilities 164,780 178,560 (13,780 ) Working capital 628,671 440,996 187,675 Subtract: Cash and cash equivalents 379,589 215,451 164,138 Short-term investments 321,524 326,218 (4,694 ) Add: Current portion of long-term debt 301 288 13 Current deferred revenue 132,962 134,804 (1,842 ) Adjusted working capital $ 60,821 $ 34,419 26,402 The $26.4 million increase in adjusted working capital is primarily attributable to the decrease in accrued compensation associated with first quarter 2011 payments against our short-term and long-term cash incentive obligations. Additionally, the expected utilization of our deferred tax assets resulted in an increase to our current deferred tax assets and contributed to the increase in adjusted working capital. Cash used in or provided by investing and financing activities 19-------------------------------------------------------------------------------- Table of Contents We used net cash in investing activities of $10.1 million and $84.4 million in first half 2011 and 2010, respectively. We purchased $4.9 million and $69.4 million of short-term marketable securities, net of sales, in first half 2011 and first half 2010, respectively. This decrease in net purchases was driven in part by lower cash receipts and higher cash needs for operating activities as discussed above. Purchases of property and equipment and technology licenses increased to $1.8 million in first half 2011 from $1.1 million in first half 2010 due to our investments in new and existing facilities. Investment costs associated with patents decreased to $13.1 million in first half 2011 from $13.9 million in first half 2010. Net cash provided by financing activities increased by $196.1 million primarily due to our issuance of the Notes and related transactions in second quarter 2011 as discussed above. This increase was partially offset by $9.1 million of dividend payments in first half 2011 that did not occur in first half half 2010 and lower levels of proceeds from stock option exercises. Other Our combined short-term and long-term deferred revenue balance at June 30, 2011 was approximately $383.5 million, a decrease of $83.5 million from December 31, 2010. We have no material obligations associated with such deferred revenue. In first half 2011, deferred revenue decreased $118.9 million due to the deferred revenue recognition of $68.4 million related to the amortization of fixed fee royalty payments and $50.5 million related to per-unit exhaustion of prepaid royalties (based upon royalty reports provided by our customers) and technology solutions agreements. These decreases in deferred revenue were partially offset by gross increases in deferred revenue of $35.5 million, primarily related to cash received or due from patent license and technology solutions customers. In addition, we are engaged in arbitration to determine whether royalties are owed on specific product classes pursuant to one of our technology solutions agreements. As of June 30, 2011 and December 31, 2011, we have deferred related revenue of $18.7 million and $8.6 million, respectively. Based on current license agreements, we expect the amortization of fixed fee royalty payments to reduce the June 30, 2011 deferred revenue balance of $383.5 million by $133.0 million over the next twelve months. Additional reductions to deferred revenue will be dependent upon the level of per-unit royalties our customers report against prepaid balances and work performed in conjunction with our technology solutions agreements. At June 30, 2011 and December 31, 2010, we had approximately 0.5 million and 0.7 million options outstanding, respectively, that had exercise prices less than the fair market value of our stock at each balance sheet date. These options would have generated $6.5 million and $9.4 million, respectively, of cash proceeds to the Company if they had been fully exercised as of such dates. RESULTS OF OPERATIONS Second Quarter 2011 Compared to Second Quarter 2010 Revenues The following table compares second quarter 2011 revenues to second quarter 2010 revenues (in millions): For the Three Months Ended June 30, 2011 2010 (Decrease)/ Increase Per-unit royalty revenue $ 35.0 $ 31.6 $ 3.4 11 % Fixed fee amortized royalty revenue 33.2 48.6 (15.4 ) (32 )% Current patent royalties 68.2 80.2 (12.0 ) (15 )% Past sales 0.4 4.9 (4.5 ) (92 )% Total patent licensing royalties 68.6 85.1 (16.5 ) (19 )% Technology solutions revenue 1.3 6.1 (4.8 ) (79 )% Total revenue $ 69.9 $ 91.2 $ (21.3 ) (23 )% The $21.3 million decrease in total revenue was primarily attributable to a $16.5 million decrease in patent licensing royalties. Of this decrease in patent licensing royalties, $15.4 million was attributable to a decrease in fixed fee amortized royalty revenue primarily driven by the expiration of the 3G portion of our patent license agreement with LG at the end of fourth quarter 2010. The remaining $1.1 million decrease in patent licensing royalties was driven by a decrease in past sales revenue as a result of the second quarter 2010 renewal of a patent license agreement. These decreases were partially offset by an increase in per-unit royalty revenue primarily due to strong sales from customers with concentrations in smartphones. More than half of the decrease in technology solutions revenue was due to the elimination of revenue under technology solutions 20-------------------------------------------------------------------------------- Table of Contents agreements that concluded in 2010. The remaining decrease was due to lower royalties recognized in connection with our SlimChip modem IP as a result of an ongoing arbitration proceeding related to one of our technology solutions agreements. In second quarter 2011 and second quarter 2010, 64% and 44% of our total revenues, respectively, were attributable to companies that individually accounted for 10% or more of these amounts. During second quarter 2011 and second quarter 2010, the following customers accounted for 10% or more of our total revenues: For the Three Months Ended June 30, 2011 2010 Samsung Electronics Company, Ltd. 37% 28% Research in Motion Limited 16% < 10% HTC Corporation 11% < 10% LG Electronics, Inc. - 16% Operating Expenses The following table summarizes the change in operating expenses by category (in millions): For the Three Months Ended June 30, 2011 2010 Increase/ (Decrease) Patent administration and licensing $ 16.8 $ 14.7 $ 2.1 14 % Development 15.8 16.4 (0.6 ) (4 )% Selling, general and administrative 7.5 7.0 0.5 7 % Total operating expenses $ 40.1 $ 38.1 $ 2.0 5 % Operating expenses increased 5% to $40.1 million in second quarter 2011 from $38.1 million in second quarter 2010. The $2.0 million increase was primarily due to net changes in the following items (in millions): Increase/ (Decrease) Personnel-related costs $ 2.1 Intellectual property enforcement 1.9 Non-patent litigation 0.7 Reserve for uncollectible accounts 0.5 Other 0.2 Consulting services (0.9 ) Sublicense fees (0.9 ) Long-term compensation (0.8 ) Commissions (0.8 )Total increase in operating expenses $ 2.0 Personnel related costs grew $2.1 million primarily due to increased personnel levels within our patents, licensing and advanced research groups. Intellectual property enforcement increased $1.9 million primarily due to costs associated with the recently filed ITC action. Non-patent litigation costs increased $0.7 million due to the previously discussed arbitration proceeding related to one of our technology solutions agreements. In second quarter 2010, we had a reduction of $0.5 million in our reserve for uncollectible accounts. This reduction resulted in a period over period increase in operating expense of $0.5 million. These increases were partially offset by an aggregate decrease of $1.8 million for consulting services and sublicense fees, primarily due to lower levels of patent due diligence and technology solutions agreements that concluded during 2010, respectively. The $0.8 million decrease in commission expense was primarily driven by the decline in revenue in second quarter 2011. The $0.8 million decrease in long-term compensation was primarily due to a second quarter 2010 charge of $0.9 million to increase our accrual rate for a cash incentive period under our long-term compensation program ("LTCP"). Patent Administration and Licensing Expense: The increase in patent administration and licensing expense primarily 21-------------------------------------------------------------------------------- Table of Contents resulted from the above-noted increases in intellectual property enforcement, personnel-related costs, and patent amortization. These increases were partially offset by a decrease in consulting services associated with patent due diligence. Development Expense: The decrease in development expense was primarily attributable to the decrease in long-term compensation costs and a decrease in sublicense fees related to our technology solutions agreements that concluded in 2010. These decreases were partially offset by increases in personnel-related costs. Selling, General and Administrative Expense: The increase in selling, general and administrative expense was primarily attributable to the above-noted increases in non-patent litigation and the reserve for uncollectible accounts. These increases were partially offset by a decrease in long-term compensation costs. Other (Expense) Income The following table compares second quarter 2011 other (expense) income to second quarter 2010 other (expense) income (in millions): For the Three Months Ended June 30, 2011 2010 (Decrease)/Increase Interest expense $ (3.6 ) $ (0.1 ) $ (3.5 ) 3,500 % Other (0.3 ) 0.4 (0.7 ) (175 )% Investment income 0.5 0.6 (0.1 ) (17 )% $ (3.4 ) $ 0.9 $ (4.3 ) (478 )% In second quarter 2011, other expense was $3.4 million as compared to other income of $0.9 million in second quarter 2010. The change between periods primarily resulted from the recognition of $3.6 million of interest expense associated with the Notes issued on April 4, 2011 and the recognition of $0.3 million for investment impairment in second quarter 2011. First Six Months 2011 Compared to First Six Months 2010 Revenues The following table compares first half 2011 revenues to first half 2010 revenues (in millions): For the Six Months Ended June 30, 2011 2010 (Decrease)/Increase Per-unit royalty revenue $ 74.4 $ 61.5 $ 12.9 21 % Fixed fee amortized royalty revenue 68.4 96.7 (28.3 ) (29 )% Current patent royalties 142.8 158.2 (15.4 ) (10 )% Past sales 2.7 40.7 (38.0 ) (93 )% Total patent licensing royalties 145.5 198.9 (53.4 ) (27 )% Technology solutions revenue 2.8 8.4 (5.6 ) (67 )% Total revenue $ 148.3 $ 207.3 $ (59.0 ) (28 )% The $59.0 million decrease in total revenue in first half 2011 was primarily attributable to a $53.4 million decrease in patent licensing royalties. Of this decrease in patent licensing royalties, $38.0 million was attributable to a decrease in past sales revenue. This decrease was due to the patent license agreement signed with Casio Hitachi Mobile Communications Co., Ltd. ("CHMC"), the resolution of a routine audit, and the renewal of a patent license agreement in first half 2010. The remaining $15.4 million decrease was attributable to a decrease in fixed fee amortized royalty revenue primarily driven by the expiration of the 3G portion of our patent license agreement with LG at the end of fourth quarter 2010, which was partially offset by an increase in per-unit royalty revenue due to strong sales from customers with concentrations in smartphones. More than half of the decrease in technology solutions revenue was due to the elimination of revenue under technology solutions agreements that concluded in 2010. The remaining decrease was due to lower royalties recognized in connection with our SlimChip modem IP as a result of the ongoing arbitration proceeding related to one of our technology solutions agreements. In first half 2011 and first half 2010, 61% and 55% of our total revenues, respectively, were attributable to companies that 22-------------------------------------------------------------------------------- Table of Contents individually accounted for 10% or more of these amounts. In first half 2011 and first half 2010, the following customers accounted for 10% or more of our total revenues: For the Six Months Ended June 30, 2011 2010 Samsung Electronics Company, Ltd. 35% 25% Research in Motion Limited 16% < 10% HTC Corporation 10% < 10% Casio Hitachi Mobile Communications Co., Ltd. - 16% LG Electronics, Inc. - 14% Operating Expenses The following table summarizes the change in operating expenses by category (in millions): For the Six Months Ended June 30, 2011 2010 Increase Patent administration and licensing $ 32.7 $ 32.5 $ 0.2 1 % Development 33.2 32.6 0.6 2 % Selling, general and administrative 15.3 14.5 0.8 6 % Total operating expenses $ 81.2 $ 79.6 $ 1.6 2 % Operating expenses increased 2% to $81.2 million in first half 2011 from $79.6 million in first half 2010. The $1.6 million increase was primarily due to net changes in the following items (in millions): Increase/ (Decrease) Personnel-related costs $ 3.4 Non-patent litigation 1.0 Depreciation and amortization 0.9 Consulting services 0.6 Reserve for uncollectible accounts 0.5 Other 0.3 Commissions (1.8 ) Long-term compensation (1.5 ) Sublicense fees (0.9 ) Intellectual property enforcement (0.9 ) Total increase in operating expenses $ 1.6 Personnel related costs grew $3.4 million primarily due to increased personnel levels within our patents, licensing and advanced research groups. Non-patent litigation costs increased $1.0 million primarily due to the previously discussed arbitration proceeding related to one of our technology solutions agreements. Depreciation and patent amortization increased $0.9 million due to higher levels of capitalized patent costs in recent years. In the aggregate, consulting services increased $0.6 million due to the initiation of new development projects in first half 2011, which were partially offset by lower levels of patent due diligence. In second quarter 2010, we had a reduction of $0.5 million in our reserve for uncollectible accounts. This reduction resulted in a period over period increase in operating expense of $0.5 million. The $1.8 million decrease in commission expense was primarily driven by the decline in revenue in first half 2011. The $1.5 million decrease in long-term compensation was primarily due to the first half 2010 charge of $1.8 million to increase our accrual rate for a cash incentive period under our LTCP covering January 1, 2008 through December 31, 2010. The decrease in sublicense fees related to our technology solutions agreements that concluded in 2010. Intellectual property enforcement decreased $0.9 million due to 23-------------------------------------------------------------------------------- Table of Contents lower levels of activity. Patent Administration and Licensing Expense: The increase in patent administration and licensing expense primarily resulted from the above-noted increase in personnel-related costs and patent amortization. These increases were partially offset by the above-discussed decreases in commissions, intellectual property enforcement, and patent due diligence. Development Expense: The increase in development expense was primarily attributable to the above-noted increases in personnel-related and consulting costs. These increases were partially offset by a decrease in long-term compensation and sublicense fees related to technology solutions agreements that concluded in 2010. Selling, General and Administrative Expense: The increase in selling, general and administrative expense was primarily attributable to the above-noted increase in non-patent litigation and the reserve for uncollectible accounts. These increases were partially offset by decreases in long-term compensation and consulting services associated with patent due diligence. Other (Expense) Income The following table compares first half 2011 other (expense) income to first half 2010 other (expense) income (in millions): For the Six Months Ended June 30, 2011 2010 (Decrease)/Increase Interest expense $ (3.6 ) $ (0.1 ) $ (3.5 ) 3,500 % Other (1.8 ) 0.4 (2.2 ) (550 )% Investment income 1.1 1.2 (0.1 ) (8 )% $ (4.3 ) $ 1.5 $ (5.8 ) (387 )% In first half 2011, other expense was $4.3 million as compared to other income of $1.5 million in first half 2010. The change between periods primarily resulted from the recognition of $3.6 million of interest expense associated with the Notes and the recognition of $1.6 million for investment impairment in first half 2011. Contractual Obligations On April 4, 2011, InterDigital entered into an indenture (the "Indenture"), dated as of April 4, 2011, by and between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, pursuant to which the $230.0 million in Notes were issued. The Notes bear interest at a rate of 2.50% per year, payable in cash on March 15 and September 15 of each year, commencing September 15, 2011. The Notes will mature on March 15, 2016, unless earlier converted or repurchased. For more information on the Notes, see Note 8, "Long-Term Debt," in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include certain information under the heading "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information regarding our current beliefs, plans and expectations, including without limitation the matters set forth below. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "forecast," variations of any such words or similar expressions are intended to identify such forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding: • The Company's exploration and evaluation of potential strategic alternatives; |