| LSI LOGIC CORP Item 1A Risk Factors |
| Some of these risks are endemic to the semiconductor industry and are the same or similar to those disclosed in our previous SEC filings, and some new risks may arise in the future |
| The reader should carefully consider all of these risks and other information in this Form 10-K before investing in us |
| The fact that certain risks are endemic to the high-technology industry does not lessen the significance of these risks |
| As a result of theses risks, our business, financial conditions or results of operations could be materially and adversely affected |
| This could cause the trading price of our common stock to decline, and stockholders might lose some or all of their investment |
| Please consider these risk factors when you read “forward-looking” statements elsewhere in this Form 10-K and in the documents incorporated herein by reference |
| Forward-looking statements are statements that relate to our expectations for future events and time periods |
| Generally, the words, “anticipate,” “expect,” “intend” and similar expressions identify forward-looking statements |
| Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements |
| General economic weakness and geopolitical factors may harm our operating results and financial condition |
| The semiconductor industry is cyclical in nature and is characterized by wide fluctuations in product supply and demand |
| In the past, the industry has experienced periods of rapid expansion of production capacity followed by periods of significant downturn |
| Even when the demand for our products remains constant, the availability of additional excess production capacity in the industry creates competitive pressures that can degrade pricing levels, which can reduce revenues |
| In addition, our results of operations are dependent on the global economy |
| Any geopolitical factors such as terrorist activities, armed conflict or global health conditions, which adversely affect the global economy, may adversely impact our operating results and financial condition |
| In addition, goodwill and other long-lived assets could be impacted by a decline in revenues because impairment is measured based upon estimates of future cash flows |
| These estimates include assumptions about future conditions within our company and industry |
| Our target markets are characterized by rapid technological change |
| The Semiconductor and Storage Systems segments in which we conduct business are characterized by rapid technological change, short product cycles and evolving industry standards |
| We believe our future success depends, in part, on our ability to improve on existing technologies and to develop and implement new ones in order to continue to reduce semiconductor chip size and improve product performance and manufacturing yields |
| We must also be able to adopt and implement emerging industry standards in a timely manner and to adapt products and processes to technological changes |
| If we are not able to implement new process technologies successfully or to achieve volume production of new products at acceptable yields, our operating results and financial condition may be adversely impacted |
| We operate in highly competitive markets |
| Our competitors include many large domestic and foreign companies that have substantially greater financial, technical and management resources than we do |
| Several major diversified electronics companies offer custom solutions and/or other standard products that are competitive with our product lines |
| Other competitors are specialized, rapidly growing companies that sell products into the same markets that we target |
| Some of our large customers may also design and manufacture products that compete with our products |
| There is no assurance that the price and performance of our products will be superior relative to the products of our competitors |
| As a result, we may experience a loss of competitive position that could result in lower prices, fewer customer orders, reduced revenues, reduced gross profit margins and loss of market share |
| We are dependent on a limited number of customers |
| A limited number of customers account for a substantial portion of our revenues |
| International Business Machines Corporation and Seagate Technology represented approximately 16prca and 11prca, respectively, of our total consolidated revenues for the year ended December 31, 2005 |
| 15 _________________________________________________________________ [49]Table of Contents Our operating results and financial condition could be significantly affected if: • we do not win new product designs from major existing customers; • major customers reduce or cancel their existing business with us; • major customers make significant changes in scheduled deliveries; or • there are declines in the prices of products that we sell to these customers |
| Our new products may not achieve market acceptance |
| We introduce many new products each year |
| We must continue to develop and introduce new products that compete effectively on the basis of price and performance and that satisfy customer requirements |
| Our cores and standard products are intended to be based upon industry standard functions, interfaces, and protocols so that they are useful in a wide variety of systems applications |
| Development of new products and cores often requires long-term forecasting of market trends, development and implementation of new or changing technologies and a substantial capital commitment |
| We cannot provide assurance that the cores or standard products that we select for investment of our financial and engineering resources will be developed or acquired in a timely manner or will enjoy market acceptance |
| The manufacturing facilities we operate are highly complex and require high fixed costs |
| Our only wafer fabrication site is located in Gresham, Oregon |
| On September 13, 2005, we announced our intention to adopt a fabless manufacturing strategy and to sell our wafer fabrication facility located in Gresham |
| We also own our Storage Systems segment manufacturing facility in Wichita, Kansas |
| The manufacture and introduction of our products is a complicated process |
| We continually strive to implement the latest process technologies and manufacture products in a clean and tightly controlled environment |
| We confront challenges in the manufacturing process that require us to: • maintain a competitive manufacturing cost structure; • implement the latest process technologies required to manufacture new products; • exercise stringent quality control measures to ensure high yields; • effectively manage the subcontractors engaged in the wafer fabrication, test and assembly of products; and • update equipment and facilities as required for leading edge production capabilities |
| We procure parts and raw materials from a limited number of domestic and foreign sources |
| We do not maintain an extensive inventory of parts and materials for manufacturing |
| We purchase a portion of our requirements for parts and raw materials from a limited number of sources, primarily from suppliers in Japan and their US subsidiaries, and we obtain other material inputs on a local basis |
| There is no assurance that, if we have difficulty in obtaining parts or materials in the future, alternative suppliers will be available, or that these suppliers will provide parts and materials in a timely manner or on favorable terms |
| As a result, we may be adversely affected by delays in product shipments |
| If we cannot obtain adequate materials for manufacture of our products or if such materials are not available at reasonable prices, there could be a material adverse impact on our operating results and financial condition |
| We utilize indirect channels of distribution over which we have limited control |
| Our financial results could be adversely affected if our relationship with resellers or distributors were to deteriorate or if the financial condition of these resellers or distributors were to decline |
| In addition, as our business grows, we may have an increased reliance on indirect channels of distribution |
| There can be no assurance that we will be successful in maintaining or expanding these indirect channels of distribution |
| This could result in the loss of certain sales opportunities |
| Furthermore, the partial reliance on indirect channels of distribution may reduce our visibility with respect to future business, thereby making it more difficult to accurately forecast orders |
| We engage in acquisitions and alliances giving rise to financial and technological risks |
| We are continually exploring strategic acquisitions that build upon our existing library of intellectual property, human capital and engineering talent, and increase our leadership position in the markets where we operate |
| We did 16 _________________________________________________________________ [50]Table of Contents not complete any material acquisitions or alliances in 2005 |
| We completed two acquisitions in 2004 |
| Mergers and acquisitions of high-technology companies bear inherent risks |
| No assurance can be given that our previous or future acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition |
| We must continue to manage any growth effectively |
| Failure to manage growth effectively and to integrate acquisitions could adversely affect our operating results and financial condition |
| In addition, we intend to continue to make investments in companies, products and technologies through strategic alliances |
| Investment activities often involve risks, including the need to acquire timely access to needed capital for investments related to alliances and to invest in companies and technologies that contribute to the growth of our business |
| On September 13, 2005, we announced our intention to sell our Gresham, Oregon manufacturing facility as part of our strategy to transition to a fabless semiconductor manufacturing model |
| Our new strategy includes the expansion of our working relationships with major foundry partners and the adoption of a roadmap leading to the production of advanced semiconductors utilizing 65-nanometer and below process technology on 300-mm or 12-inch wafers |
| We are actively marketing the facility and expect to complete a sale of the facility by September 13, 2006, one year from the date of the announcement |
| The price of our securities may be subject to wide fluctuations |
| Our stock has experienced substantial price volatility, particularly as a result of quarterly variations in results, the published expectations of analysts and announcements by our competitors and us |
| In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many technology companies and that have often been unrelated to the operating performance of such companies |
| The price of our securities may also be affected by general global, economic and market conditions |
| While we cannot predict the individual effect that these and other factors may have on the price of our securities, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time |
| These fluctuations in our stock price also impact the price of our outstanding convertible securities and the likelihood of the convertible securities being converted into cash or equity |
| If our stock price is below the conversion price of our convertible bonds on the date of maturity, they may not convert into equity and we may be required to redeem our outstanding convertible securities for cash |
| However, in the event they do not convert to equity, we believe that our current cash position and expected future operating cash flows will be adequate to meet these obligations as they mature |
| We may rely on capital and bank markets to provide liquidity |
| In order to finance strategic acquisitions, capital assets needed in our manufacturing facilities and other general corporate needs, we may rely on capital and bank markets to provide liquidity |
| As of December 31, 2005, we had convertible notes outstanding of approximately dlra622 million |
| We may need to seek additional equity or debt financing from time-to-time |
| Historically, we have been able to access capital and bank markets, but we may not be able to access these markets in the future or on terms that are acceptable to us |
| The availability of capital in these markets is affected by several factors, including geopolitical risk, the interest rate environment and the condition of the economy as a whole |
| Moreover, any future equity or equity-linked financing may dilute the equity ownership of existing shareholders |
| In addition, our own operating performance, capital structure and expected future performance impact our ability to raise capital |
| We believe that our current cash, cash equivalents, short-term investments and future cash provided by operations will be sufficient to fund our needs in the foreseeable future |
| This includes repaying our existing convertible debt when due |
| However, if our operating performance falls below expectations, we may need additional funds |
| We design and develop highly complex semiconductors and storage systems |
| As technology advances to smaller geometries, there are increases in the complexity, time and expense associated with the design, development and manufacture of semiconductors |
| We must incur substantial research and development costs to confirm the technical feasibility and commercial viability of any products that in the end may not be successful |
| Therefore, we cannot guarantee that any new semiconductor products will result in market acceptance |
| 17 _________________________________________________________________ [51]Table of Contents The high technology industry in which we operate is prone to intellectual property litigation |
| Our success is dependent in part on our technology and other proprietary rights, and we believe that there is value in the protection afforded by our patents, copyright rights, trademarks and other intellectual property rights |
| We have a program whereby we actively protect our intellectual property by acquiring patent and other intellectual property rights |
| However, the industry is characterized by rapidly changing technology and our future success depends primarily on the technical competence and creative skills of our personnel |
| As is typical in the high technology industry, from time to time we have received communications from other parties asserting that certain of our products, processes, technologies or information infringe upon their patent rights, copyrights, trademark rights or other intellectual property rights |
| We regularly evaluate such assertions |
| In light of industry practice, we believe, with respect to existing or future claims that any licenses or other rights that may be necessary may generally be obtained on commercially reasonable terms |
| Nevertheless, there is no assurance that licenses will be obtainable on acceptable terms or that a claim will not result in litigation or other administrative proceedings |
| Resolution of whether our product or intellectual property has infringed on valid rights held by others could have a material adverse effect on our results of operations or financial position and may require material changes in production processes and products |
| See “Legal Matters” in Note 12 (“Legal Matters”) of the Notes regarding current patent litigation |
| We may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position |
| Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property |
| We primarily rely on patent, copyright, trademark and trade secret laws, as well as nondisclosure agreements and other methods, to protect our proprietary technologies and processes |
| Despite our efforts to protect our proprietary technologies and processes, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies and processes |
| However, we cannot assure you that any additional patents will be issued |
| Even if a new patent is issued, the claims allowed may not be sufficiently broad to protect our technology |
| In addition, any of our existing or future patents may be challenged, invalidated or circumvented |
| As such, any rights granted under these patents may not provide us with meaningful protection |
| We may not have foreign patents or pending applications corresponding to our US patents and applications |
| Even if foreign patents are granted, effective enforcement in foreign countries may not be available |
| If our patents do not adequately protect our technology, our competitors may be able to offer products similar to ours |
| Our competitors may also be able to develop similar technology independently or design around our patents |
| Some or all of our patents have in the past been licensed and likely will in the future be licensed to certain of our competitors through cross-license agreements |
| Certain of our software (as well as that of our customers) may be derived from so-called “open source” software that is generally made available to the public by its authors and/or other third parties |
| Such open source software is often made available to us under licenses, such as the GNU General Public License, or GPL, which impose certain obligations on us in the event we were to distribute derivative works of the open source software |
| These obligations may require us to make source code for the derivative works available to the public, and/or license such derivative works under a particular type of license, rather than the forms of license customarily used to protect our intellectual property |
| While we believe we have complied with our obligations under the various applicable licenses for open source software, in the event the copyright holder of any open source software were to successfully establish in court that we had not complied with the terms of a license for a particular work, we could be required to release the source code of that work to the public and/or stop distribution of that work |
| With respect to our proprietary software, we generally license such software under terms that prohibit combining it with open source software as described above |
| Despite these restrictions, parties may combine our proprietary software with open source software without our authorization, in which case we might nonetheless be required to release the source code of our proprietary software |
| Our manufacturing facilities are subject to disruption |
| Operations at any of our primary manufacturing facilities may be disrupted for reasons beyond our control, including work stoppages, fire, earthquake, tornado, floods or other natural disasters, which could have a material adverse effect on our results of operation or financial position |
| 18 _________________________________________________________________ [52]Table of Contents We have announced our intention to sell our semiconductor fabrication facility and to become entirely dependent on independent foundry subcontractors to manufacture a portion of our current product; accordingly, any failure to secure and maintain sufficient foundry capacity could materially and adversely affect our business |
| Outside foundry subcontractors, located in Asia, manufacture a portion of our semiconductor devices in current production |
| On September 13, 2005, we announced our intention to adopt a fabless manufacturing strategy and to sell our wafer fabrication facility located in Gresham, Oregon |
| A fabless manufacturing strategy will make us completely dependent on foundry subcontractors upon the completion of the sale of the Gresham facility |
| Availability of foundry capacity has in the recent past been reduced due to strong demand |
| In addition, the occurrence of a public health emergency could further affect the production capabilities of our manufacturers by resulting in quarantines or closures |
| If we are unable to secure sufficient capacity at our existing foundries, or in the event of a quarantine or closure at any of these foundries, our revenues, cost of revenues and results of operations would be negatively impacted |
| If any of our foundries experiences a shortage in capacity, or suffers any damage to its facilities due to earthquakes or other natural disasters, experiences power outages, encounters financial difficulties or any other disruption of foundry capacity, we may need to qualify an alternative foundry in a timely manner |
| Even our current foundries need to have new manufacturing processes qualified if there is a disruption in an existing process |
| We typically require several months to qualify a new foundry or process before we can begin shipping products from it |
| If we cannot accomplish this qualification in a timely manner, we may experience a significant interruption in supply of the affected products |
| Because we rely on outside foundries with limited capacity, we face several significant risks, including: • a lack of guaranteed wafer supply and potential wafer shortages and higher wafer prices; • limited control over delivery schedules, quality assurance, manufacturing yields and production costs; and • the unavailability of, or potential delays in obtaining access to, key process technologies |
| In addition, the manufacture of integrated circuits is a highly complex and technologically demanding process |
| Although we work closely with our foundries to minimize the likelihood of reduced manufacturing yields, our foundries have from time to time experienced lower than anticipated manufacturing yields |
| This often occurs during the production of new products or the installation and start-up of new process technologies |
| Poor yields from our foundries could result in product shortages or delays in product shipments, which could seriously harm our relationships with our customers and materially and adversely affect our results of operations |
| The ability of each foundry to provide us with semiconductor devices is limited by its available capacity and existing obligations |
| Although we have entered into contractual commitments to supply specified levels of products to some of our customers, we do not have a long-term volume purchase agreement or a significant guaranteed level of production capacity with any of our foundries |
| Foundry capacity may not be available when we need it or at reasonable prices |
| Availability of foundry capacity has in the recent past been reduced from time to time due to strong demand |
| We place our orders on the basis of our customers’ purchase orders or our forecast of customer demand, and the foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice |
| It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with our main foundries, may induce our foundries to reallocate capacity to them |
| This reallocation could impair our ability to secure the supply of components that we need |
| Although we use a number of independent foundries to manufacture our semiconductor products, most of our components are not manufactured at more than one foundry at any given time, and our products typically are designed to be manufactured in a specific process at only one of these foundries |
| Accordingly, if one of our foundries is unable to provide us with components as needed, we could experience significant delays in securing sufficient supplies of those components |
| Also, our third party foundries typically migrate capacity to newer, state-of-the-art manufacturing processes on a regular basis, which may create capacity shortages for our products designed to be manufactured on an older process |
| We 19 _________________________________________________________________ [53]Table of Contents cannot assure you that any of our existing or new foundries will be able to produce integrated circuits with acceptable manufacturing yields, or that our foundries will be able to deliver enough semiconductor devices to us on a timely basis, or at reasonable prices |
| These and other related factors could impair our ability to meet our customers’ needs and have a material and adverse effect on our operating results |
| Although we may utilize new foundries for other products in the future, in using new foundries we will be subject to all of the risks described in the foregoing paragraphs with respect to our current foundries |
| We depend on third-party subcontractors to assemble, obtain packaging materials for, and test substantially all of our current semiconductor products |
| If we lose the services of any of our subcontractors or if these subcontractors are unable to attain sufficient packaging materials, shipments of our products may be disrupted, which could harm our customer relationships and adversely affect our revenues |
| Third-party subcontractors located in Asia assemble, obtain packaging materials for, and test substantially all of our current semiconductor products |
| Because we rely on third-party subcontractors to perform these functions, we cannot directly control our product delivery schedules and quality assurance |
| This lack of control has in the past resulted, and could in the future result, in product shortages or quality assurance problems that could delay shipments of our products or increase our manufacturing, assembly or testing costs |
| If our third-party subcontractors are unable to obtain sufficient packaging materials for our products in a timely manner, we may experience a significant product shortage or delay in product shipments, which could seriously harm our customer relationships and materially and adversely affect our net sales |
| If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of assembly or testing capacity, we may not be able to obtain alternative assembly and testing services in a timely manner |
| Due to the amount of time that it usually takes us to qualify assemblers and testers, we could experience significant delays in product shipments if we are required to find alternative assemblers or testers for our components |
| Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations |
| We are continuing to develop relationships with additional third-party subcontractors to assemble and test our products |
| However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above |
| We depend on third-party subcontractors to manufacture all of our current board products |
| Third-party subcontractors manufacture all of our current board products |
| Because we rely on third-party subcontractors to perform this function, we cannot directly control our product delivery schedules and quality assurance |
| This lack of control has in the past resulted, and could in the future result, in product shortages or quality assurance problems that could delay shipments of our products or increase our manufacturing, assembly or testing costs |
| If our third-party subcontractors are unable to manufacture our products in a timely manner, we may experience a significant product shortage or delay in product shipments, which could seriously harm our customer relationships and materially and adversely affect our net sales |
| If any of these subcontractors experiences capacity constraints or financial difficulties, suffers any damage to its facilities, experiences power outages or any other disruption of manufacturing capacity, we may not be able to obtain alternative manufacturing services in a timely manner |
| Due to the amount of time that it usually takes us to qualify manufacturers, we could experience significant delays in product shipments if we are required to find alternatives |
| Any problems that we may encounter with the delivery, quality or cost of our products could damage our customer relationships and materially and adversely affect our results of operations |
| However, even if we use these new subcontractors, we will continue to be subject to all of the risks described above |
| We are increasingly exposed to various legal, business, political and economic risks associated with our international operations |
| We currently obtain a substantial portion all of our manufacturing, and all of our assembly and testing services from suppliers located outside the United States |
| We also frequently ship products to our domestic customers’ international manufacturing divisions and subcontractors |
| We also undertake design and development activities in Canada, China, Dubai, Germany, India, Russia, Taiwan, and the United Kingdom |
| We intend to continue to expand our international business activities and to open other design and operational centers abroad |
| The recent war in Iraq and the lingering effects of terrorist attacks in 20 _________________________________________________________________ [54]Table of Contents the United States and abroad, the resulting heightened security and the increasing risk of extended international military conflicts may adversely impact our international sales and could make our international operations more expensive |
| International operations are subject to many other inherent risks, including but not limited to: • political, social and economic instability; • exposure to different legal standards, particularly with respect to intellectual property; • natural disasters and public health emergencies; • nationalization of business and blocking of cash flows; • trade and travel restrictions; • the imposition of governmental controls and restrictions; • burdens of complying with a variety of foreign laws; • import and export license requirements and restrictions of the United States and each other country in which we operate; • unexpected changes in regulatory requirements; • foreign technical standards; • changes in tariffs; • difficulties in staffing and managing international operations; • fluctuations in currency exchange rates; • difficulties in collecting receivables from foreign entities or delayed revenue recognition; and • potentially adverse tax consequences |
| Any of the factors described above may have a material adverse effect on our ability to increase or maintain our foreign sales |
| Additionally, public health emergencies may impact our operations, including, but not limited to, disruptions at our third-party manufacturers that are primarily located in Asia, reduced sales and increased supply chain costs |
| We are exposed to fluctuations in foreign currency exchange rates |
| We have some exposure to fluctuations in foreign currency exchange rates |
| We have international subsidiaries and distributors that operate and sell our products globally |
| We routinely hedge these exposures in an effort to minimize the impact of currency fluctuations |
| However, we may still be adversely affected by changes in foreign currency exchange rates or declining economic conditions in these countries |
| We must attract and retain key employees in a highly competitive environment |
| In May 2005, Abhijit Y Talwalkar joined us as President and Chief Executive Officer |
| Talwalkar succeeded Wilfred J Corrigan, whose status as an employee ceased as of May 2005 |
| On February 13, 2006, Mr |
| Corrigan notified the Company that he will not stand for reelection to the Company’s board of directors (the “Board”) at its next annual stockholder’s meeting to be held on May 11, 2006 |
| Corrigan currently serves as the chairman of the Board, and will continue to serve in that capacity through the end of his current term |
| The Board will elect a new chairperson at that time |
| Our employees are vital to our success and our key management, engineering and other employees are difficult to replace |
| We do not generally have employment contracts with our key employees |
| Despite the economic slowdown of the last few years, competition for certain key technical and engineering personnel remains intense |
| Our continued growth and future operating results will depend upon our ability to attract, hire and retain significant numbers of qualified employees |
| 21 _________________________________________________________________ [55]Table of Contents Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected fluctuations and affect our reported results of operations |
| Financial accounting standards in the United States are constantly under review and may be changed from time to time |
| Once implemented, these changes could result in material fluctuations in our financial results of operations and/or the way in which such results of operations are reported |
| Similarly, we are subject to taxation in the United States and a number of foreign jurisdictions |
| Rates of taxation, definitions of income, exclusions from income, and other tax policies are subject to change over time |
| Changes in tax laws in a jurisdiction in which we have reporting obligations could have a material impact on our results of operations |
| We expect that the adoption of Statement of Financial Accounting Standard Nodtta 123 (Revised 2004), entitled “Share-Based Payment” (“SFAS Nodtta 123R”), effective for the periods commencing after December 31, 2005, will have a significant impact on our reported results as described under “Recent Accounting Pronouncements |
| ” Because the factors that will affect compensation expense we incur due to the adoption of SFAS Nodtta 123R are unknown, the impact on our operating results at the point of adoption, or in the future, cannot be determined |
| Changes in these or other rules, or modifications to our current practices, may have a significant adverse effect on our reported operating results or in the way in which we conduct our business in the future |
| We face uncertainties related to the effectiveness of internal controls |
| Public companies in the United States are required to review their internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 |
| It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met |
| In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events |
| Because of these and other inherent limitations of control systems, there can be no assurance that any design will achieve its stated goal under all potential future conditions, regardless of how remote |
| Although our management has determined, and our independent public accounting firm has attested, that our internal controls were effective as of December 31, 2005, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future |
| A material weakness in our internal controls over financial reporting would require management and our independent public accounting firm to evaluate our internal controls as ineffective |
| If our internal controls over financial reporting are not considered adequate, we may experience a loss of public confidence, which could have an adverse effect on our business and our stock price |
| Internal control deficiencies or weaknesses that are not yet identified could emerge |
| Over time we may identify and correct deficiencies or weaknesses in our internal controls and, where and when appropriate, report on the identification and correction of these deficiencies or weaknesses |
| However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or weaknesses are identified |
| Deficiencies or weaknesses that are not yet identified could emerge and the identification and corrections of these deficiencies or weaknesses could have a material impact on the results of operations for the Company |