Investor Relations

About NutriSystem

Nutrisystem Inc
Sales agents and counselors are available 24 hours per day, seven days a week. Exercise of share-based instruments held by consultants, net of liability classification upon adoption of SFAS R. Principal Accounting Fees and Services. Identifiable Intangible Assets and Goodwill. Typically in the weight loss industry, revenue is strongest in the first calendar quarter and lowest in the fourth calendar quarter. The investment in Zero Water is accounted for using the equity method of accounting. Direct mail and telemarketing efforts complement our media advertising to reactivate lapsed customers and to upsell customers already on program.

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Positive 18 Negative 2 All. We believe this translates into higher customer satisfaction and more profit. Upsell and a la carte sales, including shakes and additional flexible options have continued to grow as more people are adding them to their orders.

We provide weight management products and services, including nutritionally balanced weight loss programs sold primarily online and over the telephone and multi-day kits and single items available at select retail locations.

Critical to increasing customer starts is our ability to deploy marketing dollars while maintaining marketing effectiveness. Reactivation revenue increased due to higher volumes building off of recent increases in new customer counts and a higher reactivation rate.

The credit facility provides for interest on borrowings at either a base rate or the London Inter-Bank Offered Rate, in each case plus an applicable margin and is also subject to an unused fee payable quarterly.

Substantially all of the marketing spending in promoted the direct business. If it does not load, please click the link below: Click a link below to view an exhibit that was filed with this report: Annual Number of times amended: Wednesday, February 28, 4: Wednesday, February 28, Fiscal Year ending: NTRI Positive and negative sentiment analysis is available in these filings: View our Sentiment Analysis Tour.

To succeed, online commerce and communications must provide a secure transmission of confidential information over public networks. Currently, a significant number of our customers authorize us to bill their credit cards directly for all fees charged by us.

We rely on third party software products to secure our credit card transactions. Although we have developed systems and processes that are designed to protect consumer information and prevent fraudulent payment transactions and other security breaches, failure to prevent or mitigate such fraud or breaches may adversely affect our operating results.

Table of Contents We may experience fluctuations in our operating results which may cause our stock price to be volatile. In view of the rapidly evolving nature of our business and the seasonality inherent in the weight loss industry, our operating results may fluctuate significantly. These fluctuations, as well as general economic and market conditions, may adversely affect the market price of our common stock and cause it to fluctuate significantly. Expansion into international markets may expose us to economic, political and social risks in the countries in which we operate.

In January , we expanded operations into Canada and expect to enter Japan, through a partner, by the end of This expansion may be costly as we will be required to divert management time and resources and it could require us to adapt our program to conform to local cultures.

We may not be successful in expanding into particular international markets and this expansion could expose our financial results to additional risks in the countries in which we operate.

Financial results could be adversely affected by changes in foreign currency rates, changes in worldwide economic conditions, changes in trade policies or tariffs and political unrest. Future acquisitions and the pursuit of new business opportunities present risks, and we may be unable to achieve the financial and strategic goals of any acquisition or new business.

A component of our growth strategy may be to acquire existing businesses or pursue other business opportunities in the market for weight management and fitness products and services. Even if we succeed in acquiring or building such businesses, we will face a number of risks and uncertainties, including: Table of Contents If we do not continue to receive referrals from existing customers, our customer acquisition cost may increase.

We rely on word-of-mouth advertising for a portion of our new customers. If our brand suffers or the number of customers acquired through referrals drops due to other circumstances, our costs associated with acquiring new customers and generating revenue will increase, which will, in turn, have an adverse affect on our profitability. If we cannot protect and enforce our trademarks and other intellectual property rights, our brand and our business will suffer.

We believe that our trademarks and other proprietary rights are important to our success and competitive position. The actions we take to establish and protect our trademarks and other proprietary rights may prove to be inadequate to prevent imitation of our products or services or to prevent others from claiming violations of their trademarks and proprietary rights by us.

In addition, others may develop similar trademarks or other intellectual property independently or assert rights in our trademarks and other proprietary rights. If so, third parties may seek to block or limit sales of our products and services based on allegations that use of some of our marks or other intellectual property constitutes a violation of their intellectual property rights. If we cannot protect our trademarks and other intellectual property rights, or if our trademarks or other intellectual property rights infringe upon the rights of third parties, the value of our brand may decline, which would adversely affect our results of operations.

We are dependent on our key executive officers for future success. Our future success depends to a significant degree on the skills, experience and efforts of our key executive officers. The loss of the services of any of these individuals could harm our business. We have not obtained life insurance on any key executive officers. If any key executive officers left us or were seriously injured and became unable to work, the business could be harmed.

Provisions in our certificate of incorporation may deter or delay an acquisition of us or prevent a change in control, even if an acquisition or a change of control would be beneficial to our stockholders. Provisions of our certificate of incorporation as amended may have the effect of deterring unsolicited takeovers or delaying or preventing a third party from acquiring control of us, even if our stockholders might otherwise receive a premium for their shares over then current market prices.

In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. Our certificate of incorporation as amended permits our Board of Directors to issue preferred stock without stockholder approval upon such terms as the Board of Directors may determine. The rights of the holders of our common stock will be junior to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of preferred stock could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of our outstanding common stock. The issuance of a substantial number of preferred shares could adversely affect the price of our common stock. Changes in consumer preferences could negatively impact our operating results.

Our program features pre-packaged food selections, which we believe offer convenience and value to our customers. Our continued success depends, to a large degree, upon the continued popularity of our program versus various other weight loss, weight management and fitness regimens, such as low carbohydrate diets, appetite suppressants and diets featured in the published media.

Changes in consumer tastes and preferences away from our pre-packaged food and support and counseling services, and any failure to provide innovative responses to these changes, may have a materially adverse impact on our business, financial condition, operating results, cash flows and prospects.

The weight loss industry is subject to adverse publicity, which could harm our business. The weight loss industry receives adverse publicity from time to time, and the occurrence of such publicity could harm us, even if the adverse publicity is not directly related to us. In the early s, our predecessor businesses were subject to extremely damaging adverse publicity relating to a large number of lawsuits alleging that the NutriSystem weight loss program in use at that time led to gall bladder disease.

This publicity was a factor that contributed to the bankruptcy of our predecessor businesses in The significant decline in business resulting from the fen-phen problems caused our predecessor businesses to close all of their company-owned weight loss centers. Our industry is subject to governmental regulation that could increase in severity and hurt results of operations. Other aspects of our industry are also subject to government regulation. If federal, state, local or foreign regulation of our industry increases for any reason, then we may be required to incur significant expenses, as well as modify our operations to comply with.

Table of Contents new regulatory requirements, which could harm our operating results. Additionally, remedies available in any potential administrative or regulatory actions may include requiring us to refund amounts paid by all affected customers or pay other damages, which could be substantial. The sale of ingested products involves product liability and other risks. Like other distributors of products that are ingested, we face an inherent risk of exposure to product liability claims if the use of our products results in illness or injury.

The foods that we resell in the U. Product liability claims could have a material adverse effect on our business as we do not have contractual indemnification rights against our other suppliers, and our other remedies against third parties and our existing insurance coverage may not be adequate. Distributors of weight loss food products, vitamins, nutritional supplements and minerals, including our predecessor businesses, have been named as defendants in product liability lawsuits from time to time.

The successful assertion or settlement of an uninsured claim, a significant number of insured claims or a claim exceeding the limits of our insurance coverage would harm us by adding costs to the business and by diverting the attention of senior management from the operation of the business. We may also be subject to claims that our products contain contaminants, are improperly labeled, include inadequate instructions as to use or inadequate warnings covering interactions with other substances.

Product liability litigation, even if not meritorious, is very expensive and could also entail adverse publicity for us and reduce our revenue.

In addition, the products we distribute, or certain components of those products, may be subject to product recalls or other deficiencies. Any negative publicity associated with these actions would adversely affect our brand and may result in decreased subscriptions and product sales and, as a result, lower revenues and profits.

We currently lease three locations in Horsham, Pennsylvania. One lease in Horsham expires in , the second in and the third in In November , a fourth lease in Horsham, Pennsylvania commenced with approximately 51, square feet of office space which we do not yet occupy. This lease expires in We have no lease obligations to any of our outsourced fulfillment providers; however, we are subject to minimum space commitments which we may reduce over a specified period of time.

Management believes the Horsham facilities, combined with the outsourced fulfillment capacity, are adequate to meet our needs for the foreseeable future. These actions were consolidated in December under docket number The Company believes the claims are without merit and intends to defend the litigation vigorously.

The Company received in November correspondence from an attorney purporting to represent a NutriSystem shareholder. Following receipt of additional correspondence from the same attorney in February , the Board of Directors was considering its response when the shareholder represented by this attorney commenced a derivative lawsuit in the Court of Common Pleas in the name of the Company against the entire Board of Directors at that time and certain current and former officers.

The parties have reached an agreement to stay this matter pending the disposition of the anticipated motion to dismiss the federal securities putative class action complaint. The Company believes that the claims are without merit and intends to defend the litigation vigorously. The complaint purported to bring claims on behalf of a class of current and former sales representatives who were compensated by NutriSystem pursuant to a commission-based compensation plan, rather than on an hourly basis.

Including Plaintiff, fifty-four former sales representatives and fourteen current sales representatives have opted-into this litigation.

The Company is also involved in other various claims and routine litigation matters. Prior to , we had not declared or paid any dividend since inception. Selected Consolidated Financial Data. Statement of Operations Data: Operating income from continuing operations. Equity and impairment loss.

Basic income per common share: Diluted income per common share: Weighted average shares outstanding: Cash, cash equivalents and marketable securities. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. The following discussion should be read in conjunction with the financial information included elsewhere in this Annual Report on Form K.

We provide weight management products and services. Our pre-packaged foods are sold to weight loss program participants directly primarily via the Internet and telephone, referred to as the direct channel and through QVC, a television shopping network. In and prior, substantially all of our revenue was generated domestically. Revenue consists primarily of food sales. We incur significant marketing expenditures to support our brand. We believe that our brand is continuing to gain awareness as we continue to increase our purchases of media in certain media channels.

New media channels are tested on a continual basis and we consider our media mix to be diverse. We market our weight management system through television, print, direct mail, Internet and public relations. We review and analyze a number of key operating and financial metrics to manage our business, including the number of new customers, revenue per customer, total revenues, marketing per new customer, operating margins and reactivation revenue. While proved to be very challenging from an economic perspective, we continued to focus on expanding our capabilities and strengthening our business.

During , we enhanced our ecommerce platform and redesigned our website, entered into the retail channel with our national launch in Costco and extended our business across borders into Canada.

We initiated a concerted effort to improve lifetime customer economics, length of stay and overall customer satisfaction. In the face of weakening new customer demand, it was crucial to improve each and every customer interaction with an eye toward customer success and business profitability, and in we have seen marked improvement in the key metrics of customer satisfaction, length of stay and revenue per customer.

We enhanced the customer experience with newly designed packaging, on-boarding efforts and customer service. We initiated new standards for order fulfillment and new operating procedures that delivered significant improvements in our overall order accuracy, which, we believe is a key driver of future customer satisfaction and re-order rates. In the face of increased food costs and margin pressure, we undertook a complete review of our entire supply chain management function.

That comprehensive review entailed detailed studies on product cost improvements, vendor productivity, warehouse efficiencies and key cost center opportunities. The results contributed to a reduction in overall product costs, delivery costs and packaging costs. This effort also resulted in improvement in our inventory management as we proceeded to reduce the number of outside distribution centers during Table of Contents We are continuing to see a challenging economic environment in Our key focus in is to continue to leverage our direct-to-consumer model and improve our efficiency.

We have already taken steps to reduce our overall operating costs, improve gross margins and limit capital spending to optimize cash generation in Our consolidated financial statements are prepared in accordance with U. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions. Management considers the following accounting estimates to be the most critical in preparing our consolidated financial statements.

These critical accounting estimates are discussed with our audit committee quarterly. One of our suppliers provides for rebates based on purchasing levels. We accrue this rebate as purchases are made at a rebate percentage determined based upon the estimated total purchases from the vendor. The estimated rebate is recorded as a reduction in the carrying value of purchased inventory and is reflected in the consolidated statement of operations when the associated inventory is sold.

A receivable is recorded for the estimate of the rebate earned. The actual rebate received from the vendors has closely matched the estimated rebate recorded and an adjustment is made to the estimate upon determination of the final rebate. Excess and Obsolete Inventory.

We continually assess the quantities of inventory on hand to identify excess or obsolete inventory and record a provision for the potential loss. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings and expectations of future taxable income and other relevant factors. Table of Contents We estimate the annual effective income tax rate at the beginning of each year and revise the estimate at each reporting period based on a number of factors including operating results, level of tax exempt interest income and sales by state, among other items.

Revenue and expenses consist of the following components: Cost of revenue consists primarily of the cost of the products sold, including compensation related to fulfillment, the costs of outside fulfillment, incoming and outgoing shipping costs, charge card fees and packing material. Cost of products sold includes products provided at no charge as part of promotions and the non-food materials provided with customer orders. Cost of revenue also includes the fees paid to independent distributors and sales commissions.

Marketing expense includes media, advertising production, marketing and promotional expenses and payroll-related expenses for personnel engaged in these activities. Direct-mail advertising costs are capitalized if the primary purpose was to elicit sales to customers who could be shown to have responded specifically to the advertising and results in probable future economic benefits. The capitalized costs are amortized to expense over the period during which the future benefits are expected to be received.

All other advertising costs are charged to expense as incurred. General and Administrative Expenses. General and administrative expenses consist of compensation for administrative, information technology, counselors excluding commissions and customer service personnel, share-based payment arrangements, facility expenses, website development costs, professional service fees and other general corporate expenses.

Equity and Impairment Loss. Equity and impairment loss consists of our share of the earnings or losses and estimated impairment losses of our equity interests. The investment in Zero Water is accounted for using the equity method of accounting. Interest income, net consists of interest income earned on cash balances and marketable securities, net of interest expense. We are subject to corporate level income taxes and record a provision for income taxes based on an estimated effective income tax rate for the year.

Overview of the Direct Channel. The decrease in is primarily attributable to the decline in customer starts due to the weakening economy. Revenue is primarily generated through customer starts and the customer ordering behavior, including length of time on our program and the diet program selection.

Critical to increasing customer starts is our ability to deploy marketing dollars while maintaining marketing effectiveness. Factors influencing our marketing effectiveness include the quality of the advertisements, promotional activity by our competitors, as well as the price and availability of appropriate media. Total costs and expenses.

Income from continuing operations before income taxes. Income from continuing operations. The revenue decrease resulted primarily from a decrease in customer starts due to the weakening economy. Gross margin as a percent of revenue decreased to The decrease in gross margin was primarily attributable to increased food and freight costs. We are continuing to experience pressure on gross margins but are focusing on these costs and are working on a full supply chain optimization effort. Marketing expense as a percent of revenue increased to During , we tested a number of different promotional offers to see what drove the best response rate in the current economy.

These tests, while impacting the marketing expense, will provide valuable insight into We successfully launched our new ecommerce platform during which increased the computer services expense after the development work on this website was completed. While we will continue to incur maintenance and support for our website, we believe the additional support needed for the initial launch will decline in Other expense primarily represents the realized gains and losses from currency.

The impairment charge primarily resulted from lower-than-expected operating results and projections of future performance coupled with the current non-strategic business direction of Zero Water and the overall general economic decline which indicated that the full carrying value of the equity investment was not recoverable.

Any excess cash in was invested in treasury and money market accounts as compared to marketable securities in Revenue growth in the first half of was strong yet the second half of was impacted by competitive and economic pressures. Table of Contents Other Expense. Other expense represents the realized gains and losses from currency. Contractual Obligations and Commercial Commitments.

Following is a summary of our contractual obligations. We have no other commercial commitments. Fulfillment and food purchase commitments. The Company has entered into supply agreements with various food vendors. Additionally, the Company has entered into an agreement with our outside fulfillment provider which contains minimum space requirements.

The Company anticipates it will meet all annual purchase commitments. In addition, we have no off-balance sheet financing arrangements. The capital and credit markets have become more volatile as a result of the recent global economic conditions. This has caused a general tightening in the credit markets, lower levels of liquidity and increased financing costs.

Despite these factors, we believe that available capital resources are sufficient to fund our working capital requirements, capital expenditures, income tax obligations, dividends and share repurchases for the foreseeable future.

Our principal sources of liquidity during this period were cash flow from operations. We currently have no off-balance sheet financing arrangements. The decrease in cash flow from operations is primarily attributable to lower net income offset by less of an inventory build during as compared to The repurchased shares have been retired.

We commenced our operational transition of NuKitchen during the fourth quarter of Table of Contents Seasonality. Typically in the weight loss industry, revenue is strongest in the first calendar quarter and lowest in the fourth calendar quarter. We believe our business experiences seasonality, driven by the predisposition of dieters to initiate a diet and the price and availability of certain media.

This seasonality can be seen in our results for and , however, in , third quarter revenue was higher than the first quarter due in part to favorable conditions in the market for certain media. Recently Issued Accounting Pronouncements. We believe that we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk instruments.

As such, a change in interest rates of 1 percentage point would not have a material impact on our operating results and cash flows. We have recently expanded internationally into Canada but believe we have low exposure to changes in foreign exchange rates at this point and have not yet hedged our operating exposure to foreign currency fluctuations. The information required by this Item is set forth on pages 38 through 60 hereto and is incorporated by reference herein. Disclosure Controls and Procedures.

Internal control over financial reporting includes policies and procedures that: Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. In our opinion, NutriSystem, Inc. None, as all information required in these schedules is included in the Notes to the Consolidated Financial Statements.

Notes to Consolidated Financial Statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NutriSystem, Inc. Cash and cash equivalents. Current assets of discontinued operation. Accrued payroll and related benefits. Other accrued expenses and current liabilities.

Current liabilities of discontinued operation. Accumulated other comprehensive income. The accompanying notes are an integral part of these consolidated financial statements. Net loss from discontinued operation. Exercise of stock options.

Purchase and retirement of common shares. Exercise of share-based instruments held by consultants, net of liability classification upon adoption of SFAS R. Tax benefit from stock option exercises. Foreign currency translation adjustment. Tax benefit from equity compensation awards.

Adjustments to reconcile net income to net cash provided by operating activities-. Loss on discontinued operation. Gain loss on disposal of fixed assets. Deferred income tax expense benefit. Changes in operating assets and liabilities. Other accrued expenses and liabilities. Net cash provided by operating activities of continuing operations. Net cash used in provided by operating activities of discontinued operation.

Net cash provided by operating activities. Purchases of marketable securities. Sales of marketable securities. Cash paid for acquisition of business. Proceeds from the sale of fixed assets.

Purchase of equity investment. Net cash used in provided by investing activities of continuing operations. Net cash provided by used in investing activities of discontinued operation. Net cash used in provided by investing activities. Borrowings under credit facility. Repayments of borrowings under credit facility. Tax benefit from equity compensation awards, net.

Repurchase and retirement of common stock. Net cash used in financing activities of continuing operations. Net cash used in financing activities of discontinued operation. Net cash used in financing activities. Effect of exchange rate changes on cash and cash equivalents. Nature of the Business.

This subsidiary has been treated as a discontinued operation. Accordingly, the operating results of this discontinued operation have been presented separately from continuing operations and are included in loss on discontinued operation, net of income tax in the accompanying consolidated statements of operations for all periods presented. The assets and liabilities have also been presented separately in the accompanying consolidated balance sheets see Note Presentation of Financial Statements.

All significant intercompany accounts and transactions have been eliminated. Cash, Cash Equivalents and Marketable Securities. Cash and cash equivalents include only securities having a maturity of three months or less at the time of purchase. These securities were redeemed at cost during The reset date is the date on which the underlying interest rate is revised based on a Dutch auction. Typically interest reset dates are every 35 days for these types of securities.

Inventories are valued at the lower of cost or market, with cost determined using the first-in, first-out FIFO method. Table of Contents Included in fixed assets is the capitalized cost of internal-use software and website development incurred during the application development stage. Capitalized costs are amortized using the straight-line method over the estimated useful life of the asset, which is generally two to five years.

Costs incurred related to planning or maintenance of internal-use software and website development are charged to expense as incurred. The investment in Zero Water is accounted for using the equity method of accounting and is classified as equity investment in the accompanying consolidated balance sheets.

The Company periodically reviews the carrying value of its investment in Zero Water to determine if circumstances exist indicating impairment to the carrying value of the investment.

This determination requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimates could impact the determination of whether an impairment exists.

To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property. Identifiable Intangible Assets and Goodwill. Valuation of Long-Lived and Intangible Assets. Assets and liabilities are translated into U. Table of Contents Revenue Recognition. Revenue from product sales is recognized when the earnings process is complete, which is upon transfer of title to the product.

This transfer occurs upon shipment. Recognition of revenue upon shipment meets the revenue recognition criteria in that persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and determinable and collection is reasonably assured. Customers may return unopened product within 30 days of purchase in order to receive a refund or credit.

Estimated returns are accrued at the time the sale is recognized and actual returns are tracked monthly. The Company reviews its history of actual versus estimated returns to ensure reserves are appropriate. Revenue from product sales includes amounts billed for shipping and handling and is presented net of returns and billed sales tax.

Shipping-related costs are included in cost of revenue in the accompanying consolidated statements of operations. The Company has supply arrangements with these vendors that require the Company to make minimum purchases. The Company accounts for this rebate on an accrual basis as purchases are made at a rebate percent determined based upon the estimated total purchases from the vendor.

The estimated rebate is recorded as a reduction in the carrying value of purchased inventory and is reflected in the consolidated statements of operations when the associated inventory is sold. Historically, the actual rebate received from the vendor has closely matched the estimated rebate recorded.

An adjustment is made to the estimate upon determination of the final rebate. The Company records rental costs, including costs related to fixed rent escalation clauses and rent holidays, on a straight-line basis over the lease term. Lease allowances utilized for space improvement are recorded as leasehold improvement assets and amortized over the shorter of the economic useful life of the asset or the lease term.

Tenant lease incentive allowances received are recorded as deferred rent and amortized as reductions to rent expense over the lease term.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.

FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. A tax benefit from an uncertain position was previously recognized if it was probable of being sustained.

Under FIN 48, the liability for unrecognized tax benefits is classified as noncurrent unless the liability is expected to be settled in cash within 12 months of the reporting date. The Company records accrued interest and penalties related to unrecognized tax benefits as part of interest expense. This statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

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