Acacia Research Corp (ACTG) 2009 Q4 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to Acacia Research fourth-quarter earnings release conference call.

At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

At the request of the Company, we will open the conference up for questions and answers after the presentation.

I will now turn the conference over to Mr.

Paul Ryan.

Please go ahead, sir.

Thank you for being with us today.

Today's call may involve what the SEC considers to be forward-looking statements.

Please refer to our 8-K, which was filed with the SEC today, for our forward-looking statement disclaimer.

In today's call, the terms "we," "us" and "our" refer to Acacia Research Corporation and its wholly owned and majority-owned operating subsidiaries.

All intellectual property acquisitions, development, licensing and enforcement activities are conducted solely by certain of Acacia Research Corporation's wholly and majority-owned operating subsidiaries.

With us today are Chip Harris, President of Acacia; Dooyong Lee, Executive Vice President; and Clayton Haynes, our Chief Financial Officer.

Today, I will give you an overview of the progress we're making in building the business, and Clayton Haynes will provide you with an analysis of our financial results.

We will then open up the call for questions.

Acacia Research revenues for 2009 were a record $67.3 million, up 40% compared to $48.2 million in 2008.

Acacia's subsidiaries partnered with patent owners and acquired control of 30 new patent portfolios during 2009 for future licensing.

We ended the year with over 138 patent portfolios.

We began generating revenue from 12 new licensing programs in 2009 and have now generated revenues from 60 different licensing programs.

Acacia's fourth-quarter revenues were $19.9 million, our second-highest revenue quarter to date, compared to $18.3 million in the year-ago period.

During the fourth quarter, Acacia generated revenues from 32 new licensing agreements, covering 21 different technologies, including initial revenues from four new licensing programs.

Cash and investments increased during the quarter by $8.6 million to $53.9 million at the end of the year.

Acacia's net loss decreased $11.3 million in 2009 compared to $13.8 million in the prior year.

Noncash charges were $11.7 million compared to $13.4 million in the prior year.

With a significantly increased level of business activity in 2009, we were able to keep our MG&A expenses at the same level as the prior year.

We did increase our litigation- and licensing-related expenses, which we view as an investment in generating future revenues.

We were also able to slightly improve our gross operating margins during the year.

During 2009, two of our subsidiaries received jury verdicts in trials.

Our Creative Internet Advertising subsidiary received a favorable jury verdict against Yahoo!

and has received a $12.4 million final judgment, including enhanced damages for willful infringement and an award of postverdict ongoing royalty rate of 23%.

We have not recognized any revenue from this court award and are awaiting the likely appeal by Yahoo!.

Our DNT subsidiary received an unfavorable jury verdict in its trial, and we are considering an appeal once the posttrial briefing has been completed.

We began 2010 with the largest number of licensing opportunities in our history.

We expect continued growth in new licensing programs and an expansion of many of our current licensing programs during the year.

Our successful track record of completing 740 licensing agreements covering 60 different technologies is continuing to generate interest from technology companies, universities and research centers wanting to partner with us and have us take over the licensing of their patented technologies.

We have also begun to expand our patent licensing business by partnering with large companies for the first time.

We have entered into six recent agreements covering patents issued to major technology companies.

We expect this will become an increasingly important part of our business as large companies look to monetize their patent assets.

With that, I would like to turn the call over to our Chief Financial Officer, Clayton Haynes.

Thank you, Paul, and thank you to everyone joining us for today's fourth-quarter and year-end 2009 earnings conference call.

As indicated in today's earnings press release, on a consolidated basis, fourth-quarter 2009 license fee revenues totaled $19,858,000 as compared to $18,267,000 in the fourth quarter of 2008.

Fourth-quarter 2009 revenues included license fees from 32 new licensing agreements covering 21 of our technology licensing programs as compared to 20 new licensing agreements covering 15 of our technology licensing programs in the fourth quarter of 2008.

Fourth-quarter 2009 revenues included initial license fee revenues for our multidimensional database compression technology, document generation technology, Internet radio advertising technology and virtual server technology.

For a summary of additional technology licensing programs generating revenues during the fourth quarter of 2009, please refer to today's press release and 8-K filed with the SEC.

Currently, on a consolidated basis, our operating subsidiaries have generated revenues from 60 of our technology licensing programs.

License fee revenues continue to fluctuate from period to period based on the various factors discussed on previous earnings conference calls and in our periodic filings with the SEC.

Consolidated trailing 12-month revenues totaled $67.3 million as of December 31, 2009, as compared to $65.7 million at September 30, 2009, $63.4 million as of June 30, 2009, $56.1 million as of March 31, 2009, and $48.2 million as of December 31, 2008.

While I am discussing revenues for the quarter, I would like to briefly discuss a change in accounting policy that was made during the fourth quarter of 2009.

Effective October 1, 2009, Acacia elected to change its method of accounting for its term license agreements to recognize revenue when delivery of a license has occurred, which is typically at the time of execution of the related license agreement or upon receipt of the applicable annual upfront renewal license fee payment and when all other revenue recognition criteria have been met.

Prior to the change in method of accounting, license fees for term license agreements were deferred and amortized to revenue on a straight-line basis over the applicable contractual license term.

The new method was adopted as it provides a consistent approach to accounting for all of our license arrangements with similar significant terms and conditions and more closely reflects the culmination of the earnings process associated with these revenue arrangements.

We have requested and will receive a preferability letter from our independent registered public accounting firm, Grant Thornton, stating that the change in accounting is preferable, given the nature of our term license agreements.

In accordance with Item 601B of Regulation SK, we expect to file Grant Thornton's preferability letter as an exhibit to our 2009 Annual Report on Form 10-K.

The change in accounting was accounted for through retrospective application of the new accounting policy as of January 1, 2009.

The effect of applying the new accounting policy to term licenses in periods prior to fiscal 2009 was not material.

Accordingly, our consolidated financial statements for years ending prior to January 1, 2009, have not been retroactively adjusted for this change in accounting policy.

A table detailing the effect of the change in accounting policy on our consolidated financial statement line items for the first, second and third quarters of 2009 is included in our earnings press release and 8-K filed with the SEC earlier today.

Moving on with a summary of results for the fourth quarter of 2009, our average margin, defined as gross license fees less inventor royalties and payments to noncontrolling interests and contingent legal fees for the portfolios generating revenues during the period, was approximately 42% for the fourth quarter of 2009 as compared to 43% for the fourth quarter of 2008.

As a reminder, you will need to include the net income attributable to noncontrolling interests in operating subsidiaries line item in the income statement to compute the average gross margin for the three and 12 months ended December 31, 2009.

Net income attributable to noncontrolling interests in operating subsidiaries represents a portion of net proceeds from the licensing and enforcement activities of one of our majority-owned operating subsidiaries that are distributable to the operating subsidiary's noncontrolling interest holders.

Average margins continue to fluctuate period to period based on the mix of patent portfolios that generate revenues each period and the related economics associated with the underlying inventor agreements and contingent legal fee arrangements, if any.

For the fourth quarter of 2009, Acacia Research reported a GAAP net loss from operations of $4.7 million or $0.15 a share versus a loss of $1.8 million or $0.06 a share in the fourth quarter of 2008, as illustrated in today's press release and related 8-K filed with the SEC.

Excluding the impact of noncash patent amortization charges and noncash stock compensation charges totaling $2.8 million, we reported a fourth-quarter 2009 net loss of $1.9 million compared to net income of $2.1 million, excluding noncash charges of $4 million, for the fourth quarter of 2008.

Inventor royalties expense and payments to noncontrolling interests for the fourth quarter of 2009 totaled $6.1 million as compared to $6.4 million in the prior-year period.

Contingent legal fees for the fourth quarter of 2009 were $5.4 million as compared to $3.9 million in the prior-year period.

In the aggregate, inventor royalties, noncontrolling interests in operating subsidiaries and contingent legal fees expense on a combined basis increased 12% during the fourth quarter of 2009 as compared to the fourth quarter of 2008, consistent with the 9% increase in license fee revenues recognized for the same periods.

Contingent legal fees expenses increased 38% during the fourth quarter of 2009 as compared to the fourth quarter of 2008, due to certain patent portfolios with lower contingent fee rates generating revenues during the fourth quarter of 2008 as compared to the patent portfolios generating revenues in the fourth quarter of 2009.

In the aggregate, inventor royalties and noncontrolling interests in operating subsidiaries decreased 5% during the fourth quarter of 2009 as compared to the fourth quarter of 2008, due to certain patent portfolios with lower royalty rates generating revenues during the fourth quarter of 2009 as compared to the patent portfolios generating revenues in the comparable 2008 period.

Fourth-quarter 2009 marketing, general and administrative expenses, including noncash stock compensation, increased to $5,235,000 from [four hundred, eight hundred and twenty-eight thousand] in the comparable 2008 period.

Excluding the impact of the decrease in noncash stock compensation, marketing, general and administrative expenses increased $554,000 in the fourth quarter of 2009 as compared to the prior-year period, primarily due to an increase in personnel-related costs and an increase in corporate, general and administrative costs.

Fourth-quarter 2009 litigation and licensing expenses were $5,637,000 versus $2,234,000 in the comparable 2008 period.

Litigation and licensing expenses include patent-related prosecution and enforcement costs incurred by outside patent attorneys engaged on an hourly basis and the out-of-pocket expenses incurred by law firms engaged on a contingent fee basis.

Litigation and licensing expenses also includes licensing and enforcement-related third-party patent research, development, consulting and other costs incurred in connection with the licensing and enforcement of our patent portfolios.

Litigation and licensing expenses fluctuate from period to period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and the timing of the commencement of new licensing and enforcement programs in each period.

The increase in litigation and licensing expenses is due to an increase in litigation and licensing support-related out-of-pocket expenses, third-party technical consulting expenses, professional expert expenses, and other litigation support and administrative costs incurred in connection with our investment in certain of our licensing and enforcement programs that went to trial and concluded in 2009, licensing and enforcement programs with trial dates scheduled for 2010, and a net increase in costs related to new licensing and enforcement programs commenced since the end of the prior-year period.

We expect litigation and licensing expenses to continue to fluctuate period to period in connection with upcoming scheduled trial dates and our current and future patent acquisition, development, licensing and enforcement activities.

Business development-related research, consulting and other expenses for the fourth quarter of 2009 were $516,000 as compared to $221,000 in the fourth quarter of 2008.

These costs fluctuate period to period based on business development-related activities in each period.

Patent portfolio acquisition costs for the fourth quarter of 2009 totaled $463,000 as compared to $381,000 during the comparable 2008 period.

During the fourth quarter of 2009, our operating subsidiaries acquired a total of five additional patent portfolios with applications in the micro-electro-mechanical, or MEMs, technology area; digital signal processing architectural technology area; software installation technology area; and distributed data management and synchronization technology area.

Next, I would like to provide a brief summary of the results for the full fiscal year ended December 31, 2009.

As Paul indicated, fiscal 2009 license fee revenues were $67.3 million as compared to $48.2 million in 2008.

2009 revenues included license fees from 117 new licensing agreements covering 30 of our technology licensing programs, including additional license fee revenues from 12 technology licensing programs.

Our average margin for 2009 was approximately 45% as compared to 43% for 2008.

Inventor royalties expenses for 2009 and 2008 were $15,673,000 and $14,995,000, respectively.

In addition, in 2009, net income attributable to noncontrolling interests in operating subsidiaries totaled $5,657,000.

Contingent legal fees expenses for 2009 and 2008 were $15,945,000 and $12,429,000, respectively.

In the aggregate, inventor royalties, noncontrolling interests in operating subsidiaries and contingent legal fees expense on a combined basis increased 36% during 2009 as compared to 2008, consistent with the 40% increase in license fee revenues recognized for the same period.

We reported a fiscal 2009 GAAP net loss from continuing operations of $11.3 million or $0.38 a share versus $13.8 million or $0.47 a share in 2008, as illustrated in our comparative income statements provided in today's press release and related 8-K filed with the SEC.

Excluding the impact of noncash patent amortization charges and noncash stock competition charges totaling $11.7 million, results from operations for 2009 were approximately breakeven.

Excluding noncash charges of $13.4 million in 2008, 2008 results from operations were also approximately breakeven.

Marketing, general and administrative expenses for 2009, including noncash stock compensation charges, decreased to $21,070,000 from $21,130,000 in the comparable 2008 period.

Excluding the impact of the decrease in noncash stock compensation charges, marketing, general and administrative expenses remained relatively flat year to year.

Litigation and licensing expenses for 2009 were $14,055,000 versus $6,900,000 in 2008.

As mentioned earlier, litigation and licensing expenses fluctuate from period to period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and the timing of the commencement of new licensing and enforcement programs in each period.

The increase in litigation and licensing expenses in 2009 versus 2008 is due to an increase in litigation and litigation support-related out-of-pocket expenses, third-party technical consulting expenses, professional expert expenses and other litigation, support and administrative costs incurred in connection with our investment in certain of our licensing and enforcement programs that went to trial and concluded in 2009, licensing and enforcement programs with trial dates scheduled for 2010, and a net increase in costs related to new licensing and enforcement programs commenced since the end of the prior-year period.

Looking forward, for fiscal 2010 we expect MG&A, excluding noncash stock compensation charges, to be in the range of $14 million to $14.5 million.

For fiscal 2010, based on the number of cases we have outstanding and consideration of which of these cases may or are likely to settle, and given that a significant portion of costs related to these cases were incurred and expensed during mid- to late 2009, we estimate that patent-related litigation and licensing expenses incurred for 2010 will be less than the $14 million of expenses incurred during 2009.

We will continue to assess our expectation with respect to the level of litigation and licensing costs for 2010 and will provide you with quarterly updates to these expectations on future earnings conference calls.

Moving on to a summary of our financial position as of the end of 2009, total assets were $78.3 million as of December 31, 2009, compared to $73.1 million as of December 31, 2008.

Cash and cash equivalents and investments totaled $53.9 million as of December 31, 2009, compared to $51.5 million as of December 31, 2008.

Net cash inflows from operations, including payments to noncontrolling interests, for the fourth quarter of 2009 totaled $9.2 million versus cash inflows of $6.8 million for the fourth quarter of 2008.

Net cash inflows from operations, again, including payments to noncontrolling interests, for 2009 totaled $13 million versus net cash inflows from operations of $2.6 million for 2008.

Net cash inflows for the current quarter and full year reflect the impact of the timing of cash receipts from licensees and payments to inventors, contingent law firms and vendors period to period.

Accounts receivable from licensees totaled $5.1 million at December 31, 2009, compared to $7.4 million as of December 31, 2008.

Accrued expenses, including accrued inventor royalties and contingent legal fees, totaled $20.4 million at December 31, 2009, compared to $14 million at December 31, 2008.

This concludes our summary of the results for the fourth quarter of 2009 and the year ended December 31, 2009.

Again, I thank you all for joining us for today's earnings conference call, and I will now turn the call back over to Mr.

Paul Ryan.

Thanks, Clayton.

And operator, can you open up the call for questions, please?

(Operator Instructions).

Jonathan Skeels, Davenport.

A couple quick questions.

First, on the accounting change, there were only two term licenses signed in 2009, correct?

The significant term license -- yes, there certainly were two significant term licenses that were signed during 2009.

On one of our portfolios, we do have a fair amount of additional term licenses, but those would not be deemed to be significant term licenses.

Okay.

And then, next, I guess on the Oracle agreements that were signed toward the end of the quarter, I guess that was kind of the first time you've signed multiple agreements with one licensee at one time.

Is this something we should see more of going forward?

And are you seeing companies now looking to settle multiple suits at one time as opposed to maybe handling them more on a case-by-case basis in the past?

Can you just talk about that?

This is Paul.

I expect going forward that probably we will do a number of deals like that, based on discussions we're currently having with companies.

As we've scaled the business, obviously the more portfolios we have and the more matters that relate to certain companies, I think that increases that potential.

A couple of years ago, when we only had one or two licensing programs that may affect a company, it was less likely.

Now that we, in some cases where we have seven, eight, nine portfolios, it's much more likely that we will probably achieve multiple settlements simultaneously or within a confined timeframe with companies.

So, yes, I think that probably will be an increasing trend.

And then I guess also kind of on that point, the licenses you signed with Microsoft early this year, one of them was settled fairly quickly from when you had originally acquired the portfolio.

I think it was a little less than a year.

Can you talk about whether or not you are seeing time to generating first revenue improving across the board, or do you expect, I guess, to see that time to first revenue improve going forward?

Well, it depends on the portfolio.

Certainly I think when we're settling multiple matters with an individual company, it's probably going to be more likely in the future that some of those earlier-stage portfolios may get settled at the same time.

I think there is a growing dialogue between our licensing people and some of the people at the companies that we're licensing that will probably facilitate that.

Okay.

And then one more, and I will let someone else on.

You added 30 new portfolios during the year.

I think that is up from 20 new portfolios in 2008.

Can you talk about your expectations for 2010 and whether or not we should kind of -- whether or not you think, I guess, that number will continue to kind of accelerate going forward?

Yes, I would think if anything, it would probably be above that level going forward.

We're seeing an increased level of activity.

So, certainly, if it changes, it would probably be to the plus side.

Okay, great.

Thank you.

(Operator Instructions).

Mark Argento, Craig-Hallum Capital.

Congratulations on a nice quarter.

A few questions around kind of the size and scope of some of the new IP that you're bringing into the Company.

I know in the press release here, you talk about the shift from smaller inventors to kind of midsize and now some larger tech companies in particular.

The one that you allude to in the press release here today, is that the same one that you guys mentioned earlier in a press release, the Asian consumer electronics guy, or is this incremental to that announcement?

Well, I think what we put in the press releases is there's been six recent licensing agreements that cover patents that were invented by major technology companies.

So it's not a singular one.

But certainly some of the announcements we've made recently for much larger portfolios -- I think one of them was 90-plus patents and applications, and another was 50-plus -- yes, there's definitely an increasing appetite for large technology companies to generate a return off their R&D.

And I think they've seeing companies like IBM and QUALCOMM generate huge returns, and I think now there's a growing number of technology companies who want to achieve the same kind of returns for their shareholders.

Fortunately, with our track record, we're an ideal outsource patent licensing company for them to go to.

So I think it will be an additional business.

We will -- our core business certainly has been the small companies and individual inventors and universities and research centers.

So certainly this is not to replace that.

But in addition to that, I think it will become an increasingly sizable portion of our business.

And many of these portfolios are much deeper around core technologies that these companies have developed.

So, hopefully, it may make it a little easier on the licensing side as well, given the depth of the portfolios.

Great.

And in terms of activities in some of your competitors or collaborators and the buying clubs out there, how do you see your relationship relative to the buying clubs?

And is that ultimately a potential source of business for you guys going forward as well?

Well, as the asset class continues to emerge, there's more business models building around it.

And certainly, as you're aware, we have done transactions with various buying clubs and we will continue to do so if economically it makes sense for us and our IP partners.

And there's certainly, I would expect, going to be many cases where that will make sense.

And so we -- we're in the business of licensing IP.

And to the degree there are new entities out there that are in the businesses of wanting licenses to IP, we want work with them.

So we think it's a very helpful trend.

And I think there may be opportunities to, alluding to the earlier question, where you could get multiple deals done with multiple companies simultaneously, and particularly on maybe even earlier-stage portfolios.

We, obviously as a public company, we're quite visible.

The buying clubs and other entities are now monitoring our press releases relative to portfolios we're bringing in.

And quite frankly, we're getting overtures on those at much earlier stages now, where companies individually and buying clubs are coming to us earlier, wanting to begin to negotiate prior to litigation, which -- that would be helpful, because obviously it would shorten time to money.

Sure, that's an interesting trend.

In terms of your -- I know you guys reported some capital in 2009 of about $8 million or $9 million; I don't have the exact number.

But going forward, do you see that number going up, staying the same?

What are your thoughts in terms of capital deployment for better economics?

It will probably stay about the same.

Actually, we start with some companies where we would like to deploy some more capital.

Once we get interested in a portfolio, I think a lot of companies then gear toward wanting less of our capital and a higher percentage on the back end, quite frankly.

Sometimes your success indicates -- if we get interested in a portfolio, then oftentimes the negotiation is counterintuitive.

Companies will want to take less cash up front and have a bigger back end.

So, basically, our normal deal is 50-50.

If we can use capital to buy down points and if the other side wants capital, we're more than happy to supply it if we think it's accretive to our shareholders.

So certainly there will be cases where we will do that, but I don't think it will probably be out of the range of what we're doing currently.

Sure.

And any updates on the calendar for 2010, the court calendar?

Any more visibility into some of the key cases?

I know that United Water location-based services -- any visibility there in terms of when we could potentially see some court action there?

Well, the date's obviously based on -- motions move around quickly.

I think maybe on a separate call, as an analyst, we can try to give you some guidance and some updates.

But we're kind of hesitant because of the frequency of motions outstanding.

Certainly, we've got a couple of cases that are near term that look like they may go to trial, if not settled, in April, which is the Google case on performance pricing, and then we've got another case with Red Hat and Novell, basically, which covers the original Xerox graphic user interface patents.

So those are kind of the two nearest term, but there's some motions right now and some discussion, so it will remain to be seen whether they get settled or go to trial.

Those are the two nearest in.

But for a complete calendar, we can talk later today and you can kind of go over it and do that, because it's going to be time-consuming.

Great.

I'll hop back in the queue.

Thanks, guys.

Bennett Notman, Wisco.

I guess first one for Clayton.

Can you talk about maybe what the net impact of the accounting change was on the fourth quarter of 2009?

Sure.

Because the approach for applying the change in accounting was basically retroactive as of January 1, there was no net impact on the fourth quarter.

Basically, what happened, if you recall back to the first-quarter and the third-quarter conference call, we had a sizable increase in deferred revenues related to some term licenses that we had executed during those timeframes.

And basically, the impact of the accounting change during 2009 was basically to push back those revenues to the first quarter and basically the third quarter of 2009, hence no significant impact in the fourth quarter of 2009.

If you take a look at the table that was included in the press release today, it will show the specific impact on all of our financial statement line items for first quarter, second quarter, third quarter of 2009.

But all the revenues generated, the $19.9 million in the fourth quarter, was all revenue generated in that quarter.

There wasn't any --

Correct.

There was no impact of the change in accounting in the fourth quarter.

Does that answer your question, Bennett?

Yes.

And I guess I was sort of thinking that had you not made the change, the fourth quarter might have been $1 million or $2 million higher just because of the allocations that they would have got from those prior term licenses that would have fallen in the fourth quarter.

Yes, there would have been some moneys that would have come in the fourth quarter from those on an amortized basis, yes.

About $600,000 topline -- I'm sorry, yes, about $600,000 topline was the scheduled amortization.

But to the extent we are no longer amortizing those earlier deals, all of those revenues were pushed back to the previous quarters.

Great.

And then just your comment on legal expense being down 2010, 2009, and I know it's hard to quantify it, but if we look at the legal calendar that you've got coming up, any ideas for what percentage of that investment you've already made, because obviously the last couple quarters, legal expense has been running high, and if we're just paying in advance for what we're going to see in 2010, I'm just trying to get a feel for to what extent that's already happened.

Yes, a large portion of the expenses in the second half of 2009 apply to cases scheduled for 2010, because you bring in the experts and consultants, usually six, nine, 12 months in advance of trial dates.

So a big chunk of those expenses have already occurred.

And we, going forward in 2010, all of our contingency cases, there is none that we're paying hourly for in 2010.

So there is no direct charges.

So it's really all third-party and consulting.

So we expect it will be, yes, there will be a significant decline year over year, based on where we are now.

And, yes, I would say roughly around the $10 million level is probably realistic for 2010, which would be down $4 million from last year.

Okay, great.

And then the 138 portfolio number that you guys report for the current active portfolios, is that net of any portfolios that have gone away because you've licensed everybody or that they might have lost in court, or you determined they're not (multiple speakers)?

Yes, that is a net number, yes.

That's a net number of active programs that can generate licensing revenue.

All right, great.

And then last question, just your thoughts on what we should expect out of Yahoo!.

Will that be something that is likely to be a long, drawn-out affair?

Is that something that is likely to be resolved in 2010?

I know, again, these are hard to talk to, but to the best of your ability.

Yes, the schedule right now, we expect -- I believe they have to file their appeal brief, if they're going to do so, and we expect they will, by April 19.

And then I believe we have 30 or 45 days to respond, and then it gets on the calendar at the Fed circuit.

So my guess would be it will probably be sometime in the fall where it would be -- the arguments would be heard and the determination would be made.

All right, great.

Thank you.

(Operator Instructions).

Jonathan Skeels, Davenport.

Could you talk about -- obviously, I guess, in 2010, the court calendar is an active one.

And I assume that you're in the process of starting to schedule some court dates for 2011.

I guess if you have, do you have any sense as to how active that 2011 calendar will look compared to 2010?

I would say by the time we get to that area, it will probably be about the same, based on the same level of activity.

I think we're getting more large companies wanting to engage and maybe do multiple settlements.

But then you have to settle everybody, not to go to trial.

But I would think many of these trials are going to wind up with only one remaining defendant, oftentimes the largest market share, and the rest will be settled out.

But I would expect probably about the same amount as we've got scheduled for 2010.

Okay, great.

Thanks.

This will conclude the question-and-answer session.

I will now turn the call back to Mr.

Ryan.

Okay, I want to thank you all for participating.

If you have any specific questions, please feel free to give me and Clayton or Rob Stewart a call.

And otherwise, look forward to talking with you on our first-quarter call.

Thanks.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 800-642-1687 or 706-645-9291, with confirmation code 49908261.

This concludes our conference for today.

Thank you for participating, and have a nice day.

All parties may now disconnect.