The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and the related notes included in this annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” included in Item 3 of this annual report. See “Special Note Regarding Forward-Looking Statements.” Overview We are a global leader in developing NAND flash controllers for SSDs and other solid state storage devices. We have over 20 years of experience developing specialized processor ICs that manage NAND components and deliver market leading, high-performance storage solutions widely used in enterprise and hyperscale data centers, PCs, smartphones and commercial and industrial applications. We have one of the broadest portfolios of controller intellectual property developed from our deep understanding of NAND characteristics, which enables us to design both unique, highly optimized configurable IC plus related firmware controller platforms and 33 Table of Contents complete turnkey controller solutions. In the last 10 years, we have shipped over six billion NAND flash controllers. More NAND flash components, including current and up-coming generations of flash produced by Kioxia, Micron, Samsung, SK Hynix (and its subsidiary Solidigm), Sandisk and YMTC, are supported by Silicon Motion controllers than any other company. Our customers include NAND flash makers, module makers, hyperscalers and OEMs. We are a leading supplier of SSD controllers used in PCs and other client devices and leading merchant supplier of eMMC/UFS controllers used in smartphones and IoT devices and increasingly into enterprise and data center storage solutions. We also leverage our controller expertise to supply specialized small single-chip form factor SSDs for industrial, commercial and automotive applications. We market our PC and eMMC/UFS controllers under the “SMI” brand, our enterprise controllers under the “MonTitan” brand and single-chip SSDs under the “FerriSSD,” “Ferri-eMMC,” and “Ferri-UFS” brands. Summary of Consolidated Financial Results Summary of the year ended December 31, 2025 is as follows: • Total revenue increased by 10% to US$885.6 million from US$803.6 million in the prior year. • Gross profit as a percentage of revenue increased by 2.4% points to 48.3% from 45.9% in the prior year. • Total operating expenses increased by 20.4% to US$334.5 million from US$277.9 million in the prior year. • Operating profit increased by 2.4% to US$93.0 million from US$90.9 million in the prior year. • Income tax expense as a percentage of income before income tax decreased to 12.5% from 16.9% in the prior year. • Diluted earnings per ADS increased by 37.6% to US$3.64 from US$2.65 in the prior year. Principal Factors Affecting Our Results of Operations Net sales. Our net sales consist primarily of sales of our products, after deducting sales discounts and allowances for returns. Our net sales are denominated primarily in U.S. dollars. The percentages of our net sales by currency for the periods indicated are set forth in the following table: Year Ended December 31, 2023 2024 2025 Currency U.S. dollars 98 % 99 % 100 % Chinese yuan 2 % 1 % — The length of our sales cycle, from the day purchase orders are received until products are shipped to customers, is dependent on the availability of our product inventories as well as NAND flash components for our SSD solutions products. If we do not have sufficient inventories on hand to meet customer demands, approximately three months are generally required from the day purchase orders are received until finished goods are manufactured and shipped to customers. This cycle can take up to six months during times when capacity at independent foundries is being fully utilized. The potential delays inherent in the manufacturing process increase the risk that we may not be able to fulfill a customer’s order on time. All our sales are made by purchase orders. Because our practice, which is consistent with industry practice, allows customers to reschedule orders on relatively short notice, order backlog may not be a good indicator of our future sales. 34 Table of Contents Because most of our semiconductor solutions are designed for the mobile and computing devices markets, we expect our business to be subject to seasonality, with higher net sales generally in the second half of each year, when customers place orders to meet increased demand during year-end holiday seasons. However, changing market and business conditions, including foundry wafer supply shortages, as well as changing product mix in recent years could make future assessments of the impact of seasonal factors on our business difficult. Cost of sales. Our cost of sales consists primarily of the following costs: • cost of wafer fabrication; • assembly, testing and shipping costs of our semiconductors; • personnel and equipment costs associated with manufacturing support; • quality assurance; • cost of raw materials, including NAND flash component for certain products; and • write-down of inventory. We engage independent foundries for the manufacturing and subcontractors for the assembly and testing of our semiconductors. Our manufacturing cost is subject to the cyclical supply and demand conditions typical of the semiconductor industry. Our cost per wafer generally fluctuates with the availability of capacity at independent foundries. We believe that our cost of sales is substantially variable in nature. Research and development expenses. Our R&D expenses consist primarily of employee salaries and related costs, stock-based compensation, tape-out and related project expenses and intellectual property and software licensing costs. We expense R&D expenditures as they are incurred. Sales and marketing expenses. Our sales and marketing expenses consist primarily of employee salaries and related costs, stock-based compensation expense, commissions paid to independent distributors and costs for our advertising and promotional activities. General and administrative expenses. Our general and administrative expenses consist primarily of employee salaries and related costs, stock-based compensation expense, insurance premiums, professional fees and allowance for doubtful accounts. Accounting for stock-based compensation. We grant restricted stock units to our employees and members of our board of directors. The value of our restricted stock units is expensed over the vesting period and based on the grant date share price, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate. Non-operating income and expenses. Our non-operating income and expenses include unrealized holding gain on investment, interest from deposited cash, gains or losses on foreign exchange rates, disposal of investment and other non-operating income and expenses not categorized above. We conduct an assessment on the value of our long-term investments quarterly and make corresponding write-downs as required to the value of the long- term investments. Provision for income taxes. We must make certain estimates and judgments in determining income tax expenses for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits, deductions and allowance, and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions. We have operations in several countries, which include Taiwan, China, Hong Kong, Macau and the United States and determine income taxes for each of the jurisdictions where we operate. 35 Table of Contents Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Because our estimates may vary in each situation, our actual results may differ from our estimates under different assumptions and conditions. Our management considers the following factors in reviewing our consolidated financial statements: • the selection of critical accounting policies; and • the judgments and other uncertainties affecting the application of those critical accounting policies. The use of accounting estimates, the judgments and other uncertainties affecting the application of such estimates and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our consolidated financial statements. See Note 2—Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of those accounting estimates. Critical accounting estimates are defined as those accounting estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe the following are our critical accounting estimates: Inventory valuation. We value inventories at the lower of cost or net realizable value for raw materials, work-in-process and finished goods. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. We assess net realizable value of the inventory for estimated obsolescence or unmarketable inventory based upon management’s assumptions about future demand and market conditions. In estimating reserves for obsolescence, we primarily evaluate estimates based on the timing of the introduction of new products and the quantities remaining of old products and provide reserves for inventory on hand in excess of the estimated demand. Estimated losses on slow-moving items are recognized and included in the allowance for losses. We wrote down US$7.9 million, US$6.1 million and US$1.4 million in 2023, 2024 and 2025, respectively, for estimated obsolete or unmarketable inventory, with write-downs in 2023, 2024 and 2025 primarily related to the value of NAND components and SSDs in inventory affected by rapidly falling NAND prices and the restructuring of our underperforming product lines. We have not made any material changes in the accounting methodology used to evaluate obsolescence or unmarketable inventory during the last three fiscal years. However, if actual results are not consistent with our estimates and assumptions used to calculate inventory write-downs, we may be exposed to inventory write- downs that could be material. If we have experienced significant industry fluctuations, maturing product cycles and new product introductions of both semiconductor companies’ and their customers’ products and fluctuations in general economic conditions, we may be exposed to future obsolescence or unmarketable inventory. Accounting for income taxes. In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We are tax residents in numerous taxing jurisdictions around the world and have identified our major tax jurisdictions as Taiwan, Hong Kong, Macau and China with statutory tax rates of 20%, 16.5%, 12% and 25%, respectively, and estimate our actual current tax exposure together with assessed temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our 36 Table of Contents consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income within the relevant jurisdiction and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. The total amount of valuation allowance as of December 31, 2023, 2024 and 2025 was US$23.1 million, US$27.8 million and US$31.4 million, respectively. We provide for a valuation allowance to the extent we believe that it is more likely than not that the deferred tax assets will not be recovered from future taxable income. Realization of future tax benefits related to the deferred tax assets is dependent on many factors, including our ability to generate taxable income within the period during which the temporary differences reverse, the outlook for the economic environment in which we operate, and the overall future industry outlook. Should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an additional allowance for the deferred tax asset would be charged to income in the period the determination was made. We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The total amount of unrecognized tax benefits as of December 31, 2023, 2024 and 2025 was US$43.8 million, US$43.6 million and US$35.3 million, respectively. As of December 31, 2024 and 2025, US$6.8 million and US$6.3 million, respectively, of interest and penalties were accrued. Fiscal years 2020 through 2025 remain subject to examination by the U.S. Internal Revenue Service and other foreign tax jurisdictions. The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense. Favorable resolution could result in reduced income tax expense. Within the next 12 months, we do not expect that our unrecognized tax benefits would change significantly. See Note 11 to our consolidated financial statements for further information regarding changes in unrecognized tax benefits during 2025. Legal Contingencies. From time to time, we are involved in legal actions or other third-party assertions arising in the ordinary course of business. There can be no assurance these actions or other third-party assertions will be resolved without costly litigation, in a manner that does not adversely impact our financial position, results of operations or cash flows or without requiring royalty payments in the future, which may adversely impact gross margins. We record a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. In determining the probability of a loss and consequently, determining a reasonable estimate, management is required to use significant judgment. Given the uncertainties associated with any litigation, the actual outcome can be different than our estimates and could adversely affect our results of operations, financial position and cash flows. See “Item 8. Legal Proceedings”. 37 Table of Contents Results of Operations The following table sets forth our statements of operations as a percentage of net sales for the periods indicated: Year Ended December 31, 2023 2024 2025 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 57.7 54.1 51.7 Gross profit 42.3 45.9 48.3 Operating expenses: Research and development 27.3 27.1 29.7 Sales and marketing 4.2 3.4 3.9 General and administrative 4.4 3.9 4.2 Loss from settlement of litigation 0.2 0.2 — Total operating expenses 36.1 34.6 37.8 Operating income 6.2 11.3 10.5 Non-operating income (expenses): Unrealized holding gain on investments 1.3 0.1 2.1 Gain on sale of investments 0.0 0.0 2.3 Interest income 1.9 1.8 1.1 Foreign exchange gain (loss), net 0.1 0.2 (0.2 ) Other income, net 0.0 0.0 0.0 Total non-operating income (expenses) 3.3 2.1 5.3 Income before income taxes 9.5 13.4 15.8 Income tax expense 1.3 2.3 2.0 Net income 8.2 % 11.1 % 13.8 % Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024 Net sales. Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Net sales Mobile Storage 796,365 99 877,195 99 80,830 10 Others 7,187 1 8,432 1 1,245 17 Net sales 803,552 100 885,627 100 82,075 10 In 2025, our net sales increased by 10% year-over-year to approximately US$885.6 million, primarily due to the continuing new products and new customers ramp and increase in market share with NAND makers, module makers and OEM customers. Our mobile storage revenue increased by 10% year-over-year primarily because of an increase in sales of eMMC and UFS controllers, partially offset by a decline in sales of SSD controllers and SSD solutions. Our SSD controller sales decreased in the range of 0% to 5% year-over-year to account for 45% to 50% of revenue, a lower percentage of net sales than the prior year, eMMC plus UFS controller sales increased in the range of 20% to 25% year-over-year to account for 40% to 45% of revenue, a higher percentage of net sales than the prior year, and SSD solutions sales decreased in the range of 10% to 15% year-over-year to account for 0% to 5% of revenue, a lower percentage of net sales than the prior year. 38 Table of Contents Gross profit Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Gross profit 368,765 46 427,509 48 58,744 16 Gross profit as a percentage of net sales increased to 48% in 2025 as compared to 46% in 2024 primarily because of new projects and our ability to efficiently scale new products. Our gross profit, excluding obsolete and unmarketable inventory write-downs, as a percentage of revenue increased from 47% in 2024 to 48% in 2025. Research and development expenses Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Salary and benefits 107,248 14 142,161 16 34,913 33 Stock-based compensation 11,284 1 17,874 2 6,590 58 Other research and development 99,290 12 102,683 12 3,393 3 Research and development 217,822 27 262,718 30 44,896 21 Our R&D expenses increased by 21% year-over-year to approximately US$262.7 million in 2025 primarily due to investing heavily in next generation solutions and significant employee additions. Salary and benefits increased by 33% year-over-year to approximately US$142.2 million in 2025 primarily because of expanded headcounts. Stock-based compensation increased by 58% year-over-year to approximately US$17.9 million. Other R&D expenses increased by 3% year-over-year to approximately US$102.7 million in 2025. Sales and marketing expenses Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Salary and benefits 16,647 2 19,760 2 3,113 19 Stock-based compensation 1,954 — 3,428 — 1,474 75 Other sales and marketing 8,849 1 11,195 2 2,346 27 Sales and marketing 27,450 3 34,383 4 6,933 25 Our sales and marketing expenses increased by 25% year-over-year to approximately US$34.4 million in 2025. Salary and benefits increased by 19% year-over-year to approximately US$19.8 million in 2025. Stock- based compensation increased by 75% year-over-year to approximately US$3.4 million in 2025. Other sales and marketing expenses increased by 27% year-over-year to approximately US$11.2 million. 39 Table of Contents General and administrative expenses Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Salary and benefits 11,215 2 12,090 1 875 8 Stock-based compensation 3,407 — 4,570 — 1,163 34 Other general and administrative 16,732 2 20,711 3 3,979 24 General and administrative 31,354 4 37,371 4 6,017 19 Our general and administrative expenses increased by 19% year-over-year to approximately US$37.4 million in 2025. Salary and benefits increased by 8% year-over-year to approximately US$12.1 million in 2025. Stock-based compensation increased by 34% year-over-year to approximately US$4.6 million in 2025. Other general and administrative expenses increased by 24% year-over-year to approximately US$20.7 million in 2025, primarily because of legal, financial advisory and other fees related to dispute expenses in connection with arbitration of the terminated Merger Agreement. Stock-based compensation The following table presents details of total stock-based compensation that is included in each functional line item in our consolidated statements of income: Years Ended December 31 2024 2025 US$ % of net sales US$ % of net sales US$ change % change (in thousands, except percentage data) Cost of sales 311 — 411 — 100 32 Research and development 11,284 1 17,874 2 6,590 58 Sales and marketing 1,954 — 3,428 — 1,474 75 General and administrative 3,407 — 4,570 — 1,163 34 Total stock-based compensation 16,956 1 26,283 2 9,327 55 See Note 13 to our consolidated financial statements for a discussion of activity related to stock-based awards. Loss from settlement of litigation. We accrued US$1,250 thousand to settle legal litigations in 2024. Unrealized holding gain on investment. We recognized a gain of US$0.5 million and US$18.4 million for the net change in fair value of the investments in equity securities in 2024 and 2025, respectively. Gain from disposal of long-term investment. We recognized a gain from disposal of BIWIN of US$58 thousand and Kinara of US$21.1 million in 2024 and 2025, respectively. Interest income. Our interest income decreased to approximately US$9.7 million for the year ended December 31, 2025 from approximately US$14.5 million for the year ended December 31, 2024 due to less interest rates. Foreign exchange gain (loss), net. For the year ended December 31, 2025, we realized a foreign exchange loss of US$2.1 million, compared with a gain of US$1.4 million for the year ended December 31, 2024. We do not engage in any hedging activities. 40 Table of Contents Income tax expense. Income tax expense was approximately US$17.5 million for the year ended December 31, 2025 compared to an income tax expense of approximately US$18.2 million for the year ended December 31, 2024. Net income. Net income was approximately US$122.6 million for the year ended December 31, 2025 compared to a net income of approximately US$89.2 million for the year ended December 31, 2024. Comparison of Year Ended December 31, 2024 to Year Ended December 31, 2023 For the discussion covering the comparison between the years ended December 31, 2024 and 2023, please refer to “Item 5” of our annual report on Form 20-F for the year ended December 31, 2024 filed with the SEC on April 30, 2025. Liquidity and Capital Resources As of December 31, 2025, we had approximately US$201.8 million in cash and cash equivalents, a decrease of US$74.2 million from December 31, 2024. We maintain our cash balances in bank deposits and in money market instruments. We do not engage in any currency hedging activities. We believe the cash we expect to generate from operating activities will be sufficient to meet our anticipated working capital needs, capital expenditures, and other commitments for at least the next 12 months and into the foreseeable future. Our future capital requirements will depend on many factors, including the level of our net sales, the increasing procurement of NAND to service customer demand for our SSD solutions products, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products, the costs to ensure access to adequate manufacturing capacity, the continuing market acceptance of our products, and construction of our Taipei office buildings. We could be required, or could elect, to seek additional funding through public or private equity or debt financing, and additional funds may not be available on terms acceptable to us or at all. The following table sets forth a summary of our cash flows for the periods indicated: Year Ended December 31, 2023 2024 2025 US$ US$ US$ (in thousands) Consolidated Cash Flow Data: Net cash provided by operating activities 149,083 77,095 61,360 Net cash used in investing activities (49,085 ) (44,089 ) (27,403 ) Net cash used in financing activities (16,690 ) (67,255 ) (91,512 ) Depreciation and amortization 21,810 25,331 30,174 Capital expenditures (50,313 ) (44,351 ) (55,065 ) Operating activities Our net cash provided by operating activities was approximately US$61.4 million for the year ended December 31, 2025, compared to net cash provided by operating activities of approximately US$77.1 million and US$149.1 million during 2024 and 2023, respectively. For the year ended December 31, 2025, cash flows provided by operations of US$61.4 million resulted primarily from our net income of US$122.6 million and the following reasons: • Our net income includes substantial non-cash charges, namely US$30.2 million of depreciation and amortization and US$26.3 million of stock-based compensation. 41 Table of Contents • Net working capital increased by US$78.2 million. Inventories increased by US$215.2 million, notes and accounts receivable decreased by US$22.2 million, notes and accounts payable increased by US$17.0 million, income tax payable increased by US$9.3 million, and other assets net of other liabilities provided US$88.5 million of cash. For the year ended December 31, 2024, cash flow provided by operations of US$77.1 million resulted primarily from our net income of US$89.2 million and the following reasons: • Our net income includes substantial non-cash charges, namely US$25.3 million of depreciation and amortization and US$17.0 million of stock-based compensation. • Net working capital increased by US$53.2 million. Inventories decreased by US$4.9 million, notes and accounts receivable increased by US$39.0 million, notes and accounts payable decreased by US$37.8 million, income tax payable increased by US$5.6 million, and other assets net of other liabilities provided US$13.1 million of cash. Investing activities Our net cash used in investing activities was approximately US$27.4 million for the year ended December 31, 2025, compared to net cash used in investing activities of approximately US$44.1 million for the year ended December 31, 2024. In 2025, we paid US$33.8 million for the routine purchase of software, design tools and other items, and US$21.3 million for building construction in Hsinchu and received US$27.6 million for the disposal of Kinara. Our net cash used in investing activities was approximately US$44.1 million for the year ended December 31, 2024, compared to net cash used in investing activities of approximately US$49.1 million for the year ended December 31, 2023. In 2024, we paid US$28.0 million for the routine purchase of software, design tools and other items, and US$16.3 million for building construction in Hsinchu. Financing activities Our net cash used in financing activities was approximately US$91.5 million for the year ended December 31, 2025, compared to net cash used in financing activities of approximately US$67.3 million for the year ended December 31, 2024. Our cash used in financing activities in 2025 consists primarily of US$67.2 million of dividend payments and US$24.3 million for share repurchases. Our net cash used in financing activities was approximately US$67.3 million for the year ended December 31, 2024, compared to net cash used in financing activities of approximately US$16.7 million for the year ended December 31, 2023. Our cash used in financing activities in 2024 consists primarily of US$67.3 million of dividend payments. Capital Return to Shareholders Dividend. On October 28, 2024 and October 27, 2025, we announced an annual cash dividend of US$2.00 per ADS to be paid in four quarterly installments of US$0.50 per ADS, we paid US$67.3 million and US$67.2 million to shareholders in 2024 and 2025, respectively. The declaration and payment of future cash dividends is subject to our board of directors’ continuing discretion and determination that the payment of dividends is in the best interests of our shareholders and is in compliance with all laws and agreements applicable to the declaration and payment of cash dividends. Share Repurchase. On February 6, 2025, our board of directors authorized a share repurchase program to repurchase up to US$50 million of our ADSs over a 6-month period. In the year ended December 31, 2025, we repurchased approximately 426 thousand ADSs for US$24.3 million at an average price of US$57.04 per ADS. 42 Table of Contents Share repurchases are made in the open market or according to other methods in compliance with SEC Rule 10b-18 under the Exchange Act, subject to market conditions, applicable legal requirements and other factors. Share repurchase plans announced do not obligate us to acquire any particular amount of ADSs and may be suspended at any time at our discretion. Cash Requirements Our material cash requirements include the following contractual and other obligations: Operating Leases. Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased property and equipment, see Note 14 to our consolidated financial statements. As of December 31, 2025, these obligations totaled US$14.1 million, of which US$2.6 million was short-term. Office Building Construction. In September 2018, the Company paid US$58.9 million to acquire land in Hsinchu, Taiwan intended for its future Taiwan headquarters building. Construction began in January 2021, and as of December 31, 2025, the project, with a capitalized cost of US$67.0 million, completed in 2025. In addition, we won a bid with a third party to build an office building in Taipei, and we entered into a property development agreement in May 2021. We received the construction license in September 2025 and the development cost is expected to be approximately US$101 million. We expect to complete construction of the building by the end of 2029. Tax Liability. Tax liability represents the provision for income tax and uncertain tax position recognized, see Note 11 to our consolidated financial statements. As of December 31, 2025, short-term taxes liabilities totaled US$22.4 million. We decreased long-term taxes liabilities of US$8.3 million related to uncertain tax positions as of December 31, 2025. At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing and outcome of a potential tax audit. Recent Accounting Pronouncements Please refer to Note 2 to the consolidated financial statements.