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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 
THE
 
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2002
 
OR
 
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 
THE
 
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to            
 
Commission File Number: 000-22339
 
 
RAMBUS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
  
94-3112828
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
ADDRESS
4440 El Camino Real, Los Altos, CA 94022
(Address of principal executive offices) (zip code)
 
(650) 947-5000
Registrant’s telephone number, including area code
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes x    No ¨
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
Yes x    No ¨
 
The number of shares outstanding of the registrant’s Common Stock, par value $.001 per share, was 97,542,210 as of December 31, 2002.
 

Table of Contents
RAMBUS INC.
 
FORM 10-Q
 
INDEX
 
        
PAGE
PART I.
  
FINANCIAL INFORMATION
     
Item 1.
  
Financial Statements:
     
      
1
      
2
      
3
      
4
Item 2.
     
16
Item 3.
     
32
Item 4.
     
32
PART II.
  
OTHER INFORMATION
     
Item 1.
     
34
Item 6.
     
38
  
39

Table of Contents
PART I — FINANCIAL INFORMATION
 
Item 1.    Financial Statements.
 
RAMBUS INC. AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
 
    
December 31, 2002
     
September 30, 2002
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
28,656
 
   
$
21,454
 
Marketable securities
   
 
36,081
 
   
 
65,083
 
Accounts receivable
   
 
1,080
 
   
 
312
 
Prepaid and deferred taxes
   
 
7,824
 
   
 
6,073
 
Prepaids and other current assets
   
 
2,648
 
   
 
3,011
 
    
  
Total current assets
   
 
76,289
 
   
 
95,933
 
Property and equipment, net
   
 
12,375
 
   
 
13,277
 
Marketable securities, long-term
   
 
111,095
 
   
 
69,592
 
Restricted investments
   
 
11,986
 
   
 
12,576
 
Deferred taxes, long-term
   
 
32,777
 
   
 
35,527
 
Other assets
   
 
6,001
 
   
 
6,054
 
    
  
Total assets
   
$
250,523
 
   
$
232,959
 
    
  
LIABILITIES
                  
Current liabilities:
                  
Accounts payable
   
$
2,115
 
   
$
3,953
 
Income taxes payable
   
 
22
 
   
 
21
 
Accrued salaries and benefits
   
 
2,936
 
   
 
3,254
 
Other accrued liabilities
   
 
5,313
 
   
 
3,252
 
Deferred revenue
   
 
22,218
 
   
 
11,086
 
    
  
Total current liabilities
   
 
32,604
 
   
 
21,566
 
Deferred revenue, less current portion
   
 
15,542
 
   
 
15,901
 
    
  
Total liabilities
   
 
48,146
 
   
 
37,467
 
    
  
Commitments and contingencies (Notes 6 and 8)
                  
STOCKHOLDERS’ EQUITY
                  
Convertible preferred stock, $.001 par value:
                  
Authorized: 5,000,000 shares;
                  
Issued and outstanding: no shares at December 31, 2002 and September 30, 2002
   
 
—  
 
   
 
—  
 
Common Stock, $.001 par value:
                  
Authorized: 500,000,000 shares;
                  
Issued and outstanding: 97,542,210 shares at December 31, 2002 and 97,271,061 shares at September 30, 2002
   
 
97
 
   
 
97
 
Additional paid-in capital
   
 
262,839
 
   
 
261,734
 
Accumulated deficit
   
 
(61,628
)
   
 
(67,157
)
Accumulated other comprehensive gain
   
 
1,069
 
   
 
818
 
    
  
Total stockholders’ equity
   
 
202,377
 
   
 
195,492
 
    
  
Total liabilities and stockholders’ equity
   
$
250,523
 
   
$
232,959
 
    
  
 
See Notes to Unaudited Consolidated Condensed Financial Statements.

1

Table of Contents
RAMBUS INC. AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
    
Three Months Ended December 31,
    
2002
   
2001
Revenues:
              
Contract revenues
   
$
1,379
   
$
3,084
Royalties
   
 
24,325
   
 
21,780
    
  
Total revenues
   
 
25,704
   
 
24,864
    
  
Costs and expenses:
              
Cost of contract revenues
   
 
1,595
   
 
2,158
Research and development
   
 
6,518
   
 
5,120
Marketing, general and administrative
   
 
10,754
   
 
10,024
    
  
Total costs and expenses
   
 
18,867
   
 
17,302
    
  
Operating income
   
 
6,837
   
 
7,562
Interest and other income, net
   
 
1,294
   
 
1,937
    
  
Income before income taxes
   
 
8,131
   
 
9,499
Provision for income taxes
   
 
2,602
   
 
3,325
    
  
Net income
   
$
5,529
   
$
6,174
    
  
Net income per share—basic
   
$
0.06
   
$
0.06
    
  
Net income per share—diluted
   
$
0.06
   
$
0.06
    
  
Number of shares used in per share calculations:
              
Basic
   
 
97,436
   
 
100,336
    
  
Diluted
   
 
100,209
   
 
104,016
    
  
 
See Notes to Unaudited Consolidated Condensed Financial Statements.

2

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RAMBUS INC. AND SUBSIDIARIES
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    
Three Months Ended
December 31,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net income
   
$
5,529
 
   
$
6,174
 
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Tax benefit (cost) of stock option exercises
   
 
(148
)
   
 
(1,028
)
Depreciation
   
 
1,304
 
   
 
1,270
 
Amortization of deferred compensation
   
 
—  
 
   
 
70
 
Amortization of goodwill
   
 
—  
 
   
 
67
 
Change in operating assets and liabilities:
                  
Accounts receivable
   
 
(768
)
   
 
2,093
 
Prepaids, deferred taxes and other assets
   
 
1,415
 
   
 
2,975
 
Accounts and taxes payable, accrued payroll and other liabilities
   
 
(94
)
   
 
(908
)
Deferred revenue
   
 
10,773
 
   
 
(4,731
)
    
  
Net cash provided by operating activities
   
 
18,011
 
   
 
5,982
 
    
  
Cash flows from investing activities:
                  
Purchases of property and equipment
   
 
(402
)
   
 
(599
)
Purchases of marketable securities
   
 
(105,133
)
   
 
(125,435
)
Maturities of marketable securities
   
 
92,850
 
   
 
105,634
 
Decrease (increase) in restricted investments
   
 
590
 
   
 
1,596
 
    
  
Net cash used in investing activities
   
 
(12,095
)
   
 
(18,804
)
    
  
Cash flows from financing activities:
                  
Net proceeds from issuance of Common Stock
   
 
1,253
 
   
 
1,568
 
Repurchase of Common Stock
   
 
—  
 
   
 
(3,389
)
    
  
Net cash provided by (used in) financing activities
   
 
1,253
 
   
 
(1,821
)
    
  
Effect of exchange rates on cash and cash equivalents
   
 
33
 
   
 
(87
)
    
  
Net increase (decrease) in cash and cash equivalents
   
 
7,202
 
   
 
(14,730
)
Cash and cash equivalents at beginning of period
   
 
21,454
 
   
 
44,195
 
    
  
Cash and cash equivalents at end of period
   
$
28,656
 
   
$
29,465
 
    
  
Supplemental disclosure of cash flow information:
                  
Taxes paid
   
$
1,781
 
   
$
1,305
 
 
See Notes to Unaudited Consolidated Condensed Financial Statements.

3

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RAMBUS INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 
1.    Basis of Presentation
 
The accompanying consolidated condensed financial statements include the accounts of Rambus Inc. (“Rambus”, “the Company”, “us” or “we”) and its wholly owned subsidiaries, Rambus K.K., located in Tokyo, Japan, and Rambus Deutschland GmbH, located in Hamburg, Germany. All intercompany accounts and transactions have been eliminated in the accompanying consolidated condensed financial statements.
 
In the opinion of management, the consolidated condensed financial statements include all adjustments (consisting only of normal recurring items) necessary to present fairly the financial position and results of operations for each interim period shown. Interim results are not necessarily indicative of results for a full year.
 
The consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) applicable to interim financial information. Certain information and footnote disclosures included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements pursuant to such SEC rules and regulations. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto, for the year ended September 30, 2002, included in Rambus’ 2002 Annual Report on Form 10-K.
 
2.    Recent Accounting Pronouncements
 
On July 20, 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 established new standards for accounting and reporting requirements for business combinations and requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 established new standards for goodwill acquired in a business combination and eliminates amortization of goodwill and instead sets forth methods to periodically evaluate goodwill for impairment. Intangible assets with a determinable useful life will continue to be amortized over that period. Rambus adopted the provisions of SFAS No. 142 on October 1, 2002. As a result, the Company has ceased amortization of $0.6 million in goodwill.
 
In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Rambus adopted the provisions of SFAS No. 144 on October 1, 2002, and the adoption did not have a material effect on its results of operations or financial position.
 
On October 3, 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” SFAS No. 144 applies to all long-lived assets (including discontinued operations) and consequently amends Accounting Principles Board Opinion No. 30. SFAS No. 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Rambus adopted the provisions of SFAS No. 144 on October 1, 2002, and the adoption did not have a material effect on its results of operations or financial position.
 
In June 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities”. SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the EITF has set forth in Issue No. 94-3, “Liability Recognition for Certain Employee Termination

4

Table of Contents

RAMBUS INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
 
2.    Recent Accounting Pronouncements (continued)

Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. Rambus does not expect the adoption of this statement to have a material impact on its financial statements.
 
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Rambus is required to follow the prescribed format and provide the additional disclosures required by SFAS No. 148 in its annual financial statements for the year ending September 30, 2003 and must also provide the disclosures in its quarterly reports containing condensed financial statements for interim periods beginning with the quarterly period ended March 31, 2003. Rambus has included additional disclosures in accordance with SFAS No. 148 in Note 5.
 
3.    Change in Accounting for Goodwill and Certain Other Intangibles
 
In accordance with SFAS No. 142, goodwill amortization was discontinued as of October 1, 2002. SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary), measures the impairment. Rambus completed its first phase impairment analysis during the first quarter of fiscal 2003 and found no instances of impairment of its recorded goodwill; accordingly, the second testing phase, absent future indicators of impairment, is not necessary during 2003.
 
In accordance with SFAS No. 142, the effect of this accounting change is reflected prospectively. Supplemental comparative disclosure as if goodwill had not been amortized in the prior year period is as follows (in thousands, except per share amounts):
 
    
Three Months Ended
    
December 31,<