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 March 31, 2004
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.) |
4440 El Camino Real, Los Altos, CA 94022
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (650) 947-5000
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 102,275,108 as of April 16, 2004.
FORM 10-Q
INDEX
| PAGE | ||||
| PART I. | ||||
| Item 1. | ||||
|
Consolidated Condensed Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003 (audited) |
1 | |||
|
Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2004 (unaudited) and March 31, 2003 (unaudited) |
2 | |||
|
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2004 (unaudited) and March 31, 2003 (unaudited) |
3 | |||
| Notes to Unaudited Consolidated Condensed Financial Statements |
4 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 | ||
| Item 3. | 39 | |||
| Item 4. | 39 | |||
| PART II. | ||||
| Item 1. | 41 | |||
| Item 2. | 41 | |||
| Item 3. | 41 | |||
| Item 4. | 41 | |||
| Item 5. | 41 | |||
| Item 6. | 41 | |||
| Signature | 42 | |||
| Exhibit Index | ||||
PART I — FINANCIAL INFORMATION
| Item | 1. Financial Statements. |
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 63,084 | $ | 42,005 | ||||
| Marketable securities |
47,430 | 24,777 | ||||||
| Accounts receivable |
790 | 10,263 | ||||||
| Prepaid and deferred taxes |
12,731 | 12,890 | ||||||
| Prepaids and other current assets |
4,850 | 5,652 | ||||||
| Total current assets |
128,885 | 95,587 | ||||||
| Property and equipment, net |
10,610 | 10,965 | ||||||
| Marketable securities, long-term |
128,843 | 121,756 | ||||||
| Restricted investments |
5,094 | 4,576 | ||||||
| Deferred taxes, long-term |
61,473 | 43,557 | ||||||
| Purchased intangible assets |
12,852 | 13,184 | ||||||
| Other assets |
1,729 | 3,461 | ||||||
| Total assets |
$ | 349,486 | $ | 293,086 | ||||
| LIABILITIES | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,773 | $ | 2,776 | ||||
| Accrued salaries and benefits |
4,120 | 4,369 | ||||||
| Other accrued liabilities |
4,792 | 3,659 | ||||||
| Deferred revenue |
24,510 | 24,180 | ||||||
| Total current liabilities |
36,195 | 34,984 | ||||||
| Deferred revenue, less current portion |
16,113 | 18,022 | ||||||
| Total liabilities |
52,308 | 53,006 | ||||||
| Commitments and contingencies (Notes 7 and 9) |
||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Convertible preferred stock, $.001 par value: |
||||||||
| Authorized: 5,000,000 shares; |
||||||||
| Issued and outstanding: no shares at March 31, 2004 and |
— | — | ||||||
| Common stock, $.001 par value: |
||||||||
| Authorized: 500,000,000 shares; |
||||||||
| Issued and outstanding: 102,167,499 shares at March 31, 2004 and 99,154,444 shares at December 31, 2003 |
102 | 99 | ||||||
| Additional paid-in capital |
326,708 | 278,187 | ||||||
| Accumulated deficit |
(30,102 | ) | (38,407 | ) | ||||
| Accumulated other comprehensive income |
470 | 201 | ||||||
| Total stockholders’ equity |
297,178 | 240,080 | ||||||
| Total liabilities and stockholders’ equity |
$ | 349,486 | $ | 293,086 | ||||
See Notes to Unaudited Consolidated Condensed Financial Statements.
1
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended March 31, | ||||||
| 2004 |
2003 | |||||
| Revenues: |
||||||
| Contract revenues |
$ | 5,079 | $ | 3,267 | ||
| Royalties |
27,462 | 24,812 | ||||
| Total revenues |
32,541 | 28,079 | ||||
| Costs and expenses: |
||||||
| Cost of contract revenues |
5,234 | 3,210 | ||||
| Research and development |
7,427 | 7,267 | ||||
| Marketing, general and administrative |
11,208 | 13,131 | ||||
| Total costs and expenses |
23,869 | 23,608 | ||||
| Operating income |
8,672 | 4,471 | ||||
| Interest and other income, net |
4,104 | 2,984 | ||||
| Income before income taxes |
12,776 | 7,455 | ||||
| Provision for income taxes |
4,471 | 2,386 | ||||
| Net income |
$ | 8,305 | $ | 5,069 | ||
| Net income per share: |
||||||
| Basic |
$ | 0.08 | $ | 0.05 | ||
| Diluted |
$ | 0.07 | $ | 0.05 | ||
| Number of shares used in per share calculations: |
||||||
| Basic |
100,966 | 97,169 | ||||
| Diluted |
111,198 | 103,785 | ||||
See Notes to Unaudited Consolidated Condensed Financial Statements.
2
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 8,305 | $ | 5,069 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Tax benefit of stock option exercises |
20,247 | 2,151 | ||||||
| Depreciation |
1,020 | 1,330 | ||||||
| Amortization of intangible assets |
330 | — | ||||||
| Decrease in valuation allowance related to investments |
— | (1,231 | ) | |||||
| Gain on sale of investment |
(3,166 | ) | — | |||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
9,473 | (3,319 | ) | |||||
| Prepaids, deferred taxes and other assets |
(16,922 | ) | (1,701 | ) | ||||
| Accounts payable, accrued salaries and benefits and other accrued liabilities |
881 | 3,123 | ||||||
| Increases in deferred revenue |
5,450 | 15,555 | ||||||
| Decreases in deferred revenue |
(7,029 | ) | (15,217 | ) | ||||
| Net cash provided by operating activities |
18,589 | 5,760 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(665 | ) | (1,033 | ) | ||||
| Purchases of marketable securities |
(162,494 | ) | (65,784 | ) | ||||
| Maturities of marketable securities |
133,008 | 63,490 | ||||||
| Increase in restricted investments |
(518 | ) | (334 | ) | ||||
| Proceeds from sale of investment |
4,866 | 2,000 | ||||||
| Purchase of investment |
— | (400 | ) | |||||
| Net cash used in investing activities |
(25,803 | ) | (2,061 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from issuance of Common Stock |
28,278 | 3,833 | ||||||
| Repurchase of Common Stock |
— | (14,703 | ) | |||||
| Net cash provided by (used in) financing activities |
28,278 | (10,870 | ) | |||||
| Effect of exchange rates on cash and cash equivalents |
15 | (10 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
21,079 | (7,181 | ) | |||||
| Cash and cash equivalents at beginning of period |
42,005 | 28,656 | ||||||
| Cash and cash equivalents at end of period |
$ | 63,084 | $ | 21,475 | ||||
| Non-Cash disclosure |
||||||||
| Intellectual property rights received on disposition of investment |
— | $ | 500 | |||||
See Notes to Unaudited Consolidated Condensed Financial Statements.
3
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated condensed financial statements include the accounts of Rambus Inc. (“Rambus” or “the Company”) 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 (or 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 twelve months ended December 31, 2003, included in Rambus’s 2003 Annual Report filed on Form 10-K with the SEC on February 13, 2004.
2. Accounting Policies and Recent Accounting Pronouncements
Stock-Based Compensation
Rambus accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Stock options are generally granted with exercise prices equivalent to fair market value, and no compensation cost is recognized. When stock options are granted with exercise prices below fair market value, employee stock-related compensation expense is recognized accordingly. Rambus complies with the disclosure provisions as required under Statement of Financial Accounting Standards, or SFAS, No. 123 “Accounting for Stock-Based Compensation.”
In December 2002, the Financial Accounting Standards Board, or FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure,” an amendment of SFAS 123. If Rambus had recognized compensation expense based upon the fair value of stock option awards, including shares issued under the Rambus employee stock purchase plan (collectively called options), at the grant date consistent with the methodology prescribed under SFAS 123, Rambus’s net income (loss) and net income (loss) per share would have changed to the pro forma amounts indicated below (in thousands, except share data; unaudited):
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Net Income, as reported |
$ | 8,305 | $ | 5,069 | ||||
| Add: Stock-based employee compensation expense (credit) included in reported net earnings, net of tax |
— | — | ||||||
| Deduct: Stock-based employee compensation expense determined under the fair value method, net of tax |
(6,974 | ) | (6,451 | ) | ||||
| Pro forma net income (loss) |
$ | 1,331 | $ | (1,382 | ) | |||
4
RAMBUS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)
2. Accounting Policies and Recent Accounting Pronouncements (continued)
| Three Months Ended March 31, |
|||||||
| 2004 |
2003 |
||||||
| Basic income (loss) per share |
|||||||
| As reported |
$ | 0.08 | $ | 0.05 | |||
| Pro forma |
$ | 0.01 | $ | (0.01 | ) | ||
| Diluted income (loss) per share |
|||||||
| As reported |
$ | 0.07 | $ | 0.05 | |||
| Pro forma |
$ | 0.01 | $ | (0.01 | ) | ||
| Number of shares used in per share calculations: |
|||||||
| Basic |
100,966 | 97,169 | |||||
| Diluted |
111,198 | 103,785 | |||||
| (1) | For purposes of pro forma disclosures, the estimated fair value of the options is amor |