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8-K - Rovi Corpform8k_02152011.htm

EXHIBIT 99.1



Rovi Corporation
2830 De La Cruz Blvd.
Santa Clara, CA 95050
 
(408) 562-8400 Main
 

ROVI CORPORATION REPORTS FOURTH QUARTER FINANCIAL PERFORMANCE
 
SANTA CLARA, Calif. (BUSINESS WIRE)—February 15, 2011—Rovi Corporation (NASDAQ: ROVI) announced today that it had fourth quarter 2010 revenues of $140.2 million (in line with its CY2010 estimates released on December 22, 2010), compared to $137.1 million for the fourth quarter of 2009. Fourth quarter 2010 GAAP net income was $67.2 million, compared to $2.6 million for the fourth quarter of 2009.  The Company’s GAAP earnings included a $40.7 million income tax benefit in 2010 compared to a $22 million income tax expense in 2009.

On a non-GAAP Adjusted Pro Forma basis, Adjusted Pro Forma Income was $59.7 million in the fourth quarter of 2010, compared to $52.0 million in the fourth quarter of 2009.  Adjusted Pro Forma Income Per Common Share for the fourth quarter of 2010 was $0.54, compared to $0.50 for the fourth quarter of 2009. Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share are defined below, in the section entitled Non-GAAP or Adjusted Pro Forma Information.  Reconciliations between GAAP pro forma and Adjusted Pro Forma results from operations are provided in the tables below.

“We completed another excellent quarter and are pleased with our progress toward achieving our business objectives,” said Fred Amoroso, President and CEO of Rovi.  “I am also pleased with our integration planning efforts around Sonic Solutions.  Now that our tender offer has succeeded, I look forward to executing our plans and beginning to realize the benefits and synergies of the combination.”

“Consistent with the growth in the legacy Rovi business that we reiterated at our investor day in early January, and in combination with the revenue and earnings streams of Sonic Solutions, we expect our Prospective Adjusted Pro Forma Revenue including Sonic Solutions for the full calendar year 2011 to range between $775 million and $825 million,” added James Budge, Chief Financial Officer of Rovi.  “Assuming a full calendar year 2011 impact from Sonic’s earnings, we expect our 2011 Prospective Adjusted Pro Forma Income Per Common Share including Sonic Solutions to range between $2.20 and $2.50, reflective of our recent term loan financing that was $250 million larger than we initially planned.”
 
 
 
 

 
 
Non-GAAP or Adjusted Pro Forma Information
Rovi Corporation provides non-GAAP Adjusted Pro Forma and Prospective Adjusted Pro Forma information. References to either Adjusted Pro Forma or Prospective Adjusted Pro Forma information are references to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information to assist investors in assessing its current and future operations in the way that its management evaluates those operations.  Adjusted Pro Forma Revenue, Prospective Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share and Prospective Adjusted Pro Forma Income Per Common Share are supplemental measures of the Company’s performance that are not required by, and are not presented in accordance with GAAP. Neither Adjusted Pro Forma nor Prospective Adjusted Pro Forma information substitutes for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP basis pro forma information.

Adjusted Pro Forma Income is defined as pro forma income (loss) from continuing operations, net of tax, adding back non-cash items such as equity-based compensation, amortization of intangibles, amortization or write-off of note issuance costs, non-cash interest expense recorded on convertible debt under Accounting Standards Codification (“ASC”) 470-20 (formerly known as FSP APB 14-1), mark-to-market fair value adjustments for interest rate swaps and caps, and the reversals of discrete tax items including reserves; as well as items which impact comparability that are required to be recorded under GAAP, but that the Company believes are not indicative of its core operating results such as transaction, transition and integration costs, restructuring and asset impairment charges, payments to note holders and for expenses in connection with the early redemption of debt, court awarded fees, gains on sale of strategic investments, the loss on exiting the Guideworks Joint Venture, and expenses related to certain Gemstar pre-acquisition indemnification and other matters in excess of reserves established in purchase accounting. While depreciation expense is a non-cash item, it is included in Adjusted Pro Forma Income as a reasonable proxy for capital expenditures.

Management has been using Adjusted Pro Forma measures since the acquisition of Gemstar-TV Guide International (“Gemstar”).  Management did so, in part, because it believes that including Gemstar’s operating results only for the period since its acquisition on May 2, 2008 diminishes the comparative value of results from the prior year.  Adjusted Pro Forma financial information assumes all acquisitions occurring prior to March 31, 2009 (including the Gemstar acquisition) and all divestitures (including Software, Games, eMeta, Norpak, TV Guide Magazine, TVG Network, TV Guide Network and TV Guide Online), as well as any discontinued operations and product lines were effective on January 1, 2007.  Additionally, the TVG Network, TV Guide Network and TV Guide Online businesses are assumed to have been sold for aggregate proceeds of $275 million which is assumed to have reduced the debt issued in conjunction with the acquisition of Gemstar.

Adjusted Pro Forma Income Per Common Share is calculated using Adjusted Pro Forma Income and taking into account the benefit of the convertible debt call option when it allows the Company to purchase shares of its own stock at a price below what those shares could be purchased for in the open market.

Prospective Pro Forma and Prospective Adjusted Pro Forma measures assume the Sonic Solutions business combination occurred on January 1, 2010.  Prospective Adjusted Pro Forma Revenue excludes from Pro Forma Revenue, after giving effect to the Sonic Solutions acquisition, the effect of contra revenue associated with Sonic Solution’s issuance, and subsequent vesting, of a warrant provided to a customer.  Prospective Adjusted Pro Forma Income is defined as Pro Forma Income (loss) from continuing operations, after giving effect to the Sonic Solutions acquisition and net of tax, adding back the non-cash items discussed above and used in the calculation of Adjusted Pro Forma Income and also adding back the non-cash effect of contra revenue associated with Sonic’s issuance, and subsequent vesting, of a warrant to a customer.  Prospective Adjusted Pro Forma Income also excludes certain items which impact comparability, but that are required to be recorded under GAAP, and are discussed above and used in the calculation of Adjusted Pro Forma Income, as well as the effect of the release of a portion of a payroll tax liability which Sonic Solution established in prior years in connection with a stock option review.  Prospective Adjusted Pro Forma Income Per Common Share is calculated using Prospective Adjusted Pro Forma Income and taking into account the benefit of the convertible debt call option when it allows the Company to purchase shares of its own stock at a price below what those shares could be purchased for in the open market.
 
 
 

 
Since entering into the agreement to acquire Gemstar, the Company’s management has evaluated and made operating decisions about its business operations primarily based upon Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share. Management uses Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share as measures as they exclude items management does not consider to be “core costs” or “core proceeds” when making business decisions. Therefore, management presents these Adjusted Pro Forma financial measures along with GAAP measures.  For each such Adjusted Pro Forma financial measure, the adjustment provides management with information about the Company’s underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Rovi Corporation does not acquire businesses on a predictable cycle, management excludes amortization of intangibles from acquisitions, transaction costs and transition and integration costs in order to make more consistent and meaningful evaluations of the Company’s operating expenses. Management also excludes the effect of restructuring and asset impairment charges, insurance settlements, losses on debt redemption, court awarded fees, the loss on exiting the Guideworks Joint Venture, expenses related to certain Gemstar pre-acquisition indemnification and other matters in excess of reserves established in purchase accounting and gains on sale of strategic investments for the same reason.  Management excludes discontinued product lines as it believes this exclusion is as meaningful for comparability purposes as excluding the results from a business that meets the criteria to be classified as discontinued operations on a GAAP basis.  Management excludes the impact of equity-based compensation to help it compare current period operating expenses against the operating expenses for prior periods and to eliminate the effects of this non-cash item, which, because it is based upon estimates on the grant dates, may bear little resemblance to the actual values realized upon the future exercise, expiration, termination or forfeiture of the equity-based compensation, and which, as it relates to stock options and stock purchase plan shares, is required for GAAP purposes to be estimated under valuation models, including the Black-Scholes model used by Rovi Corporation.  Management excludes non-cash interest expense recorded on convertible debt under ASC 470-20, mark-to-market fair value adjustments for interest rate swaps and caps, and the reversals of discrete tax items including reserves as they are non-cash items and not considered “core costs” or meaningful when management evaluates the Company’s operating expenses.  Management reclassifies the current period benefit of the interest rate swaps from other income or expense to interest expense in order for interest expense to reflect the swap rates, as these instruments were entered into to convert, from fixed to floating, the interest rate the Company pays on its convertible debt.  Management includes the benefit of the convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, and is excluded from GAAP EPS calculation as it is anti-dilutive, because the pragmatic reality is management would exercise this option rather than allow this dilution to occur.

Management has used these Adjusted Pro Forma measures to help it make budgeting decisions, including decisions that affect operating expenses and operating margin.  Further, Adjusted Pro Forma financial information has helped management track actual performance relative to financial targets.  Making Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may also help investors compare the Company’s performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management is using Prospective Adjusted Pro Forma measures to help it make budgeting decisions, including decisions that affect operating expenses and operating margin, for the combined company giving effect to the contemplated Sonic Solutions acquisition.  Prospective Adjusted Pro Forma financial information will help management track actual performance relative to financial targets.  As with Adjusted Pro Forma measures, making Prospective Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may help investors compare the Company’s performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management recognizes that the use of Adjusted Pro Forma and Prospective Adjusted Pro Forma measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information.  Because other companies, including companies similar to Rovi Corporation, may calculate their non-GAAP financial measures differently than the Company calculates its Adjusted Pro Forma and Prospective Adjusted Pro Forma measures, these Non-GAAP measures may have limited usefulness in comparing companies.  Management believes, however, that providing Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information, in addition to the GAAP financial information, facilitates consistent comparison of the Company’s financial performance over time. The Company has provided Adjusted Pro Forma financial and Prospective Adjusted Pro Forma information to the investment community, not as an alternative, but as an important supplement to GAAP financial information; to enable investors to evaluate the Company’s core operating performance in the same way that management does. Reconciliations between historical pro forma and Adjusted Pro Forma results of operations are provided in the tables below.
 
 
 

 
 
 
Dial-in Information
Rovi Corporation will hold an investor conference call at 4:30 p.m. Eastern time on February 15, 2011.  Investors and analysts interested in participating in the conference are welcome to call 877-941-8631  (or international +1-480-629-9819) and reference the Rovi call.

The conference call can also be accessed via live webcast at www.rovicorp.com on February 15, 2011 at 4:30 p.m. Eastern time. The on-demand audio webcast of the earnings conference call will be made available as soon as practicable after the live webcast ends.

A replay of the conference call will be available through February 20, 2011 and can be accessed by calling 800-406-7325 (or international +1 303-590-3030) and entering passcode 4407590#. A replay of the audio webcast will be available on Rovi Corporation’s website approximately 1-2 hours after the live webcast ends and will remain on Rovi Corporation’s website until our next quarterly earnings call.

About Rovi Corporation
Rovi Corporation is focused on revolutionizing the digital entertainment landscape by delivering solutions that enable consumers to intuitively discover new entertainment from many sources and locations. The company also provides extensive entertainment discovery solutions for television, movies, music and photos to its customers in the consumer electronics, cable and satellite, entertainment and online distribution markets. These solutions, complemented by a leading collection of entertainment data, create the connections between people and technology, and enable them to discover and manage entertainment in an enjoyable form.

Rovi holds over 4,700 issued or pending patents worldwide and is headquartered in Santa Clara, California, with numerous offices across the United States and around the world including Japan, Hong Kong, Luxembourg, and the United Kingdom. More information about Rovi can be found at www.rovicorp.com.
 

All statements contained herein, including the quotations attributed to Mr. Amoroso and Mr. Budge, that are not statements of historical fact, including statements that use the words “will,” “believes,” “anticipates,” “estimates,” “expects,” “intends” or “looking to the future” or similar words that describe the Company’s or its management’s future plans, objectives, or goals, are “forward-looking statements” and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the Company’s estimates of future revenues and earnings, business strategies, and future opportunities for product, market or customer expansion.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Such factors include, among others, the Company’s ability to successfully execute on its strategic plan and customer demand for and industry acceptance of the Company’s technologies and integrated solutions. Such factors are further addressed in the Company's Annual Report on Form 10-K for the period ended December 31, 2010 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at www.sec.gov). The Company assumes no obligation, except as required by law, to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

# # #
 
Investor Contact:
James Budge
Rovi Corporation
+1 (408) 562-8400

Lauren Landfield
Rovi Corporation
+1 (408) 562-8400
 
 
 

 
 
ROVI CORPORATION
             
GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
             
(IN THOUSANDS, EXCEPT PER SHARE DATA)
             
(UNAUDITED)
             
               
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
December 31,
 
2010
 
2009
 
2010
 
2009
               
Revenues
 $          140,184
 
 $          137,100
 
 $         541,490
 
 $         480,450
               
Costs and expenses:
             
    Cost of revenues
      17,285
 
      20,396
 
      99,129
 
      65,258
    Research and development
      24,297
 
       24,121
 
      95,687
 
      91,984
    Selling, general and administrative
      40,641
 
      34,637
 
     142,197
 
    132,939
    Depreciation
        4,595
 
        4,849
 
      18,758
 
      18,368
    Amortization of intangible assets
      19,823
 
      20,637
 
      80,395
 
      81,934
    Restructuring and asset impairment charges
             -
 
             -
 
             -
 
      53,619
   Total costs and expenses
     106,641
 
    104,640
 
    436,166
 
    444,102
               
Operating income from continuing operations
      33,543
 
      32,460
 
    105,324
 
      36,348
Interest expense
     (10,544)
 
     (10,595)
 
    (42,935)
 
    (52,028)
Interest income and other, net
             21
 
           757
 
        1,770
 
        4,558
Gain on interest rate swaps and caps, net
        5,097
 
             -
 
      34,197
 
             -
Loss on debt redemption
         (836)
 
             -
 
     (16,806)
 
      (8,687)
Gain on sale of strategic investments
             -
 
             -
 
        5,895
 
             -
               
Income (loss) from continuing operations before income taxes
      27,281
 
      22,622
 
      87,445
 
     (19,809)
Income tax (benefit) expense
    (40,749)
 
      22,007
 
   (139,213)
 
       (1,421)
Income (loss) from continuing operations, net of tax
              68,030
 
                   615
 
            226,658
 
             (18,388)
Discontinued operations, net of tax
                 (845)
 
                2,012
 
             (13,774)
 
            (34,563)
Net income (loss)
 $           67,185
 
 $             2,627
 
 $         212,884
 
 $          (52,951)
               
Basic earnings per common share:
             
    Basic income (loss) per share from continuing operations
 $               0.65
 
 $               0.01
 
 $               2.20
 
 $              (0.18)
    Basic income (loss) per share from discontinued operations
 $            (0.01)
 
 $               0.02
 
 $            (0.14)
 
 $              (0.34)
    Basic net earnings per share
 $               0.64
 
 $               0.03
 
 $               2.06
 
 $              (0.52)
               
Shares used in computing basic net earnings per share
     104,018
 
     101,895
 
    102,658
 
    100,860
               
Diluted earnings per common share:
             
    Diluted income (loss) per share from continuing operations
 $               0.60
 
 $                     -
 
 $               2.07
 
 $              (0.18)
    Diluted income (loss) per share from discontinued operations
 $            (0.01)
 
 $               0.02
 
 $            (0.13)
 
 $              (0.34)
    Diluted net earnings per share
 $               0.59
 
 $               0.02
 
 $               1.94
 
 $              (0.52)
               
Shares used in computing diluted net earnings per share
     112,843
 
    104,549
 
     109,175
 
    100,860
               
See notes to the GAAP Consolidated Financial Statements in our Form 10-K.
               
 
 
 

 
 
ROVI CORPORATION
     
GAAP CONSOLIDATED BALANCE SHEETS
     
(IN THOUSANDS)
     
(UNAUDITED)
     
       
 
December 31,
 
2010
 
2009
ASSETS
     
Current assets:
     
    Cash and cash equivalents
 $                200,195
 
 $                 165,410
    Short-term investments
            295,120
 
            107,362
    Restricted cash
                       -
 
             36,838
    Trade accounts receivable, net
             78,672
 
              71,875
    Taxes receivable
                6,811
 
               6,363
    Deferred tax assets, net
              15,403
 
               7,844
    Prepaid expenses and other current assets
              12,639
 
              10,661
    Total current assets
           608,840
 
           406,353
Long-term marketable securities
           200,852
 
             26,674
Property and equipment, net
             39,205
 
              43,124
Finite-lived intangible assets, net
           702,385
 
            779,371
Long-term deferred tax assets, net
                       -
 
              13,691
Other assets
             48,785
 
              27,861
Goodwill
            857,216
 
           854,065
             Total assets
 $            2,457,283
 
 $              2,151,139
LIABILITIES AND STOCKHOLDERS' EQUITY
     
Current liabilities:
     
    Accounts payable and accrued expenses
 $                  74,512
 
 $                   81,369
    Deferred revenue
              15,577
 
              16,536
    Current portion of long-term debt
            130,816
 
              18,486
    Total current liabilities
           220,905
 
             116,391
Taxes payable, less current portion
             56,566
 
             80,675
Long-term debt, less current portion
           378,083
 
             411,551
Deferred revenue, less current portion
               3,995
 
                4,919
Long-term, deferred tax liabilities, net
             26,249
 
                       -
Other non current liabilities
              19,293
 
              17,334
    Total liabilities
            705,091
 
           630,870
Redeemable equity component of convertible debt
               3,859
 
                       -
Stockholders’ equity:
     
    Common stock
                   112
 
                   106
    Treasury stock
           (134,931)
 
           (25,068)
    Additional paid-in capital
         1,781,986
 
         1,657,888
    Accumulated other comprehensive loss
               (1,139)
 
             (2,078)
    Retained earnings (deficit)
            102,305
 
           (110,579)
    Total stockholders’ equity
         1,748,333
 
         1,520,269
    Total liabilities and stockholders' equity
 $            2,457,283
 
 $              2,151,139
       
See notes to the GAAP Consolidated Financial Statements in our Form 10-K.

 
 

 
 
 
ROVI CORPORATION
                       
ADJUSTED PRO FORMA RECONCILIATION
                       
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                       
(UNAUDITED)
                       
   
Three Months Ended
 
Three Months Ended
   
December 31, 2010
 
December 31, 2009
   
GAAP
     
Adjusted
 
GAAP
     
Adjusted
   
Pro Forma (9)
 
Adjustments
 
Pro Forma
 
Pro Forma (9)
 
Adjustments
 
Pro Forma
Revenues:
                       
  Service providers
 
 $    70,478
 
 $              -
 
 $  70,478
 
 $  62,451
 
 $                -
 
 $   62,451
  CE manufacturers
 
 52,454
 
 -
 
 52,454
 
 61,247
 
 -
 
 61,247
  Other
 
 17,252
 
 -
 
 17,252
 
 13,402
 
 -
 
 13,402
   
 140,184
 
 -
 
 140,184
 
 137,100
 
 -
 
 137,100
Costs and expenses:
                       
  Cost of revenues (1)
 
 17,285
 
 (466)
 
 16,819
 
 20,396
 
 (3,651)
 
 16,745
  Research and development (2)
 
 24,297
 
 (2,208)
 
 22,089
 
 24,121
 
 (1,430)
 
 22,691
  Selling, general and administrative (3)
 
 40,641
 
 (11,159)
 
 29,482
 
 34,637
 
 (4,718)
 
 29,919
  Depreciation (4)
 
 4,595
 
 -
 
 4,595
 
 4,849
 
 -
 
 4,849
  Amortization of intangible assets
 
 19,823
 
 (19,823)
 
 -
 
 20,637
 
 (20,637)
 
 -
  Total costs and expenses
 
 106,641
 
 (33,656)
 
 72,985
 
 104,640
 
 (30,436)
 
 74,204
Operating income from continuing operations
 
 33,543
 
 33,656
 
 67,199
 
 32,460
 
 30,436
 
 62,896
Interest expense (5)
 
 (10,544)
 
 9,652
 
 (892)
 
 (10,595)
 
 5,396
 
 (5,199)
Interest income and other, net
 
 21
 
 -
 
 21
 
 757
 
 -
 
 757
Gain on interest rate swaps and caps, net (6)
 
 5,097
 
 (5,097)
 
 -
 
 -
 
 -
 
 -
Loss on debt redemption
 
 (836)
 
 836
 
 -
 
 -
 
 -
 
 -
Income from continuing operations before income taxes
 
 27,281
 
 39,047
 
 66,328
 
 22,622
 
 35,832
 
 58,454
Income tax (benefit) expense (7)
 
 (40,749)
 
 47,382
 
 6,633
 
 22,007
 
 (15,577)
 
 6,430
Income from continuing operations, net of tax
 
 $       68,030
 
 $  (8,335)
 
 $  59,695
 
 $         615
 
 $     51,409
 
 $  52,024
Diluted income per share from continuing operations
 
 $           0.60
     
 $       0.54
 
 $              -
     
 $      0.50
Shares used in computing diluted net earnings per share (8)
 
 112,843
 
 (2,544)
 
 110,299
 
 104,549
 
 (541)
 
 104,008
                         
(1) Adjustments to cost of revenues consist of the following:
                       
       
2010
 
2009
           
         Equity based compensation
     
 $  (466)
 
 $      (279)
           
         Court awarded fees
     
 -
 
 (3,372)
           
             Total adjustment
     
 $  (466)
 
 $  (3,651)
           
                         
(2) Adjustments to research and development consist of $2.2 million and $1.4 million for equity based compensation in the three months ended December 31, 2010 and 2009, respectively.
                         
(3) Adjustments to selling, general and administrative consist of the following:
                       
       
2010
 
2009
           
         Equity based compensation
     
 $    (5,919)
 
 $  (4,718)
           
         Transaction costs
     
 (5,240)
 
 -
           
             Total adjustment
     
 $ (11,159)
 
 $  (4,718)
           
                         
(4)  While depreciation is a non-cash item, it is included in Adjusted Pro Forma Income From Continuing Operations as management considers it a proxy for capital expenditures.
(5) Adjustments eliminate non-cash interest expense such as amortization of note issuance costs and the convertible note discount recorded under ASC 470-20 (formerly known as FSP APB 14-1) and reclass to include the impact of interest rate swaps on interest expense.
(6) Adjustment eliminates non-cash mark-to-market gain of $1.9 million related to interest rate swaps and caps and reclassifies the $3.2 million current period benefit from the interest rate swap to interest expense.
(7) Adjusts tax expense to the adjusted pro forma cash tax rate.
(8) Recognizes the benefit of convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, which is excluded from GAAP EPS calculation as it is anti-dilutive.
(9) GAAP Pro Forma information is the same as our GAAP results.  No adjustments have been made to the GAAP results since they are comparative with prior quarters' pro forma results.
                         

 
 

 
 
ROVI CORPORATION
                       
ADJUSTED PRO FORMA RECONCILIATION
                       
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                       
(UNAUDITED)
                       
   
Twelve Months Ended
 
Twelve Months Ended
   
December 31, 2010
 
December 31, 2009
   
GAAP
     
Adjusted
 
GAAP
     
Adjusted
   
Pro Forma (11)
 
Adjustments
 
Pro Forma
 
Pro Forma
 
Adjustments
 
Pro Forma
Revenues:
                       
  Service providers
 
 $         267,458
 
 $                    -
 
 $         267,458
 
 $         230,727
 
 $                     -
 
 $         230,727
  CE manufacturers
 
               216,625
 
                                   -
 
               216,625
 
               199,905
 
                                   -
 
               199,905
  Other
 
                  57,407
 
                                   -
 
                  57,407
 
                   49,818
 
                                   -
 
                   49,818
   
               541,490
 
                                   -
 
               541,490
 
              480,450
 
                                   -
 
              480,450
Costs and expenses:
                       
  Cost of revenues (1)
 
                   99,129
 
             (29,955)
 
                   69,174
 
                  65,258
 
                 (4,652)
 
                  60,606
  Research and development (2)
 
                  95,687
 
                  (7,817)
 
                  87,870
 
                   91,984
 
                 (4,595)
 
                  87,389
  Selling, general and administrative (3)
 
                142,197
 
             (30,250)
 
                 111,947
 
               132,939
 
              (18,745)
 
                 114,194
  Depreciation (4)
 
                   18,758
 
                                   -
 
                   18,758
 
                   18,368
 
                                   -
 
                   18,368
  Amortization of intangible assets
 
                  80,395
 
             (80,395)
 
                                   -
 
                   81,934
 
              (81,934)
 
                                   -
  Restructuring and asset impairment charges (5)
 
                                   -
 
                                   -
 
                                   -
 
                   53,619
 
              (53,619)
 
                                   -
  Total costs and expenses
 
               436,166
 
           (148,417)
 
              287,749
 
               444,102
 
          (163,545)
 
              280,557
Operating income from continuing operations
 
               105,324
 
                148,417
 
               253,741
 
                  36,348
 
               163,545
 
               199,893
Interest expense (6)
 
             (42,935)
 
                  35,943
 
                 (6,992)
 
             (45,433)
 
                   17,037
 
             (28,396)
Interest income and other, net (7)
 
                       1,770
 
                            992
 
                      2,762
 
                      4,558
 
                                   -
 
                      4,558
Gain on interest rate swaps and caps, net (8)
 
                   34,197
 
              (34,197)
 
                                   -
 
                                   -
 
                                   -
 
                                   -
Loss on debt redemption
 
              (16,806)
 
                   16,806
 
                                   -
 
                 (8,687)
 
                      8,687
 
                                   -
Gain on sale of strategic investments
 
                      5,895
 
                 (5,895)
 
                                   -
 
                                   -
 
                                   -
 
                                   -
Income (loss) from continuing operations before income taxes
 
                  87,445
 
               162,066
 
                249,511
 
               (13,214)
 
               189,269
 
               176,055
Income tax (benefit) expense (9)
 
           (139,213)
 
                164,164
 
                   24,951
 
                            797
 
                   18,569
 
                   19,366
Income (loss) from continuing operations, net of tax
 
 $         226,658
 
 $            (2,098)
 
 $         224,560
 
 $           (14,011)
 
 $          170,700
 
 $          156,689
Diluted income (loss) per share from continuing operations
 
 $                2.07
     
 $                2.09
 
 $               (0.14)
     
 $                 1.52
Shares used in computing diluted net earnings per share (10)
 
                109,175
 
                  (2,031)
 
                107,144
 
               100,860
 
                       1,254
 
                 102,114
                         
(1) Adjustments to cost of revenues consist of the following:
                       
       
2010
 
2009
           
         Equity based compensation
     
 $           (1,471)
 
 $                (783)
           
         Transition and integration costs
     
                                   -
 
                       (497)
           
         Court awarded fees
     
                                   -
 
                 (3,372)
           
         Expenses related to certain Gemstar pre-acquisition indemnification and other
                       
           matters in excess of reserves established in purchase accounting
     
             (28,484)
 
                                   -
           
             Total adjustment
     
 $        (29,955)
 
 $            (4,652)
           
                         
(2) Adjustments to research and development consist of the following:
                       
       
2010
 
2009
           
         Equity based compensation
     
 $          (7,817)
 
 $            (4,440)
           
         Transition and integration costs
     
                                   -
 
                        (155)
           
             Total adjustment
     
 $          (7,817)
 
 $            (4,595)
           
                         
(3) Adjustments to selling, general and administrative consist of the following:
                       
       
2010
 
2009
           
         Equity based compensation
     
 $        (25,010)
 
 $          (17,123)
           
         Transaction costs
     
                 (5,240)
 
                        (617)
           
         Transition and integration costs
     
                                   -
 
                  (1,005)
           
             Total adjustment
     
 $        (30,250)
 
 $          (18,745)
           
                         
(4)  While depreciation is a non-cash item, it is included in Adjusted Pro Forma Income From Continuing Operations as management considers it a proxy for capital expenditures.
(5) For 2009, adjustment eliminates $44.7 million of non-cash asset impairment charges and $8.9 million of restructuring charges.
(6) Adjustments eliminate non-cash interest expense such as amortization of note issuance costs and the convertible note discount recorded under ASC 470-20 (formerly known as FSP APB 14-1) and reclass to include the impact of interest rate swaps on interest expense.
(7) Adjustment eliminates the $1.0 million loss related to exiting the Guideworks Joint Venture.
(8) Adjustment eliminates non-cash mark-to-market gain of $24.4 million related to interest rate swaps and caps and reclassifies the $9.8 million current period benefit from the interest rate swap to interest expense.
(9) For the 2010 period, the adjustments eliminate both the discrete income tax benefit due to the release of tax contingency reserves related to the net operating losses of the Company’s former TV Guide Magazine business and the expense related to the valuation allowance established against the corresponding deferred tax assets, and adjusts tax expense to the adjusted pro forma cash tax rate.  For 2009, adjusts tax expense to the adjusted pro forma cash tax rate.
(10) For the 2010 period, recognizes the benefit of convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, which is excluded from GAAP EPS calculation as it is anti-dilutive.  For the 2009 period, adjust to include dilutive potential common shares as adjustments to pro forma loss from continuing operations resulted in Adjusted Pro Forma Net Income.
(11) GAAP Pro Forma information for the 2010 period is the same as our GAAP results.  No adjustments have been made to the GAAP results since they are comparative with prior quarters' pro forma results.
                         

 
 

 

ROVI CORPORATION
                 
QUARTERLY REVENUE SUMMARY
                 
(IN THOUSANDS)
                 
(UNAUDITED)
                 
                   
                   
   
Three Months Ended
 
   
March 31,
 
June 30,
 
September 30,
 
December 31,
 
   
2010
 
2010
 
2010
 
2010
 
Revenues:
                 
     Service providers
 
 $             67,399
 
 $             63,870
 
 $               65,711
 
 $              70,478
 
     CE manufacturers
 
                 48,579
 
                 57,701
 
                 57,891
 
                52,454
 
     Other
 
                  13,392
 
                 12,337
 
                 14,426
 
                 17,252
 
     Total revenues
 
 $            129,370
 
 $           133,908
 
 $           138,028
 
 $            140,184