Stock-based compensation expense. These expenses primarily relate to employee stock options, employee stock purchase plans, and employee non-vested equity stock and non-vested stock units. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Additionally, given the fact that other companies may grant different amounts and types of equity awards and may use different option valuation assumptions, excluding stock-based compensation expense permits more accurate comparisons of the Company’s results with peer companies.

Acquisition-related transaction costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current periods’ portion of any retention bonus expense associated with the acquisitions. The Company excludes these expenses in order to provide better comparability between periods.

Restructuring charges. These charges may consist of severance, contractual retention payments, exit costs and other charges and are excluded because such charges are not directly related to ongoing business results and do not reflect expected future operating expenses.

Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the core operation of the Company’s business.

Costs of restatement and related legal activities. These expenses consist primarily of investigation, audit, legal and other professional fees related to the 2006-2007 stock option investigation and related litigation, as well as recoveries received from third parties. The Company excludes these costs and recoveries from its non-GAAP measures primarily because the Company believes that these non-recurring costs and recoveries have no direct correlation to the core operation of the Company’s business.

Non-cash interest expense. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company’s results with other peer companies and to more accurately reflect the Company’s ongoing operations.

Reversal of one-time litigation costs. This adjustment is a one-time litigation cost reversal of prior litigation costs accrued related to previously awarded costs in connection with the SK Hynix litigation. The Company excludes this reversal from its non-GAAP measures because the Company believes that this reversal has no direct correlation to the core operations of the Company’s business and it is a one-time event.

Severance costs. These expenses relate to the separation payment to the Company’s former chief executive officer. The Company excludes these costs from its non-GAAP measures because the Company believes that these non-recurring costs have no direct correlation to the core operations of the Company’s business.

Income tax adjustments. For purposes of internal forecasting, planning and analyzing future periods that assumes net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 36 percent. Accordingly, the Company has applied the 36 percent tax rate to its non-GAAP financial results to assist the Company’s planning for future periods.

On occasion in the future, there may be other items, such as impairment of goodwill and long-lived assets, or significant gains or losses from contingencies, that the Company may exclude in deriving its non-GAAP financial measures if it believes that doing so is consistent with the goal of providing useful information to investors and management.

About Rambus Inc.

Rambus is the innovative technology solutions company that brings invention to market. Unleashing the intellectual power of our world-class engineers and scientists in a collaborative and synergistic way, Rambus invents, licenses and develops solutions that challenge and enable our customers to create the future. While best known for creating unsurpassed semiconductor memory architectures, Rambus is also developing world-changing products and services in security, advanced LED lighting and displays, and immersive mobile media. For additional information visit rambus.com.

RMBSFN

Rambus Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
		June 30,     2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents		$	155,276		$	148,984
Marketable securities			50,364			54,346
Accounts receivable			1,003			529
Prepaids and other current assets			8,694			10,529
Deferred taxes			788			788
Total current assets			216,125			215,176
Intangible assets, net			139,395			153,173
Goodwill			124,969			124,969
Property, plant and equipment, net			75,831			86,905
Deferred taxes, long-term			4,806			4,458
Other assets			3,118			3,131
Total assets		$	564,244		$	587,812
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,300		$	7,918
Accrued salaries and benefits			29,582			23,992
Accrued litigation expenses			1,673			9,822
Convertible notes, short-term			155,473			—
Other accrued liabilities			5,957			12,402
Total current liabilities			197,985			54,134
Long-term liabilities:
Convertible notes, long-term			—			147,556
Long-term imputed financing obligation			39,724			45,919
Other long-term liabilities			10,600			18,609
Total long-term liabilities			50,324			212,084
Total stockholders’ equity			315,935			321,594
Total liabilities and stockholders’ equity		$	564,244		$	587,812

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
			2013				2012				2013				2012
Revenue:
Royalties		$	57,009			$	55,723			$	123,231			$	117,766
Contract revenue			910				492				1,554				1,312
Total revenue			57,919				56,215				124,785				119,078
Operating costs and expenses:
Cost of revenue (1)			7,365				7,340				13,899				14,503
Research and development (1)			30,777				38,347				63,625				76,741
Marketing, general and administrative (1)			14,134				32,194				39,239				67,028
Gain from sale of intellectual property			(103	)			—				(1,388	)			—
Costs of restatement and related legal activities			2				83				19				113
Restructuring charges			—				—				2,206				—
Total operating costs and expenses			52,175				77,964				117,600				158,385
Operating income (loss)			5,744				(21,749	)			7,185				(39,307	)
Interest income and other income (expense), net			(19	)			89				(39	)			187
Interest expense			(7,426	)			(6,719	)			(14,738	)			(13,299	)
Interest and other income (expense), net			(7,445	)			(6,630	)			(14,777	)			(13,112	)
Loss before income taxes			(1,701	)			(28,379	)			(7,592	)			(52,419	)
Provision for income taxes			4,743				3,837				9,254				7,687
Net loss		$	(6,444	)		$	(32,216	)		$	(16,846	)		$	(60,106	)
Net loss per share:
Basic		$	(0.06	)		$	(0.29	)		$	(0.15	)		$	(0.54	)
Diluted		$	(0.06	)		$	(0.29	)		$	(0.15	)		$	(0.54	)
Weighted average shares used in per share calculation
Basic			112,183				110,553				111,892				110,456
Diluted			112,183				110,553				111,892				110,456
_________
(1) Total stock-based compensation expense for the three and six month periods ended June 30, 2013 and June 30, 2012 are presented as follows:
		Three Months Ended June 30,								Six Months Ended June 30,
			2013				2012				2013				2012
Cost of revenue		$	5			$	5			$	5			$	15
Research and development		$	1,660			$	2,631			$	3,536			$	5,351
Marketing, general and administrative		$	1,909			$	3,579			$	4,981			$	7,575

Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (In thousands) (Unaudited)
		Three Months Ended									Six Months Ended
		June 30,    2013			March 31,   2013			June 30,    2012			June 30,    2013			June 30,    2012
Revenue		$	57,919		$	66,866		$	56,215		$	124,785		$	119,078
Adjustments:
Other patent royalties received			3,392			5,237			1,201			8,629			3,615
Total customer licensing income		$	61,311		$	72,103		$	57,416		$	133,414		$	122,693
Operating costs and expenses		$	52,175		$	65,425		$	77,964		$	117,600		$	158,385
Adjustments:
Other patent royalties received			965			1,285			—			2,250			—
Stock-based compensation			(3,574	)		(4,948	)		(6,215	)		(8,522	)		(12,941	)
Acquisition-related transaction costs and retention bonuses			(3,385	)		(4,012	)		(7,699	)		(7,397	)		(17,050	)
Amortization			(6,997	)		(7,040	)		(7,943	)		(14,037	)		(15,559	)
Reversal of one-time litigation costs			8,482			—			—			8,482			—
Restructuring charges			—			(2,206	)		—			(2,206	)		—
Severance costs			—			(514	)		—			(514	)		—
Costs of restatement and related legal activities			(2	)		(17	)		(83	)		(19	)		(113	)
Non-GAAP operating costs and expenses		$	47,664		$	47,973		$	56,024		$	95,637		$	112,722
Operating income (loss)		$	5,744		$	1,441		$	(21,749	)	$	7,185		$	(39,307	)
Adjustments:
Other patent royalties received			2,427			3,952			1,201			6,379			3,615
Stock-based compensation			3,574			4,948			6,215			8,522			12,941
Acquisition-related transaction costs and retention bonuses			3,385			4,012			7,699			7,397			17,050
Amortization			6,997			7,040			7,943			14,037			15,559
Reversal of one-time litigation costs			(8,482	)		—			—			(8,482	)		—
Restructuring charges			—			2,206			—			2,206			—
Severance costs			—			514			—			514			—
Costs of restatement and related legal activities			2			17			83			19			113
Non-GAAP operating income		$	13,647		$	24,130		$	1,392		$	37,777		$	9,971
Loss before income taxes		$	(1,701	)	$	(5,891	)	$	(28,379	)	$	(7,592	)	$	(52,419	)
Adjustments:
Other patent royalties received			2,427			3,952			1,201			6,379			3,615
Stock-based compensation			3,574			4,948			6,215			8,522			12,941
Acquisition-related transaction costs and retention bonuses			3,385			4,012			7,699			7,397			17,050
Amortization			6,997			7,040			7,943			14,037			15,559
Reversal of one-time litigation costs			(8,482	)		—			—			(8,482	)		—
Restructuring charges			—			2,206			—			2,206			—
Severance costs			—			514			—			514			—
Costs of restatement and related legal activities			2			17			83			19			113
Non-cash interest expense on convertible notes			4,145			4,089			3,557			8,234			7,067
Non-GAAP income (loss) before income taxes		$	10,347		$	20,887		$	(1,681	)	$	31,234		$	3,926
Non-GAAP provision for (benefit from) income taxes			3,725			7,519			(606	)		11,244			1,413
Non-GAAP net income (loss)		$	6,622		$	13,368		$	(1,075	)	$	19,990		$	2,513
Non-GAAP basic net income (loss) per share		$	0.06		$	0.12		$	(0.01	)	$	0.18		$	0.02
Non-GAAP diluted net income (loss) per share		$	0.06		$	0.11		$	(0.01	)	$	0.17		$	0.02
Weighted average shares used in non-GAAP per share calculation:
Basic			112,183			111,599			110,553			111,892			110,456
Diluted			116,162			118,021			110,553			116,009			116,909