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.

Impairment of goodwill and long-lived assets. These charges consist of non-cash charges to goodwill and long-lived assets and are excluded because such charges are non-recurring and do not reduce the Company’s liquidity.

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 that the Company was required to pay 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 assume net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 36%. Accordingly, the Company has applied the 36% 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 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)
		September 30, 2013				December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents		$	307,961			$	148,984
Marketable securities		58,396				54,346
Accounts receivable		1,597				529
Prepaids and other current assets		6,038				10,529
Deferred taxes		288				788
Total current assets		374,280				215,176
Intangible assets, net		132,448				153,173
Goodwill		116,899				124,969
Property, plant and equipment, net		72,772				86,905
Deferred taxes, long-term		4,806				4,458
Other assets		3,801				3,131
Total assets		$	705,006			$	587,812
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,967			$	7,918
Accrued salaries and benefits		30,336				23,992
Accrued litigation expenses		1,020				9,822
Convertible notes, short-term		159,731				—
Other accrued liabilities		7,293				12,402
Total current liabilities		204,347				54,134
Long-term liabilities:
Convertible notes, long-term		108,316				147,556
Long-term imputed financing obligation		39,685				45,919
Other long-term liabilities		9,536				18,609
Total long-term liabilities		157,537				212,084
Total stockholders’ equity		343,122				321,594
Total liabilities and stockholders’ equity		$	705,006			$	587,812

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Revenue:
Royalties		71,013				57,361				194,244				175,127
Contract and other revenue		2,281				169				3,835				1,481
Total revenue		73,294				57,530				198,079				176,608
Operating costs and expenses:
Cost of revenue (1)		8,958				7,529				22,857				22,032
Research and development (1)		27,553				30,674				91,178				107,415
Marketing, general and administrative (1)		18,698				24,255				57,937				91,283
Gain from sale of intellectual property		—				—				(1,388		)		—
Costs of restatement and related legal activities		—				79				19				192
Restructuring charges		1,129				6,622				3,335				6,622
Impairment of goodwill and long-lived assets		8,070				35,471				8,070				35,471
Gain from settlement		(179		)		—				(179		)		—
Total operating costs and expenses		64,229				104,630				181,829				263,015
Operating income (loss)		9,065				(47,100		)		16,250				(86,407		)
Interest income and other income (expense), net		66				(12		)		(1,373		)		175
Interest expense		(8,552		)		(7,121		)		(23,290		)		(20,420		)
Interest and other income (expense), net		(8,486		)		(7,133		)		(24,663		)		(20,245		)
Income (loss) before income taxes		579				(54,233		)		(8,413		)		(106,652		)
Provision for income taxes		6,304				3,865				15,558				11,552
Net loss		(5,725		)		(58,098		)		(23,971		)		(118,204		)
Net loss per share:
Basic		$	(0.05	)		(0.52		)		$	(0.21	)		$	(1.07	)
Diluted		$	(0.05	)		$	(0.52	)		$	(0.21	)		$	(1.07	)
Weighted average shares used in per share calculation
Basic		112,640				110,826				112,144				110,580
Diluted		112,640				110,826				112,144				110,580

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