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Tessera Technologies Announces Third Quarter 2012 Results

About Tessera Technologies, Inc.

Tessera Technologies, Inc. is a holding company with operating subsidiaries in two segments: Intellectual Property and DigitalOptics. The Intellectual Property business, comprised of engineering, licensing, account administration and litigation teams, generates revenue from manufacturers that use its patented ideas. The DigitalOptics business delivers innovation in imaging and optics with products and capabilities that enable expanded functionality in increasingly smaller devices. DigitalOptics’ miniaturized camera module solutions provide cost-effective, high-quality camera features, including Micro Electro Mechanical Systems (“MEMS”)-based autofocus, extended depth of field (“EDoF”), zoom, image enhancement and optical image stabilization. DigitalOptics also offers customized micro-optic lenses from diffractive and refractive optical elements to integrated micro-optical subassemblies. For more information call 1.408.321.6000 or visit www.tessera.com.

Tessera, Tessera, Inc., the Tessera logo, DigitalOptics Corporation, and Invensas Corporation are trademarks or registered trademarks of affiliated companies of Tessera Technologies, Inc. in the United States and other countries. All other company, brand and product names may be trademarks or registered trademarks of their respective companies.

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the Company’s earnings release contains non-GAAP financial measures adjusted for either one-time or ongoing non-cash acquired intangibles amortization charges, acquired in-process research and development, all forms of stock-based compensation, impairment charges on long-lived assets and goodwill, and related tax effects. The non-GAAP financial measures also exclude the effects of FASB Accounting Standards Codification 718, “ Stock Compensation” upon the number of diluted shares used in calculating non-GAAP earnings per share. Management believes that the non-GAAP measures used in this release provide investors with important perspectives into the Company’s ongoing business performance. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

Set forth below are reconciliations of non-GAAP net income to the Company’s reported GAAP net income.
TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
         
 
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
Revenues:
Royalty and license fees $ 60,114 $ 55,271 $ 161,563 $ 182,931
Past production payments 79 - 79 -
Product and service revenues   12,497     4,071     19,145     14,914  
 
Total revenues   72,690     59,342     180,787     197,845  
 
Operating expenses:
Cost of revenues 16,748 5,594 28,105 16,467
Research, development and other related costs 24,615 18,690 72,930 56,088
Selling, general and administrative 24,010 20,432 73,058 62,671
Litigation expense 9,689 9,059 19,905 22,263
Goodwill impairment - 49,653 - 49,653
Restructuring charges   -     2,938     -     4,997  
 
Total operating expenses 75,062 106,366 193,998 212,139
 
Operating loss (2,372 ) (47,024 ) (13,211 ) (14,294 )
Other income and expense, net   3,725     690     5,380     2,024  
 
Income (loss) before taxes 1,353 (46,334 ) (7,831 ) (12,270 )
Provision for (benefit from) income taxes   2,465     (1,598 )   1,778     9,668  
 
Net loss $ (1,112 ) $ (44,736 ) $ (9,609 ) $ (21,938 )
 
Basic and diluted net loss per share:
Net loss per share-basic $ (0.02 ) $ (0.87 ) $ (0.19 ) $ (0.43 )
 
Net loss per share-diluted $ (0.02 ) $ (0.87 ) $ (0.19 ) $ (0.43 )

 
Cash dividends declared per share $ 0.10   $ -   $ 0.20   $ -  
 
Weighted average number of shares used in per share calculations-basic   52,093     51,364     51,908     50,980  
 
Weighted average number of shares used in per share calculations-diluted   52,093     51,364     51,908     50,980  
TESSERA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
       
September 30, December 31,
2012 2011
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 124,954 $ 55,758
Short-term investments 340,952 436,687
Accounts receivable, net 14,083 8,599
Inventories 3,261 1,574
Short-term deferred tax assets 2,032 1,892
Other current assets   23,695     13,664  
Total current assets   508,977     518,174  
 
Property and equipment, net 50,987 36,319
Intangible assets, net 126,128 141,326
Goodwill 6,844 -
Long-term deferred tax assets 15,456 18,223
Other assets   10,597     2,484  
Total assets $ 718,989   $ 716,526  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,086 $ 7,203
Accrued legal fees 7,003 6,110
Accrued liabilities 18,190 20,824
Deferred revenue   4,223     2,610  
Total current liabilities   42,502     36,747  
 
Long-term deferred tax liabilities 4,083 4,083
Other long-term liabilities 5,407 5,017
 
Stockholders' equity:
Common stock 53 52
Additional paid-in capital 478,770 462,697
Treasury stock (10,588 ) (10,505 )
Accumulated other comprehensive income 374 24
Retained earnings   198,388     218,411  
Total stockholders' equity   666,997     670,679  
 
Total liabilities and stockholders' equity $ 718,989   $ 716,526  
TESSERA TECHNOLOGIES, INC.
RECONCILIATION TO NON-GAAP INCOME FROM GAAP NET LOSS
(in thousands, except per share amounts)
(unaudited)
           
 
Three Months Ended Nine Months Ended
September 30,     September 30,
2012 2011 2012 2011
 
GAAP net loss $ (1,112 ) $ (44,736 ) $ (9,609 ) $ (21,938 )
Adjustments to GAAP net loss:
Stock-based compensation - cost of revenues 106 67

 
504 339
Stock-based compensation - research, development and other related costs 1,326 1,694

 
4,990 6,548
Stock-based compensation - selling, general and administrative 2,548 3,598 7,755 13,363
Amortization of acquired intangibles - cost of revenues 1,860 1,703

 
5,891 5,117
Amortization of acquired intangibles - research, development and other related costs 1,348 872

 
4,054 2,365
Amortization of acquired intangibles - selling, general and administration 2,985 1,736

 
8,965 5,066
Impairment of goodwill - 49,653 - 49,653
Tax adjustments for non-GAAP items   (2,564 )   (3,947 )

 
  (8,048 )   (9,503 )
Non-GAAP net income $ 6,497   $ 10,640   $ 14,502   $ 51,010  
Non-GAAP net income per common share - diluted $ 0.12   $ 0.20   $ 0.27   $ 0.97  
 

Weighted average number of shares used in per share calculations excluding the effects of 123R - diluted
53,029 52,590 52,986 52,396
TESSERA TECHNOLOGIES, INC.
CONSOLIDATED REVENUE DETAILS
(in thousands)
(unaudited)
             
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Revenues:
Intellectual Property Segment
Royalty and license fees $ 57,721 $ 50,312 $ 149,723 $ 164,414
Past production payments 79 - 79 -
Product and service revenues   66   -   66   -
Total Intellectual Property revenues 57,866 50,312 149,868 164,414
 
DigitalOptics Segment
Royalty and license fees 2,393 4,959 11,840 18,517
Product and service revenues   12,431   4,071   19,079   14,914
Total DigitalOptics revenues 14,824 9,030 30,919 33,431
       
Total revenues $ 72,690 $ 59,342 $ 180,787 $ 197,845

TSRA-E

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