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Rovi Corporation Reports Fourth Quarter And Full Year 2012 Financial Performance

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, and the Company's completion of a sale transaction involving the Rovi Entertainment Store business. Such factors are further addressed in the Company's Annual Report on Form 10-K for the period ended December 31, 2012 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.

Rovi Q4 2012 Business and Operating Highlights:

  Discovery:

IP Licensing:

  • Reached a settlement with Philips for patent infringement proceedings in Germany
  • Vizio and Rovi entered into a settlement and multi-year patent license agreement, and agreed to dismiss all pending litigation between the parties
  • Continued to license new platforms, signing agreements with a widely deployed place-shifting consumer electronics device manufacturer and with Canadian IPTV provider Beanfield Metroconnect
  • Began a new Blu-ray disc licensing program, signing an agreement with one of the world's largest BD software suppliers, covering worldwide PC deployments for some of the world's largest PC makers
  • With Kabel KBW as a licensee Rovi now licenses two of the three largest German operators
  • For the full year, invention disclosures were up over 300% and patent applications were up over 20% compared to last year

Guide Products:

  • Renewed 32 North American MSOs
  • Signed Latin America DTA agreements with VideoMar, Tricom, and Cablevision Argentina
  • Delivered TotalGuide HTML 1.2 to Panasonic
  • Licensed to Rogers Communications Rovi's Remote Record and TotalGuide xD
  • Still on track to deploy TotalGuide solutions at six MSOs during the first half of 2013
  • Introduced Rovi Services Gateway at CES

Advertising:

  • Repeat advertising campaigns, including Ford, Hurrycane, Lloyds, Mattel, Stuffies, Servus Credit Union and UMG
  • Introduced in-app and new video advertising capabilities at CES

Video Delivery and Display:

DivX:

  • Launched DivX 9.0 in November 2012
  • Deployed storefront powered by DivX Plus Streaming for Dixons mobile
  • Over 859 million devices now deployed with DivX technology

Other:

Data:

  • Renewed agreements with a major web portal and a large digital music service
  • Increased the level of music and TV programming data provided to the Shazam service
  • Increased the level of content provided to a large CE manufacturer for its music service, a large web portal company, and a major radio station group, among others.   
  • Added to our client list a provider of Automatic Content Recognition for the second screen, a second screen companion app provider and several internet based companies

For additional business metrics, see our investor presentation located at: http://ir.rovicorp.com/presentations.aspx?iid=4206196

ROVI CORPORATION    
GAAP CONSOLIDATED STATEMENTS OF OPERATIONS    
(IN THOUSANDS, EXCEPT PER SHARE DATA)    
(UNAUDITED)    
     
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011 2012 2011
Revenues $156,951 $174,313 $650,573 $680,975
Costs and expenses:  
Cost of revenues 29,960 26,158 110,163 96,888
Research and development 34,819 41,060 147,648 149,310
Selling, general and administrative 38,652 42,296 156,963 177,199
Depreciation 5,067 4,937 20,770 19,534
Amortization of intangible assets 26,131 27,128 103,926 104,711
Restructuring and asset impairment charges 546 1,969 5,094 20,800
Total costs and expenses 135,175 143,548 544,564 568,442
Operating income from continuing operations 21,776 30,765 106,009 112,533
Interest expense (16,535) (13,002) (61,742) (53,776)
Interest income and other, net (222) 898 3,203 4,859
Debt modification expense (4,496)
Gain (loss) on interest rate swaps and caps, net 30 (2,857) (10,624) (4,314)
Loss on debt redemption (2,096) (1,758) (11,514)
Income from continuing operations before income taxes 5,049 13,708 30,592 47,788
Income tax (benefit) expense (4,394) 11,405 15,691 8,723
Income from continuing operations, net of tax 9,443 2,303 14,901 39,065
Discontinued operations, net of tax (7,302) (51,649) (49,245) (80,351)
Net income (loss) $2,141 $(49,346) $(34,344) $(41,286)
Basic earnings per share:        
Basic income per share from continuing operations $0.09 $0.02 $0.14 $0.36
Basic loss per share from discontinued operations (0.07) (0.48) (0.47) (0.74)
Basic net income (loss) per share $0.02 $(0.46) $(0.33) $(0.38)
Shares used in computing basic net earnings per share 100,677 108,923 104,623 108,923
Diluted earnings per share:        
Diluted income per share from continuing operations $0.09 $0.02 $0.14 $0.34
Diluted loss per share from discontinued operations (0.07) (0.47) (0.47) (0.70)
Diluted net income (loss) per share $0.02 $(0.45) $(0.33) $(0.36)
Shares used in computing diluted net earnings per share 100,740 113,131 104,941 113,131
         
See notes to the GAAP Consolidated Financial Statements in our Form 10-K.
     
ROVI CORPORATION    
GAAP CONSOLIDATED BALANCE SHEETS    
(IN THOUSANDS)    
(UNAUDITED)    
     
  December 31, 2012 December 31, 2011
ASSETS    
Current assets:    
Cash and cash equivalents $285,352 $136,780
Short-term investments 577,988 283,433
Trade accounts receivable, net 106,018 126,752
Taxes receivable 9,237 2,976
Deferred tax assets, net 20,373 32,152
Prepaid expenses and other current assets 26,786 15,056
Assets held for sale 76,852 20,344
Total current assets 1,102,606 617,493
Long-term marketable investment securities 104,893 65,267
Property and equipment, net 32,791 43,203
Finite-lived intangible assets, net 689,494 815,049
Other assets 23,862 41,610
Goodwill 1,341,035 1,364,145
Total assets $3,294,681 $2,946,767
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable and accrued expenses $94,830 $107,037
Deferred revenue 16,152 16,460
Current portion of long-term debt 106,407 25,500
Liabilities held for sale 11,053 5,445
Total current liabilities 228,442 154,442
Taxes payable, less current portion 50,800 63,980
Long-term debt, less current portion 1,373,818 969,598
Deferred revenue, less current portion 3,921 4,041
Long-term deferred tax liabilities, net 41,596 36,267
Other non current liabilities 8,683 25,687
Total liabilities 1,707,260 1,254,015
Stockholders' equity:    
Common stock 125 123
Treasury stock (634,571) (482,479)
Additional paid-in capital 2,196,567 2,114,402
Accumulated other comprehensive loss (1,375) (313)
Retained earnings 26,675 61,019
Total stockholders' equity 1,587,421 1,692,752
Total liabilities and stockholders' equity $3,294,681 $2,946,767
 
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
  March 31, 2012 March 31, 2011
  GAAP   Adjusted GAAP   Adjusted
  Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:            
Service provider $79,354 $— $79,354 $72,843 $— $72,843
CE discovery and advertising 38,199 38,199 30,164 30,164
CE video delivery and display 37,470 37,470 52,716 52,716
Other 16,704 16,704 17,359 17,359
Total revenues 171,727 171,727 173,082 173,082
Costs and expenses:            
Cost of revenues (2) 25,152 (1,215) 23,937 23,302 (634) 22,668
Research and development (3) 40,165 (6,252) 33,913 33,770 (5,091) 28,679
Selling, general and administrative (4) 40,476 (9,768) 30,708 49,461 (12,106) 37,355
Depreciation (5) 5,000 5,000 4,803 4,803
Amortization of intangible assets 25,635 (25,635) 26,049 (26,049)
Restructuring and asset impairment charges 1,372 (1,372) 2,082 (2,082)
Total costs and expenses 137,800 (44,242) 93,558 139,467 (45,962) 93,505
Operating income from continuing operations 33,927 44,242 78,169 33,615 45,962 79,577
Interest expense (6) (12,148) 6,189 (5,959) (12,978) 8,932 (4,046)
Interest income and other, net 1,610 1,610 1,798 1,798
Debt modification expense (4,464) 4,464
Loss (gain) on interest rate swaps and caps, net (7) (104) 104 85 (85)
Loss on debt redemption (1,758) 1,758 (9,070) 9,070
Income from continuing operations before income taxes 17,063 56,757 73,820 13,450 63,879 77,329
Income tax expense (8) 4,543 624 5,167 9,524 (3,338) 6,186
Income from continuing operations, net of tax $12,520 $56,133 $68,653 $3,926 $67,217 $71,143
Diluted income per share from continuing operations $0.12   $0.63 $0.03   $0.61
Shares used in computing diluted net earnings per share (9) 108,269   108,269 119,513 (2,476) 117,037
             
(1) GAAP Pro Forma financial information for the 2012 period is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior quarter's pro forma results. GAAP Pro Forma financial information for the 2011 period has been prepared in accordance with ASC 805, Business Combinations, and assumes the acquisition of Sonic, and sale of Roxio Consumer Software and Rovi Entertainment Store businesses had occurred on January 1, 2010.
(2) Adjustments to cost of revenues consist of the following:      
    March 31, 2012 March 31, 2011      
Equity based compensation   $(1,215) $(603)      
Transition and integration costs (31)      
Total adjustment   $(1,215) $(634)      
(3) Adjustments to research and development consist of the following:      
    March 31, 2012 March 31, 2011      
Equity based compensation   $(6,252) $(3,944)      
Transition and integration costs (1,147)      
Total adjustment   $(6,252) $(5,091)      
(4) Adjustments to selling, general and administrative consist of the following:      
  March 31, 2012 March 31, 2011      
Equity based compensation   $(9,768) $(7,980)      
Transition and integration costs (4,126)      
Total adjustment   $(9,768) $(12,106)      
(5) 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.
(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 non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
(9) For the 2011 period, adjustment recognizes the benefit of convertible debt call option, which allows the Company to purchase shares of its own stock at approximately $28.28, and which is excluded from GAAP EPS calculation as it is anti-dilutive.
             
             
ROVI CORPORATION            
ADJUSTED PRO FORMA RECONCILIATION            
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            
(UNAUDITED)            
             
  Three Months Ended Three Months Ended
  June 30, 2012 June 30, 2011
  GAAP   Adjusted GAAP   Adjusted
  Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:            
Service provider $77,607 $— $77,607 $74,449 $— $74,449
CE discovery and advertising 31,861 31,861 41,539 41,539
CE video delivery and display 32,980 32,980 44,068 44,068
Other 13,850 13,850 16,653 16,653
Total revenues 156,298 156,298 176,709 176,709
Costs and expenses:            
Cost of revenues (2) 27,134 (1,250) 25,884 23,791 (1,198) 22,593
Research and development (3) 37,451 (6,793) 30,658 38,624 (7,748) 30,876
Selling, general and administrative (4) 40,366 (8,961) 31,405 47,769 (14,435) 33,334
Depreciation (5) 5,289 5,289 4,999 4,999
Amortization of intangible assets 25,914 (25,914) 26,897 (26,897)
Restructuring and asset impairment charges 14,838 (14,838)
Total costs and expenses 136,154 (42,918) 93,236 156,918 (65,116) 91,802
Operating income from continuing operations 20,144 42,918 63,062 19,791 65,116 84,907
Interest expense (6) (16,405) 6,241 (10,164) (14,178) 7,933 (6,245)
Interest income and other, net 187 187 1,122 1,122
Debt modification expense (32) 32
Loss on interest rate swaps and caps, net (7) (6,308) 6,308 (697) 697
Loss on debt redemption (348) 348
(Loss) income from continuing operations before income taxes (2,414) 55,499 53,085 5,690 74,094 79,784
Income tax expense (8) 1,834 2,944 4,778 4,979 1,404 6,383
(Loss) income from continuing operations, net of tax $(4,248) $52,555 $48,307 $711 $72,690 $73,401
Diluted (loss) income per share from continuing operations $(0.04)   $0.45 $0.01   $0.64
Shares used in computing diluted net earnings per share (9) 107,035 433 107,468 115,818 (795) 115,023
             
(1) GAAP Pro Forma financial information for the 2012 period is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior quarter's pro forma results. GAAP Pro Forma financial information for the 2011 period has been prepared in accordance with ASC 805, Business Combinations, and assumes the acquisition of Sonic, and sale of Roxio Consumer Software and Rovi Entertainment Store businesses had occurred on January 1, 2010.
(2) Adjustments to cost of revenues consist of the following:
    June 30, 2012 June 30, 2011      
Equity based compensation   $(1,250) $(807)      
Transition and integration costs   (391)      
Total adjustment   $(1,250) $(1,198)      
(3) Adjustments to research and development consist of the following:    
    June 30, 2012 June 30, 2011      
Equity based compensation   $(6,793) $(5,267)      
Transition and integration costs   (2,481)      
Total adjustment   $(6,793) $(7,748)      
(4) Adjustments to selling, general and administrative consist of the following:        
    June 30, 2012 June 30, 2011      
Equity based compensation   $(8,961) $(9,006)      
Transition and integration costs   (5,429)      
Total adjustment   $(8,961) $(14,435)      
(5) 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.
(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 non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
(9) For the 2012 period, since the adjustments resulted in Adjusted Pro Forma Net Income, shares used in computing diluted net earnings per share were adjusted to include dilutive common equivalent shares outstanding. For the 2011 period, adjustment recognizes the benefit of convertible debt call option, which allows the Company to purchase shares of its own stock at approximately $28.28, and which is excluded from GAAP EPS calculation as it is anti-dilutive.  
             
ROVI CORPORATION            
ADJUSTED PRO FORMA RECONCILIATION            
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            
(UNAUDITED)            
  Three Months Ended Three Months Ended
  September 30, 2012 September 30, 2011
  GAAP   Adjusted GAAP   Adjusted
  Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:            
Service provider $78,692 $— $78,692 $74,464 $— $74,464
CE discovery and advertising 27,847 27,847 57,597 57,597
CE video delivery and display 44,686 44,686 30,032 30,032
Other 14,372 14,372 16,652 16,652
Total revenues 165,597 165,597 178,745 178,745
Costs and expenses:            
Cost of revenues (2) 27,917 (645) 27,272 25,223 (1,347) 23,876
Research and development (3) 35,213 (4,792) 30,421 39,931 (8,218) 31,713
Selling, general and administrative (4) 37,469 (7,631) 29,838 44,592 (12,416) 32,176
Depreciation (5) 5,414 5,414 5,022 5,022
Amortization of intangible assets 26,246 (26,246) 26,549 (26,549)
Restructuring and asset impairment charges 3,176 (3,176) 1,911 (1,911)
Total costs and expenses 135,435 (42,490) 92,945 143,228 (50,441) 92,787
Operating income from continuing operations 30,162 42,490 72,652 35,517 50,441 85,958
Interest expense (6) (16,654) 6,148 (10,506) (13,610) 7,444 (6,166)
Interest income and other, net 1,628 1,628 855 855
Loss on interest rate swaps and caps, net (7) (4,242) 4,242 (845) 845
Income from continuing operations before income taxes 10,894 52,880 63,774 21,917 58,730 80,647
Income tax expense (8) 13,708 (7,968) 5,740 6,778 (326) 6,452
(Loss) income from continuing operations, net of tax $(2,814) $60,848 $58,034 $15,139 $59,056 $74,195
Diluted (loss) income per share from continuing operations $(0.03)   $0.56 $0.14   $0.66
Shares used in computing diluted net earnings per share (9) 103,307 37 103,344 111,897 (359) 111,538
             
(1) GAAP Pro Forma financial information for the 2012 period is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior quarter's pro forma results. GAAP Pro Forma financial information for the 2011 period has been prepared in accordance with ASC 805, Business Combinations, and assumes the acquisition of Sonic, and sale of Roxio Consumer Software and Rovi Entertainment Store businesses had occurred on January 1, 2010.
(2) Adjustments to cost of revenues consist of the following:      
    September 30, 2012 September 30, 2011      
Equity based compensation   $(645) $(1,114)      
Transition and integration costs    — (233)      
Total adjustment   $(645) $(1,347)      
(3) Adjustments to research and development consist of the following:      
    September 30, 2012 September 30, 2011      
Equity based compensation   $(4,792) $(5,222)      
Transition and integration costs    — (2,996)      
Total adjustment   $(4,792) $(8,218)      
(4) Adjustments to selling, general and administrative consist of the following:      
    September 30, 2012 September 30, 2011      
Equity based compensation   $(7,631) $(9,879)      
Transition and integration costs    — (2,537)      
Total adjustment   $(7,631) $(12,416)      
(5) 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.
(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 non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
(9) For the 2012 period, since the adjustments resulted in Adjusted Pro Forma Net Income, shares used in computing diluted net earnings per share were adjusted to include dilutive common equivalent shares outstanding. For the 2011 period, adjustment recognizes the benefit of convertible debt call option, which allows the Company to purchase shares of its own stock at approximately $28.28, and which is excluded from GAAP EPS calculation as it is anti-dilutive.
           
           
ROVI CORPORATION          
ADJUSTED PRO FORMA RECONCILIATION          
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)          
(UNAUDITED)              
               
    Three Months Ended Three Months Ended
    December 31, 2012 December 31, 2011
    GAAP   Adjusted GAAP   Adjusted
    Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:              
Service provider   $81,400 $— $81,400 $78,127 $— $78,127
CE discovery and advertising   34,786 34,786 40,009 40,009
CE video delivery and display   25,334 25,334 40,380 40,380
Other   15,431 15,431 15,797 15,797
Total revenues   156,951 156,951 174,313 174,313
Costs and expenses:              
Cost of revenues (2)   29,960 (1,091) 28,869 26,158 (1,650) 24,508
Research and development (3)   34,819 (8,339) 26,480 41,060 (9,590) 31,470
Selling, general and administrative (4)   38,652 (7,394) 31,258 42,296 (10,929) 31,367
Depreciation (5)   5,067 5,067 4,937 4,937
Amortization of intangible assets   26,131 (26,131) 26,030 (26,030)
Restructuring and asset impairment charges 546 (546) 1,969 (1,969)
Total costs and expenses 135,175 (43,501) 91,674 142,450 (50,168) 92,282
Operating income from continuing operations 21,776 43,501 65,277 31,863 50,168 82,031
Interest expense (6) (16,535) 6,065 (10,470) (13,002) 6,829 (6,173)
Interest income and other, net (222) 1,292 1,070 898 898
Gain (loss) on interest rate swaps and caps, net (7) 30 (30) (2,857) 2,857
Loss on debt redemption (2,096) 2,096
Income from continuing operations before income taxes 5,049 50,828 55,877 14,806 61,950 76,756
Income tax (benefit) expense (8) (4,394) 12,378 7,984 11,427 (5,287) 6,140
Income from continuing operations, net of tax $9,443 $38,450 $47,893 $3,379 $67,237 $70,616
Diluted income per share from continuing operations $0.09   $0.48 $0.03   $0.65
Shares used in computing diluted net earnings per share 100,740   100,740 108,383   108,383
               
(1) GAAP Pro Forma financial information for the 2012 period is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior quarter's pro forma results. GAAP Pro Forma financial information for the 2011 period has been prepared in accordance with ASC 805, Business Combinations, and assumes the acquisition of Sonic, and sale of Roxio Consumer Software and Rovi Entertainment Store businesses had occurred on January 1, 2010.
(2) Adjustments to cost of revenues consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(921) $(1,229)      
Transition and integration costs (170) (421)      
Total adjustment   $(1,091) $(1,650)      
(3) Adjustments to research and development consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(6,033) $(6,218)      
Transition and integration costs (2,306) (3,372)      
Total adjustment   $(8,339) $(9,590)      
(4) Adjustments to selling, general and administrative consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(6,961) $(9,407)      
Transition and integration costs (433) (1,522)      
Total adjustment   $(7,394) $(10,929)      
(5) 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.
(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 non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
           
           
ROVI CORPORATION          
ADJUSTED PRO FORMA RECONCILIATION      
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)       
(UNAUDITED)            
             
    Twelve Months Ended Twelve Months Ended
    December 31, 2012 December 31, 2011
    GAAP   Adjusted GAAP   Adjusted
    Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:              
Service provider $317,053 $— $317,053 $299,883 $— $299,883
CE discovery and advertising 132,693 132,693 169,309 169,309
CE video delivery and display 140,470 140,470 167,196 167,196
Other   60,357 60,357 66,461 66,461
Total revenues 650,573 650,573 702,849 702,849
Costs and expenses:            
Cost of revenues (2) 110,163 (4,201) 105,962 98,474 (4,829) 93,645
Research and development (3) 147,648 (26,176) 121,472 153,385 (30,647) 122,738
Selling, general and administrative (4) 156,963 (33,754) 123,209 184,118 (49,886) 134,232
Depreciation (5) 20,770 20,770 19,761 19,761
Amortization of intangible assets 103,926 (103,926) 105,525 (105,525)
Restructuring and asset impairment charges 5,094 (5,094) 20,800 (20,800)
Total costs and expenses 544,564 (173,151) 371,413 582,063 (211,687) 370,376
Operating income from continuing operations 106,009 173,151 279,160 120,786 211,687 332,473
Interest expense (6) (61,742) 24,643 (37,099) (53,768) 31,138 (22,630)
Interest income and other, net 3,203 1,292 4,495 4,673 4,673
Debt modification expense (4,496) 4,496
Loss on interest rate swaps and caps, net (7) (10,624) 10,624 (4,314) 4,314
Loss on debt redemption (1,758) 1,758 (11,514) 11,514
Income from continuing operations before income taxes 30,592 215,964 246,556 55,863 258,653 314,516
Income tax expense (8) 15,691 7,978 23,669 32,708 (7,547) 25,161
Income from continuing operations, net of tax $14,901 $207,986 $222,887 $23,155 $266,200 $289,355
Diluted income per share from continuing operations $0.14   $2.12 $0.20   $2.56
Shares used in computing diluted net earnings per share (9) 104,941   104,941 113,890 (908) 112,982
               
(1) GAAP Pro Forma financial information for the 2012 period is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior period's pro forma results. GAAP Pro Forma financial information for the 2011 period has been prepared in accordance with ASC 805, Business Combinations, and assumes the acquisition of Sonic, and sale of Roxio Consumer Software and Rovi Entertainment Store businesses had occurred on January 1, 2010.
(2) Adjustments to cost of revenues consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(4,031) $(3,753)      
Transition and integration costs (170) (1,076)      
Total adjustment   $(4,201) $(4,829)      
(3) Adjustments to research and development consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(23,870) $(20,651)      
Transition and integration costs (2,306) (9,996)      
Total adjustment   $(26,176) $(30,647)      
(4) Adjustments to selling, general and administrative consist of the following:        
      December 31, 2012 December 31, 2011      
Equity based compensation $(33,321) $(36,272)      
Transition and integration costs (433) (13,614)      
Total adjustment   $(33,754) $(49,886)      
(5) 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.
(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 non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
(9) For the 2011 period, adjustment recognizes the benefit of convertible debt call option, which allows the Company to purchase shares of its own stock at approximately $28.28, and which is excluded from GAAP EPS calculation as it is anti-dilutive.
CONTACT: Investor Contacts
         
         Peter Halt
         Rovi Corporation
         +1 (818) 295-6800
         
         Chris Keller
         Rovi Corporation
         +1 (408) 562-8400

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