Attached files
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| 8-K - 8-K - Rovi Corp | a8-kearnings123112.htm |
EXHIBIT 99.1
 | Rovi Corporation 2830 De La Cruz Blvd. Santa Clara, CA 95050 |
ROVI CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR 2012 FINANCIAL PERFORMANCE
Company Makes Significant Progress in Transition Year as it Builds Foundation for Future Growth
SANTA CLARA, Calif. (GLOBE NEWSWIRE) — February 13, 2013—Rovi Corporation (NASDAQ: ROVI) today reported financial results for the fourth quarter and full year 2012 ended December 31, 2012. All 2011 and 2012 results presented in this release have been adjusted to reflect the reclassification of the Rovi Entertainment Store business, which the Company has put up for sale, as discontinued operations.
The Company reported fourth quarter GAAP revenue of $157.0 million, compared to $174.3 million in the fourth quarter of 2011. Fourth quarter 2012 GAAP net income was $2.1 million, compared to a GAAP net loss of $49.3 million for the fourth quarter of 2011. The fourth quarter of 2011 included a $40.6 million impairment charge to reduce the carrying value of the intangible assets of the Roxio Consumer Software business to fair value less costs to sell. On a non-GAAP basis, fourth quarter Adjusted Pro Forma Income was $47.9 million, compared to $70.6 million in the fourth quarter of 2011, and Adjusted Pro Forma Income Per Common Share was $0.48, compared to $0.65 in the fourth quarter of 2011. The year-over-year declines were primarily attributable to reductions in revenue within the Company's consumer electronics vertical.
For the full year 2012, the Company reported 2012 GAAP revenues of $650.6 million, compared to $681.0 million for 2011. The full year 2012 GAAP net loss was $34.3 million, compared to a GAAP net loss of $41.3 million for 2011. Non-GAAP Adjusted Pro Forma Income for full year 2012 was $222.9 million, compared to $289.4 million for 2011. Adjusted Pro Forma Income Per Common Share was $2.12 for 2012, compared to $2.56 for 2011.
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.
“As we close out 2012, we are proud of all that we accomplished in this transition year - particularly as we eliminated more than $26 million in annualized costs while working to re-define our strategic focus, reorganize the business around our core assets and improve our product execution,” said Tom Carson, President and CEO of Rovi. “In 2013, we will continue executing on our strategic plan to position Rovi for sustainable growth in years to come. We look forward to strengthening our core business and creating our role at the center of the new value chain as digital entertainment continues to transition to TV Everywhere and IP video delivery.”
Business Outlook
Consistent with the information provided at the Company's investor day in early January, Rovi anticipates fiscal year 2013 revenue of between $630 million and $660 million, and Adjusted Pro Forma Income Per Common Share of between $1.90 and $2.20, excluding revenues and results from the Rovi Entertainment Store business, which has been reclassified as discontinued operations.
Conference Call Information
Rovi management will host a conference call today, February 13, 2013, at 2:00 p.m. PT / 5:00 p.m. ET to discuss the financial results. Investors and analysts interested in participating in the conference are welcome to call 1-800-762-8779
(or international +1-480-629-9771) and reference the Rovi call. The conference call can also be accessed via live webcast in the Investor Relations section of Rovi's website at http://www.rovicorp.com/.
A replay of the conference call will be available through April 30, 2013 and can be accessed by calling 1-800-406-7325 (or international +1-303-590-3030) and entering access code 4594114#. 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 its next quarterly earnings call.
Non-GAAP or Adjusted Pro Forma Information
Rovi Corporation provides non-GAAP Adjusted Pro Forma information. References to Adjusted Pro Forma information are references to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma information to assist investors in assessing its current and future operations in the way that its management evaluates those operations. Adjusted Pro Forma Income and 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. Adjusted Pro Forma information is not a substitute for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP pro forma information prepared in accordance with ASC 805, Business Combinations.
Adjusted Pro Forma and GAAP pro forma measures assume the Sonic Solutions business combination, the Roxio software and Rovi Entertainment Store business dispositions all occurred on January 1, 2010. Adjusted Pro Forma Income is defined as GAAP 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, caps and foreign currency collars 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 or modification of debt and gains on sale of strategic investments. While depreciation expense is a non-cash item, it is included in Adjusted Pro Forma Income as a reasonable proxy for capital expenditures.
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.
The Company's management has evaluated and made operating decisions about its business operations primarily based upon 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, expenses in connection with the early redemption or modification of debt and gains on sale of strategic investments. 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, caps, foreign currency collars, 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 or cost of the interest rate swaps from gain or loss on interest rate swaps and caps, net to interest expense in order for interest expense to reflect the swap rates, as these instruments were entered into to control the interest rate the Company effectively pays on its convertible debt. Management includes the benefit of the convertible debt call option, which allows the Company to purchase 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. This convertible debt call option was exercised in August 2011.
Management is using 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 helps 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 recognizes that the use of 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 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 measures, these Non-GAAP measures may have limited usefulness in comparing companies. Management believes, however, that providing Adjusted Pro Forma financial information, in addition to GAAP financial information, facilitates consistent comparison of the Company's financial performance over time. The Company provides Adjusted Pro Forma financial 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.
About Rovi Corporation
Rovi powers the discovery, delivery, display and monetization of digital entertainment. With innovative technology solutions for consumer electronics manufacturers, service providers, content producers, advertisers, retailers and websites, Rovi connects people and the entertainment they love. The company holds over 5,000 issued or pending patents worldwide and is headquartered in Santa Clara, California. More information about Rovi can be found at rovicorp.com.
Forward Looking Statements
All statements contained herein, including the quotations attributed to Mr. Carson, that are not statements of historical fact, including statements that use the words “will,” “believes,” “anticipates,” “estimates,” “expects,” “intends” 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 revenues and earnings for the 2013 fiscal year, business strategies, and possible sale of its Rovi Entertainment Store business.
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.
Investor Contacts
Peter Halt
Rovi Corporation
+1 (818) 295-6800
Chris Keller
Rovi Corporation
+1 (408) 562-8400
# # #
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 | Twelve Months Ended | |||||||||||||||
December 31, | 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. | ||||||||||||||||||||||||