[February 20, 2014] |
|
Acacia Research Reports Fourth Quarter and Year End Financial Results and Announces Payment of Quarterly Dividend
NEWPORT BEACH, Calif. --(Business Wire)--
Acacia Research Corporation(1) (Nasdaq: ACTG) today reported
results for the three months and year ended December 31, 2013.
Fourth Quarter 2013 Results
-
Revenues were $15,065,000, as compared to $66,264,000 in the
comparable prior year quarter.
-
GAAP net loss was $33,333,000, or $0.69 per diluted share, as compared
to GAAP net income of $9,823,000, or $0.20 per diluted share for the
comparable prior year quarter.
-
Non-GAAP net loss was $10,556,000, or $0.22 per diluted share, as
compared to non-GAAP net income of $41,849,000, or $0.84 per diluted
share for the comparable prior year quarter. See below for information
regarding non-GAAP measures.
-
During the fourth quarter of 2013 we acquired control of 3 new patent
portfolios.
Fiscal Year 2013 Results
-
Revenues were $130,556,000, as compared to revenues of $250,727,000 in
the comparable prior year.
-
GAAP net loss was $56,434,000, or $1.18 per diluted share, as compared
to net income of $59,453,000, or $1.21 per diluted share for the
comparable prior year.
-
Non-GAAP net income was $23,720,000, or $0.48 per diluted share, as
compared to non-GAAP net income of $137,339,000, or $2.80 per diluted
share for the comparable prior year. See below for information
regarding non-GAAP measures.
-
During fiscal year 2013 we acquired control of 25 new patent
portfolios.
Approval of Quarterly Dividend
Acacia Research Corporation also announced today that its Board of
Directors has approved a quarterly cash dividend, payable in the amount
of $0.125 per share, which will be paid on March 31, 2014, to
shareholders of record at the close of business on March 3, 2014. Future
cash dividends are expected to be paid on a quarterly basis and will be
at the discretion of the Board of Directors.
Consolidated Financial Results
Overview
Financial results and operating activities during the periods presented
included the following:
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (in thousands)
|
|
|
$
|
15,065
|
|
|
|
$
|
66,264
|
|
|
|
|
$
|
130,556
|
|
|
|
$
|
250,727
|
Net income (loss) (in thousands)
|
|
|
$
|
(33,333
|
)
|
|
|
$
|
9,823
|
|
|
|
|
$
|
(56,434
|
)
|
|
|
$
|
59,453
|
Non-GAAP net income (loss) (in thousands)
|
|
|
$
|
(10,556
|
)
|
|
|
$
|
41,849
|
|
|
|
|
$
|
23,720
|
|
|
|
$
|
137,339
|
Diluted earnings (loss) per share
|
|
|
$
|
(0.69
|
)
|
|
|
$
|
0.20
|
|
|
|
|
$
|
(1.18
|
)
|
|
|
$
|
1.21
|
Pro forma non-GAAP net earnings per common share - diluted
|
|
|
$
|
(0.22
|
)
|
|
|
$
|
0.84
|
|
|
|
|
$
|
0.48
|
|
|
|
$
|
2.80
|
New agreements executed
|
|
|
24
|
|
|
|
27
|
|
|
|
|
120
|
|
|
|
138
|
Licensing and enforcement programs generating revenues
|
|
|
23
|
|
|
|
27
|
|
|
|
|
53
|
|
|
|
68
|
Licensing and enforcement programs with initial revenues
|
|
|
4
|
|
|
|
9
|
|
|
|
|
23
|
|
|
|
31
|
New patent portfolios
|
|
|
3
|
|
|
|
9
|
|
|
|
|
25
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, trailing twelve-month revenues were as follows
(in thousands):
As of Date:
|
|
|
Trailing Twelve- Month Revenues
|
|
|
% Change
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
$
|
130,556
|
|
|
|
(28
|
)%
|
September 30, 2013
|
|
|
$
|
181,755
|
|
|
|
(10
|
)%
|
June 30, 2013
|
|
|
$
|
201,174
|
|
|
|
(12
|
)%
|
March 31, 2013
|
|
|
$
|
228,548
|
|
|
|
(9
|
)%
|
December 31, 2012
|
|
|
$
|
250,727
|
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013, on a consolidated basis, we have generated
revenues from 166 technology licensing and enforcement programs, as
compared to 143 programs as December 31, 2012.
Summary Financial Results
For the Three Months and Fiscal Years Ended December 31, 2013 and
2012
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (in thousands)
|
|
|
$
|
15,065
|
|
|
|
$
|
66,264
|
|
|
|
|
$
|
130,556
|
|
|
|
$
|
250,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New agreements executed
|
|
|
24
|
|
|
|
27
|
|
|
|
|
120
|
|
|
|
138
|
Licensing and enforcement programs generating revenues
|
|
|
23
|
|
|
|
27
|
|
|
|
|
53
|
|
|
|
68
|
Licensing and enforcement programs with initial revenues
|
|
|
4
|
|
|
|
9
|
|
|
|
|
23
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter 2013 compared to Fourth Quarter 2012. Revenues in
the fourth quarter of 2013 decreased $51,199,000, or 77%, to
$15,065,000, as compared to $66,264,000 in the comparable prior year
quarter. In the fourth quarter of 2013, two licensees
individually accounted for 35% and 11% of revenues recognized, as
compared to two licensees individually accounting for 38%
and 37% of revenues recognized during the fourth quarter of 2012.
Fiscal Year 2013 compared to Fiscal Year 2012. Revenues in fiscal
year 2013 decreased $120,171,000, or 48%, to $130,556,000, as compared
to $250,727,000 in the prior year. In fiscal year 2013, two licensees
individually accounted for 38% and 16% of revenues recognized, as
compared to four licensees individually accounting for 21%,
14%, 10% and 10% of revenues recognized in fiscal year 2012.
Cost of Revenues (in thousands):
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
Inventor royalties
|
|
|
$
|
3,280
|
|
|
$
|
3,829
|
|
|
|
$
|
29,724
|
|
|
$
|
26,028
|
Contingent legal fees
|
|
|
3,181
|
|
|
5,463
|
|
|
|
24,784
|
|
|
24,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter 2013 revenues, less inventor royalties expense and
contingent legal fees expense totaled $8,604,000, or 57% of related
quarterly revenues, as compared to $56,972,000, or 86%, in the
comparable prior year quarter.
Fiscal year 2013 revenues, less inventor royalties expense and
contingent legal fees expense totaled $76,048,000, or 58% of related
fiscal year 2013 revenues, as compared to $200,048,000, or 80%, in the
prior year.
The decrease in fourth quarter and fiscal year 2013 revenues, less
inventor royalties expense and contingent legal fees expense as a
percentage of related quarterly and annual revenues, respectively, was
primarily due to, on average, a higher percentage of revenues generated
in the fourth quarter and fiscal year 2012 having no inventor royalty
obligations and lower overall average inventor royalty and contingent
legal fee rates for the portfolios generating revenues in the fourth
quarter and fiscal year 2012, as compared to the fourth quarter and
fiscal year 2013. Inventor royalties and contingent legal fees expenses
fluctuate period to period, based on the amount of revenues recognized
each period and the economic terms of the patent portfolio acquisition
agreements and contingent legal fee arrangements, if any, associated
with the specific patent portfolios generating revenues each period.
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Litigation and licensing expenses - patents
|
|
|
$
|
8,899
|
|
|
$
|
6,969
|
|
|
|
$
|
39,335
|
|
|
$
|
21,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter and fiscal year 2013 litigation and licensing
expenses-patents increased due primarily to an increase in international
enforcement costs, an increase in strategic patent portfolio prosecution
costs, and a net increase in litigation support and third-party
technical consulting expenses associated with ongoing and new licensing
and enforcement programs commenced during 2013 (fiscal year period
only). We expect litigation and licensing expenses to continue to
fluctuate period to period in connection with our current and future
patent licensing and enforcement activities.
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of patents
|
|
|
$
|
16,735
|
|
|
$
|
18,088
|
|
|
|
$
|
53,658
|
|
|
$
|
39,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in amortization expense for the periods presented was due to
the following:
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013 vs. 2012
|
|
|
|
2013 vs. 2012
|
|
|
|
|
|
|
|
|
Patent portfolios acquired since the end of the prior year period
|
|
|
$
|
886
|
|
|
|
|
$
|
1,790
|
|
Patent portfolios acquired during the comparable prior year period
|
|
|
3,207
|
|
|
|
|
19,144
|
|
Accelerated amortization related to recovery of upfront advances
|
|
|
(10,065
|
)
|
|
|
|
(9,982
|
)
|
Acquisition of Adaptix, Inc.
|
|
|
-
|
|
|
|
|
411
|
|
Patent portfolio dispositions
|
|
|
4,619
|
|
|
|
|
3,276
|
|
Total change in patent amortization expense
|
|
|
$
|
(1,353
|
)
|
|
|
|
$
|
14,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Operating Expenses (in thousands):
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, general and administrative expenses
|
|
|
$
|
6,906
|
|
|
$
|
8,253
|
|
|
|
$
|
31,335
|
|
|
$
|
28,426
|
Non-cash stock compensation expense - MG&A
|
|
|
7,082
|
|
|
8,282
|
|
|
|
27,894
|
|
|
25,657
|
Total marketing, general and administrative expenses
|
|
|
$
|
13,988
|
|
|
$
|
16,535
|
|
|
|
$
|
59,229
|
|
|
$
|
54,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter 2013 marketing, general and administrative expenses
decreased due primarily to a decrease in non-cash stock compensation
charges resulting from a decrease in restricted shares expensed in the
fourth quarter of 2013, and a decrease in variable performance-based
compensation costs.
Fiscal year 2013 marketing, general and administrative expenses
increased due primarily to a net increase in personnel costs in
connection with the enhancement of our business development, licensing
and engineering teams, an increase in other non-recurring personnel
severance costs including the impact of non-recurring cash and non-cash
charges associated with Mr. Ryan's board of directors approved
retirement severance package, and a net increase in corporate legal,
facilities, general and administrative costs. The increase was partially
offset by a decrease in variable performance-based compensation costs.
Income Taxes:
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for) income taxes (in thousands)
|
|
|
$
|
(3,390
|
)
|
|
|
$
|
(5,757
|
)
|
|
|
|
$
|
21,958
|
|
|
|
$
|
(22,060
|
)
|
Effective tax rate
|
|
|
11
|
%
|
|
|
37
|
%
|
|
|
|
27
|
%
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax benefit for fiscal 2013 reflects the application of an annual
effective tax rate to the GAAP pre-tax net loss reported for fiscal
2013. The fiscal year 2013 effective tax rate was lower than the U.S.
federal statutory rate primarily due to an increase in the valuation
allowance related to foreign tax credits generated in 2013 and certain
nondeductible expenses.
The fiscal year 2012 effective tax rate was lower than the U.S. federal
statutory rate primarily due to $10.2 million of tax benefits recognized
resulting from the release of valuation allowance on the majority of our
net deferred tax assets in the first quarter of 2012 and certain
nondeductible expenses.
Financial Condition (in thousands)
Summary Balance Sheet Information:
|
|
|
December 31, 2013
|
|
|
|
December 31, 2012
|
|
|
|
|
Cash and cash equivalents and investments
|
|
|
$
|
256,702
|
|
|
|
$
|
311,279
|
Accounts receivable
|
|
|
6,341
|
|
|
|
9,843
|
Total assets
|
|
|
593,393
|
|
|
|
668,717
|
Accounts payable and accrued expenses
|
|
|
11,555
|
|
|
|
9,235
|
Royalties and contingent legal fees payable
|
|
|
10,447
|
|
|
|
12,508
|
Accrued patent acquisition costs
|
|
|
4,000
|
|
|
|
250
|
Total liabilities
|
|
|
31,195
|
|
|
|
50,239
|
|
|
|
|
|
|
|
|
Summary Cash Flow Information:
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
$
|
1,310
|
|
|
|
$
|
34,373
|
|
|
|
|
$
|
(3,509
|
)
|
|
|
$
|
104,603
|
|
Investing activities
|
|
|
22,076
|
|
|
|
(57,641
|
)
|
|
|
|
(66,059
|
)
|
|
|
(408,792
|
)
|
Financing activities
|
|
|
(15,004
|
)
|
|
|
(19,079
|
)
|
|
|
|
(25,551
|
)
|
|
|
211,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent Acquisition Costs. Patent related acquisition costs in the
fourth quarter of 2013 totaled $14,645,000, as compared to $113,300,000
during the comparable prior year quarter.
Patent related acquisition costs in fiscal year 2013 totaled
$25,061,000, as compared to $328,260,000 (including the $150,000,000
purchase of ADAPTIX, Inc., net of cash acquired) during the prior year.
Patent portfolio acquisitions in fiscal years 2013 and 2012 were
comprised of the following:
|
|
|
Number of Patent Portfolios
|
|
|
|
2013
|
|
|
%
|
|
|
2012
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnering - revenue share with upfront cash advance and preferred
returns
|
|
|
18
|
|
|
|
72
|
%
|
|
|
25
|
|
|
|
45
|
%
|
Partnering - revenue share with no upfront cash advance
|
|
|
4
|
|
|
|
16
|
%
|
|
|
19
|
|
|
|
35
|
%
|
Outright purchase
|
|
|
3
|
|
|
|
12
|
%
|
|
|
10
|
|
|
|
18
|
%
|
Acquisition of ADAPTIX, Inc.
|
|
|
-
|
|
|
|
-
|
%
|
|
|
1
|
|
|
|
2
|
%
|
|
|
|
25
|
|
|
|
100
|
%
|
|
|
55
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash outflows from financing activities included cash dividends to
shareholders totaling $6,241,000 and $18,633,000 for the fourth quarter
and fiscal year ended December 31, 2013, respectively.
Fourth quarter cash outflows also included cash paid to repurchase
shares of our common stock totaling $7,926,000 and $26,732,000 for the
fourth quarter of 2013 and 2012, respectively.
See "Business Highlights and Recent Developments" below for a summary of
patent portfolio acquisitions during the current quarter.
Refer to the section below entitled "Summary Financial Information" for
additional summary consolidated balance sheet, statements of operations
and cash flow information as of and for the applicable periods presented.
INFORMATION ABOUT NON-GAAP FINANCIAL MEASURES
As used herein, "GAAP" refers to accounting principles generally
accepted in the United States of America. To supplement our consolidated
financial statements prepared and presented in accordance with GAAP,
this earnings release includes financial measures, including (1)
non-GAAP net income and (2) non-GAAP Earnings Per Share ("EPS"), that
are considered non-GAAP financial measures as defined in Rule 101 of
Regulation G promulgated by the Securities and Exchange Commission.
Generally, a non-GAAP financial measure is a numerical measure of a
company's historical or future performance, financial position, or cash
flows that either excludes or includes amounts that are not normally
excluded or included in the most directly comparable measure calculated
and presented in accordance with GAAP. The presentation of this non-GAAP
financial information is not intended to be considered in isolation or
as a substitute for, or superior to, the financial information prepared
and presented in accordance with GAAP.
We use these non-GAAP financial measures for internal financial and
operational decision making purposes and as a means to evaluate
period-to-period comparisons of the performance and results of
operations of our core business. Our management believes that these
non-GAAP financial measures provide meaningful supplemental information
regarding the performance of our core business by excluding non-cash
stock compensation charges, non-cash patent amortization charges and
excess benefit related non-cash tax expense, that may not be indicative
of our recurring core business operating results. These non-GAAP
financial measures also facilitate management's internal planning and
comparisons to our historical performance and liquidity. We believe
these non-GAAP financial measures are useful to investors as they allow
for greater transparency with respect to key metrics used by management
in its financial and operational decision making and are used by our
institutional investors and the analyst community to help them analyze
the performance and operational results of our core business.
Non-GAAP Net income and EPS. We define non-GAAP net income as net
income calculated in accordance with GAAP, plus non-cash stock
compensation charges, non-cash patent amortization charges and excess
benefit related non-cash tax expense. Non-GAAP EPS is defined as
non-GAAP net income divided by the weighted average outstanding shares,
on a fully-diluted basis, calculated in accordance with GAAP, for the
respective reporting period.
Due to the inherent volatility in stock prices, the use of estimates and
assumptions in connection with the valuation and expensing of
share-based awards and the variety of award types that companies can
issue under FASB ASC Topic 718, management believes that providing a
non-GAAP financial measure that excludes non-cash stock compensation
allows investors to make meaningful comparisons between our recurring
core business operating results and those of other companies, as well as
providing our management with a critical tool for financial and
operational decision making and for evaluating our own period-to-period
recurring core business operating results. Similarly, due to the
variability associated with the timing and amount of patent acquisition
payments and estimates inherent in the capitalization and amortization
of patent acquisition costs, management believes that providing a
non-GAAP financial measure that excludes non-cash patent amortization
charges allows investors to make meaningful comparisons between our
recurring core business operating results and those of other companies,
and also provides our management with a useful tool for financial and
operational decision making and for evaluating our own period-to-period
recurring core business operating results. Lastly, for financial
reporting purposes, tax expense is required to be calculated without the
excess tax benefit related to the exercise and vesting of equity-based
incentive awards, however, the deduction related to the exercise and
vesting of equity-based incentive awards is available to offset taxable
income on our consolidated tax returns. Accordingly, the non-cash tax
expense calculated without the excess benefit for financial statement
purposes is credited to additional paid-in capital, not taxes payable,
and does not represent a cash tax obligation. Management believes that
providing a non-GAAP financial measure that excludes excess benefit
related non-cash tax expense allows investors to asses our net results
and the economic impact of income taxes based largely on cash tax
obligations, make more meaningful comparisons between our recurring core
business net results and those of other companies, and also provides our
management with a useful tool for financial and operational decision
making and for evaluating our own period-to-period recurring core
business net results.
There are a number of limitations related to the use of non-GAAP net
income and EPS versus net income and EPS calculated in accordance with
GAAP. For example, non-GAAP net income excludes significant non-cash
stock compensation charges, non-cash patent amortization charges and
excess benefit related non-cash tax expense that are recurring, and will
continue to be recurring for the foreseeable future. In addition,
non-cash stock compensation is a critical component of our employee
compensation programs and non-cash patent amortization reflects the cost
of certain patent portfolio acquisitions, amortized on a straight-line
basis over the estimated economic useful life of the respective patent
portfolio, and may reflect the acceleration of amortization related to
recoupable up-front patent portfolio acquisition costs. Management
compensates for these limitations by providing specific information
regarding the GAAP amounts excluded from non-GAAP net income and EPS and
evaluating non-GAAP net income and EPS in conjunction with net income
and EPS calculated in accordance with GAAP.
The accompanying table below provides a reconciliation of the non-GAAP
financial measures presented to the most directly comparable financial
measures prepared in accordance with GAAP.
A conference call is scheduled for today. The Acacia Research
presentation and Q&A will start at 1:30 p.m. Pacific Time (4:30 p.m.
Eastern).
To listen to the presentation by phone, dial (877) 856-1956 for domestic
callers and (719) 325-4783 for international callers, both of whom will
need to enter the conference ID 5728779 when prompted. A replay of the
audio presentation will be available for 30 days at (888) 203-1112 for
domestic callers and (719) 457-0820 for international callers, both of
whom will need to enter the Conference ID 5728779 when prompted.
The call is being webcast by CCBN and can be accessed at Acacia's
website at www.acaciaresearch.com.
ABOUT ACACIA RESEARCH CORPORATION
Founded in 1993, Acacia Research Corporation (NASDAQ: ACTG) is the
industry leader in patent licensing. An intermediary in the patent
marketplace, Acacia partners with inventors and patent owners to unlock
the financial value in their patented inventions. Acacia bridges the gap
between invention and application, facilitating efficiency and
delivering monetary rewards to the patent owner.
Information about Acacia Research Corporation and its subsidiaries is
available at www.acaciaresearch.com.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
This news release contains forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. These statements are based upon
our current expectations and speak only as of the date hereof. Our
actual results may differ materially and adversely from those expressed
in any forward-looking statements as a result of various factors and
uncertainties, including the effect of the global economic downturn on
technology companies, the ability to successfully develop
licensing programs and attract new business, rapid technological change
in relevant markets, changes in demand for current and future
intellectual property rights, legislative, regulatory and competitive
developments addressing licensing and enforcement of patents and/or
intellectual property in general and general economic conditions.
Our Annual Report on Form 10-K, recent and forthcoming Quarterly
Reports on Form 10-Q, recent Current Reports on Forms 8-K and 8-K/A, and
other SEC filings discuss some of the important risk factors that may
affect our business, results of operations and financial condition. We
undertake no obligation to revise or update publicly any forward-looking
statements for any reason.
The results achieved in the most recent quarter are not necessarily
indicative of the results to be achieved by us in any subsequent
quarters, as it is currently anticipated that Acacia Research
Corporation's financial results will vary, and may vary significantly,
from quarter to quarter. This variance is expected to result from
a number of factors, including risk factors affecting our results of
operations and financial condition referenced above, and the particular
structure of our licensing transactions, which may impact the amount of
inventor royalties and contingent legal fees expenses we incur period to
period.
|
|
|
|
|
|
|
|
ACACIA RESEARCH CORPORATION
|
SUMMARY FINANCIAL INFORMATION
|
(In thousands, except share and per share information)
|
(Unaudited)
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
15,065
|
|
|
|
$
|
66,264
|
|
|
|
|
$
|
130,556
|
|
|
|
$
|
250,727
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventor royalties
|
|
|
3,280
|
|
|
|
3,829
|
|
|
|
|
29,724
|
|
|
|
26,028
|
|
Contingent legal fees
|
|
|
3,181
|
|
|
|
5,463
|
|
|
|
|
24,784
|
|
|
|
24,651
|
|
Litigation and licensing expenses - patents
|
|
|
8,899
|
|
|
|
6,969
|
|
|
|
|
39,335
|
|
|
|
21,591
|
|
Amortization of patents
|
|
|
16,735
|
|
|
|
18,088
|
|
|
|
|
53,658
|
|
|
|
39,019
|
|
Marketing, general and administrative expenses (including non-cash
stock compensation expense of $7,082 and $27,894 for the three
months and year ended December 31, 2013, respectively, and $8,282
and $25,657 for the three months and year ended December 31, 2012,
respectively)
|
|
|
13,988
|
|
|
|
16,535
|
|
|
|
|
59,229
|
|
|
|
54,083
|
|
Research, consulting and other expenses - business development
|
|
|
742
|
|
|
|
721
|
|
|
|
|
3,251
|
|
|
|
4,943
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,506
|
|
|
|
-
|
|
Total operating costs and expenses
|
|
|
46,825
|
|
|
|
51,605
|
|
|
|
|
213,487
|
|
|
|
170,315
|
|
Operating income (expense)
|
|
|
(31,760
|
)
|
|
|
14,659
|
|
|
|
|
(82,931
|
)
|
|
|
80,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
161
|
|
|
|
820
|
|
|
|
|
2,131
|
|
|
|
937
|
|
Income (loss) from operations before provision for income taxes
|
|
|
(31,599
|
)
|
|
|
15,479
|
|
|
|
|
(80,800
|
)
|
|
|
81,349
|
|
Benefit from (provision for) income taxes
|
|
|
(3,390
|
)
|
|
|
(5,757
|
)
|
|
|
|
21,958
|
|
|
|
(22,060
|
)
|
Net income (loss) including noncontrolling interests in operating
subsidiaries
|
|
|
(34,989
|
)
|
|
|
9,722
|
|
|
|
|
(58,842
|
)
|
|
|
59,289
|
|
Net loss attributable to noncontrolling interests in operating
subsidiaries
|
|
|
1,656
|
|
|
|
101
|
|
|
|
|
2,408
|
|
|
|
164
|
|
Net income (loss) attributable to Acacia Research Corporation
|
|
|
$
|
(33,333
|
)
|
|
|
$
|
9,823
|
|
|
|
|
$
|
(56,434
|
)
|
|
|
$
|
59,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders - basic
|
|
|
$
|
(33,517
|
)
|
|
|
$
|
9,548
|
|
|
|
|
$
|
(56,945
|
)
|
|
|
$
|
57,564
|
|
Net income (loss) attributable to common stockholders - diluted
|
|
|
$
|
(33,517
|
)
|
|
|
$
|
9,549
|
|
|
|
|
$
|
(56,945
|
)
|
|
|
$
|
57,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
|
$
|
(0.69
|
)
|
|
|
$
|
0.20
|
|
|
|
|
$
|
(1.18
|
)
|
|
|
$
|
1.22
|
|
Diluted earnings (loss) per share
|
|
|
$
|
(0.69
|
)
|
|
|
$
|
0.20
|
|
|
|
|
$
|
(1.18
|
)
|
|
|
$
|
1.21
|
|
Weighted average number of shares outstanding, basic
|
|
|
48,415,684
|
|
|
|
48,335,865
|
|
|
|
|
48,155,832
|
|
|
|
47,251,061
|
|
Weighted average number of shares outstanding, diluted
|
|
|
48,415,684
|
|
|
|
48,607,141
|
|
|
|
|
48,155,832
|
|
|
|
47,584,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Net Income (Loss) and EPS to Non-GAAP Net
Income (Loss) and EPS
|
(In thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
|
$
|
(33,333
|
)
|
|
|
$
|
9,823
|
|
|
|
|
$
|
(56,434
|
)
|
|
|
$
|
59,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash stock compensation
|
|
|
7,082
|
|
|
|
8,282
|
|
|
|
|
27,894
|
|
|
|
25,657
|
Non-cash patent amortization
|
|
|
16,735
|
|
|
|
18,088
|
|
|
|
|
53,658
|
|
|
|
39,019
|
Excess benefit related non-cash tax expense
|
|
|
(1,040
|
)
|
|
|
5,656
|
|
|
|
|
(1,398
|
)
|
|
|
13,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income (loss)
|
|
|
$
|
(10,556
|
)
|
|
|
$
|
41,849
|
|
|
|
|
$
|
23,720
|
|
|
|
$
|
137,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income (loss) attributable to common stockholders -
diluted
|
|
|
$
|
(10,740
|
)
|
|
|
$
|
40,683
|
|
|
|
|
$
|
23,064
|
|
|
|
$
|
133,005
|
Pro forma non-GAAP net earnings per common share - diluted(1)
|
|
|
$
|
(0.22
|
)
|
|
|
$
|
0.84
|
|
|
|
|
$
|
0.48
|
|
|
|
$
|
2.80
|
GAAP weighted-average shares - diluted
|
|
|
48,415,684
|
|
|
|
48,607,141
|
|
|
|
|
48,359,927
|
|
|
|
47,584,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACACIA RESEARCH CORPORATION
|
SUMMARY FINANCIAL INFORMATION, (CONTINUED)
|
(In thousands)
|
(Unaudited)
|
|
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
December 31, 2012
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
126,685
|
|
|
|
$
|
221,804
|
Short-term investments
|
|
|
130,017
|
|
|
|
89,475
|
Accounts receivable
|
|
|
6,341
|
|
|
|
9,843
|
Deferred income tax
|
|
|
3,139
|
|
|
|
1,014
|
Prepaid expenses and other current assets
|
|
|
7,546
|
|
|
|
2,427
|
Total current assets
|
|
|
273,728
|
|
|
|
324,563
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation and
amortization
|
|
|
766
|
|
|
|
339
|
Patents, net of accumulated amortization
|
|
|
288,432
|
|
|
|
313,529
|
Goodwill
|
|
|
30,149
|
|
|
|
30,149
|
Other assets
|
|
|
318
|
|
|
|
137
|
|
|
|
$
|
593,393
|
|
|
|
$
|
668,717
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
$
|
11,555
|
|
|
|
$
|
9,235
|
Accrued patent acquisition costs
|
|
|
4,000
|
|
|
|
250
|
Royalties and contingent legal fees payable
|
|
|
10,447
|
|
|
|
12,508
|
Total current liabilities
|
|
|
26,002
|
|
|
|
21,993
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
4,874
|
|
|
|
27,831
|
Other liabilities
|
|
|
319
|
|
|
|
415
|
Total liabilities
|
|
|
31,195
|
|
|
|
50,239
|
Total stockholders' equity
|
|
|
562,198
|
|
|
|
618,478
|
|
|
|
$
|
593,393
|
|
|
|
$
|
668,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACACIA RESEARCH CORPORATION
|
SUMMARY FINANCIAL INFORMATION, (CONTINUED)
|
(In thousands)
|
(Unaudited)
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
|
|
Years Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) including noncontrolling interests in operating
subsidiaries
|
|
|
$
|
(34,989
|
)
|
|
|
$
|
9,722
|
|
|
|
|
$
|
(58,842
|
)
|
|
|
$
|
59,289
|
|
Adjustments to reconcile net income (loss) including noncontrolling
interests in operating subsidiaries to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
16,809
|
|
|
|
18,134
|
|
|
|
|
53,894
|
|
|
|
39,168
|
|
Non-cash stock compensation
|
|
|
7,082
|
|
|
|
8,282
|
|
|
|
|
27,894
|
|
|
|
25,657
|
|
Excess tax benefits from stock-based compensation
|
|
|
-
|
|
|
|
(5,656
|
)
|
|
|
|
358
|
|
|
|
(13,210
|
)
|
Change in valuation allowance on deferred taxes
|
|
|
-
|
|
|
|
(414
|
)
|
|
|
|
-
|
|
|
|
(10,651
|
)
|
Other
|
|
|
34
|
|
|
|
287
|
|
|
|
|
12
|
|
|
|
777
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
10,471
|
|
|
|
6,792
|
|
|
|
|
3,502
|
|
|
|
(6,928
|
)
|
Prepaid expenses and other assets
|
|
|
566
|
|
|
|
191
|
|
|
|
|
(5,300
|
)
|
|
|
(1,294
|
)
|
Accounts payable and accrued expenses / costs
|
|
|
(4,758
|
)
|
|
|
6,005
|
|
|
|
|
2,116
|
|
|
|
16,249
|
|
Royalties and contingent legal fees payable
|
|
|
2,134
|
|
|
|
(8,970
|
)
|
|
|
|
(2,061
|
)
|
|
|
(11,000
|
)
|
Deferred income tax
|
|
|
3,961
|
|
|
|
-
|
|
|
|
|
(25,082
|
)
|
|
|
6,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
1,310
|
|
|
|
34,373
|
|
|
|
|
(3,509
|
)
|
|
|
104,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(96
|
)
|
|
|
(68
|
)
|
|
|
|
(675
|
)
|
|
|
(268
|
)
|
Purchase of available-for-sale investments
|
|
|
(46,884
|
)
|
|
|
(97,493
|
)
|
|
|
|
(279,693
|
)
|
|
|
(402,500
|
)
|
Maturities and sales of available-for-sale investments
|
|
|
83,701
|
|
|
|
153,220
|
|
|
|
|
239,370
|
|
|
|
322,236
|
|
Purchase of ADAPTIX, Inc., net of cash acquired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(150,000
|
)
|
Patent acquisition costs paid
|
|
|
(14,645
|
)
|
|
|
(113,300
|
)
|
|
|
|
(25,061
|
)
|
|
|
(178,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
22,076
|
|
|
|
(57,641
|
)
|
|
|
|
(66,059
|
)
|
|
|
(408,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock, net of issuance costs
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
|
-
|
|
|
|
218,961
|
|
Repurchases of common stock
|
|
|
(7,908
|
)
|
|
|
(26,732
|
)
|
|
|
|
(7,926
|
)
|
|
|
(26,732
|
)
|
Dividends paid to shareholders
|
|
|
(6,241
|
)
|
|
|
-
|
|
|
|
|
(18,633
|
)
|
|
|
-
|
|
Distributions to noncontrolling interests in operating subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(312
|
)
|
Contributions from noncontrolling interests in operating subsidiary
|
|
|
-
|
|
|
|
1,953
|
|
|
|
|
1,920
|
|
|
|
5,793
|
|
Excess tax benefits (shortfall) from stock-based compensation
|
|
|
(1,040
|
)
|
|
|
5,656
|
|
|
|
|
(1,398
|
)
|
|
|
13,210
|
|
Proceeds from exercises of stock options
|
|
|
185
|
|
|
|
66
|
|
|
|
|
486
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(15,004
|
)
|
|
|
(19,079
|
)
|
|
|
|
(25,551
|
)
|
|
|
211,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
8,382
|
|
|
|
(42,347
|
)
|
|
|
|
(95,119
|
)
|
|
|
(92,929
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning
|
|
|
118,303
|
|
|
|
264,151
|
|
|
|
|
221,804
|
|
|
|
314,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, ending
|
|
|
$
|
126,685
|
|
|
|
$
|
221,804
|
|
|
|
|
$
|
126,685
|
|
|
|
$
|
221,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Highlights and Recent Developments(2)
Business highlights of the fourth quarter of 2013 and recent
developments include the following:
Revenues for the three months ended December 31, 2013 included fees from
the following technology licensing and enforcement programs:
•
|
3G & 4G Wireless Patents technology
|
|
|
•
|
Intercarrier SMS technology
|
•
|
Automotive Safety, Navigation and Diagnostics technologies
|
|
|
•
|
Messaging technology
|
•
|
Broadband Communications technology
|
|
|
•
|
MRI technology*
|
•
|
Camera Support technology
|
|
|
•
|
Online Auction Guarantees technology
|
•
|
Computer Aided Design Tools technology*
|
|
|
•
|
Online Gaming technology
|
•
|
Computer Architecture and Power Management technology
|
|
|
•
|
Reflective and Radiant Barrier Insulation technology
|
•
|
Core Fiber Optic Network Architectures technology
|
|
|
•
|
Software Activation technology
|
•
|
DMT technology
|
|
|
•
|
Suture Anchors technology
|
•
|
Facilities Operation Management System technology
|
|
|
•
|
Telematics technology
|
•
|
Gas Modulation Control Systems technology
|
|
|
•
|
Video Delivery and Processing technology
|
•
|
Greeting Card technology
|
|
|
•
|
X-Ray Powder Diffraction technology*
|
•
|
Inhaler Drug Delivery technology*
|
|
|
|
|
_______________________
|
(*) Initial license fees were recorded for these
licensing programs in the fourth quarter of 2013.
|
-
Accuhale LLC entered into a settlement agreement regarding pressurized
metered dose inhalers with AstraZeneca LP, AstraZeneca Pharmaceuticals
LP, AstraZeneca Dunkerque Production SCS and AstraZeneca AB. The
agreement resolved litigation that was pending in the United States
District Court for the Eastern District of Texas.
-
AdjustaCam LLC entered into an agreement with Logitech Inc. The
agreement resolved litigation that was pending in the United States
District Court for the Northern District of California and related
arbitration.
-
American Vehicular Sciences LLC entered into a settlement and patent
license agreement with BMW OF NORTH AMERICA, LLC.
-
Auto-Dimensions LLC entered into a settlement agreement with Siemens
Product Lifecycle Management Software, Inc. The agreement resolved
litigation that was pending in the United States District Court for
the Eastern District of Texas.
-
Automated Facilities Management Corporation entered into a settlement
and patent license agreement with Smartware Group, Inc. The agreement
resolved litigation that was pending in the United States District
Court for the District of New Hampshire.
-
Bolt MRI Technologies LLC entered into an agreement with Fonar
Corporation. The agreement resolved litigation that was pending in the
United States District Court for the Eastern District of New York.
-
Bonutti Skeletal Innovations LLC entered into an agreement with Smith
& Nephew, Inc. The agreement resolved litigation pertaining to suture
anchors that was pending in the United States District Court for the
District of Delaware.
-
Brandywine Communications Technologies LLC entered into a patent
license and settlement agreements with Zultys, Inc., Alcatel-Lucent
USA, Inc., and Aastra USA, Inc. These agreements resolved patent
litigation that was pending in the United States District Court for
the District of Delaware.
-
Brandywine Communications Technologies LLC also entered into a
settlement and patent license agreement with HickoryTech Corporation.
The agreement resolved litigation that was pending in the United
States District Court for the District of Minnesota.
-
Brilliant Optical Solutions LLC entered into a settlement and patent
license agreement with XO Holdings, XO Communications LLC and XO
Communications Services LLC that resolved the dispute between the
parties pending in the United States District Court for the Eastern
District of Missouri.
-
Brilliant Optical Solutions LLC entered into a settlement and patent
license agreement with Zayo Group LLC that resolved the dispute
between the parties pending in the United States District Court for
the District of Colorado.
-
Cell And Network Selection LLC entered into a settlement and license
agreement with Dell Inc. This agreement resolved patent litigation
that was pending in the United States District Court for the Eastern
District of Texas, Case No. 6:13-cv-00563.
-
Computer Software Protection LLC entered into a settlement and license
agreement with Flexera Software LLC. The agreement resolved related
litigation that was pending in the United States District Court for
the District of Delaware.
-
Express Card Systems LLC entered into a settlement and patent license
agreement with Staples, Inc. The agreement resolved litigation that
was pending in the United States District Court for the Eastern
District of Texas.
-
GameTek LLC entered into a patent license and settlement agreement
with Rockyou, Inc. This agreement resolved patent litigation that was
pending in the United States District Court for the Northern District
of California.
-
InterCarrier Communications LLC entered into a settlement agreement
with BroadSoft, Inc. and BroadSoft iLinc Communications, Inc. The
agreement resolved all remaining issues related to litigation that was
dismissed without prejudice in the United States District Court for
the Eastern District of Virginia.
-
Optimum Power Solutions LLC entered into a patent license and
settlement agreement with Panasonic Corporation. This agreement
resolved all claims between Optimum Power Solutions LLC and Panasonic
Corporation arising out of the patent litigation pending in the United
States Court of Appeals for the Federal Circuit.
-
Unified Messaging Solutions LLC and TD Ameritrade entered into a
Patent License and Settlement Agreement which resolved all disputes
between the parties pending in the United States District Court for
the Northern District of Illinois, Case No. 1:13-cv-0341.
-
Vertical Analytics LLC entered into an agreement with Bruker AXS, Inc.
The agreement resolved litigation that was pending in the United
States District Court for the District of Delaware.
-
Acacia Research Group LLC and its affiliates continued their patent
and patent rights acquisition activities, acquiring a total of 3 new
patent portfolios in the fourth quarter of 2013, including the
following:
-
In November 2013, acquired patents for wideband speech and audio
compression technology.
-
In November 2013, obtained rights to one issued U.S. patent and
U.S. and foreign patent applications relating to methods and
systems for performing dynamic, 3-D geological and geophysical
modeling used in oil and gas exploration and production.
-
In November 2013, acquired US patents and foreign counterparts
related to cellular HSPA and LTE technology.
_______________________
|
(1)
|
|
As used herein, "Acacia Research Corporation," "we," "us," and
"our" refer to Acacia Research Corporation and/or its wholly and
majority-owned operating subsidiaries. All intellectual property
acquisition, development, licensing and enforcement activities are
conducted solely by certain of Acacia Research Corporation's
wholly and majority-owned operating subsidiaries.
|
|
|
|
(2)
|
|
Acacia Research Group LLC, Accuhale LLC, AdjustaCam LLC, American
Vehicular Sciences LLC, Auto-Dimensions LLC, Automated Facilities
Management Corporation, Bolt MRI Technologies LLC, Bonutti
Skeletal Innovations LLC, Brandywine Communications Technologies
LLC, Brilliant Optical Solutions LLC, Cell And Network Selection
LLC, Computer Software Protection LLC, Express Card Systems LLC,
GameTek LLC, InterCarrier Communications LLC, Optimum Power
Solutions LLC , Unified Messaging Solutions LLC and Vertical
Analytics LLC are wholly and majority-owned operating subsidiaries
of Acacia Research Corporation.
|
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