<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 000-22339
RAMBUS INC.
(Exact name of registrant as specified in its charter)
- ---------------------------------------------------------------------------
DELAWARE 77-0449233
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
- ---------------------------------------------------------------------------
ADDRESS
2465 LATHAM STREET, MOUNTAIN VIEW, CA 94040
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (415) 903-3800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [_] No [X]
The number of shares outstanding of the registrant's Common Stock, par value
$.001 per share, was 22,283,781 as of June 30, 1997.
<PAGE>
RAMBUS INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
as of June 30, 1997 and September 30, 1996................................ 1
Consolidated Condensed Statements of Operations
for the Three and Nine Months ended June 30, 1997 and June 30, 1996....... 2
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended June 30, 1997 and June 30, 1996................. 3
Notes to Unaudited Consolidated Condensed Financial Statements............ 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 6
PART II. OTHER INFORMATION
Item 2. Changes in Securities..................................................... 12
Item 6. Exhibits and Reports on Form 8-K.......................................... 12
Signature .......................................................................... 13
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
-------- -------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 8,953 $ 742
Marketable securities...................................................... 46,070 7,812
Accounts receivable........................................................ 3,052 718
Prepaids and other current assets.......................................... 3,260 873
--------- --------
Total current assets.................................................. 61,335 10,145
Property and equipment, net..................................................... 3,702 2,340
Investment...................................................................... 1,058 --
Other assets.................................................................... 919 383
--------- --------
Total assets.......................................................... $ 67,014 $ 12,868
========= ========
LIABILITIES
Current liabilities:
Accounts and taxes payable, accrued payroll and other liabilities $ 2,655 $ 1,237
Current portion of:
Capital lease obligations............................................... 435 753
Deferred revenue........................................................ 20,843 13,082
--------- --------
Total current liabilities............................................. 23,933 15,072
Capital lease obligations, less current portion................................. 195 544
Deferred revenue, less current portion.......................................... 18,150 9,396
--------- --------
Total liabilities..................................................... 42,278 25,012
--------- --------
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, $.001 par value:
Authorized: 5,000,000 shares;
Issued and outstanding: no shares at June 30, 1997 and
11,296,822 shares at September 30, 1996................................. -- 11
Common stock, $.001 par value:
Authorized: 60,000,000 shares;
Issued and outstanding: 22,283,781 shares at June 30, 1997 and ............
5,758,749 shares at September 30, 1996.................................. 22 6
Additional paid-in capital...................................................... 59,329 22,330
Stockholders' notes receivable.................................................. (1,047) --
Accumulated deficit............................................................. (33,577) (34,492)
Cumulative translation adjustment............................................... 9 1
--------- --------
Total stockholders' equity (deficit).................................. 24,736 (12,144)
--------- --------
Total liabilities and stockholders' equity (deficit)............. $ 67,014 $ 12,868
========= ========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
1
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
JUNE 30, JUNE 30,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Contract revenues.............................. $ 5,375 $ 2,833 $13,842 $ 7,905
Royalties...................................... 1,399 1 4,357 1
------- ------- ------- -------
Total revenues............................ 6,774 2,834 18,199 7,906
------- ------- ------- -------
Costs and expenses:
Cost of contract revenues...................... 1,494 1,275 3,890 3,576
Research and development....................... 2,512 1,235 6,880 3,648
Marketing, general and administrative.......... 2,263 1,497 6,408 4,111
------- ------- ------- -------
Total costs and expenses.................. 6,269 4,007 17,178 11,335
------- ------- ------- -------
Operating income (loss)................... 505 (1,173) 1,021 (3,429)
Other income, net................................... 374 85 499 289
------- ------- ------- -------
Income (loss) before income taxes......... 879 (1,088) 1,520 (3,140)
Provision for income taxes.......................... 352 -- 605 183
------- ------- ------- -------
Net income (loss)......................... $ 527 $(1,088) $ 915 $(3,323)
======= ======= ======= =======
Net income (loss) per share......................... $ 0.02 $ (0.18) $ 0.04 $ (0.55)
======= ======= ======= =======
Number of shares used in per share calculations..... 22,403 6,113 20,857 6,069
======= ======= ======= =======
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
2
<PAGE>
RAMBUS INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------
1997 1996
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ 915 $ (3,323)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization......................................... 1,384 872
Other................................................................. 37 70
Change in operating assets and liabilities:
Accounts receivable.............................................. (2,334) (575)
Prepaids and other current assets................................ (2,387) (169)
Other assets..................................................... (536) 168
Accounts and taxes payable, accrued payroll and other
liabilities................................................. 1,368 (108)
Deferred revenue................................................. 15,315 964
-------- --------
Net cash provided by (used in)
operating activities...................................... 13,762 (2,101)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment......................................... (2,603) (1,414)
Proceeds from sale of property and equipment............................... -- 467
Purchases of marketable securities......................................... (98,319) (15,153)
Maturities of marketable securities........................................ 60,061 18,069
-------- --------
Net cash provided by (used in)
investing activities...................................... (40,861) 1,969
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock................................. 35,957 214
Proceeds from bank loans................................................... 794 --
Principal payments on bank loans........................................... (794) --
Principal payments on capital lease obligations............................ (655) (511)
-------- --------
Net cash provided by (used in)
financing activities..................................... 35,302 (297)
-------- --------
Foreign currency translation adjustment......................................... 8 (24)
-------- --------
Net increase (decrease) in cash and cash equivalents............................ 8,211 (453)
Cash and cash equivalents at beginning of period................................ 742 977
-------- --------
Cash and cash equivalents at end of period...................................... $ 8,953 $ 524
======== ========
Supplemental disclosure of cash flow information:
Interest paid.............................................................. $ 169 $ 227
Income taxes paid.......................................................... $ 1,685 $ 183
License of technology in exchange for common stock......................... $ 1,200 --
Issuance of stockholders' notes receivable................................. $ 1,047 --
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
3
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiary, Rambus K.K., located in
Tokyo, Japan. All intercompany accounts and transactions have been eliminated in
the accompanying consolidated condensed financial statements.
In the opinion of management, the consolidated condensed financial
statements include all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position and results of operations for
each interim period shown. Interim results are not necessarily indicative of
results for a full year.
The consolidated condensed financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission (SEC) applicable to interim financial information. Certain
information and footnote disclosures included in financial statements prepared
in accordance with generally accepted accounting principles have been omitted in
these interim statements pursuant to such SEC rules and regulations. The
information included in this Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto, for the year ended
September 30, 1996, included in the Company's Form S-1 filed with the SEC in
connection with the Company's initial public offering.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting
for Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based compensation plans at fair value. The
Company has chosen to continue to account for employee stock options using the
intrinsic value method prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock. The Company will provide pro forma disclosures for the effect of this
statement for the 1997 fiscal year.
During February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" (SFAS 128), which specifies the
computation, presentation, and disclosure requirements for net income per share.
SFAS 128 will become effective for the Company's 1998 fiscal year. The impact of
the adoption of SFAS 128 on the financial statements of the Company has not yet
been determined.
4
<PAGE>
RAMBUS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
3. COMPUTATION OF HISTORICAL AND PRO FORMA NET INCOME (LOSS) PER SHARE:
Historical net income (loss) per share is computed using the weighted
average number of common and dilutive common equivalent shares outstanding
during the period. Dilutive common equivalent shares consist of the incremental
common shares issuable upon conversion of convertible preferred stock (using the
"if converted" method) and stock options and warrants (using the treasury stock
method) as if converted for all periods.
Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin (SAB) No. 83, all common shares and all common share equivalents issued
by the Company at prices below the initial public offering price during the 12
month period prior to the initial public offering have been included in the
calculation of the number of shares used to determine net income (loss) per
share as if the shares had been outstanding for all periods presented through
March 31, 1997.
Pro forma net income (loss) per share for the three months ended June 30,
1996 and the nine months ended June 30, 1996 gives retroactive effect to the
conversion of all outstanding shares of convertible preferred stock into common
stock, which took place upon the closing of the Company's initial public
offering using the "if converted" method.
Pro forma net income (loss) per share is as follows (in thousands, except
per share data; unaudited):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1996
---- ----
<S> <C> <C>
Net income (loss)................................................. $(1,088) $(3,323)
======= =======
Pro forma net income (loss) per share............................. $ (0.06) $ (0.19)
======= =======
Pro forma number of shares used in per share calculation.......... 17,410 17,366
======= =======
</TABLE>
5
<PAGE>
ITEM 2.
MANAGEMENTIS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The forward-looking statements contained in this discussion and
analysis involve risks and uncertainties which could cause future actual results
to differ materially. Such risks include market acceptance of the Company's
technology; systems companies' acceptance of Rambus ICs produced by the
Company's licensees; market acceptance of the products of systems companies
which have adopted the Company's technology; future dependence upon the PC main
memory market and Intel; the loss of any strategic relationships with systems
companies or licensees; announcements or introductions of new technologies or
products by the Company or the Company's competitors; delays or problems in the
introduction or performance of enhancements or future generations of the
Company's technology; fluctuations in the market price and demand for DRAMs and
logic ICs into which the Company's technology has been incorporated; competitive
pressures resulting in lower contract revenues or royalty rates; changes in the
Company's and system companies' development schedules and levels of expenditure
on research and development; personnel changes, particularly those involving
engineering and technical personnel; costs associated with protecting the
Company's intellectual property; changes in Company strategies; foreign exchange
rate fluctuations or other changes in the international business climate; and
general economic trends. A more detailed discussion of risks faced by the
Company is set forth in the Company's Form S-1 filed with the SEC in connection
with the Company's initial public offering.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the
percentage of total revenues represented by certain items reflected in the
Company's consolidated condensed statements of operations and the percentage
change of such items between periods:
6
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF TOTAL REVENUES, PERCENT
THREE MONTHS ENDED CHANGE,
JUNE 30, 1997 V.
-------
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Contract revenues............................. 79.3% 100.0% 89.7%
Royalties..................................... 20.7 -- *
----- -----
Total revenues........................... 100.0% 100.0% 139.0
===== =====
Costs and Expenses:
Cost of contract revenues..................... 22.0 45.0 17.2
Research and development...................... 37.1 43.6 103.4
Marketing, general and administrative......... 33.4 52.8 51.2
----- -----
Total costs and expenses................. 92.5 141.4 56.5
----- -----
Operating income (loss)............................ 7.5 (41.4) *
Other income, net.................................. 5.5 3.0 340.0
----- -----
Income (loss) before income taxes.................. 13.0 (38.4) *
Provision for income taxes......................... 5.2 -- *
----- -----
Net income (loss).................................. 7.8% (38.4)% *
===== =====
- -------------------
* Not meaningful
<CAPTION>
PERCENT OF TOTAL REVENUES, PERCENT
NINE MONTHS ENDED CHANGE,
JUNE 30, 1997 V.
-------
1997 1996 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Contract revenues............................. 76.1% 100.0% 75.1%
Royalties..................................... 23.9 -- *
----- -----
Total revenues........................... 100.0% 100.0% 130.2
===== =====
Costs and Expenses:
Cost of contract revenues..................... 21.4 45.2 8.8
Research and development...................... 37.8 46.1 88.6
Marketing, general and administrative......... 35.2 52.1 55.9
----- -----
Total costs and expenses................. 94.4 143.4 51.5
----- -----
Operating income (loss)............................ 5.6 (43.4) *
Other income, net.................................. 2.7 3.7 72.7
----- -----
Income (loss) before income taxes.................. 8.3 (39.7) *
Provision for income taxes......................... 3.3 2.3 230.6
----- -----
Net income (loss).................................. 5.0% (42.0)% *
===== =====
</TABLE>
- -------------------
* Not meaningful
Revenues. Total revenues for the three and nine months ended June 30, 1997
increased 139.0% and 130.2% to $6.8 million and $18.2 million, respectively,
over the comparable three- and nine-month periods ended June 30, 1996. A
majority of the Company's total revenues came from contract revenues, which
increased 89.7% and 75.1% to $5.4 million and $13.8 million in the first three
and
7
<PAGE>
nine months of fiscal 1997, respectively, over the comparable periods in
fiscal 1996. The increase in contract revenues was a result of the Company's
entering into contracts with new licensees and additional contracts with current
licensees for new developments, especially for an extension of the Company's
technology to provide a higher bandwidth interface for future PC main memory
applications. While quarterly revenues from existing licenses are predictable
over the contracts' respective lives, total contract revenues will decline in
the future if the Company does not continue to obtain new licensees or if it is
unsuccessful in securing new engineering implementation work from existing
licensees.
Royalties, which first became significant in fiscal 1997, totaled $1.4
million, or 20.7% of total revenues in the three months ended June 30, 1997, and
$4.4 million, or 23.9% of total revenues in the first nine months of fiscal
1997. During these periods, royalties were primarily from NEC and, the Company
believes, were largely based on sales of Rambus ICs for use in the Nintendo 64
home video game system. The Company anticipates that its potential to generate
royalties in the next several quarters is largely dependent on system sales by
Nintendo and, to a lesser extent, sales by Cirrus Logic and Chromatic Research
of logic ICs incorporating RACs for PC graphics and multimedia applications.
Nintendo faces intense competitive pressure in the home video game market, which
is characterized by extreme volatility, frequent new product introductions and
rapidly shifting consumer preferences, and there can be no assurance as to the
unit volumes of Rambus ICs that will be purchased by Nintendo in the future or
the level of royalty-bearing revenues that the Company's licensees will receive
from Nintendo. None of the systems companies currently incorporating Rambus
interface technology into their products is contractually obligated to continue
using Rambus ICs. The Company does not expect a significant increase in royalty
revenue in the near term. However, as prepaid royalties are offset and as Rambus
ICs are incorporated into additional applications, the Company believes that
royalties will become an increasing portion of revenues over the long term.
Given the concentration of royalties from a limited number of sources, it is
likely that royalties will vary greatly in subsequent quarters. If royalties
were to decline, the Company would likely again become unprofitable.
As of June 30, 1997, the Company had 21 licensees compared to sixteen at
June 30, 1996. Because all of the Company's revenues are derived from its
relatively small number of licensees, the Company's revenues tend to be highly
concentrated. In the third quarter and first nine months of fiscal 1997, the
Company's top five licensees accounted for 61% and 66% of total revenues,
respectively. During these same periods, NEC accounted for 27% and 31% of
revenues, respectively, and LG Semicon accounted for 10% and 11% of revenues,
respectively. The Company expects that it will continue to experience
significant revenue concentration for the foreseeable future. However, the
particular licensees which account for revenue concentration may vary from
period to period depending on the addition of new contracts, the expiration of
deferred revenue schedules under existing contracts, and the volumes and prices
at which the licensees sell Rambus ICs to systems companies in any given period.
To date, companies based in Japan and Korea have accounted for the
substantial majority of the Company's revenues, and nearly all of its
international revenues. In the third quarter and first nine months of fiscal
1997, international revenues comprised 79% and 82% of total revenues,
respectively. The Company expects that revenues derived from international
licensees will continue
8
<PAGE>
to represent a significant portion of its total revenues in the future. All of
the revenues from international licensees to date have been denominated in
United States dollars.
In a few cases, the Company has received nonrefundable, prepaid royalties
which offset the earliest royalty payments otherwise due from the licensee. As
of June 30, 1997, $2.9 million of such nonrefundable, prepaid royalties had
offset initial royalties, and the Company had a balance of $3.9 million
remaining to be offset against future royalties.
Substantially all of the license fees, engineering service fees and
nonrefundable, prepaid royalties are bundled together as contract fees because
the Company generally does not provide or price these components separately. The
contracts also generally include rights to upgrades and enhancements.
Accordingly, Rambus recognizes contract revenues ratably over the period during
which post-contract customer support is expected to be provided. The excess of
contract fees received over contract revenue recognized is shown on the
Company's balance sheet as "deferred revenue." As of June 30, 1997, the
Company's deferred revenue was $39.0 million, substantially all of which is
scheduled to be recognized in varying amounts over the next five years.
Engineering Costs. Engineering costs, consisting of cost of contract
revenues and research and development expenses, increased 59.6% to $4.0 million
and 49.1% to $10.8 million in the third quarter and first nine months of fiscal
1997, respectively, over the comparable periods in fiscal 1996 due primarily to
an increase in engineering personnel. As a percentage of total revenue,
engineering costs decreased to 59.1% in the third quarter of fiscal 1997 from
88.6% in the comparable period in fiscal 1996, and decreased to 59.2% in the
first nine months of fiscal 1997 from 91.3% in the first nine months of fiscal
1996 as a result of the Company's growth in revenues.
Cost of Contract Revenues. Cost of contract revenues as a percentage of
total revenues decreased to 22.0% in the third quarter of fiscal 1997 from 45.0%
in the comparable period of fiscal 1996, and decreased to 21.4% in the first
nine months of fiscal 1997 from 45.2% in the first nine months of fiscal 1996.
The decrease in cost of contract revenues as a percentage of total revenues was
the result of the Company's growth in revenues combined with a decrease in the
proportion of the Company's engineering costs attributable to cost of contract
revenues. The Company believes that the level of cost of contract revenues will
continue to fluctuate in the future, both in absolute dollars and as a
percentage of revenues, as new generations of Rambus ICs go through the normal
development and implementation phases.
Research and Development. Research and development expenses as a
percentage of total revenues decreased to 37.1% in the third quarter of fiscal
1997 from 43.6% in the comparable period of fiscal 1996, and decreased to 37.8%
in the first nine months of fiscal 1997 from 46.1% in the first nine months of
fiscal 1996. The decrease in research and development expenses as a percentage
of total revenues was the result of the Company's growth in revenues partially
offset by an increase in the proportion of engineering costs attributable to
research and development expenses due to development efforts related to a new
generation of 16/18 and 64 Mbit RDRAMs and associated RACs for the Company's
current technology, and an extension of the Company's technology to provide a
higher bandwidth interface for future PC main memory applications. The Company
expects research and development expenses to increase over time as it enhances
and improves its technology and applies it to new generations of ICs. The rate
of increase of, and the percentage of
9
<PAGE>
revenues represented by, research and development expenses in the future will
vary from period to period based on the research and development projects
underway and the change in research and development headcount in any given
period, as well as the rate of change in the Company's total revenues.
Marketing, General and Administrative. Marketing, general and
administrative expenses increased 51.2% to $2.3 million and 55.9% to $6.4
million in the third quarter and first nine months of fiscal 1997, respectively,
over the comparable periods in fiscal 1996 primarily due to a buildup of
marketing, sales and administrative support personnel in both the U.S. and Japan
as well as increased costs associated with applications engineering and other
technical support provided to systems companies. As a percentage of total
revenue, marketing, general and administrative expenses decreased to 33.4% in
the third quarter of fiscal 1997 from 52.8% in the comparable period in fiscal
1996, and decreased to 35.2% in the first nine months of fiscal 1997 from 52.1%
in the first nine months of fiscal 1996 due to the increased revenue base. The
Company expects marketing, general and administrative expenses to increase in
the future as the Company puts additional effort into marketing its technology
and assisting systems companies to adapt this technology to new generations of
products and as a result of becoming a public company. The rate of increase of,
and the percentage of revenues represented by, marketing, general and
administrative expenses in the future will vary from period to period based on
the trade shows, advertising and other sales and marketing activities undertaken
and the change in sales, marketing and administrative headcount in any given
period, as well as the rate of change in the Company's total revenues.
Other Income. Other income consists primarily of interest income from the
Company's short-term cash investments, offset by interest expense on leases and
other equipment financing. Other income increased 340.0% to $374,000 (5.5% of
total revenues) and 72.7% to $499,000 (2.7% of total revenues) in the third
quarter and first nine months of fiscal 1997, respectively, over the comparable
periods in fiscal 1996 primarily due to higher interest income on a higher
average cash investment balance in the fiscal 1997 periods.
Provision for Income Taxes. The Company recorded a provision for income
taxes of $352,000 in the third quarter of fiscal 1997 compared to no provision
recorded in the third quarter of fiscal 1996, and $605,000 in the first nine
months of fiscal 1997, an increase of 230.6% over the $183,000 recorded in the
first nine months of fiscal 1996. Whereas the 1996 provisions primarily
represent foreign withholding tax on license revenue, the 1997 provisions are
based on an estimated federal and state combined rate of 40% on income before
income taxes.
At June 30, 1997 the Company had deferred tax assets of approximately $16
million, primarily relating to the difference between tax and book treatment of
deferred revenue and the carryforward of foreign tax credits and net operating
losses. The Company has established a valuation allowance against its deferred
tax assets due to the uncertainty surrounding the realization of such assets. If
it is determined that it is more likely than not that the deferred tax assets
are realizable, the valuation allowance will be reduced. The Company currently
anticipates that such reduction will take place in the fourth quarter of fiscal
1997, which will result in a one-time increase to net income equal to the amount
of the reduction in the valuation allowance.
10
<PAGE>
OTHER
The Company has granted to Intel Corporation a warrant for the purchase of
1,000,000 shares of Common Stock at an exercise price of $10.00 per share. The
warrant will become exercisable only upon the achievement of certain milestones,
which will result in a charge to the statement of operations at the time of
achievement of the milestones based on the fair value of the warrant.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the initial public offering of its common stock, completed in May
1997, the Company funded its operations primarily from payments received under
its license contracts and, to a lesser extent, the private sale of equity.
Including net proceeds of approximately $34 million from its initial public
offering, the Company had cash and cash equivalents and marketable securities of
$55.0 million as of June 30, 1997 and total working capital of $37.4 million,
including a short-term component of deferred revenue of $20.8 million. Deferred
revenue represents the excess of cash received from licensees over revenue
recognized on license contracts, and the short-term component represents the
amount of this deferred revenue to be recognized over the next twelve months.
Without the short-term component of deferred revenue, working capital would be
$58.2 million as of June 30, 1997.
The Company's operating activities provided net cash of $13.8 million in
the first nine months of fiscal 1997 compared to a net cash use of $2.1 million
in the first nine months of fiscal 1996. Net cash generated by operations in the
first nine months of fiscal 1997 was primarily the result of net income, an
increase in deferred revenue, and an increase in accounts and taxes payable,
accrued payroll and other liabilities, offset by increases in accounts
receivable and prepaids and other current assets. Accounts receivable increased
as a result of amounts billed under new license contracts, and prepaids and
other current assets increased primarily due to increased income tax payments.
The increase in deferred revenue for the nine months ended June 30, 1997 was due
to new billings on license contracts in excess of revenues recognized thereon.
Net cash used in investing activities was $40.9 million in the first nine
months of fiscal 1997 compared to net cash provided by investing activities of
$2.0 million in the first nine months of fiscal 1996. Net cash used in investing
activities in the fiscal 1997 period consisted primarily of net purchases of
marketable securities and, to a lesser extent, purchases of property and
equipment.
Net cash provided by financing activities was $35.3 million in the first
nine months of fiscal 1997 compared to net cash used in financing activities of
$297,000 in the first nine months of fiscal 1996. Net cash provided by financing
activities in the fiscal 1997 period was primarily due to completion of the
Company's initial public offering of its common stock.
The Company presently anticipates that existing cash balances will be
adequate to meet its cash needs for at least the next 12 months.
11
<PAGE>
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the period covered by this report, the Registrant has issued
and sold the following unregistered securities:
1. During the period from April 1, 1997 through May 13, 1997, the
Registrant granted options to purchase an aggregate of 246,500
shares of Common Stock to an aggregate of 20 directors,
employees, and consultants pursuant to the Registrant's 1990
Stock Plan in reliance on Rule 701 promulgated under the
Securities Act or an exemption from registration provided by
Section 4(2) of the Securities Act.
2. During the period from April 1, 1997 through May 13, 1997,
options to purchase an aggregate of 417,630 shares of Common
Stock were exercised by an aggregate of 54 directors, employees,
and consultants pursuant to the Registrant's 1990 Stock Plan in
reliance on Rule 701 promulgated under the Securities Act or an
exemption from registration provided by Section 4(2) of the
Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
11. Statement Re: Computation of Net Income (Loss) Per Share
27. Financial Data Schedule
(B) Reports on Form 8-K
None.
ITEMS 1, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAMBUS INC.
August 1, 1997 /s/ Gary Harmon
Date: ______________________ By: __________________________________________
Gary Harmon,
Vice President and Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
13
<PAGE>
EXHIBIT 11
RAMBUS INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
HISTORICAL NET INCOME (LOSS) PER SHARE
- --------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
JUNE 30, JUNE 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income (loss)............................................... $ 527 $(1,088) $ 915 $(3,323)
======= ======= ======= =======
Shares used in computing net income (loss) per share:
Weighted average common shares outstanding................. 20,632 5,712 18,632 5,668
Options issued within twelve months of the initial
public offering based on the Treasury Stock
method................................................. -- 401 268 401
Additional dilutive options................................ 1,771 -- 1,957 --
------- ------- ------- -------
22,403 6,113 20,857 6,069
======= ======= ======= =======
Net income (loss) per share..................................... $ 0.02 $ (0.18) $ 0.04 $ (0.55)
======= ======= ======= =======
Fully diluted:
Net income (loss)............................................... $ 527 $(1,088) $ 915 $(3,323)
======= ======= ======= =======
Shares used in computing net income (loss) per share:
Weighted average common shares outstanding................. 20,632 5,712 18,632 5,668
Options issued within twelve months of the initial
public offering based on the Treasury Stock
method................................................. -- 401 268 401
Additional dilutive options................................ 1,927 -- 2,044 --
Additional dilutive warrants............................... 414 -- 138 --
------- ------- ------- -------
22,973 6,113 21,082 6,069
======= ======= ======= =======
Net income (loss) per share..................................... $ 0.02 $ (0.18) $ 0.04 $ (0.55)
======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 11
RAMBUS INC. AND SUBSIDIARY
STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER SHARE--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA NET INCOME (LOSS) PER SHARE
- -------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
JUNE 30, JUNE 30,
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Net income (loss)............................................... $ 527 $ (1,088) $ 915 $(3,323)
======= ======== ======= =======
Shares used in computing net income (loss) per share:
Weighted average common shares outstanding................. 20,632 5,712 18,632 5,668
Net effect of Convertible Preferred Stock (using the
"if converted" method)................................. -- 11,297 -- 11,297
Options issued within twelve months of the initial
public offering based on the Treasury Stock
method................................................. -- 401 268 401
Additional dilutive options................................ 1,771 -- 1,957 --
------- -------- ------- -------
22,403 17,410 20,857 17,366
======= ======== ======= =======
Net income (loss) per share..................................... $ 0.02 $ (0.06) $ 0.04 $ (0.19)
======= ======== ======= =======
Fully diluted:
Net income (loss)............................................... $ 527 $ (1,088) $ 915 $(3,323)
======= ======== ======= =======
Shares used in computing net income (loss) per share:
Weighted average common shares outstanding................. 20,632 5,712 18,632 5,668
Net effect of Convertible Preferred Stock (using the
"if converted" method)................................. -- 11,297 -- 11,297
Options issued within twelve months of the initial
public offering based on the Treasury Stock
method................................................. -- 401 268 401
Additional dilutive options................................ 1,927 -- 2,044 --
Additional dilutive warrants............................... 414 -- 138 --
------- -------- ------- -------
22,973 17,410 21,082 17,366
======= ======== ======= =======
Net income (loss) per share..................................... $ 0.02 $ (0.06) $ 0.04 $ (0.19)
======= ======== ======= =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 8,953
<SECURITIES> 46,070
<RECEIVABLES> 3,052
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,335
<PP&E> 10,148
<DEPRECIATION> 6,446
<TOTAL-ASSETS> 67,014
<CURRENT-LIABILITIES> 23,933
<BONDS> 0
0
0
<COMMON> 22
<OTHER-SE> 24,714
<TOTAL-LIABILITY-AND-EQUITY> 67,014
<SALES> 18,199
<TOTAL-REVENUES> 18,199
<CGS> 3,890
<TOTAL-COSTS> 3,890
<OTHER-EXPENSES> 13,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169
<INCOME-PRETAX> 1,520
<INCOME-TAX> 605
<INCOME-CONTINUING> 915
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 915
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
