ACACIA RESEARCH CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | 000-26068 | 95-4405754 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
500 Newport Center Drive Newport Beach, California | 92660 |
(Address of principal executive offices) | (Zip Code) |
Not applicable |
(Former name or former address, if changed since last report.) |
(c) | Exhibits. | |
99.1 Press Release dated April 18, 2013 of the Registrant. |
ACACIA RESEARCH CORPORATION | ||
Date: April 18, 2013 | By: | /s/ Paul R. Ryan |
Name: Paul R. Ryan | ||
Title: Chief Executive Officer | ||
Exhibit Number | Description |
99.1 | Press Release dated April 18, 2013, of the Registrant. |
• | Revenues in the first quarter of 2013 were $76,861,000, as compared to $99,040,000 in the comparable prior year quarter. |
• | GAAP net income in the first quarter of 2013 was $5,113,000, or $0.11 per diluted share, as compared to GAAP net income of $49,928,000, or $1.09 per diluted share for the comparable prior year quarter. |
• | Non-GAAP net income in the first quarter of 2013 was $22,710,000, or $0.47 per diluted share, as compared to $67,755,000, or $1.48 per diluted share for the comparable prior year quarter. See below for information regarding non-GAAP measures. |
• | Trailing twelve-month revenues as of the end of the first quarter of 2013 were $228,548,000, as compared to $222,617,000 as of the end of the prior year quarter. |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Revenues (in thousands) | $ | 76,861 | $ | 99,040 | |||
Net income (in thousands) | $ | 5,113 | $ | 49,928 | |||
Non-GAAP net income (in thousands) | $ | 22,710 | $ | 67,755 | |||
Diluted earnings per share | $ | 0.11 | $ | 1.09 | |||
Pro forma non-GAAP net earnings per common share - diluted | $ | 0.47 | $ | 1.48 | |||
New agreements executed | 29 | 40 | |||||
Licensing and enforcement programs generating revenues | 31 | 32 | |||||
Licensing and enforcement programs with initial revenues | 11 | 6 | |||||
New patent portfolios | 9 | 5 |
As of Date: | Trailing Twelve -Month Revenues(*) | % Change | |||||
March 31, 2013 | $ | 228,548 | (9 | )% | |||
December 31, 2012 | $ | 250,727 | 22 | % | |||
September 30, 2012 | $ | 205,258 | (12 | )% | |||
June 30, 2012 | $ | 233,355 | 5 | % | |||
March 31, 2012 | $ | 222,617 | 21 | % |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Revenues | $ | 76,861 | $ | 99,040 | $ | (22,179 | ) | (22 | )% | ||||||
New revenue agreements | 29 | 40 | |||||||||||||
Licensing programs generating revenues | 31 | 32 | |||||||||||||
Licensing programs with initial revenues | 11 | 6 |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Inventor royalties | $ | 18,481 | $ | 7,594 | $ | 10,887 | 143 | % | |||||||
Contingent legal fees | 15,032 | 3,748 | 11,284 | 301 | % |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Litigation and licensing expenses - patents | $ | 9,648 | $ | 3,381 | $ | 6,267 | 185 | % |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Amortization of patents | $ | 11,730 | $ | 5,126 | $ | 6,604 | 129 | % |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Marketing, general and administrative expenses | $ | 8,693 | $ | 8,641 | $ | 52 | 1 | % | |||||||
Non-cash stock compensation expense - MG&A | 5,158 | 5,090 | 68 | 1 | % | ||||||||||
Total marketing, general and administrative expenses | $ | 13,851 | $ | 13,731 | $ | 120 | 1 | % |
Three Months Ended March 31, | Change | ||||||||||||||
2013 | 2012 | $ | % | ||||||||||||
Provision for income taxes (in thousands) | $ | (3,272 | ) | $ | (14,747 | ) | $ | 11,475 | (78 | )% | |||||
Effective tax rate | 39 | % | 23 | % |
• | Our estimated annual effective tax rate for the three months ended March 31, 2013 was approximately 39%. The effective tax rate for the three months ended March 31, 2012, including the impact of discrete items, was 23%. Discrete items were primarily comprised of $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. |
• | Noncash tax expense calculated without the excess benefit related to the exercise and vesting of equity-based incentive awards, which was credited to additional paid-in capital, not taxes payable, totaled approximately $709,000 and $7.6 million for the three months ended March 31, 2013 and 2012, respectively. |
• | As of March 31, 2013, taxes paid or payable totaled approximately $3.4 million, primarily comprised of $2.2 million of foreign withholding taxes withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions, and federal and other state related taxes payable. The 2012 tax provision contemplates utilization of the $2.2 million in foreign taxes withheld in the first quarter of 2013 as a credit against income tax expense calculated for financial statement purposes. |
March 31, 2013 | December 31, 2012 | |||||||
Cash & cash equivalents and investments | $ | 327,448 | $ | 311,279 | ||||
Accounts receivable | 45,351 | 9,843 | ||||||
Total assets | 714,532 | 668,717 | ||||||
Accounts payable and accrued expenses / costs | 17,127 | 9,485 | ||||||
Royalties and contingent legal fees payable | 36,736 | 12,508 | ||||||
Total liabilities | 82,188 | 50,239 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 16,825 | $ | 48,952 | |||
Investing activities | (48,214 | ) | (276,886 | ) | |||
Financing activities | 2,746 | 228,699 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Revenues | $ | 76,861 | $ | 99,040 | |||
Operating costs and expenses: | |||||||
Cost of revenues: | |||||||
Inventor royalties | 18,481 | 7,594 | |||||
Contingent legal fees | 15,032 | 3,748 | |||||
Litigation and licensing expenses - patents | 9,648 | 3,381 | |||||
Amortization of patents | 11,730 | 5,126 | |||||
Marketing, general and administrative expenses (including non-cash stock compensation expense of $5,158 for the three months ended March 31, 2013, and $5,090 for the three months ended March 31, 2012) | 13,851 | 13,731 | |||||
Research, consulting and other expenses - business development | 1,024 | 1,116 | |||||
Total operating costs and expenses | 69,766 | 34,696 | |||||
Operating income | 7,095 | 64,344 | |||||
Total other income | 1,290 | 56 | |||||
Income from operations before provision for income taxes | 8,385 | 64,400 | |||||
Provision for income taxes | (3,272 | ) | (14,747 | ) | |||
Net income including noncontrolling interests in operating subsidiaries | 5,113 | 49,653 | |||||
Net (income) loss attributable to noncontrolling interests in operating subsidiaries | — | 275 | |||||
Net income attributable to Acacia Research Corporation | $ | 5,113 | $ | 49,928 | |||
Net income per common share attributable to Acacia Research Corporation: | |||||||
Basic earnings per share | $ | 0.11 | $ | 1.13 | |||
Diluted earnings per share | $ | 0.11 | $ | 1.09 | |||
Weighted average number of shares outstanding, basic | 47,859,774 | 44,367,499 | |||||
Weighted average number of shares outstanding, diluted | 48,354,444 | 45,771,228 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
GAAP net income | $ | 5,113 | $ | 49,928 | |||
Non-cash stock compensation | 5,158 | 5,090 | |||||
Non-cash patent amortization | 11,730 | 5,126 | |||||
Excess benefit related non-cash tax expense | 709 | 7,611 | |||||
Non-GAAP net income | $ | 22,710 | $ | 67,755 | |||
Pro forma non-GAAP net earnings per common share — basic | $ | 0.47 | $ | 1.53 | |||
Pro forma non-GAAP net earnings per common share — diluted | $ | 0.47 | $ | 1.48 | |||
GAAP weighted-average shares — basic | 47,859,774 | 44,367,499 | |||||
GAAP weighted-average shares — diluted | 48,354,444 | 45,771,228 |
March 31, 2013 | December 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 193,161 | $ | 221,804 | |||
Short-term investments | 134,287 | 89,475 | |||||
Accounts receivable | 45,351 | 9,843 | |||||
Prepaid expenses and other current assets | 5,101 | 3,441 | |||||
Total current assets | 377,900 | 324,563 | |||||
Property and equipment, net of accumulated depreciation and amortization | 536 | 339 | |||||
Patents, net of accumulated amortization | 305,809 | 313,529 | |||||
Goodwill | 30,149 | 30,149 | |||||
Other assets | 138 | 137 | |||||
$ | 714,532 | $ | 668,717 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses / costs | $ | 17,127 | $ | 9,485 | |||
Royalties and contingent legal fees payable | 36,736 | 12,508 | |||||
Total current liabilities | 53,863 | 21,993 | |||||
Deferred income taxes | 27,831 | 27,831 | |||||
Other liabilities | 494 | 415 | |||||
Total liabilities | 82,188 | 50,239 | |||||
Total stockholders’ equity | 632,344 | 618,478 | |||||
$ | 714,532 | $ | 668,717 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income including noncontrolling interests in operating subsidiaries | $ | 5,113 | $ | 49,653 | |||
Adjustments to reconcile net income including noncontrolling interests in operating subsidiaries to net cash provided by operating activities: | |||||||
Depreciation and amortization | 11,773 | 5,158 | |||||
Non-cash stock compensation | 5,158 | 5,090 | |||||
Change in valuation allowance on deferred taxes | — | (10,237 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (35,508 | ) | 1,635 | ||||
Prepaid expenses and other assets | (1,660 | ) | (919 | ) | |||
Accounts payable and accrued expenses / costs | 7,721 | 2,692 | |||||
Royalties and contingent legal fees payable | 24,228 | (9,413 | ) | ||||
Deferred income tax | — | 5,293 | |||||
Net cash provided by operating activities | 16,825 | 48,952 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (241 | ) | (24 | ) | |||
Purchase of available-for-sale investments | (97,225 | ) | (144,762 | ) | |||
Maturities and sale of available-for-sale investments | 53,262 | 20,000 | |||||
Purchase of ADAPTIX, Inc., net of cash acquired | — | (150,000 | ) | ||||
Patent acquisition costs | (4,010 | ) | (2,100 | ) | |||
Net cash used in investing activities | (48,214 | ) | (276,886 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from sale of common stock, net of issuance costs | — | 219,084 | |||||
Contributions from noncontrolling interests in operating subsidiary | 1,920 | 1,920 | |||||
Excess tax benefits from stock-based compensation | 709 | 7,611 | |||||
Proceeds from exercises of stock options | 117 | 84 | |||||
Net cash provided by financing activities | 2,746 | 228,699 | |||||
(Decrease) increase in cash and cash equivalents | (28,643 | ) | 765 | ||||
Cash and cash equivalents, beginning | 221,804 | 314,733 | |||||
Cash and cash equivalents, ending | $ | 193,161 | $ | 315,498 | |||
• | 4G Wireless Handsets technology* | • | Memory Circuit and Packaging technology* | |
• | Audio Communications Fraud Detection technology | • | Messaging technology | |
• | Camera Support technology | • | Mobile Computer Synchronization technology | |
• | Computer Architecture and Power Management | • | NOR Flash technology | |
• | Digital Imaging technology* | • | Online Auction Guarantee technology | |
• | Digital Signal Processing Architecture technology | • | Online Gaming technology | |
• | DMT | • | Pop-up Internet Advertising technology | |
• | Domain Name Redirection technology | • | Power Management Within Integrated Circuits technology | |
• | Electronic spreadsheet, data analysis and software development technology* | • | Prescription Lens technology* | |
• | Enhanced Mobile Communications technology | • | Semiconductor Memory and Process technology* | |
• | Facilities Operation Management System technology | • | Surgical Access technology | |
• | Gas Modulation Control Systems technology* | • | Suture Anchors technology | |
• | Greeting Card technology* | • | Telematics technology | |
• | Improved Memory Manufacturing technology | • | Wireless Data Synchronization & Data Transfer technology* | |
• | Intercarrier SMS technology* | • | Wireless Location Based Services technology* | |
• | Location Based Services technology |
* | Initial revenues recognized during the three months ended March 31, 2013. |
• | A subsidiary of Acacia Research Group LLC entered into a patent rights agreement with RPX Corporation. |
• | Advanced Data Access LLC entered into a license agreement with Powerchip Technology Corporation. |
• | Advanced Data Access LLC, Smart Memory Solutions LLC, and Semiconductor Technologies LLC entered into a settlement and license agreement with Micron Technology, Inc., Micron Semiconductor Products, Inc., and Micron Technology Texas, LLC. This agreement resolved litigation that was pending in the United States District Court for the Eastern District of Texas and the United States District Court for the District of Delaware. |
• | Automated Facilities Management Corporation entered into a settlement and license agreement with Ventyx USA, Inc. This agreement resolved patent litigation that was pending in the United States District Court for the Northern District of Georgia. |
• | Express Card Systems LLC entered into a settlement and license agreement with Supervalu 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 settlement and license agreement with 6waves LLC, 6waves Technologies LLC, 6waves US Inc., and Six Waves Inc. This agreement resolved patent litigation that was pending in the United States District Court for the Southern District of California. |
• | HVAC Modulation Technologies LLC entered into a licensing agreement with Johnson Controls, Inc. |
• | Smartphone Technologies LLC resolved the following legal proceedings: in the United States District Court for the Eastern District of Texas, Civil Action Nos. 6:10cv74, 6:11cv604, 6:13cv196, 6:10cv00580 and |
• | Optimum Power Solutions LLC, Data Engine Technologies LLC, Express Card Systems LLC, Digitech Image Technologies LLC and Intercarrier Communications LLC resolved the following legal proceedings: Civil Action No. 3:11-cv-01509-WHA previously pending in the Federal District Court for the Northern District of California and on appeal to the Federal Circuit; Civil Action Nos. 6:12-cv-00697-LED and No. 6:13-cv-00136-LED pending in the United States District Court for Eastern District of Texas; Civil Action No. 8:12-cv-02125-MRW pending in the United States District Court for the Central District of California; and Civil Action No. 3:12-cv-00764-JAG pending in the United States District Court of the Eastern District of Virginia, respectively. |
• | Telematics Corporation entered into a settlement and license agreement with Webtech Wireless Inc. This agreement resolved patent litigation that was pending in the United States District Court for the Northern District of Georgia. |
• | Unified Messaging Solutions LLC entered into a license agreement with CenturyLink, Inc. This agreement resolved patent litigation that was pending in the United States District Courts for the Eastern District of Texas and the Northern District of Illinois. |
• | Unified Messaging Solutions LLC entered into a license and settlement agreement with Charles Schwab Corporation. This agreement resolved patent litigation that was pending in the United States District Court for the Northern District of Illinois. |
• | Unified Messaging Solutions LLC entered into a license and settlement agreement with Morgan Stanley. This agreement resolved patent litigation that was pending in the United States District Court for the Northern District of Illinois. |
• | Unified Messaging Solutions LLC entered into a settlement and license agreement with Radio One, Inc. This agreement resolved patent litigation that was pending in the United States District Court for the Southern District of New York and the Northern District of Illinois. |
• | Unified Messaging Solutions LLC and Charter Communications, Inc. entered into a Release Agreement which resolves all disputes between the parties currently pending in the United Stated District Court for the Northern District of Illinois, Case No. 12C6286. |
• | Acacia Research Group LLC and its affiliates continued their patent and patent rights acquisition activities, acquiring a total of 9 new patent portfolios in the first quarter of 2013, including the following: |
• | In January 2013, obtained a patent relating to core fiber optic network architectures. |
• | In January 2013, obtained rights to a patent portfolio relating to oil and gas production and will share licensing revenue with the patent owner. The portfolio comprises 4 US and 27 foreign patents that relate to polymer based drilling fluids which are widely used in the drilling of oil and gas wells. |
• | In January 2013, acquired patents relating to vascular device technology. |
• | In January 2013, acquired patents relating to oil and gas production. The patents relate to solids separation technology which addresses removal of solids from drilling fluids used in oil and gas wells. |
• | In February 2013, obtained rights to a portfolio of patent assets covering display technologies. The set of patents involved in this transaction relate to certain display technologies used in smartphones, tablets, computers, HDTVs and other devices. |