ACACIA RESEARCH CORPORATION
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(Exact name of registrant as specified in its charter)
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Delaware
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000-26068
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95-4405754
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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500 Newport Center Drive
Newport Beach, California
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92660
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(Address of principal executive offices)
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(Zip Code)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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(d)
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Exhibits.
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99.1
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Press Release dated April 19, 2012 of the Registrant.
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ACACIA RESEARCH CORPORATION | |||
Date: April 19, 2012
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By:
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/s/ Paul R. Ryan | |
Name: Paul R. Ryan | |||
Title: Chairman and Chief Executive Officer | |||
Exhibit Number | Description | |
99.1 | Press Release dated April 19, 2012, of the Registrant. |
Contacts: Rob Stewart
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Media Contact: Adam Handelsman
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Investor Relations
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Managing Director
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Tel (949) 480-8300
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Lippert/Heilshorn & Associates
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Fax (949) 480-8301
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(212) 201-6622
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ahandelsman@lhai.com
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Revenues in the first quarter of 2012 were $99,040,000, as compared to $61,130,000 in the prior year quarter.
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GAAP net income in the first quarter of 2012 was $50,101,000, or $1.09 per diluted share, as compared to GAAP net income of $12,353,000, or $0.34 per diluted share for the prior year quarter.
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Non-GAAP net income in the first quarter of 2012 was $67,928,000, or $1.48 per diluted share, as compared to $19,026,000, or $0.52 per diluted share for the prior year quarter. See below for information regarding non-GAAP measures.
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Trailing twelve-month revenues as of the end of the first quarter of 2012 increased to $222,617,000, as compared to $153,187,000 as of the end of the prior year quarter.
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Three Months Ended March 31,
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2012
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2011
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Revenues (in thousands)
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$ | 99,040 | $ | 61,130 | ||||
Net income (in thousands)
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$ | 50,101 | $ | 12,353 | ||||
Non-GAAP net income (in thousands)
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$ | 67,928 | $ | 19,026 | ||||
Diluted earnings per share
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$ | 1.09 | $ | 0.34 | ||||
Pro forma non-GAAP net earnings per common share - diluted
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$ | 1.48 | $ | 0.52 | ||||
New revenue agreements
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40 | 35 | ||||||
Licensing programs generating revenues
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32 | 32 | ||||||
Licensing programs with initial revenues
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6 | 8 | ||||||
New patent portfolios
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5 | 8 |
As of Date:
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Trailing Twelve-Month Revenues and Other Operating Income
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% Change
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||||||
March 31, 2012
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$ | 222,617 | 21% | |||||
December 31, 2011
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184,707 | 4% | ||||||
September 30, 2011
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177,014 | -1% | ||||||
June 30, 2011
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177,927 | 16% | ||||||
March 31, 2011
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153,187 | - |
Three Months Ended March 31,
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2012
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2011
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Revenues
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$ | 99,040 | $ | 61,130 |
Three Months Ended March 31,
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2012
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2011
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Inventor royalties
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$ | 7,594 | $ | 13,089 | ||||
Contingent legal fees
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3,748 | 9,367 |
Three Months Ended March 31,
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2012
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2011
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Litigation and licensing expenses - patents
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$ | 3,259 | $ | 3,534 |
Three Months Ended March 31,
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2012
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2011
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Amortization of patents
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$ | 5,126 | $ | 3,772 |
Three Months Ended March 31,
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2012
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2011
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Marketing, general and administrative expenses
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$ | 8,608 | $ | 7,084 | ||||
Non-cash stock compensation expense - MG&A
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5,090 | 2,901 | ||||||
Total marketing, general and administrative expenses
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$ | 13,698 | $ | 9,985 |
Three Months Ended March 31,
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2012
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2011
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Research, consulting and other expenses - business development
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$ | 1,098 | $ | 708 |
Three Months Ended March 31,
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2012
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2011
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Provision for income taxes (in thousands)
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$ | 14,747 | $ | 7,148 | ||||
Effective tax rate
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23% | 35% |
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An increase in foreign withholding taxes, totaling $4,438,000, withheld by the applicable foreign tax authority on revenue agreements executed with third party licensees domiciled in certain foreign jurisdictions. The first quarter 2012 tax provision contemplates utilization of the $11.8 million in foreign taxes withheld in the first quarter of 2011 as a credit against income tax expense calculated for financial statement purposes. First quarter 2011 tax expense primarily relates to foreign taxes withheld as described above.
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For financial reporting purposes, tax expense is calculated without the excess tax benefit related to the exercise and vesting of equity-based incentive awards. Under U.S. generally accepted accounting principles, if a deduction reported on a tax return for an equity-based incentive award exceeds the cumulative compensation cost for those instruments recognized for financial reporting purposes, any resulting realized tax benefit that exceeds the previously calculated and recognized compensation expense for those instruments is considered an excess tax benefit, and is recognized as a credit to additional paid-in capital, as the expense does not reflect cash taxes payable. The deductions related to the exercise and vesting of equity-based incentive awards is available to offset taxable income on our consolidated tax returns. Accordingly, the noncash tax expense calculated without the excess benefit, totaling approximately $7.6 million was credited to additional paid-in capital, not taxes payable.
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As of December 31, 2011, we maintained a full valuation allowance against our net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX, Inc. created an additional source of income to utilize against our existing consolidated net deferred tax assets. Accordingly, the valuation allowance on the majority of our net deferred tax assets was released, resulting in a first quarter 2012 financial statement income tax benefit of approximately $10.2 million, which decreased the net deferred tax liability established in connection with the acquisition method of accounting for the ADAPTIX, Inc. acquisition.
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As of March 31, 2012, taxes paid or payable totaled approximately $12.1 million, primarily comprised of foreign withholding taxes as described above, and other state related taxes payable.
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March 31,
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December 31,
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2012
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2011
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Cash & cash equivalents and investments
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$ | 451,639 | $ | 323,286 | ||||
Accounts receivable
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1,280 | 2,915 | ||||||
Total assets
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663,593 | 352,877 | ||||||
Accounts payable and accrued expenses
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8,336 | 6,625 | ||||||
Royalties and contingent legal fees payable
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14,095 | 23,508 | ||||||
Total liabilities
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55,436 | 30,765 |
Three Months Ended March 31,
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2012
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2011
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Net cash provided by (used in):
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Operating activities
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$ | 48,952 | $ | 36,452 | ||||
Investing activities
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(276,886 | ) | (704 | ) | ||||
Financing activities
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228,699 | 175,348 | ||||||
Increase in cash and cash equivalents
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$ | 765 | $ | 211,096 |
Three Months Ended March 31,
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2012
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2011
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Revenues
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$ | 99,040 | $ | 61,130 | ||||
Operating costs and expenses:
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Cost of revenues:
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Inventor royalties
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7,594 | 13,089 | ||||||
Contingent legal fees
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3,748 | 9,367 | ||||||
Litigation and licensing expenses - patents
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3,259 | 3,534 | ||||||
Amortization of patents
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5,126 | 3,772 | ||||||
Marketing, general and administrative expenses (including non-cash stock compensation expense of $5,090 and $2,901 for the three months ended March 31 2012 and 2011, respectively)
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13,698 | 9,985 | ||||||
Research, consulting and other expenses - business development
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1,098 | 708 | ||||||
Total operating costs and expenses
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34,523 | 40,455 | ||||||
Operating income
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64,517 | 20,675 | ||||||
Total other income
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56 | 29 | ||||||
Income from operations before provision for income taxes
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64,573 | 20,704 | ||||||
Provision for income taxes
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(14,747 | ) | (7,148 | ) | ||||
Net income including noncontrolling interests in operating subsidiary
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49,826 | 13,556 | ||||||
Net (income) loss attributable to noncontrolling interests in operating subsidiaries
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275 | (1,203 | ) | |||||
Net income attributable to Acacia Research Corporation
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$ | 50,101 | $ | 12,353 | ||||
Net income per common share attributable to Acacia Research Corporation:
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Basic earnings per share
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$ | 1.13 | $ | 0.35 | ||||
Diluted earnings per share
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$ | 1.09 | $ | 0.34 | ||||
Weighted average number of shares outstanding, basic
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44,367,499 | 35,182,811 | ||||||
Weighted average number of shares outstanding, diluted
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45,771,228 | 36,448,005 |
Three Months Ended March 31,
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2012
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2011
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GAAP net income
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$ | 50,101 | $ | 12,353 | ||||
Non-cash stock compensation
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5,090 | 2,901 | ||||||
Non-cash patent amortization
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5,126 | 3,772 | ||||||
Excess benefit related non-cash tax expense
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7,611 | - | ||||||
Non-GAAP net income
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$ | 67,928 | $ | 19,026 | ||||
Pro forma non-GAAP net earnings per common share — basic
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$ | 1.53 | $ | 0.54 | ||||
Pro forma non-GAAP net earnings per common share — diluted
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$ | 1.48 | $ | 0.52 | ||||
GAAP weighted-average shares — basic
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44,367,499 | 35,182,811 | ||||||
GAAP weighted-average shares — diluted
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45,771,228 | 36,448,005 |
March 31,
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December 31,
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2012
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2011
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 315,498 | $ | 314,733 | ||||
Short-term investments
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134,185 | 6,597 | ||||||
Accounts receivable
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1,280 | 2,915 | ||||||
Prepaid expenses and other current assets
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2,533 | 803 | ||||||
Total current assets
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453,496 | 325,048 | ||||||
Property and equipment, net of accumulated depreciation and amortization
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212 | 220 | ||||||
Patents, net of accumulated amortization
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171,262 | 25,188 | ||||||
Goodwill, net of accumulated amortization
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36,202 | - | ||||||
Investments - noncurrent
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1,956 | 1,956 | ||||||
Other assets
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465 | 465 | ||||||
$ | 663,593 | $ | 352,877 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 8,336 | $ | 6,625 | ||||
Royalties and contingent legal fees payable
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14,095 | 23,508 | ||||||
Total current liabilities
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22,431 | 30,133 | ||||||
Deferred income taxes
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32,363 | - | ||||||
Other liabilities
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642 | 632 | ||||||
Total liabilities
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55,436 | 30,765 | ||||||
Total stockholders' equity
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608,157 | 322,112 | ||||||
$ | 663,593 | $ | 352,877 |
Three Months Ended March 31,
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2012
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2011
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Cash flows from operating activities:
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Net income including noncontrolling interests in operating subsidiary
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$ | 49,826 | $ | 13,556 | ||||
Adjustments to reconcile net income including noncontrolling interests in operating subsidiary to net cash provided by operating activities :
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Depreciation and amortization
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5,158 | 3,794 | ||||||
Non-cash stock compensation
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5,090 | 2,901 | ||||||
Change in valuation allowance
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(10,237 | ) | - | |||||
Other
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- | (9 | ) | |||||
Changes in assets and liabilities, net of effects from the acquisition of ADAPTIX, Inc:
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Accounts receivable
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1,635 | 6,789 | ||||||
Prepaid expenses, deferred fees and other assets
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(1,021 | ) | (337 | ) | ||||
Accounts payable and accrued expenses
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2,621 | 782 | ||||||
Royalties and contingent legal fees payable
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(9,413 | ) | 8,976 | |||||
Deferred tax liability
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5,293 | - | ||||||
Net cash provided by operating activities
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48,952 | 36,452 | ||||||
Cash flows from investing activities:
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Purchase of property and equipment
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(24 | ) | (59 | ) | ||||
Purchase of available-for-sale investments
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(144,762 | ) | - | |||||
Sales and maturities of available-for-sale investments
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20,000 | 35 | ||||||
Purchase of ADAPTIX, Inc., net of cash acquired
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(150,000 | ) | - | |||||
Patent acquisition costs
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(2,100 | ) | (680 | ) | ||||
Net cash used in investing activities
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(276,886 | ) | (704 | ) | ||||
Cash flows from financing activities:
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Proceeds from sale of common stock, net of issuance costs
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219,084 | 175,284 | ||||||
Distributions to noncontrolling interests in operating subsidiary
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- | (880 | ) | |||||
Contributions from noncontrolling interests in operating subsidiary
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1,920 | 877 | ||||||
Excess tax benefits from stock-based compensation
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7,611 | 23 | ||||||
Proceeds from the exercise of stock options
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84 | 44 | ||||||
Net cash provided by financing activities
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228,699 | 175,348 | ||||||
Increase in cash and cash equivalents
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765 | 211,096 | ||||||
Cash and cash equivalents, beginning
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314,733 | 102,515 | ||||||
Cash and cash equivalents, ending
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$ | 315,498 | $ | 313,611 |
· 4G Wireless technology*
· Audio Communications Fraud Detection technology
· Camera Support technology
· Consumer Rewards technology*
· Data Compression technology
· DDR SDRAM technology
· Digital Signal Processing Architecture technology
· Disk Array Systems & Storage Area Network technology
· DMT® technology
· Document Generation technology
· Impact Instrument technology
· Improved Anti-Trap Safety Technology for Vehicles technology*
· Improved Lighting technology
· Improved Memory Manufacturing technology*
· Lighting Ballast technology
· Location Based Services technology
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· Medical Monitoring technology
· Messaging technology
· Network Monitoring technology
· NOR Flash technology
· Online Auction Guarantee technology
· Optical Recording technology
· Pop-up Internet Advertising technology
· Power-over-Ethernet technology
· Rule Based Monitoring technology
· Semiconductor Memory and Process Patents technology*
· Shape Memory Alloys technology
· Telematics technology
· User Programmable Engine Control technology
· Video Encoding technology
· Visual Data Evaluation technology
· Voice-Over-IP technology*
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A subsidiary of Acacia Research Corporation acquired ADAPTIX, Inc., a pioneer in the development of 4G technologies for wireless systems, for $160 million. ADAPTIX, Inc., which has $10 million in cash, is an award-winning technology company long recognized in the industry as one of the first developers of cutting edge 4G wireless systems. With patents filed as early as 2000, ADAPTIX’s research and development efforts have resulted in one of the world’s most significant intellectual property portfolios focused on 4G technologies. With its rapidly growing portfolio of 230 issued and pending patents in 13 countries, ADAPTIX’s innovations extend across a broad range of 4G technologies including OFDMA and MIMO.
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ADAPTIX, Inc. entered into Licensing Agreements with Microsoft Corporation and Samsung Electronics Co., Ltd.
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AdjustaCam LLC entered into settlement agreements with J&R Electronics Inc., CompUSA.com, New CompUSA Corporation, Systemax Inc., Tiger Direct Inc. and Amazon.com Inc. The agreements resolved patent litigation that was pending in the United States District Court for the Eastern District of Texas.
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Anti Pinch Solutions LLC entered into a settlement and license agreement with BMW of North America LLC, covering a portfolio of patents that apply to vehicle occupant presence and position sensing systems.
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Advanced Data Access LLC entered into settlement agreements with Windbond Electronics Corporation and Windbond Electronics Corporation America. These agreements resolved patent litigation that was pending in the United States District Court for the Eastern District of Texas.
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Advanced Encoding Solutions LLC entered into a license agreement with Ericsson Television Inc. covering a patent that applies to the encoding of HD and SD MPEG-compressed video. This agreement resolved the parties’ dispute that was pending in the District Court for the Eastern District of Texas.
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B.I. Systems LLC entered into settlement and license agreements with QlikTech Inc., Lawson Software Inc. and Actuate Corporation. The agreements resolved patent litigation that was pending in the United States District Court for the Middle District of Florida. The litigation involved United States Patent No. 5,894,311, which is entitled, “Computer-Based Visual Data Evaluation.”
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Chalumeau Power Systems LLC entered into license agreements with SMC Networks Inc., D-Link Systems Inc. and D-Link Corp. covering patents generally relating to Power Over Ethernet technology. The agreements resolved litigation that was pending in the United States District Court for the District of Delaware.
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Compression Technology Solutions LLC entered into settlement agreements with CA, Inc. and International Business Machines Corporation (IBM). The agreements resolved patent litigation that was pending in the United States District Court for the Eastern District of Missouri.
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DRAM Memory Technologies LLC entered into settlement agreements with Integrated Silicon Solution Inc. and SK hynix Inc. The settlement agreements resolved litigation that was pending in the Central District of California.
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EVM Systems LLC entered into a settlement agreement with Abbott Laboratories Inc. and Abbott Vascular Inc., which resolved litigation that was pending in the Eastern District of Texas.
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Internet Communications Solutions LLC and magicJack VocalTec entered into a Patent License and Settlement Agreement which resolved all disputes between all parties currently pending in the United States District Court for the Eastern District of Texas (Tyler Division), Case No. 6:11cv375.
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Lambda Optical Solutions LLC entered into a license agreement with Nokia Siemens Networks Oy. This agreement resolved patent litigation that was pending in the United States District Court for the District of Delaware.
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Lighting Ballast Control LLC entered into settlement and license agreements with American Ballast Corp. and Robertson Transformer Co. covering patents relating to electronic lighting ballasts. The agreements resolved litigation that was pending in the United States District Court for the Northern District of Texas.
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Medical Monitoring and Paging LLC resolved litigation with Philips Electronics North America Corporation and Oridion Capnography Inc. The litigation related to a patent directed to medical monitoring and paging technology.
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Program Rewards Solutions LLC entered into a license and settlement agreement with Points International Ltd. covering patents directed to an online system for managing and using miles and points from various organizations. This agreement resolved the matter that was pending in the District Court for the Southern District of New York, 10 Civ. 1561 (RJS).
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Semiconductor Technologies LLC entered into a settlement agreement with SK hynix Inc. The settlement agreement resolved litigation that was pending in the Central District of California.
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Smart Memory Solutions LLC entered into a settlement agreement with Windbond Electronics Corporation America. This agreement resolved patent litigation that was pending in the United States District Court for the District of Delaware.
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Smooth Impact LLC entered into license agreements with the following companies covering patents directed to impact instrument technology. The agreements resolved the parties’ dispute that was pending in the District Court for the Eastern District of Texas, Case No. 6:10-cv-690.
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Easy Strike Co. Ltd., Apex Tool Group LLC, Cooper Tools LLC, Bold Inc., and Test-Rite Products Corp.
Lowe's Home Centers Inc.
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· Pull’R Holding Company LLC
· Stanley Black & Decker Inc.
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Summit Data Systems LLC entered into settlement agreements with Buffalo Technology (USA) LLC and D-Link Systems Inc. The agreements resolved patent litigation that was pending in the United States District Court for the District of Delaware.
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Unified Messaging Solutions LLC and Comerica Incorporated and Comerica Bank entered into a Patent License and Settlement Agreement which resolved all disputes between the parties currently pending in the United States District Court for the Eastern District of Texas (Tyler Division), Case No. 6:11-cv-464.
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Acacia Research Group LLC and its affiliates continued their patent and patent rights acquisition activities, acquiring a total of 5 new patent portfolios in the first quarter of 2012, including the following:
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In January 2012, acquired patents relating to catheter ablation technology.
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In January 2012, acquired patents relating to online user registration technology.
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In January 2012, acquired rights to patents relating to optical networking technology.
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In February 2012, acquired over 300 patents from Automotive Technologies International (ATI) relating to numerous automotive safety, navigation and diagnostics technologies.
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(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.
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(2) Acacia Research Group LLC, ADAPTIX Inc., AdjustaCam LLC, Anti Pinch Solutions LLC, Advanced Data Access LLC, Advanced Encoding Solutions LLC, B.I. Systems LLC, Chalumeau Power Systems LLC, Compression Technology Solutions LLC, DRAM Memory Technologies LLC , EVM Systems LLC , Internal Combustion Solutions LLC , Internet Communications Solutions LLC, Lambda Optical Solutions LLC, Lighting Ballast Control LLC, Medical Monitoring and Paging LLC, Optical Memory Storage LLC , Program Rewards Solutions LLC, Semiconductor Technologies LLC, Smooth Impact LLC, Summit Data Systems LLC and Unified Messaging Solutions LLC are all wholly owned operating subsidiaries of Acacia Research Corporation.
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