Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

Costs of restatement and related legal activities. These expenses consist primarily of investigation, audit, legal and other professional fees related to the 2006-2007 stock option investigation and related litigation, as well as recoveries received from third parties. The Company excludes these costs and recoveries from its non-GAAP measures primarily because the Company believes that these non-recurring costs and recoveries have no direct correlation to the operation of the Company’s core business.

Non-cash interest expense on convertible notes. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company’s results with other peer companies and to more accurately reflect the Company’s ongoing operations.

Reversal of one-time litigation costs. These adjustments are a one-time litigation cost reversal of prior litigation costs accrued related to previously awarded costs that the Company was required to pay in connection with the SK hynix and Micron Technology litigation. The Company excludes these reversals from its non-GAAP measures because the Company believes that these reversals have no direct correlation to the operations of the Company’s core business and they are a one-time event.

Severance costs. These expenses relate to the separation payment to the Company’s former chief executive officer. The Company excludes these costs from its non-GAAP measures because the Company believes that these non-recurring costs have no direct correlation to the operations of the Company’s core business.

Income tax adjustments. For purposes of internal forecasting, planning and analyzing future periods that assume net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 36 percent, which consists of estimated U.S. federal and state tax rates, and excludes tax rates associated with certain items such as withholding tax, tax credits and deferred tax asset valuation allowance. Accordingly, the Company has applied the 36 percent tax rate to its non-GAAP financial results for all periods to assist the Company’s planning for future periods. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

On occasion in the future, there may be other items, such as significant gains or losses from contingencies that the Company may exclude in deriving its non-GAAP financial measures if it believes that doing so is consistent with the goal of providing useful information to investors and management.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including relating to Rambus’ expectations regarding 2015 revenue for the first quarter and year, and estimated, fixed, long-term projected tax rates. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

About Rambus Inc.

Rambus brings invention to market. Our customizable IP cores, architecture licenses, tools, services, and training improve the competitive advantage of our customers’ products while accelerating their time-to-market. Rambus products and innovations capture, secure and move data. For more information, visit www.rambus.com.

RMBSFN

Rambus Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
							December 31, 2014							December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents							$	154,126						$	338,696
Marketable securities							145,983							48,966
Accounts receivable							6,001							2,251
Prepaids and other current assets							8,541							8,253
Deferred taxes							187							205
Total current assets							314,838							398,371
Intangible assets, net							89,371							117,172
Goodwill							116,899							116,899
Property, plant and equipment, net							64,023							72,642
Deferred taxes, long-term							536							4,797
Other assets							2,612							3,498
Total assets							$	588,279						$	713,379
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable							$	6,962						$	7,001
Accrued salaries and benefits							14,840							33,448
Convertible notes, short-term							—							164,047
Other accrued liabilities							12,856							8,346
Total current liabilities							34,658							212,842
Long-term liabilities:
Convertible notes, long-term							115,089							109,629
Long-term imputed financing obligation							39,063							39,349
Other long-term liabilities							7,847							11,330
Total long-term liabilities							161,999							160,308
Total stockholders’ equity							391,622							340,229
Total liabilities and stockholders’ equity							$	588,279						$	713,379

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
						Three Months Ended December 31,												Year Ended December 31,
						2014				2013								2014				2013
Revenue:
Royalties						$	64,134			$	69,867							$	271,521			$	264,111
Contract and other revenue						7,906				3,555								25,037				7,390
Total revenue						72,040				73,422								296,558				271,501
Operating costs and expenses:
Cost of revenue (1)						10,748				10,358								41,947				33,215
Research and development (1)						28,445				26,803								110,025				117,981
Sales, general and administrative (1)						19,131				18,511								74,770				76,467
Restructuring charges						—				2,211								39				5,546
Impairment of goodwill and long-lived assets						—				9,681								—				17,751
Gain from sale of intellectual property						(3,359		)		—								(3,529		)		(1,388		)
Gain from settlement						(510		)		(356		)						(2,040		)		(535		)
Total operating costs and expenses						54,455				67,208								221,212				249,037
Operating income						17,585				6,214								75,346				22,464
Interest income and other income (expense), net						156				(223		)						(276		)		(1,596		)
Interest expense						(3,065		)		(9,595		)						(24,820		)		(32,885		)
Interest and other income (expense), net						(2,909		)		(9,818		)						(25,096		)		(34,481		)
Income (loss) before income taxes						14,676				(3,604		)						50,250				(12,017		)
Provision for income taxes						6,835				6,173								24,049				21,731
Net income (loss)						$	7,841			$	(9,777	)						$	26,201			$	(33,748	)
Net income (loss) per share:
Basic						$	0.07			$	(0.09	)						$	0.23			$	(0.30	)
Diluted						$	0.07			$	(0.09	)						$	0.22			$	(0.30	)
Weighted average shares used in per share calculation
Basic						115,024				113,217								114,318				112,415
Diluted						117,620				113,217								117,624				112,415
_________
(1) Total stock-based compensation expense for the three months and years ended December 31, 2014 and 2013 are presented as follows:
						Three Months Ended December 31,												Year Ended December 31,
						2014				2013								2014				2013
Cost of revenue					$	10			$	7							$	44			$	19
Research and development					$	1,642			$	1,431							$	7,216			$	6,597
Sales, general and administrative					$	1,883			$	1,658							$	7,470			$	8,365

Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (In thousands) (Unaudited)
					Three Months Ended																		Year Ended
					December 31, 2014					September 30, 2014					December 31, 2013								December 31, 2014					December 31, 2013
Operating costs and expenses					$	54,455				$	55,244				$	67,208							$	221,212				$	249,037
Adjustments:
Stock-based compensation expense					(3,535		)			(3,441		)			(3,096		)						(14,730		)			(14,981		)
Acquisition-related transaction costs and retention bonus expense					(6		)			(6		)			(1,463		)						(2,475		)			(10,372		)
Amortization expense					(6,323		)			(6,741		)			(7,489		)						(26,618		)			(28,909		)
Reversal of one-time litigation costs					—					—					566								—					9,048
Restructuring charges					—					—					(2,211		)						(39		)			(5,546		)
Impairment of goodwill and long-lived assets					—					—					(9,681		)						—					(17,751		)
Severance costs					—					—					—								—					(514		)
Costs of restatement and related legal activities					—					—					—								—					(19		)
Non-GAAP operating costs and expenses					$	44,591				$	45,056				$	43,834							$	177,350				$	179,993
Operating income					$	17,585				$	14,468				$	6,214							$	75,346				$	22,464
Adjustments:
Stock-based compensation expense					3,535					3,441					3,096								14,730					14,981
Acquisition-related transaction costs and retention bonus expense					6					6					1,463								2,475					10,372
Amortization expense					6,323					6,741					7,489								26,618					28,909
Reversal of one-time litigation costs					—					—					(566		)						—					(9,048		)
Restructuring charges					—					—					2,211								39					5,546
Impairment of goodwill and long-lived assets					—					—					9,681								—					17,751
Severance costs					—					—					—								—					514
Costs of restatement and related legal activities					—					—					—								—					19
Non-GAAP operating income					$	27,449				$	24,656				$	29,588							$	119,208				$	91,508
Income (loss) before income taxes					$	14,676				$	10,860				$	(3,604	)						$	50,250				$	(12,017	)
Adjustments:
Stock-based compensation expense					3,535					3,441					3,096								14,730					14,981
Acquisition-related transaction costs and retention bonus expense					6					6					1,463								2,475					10,372
Amortization expense					6,323					6,741					7,489								26,618					28,909
Reversal of one-time litigation costs					—					—					(566		)						—					(9,048		)
Restructuring charges					—					—					2,211								39					5,546
Impairment of goodwill and long-lived assets					—					—					9,681								—					17,751
Severance costs					—					—					—								—					514
Costs of restatement and related legal activities					—					—					—								—					19
Impairment of investment					—					600					—								600					1,400
Non-cash interest expense on convertible notes					1,536					1,515					5,927								14,762					19,296
Non-GAAP income before income taxes					$	26,076				$	23,163				$	25,697							$	109,474				$	77,723
GAAP provision for income taxes					6,835					5,347					6,173								24,049					21,731
Adjustment to GAAP provision for income taxes					2,552					2,992					3,078								15,362					6,249
Non-GAAP provision for income taxes					9,387					8,339					9,251								39,411					27,980
Non-GAAP net income					$	16,689				$	14,824				$	16,446							$	70,063				$	49,743
Non-GAAP basic net income per share					$	0.15				$	0.13				$	0.15							$	0.61				$	0.44
Non-GAAP diluted net income per share					$	0.14				$	0.13				$	0.14							$	0.60				$	0.43
Weighted average shares used in non-GAAP per share calculation:
Basic					115,024					114,523					113,217								114,318					112,415
Diluted					117,620					118,206					116,211								117,624					115,670

Supplemental Reconciliation of GAAP to Non-GAAP Effective Tax Rate (1)