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 core operation of the Company’s business.

Non-cash interest expense. 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 core operations of the Company’s 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 core operations of the Company’s business.

Income tax adjustments. For purposes of internal forecasting, planning and analyzing future periods that assumes 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 impairment charges and 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 revenue for the third quarter of 2014 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 rambus.com.

RMBSFN

Rambus Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
		June 30, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents		$	99,571		$	338,696
Marketable securities		146,859			48,966
Accounts receivable		12,503			2,251
Prepaids and other current assets		7,283			8,253
Deferred taxes		1,069			205
Total current assets		267,285			398,371
Intangible assets, net		102,435			117,172
Goodwill		116,899			116,899
Property, plant and equipment, net		67,411			72,642
Deferred taxes, long-term		571			4,797
Other assets		3,090			3,498
Total assets		$	557,691		$	713,379
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,465		$	7,001
Accrued salaries and benefits		14,410			33,448
Convertible notes, short-term		—			164,047
Other accrued liabilities		10,310			8,346
Total current liabilities		30,185			212,842
Long-term liabilities:
Convertible notes, long-term		112,316			109,629
Long-term imputed financing obligation		39,232			39,349
Other long-term liabilities		9,652			11,330
Total long-term liabilities		161,200			160,308
Total stockholders’ equity		366,306			340,229
Total liabilities and stockholders’ equity		$	557,691		$	713,379

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Revenue:
Royalties		$	69,741			$	57,009			$	143,378			$	123,231
Contract and other revenue		6,777				910				11,428				1,554
Total revenue		76,518				57,919				154,806				124,785
Operating costs and expenses:
Cost of revenue (1)		10,637				7,365				20,659				13,899
Research and development (1)		27,668				30,777				54,566				63,625
Marketing, general and administrative (1)		18,619				14,136				37,439				39,258
Restructuring charges		—				—				39				2,206
Gain from sale of intellectual property		—				(103		)		(170		)		(1,388		)
Gain from settlement		(510		)		—				(1,020		)		—
Total operating costs and expenses		56,414				52,175				111,513				117,600
Operating income		20,104				5,744				43,293				7,185
Interest income and other income (expense), net		104				(1,419		)		117				(1,439		)
Interest expense		(8,770		)		(7,426		)		(18,696		)		(14,738		)
Interest and other income (expense), net		(8,666		)		(8,845		)		(18,579		)		(16,177		)
Income (loss) before income taxes		11,438				(3,101		)		24,714				(8,992		)
Provision for income taxes		6,395				4,743				11,867				9,254
Net income (loss)		$	5,043			$	(7,844	)		$	12,847			$	(18,246	)
Net income (loss) per share:
Basic		$	0.04			$	(0.07	)		$	0.11			$	(0.16	)
Diluted		$	0.04			$	(0.07	)		$	0.11			$	(0.16	)
Weighted average shares used in per share calculation
Basic		114,116				112,183				113,854				111,892
Diluted		117,398				112,183				116,733				111,892
_________ (1) Total stock-based compensation expense for the three and six months ended June 30, 2014 and 2013 are presented as follows:
		Three Months Ended June 30,								Six Months Ended June 30,
		2014				2013				2014				2013
Cost of revenue		$	15			$	5			$	22			$	5
Research and development		$	2,615			$	1,660			$	3,926			$	3,536
Marketing, general and administrative		$	2,225			$	1,909			$	3,806			$	4,981

Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (In thousands) (Unaudited)
		Three Months Ended												Six Months Ended
		June 30, 2014				March 31, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Operating costs and expenses		$	56,414			$	55,099			$	52,175			$	111,513			$	117,600
Adjustments:
Stock-based compensation		(4,855		)		(2,899		)		(3,574		)		(7,754		)		(8,522		)
Acquisition-related transaction costs and retention bonuses		(1,028		)		(1,435		)		(3,385		)		(2,463		)		(7,397		)
Amortization		(6,757		)		(6,797		)		(6,997		)		(13,554		)		(14,037		)
Reversal of one-time litigation costs		—				—				8,482				—				8,482
Restructuring charges		—				(39		)		—				(39		)		(2,206		)
Severance costs		—				—				—				—				(514		)
Costs of restatement and related legal activities		—				—				(2		)		—				(19		)
Non-GAAP operating costs and expenses		$	43,774			$	43,929			$	46,699			$	87,703			$	93,387
Operating income		$	20,104			$	23,189			$	5,744			$	43,293			$	7,185
Adjustments:
Stock-based compensation		4,855				2,899				3,574				7,754				8,522
Acquisition-related transaction costs and retention bonuses		1,028				1,435				3,385				2,463				7,397
Amortization		6,757				6,797				6,997				13,554				14,037
Reversal of one-time litigation costs		—				—				(8,482		)		—				(8,482		)
Restructuring charges		—				39				—				39				2,206
Severance costs		—				—				—				—				514
Costs of restatement and related legal activities		—				—				2				—				19
Non-GAAP operating income		$	32,744			$	34,359			$	11,220			$	67,103			$	31,398
Income (loss) before income taxes		$	11,438			$	13,276			$	(3,101	)		$	24,714			$	(8,992	)
Adjustments:
Stock-based compensation		4,855				2,899				3,574				7,754				8,522
Acquisition-related transaction costs and retention bonuses		1,028				1,435				3,385				2,463				7,397
Amortization		6,757				6,797				6,997				13,554				14,037
Reversal of one-time litigation costs		—				—				(8,482		)		—				(8,482		)
Restructuring charges		—				39				—				39				2,206
Severance costs		—				—				—				—				514
Costs of restatement and related legal activities		—				—				2				—				19
Impairment of investment		—				—				1,400				—				1,400
Non-cash interest expense on convertible notes		5,469				6,242				4,145				11,711				8,234
Non-GAAP income before income taxes		$	29,547			$	30,688			$	7,920			$	60,235			$	24,855
GAAP provision for income taxes		6,395				5,472				4,743				11,867				9,254
Adjustment to GAAP provision for income taxes		4,242				5,576				(1,892		)		9,818				(307		)
Non-GAAP provision for income taxes		10,637				11,048				2,851				21,685				8,947
Non-GAAP net income		$	18,910			$	19,640			$	5,069			$	38,550			$	15,908
Non-GAAP basic net income per share		$	0.17			$	0.17			$	0.05			$	0.34			$	0.14
Non-GAAP diluted net income per share		$	0.16			$	0.17			$	0.04			$	0.33			$	0.14
Weighted average shares used in non-GAAP per share calculation:
Basic		114,116				113,590				112,183				113,854				111,892
Diluted		117,398				116,629				116,162				116,733				116,009

Supplemental Reconciliation of GAAP to Non-GAAP Effective Tax Rate (1)
		Three Months Ended									Six Months Ended
		June 30, 2014			March 31, 2014			June 30, 2013			June 30, 2014			June 30, 2013
GAAP effective tax rate		56%			41%			153%			48%			103%
Adjustment to GAAP effective tax rate		(20)%			(5)%			(117)%			(12)%			(67)%
Non-GAAP effective tax rate		36%			36%			36%			36%			36%

(1)

For purposes of internal forecasting, planning and analyzing future periods that assumes 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.

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