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Acquisition | 9 Months Ended
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Sep. 30, 2016
Business Combinations [Abstract] |
Acquisition | Acquisitions Smart Card Software Limited On January 25, 2016, the Company completed its acquisition of Smart Card Software Limited (“SCS”), a privately-held company incorporated in the United Kingdom, by acquiring all issued and outstanding shares of capital stock of SCS. Pursuant to the merger agreement on January 25, 2016, SCS was merged into Rambus, Inc. The transaction was denominated in British pounds. Under the terms of the merger agreement, the total consideration in U.S. dollar equivalent was $104.7 million which included the purchase price of $92.6 million paid on January 25, 2016 and additional purchase consideration to be paid in the fourth quarter of 2016 totaling $12.1 million and comprised of $11.6 million in cash, $4.0 million in working capital, offset by $3.5 million in liabilities assumed from SCS. Subsequently, the additional purchase consideration was adjusted to $10.8 million based on the period exchange rate as of September 30, 2016. Of the purchase price, approximately $17.1 million of the consideration was deposited into an escrow account to fund indemnification obligations and other contractual provisions, with releases of portions of the escrow at various intervals through 18 months. SCS is a leader in mobile payments and a leading supplier of smart ticketing systems, which includes Bell Identification Ltd. and Ecebs Ltd. SCS is part of the RSD reporting unit. This acquisition will complement the Company's RSD reporting unit by allowing the Company to leverage its foundational security technology to offer differentiated, value-added security solutions to its customers. As of September 30, 2016, the Company has incurred approximately $2.0 million in external acquisition costs in connection with the acquisition which were expensed as incurred. The initial purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company's estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period. The fair value of the assets acquired has been determined primarily by using valuation methods that discount the expected future cash flows to present value using estimates and assumptions determined by management. The Company performed a valuation of the net assets acquired as of the January 25, 2016 closing date. The total consideration from the business combination was allocated as follows:
| Total
| (in thousands)
Cash | $ | 12,056 |
Accounts receivable | 6,563 |
Property and equipment | 524 |
Other tangible assets | 1,462 |
Identified intangible assets | 59,700 |
Goodwill | 46,903 |
Accounts payable and accrued liabilities | (5,996 | )
Deferred income taxes | (15,556 | )
Deferred revenue | (1,313 | )
Total | $ | 104,343 |
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of SCS. This goodwill is not expected to be deductible for tax purposes. The identified intangible assets assumed in the acquisition of SCS were recognized as follows based upon their estimated fair values as of the acquisition date:
| Total |  | Estimated Weighted Average Useful Life
| (in thousands) |  | (in years)
Existing technology | $ | 24,600 |  |  | 6
Customer contracts and contractual relationships (1) | 35,100 |  |  | 6
Total | $ | 59,700 |  |  |
(1) Includes favorable contracts of $8.3 million with an estimated useful life of 5 years. The favorable contracts are acquired software and service agreements where the Company has no performance obligations. Cash received from these acquired favorable contracts reduces the favorable contract intangible asset. The following unaudited pro forma financial information presents the combined results of operations for the Company and SCS as if the acquisition had occurred on January 1, 2015. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2015, and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition (unaudited, in thousands, except per share amounts):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Revenue | $ | 89,855 |  |  | $ | 78,325 |  |  | $ | 240,498 |  |  | $ | 233,372 |
Net income | $ | 4,511 |  |  | $ | 173,564 |  |  | $ | 11,602 |  |  | $ | 182,146 |
Net income per share - diluted | $ | 0.04 |  |  | $ | 1.45 |  |  | $ | 0.10 |  |  | $ | 1.53 |
Pro forma earnings for 2016 were adjusted to exclude $2.0 million of acquisition-related costs incurred in 2016. Consequently, pro forma earnings for 2015 were adjusted to include these costs. Inphi Memory Interconnect Business On August 4, 2016, the Company completed its acquisition of all the assets of Inphi's Memory Interconnect Business (“Memory Interconnect Business”) from Inphi Corporation for $90 million in cash. The acquisition includes all assets of the Memory Interconnect Business including product inventory, customer contracts, supply chain agreements and intellectual property. Of the purchase price, approximately $11.3 million of the consideration was deposited into an escrow account to fund indemnification obligations and other contractual provisions, to be released 12 months after the closing date. This acquisition will complement the MID reporting unit by allowing the Company to strengthen its market position for memory buffer chip products and execute on programs that meet the needs of the server, networking and data center market. As of September 30, 2016, the Company has incurred approximately $0.6 million in external acquisition costs in connection with the acquisition which were expensed as incurred. The purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company's estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period. The fair value of the assets acquired has been determined primarily by using valuation methods that discount the expected future cash flows to present value using estimates and assumptions determined by management. The Company performed a valuation of the net assets acquired as of the August 4, 2016 closing date. The total consideration from the business combination was allocated as follows:
| Total
| (in thousands)
Inventory (1) | $ | 6,300 |
Property and equipment | 4,543 |
Other tangible assets | 206 |
Identified intangible assets | 49,722 |
Goodwill | 33,223 |
Accounts payable and accrued liabilities | (3,527 | )
Deferred revenue | (467 | )
Total | $ | 90,000 |
(1) Includes inventory fair value step-up of $2.3 million. The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of the acquired business. This goodwill is expected to be deductible for tax purposes. The identified intangible assets assumed in the acquisition of the acquired business were recognized as follows based upon their estimated fair values as of the acquisition date:
| Total |  | Estimated Weighted Average Useful Life
| (in thousands) |  | (in years)
Existing technology | $ | 44,400 |  |  | 5
Customer contracts and contractual relationships | 3,722 |  |  | 6
In-process research and development | 1,600 |  |  | Not applicable
Total | $ | 49,722 |  |  |
In-process research and development ("IPR&D") consists of one project, primarily relating to the development of process technologies to manufacture the next generation buffer chip product. The project is expected to be completed over the next 4 years. The estimated remaining costs to complete the IPR&D project were $77 million as of the acquisition date. The acquired IPR&D will not be amortized until completion of the related product which is determined by when the underlying projects reach technological feasibility and commence commercial production. Upon completion, each IPR&D project will be amortized over its useful life which is expected to range between 5 years and 7 years. The following unaudited pro forma financial information presents the combined results of operations for the Company and the acquired business as if the acquisition had occurred on January 1, 2015. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2015, and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition (unaudited, in thousands, except per share amounts):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Revenue | $ | 92,067 |  |  | $ | 88,798 |  |  | $ | 263,456 |  |  | $ | 261,897 |
Net income | $ | 4,410 |  |  | $ | 180,471 |  |  | $ | 5,579 |  |  | $ | 194,255 |
Net income per share - diluted | $ | 0.04 |  |  | $ | 1.51 |  |  | $ | 0.05 |  |  | $ | 1.63 |
Pro forma earnings for 2016 were adjusted to exclude $0.6 million of acquisition-related costs incurred in 2016. Consequently, pro forma earnings for 2015 were adjusted to include these costs. Snowbush IP Assets On August 5, 2016, the Company completed its acquisition of the assets of Semtech Corporation's Snowbush IP for $32.0 million in cash and additional payments of up to $50 million, currently valued at $6.8 million, which are based upon specific new product sales through the end of 2022. Snowbush IP, formerly part of Semtech's Systems Innovation Group, is a provider of silicon-proven, high-performance serial link solutions. The Snowbush IP assets will be integrated into the MID reporting unit to bolster its SerDes and IP offerings, addressing critical needs of the server, networking and data center market. As of September 30, 2016, the Company has incurred approximately $0.6 million in external acquisition costs in connection with the acquisition which were expensed as incurred. The purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company's estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period. The fair value of the assets acquired has been determined primarily by using valuation methods that discount the expected future cash flows to present value using estimates and assumptions determined by management. The Company performed a valuation of the net assets acquired as of the August 5, 2016 closing date. The total consideration from the business combination was allocated as follows:
| Total
| (in thousands)
Property and equipment | $ | 911 |
Identified intangible assets | 25,189 |
Goodwill | 14,123 |
Deferred revenue | (1,378 | )
Total | $ | 38,845 |
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of the Snowbush IP assets. This goodwill is expected to be deductible for tax purposes. The identified intangible assets assumed in the acquisition of the Snowbush IP assets were recognized as follows based upon their estimated fair values as of the acquisition date:
| Total |  | Estimated Weighted Average Useful Life
| (in thousands) |  | (in years)
Existing technology | $ | 2,600 |  |  | 5
Customer contracts and contractual relationships | 789 |  |  | 2
In-process research and development | 21,800 |  |  | Not applicable
Total | $ | 25,189 |  |  |
IPR&D consists of four projects, primarily relating to the development of SerDes and IP process technologies. The projects are expected to be completed over the next 1.5 years. The estimated remaining costs to complete the IPR&D projects were $8.4 million as of the acquisition date. The acquired IPR&D will not be amortized until completion of the related products which is determined by when the underlying projects reach technological feasibility and commence commercial production. Upon completion, each IPR&D project will be amortized over its useful life, each of which is expected to range between 4 years and 6 years. The following unaudited pro forma financial information presents the combined results of operations for the Company and the Snowbush IP assets as if the acquisition had occurred on January 1, 2015. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2015, and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition (unaudited, in thousands, except per share amounts):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Revenue | $ | 90,149 |  |  | $ | 73,811 |  |  | $ | 241,005 |  |  | $ | 220,912 |
Net income | $ | 4,756 |  |  | $ | 181,657 |  |  | $ | 11,242 |  |  | $ | 200,771 |
Net income per share - diluted | $ | 0.04 |  |  | $ | 1.52 |  |  | $ | 0.10 |  |  | $ | 1.69 |
Pro forma earnings for 2016 were adjusted to exclude $0.6 million of acquisition-related costs incurred in 2016. Consequently, pro forma earnings for 2015 were adjusted to include these costs.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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