updated 2/15/2011 4:16:12 PM ET 2011-02-15T21:16:12

SANTA CLARA, Calif., Feb. 15, 2011 (GLOBE NEWSWIRE) -- Rovi Corporation (Nasdaq:ROVI) announced today that it had fourth quarter 2010 revenues of $140.2 million (in line with its CY2010 estimates released on December 22, 2010), compared to $137.1 million for the fourth quarter of 2009. Fourth quarter 2010 GAAP net income was $67.2 million, compared to $2.6 million for the fourth quarter of 2009. The Company's GAAP earnings included a $40.7 million income tax benefit in 2010 compared to a $22 million income tax expense in 2009.

On a non-GAAP Adjusted Pro Forma basis, Adjusted Pro Forma Income was $59.7 million in the fourth quarter of 2010, compared to $52.0 million in the fourth quarter of 2009. Adjusted Pro Forma Income Per Common Share for the fourth quarter of 2010 was $0.54, compared to $0.50 for the fourth quarter of 2009. Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share are defined below, in the section entitled Non-GAAP or Adjusted Pro Forma Information. Reconciliations between GAAP pro forma and Adjusted Pro Forma results from operations are provided in the tables below.

"We completed another excellent quarter and are pleased with our progress toward achieving our business objectives," said Fred Amoroso, President and CEO of Rovi. "I am also pleased with our integration planning efforts around Sonic Solutions. Now that our tender offer has succeeded, I look forward to executing our plans and beginning to realize the benefits and synergies of the combination."

"Consistent with the growth in the legacy Rovi business that we reiterated at our investor day in early January, and in combination with the revenue and earnings streams of Sonic Solutions, we expect our Prospective Adjusted Pro Forma Revenue including Sonic Solutions for the full calendar year 2011 to range between $775 million and $825 million," added James Budge, Chief Financial Officer of Rovi. "Assuming a full calendar year 2011 impact from Sonic's earnings, we expect our 2011 Prospective Adjusted Pro Forma Income Per Common Share including Sonic Solutions to range between $2.20 and $2.50, reflective of our recent term loan financing that was $250 million larger than we initially planned."

Non-GAAP or Adjusted Pro Forma Information

Rovi Corporation provides non-GAAP Adjusted Pro Forma and Prospective Adjusted Pro Forma information. References to either Adjusted Pro Forma or Prospective Adjusted Pro Forma information are references to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information to assist investors in assessing its current and future operations in the way that its management evaluates those operations. Adjusted Pro Forma Revenue, Prospective Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share and Prospective Adjusted Pro Forma Income Per Common Share are supplemental measures of the Company's performance that are not required by, and are not presented in accordance with GAAP. Neither Adjusted Pro Forma nor Prospective Adjusted Pro Forma information substitutes for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP basis pro forma information. 

Adjusted Pro Forma Income is defined as pro forma income (loss) from continuing operations, net of tax, adding back non-cash items such as equity-based compensation, amortization of intangibles, amortization or write-off of note issuance costs, non-cash interest expense recorded on convertible debt under Accounting Standards Codification ("ASC") 470-20 (formerly known as FSP APB 14-1), mark-to-market fair value adjustments for interest rate swaps and caps, and the reversals of discrete tax items including reserves; as well as items which impact comparability that are required to be recorded under GAAP, but that the Company believes are not indicative of its core operating results such as transaction, transition and integration costs, restructuring and asset impairment charges, payments to note holders and for expenses in connection with the early redemption of debt, court awarded fees, gains on sale of strategic investments, the loss on exiting the Guideworks Joint Venture, and expenses related to certain Gemstar pre-acquisition indemnification and other matters in excess of reserves established in purchase accounting. While depreciation expense is a non-cash item, it is included in Adjusted Pro Forma Income as a reasonable proxy for capital expenditures.

Management has been using Adjusted Pro Forma measures since the acquisition of Gemstar-TV Guide International ("Gemstar"). Management did so, in part, because it believes that including Gemstar's operating results only for the period since its acquisition on May 2, 2008 diminishes the comparative value of results from the prior year. Adjusted Pro Forma financial information assumes all acquisitions occurring prior to March 31, 2009 (including the Gemstar acquisition) and all divestitures (including Software, Games, eMeta, Norpak, TV Guide Magazine, TVG Network, TV Guide Network and TV Guide Online), as well as any discontinued operations and product lines were effective on January 1, 2007. Additionally, the TVG Network, TV Guide Network and TV Guide Online businesses are assumed to have been sold for aggregate proceeds of $275 million which is assumed to have reduced the debt issued in conjunction with the acquisition of Gemstar.  

Adjusted Pro Forma Income Per Common Share is calculated using Adjusted Pro Forma Income and taking into account the benefit of the convertible debt call option when it allows the Company to purchase shares of its own stock at a price below what those shares could be purchased for in the open market. 

Prospective Pro Forma and Prospective Adjusted Pro Forma measures assume the Sonic Solutions business combination occurred on January 1, 2010. Prospective Adjusted Pro Forma Revenue excludes from Pro Forma Revenue, after giving effect to the Sonic Solutions acquisition, the effect of contra revenue associated with Sonic Solutions' issuance, and subsequent vesting, of a warrant provided to a customer. Prospective Adjusted Pro Forma Income is defined as Pro Forma Income (loss) from continuing operations, after giving effect to the Sonic Solutions acquisition and net of tax, adding back the non-cash items discussed above and used in the calculation of Adjusted Pro Forma Income and also adding back the non-cash effect of contra revenue associated with Sonic's issuance, and subsequent vesting, of a warrant to a customer. Prospective Adjusted Pro Forma Income also excludes certain items which impact comparability, but that are required to be recorded under GAAP, and are discussed above and used in the calculation of Adjusted Pro Forma Income, as well as the effect of the release of a portion of a payroll tax liability which Sonic Solutions established in prior years in connection with a stock option review. Prospective Adjusted Pro Forma Income Per Common Share is calculated using Prospective Adjusted Pro Forma Income and taking into account the benefit of the convertible debt call option when it allows the Company to purchase shares of its own stock at a price below what those shares could be purchased for in the open market.

Since entering into the agreement to acquire Gemstar, the Company's management has evaluated and made operating decisions about its business operations primarily based upon Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share. Management uses Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share as measures as they exclude items management does not consider to be "core costs" or "core proceeds" when making business decisions. Therefore, management presents these Adjusted Pro Forma financial measures along with GAAP measures. For each such Adjusted Pro Forma financial measure, the adjustment provides management with information about the Company's underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Rovi Corporation does not acquire businesses on a predictable cycle, management excludes amortization of intangibles from acquisitions, transaction costs and transition and integration costs in order to make more consistent and meaningful evaluations of the Company's operating expenses. Management also excludes the effect of restructuring and asset impairment charges, insurance settlements, losses on debt redemption, court awarded fees, the loss on exiting the Guideworks Joint Venture, expenses related to certain Gemstar pre-acquisition indemnification and other matters in excess of reserves established in purchase accounting and gains on sale of strategic investments for the same reason. Management excludes discontinued product lines as it believes this exclusion is as meaningful for comparability purposes as excluding the results from a business that meets the criteria to be classified as discontinued operations on a GAAP basis. Management excludes the impact of equity-based compensation to help it compare current period operating expenses against the operating expenses for prior periods and to eliminate the effects of this non-cash item, which, because it is based upon estimates on the grant dates, may bear little resemblance to the actual values realized upon the future exercise, expiration, termination or forfeiture of the equity-based compensation, and which, as it relates to stock options and stock purchase plan shares, is required for GAAP purposes to be estimated under valuation models, including the Black-Scholes model used by Rovi Corporation. Management excludes non-cash interest expense recorded on convertible debt under ASC 470-20, mark-to-market fair value adjustments for interest rate swaps and caps, and the reversals of discrete tax items including reserves as they are non-cash items and not considered "core costs" or meaningful when management evaluates the Company's operating expenses. Management reclassifies the current period benefit of the interest rate swaps from other income or expense to interest expense in order for interest expense to reflect the swap rates, as these instruments were entered into to convert, from fixed to floating, the interest rate the Company pays on its convertible debt. Management includes the benefit of the convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, and is excluded from GAAP EPS calculation as it is anti-dilutive, because the pragmatic reality is management would exercise this option rather than allow this dilution to occur.

Management has used these Adjusted Pro Forma measures to help it make budgeting decisions, including decisions that affect operating expenses and operating margin. Further, Adjusted Pro Forma financial information has helped management track actual performance relative to financial targets. Making Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may also help investors compare the Company's performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management is using Prospective Adjusted Pro Forma measures to help it make budgeting decisions, including decisions that affect operating expenses and operating margin, for the combined company giving effect to the contemplated Sonic Solutions acquisition. Prospective Adjusted Pro Forma financial information will help management track actual performance relative to financial targets. As with Adjusted Pro Forma measures, making Prospective Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may help investors compare the Company's performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management recognizes that the use of Adjusted Pro Forma and Prospective Adjusted Pro Forma measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information. Because other companies, including companies similar to Rovi Corporation, may calculate their non-GAAP financial measures differently than the Company calculates its Adjusted Pro Forma and Prospective Adjusted Pro Forma measures, these Non-GAAP measures may have limited usefulness in comparing companies. Management believes, however, that providing Adjusted Pro Forma and Prospective Adjusted Pro Forma financial information, in addition to the GAAP financial information, facilitates consistent comparison of the Company's financial performance over time. The Company has provided Adjusted Pro Forma financial and Prospective Adjusted Pro Forma information to the investment community, not as an alternative, but as an important supplement to GAAP financial information; to enable investors to evaluate the Company's core operating performance in the same way that management does. Reconciliations between historical pro forma and Adjusted Pro Forma results of operations are provided in the tables below.

Dial-in Information

Rovi Corporation will hold an investor conference call at 4:30 p.m. Eastern time on February 15, 2011. Investors and analysts interested in participating in the conference are welcome to call 877-941-8631  (or international +1-480-629-9819) and reference the Rovi call.

The conference call can also be accessed via live webcast at www.rovicorp.com on February 15, 2011 at 4:30 p.m. Eastern time. The on-demand audio webcast of the earnings conference call will be made available as soon as practicable after the live webcast ends.

A replay of the conference call will be available through February 20, 2011 and can be accessed by calling 800-406-7325 (or international +1 303-590-3030) and entering passcode 4407590#. A replay of the audio webcast will be available on Rovi Corporation's website approximately 1-2 hours after the live webcast ends and will remain on Rovi Corporation's website until our next quarterly earnings call.

About Rovi Corporation

Rovi Corporation is focused on revolutionizing the digital entertainment landscape by delivering solutions that enable consumers to intuitively discover new entertainment from many sources and locations. The company also provides extensive entertainment discovery solutions for television, movies, music and photos to its customers in the consumer electronics, cable and satellite, entertainment and online distribution markets. These solutions, complemented by a leading collection of entertainment data, create the connections between people and technology, and enable them to discover and manage entertainment in an enjoyable form.

Rovi holds over 4,700 issued or pending patents worldwide and is headquartered in Santa Clara, California, with numerous offices across the United States and around the world including Japan, Hong Kong, Luxembourg, and the United Kingdom. More information about Rovi can be found at www.rovicorp.com .

The Rovi Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6482

All statements contained herein, including the quotations attributed to Mr. Amoroso and Mr. Budge, that are not statements of historical fact, including statements that use the words "will," "believes," "anticipates," "estimates," "expects," "intends" or "looking to the future" or similar words that describe the Company's or its management's future plans, objectives, or goals, are "forward-looking statements" and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the Company's estimates of future revenues and earnings, business strategies, and future opportunities for product, market or customer expansion.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Such factors include, among others, the Company's ability to successfully execute on its strategic plan and customer demand for and industry acceptance of the Company's technologies and integrated solutions. Such factors are further addressed in the Company's Annual Report on Form 10-K for the period ended December 31, 2010 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at www.sec.gov ). The Company assumes no obligation, except as required by law, to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release. 

ROVI CORPORATION        
GAAP CONSOLIDATED STATEMENTS OF OPERATIONS        
(IN THOUSANDS, EXCEPT PER SHARE DATA)        
(UNAUDITED)        
         
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2010 2009 2010 2009
         
Revenues  $ 140,184  $ 137,100  $ 541,490  $ 480,450
         
Costs and expenses:        
Cost of revenues  17,285  20,396  99,129  65,258
Research and development  24,297  24,121  95,687  91,984
Selling, general and administrative  40,641  34,637  142,197  132,939
Depreciation  4,595  4,849  18,758  18,368
Amortization of intangible assets  19,823  20,637  80,395  81,934
Restructuring and asset impairment charges  --   --   --   53,619
Total costs and expenses  106,641  104,640  436,166  444,102
         
Operating income from continuing operations  33,543  32,460  105,324  36,348
Interest expense  (10,544)  (10,595)  (42,935)  (52,028)
Interest income and other, net  21  757  1,770  4,558
Gain on interest rate swaps and caps, net  5,097  --   34,197  -- 
Loss on debt redemption  (836)  --   (16,806)  (8,687)
Gain on sale of strategic investments  --   --   5,895  -- 
         
Income (loss) from continuing operations before income taxes  27,281  22,622  87,445  (19,809)
Income tax (benefit) expense   (40,749)  22,007  (139,213)  (1,421)
Income (loss) from continuing operations, net of tax  68,030  615  226,658  (18,388)
Discontinued operations, net of tax  (845)  2,012  (13,774)  (34,563)
Net income (loss)  $ 67,185  $ 2,627  $ 212,884  $ (52,951)
         
Basic earnings per common share:        
Basic income (loss) per share from continuing operations  $ 0.65  $ 0.01  $ 2.20  $ (0.18)
Basic income (loss) per share from discontinued operations  $ (0.01)  $ 0.02  $ (0.14)  $ (0.34)
Basic net earnings per share  $ 0.64  $ 0.03  $ 2.06  $ (0.52)
         
Shares used in computing basic net earnings per share  104,018  101,895  102,658  100,860
         
Diluted earnings per common share:        
Diluted income (loss) per share from continuing operations  $ 0.60  $ --  $ 2.07  $ (0.18)
Diluted income (loss) per share from discontinued operations  $ (0.01)  $ 0.02  $ (0.13)  $ (0.34)
Diluted net earnings per share  $ 0.59  $ 0.02  $ 1.94  $ (0.52)
         
Shares used in computing diluted net earnings per share  112,843  104,549  109,175  100,860
         
See notes to the GAAP Consolidated Financial Statements in our Form 10-K.  
ROVI CORPORATION    
GAAP CONSOLIDATED BALANCE SHEETS    
(IN THOUSANDS)    
(UNAUDITED)    
     
  December 31,
  2010 2009
ASSETS
Current assets:    
Cash and cash equivalents  $ 200,195  $ 165,410
Short-term investments  295,120  107,362
Restricted cash  --  36,838
Trade accounts receivable, net  78,672  71,875
Taxes receivable  6,811  6,363
Deferred tax assets, net  15,403  7,844
Prepaid expenses and other current assets  12,639  10,661
Total current assets  608,840  406,353
Long-term marketable securities  200,852  26,674
Property and equipment, net  39,205  43,124
Finite-lived intangible assets, net  702,385  779,371
Long-term deferred tax assets, net  --  13,691
Other assets  48,785  27,861
Goodwill  857,216  854,065
Total assets  $ 2,457,283  $ 2,151,139
     
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:    
Accounts payable and accrued expenses  $ 74,512  $ 81,369
Deferred revenue  15,577  16,536
Current portion of long-term debt   130,816  18,486
Total current liabilities  220,905  116,391
Taxes payable, less current portion  56,566  80,675
Long-term debt, less current portion  378,083  411,551
Deferred revenue, less current portion  3,995  4,919
Long-term, deferred tax liabilities, net  26,249  --
Other non current liabilities  19,293  17,334
Total liabilities  705,091  630,870
Redeemable equity component of convertible debt  3,859  --
Stockholders' equity:    
Common stock  112  106
Treasury stock  (134,931)  (25,068)
Additional paid-in capital  1,781,986  1,657,888
Accumulated other comprehensive loss  (1,139)  (2,078)
Retained earnings (deficit)  102,305  (110,579)
Total stockholders' equity  1,748,333  1,520,269
Total liabilities and stockholders' equity  $ 2,457,283  $ 2,151,139
     
See notes to the GAAP Consolidated Financial Statements in our Form 10-K.
ROVI CORPORATION            
ADJUSTED PRO FORMA RECONCILIATION          
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)          
(UNAUDITED)            
  Three Months Ended Three Months Ended
  December 31, 2010 December 31, 2009
             
  GAAP

Pro Forma (9)


Adjustments
Adjusted

Pro Forma
GAAP

Pro Forma (9)


Adjustments
Adjusted

Pro Forma
Revenues:            
Service providers  $ 70,478  $ --   $ 70,478  $ 62,451  $ --   $ 62,451
CE manufacturers   52,454  --   52,454  61,247  --   61,247
Other  17,252  --   17,252  13,402  --   13,402
   140,184  --   140,184  137,100  --   137,100
Costs and expenses:            
Cost of revenues (1)  17,285  (466)  16,819  20,396  (3,651)  16,745
Research and development (2)  24,297  (2,208)  22,089  24,121  (1,430)  22,691
Selling, general and administrative (3)  40,641  (11,159)  29,482  34,637  (4,718)  29,919
Depreciation (4)  4,595  --   4,595  4,849  --   4,849
Amortization of intangible assets  19,823  (19,823)  --   20,637  (20,637)  -- 
Total costs and expenses  106,641  (33,656)  72,985  104,640  (30,436)  74,204
Operating income from continuing operations  33,543  33,656  67,199  32,460  30,436  62,896
Interest expense (5)  (10,544)  9,652  (892)  (10,595)  5,396  (5,199)
Interest income and other, net  21  --   21  757  --   757
Gain on interest rate swaps and caps, net (6)  5,097  (5,097)  --   --   --   -- 
Loss on debt redemption  (836)  836  --   --   --   -- 
Income from continuing operations before income taxes  27,281  39,047  66,328  22,622  35,832  58,454
Income tax (benefit) expense (7)  (40,749)  47,382  6,633  22,007  (15,577)  6,430
Income from continuing operations, net of tax  $ 68,030  $ (8,335)  $ 59,695  $ 615  $ 51,409  $ 52,024
             
Diluted income per share from continuing operations  $ 0.60    $ 0.54  $ --     $ 0.50
Shares used in computing diluted net earnings per share (8)  112,843  (2,544)  110,299  104,549  (541)  104,008
             
(1) Adjustments to cost of revenues consist of the following:
    2010 2009      
Equity based compensation    $ (466)  $ (279)      
Court awarded fees    --   (3,372)      
Total adjustment    $ (466)  $ (3,651)      
             
(2) Adjustments to research and development consist of $2.2 million and $1.4 million for equity based compensation in the three months ended December 31, 2010 and 2009, respectively.
             
(3) Adjustments to selling, general and administrative consist of the following:
    2010 2009      
Equity based compensation    $ (5,919)  $ (4,718)      
Transaction costs    (5,240)  --       
Total adjustment    $ (11,159)  $ (4,718)      
             
(4) While depreciation is a non-cash item, it is included in Adjusted Pro Forma Income From Continuing Operations as management considers it a proxy for capital expenditures.
(5) Adjustments eliminate non-cash interest expense such as amortization of note issuance costs and the convertible note discount recorded under ASC 470-20 (formerly known as FSP APB 14-1) and reclass to include the impact of interest rate swaps on interest expense.
(6) Adjustment eliminates non-cash mark-to-market gain of $1.9 million related to interest rate swaps and caps and reclassifies the $3.2 million current period benefit from the interest rate swap to interest expense.
(7) Adjusts tax expense to the adjusted pro forma cash tax rate. 
(8) Recognizes the benefit of convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, which is excluded from GAAP EPS calculation as it is anti-dilutive.
(9) GAAP Pro Forma information is the same as our GAAP results. No adjustments have been made to the GAAP results since they are comparative with prior quarters' pro forma results.
ROVI CORPORATION            
ADJUSTED PRO FORMA RECONCILIATION            
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            
(UNAUDITED)            
  Twelve Months Ended Twelve Months Ended
  December 31, 2010 December 31, 2009
             
  GAAP

Pro Forma (11)


Adjustments
Adjusted

Pro Forma
GAAP

Pro Forma


Adjustments
Adjusted

Pro Forma
Revenues:            
Service providers  $ 267,458  $ --   $ 267,458  $ 230,727  $ --   $ 230,727
CE manufacturers   216,625  --   216,625  199,905  --   199,905
Other  57,407  --   57,407  49,818  --   49,818
   541,490  --   541,490  480,450  --   480,450
Costs and expenses:            
Cost of revenues (1)  99,129  (29,955)  69,174  65,258  (4,652)  60,606
Research and development (2)  95,687  (7,817)  87,870  91,984  (4,595)  87,389
Selling, general and administrative (3)  142,197  (30,250)  111,947  132,939  (18,745)  114,194
Depreciation (4)  18,758  --   18,758  18,368  --   18,368
Amortization of intangible assets  80,395  (80,395)  --   81,934  (81,934)  -- 
Restructuring and asset impairment charges (5)  --   --   --   53,619  (53,619)  -- 
Total costs and expenses  436,166  (148,417)  287,749  444,102  (163,545)  280,557
Operating income from continuing operations  105,324  148,417  253,741  36,348  163,545  199,893
Interest expense (6)  (42,935)  35,943  (6,992)  (45,433)  17,037  (28,396)
Interest income and other, net (7)  1,770  992  2,762  4,558  --   4,558
Gain on interest rate swaps and caps, net (8)  34,197  (34,197)  --   --   --   -- 
Loss on debt redemption  (16,806)  16,806  --   (8,687)  8,687  -- 
Gain on sale of strategic investments  5,895  (5,895)  --   --   --   -- 
Income (loss) from continuing operations before income taxes  87,445  162,066  249,511  (13,214)  189,269  176,055
Income tax (benefit) expense (9)  (139,213)  164,164  24,951  797  18,569  19,366
Income (loss) from continuing operations, net of tax  $ 226,658  $ (2,098)  $ 224,560  $ (14,011)  $ 170,700  $ 156,689
             
Diluted income (loss) per share from continuing operations  $ 2.07    $ 2.09  $ (0.14)    $ 1.52
             
Shares used in computing diluted net earnings per share (10)  109,175  (2,031)  107,144  100,860  1,254  102,114
             
(1) Adjustments to cost of revenues consist of the following:
    2010 2009      
Equity based compensation    $ (1,471)  $ (783)      
Transition and integration costs    --   (497)      
Court awarded fees    --   (3,372)      
Expenses related to certain Gemstar pre-acquisition indemnification and other matters in excess of reserves established in purchase accounting  (28,484)  --       
Total adjustment    $ (29,955)  $ (4,652)      
             
(2) Adjustments to research and development consist of the following:
    2010 2009      
Equity based compensation    $ (7,817)  $ (4,440)      
Transition and integration costs    --   (155)      
Total adjustment    $ (7,817)  $ (4,595)      
             
(3) Adjustments to selling, general and administrative consist of the following:            
    2010 2009      
Equity based compensation    $ (25,010)  $ (17,123)      
Transaction costs    (5,240)  (617)      
Transition and integration costs    --   (1,005)      
Total adjustment    $ (30,250)  $ (18,745)      
             
(4) While depreciation is a non-cash item, it is included in Adjusted Pro Forma Income From Continuing Operations as management considers it a proxy for capital expenditures.
(5) For 2009, adjustment eliminates $44.7 million of non-cash asset impairment charges and $8.9 million of restructuring charges.            
(6) Adjustments eliminate non-cash interest expense such as amortization of note issuance costs and the convertible note discount recorded under ASC 470-20 (formerly known as FSP APB 14-1) and reclass to include the impact of interest rate swaps on interest expense.
(7) Adjustment eliminates the $1.0 million loss related to exiting the Guideworks Joint Venture.
(8) Adjustment eliminates non-cash mark-to-market gain of $24.4 million related to interest rate swaps and caps and reclassifies the $9.8 million current period benefit from the interest rate swap to interest expense.
(9) For the 2010 period, the adjustments eliminate both the discrete income tax benefit due to the release of tax contingency reserves related to the net operating losses of the Company's former TV Guide Magazine business and the expense related to the valuation allowance established against the corresponding deferred tax assets, and adjusts tax expense to the adjusted pro forma cash tax rate. For 2009, adjusts tax expense to the adjusted pro forma cash tax rate.
(10) For the 2010 period, recognizes the benefit of convertible debt call option, which allows the Company to purchase up to 5.4 million shares of its own stock at approximately $28.28, which is excluded from GAAP EPS calculation as it is anti-dilutive. For the 2009 period, adjust to include dilutive potential common shares as adjustments to pro forma loss from continuing operations resulted in Adjusted Pro Forma Net Income.
(11) GAAP Pro Forma information for the 2010 period is the same as our GAAP results. No adjustments have been made to the GAAP results since they are comparative with prior quarters' pro forma results.
ROVI CORPORATION        
QUARTERLY REVENUE SUMMARY        
(IN THOUSANDS)        
(UNAUDITED)        
         
         
  Three Months Ended
  March 31, June 30, September 30, December 31,
  2010 2010 2010 2010
Revenues:        
Service providers  $ 67,399  $ 63,870  $ 65,711  $ 70,478
CE manufacturers  48,579  57,701  57,891  52,454
Other  13,392  12,337  14,426  17,252
Total revenues  $ 129,370  $ 133,908  $ 138,028  $ 140,184
CONTACT:  Investor Contact:
          James Budge
          Rovi Corporation
          +1 (408) 562-8400
         
          Lauren Landfield
          Rovi Corporation
          +1 (408) 562-8400

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