Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 05, 2015 | |
Entity Information [Line Items] | ||
Entity Registrant Name | ACACIA RESEARCH CORP | |
Entity Central Index Key | 934,549 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 50,736,407 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 157,775 | $ 134,466 |
Restricted cash | 10,721 | 0 |
Short-term investments | 0 | 58,558 |
Accounts receivable | 12,757 | 20,168 |
Deferred income taxes | 1,161 | 1,161 |
Prepaid expenses and other current assets | 4,926 | 4,355 |
Total current assets | 187,340 | 218,708 |
Property and equipment, net of accumulated depreciation and amortization | 319 | 500 |
Patents, net of accumulated amortization | 249,486 | 286,636 |
Goodwill | 30,149 | 30,149 |
Other assets | 353 | 355 |
Total assets | 467,647 | 536,348 |
Current liabilities: | ||
Accounts payable and accrued expenses | 17,477 | 14,860 |
Accrued patent investment costs | 0 | 16,700 |
Royalties and contingent legal fees payable | 9,243 | 14,351 |
Total current liabilities | 26,720 | 45,911 |
Deferred income taxes | 1,161 | 1,161 |
Other liabilities | 291 | 228 |
Total liabilities | $ 28,172 | $ 47,300 |
Commitments and contingencies (Note 5) | ||
Stockholders' equity: | ||
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding | $ 0 | $ 0 |
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 50,750,245 and 50,065,382 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | 51 | 50 |
Treasury stock, at cost, 1,729,408 shares as of September 30, 2015 and December 31, 2014 | (34,640) | (34,640) |
Additional paid-in capital | 637,029 | 646,595 |
Accumulated comprehensive loss | (233) | (353) |
Accumulated deficit | (172,221) | (128,095) |
Total Acacia Research Corporation stockholders' equity | 429,986 | 483,557 |
Noncontrolling interests in operating subsidiaries | 9,489 | 5,491 |
Total stockholders' equity | 439,475 | 489,048 |
Total liabilities and stockholders' equity | $ 467,647 | $ 536,348 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Stockholders' Equity: | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 50,750,245 | 50,065,382 |
Common stock, shares outstanding | 50,750,245 | 50,065,382 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury Stock, Shares | 1,729,408 | 1,729,408 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues | $ 12,994,000 | $ 37,192,000 | $ 87,540,000 | $ 99,846,000 |
Operating costs and expenses | ||||
Inventor royalties | 116,000 | 4,667,000 | 10,706,000 | 16,312,000 |
Contingent legal fees | 1,972,000 | 7,663,000 | 12,268,000 | 16,267,000 |
Litigation and licensing expenses - patents | 10,345,000 | 9,592,000 | 28,032,000 | 29,406,000 |
Amortization of patents | 13,688,000 | 13,511,000 | 39,954,000 | 43,515,000 |
General and administrative expenses (including non-cash stock compensation expense of $2,164 and $8,588 for the three and nine months ended September 30, 2015 and $3,954 and $14,022 for the three and nine months ended September 30, 2014, respectively) | 9,442,000 | 11,636,000 | 29,604,000 | 36,510,000 |
Research, consulting and other expenses - business development | 802,000 | 1,208,000 | 2,531,000 | 3,203,000 |
Other expenses | 3,465,000 | 1,548,000 | 3,891,000 | 1,548,000 |
Total operating costs and expenses | 39,830,000 | 49,825,000 | 126,986,000 | 146,761,000 |
Operating loss | (26,836,000) | (12,633,000) | (39,446,000) | (46,915,000) |
Total interest and other investment loss, net | (180,000) | (57,000) | (56,000) | (144,000) |
Loss before provision for income taxes | (27,016,000) | (12,690,000) | (39,502,000) | (47,059,000) |
Provision for income taxes | (337,000) | (145,000) | (626,000) | (3,462,000) |
Loss including noncontrolling interests in operating subsidiaries | (27,353,000) | (12,835,000) | (40,128,000) | (50,521,000) |
Net (income) loss attributable to noncontrolling interests in operating subsidiaries | 43,000 | 420,000 | (3,998,000) | 736,000 |
Net loss attributable to Acacia Research Corporation | (27,310,000) | (12,415,000) | (44,126,000) | (49,785,000) |
Net loss available to common stockholders, basic | $ (27,450,000) | $ (12,575,000) | $ (44,691,000) | $ (50,356,000) |
Earnings Per Share, Basic and Diluted | $ (0.55) | $ (0.26) | $ (0.90) | $ (1.04) |
Weighted Average Number of Shares Outstanding, Basic and Diluted | 49,630,369 | 48,806,334 | 49,423,548 | 48,561,428 |
Common Stock, Dividends, Per Share, Cash Paid | $ 0.125 | $ 0.125 | $ 0.375 | $ 0.375 |
Consolidated Statements of Inco
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Non-cash stock compensation | $ 2,164 | $ 3,954 | $ 8,588 | $ 14,022 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Other comprehensive income (loss): | ||||
Net Loss, Including Portion Attributable to Noncontrolling Interest | $ (27,353) | $ (12,835) | $ (40,128) | $ (50,521) |
Unrealized loss on short-term investments, net of tax of $0 | (94) | (347) | (356) | (1,196) |
Unrealized loss on foreign currency translation, net of tax of $0 | 0 | 0 | (141) | 0 |
Reclassification adjustment for losses included in net loss | 274 | 350 | 617 | 1,362 |
Total other comprehensive loss | (27,173) | (12,832) | (40,008) | (50,355) |
Comprehensive Income (Loss) Attributable to Noncontrolling Interest | (43) | (420) | 3,998 | (736) |
Comprehensive loss attributable to Acacia Research Corporation | $ (27,130) | $ (12,412) | $ (44,006) | $ (49,619) |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Parentheticals) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax | $ 0 | $ 0 | $ 0 | $ 0 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows Statement - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net Loss, Including Portion Attributable to Noncontrolling Interest | $ (40,128) | $ (50,521) |
Adjustments to reconcile net loss including noncontrolling interests in operating subsidiaries to net cash used in operating activities: | ||
Depreciation and amortization | 40,129 | 43,753 |
Non-cash stock compensation | 8,588 | 14,022 |
Net cash used in operating activities | 2,155 | 13,890 |
Cash flows from investing activities: | ||
Maturities and sale of available-for-sale investments | 82,115 | 133,878 |
Purchase of available-for-sale investments | (23,296) | (76,130) |
Investments in patents/ patent rights | (19,504) | (24,518) |
Purchases of property and equipment | (8) | (106) |
Net cash provided by investing activities | 39,307 | 33,124 |
Cash flows from financing activities: | ||
Payments of Dividends | (19,091) | (18,773) |
Distributions to noncontrolling interests in operating subsidiary | 0 | 867 |
Proceeds from exercises of stock options | 938 | 198 |
Net cash used in financing activities | (18,153) | (19,442) |
Increase (decrease) in cash and cash equivalents | 23,309 | 27,572 |
Cash and cash equivalents, beginning | 134,466 | 126,685 |
Cash and cash equivalents, ending | 157,775 | 154,257 |
Patent acquisition costs included in accrued patent acquisition costs | 0 | 2,000 |
Changes in assets and liabilities: | ||
Restricted cash | (10,721) | 0 |
Accounts receivable | 7,411 | (6,361) |
Prepaid expenses and other assets | (569) | 1,719 |
Accounts payable and accrued expenses | 2,680 | 5,503 |
Royalties and contingent legal fees payable | (5,108) | 7,330 |
Deferred income tax | 0 | (1,531) |
Other | $ (127) | $ (24) |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Description of Business and Basis of Presentation [Abstract] | |
Description of Business and Basis of Presentation | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business. As used herein, “Acacia” and the “Company” refer to Acacia Research Corporation and/or its wholly and majority-owned and controlled operating subsidiaries, and/or where applicable, its management. All patent investment, prosecution, licensing and enforcement activities are conducted solely by certain of Acacia’s wholly and majority-owned and controlled operating subsidiaries. Acacia’s operating subsidiaries invest in, license and enforce patented technologies. Acacia’s operating subsidiaries partner with inventors and patent owners, applying their legal and technology expertise to patent assets to unlock the financial value in their patented inventions. Acacia is an intermediary in the patent marketplace, bridging the gap between invention and application, facilitating efficiency and delivering monetary rewards to patent owners. Acacia’s operating subsidiaries generate revenues and related cash flows from the granting of intellectual property rights for the use of patented technologies that its operating subsidiaries control or own. Acacia’s operating subsidiaries assist patent owners with the prosecution and development of their patent portfolios, the protection of their patented inventions from unauthorized use, the generation of licensing revenue from users of their patented technologies and, where necessary, with the enforcement against unauthorized users of their patented technologies through the filing of patent infringement litigation. Acacia’s operating subsidiaries are principals in the licensing and enforcement effort, obtaining control of the rights in the patent portfolio, or control of the patent portfolio outright. Acacia’s operating subsidiaries own or control the rights to multiple patent portfolios, which include U.S. patents and certain foreign counterparts, covering technologies used in a wide variety of industries. Basis of Presentation. The accompanying consolidated financial statements include the accounts of Acacia and its wholly and majority-owned and controlled subsidiaries. Material intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in Acacia’s majority-owned and controlled operating subsidiaries (“noncontrolling interests”) are separately presented as a component of stockholders’ equity in the consolidated statements of financial position for the applicable periods presented. Consolidated net loss is adjusted to include the net (income) loss attributed to noncontrolling interests in the consolidated statements of operations. Refer to the accompanying consolidated financial statements for total noncontrolling interests, net (income) loss attributable to noncontrolling interests and contributions from and distributions to noncontrolling interests, for the applicable periods presented. A wholly owned subsidiary of Acacia is the general partner of the Acacia Intellectual Property Fund, L.P. (the “Acacia IP Fund”), which was formed in August 2010. The Acacia IP Fund is included in the Company’s consolidated financial statements for the periods presented because Acacia’s wholly owned subsidiary, which is the majority owner and general partner, has the ability to control the operations and activities of the Acacia IP Fund. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014 , as reported by Acacia in its Annual Report on Form 10-K filed with the SEC. The year end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The condensed consolidated interim financial statements of Acacia include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Acacia’s consolidated financial position as of September 30, 2015 , and results of its operations and its cash flows for the interim periods presented. The consolidated results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectibility of amounts is reasonably assured. In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by Acacia’s operating subsidiaries. These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by Acacia’s operating subsidiaries, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. Pursuant to the terms of these agreements, Acacia’s operating subsidiaries have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on Acacia’s operating subsidiaries’ part to maintain or upgrade the technology, or provide future support or services. Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals. As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectibility is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met. For the periods presented herein, the majority of the revenue agreements executed by the Company provided for the payment of one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technology rights owned by Acacia's operating subsidiaries. These rights were primarily granted on a perpetual basis, extending until the expiration of the underlying patents. Cost of Revenues . Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Cost of revenues” in the accompanying consolidated statements of operations. Inventor Royalties and Contingent Legal Expenses. Inventor royalties are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered, and included in amortization expense in the consolidated statements of operations. Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, stock-based compensation expense, impairment of marketable securities and intangible assets including goodwill, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets and the application of the acquisition method of accounting for business combinations, require its most difficult, subjective or complex judgments. Concentrations. Three licensees individually accounted for 54% , 15% and 13% of revenues recognized during the three months ended September 30, 2015 , and two licensees accounted for 34% and 23% of revenues recognized during the nine months ended September 30, 2015 . Three licensees individually accounted for 43% , 30% and 12% of revenues recognized during the three months ended September 30, 2014 , and three licensees accounted for 29% , 18% and 11% of revenues recognized during the nine months ended September 30, 2014 . For the three and nine months ended September 30, 2015 , 5% and 34% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement. For the three and nine months ended September 30, 2014 , 20% and 49% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. The Company does not have any material foreign operations. Three licensees individually represented approximately 55% , 16% and 15% of accounts receivable at September 30, 2015 . Three licensees individually represented approximately 30% , 17% and 15% of accounts receivable at December 31, 2014. Stock-Based Compensation. The compensation cost for stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (the vesting period of the equity award) which is two to four years . The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate. Fair Value Measurements. U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows: ● Level 1 - Observable Inputs: Quoted prices in active markets for identical investments; ● Level 2 - Pricing Models with Significant Observable Inputs: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and ● Level 3 - Unobservable Inputs: Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments. Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value. Investments in Marketable Securities. Investments in securities with original maturities of greater than three months and less than one year and other investments representing amounts that are available for current operations are classified as short-term investments, unless there are indications that such investments may not be readily sold in the short term. The fair values of these investments approximate their carrying values. As of September 30, 2015, the balance of short term investments was zero . As of December 31, 2014, all of Acacia’s short term investments were classified as available-for-sale, which are reported at fair value on a recurring basis using observable inputs (Level 1), with related unrealized gains and losses in the value of such securities recorded as a separate component of comprehensive income (loss) in stockholders’ equity until realized. Realized and unrealized gains and losses are recorded based on the specific identification method. Interest on all securities is included in interest income. Short-term marketable securities for the periods presented were comprised of the following (in thousands): December 31, 2014 Security Type Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government fixed income securities $ 58,819 $ 2 $ (263 ) $ 58,558 Total short-term investments $ 58,819 $ 2 $ (263 ) $ 58,558 Patents. Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) obtained from third-parties or obtained in connection with business combinations. Capitalized patent costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to nine years . Certain patent application and prosecution costs incurred to secure additional patent claims, that based on management’s estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. Goodwill. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Acacia considers its market capitalization and other valuation techniques and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. Refer to Note 9 for additional information. Impairment of Long-lived Assets. Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available or not indicative of current fair value, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over the estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, technology coverage and other pertinent information that could impact future net cash flows. Income Taxes. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realizability of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company's effective tax rates were 1% and 2% for the three and nine months ended September 30, 2015 , respectively, and 1% and 7% for the three and nine months ended September 30, 2014 , respectively. The effective rates for the periods presented primarily reflect the impact of foreign withholding taxes related to certain revenue agreements executed with third party licensees domiciled in foreign jurisdictions, and valuation allowances recorded for foreign withholding tax credits and net operating loss related tax assets generated during the periods. |
Income (Loss) Per Share
Income (Loss) Per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | INCOME (LOSS) PER SHARE The Company computes net income (loss) attributable to common stockholders using the two-class method required for capital structures that include participating securities. Under the two-class method, securities that participate in non-forfeitable dividends, such as the Company’s outstanding unvested restricted stock, are considered “participating securities.” In applying the two-class method, (i) basic net income (loss) per share is computed by dividing net income (loss) (less any dividends paid on participating securities) by the weighted average number of shares of common stock and participating securities outstanding for the period and (ii) diluted earnings per share may include the additional effect of other securities, if dilutive, in which case the dilutive effect of such securities is calculated by applying the two-class method and the treasury stock method to the assumed exercise or vesting of potentially dilutive common shares. The method yielding the more dilutive result is ultimately reported for the applicable period. Potentially dilutive common stock equivalents primarily consist of employee stock options, and restricted stock units for calculations utilizing the two-class method, and also include unvested restricted stock, when utilizing the treasury method. The following table presents the weighted-average number of common shares outstanding used in the calculation of basic and diluted loss per share: Three Months Ended Nine Months Ended 2015 2014 2015 2014 Numerator (in thousands): Basic and Diluted Net loss $ (27,310 ) $ (12,415 ) $ (44,126 ) $ (49,785 ) Total dividends declared / paid (6,342 ) (6,260 ) (19,091 ) (18,773 ) Dividends attributable to common stockholders 6,202 6,100 18,526 18,202 Net loss attributable to common stockholders – basic and diluted $ (27,450 ) $ (12,575 ) $ (44,691 ) $ (50,356 ) Denominator: Weighted-average shares used in computing net loss per share attributable to common stockholders – basic and diluted 49,630,369 48,806,334 49,423,548 48,561,428 Basic and diluted net loss per common share $ (0.55 ) $ (0.26 ) $ (0.90 ) $ (1.04 ) Anti-dilutive equity-based incentive awards excluded from the computation of diluted loss per share were immaterial for the applicable periods presented. |
Patents
Patents | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Identifiable Intangible Assets | PATENTS Acacia’s only identifiable intangible assets at September 30, 2015 and December 31, 2014 are patents and patent rights. Patent-related accumulated amortization totaled $206,519,000 and $166,565,000 as of September 30, 2015 and December 31, 2014 , respectively. Acacia’s patents have remaining estimated economic useful lives ranging from one to nine years . The weighted-average remaining estimated economic useful life of Acacia’s patents is approximately six years . The following table presents the scheduled annual aggregate amortization expense as of September 30, 2015 (in thousands): For the years ending December 31, Remainder of 2015 $ 12,732 2016 49,880 2017 48,870 2018 44,614 2019 38,981 Thereafter 54,409 $ 249,486 For the nine months ended September 30, 2015 and 2014 , Acacia paid patent related investment costs, including up-front patent portfolio advances and previously accrued milestone payments related to patent related investments made in prior periods, totaling $19,504,000 and $24,518,000 , respectively. The underlying patents have estimated economic useful lives of approximately two to ten years . During the nine months ended September 30, 2014 , certain Acacia operating subsidiaries elected to sell their rights to patent portfolios, resulting in the acceleration of amortization expense for the patent-related assets totaling $2,702,000 . Proceeds from the sale of patents and the related gain on sale for the nine months ended September 30, 2014 were $3,500,000 and $833,000 , respectively. Included in amortization of patents for the nine months ended September 30, 2015 and 2014, was accelerated amortization related to the full or partial write-down of patent portfolios, due primarily to a reduction in expected estimated future net cash flows, totaling $258,000 and $2,565,000 , respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Bank Guarantee In March 2015, an operating subsidiary of Acacia entered into a standby letter of credit and guarantee arrangement (“Guarantee”) with a bank in the amount of $10,721,000 , for purposes of enforcing a court ruling in a German patent court granting an injunction against the defendants in the related patent infringement case. An injunction is an equitable remedy in the form of a court order that compels the defendant(s) to cease marketing, offering for sale or importing applicable infringing products into applicable jurisdiction(s). Under German law, in order to enforce the injunction granted by the court, a Guarantee is required to be furnished by the operating subsidiary, the plaintiff in the case, for potential payment to the defendants of any applicable claims which may be incurred by the defendants as a result of the enforcement of the injunction, only in the event that the aforementioned court ruling is subsequently successfully appealed by the defendants or otherwise amended. The Guarantee is required to be issued unlimited with respect to time, until appropriately extinguished in accordance with German law. The Guarantee will be extinguished when a relevant extinguishment order by the court having jurisdiction takes effect, typically occurring when the related infringement case has been settled or a final non-appealable decision has been issued by the court. The Guarantee is secured by a cash deposit at the contracting bank totaling $10,721,000 , which is classified as restricted cash in the September 30, 2015 balance sheet. The Guarantee expires on April 10, 2016, however, it is automatically extended without amendment for a period of one (1) year from the present or any future expiration date, unless at least 30 days prior to any expiration date, the Guarantee is extinguished in accordance with German law. The Guarantee facility fee is 1.15% per year, and the related expense is included in the consolidated statement of operations. Patent Enforcement Certain of Acacia’s operating subsidiaries are often required to engage in litigation to enforce their patents and patent rights. In connection with any of Acacia’s operating subsidiaries’ patent enforcement actions, it is possible that a defendant may request and/or a court may rule that an operating subsidiary has violated statutory authority, regulatory authority, federal rules, local court rules, or governing standards relating to the substantive or procedural aspects of such enforcement actions. In such event, a court may issue monetary sanctions against Acacia or its operating subsidiaries or award attorney’s fees and/or expenses to a defendant(s), which could be material. For the nine months ended September 30, 2015 and 2014, other operating expenses were $3,891,000 and $1,548,000 , respectively. Third quarter 2015 operating expenses included expense accruals for court ordered attorney fees related to a matter initiated in 2010, and settlement and contingency accruals for other matters. Third quarter 2014 operating expenses included an expense accrual for court ordered attorney fees related to matters initiated in 2010 and 2011. Other Acacia is subject to claims, counterclaims and legal actions that arise in the ordinary course of business. Management believes that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on Acacia’s consolidated financial position, results of operations or cash flows. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Stockholders' Equity Note Disclosure [Text Block] | STOCKHOLDERS’ EQUITY Cash Dividends. On April 23, 2013, Acacia announced that its Board of Directors approved the adoption of a cash dividend policy that calls for the payment of an expected total annual cash dividend of $0.50 per common share, payable in the amount of $0.125 per share per quarter. Under the policy, the Company paid quarterly cash dividends totaling $19,091,000 and $18,773,000 during the nine months ended September 30, 2015 and 2014 , respectively. Future cash dividends are expected to be paid on a quarterly basis and will be at the discretion of the Company’s Board of Directors. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Event [Line Items] | |
Subsequent Events | SUBSEQUENT EVENTS On October 22, 2015, Acacia announced that its Board of Directors approved a quarterly cash dividend payable in the amount of $0.125 per share. The quarterly cash dividend will be paid on November 30, 2015 to stockholders of record at close of business on November 6, 2015 . Future cash dividends are expected to be paid on a quarterly basis and will be at the discretion of the Company’s Board of Directors. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2015 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Pronouncements - Not Yet Adopted. In June 2014, the Financial Accounting Standards Board (the "FASB") issued a new accounting standard which requires that a performance target that affects vesting and could be achieved after the requisite service period shall be treated as a performance condition. Adoption of this standard is required for annual periods beginning after December 15, 2015. Early adoption is permitted. Management is currently evaluating the impact the pronouncement will have on the Company's consolidated financial statements and related disclosures. In May 2014, the FASB issued a new accounting standards update addressing revenue from contracts with customers, which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The amendments for this standard update are effective for interim and annual reporting periods beginning after December 15, 2016, and are to be applied retrospectively or the cumulative effect as of the date of adoption, with early application not permitted. On April 1, 2015, the FASB voted to propose a one-year deferral to the effective date, but to permit entities to adopt one year earlier if they choose (i.e., the original effective date). Management is currently evaluating the impact the pronouncement will have on the Company's consolidated financial statements and related disclosures. In August 2014, the FASB issued a new accounting standard which requires management to assess an entity’s ability to continue as a going concern every reporting period including interim periods, and to provide related footnote disclosure in certain circumstances. Adoption of this standard is required for annual periods beginning after December 15, 2016 and are to be applied retrospectively or the cumulative effect as of the date of adoption. Early adoption is permitted. Management is currently evaluating the impact the pronouncement will have on the Company's consolidated financial statements and related disclosures. In September 2015, the FASB issued an accounting standard update to simplify the accounting for measurement-period adjustments in a business combination by requiring the acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which the adjustments are determined. The acquirer is also required to record in the reporting period in which the adjustments are determined the effect on earnings of changes in depreciation, amortization, and other items resulting from the change to the provisional amounts. The new guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Management is currently evaluating the effect that implementation of this update will have on its consolidated financial position and results of operations upon adoption. |
Goodwill (Notes)
Goodwill (Notes) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill [Abstract] | |
Goodwill Disclosure [Text Block] | GOODWILL At June 30, 2015 and September 30, 2015 , the goodwill balance totaled $30.1 million . Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Factors considered important, which could trigger an impairment review, include the following: • significant other-than-temporary decline in the Company's stock price for a sustained period; • significant underperformance relative to expected historical or projected future operating results; • significant changes in the manner of use of assets or the strategy for the Company's overall business; • significant negative industry or economic trends; and • significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments. The Company considers its market capitalization and other valuation techniques, as applicable, when estimating fair value for goodwill impairment tests. When conducting annual and interim goodwill impairment assessments, the Company initially performs a qualitative evaluation (considering factors described above as applicable) of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, a two-step impairment test is applied. The two-step impairment test first compares the estimated fair value of the Company's single reporting unit to its carrying or book value. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and there is no requirement to perform further testing. If the carrying value of the reporting unit exceeds its estimated fair value, the Company is required to determine the estimated implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its estimated implied fair value, then an impairment loss equal to the difference is recorded in the consolidated statements of operations. June 30, 2015 Goodwill Impairment Assessment. At June 30, 2015, the Company assessed the impact of the recent downward volatility in the Company's stock price and concluded that the decline constituted a triggering event requiring an interim goodwill impairment test. The Company conducted the first step of the goodwill impairment test for its single reporting unit as of June 30, 2015. The estimated fair value of the reporting unit exceeded its carrying value as of June 30, 2015 by approximately 4% , utilizing the market capitalization plus cost synergies approach described below, and therefore, goodwill was determined to not be impaired as of June 30, 2015. September 30, 2015 Goodwill Impairment Analysis Update . The Company updated the quantitative impairment assessment described above as of September 30, 2015, conducting the first step of the goodwill impairment test for the Company's single reporting unit as of September 30, 2015. The fair value of the reporting unit exceeded its carrying value as of September 30, 2015, and therefore goodwill was determined to not be impaired as of September 30, 2015. At September 30, 2015, fair value was estimated using the Company's market capitalization as of September 30, 2015. The estimated market capitalization was determined by multiplying the Company's stock price and the common shares outstanding as of September 30, 2015, resulting in a market capitalization and fair value estimate of approximately $460.8 million . The carrying value of the Company was $439.5 million at September 30, 2015, resulting in an excess fair value estimate of $21.3 million or 5% . When considering an estimated control premium based on estimated cost synergies that could be realized by an acquirer in a hypothetical sale of the company, the estimated fair value increased to $502.8 million , resulting in an excess fair value estimate of $63.3 million or 14% . Utilization of the Company's market capitalization in the first step of the analysis to estimate the fair value of the company for the purpose of assessing the recoverability of goodwill is significantly impacted by the stock price of the company at the measurement date. Historically, the Company's stock price has been volatile, and this volatility has continued for the periods reflected herein, ranging from $7.88 to $17.22 during the 2015 periods. In addition, subsequent to September 30, 2015, the Company's stock price volatility has continued, trending downward to $6.91 , as of November 3, 2015. If the first step of the analysis was performed using the market capitalization approach as of November 3, 2015, the fair value estimate would have been approximately $350.6 million , resulting in a deficit of $88.9 million or 20% when compared to the September 30, 2015 carrying value of the company. If the first step of the analysis was performed using the market capitalization plus control premium approach on the same date, the fair value estimate would have been $392.6 million , resulting in a deficit of $46.9 million or 11% when compared to the September 30, 2015 carrying value of the company. If this downward stock price movement since September 30, 2015 were deemed to be sustained and/or other-than-temporary, the Company may fail the first step of the goodwill impairment analysis using the market capitalization measurement approach and market capitalization plus cost synergies approach in future periods. As of the date of this report, management believes that the decline in the Company's stock price subsequent to September 30, 2015 is temporary, based on the historical volatility of the Company's stock price and management's belief that there have been no material changes to the estimates, judgments and assumptions underlying the estimates of fair value of the Company, subsequent to September 30, 2015. However, as of the filing date of this report, Acacia's operating subsidiaries have in excess of 10 patent infringement cases with a scheduled trial date in the next six months. It is difficult to predict the outcome of patent enforcement litigation at the trial level, and outcomes can be unfavorable. An unfavorable outcome in certain of the litigations scheduled to occur in the next six months could materially impact the Company's stock price (potentially resulting in an other-than-temporary-decline) and could materially reduce expected estimated future cash flows, which could materially reduce estimates of fair value in future periods. If, in future periods it is determined by the first step of the two-step impairment analysis that the carrying value of the reporting unit exceeds its fair value, the Company is required to determine the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference would be recorded in the consolidated statements of operations. In future periods, fair value may be estimated using the “Income Approach,” focusing on the estimated future income-producing capability of the Company's assets, principally its patent portfolios. The underlying premise of this approach is that the value of the Company can be estimated by the present value of the estimated future net economic benefit (cash receipts less cash outlays). The approach contemplates estimates of after-tax cash flows attributable to the Company's aggregate assets and converting these after-tax cash flows to present value through “discounting.” The discounting process contemplates an estimated rate of return that accounts for both the time value of money and investment risk factors. The cash inflows considered are comprised of an estimate of revenues to be generated from future licensing. Estimated cash outflows are based on estimated contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated revenues, in addition to other estimates of out-of-pocket expenses associated with licensing and enforcement and ongoing operations. Net cash flows also consider utilization of applicable tax assets, including net operating loss carryforwards, subject to applicable limitations on use. As described above, in assessing the recoverability of goodwill using a discounted cash flow analysis, significant judgments and estimates are required in connection with estimates of fair values, including estimates of the amount and timing of future cash inflows and outflows, estimates of time and risk related discount factors, estimates of costs and expenses and estimates of other factors that are used to estimate fair values of the Company. These estimates and judgments may change in future periods based on new or changing facts and circumstances. For example, significant declines in estimates of future revenues due to future adverse litigation or trial outcomes, changes in estimates of patent coverages, adverse rulings by the courts or other regulatory bodies that increase the complexity of patent law and the costs associated with the litigation process, changes in the Company's ability to invest in additional high-quality patent portfolios in future periods, changes in estimates of the Company's ability to launch new products or strategies, or other increases in costs associated with current or future licensing and enforcement programs, could have a material impact on estimates of fair value in connection with future interim or annual impairment tests. If these estimates or related projections result in material reductions to estimates of fair value in future periods, future intangible asset and/or goodwill impairment tests may result in material impairment charges to earnings. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Revenue Recognition | Revenue Recognition. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectibility of amounts is reasonably assured. In general, revenue arrangements provide for the payment of contractually determined fees in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by Acacia’s operating subsidiaries. These rights typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by Acacia’s operating subsidiaries, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. The intellectual property rights granted may be perpetual in nature, extending until the expiration of the related patents, or can be granted for a defined, relatively short period of time, with the licensee possessing the right to renew the agreement at the end of each contractual term for an additional minimum upfront payment. Pursuant to the terms of these agreements, Acacia’s operating subsidiaries have no further obligation with respect to the grant of the non-exclusive retroactive and future licenses, covenants-not-to-sue, releases, and other deliverables, including no express or implied obligation on Acacia’s operating subsidiaries’ part to maintain or upgrade the technology, or provide future support or services. Generally, the agreements provide for the grant of the licenses, covenants-not-to-sue, releases, and other significant deliverables upon execution of the agreement, or upon receipt of the minimum upfront payment for term agreement renewals. As such, the earnings process is complete and revenue is recognized upon the execution of the agreement, when collectibility is reasonably assured, or upon receipt of the minimum upfront fee for term agreement renewals, and when all other revenue recognition criteria have been met. For the periods presented herein, the majority of the revenue agreements executed by the Company provided for the payment of one-time, paid-up license fees in consideration for the grant of certain intellectual property rights for patented technology rights owned by Acacia's operating subsidiaries. These rights were primarily granted on a perpetual basis, extending until the expiration of the underlying patents. |
Cost of Revenues | Cost of Revenues . Cost of revenues include the costs and expenses incurred in connection with Acacia’s patent licensing and enforcement activities, including inventor royalties paid to original patent owners, contingent legal fees paid to external patent counsel, other patent-related legal expenses paid to external patent counsel, licensing and enforcement related research, consulting and other expenses paid to third-parties and the amortization of patent-related investment costs. These costs are included under the caption “Cost of revenues” in the accompanying consolidated statements of operations. |
Inventor Royalties and Contingent Legal Expenses | Inventor Royalties and Contingent Legal Expenses. Inventor royalties are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In certain instances, pursuant to the terms of the underlying inventor agreements, upfront advances paid to patent owners by Acacia’s operating subsidiaries are recoverable from future net revenues. Patent costs that are recoverable from future net revenues are amortized over the estimated economic useful life of the related patents, or as the prepaid royalties are earned by the inventor, as appropriate, and the related expense is included in amortization expense in the consolidated statements of operations. Any unamortized upfront advances recovered from net revenues are expensed in the period recovered, and included in amortization expense in the consolidated statements of operations. Contingent legal fees are expensed in the consolidated statements of operations in the period that the related revenues are recognized. In instances where there are no recoveries from potential infringers, no contingent legal fees are paid; however, Acacia’s operating subsidiaries may be liable for certain out of pocket legal costs incurred pursuant to the underlying legal services agreement. |
Use of Estimates | Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Acacia believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, stock-based compensation expense, impairment of marketable securities and intangible assets including goodwill, the determination of the economic useful life of amortizable intangible assets, income taxes and valuation allowances against net deferred tax assets and the application of the acquisition method of accounting for business combinations, require its most difficult, subjective or complex judgments. |
Concentrations | Concentrations. Three licensees individually accounted for 54% , 15% and 13% of revenues recognized during the three months ended September 30, 2015 , and two licensees accounted for 34% and 23% of revenues recognized during the nine months ended September 30, 2015 . Three licensees individually accounted for 43% , 30% and 12% of revenues recognized during the three months ended September 30, 2014 , and three licensees accounted for 29% , 18% and 11% of revenues recognized during the nine months ended September 30, 2014 . For the three and nine months ended September 30, 2015 , 5% and 34% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement. For the three and nine months ended September 30, 2014 , 20% and 49% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. The Company does not have any material foreign operations. Three licensees individually represented approximately 55% , 16% and 15% of accounts receivable at September 30, 2015 . Three licensees individually represented approximately 30% , 17% and 15% of accounts receivable at December 31, 2014. |
Stock-Based Compensation | Stock-Based Compensation. The compensation cost for stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (the vesting period of the equity award) which is two to four years . The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate. |
Fair Value Measurements | Fair Value Measurements. U.S. GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows: ● Level 1 - Observable Inputs: Quoted prices in active markets for identical investments; ● Level 2 - Pricing Models with Significant Observable Inputs: Other significant observable inputs, including quoted prices for similar investments, interest rates, credit risk, etc.; and ● Level 3 - Unobservable Inputs: Significant unobservable inputs, including the entity’s own assumptions in determining the fair value of investments. Whenever possible, the Company is required to use observable market inputs (Level 1 - quoted market prices) when measuring fair value. |
Investments in and Impairment of Marketable Securities | Investments in Marketable Securities. Investments in securities with original maturities of greater than three months and less than one year and other investments representing amounts that are available for current operations are classified as short-term investments, unless there are indications that such investments may not be readily sold in the short term. The fair values of these investments approximate their carrying values. As of September 30, 2015, the balance of short term investments was zero . As of December 31, 2014, all of Acacia’s short term investments were classified as available-for-sale, which are reported at fair value on a recurring basis using observable inputs (Level 1), with related unrealized gains and losses in the value of such securities recorded as a separate component of comprehensive income (loss) in stockholders’ equity until realized. Realized and unrealized gains and losses are recorded based on the specific identification method. Interest on all securities is included in interest income. Short-term marketable securities for the periods presented were comprised of the following (in thousands): December 31, 2014 Security Type Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government fixed income securities $ 58,819 $ 2 $ (263 ) $ 58,558 Total short-term investments $ 58,819 $ 2 $ (263 ) $ 58,558 |
Patents | Patents. Patents include the cost of patents or patent rights (hereinafter, collectively “patents”) obtained from third-parties or obtained in connection with business combinations. Capitalized patent costs are amortized utilizing the straight-line method over their remaining economic useful lives, ranging from one to nine years . Certain patent application and prosecution costs incurred to secure additional patent claims, that based on management’s estimates are deemed to be recoverable, are capitalized and amortized over the remaining estimated economic useful life of the related patent portfolio. |
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Acacia considers its market capitalization and other valuation techniques and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. Refer to Note 9 for additional information. |
Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block] | Impairment of Long-lived Assets. Acacia reviews long-lived assets and intangible assets for potential impairment annually (quarterly for patents) and when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss is recorded equal to the excess of the asset’s carrying value over its fair value. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available or not indicative of current fair value, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. Fair value is generally estimated using the “Income Approach,” focusing on the estimated future net income-producing capability of the patent portfolios over the estimated remaining economic useful life. Estimates of future after-tax cash flows are converted to present value through “discounting,” including an estimated rate of return that accounts for both the time value of money and investment risk factors. Estimated cash inflows are typically based on estimates of reasonable royalty rates for the applicable technology, applied to estimated market data. Estimated cash outflows are based on existing contractual obligations, such as contingent legal fee and inventor royalty obligations, applied to estimated license fee revenues, in addition to other estimates of out-of-pocket expenses associated with a specific patent portfolio’s licensing and enforcement program. The analysis also contemplates consideration of current information about the patent portfolio including, status and stage of litigation, periodic results of the litigation process, technology coverage and other pertinent information that could impact future net cash flows. |
Income Taxes | Income Taxes. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in Acacia’s consolidated financial statements or consolidated income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realizability of such assets. The provision for income taxes for interim periods is determined using an estimate of Acacia’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, Acacia updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. The Company's effective tax rates were 1% and 2% for the three and nine months ended September 30, 2015 , respectively, and 1% and 7% for the three and nine months ended September 30, 2014 , respectively. The effective rates for the periods presented primarily reflect the impact of foreign withholding taxes related to certain revenue agreements executed with third party licensees domiciled in foreign jurisdictions, and valuation allowances recorded for foreign withholding tax credits and net operating loss related tax assets generated during the periods. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentrations. Three licensees individually accounted for 54% , 15% and 13% of revenues recognized during the three months ended September 30, 2015 , and two licensees accounted for 34% and 23% of revenues recognized during the nine months ended September 30, 2015 . Three licensees individually accounted for 43% , 30% and 12% of revenues recognized during the three months ended September 30, 2014 , and three licensees accounted for 29% , 18% and 11% of revenues recognized during the nine months ended September 30, 2014 . For the three and nine months ended September 30, 2015 , 5% and 34% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions, based on the jurisdiction of the entity obligated to satisfy payment obligations pursuant to the applicable revenue arrangement. For the three and nine months ended September 30, 2014 , 20% and 49% , respectively, of revenues were attributable to licensees domiciled in foreign jurisdictions. The Company does not have any material foreign operations. Three licensees individually represented approximately 55% , 16% and 15% of accounts receivable at September 30, 2015 . Three licensees individually represented approximately 30% , 17% and 15% of accounts receivable at December 31, 2014. |
Marketable Securities | Short-term marketable securities for the periods presented were comprised of the following (in thousands): December 31, 2014 Security Type Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government fixed income securities $ 58,819 $ 2 $ (263 ) $ 58,558 Total short-term investments $ 58,819 $ 2 $ (263 ) $ 58,558 |
Income (Loss) Per Share (Tables
Income (Loss) Per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the weighted-average number of common shares outstanding used in the calculation of basic and diluted loss per share: Three Months Ended Nine Months Ended 2015 2014 2015 2014 Numerator (in thousands): Basic and Diluted Net loss $ (27,310 ) $ (12,415 ) $ (44,126 ) $ (49,785 ) Total dividends declared / paid (6,342 ) (6,260 ) (19,091 ) (18,773 ) Dividends attributable to common stockholders 6,202 6,100 18,526 18,202 Net loss attributable to common stockholders – basic and diluted $ (27,450 ) $ (12,575 ) $ (44,691 ) $ (50,356 ) Denominator: Weighted-average shares used in computing net loss per share attributable to common stockholders – basic and diluted 49,630,369 48,806,334 49,423,548 48,561,428 Basic and diluted net loss per common share $ (0.55 ) $ (0.26 ) $ (0.90 ) $ (1.04 ) |
Patents (Tables)
Patents (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The following table presents the scheduled annual aggregate amortization expense as of September 30, 2015 (in thousands): For the years ending December 31, Remainder of 2015 $ 12,732 2016 49,880 2017 48,870 2018 44,614 2019 38,981 Thereafter 54,409 $ 249,486 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Summary of Significant Accounting Policies [Line Items] | ||||
Effective tax rate | 1.00% | 1.00% | 2.00% | 7.00% |
Minimum [Member] | ||||
Summary of Significant Accounting Policies [Line Items] | ||||
Vesting period of equity awards | 2 years | |||
Useful life of patents and patent rights | 1 year | |||
Maximum [Member] | ||||
Summary of Significant Accounting Policies [Line Items] | ||||
Vesting period of equity awards | 4 years | |||
Useful life of patents and patent rights | 9 years |
Summary of Significant Accoun23
Summary of Significant Accounting Policies Concentration Risk (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Concentrations | |||||
Effective Income Tax Rate Reconciliation, Percent | 1.00% | 1.00% | 2.00% | 7.00% | |
Licensee 1 [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Accounts Receivable | 55.00% | 55.00% | 30.00% | ||
Licensee 1 [Member] | License Revenues [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Revenues | 54.00% | 43.00% | 34.00% | 29.00% | |
Licensee 2 [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Accounts Receivable | 16.00% | 16.00% | 17.00% | ||
Licensee 2 [Member] | License Revenues [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Revenues | 15.00% | 30.00% | 23.00% | 18.00% | |
Licensee 3 [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Accounts Receivable | 15.00% | 15.00% | 15.00% | ||
Licensee 3 [Member] | License Revenues [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Revenues | 13.00% | 12.00% | 11.00% | ||
Licensees in foreign jurisdictions [Member] | License Revenues [Member] | |||||
Concentrations | |||||
Concentration Risk, Percentage - Revenues | 5.00% | 20.00% | 34.00% | 49.00% |
Summary of Significant Accoun24
Summary of Significant Accounting Policies Investments in Marketable Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2014 | Sep. 30, 2015 | |
Schedule of Available-for-sale Securities [Line Items] | ||
Short-term investments | $ 58,558 | $ 0 |
Available-for-sale Securities, Amortized Cost Basis | 58,819 | |
Available-for-sale Securities, Gross Unrealized Gains | 2 | |
Available-for-sale Securities, Gross Unrealized Losses | (263) | |
Available-for-sale Securities, Fair Value Disclosure | 58,558 | |
US Government Debt Securities [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale Securities, Amortized Cost Basis | 58,819 | |
Available-for-sale Securities, Gross Unrealized Gains | 2 | |
Available-for-sale Securities, Gross Unrealized Losses | (263) | |
Available-for-sale Securities, Fair Value Disclosure | $ 58,558 |
Income (Loss) Per Share (Detail
Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Earnings Per Share [Abstract] | ||||
Net Loss Attributable to Parent | $ (27,310) | $ (12,415) | $ (44,126) | $ (49,785) |
Dividends | 6,342 | 6,260 | 19,091 | 18,773 |
Dividends attributable to common stockholders under the two class method | 6,202 | 6,100 | 18,526 | 18,202 |
Net loss available to common stockholders, basic | $ (27,450) | $ (12,575) | $ (44,691) | $ (50,356) |
Weighted Average Number of Shares Outstanding, Basic and Diluted | 49,630,369 | 48,806,334 | 49,423,548 | 48,561,428 |
Earnings Per Share, Basic and Diluted | $ (0.55) | $ (0.26) | $ (0.90) | $ (1.04) |
Patents (Details)
Patents (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Finite-Lived Intangible Assets [Line Items] | |||
Patents, accumulated amortization | $ 206,519,000 | $ 166,565,000 | |
Weighted average useful life of patents and patent rights | 6 years | ||
Investments in patents/ patent rights | $ 19,504,000 | $ 24,518,000 | |
Accelerated amortization expense (termination) | 2,702,000 | ||
Proceeds from patent sale | 3,500,000 | ||
Gain on Patent Sale | 833,000 | ||
Impairment of Intangible Assets (Excluding Goodwill) | $ 258,000 | $ 2,565,000 | |
Minimum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life of patents and patent rights | 1 year | ||
Finite lived intangible asset acquired during the year, useful life | 2 years | ||
Maximum [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Useful life of patents and patent rights | 9 years | ||
Finite lived intangible asset acquired during the year, useful life | 10 years |
Patents Future Amortization Exp
Patents Future Amortization Expense for Intangible Assets (Details) $ in Thousands | Sep. 30, 2015USD ($) |
Finite-Lived Intangible Assets [Line Items] | |
For the remainder of 2015 | $ 12,732 |
2,016 | 49,880 |
2,017 | 48,870 |
2,018 | 44,614 |
2,019 | 38,981 |
Thereafter | 54,409 |
Total expected amortization expense | $ 249,486 |
Commitments and Contingencies D
Commitments and Contingencies Details (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |||||
Restricted cash | $ 10,721,000 | $ 10,721,000 | $ 0 | ||
Line of Credit Facility, Commitment Fee Percentage | 1.15% | ||||
Other expenses | $ 3,465,000 | $ 1,548,000 | $ 3,891,000 | $ 1,548,000 |
Stockholders' Equity Stockholde
Stockholders' Equity Stockholders Equity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2015 | |
Subsequent Event [Line Items] | |||||
Common Stock, Dividends, Per Share, Cash Paid | $ 0.125 | $ 0.125 | $ 0.375 | $ 0.375 | |
Payments of Dividends | $ 19,091 | $ 18,773 | |||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Common Stock, Dividends, Per Share, Declared | $ 0.50 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - $ / shares | 3 Months Ended | |
Dec. 31, 2015 | Nov. 30, 2015 | |
Subsequent Event [Line Items] | ||
Dividends payable, per share | $ 0.125 | |
Dividends payable, date to be paid | Nov. 30, 2015 | |
Dividends payable, record date | Nov. 6, 2015 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | ||
Sep. 30, 2015 | Nov. 03, 2015 | Dec. 31, 2014 | |
Goodwill [Line Items] | |||
Fair Value, Control Premium Approach | $ 502,800 | ||
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount | 5.00% | ||
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount, Control Premium Approach | $ 63,300 | ||
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount, Control Premium Approach | 14.00% | ||
Fair Value Using Market Capitalization | $ 460,800 | ||
Goodwill | 30,149 | $ 30,149 | |
Net Assets | 439,500 | ||
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount | $ 21,300 | ||
Minimum [Member] | |||
Goodwill [Line Items] | |||
Price per share | $ 7.88 | ||
Maximum [Member] | |||
Goodwill [Line Items] | |||
Price per share | $ 17.22 | ||
Subsequent Event [Member] | |||
Goodwill [Line Items] | |||
Fair Value, Control Premium Approach | $ 392,600 | ||
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount | 20.00% | ||
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount, Control Premium Approach | $ 46,900 | ||
Reporting Unit, Percentage of Fair Value in Excess of Carrying Amount, Control Premium Approach | 11.00% | ||
Fair Value Using Market Capitalization | $ 350,600 | ||
Reporting Unit, Amount of Fair Value in Excess of Carrying Amount | $ 88,900 | ||
Share Price | $ 6.91 |