Exhibit 3.1
AMENDED AND RESTATED
BYLAWS
OF
REALNETWORKS, INC.
Adopted July 23, 2010
TABLE OF CONTENTS
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Page
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ARTICLE I
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1
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1.1 Annual Meeting
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1
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1.1.1 Time and Place of Meeting
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1
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1.1.2 Business Conducted at Meeting
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1
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1.2 Special Meetings
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2
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1.3 Notice of Meetings
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3
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1.3.1 Notice of Special Meeting
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3
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1.3.2 Proposed Articles of Amendment, Merger, Exchange, Sale, Lease or
Disposition
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3
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1.3.3 Proposed Dissolution
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3
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1.3.4 Declaration of Mailing
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4
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1.3.5 Waiver of Notice
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4
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1.4 Quorum; Vote Requirement
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4
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1.5 Adjourned Meetings
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4
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1.6 Fixing Record Date
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5
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1.7 Shareholders’ List for Meeting
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5
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1.8 Ratification
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5
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1.9 Action by Shareholders Without a Meeting
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6
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1.10 Telephonic Meetings
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6
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ARTICLE II
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6
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2.1 Responsibility of Board of Directors
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6
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2.2 Number of Directors; Qualification
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7
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2.3 Election of Directors; Nominations
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7
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2.3.1 Election and Term of Office
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7
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2.3.2 Nominations for Directors
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7
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2.4 Vacancies
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8
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2.5 Removal
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9
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2.6 Resignation
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9
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2.7 Annual Meeting
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9
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Page
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2.8 Regular Meetings
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9
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2.9 Special Meetings
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9
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2.10 Notice of Meeting
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9
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2.11 Quorum of Directors
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10
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2.12 Dissent by Directors
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11
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2.13 Action by Directors Without a Meeting
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11
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2.14 Telephonic Meetings
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11
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2.15 Compensation
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11
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2.16 Committees
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11
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ARTICLE III
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12
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3.1 Appointment
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12
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3.2 Qualification
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12
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3.3 Officers Enumerated
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12
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3.3.1 Chairman of the Board
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12
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3.3.2 President
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13
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3.3.3 Vice Presidents
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13
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3.3.4 Secretary
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14
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3.3.5 Treasurer
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14
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3.4 Delegation
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15
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3.5 Resignation
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15
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3.6 Removal
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15
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3.7 Vacancies
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15
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3.8 Other Officers and Agents
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15
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3.9 Compensation
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15
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3.10 General Standards for Officers
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15
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ARTICLE IV
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16
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4.1 Contracts
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16
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4.2 Checks, Drafts, Etc.
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16
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4.3 Deposits
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16
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ARTICLE V
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16
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5.1 Issuance of Shares
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16
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Page
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5.2 Stock Certificates
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16
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5.3 Stock Records
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17
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5.4 [Reserved]
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17
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5.5 Transfers
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17
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ARTICLE VI
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17
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ARTICLE VII
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17
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ARTICLE VIII
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18
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ARTICLE IX
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18
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ARTICLE X
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18
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10.1 Definitions
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18
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10.2 Mandatory Indemnification
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18
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10.3 Insurance
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18
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10.4 Changes in Law
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19
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10.5 Exclusivity; Nature of Rights; Amendment
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19
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ARTICLE XI
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19
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11.1 Communications by Facsimile
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19
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11.2 Inspector of Elections
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19
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11.3 Rules of Order
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20
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11.4 Construction
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20
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11.5 Severability
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20
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ARTICLE XII
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21
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ARTICLE XIII
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21
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13.1 Notice by Electronic Transmission
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21
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13.2 Definitions
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21
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ARTICLE XIV
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22
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-iii-
AMENDED AND RESTATED BYLAWS OF
REALNETWORKS, INC.
These Bylaws are promulgated pursuant to the Washington Business Corporation Act, as set forth
in Title 23B of the Revised Code of Washington (the “Act”).
ARTICLE I
SHAREHOLDERS
1.1
Annual Meeting
.
1.1.1
Time and Place of Meeting
. The annual meeting of the shareholders of the
corporation for the election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at a place, day, and time to be set by the
Board of Directors.
1.1.2
Business Conducted at Meeting
.
(a) At an annual meeting of shareholders, an item of business may be conducted, and a proposal
may be considered and acted upon, only if such item or proposal is brought before the meeting (i)
by, or at the direction of, the Board of directors, or (ii) by any shareholder of the corporation
who is entitled to vote at the meeting and who complies with the procedures set forth in the
remainder of this Section 1.1.2. This Section 1.1.2 shall not apply to matters of procedure that,
pursuant to Section 11.3(a) of these Bylaws, are subject to the authority of the chairman of the
meeting.
(b) For an item of business or proposal to be brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a shareholder’s notice must be delivered to, or mailed and received
at, the principal office of the corporation not less than one hundred twenty (120) days prior to
the first anniversary of the date that the Company’s proxy statement was released to shareholders
in connection with the previous year’s annual meeting, or, if the date of this year’s annual
meeting has been changed by more than thirty (30) days from the date of the previous year’s
meeting, then the deadline is a reasonable time before the Company begins to print and mail its
proxy materials.
(c) A shareholder’s notice to the Secretary under Section 1.1.2(b) shall set forth, as to each
item of business or proposal the shareholder intends to bring before the meeting (i) a brief
description of the item of business or proposal and the reasons for bringing it before the meeting,
(ii) the name and address, as they appear on the corporation’s books, of the shareholder and of any
other shareholders that the shareholder knows or anticipates will support the item of business or
proposal, (iii) the number and class of shares of stock of the corporation that are beneficially
owned on the date of such notice by the shareholder and by any such other
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shareholders, and (iv) any financial interest of the shareholder or any such other shareholders in
such item of business or proposal.
(d) The Board of Directors, or a designated committee thereof, may reject a shareholder’s
notice that is not timely given in accordance with the terms of Section 1.1.2(b). If the Board of
Directors, or a designated committee thereof, determines that the information provided in a timely
shareholder’s notice does not satisfy the requirements of Section 1.1.2(c) in any material respect,
the Secretary of the corporation shall notify the shareholder of the deficiency in the notice. The
shareholder shall have an opportunity to cure the deficiency by providing additional information to
the Secretary within such period of time, not to exceed five (5) days from the date such deficiency
notice is given to the shareholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of Directors or such
committee determines that the additional information provided by the shareholder, together with
information previously provided, does not satisfy the requirements of Section 1.1.2(c) in any
material respect, then the Board of Directors or such committee may reject the shareholder’s
notice.
(e) Notwithstanding the procedures set forth in Section 1.1.2(d), if a shareholder desires to
bring an item of business or proposal before an annual meeting, and neither the Board of Directors
nor any committee thereof has made a prior determination of whether the shareholder has complied
with the procedures set forth in this Section 1.1.2 in connection with such item of business or
proposal, then the chairman of the meeting shall determine and declare at the meeting whether the
shareholder has so complied. If the chairman determines that the shareholder has so complied, then
the chairman shall so state and ballots shall be provided for use at the meeting with respect to
such item of business or proposal. If the chairman determines that the shareholder has not so
complied, then, unless the chairman, in his sole and absolute discretion, determines to waive such
compliance, the chairman shall state that the shareholder has not so complied and the item of
business or proposal shall not be brought before the meeting.
(f) This Section 1.1.2 shall not prevent the consideration and approval or disapproval at the
annual meeting of reports of officers, directors and committees of the Board of Directors, but, in
connection with such reports, no item of business may be conducted, and no proposal may be
considered and acted upon, unless there has been compliance with the procedures set forth in this
Section 1.1.2 in connection therewith.
1.2
Special Meetings
. Special meetings of the shareholders for any purpose or
purposes may be called at any time by the Board of Directors or by the Chairman of the Board (if
one be appointed) or by the President or by one or more shareholders holding at least twenty-five
percent (25%) of all the shares entitled to be cast on any issue proposed to be considered at that
meeting, to be held at such time and place as the Board or the Chairman (if one be appointed) or
the President may prescribe.
If a special meeting is called by any person or persons other than the Board of Directors or
the Chairman of the Board (if one be appointed) or the President, then a written demand,
describing with reasonable clarity the purpose or purposes for which the meeting is called and
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specifying the general nature of the business proposed to be transacted, shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile transmission to the
Secretary of the corporation. Upon receipt of such a demand, the Secretary shall cause notice of
such meeting to be given, within thirty (30) days after the date the demand was delivered to the
Secretary, to the shareholders entitled to vote, in accordance with the provisions of Section 1.3
of these Bylaws. Except as provided below, if the notice is not given by the Secretary within
thirty (30) days after the date the demand was delivered to the Secretary, then the person or
persons demanding the meeting may specify the time and place of the meeting and give notice
thereof.
1.3
Notice of Meetings
. Except as otherwise provided below, the Secretary, Assistant
Secretary, or any transfer agent of the corporation shall give, in any manner permitted by law, not
less than ten (10) nor more than sixty (60) days before the date of any meeting of shareholders,
written or electronic notice stating the place, day, and time of the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, notice to a shareholder shall be effective when
mailed, with first-class postage thereon prepaid, correctly addressed to the shareholder at the
shareholder’s address as it appears on the current record of shareholders of the corporation.
Otherwise, written notice shall be effective at the earliest of the following: (a) when received,
(b) five (5) days after its deposit in the United States mail, as evidenced by the postmark, if
mailed with first-class postage, prepaid, and correctly addressed, or (c) on the date shown on the
return receipt, if sent by registered or certified mail, return receipt requested, and the receipt
is signed by or on behalf of the addressee.
If provided in an electronic transmission, notice to a shareholder shall be deemed given in
accordance with the provisions set forth in Article XIII of these Bylaws.
1.3.1
Notice of Special Meeting
. In the case of a special meeting, the written or
electronic notice shall also state with reasonable clarity the purpose or purposes for which the
meeting is called and the general nature of the business proposed to be transacted at the meeting.
No business other than that within the purpose or purposes specified in the notice may be
transacted at a special meeting.
1.3.2
Proposed Articles of Amendment, Merger, Exchange, Sale, Lease or Disposition
.
If the business to be conducted at any meeting includes any proposed amendment to the Articles of
Incorporation or any proposed merger or exchange of shares, or any proposed sale, lease, exchange,
or other disposition of all or substantially all of the property and assets (with or without the
goodwill) of the corporation not in the usual or regular course of its business, then the written
or electronic notice shall state that the purpose or one of the purposes is to consider the
proposed amendment or plan of merger, exchange of shares, sale, lease, exchange, or other
disposition, as the case may be, shall describe the proposed action with reasonable clarity, and
shall be accompanied by a copy of the proposed amendment or plan. Written or electronic notice of
such meeting shall be given to each shareholder of record, whether or not entitled to vote at such
meeting, not less than twenty (20) days before such meeting, in the manner provided in Section 1.3
above.
1.3.3
Proposed Dissolution
. If the business to be conducted at any meeting
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includes
the proposed voluntary dissolution of the corporation, then the written or electronic notice shall
state that the purpose or one of the purposes is to consider the advisability thereof. Written or
electronic notice of such meeting shall be given to each shareholder of record, whether or not
entitled to vote at such meeting, not less than twenty (20) days before such meeting, in the manner
provided in Section 1.3 above.
1.3.4
Declaration of Mailing
. A declaration of the mailing, electronic transmission or
other means of giving any notice of any shareholders’ meeting, executed by the Secretary, Assistant
Secretary, or any transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
1.3.5
Waiver of Notice
. A shareholder may waive notice of any meeting at any time,
either before or after such meeting. Except as provided below, the waiver must be in writing, be
signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion
in the minutes or filing with the corporate records. A shareholder’s attendance at a meeting in
person or by proxy waives objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or transacting business
at the meeting on the ground that the meeting is not lawfully called or convened. In the case of a
special meeting, or an annual meeting at which fundamental corporate changes are considered, a
shareholder waives objection to consideration of a particular matter that is not within the purpose
or purposes described in the meeting notice unless the shareholder objects to considering the
matter when it is presented.
1.4
Quorum; Vote Requirement
. A quorum shall exist at any meeting of shareholders if
a majority of the votes entitled to be cast is represented in person or by proxy. Once a share is
represented for any purpose at a meeting other than solely to object to holding the meeting or
transacting business at the meeting, it is deemed present for quorum purposes for the remainder of
the meeting and for any adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting. Subject to the foregoing, the determination of the voting groups entitled
to vote (as required by law), and the quorum and voting requirements applicable thereto, must be
made separately for each matter being considered at a meeting. In the case of any meeting of
shareholders that is adjourned more than once because of the failure of a quorum to attend, those
who attend the third convening of such meeting, although less than a quorum, shall nevertheless
constitute a quorum for the purpose of electing directors, provided that the percentage of shares
represented at the third convening of such meeting shall not be less than one-third of the shares
entitled to vote.
If a quorum exists, action on a matter (other than the election of directors) is approved by a
voting group if the votes cast within the voting group favoring the action exceed the votes cast
within the voting group opposing the action unless a greater number of affirmative votes is
required by law or by the Articles of Incorporation.
1.5
Adjourned Meetings
. An adjournment or adjournments of any shareholders’ meeting,
whether by reason of the failure of a quorum to attend or otherwise, may be taken to such date,
time, and place as the chairman of the meeting may determine without new notice
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being given if the
date, time, and place are announced at the meeting at which the adjournment is taken. However, if
the adjournment is for more than one hundred twenty (120) days from the date set for the original
meeting, a new record date for the adjourned meeting shall be fixed and a new notice of the
adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned
meeting, in accordance with the provisions of Section 1.3 of these Bylaws. At any adjourned
meeting, the corporation may transact any business which might have been transacted at the original
meeting. Any meeting at which directors are to be elected shall be adjourned only from day to day
until such directors are elected.
1.6
Fixing Record Date
. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders (or, subject to Section 1.5 above, any
adjournment thereof), the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be not more than seventy (70) days
prior to the meeting. If no such record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, then the day before the first notice
is delivered to shareholders shall be the record date for such determination of shareholders. If
no notice is given because all shareholders entitled to notice have waived notice, then the record
date for the determination of shareholders entitled to notice of or to vote at a meeting shall be
the date on which the last such waiver of notice was obtained. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, except as provided in Section
1.5 of these Bylaws. If no notice is given because all shareholders entitled to notice have signed
a consent as described in Section 1.9 below, the record date for determining shareholders entitled
to take action without a meeting is the date the first shareholder signs the consent.
1.7
Shareholders’ List for Meeting
. The corporation shall cause to be prepared an
alphabetical list of the names of all of its shareholders on the record date who are entitled to
notice of a shareholders’ meeting or any adjournment thereof. The list must be arranged by voting
group (and within each voting group by class or series of shares) and show the address of and the
number of shares held by each shareholder. The shareholders’ list must be available for inspection
by any shareholder, beginning ten (10) days prior to the meeting and continuing through the
meeting, at the principal office of the corporation or at a place identified in the meeting notice
in the city where the meeting will be held. Such list shall be produced and kept open at the time
and place of the meeting. During such ten-day period, and during the whole time of the meeting,
the shareholders’ list shall be subject to the inspection of any shareholder, or the shareholder’s
agent or attorney. In cases where the record date is fewer than ten (10) days prior to the meeting
because notice has been waived by all shareholders, the Secretary shall keep such record available
for a period from the date the first waiver of notice was delivered to the date of the meeting.
Failure to comply with the requirements of this section shall not affect the validity of any action
taken at the meeting.
1.8
Ratification
. Subject to the requirements of RCW 23B.08.730 and 23B.19.040, any
contract, transaction, or act of the corporation or of any director or officer of the corporation
that shall be authorized, approved, or ratified by the affirmative vote of a majority of shares
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represented at a meeting at which a quorum is present shall, insofar as permitted by law, be as
valid and as binding as though ratified by every shareholder of the corporation.
1.9
Action by Shareholders Without a Meeting
. Any action which may be or which is
required by law to be taken at any meeting of shareholders may be taken, without a meeting or
notice of a meeting, if one or more consents in writing, setting forth the action so taken, are
signed by all of the shareholders entitled to vote or, in the place of any one or more of such
shareholders, by a person holding a valid proxy to vote with respect to the subject matter thereof,
and are delivered to the corporation for inclusion in the minutes or filing with the corporate
records. If notice of the proposed action to be taken by unanimous consent of the voting
shareholders is required by law to be given to nonvoting shareholders, the corporation must give
its nonvoting shareholders written notice of the proposed action at least ten (10) days before the
action is taken. The notice must contain or be accompanied by the same material that, by law,
would have been required to be sent to nonvoting shareholders in a notice of meeting at which the
proposed action would have been submitted to such shareholders for action. Action taken by
unanimous written consent is effective when all consents are in possession of the corporation,
unless the consent specifies a later effective date. Such consent shall have the same force and
effect as a meeting vote of shareholders and may be described as such in any articles or other
document filed with the Secretary of State of the State of Washington.
1.10
Telephonic Meetings
. Shareholders may participate in a meeting by means of a
conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting.
ARTICLE II
BOARD OF DIRECTORS
2.1
Responsibility of Board of Directors
. The business and affairs and property of
the corporation shall be managed under the direction of a Board of Directors. A director shall
discharge the duties of a director, including duties as a member of a committee, in good faith,
with the care an ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner the director reasonably believes to be in the best interests of the
corporation. In discharging the duties of a director, a director is entitled to rely on
information, opinions, reports, or statements, including financial statements and other financial
data, if prepared or presented by: (a) one or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the matters presented; (b) legal
counsel, public accountants, or other persons as to matters the director reasonably believes are
within the person’s professional or expert competence; or (c) a committee of the Board of Directors
of which the director is not a member, if the director reasonably believes the committee merits
confidence. A director is not acting in good faith if the director has knowledge concerning the
matter in question that makes reliance otherwise permitted above unwarranted. The creation
of, delegation of authority to, or action by a committee does not alone constitute compliance
by a director with the standards of conduct imposed by law upon directors. A
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director is not
liable for any action taken as a director, or any failure to take any action, if the director
performed the duties of the director’s office in compliance with this section.
2.2
Number of Directors; Qualification
. The Board shall be composed of not less than
two nor more than nine directors, the specific number to be set by resolution of the Board or the
shareholders. No reduction of the authorized number of directors shall have the effect of removing
any director before that director’s term of office expires. If a greater or lesser number of
directors than is specified in this section is elected by the shareholders, then election of that
number shall automatically be deemed to constitute an amendment to these Bylaws. No director need
be a shareholder of the corporation or a resident of Washington. Each director must be at least
eighteen (18) years of age.
2.3
Election of Directors; Nominations
.
2.3.1
Election and Term of Office
. At the first annual meeting of shareholders and at
each annual meeting thereafter, the shareholders shall elect directors. Except in the case of
death, resignation or removal, each director shall hold office until the next succeeding annual
meeting or, in the case of staggered terms as permitted by RCW 23B.08.060, for the term for which
he/she is elected, and in each case until his/her successor shall have been elected and qualified.
2.3.2
Nominations for Directors
.
(a) Nominations of candidates for election as directors at an annual meeting of shareholders
may only be made (i) by, or at the direction of, the Board of Directors or (ii) by any shareholder
of the corporation who is entitled to vote at the meeting and who complies with the procedures set
forth in the remainder of this Section 2.3.2.
(b) If a shareholder proposes to nominate one or more candidates for election as directors at
an annual meeting, the shareholder must have given timely notice thereof in writing to the
Secretary of the corporation. To be timely, a shareholder’s notice must be delivered to, or mailed
and received at, the principal office of the corporation not less than one hundred twenty (120)
days prior to the first anniversary of the date that the Company’s proxy statement was released to
shareholders in connection with the previous year’s annual meeting, or, if the date of this year’s
annual meeting has been changed by more than thirty (30) days from the date of the previous year’s
meeting, then the deadline is a reasonable time before the Company begins to print and mail its
proxy materials.
(c) A shareholder’s notice to the Secretary under Section 2.3.2(b) shall set forth, as to
each person whom the shareholder proposes to nominate for election as a director (i) the name, age,
business address and residence address of such person, (ii) the principal occupation or employment
of such person, (iii) the number and class of shares of stock of the corporation that are
beneficially owned on the date of such notice by such person and (iv) if the
corporation at such time has any security registered pursuant to Section 12 of the Exchange Act,
any other information relating to such person required to be disclosed in solicitations of proxies
with respect to nominees for election as directors pursuant to Regulation 14A under the
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Exchange
Act, including but not limited to information required to be disclosed by Schedule 14A of
Regulation 14A, and any other information that the shareholder would be required to file with the
Securities and Exchange Commission in connection with the shareholder’s nomination of such person
as a candidate for director or the shareholder’s opposition to any candidate for director nominated
by, or at the direction of, the Board of Directors. In addition to the above information, a
shareholder’s notice to the Secretary under Section 2.3.2(b) shall (A) set forth (i) the name and
address, as they appear on the corporation’s books, of the shareholder and of any other
shareholders that the shareholder knows or anticipates will support any candidate or candidates
nominated by the shareholder and (ii) the number and class of shares of stock of the corporation
that are beneficially owned on the date of such notice by the shareholder and by any such other
shareholders and (B) be accompanied by a written statement, signed and acknowledged by each
candidate nominated by the shareholder, that the candidate agrees to be so nominated and to serve
as a director of the corporation if elected at the annual meeting.
(d) The Board of Directors, or a designated committee thereof, may reject any shareholder’s
nomination of one or more candidates for election as directors if the nomination is not made
pursuant to a shareholder’s notice timely given in accordance with the terms of Section 2.3.2(b).
If the Board of Directors, or a designated committee thereof, determines that the information
provided in a shareholder’s notice does not satisfy the requirements of Section 2.3.2(c) in any
material respect, the Secretary of the corporation shall notify the shareholder of the deficiency
in the notice. The shareholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within such period of time, not to exceed five (5) days
from the date such deficiency notice is given to the shareholder, as the Board of Directors or such
committee shall reasonably determine. If the deficiency is not cured within such period, or if the
Board of Directors or such committee determines that the additional information provided by the
shareholder, together with information previously provided, does not satisfy the requirements of
Section 2.3.2(c) in any material respect, then the Board of Directors or such committee may reject
the shareholder’s notice.
(e) Notwithstanding the procedures set forth in Section 2.3.2(d), if a shareholder proposes
to nominate one or more candidates for election as directors at an annual meeting, and neither the
Board of Directors nor any committee thereof has made a prior determination of whether the
shareholder has complied with the procedures set forth in this Section 2.3.2 in connection with
such nomination, then the chairman of the annual meeting shall determine and declare at the annual
meeting whether the shareholder has so complied. If the chairman determines that the shareholder
has so complied, then the chairman shall so state and ballots shall be provided for use at the
meeting with respect to such nomination. If the chairman determines that the shareholder has not
so complied, then, unless the chairman, in his sole and absolute discretion, determines to waive
such compliance, the chairman shall state that the shareholder has not so complied and the
defective nomination shall be disregarded.
2.4
Vacancies
. Except as otherwise provided by law, any vacancy occurring in the
Board of Directors (whether caused by resignation, death, or otherwise) may be filled by the
affirmative vote of a majority of the directors present at a meeting of the Board at which a quorum
is present, or, if the directors in office constitute less than a quorum, by the affirmative
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vote
of a majority of all of the directors in office. Notice shall be given to all of the remaining
directors that such vacancy will be filled at the meeting. However, if the vacant office was held
by a director elected by a voting group composed of less than all of the voting shareholders, then
the Board of Directors shall not have the power to fill such vacancy. A director elected to fill
any vacancy shall hold office until the next meeting of shareholders at which directors are
elected, and until his/her successor shall have been elected and qualified.
2.5
Removal
. One or more members of the Board of Directors (including the entire
Board) may be removed, with or without cause, at a special meeting of shareholders called expressly
for that purpose. A director (or the entire Board) may be removed if the number of votes cast in
favor of removing such director (or the entire Board) exceeds the number of votes cast against
removal; provided that, if a director (or the entire Board) has been elected by one or more voting
groups, only those voting groups may participate in the vote as to removal. However, if the
Articles of Incorporation grant shareholders the right to cumulate their votes in the election of
directors, a director may not be removed if a number of votes sufficient to elect such director
under cumulative voting (computed on the basis of the number of votes actually cast at the meeting
on the question of removal) is cast against such director’s removal.
2.6
Resignation
. A director may resign at any time by delivering written notice to
the Board of Directors, its Chairman, the President, or the Secretary. A resignation is effective
when the notice is delivered unless the notice specifies a later effective date.
2.7
Annual Meeting
. The first meeting of each newly elected Board of Directors shall
be known as the annual meeting thereof and shall be held without notice immediately after the
annual shareholders’ meeting or any special shareholders’ meeting at which a Board is elected.
Such meeting shall be held at the same place as such shareholders’ meeting unless some other place
shall be specified by resolution of the shareholders.
2.8
Regular Meetings
. Regular meetings of the Board of Directors may be held at such
place, day, and time as shall from time to time be fixed by resolution of the Board without notice
other than the delivery of such resolution as provided in Section 2.10 below.
2.9
Special Meetings
. Special meetings of the Board of Directors may be called by the
President or the Chairman of the Board (if one be appointed) or any two or more directors, to be
held at such place, day, and time as specified by the person or persons calling the meeting.
2.10
Notice of Meeting
. Notice of the place, day, and time of any meeting of the
Board of Directors for which notice is required shall be given, at least two (2) days preceding the
day on which the meeting is to be held, by the Secretary or an Assistant Secretary, or by the
person calling the meeting, in any manner permitted by law, including orally. Any oral notice given
by personal communication over the telephone or otherwise may be communicated either to the
director or to a person at the office of the director who, the person giving the notice has
reason to believe, will promptly communicate it to the director. If mailed, notice to the director
shall be deemed to have been given on the earliest of (a) the day of actual receipt, (b) five (5)
days after the day on which written notice is deposited in the United States mail, as evidenced by
the postmark, with first-class postage prepaid, and correctly addressed, or (c) on the date shown
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on the return receipt, if sent by registered or certified mail, return receipt requested, and the
receipt is signed by or on behalf of the addressee. If sent by electronic transmission, notice to
the director shall be deemed to have been given when delivered in accordance with Article XIII of
these Bylaws.
No notice of any regular meeting need be given if the place, day, and time thereof have been
fixed by resolution of the Board of Directors and a copy of such resolution has been delivered to
every director at least two (2) days or deposited in the United States mail, as evidenced by the
postmark, with first-class postage prepaid, and correctly addressed at least five (5) days
preceding the day of the first meeting held in pursuance thereof.
Notice of a meeting of the Board of Directors need not be given to any director if it is
waived by the director in writing, whether before or after such meeting is held. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting unless required by
law, the Articles of Incorporation, or these Bylaws.
A director’s attendance at or participation in a meeting shall constitute a waiver of notice
of such meeting except when a director attends or participates in a meeting for the express purpose
of objecting on legal grounds prior to or at the beginning of the meeting (or promptly upon the
director’s arrival) to the holding of the meeting or the transaction of any business and does not
thereafter vote for or assent to action taken at the meeting. Any meeting of the Board of
Directors shall be a legal meeting without any notice thereof having been given if all of the
directors have received valid notice thereof, are present without objecting, or waive notice
thereof, or any combination thereof.
2.11
Quorum of Directors
. Except in particular situations where a lesser number is
expressly permitted by law, and unless a greater number is required by the Articles of
Incorporation, a majority of the number of directors specified in or fixed in accordance with these
Bylaws shall constitute a quorum for the transaction of business, and the affirmative vote of a
majority of the directors present at a meeting at which a quorum is present shall be the act of the
Board of Directors. If the number of directors in office at any time is less than the number
specified in or fixed in accordance with these Bylaws, then a quorum shall consist of a majority of
the number of directors in office; provided that in no event shall a quorum consist of fewer than
one-third of the number specified in or fixed in accordance with these Bylaws.
Directors at a meeting of the Board of Directors at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, provided such withdrawal
does not reduce the number of directors attending the meeting below the level of a quorum.
A majority of the directors present, whether or not constituting a quorum, may adjourn any
meeting of the Board of Directors to another time and place. If the meeting is adjourned for more
than forty-eight (48) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in Section 2.10 of these
Bylaws, to the directors who were not present at the time of the adjournment.
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2.12
Dissent by Directors
. Any director who is present at any meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to have assented to
the action taken unless the director objects at the beginning of the meeting (or promptly upon the
director’s arrival) to the holding of, or the transaction of business at, the meeting; or unless
the director’s dissent or abstention shall be entered in the minutes of the meeting; or unless the
director delivers written notice of the director’s dissent or abstention to the presiding officer
of the meeting before the adjournment thereof or to the corporation within a reasonable time after
the adjournment of the meeting. Such right to dissent or abstention shall not be available to any
director who votes in favor of such action.
2.13
Action by Directors Without a Meeting
. Any action required by law to be taken or
which may be taken at a meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board of Directors. The action must be evidenced by one or
more consents describing the action taken, executed by each director either before or after the
action taken, and delivered to the corporation for inclusion in the minutes or filing with the
corporate records, each of which consents shall be set forth either (a) in an executed record or
(b) if the corporation has designated an address, location or system to which the consents may be
electronically transmitted and the consent is electronically transmitted to the designated address,
location or system, in an executed electronically transmitted record. Such consent shall have the
same effect as a meeting vote. Action taken under this section is effective when the last director
executes the consent, unless the consent specifies a later effective date.
2.14
Telephonic Meetings
. Except as may be otherwise restricted by the Articles of
Incorporation, members of the Board of Directors may participate in a meeting of the Board by any
means of communication by which all directors participating in the meeting may simultaneously hear
each other during the meeting. Participation by such means shall constitute presence in person at
a meeting.
2.15
Compensation
. By resolution of the Board of Directors, the directors may be paid
their expenses, if any, and may be paid a fixed sum or a stated salary as a director, for
attendance at each meeting of the Board. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
2.16
Committees
. The Board of Directors, by resolution adopted by the greater of (a)
a majority of all of the directors in office, or (b) the number of directors required by the
Articles of Incorporation or these Bylaws to take action may from time to time create, and appoint
individuals to, one or more committees, each of which must have at least two (2) members. If a
committee is formed for the purpose of exercising functions of the Board, the committee must
consist solely of directors. If the only function of a committee is to study and make
recommendations for action by the full Board, the committee need not consist of directors.
Members of a committee composed solely of directors, in fulfilling their standard of conduct, may
rely upon Section 2.1 above. Committees of directors may exercise the authority of the Board of
Directors to the extent specified by such resolution or in the Articles of Incorporation or these
Bylaws. However, no committee shall:
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(a) authorize or approve a distribution (as defined in RCW 23B.01.400) except according to a
general formula or method prescribed by the Board of Directors;
(b) approve or propose to shareholders action that by law is required to be approved by
shareholders;
(c) fill vacancies on the Board of Directors or on any of its committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend, or repeal Bylaws;
(f) approve a plan of merger not requiring shareholder approval; or
(g) authorize or approve the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or series of shares,
except that the Board of Directors may authorize a committee of directors (or a senior executive
officer of the corporation) to do so within limits specifically prescribed by the Board of
Directors.
Committees shall be governed by the same provisions as govern the meetings, actions without
meetings, notice and waiver of notice, quorum and voting requirements, and standards of conduct of
the Board of Directors. The Executive Committee (if one be established) shall meet periodically
between meetings of the full Board. All committees shall keep regular minutes of their meetings
and shall cause them to be recorded in books kept for that purpose at the office of the
corporation.
ARTICLE III
OFFICERS
3.1
Appointment
. The officers of the corporation shall be appointed annually by the
Board of Directors at its annual meeting held after the annual meeting of the shareholders. If
the appointment of officers is not held at such meeting, such appointment shall be held as soon
thereafter as a Board meeting conveniently may be held. Except in the case of death, resignation,
or removal, each officer shall hold office until the next annual meeting of the Board and until
his/her successor is appointed and qualified.
3.2
Qualification
. None of the officers of the corporation need be a director, except
as specified below. Any two or more of the corporate offices may be held by the same person.
3.3
Officers Enumerated
. Except as otherwise provided by resolution of the Board of
Directors, the officers of the corporation and their respective powers and duties shall be as
follows:
3.3.1
Chairman of the Board
. The Chairman of the Board (if such an officer be
appointed) shall be a director and shall perform such duties as shall be assigned to him/her by the
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Board of Directors and in any employment agreement. The Chairman shall preside at all meetings of
the shareholders and at all meetings of the Board at which he/she is present. The Chairman may
sign deeds, mortgages, bonds, contracts, and other instruments, except when the signing thereof has
been expressly delegated by the Board or by these Bylaws to some other officer or agent of the
corporation or is otherwise required by law to be signed by some other officer or in some other
manner. If the President dies or becomes unable to act, the Chairman shall perform the duties of
the President, except as may be limited by resolution of the Board of Directors, with all the
powers of and subject to all the restrictions upon the President.
3.3.2
President
. Subject to such supervisory powers as may be given by the Board of
Directors to the Chairman of the Board (if such an officer be appointed), the President shall be
the chief executive officer of the corporation unless some other officer is so designated by the
Board and, subject to the control of the Board and the Executive Committee (if one be established),
shall supervise and control all of the assets, business, and affairs of the corporation. The
President may sign certificates for shares of the corporation, deeds, mortgages, bonds, contracts,
and other instruments, except when the signing thereof has been expressly delegated by the Board or
by these Bylaws to some other officer or agent of the corporation or is otherwise required by law
to be signed by some other officer or in some other manner. The President shall vote the shares
owned by the corporation in other corporations, domestic or foreign, unless otherwise prescribed by
law or resolution of the Board. In general, the President shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board from time to time. In
the absence of the Chairman of the Board, the President, if a director, shall preside over all
meetings of the shareholders and over all meetings of the Board of Directors. The President shall
have the authority to appoint one or more Assistant Secretaries and Assistant Treasurers, as he/she
deems necessary.
3.3.3
Vice President
. If no Chairman of the Board has been appointed, in the absence
or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board shall perform all
the duties of the President and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the President; provided that no such Vice President shall assume the
authority to preside as Chairman of meetings of the Board unless such Vice President is a member of
the Board. The Vice Presidents shall have such other powers and perform such other duties as from
time to time may be respectively prescribed for them by the Board, these Bylaws, the President, or
the Chairman of the Board (if one be appointed).
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3.3.4
Secretary
. The Secretary shall:
(a) have responsibility for preparing minutes of meetings of the shareholders and the
Board of Directors and for authenticating records of the corporation;
(b) see that all notices are duly given in accordance with the provisions of Sections
1.3, 1.5, 2.8, and 2.10 of these Bylaws and as required by law;
(c) be custodian of the corporate records and seal of the corporation, if one be
adopted;
(d) keep a register of the post office address of each shareholder and director;
(e) attest certificates for shares of the corporation;
(f) have general charge of the stock transfer books of the corporation;
(g) when required by law or authorized by resolution of the Board of Directors, sign
with the President, or other officer authorized by the President or the Board, deeds,
mortgages, bonds, contracts, and other instruments; and
(h) in general, perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned by the President or the Board of Directors.
In the absence of the Secretary, an Assistant Secretary may perform the duties of the
Secretary.
3.3.5
Treasurer
. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his/her duties in such sum and with such surety or sureties as
the Board shall determine. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds and securities of the
corporation;
(b) receive and give receipts for moneys due and payable to the corporation from any
source whatsoever and deposit all such moneys in the name of the corporation in banks, trust
companies, or other depositories selected in accordance with the provisions of these Bylaws;
and
(c) in general, perform all of the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned by the President or the Board of Directors.
In the absence of the Treasurer, an Assistant Treasurer may perform the duties of the
Treasurer.
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3.4
Delegation
. In case of the absence or inability to act of any officer of the
corporation and of each person herein authorized to act in his/her place, the Board of Directors
may from time to time delegate the powers and duties of such officer to any other officer or other
person whom it may select.
3.5
Resignation
. Any officer may resign at any time by delivering notice to the
corporation. Any such resignation shall take effect at the time the notice is delivered unless the
notice specifies a later effective date. Unless otherwise specified therein, acceptance of such
resignation by the corporation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any contract to which the
officer is a party.
3.6
Removal
. Any officer or agent may be removed by the Board with or without cause.
An officer empowered to appoint another officer or assistant officer also has the power with or
without cause to remove any officer he/she would have the power to appoint whenever in his/her
judgment the best interests of the corporation would be served thereby. The removal of an officer
or agent shall be without prejudice to the contract rights, if any, of the corporation or the
person so removed. Appointment of an officer or agent shall not of itself create contract rights.
3.7
Vacancies
. A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office, or any other cause may be filled by the Board of
Directors for the unexpired portion of the term or for a new term established by the Board.
3.8
Other Officers and Agents
. One or more Vice Presidents and such other officers
and assistant officers as may be deemed necessary or advisable may be appointed by the Board of
Directors or, to the extent provided in Section 3.3.2 above, by the President. Such other officers
and assistant officers shall hold office for such periods, have such authorities, and perform such
duties as are provided in these Bylaws or as may be provided by resolution of the Board. Any
officer may be assigned by the Board any additional title that the Board deems appropriate. The
Board may delegate to any officer or agent the power to appoint any such assistant officers or
agents and to prescribe their respective terms of office, authorities, and duties.
3.9
Compensation
. Compensation, if any, for officers and other agents and employees
of the corporation shall be determined by the Board of Directors, or by the President to the extent
such authority may be delegated to his/her by the Board. No officer shall be prevented from
receiving compensation in such capacity by reason of the fact that he/she is also a director of the
corporation.
3.10
General Standards for Officers
. Officers with discretionary authority shall
discharge their duties under that authority in accordance with the same standards of conduct
applicable to directors as specified in Section 2.1 above (except for subsection (c) thereof).
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ARTICLE IV
CONTRACTS, CHECKS AND DRAFTS
4.1
Contracts
. The Board of Directors may authorize any officer or officers or agent
or agents to enter into any contract or execute and deliver any instrument in the name of and on
behalf of the corporation. Such authority may be general or confined to specific instances.
Subject to the limitations set forth in RCW 23B.08.700 through 23B.08.730 and 23B.19.040, to
the extent applicable:
(a) The corporation may enter into contracts and otherwise transact business as vendor,
purchaser, lender, borrower, or otherwise with its directors and shareholders and with
corporations, associations, firms, and entities in which they are or may be or become interested as
directors, officers, shareholders, members, or otherwise.
(b) Any such contract or transaction shall not be affected or invalidated or give rise to
liability by reason of the director’s or shareholder’s having an interest in the contract or
transaction.
4.2
Checks, Drafts, Etc
. All checks, drafts, and other orders for the payment of
money, notes, and other evidences of indebtedness issued in the name of the corporation shall be
signed by such officer or officers or agent or agents of the corporation and in such manner as may
be determined from time to time by resolution of the Board of Directors.
4.3
Deposits
. All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust companies, or other
depositories as the Treasurer, subject to the direction of the Board of Directors, may select.
ARTICLE V
STOCK
5.1
Issuance of Shares
. No shares of the corporation shall be issued unless
authorized by the Board of Directors, which authorization shall include the maximum number of
shares to be issued, the consideration to be received for each share, and, if the consideration is
in a form other than cash, the determination of the value of the consideration.
5.2
Stock Certificates
.
The shares of the corporation shall be represented by
certificates, provided that the Board of Directors may provide by resolution or resolutions that
some or all of any or all classes or series of the corporation’s stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Every holder of stock of the corporation
represented by certificates shall be entitled to have a certificate signed by, or in the name of
the corporation by the Chairman or vice-chairperson of the Board of Directors, or the President or
vice-president and by the Secretary or an assistant secretary of the corporation representing the
number of shares
registered in certificate form. Any or all of the signatures on the certificate may be by a
facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the corporation with the same
effect as if such person were such officer, transfer agent or registrar at the date of issue. The
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corporation shall not have power to issue a certificate in bearer form.
5.3
Stock Records
. The corporation or its agent shall maintain at the registered
office or principal office of the corporation, or at the office of the transfer agent or registrar
of the corporation, if one be designated by the Board of Directors, a record of its shareholders,
in a form that permits preparation of a list of the names and addresses of all shareholders in
alphabetical order by class of shares showing the number and class of shares held by each. The
person in whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
5.4 [Reserved]
5.5
Transfers
. Stock of the corporation shall be transferable in the manner
prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the
corporation only by the record holder of such stock or by his or her attorney lawfully constituted
in writing and, if such stock is certificated, upon the surrender of the certificate therefor,
which shall be canceled before a new certificate shall be issued.
ARTICLE VI
RECORDS OF CORPORATE MEETINGS
The corporation shall keep, as permanent records, minutes of all meetings of its shareholders
and Board of Directors, a record of all actions taken by the shareholders or Board of Directors
without a meeting, and a record of all actions taken by a committee of the Board of Directors
exercising the authority of the Board of Directors on behalf of the corporation. The corporation
shall keep at its principal office a copy of the minutes of all shareholders’ meetings that have
occurred, and records of all action taken by shareholders without a meeting, within the past three
(3) years. Any person dealing with the corporation may rely upon a copy of any of the records of
the proceedings, resolutions, or votes of the Board or shareholders when certified by the President
or Secretary.
ARTICLE VII
FINANCIAL MATTERS
The corporation shall maintain appropriate accounting records at its principal office and
shall prepare the annual financial statements required by RCW 23B.16.200. Except to the extent
otherwise expressly determined by the Board of Directors or otherwise required by law, the
accounting records of the corporation shall be kept and prepared in accordance with generally
accepted accounting principles applied on a consistent basis from period to period. The fiscal
year of the corporation shall be the calendar year unless otherwise expressly determined by
the Board of Directors.
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ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time authorize, and the corporation may make,
distributions (as defined in RCW 23B.01.400) to its shareholders to the extent permitted by RCW
23B.06.400, subject to any limitation in the Articles of Incorporation. A director who votes for
or assents to a distribution made in violation of RCW 23B.06.400 is personally liable to the
corporation for the amount of the distribution that exceeds that which could have been distributed
without violating RCW 23B.06.400 if it is established that the director did not perform the
director’s duties in compliance with Section 2.1 above.
ARTICLE IX
CORPORATE SEAL
The Board of Directors may, but shall not be required to, adopt a corporate seal for the
corporation in such form and with such inscription as the Board may determine. If such a corporate
seal shall at any time be so adopted, the application of or the failure to apply such seal to any
document or instrument shall have no effect upon the validity or invalidity of such document or
instrument under otherwise applicable principles of law.
ARTICLE X
INDEMNIFICATION
As provided by Section 5.4 of the Articles of Incorporation:
10.1
Definitions
. The capitalized terms in this Article X shall have the meanings set
forth in RCW 23B.08.500.
10.2
Mandatory Indemnification
. The Corporation shall indemnify and hold harmless
each individual who is or was serving as a Director or officer of the Corporation or who, while
serving as a Director or officer of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against any and all Liability incurred with respect to any Proceeding to which the
individual is or is threatened to be made a Party because of such service, and shall make advances
of reasonable Expenses with respect to such Proceeding, to the fullest extent permitted by law,
without regard to the limitations in RCW 23B.08.510 through 23B.08.550; provided that no such
indemnity shall indemnify any Director or officer from or on account of (a) acts or omissions of
the Director or officer finally adjudged to be intentional misconduct or a knowing violation of
law; (b) conduct of the Director or officer finally adjudged to be in violation of RCW 23B.08.310;
or (c) any transaction with respect to which it was finally adjudged that such Director or officer
personally received a benefit in money, property, or services to which the Director or officer
was not legally entitled.
10.3
Insurance
. The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the Corporation or, who, while
a director, officer, employee, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise
-18-
against Liability asserted against or incurred by the individual in that capacity or arising from
the individual’s status as a director, officer, employee, or agent, whether or not the Corporation
would have power to indemnify the individual against such Liability under RCW 23B.08.510 or
23B.08.520.
10.4
Changes in Law
. If, after the effective date of this Article X, the Act is
amended to authorize further indemnification of Directors or officers, then Directors and officers
of the Corporation shall be indemnified to the fullest extent permitted by the Act as so amended.
10.5
Exclusivity; Nature of Rights; Amendment
. To the extent permitted by law, the
rights to indemnification and advance of reasonable expenses conferred in this Article X shall not
be exclusive of any other right which any individual may have or hereafter acquire under any
statute, provision of the Bylaws, agreement, vote of shareholders or disinterested directors, or
otherwise. The right to indemnification conferred in this Article X shall be a contract right upon
which each Director or officer shall be presumed to have relied in determining to serve or to
continue to serve as such. Any amendment to or repeal of this Article X shall not adversely affect
any right or protection of a Director or officer of the Corporation for or with respect to any acts
or omissions of such Director or officer occurring prior to such amendment or repeal.
ARTICLE XI
MISCELLANY
11.1
Communications by Facsimile
. Whenever these Bylaws require notice, consent, or
other communication to be delivered for any purpose, transmission by phone, wire, or wireless
equipment which transmits a facsimile of such communication shall constitute sufficient delivery
for such purpose. Such communication shall be deemed to have been received by or in the possession
of the addressee upon completion of the transmission.
11.2
Inspector of Elections
. Before any annual meeting of shareholders, the Board of
Directors may appoint an inspector of elections to act at the meeting and any adjournment thereof.
If no inspector of elections is so appointed by the Board, then the chairman of the meeting may
appoint an inspector of elections to act at the meeting. If any person appointed as inspector
fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the
request of any shareholder or a shareholder’s proxy shall, appoint a person to fill that vacancy.
Such inspector of elections shall:
(a) determine the number of shares outstanding and the voting power of each, the number of
shares represented at the meeting, the existence of a quorum, and, with the advice of legal counsel
to the corporation, the authenticity, validity, and effect of proxies pursuant to RCW 23B.07.220
and 23B.07.240 and any procedure adopted by the Board of Directors pursuant to RCW 23B.07.230;
(b) receive votes, ballots, or consents;
-19-
(c) hear and determine all challenges and questions in any way arising in connection with the
right to vote;
(d) count and tabulate all votes or consents;
(e) determine the result; and
(f) do any other acts that may be proper to conduct the election or vote with fairness to all
shareholders.
11.3
Rules of Order
. The rules contained in the most recent edition of Robert’s Rules
of Order, Revised, shall govern all meetings of shareholders and directors where those rules are
not inconsistent with the Articles of Incorporation or Bylaws, subject to the following:
(a) The chairman of the meeting shall have absolute authority over matters of procedure, and
there shall be no appeal from the ruling of the chairman. If the chairman in his/her absolute
discretion deems it advisable to dispense with the rules of parliamentary procedure for any meeting
or any part thereof, the chairman shall so state and shall clearly state the rules under which the
meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which prevents continuation of the legitimate business of the
meeting, the chairman may quit the chair and announce the adjournment of the meeting; upon so
doing, the meeting shall be deemed immediately adjourned, subject to being reconvened in accordance
with Section 1.5 or 2.11 of these Bylaws, as the case may be.
(c) The chairman may ask or require that anyone not a bona fide shareholder or proxy leave the
meeting of shareholders.
(d) A resolution or motion at a meeting of shareholders shall be considered for vote only if
proposed by a shareholder or duly authorized proxy and seconded by an individual who is a
shareholder or duly authorized proxy other than the individual who proposed the resolution or
motion.
11.4
Construction
. Within these Bylaws, words of any gender shall be construed to
include any other gender, and words in the singular or plural number shall be construed to include
the plural or singular, respectively, unless the context otherwise requires.
11.5
Severability
. If any provision of these Bylaws or any application thereof shall
be invalid, unenforceable, or contrary to applicable law, the remainder of these Bylaws, and the
application of such provisions to individuals or circumstances other than those as to which it is
held invalid, unenforceable, or contrary to applicable law, shall not be affected thereby.
-20-
ARTICLE XII
AMENDMENT OF BYLAWS
Subject to the requirements of RCW 23B.10.210 relating to supermajority quorum provisions for
the Board of Directors, the Bylaws of the corporation may be amended or repealed, or new Bylaws may
be adopted, by: (a) the shareholders, even though the Bylaws may also be amended or repealed, or
new Bylaws may also be adopted, by the Board of Directors; or (b) subject to the power of the
shareholders of the corporation to change or repeal the Bylaws, the Board of Directors, unless such
power is reserved, by the Articles of Incorporation or by law, exclusively to the shareholders in
whole or in part or unless the shareholders, in amending or repealing a particular bylaw, provide
expressly that the Board of Directors may not amend or repeal that bylaw.
ARTICLE XIII
NOTICE BY ELECTRONIC TRANSMISSION
13.1
Notice by Electronic Transmission
. Without limiting the manner by which notice
otherwise may be given effectively to shareholders and directors of the corporation pursuant to the
Washington Business Corporation Act, the Articles of Incorporation or these Bylaws, any notice to
shareholders or directors given by the corporation under the Washington Business Corporation Act,
the Articles of Incorporation or these Bylaws shall be effective if provided in an electronic
transmission and electronically transmitted to a director or shareholder who has consented, in the
form of a record, to receive electronically transmitted notices and designated in the consent the
address, location, or system to which such notices may be electronically transmitted. Any such
consent shall be revocable by the shareholder or director by delivery of a revocation to the
corporation in the form of a record. In addition, any such consent shall be deemed revoked if:
(a) the corporation is unable to electronically transmit two consecutive notices given by the
corporation in accordance with the consent; and
(b) such inability becomes known to the Secretary of the corporation, the transfer agent, or
any other person responsible for giving the notice.
However, the inadvertent failure of the corporation to treat such inability as a revocation
shall not invalidate any meeting or other action.
Any notice given by electronic transmission, if in comprehensible form, shall be deemed given:
(a) if electronically transmitted to an address, location or system designated by the
shareholder or director for that purpose; or
(b) if posted on an electronic network and a separate record of the posting has been delivered
to the shareholder or director together with comprehensible instructions regarding how to obtain
access to the posting on the electronic network.
13.2
Definitions
.
-21-
(a) “Electronic transmission” means an electronic communication (i) not directly involving the
physical transfer of a record in a tangible medium and (ii) that may be retained, retrieved and
reviewed by the sender and the recipient thereof, and that may be directly reproduced in a tangible
medium by such a sender and recipient.
(b) “Electronically transmitted” means the initiation of an electronic transmission.
(c) “Record” means information inscribed on a tangible medium or contained in an electronic
transmission.
(d) “Tangible medium” means a writing, copy of a writing, or facsimile, or a physical
reproduction, each on paper or on other tangible material.
ARTICLE XIV
AUTHENTICATION
The foregoing Amended and Restated Bylaws were approved and duly adopted by the Board of
Directors of RealNetworks, Inc. on the 23rd day of July, 2010.
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/s/ Tracy D. Daw
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Tracy D. Daw, Secretary
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-22-
Exhibit 99.1
REALNETWORKS ANNOUNCES SECOND QUARTER 2010 RESULTS
Dominique Trempont Named to Board of Directors
Matt Hulett Named to Head Games Business
SEATTLE — July 29, 2010
— Digital entertainment services company RealNetworks, Inc. (Nasdaq:
RNWK) today announced results for the second quarter ended June 30, 2010.
Quarterly Highlights:
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•
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Revenue of $88.9 million
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•
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Net loss of $(25.9) million or $(0.19) per share
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•
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Adjusted EBITDA of $604,000
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•
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Cash and short term investments of $313.2 million as of June 30, 2010
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“We made strong progress transforming RealNetworks during the second quarter,” said Bob Kimball,
President and CEO of RealNetworks. “Our restructuring efforts are ahead of plan. In the first six
months of the year, we cut more than $30 million in annualized operating expenses from our ongoing
businesses. Now it is time to focus on growing the business by improving our sales and marketing
of existing products and building a strong pipeline of innovative products for the long term.”
Second Quarter Results
Beginning in the second quarter of 2010, revenue and other operating results of Real’s music
business from its Rhapsody joint venture are not consolidated in Real’s financial statements as a
result of the restructuring of Rhapsody completed on March 31, 2010.
For the second quarter of 2010, revenue from Real’s Technology Products and Solutions, Media
Software and Services, and Games businesses was $88.9 million compared with $95.3 million for the
second quarter of 2009. Total revenue in the second quarter of 2009 was $135.7 million, which
included revenue from Real’s music business of $40.5 million. Foreign currency exchange rate
fluctuations positively affected 2010 second quarter revenue by approximately $800,000 compared
with the year-ago quarter. Revenue trends in each of Real’s businesses in the second quarter of
2010 compared with the year-earlier quarter were: a 2% increase in Media Software and Services
revenue to $19.6 million, a 5% decrease in Games revenue to $28.1 million and an 11% decrease in
Technology Products and Solutions revenue to $41.1 million.
Net loss for the second quarter of 2010 was $(25.9) million, or $(0.19) per share, compared with a
net loss of $(188.3) million, or $(1.40) per share, in the second quarter of 2009. Net loss for
the second quarter of 2010 included restructuring charges of $11.9 million primarily for employee
severance costs and loss on excess office facilities, while the net loss in the year-ago quarter
included goodwill impairment charges of $175.6 million. Adjusted EBITDA for the second quarter of
2010 was $604,000, compared with $4.4 million for the second quarter of 2009. A reconciliation of
GAAP net loss to adjusted EBITDA is provided in the financial tables that accompany this release.
As of June 30, 2010, Real had $313.2 million in unrestricted cash, cash equivalents and short-term
investments compared with $335.2 million at March 31, 2010. In addition, Real had $51.8 million in
restricted cash and equity investments, including an approximate 47.5% equity interest in its
Rhapsody joint venture. A majority of the $22.0 million decrease in cash, cash equivalents and
short-term investments from March 31, 2010, was related to working capital changes, including a
reduction in accrued liabilities and payables, primarily royalties. During the quarter, total
liabilities declined by $22.1 million.
Gross margin in the second quarter rose to 67%, compared with 59% for the second quarter a year
earlier, primarily due to the deconsolidation of the lower-margin music business. Income tax
expense was $281,000 compared with $1.2 million in the year-earlier period. Interest income in the
second quarter of 2010 was $551,000 compared with $754,000 in the year-earlier period.
Reorganization
Towards the end of the second quarter of 2010, RealNetworks announced a significant reorganization
of its business and operational structure. The reorganization is a key milestone in Real’s
execution of its previously announced strategy to simplify, restructure and grow.
As part of the second-quarter reorganization, the company eliminated about 85 positions, including
about 25% of its executive ranks. The new organizational structure is designed to reduce the spans
and layers of management to create greater efficiency, teamwork and accountability.
In addition, Real today announced that it has named Matt Hulett as the head of the Games business,
replacing John Barbour. Mr. Hulett, formerly Chief Revenue Officer of Games, has more than 20
years of experience in digital games and other online businesses, including executive roles at
Expedia and online games pioneer Shockwave.com. “Given the urgent need to pivot our Games business
to social and online games, we think it is critical to have a leader based here in Seattle,” said
Mr. Kimball. “Matt has the right combination of leadership skills, online business experience and
support from the team to refocus our Games business on the growth markets, including social games.”
During the second quarter, Real also reduced its use of office space in Europe and its Seattle
headquarters. As a result of the reorganization and reduction in office space, the company
recorded restructuring charges of approximately $11.9 million for the quarter. Of these charges,
approximately $4.8 million is primarily related to the reduction in force and approximately $7.1
million is related to the loss on excess office facilities.
Beginning with the third quarter, Real consolidated its Technology Products and Solutions and Media
Software and Services business units and organized them into functional teams that represent
product development, sales and marketing, and service delivery. Therefore, Real’s third-quarter
financial results will reflect the new corporate reorganization with the following reporting
segments: (1)
Core products
, which will include existing and evolving SaaS services of
ringback tones, music on demand, and intercarrier messaging; professional services and systems
integration; Helix software; and SuperPass; (2)
Emerging products
, which will include
RealPlayer and new products and services that will be introduced over time for consumers or
enterprise customers; and (3)
Games
. We will present Music results on a historical basis
only.
Additionally,
Real is changing how it allocates shared corporate costs. Historically, common
corporate general and administrative costs, including facilities, were allocated to each business
segment. In the future, these costs will be shown in the aggregate and not allocated to segments.
Direct business unit costs such as R&D and marketing will continue to be reflected in the business
unit results. The changes will ensure that business unit results will be directly attributable to
that unit’s specific performance and that shared costs will be centrally managed to ensure focus
and accountability on the overall corporate cost structure. Starting with the third-quarter
earnings release, Real will report historical results that reflect this new presentation to provide
comparability across quarters. In advance of Real’s third quarter earnings release, the company
expects to file with the Securities and Exchange Commission a current report on Form 8-K with a
description of the new segments and historical results for these new segments.
Business Outlook
For the third quarter of 2010, Real expects overall revenue to be slightly lower sequentially,
primarily due to softness in Games, and to decline year-over-year compared with total revenue for
the third quarter of 2009, excluding music. Real expects adjusted EBITDA for the third quarter of
2010 to increase slightly sequentially and to decline year-over-year.
Approximately 35% of Real’s revenue is denominated in currencies other than the U.S. dollar, most
notably the euro and Korean won. Real expects reported revenues in future periods to be affected by
foreign currency trends.
The foregoing forward-looking statements reflect Real’s expectations as of July 29, 2010. It is
not Real’s general practice to update these forward-looking statements until its next quarterly
results announcement.
Dominique Trempont joins RealNetworks Board of Directors
RealNetworks also announced that it has named Dominique Trempont, a former CEO and an executive
with extensive public-company board experience, to its Board of Directors effective July 23. The
addition brings the board composition to eight members, including six independent directors.
“We are excited to have Dominique’s extensive experience with software, Internet, mobile
applications and SaaS companies to help broaden our board’s understanding of these industries and
trends,” said Kalpana Raina, chairperson of Real’s Nominating and Corporate Governance Committee.
“His background in both finance and executive leadership makes him especially valuable as
RealNetworks has embarked on a transformation that involves major strategic and operational
decisions.”
“I am pleased to be joining the RealNetworks board at this very important time in the company’s
history,” said Mr. Trempont. “This opportunity allows me to bring my experience in many kinds of
organizations — from start-ups to Fortune 500 companies — to assist in the company’s strategic
transformation.”
Mr. Trempont, 56, currently serves on the boards of Finisar Corp. and Energy Recovery, Inc. and
on24 (SaaS). He also was a board member of 3Com Corp. prior to its acquisition by Hewlett Packard
earlier this year. Over the past 25 years, he has been CEO-in-Residence at Battery Ventures, a
venture capital firm; chairman, president and CEO of Kanisa, Inc., a software company (SaaS); CEO
of Gemplus Corp., a smart card application company; CFO and head of operations at NeXT Software;
and a senior executive at Raychem Corp.
Mr. Trempont earned an undergraduate degree in Economics from College St. Louis (Belgium), a B.A.
with high honors in Business Administration and Computer Sciences (LSM) from the University of
Louvain (Belgium) and a master’s degree in Business Administration from INSEAD (France/Singapore).
Webcast and Conference Call Information
The company will host an audio Webcast conference call to review results and discuss the company’s
operations for the second quarter at 5:00 p.m. ET on July 29. The Webcast will be available at:
http://investor.realnetworks.com
Webcast participants will need RealPlayer
®
to hear the webcast, which can be downloaded at
www.real.com.
The on-demand Webcast will be available beginning approximately two hours following the conclusion
of the live Webcast.
Conference Call Details
5:00 p.m. (Eastern) / 2:00 p.m. (Pacific)
Dial in:
800-857-5305 Domestic
773-681-5857 International
Passcode: Second Quarter Earnings
Leader: Bob Kimball
Telephonic replay will be available until 8:00 p.m. (Eastern), Aug. 12, 2010.
Replay dial in:
800-884-1527 Domestic
203-369-3842 International
RNWK-F
For More Information Contact
Press:
Bill Hankes, (206) 892-6614, bhankes@real.com
Financial:
Marj Charlier, (206) 892-6718, mcharlier@real.com
About RealNetworks
RealNetworks, Inc. delivers digital entertainment services to consumers via PC and mobile phone.
Real
®
created the streaming media category in 1995 and continues to offer pioneering products and
services, including: RealPlayer
®
, the first mainstream media player to enable downloading,
recording, editing and sharing of digital video; GameHouse
®
, one of the largest casual games
services on the Internet; and a variety of mobile entertainment services, such as
ringback tones, music and video, offered to consumers through leading wireless carriers around the
world. RealNetworks’ corporate information is located at http://investor.realnetworks.com.
About Non-GAAP Financial Measures
To supplement RealNetworks’ condensed consolidated financial statements presented in accordance
with GAAP in this press release, the company also discloses certain non-GAAP financial measures,
including adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue and
adjusted operating expenses, which management believes provide investors with useful information.
In the financial tables of our earnings press release, RealNetworks has included reconciliations of
GAAP net income (loss) attributable to common shareholders to adjusted EBITDA and to adjusted
EBITDA by reporting segment; GAAP cost of revenue to adjusted cost of revenue; and GAAP operating
expenses to adjusted operating expenses for the relevant periods.
The rationale for management’s use of non-GAAP measures is included in the supplementary materials
presented with the first quarter earnings materials. Please refer to Exhibit 99.2 (“Information
Regarding Non-GAAP Financial Measures”) to the company’s report on Form 8-K, which is being
submitted today to the SEC.
Forward-Looking Statements
: This press release contains forward-looking statements that involve
risks and uncertainties, including statements relating to Real’s current expectations for future
revenue, operating expenses and adjusted EBITDA, changes in reporting financial results and
reporting segments in future periods, the impact of foreign currency rates in future periods and
plans to transform the Company as well as to realize future benefits from those plans. All
statements contained in this press release that do not relate to matters of historical fact should
be considered forward-looking statements. Actual results may differ materially from the results
predicted. Factors that could cause actual results to differ from the results predicted include:
fluctuations in foreign currencies; risks associated with the ability of Real to realize financial
benefits from the restructuring of Rhapsody; Real’s ability to realize operating efficiencies,
growth and other benefits from the implementation of its strategic initiatives; the emergence of
new entrants and competition in the market for digital media products and services; other
competitive risks, including the growth of competing technologies, products and services; the
potential outcomes and effects of claims and legal proceedings on Real’s business, prospects,
financial condition or results of operations; risks associated with key customer or strategic
relationships, business acquisitions and the introduction of new products and services; changes in
consumer and advertising spending in response to disruptions in the global financial markets; and
changes in Real’s GAAP tax rate. More information about potential risk factors that could affect
RealNetworks’ business and financial results is included in RealNetworks’ annual report on Form
10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other
reports and documents filed by RealNetworks from time to time with the Securities and Exchange
Commission. The preparation of RealNetworks’ financial statements and forward-looking financial
guidance requires the company to make estimates and assumptions that affect the reported amount of
assets and liabilities and the reported amounts of revenues and expenses during the reported
period. Actual results may differ materially from these estimates under
different assumptions or conditions. The company assumes no obligation to update any
forward-looking statements or information, which are in effect as of their respective dates.
RealNetworks, RealPlayer and GameHouse are trademarks or registered trademarks of RealNetworks,
Inc. or its subsidiaries. All other companies or products listed herein are trademarks or
registered trademarks of their respective owners.
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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Quarters Ended
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Six Months Ended
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June 30,
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June 30,
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2010
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2009
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2010
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2009
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(in thousands, except per share data)
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Net revenue
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$
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88,884
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$
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135,725
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$
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217,484
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$
|
276,498
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Cost of revenue
|
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29,149
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|
55,614
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|
78,308
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111,635
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Gross profit
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59,735
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|
80,111
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139,176
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164,863
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Operating expenses:
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Research and development
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27,583
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28,923
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62,258
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57,482
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Sales and marketing
|
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27,382
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42,273
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65,209
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85,958
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Advertising with related party (A)
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—
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6,865
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1,065
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14,288
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General and administrative
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14,590
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19,338
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29,511
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42,169
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Impairment of goodwill
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—
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175,583
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—
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175,583
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Restructuring and other charges
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4,792
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—
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10,407
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794
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Loss on excess office facilities
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7,082
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—
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7,082
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—
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Total operating expenses
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81,429
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272,982
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175,532
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376,274
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Operating loss
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(21,694
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)
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(192,871
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)
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(36,356
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)
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(211,411
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)
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|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
551
|
|
|
|
754
|
|
|
|
931
|
|
|
|
1,937
|
|
|
Equity in net loss of Rhapsody and other equity method investments (B)
|
|
|
(5,427
|
)
|
|
|
(269
|
)
|
|
|
(5,427
|
)
|
|
|
(924
|
)
|
|
Gain (loss) on sale of equity investments, net
|
|
|
(50
|
)
|
|
|
68
|
|
|
|
(50
|
)
|
|
|
205
|
|
|
Gain on deconsolidation of Rhapsody
|
|
|
—
|
|
|
|
—
|
|
|
|
10,929
|
|
|
|
—
|
|
|
Other income (expense), net
|
|
|
994
|
|
|
|
(449
|
)
|
|
|
1,093
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
(3,932
|
)
|
|
|
104
|
|
|
|
7,476
|
|
|
|
1,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(25,626
|
)
|
|
|
(192,767
|
)
|
|
|
(28,880
|
)
|
|
|
(209,787
|
)
|
|
Income tax benefit (expense)
|
|
|
(281
|
)
|
|
|
(1,210
|
)
|
|
|
3,291
|
|
|
|
(2,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(25,907
|
)
|
|
|
(193,977
|
)
|
|
|
(25,589
|
)
|
|
|
(212,546
|
)
|
|
Net loss attributable to the noncontrolling interest in Rhapsody (C)
|
|
|
—
|
|
|
|
5,648
|
|
|
|
2,910
|
|
|
|
12,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(25,907
|
)
|
|
$
|
(188,329
|
)
|
|
$
|
(22,679
|
)
|
|
$
|
(200,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share available to common shareholders
|
|
$
|
(0.19
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(1.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share available to common shareholders
|
|
$
|
(0.19
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(1.51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic net income (loss) per share available to common shareholders
|
|
|
135,277
|
|
|
|
134,420
|
|
|
|
135,209
|
|
|
|
134,394
|
|
|
Shares used to compute diluted net income (loss) per share available to common shareholders
|
|
|
135,277
|
|
|
|
134,420
|
|
|
|
135,209
|
|
|
|
134,394
|
|
|
|
|
|
|
(A)
|
|
Consists of advertising purchased by Rhapsody from MTV Networks (MTVN). MTVN had a 49%
ownership interest in Rhapsody prior to the restructuring transactions that occurred on March 31,
2010. See note (B) for more details regarding the restructuring and the related deconsolidation.
|
|
|
|
(B)
|
|
On March 31, 2010, we completed the restructuring of Rhapsody which resulted in our ownership
decreasing to approximately 47.5% of the outstanding equity in Rhapsody and no longer having
operating control. Since the restructuring was completed on the last day of the quarter ended
March 31, 2010, our statement of operations for the first quarter includes results from Rhapsody’s
operations. Beginning with the quarter ended June 30, 2010, Rhapsody’s revenue or other operating
results are no longer consolidated within our financial statements and we are not recording any
operating or other financial results for our Music segment. We now report our share of Rhapsody’s
income or losses as “Equity in net loss of Rhapsody and other equity method investments” in “Other
income.”
|
|
|
|
(C)
|
|
Noncontrolling interest in Rhapsody reflects MTVN’s 49% ownership share in the losses of
Rhapsody prior to the restructuring transactions that occurred on March 31, 2010.
|
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in thousands)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
156,155
|
|
|
$
|
277,030
|
|
|
Short-term investments
|
|
|
157,065
|
|
|
|
107,870
|
|
|
Trade accounts receivable, net
|
|
|
43,805
|
|
|
|
60,937
|
|
|
Deferred costs, current portion
|
|
|
4,541
|
|
|
|
5,192
|
|
|
Prepaid expenses and other current assets
|
|
|
30,001
|
|
|
|
30,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
391,567
|
|
|
|
481,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment, software, and leasehold improvements, at cost:
|
|
|
|
|
|
|
|
|
|
Equipment and software
|
|
|
142,978
|
|
|
|
151,951
|
|
|
Leasehold improvements
|
|
|
25,308
|
|
|
|
31,041
|
|
|
|
|
|
|
|
|
|
|
Total equipment, software, and leasehold improvements
|
|
|
168,286
|
|
|
|
182,992
|
|
|
Less accumulated depreciation and amortization
|
|
|
121,616
|
|
|
|
125,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net equipment, software, and leasehold improvements
|
|
|
46,670
|
|
|
|
57,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash equivalents and investments
|
|
|
10,000
|
|
|
|
13,700
|
|
|
Equity investments
|
|
|
41,810
|
|
|
|
19,553
|
|
|
Other assets
|
|
|
3,746
|
|
|
|
4,030
|
|
|
Deferred costs, non-current portion
|
|
|
13,516
|
|
|
|
10,182
|
|
|
Deferred tax assets, net, non-current portion
|
|
|
8,822
|
|
|
|
10,001
|
|
|
Other intangible assets, net
|
|
|
7,804
|
|
|
|
10,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
523,935
|
|
|
$
|
606,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
27,662
|
|
|
$
|
32,703
|
|
|
Accrued and other liabilities
|
|
|
88,521
|
|
|
|
124,934
|
|
|
Deferred revenue, current portion
|
|
|
20,740
|
|
|
|
31,374
|
|
|
Related party payable — Rhapsody (A)
|
|
|
459
|
|
|
|
—
|
|
|
Related party payable — MTVN (B)
|
|
|
—
|
|
|
|
11,216
|
|
|
Accrued loss on excess office facilities, current portion
|
|
|
762
|
|
|
|
3,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
138,144
|
|
|
|
203,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue, non-current portion
|
|
|
879
|
|
|
|
1,933
|
|
|
Accrued loss on excess office facilities, non-current portion
|
|
|
4,047
|
|
|
|
—
|
|
|
Deferred rent
|
|
|
3,768
|
|
|
|
4,464
|
|
|
Deferred tax liabilities, net, non-current portion
|
|
|
719
|
|
|
|
961
|
|
|
Other long-term liabilities
|
|
|
12,293
|
|
|
|
13,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
159,850
|
|
|
|
223,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in Rhapsody (C)
|
|
|
—
|
|
|
|
7,253
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
364,085
|
|
|
|
375,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
523,935
|
|
|
$
|
606,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
Related party payable reflects amounts owed to Rhapsody International, formed on March 31,
2010.
|
|
|
|
(B)
|
|
Related party payable reflects amounts owed by Rhapsody to MTVN in periods prior to the
restructuring and related deconsolidation that was completed on March 31, 2010.
|
|
|
|
(C)
|
|
Noncontrolling interest in Rhapsody reflects MTVN’s 49% ownership interest in the net assets of
Rhapsody at December 31, 2009. Due to the restructuring transactions which occurred on March 31,
2010, Rhapsody’s balance sheet is no longer included within RealNetworks consolidated financial
statements.
|
RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(25,589
|
)
|
|
$
|
(212,546
|
)
|
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13,973
|
|
|
|
15,522
|
|
|
Stock-based compensation
|
|
|
6,692
|
|
|
|
10,818
|
|
|
Gain on disposal of equipment, software, and leasehold improvements
|
|
|
(3
|
)
|
|
|
(34
|
)
|
|
Equity in net loss of Rhapsody and other investments
|
|
|
5,427
|
|
|
|
924
|
|
|
Loss (gain) on sale of equity investment, net
|
|
|
50
|
|
|
|
(205
|
)
|
|
Gain on deconsolidation of Rhapsody
|
|
|
(10,929
|
)
|
|
|
—
|
|
|
Excess tax benefit from stock option exercises
|
|
|
(18
|
)
|
|
|
(9
|
)
|
|
Impairment of goodwill
|
|
|
—
|
|
|
|
175,583
|
|
|
Accrued restructuring and other charges
|
|
|
3,581
|
|
|
|
(3,675
|
)
|
|
Accrued loss on excess office facilities
|
|
|
6,470
|
|
|
|
—
|
|
|
Deferred income taxes, net
|
|
|
(1,609
|
)
|
|
|
(682
|
)
|
|
Other
|
|
|
22
|
|
|
|
24
|
|
|
Net change in certain operating assets and liabilities, net of acquisitions and disposals
|
|
|
(54,404
|
)
|
|
|
(3,961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(56,337
|
)
|
|
|
(18,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases of equipment, software, and leasehold improvements
|
|
|
(9,507
|
)
|
|
|
(7,608
|
)
|
|
Purchases of short-term investments
|
|
|
(65,754
|
)
|
|
|
(66,192
|
)
|
|
Proceeds from sales and maturities of short-term investments
|
|
|
16,559
|
|
|
|
38,692
|
|
|
Proceeds from the sales of equity investments
|
|
|
—
|
|
|
|
205
|
|
|
Purchases of equity investments
|
|
|
—
|
|
|
|
(2,000
|
)
|
|
Payment of acquisition costs, net of cash acquired
|
|
|
—
|
|
|
|
(3,154
|
)
|
|
Payment in connection with the restructuring of Rhapsody
|
|
|
(18,000
|
)
|
|
|
—
|
|
|
Repayment of temporary funding on deconsolidation of Rhapsody
|
|
|
5,869
|
|
|
|
—
|
|
|
Decrease in restricted cash equivalents and investments, net
|
|
|
3,700
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(67,133
|
)
|
|
|
(39,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Net proceeds from sales of common stock under employee stock purchase
plan and exercise of stock options
|
|
|
1,272
|
|
|
|
819
|
|
|
Payments received on MTVN note
|
|
|
1,213
|
|
|
|
14,537
|
|
|
Capital contribution to Rhapsody from MTVN
|
|
|
—
|
|
|
|
5,000
|
|
|
Excess tax benefit from stock option exercises
|
|
|
18
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
2,503
|
|
|
|
20,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
92
|
|
|
|
2,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(120,875
|
)
|
|
|
(35,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
277,030
|
|
|
|
232,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
156,155
|
|
|
$
|
197,492
|
|
|
|
|
|
|
|
|
|
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
Q2
|
|
|
Q1
|
|
|
Q4
|
|
|
Q3
|
|
|
Q2
|
|
|
Q1
|
|
|
|
|
(in thousands)
|
|
|
Net Revenue by Line of Business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology products and solutions (A)
|
|
$
|
41,122
|
|
|
$
|
41,892
|
|
|
$
|
54,269
|
|
|
$
|
47,428
|
|
|
$
|
46,208
|
|
|
$
|
43,579
|
|
|
Media software and services (B)
|
|
|
19,617
|
|
|
|
20,739
|
|
|
|
22,899
|
|
|
|
24,580
|
|
|
|
19,291
|
|
|
|
20,318
|
|
|
Games (C)
|
|
|
28,145
|
|
|
|
30,236
|
|
|
|
30,736
|
|
|
|
29,491
|
|
|
|
29,774
|
|
|
|
32,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal net revenue
|
|
|
88,884
|
|
|
|
92,867
|
|
|
|
107,904
|
|
|
|
101,499
|
|
|
|
95,273
|
|
|
|
96,720
|
|
|
Music (D)
|
|
|
—
|
|
|
|
35,733
|
|
|
|
37,598
|
|
|
|
38,765
|
|
|
|
40,452
|
|
|
|
44,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
88,884
|
|
|
$
|
128,600
|
|
|
$
|
145,502
|
|
|
$
|
140,264
|
|
|
$
|
135,725
|
|
|
$
|
140,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Products and Services: (D)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions (E)
|
|
$
|
22,000
|
|
|
$
|
49,805
|
|
|
$
|
50,492
|
|
|
$
|
52,401
|
|
|
$
|
54,446
|
|
|
$
|
59,052
|
|
|
Media properties (F)
|
|
|
13,921
|
|
|
|
17,168
|
|
|
|
20,327
|
|
|
|
21,001
|
|
|
|
14,753
|
|
|
|
15,536
|
|
|
E-commerce and other (G)
|
|
|
11,841
|
|
|
|
19,735
|
|
|
|
20,414
|
|
|
|
19,434
|
|
|
|
20,318
|
|
|
|
22,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer products and services revenue
|
|
$
|
47,762
|
|
|
$
|
86,708
|
|
|
$
|
91,233
|
|
|
$
|
92,836
|
|
|
$
|
89,517
|
|
|
$
|
97,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue by Geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
48,351
|
|
|
$
|
84,550
|
|
|
$
|
91,175
|
|
|
$
|
95,758
|
|
|
$
|
90,685
|
|
|
$
|
96,666
|
|
|
Rest of world
|
|
|
40,533
|
|
|
|
44,050
|
|
|
|
54,327
|
|
|
|
44,506
|
|
|
|
45,040
|
|
|
|
44,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
$
|
88,884
|
|
|
$
|
128,600
|
|
|
$
|
145,502
|
|
|
$
|
140,264
|
|
|
$
|
135,725
|
|
|
$
|
140,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers (presented as greater than):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer subscribers(H)
|
|
|
600
|
|
|
|
575
|
|
|
|
625
|
|
|
|
625
|
|
|
|
550
|
|
|
|
575
|
|
|
Technology products and solutions application
services subscribers (I)
|
|
|
37,600
|
|
|
|
37,950
|
|
|
|
38,850
|
|
|
|
37,500
|
|
|
|
36,300
|
|
|
|
33,850
|
|
|
|
|
|
|
(A)
|
|
The Technology Products and Solutions (TPS) segment includes revenue and related costs from:
sales of ringback tones, music-on-demand, video-on-demand, messaging, and information services;
sales of media delivery system software, including Helix system software and related authoring and
publishing tools, both directly to customers and indirectly through original equipment manufacturer
channels; support and maintenance services sold to customers who purchase software products;
broadcast hosting services; and consulting and professional services that are offered to customers.
|
|
|
|
(B)
|
|
The Media Software and Services (MSS) segment primarily includes revenue and related costs
from: the SuperPass premium subscription service; RealPlayer Plus and related products; sales and
distribution of third-party software products; and all advertising other than that related directly
to our Games and former Music businesses. We repurchased RadioPass from Rhapsody as part of the
restructuring that occurred on March 31, 2010. We have included RadioPass subscribers beginning in
the quarter ended June 30, 2010, as a result.
|
|
|
|
(C)
|
|
The Games segment primarily includes revenue and related costs from: the sale of individual
games on our websites RealArcade.com, GameHouse.com and Zylom.com; the sales of games subscription
services; advertising through our games websites; the sale of games through the syndication on
partner sites, and sales of games through wireless carriers.
|
|
|
|
(D)
|
|
On March 31, 2010, we completed the restructuring of Rhapsody which resulted in our ownership
decreasing to approximately 47.5% of the outstanding equity in Rhapsody and no longer having
operating control. Beginning with the quarter ended June 30, 2010, Rhapsody’s revenue or other
operating results are no longer consolidated within our financial statements and we are not
recording any operating or other financial results for our Music segment. We now report our share
of Rhapsody’s income or losses as “Equity in net loss of Rhapsody and other equity-method
investments” in “Other income.” Prior to March 31, 2010, the Music segment primarily included
revenue and related costs from: Rhapsody’s Rhapsody and RadioPass subscription services; sales of
digital music content through the Rhapsody service and the RealPlayer music store; and advertising
from music websites.
|
|
|
|
(E)
|
|
Revenue is derived from consumer digital media subscription services including: SuperPass,
RadioPass, FunPass, GamePass and Rhapsody. Revenue from Rhapsody no longer appears within our
results in periods after March 31, 2010.
|
|
|
|
(F)
|
|
Revenue is derived from advertising and through the distribution of third party products.
Revenue from Rhapsody no longer appears within our results in periods after March 31, 2010.
|
|
|
|
(G)
|
|
Revenue is derived from RealPlayer Plus and related products, sales of third party software
products, and content such as games and music. Revenue from Rhapsody no longer appears within our
results in periods after March 31, 2010.
|
|
|
|
(H)
|
|
Consumer subscribers primarily include: SuperPass, and GamePass. We repurchased RadioPass from
Rhapsody as part of the restructuring that occurred on March 31, 2010. We have included RadioPass
subscribers beginning in the quarter ended June 30, 2010, as a result.
|
|
|
|
(I)
|
|
Technology products and solutions application service subscribers include: ringback tones,
music-on-demand and video-on-demand.
|
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
Reconciliation of GAAP net income (loss) attributable to common shareholders to adjusted EBITDA is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
(in thousands)
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(25,907
|
)
|
|
$
|
3,228
|
|
|
$
|
(17,819
|
)
|
|
$
|
1,520
|
|
|
$
|
(188,329
|
)
|
|
$
|
(12,136
|
)
|
|
Interest income, net
|
|
|
(551
|
)
|
|
|
(380
|
)
|
|
|
(779
|
)
|
|
|
(1,253
|
)
|
|
|
(754
|
)
|
|
|
(1,183
|
)
|
|
Income taxes
|
|
|
281
|
|
|
|
(3,572
|
)
|
|
|
(124
|
)
|
|
|
686
|
|
|
|
1,210
|
|
|
|
1,549
|
|
|
Depreciation and amortization (net of noncontrolling interest effect)
|
|
|
5,492
|
|
|
|
6,005
|
|
|
|
6,355
|
|
|
|
5,432
|
|
|
|
5,815
|
|
|
|
5,726
|
|
|
Acquisitions related intangible asset amortization (net of noncontrolling interest effect)
|
|
|
1,167
|
|
|
|
1,239
|
|
|
|
1,797
|
|
|
|
1,784
|
|
|
|
1,649
|
|
|
|
1,768
|
|
|
Stock-based compensation
|
|
|
2,771
|
|
|
|
3,921
|
|
|
|
5,915
|
|
|
|
4,727
|
|
|
|
5,596
|
|
|
|
5,222
|
|
|
Pro forma gain on sale of interest in Rhapsody
|
|
|
—
|
|
|
|
598
|
|
|
|
5,577
|
|
|
|
3,839
|
|
|
|
3,444
|
|
|
|
4,010
|
|
|
Gain on deconsolidation of Rhapsody
|
|
|
—
|
|
|
|
(10,929
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Equity in net loss of Rhapsody and other equity investments
|
|
|
5,427
|
|
|
|
—
|
|
|
|
116
|
|
|
|
273
|
|
|
|
269
|
|
|
|
655
|
|
|
Loss (gain) on sale of equity investments, net
|
|
|
50
|
|
|
|
—
|
|
|
|
121
|
|
|
|
(604
|
)
|
|
|
(68
|
)
|
|
|
(137
|
)
|
|
Impairment of equity investments
|
|
|
—
|
|
|
|
—
|
|
|
|
5,020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Impairment of goodwill and long-lived assets
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
175,583
|
|
|
|
—
|
|
|
Restructuring and other charges
|
|
|
4,792
|
|
|
|
5,615
|
|
|
|
2,346
|
|
|
|
877
|
|
|
|
—
|
|
|
|
794
|
|
|
Loss on excess office facilities
|
|
|
7,082
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
604
|
|
|
$
|
5,725
|
|
|
$
|
8,525
|
|
|
$
|
17,281
|
|
|
$
|
4,415
|
|
|
$
|
6,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2010
|
|
|
|
|
TPS
(A)
|
|
|
MSS
(B)
|
|
|
Games
(C)
|
|
|
Music
(D)
|
|
|
Other
|
|
|
Grand Total
|
|
|
|
|
(in thousands)
|
|
|
Net revenue
|
|
$
|
41,122
|
|
|
$
|
19,617
|
|
|
$
|
28,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
17,526
|
|
|
|
4,243
|
|
|
|
7,380
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
23,596
|
|
|
|
15,374
|
|
|
|
20,765
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
57
|
%
|
|
|
78
|
%
|
|
|
74
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on excess office facilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,082
|
|
|
|
7,082
|
|
|
Restructuring and other charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,792
|
|
|
|
4,792
|
|
|
Other operating expenses
|
|
|
25,663
|
|
|
|
16,132
|
|
|
|
27,784
|
|
|
|
—
|
|
|
|
(24
|
)
|
|
|
69,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,663
|
|
|
|
16,132
|
|
|
|
27,784
|
|
|
|
—
|
|
|
|
11,850
|
|
|
|
81,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(2,067
|
)
|
|
|
(758
|
)
|
|
|
(7,019
|
)
|
|
|
—
|
|
|
|
(11,850
|
)
|
|
|
(21,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
551
|
|
|
|
551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss of Rhapsody and other equity method investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,427
|
)
|
|
|
(5,427
|
)
|
|
Gain (loss) on sale of equity investments, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50
|
)
|
|
|
(50
|
)
|
|
Gain on deconsolidation of Rhapsody
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Other income (expenses), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
994
|
|
|
|
994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,932
|
)
|
|
|
(3,932
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(2,067
|
)
|
|
|
(758
|
)
|
|
|
(7,019
|
)
|
|
|
—
|
|
|
|
(15,782
|
)
|
|
|
(25,626
|
)
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(281
|
)
|
|
|
(281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(2,067
|
)
|
|
|
(758
|
)
|
|
|
(7,019
|
)
|
|
|
—
|
|
|
|
(16,063
|
)
|
|
|
(25,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interest in Rhapsody
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(2,067
|
)
|
|
$
|
(758
|
)
|
|
$
|
(7,019
|
)
|
|
$
|
—
|
|
|
$
|
(16,063
|
)
|
|
$
|
(25,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment GAAP net income (loss) attributable
to common shareholders to segment adjusted EBITDA is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(2,067
|
)
|
|
$
|
(758
|
)
|
|
$
|
(7,019
|
)
|
|
$
|
—
|
|
|
$
|
(16,063
|
)
|
|
$
|
(25,907
|
)
|
|
Interest income, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(551
|
)
|
|
|
(551
|
)
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
281
|
|
|
|
281
|
|
|
Depreciation and amortization
|
|
|
2,544
|
|
|
|
718
|
|
|
|
2,230
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,492
|
|
|
Acquisitions related intangible asset amortization
|
|
|
1,106
|
|
|
|
—
|
|
|
|
61
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,167
|
|
|
Stock-based compensation
|
|
|
1,537
|
|
|
|
456
|
|
|
|
778
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,771
|
|
|
Equity in net loss of Rhapsody and other equity investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,427
|
|
|
|
5,427
|
|
|
Loss (gain) on sale of equity investments, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50
|
|
|
|
50
|
|
|
Restructuring and other charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,792
|
|
|
|
4,792
|
|
|
Loss on excess office facilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,082
|
|
|
|
7,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
3,120
|
|
|
$
|
416
|
|
|
$
|
(3,950
|
)
|
|
$
|
—
|
|
|
$
|
1,018
|
|
|
$
|
604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2009
|
|
|
|
|
TPS
(A)
|
|
|
MSS
(B)
|
|
|
Games
(C)
|
|
|
Music
(D)
|
|
|
Other
|
|
|
Grand Total
|
|
|
|
|
(in thousands)
|
|
|
Net revenue
|
|
$
|
46,208
|
|
|
$
|
19,291
|
|
|
$
|
29,774
|
|
|
$
|
40,452
|
|
|
$
|
—
|
|
|
$
|
135,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
19,278
|
|
|
|
2,590
|
|
|
|
8,801
|
|
|
|
24,945
|
|
|
|
—
|
|
|
|
55,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
26,930
|
|
|
|
16,701
|
|
|
|
20,973
|
|
|
|
15,507
|
|
|
|
—
|
|
|
|
80,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
58
|
%
|
|
|
87
|
%
|
|
|
70
|
%
|
|
|
38
|
%
|
|
|
—
|
|
|
|
59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising with related party
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,865
|
|
|
|
—
|
|
|
|
6,865
|
|
|
Impairment of goodwill
|
|
|
50,531
|
|
|
|
46,776
|
|
|
|
41,247
|
|
|
|
37,029
|
|
|
|
—
|
|
|
|
175,583
|
|
|
Other operating expenses
|
|
|
25,512
|
|
|
|
18,417
|
|
|
|
26,761
|
|
|
|
19,808
|
|
|
|
36
|
|
|
|
90,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
76,043
|
|
|
|
65,193
|
|
|
|
68,008
|
|
|
|
63,702
|
|
|
|
36
|
|
|
|
272,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(49,113
|
)
|
|
|
(48,492
|
)
|
|
|
(47,035
|
)
|
|
|
(48,195
|
)
|
|
|
(36
|
)
|
|
|
(192,871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
754
|
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss of Rhapsody and other equity method investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(269
|
)
|
|
|
(269
|
)
|
|
Gain (loss) on sale of equity investments, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68
|
|
|
|
68
|
|
|
Other income (expenses), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(449
|
)
|
|
|
(449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expenses), net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
104
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(49,113
|
)
|
|
|
(48,492
|
)
|
|
|
(47,035
|
)
|
|
|
(48,195
|
)
|
|
|
68
|
|
|
|
(192,767
|
)
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,210
|
)
|
|
|
(1,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(49,113
|
)
|
|
|
(48,492
|
)
|
|
|
(47,035
|
)
|
|
|
(48,195
|
)
|
|
|
(1,142
|
)
|
|
|
(193,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interest in Rhapsody
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,648
|
|
|
|
—
|
|
|
|
5,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(49,113
|
)
|
|
$
|
(48,492
|
)
|
|
$
|
(47,035
|
)
|
|
$
|
(42,547
|
)
|
|
$
|
(1,142
|
)
|
|
$
|
(188,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment GAAP net income (loss)
attributable to common shareholders to segment
adjusted EBITDA is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(49,113
|
)
|
|
$
|
(48,492
|
)
|
|
$
|
(47,035
|
)
|
|
$
|
(42,547
|
)
|
|
$
|
(1,142
|
)
|
|
$
|
(188,329
|
)
|
|
Interest income, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(754
|
)
|
|
|
(754
|
)
|
|
Income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,210
|
|
|
|
1,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(E)
|
|
|
2,847
|
|
|
|
856
|
|
|
|
1,041
|
|
|
|
1,071
|
|
|
|
—
|
|
|
|
5,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions related intangible asset amortization
(E)
|
|
|
1,270
|
|
|
|
—
|
|
|
|
101
|
|
|
|
278
|
|
|
|
—
|
|
|
|
1,649
|
|
|
Stock-based compensation
|
|
|
2,464
|
|
|
|
798
|
|
|
|
1,596
|
|
|
|
738
|
|
|
|
—
|
|
|
|
5,596
|
|
|
Pro forma gain on sale of interest in Rhapsody
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,444
|
|
|
|
—
|
|
|
|
3,444
|
|
|
Equity in net loss of Rhapsody and other investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
269
|
|
|
|
269
|
|
|
Loss (gain) on sale of equity investments, net
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(68
|
)
|
|
|
(68
|
)
|
|
Impairment of goodwill
|
|
|
50,531
|
|
|
|
46,776
|
|
|
|
41,247
|
|
|
|
37,029
|
|
|
|
—
|
|
|
|
175,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
7,999
|
|
|
$
|
(62
|
)
|
|
$
|
(3,050
|
)
|
|
$
|
13
|
|
|
$
|
(485
|
)
|
|
$
|
4,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Cost of revenue and operating expenses of the segments shown above include costs
directly attributable to those segments and an allocation of general and administrative and other
common or shared costs.
|
|
|
|
(A)
|
|
The Technology Products and Solutions (TPS) segment includes revenue and related costs from:
sales of ringback tones, music-on-demand, video-on-demand, messaging, and information services;
sales of media delivery system software, including Helix system software and related authoring and
publishing tools, both directly to customers and indirectly through original equipment manufacturer
channels; support and maintenance services sold to customers who purchase software products;
broadcast hosting services; and consulting and professional services that are offered to customers.
|
|
|
|
(B)
|
|
The Media Software and Services (MSS) segment primarily includes revenue and related costs
from: the SuperPass premium subscription service; RealPlayer Plus and related products; sales and
distribution of third-party software products; and all advertising other than that related directly
to our Music and Games businesses. We repurchased RadioPass from Rhapsody as part of the
restructuring that occurred on March 31, 2010. We have included RadioPass subscribers beginning in
the quarter ended June 30, 2010, as a result.
|
|
|
|
(C)
|
|
The Games segment primarily includes revenue and related costs from: the sale of individual
games on our websites RealArcade.com, GameHouse.com and Zylom.com; the sales of games subscription
services; advertising through our games websites; the sale of games through the syndication on
partner sites, and sales of games through wireless carriers.
|
|
|
|
(D)
|
|
On March 31, 2010, we completed the restructuring of Rhapsody which resulted in our ownership
decreasing to approximately 47.5% of the outstanding equity in Rhapsody and no longer having
operating control. Beginning with the quarter ended June 30, 2010, Rhapsody’s revenue or other
operating results are no longer consolidated within our financial statements and we are not
recording any operating or other financial
results for our Music segment. We now report our share of Rhapsody’s income or losses as “Equity in
net loss of Rhapsody and other equity method investments” in “Other income.”
|
|
|
|
(E)
|
|
Net of noncontrolling interest effect.
|
RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
|
|
|
|
|
|
|
|
As
|
|
|
Stock-Based
|
|
|
Asset
|
|
|
|
|
|
|
|
Reported
|
|
|
Compensation
|
|
|
Amortization
(A)
|
|
|
Adjusted
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
29,149
|
|
|
$
|
(228
|
)
|
|
$
|
(525
|
)
|
|
$
|
28,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
27,583
|
|
|
$
|
(693
|
)
|
|
$
|
—
|
|
|
$
|
26,890
|
|
|
Sales and marketing
|
|
|
27,382
|
|
|
|
(811
|
)
|
|
|
(642
|
)
|
|
|
25,929
|
|
|
General and administrative
|
|
|
14,590
|
|
|
|
(1,039
|
)
|
|
|
—
|
|
|
|
13,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating expenses, net
|
|
$
|
69,555
|
|
|
$
|
(2,543
|
)
|
|
$
|
(642
|
)
|
|
$
|
66,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
|
|
|
|
|
|
|
|
As
|
|
|
Stock-Based
|
|
|
Asset
|
|
|
|
|
|
|
|
Reported
|
|
|
Compensation
|
|
|
Amortization
(A)
|
|
|
Adjusted
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
55,614
|
|
|
$
|
(363
|
)
|
|
$
|
(553
|
)
|
|
$
|
54,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
28,923
|
|
|
$
|
(2,234
|
)
|
|
$
|
—
|
|
|
$
|
26,689
|
|
|
Sales and marketing
|
|
|
42,273
|
|
|
|
(1,199
|
)
|
|
|
(1,096
|
)
|
|
|
39,978
|
|
|
General and administrative
|
|
|
19,338
|
|
|
|
(1,800
|
)
|
|
|
—
|
|
|
|
17,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating expenses, net
|
|
$
|
90,534
|
|
|
$
|
(5,233
|
)
|
|
$
|
(1,096
|
)
|
|
$
|
84,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
|
|
|
|
|
|
|
|
As
|
|
|
Stock-Based
|
|
|
Asset
|
|
|
|
|
|
|
|
Reported
|
|
|
Compensation
|
|
|
Amortization
(A)
|
|
|
Adjusted
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
78,308
|
|
|
$
|
(459
|
)
|
|
$
|
(1,045
|
)
|
|
$
|
76,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
62,258
|
|
|
$
|
(2,290
|
)
|
|
$
|
—
|
|
|
$
|
59,968
|
|
|
Sales and marketing
|
|
|
65,209
|
|
|
|
(1,807
|
)
|
|
|
(1,361
|
)
|
|
|
62,041
|
|
|
General and administrative
|
|
|
29,511
|
|
|
|
(2,136
|
)
|
|
|
—
|
|
|
|
27,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating expenses, net
|
|
$
|
156,978
|
|
|
$
|
(6,233
|
)
|
|
$
|
(1,361
|
)
|
|
$
|
149,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
|
|
|
|
|
|
|
|
As
|
|
|
Stock-Based
|
|
|
Asset
|
|
|
|
|
|
|
|
Reported
|
|
|
Compensation
|
|
|
Amortization
(A)
|
|
|
Adjusted
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
111,635
|
|
|
$
|
(993
|
)
|
|
$
|
(1,099
|
)
|
|
$
|
109,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
57,482
|
|
|
$
|
(4,058
|
)
|
|
$
|
—
|
|
|
$
|
53,424
|
|
|
Sales and marketing
|
|
|
85,958
|
|
|
|
(2,265
|
)
|
|
|
(2,318
|
)
|
|
|
81,375
|
|
|
General and administrative
|
|
|
42,169
|
|
|
|
(3,502
|
)
|
|
|
—
|
|
|
|
38,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating expenses, net
|
|
$
|
185,609
|
|
|
$
|
(9,825
|
)
|
|
$
|
(2,318
|
)
|
|
$
|
173,466
|
|
|
|
|
|
|
(A)
|
|
- Net of noncontrolling interest effect.
|
RealNetworks, Inc. and Subsidiaries
Earnings Per Share Reconciliation
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
(in thousands, except per share data)
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(25,907
|
)
|
|
$
|
(188,329
|
)
|
|
$
|
(22,679
|
)
|
|
$
|
(200,465
|
)
|
|
Less accretion of MTVN’s preferred return in Rhapsody
|
|
|
—
|
|
|
|
(416
|
)
|
|
|
3,700
|
|
|
|
(1,850
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
(25,907
|
)
|
|
$
|
(188,745
|
)
|
|
$
|
(18,979
|
)
|
|
$
|
(202,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic net income (loss) per share available to common shareholders
|
|
|
135,277
|
|
|
|
134,420
|
|
|
|
135,209
|
|
|
|
134,394
|
|
|
Dilutive potential common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute diluted net income (loss) per share available to common shareholders
|
|
|
135,277
|
|
|
|
134,420
|
|
|
|
135,209
|
|
|
|
134,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share available to common shareholders
|
|
$
|
(0.19
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(1.51
|
)
|
|
Diluted net income (loss) per share available to common shareholders
|
|
$
|
(0.19
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(1.51
|
)
|