Exhibit 99.1
InterDigital Announces Strong Second Quarter Financial Results
and Share Repurchase Program
Profitable Performance Driven by Growth in Patent Licensing Revenues
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Aug. 13, 2003--InterDigital
Communications Corporation (Nasdaq:IDCC), a leading architect,
designer and provider of wireless technology and product platforms,
today announced revenues of $25.8 million and net income of $3.1
million, or $0.05 per share (diluted), for its second quarter ended
June 30, 2003. InterDigital's cash and short-term investment position
grew to $127.9 million at June 30, 2003, up $40.4 million over
year-end 2002. The Company's cash position was further strengthened
early in third quarter 2003 by the receipt of approximately $24.0
million of initial payments associated with new or renewed patent
license agreements with Sharp Corporation of Japan (Sharp), Sony
Ericsson, Research in Motion (RIM), and Nakayo Telecommunications,
Inc.
InterDigital's Board of Directors also approved the repurchase of
up to two million shares of the Company's outstanding common stock,
reflecting its confidence in the Company's future. The shares may be
repurchased from time to time through open-market purchases or
prearranged plans. The amount and timing of purchases will be based on
a variety of factors, including potential stock acquisition price,
cash requirements and other market and economic factors.
Revenues in second quarter 2003 of $25.8 million increased $0.6
million, or 3%, over second quarter 2002 revenues of $25.2 million.
Recurring royalty revenue of $25.6 million in second quarter 2003,
increased 54% compared to $16.6 million in second quarter 2002, aided
by royalties of $4.8 million related to 2003 patent license agreements
with Ericsson and Sony Ericsson, and increases in aggregate royalties
of $2.9 million from NEC Corporation of Japan (NEC) and Sharp. This
includes $2.3 million from a true up of NEC's projected versus actual
royalties for first quarter 2003. Second quarter 2002 revenue included
the recognition of $6.9 million of deferred royalty revenue (related
to a non-refundable prepayment) associated with the discontinuation of
sales of covered products by Kyocera and $1.6 million of specialized
engineering services revenue associated with Wideband Time Division
Duplex (WTDD) technology development work for Nokia Corporation
(Nokia).
The Company reported net income of $3.1 million, or $0.05 per
share (diluted), for second quarter 2003, compared to net income of
$2.4, or $0.04 per share (diluted) in second quarter 2002. Operating
expenses increased a modest 1% over second quarter 2002 to $20.9
million, as higher directors' and officers' liability insurance
premiums, and patent administration and licensing costs were largely
offset by decreases in development and sales and marketing expenses,
reflecting the influence of both focused cost management and the
timing of sales and marketing activities in 2003. Tax expense
decreased in second quarter 2003 due to a reduced level of royalties
upon which InterDigital is required to pay non-U.S. withholding taxes.
For first half 2003, revenues were $63.1 million, an increase of
37% versus revenues of $46.1 million in first half 2002. The Company
reported net income of $29.8 million for first half 2003, or $0.49 per
share (diluted), compared to net income of $2.5 million, or $0.04 per
share (diluted) in first half 2002. Absent non-recurring revenue items
associated with the discontinuation of sales of covered products by
Kyocera in 2002 and past infringement related to new patent license
agreements in first half 2002 and 2003, adjusted first half 2003
revenue of $42.7 million would have increased 36% over comparable
first half 2002 revenue of $31.3 million. As expected, no specialized
engineering services revenue associated with WTDD technology
development work for Nokia was recognized in the first half 2003,
resulting in a decrease of $3.6 million in specialized engineering
service revenue versus first half 2002.
"Our strong performance in second quarter 2003 is a reflection of
the continuing momentum of our patent licensing program and sales
success of our licensees," said Howard Goldberg, President and Chief
Executive Officer. "Since mid-March 2003, we have signed new patent
license agreements with Ericsson and Sony Ericsson and extended a
prior agreement with Sharp. These three licensees, along with NEC,
made significant contributions to both second quarter 2003 revenue and
to the expansion of our recurring royalty revenue base. Over the last
ten quarters, our recurring royalty base has grown at a compounded
annual growth rate of slightly over 50%.
"The significant growth in our cash balance and recurring royalty
base provides additional resources with which to pursue attractive
growth opportunities for the Company. Leveraging our financial
strength, we recently acquired substantially all the assets of Tantivy
Communications, Inc., creating a new and highly specialized design
center in Melbourne, Florida. Our ample resources also have enabled us
to broaden our advanced wireless technology and product development
efforts beyond TDD and FDD. At the same time, we continue to calibrate
our advanced wireless product development efforts to best align with
the emergence and timing of very fluid 2.5G and 3G wireless markets.
"Finally, we continue to apply key internal and external resources
toward addressing the resolution of 2G and 2.5G patent licensing
negotiations and arbitration with Nokia. We remain both confident in
and very committed to our position in the Nokia and Samsung matters,"
concluded Mr. Goldberg.
Rich Fagan, Chief Financial Officer, commented, "We're obviously
very pleased with our strong financial performance in second quarter
2003 and are optimistic that we'll continue to benefit from solid
performances of our key licensees in second half 2003. We also expect
to expand our licensee base over the next twelve months with new
agreements. We intend to complete the WTDD technology development
program as planned, but will delay investment in field trial
demonstration products until 3G market demands warrant such
investment. Nonetheless, we anticipate that our operating expenses and
capital expenditures in second half 2003 will increase slightly as we
examine and invest in growth and expansion opportunities, and other
strategic corporate initiatives."
About InterDigital
InterDigital architects, designs and provides advanced wireless
technologies and products that drive voice and data communications.
The Company offers technology and product solutions for mainstream
wireless applications that deliver cost and time-to-market advantages
for its customers. InterDigital has a strong portfolio of patented
technologies covering 2G, 2.5G and 3G standards, which it licenses
worldwide. For more information, please visit InterDigital's web site:
www.interdigital.com. InterDigital is a registered trademark of
InterDigital Communications Corporation. All other trademarks are the
property of their respective owners.
This press release contains forward-looking statements regarding,
among other things, our current beliefs, plans, and expectations as to
(i) our ability to expand our licensee base and recurring royalty
revenue base, (ii) completing our WTDD technology development program
and field trial demonstration products, and the timing thereof, (iii)
resolution of royalty issues with Nokia and Samsung, (iv) future
performance of our licensees, (v) our technology and product
development efforts, (vi) our stock repurchase program, and (vii) our
revenues, capital expenditures, and operating expenses. Words such as
"expect", "anticipate", "future", "optimistic", "intend" or similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements are subject to risks and uncertainties.
Actual outcomes could differ materially from those expressed in
forward-looking statements due to a variety of factors in addition to
those specifically identified above including, but not limited to: (i)
any disputes, and the length and resolution of any disputes, as to the
applicability of the terms of the Ericsson and Sony Ericsson licensing
agreements to the royalty obligations of Nokia and Samsung under their
licensing agreements; (ii) the review, negotiation and dispute
resolution processes permitted under Nokia's and Samsung's license
agreements and the results therefrom; (iii) our ability to enter into
additional license agreements; (iv) a failure by any licensee to
realize our and market projections for sales of covered products; (v)
unanticipated development costs and technical, financial or other
difficulties or delays related to the development of our technologies
and products, and market acceptance of our technologies and products;
(vi) the market share and the performance of our licensees in selling
their products, and our ability to adequately prosecute, enforce and
protect our patents and other intellectual property rights; (vii) the
potential acquisition price, our cash requirements, and other market
and economic factors, relating to the share repurchase program; and
(viii) other factors listed in the Company's most recently filed Form
10-K and Form 10-Q. We undertake no duty to publicly update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------
For the Periods Ended June 30
(Dollars in thousands except per share data)
(unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
-----------------------------------------
2003 2002 2003 2002
-----------------------------------------
REVENUES: $ 25,777 $ 25,149 $ 63,101 $ 46,098
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 933 1,282 2,143 2,372
General and administrative 4,621 4,069 8,738 7,763
Patents administration and
licensing 3,936 3,465 7,075 6,320
Development 11,413 11,816 22,801 23,631
--------- --------- --------- ---------
20,903 20,632 40,757 40,086
--------- --------- --------- ---------
Income from operations 4,874 4,517 22,344 6,012
OTHER INCOME - - 10,580 -
NET INTEREST INCOME 474 555 893 1,055
--------- --------- --------- ---------
Income before income taxes 5,348 5,072 33,817 7,067
INCOME TAX PROVISION (2,190) (2,594) (3,932) (4,539)
--------- --------- --------- ---------
Net income 3,158 2,478 29,885 2,528
PREFERRED STOCK DIVIDENDS (33) (34) (67) (68)
--------- --------- --------- ---------
NET INCOME APPLICABLE TO
COMMON
SHAREHOLDERS $ 3,125 $ 2,444 $ 29,818 $ 2,460
========= ========= ========= =========
NET INCOME PER COMMON SHARE -
BASIC $0.06 $0.04 $0.54 $0.05
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON
SHARES OUTSTANDING - BASIC 55,895 54,358 55,253 54,163
========= ========= ========= =========
NET INCOME PER COMMON SHARE -
DILUTED $0.05 $0.04 $0.49 $0.04
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON
SHARES OUTSTANDING -
DILUTED 61,293 57,535 60,239 57,207
========= ========= ========= =========
SUMMARY CASH FLOW
-----------------
For the Periods Ended June 30
(Dollars in thousands)
(unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
-------------------- --------------------
2003 2002 2003 2002
-------------------- --------------------
Net income before pref. stock
dividends $3,158 $2,478 $29,885 $2,528
Depreciation & amortization 2,650 2,875 5,254 5,559
Increase in deferred revenue 22,252 13,250 54,488 59,250
Deferred revenue recognized (17,408) (15,839) (28,372) (28,706)
Decrease (increase) in
operating working
capital, deferred charges
and other 17,438 16,946 (32,276) (28,809)
Capital spending & patent
additions (3,120) (2,666) (4,769) (5,159)
---------- -------- ---------- --------
CASH FLOW BEFORE FINANCING
ACTIVITIES 24,970 17,044 24,210 4,663
Debt decrease & preferred
dividends (88) (145) (135) (249)
Net stock issued 8,455 2,562 16,278 3,260
---------- -------- ---------- --------
NET INCREASE IN CASH
AND SHORT-TERM INVESTMENTS $ 33,337 $ 19,461 $ 40,353 $ 7,674
========= ========= ========= =========
CONDENSED BALANCE SHEETS
------------------------
(Dollars in thousands)
(unaudited)
June 30, December 31,
2003 2002
--------- ------------
Assets
- ------
Cash & short-term investments $127,919 $87,566
Accounts receivable 84,459 53,486
Other current assets 6,481 7,627
Property & equipment (net) 12,224 14,091
Patents (net) & other non-current assets 31,102 28,408
--------- ------------
TOTAL ASSETS $262,185 $191,178
========= ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current portion of long-term debt $196 $189
Accounts payable & accrued liabilities 11,454 14,124
Foreign & domestic taxes payable 5,063 5,434
Deferred revenue 116,786 90,670
Long-term debt & long-term liabilities 3,490 1,970
--------- ------------
TOTAL LIABILITIES 136,989 112,387
SHAREHOLDERS' EQUITY 125,196 78,791
--------- ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $262,185 $191,178
========= ============
CONTACT: InterDigital Communications Corporation
Media Contact:
Dawn Goldstein
dawn.goldstein@interdigital.com
or
Investor Contact:
Janet Point, 610-878-7800
janet.point@interdigital.com