Exhibit 99.1
InterDigital Announces Fourth Quarter and Full Year 2003
Financial Results; Growth in Recurring Patent Licensing Revenue
and New Agreements Drive Profitable Results
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--March 10,
2004--InterDigital Communications Corporation (Nasdaq:IDCC), a leading
architect, designer and provider of wireless technology and product
platforms, today announced financial results for the fourth quarter
and full year ended December 31, 2003. For full year 2003, revenue and
net income were $114.6 million and $34.3 million, respectively,
increases of $26.7 million and $32.0 million over 2002. Further,
InterDigital's cash and short-term investment position grew to $105.9
million at December 31, 2003 up $18.4 million versus year-end 2002.
Howard Goldberg, President and Chief Executive Officer, stated,
"2003 was one of the best years in InterDigital's history. We
delivered excellent financial results, expanded our licensee base, and
enhanced our position for broad-based participation in the future
growth of wireless communications. In 2003, we grew our technology
offerings through both internal development and the strategic
acquisition of key patents and technology assets. We enhanced
InterDigital's corporate governance practices through the
implementation of new policies and procedures, expanded the size of
our Board of Directors and appointed three independent directors. In
the third quarter, we repurchased two million shares of our common
stock at then prevailing prices. At year end, our balance sheet
remained very strong and we're well positioned to take advantage of
the opportunities that lie ahead."
Fourth Quarter Summary
Revenues in fourth quarter 2003 were $24.7 million compared to
$27.1 million in fourth quarter 2002. Recurring patent license
royalties for fourth quarter 2003 of $23.5 million increased $6.1
million, or 35%, when compared to fourth quarter 2002. Fourth quarter
2002 revenue consisted of $17.4 million of recurring patent license
royalties and $9.7 million of non-recurring royalty revenue associated
with the discontinuation of sales of covered products by Denso. The
increase in recurring royalties was primarily driven by $5.1 million
of royalties related to new patent license agreements in 2003 with
Ericsson and Sony Ericsson, and an incremental $3.1 million in fourth
quarter 2003 royalties from NEC Corporation of Japan (NEC). As
expected, fourth quarter 2003 revenue also included $1.0 million of
specialized engineering services revenue related to successful final
delivery of a Wideband Time Division Duplex platform to Nokia.
The Company reported net income of $1.1 million, or $0.02 per
share (diluted), for fourth quarter 2003, compared to net income of
$5.7 million, or $0.10 per share (diluted) in fourth quarter 2002.
Operating expenses of $22.9 million increased 22% over fourth quarter
2002 and 7% over third quarter 2003, in line with previous Company
guidance. The increase in operating expenses over fourth quarter 2002
was due, in large part, to higher directors' and officers' liability
insurance premiums, patent licensing costs, investments in product and
technology development, tradeshow costs and consulting costs
associated with a review and update of the Company's strategic plan.
Tax expense decreased in fourth quarter 2003 due to a reduction in the
level of royalty revenue subject to non-U.S. withholding tax and the
recognition of an anticipated refund of previously expensed
alternative minimum tax payments.
Full Year Summary
For full year 2003, revenues were $114.6 million, an increase of
30% versus revenues of $87.9 million in 2002. Absent non-recurring
items in both 2003 and 2002, revenue in 2003 of $93.9 million would
have increased 48% from $63.5 million in 2002. Recurring patent
license royalty revenue increased 58% in 2003 to $92.9 million from
$58.9 million in 2002. The 58% increase was largely attributable to
both 2003 patent license agreements with Ericsson and Sony Ericsson
and higher recurring royalties from NEC, Sharp and Sanyo. As expected,
specialized engineering services revenue decreased $3.5 million in
2003 to $1.0 million from $4.5 million in 2002.
The Company reported net income of $34.3 million for the year
2003, or $0.58 per share (diluted), compared to net income in 2002 of
$2.4 million, or $0.04 per share (diluted). Operating expenses of
$85.0 million in 2003 increased 8% over 2002 due mainly to higher
expenses related to directors' and officers' liability insurance
premiums, patent licensing costs, investments in product and
technology development and consulting costs associated with a review
and update of the Company's strategic plan. Tax expense decreased in
2003 to $7.3 million from $8.7 million in 2002 due mainly to a
reduction in the level of royalty revenue subject to non-U.S.
withholding tax.
Cash and short-term investments grew to $105.9 million at December
31, 2003, up $18.4 million versus year-end 2002. The increase
primarily resulted from royalty payments from licensees, the largest
of which were from NEC, Ericsson and Sony Ericsson, partially offset
by non-operating uses of cash of approximately $46.5 million in
connection with the repurchase of two million shares of the Company's
stock and the acquisition of substantially all of the assets of the
former Tantivy Communications, Inc.
2004 Outlook
"We benefited in 2003 from our success in signing or extending six
patent license agreements, as well as growth in sales of licensed
products by our licensees. These were key factors driving our revenue
and profitability in 2003," added Mr. Goldberg. "As we move into 2004,
we're encouraged by industry anticipation of double digit growth in
handset sales and renewed optimism for 3G rollout. With the industry
starting to return to financial health, we expect to benefit from both
continued investment in 3G infrastructure and the increasing numbers
of 2G and 3G handsets sold. We are also encouraged by early
indications of operators' and manufacturers' interest in technology
extensions and enhancements such as those we are working on in the
areas of High Speed Downlink Packet Access technology and Smart
Antenna solutions for WLAN and cellular applications."
"Of course, we continue to focus appropriate internal and external
resources toward the resolution of arbitrations with Nokia and Samsung
and litigation with Lucent. Under a draft schedule proposed by the
arbitration panel in the Nokia matter, an evidentiary hearing would be
conducted in January 2005, with a decision expected sometime
thereafter. The arbitration with Samsung remains at an early stage,
with panel selection still underway. The recently filed patent
infringement suit against Lucent is also at an early stage. We are
confident in our positions in these matters," concluded Mr. Goldberg.
Rich Fagan, Chief Financial Officer, commented, "In 2004, we
expect to benefit from the continued solid performance of our key
licensees and to expand our licensee base. As such, we expect to build
upon the solid base of quarterly recurring royalty revenues
experienced in the last three quarters of 2003. Dependent upon market
timing, we may also recognize a small level of technology
product-related revenue associated with our jointly-developed FDD
protocol stacks, as products containing this embedded solution are
delivered into the emerging 3G markets by Infineon. In addition, we
expect that our operating expenses will be higher in 2004 due to the
impact of inflation-adjusted expenses, increased directors' and
officers' liability insurance premiums, patent prosecution and
licensing costs (including legal costs related to arbitration and
litigation activities), Sarbanes-Oxley compliance and increased
marketing and business development costs.
"Our first quarter 2004 revenues are likely to be comprised of
royalties from our current base of licensees. Also, we expect that
first quarter 2004 expenses could increase 5% - 10% over fourth
quarter 2003 levels," added Mr. Fagan.
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) anticipated increased market demand for handset sales and the
rollout of 3G technologies, (ii) continued industry investment in 3G
infrastructure, (iii) operator and manufacturer interest in High Speed
Downlink Packet Access technology and Smart Antenna solutions for WLAN
and cellular applications, (iv) our position in the arbitrations with
Nokia and Samsung and litigation with Lucent, (v) our ability to
expand our licensee base and benefit from the performance of our key
licensees, (vi) our ability to recognize product-related revenue from
our jointly-developed FDD protocol stack product offering, and (vii)
future recurring royalty revenues, capital expenditures, and operating
expenses. Words such as "expect", "continue", "encourage", "may" or
other similar expressions are intended to identify such
forward-looking statements.
Forward-looking statements are subject to risks and uncertainties,
and actual outcomes could differ materially from those expressed in
any such forward-looking statements due to a variety of factors
including, but not limited to those identified in the press release,
and: (i) the failure by our licensees to realize market projections
for sales of covered products, in the accuracy of market projections,
and changes in our licensees' market share; (ii) the market relevance
of our technologies; changes in technology preferences of strategic
partners, operators and manufacturers; the availability or development
of substitute or competitive technologies; our ability to leverage our
existing technologies and enter into additional strategic
relationships; failure of the 3G market or the wireless data services
market to materialize in the manner, scope or time frame anticipated,
the ability of operators to deliver 3G services in volume; the success
of underlying 3G technology; and the successful delivery of
differentiated applications by 3G products; (iii) inability to
successfully resolve or delays in the arbitration proceedings with
Nokia and Samsung under their respective patent licensing agreements;
(iv) our ability to successfully enforce patent infringement claims
against Lucent, and our ability to adequately prosecute, enforce and
protect our patents and other intellectual property rights with other
third parties; (v) our ability to enter into additional license
agreements; (vi) difficulties or delays related to Infineon's sale of
the FDD protocol stack product offering; (vii) the effects of global
economic conditions and governmental licensing decisions, and (viii)
other factors listed in the Company's most recently filed Form 10-K,
Form 10-Q, and Forms 8-K. 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 December 31
(Dollars in thousands except per share data)
(unaudited)
For the Three Months For the Year
Ended Ended
December 31, December 31,
-------------------- ---------------------
2003 2002 2003 2002
-------------------- ---------------------
REVENUES: $ 24,683 $ 27,091 $ 114,574 $ 87,895
--------- --------- --------- --------
OPERATING EXPENSES:
Sales and marketing 1,446 860 4,919 4,286
General and administrative 4,878 3,853 18,183 15,227
Patents administration and
licensing 4,657 3,778 15,995 13,074
Development 11,882 10,295 45,936 46,068
--------- --------- --------- --------
22,863 18,786 85,033 78,655
--------- --------- --------- --------
Income from operations 1,820 8,305 29,541 9,240
OTHER INCOME - - 10,580 -
NET INTEREST INCOME 315 439 1,613 2,019
--------- --------- --------- --------
Income before income taxes 2,135 8,744 41,734 11,259
INCOME TAX PROVISION (1,020) (2,963) (7,269) (8,748)
--------- --------- --------- --------
Net income 1,115 5,781 34,465 2,511
PREFERRED STOCK DIVIDENDS (32) (33) (133) (136)
--------- --------- --------- --------
NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 1,083 $ 5,748 $ 34,332 $ 2,375
========= ========= ========= ========
NET INCOME PER COMMON SHARE
- BASIC $0.02 $0.11 $0.62 $0.04
========= ========= ========= ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 54,664 53,630 55,271 52,981
========= ========= ========= ========
NET INCOME PER COMMON SHARE
- DILUTED $0.02 $0.10 $0.58 $0.04
========= ========= ========= ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 58,786 57,919 59,840 56,099
========= ========= ========= ========
Certain prior period amounts have been reclassified to conform to the
2003 presentation.
SUMMARY CASH FLOW
-----------------
For the Periods Ended December 31
(Dollars in thousands)
(unaudited)
For the Three Months For the Year
Ended Ended
December 31, December 31,
-------------------- --------------------
2003 2002 2003 2002
-------------------- --------------------
Net income before pref. stock
dividends $1,115 $5,781 $34,465 $2,511
Depreciation & amortization 2,695 3,060 10,691 11,629
Increase in deferred revenue 1,500 13,250 57,488 72,500
Deferred revenue recognized (16,579) (19,003) (61,563) (54,738)
Decrease (increase) in
operating working capital,
deferred charges and other 14,924 (16,885) 18,000 (34,139)
Capital spending & patent
additions (4,561) (3,962) (13,135) (11,994)
---------- --------- ---------- ---------
CASH FLOW BEFORE FINANCING
ACTIVITIES AND ASSET
ACQUISITION (906) (17,759) 45,946 (14,231)
Increase in notes receivable - - (1,446) -
Acquisition of Tantivy assets - - (10,430) -
Debt decrease & preferred
dividends (83) (69) (266) (470)
Net stock (acquired) issued 988 8,812 (15,443) 11,904
---------- --------- ---------- ---------
NET (DECREASE) INCREASE IN
CASH AND SHORT-TERM
INVESTMENTS $ (1) $ (9,016) $ 18,361 $ (2,797)
========== ========= ========== =========
Certain prior period amounts have been reclassified to conform to the
2003 presentation.
CONDENSED BALANCE SHEETS
------------------------
(Dollars in thousands)
(unaudited)
December 31, 2003 December 31, 2002
----------------- -----------------
Assets
- ------
Cash & short-term investments $105,927 $87,566
Accounts receivable 37,839 53,486
Other current assets 8,628 7,627
Property & equipment (net) 12,137 14,091
Patents (net) & other non-current
assets 40,634 28,408
----------------- -----------------
TOTAL ASSETS $205,165 $191,178
================= =================
Liabilities and Shareholders'
Equity
- -----------------------------
Current portion of long-term debt $193 $189
Accounts payable & accrued
liabilities 16,236 14,124
Foreign & domestic taxes payable 1,259 5,434
Deferred revenue 86,595 90,670
Long-term debt & long-term
liabilities 3,397 1,970
----------------- -----------------
TOTAL LIABILITIES 107,680 112,387
SHAREHOLDERS' EQUITY 97,485 78,791
----------------- -----------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $205,165 $191,178
================= =================
CONTACT: InterDigital Communications Corporation
Media:
Dawn Goldstein, 610-878-7800
e-mail: dawn.goldstein@interdigital.com
or
Investor:
Janet Point, 610-878-7800
e-mail: janet.point@interdigital.com