Exhibit 99.1
InterDigital Announces Second Quarter Financial Results; Continued
Growth in Recurring Royalties, Solid Cash Position Highlight Quarter
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Aug. 9, 2004--InterDigital
Communications Corporation (Nasdaq:IDCC), a leading architect,
designer and provider of wireless technology and product platforms,
today announced revenues of $29.4 million and net income of $0.9
million, or $0.01 per share (diluted), for its second quarter ended
June 30, 2004. InterDigital's cash and short-term investment position
of $123.3 million at June 30, 2004 increased $17.4 million over
year-end 2003. The Company's cash position was further strengthened
early in the third quarter following the receipt of payments totaling
$33.0 million from SANYO Electric Co., Ltd (SANYO) and Sharp
Corporation of Japan (Sharp) associated with previously announced
updated patent license agreements.
Howard Goldberg, President and Chief Executive Officer, stated, "I
am pleased with our performance for both the second quarter and the
first half of 2004. The quality of our revenue and business continue
to improve, as reflected by growth in both our recurring royalties and
licensee base. The expansion of our licensing agreement with SANYO,
covering 2G and 3G standards, was an important accomplishment in the
quarter. We are continuing to make the investments required to broaden
our 3G technology offerings and have made solid progress in the
development of our advanced antenna product solutions, which have
attractive commercial potential in both the WLAN and cellular markets.
Given our strong cash position, we have the flexibility we need to
both invest in building our technology solutions portfolio and create
a direct, near-term benefit to our shareholders through the previously
announced share repurchase program."
Second Quarter Summary
Revenues in second quarter 2004 of $29.4 million increased $3.6
million, or 14%, over second quarter 2003 revenues of $25.8 million.
Recurring patent license royalty revenue in second quarter 2004 of
$29.1 million increased $3.5 million, or 14%, when compared to second
quarter 2003. The increase in recurring patent license royalties
relates to both growth in royalties from the majority of our licensee
base (as of second quarter 2003) and royalties from licensees added
since last year's second quarter.
Excluding the impact of a non-recurring charge of $0.6 million
related to repositioning activities, the Company's net income would
have been $1.4 million, or $0.02 per share (diluted), for second
quarter 2004, compared to net income of $3.1 million, or $0.05 per
share (diluted) in second quarter 2003. Operating expenses of $26.6
million (excluding the repositioning charge) increased 27% over second
quarter 2003 and 7% over first quarter 2004. The increase in operating
expenses over second quarter 2003 was driven, in large part, by
additional personnel costs related to both a new long-term incentive
compensation program implemented in first half 2004 and annual wage
inflation, as well as higher costs associated with patent licensing
arbitration and litigation and public entity matters. The sequential
increase over first quarter 2004 resulted from higher patent licensing
costs related to arbitration and litigation matters and commissions
expense. Tax expense decreased in second quarter 2004 mainly due to a
lower level of royalty revenue subject to non-U.S. withholding tax.
Six Months Summary
For first half 2004, revenues were $62.4 million, a decrease of 1%
versus revenues of $63.1 million in first half 2003. Recurring patent
license royalties for first half 2004 of $61.5 million increased $18.9
million, or 44%, when compared to first half 2003. First half 2003
revenue consisted of $42.6 million of recurring patent license
royalties and $20.5 of non-recurring revenue primarily associated with
Sony Ericsson's pre-2003 handset sales. Of the $18.9 million increase,
approximately $17 million was driven by growth in royalties from NEC
Corporation of Japan, Sony Ericsson and Sharp.
Net income for first half 2004 was $6.7 million, or $0.11 per
share (diluted). Excluding the first half 2004 repositioning charge,
net income would have been $7.2 million, or $0.12 per share (diluted).
Net income for first half 2003 was $29.8 million, or $0.49 per share
(diluted). Results for first half 2003 included the benefit of $30.8
million (pre-tax) of non-recurring items related to Sony Ericsson's
pre-2003 handset sales and the settlement of litigation with Ericsson.
Excluding these items, the Company would have reported a net loss in
first half 2003 of approximately $0.4 million, or $0.01 per share
(diluted).
2004 Outlook
Rich Fagan, Chief Financial Officer commented, "Assuming a
continued positive balance of royalty contributions from our existing
licensees, we expect recurring patent licensing royalties from such
licensees to be in the range of $27 million to $30 million per quarter
over the remainder of 2004. We are also optimistic that we can
conclude additional patent license agreements during 2004, which
should be accretive. We continue to manage our ongoing operating
expenses generally in line with our expectations and continue to make
planned substantial investment in new technologies to strongly
position InterDigital for the future. Also, we expect that the costs
associated with the Nokia and Samsung arbitrations will continue to
escalate in second half 2004 due to increased activity levels as we
approach the evidentiary hearings scheduled for early 2005. Given
these factors, we now expect that third quarter operating expenses
will increase 6% - 9% over second quarter 2004 levels (excluding
repositioning charges), with fourth quarter levels equal to or
slightly higher than those in the third quarter.
"In addition, although we do not expect to have any U.S. cash tax
obligations other than alternative minimum tax until our U.S. net
operating loss (NOL) carryforwards are fully utilized or have expired,
our provision for income taxes may vary significantly from
period-to-period. The expected variability is due to the character of
our NOL carryforwards (the majority of which result from deductions
related to the exercise of employee stock options) and recent changes
in U.S./Japan source withholding tax treaties that became effective
July 1, 2004. Throughout the remainder of 2004, we will continue to
evaluate the need for a full valuation allowance against our deferred
tax assets. In the event that we determine the valuation allowance is
no longer needed, we will record the estimated realizable value of the
deferred tax asset and begin providing for income taxes at a rate more
consistent with our overall combined federal and state effective
rates. Our provision will also include the amortization of prior
source withholding tax payments," added Mr. Fagan.
Mr. Fagan further noted, "To date, we have repurchased
approximately 500,000 shares at an average cost of just over $18 per
share against the one million share Board authorization and expect
free cash flow to be positive for the full year 2004."
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. In addition, InterDigital is developing proprietary
technology solutions with future product potential to address emerging
telecommunications issues. For more information, please visit
InterDigital's web site: www.interdigital.com. InterDigital is a
registered trademark of InterDigital Communications Corporation.
This press release contains forward-looking statements regarding,
among other things, our current beliefs, plans, and expectations as
to: (i) our business and our ability to expand our licensee base and
recurring royalty revenue base; (ii) our positions in the matters
involving Nokia, Samsung, and Lucent; (iii) future performance of our
licensees; (iv) our technology and product development efforts; (v)
our share repurchase program; and, (vi) our revenues, operating
expenses, cash flow, and tax provision. 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 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) changes
in 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
market price of our stock, 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 June 30, Ended June 30,
-------------------------------------------
2004 2003 2004 2003
-------------------------------------------
REVENUES $ 29,379 $ 25,777 $ 62,395 $ 63,101
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing 1,396 933 3,010 2,143
General and
administrative 5,430 4,621 10,820 8,738
Patents administration
and licensing 6,930 3,936 11,930 7,075
Development 12,828 11,413 25,742 22,801
Repositioning 604 - 604 -
---------- ---------- ---------- ----------
27,188 20,903 52,106 40,757
---------- ---------- ---------- ----------
Income from operations 2,191 4,874 10,289 22,344
OTHER INCOME - - - 10,580
NET INTEREST & OTHER
INVESTMENT INCOME 262 474 690 893
---------- ---------- ---------- ----------
Income before income
taxes 2,453 5,348 10,979 33,817
INCOME TAX PROVISION (1,565) (2,190) (4,257) (3,932)
---------- ---------- ---------- ----------
Net income 888 3,158 6,722 29,885
PREFERRED STOCK DIVIDENDS (32) (33) (66) (67)
---------- ---------- ---------- ----------
NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 856 $ 3,125 $ 6,656 $ 29,818
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
- BASIC $0.02 $0.06 $0.12 $0.54
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
- BASIC 55,596 55,895 55,371 55,253
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
- DILUTED $0.01 $0.05 $0.11 $0.49
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
- DILUTED 59,112 61,293 59,419 60,239
========== ========== ========== ==========
SUMMARY CASH FLOW
-----------------
For the Periods Ended June 30
(Dollars in thousands)
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
2004 2003 2004 2003
--------------------- ---------------------
Net income before pref.
stock dividends $888 $3,158 $6,722 $29,885
Depreciation & amortization 3,968 2,650 7,089 5,643
Increase in deferred
revenue 27,000 22,252 49,784 54,488
Deferred revenue recognized (17,904) (17,408) (30,613) (28,372)
(Increase) decrease in
operating working capital,
deferred charges and other (14,561) 17,438 (17,498) (32,276)
Capital spending & patent
additions (3,918) (3,120) (7,014) (4,769)
---------- ---------- ---------- ----------
CASH FLOW BEFORE
FINANCING ACTIVITIES (4,527) 24,970 8,470 24,599
Debt decrease & preferred
dividends (87) (88) (137) (135)
Net stock issued 2,553 8,455 9,045 15,889
---------- ---------- ---------- ----------
NET INCREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (2,061) $ 33,337 $ 17,378 $ 40,353
========== ========== ========== ==========
CONDENSED BALANCE SHEET
-----------------------
(Dollars in thousands)
(unaudited)
June 30, December 31,
2004 2003
------------ ------------
Assets
- ------
Cash & short-term investments $123,305 $105,927
Accounts receivable 55,890 37,839
Other current assets 6,876 8,628
Property & equipment (net) 10,841 12,137
Patents (net) & other non-current assets 47,582 40,634
------------ ------------
TOTAL ASSETS $244,494 $205,165
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current portion of long-term debt $179 $193
Accounts payable & accrued liabilities 18,111 16,236
Foreign & domestic taxes payable 854 1,259
Deferred revenue 105,766 86,595
Long-term debt & long-term liabilities 3,311 3,397
------------ ------------
TOTAL LIABILITIES 128,221 107,680
SHAREHOLDERS' EQUITY 116,273 97,485
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $244,494 $205,165
============ ============
CONTACT: InterDigital Communications Corporation
Media Contact:
Dawn Goldstein, 610-878-7800
dawn.goldstein@interdigital.com
or
Investor Contact:
Janet Point, 610-878-7800
janet.point@interdigital.com