Exhibit 99.1
InterDigital Announces Third Quarter Financial Results; Results Reflect
Transition in Per-Unit Royalty Reporting and Positive Tax Adjustment
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Nov. 9, 2004--
Results in Line With Company Guidance
InterDigital Communications Corporation (Nasdaq:IDCC), a leading
architect, designer and provider of wireless technology and product
platforms, today announced revenues of $7.4 million and a net loss of
$6.4 million, or $0.12 per share, for its third quarter ended
September 30, 2004. These results include the effect of a transition
(described in the Company's October 25, 2004 press release) for
reporting per-unit royalties in the quarter in which licensee reports
are received rather than in the quarter in which a licensee's sales
occur.
In addition, the Company recognized a non-cash benefit of $26.9
million in third quarter 2004 associated with the partial reversal of
its valuation allowance against deferred tax assets, approximately
$17.1 million of which was recognized as income. The remaining $9.8
million was credited directly to additional paid-in-capital.
InterDigital's cash and short-term investment position of $144.9
million remained strong at September 30, 2004, up $39 million over
year-end 2003.
Howard Goldberg, President and Chief Executive Officer, stated,
"Our performance in the third quarter and through the first nine
months of 2004 has been strong. We are in a healthy financial position
based upon robust free cash flow(1). This has facilitated the
repurchase of one million shares during the third quarter. Our revenue
and income results for this year's third quarter were anomalies due to
the non-cash effect of the nonrecurring items related to both per-unit
royalty reporting and the tax valuation allowance adjustment. We
expanded our royalty base with new or expanded agreements with Danger
and Toshiba, respectively. We are making solid progress in
establishing customer relationships for our Adaptive Interference
Management(TM) (AIM) family of advanced antenna products and 3G air
interface solutions. We are especially pleased that we have been
selected as a supplier to General Dynamics to provide the WCDMA air
interface technology for the Mobile User Objective System for the U.S.
military. Further, our strong cash position enables us to focus on
enhancing shareholder value by investing in technology and product
development, and by making the additional share repurchases which we
recently announced."
Third Quarter Summary
Due to the transition in reporting per-unit royalties, third
quarter 2004 revenues of $7.4 million included only the amortization
of paid-up royalties and fixed obligations. This compares with
revenues of $26.8 million in third quarter 2003, which consisted of
$20.8 million of per-unit royalties and $6.0 million related to
amortization of paid-up royalties and fixed obligations. Commencing in
fourth quarter 2004, royalty revenue will include both fixed and
amortized amounts, as well as per-unit royalties reported to the
Company during that quarter.
The Company reported a net loss of $6.4 million, or $0.12 per
share in third quarter 2004, compared to net income of $3.4 million,
or $0.06 per share (diluted) in third quarter 2003. Operating expenses
of $26.5 million increased 24% over third quarter 2003 and were about
even with second quarter 2004 (excluding repositioning charges). The
increase in operating expenses over third 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. The Company's third
quarter 2004 tax provision included a $17.1 million positive effect
related to the partial reversal of the Company's valuation allowance
against deferred tax assets. This was offset in part by a non-cash tax
expense of $4.8 million primarily associated with the character and
usage of the Company's remaining federal net operating loss
carryforwards (the majority of which resulted from deductions related
to stock option exercises).
Nine Months Summary
For the first nine months 2004, revenues were $69.8 million
compared to $89.9 million in the first nine months 2003. The decrease
in revenues for the first nine months 2004 versus 2003 was due to the
absence of per-unit royalty revenue in third quarter 2004 associated
with the transition noted above. Recurring patent license royalties
(which include both fixed and amortized amounts, as well as per-unit
royalties reported to the Company) for the first nine months 2004 were
$68.7 million. This included $20.9 million related to nine months of
fixed and amortized amounts, as well as $47.8 million associated with
six months of per-unit royalties. The first nine months 2003 revenue
consisted of $69.4 million of recurring patent license royalties and
$20.5 of non-recurring revenue primarily associated with Sony
Ericsson's pre-2003 handset sales.
Net income for the first nine months 2004 (including a $0.6
million pre-tax repositioning charge) was $0.3 million, or breakeven
per share. Net income for the first nine months 2003 was $33.2
million, or $0.55 per share (diluted). Results for the first nine
months 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 net income in the first nine months
2003 of approximately $3.0 million, or $0.05 per share (diluted).
2004 Outlook
Rich Fagan, Chief Financial Officer commented, "We expect to
provide updated guidance on fourth quarter 2004 revenue shortly, after
we receive and review all per-unit royalty reports. Based on reports
received to date, we expect that fourth quarter 2004 revenue should
exceed $30 million due to the strength of our licensees in the 3G
market. We're also excited about the potential of our new relationship
with General Dynamics and heightened interest in our AIM ANTENNA
family of products. To take full advantage of these opportunities,
we're scaling our developments efforts. As a result of additional
investment in technology development and related productization and
higher commissions related to per-unit royalty revenue, we expect our
fourth quarter operating expenses to increase 10% to 15% over third
quarter 2004 levels."
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, 3G and 802 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 and AIM ANTENNA and Adaptive
Interference Management are trademarks 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 fourth quarter 2004 revenue; (ii) our selection as a
supplier to General Dynamics on the MUOS project, and heightened
interest in our AIM ANTENNA products; (iii) the scaling of our
development efforts; and (iv) increases in ongoing expenses over third
quarter levels. Words such as "expect" 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)
our ability to enter into new and expanded patent license agreements;
(ii) a failure by any of our key licensees to realize our projections
for sales of covered products; (iii) our ability to successfully
negotiate and enter into an agreement with General Dynamics with
respect to the MUOS project, and our ability to successfully negotiate
and enter into agreements with parties expressing interest in our AIM
ANTENNA technology; (iv) our ability to hire and retain qualified
personnel; (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; and (vi) 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.
(1) InterDigital defines "free cash flow" as operating cash flow
less purchases of property and equipment and investments in patents
SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------
For the Periods Ended September 30
(Dollars in thousands except per share data)
(unaudited)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
---------------------------------------
2004 2003 2004 2003
---------------------------------------
REVENUES $7,358 $26,790 $69,753 $89,891
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 1,399 1,330 4,409 3,473
General and administrative 5,046 4,567 15,866 13,305
Patents administration and
licensing 7,708 4,263 19,638 11,338
Development 12,349 11,253 38,091 34,054
Repositioning 3 - 607 -
--------- --------- --------- ---------
26,505 21,413 78,611 62,170
--------- --------- --------- ---------
(Loss) income from operations (19,147) 5,377 (8,858) 27,721
OTHER INCOME - - - 10,580
NET INTEREST & OTHER FINANCING
INCOME 436 405 1,126 1,298
--------- --------- --------- ---------
(Loss) income before income
taxes (18,711) 5,782 (7,732) 39,599
INCOME TAX PROVISION 12,308 (2,317) 8,051 (6,249)
--------- --------- --------- ---------
Net (loss) income (6,403) 3,465 319 33,350
PREFERRED STOCK DIVIDENDS - (34) (66) (101)
--------- --------- --------- ---------
NET (LOSS) INCOME APPLICABLE TO
COMMON SHAREHOLDERS $(6,403) $ 3,431 $ 253 $33,249
========= ========= ========= =========
NET (LOSS) INCOME PER COMMON
SHARE - BASIC $(0.12) $0.06 $- $0.60
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 55,282 55,912 55,341 55,475
========= ========= ========= =========
NET (LOSS) INCOME PER COMMON
SHARE - DILUTED $(0.12) $0.06 $- $0.55
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 55,282 60,109 59,421 60,192
========= ========= ========= =========
SUMMARY CASH FLOW
-----------------
For the Periods Ended September 30
(Dollars in thousands)
(unaudited)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
--------------------- ---------------------
2004 2003 2004 2003
--------------------- ---------------------
(Loss) income before taxes $(18,711) $5,782 $(7,732) $39,599
Taxes paid (692) (3,220) (4,187) (7,555)
Depreciation & amortization 4,029 2,742 11,118 8,385
Increase in deferred
revenue 13,210 1,500 62,994 55,988
Deferred revenue recognized (6,286) (16,612) (36,899) (44,984)
Decrease in operating
working capital, deferred
charges and other 50,482 34,420 32,222 3,993
Capital spending & patent
additions (4,456) (3,805) (11,470) (8,574)
---------- ---------- ---------- ----------
CASH FLOW BEFORE
FINANCING ACTIVITIES 37,576 20,807 46,046 46,852
Increase in notes
receivable - - - (1,446)
Acquisition of Tantivy
assets - (10,430) - (10,430)
Debt decrease & preferred
dividends (52) (48) (189) (183)
Net stock issued (acquired) (15,907) (32,320) (6,862) (16,431)
---------- ---------- ---------- ----------
NET INCREASE IN CASH
AND SHORT-TERM
INVESTMENTS $ 21,617 $(21,991) $ 38,995 $ 18,362
========== ========== ========== ==========
CONDENSED BALANCE SHEET
-----------------------
(Dollars in thousands)
(unaudited)
September 30, December 31,
2004 2003
------------- -------------
Assets
- -------------------------------------------
Cash & short-term investments $144,922 $105,927
Accounts receivable 6,603 37,839
Other current assets 6,168 8,628
Property & equipment (net) 10,711 12,137
Patents (net) & other non-current assets 76,757 40,634
------------- -------------
TOTAL ASSETS $245,161 $205,165
============= =============
Liabilities and Shareholders' Equity
- -------------------------------------------
Current portion of long-term debt $172 $193
Accounts payable & accrued liabilities 19,288 16,236
Foreign & domestic taxes payable 94 1,259
Deferred revenue 112,690 86,595
Long-term debt & long-term liabilities 3,266 3,397
------------- -------------
TOTAL LIABILITIES 135,510 107,680
SHAREHOLDERS' EQUITY 109,651 97,485
------------- -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $245,161 $205,165
============= =============
The Company's short-term investments are comprised of high quality
credit instruments including U.S. Government agency instruments and
corporate bonds. Management views these instruments to be near
equivalents to cash and believes that investors may share this
viewpoint. This release includes a summary cash flow statement that
results in the change in both our cash and short-term investment
balances. One of the subtotals in the summary cash flow statement is
cash flow before financing activity. Management has presented a
reconciliation of this non-GAAP line item to net cash provided by
operating activities below:
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2004 2003 2004 2003
Net cash provided by operating
activities $41,996 $24,920 $57,819 $55,771
Purchases of property and equipment (1,166) (1,190) (2,654) (2,579)
Patent costs (3,290) (2,615) (8,816) (5,995)
Unrealized (loss) gain on short
term investments 36 (112) (303) 345
-------- -------- -------- --------
Cash flow before financing
activities $37,576 $21,003 $46,046 47,542
======== ======== ======== ========
This release also discusses operating expenses, excluding
repositioning charges, and net income including certain non-recurring
revenue items. Management believes that investors may find these
non-GAAP financial measures useful in understanding the Company's
operating results. This information is intended to provide more
meaningful comparisons of the Company's results.
CONTACT: InterDigital Communications Corporation
Media:
Dawn Goldstein, 610-878-7800
dawn.goldstein@interdigital.com
or
Investor:
Janet Point, 610-878-7800
janet.point@interdigital.com