Exhibit 99.1
InterDigital Announces First Quarter 2005 Financial Results; Revenue up 8% over
Comparable Period of 2004
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 6, 2005--InterDigital
Communications Corporation (Nasdaq:IDCC), a leading architect, designer and
provider of wireless technology and product platforms, today announced revenues
of $35.5 million and a net loss of $0.9 million, or $0.02 per share for its
first quarter ended March 31, 2005. In addition, InterDigital's cash and
short-term investment position remained strong, ending first quarter 2005 at
$126.5 million.
William Merritt, President and Chief Executive Officer, stated, "I am
pleased with the company's performance during first quarter 2005. Our recurring
patent licensing and technology revenues of $35.5 million set a new high for the
corporation. We continued to see the beneficial effect of a larger licensee and
customer base, as a decline in the royalties from NEC was offset by both
increased royalties from other licensees, including Sharp, and revenues
associated with our strong performance under our contract with General Dynamics.
As we move through the year, my focus as CEO will be to grow revenues through
the addition of new patent and technology licensees, and to scrutinize our cost
structure and investment decisions, making changes as appropriate to enhance the
financial performance of the company."
First Quarter Summary
First quarter 2005 revenues of $35.5 million increased $2.5 million or 8%
over first quarter 2004 revenue of $33.0 million. This increase was driven by
the recognition of $4.7 million of revenue related to a software license
agreement with General Dynamics that was offset in part by a $1.6 million
decrease in recurring patent license royalty revenue. Key contributors to first
quarter revenue included NEC (32%), Sharp (27%), General Dynamics (13%) and Sony
Ericsson (12%). Recurring patent license royalties for first quarter 2005 were
$30.8 million compared to $32.4 million in first quarter 2004. The lower level
of recurring royalties in first quarter 2005 was primarily a function of two
items: first, royalties from NEC in first quarter 2004 were inflated due to a
catch-up in 3G handset shipments that had been delayed from the previous
quarter; and, second, the late receipt of a royalty report after March 31, 2005
of approximately $1.1 million. Under the company's revenue recognition policy,
revenue associated with per-unit royalties is recognized in the quarter in which
the report is received.(1)
The company reported a net loss of $0.9 million, or $0.02 per share, for
first quarter 2005, compared to net income of $5.8 million, or $0.10 per share
(diluted) in first quarter 2004.
Operating expenses of $36.3 million in first quarter 2005 increased 16%
over fourth quarter 2004 and 46% over first quarter 2004. The increase in
operating expenses over first quarter 2004 was driven largely by legal fees
associated with outstanding arbitrations and litigations as well as personnel
costs related to a company-wide long-term compensation program implemented in
second quarter 2004 that substantially replaced the widespread use of stock
options as an incentive and retention tool. The long-term compensation program
is structured with overlapping cycles starting in 2005. First quarter 2005, the
first period to reflect the effect of the overlap, included approximately $3.9
million of expense related to the long-term compensation program. Tax expense
decreased in first quarter 2005 compared to first quarter 2004 due to a lower
level of royalty revenue subject to non-U.S. withholding tax.
During first quarter 2005, the company generated approximately $10.5
million of free cash flow.(2) In addition, the company expended $9.0 million in
connection with the repurchase of 500,000 shares of the company's stock and $8.0
million to acquire complementary patents and related assets. Further, in early
second quarter 2005, the company expended an additional $25.1 million to
repurchase 1.5 million shares in connection with the completion of a two million
share repurchase program.
2005 Outlook
Rich Fagan, Chief Financial Officer, commented, "We expect to provide
updated guidance on second quarter 2005 revenue shortly, after we receive and
review the majority of our per-unit royalty reports. Based on a preliminary
report received from NEC, we anticipate that its royalties will improve 15% to
18% over first quarter 2005 levels. In addition, we will benefit from the
recognition of approximately $1.1 million of royalties from a licensee that
submitted a royalty report after the most recent quarter-end covering fourth
quarter 2004 sales. We currently estimate that revenue associated with the work
for General Dynamics may exceed that of first quarter 2005 as activity levels
remain high. Subject to the level of expenses associated with current
arbitrations and litigations, we expect second quarter ongoing operating expense
levels to be similar to first quarter 2005. We also project that our book tax
rate for second quarter will approximate 34% to 38%, plus an amount for deferred
foreign source withholding tax expense, which is, in part, dependent on the
level of per-unit royalties."
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 time-to-market, performance, and cost benefits, as well as product
differentiation advantages, to its commercial and government/military customers.
InterDigital has a strong portfolio of patented technologies covering 2G, 2.5G,
3G and 802 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.
This press release contains forward-looking statements regarding our
current beliefs, plans, and expectations as to management's focus; second
quarter 2005 revenue including revenues from patent licensing royalties and from
the General Dynamics agreement; second quarter 2005 operating expenses and book
tax rate and foreign source withholding tax expense for first quarter 2005.
Forward-looking statements are subject to risks and uncertainties, and actual
outcomes could differ materially from those expressed in any such
forward-looking statement due to a variety of factors in addition to those
identified in this press release including, but not limited to: (i)
unanticipated changes in the schedule or costs associated with the Nokia and
Samsung arbitrations or Lucent litigation; (ii) delays in concluding additional
license agreements; (iii) changes in the market share and sales performance of
our primary licensees, delays in product shipments of our licensees, inaccuracy
of market projections; (iv) the market relevance of our technologies, changes in
technology preferences of strategic partners or consumers, the availability or
development of substitute or competitive technologies, our ability to leverage
our existing and enter into additional strategic relationships; (v) further
changes or adjustments to accruals and expenses and verifications of
percentage-of-completion on deliverables under the General Dynamics contract;
and (vi) other factors listed in the Company's most recently filed Forms 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) In third quarter 2004, the company transitioned to reporting
per-unit royalties in the quarter in which reports are received
rather than the quarter in which licensee's underlying sales
occur.
(2) 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 March 31
(Dollars in thousands except per share data)
(unaudited)
For the Three Months Ended
March 31,
--------------------------
2005 2004
--------------------------
REVENUES $ 35,497 $ 33,016
------------ -------------
OPERATING EXPENSES:
Sales and marketing 2,280 1,614
General and administrative 6,566 5,390
Patents administration and licensing 11,247 5,000
Development 16,173 12,914
------------ -------------
36,266 24,918
------------ -------------
(Loss) income from operations (769) 8,098
NET INTEREST & OTHER FINANCING INCOME 790 428
------------ -------------
Income before income taxes 21 8,526
INCOME TAX PROVISION (903) (2,692)
------------ -------------
Net (loss) income (882) 5,834
PREFERRED STOCK DIVIDENDS - (34)
------------ -------------
NET (LOSS) INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ (882) $ 5,800
============ =============
NET (LOSS) INCOME PER COMMON SHARE - BASIC $ (0.02) $ 0.11
============ =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC 55,053 55,146
============ =============
NET (LOSS) INCOME PER COMMON SHARE -
DILUTED $ (0.02) $ 0.10
============ =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - DILUTED 55,053 59,745
============ =============
SUMMARY CASH FLOW
-----------------
(Dollars in thousands)
(unaudited)
For the Three Months Ended
March 31,
--------------------------
2005 2004
--------------------------
Net (loss) income before pref. stock
dividends $ (882) $ 5,834
Depreciation & amortization 2,669 2,474
Increase in deferred revenue 27,906 22,784
Deferred revenue recognized (15,907) (12,709)
(Increase) decrease in operating working
capital, deferred charges and other 2,660 (2,290)
Capital spending & patent additions (5,897) (3,096)
------------ -------------
CASH FLOW BEFORE FINANCING ACTIVITIES AND
ASSET ACQUISITION 10,549 12,997
Asset acquisition (8,050) -
Debt decrease & preferred dividends (80) (50)
Repurchase of Common Stock (9,028) -
Net stock issued 1,287 6,492
------------ -------------
NET (DECREASE) INCREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (5,322) $ 19,439
============ =============
CONDENSED BALANCE SHEETS
------------------------
(Dollars in thousands)
(unaudited)
March 31, 2005 December 31, 2004
-------------- -----------------
Assets
- ------
Cash & short-term investments $ 126,496 $ 131,818
Accounts receivable 9,868 11,612
Other current assets 13,451 13,187
Property & equipment and Patents(net) 63,331 51,688
Long-term deferred tax assets and
other non-current assets 32,173 33,615
-------------- -----------------
TOTAL ASSETS $ 245,319 $ 241,920
============== =================
Liabilities and Shareholders' Equity
- ------------------------------------
Current portion of long-term debt $ 332 $ 212
Accounts payable & accrued
liabilities 20,904 21,546
Current deferred revenue 25,908 28,075
Long-term deferred revenue 85,287 71,121
Long-term debt & long-term
liabilities 3,317 5,307
-------------- -----------------
TOTAL LIABILITIES 135,748 126,261
SHAREHOLDERS' EQUITY 109,571 115,659
-------------- -----------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 245,319 $ 241,920
============== =================
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 of 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 and asset acquisition. Management
has presented a reconciliation of this non-GAAP line item to net cash
provided by operating activities below:
RECONCILIATION OF PRO-FORMA CASH
FLOW TO SUMMARY CASH FLOW
--------------------------------
(Dollars in thousands)
(unaudited)
For the Three Months Ended
March 31,
--------------------------
2005 2004
--------------------------
Net cash provided by operating activities $ 16,651 $ 16,058
Purchases of property and equipment (2,071) (546)
Patent additions (3,826) (2,550)
Net change in value of short-term
investments (205) 35
------------- ------------
Cash flow before financing activity and
asset acquisition $ 10,549 $ 12,997
============= ============
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