Exhibit 99.1
InterDigital Announces Fourth Quarter and Full Year 2005 Financial Results;
Company Projects First Quarter 2006 Revenue of $50 million to $52 million;
Board Authorizes $100 Million Share Repurchase Program
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--March 9, 2006--InterDigital
Communications Corporation (Nasdaq:IDCC) today announced financial results for
the fourth quarter and full year ended December 31, 2005. For the fourth quarter
2005, the company reported revenue of $40.5 million and net income of $45.0
million, or $0.80 per share (diluted). For the full year 2005, revenue and net
income totaled $163.1 million and $54.7 million or $0.96 per share (diluted),
respectively. The results for the full year and fourth quarter included
non-cash, non-recurring tax benefits of $43.7 million, or approximately $0.76
per share (diluted), mainly related to the fourth quarter reversal of the
company's valuation allowance against its federal deferred tax assets. The
company ended 2005 with a cash and short-term investment position of
approximately $105.7 million. This position is expected to be further
strengthened in first quarter 2006 by approximately $111 million in royalty
prepayments, the majority of which has been received, from both existing
licensees and LG Electronics' (LG) first scheduled payment, net of related
source withholding taxes, under its recently executed license agreement.
The company also announced that its Board of Directors approved the
repurchase of up to $100 million of the company's outstanding Common Stock.
Shares may be repurchased, from time-to-time, through open market purchases,
pre-arranged trading plans or privately negotiated transactions. The amount and
timing of purchases will be based on a variety of factors, including potential
stock repurchase price, cash requirements, acquisition opportunities, strategic
investments and other market and economic factors.
William J. Merritt, President and Chief Executive Officer, stated, "2005
marked another very good year for InterDigital. We substantially increased our
revenue, further grew our already large base of patent licensees, added two
customers for our HSDPA offering, returned $34 million to shareholders through
the repurchase of two million shares of common stock and sharpened
organizational focus to drive toward our ultimate goal of securing revenue from
every 3G terminal unit sold. With the addition of LG as a licensee in early
2006, we now estimate that we derive revenue on approximately 35% to 40% of all
3G terminal units sold worldwide."
Mr. Merritt added, "During 2005, we also expanded our dual mode modem
offering for terminal units through both internal 3G development and external
licensing of market-proven GSM/GPRS/EDGE technology. Our key goals for 2006
include completing and enhancing that offering and achieving meaningful market
penetration, growing our base of patent licensees, expanding and defending our
IPR position and seeking further investments in technologies that can enhance
the attractiveness and profitability of our technology solutions. We are
confident that these activities can drive even greater value for our
shareholders. With our strong financial position, we can support investments in
both our business opportunities and in our own stock in order to maximize the
return of value to our shareholders."
Fourth Quarter Summary
Revenues in fourth quarter 2005 increased 19% to $40.5 million from $33.9
million in the fourth quarter 2004, driven by higher technology solution revenue
and recurring royalties. For fourth quarter 2005, recurring royalty revenue of
$36.2 million increased $3.3 million, or 10%, when compared to fourth quarter
2004. This increase was due to both royalties from new licensees in 2005 and
generally higher royalties from existing licensees. Fourth quarter 2005
technology solution revenue of $4.3 million increased $4.1 million over last
year's comparable fourth quarter primarily due to revenue from agreements with
General Dynamics and Philips. Fourth quarter 2004 also included $0.8 million of
non-recurring revenue, a portion of which related to past sales of products
covered under a new license agreement. Licensees that accounted for 10% or more
of fourth quarter 2005 revenue were NEC (28%), Sharp (25%) and Sony Ericsson
(10%).
The company's net income increased to $45.0 million, or $0.80 per share
(diluted), in fourth quarter 2005 from a loss of $0.2 million, or breakeven
earnings per share, in fourth quarter 2004. This increase was primarily due to
the recognition of non-cash, non-recurring tax benefits of $43.7 million, mainly
related to the reversal of the company's valuation allowance against its federal
deferred tax assets.
Fourth quarter 2005 operating expenses of $39.0 million increased 24% over
fourth quarter 2004. The most significant quarter-over-quarter increases
included an adjustment to the long-term compensation program accrual and ongoing
patent arbitration and litigation costs. In fourth quarter 2005 total expense
for current and now concluded patent arbitration or litigation was approximately
$8 million. The balance of the increase from quarter-to-quarter was due to
investments in key technology initiatives, higher patent amortization and
repositioning activities.
The company's fourth quarter 2005 tax expense, excluding non-recurring tax
benefits of $43.7 million, was $1.1 million, consisting of non-cash charges for
both federal income taxes and non-U.S. withholding taxes. Fourth quarter 2004
tax expense of $3.3 million consisted of non-cash charges for both federal
income and non-U.S. withholding taxes.
Twelve Month Summary
For the full year 2005, revenues were $163.1 million compared to $103.7
million in 2004. This 57% increase was attributable to growth in royalties from
patent licensees under agreements in effect at the beginning of 2005, new patent
licensees added during 2005 and growth in revenue primarily related to
technology solution agreements with General Dynamics and Philips. The increase
was also due, in part, to the third quarter 2004 transition in reporting
per-unit royalties which resulted in no per-unit royalties being recognized in
that quarter. Revenues for 2005 included $133.9 million of recurring royalties,
$10.2 million related to past sales of products covered under new license
agreements and $19.0 million from technology solution agreements with General
Dynamics and Philips. Revenues for 2004 included $101.6 million of recurring
royalties, $1.8 million primarily related to past sales of products covered
under new license agreements and $0.3 million from technology solution
agreements. Licensees that accounted for 10% or more of full year 2005 revenue
were NEC (30%) and Sharp (22%).
The company reported net income of $54.7 million for the year 2005, or
$0.96 per share (diluted), compared to net income in 2004 of $0.1 million, or
breakeven earnings per share. The increase in net income was primarily due to
higher revenue and non-cash, non-recurring tax benefits in 2005.
Operating expenses of $146.0 million in 2005 increased 33% over 2004, due
mainly to (i) significantly higher costs associated with patent licensing
arbitration and/or litigation with Nokia, Samsung and Lucent (totaling nearly
$28 million for the year), (ii) long-term compensation program costs, (iii)
executive severance costs and (iv) investment in technology solution
initiatives.
In 2005, the company generated approximately $11.3 million of free cash
flow(1). Also in 2005, the company expended $34.1 million in connection with the
repurchase of two million shares of the company's stock and $8.1 million to
acquire complementary patents and related assets.
First Quarter 2006 Outlook
Rich Fagan, Chief Financial Officer commented, "In first quarter 2006, we
expect to report revenue of $50 million to $52 million. This revenue amount
includes slightly more than $11 million related to the recently announced patent
license agreement with LG (for which we are recognizing revenue associated with
$285 million in total expected payments on a straight-line amortization over the
approximately five-year term of the agreement) as well as increases in sales
from some of our other licensees. We anticipate that first quarter 2006
operating expenses, excluding current patent arbitration or litigation costs,
will be in line with those experienced in fourth quarter 2005 reflecting
continued investment in our dual mode terminal unit offering. Patent arbitration
and litigation expense will depend on the level of activity through the
remainder of the quarter. Lastly, we expect that our book tax rate for first
quarter 2006 will approximate 35% to 37%."
About InterDigital
InterDigital Communications Corporation designs, develops and provides
advanced wireless technologies and products that drive voice and data
communications. InterDigital is a leading contributor to the global wireless
standards and holds a strong portfolio of patented technologies which it
licenses to manufacturers of 2G, 2.5G, 3G and 802 products worldwide.
Additionally, the company offers baseband product solutions and protocol
software for 3G multimode terminals and converged devices, delivering
time-to-market, performance and cost benefits. The company's financial strength
and solid revenue base contribute to the continued investment in innovation and
development that will shape the next generation of wireless technology. For more
information, visit the InterDigital website: www.interdigital.com.
(1) InterDigital defines "free cash flow" as operating cash flow less
purchases of property and equipment and investments in patents.
This press release contains forward-looking statements regarding our
current beliefs, plans, and expectations as to (i) the percent of 3G terminal
units sold on which we derive revenue (ii) our goals for 2006, (iii) our ability
to support investment in business opportunities and our stock, and (iv) our
first quarter 2006 revenue, operating expenses and book tax rate. Words such as
"expect," "future," "should," "continue," "will," "assessing," "anticipate" or
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 or anticipated
by such forward-looking statements due to a variety of factors including those
identified in this press release as well as the following: (i) unanticipated
delays, difficulties or acceleration in the execution of patent license
agreements; (ii) our ability to leverage our strategic relationships and secure
new relationships or appropriate technologies on acceptable terms, changes in
the market share and sales performance of our primary licensees, delays in
product shipments of our licensees, and any delay in receipt of quarterly
royalty reports from our licensees; (iii) changes or inaccuracies in market
data; (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, and the economy and sales trends in
the wireless market; (v) changes in personnel costs and commissions; (vi) the
resolution of current legal proceedings or unanticipated additional legal
proceedings, or changes in the schedules or costs associated with current
proceedings, or adverse rulings in such legal proceedings; and, (vii) changes in
our foreign withholding tax. 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 For the Twelve
Months Ended Months Ended
December 31, December 31,
---------------------------------------
2005 2004 2005 2004
---------------------------------------
REVENUES $40,489 $33,932 $163,125 $103,685
--------- --------- --------- ---------
OPERATING EXPENSES:
Sales and marketing 2,299 1,792 7,914 6,201
General and administrative 6,252 5,756 24,150 21,622
Patents administration and
licensing 13,377 10,702 49,399 30,340
Development 16,391 13,127 63,095 51,218
Repositioning 631 (11) 1,480 596
--------- --------- --------- ---------
38,950 31,366 146,038 109,977
--------- --------- --------- ---------
Income (loss) from operations 1,539 2,566 17,087 (6,292)
NET INTEREST & OTHER INVESTMENT
INCOME 918 617 3,164 1,743
--------- --------- --------- ---------
Income (loss) before income
taxes 2,457 3,183 20,251 (4,549)
INCOME TAX BENEFIT (PROVISION) 42,573 (3,347) 34,434 4,704
--------- --------- --------- ---------
Net income (loss) 45,030 (164) 54,685 155
PREFERRED STOCK DIVIDENDS - - - (66)
--------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO
COMMON SHAREHOLDERS $45,030 $ (164) $54,685 $ 89
========= ========= ========= =========
NET INCOME PER COMMON SHARE -
BASIC $0.83 $- $1.01 $-
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 53,943 55,036 54,058 55,264
========= ========= ========= =========
NET INCOME PER COMMON SHARE -
DILUTED $0.80 $- $0.96 $-
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 56,370 55,036 57,161 59,075
========= ========= ========= =========
SUMMARY CASH FLOW
-----------------
For the Periods Ended December 31
(Dollars in thousands)
(unaudited)
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
------------------- -------------------
Net income (loss) before income
taxes $2,457 $3,183 $20,251 $(4,549)
Taxes paid - - (755) (4,187)
Depreciation & amortization 5,540 4,121 21,187 15,807
Increase in deferred revenue 11,500 3,208 57,605 66,202
Deferred revenue recognized (21,906) (16,702) (65,553) (53,601)
(Increase) decrease in
operating working capital,
deferred charges and other (1,519) (3,342) 921 28,312
Capital spending & patent
additions (5,777) (5,429) (22,326) (16,899)
--------- --------- --------- ---------
CASH FLOW BEFORE FINANCING
ACTIVITIES (9,705) (14,961) 11,330 31,085
Asset acquisition - - (8,050) -
Disposal of fixed assets 169 - 169 -
Debt decrease & preferred
dividends (84) (47) (327) (236)
Repurchase of common stock - - (34,085) (17,061)
Stock issued 1,101 1,904 4,853 12,103
--------- --------- --------- ---------
NET (DECREASE) INCREASE IN
CASH AND SHORT-TERM
INVESTMENTS $(8,519) $(13,104) $(26,110) $25,891
========= ========= ========= =========
CONDENSED BALANCE SHEET
-----------------------
(Dollars in thousands)
(unaudited)
December 31, December 31,
2005 2004
------------ ------------
Assets
- ------
Cash & short-term investments $105,708 $131,818
Accounts receivable 19,534 11,612
Current deferred tax assets 42,103 5,170
Other current assets 8,370 8,017
Property & equipment and Patents (net) 70,176 51,688
Long-term deferred tax assets and non-current
assets 53,646 33,615
------------ ------------
TOTAL ASSETS $299,537 $241,920
============ ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current portion of long-term debt $350 $212
Accounts payable & accrued liabilities 30,129 21,546
Current deferred revenue 20,055 28,075
Long-term deferred revenue 71,193 71,121
Long-term debt & long-term liabilities 3,496 5,307
------------ ------------
TOTAL LIABILITIES 125,223 126,261
SHAREHOLDERS' EQUITY 174,314 115,659
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $299,537 $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 cash
flow statement that reflects the key activities causing 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 Twelve
Months Ended Months Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
------------------- -------------------
Net cash (used) provided by
operating activities $(3,959) $(9,589) $33,674 $48,230
Purchases of property and
equipment (1,366) (1,092) (5,372) (3,746)
Patent additions (4,411) (4,337) (16,954) (13,153)
Unrealized gain (loss) on
short-term investments 31 57 (18) (246)
--------- --------- --------- ---------
Cash flow before financing
activities $(9,705) $(14,961) $11,330 $31,085
========= ========= ========= =========
InterDigital is a registered trademark of InterDigital Communications
Corporation.
CONTACT: InterDigital Communications Corporation
Media Contact:
Jack Indekeu, 610-878-7800
jack.indekeu@interdigital.com
or
Investor Contact:
Janet Point, 610-878-7800
janet.point@interdigital.com