Exhibit 99.1
InterDigital Announces First Quarter 2006 Financial Results
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 4, 2006--InterDigital
Communications Corporation (Nasdaq: IDCC):
Revenue Increase of 45% Drives Strong Profitability
New License Agreement Key to Free Cash Flow of $79 Million
Board Expands Share Repurchase Authorization to $200 Million
InterDigital Communications Corporation (Nasdaq: IDCC) today
announced revenues of $51.6 million and net income of $12.9 million,
or $0.23 per share (diluted), for its first quarter ended March 31,
2006. The company also noted that it ended the quarter with a cash and
short-term investment position of approximately $197 million. This
position was further strengthened in second quarter 2006 by the
receipt of approximately $240 million, net of related source
withholding taxes, associated with the recently announced resolution
of the 2G royalty dispute with Nokia Corporation (Nokia).
In addition, the company announced that its Board of Directors had
approved the expansion of its current share repurchase program by $100
million to $200 million. 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 share repurchase
price, cash requirements, acquisition opportunities, strategic
investments and other market and economic factors. Under the original
$100 million share repurchase program authorized in March 2006,
repurchases commenced in April 2006 and, to date, the company has
repurchased 856,000 shares for $20 million.
William J. Merritt, President and Chief Executive Officer, stated,
"The company achieved outstanding results in first quarter 2006. We
exceeded $50 million in quarterly revenue for the first time in our
history, with contributions coming from both new licensees as well as
growing royalties from our base of existing licensees. We also
delivered strong profitability and substantial free cash flow(1).
Further, in the first four months of 2006, we concluded agreements
with a combined value in excess of $500 million with LG Electronics
Inc. (LG) and Nokia. Lastly, our technology programs continue to move
forward at an excellent pace, with the substantial completion of our
W-CDMA Release 4 offering, significant progress on the productization
of our market leading HSDPA technology, and similar progress with our
work on HSUPA - the next generation of 3G technology."
First Quarter Summary
The company's net income increased to $12.9 million, or $0.23 per
share (diluted), in first quarter 2006 from a loss of $0.9 million, or
$0.02 per share, in first quarter 2005. In addition, during first
quarter 2006 the company generated approximately $79 million of free
cash flow(1) due largely to the receipt of royalty payments from LG
under its recently executed license agreement, and two other patent
existing licensees.
Revenues in first quarter 2006 increased 45% to $51.6 million from
$35.5 million in the first quarter 2005. This increase was driven by
higher recurring royalties, related to both new agreements signed in
the last nine months notably LG and Kyocera Wireless Corporation and
increased contributions from other existing licensees. First quarter
2006 recurring royalties increased to $49.6 million from $30.8 million
in first quarter 2005. First quarter 2006 technology solution revenue
was $2.0 million compared to $4.7 million in first quarter 2005.
Licensees that accounted for 10% or more of first quarter 2006 revenue
were NEC Corporation of Japan (22%), LG (22%) and Sharp Corporation of
Japan (18%).
First quarter 2006 operating expenses of $32.8 million decreased
9% compared to first quarter 2005. This decrease primarily resulted
from lower costs in two areas. Patent litigation and arbitration costs
for first quarter 2006, which totaled approximately $3.8 million,
declined $2.5 million due to a decrease in activity levels in first
quarter 2006. In addition, the company's long-term compensation
program costs decreased $2.2 million, reflecting the absence of
overlapping cycles in 2006.
Net interest and investment income of $1.5 million in first
quarter 2006 increased $0.7 million or 91% from first quarter 2005 due
to both higher rates of return and higher investment balances in first
quarter 2006.
The company's first quarter 2006 tax expense consisted largely of
a non-cash provision for federal income taxes. First quarter 2005 tax
expense consisted mainly of non-cash charges related to non-U.S.
withholding taxes.
Second Quarter 2006 Outlook
Rich Fagan, Chief Financial Officer commented, "We will provide
guidance on second quarter 2006 revenue after we receive and review
applicable royalty reports, conclude our analysis related to the final
accounting associated with the $253 million payment from Nokia and
update our forecasts on anticipated revenue from work associated with
technology solution agreements. We anticipate that second quarter 2006
operating expenses, excluding current patent arbitration or litigation
costs, will grow by 8% to 12% over first quarter 2006, reflecting a
gradually increasing level of investment in our dual mode terminal
unit ASIC 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 second 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
continues to support investment in innovation and development that
will shape the next generation of wireless technology. For more
information, visit the InterDigital website: www.interdigital.com.
This press release contains forward-looking statements regarding
our current beliefs, plans, and expectations as to our (i) second
quarter 2006 operating expenses excluding current patent arbitration
or litigation costs; and (ii) second quarter 2006 book tax rate. Words
such as "expect," "will," "depend," "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) an unanticipated growth in expenses related to our
technology offerings; (ii) changes in our expectations of the amount
and composition of full-year taxable income, changes in foreign and
domestic tax laws or treatises, or changes in our tax planning
strategies; and (iii) 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 March 31
(Dollars in thousands except per share data)
(unaudited)
For the Three Months
Ended March 31,
--------------------
2006 2005
---------- --------
REVENUES $51,606 $35,497
---------- --------
OPERATING EXPENSES:
Sales and marketing 1,824 2,280
General and administrative 5,021 6,566
Patents administration and licensing 9,982 11,247
Development 16,010 16,173
---------- --------
32,837 36,266
---------- --------
Income (loss) from operations 18,769 (769)
NET INTEREST & OTHER INVESTMENT INCOME 1,508 790
---------- --------
Income before income taxes 20,277 21
INCOME TAX PROVISION (7,338) (903)
---------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS $ 12,939 $ (882)
========== ========
NET INCOME (LOSS) PER COMMON SHARE - BASIC $0.24 $(0.02)
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC 54,785 55,053
========== ========
NET INCOME (LOSS) PER COMMON SHARE - DILUTED $0.23 $(0.02)
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 56,884 55,053
========== ========
SUMMARY CASH FLOW
---------------------
For the Periods Ended March 31
(Dollars in thousands)
(unaudited)
For the Three Months
Ended March 31,
----------------------
2006 2005
----------- ----------
Net income before income taxes $20,277 $21
Taxes paid (15,675) (375)
Depreciation & amortization 4,671 5,506
Increase in deferred revenue 225,528 27,906
Deferred revenue recognized (29,908) (15,907)
Increase in operating working
capital, deferred charges and other (118,298) (705)
Capital spending & patent additions (7,778) (5,897)
---------- ----------
FREE CASH FLOW 78,817 10,549
Asset acquisition - (8,050)
Tax benefit from stock options 3,212 -
Debt decrease (84) (80)
Repurchase of common stock - (9,028)
Proceeds from exercise of stock options 9,386 1,287
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS $ 91,331 $ (5,322)
========== ==========
CONDENSED BALANCE SHEETS
----------------------------
(Dollars in thousands)
(unaudited)
March 31, December
2006 31, 2005
---------- ----------
Assets
- --------
Cash, cash equivalents & short-term investments $197,039 $105,708
Accounts receivable 113,404 19,534
Current deferred tax assets 76,698 42,103
Other current assets 13,109 8,370
Property & equipment and Patents (net) 74,653 70,176
Long-term deferred tax assets and non-current
assets 56,407 53,646
---------- ----------
TOTAL ASSETS $531,310 $299,537
========== ==========
Liabilities and Shareholders' Equity
- --------------------------------------
Current portion of long-term debt $357 $350
Accounts payable & accrued liabilities 38,100 30,129
Current deferred revenue 73,690 20,055
Long-term deferred revenue 213,178 71,193
Long-term debt & long-term liabilities 4,148 3,496
---------- ----------
TOTAL LIABILITIES 329,473 125,223
SHAREHOLDERS' EQUITY 201,837 174,314
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $531,310 $299,537
========== ==========
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 free cash flow. The table below presents a reconciliation
of this non-GAAP line item to net cash provided by operating
activities.
For the Three
Months Ended
March 31,
------------------
2006 2005
------------------
Net cash provided by operating activities $86,546 $16,651
Purchases of property and equipment (3,249) (2,071)
Patent additions (4,529) (3,826)
Unrealized gain (loss) on short-term investments 49 (205)
-------- --------
Free cash flow $78,817 $10,549
======== ========
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