Mac; & your pick IDCC + 7% on earnings news @ 21 3/8 +1 7/16: InterDigital Announces Second Quarter 2000 Results
Company Results in Line with Expectations
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--July 20, 2000--InterDigital Communications Corporation (Nasdaq: IDCC - news), a leading wireless technology provider, today reported a post-SAB 101 loss of $0.02 per share for the second quarter ended June 30, 2000.
Results in the second quarter 2000 reflected an increase in engineering and strategic resources supporting the development of 3G digital wireless technologies. The second quarter 2000 also included strong recurring royalty revenue from TDMA licensees and higher specialized engineering service revenues compared to the same quarter a year ago.
For the second quarter 2000, InterDigital reported a post-SAB 101 net loss of $1.1 million, or $0.02 per share, compared to net income of $1.4 million, or $0.03 per share (diluted) in the same quarter of 1999. The decrease in earnings versus 1999 was due primarily to increased development and general and administrative expenses in 2000 related to accelerated investments in developing next generation wireless technology, corporate strategic analyses and other key planning initiatives. On a pre-SAB 101 basis, the second quarter 2000 loss would have been $0.04 per share.
Revenues in the second quarter of 2000 totaled $11.6 million and were comprised largely of recurring royalties from TDMA patent licensees and specialized engineering service revenue. Recurring royalties in the second quarter of 2000 totaled approximately $5.8 million ($4.2 million on a pre-SAB 101 basis), up significantly from the $0.2 million reported in the same quarter of 1999. Specialized engineering service revenue associated with technology development work for Nokia in the second quarter 2000 was $4.7 million, up from $3.1 million in last year's second quarter. Revenues in the second quarter of 1999 were $12.3 million, which included an approximately $8 million up-front payment associated with a royalty-bearing license with Robert Bosch GmbH.
Commenting on the second quarter, Mark Gercenstein, Chief Executive Officer, stated, ``Our performance was on target with our expectations. Revenues from specialized engineering services and recurring royalties both grew significantly. We accelerated our investments to meet our technology and product development objectives. In addition, we added Ubinetics to our expanding roster of licensees and continued to build our patent portfolio.''
As previously announced, InterDigital reflected in its six month results the negative impact of a net after tax cumulative effect of change in accounting principle of $30.5 million, or approximately $0.54 per share (diluted), associated with the Company's modification of its revenue recognition policy in response to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101 ``Revenue Recognition in Financial Statements'' (SAB 101). This one-time non-cash charge effectively defers previously recognized net up-front royalty pre-payments not exhausted through product sales of licensees as of January 1, 2000. In the first half of 2000, InterDigital recognized approximately $3.3 million and $2.7 million of revenue and earnings, respectively, on a post-SAB 101 basis related to the deferred items. Going forward, the Company will continue to recognize the revenue and net earnings associated with the deferred amounts as licensee product sales occur.
For the first six months of 2000, the Company reported on a post-SAB 101 basis, earnings of $661,000, or $0.01 per share, before the one-time charge described above, compared to $22.5 million, or $0.46 per share (diluted), in the first six months of 1999. On a pre-SAB 101 basis, the Company would have reported a loss of $0.03 per share for the first half of 2000. Revenues in the first six months of 2000 were $25.5 million ($22.2 million on a pre-SAB 101 basis) versus $47.5 million in last year's first six months. Revenues in the first half of 1999 included $39 million in up-front payments from Nokia and Robert Bosch GmbH.
The Company's cash position at June 30, 2000 remained a very healthy $94.3 million, up $11.1 million from year-end 1999.
In commenting on the Company's outlook, Mr. Gercenstein said, ``We expect to secure additional licensing and other business agreements necessary to deliver a third straight cash flow positive year. Some agreements may generate up-front cash in 2000, while contributing revenue and earnings after this year due to the new method of revenue recognition we adopted in response to SAB 101. Through the balance of this year, we expect revenues from recurring royalties and engineering services to continue to be strong, approaching $35 million for the year. Because we anticipate that new licensing agreements may come later in the year, we may report losses again in the third quarter. Spending during the second half will increase as we continue to invest in additional resources for 3G technology development and other strategic initiatives. Considering all of these factors, we are currently projecting earnings in the second half of the year to be lower than we originally projected. Actual results will depend upon the type of agreements that materialize.
``We plan to play a major role in the future of wireless technology, particularly as the industry gears up to present 3G technologies and products to an expanding market. InterDigital is extremely well-positioned to offer next generation solutions through its past and present work in developing digital wireless technology and products. We believe we have technology, patents and patents pending that will be essential to all modes of the 3G standard,'' he said.
This press release contains forward-looking statements regarding InterDigital's current beliefs and expectations as to its strategic objectives, the usefulness of the Company's technology, patents and patents pending in the implementation of all modes of the 3G standard, its anticipated spending, sources and amounts of revenues and cash flow in the second half of 2000, and its ability to secure licensing and other business arrangements. Such statements are subject to risks and uncertainties. Actual outcomes could differ materially from those expressed in any such forward-looking statement due to a variety of factors including, but not limited to: failure of licensees to meet expectations and commitments, the timing and accuracy of reports and guidance provided by licensees, inability to enforce patent rights against third parties, adverse developments in the Ericsson patent litigation, unanticipated development costs, difficulties or delays, failure to successfully negotiate patent licensing agreements or adequate strategic relationships, failure to obtain or maintain patents relevant to the 3G standards, inability to hire or retain adequate personnel, Nokia's right to terminate the development project for convenience. InterDigital undertakes no duty to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
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SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share data)
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ------------------
2000 1999 2000 1999
------- ------- ------- -------
REVENUES:
Product $ 1,076 $ 427 $ 5,634 $ 1,524
Licensing and
strategic partner 10,556 11,919 19,842 45,964
------- ------- ------- -------
11,632 12,346 25,476 47,488
------- ------- ------- -------
PRODUCT COSTS AND
OPERATING EXPENSES:
Cost of product 1,374 1,302 5,200 2,997
Sales and marketing 727 711 2,248 1,666
General and
administrative 3,206 1,922 5,874 3,440
Patents administration
and licensing 1,746 1,527 1,337 4,324
Development 6,445 5,108 11,888 10,706
Repositioning Charges - 1,213 - 1,213
------- ------- ------- -------
13,498 11,783 26,547 24,346
------- ------- ------- -------
Income (loss) from
operations (1,866) 563 (1,071) 23,142
NET INTEREST INCOME 1,308 890 2,892 1,632
------- ------- ------- -------
Income (loss) before
income taxes (558) 1,453 1,821 24,774
INCOME TAX PROVISION (511) (29) (1,091) (2,125)
------- ------- ------- -------
Net income (loss) (1,069) 1,424 730 22,649
PREFERRED STOCK DIVIDENDS (35) (64) (69) (128)
------- ------- ------- -------
NET INCOME (LOSS)
APPLICABLE TO COMMON
SHAREHOLDERS BEFORE
CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE $(1,104) $ 1,360 $ 661 $22,521
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE $ - $ - $(30,532) $ -
------- ------- --------
NET INCOME $(1,104) $ 1,360 $(29,871) $22,521
======= ======= ======== =======
NET INCOME (LOSS) PER
COMMON SHARE BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE - BASIC $( 0.02) $ 0.03 $ 0.01 $ 0.46
======= ======= ======== =======
NET INCOME (LOSS) PER
COMMON SHARE - BASIC $ (0.02) $ 0.03 $ (0.58) $ 0.46 |
