InterDigital Announces Fourth Quarter and Full Year 2002 Financial Results
Tuesday February 11, 8:20 am ET
Profitable Performance Driven by Licensing Revenues
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Feb. 11, 2003--InterDigital Communications Corporation (Nasdaq: IDCC - News), a leading architect, designer and provider of wireless technology and product platforms, today announced operating results for the fourth quarter and year ended December 31, 2002.
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The results were highlighted by year-over-year revenue growth of 64% in 2002, including non-recurring items. Further, InterDigital's cash and short-term investment position at December 31, 2002 remained very strong at $87.6 million. The receipt of approximately $11.9 million (net of non-U.S. withholding taxes) associated with an installment payment related to a 2G patent license agreement with NEC Corporation of Japan (NEC) immediately after year-end further strengthened the Company's cash position going into early 2003.
Revenues in the fourth quarter 2002 of $25.2 million, increased $16.8 million, or 200%, over fourth quarter 2001 due to the recognition of significantly higher patent licensing royalty revenue. Patent licensing royalty revenue increased $19.2 million, or 316%, in the fourth quarter 2002 over the $6.0 million reported in the fourth quarter 2001. The increase in patent licensing royalty revenue in the fourth quarter 2002 was primarily due to three items: $5.1 million of new revenue resulting from agreements reached with NEC in early 2002; an increase of $4.6 million in royalties related to improved marketplace performance from a key licensee, Sharp Corporation (Sharp); and the recognition of $9.7 million of deferred revenue associated with a non-refundable and non-transferable patent license prepayment previously received from Denso Corporation, relating to its discontinued PDC and PHS second generation (2G) wireless products. As expected, no specialized engineering services revenue associated with the final stages of the Wideband Time Division Duplex (WTDD) technology development work for Nokia Corporation (Nokia) was recognized in the fourth quarter 2002, resulting in a decrease in specialized engineering service revenue of $2.3 million in fourth quarter 2002 versus fourth quarter 2001.
The Company reported net income of $4.0 million, or $0.07 per share (diluted), for the fourth quarter 2002, compared to a net loss of $9.8 million, or $0.18 per share in the fourth quarter 2001. The improvement in operating results compared to the fourth quarter 2001 was due to the overall increase in revenues, partially offset by modest increases in operating expenses. Operating expenses increased 2% over fourth quarter 2001 to $18.8 million, as increased patent enforcement costs offset decreases in other expense areas. In addition, net interest income for the fourth quarter 2002 decreased due to lower interest rates on investments in 2002 compared to 2001. Tax expense increased in the fourth quarter 2002 due to higher non-US withholding taxes related to the increased royalty revenue recognized in the period.
For the year ended December 31, 2002, revenues were $86.0 million, an increase of 64% versus comparable revenues of $52.6 million in 2001. Absent non-recurring revenue items associated with the discontinuation of sales of covered products by Denso and Kyocera and revenue attributable to the pre-2002 build-out of 3G systems in Japan by NEC, 2002 revenue would have increased 17% to $61.5 million in 2002 over 2001. Revenues from specialized engineering services associated with the WTDD technology development work for Nokia totaled $4.5 million in 2002, down from the $21.8 million recorded in 2001. The Company reported net income of $0.7 million for the year 2002, or $0.01 per share, compared to a net loss of $19.4 million or $0.36 per share in 2001.
"In one of the most challenging years for the wireless industry, we are pleased to report solid results for 2002," said Howard Goldberg, President and CEO. "We achieved our most important objectives: substantial progress and continued aggressive investment in 3G technology and product development while maintaining the Company's financial strength, improving our industry positioning, and enhancing our reputation in the investment community.
"The migration of our WCDMA technologies to product is progressing well. We enter 2003 having commenced the marketing of our future FDD products to potential customers worldwide and looking forward to demonstrating the first standards-compliant WTDD end-to-end solution next week at the 3GSM Congress in Cannes, France.
"As a result of our aggressive development efforts and focused financial management, we are well positioned to take full advantage of the market opportunities for traditional and emerging wireless communications," Mr. Goldberg concluded.
Operational highlights of the year included:
Posting significant advances toward global 3G WCDMA product introduction. The Company began actively marketing its FDD software protocol stack, developed through its strategic partnership with Infineon, and demonstrated its portability to different hardware platforms.
Passing a major product development milestone in WTDD product definition and development. As a result, the Company will demonstrate the first standards compliant WTDD system at the 3GSM World Congress this month.
Strengthening the Company's patent licensing program through the addition of four 3G licensees while also resolving outstanding 2G patent licensing disputes with NEC and Samsung.
Broadening the Company's patent licensing portfolio through the acquisition of exclusive licensing rights to Tantivy Corporation's CDMA2000 patent portfolio.
Expanding the Company's technology outreach to leading universities in wireless communications by adding a research partnership with Virginia Polytechnic Institute and State University, enhancing the Company's 3G wireless development initiatives.
Attaining the International Standards Organization quality standard (ISO 9001:2000) Multi-Site Registration Certificate for all the Company's development centers including Montreal, Canada, and Munich, Germany.
Rich Fagan, Chief Financial Officer, commented, "As we enter 2003, our baseline revenues continue to be largely dependent on trends in the mobile wireless market, particularly in Japan. In addition, we expect that the performance of NEC and Sharp will continue to be the major determinant of our baseline revenues in the near term. To the extent that these and other Japanese licensees continue their apparent early success in penetrating markets outside Japan, we expect to see some improvement to our baseline royalty revenues from sales of covered products in 2003. We also intend to work aggressively towards expanding our licensee base with new agreements in 2003. We anticipate maintaining relatively stable employment levels in the near term and expect quarterly operating expense levels to be in the range, or slightly above, those experienced in the past few quarters.
"Our total year 2003 results could also be affected materially by the nature of any ultimate resolutions related to open licensing and infringement issues with Ericsson (currently in litigation and scheduled for trial in May 2003) and Nokia (pending determination of royalty rates associated with the existing license agreement)," added Mr. Fagan.
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 and 3G 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 reflecting, among other things, the Company's beliefs and expectations as to (i) the migration of our WCDMA technologies to product and our ability to take advantage of market opportunities, (ii) revenues, our ability to expand our licensee base, employee levels, and operating expenses and (iii) the impact of any resolutions with Ericsson and Nokia, including our ability to achieve such resolutions and the timing thereof. Words such as "looking forward", "opportunities", "expect", "intend", "anticipate", and "could", 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 any such forward-looking statement due to a variety of factors in addition to those specifically identified above including, but not limited to: (i) the market relevance of our technologies; limited or no deployment of WTDD technology; changes in technology preferences of strategic partners or consumers; unanticipated development costs, technical, financial or other difficulties or delays related to the development of strategic relationships our technologies and products; the availability or development of substitute technologies or competition from competitive technologies; our ability to leverage our existing and enter into additional strategic relationships; the ability of our semiconductor partner(s) to provide capacity, competitively priced products and possess adequate manufacturing and distribution networks; failure of the 3G market or the wireless data services market to materialize in the manner, scope or time frame anticipated, the ability of operators to fund new 3G network deployments, the ability of operators to deliver 3G products in volume; the success of underlying 3G technology; and the successful delivery of differentiated services by 3G products; (ii) the effects of global economic conditions, governmental licensing decisions, and delays in spectrum licensing, (iii) our ability to enter into additional licenses, our ability to extend the term of the Sharp patent license agreement on favorable terms or at all, the market share and performance of our licensees in selling their products, our ability to adequately enforce and protect our patents and other intellectual property rights, developments in the Ericsson patent litigation, and our ability to negotiate and finalize royalty rates with Nokia and Samsung. We undertake 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
--------------------------------------------
For the Periods Ended December 31
(Dollars in thousands except per share data)
(unaudited)
For the Three Months For the Twelve Months
Ended Ended
December 31, December 31,
-------------------- ---------------------
2002 2001 2002 2001
---------- --------- ---------- ----------
REVENUES: $ 25,159 $ 8,379 $ 85,963 $ 52,562
---------- --------- ---------- ----------
OPERATING EXPENSES:
Sales and marketing 884 1,212 4,331 4,698
General and
administrative 3,466 3,995 14,477 14,898
Patents administration
and licensing 3,802 2,346 13,141 8,959
Development 10,614 10,765 46,686 44,500
---------- --------- ---------- ----------
18,766 18,318 78,635 73,055
---------- --------- ---------- ----------
Income (loss) from
operations 6,393 (9,939) 7,328 (20,493)
NET INTEREST INCOME 439 873 2,019 4,627
---------- --------- ---------- ----------
Income (loss) before
income taxes 6,832 (9,066) 9,347 (15,866)
INCOME TAX PROVISION (2,770) (695) (8,555) (3,418)
---------- --------- ---------- ----------
Net income (loss) 4,062 (9,761) 792 (19,284)
PREFERRED STOCK
DIVIDENDS (33) (34) (136) (137)
---------- --------- ---------- ----------
NET INCOME (LOSS) TO
COMMON SHAREHOLDERS $4,029 $(9,795) $656 $(19,421)
========== ========= ========== ==========
NET INCOME (LOSS) PER
COMMON SHARE - BASIC $0.08 $(0.18) $0.01 $(0.36)
========== ========= ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON
SHARES OUTSTANDING -
BASIC 53,630 53,589 52,981 53,446
========== ========= ========== ==========
NET INCOME (LOSS) PER
COMMON SHARE - DILUTED $0.07 $(0.18) $0.01 $(0.36)
========== ========= ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON
SHARES OUTSTANDING -
DILUTED 57,919 53,589 56,099 53,446
========== ========= ========== ==========
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,
--------------------- --------------------
2002 2001 2002 2001
---------- ---------- ---------- ---------
Net income (loss) before
pref. stock dividends $4,062 $(9,761) $792 $(19,284)
Depreciation &
amortization 2,792 1,568 9,268 6,375
Increase in deferred
revenue 13,250 - 72,500 30,611
Deferred revenue
recognized (18,807) (2,331) (54,542) (9,877)
Decrease (increase) in
operating working
capital, deferred
charges and other (15,092) 6,305 (30,663) 1,963
Capital spending &
patent additions (3,962) (1,701) (11,994) (10,590)
---------- ---------- ---------- ---------
CASH FLOW BEFORE
FINANCING
ACTIVITIES (17,757) (5,920) (14,639) (802)
Debt decrease &
preferred dividends (69) (49) (470) (428)
Net stock issued 8,810 1,373 12,312 2,606
---------- ---------- ---------- ---------
NET (DECREASE)
INCREASE IN CASH
AND SHORT-TERM
INVESTMENTS $ (9,016) $ (4,596) $ (2,797) $ 1,376
========== ========== ========== =========
CONDENSED BALANCE SHEETS
------------------------
(Dollars in thousands)
(unaudited)
December December
31, 2002 31, 2001
--------- ---------
Assets
------
Cash & short-term investments $87,566 $90,363
Accounts receivable 51,749 14,479
Other current assets 7,627 6,385
Property & equipment (net) 14,091 14,402
Patents (net) & other non-current assets 27,001 22,752
--------- ---------
TOTAL ASSETS $188,034 $148,381
========= =========
Liabilities and Shareholders' Equity
------------------------------------
Current portion of long-term debt $189 $184
Accounts payable & accrued liabilities 14,111 11,950
Foreign & domestic taxes payable 5,260 907
Deferred revenue 90,866 72,908
Long-term debt & long-term liabilities 1,970 2,158
--------- ---------
TOTAL LIABILITIES 112,396 88,107
SHAREHOLDERS' EQUITY 75,638 60,274
--------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $188,034 $148,381
========= =========
--------------------------------------------------------------------------------
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
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