InterDigital Announces First Quarter 2000 Results
Company Reports Positive Cash Flow and Earnings
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 4, 2000-- InterDigital Communications Corporation (Nasdaq: IDCC
- news), a leading wireless technology provider, today reported earnings of $0.01 per share for the first quarter ended March
31, 2000. Results in the quarter included strong recurring royalty revenue from TDMA licensees compared to last year and a
healthy increase in cash since year-end 1999.
For the first quarter of 2000, InterDigital reported net income of $417,000, or $0.01 per share (diluted) compared to the
$21.2 million, or $0.43 per share (diluted), reported in last year's extremely strong first quarter. The decrease versus 1999 was
due to the positive impact in last year's first quarter of $31.5 million of license revenue from Nokia associated with a TDMA
patent licensing agreement.
Commenting on InterDigital's first quarter 2000 performance, Chief Executive Officer Mark Gercenstein said, ``We made good
progress this quarter on our key financial performance goals and on our technology development programs. Recurring revenues
are growing on the strength of royalties from TDMA licensees and our ongoing technology development for Nokia. We met
this quarter's commitments to Nokia on our Wideband CDMA technology development program and are progressing on our
FDD system on a chip project. I am especially pleased with the increase in our cash position because we are deepening our
financial resources even as we accelerate the pace of investment we are making to develop next generation wireless technology.
We've also had great success hiring talented new engineers who are adding to the depth of our team.''
Revenues in the first quarter of 2000 totaled $12.2 million and were comprised largely of recurring royalties from TDMA
patent licensees, specialized engineering service revenue and product sales related to the completion of the final order of
UltraPhone© wireless local loop systems. Revenues in the first quarter of 1999 were $35.2 million, which included a $31.5
million payment from Nokia. Recurring royalties in the first quarter of 2000 totaled approximately $4.3 million, up significantly
from the $0.6 million generated in the same quarter of 1999.
Product costs in the first quarter of 2000 mainly reflect costs associated with fulfilling a large portion of a 5,000 line order of
UltraPhone© wireless local loop systems for Namibia. As previously announced, after completing this order in the second
quarter of 2000, production of those systems will cease.
Operating expenses in the first quarter of 2000 decreased versus those incurred in the first quarter of 1999 as a result of the
recovery of certain expenses associated with the ongoing patent litigation with Ericsson. These recoveries offset other cost
increases mainly attributable to strategic marketing analyses and technology and product positioning initiatives.
Net interest income contributed to earnings in the first quarter of 2000, rising to $1.6 million from $0.7 million in last year's first
quarter. This largely resulted from the substantial increase in the Company's cash balance.
Cash and short-term investments increased to $100.4 million at March 31, 2000, up $17.3 million from year-end 1999. The
increase was due to cash receipts from the exercise of stock options and changes in operating working capital.
The Company plans to modify its revenue recognition policy in the second quarter of 2000 in response to a recent Securities
and Exchange Commission (SEC) Staff Accounting Bulletin (SAB 101), which applies to all U.S. companies. SAB 101 relates,
among other things, to the SEC staff's view on accounting for non-refundable up-front fees received in connection with licensing
agreements. Historically, InterDigital and many other companies have recorded such fees as revenue upon the signing of the
applicable license agreement because the Company has delivered the license and has no remaining obligations. InterDigital
expects to record a cumulative change in accounting principle, consisting of a one-time charge, to defer up-front payments
which relate to future product sales by licensees and which have not been exhausted by the licensees in connection with their
product sales. Thereafter, the Company will recognize the revenue associated with those remaining pre-payments generally as
such royalty pre-payments are used up by the licensees. The amount of the expected charge in the second quarter is still being
determined but is currently expected to be in the $19 to $31 million range, depending upon the royalty reports provided by
InterDigital's licensees. This change in accounting policy will not affect cash flows or the amount of earnings the Company will
ultimately recognize.
According to Richard Fagan, Chief Financial Officer of InterDigital, ``This change in accounting policy does not affect our
licensing agreements. It is a change in the way we will report licensing revenue in accordance with the SEC's view. Our
historical financial statements are in accordance with Generally Accepted Accounting Principles and this policy change will have
no effect on previously reported results. More importantly, the change has no impact on current or projected cash flows. The
charge we take in the second quarter, which could range from $19 to $31 million, will be reflected as earnings in future periods
as revenue is recorded. There is an important benefit to this change. It will help reduce some of the variability in our revenue
flow, thus providing a more normalized earnings stream, taking us a step closer to greater predictability in our financial results.''
Looking forward, Mr. Gercenstein said: ``Our focus this year is on the refinement of our strategy and on executing our business
plan. Our strategic direction is sound. We are working now to finalize the critical strategic objectives and tactical plans to
ensure long-term success for InterDigital. As we do that, we are concentrating on meeting our technology development
milestones and on establishing the strategic relationships we need to solidify our position in the wireless market for the future.''
SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
For the Period Ended March 31, 2000
(Dollars in thousands except per share data)
(unaudited)
For the three months ended March 31,
-------------------------------------
2000 1999
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REVENUES:
Product $ 4,558 $ 1,097
Licensing and
strategic partner 7,648 34,045
---------- ---------
12,206 35,142
---------- ---------
PRODUCT COSTS AND
OPERATING EXPENSES:
Cost of product 3,826 1,695
Sales and marketing 1,521 955
General and administrative 2,668 1,518
Patents administration
and licensing (450) 2,797
Development 5,443 5,598
---------- ---------
13,008 12,563
----------- ---------
Income (loss)
from operations (802) 22,579
NET INTEREST INCOME 1,584 742
---------- ---------
Income before income taxes 782 23,321
INCOME TAX PROVISION (331) (2,096)
-------------- ----------
Net income 451 21,225
PREFERRED STOCK DIVIDENDS (34) (64)
-------------- -----------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 417 $ 21,161
============== ===========
============== ===========
NET INCOME PER COMMON
SHARE - DILUTED $ 0.01 $ 0.43
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 56,046 48,855
CONDENSED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, 2000 Dec. 31, 1999
-------------- -------------
Cash & short term investments $ 100,357 $ 83,142
Other current assets 16,457 25,601
Property, plant &
equipment (net) 7,570 7,393
Patents (net) & other
long term assets 10,357 10,435
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TOTAL ASSETS 134,741 126,571
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Current portion of
long term debt 431 446
Accounts payable &
accrued liabilities 9,010 11,637
Foreign & domestic taxes payable 967 1,093
Deferred revenue 147 69
Long term debt and non
current liabilities 3,419 3,819
------------- --------------
TOTAL LIABILITIES 13,974 17,064
SHAREHOLDERS' EQUITY 120,767 109,507
------------- --------------
------------- --------------
TOTAL LIABILITIES & EQUITY $ 134,741 $ 126,571
============== ==============
InterDigital is creating innovative solutions for mainstream wireless applications which deliver cost and time-to-market
advantages for its customers. By leveraging its technology and intellectual property into third generation standards and
products, it is maximizing its long-term revenue and earnings opportunities. The Company has a strong portfolio of patented
TDMA and CDMA inventions which it licenses worldwide. For more information, please visit InterDigital's web site:
www.interdigital.com. InterDigital© and B-CDMA(TM) are trademarks of the Company.
This press release contains forward-looking statements regarding InterDigital's current beliefs and expectations as to future
sources of revenues, and the impact of SAB 101. 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: unanticipated 3G development costs, difficulties or delays; failure to successfully negotiate patent licensing
agreements; a slowdown or shifting of the 3G market emergence; the continued guidance from the SEC on SAB101, and
actual licensee reporting on product sales. InterDigital undertakes no duty to publicly update any forward looking statements,
whether as a result of new information, future events or otherwise.
Contact:
InterDigital Communications Corporation
Media Contact:
Susan Sutton, 610/878-7800
e-mail: susan.sutton@interdigital.com
or
Investor Contact:
Janet Point, 610/878-7800
e-mail: janet.point@interdigital.com |
