Full Year Net Income Quadruple Prior Year After Adjustments
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--
InterDigital, Inc. (NASDAQ: IDCC) today announced results for the fourth
quarter and twelve months ended December 31, 2009.
Fourth Quarter 2009 Highlights:
-- Net income of $38.9 million, or $0.88 per diluted share
-- Pro forma net income of $27.1 million, or $0.61 per diluted share,
exclusive of after-tax adjustments of $11.8 million related to foreign
tax credits, investment impairment, and other items
-- Revenue of $76.4 million, a 30 percent increase over fourth quarter 2008
Full Year 2009 Highlights:
-- Net income of $87.3 million, or $1.95 per diluted share
-- Pro forma net income of $97.3 million, or $2.18 per diluted share,
exclusive of after-tax adjustments of $10.1 million, related to
repositioning charges, foreign tax credits, and other items
-- Revenue of $297.4 million
-- Free cash flow1 of $284.3 million
-- Ending cash and short-term investments totaling $409.8 million
"Our core business of developing and licensing our leading edge wireless
technologies delivered exceptional fourth quarter and full year 2009
revenue growth and profitability," stated William J. Merritt, President
and Chief Executive Officer. "As a result, we enter 2010 in our
strongest position ever. We intend to leverage this financial strength,
our technical expertise, and innovative partnerships to continue to
shape the future of mobile broadband through a suite of solutions to
create more powerful and efficient networks and richer multimedia
experiences."
"We anticipated many years ago that the popularity of mobile data would
saturate traditional wireless networks," continued Mr. Merritt. "Our
team is addressing this bandwidth challenge with fundamental innovations
in spectrum optimization, cross-network connectivity and mobility, and
intelligent data delivery techniques, samples of which we demonstrated
at the Mobile World Congress earlier this month. We intend to continue
to be a high-value innovator in the industry, creating solutions that
not only drive the performance of wireless networks, but also the value
of our company."
Fourth Quarter 2009 Summary
The company's fourth quarter 2009 net income of $38.9 million, or $0.88
per diluted share, posted a substantial increase compared to net income
of $3.8 million or $0.09 per diluted share in fourth quarter 2008. This
year-over-year increase was driven by revenue contributions from new
patent license agreements with Samsung (signed in January 2009) as well
as Pantech and Cinterion and reduced operating expenses resulting from
the company's repositioning (announced on March 30, 2009).
Pro forma net income for fourth quarter 2009, which excludes the
recognition of a $16.4 million tax benefit, a $3.9 million investment
impairment, and other items noted in the company's pro forma
consolidated statement of income, totaled $27.1 million, or $0.61 per
diluted share, reflecting an increase of $19.6 million, more than three
times the company's pro forma fourth quarter 2008 net income of $7.5
million, or $0.17 per diluted share.
Total revenue in fourth quarter 2009 totaled $76.4 million, a 30 percent
increase from $58.7 million reported in fourth quarter 2008. Patent
licensing royalties in fourth quarter 2009 of $72.6 million increased 36
percent over $53.6 million in fourth quarter 2008 primarily due to the
new patent license agreement with Samsung signed in first quarter 2009,
as well as revenue related to the new patent license agreements with
Pantech and Cinterion signed in third quarter 2009. Technology solutions
revenue decreased 25 percent to $3.8 million in fourth quarter 2009 from
$5.1 million in fourth quarter 2008, driven by declines in
services-related revenues derived from the SlimChip(TM) modem IP business.
In fourth quarter 2009, 53 percent of total revenue of $76.4 million was
attributable to companies that individually accounted for 10 percent or
more of this amount, Samsung (34 percent) and LG (19 percent).
Fourth quarter 2009 operating expenses of $35.6 million decreased $18.3
million, or 34 percent, from $53.9 million in fourth quarter 2008. This
reduction was due primarily to the company's repositioning announced on
March 30, 2009 and a fourth quarter 2008 adjustment to the company's
long-term performance-based cash incentive costs, both of which helped
decrease development expenses by $17.1 million, or 56 percent
year-over-year, from $30.4 million in fourth quarter 2008 to $13.3
million in fourth quarter 2009. Patent administration and licensing
expenses increased 30 percent to $15.1 million in fourth quarter 2009
from $11.6 million in the comparable quarter 2008 due to higher levels
of arbitration and litigation activity. Selling, general and
administrative expenses declined from $11.9 million in fourth quarter
2008 to $5.6 million in fourth quarter 2009 primarily due to reduced
long-term performance-based cash incentive costs, the fourth quarter
2008 establishment of a reserve for uncollectible accounts associated
with the company's SlimChip modem IP, and the fourth quarter 2009
partial release of that reserve.
Net interest and investment (loss) income was negative $3.2 million in
fourth quarter 2009, a decrease of $3.8 million from fourth quarter 2008
due to a $3.9 million write-down of an investment and lower rates of
return on the company's investments.
The company reported a net tax benefit in fourth quarter 2009 of $1.2
million, driven by the recognition of $16.4 million of foreign tax
credits related to the company's planned amendments of prior period
income tax returns. Excluding these credits, the company's effective tax
rate for 2009 was approximately 40 percent compared to 34 percent for
2008. This increase was driven by non-deductible impairment charges
recognized in fourth quarter 2009 and the absence of a research and
development credit for 2009.
Twelve Months Summary
Net income for full year 2009 was $87.3 million, or $1.95 per diluted
share, more than triple the $26.2 million, or $0.57 per diluted share,
reported in 2008. This year-over-year increase was driven by revenue
contributions from new patent license agreements with Samsung, Pantech,
and Cinterion, as well as reduced operating expenses resulting from the
company's repositioning announced on March 30, 2009.
Pro forma net income for full year 2009, which excludes the
repositioning charge of $38.6 million, recognition of a $16.4 million
tax benefit, and other items noted in the company's pro forma
consolidated statement of income, totaled $97.3 million, or $2.18 per
diluted share, reflecting an increase of $73.9 million, more than
quadruple the company's pro forma full year 2008 net income of $23.4
million, or $0.51 per diluted share.
For full year 2009, total revenues of $297.4 million increased 30
percent over 2008's revenues of $228.5 million. Patent licensing
revenues in 2009 increased to $287.6 million, a $71.1 million or 33
percent increase, over the $216.5 million reported in 2008. Growth in
year-over-year patent licensing royalties was driven by the addition of
$102.9 million in fixed-fee amortized royalty revenue from patent
license agreements signed with Samsung and Pantech in 2009, offset by
declines in per-unit royalty revenues of $17.7 million due to
industry-wide declines in handset sales, specifically in Japan. Despite
the overall decline in per-unit royalties, certain licensees with
concentrations in the smartphone market reported increased royalties in
2009.
Technology solutions revenue decreased to $9.8 million in 2009 from
$12.0 million in 2008, attributable to engineering service fees earned
in 2008 associated with the company's SlimChip modem IP that did not
recur in 2009. This decrease was partially offset by an increase in
royalties earned on the SlimChip modem IP related to product sales.
During 2009, 62 percent of the company's total revenue of $297.4 million
was attributable to companies that individually accounted for 10 percent
or more of total revenue, Samsung (33 percent), LG (19 percent), and
Sharp (10 percent).
Operating expenses for 2009 were $144.9 million, a decrease of $47.0
million, or 25 percent, over $191.9 million in 2008, excluding a 2009
repositioning charge of $38.6 million. The repositioning, which the
company announced on March 30, 2009, decreased development expenses by
$34.9 million, or 35 percent year-over-year, from $98.9 million in 2008
to $64.0 million in 2009. Patent licensing and administration costs of
$56.1 million decreased 12 percent year-over-year from $63.5 million in
2008, primarily due to the resolution of the company's various disputes
with Samsung and the third quarter 2008 resolution of the Nokia U.K.
disputes.
Net interest and investment (loss) income was negative $1.2 million in
2009, a decrease from the $3.4 million in 2008, due to a $3.9 million
write-down of an investment and lower rates of return on the company's
investments.
Excluding the company's fourth quarter 2009 recognition of $16.4 million
in foreign tax credits, the company's effective tax rate for 2009 was
approximately 37 percent compared to 34 percent for 2008. This increase
was driven by non-deductible impairment charges recognized in fourth
quarter 2009 and the absence of a research and development credit for
2009.
In 2009, the company generated $284.3 million of free cash flow compared
to $45.0 million in 2008. This free cash flow was driven by receipts of
approximately $506.5 million related to patent licensing and technology
solutions agreements, including the first two of four installments of
$100.0 million from Samsung under the company's January 2009 agreement
and $182.4 million of prepayments received from two existing licensees.
The cash receipts were partially offset by cash-based operating
expenses, foreign withholding and estimated federal income taxes paid,
and capital investments in the company's development and patent-related
initiatives. During 2009, the company repurchased approximately 1.0
million shares for $25.0 million under the $100.0 million share
repurchase program authorized in March 2009.
First Quarter 2010 Outlook
Scott A. McQuilkin, Chief Financial Officer, commented, "In first
quarter 2010, we expect to report revenues from existing agreements in
the range of $78 million to $79 million. The expected increase of range
does not include any potential impact from additional new agreements
that might be signed during first quarter 2010 or additional royalties
identified in regularly conducted audits."
Due to the repositioning announced on March 30, 2009, the company
reclassified its income statement presentation to better align its
operating expense classifications with its ongoing activities. The
company eliminated the General and administrative and Sales
and marketing classifications within operating expenses and created
the Selling, general and administrative classification. All costs
previously reported under General and administrative have been
reclassified to Selling, general and administrative, while Sales
and marketing costs have been reclassified between Selling,
general and administrative and Patent administration and licensing.
Additionally, the company reclassified portions of its Development
costs to Patent administration and licensing.
Conference Call Information
InterDigital(R) will host a conference call on Thursday,
February 25, 2010 at 10:00 a.m. Eastern Time to discuss its fourth
quarter and full year 2009 performance and other company matters. For a
live Internet webcast of the conference call visit www.interdigital.com
and click on the link to the Live Webcast on the homepage. The company
encourages participants to take advantage of the Internet option.
For telephone access to the conference, call (888) 802-2225 within the
U.S. or (913) 312-1254 from outside the U.S. Please call by 9:50 a.m. ET
on February 25 and ask the operator for the InterDigital Financial Call.
An Internet replay of the conference call will be available for 30 days
on InterDigital's web site in the Investor Relations section. In
addition, a telephone replay will be available from 1:00 p.m. ETFebruary 25 through 1:00 p.m. ETMarch 2. To access the recorded replay,
call (888) 203-1112 or (719) 457-0820 and use the replay code 2082454.
About InterDigital
InterDigital develops fundamental wireless technologies that are at the
core of mobile devices, networks, and services worldwide. We solve many
of the industry's most critical and complex technical challenges,
inventing solutions for more efficient broadband networks and a richer
multimedia experience years ahead of market deployment. InterDigital has
licenses and partnerships with many of the world's leading wireless
companies.
For more information, visit the InterDigital website: www.interdigital.com.
Safe Harbor Statement
This press release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include the information under the heading
"First Quarter 2010 Outlook" and other information regarding our current
beliefs, plans and expectations, including, but not limited to,
statements with respect to first quarter 2010 revenue and broadening our
licensee base into new areas. Words such as "believe," "will," "expect,"
"potential," and "might" or similar expressions are intended to identify
such forward-looking statements.
These forward-looking statements are based on management's current
expectations, estimates, forecasts and projections about the company and
are subject to risks and uncertainties that could cause actual results
and events to differ materially from those stated in the forward-looking
statements. These risks and uncertainties include, but are not limited
to, 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 patent licensing and technology solutions
agreements on acceptable terms; (iii) changes in the market share and
sales performance of our primary licensees, delays in product shipments
of our licensees, and timely receipt and final reviews of quarterly
royalty reports from our licensees and related matters; (iv) the
resolution of current legal proceedings, including any awards or
judgments relating to such proceedings, additional legal proceedings,
changes in the schedules or costs associated with legal proceedings, or
adverse rulings in such legal proceedings; and (v) unanticipated delays
or difficulties in our technology development effort. Risks and
uncertainties that could cause the company's actual results to differ
from those set forth in any forward-looking statement are discussed in
more detail under "Risk Factors," "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the company's Annual Report on Form 10-K for the year
ended December 31, 2008, as well as similar disclosures in the company's
subsequent Securities and Exchange Commission filings. Forward-looking
statements contained in this press release are made only as of the date
hereof, and the company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by applicable law,
regulation or other competent legal authority.
1 Free cash flow is a supplemental non-GAAP financial measure
that InterDigital believes is helpful in evaluating the company's
ability to invest in its business, make strategic acquisitions and fund
share repurchases, among other things. A limitation of the utility of
free cash flow as a measure of financial performance is that it does not
represent the total increase or decrease in the company's cash balance
for the period. InterDigital defines "free cash flow" as operating cash
flow less purchases of property and equipment, technology licenses,
investments in patents, and unrealized (loss) gain on short-term
investments. InterDigital's computation of free cash flow might not be
comparable to free cash flow reported by other companies. The
presentation of this financial information, which is not prepared under
any comprehensive set of accounting rules or principles, is not intended
to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with generally accepted
accounting principles (GAAP). A detailed reconciliation of free cash
flow to GAAP results is provided at the end of this press release.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
REVENUES $ 76,429 $ 58,677 $ 297,404 $ 228,469
OPERATING EXPENSES:
Selling, general and 5,611 11,882 24,777 33,452
administrative
Patent administration 15,090 11,638 56,127 63,492
and licensing
Development 13,252 30,422 64,007 98,932
Repositioning 1,634 - 38,604 -
Arbitration and
litigation - - - (3,940 )
contingencies
35,587 53,942 183,515 191,936
Income from operations 40,842 4,735 113,889 36,533
OTHER (LOSS) INCOME:
Interest and investment (3,171 ) 643 (1,186 ) 3,429
(loss) income, net
Income before income 37,671 5,378 112,703 39,962
taxes
INCOME TAX BENEFIT 1,205 (1,549 ) (25,447 ) (13,755 )
(PROVISION)
NET INCOME $ 38,876 $ 3,829 $ 87,256 $ 26,207
NET INCOME PER COMMON $ 0.89 $ 0.09 $ 1.98 $ 0.58
SHARE - BASIC
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 43,124 43,243 43,295 44,928
OUTSTANDING - BASIC
NET INCOME PER COMMON $ 0.88 $ 0.09 $ 1.95 $ 0.57
SHARE - DILUTED
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 43,735 44,113 44,080 45,794
OUTSTANDING - DILUTED
SUMMARY CASH FLOW
(dollars in thousands)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
Net income before $ 37,671 $ 5,378 $ 112,703 $ 39,962
income taxes
Taxes paid (145 ) (7,436 ) (44,853 ) (23,125 )
Depreciation,
amortization,
share-based 11,213 8,577 67,157 34,697
compensation & asset
impairment
Increase in deferred 6,617 (944 ) 611,991 84,207
revenue
Deferred revenue (60,215 ) (35,793 ) (225,159 ) (127,949 )
recognized
(Decrease) Increase in
operating working (6,949 ) 10,234 (201,145 ) 78,019
capital, deferred
charges and other
Capital spending,
technology licensing & (10,951 ) (12,248 ) (36,424 ) (40,825 )
patent additions
FREE CASH FLOW (22,759 ) (32,232 ) 284,270 44,986
Long-term investments (650 ) - (650 ) (651 )
Tax benefit from
shared-based 1,321 510 3,880 1,502
compensation
Debt decrease (74 ) (67 ) (1,877 ) (1,589 )
Repurchase of common - (15,098 ) (25,020 ) (82,331 )
stock
Proceeds from exercise 2,479 482 7,635 2,182
of stock options
Unrealized (loss) gain
on short-term (234 ) 399 (92 ) 94
investments
NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM $ (19,917 ) $ (46,006 ) $ 268,146 $ (35,807 )
INVESTMENTS
CONDENSED BALANCE SHEET
(dollars in thousands)
December 31, 2009 December 31, 2008
Assets
Cash & short-term investments $ 409,806 $ 141,660
Accounts receivable, less allowance of 212,905 33,892
$1,500 & $3,000
Current deferred tax assets 68,500 49,002
Other current assets 11,111 16,467
Property & equipment and Patents (net) 129,569 123,782
Other long-term assets (net) 73,894 40,965
TOTAL ASSETS $ 905,785 $ 405,768
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 584 $ 1,608
Accounts payable, accrued liabilities & 58,567 46,283
taxes payable
Current deferred revenue 193,409 78,646
Long-term deferred revenue 474,844 181,056
Long-term debt & long-term liabilities 8,844 10,515
TOTAL LIABILITIES 736,248 318,108
SHAREHOLDERS' EQUITY 169,537 87,660
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 905,785 $ 405,768
The following pro forma statements of financial results excludes the
items indicated. The company has provided these pro forma figures here
and elsewhere in this press release because management regards these
non-recurring items as not indicative of income for the period and
believes that investors might share this viewpoint.
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands except per share data)
For the Twelve Months Ended For the Twelve Months Ended
December 31, 2009 December 31, 2008
Actual Adj. Pro Forma Actual Adj. Pro Forma
REVENUES $ 297,404 - $ 297,404 $ 228,469 (6,394 ) $ 222,075
OPERATING
EXPENSES:
Selling,
general and 24,777 2,132 26,909 33,452 (5,914 ) 27,538
administrative
Patent
administration 56,127 288 56,415 63,492 6,680 70,172
and licensing
Development 64,007 1,380 65,387 98,932 (6,016 ) 92,916
Repositioning 38,604 (38,604 ) - - - -
Arbitration
and litigation - - - (3,940 ) 3,940 -
contingencies
183,515 (34,804 ) 148,711 191,936 (1,310 ) 190,626
Income from 113,889 34,804 148,693 36,533 (5,084 ) 31,449
operations
OTHER (LOSS)
INCOME:
Interest and
investment (1,186 ) 3,900 2,714 3,429 745 4,174
(loss) income,
net
Income before 112,703 38,704 151,407 39,962 (4,339 ) 35,623
income taxes
INCOME TAX
(PROVISION) (25,447 ) (28,616 ) (54,063 ) (13,755 ) 1,519 (12,236 )
BENEFIT
NET INCOME $ 87,256 $ 10,088 $ 97,344 $ 26,207 $ (2,820 ) $ 23,387
NET INCOME PER
COMMON SHARE - $ 1.98 $ 2.21 $ 0.58 $ 0.52
BASIC
WEIGHTED
AVERAGE NUMBER
OF COMMON 43,295 43,295 44,928 44,928
SHARES
OUTSTANDING -
BASIC
NET INCOME PER
COMMON SHARE - $ 1.95 $ 2.18 $ 0.57 $ 0.51
DILUTED
WEIGHTED
AVERAGE NUMBER
OF COMMON 44,080 44,080 45,794 45,794
SHARES
OUTSTANDING -
DILUTED
-- Adjustments to full year 2009 have been made to remove the following
items, including the related tax effect:
o Repositioning charge of $38.6 million
o Recognition of foreign tax credits of $16.4 million
o Write-down of investment of $3.9 million
o Adjustment to reduce long-term cash incentive of $2.3 million
o Reversal of bad debt expense of $1.5 million
-- Adjustments to full year 2008 have been made to remove the following
items, including the related tax effect:
o Adjustment to increase long-term cash incentive of $9.4 million
o Recognition of $7.1 million of reinsurance reimbursement
o Recognition of $6.4 million of deferred revenue for a licensee that
exited the handset business
o Reduction of arbitration and litigation contingencies of $3.9 million
o Bad debt expense of $3.0 million
o Write-down of investment of $0.7 million
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands except per share data)
For the Three Months Ended For the Three Months Ended
December 31, 2009 December 31, 2008
Actual Adj. Pro Forma Actual Adj. Pro Forma
REVENUES $ 76,429 - $ 76,429 $ 58,677 (6,394 ) $ 52,283
OPERATING
EXPENSES:
Selling,
general and 5,611 500 6,111 11,882 (5,914 ) 5,968
administrative
Patent
administration 15,090 - 15,090 11,638 (170 ) 11,468
and licensing
Development 13,252 - 13,252 30,422 (6,016 ) 24,406
Repositioning 1,634 (1,634 ) - - - -
Arbitration
and litigation - - - - - -
contingencies
35,587 (1,134 ) 34,453 53,942 (12,100 ) 41,842
Income from 40,842 1,134 41,976 4,735 5,706 10,441
operations
OTHER (LOSS)
INCOME:
Interest and
investment (3,171 ) 3,900 729 643 - 643
(loss) income,
net
Income before 37,671 5,034 42,705 5,378 5,706 11,084
income taxes
INCOME TAX
BENEFIT 1,205 (16,798 ) (15,593 ) (1,549 ) (1,997 ) (3,546 )
(PROVISION)
NET INCOME $ 38,876 $ (11,764 ) $ 27,112 $ 3,829 $ 3,709 $ 7,538
NET INCOME PER
COMMON SHARE - $ 0.89 $ 0.62 $ 0.09 $ 0.17
BASIC
WEIGHTED
AVERAGE NUMBER
OF COMMON 43,124 43,124 43,243 43,243
SHARES
OUTSTANDING -
BASIC
NET INCOME PER
COMMON SHARE - $ 0.88 $ 0.61 $ 0.09 $ 0.17
DILUTED
WEIGHTED
AVERAGE NUMBER
OF COMMON 43,735 43,735 44,341 44,341
SHARES
OUTSTANDING -
DILUTED
-- Adjustments to fourth quarter 2009 have been made to remove the
following items, including the related tax effect:
o Recognition of foreign tax credits of $16.4 million
o Write-down of investment of $3.9 million
o Repositioning charge of $1.6 million
o Reversal of bad debt expense of $0.5 million
-- Adjustments to fourth quarter 2008 have been made to remove the
following items, including the related tax effect:
o Adjustment to increase long-term cash incentive of $9.4 million
o Recognition of $6.4 million of deferred revenue for a licensee that
exited the handset business
o Bad debt expense of $3.0 million
o Recognition of $0.3 million of reinsurance reimbursement
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 might share this
viewpoint.
This press release includes a summary cash flow statement that results
in changes in both the company's cash and short-term investment
balances. In the summary cash flow statement and throughout this press
release, we refer to free cash flow. The table below presents a
reconciliation of this non-GAAP line item to net cash provided by
operating activities, the most directly comparable GAAP financial
measure.
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
Net cash (used)
provided by operating $ (11,808 ) $ (19,984 ) $ 320,694 $ 85,811
activities
Purchases of property,
equipment, & technology (1,612 ) (4,777 ) (5,139 ) (12,608 )
licenses
Patent additions (9,339 ) (7,471 ) (31,285 ) (28,217 )
Free cash flow $ (22,759 ) $ (32,232 ) $ 284,270 $ 44,986
InterDigital is a registered trademark and SlimChip is a trademark of
InterDigital, Inc.
Source: InterDigital, Inc.
Contact: InterDigital, Inc.
Media Contact:
Jack Indekeu
+1 610-878-7800
jack.indekeu@interdigital.com
or
Investor Contact:
Janet Point
+1 610-878-7800
janet.point@interdigital.com