-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RxzOveqNfKjodL4M+2rLCAC51LT+FAQrfMA0Dolcjpg2Nbszl7v7wDd6T+RLkL9w hbfWE1hjVzC33N78Hwe/xQ== 0001157523-05-007017.txt : 20050804 0001157523-05-007017.hdr.sgml : 20050804 20050804094738 ACCESSION NUMBER: 0001157523-05-007017 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050804 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050804 DATE AS OF CHANGE: 20050804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERDIGITAL COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000354913 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 231882087 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11152 FILM NUMBER: 05997855 BUSINESS ADDRESS: STREET 1: 781 THIRD AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406-1409 BUSINESS PHONE: 6108787800 MAIL ADDRESS: STREET 1: 781 THIRD AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406-1409 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MOBILE MACHINES CORP DATE OF NAME CHANGE: 19920703 8-K 1 a4946191.txt INTERDIGITAL COMMUNICATIONS CORPORATION 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of earliest event reported): August 4, 2005 -------------- InterDigital Communications Corporation (Exact name of registrant as specified in its charter) Pennsylvania 1-11152 23-1882087 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 781 Third Avenue, King of Prussia, PA 19406-1409 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 610-878-7800 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Item 2.02. Results of Operations and Financial Condition. (a) On August 4, 2005, InterDigital Communications Corporation issued a press release announcing its results of operations and financial condition for the quarter ended June 30, 2005. A copy of the press release is attached hereto as Exhibit 99.1. Item 9.01. Financial Statements and Exhibits. (c) Exhibits 99.1 Press release dated August 4, 2005. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized. INTERDIGITAL COMMUNICATIONS CORPORATION By: /s/ R.J. Fagan ----------------------------------------------- Richard J. Fagan Chief Financial Officer Dated: August 4, 2005 EXHIBIT INDEX Exhibit No. Description - ------------ ----------- 99.1 Press release dated August 4, 2005 EX-99.1 2 a4946191ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 InterDigital Announces Second Quarter 2005 Financial Results and Initiative to Enhance Profitability; Strong Recurring Revenues Highlight Quarter KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Aug. 4, 2005--InterDigital Communications Corporation (Nasdaq:IDCC), a leading designer, developer and provider of wireless technology and product platforms, today announced revenues of $38.6 million and net income of $4.0 million, or $0.07 per share (diluted), for its second quarter ended June 30, 2005. The company also ended the quarter with a solid cash and short-term investment position of approximately $100.0 million, after using $25.1 million for the repurchase of 1.5 million shares of the company's stock during the quarter. William Merritt, President and Chief Executive Officer, stated, "The company's performance in the quarter reflects the favorable impact of the strategy we put in place a number of years ago. Our core business - patent and technology licensing - achieved its second consecutive quarterly high for recurring revenues. We also continued to make good progress in our patent licensing program and expect to benefit from that progress in the third quarter. Further, we were pleased to announce yesterday the addition of a new technology solutions customer, Philips Semiconductor, thus building our future revenue base." Second Quarter Summary Revenues of $38.6 million in second quarter 2005 increased $9.2 million, or 31%, over second quarter 2004 revenues of $29.4 million. This increase was driven by $5.5 million of revenue related to progress toward completion of a software license agreement with General Dynamics, as well as a $4.0 million increase in recurring patent license royalty revenue. Key contributors to second quarter revenue included NEC (36%), Sharp (20%) and General Dynamics (14%). For second quarter 2005, recurring royalties of $33.1 million increased $4.0 million, or 14%, when compared to second quarter 2004. This increase was mainly due to growth in royalties from NEC and the recognition of $1.1 million related to the receipt, in the second quarter, of a licensee's royalty report for a previous quarter. The company's net income increased to $4.0 million, or $0.07 per share (diluted), in second quarter 2005 from income of $0.9 million, or $0.01 per share (diluted) in second quarter 2004. Excluding a second quarter 2004 repositioning charge, net income would have been $1.4 million, or $ 0.02 per share (diluted). Operating expenses of $32.5 million increased 19% over second quarter 2004. The increase in operating expenses over second quarter 2004 was driven by a number of factors, including legal fees associated with arbitrations and litigations, severance costs related to previously announced management changes, the hiring of additional development resources, as well as higher costs for travel and patent amortization. These increases, and other costs, were partially offset by expense reductions in second quarter 2005 related to the previously announced structural changes to the second cycle (2005 - 2008) of the performance-based element of the company's long-term compensation program and adjustments to expense accruals related to the first cycle (2004 - 2005) of the program. When compared to first quarter 2005, operating expenses decreased 11%, primarily due to the above-noted changes and adjustments related to the long-term compensation program and lower arbitration-related costs. These decreases were partially offset by severance costs associated with management changes. Second quarter 2005 tax expense of $2.8 million included non-cash charges for both federal income taxes and non-U.S. withholding taxes of $2.3 million and $0.5 million, respectively, while the tax expense of $1.6 million for second quarter 2004 was primarily comprised of non-U.S. withholding taxes. Six Months Summary For first half 2005, revenues were $74.1 million, a 19 % increase over revenues of $62.4 million in first half 2004. This increase was driven by $10.2 million of revenue related to progress toward completion of a software license agreement with General Dynamics, as well as a $2.4 million increase in recurring patent license royalty revenue. Net income for first half 2005 was $3.1 million, or $0.05 per share (diluted). Net income for first half 2004 was $6.7 million, or $0.11 per share (diluted). Excluding a first half 2004 repositioning charge, net income would have been $7.2 million, or $ 0.12 per share (diluted). During first half 2005, the company generated approximately $8.6 million of free cash flow(1). In addition, the company expended $34.1 million in connection with the repurchase of two million shares of the company's stock and $8.0 million to acquire complementary patents and related assets. Initiative to Enhance Profitability The company also announced it plans to close its Melbourne, Florida design facility in third quarter 2005 and relocate certain development efforts and personnel to other company locations. Currently, there are thirty-three full or part-time employees at this facility, of which sixteen have been offered continued employment elsewhere within the company. In connection with the closure, the company expects to recognize repositioning charges over the next twelve months beginning in third quarter 2005. The majority of these charges should be recognized in third quarter 2005. The charges will be comprised primarily of severance, relocation costs, lease termination costs and other cash benefits paid in connection with the repositioning. The total amount of the charges will be largely dependent upon the actual number of positions eliminated and the timing of relocations. These actions should result in minimum annual pre-tax cost savings of $4.0 million. William Merritt, President and Chief Executive Officer, added, "As part of our continuous evaluation of the business, it became clear to us that we could close the Melbourne facility and generate meaningful, ongoing savings without diminishing our ability to respond to targeted opportunities to develop technology and wireless component products and serve as a value-added partner to equipment producers. We will continue to invest in smart antenna technology, but target our efforts toward mobile products." 2005 Outlook Rich Fagan, Chief Financial Officer commented, "We will provide guidance on third quarter 2005 revenue shortly, after we receive and review the applicable royalty reports and update our forecast on expected progress associated with work for both General Dynamics and Philips. In terms of third quarter 2005 expenses, we anticipate that costs associated with the performance-based element of the company's long-term compensation program should return to a level slightly lower than that recorded in first quarter 2005. We're also currently assessing the potential level of third quarter 2005 expenses associated with current arbitrations and litigations, including the recently announced new litigation matter involving Nokia in the United Kingdom and the continuing Nokia award enforcement action in Federal Court in New York. If these expenses remain at the average level experienced over the first six months of the year, our overall third quarter 2005 ongoing operating expenses could be in the range experienced in first quarter 2005. We should see the full benefits of the repositioning initiative beginning in fourth quarter 2005. Lastly, we expect that our book tax rate for third quarter 2005 will approximate 34% to 38%, plus an amount for deferred foreign source withholding tax expense which is, in part, dependent on the level and geographic mix of per-unit royalties." About InterDigital InterDigital designs, develops 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 time-to-market, performance, and cost benefits, as well as product differentiation advantages, to its commercial and government/military customers. InterDigital has a strong portfolio of patented technologies covering 2G, 2.5G, 3G and 802 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. (1) InterDigital defines "free cash flow" as operating cash flow less purchases of property and equipment and investments in patents. This press release contains forward-looking statements regarding our current beliefs, plans, and expectations as to (i) progress in the patent licensing program in third quarter 2005; (ii) third quarter 2005 revenue and future revenue bases; (iii) the timing, benefit and nature of repositioning charges and minimum annual pre-tax cost savings associated with our repositioning relating to our Melbourne, Florida facility; (iv) our continued investment in smart antenna technology; (v) third quarter 2005 operating expenses including expenses associated with our long-term compensation program and current arbitration and litigation matters; and (vi) our third quarter 2005 book tax rate and deferred foreign source withholding tax expense. Words such as "expect," "future," "should," "continue," "will," "assessing," "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) unanticipated delays or difficulties in executing patent license agreements; (ii) our ability to leverage our existing and enter into additional strategic relationships, changes in the market share and sales performance of our primary licensees, delays in product shipments of our licensees, inaccuracy of market projections, and any delay in receipt of quarterly royalty reports from our licensees; (iii) with respect to our Melbourne, Florida facility the actual termination dates of various employees, the number of employees who choose to accept relocations packages and stay bonuses, our ability to move or dispose of certain equipment, and our ability to negotiate favorable terminations of various contracts and leases; (iv) the market relevance of our technologies, changes in technology preferences of strategic partners or consumers, the availability or development of substitute or competitive technologies, and the economy and sales trends in the wireless market; (v) our ability to satisfactorily meet milestones and the timing of associated payments under our contract with General Dynamics, changes in delivery schedules, or an exercise of termination for convenience on the part of the U.S. government; (vi) significant changes in personnel eligible to participate in the long-term compensation program, or changes to the terms of the program; (vii) unanticipated additional legal proceedings or changes in the schedules or costs associated with current Nokia legal proceedings, the Samsung arbitration or the Lucent litigation, or adverse rulings in such legal proceedings; (viii) 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 (ix) 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. SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS -------------------------------------------- For the Periods Ended June 30 (Dollars in thousands except per share data) (unaudited) For the Three For the Six Months Ended Months Ended June 30, June 30, -------------------------------------- 2005 2004 2005 2004 -------------------------------------- REVENUES $38,601 $29,379 $74,098 $62,395 --------- -------- --------- --------- OPERATING EXPENSES: Sales and marketing 1,537 1,396 3,817 3,010 General and administrative 5,912 5,430 12,478 10,820 Patents administration and licensing 10.080 6,930 21,327 11,930 Development 14,921 12,828 31,094 25,742 Repositioning - 604 - 604 --------- -------- --------- --------- 32,450 27,188 68,716 52,106 --------- -------- --------- --------- Income from operations 6,151 2,191 5,382 10,289 NET INTEREST & OTHER INVESTMENT INCOME 677 262 1,467 690 --------- -------- --------- --------- Income before income taxes 6,828 2,453 6,849 10,979 INCOME TAX PROVISION (2,817) (1,565) (3,720) (4,257) --------- -------- --------- --------- Net income 4,011 888 3,129 6,722 PREFERRED STOCK DIVIDENDS - (32) - (66) --------- -------- --------- --------- NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 4,011 $ 856 $ 3,129 $ 6,656 ========= ======== ========= ========= NET INCOME PER COMMON SHARE - BASIC $0.07 $0.02 $0.06 $0.12 ========= ======== ========= ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 53,642 55,596 54,344 55,371 ========= ======== ========= ========= NET INCOME PER COMMON SHARE - DILUTED $0.07 $0.01 $0.05 $0.11 ========= ======== ========= ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 56,790 59,112 57,799 59,419 SUMMARY CASH FLOW ----------------- For the Periods Ended June 30 (Dollars in thousands) (unaudited) For the Three Months For the Six Months Ended Ended June 30, June 30, ---------------------- ---------------------- 2005 2004 2005 2004 ---------------------- ---------------------- Net income before pref. stock dividends $4,011 $888 $3,129 $6,722 Depreciation & amortization 5,131 3,968 10,468 7,089 Increase in deferred revenue 7,199 27,000 35,105 49,784 Deferred revenue recognized (12,888) (17,904) (28,795) (30,613) Decrease (Increase) in operating working capital, deferred charges and other 186 (14,561) 312 (17,498) Capital spending & patent additions (5,587) (3,918) (11,618) (7,014) ----------- ---------- ----------- ---------- CASH FLOW BEFORE FINANCING ACTIVITIES (1,948) (4,527) 8,601 8,470 Asset acquisition - - (8,050) - Debt decrease & preferred dividends (81) (87) (161) (137) Repurchase of common stock (25,057) (30) (34,085) (30) Net stock issued 623 2,583 1,910 9,075 ----------- ---------- ----------- ---------- NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS $ (26,463) $ (2,061) $ (31,785) $ 17,378 =========== ========== =========== ========== CONDENSED BALANCE SHEET ----------------------- (Dollars in thousands) (unaudited) June 30, Dec. 31, 2005 2004 ---------- --------- Assets - ------ Cash & short-term investments $100,033 $131,818 Accounts receivable 15,569 11,612 Other current assets 14,374 13,187 Property & equipment and Patents (net) 65,512 51,688 Long-term deferred tax assets and non-current assets 26,370 33,615 ---------- --------- TOTAL ASSETS $221,858 $241,920 ========== ========= Liabilities and Shareholders' Equity - ------------------------------------ Current portion of long-term debt $338 $212 Accounts payable & accrued liabilities 22,307 21,546 Current Deferred Revenue 21,638 28,075 Long-term Deferred revenue 83,868 71,121 Long-term debt & long-term liabilities 2,155 5,307 ---------- --------- TOTAL LIABILITIES 130,306 126,261 SHAREHOLDERS' EQUITY 91,552 115,659 ---------- --------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $221,858 $241,920 ========== ========= 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 results in the change in both our cash and short-term investment balances. One of the subtotals in the summary cash flow statement is cash flow before financing activity. Management has presented a reconciliation of this non-GAAP line item to net cash provided by operating activities below: For the Three For the Six Months Ended Months Ended June 30, June 30, ----------------- ----------------- 2005 2004 2005 2004 ----------------- ----------------- Net cash provided (used) by operating activities $3,264 $(235) $20,049 $15,823 Purchases of property and equipment (1,234) (942) (3,011) (1,488) Patent additions (4,353) (2,976) (8,607) (5,526) Unrealized gain (loss) on short term investments 375 (374) 170 (339) -------- -------- -------- -------- Cash flow before financing activities $(1,948) $(4,527) $8,601 $8,470 ======== ======== ======== ======== This release also discusses operating expenses, excluding repositioning charges, and net income including certain non-recurring revenue items. Management believes that investors may find these non-GAAP financial measures useful in understanding the company's operating results. This information is intended to provide more meaningful comparisons of the company's results. CONTACT: InterDigital Communications Corporation Media: Dawn Goldstein, 610-878-7800 e-mail: dawn.goldstein@interdigital.com or Investor: Janet Point, 610-878-7800 e-mail: janet.point@interdigital.com -----END PRIVACY-ENHANCED MESSAGE-----