-----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, VEXMAeE79usQFqW2ucccqCymSlyAB/clE6WLoj14Hkt3frvOauo+cRTwA8goj0S1 ZQgzUXAkuEpfr4W3Muz9nw== 0001157523-07-004767.txt : 20070508 0001157523-07-004767.hdr.sgml : 20070508 20070508114842 ACCESSION NUMBER: 0001157523-07-004767 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070508 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070508 DATE AS OF CHANGE: 20070508 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: 1206 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11152 FILM NUMBER: 07826860 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 a5396860.txt INTERDIGITAL COMMUNICATIONS CORP. 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): May 8, 2007 -------------- InterDigital Communications Corporation (Exact name of registrant as specified in its charter) Pennsylvania 1-11152 23-1882087 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) 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 May 8, 2007, InterDigital Communications Corporation issued a press release announcing its results of operations and financial condition for the quarter ended March 31, 2007. 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 May 8, 2007. 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: May 8, 2007 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Press release dated May 8, 2007 EX-99.1 2 a5396860ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 InterDigital Announces First Quarter 2007 Financial Results Strong Profitability and Cash Flow in Quarter KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 8, 2007--InterDigital Communications Corporation (NASDAQ:IDCC) today announced results for first quarter ended March 31, 2007. Highlights for the first quarter include: -- Revenue of $67.8 million, including $58.5 million of recurring revenue -- Net income of $17.7 million, or $0.34 per diluted share -- Free cash flow(1) of $93.3 million -- Repurchase of 4.5 million shares of the company's common stock for $147.6 million William J. Merritt, President and Chief Executive Officer, stated, "First quarter 2007 was another good quarter for InterDigital. Recurring royalties from our core base of existing licensees were strong, growing significantly both sequentially and on a comparable quarter basis. We also drove substantial additional earnings through incremental royalties identified in a routine audit. Further, we continued to protect our intellectual property, as evidenced by the actions brought against Samsung in April 2007. We continue to have dialogue with unlicensed manufacturers and remain focused on growing our base of 3G licensees." "Our product programs also progressed very well," continued Mr. Merritt. "We are on target to have a dual-mode 2G/3G HSDPA/HSUPA modem ASIC available in engineering samples by late summer 2007, making InterDigital one of only a few companies in the world with commercial terminal unit ASIC products with functioning HSDPA and HSUPA technologies." In addition, in April 2007, the company completed its $350 million share repurchase program. That program began in March 2006 with the Board of Directors authorization of $100 million in repurchases which expanded to $200 million in May 2006 and $350 million in December 2006. Over the course of the program, the company repurchased 11.3 million shares, or approximately 20 percent of the shares outstanding. Since 2003, InterDigital has expended $436 million repurchasing 16.3 million of its shares. First Quarter Summary Revenue in first quarter 2007 increased to $67.8 million from $51.6 million in first quarter 2006. First quarter 2007 revenue included $58.5 million of recurring patent license royalties and technology solution sales as well as $9.3 million associated with prior period sales of Sony Ericsson's covered 2G products identified in a routine audit. Recurring patent license royalties in first quarter 2007 increased 16 percent to $57.5 million from $49.6 million in first quarter 2006. This increase was due largely to higher 2G royalties from Sony Ericsson, 3G royalties from Panasonic, and a full quarter's amortization of patent licensing revenue related to an agreement with LG. Technology solution revenue decreased to $1.0 million in first quarter 2007 from $2.0 million in first quarter 2006 due to the completion of deliverables under an agreement with General Dynamics and the timing of milestone achievements under a development agreement with NXP. Licensees that accounted for 10 percent or more of the $58.5 million of recurring patent license royalties and technology solution sales were LG (24 percent), Sharp Corporation of Japan (18 percent), NEC Corporation of Japan (16 percent), and Sony Ericsson (15 percent). The company's net income in first quarter 2007 increased to $17.7 million, or $0.34 per diluted share, from $12.9 million, or $0.23 per diluted share, in first quarter 2006. This improvement in net income was driven by higher revenues offset, in part, by increased operating expenses. First quarter 2007 operating expenses of $43.6 million increased 33 percent when compared to first quarter 2006. This increase primarily resulted from higher costs related to (i) the company's acceleration of planned expenditures associated with the development and fabrication of its dual mode 2G/3G ASIC and related PC card reference platform (ii) overlapping incentive compensation plans as well as normal inflation and vacation accruals, and, (iii) increased patent litigation and arbitration activity. Patent litigation and arbitration expenses increased to $5.5 million, net of a $1.7 million insurance recovery, in first quarter 2007 from $3.8 million in first quarter 2006. Net interest and investment income of $2.6 million in first quarter 2007 increased $1.1 million over first quarter 2006 due mainly to higher investment balances in first quarter 2007. The company's first quarter 2007 effective tax rate was approximately 34 percent, which takes into account estimated future tax credits related to 2007 research and development activity. In first quarter 2006, the company's tax expense included amounts related to both U.S. statutory federal taxes and foreign withholding tax payments made in prior years resulting in an effective rate of approximately 36%. During first quarter 2007, the company generated $93.3 million of free cash flow due largely to the receipt of a $95 million payment from LG related to its patent license agreement. Near-Term Outlook Richard J. Fagan, Chief Financial Officer commented, "Consistent with the company's practice, revenue guidance for second quarter 2007 will be provided following the receipt and review of applicable royalty reports. Notwithstanding that fact, the reports we have received to date (which include all of our major licensees) reflect a trend of strong sales. "We currently anticipate that second quarter 2007 operating expense growth, excluding patent arbitration/litigation costs, will slow to roughly one third of that experienced between the most recent two quarters," added Mr. Fagan. "Beyond second quarter 2007, we anticipate that the quarterly level of expense for product programs should level off for the remainder of the year, as we will have reached the level of capability needed to pursue the fabless business. Further increases in costs would likely be customer specific acquisition costs that would also be accompanied by revenue. "Further, we also currently expect that our patent arbitration and litigation expenses in second quarter 2007 will be above the $7.2 million (excluding an insurance recovery) experienced in first quarter 2007," continued Mr. Fagan. "The actual level of expense will depend on the level of activity we experience during the quarter including any activities associated with newly filed cases involving Samsung in the U.S. District Court and the U.S. International Trade Commission. Lastly, our book tax rate throughout the balance of 2007 will be dependent upon our estimates of the relative proportions of our full year profitability and level of investment tax credits in 2007, but is currently estimated to be a 34 percentage effective rate." About InterDigital InterDigital Communications Corporation designs, develops and provides advanced wireless technologies and products that drive voice and data communications. InterDigital is a leading contributor to the global wireless standards and holds a strong portfolio of patented technologies which it licenses to manufacturers of 2G, 2.5G, 3G and 802 products worldwide. Additionally, the Company offers baseband product solutions and protocol software for 3G multimode terminals and converged devices. InterDigital's differentiated technology and product solutions deliver time-to-market, performance and cost benefits. For more information, please visit InterDigital's web site: www.interdigital.com. This press release contains forward-looking statements regarding our current beliefs, plans, and expectations with respect to: (i) growing our base of 3G licensees: (ii) our schedule for the delivery of engineering samples of our dual mode 2G/3G ASIC: (iii) the competitive advantage of our dual mode ASIC: (iv) second quarter 2007 revenue guidance: (v) second quarter 2007 operating expenses excluding patent arbitration/litigation expense: (vi) second quarter 2007 patent arbitration/litigation expense; and (vii) our estimated 2007 book tax rate. Words such as "will," "expect," "anticipate" "continue to," "forecast," "likely," "estimate," "on target" 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 or anticipated by such forward-looking statements due to a variety of factors including, but 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 relationships on acceptable terms; (iii) changes in the market share and sales performance of our primary licensees, delays in product shipments of our licensees, and any delay in receipt of quarterly royalty reports from our licensees; (iv) unanticipated product development expenses and the timing of such expenses; (v) unanticipated difficulties or delays in the production or delivery of our ASIC engineering samples; (vi) changes in the technology preferences, needs, availability and pricing of competitive technologies and product offerings; (vii) timely receipt and final reviews of licensee royalty reports and related matters; (viii) 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, (ix) changes in our expectations of the amount and composition of full-year taxable income, changes in the amount of our 2007 U.S. federal research and experimental credit, changes in foreign and domestic tax laws or treatises, or changes in our tax planning strategies. We undertake no duty to publicly update any 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. SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS - ---------------------------------------------------------------------- For the Periods Ended March 31 (Dollars in thousands except per share data) (unaudited) For the Three Months Ended March 31, ------------------------------ 2007 2006 ------------------------------ REVENUES $ 67,818 $ 51,606 --------------- -------------- OPERATING EXPENSES: Sales and marketing 2,096 1,824 General and administrative 6,544 5,021 Patents administration and licensing 13,205 9,982 Development 21,784 16,010 --------------- -------------- 43,629 32,837 --------------- -------------- Income from operations 24,189 18,769 NET INTEREST & OTHER INVESTMENT INCOME 2,633 1,508 --------------- -------------- Income before income taxes 26,822 20,277 INCOME TAX PROVISION (9,153) (7,338) --------------- -------------- NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 17,669 $ 12,939 =============== ============== NET INCOME PER COMMON SHARE - BASIC $ 0.35 $ 0.24 =============== ============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 49,782 54,785 =============== ============== NET INCOME PER COMMON SHARE - DILUTED $ 0.34 $ 0.23 =============== ============== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 51,880 56,884 =============== ============== SUMMARY CASH FLOW For the Periods Ended March 31 (Dollars in thousands) (unaudited) - ---------------------------------------------------------------------- For the Three Months Ended March 31, ------------------------------ 2007 2006 ------------------------------ Income before income taxes $ 26,822 $ 20,277 Taxes paid (15,675) (15,675) Depreciation & amortization 7,177 4,671 Increase in deferred revenue 104,088 225,528 Deferred revenue recognized (31,107) (29,908) Increase (decrease) in operating working capital, deferred charges and other 14,289 (118,347) Capital spending, technology licensing & patent additions (12,278) (7,778) --------------- -------------- FREE CASH FLOW 93,316 78,768 Long-term investment (5,000) - Tax benefit from share-based compensation 2,425 3,212 Debt decrease (92) (84) Repurchase of common stock (143,926) - Proceeds from exercise of stock options 2,099 9,386 Unrealized gain on short term investments 31 49 --------------- -------------- NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS $ (51,147) $ 91,331 =============== ============== CONDENSED BALANCE SHEET - ---------------------------------------------------------------------- (Dollars in thousands) (unaudited) March 31, 2007 December 31, 2006 --------------- ----------------- Assets - ------------------------------------- Cash & short-term investments $ 212,819 $ 263,966 Accounts receivable 110,994 131,852 Current deferred tax assets 45,438 43,520 Other current assets 13,045 14,464 Property & equipment and Patents (net) 95,026 87,178 Long-term deferred tax assets and non-current assets 31,171 23,096 --------------- ----------------- TOTAL ASSETS $ 508,493 $ 564,076 =============== ================= Liabilities and Shareholders' Equity - ------------------------------------- Current portion of long-term debt $ 332 $ 369 Accounts payable & accrued liabilities 41,548 50,150 Current deferred revenue 67,538 70,709 Long-term deferred revenue 237,047 160,895 Long-term debt & long-term liabilities 12,957 6,477 --------------- ----------------- TOTAL LIABILITIES 359,422 288,600 SHAREHOLDERS' EQUITY 149,071(2) 275,476 --------------- ----------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 508,493 $ 564,076 =============== ================= 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 the company's cash and short-term investment balances. One of the subtotals in the summary cash flow statement is free cash flow. The table below presents a reconciliation of this non-GAAP line item to net cash provided by operating activities. For the Three Months Ended March 31, ------------------------------ 2007 2006 ------------------------------ Net cash provided by operating activities $105,594 $86,546 Purchases of property, equipment, & technology licenses (7,112) (3,249) Patent additions (5,166) (4,529) --------------- -------------- Free cash flow $93,316 $78,768 =============== ============== (1) InterDigital defines "free cash flow" as operating cash flow less purchases of property and equipment and investments in patents. A detailed reconciliation of free cash flow to GAAP results is provided at the end of this news release. (2) InterDigital adopted FASB Interpretation No. 48 (FIN 48) on January 1, 2007. Upon adoption, a $2.1 million reserve for uncertain tax positions was established. Consistent with FIN 48, the beginning balance of retained earnings was reduced by the $2.1 million increase in reserves. InterDigital is a registered trademark of InterDigital Communications Corporation. CONTACT: InterDigital Communications Corporation Media Contact: Jack Indekeu, 610-878-7800 e-mail: jack.indekeu@interdigital.com or Investor Contact: Janet Point, 610-878-7800 e-mail: janet.point@interdigital.com -----END PRIVACY-ENHANCED MESSAGE-----