InterDigital Announces Fourth Quarter and Full Year 2008 Financial Results.
Company Projects First Quarter 2009 Recurring re·cur
intr.v. re·curred, re·cur·ring, re·curs
1. To happen, come up, or show up again or repeatedly.
2. To return to one's attention or memory.
3. To return in thought or discourse. Revenue of $69 million to $71 million
KING OF PRUSSIA King of Prussia, industrialized suburban area (1990 pop. 18,406), Montgomery co., SE Pa. It has glass and steel fabricating, food processing, printing and publishing, and varied manufacturing (textiles, liquified petroleum gas, water-treatment and electrical , Pa. -- InterDigital interdigital
between two digits.
see interdigital pyoderma, pododermatitis.
1. the early lesion in the development of infectious footrot in sheep; called also sheep scald. , Inc. (NASDAQ NASDAQ
in full National Association of Securities Dealers Automated Quotations
U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :IDCC IDCC Integrated Dual-use Commercial Companies ) today announced results for the fourth quarter and twelve months ended December 31, 2008.
Fourth Quarter 2008 Highlights:
* Revenue of $58.7 million, including $51.4 million of recurring revenue
* Net income of $3.8 million, or $0.09 per share
Full Year 2008 Highlights:
* Revenue of $228.5 million, including $219.1 million of recurring revenue
* Net income of $26.2 million, or $0.57 per diluted share
* Free cash flow1 of $45.0 million
* Repurchase of 3.8 million shares of common stock for $81.5 million
* Ending cash and short-term investments totaling $141.7 million, or $3.08 per diluted share
William J. Merritt, President and Chief Executive Officer, stated, "During 2008, we delivered solid financial results and achieved a number of important milestones. We closed four new patent license agreements including a significant 2G and 3G license agreement with Samsung, one of the world's leading brands, which will deliver $400 million in cash over the next 18 months. As of the end of 2008, nearly 50% of all 3G handsets shipped worldwide are under license with InterDigital."
"In addition, we made excellent progress on our technology development, both in support of our SlimChip[TM] family of mobile broadband Description
Mobile Broadband is a type of wireless internet access that differs from Wi-Fi.
Mobile Broadband is the name used to describe the 3G services which are made possible by HSDPA and HSUPA, the latest technologies on the W-CDMA evolutionary path. modem solutions and in the generation of new innovative wireless solutions that help shape the wireless industry of the future. With regard to the latter, at the Mobile World Congress in Barcelona, we demonstrated our Media Independent Handover Media Independent Handover (MIH) is a standard being developed by IEEE 802.21 to enable the handover of IP sessions from one layer 2 access technology to another, to achieve mobility of end user devices. technology with support of British Telecom The telephone and communications carrier that provides services in Great Britain and Northern Ireland. It used to be a division of the British Post Office, but was privatized in 1984 under Margaret Thatcher's administration. , showing seamless handover n. 1. The act of relinquishing property or authority etc. to another; as, the handover of occupied territory to the original posssessors; the handover of power from the military back to the civilian authorities s>. between live 3G and WiFi networks See wireless Ethernet and 802.11. for both data and voice using commercially available handsets and servers adapted with our MIH MIH Make It Happen (band)
MIH Master of International Health (University of Copenhagen)
MIH Men in Hats (online comic) solutions."
"In 2008 we delivered on our promise of securing a high return on our investments that we have made over the past few years. As a result, we entered 2009 in the strongest financial position in our company's history. We intend to leverage that strength by making additional investments both organically and through external acquisitions in technology development and future products that will drive additional shareholder value," concluded Mr. Merritt.
Fourth Quarter Summary
The company's net income of $3.8 million, or $0.09 per fully diluted share, in fourth quarter 2008 posted an increase compared to fourth quarter 2007's net loss of $2.0 million or $0.04 per share.
Total revenue in fourth quarter 2008 increased to $58.7 million from $54.9 million in fourth quarter 2007. This increase resulted from a $4.1 million increase in technology solutions revenue and a $3.8 million increase in past infringement. These increases were partly offset by a $4.0 million decrease in recurring patent license royalties, which was driven by declining royalties from the company's Japanese licensees. Fourth quarter 2008 revenue included $46.3 million of recurring patent license royalties, $5.1 million of technology solution sales and $7.3 million primarily associated with a non-refundable prepayment Prepayment
1. The payment of a debt obligation prior to its due date.
2. The excess payment over a scheduled debt repayment amount.
1. Examples include deferred expenses such as rent and early loan repayments.
2. made in a prior period by a licensee that subsequently exited the handset business. Licensees that accounted for 10 percent or more of the $51.4 million of recurring patent license royalties and technology solution sales were LG (28%), Sharp Corporation of Japan (14%) and NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98).
NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Corporation of Japan (10%).
Fourth quarter 2008 operating expenses Operating expenses
The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $53.9 million decreased from $57.6 million in fourth quarter 2007. Fourth quarter 2007 included $7.8 million accrued expense Accrued Expense
An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. associated with arbitration and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.
When a person begins a civil lawsuit, the person enters into a process called litigation. contingencies. Patent administration and licensing expenses declined $8.2 million year over year due to a lower level of arbitration and litigation activity. Development expenses increased $8.0 million, most of which related to a companywide charge of $9.4 million in fourth quarter 2008 to adjust the accrual accrual,
n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. rate on a long-term performance based cash incentive.
Net interest and investment income was $0.6 million in fourth quarter 2008, a decrease of $1.3 million from fourth quarter 2007 due to both lower investment balances and lower investment yields.
The company's fourth quarter 2008 tax expense consisted of the statutory federal tax rate plus an adjustment to record a research and development credit for 2008 following the U.S. government's renewal of this credit. The company's fourth quarter 2007 tax expense consisted of the statutory federal tax rate plus an adjustment to increase the estimated value of 2007 research and development tax credits. The adjustments to the company's 2008 and 2007 research and development credits are based on the preliminary results of related tax studies and the 2007 amount updates a prior estimate for the credit.
Twelve Months Summary
Net income for the full year 2008 was $26.2 million, or $0.57 per diluted share. For the full year 2007, net income was $20.0 million, or $0.40 per diluted share.
For full year 2008, total revenues were $228.5 million compared to $234.2 million in 2007. Recurring patent licensing revenues decreased $9.0 million to $207.1 million due to the absence of recurring 2G revenue from Sony Ericsson For an arrangement of Sony Ericsson products, see list of Sony Ericsson products
Sony Ericsson is a joint venture established in 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. , along with the softening market in Japan. These decreases were partly offset by a $14.2 million increase from all other new and existing licenses. Technology solutions revenue increased to $12.0 million from $3.4 million in 2007 due to increased royalties and license fees from the company's SlimChip modem IP.
Operating expenses were $191.9 million in 2008, a decrease of $19.3 million over 2007. This decrease is primarily related to a $28.3 million decrease in litigation and arbitration contingencies that were first accrued in 2007. Other operating expenses increased $9.0 million, driven by a companywide charge of $9.4 million in fourth quarter 2008 to adjust the accrual rate on a long-term performance based cash incentive.
Net interest and investment income was $3.4 million in 2008, a decrease of $5.5 million from 2007, due to both lower investment balances and lower investment yields.
The company's full year tax expense for both 2008 and 2007 consisted of the statutory federal tax rate plus book-tax permanent differences related to the company's research and development credits.
In 2008, the company generated $45.0 million of free cash flow. This free cash flow was driven by $85.8 million cash flows from operations, which includes patent license receipts from LG, net of source withholding taxes The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. , totaling $79.3 million, partially offset by estimated federal tax payments and investments in product and patent related initiatives. During 2008, the company utilized free cash flow and existing cash balances to repurchase 3.8 million common shares at a cost of $81.5 million.
First Quarter 2009 Outlook
Scott McQuilkin, Chief Financial Officer, commented, "In first quarter 2009, we expect to report recurring revenues from existing agreements in the range of $69 million to $71 million. The expected increase of nearly $20 million over fourth quarter 2008 levels reflects the recognition of 2 u months of revenue under a new patent license agreement with Samsung signed in January 2009, partly offset by the loss of $1.1 million of fixed revenue amortization from a licensee who exited the handset business. This range does not include any potential impact from additional new agreements that may be signed during first quarter 2009 or additional royalties identified in audits regularly conducted by us."
"In addition, in late 2008, we noted that while we were pleased with the progress of our modem product solutions, we understood the need to evaluate a number of strategic options for that business given the rapidly evolving landscape in the baseband market," added Mr. McQuilkin. "We have had substantive discussions with a number of companies with respect to building scale as well as selling the business. While we have not made a determination, we are moving quickly to reach a final decision."
InterDigital designs, develops and provides advanced wireless technologies and products that drive voice and data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. . 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 a family of SlimChip[TM] high performance mobile broadband modem solutions, consisting of Baseband ICs, Embedded Inserted into. See embedded system. Modules, Modem IP and Reference Platforms. InterDigital's differentiated technology and product solutions deliver time to market, performance and cost benefits.
For more information, visit the InterDigital website: www.interdigital.com.
Safe Harbor Safe Harbor
1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.
2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement
This press release contains forward-looking statements forward-looking statement
A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 2009 Outlook" and other information regarding our current beliefs, plans and expectations, including, but not limited to, statements with respect to: (i) first quarter 2009 revenue guidance and (ii) the financial impact of the Samsung agreement, (iii) investments by the company in internal resources and external acquisitions, (iv) the effect of further commoditization Commoditization
1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.
2. Making a product into a commodity.
1. of the baseband market and (v) the timing of a final decision with respect to the strategic direction of our product business. Words such as "projects," "could," "expect," "potential," and "may" 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) 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, (ii) the failure of either the company or Samsung to observe the covenants under their license agreement for any reason, (iii) the failure of Samsung to make any agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations"
noncontroversial, uncontroversial - not likely to arouse controversy payment in the time and manner specified in their license agreement, (iv) unexpected deterioration of the company's financial position, (v) unanticipated developments in the baseband market and (vi) unanticipated delays, difficulties or other developments in our discussions with potential counterparties or other factors affecting our final decision with respect to our product business. 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 Management's discussion and analysis (MD&A)
A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K Form 10-K
A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.
See 10-K. for the year ended December 31, 2007, 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 InterDigital defines "free cash flow" as operating cash flow Operating cash flow
Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. less purchases of property equipment and technology licenses, and patent additions. A detailed reconciliation of free cash flow to GAAP GAAP
See: Generally Accepted Accounting Principles
See generally accepted accounting principles (GAAP). results is provided at the end of this press release.
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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.
InterDigital is a registered trademark and SlimChip is a trademark of InterDigital, Inc.