InterDigital Announces Third Quarter 2009 Financial Results

About InterDigital

InterDigital 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.

InterDigital is a registered trademark and SlimChip is a trademark of InterDigital, Inc.

For more information, visit: www.interdigital.com

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 information regarding the company’s current beliefs, plans and expectations, including, without limitation, with respect to: (i)the company’s ability to add new licensees, (ii) global demand for mobile phones and the growth prospects for the 3G handset market, (iii) the company’s ability to develop the key technologies that will drive the future of the wireless industry and (iv) fourth quarter 2009 revenue guidance. Words such as “looking forward,” “continue to,” “will” 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) the company’s ability to leverage our strategic relationships and secure new patent licensing 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) unanticipated delays or difficulties in our technology development efforts, testing and evaluations; (v) changes in technology preferences, needs, availability, pricing and features of competitive technologies; and (vi) 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. The company undertakes no duty to update publicly 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.

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)
(unaudited)
       
For the Three Months Ended For the Nine Months Ended
September 30,   September 30,
2009   2008   2009   2008
 
REVENUES $ 75,486   $ 55,059   $ 220,975   $ 169,792  
 
OPERATING EXPENSES:
Selling, general and administrative 4,925 6,878 19,166 21,570
Patents administration and licensing 13,320 14,329 41,037 51,854
Development 10,659 23,544 50,755 68,510
Repositioning - - 36,970 -
Arbitration and litigation contingencies   -     (2,740 )   -     (3,940 )
  28,904     42,011     147,928     137,994  
Income from operations 46,582 13,048 73,047 31,798
 
OTHER INCOME
Interest and investment income, net   531     1,117     1,985     2,786  
Income before income taxes 47,113 14,165 75,032 34,584
INCOME TAX PROVISION   (16,492 )   (4,956 )   (26,652 )   (12,206 )
 
NET INCOME $ 30,621   $ 9,209   $ 48,380   $ 22,378  

NET INCOME PER COMMON SHARE - BASIC 2

$ 0.70   $ 0.20   $ 1.10   $ 0.49  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 2

  43,083     44,708     43,353     45,494  

NET INCOME PER COMMON SHARE - DILUTED 2

$ 0.69   $ 0.20   $ 1.08   $ 0.48  

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 2

  43,819     45,619     44,196     46,358  
 

2 Effective January 1, 2009, the company adopted new accounting guidance related to the inclusion of instruments granted in share-based payment transactions in calculating weighted average number of common shares, and, therefore, earnings per share. As a result, the company has adjusted basic and diluted earnings per share for all prior periods affected by this guidance. Refer to Footnote 1 in the company’s Form 10-Qs filed May 8, 2009 and July 27, 2009 for more information.

 
       

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)
(unaudited)
 
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2009   2008 2009   2008
 

Income before income taxes

$ 47,113 $ 14,165 $ 75,032 $ 34,584
Taxes paid (24,208 ) - (44,708 ) (15,689 )
Depreciation, amortization, share based compensation & asset impairment 7,277 8,792 55,944 26,120
Increase in deferred revenue 220,360 2,687 605,374 85,151
Deferred revenue recognized (53,918 ) (33,531 ) (164,944 ) (92,156 )

Increase (decrease) in operating working capital, deferred charges and other

32,588 (3,821 ) (194,196 ) 67,785
Capital spending & patent additions   (8,680 )   (8,686 )   (25,473 )   (28,577 )
FREE CASH FLOW 220,532 (20,394 ) 307,029 77,218
 
Long-term investment - - - (651 )
Tax benefit from shared-based compensation 1,908 494 2,560 992
Debt decrease (340 ) (343 ) (1,803 ) (1,522 )
Repurchase of common stock (11,019 ) (30,653 ) (25,020 ) (67,233 )
Proceeds from exercise of stock options 1,915 744 5,156 1,700
Unrealized gain (loss) on short-term investments   87     (377 )   141     (304 )

NET INCREASE (DECREASE)IN CASH AND SHORT-TERM INVESTMENTS

$ 213,083   $ (50,529 ) $ 288,063   $ 10,200  
 
   

SUMMARY CONSOLIDATED BALANCE SHEET

(Dollars in thousands)
(unaudited)
 
September 30, 2009 December 31, 2008

Assets

Cash & short-term investments $ 429,723 $ 141,660
Accounts receivable, less allowance of $2,000 & $3,000 204,665 33,892
Current deferred tax assets 69,176 49,002
Other current assets 14,685 16,467
Property & equipment and Patents (net) 123,425 123,782
Other long-term assets (net)   68,884   40,965

TOTAL ASSETS

$ 910,558 $ 405,768
 

Liabilities and Shareholders' Equity

Current portion of long-term debt $ 586 $ 1,608
Accounts payable, accrued liabilities & taxes payable 49,978 46,283
Current deferred revenue 193,527 78,646
Long-term deferred revenue 528,325 181,056
Long-term debt & long-term liabilities   13,179   10,515
TOTAL LIABILITIES 785,595 318,108
SHAREHOLDERS' EQUITY   124,963   87,660
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 910,558 $ 405,768
 
   

PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF INCOME

(Dollars in thousands except per share data)
(unaudited)
 
For the Nine Months Ended
September 30, 2009
Actual   Adjustments   Pro Forma
 
REVENUES $ 220,975   $ 220,975  
 
OPERATING EXPENSES:
Selling, general and administrative 19,166

-

19,166
Patent administration and licensing 41,037

-

41,037
Development 50,755

-

50,755
Repositioning   36,970     (36,970 )   -  
  147,928     (36,970 )   110,958  
Income from operations 73,047 36,970 110,017
OTHER INCOME:
Interest and investment income, net   1,985    

-

    1,985  
Income before income taxes 75,032 36,970 112,002
 
INCOME TAX PROVISION   (26,652 )   (12,976 )   (39,628 )
 
NET INCOME $ 48,380   $ 23,994   $ 72,374  
 
NET INCOME PER COMMON SHARE - BASIC $ 1.10   $ 1.64  
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC   43,353     43,353  
 
NET INCOME PER COMMON SHARE - DILUTED $ 1.08   $ 1.61  
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED   44,196     44,196  
 

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