Market Snapshot
  • U.S.
  • Europe
  • Asia
Ticker Volume Price Price Delta
DJIA 16,405.93 -18.92 -0.12%
S&P 500 1,863.84 1.53 0.08%
NASDAQ 4,087.98 1.76 0.04%
Ticker Volume Price Price Delta
STOXX 50 3,155.81 16.55 0.53%
FTSE 100 6,625.25 41.08 0.62%
DAX 9,409.71 91.89 0.99%
Ticker Volume Price Price Delta
NIKKEI 14,417.53 -0.15 -0.00%
TOPIX 1,166.59 0.04 0.00%
HANG SENG 22,760.24 64.23 0.28%

InterDigital Announces Fourth Quarter 2012 Financial Results



  InterDigital Announces Fourth Quarter 2012 Financial Results

Business Wire

WILMINGTON, Del. -- February 20, 2013

InterDigital, Inc. (NASDAQ: IDCC), a wireless research and development
company, today announced results for the fourth quarter and full year ended
December 31, 2012.

Highlights for fourth quarter 2012:

  * Revenue of $87.9 million;
  * Net income of $15.5 million, or $0.38 per diluted share; and
  * Ending cash and short-term investments totaling $577.3 million.

Highlights for full year 2012:

  * Record revenue of $663.1 million and net income of $271.8 million, or
    $6.26 per diluted share;
  * Free cash flow^1 of $145.7 million; and
  * $235.8 million returned to shareholders in share repurchases and regular
    and special dividend payments.

“By all measures we delivered a stand-out year, characterized by meeting the
objectives we'd discussed at the start of 2012,” commented William J. Merritt,
President and CEO. “We began the year by expanding our strategy to include
patent sales, and then successfully executed on that strategy, concluding
transactions that drove an additional $384 million in revenue. In the fall of
2012, we announced another enhancement of our strategy and the formation of
InterDigital Solutions, a new group with the goal of commercializing our
technologies through key industry partnerships. We followed this up by
announcing, at the very start of 2013, the first such partnership with Sony
involving the exciting area of wireless machine-to-machine communications and
services, where InterDigital has been a long-term innovator. All of that came
on top of exceptionally strong performance from our core terminal unit
licensing team, which launched our LTE licensing efforts with nine new,
renewed or expanded patent license agreements—including agreements with Sony
and Blackberry—all of which aligned with our long-term licensing strategy.”

“As a result of executing on our enhanced strategy and fulfilling these
commitments, we delivered our strongest financial year ever, with record
revenue, cash flow and profit,” continued Mr. Merritt. “We have equally high
hopes for this year. With our restructured Innovations Group, we expect to
create a greater quantity and more diverse set of inventions, touching on a
broader range of wireless devices and services, at a lower cost. We will look
for our Solutions Group to extend its success with new partnerships involving
some of our other exciting technologies, like our Smart Access technologies.
And we expect our licensing teams to continue their success, driving new and
renewed license agreements and expanding our revenue base. With a strong cash
position, solid strategy and no shortage of opportunities to pursue, we look
forward to delivering another banner year.”

Fourth Quarter 2012 Summary

Revenue in fourth quarter 2012 totaled $87.9 million, compared to $77.0
million in fourth quarter 2011. This $10.9 million increase in total revenue
was primarily attributable to $22.3 million of past sales recognized in
conjunction with a patent license agreement we signed in December 2012 with a
new licensee. This increase related to past sales was partially offset by
decreases in our per-unit royalty revenue and lower technology solutions
revenue. The decrease in per-unit royalty revenue resulted primarily from
lower shipments by BlackBerry (formerly Research in Motion Limited), HTC
Corporation ("HTC") and the company's Japanese per-unit licensees.
Additionally, technology solutions revenue decreased to $0.6 million in fourth
quarter 2012 from $2.4 million in fourth quarter 2011, primarily due to lower
royalties recognized in connection with the company's SlimChip® modem IP
business. As of December 31, 2012, the company has deferred $44.3 million,
including $4.2 million in fourth quarter 2012, of disputed SlimChip modem IP
royalties pending the outcome of an ongoing arbitration.

The company's fourth quarter 2012 net income was $15.5 million, or $0.38 per
diluted share, a decrease of 32 percent from $22.8 million, or $0.49 per
diluted share, in fourth quarter 2011, primarily due to higher expenses
associated with the company's voluntary early retirement program ("VERP"),
higher intellectual property enforcement costs and Long-Term Compensation
Program ("LTCP"). Not including the repositioning charge of $12.5 million and
its related tax effect, fourth quarter 2012 net income would have been $23.7
million, or $0.57 per diluted share.

“Agreements we signed in fourth quarter 2012 immediately contributed to our
financial results through our recognition of past sales. We look forward to
the recurring contributions these agreements will make and expect to recognize
approximately $46 million to $47 million in revenue in first quarter 2013
based on agreements signed to date and subject to any agreements that may be
completed between now and the end of the quarter,” said Richard Brezski, Chief
Financial Officer. “Our fourth quarter expenses included a $12.5 million
repositioning charge related to our fourth quarter 2012 voluntary early
retirement plan. We expect to recognize an additional $1.0 million to $2.0
million charge related to this plan in first quarter 2013. Finally, in
recognition of our strong financial position and expected future cash flows,
we returned $69.7 million to shareholders during the quarter through regular
and special dividends.”

Fourth quarter 2012 operating expenses totaled $69.0 million, an increase of
$27.5 million from $41.5 million in fourth quarter 2011. This increase was
driven by $12.5 million of costs associated with the company's VERP, a $5.6
million increase in long-term compensation costs, a $3.7 million increase in
intellectual property enforcement costs and a $3.2 million legal contingency
recorded in fourth quarter 2012 related to one of our ongoing legal
proceedings. Fourth quarter 2012 intellectual property enforcement costs were
$13.6 million as compared to $9.9 million in fourth quarter 2011, and related
primarily to the USITC patent infringement proceedings initiated in second
half 2011 and January 2013. Long-term compensation costs increased due to a
fourth quarter 2012 increase to our accrual rate for the LTCP cycle ended
December 31, 2012, coupled with a reduction in fourth quarter 2011 to the
accrual rate for two of the performance cycles under the LTCP. These and other
increases were partially offset by lower costs associated with the 2011
strategic alternatives evaluation process.

Fourth quarter 2012 other expense of $2.5 million decreased $0.2 million from
$2.7 million in fourth quarter 2011. The change between periods primarily
resulted from higher returns on the company's investment balances during
fourth quarter 2012 as compared to fourth quarter 2011.

The company's fourth quarter 2012 effective tax rate was approximately 5
percent, as compared to 31 percent in fourth quarter 2011. The decrease
resulted from a $4.5 million benefit recognized in fourth quarter 2012 related
to the reversal of a valuation allowance against certain deferred tax assets.
Fourth quarter 2011 includes a $1.5 million after-tax benefit related to
interest income on a tax refund.

Full Year 2012 Summary

The company's full year 2012 revenue totaled $663.1 million, a $361.4 million
increase from $301.7 million in full year 2011. This increase was primarily
attributable to the patent sale to Intel Corporation. Full year 2012 patent
licensing royalties decreased $18.7 million, primarily due to a $31.3 million
decrease in per-unit royalty revenue, which was partially offset by a $12.6
million increase in past sales. The decrease in per-unit royalty revenue
resulted from lower shipments by HTC, BlackBerry and the company's Japanese
per-unit licensees. The increase in past sales is driven by the fourth quarter
2012 signing of a new patent licensee. In addition, technology solutions
revenue of $2.5 million decreased $3.9 million due to lower royalties
recognized in connection with the company's SlimChip modem IP business. During
2012, Intel (57 percent) and Samsung Electronics Company, Ltd. (15 percent)
each accounted for ten percent or more of total revenue.

The company's full year 2012 net income was $271.8 million, or $6.26 per
diluted share, compared to $89.5 million, or $1.94 per diluted share, in 2011.
Not including the $12.5 million repositioning charge and its related tax
effects, full year 2012 net income would have been $280.0 million or $6.45 per
diluted share.

Full year 2012 operating expenses of $244.1 million increased $77.1 million,
or 46 percent, from $167.0 million in full year 2011. This increase was driven
by a $31.2 million increase in intellectual property enforcement and
non-patent litigation costs, $16.7 million of costs associated with the
company's patent sales, $12.5 million of costs associated with the VERP and an
$11.7 million increase in personnel and LTCP costs. Full year 2012
intellectual property enforcement and non-patent litigation costs were $52.7
million as compared to $23.7 million in full year 2011, and related primarily
to the USITC actions initiated in second half 2011 and January 2013 and
arbitration proceedings with our existing customers. These and other increases
were partially offset by lower costs associated with consulting services and
the 2011 strategic alternatives evaluation process. Personnel-related costs
grew $6.8 million primarily due to increased personnel levels and merit
increases. Long-term compensation increased $5.0 million, primarily due to a
$4.4 million charge to increase the accrual rate on our LTCP cycle ended
December 31, 2012.

Full year 2012 other expense of $10.4 million increased from $10.1 million in
full year 2011. The change between periods primarily resulted from the
recognition of an additional $4.0 million of interest expense primarily
associated with the company's 2.5% Senior Convertible Notes due 2016 issued on
April 4, 2011 (the "Notes"), due to the Notes being outstanding for the full
year 2012. This change was partially offset by higher returns on the company's
investment balances in full year 2012 and a decrease in other expense due to
$1.6 million of investment impairments recorded in full year 2011.

The company's full year 2012 effective tax rate was approximately 33.5
percent, compared to an effective tax rate in full year 2011 of approximately
28.2 percent. The full year 2012 effective rate included $6.7 million of
benefits related to the reversal of a valuation allowance against deferred tax
assets. During full year 2011, our effective tax rate included a $6.8 million
benefit related to the reversal of a previously accrued liability for tax
contingencies and its related interest and $1.5 million of after-tax interest
income related to a tax refund.

In 2012, the company generated $145.7 million in free cash flow compared to
$65.3 million used in 2011. This change in free cash flow primarily resulted
from the receipt of $375.0 million from Intel and was partially offset by
higher intellectual property enforcement and non-patent litigation costs and
costs of the patent sales in 2012. Additionally, during 2012, the company
invested $15.5 million for patent acquisitions and returned capital to
shareholders through $152.7 million in share repurchases and $83.1 million in
regular and special dividend payments.

Conference Call Information

InterDigital will host a conference call on Wednesday, February 20, 2013 at
6:00 p.m. Eastern Time to discuss its fourth quarter 2012 financial
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 under the Events section 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 United
States or (913) 312-1254 from outside the United States. Please call by 5:50
p.m. ET on February 20 and ask the operator for the InterDigital Financial
Call.

An Internet replay of the conference call will be available on InterDigital's
web site in the Investor Relations section. In addition, a telephone replay
will be available from 9:00 p.m. ET February 20 through 9:00 p.m. ET February
25. To access the recorded replay, call (888) 203-1112 or (719) 457-0820 and
use the replay code 7640351.

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 strategic
relationships with many of the world's leading wireless companies. Founded in
1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400®
index.

InterDigital and SlimChip are registered trademarks of InterDigital, Inc.

For more information, visit the InterDigital website: www.interdigital.com.

Forward-Looking Statements

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 our current beliefs, plans and
expectations, including, without limitation: (i) our expectation of creating a
greater quantity and more diverse set of inventions ; (ii) our expectation
that the Solutions Group will extend its success with new partnerships
involving our technologies; (iii) our expectation for our patent licensing
teams to continue their success in driving new and renewed license agreements
and expanding our revenue base; (iv) our expectation of delivering another
banner year; (v) our expectation of recurring contributions from the
agreements we signed in fourth quarter 2012; (vi) our revenue expectations for
first quarter 2013; and (vii) our expectation of recognizing an additional
charge related to the VERP in first quarter 2013. Words such as “anticipate,”
“estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “will,”
“continue to,” variations of any such words 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,
without limitation, 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 license agreements on acceptable
terms; (iii) our ability to enter into sales and/or licensing partnering
arrangements for certain of our patent assets; (iv) the ability of our
Innovations Group to enter into partnerships with leading inventors and
research organizations and identify and acquire technology and patent
portfolios that align with InterDigital's roadmap; (v) the ability of our
Solutions Group to commercialize the company's technologies and enter into
customer agreements; (vi) the failure of the markets for the company's current
or new technologies to materialize to the extent or at the rate that we
expect; (vii) unexpected delays or difficulties related to the development of
the company's technologies; (viii) 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; (ix) 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; (x)
changes or inaccuracies in market projections; (xi) changes in the company's
business strategy; and (xii) changes to our expected VERP-related costs.

We undertake no duty to update publicly any forward-looking statement, 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.

Footnotes

^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 net cash provided by operating activities less purchases
of property and equipment, technology licenses and investments in patents.
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 net cash used in operating activities, the
most directly comparable GAAP financial measure, 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 Year Ended
                        December 31,                 December 31,
                        2012            2011         2012          2011
REVENUES:
Per-unit royalty        $  29,821       $ 37,932     $ 115,295     $ 146,482
revenue
Fixed fee amortized     33,764          33,610       135,056       135,243
royalty revenue
Past sales              23,652          3,038        26,238        13,649
Patent sales            —               —            384,000       —
Technology solutions    640             2,376        2,474         6,368      
revenue
                        87,877          76,956       663,063       301,742    
                                                                    
OPERATING EXPENSES:
Patent administration   31,305          21,132       126,284       71,736
and licensing
Development             16,821          13,561       67,862        63,763
Selling, general and    8,383           6,772        37,351        31,486
administrative
Repositioning           12,536          —            12,536        —          
                        69,045          41,465       244,033       166,985    
                                                                    
Income from             18,832          35,491       419,030       134,757
operations
                                                                    
OTHER EXPENSE           (2,470     )    (2,677   )   (10,396   )   (10,149   )
Income before income    16,362          32,814       408,634       124,608
taxes
INCOME TAX PROVISION    (830       )    (10,047  )   (136,830  )   (35,140   )
NET INCOME              $  15,532       $ 22,767     $ 271,804     $ 89,468   
NET INCOME PER COMMON   $  0.38         $ 0.50       $ 6.31        $ 1.97     
SHARE — BASIC
WEIGHTED AVERAGE
NUMBER OF COMMON        40,981          45,503       43,070        45,411     
SHARES OUTSTANDING —
BASIC
NET INCOME PER COMMON   $  0.38         $ 0.49       $ 6.26        $ 1.94     
SHARE — DILUTED
WEIGHTED AVERAGE
NUMBER OF COMMON        41,339          46,055       43,396        46,014     
SHARES OUTSTANDING —
DILUTED
CASH DIVIDENDS
DECLARED PER COMMON     $  1.60         $ 0.10       $ 1.90        $ 0.40     
SHARE

                                                   
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
                                                     
                       For the Three Months Ended   For the Year Ended
                       December 31,                 December 31,
                       2012           2011          2012           2011
Net income before      $ 16,362       $ 32,814      $ 408,634      $ 124,608
income taxes
Taxes paid             (108,997   )   (12,787   )   (116,871   )   (36,593   )
Non-cash expenses      11,252         10,381        52,562         40,080
Increase in deferred   145,384        9,097         174,604        56,575
revenue
Deferred revenue       (68,075    )   (60,300   )   (223,419   )   (235,513  )
recognized
(Decrease) increase
in operating working   (118,740   )   19,017        (117,902   )   16,505
capital, deferred
charges and other
Capital spending and
capitalized patent     (10,176    )   (9,056    )   (31,938    )   (31,007   )
costs
FREE CASH FLOW         (132,990   )   (10,834   )   145,670        (65,345   )
                                                                    
Tax benefit from
share-based            (608       )   2,426         898            5,131
compensation
Payments on
long-term debt,        —              (73       )   (180       )   (288      )
including capital
leases
Acquisition of         (1,700     )   —             (15,450    )   —
patents
Proceeds from
issuance of            —              —             —              221,985
convertible senior
notes, net
Purchase of
convertible bond       —              —             —              (42,665   )
hedge
Proceeds from          —              —             —              31,740
issuance of warrants
Dividends paid         (69,689    )   (4,548    )   (83,077    )   (18,150   )
Share repurchases      —              —             (152,694   )   —
Net proceeds from
exercise of stock      1,398          447           2,111          4,497
options
Unrealized (loss)
gain on short-term     (459       )   (15       )   2,007          (580      )
investments
NET (DECREASE)
INCREASE IN CASH AND   $ (204,048 )   $ (12,597 )   $ (100,715 )   $ 136,325  
SHORT-TERM
INVESTMENTS

                                                                 
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
                                                                   
                                                   December 31,   December 31,
                                                   2012           2011
ASSETS
Cash & short-term investments                      $  577,279     $   677,994
Accounts receivable (net)                          169,874        28,079
Current deferred tax assets                        36,997         53,990
Other current assets                               30,197         8,824
Property & equipment and patents (net)             185,381        145,960
Other long-term assets (net)                       56,881         82,121
TOTAL ASSETS                                       $  1,056,609   $   996,968
                                                                   
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of long-term debt                  $  —           $   180
Accounts payable, accrued liabilities, taxes       66,608         38,886
payable & dividends payable
Current deferred revenue                           106,305        134,087
Long-term deferred revenue                         161,820        153,953
Long-term debt & other long-term liabilities       203,171        198,180
TOTAL LIABILITIES                                  537,904        525,286
SHAREHOLDERS' EQUITY                               518,705        471,682
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY         $  1,056,609   $   996,968

 
RECONCILIATION OF FREE CASH FLOW TO NET CASH
PROVIDED BY / (USED IN) OPERATING ACTIVITIES
 
In the summary consolidated statements of cash flows and throughout this
release, the company refers to free cash flow. The table below presents a
reconciliation of this non-GAAP financial measure to net cash used in
operating activities, the most directly comparable GAAP financial measure.

                                                                  
                        For the Three Months Ended   For the Year Ended
                        December 31,                 December 31,
                        2012           2011          2012          2011
Net cash provided by
(used in) operating     $ (122,814 )   $ (1,778  )   $ 177,608     $ (34,338 )
activities
Purchases of
property, equipment,    (1,642     )   (1,312    )   (3,621    )   (3,835    )
& technology licenses
Patent additions        (8,534     )   (7,744    )   (28,317   )   (27,172   )
Free cash flow          $ (132,990 )   $ (10,834 )   $ 145,670     $ (65,345 )

Contact:

InterDigital, Inc.
Patrick Van de Wille, +1 858-210-4814
patrick.vandewille@interdigital.com
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement