UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 11-K
------------------------------
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ending December 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to _________
Commission File Number 333-66626
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
INTERDIGITAL COMMUNICATIONS CORPORATION
781 Third Avenue, King of Prussia, Pennsylvania 19406-1409
- 1 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
TABLE OF CONTENTS
-----------------
Page Number
-----------
Reports of Independent Registered Public Accounting Firms 3-4
Basic Financial Information:
Statements of Net Assets Available for Benefits as of December 31, 2004 and
2003 5
Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 2004 and 2003 6
Notes to Financial Statements 7 - 16
Additional Information:
Schedule of Assets (Held at End of Year) 17
Schedule of Reportable Transactions 18
Other supplemental schedules required by Section 2520.103-10 of the Department
of Labor Rules and Regulations for Reporting and Disclosure under ERISA have
been omitted because they are not applicable.
Signature 20
Exhibit 23.1 Consent of Cogen Sklar LLP 21
Exhibit 23.2 Consent of Grant Thornton LLP
- 2 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
Participants and Plan Administrator
InterDigital Communications Corporation
Savings and Protection Plan
King of Prussia, Pennsylvania
We have audited the accompanying statement of net assets available for benefits
of InterDigital Communications Corporation Savings and Protection Plan as of
December 31, 2004, and the related statement of changes in net assets available
for benefits for the year then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of InterDigital
Communications Corporation Savings and Protection Plan as of December 31, 2004,
and changes in its net assets available for benefits for the year then ended, in
conformity with accounting principles generally accepted in the United States.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and is not a required part of the basic financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Cogen Sklar LLP
-------------------
Bala Cynwyd, Pennsylvania
May 27, 2005
- 3 -
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
Participants and Plan Administrator
InterDigital Communications Corporation Savings and Protection Plan
We have audited the accompanying statements of net assets available for
benefits of the InterDigital Communications Corporation Savings and Protection
Plan as of December 31, 2003 and the related statement of changes in net assets
available for benefits for the year ended December 31, 2003. These financial
statements are the responsibility of the Plan's management.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of December 31, 2003, and the changes in net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
/s/ Grant Thornton LLP
----------------------
Philadelphia, Pennsylvania
July 8, 2004
- 4 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
2004 2003
---------------- ----------------
CASH AND INVESTMENTS AT FAIR VALUE
Cash $ 11,559 * $13,948,408
---------------- ----------------
Investments in common trusts
Stable Pooled Collective Trust 898,545 -
---------------- ----------------
Registered investment companies
Money Market Fund 814,236 -
Short Horizon Fund 275,713 -
Equity Growth Fund 392,713 -
Mid-Cap Growth Fund 383,983 -
International Fund * 1,463,438 -
Long Horizon Fund 379,630 -
Value and Income Fund 360,801 -
Special Equity Fund * 1,549,106 -
Mid-Cap Value Fund * 2,923,478 -
Intermediate Bond Fund 681,088 -
Core Bond Fund 1,001,068 -
Intermediate Horizon Fund 49,099 -
---------------- ----------------
10,274,353 -
---------------- ----------------
Interest in other funds
AIM Real Estate Funds, Class A 1,032,451 -
Baron Small Cap Fund 845,380 -
Transamerica PRM Core Equity Investment * 1,901,890 -
Transamerica PRM Equity Index * 3,295,232 -
---------------- ----------------
7,074,953 -
---------------- ----------------
InterDigital Stock Fund * 2,447,075 * 1,787,194
---------------- ----------------
Participant Loans 156,234 76,670
---------------- ----------------
Employer Profit Sharing Receivable 567,808 -
---------------- ----------------
NET ASSETS AVAILABLE FOR BENEFITS $21,430,527 $15,812,272
================ ================
* Represents 5% or more of net assets available for benefits.
The accompanying notes are an integral part ofthese financial statements.
- 5 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
---------------- -----------------
ADDITIONS
Investment income
Interest and dividend income, investments $ 8,157 $ 10,102
Net appreciation in fair value of investments 2,348,174 2,973,075
---------------- -----------------
Total investment income 2,356,331 2,983,177
---------------- -----------------
Contributions
Employer 1,434,203 805,882
Participants 2,616,283 2,304,553
---------------- -----------------
Total contributions 4,050,486 3,110,435
---------------- -----------------
Asset transfers in 97,430 36,876
---------------- -----------------
TOTAL ADDITIONS 6,504,247 6,130,488
---------------- -----------------
DEDUCTIONS
Payment of benefits 885,316 1,801,851
Other deductions 676 45,138
---------------- -----------------
TOTAL DEDUCTIONS 885,992 1,846,989
---------------- -----------------
NET INCREASE 5,618,255 4,283,499
NET ASSETS AVAILABLE FOR BENEFITS -
BEGINNING OF YEAR 15,812,272 11,528,773
---------------- -----------------
NET ASSETS AVAILABLE FOR BENEFITS - END OF YEAR $21,430,527 $15,812,272
================ =================
The accompanying notes are an integral part of these financial statements.
- 6 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the InterDigital Communications Corporation
Savings and Protection Plan (the Plan) is provided for general information
purposes. Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
General
-------
The Plan is a defined contribution 401(k) plan of InterDigital
Communications Corporation and its participating subsidiaries (the "Company")
for eligible employees over the age of 18 and who have completed one month of
service. Beginning in 2004, individuals employed by the Company as part of an
academic course of study, such as a work-study program, co-op program or similar
arrangements, are not eligible. The Plan was established effective February 1,
1985 and restated January 1, 1997. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). Reliance
Trust Company is the trustee of the Plan.
Contributions
-------------
All participant contributions are made on a before-tax basis. In 2003 each
participant could invest from 1% to 15% of annual compensation as a basic
contribution, beginning 2004 each participant may invest from 1% to 100% of
annual compensation as a basic contribution. The total of the basic and
supplemental contributions cannot exceed IRS limitations for each plan year. For
the 2004 and 2003 plan years, the total IRS limitations were $13,000 and
$12,000, respectively. If a participant's annual contributions exceed the dollar
limitation set by the IRS, thereby requiring a distribution of such excess
contributions, the participant will forfeit any employer matching contributions
related to the distribution amount. Amounts forfeited will be used to reduce
future employer contributions.
The Company may, at its sole discretion, contribute to the Plan through
matching contributions and/or discretionary contributions. Beginning July 2001,
the Company matches 50% of each participant's contribution, up to a maximum of
6% of the participant's pretax annual basic compensation, as defined by the
plan. During 2003, 50% of the Company match consisted of cash and the other 50%
was directed by the Company to the InterDigital Stock Fund. Beginning in 2004,
the Company match is directed by the Company to the InterDigital Stock Fund and
may be immediately transferred to other investment alternatives by Plan
participants. Discretionary contributions are lump sum payments made to the Plan
as determined from time to time by the Board of Directors of the Company. In
first quarter 2005, the Company contributed 32,632 shares of InterDigital Common
Stock, valued at $567,808, to participant accounts in association with the
Company's performance in 2004. The Plan recorded a related receivable at
December 31, 2004. The Company did not make any discretionary contributions in
2003.
The Internal Revenue Code limits the amount of pay that may be used to
determine contributions. The limit was $205,000 and $200,000 in 2004 and 2003,
respectively. The law also limits the amount of all contributions that can be
made for or by a participant to the Plan in a given year. The limit is the
lesser of 100% of pay or $41,000 for 2004 and, the lessor of 100% of pay or
$40,000 for 2003. Employee rollover contributions from other qualified
retirement plans are permitted; such contributions are subject to the conditions
and procedures set forth in the Plan.
Participant Accounts
--------------------
Each participant's account is credited with that participant's contributions and
allocations of the Company's matching and discretionary contributions and Plan
earnings and losses. Allocations of discretionary contributions are based on a
participant's annual compensation relative to the total compensation of all
other participants. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account. Terminating
participants forfeit unvested Company contributions. Forfeitures are used to pay
Plan expenses or reduce employer contributions.
- 7 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Vesting
-------
Participants are immediately vested in their salary deferral and rollover
contributions. Vesting in Company contributions is based on length of service.
Participants vest 33 1/3% on each of their first three anniversaries of
employment.
Participants Loans
------------------
Any participant who is an active employee may apply for a secured loan
provided the request does not exceed the lesser of 50% of their vested account
balance or $50,000. The minimum loan amount was $500 and $1,000 during 2004 and
2003, respectively. Only one loan per participant may be made every 365 days and
all loans are subject to approval by the Plan Administrator. Loan terms are
limited to five years set at the inception of each loan. During 2003, the
interest rates were determined by the loan administrator in accordance with
prevailing market rates on similar types of loans. Beginning in 2004, interest
rates were set at an annual rate of prime + 1%. The rates of outstanding loans
at December 31, 2004 and 2003 range between 4.0% and 6.0%. Interest paid by the
participant is credited to the participant's account. If a participant's balance
remains unpaid for more than 90 days after it is due, the loan will be in
default on the outstanding loan amount and the participant's vested account will
be reduced by the amount of the unpaid principal and interest. The unpaid amount
is treated as a taxable withdrawal and is subject to federal income taxes. At
December 31, 2004, one loan was in default in the amount of $20,193 in principal
and interest. Beginning in 2004, outstanding loans become due and payable in
full 60 days after the related participant ceases to be an employee and a
party-in-interest, as defined under ERISA or after complete termination of the
Plan.
When a participant receives a distribution from the Plan, any outstanding
principal plus accrued interest will be deducted from the amount of the
distribution. A participant may then either default on the loan or make
arrangements to continue loan repayments beyond when they become entitled to a
distribution as long as their remaining interest in the Plan exceeds their
outstanding loan balance.
Payment of Benefits
-------------------
If a participant retires, dies, becomes permanently disabled, or otherwise
separates from the Company, the participant or participant's beneficiary is
entitled to the vested amount of their account as valued on the applicable
valuation date. In the event of a participant's death, distribution of their
account will be made as soon as administratively practicable upon the receipt of
appropriate documentation from their designated beneficiary. Distributions for
reasons of retirement, permanent disability or termination will be made upon
written request. Distributions from participant accounts are typically made,
subject to certain limitations, using a single installment or deferred payment.
Plan Termination
----------------
The Company may amend or suspend the Plan and may terminate the Plan at any time
subject to the provisions of ERISA; although there is no present intent to do
so. However, no such action may cause the Plan's assets to be used for purposes
other than the exclusive benefit of the participants and their beneficiaries. If
the Plan is terminated, all such participant accounts shall become fully
vested and shall be distributed as soon as administratively possible.
- 8 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Investment Options
------------------
All investments are participant directed except for 50% of the Company's
matching contribution, which by the terms of the Plan is directed by the Company
to the InterDigital Stock Fund. Participants may reallocate their holdings among
available investment options at any time. However, prior to 2004, participants
could not reallocate that portion of their Plan account that was attributable to
the Company's matching contribution made after June 2001. During the plan years
ended December 31, 2004 participants were able to allocate their contributions
among the following investment options:
SHORT-TERM BONDS:
----------------
Money Market Fund
-----------------
This fund seeks high current income while preserving capital and providing
liquidity by investing in high quality short-term cash equivalent securities,
such as commercial paper, bank acceptances, and repurchase agreements. The Fund
will typically invest in A1/P1- rated debt instruments, and in securities with
maturities of 30-120 days. All securities will have maturities less than one
year.
Stabled Pooled Fund
-------------------
This Fund seeks to provide positive income with reduced return volatility
through investment in a diversified portfolio of high quality fixed income
securities. The Fund invests in stable value fixed income instruments, including
Guaranteed Investment Contracts (GIC's), Bank Investment Contracts (BIC's), as
well as GIC alternatives, such as synthetic GIC's.
INTERMEDIATE/LONG-TERM BONDS:
----------------------------
Core Bond Fund
--------------
This Fund seeks to maximize return through investment in US Government,
asset-backed and mortgage-backed securities, corporate securities, and to a
lesser extent, convertible, high yield and international fixed income
securities.
Intermediate Bond Fund
----------------------
This Fund seeks maximum current income over the intermediate-term consistent
with preservation of capital primarily, almost exclusively, through the
investment in US Government securities, its Agencies and money market
instruments. The Fund maintains a dollar weighted-average maturity of three to
ten wars under normal conditions. A three-year duration is typical.
LARGE-CAP STOCKS:
----------------
Value & Income Fund
-------------------
This Fund seeks long-term capital appreciation primarily through investment in a
diversified portfolio of common stocks selling at reasonable valuations relative
to their future projected earnings. The Fund utilizes a combination of deep and
relative value sub styles.
Equity Growth Fund
------------------
This Fund seeks to provide a high level of capital appreciation through
investment in a diversified portfolio of common stocks with the potential for
above-average growth in earnings. The Fund utilizes two managers with
complementary large capitalization growth styles.
- 9 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Transamerica PRM Core Equity Investment
---------------------------------------
Transamerica Premier Core Equity Fund seeks capital appreciation. The Fund
primarily invests in common and preferred stocks, warrants, convertibles,
corporate and high-yield debt, and other securities that management believes to
be undervalued. It may invest any proportion of assets in each type of security.
The Fund may invest in securities of any asset size, earnings level, or industry
type. It may invest no more than 35% of assets in debt rated below-investment
grade.
Transamerica Premier Equity Index
---------------------------------
Transamerica Premier Index Fund - Class M seeks to track the performance of the
S&P 500 index. The fund invests in a combination of common stocks included in
the index, S&P 500 stock index futures and options, and short-term investments.
It may not purchase Transamerica Corporation common stock. Management seeks a
correlation between the performance of the Fund and the index of .95 or higher.
To select securities, management solely takes into consideration the proportions
of securities within the index.
SMALL MID-CAP STOCKS:
--------------------
Mid-Cap Value Fund
------------------
The Fund seeks capital appreciation through investment in a diversified
portfolio of medium size value-oriented companies. The Fund invests in quality
companies undergoing beneficial strategic changes that are selling at below
market valuation standards due to limited analyst coverage and low expectations.
Mid-Cap Growth Fund
-------------------
The Fund seeks a high level of capital appreciation through investment in a
diversified portfolio of medium size, growth-oriented companies. The Fund
invests in high quality companies whose growth in earnings will provide returns
in excess of the market, while frequently exhibiting above-market standard
valuation measures.
Special Equity Fund
-------------------
The Fund seeks to provide long-term capital appreciation through investment in a
diversified portfolio of common stocks of small size companies. The Fund
utilizes two growth-style managers, two value-oriented managers and a structured
core manager. This provides an opportunity for higher returns relative to the
broad small-cap market over a full market cycle.
Baron Small Cap Fund
--------------------
Baron Small Cap Fund seeks capital appreciation. The Fund normally invests at
least 80% of assets in securities of smaller companies. A small sized company is
defined as having a market value of under $2.5 billion.
INTERNATIONAL STOCKS:
--------------------
International Fund
------------------
The Fund seeks long-term capital appreciation by investing in both value and
growth oriented companies. The Fund invests primarily in the stock markets of
the United Kingdom, continental Europe, Japan, Canada, and Australia. Stock
selection is based on in-depth, local research.
- 10 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
MULTI-ASSET/OTHER:
-----------------
AIM Real Estate A Funds, Class A
--------------------------------
AIM Real Estate Fund seeks high total return. The fund normally invests at least
80% of its assets in securities of real estate and real estate-related
companies. The fund considers a company to be a real estate-related company if
at least 50% of assets, gross income or net profits are attributable to
ownership, construction, management or sale of residential, commercial or
industry real estate. The fund may invest up to 25% of its total assets in
foreign securities.
Intermediate Horizon Strategic Allocation Fund
----------------------------------------------
The portfolio seeks to provide greater potential for long-term return at
moderate risk levels by investing in an array of Diversified Investment Advisors
("Diversified") Funds. The portfolio will invest in a combination of both fixed
income and equity funds, maintaining approximately equal exposure to both asset
classes. Fund allocations within asset classes are broadly designed to mirror
the market at large.
Long Horizon Strategic Allocation Fund
--------------------------------------
The portfolio seeks to attain its objective by investing in an array of
Diversified's Funds with an emphasis on equity funds. The Fund will have limited
exposure to a variety of fixed income funds. Fund allocations within asset
classes are broadly designed to mirror the market at large.
Short Horizon Strategic Allocation Fund
---------------------------------------
The portfolio seeks to attain its objective by investing in an array of
Diversified's Funds. The primary emphasis is on fixed income funds with limited
exposure to equity funds. Fund allocations within asset classes are broadly
designed to mirror the market at large.
InterDigital Stock Fund
-----------------------
This fund invests in the Common Stock of InterDigital Communications
Corporation.
During the plan year ended December 31, 2003, participants were able to
allocate their contributions among the following investment options:
POOLED SEPARATE ACCOUNTS:
Guaranteed Interest Account
---------------------------
This account invests in private-market bonds, commercial mortgages and mortgage
backed securities. Contributions placed in this account earn a guaranteed rate
of interest for either two or five year periods.
Money Market Account
--------------------
This account invests in high-quality commercial paper. The average maturity is
less than one month.
Bond & Mortgage Account
-----------------------
This account invests in issuances of five-to-ten year bonds and commercial
mortgages to companies located in various geographic regions.
Government Securities Account
-----------------------------
This account invests in various types of government securities including GNMA,
FNMA, FHLMC and SLMA.
Bond Emphasis Balanced Account
------------------------------
This account invests in other accounts of The Principal Life Insurance Company
("Principal"). The account usually invests from 50-100% of its assets in
conservative and moderate investment accounts, as defined, and 0-50% in
aggressive investment accounts, as defined.
- 11 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Large Cap Stock Index Account
-----------------------------
This account primarily invests in common stocks of those companies listed in the
S&P Stock Index.
Medium Company Value Account
----------------------------
This account invests in medium-sized companies whose stock prices are perceived
to be low, relative to the companies' assets, profits, and other measures.
Large Company Blend Account
---------------------------
This account invests in stocks of larger companies whose earnings and dividends
are expected to be above average.
Real Estate Account
-------------------
This account invests in developed rental properties including warehouses, office
building, and retail properties. The properties are diversified by geographic
location and type.
Stock Emphasis Balanced Account
-------------------------------
This account invests in other accounts of Principal. The account usually invests
from 50-100% of its assets in dynamic and aggressive investment accounts, as
defined, and 0-50% in conservative investment accounts, as defined.
Medium Company Blend Account
----------------------------
This account invests in medium-sized stocks that offer a combination of value
and earnings potential.
Small Company Blend Account
---------------------------
This account invests in smaller established companies with above average
long-term growth potential.
International Stock Account
---------------------------
This account invests in common stocks of companies located outside the United
States. Industries are selected by evaluating the economic, social and political
factors of each market. Most investments are in Western Europe and Asia.
Principal Financial Group Income Stock Account
----------------------------------------------
This account invests in stock of The Principal Financial Group, Inc. The value
of its investment changes based on changes in the market value of the stock and
expenses.
REGISTERED INVESTMENT COMPANIES:
--------------------------------
Vanguard Growth & Income Fund
-----------------------------
This Fund seeks a total annual return greater than that of the S&P 500 Index. At
least 65% (and more typically 90%) of the Fund's assets are invested in
securities included in the S&P 500 Index.
Invesco Small Company Growth Fund
---------------------------------
This Fund seeks to invest in smaller, established companies with above average
long-term growth potential.
Janus Aspen Aggregate Growth Fund
---------------------------------
This Fund seeks long-term capital growth. The Fund typically invests at least
50% of its assets in securities issued by medium-sized companies whose market
capitalizations fall within the range of the companies in the S&P Mid-Cap 500
Index.
- 12 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN (Continued)
Strong Growth Fund
------------------
This Fund seeks capital appreciation. The Fund normally invests at least 65% of
its assets in equity securities and may invest in companies of any size.
Strong Opportunity Fund
-----------------------
This Fund seeks capital appreciation. The Fund normally invests at least 70% of
its assets in equities, including common stocks, convertible debentures,
preferred stocks, convertible preferred stocks, and warrants. It may invest up
to 30% of its assets in nonconvertible, corporate and government intermediate to
long-term debt securities that management believes have capital-appreciation
potential.
T. Rowe Price Science and Technology Fund
-----------------------------------------
This Fund seeks long-term growth of capital. The Fund normally invests at least
65% of assets in companies, both foreign and domestic, that seek to develop or
use scientific and technological advances.
Putnam International Growth Fund
--------------------------------
This Fund seeks capital appreciation. The Fund invests mainly in common stocks
of companies outside the United States. The Fund normally invests at least 65%
of its assets in equity securities of companies located outside of the United
States.
COMPANY STOCK:
-------------
InterDigital Stock Fund
-----------------------
This Fund invests in the common stock of InterDigital Communications
Corporation.
Plan Amendments
---------------
In June 2001, the Compensation & Stock Option Committee of the Company's
Board of Directors authorized an amendment to the Plan to include increasing the
Company's matching contribution from 25% to 50% of the first 6% of a
participant's annual compensation that a participant contributes to the Plan,
(paying the additional 25% matching contribution in the Company's Common Stock),
adding the Company's Common Stock to the selection of investments under the
Plan, permitting an additional discretionary year-end matching contribution and,
effective for employees hired on or after January 1, 2002, extending the vesting
period of the Company's matching contributions to 36 months from the
commencement of employment. The prior vesting policy permitted immediate vesting
of 33% upon commencement of employment and vesting of 67% and 100% on the first
and second anniversaries of commencement of employment, respectively. Under the
current vesting policy, participants vest 33 1/3% on each of their first three
anniversaries of employment.
In August 2001, 400,000 shares of the Company's authorized but unissued Common
Stock were reserved for issuance to the account of participants in the Plan as
matching contributions. An agreement was entered into between the Company, on
behalf of the Plan, and Web401(k).com and Fidelity Investments to serve as third
party administrator and custodian, respectively, of the InterDigital Stock Fund.
As more fully discussed in Note 3, Diversified replaced Principal, Web 401(k)
and Fidelity Investments in these capacities in 2004.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The following accounting policies, which conform with accounting principles
generally accepted in the United States of America, have been used consistently
in the preparation of the Plan's financial statements.
- 13 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Basis of Accounting
-------------------
Accounting records are maintained by the custodian on the cash basis of
accounting. The financial statements of the Plan reflect all material
adjustments to place the financial statements on the accrual basis of
accounting.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as reported amounts of additions and
deductions during the reporting period. Actual results could differ from those
estimates.
Investment Valuation and Income Recognition
-------------------------------------------
Investments in pooled separate accounts are stated at fair value. Shares of
registered investment companies are valued at quoted market prices which
represent the net asset value of shares held by the Plan at year-end. The
InterDigital Stock Fund and The Principal Financial Group, Inc. Stock Account
are valued at their year-end unit closing price (comprised of common stock
market price plus uninvested cash position). Participant loans are valued at
cost, which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market, and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the value of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statement of net
assets available for benefits.
Payment of Benefits
-------------------
Benefits are recorded when paid.
Forfeited Accounts
------------------
At December 31, 2004 and 2003, forfeited non-vested accounts totaled $8,000
and $7,820, respectively. These forfeited accounts were fully utilized to reduce
employer matching contributions in 2004 and 2003.
NOTE 3 - CUSTODIAN AND THIRD PARTY ADMINISTRATOR
Effective January 1, 2004, the Plan appointed Diversified to replace Principal
as the custodian and third party administrator for the majority of Plan Assets.
Also effective January 1, 2004, Diversified replaced Web 401(k) and Fidelity
Investments as the third party administrator and custodian, respectively, of
InterDigital Common Stock held by the Plan.
On December 31, 2003, Principal converted a portion of the Plan's holdings into
cash in preparation for the transfer of funds to Diversified. In January 2004,
Principal transferred approximately $13.9 million cash to Diversified.
Diversified invested these funds into investment options offered by Diversified,
in accordance with the instructions of each participant. In January 2004,
Principal and Fidelity (as custodians) also transferred InterDigital Common
Stock with a total fair value of approximately $1.8 million, as of December 31,
2003, to Diversified.
- 14 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - INVESTMENT CONTRACT WITH INSURANCE COMPANIES
The Guaranteed Interest Account (the "Account"), which was an investment option
in 2003, provided a guaranteed interest rate for a two year and five year
period. The rate credited to the Account was the rate in effect on the day each
deposit was directed to the Account. To simplify reporting to Plan participants,
all rates credited during 2003 were averaged into a single composite rate.
The guarantees made with regard to the Account were supported by the General
account of The Principal Financial Group, Inc. The General Account was invested
mostly in private placement bonds, commercial mortgages and residential
mortgages. The Account promised contract value for a benefit event, however,
there was a market adjustment when funds were withdrawn prior to their maturity.
Thus, the Account was not considered benefit responsive.
NOTE 5 - INVESTMENTS
During 2004 and 2003, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year, appreciated
in value as follows:
2004 2003
--------------- ---------------
Investment in Common Trusts $ 26,124 $ -
Registered Investment Companies 1,352,383 440,719
Interest in Other Funds 699,109 -
Pooled Separate Accounts - 2,097,576
InterDigital Stock Fund 270,558 434,780
--------------- ---------------
$ 2,348,174 $ 2,973,075
=============== ===============
NOTE 6 - NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the components of and significant changes in net assets
relating to the Plan's nonparticipant-directed investments are as follows:
2004 2003
--------------- ---------------
Net Assets
InterDigital Stock Fund $ 2,447,075 $ 1,787,194
=============== ===============
Changes in Net Assets
Contributions $ 923,904 $ 560,846
Net appreciation in fair value of investments 270,558 434,780
Administrative expenses - (1,389)
Distributions (49,934) -
Transfers (476,899) -
Forfeitures and other (7,748) (19,614)
--------------- ---------------
$ 659,881 $ 974,623
=============== ===============
- 15 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - RELATED PARTY TRANSACTIONS
The Plan invests in shares of the Company's Common Stock through the
InterDigital Stock Fund. In 2004, the Plan also invested in funds with
Diversified. In 2003, the Plan also invested in Pooled Separate Account and
Guaranteed Interest Account investments with The Principal Financial Group, Inc.
Transactions in such investments qualify as party-in-interest transactions that
are exempt from the prohibited transaction rules.
NOTE 8 - PLAN EXPENSES
All costs and expenses incurred in the administration of the Plan (i.e., trustee
and recordkeeper fees) are currently paid by the Company.
NOTE 9 - TAX STATUS
The Internal Revenue Service has determined and informed the Company by letter
dated July 8, 2002 that the Plan satisfies the qualification requirements under
Internal Revenue Code ("IRC") Section 401(a) and that the trust maintained in
connection with the Plan satisfies the requirements for exemption under Section
501(a) of the IRC. The Company believes the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
- 16 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
EIN 23-1882087
SCHEDULE H, PART IV(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2004
EIN 23-1882087
Fair
Identity of Issue Investment Type Value
---------------------------------- ------------------------------------ ----------------
Cash Cash $ 11,559
Stable Pooled Collective Trust* Investments in common trusts 898,545
Money Market Fund* Registered investment companies 814,236
Short Horizon Fund* Registered investment companies 275,713
Equity Growth Fund* Registered investment companies 392,713
Mid-Cap Growth Fund* Registered investment companies 383,983
International Fund* Registered investment companies 1,463,438
Long Horizon Fund* Registered investment companies 379,630
Value and Income Fund* Registered investment companies 360,801
Special Equity Fund* Registered investment companies 1,549,106
Mid-Cap Value Fund* Registered investment companies 2,923,478
Intermediate Bond Fund* Registered investment companies 681,088
Core Bond Fund* Registered investment companies 1,001,068
Intermediate Horizon Fund* Registered investment companies 49,099
AIM Real Estate funds, Class A Registered investment companies 1,032,451
Baron Small Cap Fund Registered investment companies 845,380
Transamerica PRM Core
Equity Investment Registered investment companies 1,901,890
Transamerica PRM Equity Index Registered investment companies 3,295,232
InterDigital Stock Fund* Company Stock Fund 2,447,075 **
Participant Loans Participant Loan 156,234
----------------
TOTAL ASSETS HELD AT END OF YEAR $20,862,719
================
*transaction with party in interest
**cost basis is $1,674,173
- 17 -
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
SUPPLEMENTAL SCHEDULE H, PART IV(j)
REPORTABLE TRANSACTIONS
December 31, 2004
Gain (Loss) As
Purchase Selling Historical Cost a Result of
Identity of Party Involved Description of Asset Price Price of Asset Transaction
--------------------------------- ----------------------------------- ------------ ------------ --------------- ---------------
Diversified Investors Advisors Stable Pooled Collective Trust Fund $ 1,033,923 $ 161,502 $ 158,854 $ 2,648
Collective Trust
Diversified Investors Funds Group Transamerica PRM Equity Index Fund 2,869,388 - - -
Diversified Investors Funds Group Transamerica PRM Equity Index Fund - 3,194,654 3,019,154 175,500
Diversified Investors Funds Group Money Market Account 1,493,389 678,746 678,413 333
Diversified Investors Funds Group International Fund 1,374,261 93,596 91,648 1,948
Diversified Investors Funds Group Special Equity Fund 1,332,228 - - -
Diversified Investors Funds Group Mid-Cap Value Fund 2,043,968 - - -
Diversified Investors Funds Group Mid-Cap Value Fund 812,426 234,991 218,451 16,540
Diversified Investors Funds Group Intermediate Bond Fund 874,524 189,031 189,406 (375)
Diversified Investors Funds Group Core Bond Fund 1,170,600 168,016 167,476 540
Diversified Investors Funds Group AIM Real Estate Funds, Class A 968,345 132,479 120,325 12,154
Diversified Investors Funds Group Transamerica PRM Core Equity
Investment Fund 1,556,678 - - -
Diversified Investors Funds Group InterDigital Stock Fund 1,787,047 - - -
Diversified Investors Funds Group InterDigital Stock Fund 1,112,911 723,452 704,216 19,236
Diversified Investors Funds Group Transamerica PRM Equity Index Fund 3,182,110 - - -
- 18 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this Annual Report on Form 11-K to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERDIGITAL COMMUNICATIONS CORPORATION
SAVINGS AND PROTECTION PLAN
By: InterDigital Communications Corporation, in its
capacity as Plan Sponsor and Plan Administrator
Date: June 29, 2005 By: /s/ R.J. Fagan
-------------------------------------
Richard J. Fagan
Chief Financial Officer
- 19 -
EXHIBIT INDEX
Exhibit Number Document
-------------- --------
23.1 Consent of Cogen Sklar LLP
23.2 Consent of Grant Thornton LLP