InterDigital Inc (IDCC)

[olddog967]

Apparently the BOD decided that the named executive officers did an exceptional job during 2014. Their Short Term Incentive Plan (STIP) payouts were at or near the maximum possible payout ranging from 182 to 200 percent of the target amounts. Depending on performance during the year, STIP payouts can range from 25 - 200 percent of the target amounts.

Te following are calculations comparing the 2014 target amounts against the amounts paid

……………………..Merritt……..Brezski…….McQuilkin…..Nolan……Shay
Base Salary……$600,000….$325,000.….$400,000….$350,000….$425,000
STIP Target %.…….100…………..60…………..75……..……..60………….75
Target STIP………600,000…..195,000……300.000…….210,000..…318,750
Actual Payout.....1,196,908…..368,986……599,048…….382,315…..636,928
Payout %…….……..199………..189……….…200…………..182………..200

Note: 2014 Base Salaries and STIP Target % previously reported by IDCC, see:

https://www.sec.gov/Archives/edgar/data/1405495/000140549514000004/form8-kx01x23x2014.htm

The reported RSU awards under the incentive component Long Term Compensation Program (LTCP) for the 3 year 2012-2014 cycle were also awarded over the target 100% amount, However these awards were only 110% of the target.

According to the proxy statement for the performance element of the LTCP:
“100% achievement of the corporate goal or goals results in a 100% payout of the associated target amounts. For each 1% change above or below 100% achievement, the actual award amount is adjusted by 2.5 percentage points, with a threshold payout of 50% of target and a maximum payout of 200% of target. Accordingly, for performance that falls below 80% achievement, no performance-based award would vest.”

The actual determination of the award amount is not done until after the applicable 1 or 3 year period; therefore, it is necessary to periodically accrue the estimated charge. When the earnings report for 4th qtr/year ending 2008 came out there was an unexpected “companywide charge of $9.4 million in fourth quarter 2008 to adjust the accrual rate on a long-term performance based cash incentive”. This charge resulted in reported earnings coming in significantly below estimates and a 5 point drop in the stock price. I hope that IDCC has done a better job in their accrual accounting, so that the noted above target payouts do not negatively affect the upcoming earnings report.