InterDigital Inc (IDCC)

[rmarchma]

Corp_Buyer re 2004 cost of new LTI compensation plan you asked in bold:

Also, do you agree that the total VALUE of the 2004 LTIP grants was about $11M, even though only $7M was actually expensed in 2004?

The total value of the 2004 LTI RSU grants and cash incentives comes out to $9.4m, composed of $2.9m in cash incentives and $6.5m total RSU grant value on April 1, 2004. However only $4.1m of the 2004 RSU grant was amortized to expense in 2004, the unamortized remainder of $2.4m will carryover and be amortized to expense in 2005. The total recorded expense associated with the new LTI comp plan for 2004 was $7m, composed of $2.9m cash incentives and $4.1m amortized RSU incentives.

You are getting $11m total value for 2004 LTI based upon assuming that the RSU component is being amortized equally on a straight-line basis, but it is not. Therefore you can not just double the $4m RSU expense into two separate years. The RSU grant is being amortized on an accelerated basis, which puts more into expense in first year of the grant, ie front-end loading of the expense.

There is still some more executive incentives going on at IDCC in 2004 besides the new LTI plan. Certain executives are still being compensated from the old existing bonus plan, in addition to the new LTI plan. We will get more data about the total compensation of the inside executives when the proxy is published.

There is also an increase in compensation expense for 2004 being generated by some new initiatives in 2004, other than the LTI plan. From the 10K:

..."$13.1m increase in personnel cost. Approximately 73% of the increase was due to company-wide compensation initiatives instituted in the first half of 2004."

$13.1m increase x 73% = $9.5m expense increase associated with the new compensation initiatives, of which $7m is associated with the new LTI plan. Therefore another $2.5m increase is from new compensation initiatives, other than the LTI plan. I think this extra amount might be associated with the outside directors compensation, which is not part of the LTI plan, but I am certainly not sure at this point.

Also I might have misinterpreted something dealing with the projected 2005 increase in LTI compensation in a post last night. I will have to deal with this issue later today, no time now.