Corp-Buyer: Thanks for your prompt response I will try answering the points you bring up. I think your response helps prove the point that I was trying to make that IDCC needs to do a better job in explaining what the program is about , how it operates, and how it is accounted for.
"I think Ronnie has confirmed the $9.5M and $16M grant values for 2004 and 2005 respectively (not the expensed amount)."
Ron’s latest statement (post100498) helps prove my point about confusion in regard to the program. For 2004 he states that the total value granted was $9.5m ($2.9 cash and $6.5m RSUs). This amount is actually a combination of what was expensed in 2004 for the cash portion, with the RSU amount of $6.5m representing the total program grant for the period Apr 1, 2004 - Dec. 31, 2005. In regard to his 2005 figures, as he states he is not sure of the total amount with his figure being just an estimate based on limited data available.
“The total value of the cash incentive and RSUs granted for the nine months of 2004 under the LTI Plan was $9.5m ($2.9m cash and $6.5m total value of the RSU grant). At this point we are really not sure of the total value of the cash incentives and RSUs granted for 2005 under the LTI Plan, but I would estimate from limited data available, that it could be around $16m. We will have a much better handle on the 2005 LTI Plan cost and total value when the first quarter 10Q is published.”
"What does this part mean: "amounts can change based on actual future performance" - is this referring to e.g. if the stock value goes up during the vesting period, then the grant recipient recieves greater value than was originally granted?
Coneptually, it seems to me that the LTIP is a form of bonus for past performance. So, of course, the actual final value can be more or less, depending on the stock trend. However, for compensation purposes, it seems best to consider the value of the grant on the date of grant as compensation for past achievment?"
As I stated the plan is for future, not past, performance. The following from the 10-K explains some details on how program amounts were derived. Note their use of the word assuming
The amount of expense accrued in 2004 related to the performance-based cash incentive was based on our assumption that the Company will meet 100% of its goals under the long-term cash-based incentive. If we had assumed that the Company’s performance will meet 120% of the Company’s associated goals, we would have recorded approximately $1.4 million of additional operating expense. If we had assumed that the Company’s performance will meet 80% of the associated goals, we would have recognized approximately $1.4 million less operating expense in 2004. There is no cash pay-out for performance that falls below 80% of target results. We expect that the expenses associated with the performance-based cash incentive and RSUs will each increase by between $4 million to $5 million in 2005 as we accrue expenses for both the final year of the initial measurement period (April 2004 through December 2005) and begin the first year of the first three year measurement period under our long term compensation programs. However, the amount recorded may change dependant upon our future expectations to attain performance targets.
"If LTIP is a new form of bonus plan, then it should supercede the "regular" bonus plan, right? Otherwise, if the company is looking at the LTIP not as a performance bonus, but rather as a future retention and incentive plan, then IMO we don't need it at all."
While the current program is a new plan, IDCC had a Long-Term Equity Incentives Program under which options were granted. This was/is in addition to the Performance-Based Annual Bonus Program. In regard to the purpose of the program, the following are the stated program goals:
Program Goals
• Introduces a new compensation program to attract, motivate and retain employees; and
• Ensures alignment with market/industry practices and shareholder interests.
I would just like to add one point. You, Ron, myself and others have been using the acronym LTI Or LTIP when referring to the program. The actual title of the program is “LONG TERM COMPENSATION PROGRAM” . LTIP only refers to the cash incentive portion of the program.
“Compensation Components. As further described below, the Program consists of two compensation components: (1) a Long-Term Incentive Plan providing performance-based cash bonuses (the “LTIP”), and (2) an award of restricted stock units (“RSUs”) under the Company’s 1999 Restricted Stock Plan.”
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