Jim re earnings, revenues, and cash you asked:
...."Question if we had positive earnings why did our cash balance go from $563.6 million in the 3rd quarter to 541.7 in this quarter?? ....Where did that 11.9 million go??
Net income does not equal net cash. First, earned revenues for a given quarter are NOT the same as cash receipts from licensees in a given quarter. The main reason is that IDCC receives cash in advance from some per-unit licensees' "prepayments" and some fixed-fee licensees "advance" payments. IDCC received two very large per-unit prepayments in the second and third quarters of 2009 amounting to $77m and $105m. These prepayments were cash receipts in the second and third quarters of 2009, but probably represented several years of estimated unit sales by the prepayers. Thus, they will be recorded as earned revenues by IDCC over time as the quarterly sales reports are received. In other words the cash was received in 2009, but the earned revenues in 2010 from these two prepayers represented no more cash receipts to IDCC in 2010, and will not involve any future cash receipts to IDCC until the prepayments are all used-up.
Also some fixed-fee licensees like LG and Samsung paid their fixed fees in advance. Samsung licensed for 4 years paying a total of $400m in four six-month installments of $100m each, with the last installment payment being received in July 2010. However, IDCC will be recording $25.7m per quarter of earned revenue through 2012 on Samsung. Therefore, the recorded Samsung earnings from 3rd quarter 2010 through the 4th quarter of 2012 will not involve any more cash receipts from Samsung.
Prepayments and advances go into deferred revenues, and are transferred from deferred revenues to earned revenues over time. IDCC mentioned in today's CC that of the $95m 4th quarter recorded revenues, only about $20m to $25m represented actual cash receipts from licensees during the 4th quarter. The remaining recorded earned revenues of $70m to $75m was from deferred revenues.
Other than revenue differences, another reason that net income does not equal net cash for a given quarter deals with expense differences. Some quarterly expenses are accruals, which do not represent actual cash payments in that particular quarter but in a future quarter. Some recorded expenses, such as income tax expense, can be very different from the income taxes actually paid. For most corporations, there is usually a big difference between income tax expense accrual and income tax cash payments. Finally, some quarterly expenses, such as, depreciation and patent amortization do not involve future quarterly cash payments at all. Also bonus and salary expense involving stock options and RSU's, do not involve cash payments.
AI
