11-K 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK
PURCHASE, SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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þ | | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2011
OR
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o | | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-33579
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
INTERDIGITAL
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, INC.
781 Third Avenue, King of Prussia, Pennsylvania 19406-1409
INTERDIGITAL
SAVINGS AND PROTECTION PLAN
C O N T E N T S
Other supplemental schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employment Retirement Income Security Act of 1974, as amended, have been omitted because they are not applicable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
InterDigital, Inc.
Savings and Protection Plan
King of Prussia, Pennsylvania
We have audited the accompanying statements of net assets available for benefits of the InterDigital Savings and Protection Plan (the Plan) as of December 31, 2011 and 2010, and the related statements of changes in net assets available for benefits for the years 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 audits.
We conducted our audits 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. 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, 2011 and 2010, and changes in its net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held at end of year at December 31, 2011 is 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, as amended. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Morison Cogen LLP
Bala Cynwyd, Pennsylvania
June 22, 2012
INTERDIGITAL
SAVINGS AND PROTECTION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2011 AND 2010
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| | 2011 | | 2010 |
Investments at fair value (see Notes 2 and 3) | | $ | 55,863,955 |
| | $ | 53,025,706 |
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Cash | | 25,016 |
| | 2,806 |
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Notes receivable from participants | | 176,602 |
| | 210,495 |
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NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE | | $ | 56,065,573 |
| | $ | 53,239,007 |
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Adjustment from fair value to contract value for fully benefit-responsive investment contracts | | (100,614 | ) | | (218,847 | ) |
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NET ASSETS AVAILABLE FOR BENEFITS | | $ | 55,964,959 |
| | $ | 53,020,160 |
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The accompanying notes are an integral part of these financial statements.
INTERDIGITAL
SAVINGS AND PROTECTION PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
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| | 2011 | | 2010 |
ADDITIONS | | | | |
Investment income | | | | |
Dividend income | | $ | 649,467 |
| | $ | 603,529 |
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Interest from notes receivable from participants | | 9,495 |
| | 13,586 |
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Net (depreciation) appreciation in fair value of investments | | (521,747 | ) | | 7,240,952 |
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Total investment income | | 137,215 |
| | 7,858,067 |
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Contributions | | | | |
Employer | | 1,027,422 |
| | 972,107 |
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Participants | | 3,344,932 |
| | 3,209,493 |
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Rollover | | 78,179 |
| | 1,025,140 |
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Expense Budget Account | | 36,459 |
| | 2,136 |
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Total contributions | | 4,486,992 |
| | 5,208,876 |
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TOTAL ADDITIONS | | 4,624,207 |
| | 13,066,943 |
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DEDUCTIONS | | | | |
Payment of benefits | | 1,655,521 |
| | 1,990,207 |
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Other deductions | | 23,887 |
| | 9,671 |
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TOTAL DEDUCTIONS | | 1,679,408 |
| | 1,999,878 |
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NET INCREASE | | 2,944,799 |
| | 11,067,065 |
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NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF YEAR | | 53,020,160 |
| | 41,953,095 |
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NET ASSETS AVAILABLE FOR BENEFITS - END OF YEAR | | $ | 55,964,959 |
| | $ | 53,020,160 |
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The accompanying notes are an integral part of these financial statements.
INTERDIGITAL
SAVINGS AND PROTECTION PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF THE PLAN
The following description of the InterDigital Savings and Protection Plan (the “Plan”) is provided for general information purposes. Plan 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, Inc. and its participating subsidiaries (the “Company” or “InterDigital”) for its eligible employees. For purposes of before-tax contributions and matching contributions, an eligible employee will be eligible to participate in the Plan in the next payroll period, or as soon as administratively possible, following the date the eligible employee attained age 18 and completed one month of service with the Company.
The following individuals are not eligible to participate in the Plan: (i) 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; (ii) collective bargaining employees; (iii) leased employees within the meaning of Internal Revenue Code (“IRC”) Sections 414(n)(2) and 414(o)(2); and (iv) nonresident aliens who receive no earned income that constituted income from sources within the United States.
The Plan was established effective February 1, 1985, restated January 1, 1997, and restated January 1, 2007, when the Plan name was changed from InterDigital Communications Corporation Savings & Protection Plan to InterDigital Savings & Protection Plan, and most recently amended and restated effective January 1, 2010. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). State Street Bank & Trust is the trustee of the Plan. Diversified Investment Advisors (“Diversified”) is the Plan custodian and third party administrator of the Plan's assets.
Contributions
All participant contributions are made on a before-tax basis. Each participant may invest from 1% to 100% of annual compensation as a basic contribution subject to state, local, and certain Federal taxes. The total of the basic and supplemental contributions cannot exceed IRC limitations for each plan year. For both the 2011 and 2010 plan years, such limit was $16,500. In addition, participants who have attained the age of 50 may make pre-tax contributions that exceed the IRC limitations. In both 2011 and 2010, the maximum additional annual contribution was $5,500 for individuals who have attained the age of 50. If a participant's annual contributions exceed the dollar limitation set by the IRC, 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 by the Company to reduce future employer matching contributions.
The Company may, at its sole discretion, contribute to the Plan through matching contributions and/or discretionary employer contributions. The Company currently matches 50% of the first 6% of each participant's contribution, as defined by the Plan. Prior to May 31, 2009 the Company match was directed by the Company to the InterDigital Stock Fund under the Plan. The participant could immediately transfer the stock match to other investment alternatives. Since June 1, 2009, the Company match has been distributed in cash deposited into participants' accounts according to their elected fund investments. Through December 31, 2009, the Company also made discretionary employer contributions in the form of lump sum payments as determined from time to time by the Board of Directors of the Company. There was no such contribution or related receivable associated with the years ended December 31, 2010 and December 31, 2011.
The IRC limits the amount of pay that may be used to determine participants' discretionary contributions. The limit was $245,000 in both 2011 and 2010. The IRC 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 was the lesser of 100% of pay or $49,000 for both 2011 and 2010.
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, allocations of the Company's matching contributions, discretionary employer contributions, and Plan earnings and losses. Allocations of discretionary
employer contributions are based on a percentage of a participant's eligible annual base compensation as determined by the Board of Directors of the Company. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Terminated participants forfeit unvested Company contributions. Forfeitures are used to reduce future employer matching contributions.
Vesting
Rollover contributions and participants' before-tax contributions are 100% vested and nonforfeitable. Plan participants who were credited with an Hour of Service (as defined in the Plan) prior to January 1, 2004 shall be vested in their discretionary matching and employer contributions as follows:
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Periods of Service Before January 1, 2004 | | Percentage |
Less than 1 year | | 33 | % |
At least 1, less than 2 years | | 67 | % |
2 or more years | | 100 | % |
All other participants shall be vested in their discretionary matching and employer contributions as follows:
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Periods of Service After January 1, 2004 | | Percentage |
Less than 1 year | | — | % |
At least 1, less than 2 years | | 33 | % |
At least 2, less than 3 years | | 67 | % |
3 or more years | | 100 | % |
Participants who die while an employee of InterDigital or retire at their normal retirement age (age 65) are 100% vested in their account, regardless of their length of service.
Notes Receivable from Participants
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 during 2011 and 2010. Only one loan per participant may be made every 365 days and all loans are subject to approval by the Company as Plan Administrator. Loan terms are limited to five years set at the inception of each loan. Interest rates are set at an annual rate of prime + 1%. The rates of outstanding loans at December 31, 2011 and 2010 ranged between 4.25% and 9.25%. 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. Loans in default, in principle plus interest, were both $0 at December 31, 2011 and 2010. 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 by 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 a participant's account are made in a single lump sum payment. Employees may defer payment of their account under the Plan.
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 participants' accounts shall become fully vested and all accounts of participants shall be distributed as soon as administratively possible.
Investment Options
Prior to June 1, 2009, all investments were participant-directed except for the Company's matching and discretionary employer contributions, which by the terms of the Plan were directed by the Company to the InterDigital Stock Fund. Participants, however, were permitted to reallocate their holdings among available investment options at any time. Beginning June 1, 2009, all investments are participant-directed including the Company matching and discretionary employer contributions. Fund descriptions below were obtained from fund brochures and other Plan documents:
SHORT-TERM BONDS:
Federated U.S. Treasury Cash Reserves, Institutional Service Shares Fund
The fund pursues its objective by investing only in a portfolio of short-term U.S. Treasury securities.
Stable 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.
AGGRESSIVE BONDS:
BlackRock High Yield Institutional Bond Fund
The investment seeks to maximize total return, consistent with income generation and prudent investment management. The fund invests primarily in non-investment grade bonds with maturities of ten years or less. It normally invests at least 80% of its assets in high yield bonds. The fund may invest up to 30% of its assets in non-dollar denominated bonds of issuers located outside of the United States. Its investment in non-dollar denominated bonds may be on a currency hedged or unhedged basis.
INTERMEDIATE/LONG-TERM BONDS :
JP Morgan Core Bond A Fund
The investment seeks to maximize total return. The fund is designed to maximize total return by investing in a portfolio of investment grade intermediate - and long-term debt securities. As a matter of fundamental policy, the fund will invest at least 80% of assets in bonds. The fund's average weighted maturity will ordinarily range between 4 and 12 years.
T. Rowe Price Corporate Income Fund
The investment seeks to provide high income and some capital growth. The fund normally invests at least 80% of net assets in corporate debt securities. It may invest in other securities in an effort to enhance income and achieve capital growth. These include: convertible securities, preferred stock, and equities, together limited to no more than 10% of total assets; mortgage and asset-backed securities, including some mortgage derivatives, together limited to no more than 5% of total assets. In addition, the fund may invest up to 10% of total assets in non-U.S. dollar-denominated fixed income securities. The fund was no longer offered after July 27, 2011.
LARGE-CAP STOCKS :
BlackRock Equity Dividend Institutional Fund
The investment seeks long-term total return and current income. The fund invests primarily in a portfolio of equity securities. It normally invests at least 80% of assets in equity securities and at least 80% of assets in dividend paying securities. The fund may invest in securities of companies with any market capitalization, but will generally focus on large cap securities. It may invest up to 25% of total assets in securities of foreign issuers and may invest in securities from any country. The fund may invest in securities denominated in both U.S. dollars and non-U.S. dollar currencies. It may also invest in convertible securities and non-convertible preferred stock.
Transamerica Partners Institutional Stock Index Fund
This fund seeks its objective by investing in the stocks comprising the Standard & Poor's 500 Stock Index. The fund invests approximately the same percentage of its assets in each stock as the stock represents in the S&P 500
Index. Under normal market conditions, the fund invests at least 90% of its net assets in securities comprising the S&P 500 Index and related investments.
Transamerica Diversified Equity I, Fund
The investment seeks to maximize long-term growth. This fund normally invests at least 80% of net assets (plus the amount of borrowing, if any, for investment purposes) in domestic equity securities. It invests primarily in common stocks of growth-oriented companies. Each stock is evaluated and ranked on a consistent set of growth, valuation and quality criteria and the fund will seek to build a portfolio with companies that have attractive growth, quality and valuation attributes. The fund may invest up to 20% of its assets in foreign securities.
SMALL/MID-CAP STOCKS :
Baron Small Cap Retail Fund
The investment seeks capital appreciation. The fund invests 80% of net assets in equity securities in the form of common stock of small-sized growth companies with market capitalizations of less than $2.5 billion at the time of purchase selected for their capital appreciation potential. It seeks to purchase securities that BAMCO, Inc., the adviser, expects could increase in value by 50% within two years.
Columbia Acorn A Fund
The investment seeks long-term capital appreciation. The fund normally invests a majority of net assets in small and mid-sized companies with market capitalizations under $5 billion at the time of investment. It invests the majority of assets in U.S. companies, but also may invest up to 33% of total assets in foreign companies in developed markets and emerging markets.
Columbia Small Cap Index A Fund
The investment seeks total return before fees and expenses that corresponds to the total return of the Standard & Poor's (S&P) SmallCap 600 Index. The fund normally invests at least 80% of its net assets in common stocks that comprise the S&P SmallCap 600 Index. It may invest in derivatives, consisting of stock index futures or options, as substitutes for the underlying securities in the S&P SmallCap 600 Index.
Diamond Hill Small Cap A Fund
The investment seeks to provide long-term capital appreciation. The fund normally invests at least 80% of its net assets in equity securities of U.S. companies with small capitalizations that the adviser believes are undervalued. Small cap companies are defined as companies with market capitalizations, at the time of purchase, below $2.5 billion or in the range of those market capitalizations of companies included in the Russell 2000 index at the time of purchase. The adviser focuses on estimating a company's value independent of its current stock price.
Goldman Sachs Mid Cap Value Institutional Fund
The investment seeks long-term capital appreciation. The fund invests, under normal circumstances, at least 80% of its net assets for investment purposes in a diversified portfolio of equity investments in mid-cap issuers with public stock capitalizations within the range of the market capitalization of companies constituting the Russell Midcap Value Index at the time of investment. Although it will invest primarily in publicly traded U.S. securities, the fund may invest in foreign securities, including securities of issuers in countries with emerging markets or economies and securities quoted in foreign currencies.
Invesco Real Estate Institutional Funds
The investment seeks high total return through growth of capital and current income. The fund normally invests at least 80% of assets in securities of real estate and real estate-related issuers, including real estate investment trusts. It primarily invests in equity securities. The fund may invest in equity and debt securities of issuers unrelated to the real estate industry that the portfolio managers believe are undervalued and have potential for growth of capital. It may invest in non-investment grade debt securities of real estate and real estate-related issuers.
Keeley Small-Cap Value Fund, Class A
The investment seeks capital appreciation. The fund invests in companies with a small market capitalization, which is currently defined as $3.5 billion or less. It normally invests at least 80% of net assets plus the amount of any borrowings for investment purposes in common stocks and other equity type securities (including preferred stock, convertible debt securities and warrants) of companies with small market capitalization. As long as an investment continues to meet its other criteria, the fund may choose to hold such securities even if the company grows beyond the $3.5 billion capitalization level. This fund was no longer offered after July 27, 2011.
Transamerica Partners Mid Value Fund
The fund invests primarily in stocks of medium sized companies which the fund's advisers believe have below market valuations and present an opportunity for earnings improvement. Under normal circumstances, the fund invests at least 80% of its net assets in securities of medium sized (or mid-cap) companies and related investments. This fund was no longer offered after July 27, 2011.
INTERNATIONAL STOCKS :
American Funds EuroPacific Growth R4 Fund
The investment seeks to provide long-term growth of capital. The fund invests primarily in common stock of issuers in Europe and the Pacific Basin that the investment adviser believes have the potential for growth. Growth stocks are those that the investment adviser believes have the potential for above-average capital appreciation. It normally invests at least 80% of net assets in securities of issuers in Europe and the Pacific Basin. The fund may invest a portion of its assets in common stocks and other securities of companies in countries with developing economies and/or markets.
Wells Fargo Advantage Emerging Markets Equity Fund
The investment seeks long-term capital appreciation. The fund normally invests at least 80% of its net assets in emerging market equity securities. It considers emerging market companies to include companies that are traded in, have their primary operations in, are domiciled in or derive a majority of their revenue from emerging market countries as defined by the MSCI Emerging Markets Index. The fund may use futures to manage risk or enhance return. It may have exposure to stocks across all capitalizations and styles and will be diversified across countries and sectors.
MULTI-ASSET/OTHER :
Vanguard Target Retirement 2010 Fund
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund primarily invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the work force in or within a few years of 2010 (the target year). Its asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments increases.
Vanguard Target Retirement 2020 Fund
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund primarily invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the work force in or within a few years of 2020 (the target year). Its asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investment increases.
Vanguard Target Retirement 2030 Fund
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund primarily invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the work force in or within a few years of 2030 (the target year). Its asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments increases.
Vanguard Target Retirement 2040 Fund
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund primarily invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the work force in or within a few years of 2040 (the target year). Its asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease while the percentage of assets allocated to bonds and other fixed income investments increases.
Vanguard Target Retirement 2050 Fund
The investment seeks to provide capital appreciation and current income consistent with its current asset allocation. The fund primarily invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire and leave the work force within a few years of 2050 (the target year). Its asset allocation will become more conservative over time, meaning that the percentage of assets allocated to stocks will decrease
while the percentage of assets allocated to bonds and other fixed income investments increases.
InterDigital Stock Fund
This fund invests in the common stock of InterDigital, Inc.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The following accounting policies, which conform with accounting principles generally accepted in the United States(“GAAP”), have been used consistently in the preparation of the Plan's financial statements.
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 GAAP 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 Contracts
As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and AICPA Statement of Position 962 (formerly 94-4-1) , Reporting of Fully Benefit Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans (the “FSP”), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
Investment Valuation and Income Recognition
Shares of registered investment companies are valued at quoted market prices that represent the net asset value of shares held by the Plan at year-end. The InterDigital Stock Fund is valued at its year-end unit closing price (comprised of common stock market price plus uninvested cash position). The fair value of the guaranteed investment contracts are calculated by discounting the related cash flows based on current yields of similar investments with comparable durations.
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.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are reclassified as distributions based upon the terms of the plan document.
Payment of Benefits
Benefits are recorded when paid.
Forfeited Accounts
At December 31, 2011 and 2010, forfeited non-vested accounts totaled $2,762 and $23,000, respectively. These forfeited accounts were fully utilized to reduce employer matching contributions in 2011 and 2010.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board ('FASB') issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This update provides amendments to ASC Topic 820 that provides disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Plan adopted the disclosures required as of January 1, 2010.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendments change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about the fair value measurements. The amendments include the following:
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1. | Those that clarify the FASB's intent about the application of existing fair value measurement and disclosure requirements. |
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2. | Those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. |
The amendments in this update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Plan intends to adopt the required disclosures effective January 1, 2012.
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this update will enhance disclosures that will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments in the scope of this update. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Plan intends to adopt the required disclosures effective January 1, 2013.
Reclassifications
Certain reclassifications were made to the 2010 financial statements in order to conform to the 2011 financial statement presentation.
NOTE 3 - FAIR VALUE MEASUREMENTS
FASB ASC 820, Fair Value Measurements (formerly FASB Statement No. 157), establishes a framework for measuring fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described below:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access;
Level 2
Inputs to the valuation methodology include:
-Quoted prices for similar assets or liabilities in active markets;
-Quoted prices for identical or similar assets or liabilities in inactive markets;
-Inputs other than quoted prices that are observable for the asset or liability;
-Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability;
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2011 and 2010.
Common stocks, corporate bonds and U.S. government securities : Valued at the closing price reported on the active market on which the individual securities are traded.
Registered investment companies : Valued at the quoted market prices representing the net asset value (“NAV”) of shares held by the plan at year-end.
Guaranteed investment contract : Valued at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations considering the credit worthiness of the issuer.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2011 and December 31, 2010:
|
| | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Assets at Fair Value as of December 31, 2011 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | |
Registered investment companies: | |
|
| |
|
| |
|
| |
|
|
Short-term Bonds | | $ | 2,692,420 |
| | | | | | $ | 2,692,420 |
|
Aggressive Bonds | | 430,730 |
| | | | | | 430,730 |
|
Intermediate/Long-term Bonds | | 5,399,990 |
| | | | | | 5,399,990 |
|
Large-Cap Stocks | | 14,637,566 |
| | | | | | 14,637,566 |
|
Small/Mid-Cap Stocks | | 13,349,411 |
| | | | | | 13,349,411 |
|
International Stocks | | 4,228,101 |
| | | | | | 4,228,101 |
|
Multi-Asset/Other | | 6,143,837 |
| | | | | | 6,143,837 |
|
Common stock | | |
| | 5,449,473 |
| |
|
| | 5,449,473 |
|
Guaranteed investment contract | |
|
| |
|
| | 3,532,427 |
| | 3,532,427 |
|
| | | | | | | | |
Total assets at fair value | | $ | 46,882,055 |
| | $ | 5,449,473 |
| | $ | 3,532,427 |
| | $ | 55,863,955 |
|
| | | | | | | | |
| | | | | | | | |
| | Assets at Fair Value as of December 31, 2010 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | |
Registered investment companies: | |
|
| |
|
| |
|
| |
|
|
Short-term Bonds | | $ | 2,875,143 |
| | | | | | $ | 2,875,143 |
|
Aggressive Bonds | | — |
| | | | | | — |
|
Intermediate/Long-term Bonds | | 4,235,290 |
| | | | | | 4,235,290 |
|
Large-Cap Stocks | | 13,779,056 |
| | | | | | 13,779,056 |
|
Small/Mid-Cap Stocks | | 12,621,577 |
| | | | | | 12,621,577 |
|
International Stocks | | 4,565,565 |
| | | | | | 4,565,565 |
|
Multi-Asset/Other | | 5,498,657 |
| | | | | | 5,498,657 |
|
Common stock | | — |
| | 5,911,439 |
| | — |
| | 5,911,439 |
|
Guaranteed investment contract | | — |
| | — |
| | 3,538,979 |
| | 3,538,979 |
|
| | | | | | | | |
Total assets at fair value | | $ | 43,575,288 |
| | $ | 5,911,439 |
| | $ | 3,538,979 |
| | $ | 53,025,706 |
|
| | | | | | | | |
The tables below set forth a summary of changes in the fair value of the Plan's level 3 assets for the years ended December 31, 2011 and 2010:
|
| | | | | | | |
| | | |
| Guaranteed Investment Contract |
| 2011 | | 2010 |
| | | |
Balance, beginning of year | $ | 3,538,979 |
| | $ | 2,958,971 |
|
Unrealized gains relating to instruments still held at the reporting date | 56,286 |
| | 72,545 |
|
Adjustment to fair value | (118,233 | ) | | 202,999 |
|
Purchases | 281,278 |
| | 246,180 |
|
Transfers In | 382,360 |
| | 387,702 |
|
Sales | (576,283 | ) | | (331,504 | ) |
Loans (issued), repaid | (31,885 | ) | | 2,086 |
|
Expenses | (75 | ) | | — |
|
| | | |
Balance, end of year | $ | 3,532,427 |
| | $ | 3,538,979 |
|
| | | |
The amounts of total gains or losses for the period attributable to the change in unrealized gains or losses relating to assets still held at the reporting date | $ | 56,286 |
| | $ | 72,545 |
|
NOTE 4 - INVESTMENTS
The following table presents investments that represented five percent or more of the Plan's net assets at December 31, 2011 and 2010:
|
| | | | | | | | |
| | | | |
| | 2011 | | 2010 |
Transamerica Partners Institutional Stock Index Fund | | $ | 6,417,954 |
| | $ | 6,100,278 |
|
InterDigital Stock Fund | | 5,449,473 |
| | 5,911,439 |
|
JPMorgan Core Bond A Fund | | 5,399,990 |
| | 3,241,195 |
|
Transamerica Diversified Equity I Fund | | 4,373,994 |
| | 4,528,115 |
|
BlackRock Equity Dividend Institutional Fund | | 3,845,618 |
| | 3,150,664 |
|
Goldman Sachs Mid Cap Value Institutional Fund | | 3,841,464 |
| | — |
|
American Funds EuroPacific Growth R4 Fund | | 3,808,787 |
| | 4,565,565 |
|
Stable Pooled Fund | | 3,532,427 |
| | 3,538,979 |
|
At December 31, 2011 and 2010, the Plan's investments, including gains and losses on investments bought and sold, as well as held during the year, appreciated (depreciated) in value as follows:
|
| | | | | | | | |
| | | | |
| | 2011 | | 2010 |
Investment in common trusts | | $ | 56,286 |
| | $ | 72,545 |
|
Registered investment companies | | (1,263,182 | ) | | 4,656,501 |
|
InterDigital Stock Fund | | 685,149 |
| | 2,511,906 |
|
| | $ | (521,747 | ) | | $ | 7,240,952 |
|
| | | | |
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 values 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.
NOTE 5 - GUARANTEED INVESTMENT CONTRACTS AND SECURITY-BACKED CONTRACTS
In 2004, the Plan entered into a benefit-responsive investment contract with the Stable Pooled Fund (the “Fund”). The Fund primarily invests in traditional GICs and security-backed contracts issued by insurance companies and other financial institutions. The Fund's principal objective is to protect principal while providing a higher rate of return than shorter maturity investments, such as money market funds or certificates of deposit. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses.
As described in Note 2, because the GICs are fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the guaranteed investment contract. Contract value, as reported to the Plan by Diversified, represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
Risks arise when entering into any investment contract due to the potential inability of the issuer to meet the terms of the contract. In addition, security-backed contracts have the risk of default or the lack of liquidity of the underlying portfolio assets. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rate is based on a formula agreed upon with the issuer. Such interest rates are reviewed on a quarterly basis for resetting.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Plan invests in shares of the Company's common stock through the InterDigital Stock Fund. In 2011 and 2010, the Plan also invested in funds managed by Diversified. Transactions in such investments qualify as party-in-interest transactions that are exempt from the prohibited transaction rules.
NOTE 7 - PLAN EXPENSES
Effective April 1, 2011, an amendment to the Pension Services Agreement between Diversified and the Company was made to revise the way costs and expenses incurred in the administration of the Plan (i.e. trustee and recordkeeper fees) are paid. Under the new agreement, Diversified will receive certain revenue sharing payments from the Investment Options available in the plan. These amounts will be used to offset the costs of administration of the Plan. Diversified will compare such payments to its required revenue. Any amounts in excess of its required revenue will be credited to the "Expense Budget Account". If the amount received by Diversified is less than its required revenue and the funds in the Expense Budget Account are insufficient to cover the shortfall, the Company will pay the shortfall. The amount of the credit to the Expense Budget Account in 2011 was $36,459.
NOTE 8 - TAX STATUS
The Internal Revenue Service (“IRS”) has determined and informed the Company by letter dated June 13, 2005 that the Plan satisfies the qualification requirements under IRC Section 401(a) and that the trust maintained in connection with the Plan satisfies the requirements for exemption under IRC Section 501(a). The Company has filed for an updated revenue ruling that is still pending. The Company believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan had taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan, and has concluded that, as of December 31, 2011, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2008.
INTERDIGITAL
SAVINGS AND PROTECTION PLAN
EIN 23-1882087
SCHEDULE H, PART IV(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2011 |
| | | | | | | |
| | | | Current/Contract | |
Identity of Issue | | Investment Type | | Value | |
State Street Bank & Trust* | | Cash | | $ | 25,016 |
| |
Federated U.S. Treasury Cash Reserves, Institutional Service Shares Fund | | Registered investment companies | | 2,692,420 |
| |
JP Morgan Core Bond A Fund | | Registered investment companies | | 5,399,990 |
| |
Vanguard Target Retirement 2010 Fund | | Registered investment companies | | 1,257,371 |
| |
Vanguard Target Retirement 2020 Fund | | Registered investment companies | | 1,682,590 |
| |
Vanguard Target Retirement 2030 Fund | | Registered investment companies | | 2,542,608 |
| |
Vanguard Target Retirement 2040 Fund | | Registered investment companies | | 484,370 |
| |
Vanguard Target Retirement 2050 Fund | | Registered investment companies | | 176,899 |
| |
Invesco Real Estate Institutional Funds | | Registered investment companies | | 2,266,489 |
| |
American Funds EuroPacific Growth R4 Fund | | Registered investment companies | | 3,808,787 |
| |
Baron Small Cap Retail Fund | | Registered investment companies | | 2,529,966 |
| |
BlackRock Equity Dividend Institutional Fund | | Registered investment companies | | 3,845,618 |
| |
BlackRock High Yield Institutional Bond Fund | | Registered investment companies | | 430,730 |
| |
Columbia Acorn A Fund | | Registered investment companies | | 1,982,024 |
| |
Columbia Small Cap Index A Fund | | Registered investment companies | | 1,904,102 |
| |
Diamond Hill Small Cap A Fund | | Registered investment companies | | 825,365 |
| |
Goldman Sachs Mid Cap Value Institutional Fund | | Registered investment companies | | 3,841,464 |
| |
Transamerica Diversified Equity I Fund* | | Registered investment companies | | 4,373,994 |
| |
Transamerica Partners Institutional Stock Index Fund* | | Registered investment companies | | 6,417,954 |
| |
Wells Fargo Advantage Emerging Markets Equity Fund | | Registered investment companies | | 419,314 |
| |
| | Registered Investment Companies Total | | $ | 46,882,055 |
| |
| | | | |
| |
Stable Pooled Fund* | | Investments in common trusts | | 3,431,813 |
| ** |
| | | | | |
| | Collective Trust Fund Total | | $ | 3,431,813 |
| |
| | | | |
| |
InterDigital Stock Fund* | | Employer Stock Fund | | $ | 5,449,473 |
| |
| | | | |
| |
Notes Receivable from Participant Loans* | | Notes Receivable with Interest Rates of 4.25% to 9.25% | | $ | 176,602 |
| |
TOTAL ASSETS HELD AT END OF YEAR | | | | $ | 55,964,959 |
| |
|
| | |
* | | transaction with party in interest |
| |
** | | fair value is $3,532,427 |
Cost is not required for participant-directed investments.
SIGNATURES
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 to be signed on its behalf by the undersigned hereunto duly authorized.
|
| | | | |
| | | | |
| INTERDIGITAL SAVINGS AND PROTECTION PLAN |
| By: | InterDigital, Inc., in its capacity as Plan Sponsor and Plan Administrator | |
| | |
Date: June 22, 2012 | By: | /s/ Richard J. Brezski | |
| | Richard J. Brezski | |
| | Chief Financial Officer | |
EXHIBIT INDEX
The following is a list of Exhibits filed as part of this Annual Report on Form 11-K:
|
| | |
| | |
Exhibit | | Exhibit |
Number | | Description |
23.1 | | Consent of Morison Cogen LLP |