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WiLAN Reports Financial Results for Three and Twelve Months Ended October 31, 2009

^{Published on 2009-12-10 04:12:22 - Market Wire}
 

OTTAWA, CANADA--(Marketwire - Dec. 10, 2009) - Wi-LAN Inc. ("WiLAN" or the "Company") (TSX:WIN), a leading technology innovation and licensing company, today announced financial results for the three and twelve months ended October 31, 2009. All financial amounts are expressed in Canadian dollars.

On July 4, 2009, the Company announced that it would change its fiscal year-end from October 31 to December 31. This change was intended to provide better alignment with the royalty reporting periods of the Company's licensees and to better align with industry peers for comparison purposes. As a result, the Company's fourth quarter for fiscal 2009 will be the five month period from August 1, 2009 to December 31, 2009 and its year-end will be December 31, 2009.

With this change to the Company's fiscal year-end, WiLAN is not required to release financial results for the three and twelve months ended October 31, 2009. WiLAN has, however, elected to release financial information for these periods to assist investors and others in assessing WiLAN's performance against the previous 12 month period and the guidance previously provided by the Company. The three and twelve months ended October 31, 2009 is not an official reporting period and as such WiLAN will not host a conference call and audio webcast following the release. WiLAN will release audited financial results for the fourteen months ending December 31, 2009 and host a supporting conference call and audio webcast on or about March 3, 2010.

Highlights for the Three Months ended October 31, 2009:

- Revenues of $9.1 million as compared to $13.7 million in the same period in 2008.

- Net earnings of $16.5 million or 16 cents per share as compared to net earnings of $277 thousand or nil cents per share in the same period in 2008.

- One-time tax benefit of $19.6 million as a result of corporate restructuring.

- Pro forma earnings(i) of $2.7 million or 3 cents per share as compared to pro forma earnings of $9.1 million or 10 cents per share in the same period in 2008.

Highlights for the Twelve Months ended October 31, 2009:

- Revenues of $35.1 million as compared to $26.6 million in the same period in 2008, representing a sequential increase of $8.5 million or 32 percent, and in-line with guidance of $34 million to $36 million.

- Net earnings of $10.3 million or 11 cents per share as compared to a net loss of $9.2 million or 10 cents per share in the same period in 2008.

- Pro forma earnings(i) of $10.3 million or 11 cents per share as compared to pro forma earnings of $11 million or 12 cents per share in the same period in 2008, and at the high-end of guidance of $9.5 million to $10.5 million.

"Since the end of fiscal 2008, in the face of significant economic uncertainty, our business has delivered strong financial and operational performance and it has met or exceeded our guidance," said Jim Skippen, Chairman & CEO. "Cash revenues in the twelve months ended October 31, 2009 increased 32% over fiscal 2008. Over the twelve month period we signed license agreements with 50 companies, the majority of them running royalty, which will strengthen our revenues in the years to come."

Added Skippen, "Careful management of our business during the year enabled WiLAN to generate pro forma earnings of $10.3 million while making very important investments in new patents, litigation and research and development activities that we believe will generate significant future returns. Proceeds from a bought deal financing and cash generated from operations helped WiLAN end the year with a stronger cash balance of $102.6 million, after investing nearly $20 million in valuable patent acquisitions and returning $3.4 million to shareholders through a share buyback and dividend payments."

The Board of Directors expects to declare a dividend when results for the official fourth quarter ending December 31, 2009 are released on or about March 3, 2010.

Financial Guidance Review

For the twelve months ended October 31, 2009, WiLAN reported revenues of $35.1 million. Operating expenses, excluding stock-based compensation, depreciation and amortization and unrealized foreign exchange loss, for the twelve months ended October 31, 2009 were $27.3 million. WiLAN generated pro forma earnings of $10.3 million during the twelve months ended October 31, 2009. The above numbers met or exceeded financial guidance provided for the same period.

Operating Expense Review

Patent licensing expense amounted to $0.8 million in the three months ended October 31, 2009 as compared to $0.7 million in the same period in 2008. In the three months ended October 31, 2009, the Company signed wireless license agreements with six companies including Ascon AB and Nikon Corporation. This brings the total number of companies that have signed wireless licenses, as of October 31, 2009, to 79. During the quarter, WiLAN signed V-Chip license agreements with one company bringing the total number of companies that have signed V-Chip licenses, as of October 31, 2009, to 116. The Company also signed a wireline license agreement with NEC Corporation which brings the total number of companies that have signed wireline license agreements, as of October 31, 2009, to eight. For the twelve months ended October 31, 2009, patent licensing expenses were $3.5 million as compared to $3.0 million for the same period last year.

Litigation expenses in the three months ended October 31, 2009 were $4.0 million representing an increase of $1.7 million over the same period last year. The increase is due primarily to the Company's ongoing response to declaratory judgment (DJ) claims filed by Intel Corporation and a number of other companies involving a number of WiLAN's wireless patents including U.S. Patent No. 6,549,759 (the "759 patent") and extensive preparations required for the claims construction hearing in the Company's handset litigation, involving the U.S. Patent Nos. 5,282,222 (the "222 patent") and RE37,802 (the "802 patent"), which is scheduled to commence on March 11, 2010. Subsequent to October 31, 2009, WiLAN announced that U.S. District Judge Ward issued an Order consolidating the claims construction hearing and related deadlines for the laptop, router and handset cases. The joint claims construction hearing concerning the 222 and 802 patents will now be held on March 11, 2010 for all three cases. However, the claims construction deadlines for the other two patents in the laptop and router cases, U.S. Patent Nos. 5,956,323 and 6,549,759 will remain on the original schedule with the hearing to occur on September 1, 2010. For the twelve months ended October 31, 2009, litigation expenses amounted to $15.2 million as compared to $7.5 million in the comparable 2008 period.

In the three months ended October 31, 2009 research and development expense amounted to $1.0 million as compared to $0.7 million in the same period last year. Research and development expenses in the twelve months ended October 31, 2009 were $3.3 million as compared to $3.2 million in the comparable period in 2008.

General and administrative expense amounted to $1.2 million in three months ended October 31, 2009 as compared to $1.5 million in the same period last year. For the twelve months ended October 31, 2009, general and administrative expenses totaled $6.1 million as compared to $5.2 million in the comparable 2008 period; this increase is attributable to increased operations of the Company.

In the three months ended October 31, 2009 depreciation and amortization expense amounted to $4.5 million as compared to $4.2 million in the comparable period in 2008. For the twelve months ended October 31, 2009, depreciation and amortization expense totaled $17.3 million as compared to $16.5 million in the same period last year. These increases related to the patent purchases completed in the year.

Investment income in the three months ended October 31, 2009 was $163 thousand as compared to $685 thousand in the same period last year. Investment income for the twelve months ended October 31, 2009 was $2.5 million as compared to $3.2 million last year. The decline in investment income year over year reflects the decline in short-term investment rates.

In the three months ended October 31, 2009, the Company reported a foreign exchange gain of $0.6 million which consisted of a realized foreign exchange gain of $0.8 million and an unrealized loss of $0.2 million. Foreign exchange gain for the twelve months ended October 31, 2009 was $0.8 million as compared to a gain on foreign exchange of $85 thousand in the comparable 2008 period.

On October 1, 2009, WiLAN completed a "vertical, short-form" amalgamation with certain of its wholly-owned subsidiaries including Wi-LAN V-Chip Corp. ("WiLAN V-Chip"). WiLAN V-Chip is the corporate entity that arose from the acquisition of Tri-Vision International ("Tri-Vision") in 2007. Since WiLAN's acquisition of Tri-Vision, WiLAN V-Chip has maintained a significant deferred tax liability resulting from the excess of the accounting value of Tri-Vision's patents over the tax value of those patents. As a result of the amalgamation, all of the Company's tax assets and liabilities are now held solely within Wi-LAN Inc. Accordingly, the deferred tax liability previously recorded can now be offset against deferred tax assets previously unrecorded. The net effect of this is to reverse the deferred tax liability and record a one-time gain of $19.6 million.

At October 31, 2009, the Company's net cash, comprised of cash, cash equivalents and short-term investments totaled $102.6 million, representing an increase of $0.5 million from the net cash position at July 31, 2009. The Company's cash equivalents and short-term investments include T-bills, term deposits, GICs and other marketable securities.

About WiLAN

WiLAN, founded in 1992, is a leading technology innovation and licensing company. WiLAN has licensed its intellectual property to over 200 companies worldwide. Inventions in our portfolio have been licensed by companies that manufacture or sell a wide range of communication and consumer electronics products including 3G cellular handsets, Wi-Fi-enabled laptops, Wi-Fi/DSL routers, xDSL infrastructure equipment, WiMAX base stations and digital television receivers. WiLAN has a large and growing portfolio of more than 750 issued or pending patents. For more information: [ www.wilan.com ].

Note

(i) WiLAN follows Canadian generally accepted accounting principles ("GAAP") in preparing its interim and annual financial statements. To assist readers in further understanding its operating performance, WiLAN is reporting "pro forma earnings" which is a non-GAAP financial term. WiLAN's pro forma earnings represent earnings from continuing operations before stock-based compensation, unrealized gain or loss on foreign exchange contracts, depreciation & amortization and provision for income taxes.

Forward-looking Information

Certain statements in this release, other than statements of historical fact, may include forward-looking information that involves various risks and uncertainties that face the Company; such statements may contain such words as "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, and may be based on management's current assumptions and expectations related to all aspects of the wireless and wireline telecommunications industries and the global economy. Risks and uncertainties that may face the Company include, but are not restricted to: licensing of the Company's patents can take an extremely long time and may be subject to variable cycles; the Company is currently reliant on licensees paying royalties under existing licensing agreements and additional licensing of its patent portfolio to generate future revenues and increased cash flows; the Company may be required to establish the enforceability of its patents in court in order to obtain material licensing revenues; changes in patent laws or in the interpretation or application of patent laws could materially adversely affect the Company; a court may determine that certain of the Company's patents are not infringed by certain standards or products or may disagree with management with respect to whether one or more of the Company's patents apply to certain standards or products, which could adversely affect the Company; the Company will need to acquire or develop new patents to continue and grow its business; fluctuations in foreign exchange rates impact and may continue to impact the Company's revenues and operating expenses, potentially adversely affecting financial results; the Company has made and may make acquisitions of technologies or businesses which could materially adversely affect the Company; the Company may require investment to translate its intellectual property position into sustainable profit in the market; the generation of future V-chip revenues and the likelihood of the Company signing additional V-chip licenses could be negatively impacted by changes in government regulation; the Company is dependent on its key officers and employees; the price of the Company's common shares is volatile and subject to market fluctuation; and the Company may be negatively affected by reduced consumer spending due to the uncertainty of economic and geopolitical conditions.
These risks and uncertainties may cause actual results to differ from information contained in this release, when estimates and assumptions have been used to measure and report results. There can be no assurance that any statements of forward-looking information contained in this release will prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. These and all subsequent written and oral statements containing forward-looking information are based on the estimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. Except as required by applicable laws, the Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. Readers are cautioned not to place undue reliance on any statements of forward looking information that speak only as of the date of this release. Additional information identifying risks and uncertainties relating to the Company's business are contained under the heading "Risk Factors" in WiLAN's current Annual Information Form and its other filings with the various Canadian securities regulators which are available online at [ www.sedar.com ].

This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States.

All trademarks and brands mentioned in this release are the property of their respective owners.

Wi-LAN Inc.
Consolidated Statements of Operations and Retained Earnings (Deficit)
(Unaudited)
(in thousands of Canadian dollars, except per share amounts)

 Three months ended Twelve months ended
 October 31, October 31,
--------------------------------------------------------------------------
 2009 2008 2009 2008
--------------------------------------------------------------------------
Revenues $9,081 $13,749 $35,051 $26,564

Operating expenses
 Patent licensing 811 710 3,491 2,960
 Litigation 4,345 2,267 15,201 7,502
 Research and development 1,029 672 3,338 3,197
 General and admin 1,175 1,506 6,117 5,204
 Foreign exchange (gain)loss (597) 227 (840) (85)
 Stock-based compensation 498 524 1,974 2,024
 Depreciation & amortization 4,503 4,237 17,306 16,496
--------------------------------------------------------------------------
 Total operating expenses 11,762 10,143 46,585 37,298
 Investment income 163 685 2,548 3,228
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Earnings (loss) before
 income taxes (2,520) 4,291 (8,988) (7,506)

Provision for income
 tax expense (recovery) (18,986) 4,014 (19,274) 1,680
--------------------------------------------------------------------------
Net and comprehensive
 earnings (loss) 16,466 277 10,286 (9,186)

Deficit, beginning of period (7,357) (147,438) (147,174) (137,975)
Dividends (1,270) - (2,434) -
Reduction of stated capital - - 147,161 -
--------------------------------------------------------------------------
Retained earnings (deficit),
 end of period $7,839 $(147,161) $7,839 $(147,161)
--------------------------------------------------------------------------
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Earnings (loss) per share
 - basic and diluted
 Basic $0.16 $0.00 $0.11 $(0.10)
 Diluted $0.16 $0.00 $0.11 $(0.10)

Weighted average number of
 common shares
 Basic 101,777,058 93,545,015 95,516,879 93,505,899
 Diluted 102,853,902 94,301,402 96,469,906 93,505,899
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Wi-LAN Inc.
Consolidated Balance Sheets
(Unaudited)
(in thousands of Canadian dollars)

--------------------------------------------------------------------------
As at October 31 2009 2008
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Assets
Current assets
 Cash and cash equivalents $80,525 $38,768
 Short-term investments 22,092 62,679
 Accounts receivable 5,383 3,441
 Prepaid expenses and deposits 32 110
 Assets held for sale 2,353 2,229
--------------------------------------------------------------------------
Current assets 110,385 107,227

Furniture and equipment, net 754 816
Patents and other intangibles, net 143,006 132,111
Goodwill 13,449 13,449
--------------------------------------------------------------------------
Assets $267,594 $253,603
--------------------------------------------------------------------------
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Liabilities and Shareholders' equity
Current liabilities
 Accounts payable and
 accrued liabilities $15,782 $6,530
--------------------------------------------------------------------------
Current liabilities 15,782 6,530

Future income tax liability - 21,408
--------------------------------------------------------------------------
Liabilities 15,782 27,938
--------------------------------------------------------------------------

Shareholders' equity

 Common shares 231,440 362,041
 Contributed surplus 12,533 10,785
 Retained earnings (deficit) 7,839 (147,161)
--------------------------------------------------------------------------
Shareholders' equity 251,812 225,665
--------------------------------------------------------------------------
Liabilities and Shareholders' equity $267,594 $253,603
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Wi-LAN Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of Canadian dollars)

 Three Months Ended Twelve Months Ended
 October 31, October 31,
--------------------------------------------------------------------------
 2009 2008 2009 2008
--------------------------------------------------------------------------

Cash generated from (used in)
Operations
Net and comprehensive
 earnings (loss) $16,466 $277 $10,286 $(9,186)
 Non-cash items
 Stock-based compensation 498 524 1,974 2,024
 Depreciation & amortization 4,503 4,237 17,306 16,496
 Provision for income tax
 recovery (19,638) 2,464 (21,736) (216)
--------------------------------------------------------------------------
 1,829 7,502 7,830 9,118
 Change in non-cash working
 capital balances
 Accounts receivable (1,590) (61) (1,942) (525)
 Prepaid expenses
 and deposits 339 47 78 101
 Net assets held for sale - (1) (124) 1,467
 Accounts payable and
 accrued liabilities 1,076 1,284 1,260 2,051
--------------------------------------------------------------------------
Cash generated from operations 1,654 8,771 7,102 12,212
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Financing
 Mortgage repayment - - - (518)
 Proceeds on sale of
 common shares - - 16,899 -
 Common shares repurchased
 in Normal Course Issuer Bid - (266) (944) (266)
 Dividends (1,270) - (2,434) -
 Common shares issued for cash
 on the exercise of options 58 37 488 109
 Common shares issued for
 cash from Employee Share
 Purchase Plan 58 51 118 51
--------------------------------------------------------------------------
Cash (used in) generated
 from financing (1,154) (178) 14,127 (624)
--------------------------------------------------------------------------
Investing
 Sale (purchase) of
 short-term investments 4,000 - 40,587 (62,679)
 Purchase of furniture
 and equipment (29) (100) (307) (320)
 Purchase of patents - - (19,752) (1,363)
--------------------------------------------------------------------------
Cash generated from (used in)
 investing 3,971 (100) 20,528 (64,362)
--------------------------------------------------------------------------

Net cash and cash equivalents
 generated (used)in the period 4,471 8,493 41,757 (52,774)
Cash and cash equivalents,
 beginning of period 76,054 30,275 38,768 91,542
--------------------------------------------------------------------------
Cash and cash equivalents,
 end of period $80,525 $38,768 $80,525 $38,768
--------------------------------------------------------------------------