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UTStarcom Releases Financial Results for the Second Quarter of 2010

August 4, 2010

ALAMEDA, Calif., Aug. 4 /PRNewswire-Asia-FirstCall/ — UTStarcom, Inc.
(Nasdaq: UTSI), today reported financial results for the second quarter of
2010 ended June 30, 2010.

“Our second quarter performance reflects continued progress towards
restructuring the company and an improved business model,” said Peter
Blackmore
, UTStarcom’s chief executive officer and president. “We are
optimistic about the market opportunity for IPTV and broadband in China, India
and Japan and remain focused on growing bookings in these areas to achieve
profitability.”

Second quarter 2010 Financial Results

Net sales for the second quarter of 2010 were $73.2 million as compared to
$80.2 million in the second quarter of 2009. Gross margin for the second
quarter of 2010 was 31% as compared to gross loss of 20% in the second quarter
of 2009. The operating loss for the second quarter of 2010 and 2009 were $5.1
million
and $85.4 million, respectively.

The GAAP net loss attributable to UTStarcom for the second quarter of 2010
was $9.0 million, or a loss of $0.07 per share, as compared to a loss of $84.3
million
, or loss of $0.66 per share in the second quarter of 2009.

Second quarter 2010 GAAP operating expenses of 28.0 million include a $2.1
million
net gain related to the divestiture of our IP Messaging and US PDSN
Assets in the quarter.

Net cash, cash equivalents and short-term investments as of June 30, 2010
was $308.0 million compared to $266.9 million on December 31, 2009.

Non-GAAP Results

To enable a comparison of the financial results for the Company on a year-
over-year basis the Company has prepared certain non-GAAP results which
present the Company’s results as if both the divestiture of PCD and the wind-
down of the Company’s Korea-based handset operations were completed as of the
beginning of the earliest time-period presented.

The second quarter of 2010 non-GAAP revenue was $73 million, non-GAAP
gross margin was 30% and non-GAAP operating loss was $6 million. This compares
to the second quarter of 2009 non-GAAP revenue of $83 million, non-GAAP gross
margin of 14% and non-GAAP operating loss of $55 million.

Conference Call

The Company will host a conference call to discuss the results at 7:00 a.m.
(PT)
/ 10:00 a.m. (ET) on August 4, 2010.

The conference call dial-in numbers are as follows: United States 877-405-
3429; International 702-928-6906. The conference ID number is 8821-7126.

A replay of the call will be available for 7 days. The conference call
replay numbers are as follows: United States — 800-642-1687; International –
706-645-9291. The Access Code is 8821-7126.

Investors will also have the opportunity to listen to the conference call
and the replay over the Internet through the investor relations section of
UTStarcom’s Web site at: http://www.utstar.com .

To listen to the live call, please go to the Web site at least 15 minutes
early to register, and to download and install any necessary audio software.
For those who cannot listen to the live broadcast, a replay will also be
available on this site.

Discussion of Non-GAAP Financial Measures

In this earnings release, UTStarcom refers to certain non-GAAP financial
measures. Generally, a non-GAAP financial measure is a numerical measure of a
company’s performance, financial position, or cash flows that either excludes
or includes amounts that are not normally excluded or included in the most
directly comparable measure calculated and presented in accordance with GAAP.
A reconciliation between non-GAAP and GAAP measures can be found in the
accompanying tables. UTStarcom believes that, while these non-GAAP measures
are not a substitute for GAAP results, they provide a basis for the Company’s
planning and forecasting of future periods. These non-GAAP measures have been
reconciled to the nearest GAAP measure as required under Securities and
Exchange Commission rules.

On July 1, 2008, the Company divested its Personal Communications Division
(“PCD”) which has historically represented a significant portion of the
Company’s revenues. In the fourth quarter of 2008, the Company announced
actions to wind down its Korea-based handset manufacturing operations. To
enable a comparison of the financial results for the Company on a year-over-
year and a quarter-over-quarter basis the Company has prepared certain non-
GAAP results which present the Company’s results as if both the divestiture of
PCD and the wind down of the Company’s Korea-based handset operations were
completed prior to each time period presented. The reconciliation between GAAP
and these non-GAAP financial measures is provided at the end of this press
release and on the Company’s website.

About UTStarcom, Inc.

UTStarcom is a global leader in IP-based, end-to-end networking solutions
and international service and support. The Company sells its solutions to
operators in both emerging and established telecommunications markets around
the world. UTStarcom enables its customers to rapidly deploy revenue-
generating access services using their existing infrastructure, while
providing a migration path to cost-efficient, end-to-end IP networks.

Founded in 1991 and headquartered in Alameda, California, the Company has
research and development operations in the United States, China, and India.
For more information about UTStarcom, visit the Company’s Web site at
http://www.utstar.com .

Forward-Looking Statements

This release includes forward-looking statements, including statements
regarding the Company’s strategy to reduce operating expenses, achieve
profitability, investment in selective products and certain geographic regions
and transition to a new business model. These statements are forward-looking
in nature and subject to risks and uncertainties that may cause actual results
to differ materially. These risks include [the ability of the Company to
realize anticipated results of operational improvements, increase bookings,
successfully transition to a new management team and headquarters location,
execute on its business plan and manage regulatory matters] as well as risk
factors identified in its latest Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, as filed with the Securities and
Exchange Commission. The Company is in a period of significant transition and
in the conduct of its business is exposed to additional risks as a result. All
forward-looking statements included in this release are based upon information
available to the Company as of the date of this release, which may change, and
we assume no obligation to update any such forward-looking statement.

    For further information, please contact:

    Market Street Partners
     Linda Rothemund
     Tel: +1-415-445-3236

                                 UTStarcom, Inc.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
                                   (Unaudited)

                                                 June 30,        December 31,
                                                   2010              2009
                   ASSETS
    Current assets:
    Cash, cash equivalents and short-term
     investments                                  $307,996          $266,881
    Accounts and notes receivable, net              45,204            43,773
    Inventories and deferred costs                 161,321           202,753
    Prepaids and other current assets               79,132            74,354
    Total current assets                           593,653           587,761
    Long-term assets:
    Property, plant and equipment, net               5,186           130,612
    Long-term deferred costs                       180,777           184,978
    Other long-term assets                          33,679            25,760
    Total assets                                  $813,295          $929,111

           LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable                               $30,159           $54,115
    Customer advances                              147,398           120,364
    Deferred revenue                               162,443           170,777
    Other current liabilities                      101,097           147,914
    Total current liabilities                      441,097           493,170
    Long-term liabilities:
    Long-term deferred revenue and other
     liabilities                                   135,159           179,790
    Total liabilities                              576,256           672,960

    Total equity                                   237,039           256,151
    Total liabilities and equity                  $813,295          $929,111

                                UTStarcom, Inc.
               Condensed Consolidated Statements of Operations
                  (in thousands, except per share amounts)
                                  (Unaudited)

                                       Three months ended   Six months ended
                                           June 30,             June 30,
                                        2010      2009      2010      2009

    Net sales                          $73,165   $80,163  $154,012   $199,503
    Cost of net sales                   50,293    96,001   103,931    193,689
    Gross profit (loss)                 22,872   (15,838)   50,081      5,814
                                           31%     (20)%       33%         3%
    Operating expenses:
    Selling, general and
     administrative                     21,162    26,971    51,352     81,151
    Research and development             9,078    16,229    19,101     37,737
    Restructuring charges / (credit)      (216)   27,757     7,291     32,576
    Net gain on divestiture             (2,056)   (1,357)   (3,808)    (1,357)
    Total operating expenses            27,968    69,600    73,936    150,107

    Operating loss                      (5,096)  (85,438)  (23,855)  (144,293)

    Interest income, net                   382       369       660        828
    Other income (expense), net         (4,767)    5,429       100     (1,785)
    Loss before income taxes            (9,481)  (79,640)  (23,095)  (145,250)
    Income taxes expense                   510    (4,659)   (1,843)    (6,483)
    Net loss                            (8,971)  (84,299)  (24,938)  (151,733)

    Net loss attributable to
     noncontrolling interest                 6        16        10         17
    Net loss attributable to
     UTStarcom, Inc.                   $(8,965) $(84,283) $(24,928) $(151,716)

    Net loss per share attributable to
     UTStarcom, Inc. - Basic and
     Diluted                            $(0.07)   $(0.66)   $(0.19)    $(1.20)

    Weighted average shares used in
     per share calculation:
    Basic and Diluted                  130,311   127,160   129,866    126,450

                                  UTStarcom, Inc.
                   Condensed Consolidated Statements of Cashflows
                                  (in thousands)
                                   (Unaudited)

                                                   Six months ended June 30,
                                                    2010               2009

    Net cash used in operating activities         $(84,964)          $(37,136)

    Cash flows from investing activities:
    Property, plant and equipment, net              (1,826)            (1,337)
    Net proceeds from sale of building             123,955                 --
    Proceeds from divestitures                       1,500                 --
    Proceeds from settlement of an
     investment interest                               481                 --
    Purchase of an investment interest                (550)
    Change in restricted cash                        2,998              1,404
    Short-term investments, net                     (3,837)               808
    Other                                              971                392
    Net cash provided by investing
     activities                                    123,692              1,267
    Cash flows from financing activities:
    Other                                              (30)              (389)
    Net cash used in financing activities              (30)              (389)
    Effect of exchange rate changes on
     cash and cash equivalents                       2,300               (749)
    Net increase (decrease) in cash and cash
     equivalents                                    40,998            (37,007)
    Cash and cash equivalents at
     beginning of period                           265,843            309,603
    Cash and cash equivalents at end of
     period                                       $306,841           $272,596

                                UTSTARCOM, INC.
                           Aug 4, 2010 Conference Call
               RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE
                               ($ in millions)
                                  (Unaudited)

    To supplement our condensed consolidated financial statements presented on
    a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted
    to present those metrics as if both PCD had been divested and the Korea
    handsets business had been wound down prior to each time period reflected
    below.  We believe this enables year over year comparisons to our recent
    financial results.  These adjustments to our GAAP results are made with
    the intent of providing both management and investors a more complete
    understanding of UTStarcom's underlying results and trends.  In addition,
    these adjusted  non-GAAP results are among the information management uses
    as a basis for our planning and forecasting of future periods.  The
    presentation of this additional information is not meant to be considered
    in isolation or as a substitute for results prepared in accordance with
    generally accepted accounting principles in the United States.

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -08    -08     -08     -09    -09

    GAAP Revenue (a)                       $181   $241  $1,641    $119    $80

    Less: PCD Segment Revenue (b)            --     --     880      --     --

    Less: Korea Handset Sales to PCD (c)     35     92     127      39     (3)

    Non-GAAP Revenue                       $146   $149    $634     $80    $83

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -09    -09     -09     -10    -10

    GAAP Revenue (a)                        $71   $116     $386    $81    $73

    Less: PCD Segment Revenue (b)            --     --       --     --     --

    Less: Korea Handset Sales to PCD (c)      8     12       56      3     --

    Non-GAAP Revenue                        $63   $104     $330    $78    $73

    (a) GAAP Revenue for each period is the consolidated revenue as reported
        on Form 10-Q or Form 10-K, as applicable, for such period, except for
        the consolidated revenue for the quarters ended December 31, 2008 and
        2009, which is derived from the revenue reported in the Form 10-Qs and
        Form 10-K with respect to fiscal years 2008 and 2009.
    (b) Effective July 1, 2008 the PCD segment was divested by the Company.
    (c) Prior to the July 1, 2008 divestiture of PCD, Korea handset did not
        record revenue for units shipped to PCD as this activity was an
        intercompany transfer.
        After July 1, 2008 this activity was recorded as a third party sale in
        the Handset segment.

                              UTSTARCOM, INC.
                      Aug 4, 2010 Conference Call
     RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT
                             ($ in millions)
                               (Unaudited)

    To supplement our condensed consolidated financial statements presented on
    a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted
    to present those metrics as if both PCD had been divested and the Korea
    handsets business had been wound down prior to each time period reflected
    below.  We believe this enables year over year comparisons to our recent
    financial results.  These adjustments to our GAAP results are made with
    the intent of providing both management and investors a more complete
    understanding of UTStarcom's underlying results and trends.  In addition,
    these adjusted non-GAAP results are among the information management uses
    as a basis for our planning and forecasting of future periods.  The
    presentation of this additional information is not meant to be considered
    in isolation or as a substitute for results prepared in accordance with
    generally accepted accounting principles in the United States.

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -08    -08     -08     -09    -09

    GAAP Gross Profit (a)                   $57    $30    $261     $22   ($16)
                      GAAP Gross Margin %   31%    12%     16%     18%   (20%)

    Less: PCD Segment Gross Profit (b)       --     --      69      --     --

    Less: Korea Handset Gross Profit from
     Sales to PCD (c)                         6     (4)      4       3    (28)

    Non-GAAP Gross Profit                   $51    $34    $188     $19    $12
     Non-GAAP Gross Margin %                35%    23%     30%     24%    14%

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -09    -09     -09     -10    -10

    GAAP Gross Profit (a)                   $24    $35     $65     $27    $23
     GAAP Gross Margin %                    34%    30%     17%     34%    32%

    Less: PCD Segment Gross Profit (b)       --     --      --      --     --

    Less: Korea Handset Gross Profit from
     Sales to PCD (c)                         2      2     (21)      1      1

    Non-GAAP Gross Profit                   $22    $33     $86     $26    $22
     Non-GAAP Gross Margin %                35%    32%     26%     33%    30%

    (a) GAAP Gross Profit and GAAP Gross Margin % for each period is the
        consolidated gross profit and gross margin % as reported on Form 10-Q
        or Form 10-K, as applicable, for such period, except for the
        consolidated gross profit and gross margin % for the quarter ended
        December 31, 2008 and 2009, which is derived from the gross profit and
        gross margin % reported in the Form 10-Qs and Form 10-K with respect
        to fiscal years 2008 and 2009.
    (b) Effective July 1, 2008 the PCD segment was divested by the Company.
    (c) Prior to the July 1, 2008 divestiture of PCD, Korea handset earned a
        gross profit on the intercompany transfer of inventory to PCD.
        This gross profit was recorded in the Handset segment.  After July 1,
        2008 this activity was recorded as a third party transaction.

                               UTSTARCOM, INC.
                       Aug 4, 2010 Conference Call
     RECONCILIATION OF GAAP OPERATING EXPENSE TO NON-GAAP OPERATING EXPENSE
                              ($ in millions)
                                (Unaudited)

    To supplement our condensed consolidated financial statements presented on
    a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted
    to present those metrics as if both PCD had been divested and the Korea
    handsets business had been wound down prior to each time period reflected
    below.  We believe this enables year over year comparisons to our recent
    financial results.  These adjustments to our GAAP results are made with
    the intent of providing both management and investors a more complete
    understanding of UTStarcom's underlying results and trends.  In addition,
    these adjusted non-GAAP results are among the information management uses
    as a basis for our planning and forecasting of future periods.  The
    presentation of this additional information is not meant to be considered
    in isolation or as a substitute for results prepared in accordance with
    generally accepted accounting principles in the United States.

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -08    -08     -08     -09    -09

    GAAP Operating Expense (a)              $92   $109    $437     $81    $70

    Less: PCD Operating Expense (b)          --     --      15      --     --

    Less: Korea Handset Operating Expense
     (c)                                     10      5      34       3      2

    Non-GAAP Operating Expense              $82   $104    $388     $78    $68

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -09    -09     -09     -10    -10

    GAAP Operating Expense (a)              $58    $76    $285     $46    $28

    Less: PCD Operating Expense (b)          --     --      --      --     --

    Less: Korea Handset Operating Expense
     (c)                                      1     --       6      --     --

    Non-GAAP Operating Expense              $57    $76    $279     $46    $28

    (a) GAAP Operating Expense for each period is the consolidated operating
        expense as reported on Form 10-Q or Form 10-K, as applicable, for such
        period, except for the consolidated operating expense for the quarter
        ended December 31, 2008 and 2009, which is derived from the operating
        expenses reported in the Form 10-Qs and Form 10-K with respect to the
        fiscal years 2008 and 2009.
    (b) Effective July 1, 2008 the PCD segment was divested by the Company.
    (c) Both prior to and after the July 1, 2008 divestiture of PCD, all
        direct operating expense relating to Korea handset has been recorded
        in the Handset segment.

                                 UTSTARCOM, INC.
                         Aug 4, 2010 Conference Call
         RECONCILIATION OF GAAP OPERATING LOSS TO  NON-GAAP OPERATING LOSS
                                ($ in millions)
                                   (Unaudited)

    To supplement our condensed consolidated financial statements presented on
    a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted
    to present those metrics as if both PCD had been divested and the Korea
    handsets business had been wound down prior to each time period reflected
    below. We believe this enables year over year comparisons to our recent
    financial results.  These adjustments to our GAAP results are made with
    the intent of providing both management and investors a more complete
    understanding of UTStarcom's underlying results and trends.  In addition,
    these adjusted non-GAAP results are among the information management uses
    as a basis for our planning and forecasting of future periods.  The
    presentation of this additional information is not meant to be considered
    in isolation or as a substitute for results prepared in accordance with
    generally accepted accounting principles in the United States.

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -08    -08     -08     -09    -09

    GAAP Operating Loss (a)                ($35)  ($79)  ($176)   ($59)  ($85)

    Less: PCD Operating Profit (b)           --     --      53      --     --

    Less: Korea Handset Operating Income
     (Loss) (c)                              (4)    (9)    (30)     --    (30)

    Non-GAAP Operating Loss                ($31)  ($70)  ($199)   ($59)  ($55)

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -09    -09     -09     -10    -10

    GAAP Operating Loss (a)                ($34)  ($41)  ($219)  ($19)   ($5)

    Less: PCD Operating Profit (b)           --     --      --     --     --

    Less: Korea Handset Operating Income
     (Loss) (c)                               1      2     (27)     1      1

    Non-GAAP Operating Loss                ($35)  ($43)  ($192)  ($20)   ($6)

    (a) GAAP Operating Loss for each period is the consolidated operating loss
        as reported on Form 10-Q or Form 10-K, as applicable, for such period,
        except for the consolidated operating loss for the quarter ended
        December 31,  2008 and 2009, which is derived from the operating loss
        reported in the Form 10-Qs and Form 10-K with respect to fiscal years
        2008 and 2009.
    (b) Effective July 1, 2008 the PCD segment was divested by the Company.
    (c) Both prior to and after the July 1, 2008 divestiture of PCD, the
        operating loss relating to Korea handset has been recorded in the
        Handset segment.

                                    UTSTARCOM, INC.
                             Aug 4, 2010 Conference Call
                          ABBREVIATED NON-GAAP P&L STATEMENT (a)
                                     ($ in millions)
                                        (Unaudited)

    To supplement our condensed consolidated financial statements presented on
    a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted
    to present those metrics as if both PCD had been divested and the Korea
    handsets business had been wound down prior to each time period reflected
    below.  We believe this enables year over year comparisons to our recent
    financial results.  These adjustments to our GAAP results are made with
    the intent of providing both management and investors a more complete
    understanding of UTStarcom's underlying results and trends.  In addition,
    these adjusted non-GAAP results are among the information management uses
    as a basis for our planning and forecasting of future periods.  The
    presentation of this additional information is not meant to be considered
    in isolation or as a substitute for results prepared in accordance with
    generally accepted accounting principles in the United States.

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -08    -08     -08     -09    -09

    Non-GAAP Revenue                       $146   $149    $634     $80    $83

    Non-GAAP Gross Profit                    51     34     188      19     12
     Non-GAAP Gross Margin %                35%    23%     30%     24%    14%

    Non-GAAP Operating Expense               82    104     388      78     68

    Non-GAAP Operating Loss                ($31)  ($70)  ($199)   ($59)  ($55)

                                           Qtr    Qtr    Year     Qtr    Qtr
                                          ended  ended   ended   ended  ended
                                         30-Sep 31-Dec  31-Dec  31-Mar 30-Jun
                                            -09    -09     -09     -10    -10

    Non-GAAP Revenue                        $63   $104    $330     $78    $73

    Non-GAAP Gross Profit                    22     33      86      26     22
     Non-GAAP Gross Margin %                35%    32%     26%     33%    30%

    Non-GAAP Operating Expense               57     76     279      46     28

    Non-GAAP Operating Loss                ($35)  ($43)  ($192)   ($20)   ($6)

    (a) Please refer to the preceding reconciliation tables for the
        adjustments to GAAP Revenue, Gross Profit, Operating Expense and
        Operating Loss.

SOURCE UTStarcom, Inc.


Source: newswire



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