Investor Relations
UTStarcom Announces a Corporate Restructuring and Initiatives to Improve Financial Performance
ALAMEDA, Calif., Dec. 18 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI) today announced a series of corporate initiatives that are
expected to reduce its annualized operating expenses by more than 25% or
greater than $100 million. The majority of these measures will have been
initiated by the end of January 2009 and a significant portion of the savings
will be recognized in the first half of 2009.
UTStarcom Announces a Corporate Restructuring and Initiatives to Improve Financial Performance
- Actions Expected to Result in Annual Savings of 25% or $100 Million
(Logo: http://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO)
The actions announced today represent a continuation of the strategic plan
UTStarcom outlined in September of 2007. Since the beginning of this year the
company has divested a number of non-core business units and increased its net
cash position by
'Over the past twelve months, we have achieved a year-over-year OPEX
reduction of 20% and streamlined our business to improve our competitive and
financial position,' said
'These additional measures will reduce our annualized expense base by another
25% or
goals by increasing our focus on our IP-based portfolio targeting the
developing regions of the world.'
Rationalization of Non-Core Businesses
On
Korea-based handset manufacturing operation whose principal activity is
supplying handsets to Personal Communications Devises LLC. This wind down will
occur over the next six months to enable the company to meet current customer
commitments in
The company's Handset segment will continue to supply handsets to the
market.
Additionally, the company has initiated actions to disband its Custom
Solutions Business Unit by the end of the first quarter 2009.
Additional 10% Savings Through Headcount and SG&A Reductions
In the fourth quarter 2008 and first quarter 2009 the company will reduce
its global employee base by approximately 10%. This reduction is in addition
to the employees impacted by the identified non-core business rationalizations
discussed above.
In addition, the company also announced that the non-executive members of
the board have agreed to a reduction in their board retainers for a period of
one year. Furthermore,
other executive officers have voluntarily agreed to decline their cash bonuses
for 2008.
Although each geographic region and business will be affected,
management's plan will protect the most strategically important R&D
investments, customer relationships and product areas.
Consolidation of Back Office Functions in
Over the past twelve months the company has implemented a number of IT
systems and operational enhancements. With the improved operational
capability, the company is now able to eliminate functional duplication and
consolidate a number of back office functions into our
process will start in the first quarter of 2009 and be executed over the first
three quarters of 2009.
Restructuring Charge
In connection with the wind down of the Korea-based handset manufacturing
business the company expects to incur a restructuring charge of approximately
benefits. This charge is expected to be taken in the fourth quarter of 2008.
The company also expects to incur a restructuring charge in connection
with the worldwide reduction in workforce not related to the wind down of the
Korea-based handset manufacturing of approximately
one-time severance benefits. This charge is also expected to be taken in the
fourth quarter of 2008.
Conference Call
The company will host a conference call to discuss the announcements. The
call will take place at
2008
The conference call dial-in numbers are:
888-889-1058; International 706-634-2327. The conference ID number is
76385918.
A replay of the call will be available for 30 days. The conference call
replay numbers are as follows:
706-645-9291. The conference ID number is 76385918.
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 Pro Forma Non-GAAP Financial Measures
In order to provide both management and investors with a more complete
understanding of UTStarcom's underlying results and trends in light of the
planned wind down of its Korea-based handset manufacturing operation,
UTStarcom has prepared reconciliation tables for comparing GAAP results to
non-GAAP measures of revenues, gross profits, operating expenses and operating
profit (loss), along with an abbreviated, pro forma non-GAAP profit and loss
statement based on these non-GAAP measures. The pro forma non-GAAP measures
present the company's results as if both the
company's Personal Communications Division and the wind down of the company's
Korea operation were completed prior to each time period below.
In addition, these pro forma non-GAAP measures 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
Forward-Looking Statements
This release includes forward-looking statements, including the foregoing
statements regarding the company's plan to reduce its operating expenses and
its global employee base, including the expected timing for completion of the
various aspects of the plan and the resulting magnitude and timing of expense
reductions, the company's ability to focus on its IP-based portfolio in
certain geographies, expectations that the company will continue to supply
handsets to the
protect the company's most strategically important R&D investments, customer
relationships and product areas, and the expected amount and timing of
restructuring charges associated with the plan. These statements are
forward-looking in nature and subject to risks and uncertainties that may
cause actual results to differ materially, including but not limited to the
risks that the company may not be able to implement its plan effectively, the
company may incur charges and cash expenditures in connection with its plan
that are higher than anticipated or in other fiscal periods than anticipated,
the plan may not strengthen the company's operating performance, the company
may not achieve anticipated cost savings due to increased expenses in other
areas of its business, and other risks identified in the company's 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.
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
development operations in
information about UTStarcom, visit the company's Web site at
http://www.utstar.com.
UTSTARCOM, INC.
December 18, 2008 Update Call
RECONCILIATION OF GAAP REVENUE TO PRO FORMA NON-GAAP REVENUE
($ in millions)
(Unaudited)
To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if both PCD had been divested and Korea
BU 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 pro forma 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
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr
ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep-
07 07 07 07 07 08 08 08
GAAP Revenue (a) $476 $538 $647 $806 $2,467 $586 $633 $181
Less: PCD Segment
Revenue (b) 288 358 458 560 1,664 431 449 -
Less: Korea BU
Sales to PCD (c) - - - - - - - 35
Non-GAAP Revenue $188 $180 $189 $246 $803 $155 $184 $146
(a) GAAP Revenue for each period is the consolidated revenue as reported
on Form 10-Q or Form 10-K, as applicable, for such period, except for
the consolidated revenue for the quarter ended December 31, 2007,
which is derived from the revenue reported in the Form 10-Qs and Form
10-K with respect to fiscal year 2007.
(b) Effective
(c) Prior to the
revenue for units shipped to PCD as this activity was an intercompany
transfer. After July 1, 2008 this activity was recorded as a third
party sale in the Handset segment.
UTSTARCOM, INC.
December 18, 2008 Update Call
RECONCILIATION OF GAAP GROSS PROFIT TO PRO FORMA NON-GAAP GROSS PROFIT
($ in millions)
(Unaudited)
To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if both PCD had been divested and Korea
BU 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 pro forma 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 Qtr Qtr Year Qtr Qtr Qtr
ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep-
07 07 07 07 07 08 08 08
GAAP Gross
Profit (a) $75 $80 $64 $102 $321 $92 $82 $57
GAAP Gross
Margin % 16% 15% 10% 13% 13% 16% 13% 31%
Less: PCD Segment
Gross Profit (b) 17 16 27 $34 94 33 36 -
Less: Korea BU
Gross Profit from
Sales to PCD (c) 1 2 2 2 7 2 0 6
Non-GAAP Gross
Profit $57 $62 $35 $66 $220 $57 $46 $51
Non-GAAP Gross
Margin % 30% 34% 19% 27% 27% 37% 25% 35%
(a) GAAP Gross Profit and GAAP Gross Margin % for each period is the
consolidated gross profit and gross margin % as reported on Form 10-Q
or Form 10-K, as applicable, for such period, except for the
consolidated gross profit and gross margin % for the quarter ended
December 31, 2007, which is derived from the gross profit and gross
margin % reported in the Form 10-Qs and Form 10-K with respect to
fiscal year 2007.
(b) Effective
(c) Prior to the
profit on the intercompany transfer of inventory to PCD. This gross
profit was recorded in the Handset segment. After July 1, 2008 this
activity was recorded as a third party transaction.
UTSTARCOM, INC.
December 18, 2008 Update Call
RECONCILIATION OF GAAP OPERATING EXPENSE TO PRO FORMA NON-GAAP OPERATING
EXPENSE
($ in millions)
(Unaudited) To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if both PCD had been divested and Korea
BU 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 pro forma 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
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr
ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep-
07 07 07 07 07 08 08 08
GAAP Operating
Expense (a) $128 $135 $116 $154 $533 $123 $113 $92
Less: PCD
Operating
Expense (b) 9 8 7 7 31 8 8 -
Less: Korea
BU Operating
Expense (c) 7 8 8 8 31 9 10 10
Non-GAAP
Operating
Expense $112 $119 $101 $139 $471 $106 $95 $82
(a) GAAP Operating Expense for each period is the consolidated operating
expense as reported on Form 10-Q or Form 10-K, as applicable, for such
period, except for the consolidated operating expense for the quarter
ended December 31, 2007, which is derived from the operating expenses
reported in the Form 10-Qs and Form 10-K with respect to the fiscal
year 2007.
(b) Effective
(c) Both prior to and after the
direct operating expense relating to Korea BU has been recorded in the
Handset segment.
UTSTARCOM, INC.
December 18, 2008 Update Call
RECONCILIATION OF GAAP OPERATING LOSS TO PRO FORMA NON-GAAP
OPERATING LOSS
($ in millions)
(Unaudited)
To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if both PCD had been divested and Korea
BU 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 pro forma 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
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr
ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep-
07 07 07 07 07 08 08 08
GAAP Operating
Loss (a) ($53) ($55) ($52) ($52) ($212) ($31) ($31) ($35)
Less: PCD
Operating
Profit (b) 8 8 20 27 63 25 28 -
Less: Korea
BU Operating
Loss (c) (6) (6) (6) (6) (24) (7) (10) (4)
Non-GAAP
Operating Loss ($55) ($57) ($66) ($73) ($251) ($49) ($49) ($31)
(a) GAAP Operating Loss for each period is the consolidated operating
loss as reported on Form 10-Q or Form 10-K, as applicable, for such
period, except for the consolidated operating loss for the quarter
ended December 31, 2007, which is derived from the operating loss
reported in the Form 10-Qs and Form 10-K with respect to fiscal year
2007.
(b) Effective
(c) Both prior to and after the July 1, 2008 divestiture of PCD, the
operating loss relating to Korea BU has been recorded in the Handset
segment.
UTSTARCOM, INC.
December 18, 2008 Update Call
ABBREVIATED PRO FORMA NON-GAAP P&L STATEMENT (a)
($ in millions)
(Unaudited)
To supplement our condensed consolidated financial statements presented on
a GAAP basis, UTStarcom uses certain pro forma non-GAAP measures which are
adjusted to present those metrics as if both PCD had been divested and Korea
BU 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 pro forma 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
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr
ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep-
07 07 07 07 07 08 08 08
Non-GAAP Revenue $188 $180 $189 $246 $803 $155 $184 $146
Non-GAAP Gross
Profit 57 62 35 66 220 57 46 51
Non-GAAP Gross
Margin % 30% 34% 19% 27% 27% 37% 25% 35%
Non-GAAP Operating
Expense 112 119 101 139 471 106 95 82
Non-GAAP
Operating Loss ($55) ($57) ($66) ($73) ($251) ($49) ($49) ($31)
(a) Please refer to the preceding reconciliation tables for the
adjustments to GAAP Revenue, Gross Profit, Operating Expense and
Operating Loss.
SOURCE UTStarcom, Inc.