Investor Relations
UTStarcom Audit Committee Concludes Independent Investigation
ALAMEDA, Calif., May 24 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI), announced today that the Audit Committee of the Board of
Directors of the Company has concluded its independent investigation with
regard to the circumstances surrounding the previously disclosed premature
recognition of revenue on a contract with a customer in India and a number of
certain other transactions. As a result of the findings of the investigation,
the Company will restate revenues and earnings for the fiscal years ended 2003
and 2004, and for each fiscal quarter within these fiscal years, and for the
first three quarters of 2005. The aggregate impact of the error corrections
over the restatement periods have the effect of reducing previously reported
revenue by approximately $49.6 million and net income by approximately $11.8
million. No changes in cash balances are expected as a result of the
restatements. The Company expects that the revenue it has deferred as a result
of these restatements will be recognized in periods subsequent to fiscal 2005.
UTStarcom Audit Committee Concludes Independent Investigation
The Company Will Restate its Financial Statements for 2003 Through 2005 With an Aggregate Reduction in Total Revenue of $49.6 million and Net Income of $11.8 million Over the Restatement Period. No Changes in Cash Balances Expected
The Company Continues to Expect To File its Annual Report on Form 10-K for the Year Ended 2005 on or about June 1, 2006
(Logo: http://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO )
All restated financial information for fiscal 2003 and 2004, and for each
fiscal quarter within these fiscal years, and the first three quarters of
fiscal 2005 will be included in the Company's Annual Report on Form 10-K for
the year ended
expects to file on or about
Audit Committee Investigation:
As outlined in the Company's press releases dated
16, 2006
the Company conducted an investigation, with the assistance of independent
counsel and forensic accountants, with regard to the circumstances surrounding
the premature recognition of revenue on a contract with a customer in
and certain other transactions.
Specifically, it was determined that the Company prematurely recognized
approximately
gross margins of less than one million dollars. Management has concluded that
certain information was withheld from management and the Company's auditors at
the time revenue was originally recorded, which resulted in inappropriate
revenue recognition during several of the quarters from 2003 through 2005.
Additionally, as a result of this investigation, management has also
identified a limited number of certain other transactions which also require
adjustment. These adjustments relate primarily to contracts where management
has determined that revenue was prematurely recognized because certain
elements of these contracts were undelivered at the time of the original
recognition. Specifically, UTStarcom management identified instances where
all the relevant documentation pertaining to these contracts was not
previously made available for evaluation at the time of original revenue
recognition.
The Company analyzed all the pertinent quantitative and qualitative
factors surrounding these transactions and determined that previously issued
financial statements should be restated for the fiscal years ended 2003 and
2004, and for each fiscal quarter within these fiscal years, and for the first
three quarters of 2005. Accordingly, all previously filed financial
statements for these time periods should no longer be relied upon until such
financial statements have been restated.
Restatement Impacts (Preliminary)
$ in millions, except per share amount
2003
Previously As
Reported Restated Adjustment Percent
Net Sales $1,965.2 $1,941.2 $(24.0) (1.2%)
Net Income/(Loss) $215.5 $209.9 $(5.6) (2.6%)
Diluted Earnings/(Loss) per Share $1.75 $1.70 $(0.05) (2.9%)
2004
Previously As
Reported Restated Adjustment Percent
Net Sales $2,703.6 $2,684.4 $(19.2) (0.7%)
Net Income/(Loss) $73.4 $69.8 $(3.6) (4.9%)
Diluted Earnings/(Loss) per Share $0.56 $0.54 $(0.02) (3.6%)
Nine Months Ended
September 30, 2005
Previously As
Reported Restated Adjustment Percent
Net Sales $2,260.1 $2,253.7 $(6.4) (0.3%)
Net Income/(Loss) $(439.4) $(442.0) $(2.6) (0.6%)
Diluted Earnings/(Loss) per Share $(3.79) $(3.81) $(0.02) (0.5%)
Details of all the financial restatements above will be reflected in the
Company's 2005 Form 10-K which is expected to be filed on or about
2006
Management's Assessment of Effectiveness of Internal Controls
Management has determined that due to the continued existence of certain
previously identified material weaknesses, the Company's management will
conclude in its 'Management Report on Internal Control Over Financial
Reporting' to be included in the 2005 Form 10-K, that the Company's internal
control over financial reporting was not effective as of
Also, as a result of these material weaknesses, the Company's management
believes that the report of its independent registered public accounting firm
will contain an adverse opinion with respect to the effectiveness of the
Company's internal control over financial reporting as of
material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected.
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 broadband,
wireless, and handset 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 design operations in the
and
For more information about UTStarcom, visit the company's Web site at
www.utstar.com.
Forward-Looking Statements
This release includes forward-looking statements, including the foregoing
statements regarding the anticipated restatements of revenue and net income
for the fiscal years ended 2003 and 2004, and for each fiscal quarter within
these fiscal years, and for the first three quarters of fiscal 2005, the
impact of such restatements and the anticipated timing for the Company to file
its 2005 Form 10-K. These statements are forward-looking in nature and
subject to risks and uncertainties that may cause actual results to differ
materially. These risk factors include possible accounting entries and
adjustments that may be made to the Company's financial statements as part of
the restatements. The Company also refers readers to the 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.
SOURCE UTStarcom, Inc.