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UTStarcom Releases Financial Results for the Fourth Quarter and Full Year 2008
ALAMEDA, Calif., Feb. 26 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (Nasdaq: UTSI) today reported financial results for the fourth quarter of 2008 and for the full year ended December 31, 2008.
UTStarcom Releases Financial Results for the Fourth Quarter and Full Year 2008
UTStarcom Releases Financial Results for the Fourth Quarter and Full Year 2008
(Logo: http://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO)
On July 1, 2008 the Company divested its Personal Communications Division ('PCD') which has historically represented a significant portion of the Company's revenues. On December 18, 2008 the Company announced actions to wind down its Korea-based handset manufacturing operations by July 2009. To enable a comparison of the financial results for the Company on a year-over-year basis the Company has prepared certain pro forma 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 pro forma non-GAAP financial measures is provided at the end of this press release and on the Company's website.
Fourth Quarter 2008 Financial Results
Net sales for the fourth quarter 2008 were $241 million as compared to $806 million in the fourth quarter of 2007. Gross margins for the fourth quarter 2008 were 12.4% as compared to 12.7% in the fourth quarter of 2007. The operating loss for the fourth quarter of 2008 and 2007 was $79 million and $53 million, respectively. The fourth quarter 2008 pro forma non-GAAP revenue was $149 million, the pro forma non-GAAP gross margin was 22.8% and the pro forma non-GAAP operating loss was $70 million. This compares to the fourth quarter 2007 pro forma non-GAAP revenue of $246 million, the pro forma non-GAAP gross margin of 26.8% and the pro forma non-GAAP operating loss of $74 million. The decrease in pro forma non-GAAP revenues and pro forma non-GAAP gross margins primarily reflects the expected volume decline in our PAS business.
The GAAP net loss for the fourth quarter of 2008 was $80.9 million, or a loss of $0.65 per share, as compared to a loss of $24.6 million, or $0.20 per share in the fourth quarter of 2007.
The fourth quarter GAAP gross profit of $30 million was impacted by the following significant items:
- The Company recorded an increase of $18.5 million in inventory reserves primarily related to the Korea-based handset operations.
- The Company's Broadband segment recorded an additional loss reserve of approximately $6.0 million related to its large infrastructure project in India.
The fourth quarter GAAP operating expenses of $109 million were impacted by the following significant items:
- Recording a $13.1 million restructuring charge related to the actions announced on December 18, 2008 largely comprised of severance payment accruals.
- Recording a $27.2 million non cash asset impairment relating to long-lived assets (primarily intangible assets, equipment and capitalized software).
- Reduction of 2008 bonus accruals by $9.0 million.
Net cash, cash equivalents and short-term investments as of December 31, 2008 was $314 million compared to $180 million on December 31, 2007. The increase reflects the sale of PCD partially offset by usage of cash flow from operations.
Full Year 2008 Financial Results
Net sales for the year 2008 were $1.6 billion as compared to $2.5 billion for the year 2007. Gross margins for the year 2008 were 15.9% as compared to 13.0% in 2007. The operating loss for the full year 2008 and 2007 was $176 million and $212 million, respectively. The full year 2008 pro forma non-GAAP revenue, gross margins and operating loss were $634 million, 29.7% and $199 million, respectively. This compares to the full year 2007 pro forma non-GAAP revenue, gross margins and operating loss of $803 million, 27.4% and $251 million, respectively. The decrease in pro forma non-GAAP revenues primarily reflects the expected volume decline in our PAS business.
The GAAP net loss for the full year 2008 was $150.3 million, or a loss of $1.22 per share, as compared to a loss of $195.6 million, or $1.62 per share in the prior year.
'Our fourth quarter results reflect the significant changes we made during the year to both simplify the Company and to focus on our core business,' said
Peter Blackmore, UTStarcom's chief executive officer and president. 'Importantly we ended the year with net cash and short term investments of $314 million. During the fourth quarter we also announced aggressive actions to further reduce our operating expenses and streamline our business. We shall continue to drive further reductions in expenses during 2009 as we focus on growing revenues in our core IP based product portfolio.'
Going Concern
As a result of the Company's history of recurring losses and negative cash flows from operations, the Company expects its independent registered public accounting firm will issue a going concern uncertainty explanatory paragraph in its audit report on the financial statements for the year ended December 31, 2008.
However, management believes that if the Company is able to achieve its projected sales in 2009 and contain expenses and cash used in operations to the levels contemplated in the Company's 2009 financial plan, the Company will have sufficient liquidity to finance its anticipated working capital and capital expenditure requirements for the next twelve months.
Q1 2009 Guidance
During the conference call management will provide financial guidance for the first quarter of 2009. Due to the current economic climate the Company will not provide annual guidance.
Conference Call
The Company will host a conference call to discuss the results at 2:00 p.m. (PST) / 5:00 p.m. (EST) on February 26, 2009. The conference call dial-in numbers are as follows: United States 888-889-1058; International 706-634-2327. The conference ID number is 86513483.
A replay of the call will be available for 30 days. The conference call replay numbers are as follows: United States -- 800-642-1687; International -- 706-645-9291. The Access Code is 86513483.
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 PCD divestiture and planned wind down of its Korea-based handset manufacturing operations, 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 July 2008 divestiture of the Company's Personal Communications Division and the wind down of the Company's Korea-based handset operations 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 the United States.
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, Korea 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, expected financial results in the first quarter of 2009, anticipated liquidity, capital expenditure requirements, the nature and contents of the audit report to be delivered by the Company's independent registered public accounting firm concerning the financial statements for the year ended December 31, 2008 and the expected investment in the Company's IP-based product portfolio. 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 and execute on its business plan 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.
UTStarcom, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
December 31, December 31,
2008 2007
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $313,865 $503,078
Accounts and notes receivable, net 169,496 343,525
Inventories and deferred costs 304,716 524,727
Prepaids and other current assets 144,515 121,636
------- -------
Total current assets 932,592 1,492,966
Long-term assets:
Property, plant and equipment, net 175,287 209,094
Long-term deferred costs 149,258 164,766
Other long-term assets 53,669 117,762
------ -------
Total assets $1,310,806 $1,984,588
========== ==========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $176,384 $148,440
Short-term debt - 322,829
Customer advances 144,700 229,050
Deferred revenue 117,584 100,502
Other current liabilities 181,852 302,395
------- -------
Total current liabilities 620,520 1,103,216
Long-term liabilities:
Long-term debt - 333
Long-term deferred revenue and other
liabilities 222,644 259,358
------- -------
Total liabilities 843,164 1,362,907
Minority interest in consolidated subsidiaries 808 3,705
Total stockholders' equity 466,834 617,976
------- -------
Total liabilities, minority interest and
stockholders' equity $1,310,806 $1,984,588
========== ==========
UTStarcom, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three months ended Years ended
December 31, December 31,
-------------- ----------------
2008 2007 2008 2007
---- ---- ---- ----
Net sales $241,097 $806,330 $1,640,449 $2,466,970
Cost of net sales 211,209 704,326 1,379,207 2,145,519
------- ------- --------- ---------
Gross profit 29,888 102,004 261,242 321,451
------ ------- ------- -------
Operating expenses (income):
Selling, general and
administrative 46,360 76,146 257,559 319,145
Research and development 26,634 40,575 143,291 168,275
Amortization of intangible
assets 278 3,824 4,111 15,961
Impairment of goodwill and
other long-lived assets 27,220 19,912 27,220 19,912
Restructuring charges 13,059 14,474 13,059 14,474
Net gain on divestitures (4,327) - (7,782) (4,271)
------ - ------ ------
Total operating expenses 109,224 154,931 437,458 533,496
------- ------- ------- -------
Operating loss (79,336) (52,927) (176,216) (212,045)
------- ------- -------- --------
Interest income (expense), net 776 (6,612) (2,948) (18,216)
Other (expense) income (2,680) 56,318 35,427 64,796
------ ------ ------ ------
Loss before income taxes and
minority interest (81,240) (3,221) (143,737) (165,465)
Income taxes benefit (expense) 309 (22,164) (7,087) (32,898)
Minority interest in (gain)
losses of consolidated
subsidiaries (18) 828 508 2,788
--- --- --- -----
Net loss $(80,949) $(24,557) $(150,316) $(195,575)
======== ======== ========= =========
Loss per share - Basic and
Diluted $(0.65) $(0.20) $(1.22) $(1.62)
Weighted average shares used
in per share calculation:
- Basic and Diluted 124,843 121,340 123,490 121,059
======= ======= ======= =======
UTStarcom, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Year ended Year ended
December 31, 2008 December 31, 2007
------------------ ------------------
Net cash used in operating
activities $(55,164) $(225,093)
-------- ---------
Cash flows from investing activities:
Property, plant and equipment, net (14,214) (27,324)
Investments, net
Proceeds from divestitures 214,051 4,271
(Purchase of ) proceeds from
disposition of an investment
interest (8,655) 3,255
Proceeds from repayment of loan
by a variable interest entity 7,728 -
Change in restricted cash (8,216) 6,591
Short-term investments, net 54,991 41,950
Other 361 695
--- ---
Net cash provided by investing
activities 246,046 29,438
------- ------
Cash flows from financing activities:
Borrowings, net (325,317) (61,605)
Other (7,295) 3,500
------ -----
Net cash (used in) financing
activities (332,612) (58,105)
Effect of exchange rate changes
on cash and cash equivalents 13,884 29,586
------ ------
Net decrease in cash and cash
equivalents (127,846) (224,174)
Cash and cash equivalents at
beginning of period 437,449 661,623
------- -------
Cash and cash equivalents at
end of period $309,603 $437,449
======== ========
UTSTARCOM, INC.
February 26, 2009 Conference Call
RECONCILIATION OF GAAP REVENUE TO PRO FORMA NON-GAAP REVENUE
($ 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 the United
States.
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr Year
ended ended ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30- 31- 31-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep- Dec- Dec-
07 07 07 07 07 08 08 08 08 08
--- --- --- --- --- --- --- --- --- ---
GAAP Revenue
(a) $476 $538 $647 $806 $2,467 $586 $633 $181 241 $1,641
Less: PCD
Segment
Revenue (b) 288 358 458 560 1,664 431 449 - - 880
Less: Korea
BU Sales
to PCD (c) - - - - - - - 35 92 $127
--- --- --- --- --- --- --- --- --- ----
Non-GAAP
Revenue $188 $180 $189 $246 $803 $155 $184 $146 $149 $634
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
-------------------------------
(a) GAAP Revenue for each period is the consolidated revenue as reported
on Form 10-Q or Form 10-K, as applicable, for such period, except for the
consolidated revenue for the quarter ended December 31, 2007, which is
derived from the revenue reported in the Form 10-Qs and Form 10-K with
respect to fiscal year 2007.
(b) Effective July 1, 2008 the PCD segment was divested by the Company.
(c) Prior to the July 1, 2008 divestiture of PCD, Korea BU did not record
revenue for units shipped to PCD as this activity was an intercompany
transfer. After July 1, 2008 this activity was recorded as a third party
sale in the Handset segment.
UTSTARCOM, INC.
February 26, 2009 Conference Call
RECONCILIATION OF GAAP GROSS PROFIT TO PRO FORMA NON-GAAP GROSS PROFIT
($ 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 Qtr Year
ended ended ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30- 31- 31-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep- Dec- Dec-
07 07 07 07 07 08 08 08 08 08
--- --- --- --- --- --- --- --- --- ---
GAAP Gross
Profit (a) $75 $80 $64 $102 $321 $92 $82 $57 $30 $261
GAAP Gross
Margin % 16% 15% 10% 13% 13% 16% 13% 31% 12% 16%
Less: PCD
Segment
Gross
Profit (b) 17 16 27 $34 94 33 36 - - 69
Less: Korea
BU Gross
Profit from
Sales to
PCD (c) 1 2 2 2 7 2 0 6 (4) 4
--- --- --- --- --- --- --- --- --- ---
Non-GAAP
Gross
Profit $57 $62 $35 $66 $220 $57 $46 $51 $34 $188
=== === === === ==== === === === === ====
Non-GAAP
Gross
Margin % 30% 34% 19% 27% 27% 37% 25% 35% 23% 30%
-------------------------------------------------
(a) GAAP Gross Profit and GAAP Gross Margin % for each period is the
consolidated gross profit and gross margin % as reported on Form 10-Q or
Form 10-K, as applicable, for such period, except for the consolidated
gross profit and gross margin % for the quarter ended December 31, 2007,
which is derived from the gross profit and gross margin % reported in the
Form 10-Qs and Form 10-K with respect to fiscal year 2007.
(b) Effective July 1, 2008 the PCD segment was divested by the Company.
(c) Prior to the July 1, 2008 divestiture of PCD, Korea BU earned a gross
profit on the intercompany transfer of inventory to PCD. This gross
profit was recorded in the Handset segment. After July 1, 2008 this
activity was recorded as a third party transaction.
UTSTARCOM, INC.
February 26, 2009 Conference Call
RECONCILIATION OF GAAP OPERATING EXPENSE TO PRO FORMA NON-GAAP
OPERATING EXPENSE
($ 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 the United
States.
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr Year
ended ended ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30- 31- 31-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep- Dec- Dec-
07 07 07 07 07 08 08 08 08 08
--- --- --- --- --- --- --- --- --- ---
GAAP
Operating
Expense (a) $128 $135 $116 $154 $533 $123 $113 $92 $109 $437
Less: PCD
Operating
Expense (b) 9 8 7 7 31 8 7 - - $15
Less: Korea
BU Operating
Expense (c) 7 8 8 8 31 9 10 10 5 $34
--- --- --- --- --- --- --- --- --- ---
Non-GAAP
Operating
Expense $112 $119 $101 $139 $471 $106 $96 $82 $104 $388
==== ==== ==== ==== ==== ==== === === ==== ====
------------------------------------
(a) GAAP Operating Expense for each period is the consolidated operating
expense as reported on Form 10-Q or Form 10-K, as applicable, for such
period, except for the consolidated operating expense for the quarter
ended December 31, 2007, which is derived from the operating expenses
reported in the Form 10-Qs and Form 10-K with respect to the fiscal year
2007.
(b) Effective July 1, 2008 the PCD segment was divested by the Company.
(c) Both prior to and after the July 1, 2008 divestiture of PCD, all
direct operating expense relating to Korea BU has been recorded in the
Handset segment.
UTSTARCOM, INC.
February 26, 2009 Conference Call
RECONCILIATION OF GAAP OPERATING LOSS TO PRO FORMA NON-GAAP OPERATING LOSS
($ 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 the United
States.
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr Year
ended ended ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30- 31- 31-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep- Dec- Dec-
07 07 07 07 07 08 08 08 08 08
--- --- --- --- --- --- --- --- --- ---
GAAP
Operating
Loss (a) ($52) ($55) ($52) ($53) ($212) ($31) ($31) ($35) ($79) (176)
Less: PCD
Operating
Profit (b) 8 8 20 27 63 25 28 - - 53
Less: Korea
BU Operating
Loss (c) (6) (6) (6) (6) (24) (7) (10) (4) (9) (30)
--- --- --- --- --- --- --- --- --- ---
Non-GAAP
Operating
Loss ($54) ($57) ($66) ($74) ($251) ($49) ($49) (31) (70) (199)
=== === === === ==== === === === === ===
---------------------------------
(a) GAAP Operating Loss for each period is the consolidated operating
loss as reported on Form 10-Q or Form 10-K, as applicable, for such
period, except for the consolidated operating loss for the quarter ended
December 31, 2007, which is derived from the operating loss reported in
the Form 10-Qs and Form 10-K with respect to fiscal year 2007.
(b) Effective July 1, 2008 the PCD segment was divested by the Company.
(c) Both prior to and after the July 1, 2008 divestiture of PCD, the
operating loss relating to Korea BU has been recorded in the Handset
segment.
UTSTARCOM, INC.
February 26, 2009 Conference Call
ABBREVIATED PRO FORMA NON-GAAP P&L STATEMENT (a)
($ 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 the United
States.
Qtr Qtr Qtr Qtr Year Qtr Qtr Qtr Qtr Year
ended ended ended ended ended ended ended ended ended ended
31- 30- 30- 31- 31- 31- 30- 30- 31- 31-
Mar- Jun- Sep- Dec- Dec- Mar- Jun- Sep- Dec- Dec-
07 07 07 07 07 08 08 08 08 08
--- --- --- --- --- --- --- --- --- ---
Non-GAAP
Revenue $188 $180 $189 $246 $803 $155 $184 $146 $149 $634
Non-GAAP
Gross
Profit 57 62 35 66 220 57 46 51 34 $188
Non-GAAP
Gross
Margin % 30% 34% 19% 27% 27% 37% 25% 35% 23% 30%
Non-GAAP
Operating
Expense 112 119 101 139 471 106 96 82 104 $388
--- --- --- --- --- --- --- --- --- ----
Non-GAAP
Operating
Loss ($54) ($57) ($66) ($74) ($251) ($49) ($49) ($31) ($70) ($199)
=== === === === ==== === === === === ====
--------------------------
(a) Please refer to the preceding reconciliation tables for the
adjustments to GAAP Revenue, Gross Profit, Operating Expense and
Operating Loss.
SOURCE UTStarcom, Inc.