Exhibit 99.1
UTSTARCOM RELEASES FIRST QUARTER 2006 FINANCIAL RESULTS
First Quarter Revenues of $596.6 Million, Gross Margins of 20.5%, and
Loss per Share of ($0.09)
Positive Cash Flow from Operations of Approximately $54 Million in the
First Quarter
ALAMEDA, Calif., June 21, 2006 — UTStarcom, Inc. (Nasdaq: UTSI), a global leader in IP-based, end-to-end networking solutions and services, today reported financial results for the first quarter of 2006.
Net sales for the first quarter of 2006 were $596.6 million. Gross margins for the first quarter were 20.5% and GAAP net loss for the quarter was $10.6 million, or a loss of ($0.09) per share.
“While there is still a lot of work to be done, we are pleased with our solid first quarter results. We believe they demonstrate progress toward our planned improvements to gross margins, expenses, and cash-flows,” stated Fran Barton, executive vice president and chief financial officer of UTStarcom.
The Company generated approximately $54 million of positive cash flow from operations and paid down approximately $27 million in short-term debt during the quarter.
“We will continue to strive to make improvements in our business operations. We will also continue to drive our strategic focus to evolve our product portfolio, build new customer relationships and to maintain our technology and market leadership in key markets around the world,” added Hong Lu, chief executive officer of UTStarcom.”
Consolidated Second Quarter 2006 Guidance
Total Revenues: | Approximately $545-$575 million |
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Gross Profit Margin: | Total Company: 15-17% |
Operating Expenses: | Approximately: $141 million, including approximately $4 million in expenses associated with stock compensation |
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GAAP EPS: | Loss of approximately ($0.45) to ($0.55) |
Conference Call
The Company will conduct a conference call, which is open to the public, to discuss these results. The call will take place today, June 21, 2006 at 1:30 p.m. (PST). The conference call dial-in numbers are as follows: United States — 888-398-3046; International — 706-634-2492.
A replay of the call will be available from approximately 5:30 p.m. (PST) on June 21, 2006 to 11:59 p.m. (PST) on June 28, 2006. The conference call replay numbers are as follows: United States — 800-642-1687; International — 706-645-9291. The Access Code is 2062973.
Investors will also have the opportunity to listen to the conference call and the replay over the Internet through UTStarcom’s Web site at: 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.
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 United States, China, Korea and India. UTStarcom is a FORTUNE 1000 company.
For more information about UTStarcom, visit the company’s Web site at www.utstar.com.
This release includes forward-looking statements, including the foregoing statements regarding the anticipated continued progress with respect to business operation and execution, the anticipated improvement in the Company’s strategic focus and the resulting evolution of product portfolio, the anticipated ability to build new customer relationships, the expectation that the Company will be able to maintain its technology and market leadership in key markets, and the guidance given for anticipated total revenues, gross profit margin, operating expenses and earnings per share for the second quarter of 2006. 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 rapidly changing technology, the changing nature of global telecommunications markets, the termination of significant contracts, the direction and results of future research and development efforts, evolving product and applications standards, reduction or delays in system deployments, product transitions, potential non-realization of backlog, changes in demand for and acceptance of the Company’s products, general adverse economic conditions, and trends and uncertainties such as changes in government regulation and licensing requirements. 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.
Chesha Kamieniecki
Director of Investor Relations
UTStarcom, Inc.
(510) 749-1560
UTStarcom Inc.
1275 Harbor Bay Parkway
Alameda, CA 94502
UTStarcom, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
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| March 31, |
| December 31, |
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| 2006 |
| 2005 |
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ASSETS |
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Current assets: |
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Cash, cash equivalents and short-term investments |
| $ | 684,477 |
| $ | 658,837 |
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Accounts receivable, net |
| 494,988 |
| 522,964 |
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Notes receivable |
| 7,659 |
| 2,065 |
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Inventories, net |
| 424,028 |
| 425,955 |
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Deferred costs/Inventories at customer sites under contracts |
| 246,678 |
| 239,876 |
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Prepaids |
| 66,598 |
| 61,795 |
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Short-term restricted cash and investments |
| 69,078 |
| 53,680 |
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Other current assets |
| 36,677 |
| 37,267 |
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Total current assets |
| 2,030,183 |
| 2,002,439 |
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Property, plant and equipment, net |
| 221,003 |
| 233,403 |
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Long-term investments |
| 25,643 |
| 26,023 |
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Goodwill |
| 3,063 |
| 3,063 |
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Intangible assets, net |
| 70,389 |
| 75,313 |
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Other long-term assets |
| 25,235 |
| 25,811 |
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Total assets |
| $ | 2,375,516 |
| $ | 2,366,052 |
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LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
| $ | 339,865 |
| $ | 320,677 |
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Short-term debt |
| 172,141 |
| 198,826 |
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Income taxes payable |
| 31,708 |
| 33,608 |
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Customer advances |
| 265,359 |
| 221,301 |
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Deferred revenue |
| 86,681 |
| 69,030 |
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Other current liabilities |
| 243,888 |
| 289,867 |
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Total current liabilities |
| 1,139,642 |
| 1,133,309 |
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Long-term debt |
| 274,900 |
| 274,900 |
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Other long-term liabilities |
| 30,943 |
| 20,958 |
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Total liabilities |
| 1,445,485 |
| 1,429,167 |
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Minority interest in consolidated subsidiaries |
| 7,852 |
| 8,338 |
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Stockholders’ equity: |
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Common stock: $0.00125 par value; authorized: 750,000,000 shares; issued and outstanding: 120,607,118 and 120,585,158 at March 31, 2006 and December 31, 2005, respectively |
| 152 |
| 152 |
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Additional paid-in capital |
| 1,166,519 |
| 1,168,166 |
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Deferred stock compensation |
| — |
| (3,493 | ) | ||
Retained earnings (accumulated deficit) |
| (263,809 | ) | (253,174 | ) | ||
Accumulated other comprehensive income |
| 19,317 |
| 16,896 |
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Total stockholders’ equity |
| 922,179 |
| 928,547 |
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Total liabilities, minority interest and stockholders’ equity |
| $ | 2,375,516 |
| $ | 2,366,052 |
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UTStarcom, Inc.
Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
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| Three months ended March 31, |
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| 2006 |
| 2005 |
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| as restated |
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Net sales |
| $ | 596,571 |
| $ | 901,884 |
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Cost of sales |
| 474,117 |
| 664,460 |
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Gross profit |
| 122,454 |
| 237,424 |
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Operating expenses: |
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Selling, general and administrative |
| 83,172 |
| 109,011 |
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Research and development |
| 46,309 |
| 66,260 |
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Amortization of intangible assets |
| 4,925 |
| 6,972 |
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Total operating expenses |
| 134,406 |
| 182,243 |
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Operating (loss) earnings |
| (11,952 | ) | 55,181 |
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Interest income (expense) |
| 32 |
| (2,929 | ) | ||
Other income (expense), net |
| 3,568 |
| (6,847 | ) | ||
(Loss) income before income taxes, minority interest and equity in loss of affiliated companies |
| (8,352 | ) | 45,405 |
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Income tax expense |
| 2,839 |
| 7,680 |
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Minority interest in consolidated subsidiaries |
| 556 |
| (222 | ) | ||
Equity in loss of affiliated companies |
| — |
| (459 | ) | ||
Net (loss) income |
| $ | (10,635 | ) | $ | 37,044 |
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Basic (loss) earnings per share |
| $ | (0.09 | ) | $ | 0.32 |
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Diluted (loss) earnings per share |
| $ | (0.09 | ) | $ | 0.29 |
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Weighted average shares used in per-share calculation: |
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- Basic |
| 120,600 |
| 114,523 |
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- Diluted |
| 120,600 |
| 132,949 |
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UTStarcom, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
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| Three months ended March 31, |
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| 2006 |
| 2005 |
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| as restated |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net (loss) income |
| $ | (10,635 | ) | $ | 37,044 |
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Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
| 17,476 |
| 25,897 |
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Loss on sale and disposal of assets |
| 4,708 |
| 1,278 |
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Stock compensation expense |
| 4,159 |
| 575 |
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Reversal of stock compensation due to terminations |
| (2,390 | ) | — |
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Provision for doubtful accounts |
| 892 |
| 17,548 |
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Provision for inventory reserve |
| 795 |
| 15,160 |
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Other |
| (578 | ) | 1,769 |
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Changes in operating assets and liabilities, net of of acquisitions: |
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Accounts receivable |
| 28,787 |
| (120,621 | ) | ||
Inventories |
| (4,337 | ) | (15,724 | ) | ||
Deferred costs/Inventories at customer sites under contracts |
| (810 | ) | 3,533 |
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Other current and non-current assets |
| (6,771 | ) | 49,621 |
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Accounts payable |
| 18,077 |
| 33,429 |
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Income taxes payable |
| (2,020 | ) | (32,015 | ) | ||
Customer advances |
| 43,097 |
| (223,720 | ) | ||
Deferred revenue |
| 14,207 |
| 28,016 |
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Other current liabilities |
| (50,985 | ) | (4,667 | ) | ||
Net cash provided by (used in) operating activities |
| 53,672 |
| (182,877 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property, plant and equipment |
| (3,162 | ) | (28,313 | ) | ||
Purchase of business, net of cash acquired |
| — |
| (18,449 | ) | ||
Sale of business |
| 19,965 |
| — |
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Change in restricted cash and investments |
| (17,037 | ) | 5,796 |
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Purchase of short-term investments |
| (10,819 | ) | (101,194 | ) | ||
Proceeds from sale of short-term investments |
| 13,309 |
| 221,253 |
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Other |
| 499 |
| (18 | ) | ||
Net cash provided by investing activities |
| 2,755 |
| 79,075 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from borrowings |
| 62,370 |
| 146,000 |
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Payments on borrowings |
| (89,948 | ) | (230,000 | ) | ||
Other |
| (3,184 | ) | 667 |
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Net cash used in financing activities |
| (30,762 | ) | (83,333 | ) | ||
Effect of exchange rate changes on cash and cash equivalents |
| 2,389 |
| (2,683 | ) | ||
Net increase (decrease) in cash and cash equivalents |
| 28,054 |
| (189,818 | ) | ||
Cash and cash equivalents at beginning of period |
| 645,571 |
| 562,532 |
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Cash and cash equivalents at end of period |
| $ | 673,625 |
| $ | 372,714 |
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Supplemental disclosure of cash flow information: |
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Cash paid: |
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Interest |
| $ | 2,511 |
| $ | 5,104 |
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Income taxes |
| $ | 3,801 |
| $ | 1,489 |
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Non-cash operating activity |
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Accounts receivable transferred to notes receivable |
| $ | 8,977 |
| $ | 9,394 |
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