EXHIBIT 99.2
FINAL
UTStarcom Releases Financial Results for the Second Quarter of 2007
ALAMEDA, Calif., October 18, 2007 — UTStarcom, Inc. (Nasdaq: UTSI), a global leader in IP-based, end-to-end networking solutions and services, today reported financial results for the second quarter of 2007.
Net sales for the second quarter 2007 were $538.2 million. Gross margins for the second quarter 2007 were 14.8% and net loss for the quarter was $61.7 million, or a loss of ($0.51) per share.
“Clearly the first half of 2007 was challenging for UTStarcom,” stated Fran Barton, Chief Financial Officer of UTStarcom, Inc. “However we are pleased to report that we expect to file our Q2 2007 Form 10-Q within the next few days, and as such, we will have completed all of our outstanding filings, which will bring us current with both the NASDAQ listing qualifications panel and our bondholders. Now, we look forward to executing on our new corporate strategy and focusing on the opportunities and internal improvements that we believe will drive the Company toward profitability.”
Conference Call Details
The Company will host a conference call to discuss both the first and second quarter 2007 results. The call will take place at 2:00 p.m. (PST)/ 5:00 p.m. (EST) on Thursday, October 18. The conference call dial-in numbers are as follows: United States — 888-398-3046; International — 706-902-1962. The conference ID number is 19776282.
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 19776282.
Investors will also have the opportunity to listen to the conference call and the replay over the Internet through 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.
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 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.
Forward-Looking Statements
This release includes forward-looking statements, including the foregoing statements regarding the Company’s expectations with respect to the completion of any outstanding filing required to be made with the Securities and Exchange Commission, the anticipated execution on new corporate strategy and the anticipated focus on opportunities and internal improvements that will drive the Company to profitability. 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 complete its preparation of its Form 10-Q for the quarter ended June 30, 2007 and the ability of the Company to develop and implement a successful new corporate strategy and to identify and execute on opportunities and internal improvements that will improve its competitiveness and profitability. 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.
Company Contact
Chesha Kamieniecki
Director of Investor Relations
UTStarcom, Inc.
(510) 749-1560
UTStarcom, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
|
| June 30, |
| December 31, |
|
|
| 2007 |
| 2006 |
|
|
| (Unaudited) |
| (As reported) |
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash, cash equivalents and short-term investments |
| $ 527,579 |
| $ 671,169 |
|
Accounts receivable, net |
| 322,892 |
| 406,080 |
|
Notes receivable |
| 4,083 |
| 5,060 |
|
Inventories |
| 652,956 |
| 635,838 |
|
Prepaids and other current assets |
| 132,882 |
| 101,795 |
|
Short-term restricted cash and investments |
| 9,797 |
| 16,666 |
|
Total current assets |
| 1,650,189 |
| 1,836,608 |
|
Property, plant and equipment, net |
| 212,873 |
| 213,155 |
|
Long-term investments |
| 96,407 |
| 47,809 |
|
Goodwill |
| 3,063 |
| 3,063 |
|
Intangible assets |
| 48,351 |
| 56,443 |
|
Long-term deferred costs |
| 169,745 |
| 176,649 |
|
Other long-term assets |
| 38,445 |
| 40,223 |
|
Total assets |
| $ 2,219,073 |
| $ 2,373,950 |
|
|
|
|
|
|
|
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
| $ 219,736 |
| $ 304,869 |
|
Short-term debt |
| 379,935 |
| 102,758 |
|
Income taxes payable |
| — |
| 2,483 |
|
Customer advances |
| 298,104 |
| 265,812 |
|
Deferred revenue |
| 96,422 |
| 95,742 |
|
Other current liabilities |
| 231,341 |
| 271,400 |
|
Total current liabilities |
| 1,225,538 |
| 1,043,064 |
|
|
|
|
|
|
|
Long-term deferred revenue |
| 243,999 |
| 261,014 |
|
Long-term debt |
| 460 |
| 275,161 |
|
Other long-term liabilities |
| 21,307 |
| 13,858 |
|
Total liabilities |
| 1,491,304 |
| 1,593,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated subsidiaries |
| 5,331 |
| 6,493 |
|
Stockholders’ equity: |
|
|
|
|
|
Common stock: $0.00125 par value; 750,000,000 authorized shares; 121,299,113 issued and 121,294,645 outstanding at June 30, 2007 and December 31, 2006 |
| 152 |
| 152 |
|
Additional paid-in capital |
| 1,210,531 |
| 1,205,592 |
|
Accumulated deficit |
| (611,284 | ) | (494,244 | ) |
Accumulated other comprehensive income |
| 123,078 |
| 62,899 |
|
Treasury stock: 4,468 shares held in treasury at June 30, 2007 and December 31, 2006 |
| (39 | ) | (39 | ) |
Total stockholders’ equity |
| 722,438 |
| 774,360 |
|
Total liabilities, minority interest and stockholders’ equity |
| $ 2,219,073 |
| $ 2,373,950 |
|
UTStarcom, Inc.
Consolidated Statement of Operations
(in thousands, except per share amounts)
|
| Three months ended June 30, |
| Six months ended June 30, |
| ||||
|
| 2007 |
| 2006 |
| 2007 |
| 2006 |
|
|
| (Unaudited) |
| (As restated) |
| (Unaudited) |
| (As restated) |
|
Net sales |
| $ 538,245 |
| $ 551,525 |
| $ 1,014,146 |
| $ 1,153,506 |
|
Cost of net sales |
| 458,515 |
| 442,575 |
| 859,132 |
| 920,765 |
|
Gross profit |
| 79,730 |
| 108,950 |
| 155,014 |
| 232,741 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
| 88,865 |
| 83,108 |
| 168,701 |
| 166,833 |
|
Research and development |
| 42,158 |
| 46,603 |
| 85,819 |
| 93,005 |
|
Amortization of intangible assets |
| 4,046 |
| 4,821 |
| 8,092 |
| 9,746 |
|
Total operating expenses |
| 135,069 |
| 134,532 |
| 262,612 |
| 269,584 |
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
| (55,339 | ) | (25,582 | ) | (107,598 | ) | (36,843 | ) |
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
| (3,926 | ) | 781 |
| (5,742 | ) | 812 |
|
Other income, net |
| 158 |
| 6,887 |
| 4,129 |
| 10,454 |
|
Loss before income taxes, minority interest and equity in loss of affiliated companies |
| (59,107 | ) | (17,914 | ) | (109,211 | ) | (25,577 | ) |
Income tax expense |
| (3,298 | ) | (4,669 | ) | (7,640 | ) | (7,508 | ) |
Minority interest in losses of consolidated subsidiaries |
| 698 |
| 259 |
| 1,161 |
| 815 |
|
Net loss |
| $ (61,707 | ) | $ (22,324 | ) | $ (115,690 | ) | $ (32,270 | ) |
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Loss per share - Basic and diluted |
| $ (0.51 | ) | $ (0.19 | ) | $ (0.96 | ) | $ (0.27 | ) |
|
|
|
|
|
|
|
|
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Weighted average shares used in per-share calculation: |
|
|
|
|
|
|
|
|
|
- Basic and diluted |
| 120,982 |
| 120,608 |
| 120,941 |
| 120,604 |
|
UTStarcom, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
|
| Six months ended |
| Six months ended |
|
|
| (Unaudited) |
| (As restated) |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net loss |
| $ (115,690 | ) | $ (32,270 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
| 29,737 |
| 34,653 |
|
Net (gain) loss on sale and disposal of assets |
| (2,629 | ) | 2,169 |
|
Net gain on long-term investment |
| (366 | ) | — |
|
Stock-based compensation expense |
| 4,939 |
| 7,542 |
|
(Recovery of) provision for doubtful accounts |
| 2,370 |
| 3,133 |
|
(Recovery of) provision for deferred costs reserves |
| (8,136 | ) | 5,978 |
|
Deferred income taxes |
| 1,267 |
| — |
|
Other |
| (366 | ) | (537 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
| 84,696 |
| 97,596 |
|
Inventories |
| (19,369 | ) | (36,916 | ) |
Deferred costs |
| 31,563 |
| (6,853 | ) |
Other assets |
| (28,637 | ) | (7,784 | ) |
Accounts payable |
| (89,502 | ) | 39,693 |
|
Income taxes payable |
| 6,801 |
| 3,438 |
|
Customer advances |
| 27,141 |
| 69,280 |
|
Deferred revenue |
| (23,982 | ) | (10,512 | ) |
Other current liabilities |
| (49,135 | ) | (89,454 | ) |
Net cash (used in) provided by operating activities |
| (149,298 | ) | 79,156 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Additions to property, plant and equipment |
| (15,425 | ) | (12,288 | ) |
Proceeds from the disposition of a long-term investment |
| 1,800 |
| — |
|
Investment in affiliates, net of cash acquired |
| — |
| (302 | ) |
Proceeds from sale of semiconductor design operations |
| — |
| 19,965 |
|
Change in restricted cash and long-term investments |
| 6,615 |
| (19,994 | ) |
Purchase of short-term investments |
| (21,735 | ) | (28,032 | ) |
Proceeds from sale of short-term investments |
| 13,484 |
| 25,588 |
|
Other |
| (230 | ) | 1,672 |
|
Net cash used in investing activities |
| (15,491 | ) | (13,391 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Proceeds from borrowing |
| 64,621 |
| 62,545 |
|
Payments on borrowings |
| (64,732 | ) | (140,053 | ) |
Other |
| 4,728 |
| 1,967 |
|
Net cash provided by (used in) financing activities |
| 4,617 |
| (75,541 | ) |
Effect of exchange rate changes on cash and cash equivalents |
| 7,972 |
| 5,225 |
|
Net decrease in cash and cash equivalents |
| (152,200 | ) | (4,551 | ) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
| 661,623 |
| 645,571 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ 509,423 |
| $ 641,020 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
Interest |
| $ 7,054 |
| $ 4,596 |
|
Income taxes |
| $ 3,687 |
| $ 3,529 |
|
Non-cash operating activity |
|
|
|
|
|
Accounts receivable transferred to notes receivable |
| $ 11,462 |
| $ 15,376 |
|
Property, plant and equipment exchanged for long-term investment |
| $ — |
| $ 5,500 |
|