Exhibit 99.1
UTStarcom Releases Fourth Quarter and Full Year 2007 Financial Results
Fourth Quarter Revenue of $806 Million up 14.5% Year-over-Year
Company Also Announces it has Transferred $289.5 Million To the Trustee of its Convertible Notes Due March 1, 2008 to Pay in Full its Principal and Interest Obligations Under the Note
ALAMEDA, Calif., February 28, 2008 — UTStarcom, Inc. (Nasdaq: UTSI), a global leader in IPTV and IP-based broadband and switching solutions, today reported financial results for the fourth quarter of 2007 and for the full year ended December 31, 2007.
2007 Financial Results
Net sales for the fourth quarter 2007 were $806 million as compared to $704 million in the fourth quarter of 2006. Gross margins for the fourth quarter 2007 were 12.7% as compared to 11.1% in the fourth quarter of 2006. Net loss for the fourth quarter of 2007 was $24.6 million, or a loss of ($0.20) per share, as compared to a loss of $42 million, or ($0.35) per share in the fourth quarter of 2006.
Certain significant items in the fourth quarter include:
· A restructuring charge of $14.5 million
· A $23 million non-cash impairment of long lived assets primarily related to the IP-CDMA business unit
· A tax accrual of $17.1 million related to China withholding tax on dividends and capital gains for anticipated future remittances
· A cash gain of $53.5 million related to the sale of securities
Net sales for the full year 2007 were $2.5 billion as compared to $2.5 billion in 2006. Gross margins for the full year 2007 were 13.0% as compared with 15.7% in 2006. Net loss for the year was $195.6 million, or a loss of ($1.62) per share, as compared to a loss of $117.3 million, or ($0.97) per share in 2006.
“Beginning in the fourth quarter of 2007, we launched a number of initiatives, including a restructure of the Company to focus on our core growth technologies, including IPTV, and IP-based softswitch and broadband devices.
Through 2008, we shall be very focused on continued operational improvements and the execution of our new strategy,” stated Peter Blackmore, chief operating officer of UTStarcom. “We are also actively pursuing our liquidity plan to strengthen our cash position, which includes the divestiture of certain non-core assets. We are committed to fulfilling our goal of returning the company to profitability and positive cash flows.”
Convertible Notes
The Company also announced that it has transferred $289.5 million to the Trustee of its 10 7/8% Convertible Subordinated Notes, due March 1, 2008 in full repayment of its principal and interest obligations under the Notes.
Added Blackmore, “We are very pleased to be able to pay off the Notes using our own cash; we worked hard to ensure that we would not dilute our equity holders.”
Going Concern
As a result of the Company’s recurring net losses, the continued use of cash in its operations, and the repayment of the convertible notes described above, 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, 2007.
However, management believes that it has developed a liquidity plan that, if executed successfully, will provide sufficient liquidity to finance the Company’s anticipated working capital and capital expenditure requirements for the next twelve months.
Q1 2008 Guidance
· Revenue is expected to improve modestly year-over-year and should be in the range of $500-$520 million.
· Overall gross margins in the first quarter is expected to be approximately 13%
· First quarter operating expenses is expected to range between $115-$120 million, excluding any one-time items
· Gains of approximately $35 million from the sale of securities
· Cash flow from operations is expected to be about neutral
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, February 28, 2008 at 2:00 p.m. (PST). The conference call dial-in numbers are as follows: United States — 888-398-3046; International — 706-902-1962. The conference ID number is 34095806.
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 34095806.
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
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.
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 its anticipated results for the first quarter of 2008, anticipated realization of operational
improvements, and the Company’s developing plans to provide sufficient liquidity to finance the Company’s anticipated working capital and capital expenditure requirements for the next twelve months. 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 and execute on its liquidity plans 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
Company Contact
Chesha Kamieniecki
Director of Investor Relations
UTStarcom, Inc.
(510) 749-1560
UTStarcom, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| | December 31, | | December 31, | |
| | 2007 | | 2006 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash, cash equivalents and short-term investments | | $ | 503,078 | | $ | 671,169 | |
Accounts and notes receivable, net | | 343,525 | | 411,140 | |
Inventories and deferred costs | | 524,727 | | 635,838 | |
Prepaids and other current assets | | 121,636 | | 126,879 | |
Total current assets | | 1,492,966 | | 1,845,026 | |
Long-term assets: | | | | | |
Property, plant and equipment, net | | 209,094 | | 213,155 | |
Long-term deferred costs | | 164,766 | | 176,649 | |
Other long-term assets | | 117,762 | | 148,475 | |
Total assets | | $ | 1,984,588 | | $ | 2,383,305 | |
| | | | | |
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 148,440 | | $ | 304,869 | |
Short-term debt | | 322,829 | | 102,758 | |
Customer advances | | 229,050 | | 265,812 | |
Deferred revenue | | 100,502 | | 95,742 | |
Other current liabilities | | 302,395 | | 275,489 | |
Total current liabilities | | 1,103,216 | | 1,044,670 | |
Long-term liabilities: | | | | | |
Long-term debt | | 333 | | 275,161 | |
Long-term deferred revenue and other liabilities | | 259,358 | | 282,621 | |
Total liabilities | | 1,362,907 | | 1,602,452 | |
| | | | | |
Minority interest in consolidated subsidiaries | | 3,705 | | 6,493 | |
Total stockholders’ equity | | 617,976 | | 774,360 | |
Total liabilities, minority interest and stockholders’ equity | | $ | 1,984,588 | | $ | 2,383,305 | |
UTStarcom, Inc.
Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
| | Three months ended December 31, | | Twelve months ended December 31, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
Net sales | | $ | 806,330 | | $ | 704,456 | | $ | 2,466,970 | | $ | 2,458,861 | |
Cost of net sales | | 704,326 | | 626,253 | | 2,145,519 | | 2,073,117 | |
Gross profit | | 102,004 | | 78,203 | | 321,451 | | 385,744 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Selling, general and administrative | | 76,146 | | 87,547 | | 319,145 | | 334,455 | |
Research and development | | 40,575 | | 43,559 | | 168,275 | | 182,869 | |
Amortization of intangible assets | | 3,824 | | 4,304 | | 15,961 | | 18,871 | |
Gain on sale of semi-conductor design assets | | — | | — | | (4,271 | ) | (12,291 | ) |
Impairment of goodwill and other long-lived assets | | 19,912 | | — | | 19,912 | | — | |
Restructuring charges | | 14,474 | | — | | 14,474 | | — | |
Total operating expenses | | 154,931 | | 135,410 | | 533,496 | | 523,904 | |
| | | | | | | | | |
Operating loss | | (52,927 | ) | (57,207 | ) | (212,045 | ) | (138,160 | ) |
| | | | | | | | | |
Interest (expense)/income, net | | (6,612 | ) | 1,734 | | (18,216 | ) | 3,141 | |
Other income, net | | 56,318 | | (11,198 | ) | 64,796 | | 1,092 | |
Loss before income taxes and minority interest | | (3,221 | ) | (66,671 | ) | (165,465 | ) | (133,927 | ) |
Income taxes | | (22,164 | ) | 23,991 | | (32,898 | ) | 15,024 | |
Minority interest in losses of consolidated subsidiaries | | 828 | | 651 | | 2,788 | | 1,558 | |
Net loss | | $ | (24,557 | ) | $ | (42,029 | ) | $ | (195,575 | ) | $ | (117,345 | ) |
| | | | | | | | | |
Loss per share - Basic and diluted | | $ | (0.20 | ) | $ | (0.35 | ) | $ | (1.62 | ) | $ | (0.97 | ) |
| | | | | | | | | |
Weighted average shares used in per-share calculation: | | | | | | | | | |
- Basic and diluted | | 121,340 | | 120,741 | | 121,059 | | 120,657 | |
UTStarcom, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(Unaudited)
| | Twelve months ended | | Twelve months ended | |
| | December 31, 2007 | | December 31, 2006 | |
Net cash (used in) provided by operating activities | | $ | (218,209 | ) | $ | 66,079 | |
| | | | | |
Cash flows from investing activities: | | | | | |
Property, plant and equipment, net | | (27,324 | ) | (26,274 | ) |
Proceeds from sale of semiconductor design asset | | 4,271 | | 35,965 | |
Proceeds from sale of long-term investments | | 3,334 | | 775 | |
Change in restricted cash and long-term investments | | 6,591 | | 20,882 | |
Short-term investments, net | | 41,950 | | 4,028 | |
Investment in affiliates, net of cash acquired | | (79 | ) | (302 | ) |
Other | | 695 | | 991 | |
Net cash provided by investing activities | | 29,438 | | 36,065 | |
Cash flows from financing activities: | | | | | |
Borrowings, net | | (61,605 | ) | (100,113 | ) |
Other | | 3,500 | | 604 | |
Net cash (used in) financing activities | | (58,105 | ) | (99,509 | ) |
Effect of exchange rate changes on cash and cash equivalents | | 22,702 | | 13,417 | |
Net (decrease) increase in cash and cash equivalents | | (224,174 | ) | 16,052 | |
Cash and cash equivalents at beginning of period | | 661,623 | | 645,571 | |
Cash and cash equivalents at end of period | | $ | 437,449 | | $ | 661,623 | |
