Exhibit 99.1
UTSTARCOM RELEASES FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2008
Second Quarter 2008 Total Revenues of $633 million
ALAMEDA, Calif., — August 6, 2008 — UTStarcom, Inc. (Nasdaq: UTSI), today reported financial results for the second quarter of 2008. Net sales for the second quarter of 2008 were $633 million as compared to $538 million in the second quarter of 2007 representing an 18% increase. The Personal Communications Division (“PCD”) revenues for the second quarter of 2008 were $449 million as compared to $358 million in the second quarter of 2007. Gross margins for the second quarter of 2008 were 13.0% as compared to 14.8% in the second quarter of 2007. The operating loss for the second quarter of 2008 was $31.1 million as compared to an operating loss of $55.3 million in the second quarter of 2007. This improvement was primarily due to a $22 million reduction in operating expenses. The net loss for the second quarter of 2008 was $38.8 million, or ($0.31) per share, as compared to a net loss of $61.7 million, or ($0.51) per share in the second quarter of 2007.
Cash, cash equivalents and short term investments were $255 million at quarter end, while the total debt was $29 million. These balance sheet items do not include the proceeds received from completing the divestiture of PCD on July 1, 2008. On July 1, the company closed the divestiture of PCD for expected proceeds of approximately $240 million subject to certain adjustments. Of this amount, the company received approximately $216 million in cash with the balance of approximately $24 million held in escrow accounts.
“In the second quarter we continued to execute on the strategic plan laid out in late 2007. We recently closed a significant divestiture which provides us with the liquidity to execute the next phase of that plan. Strategically, we are now focused primarily on delivering IP-based products to the world’s fastest growing economies.” said Peter Blackmore, UTStarcom’s chief executive officer and president. “We are also taking further action to adjust the operating model of the company consistent with our new structure. The results of these efforts will become evident as we move forward in late 2008 and into 2009.”
Q3 2008 Guidance
Given the recent changes to the company’s structure, management will provide third quarter financial guidance during the conference call.
Conference Call
The company will host a conference call to discuss the results. The call will take place at 2:00 p.m. (PDT) / 5:00 p.m. (EDT) on August 6, 2008. The conference call dial-in numbers are as follows: United States / Canada — 877-405-9548; International — 706-679-7496. The conference ID number is 5823-3299.
A replay of the call will be available for 30 days. The conference call replay numbers are as follows: United States / Canada — 800-642-1687; International — 706-645-9291. The Access Code is 5823-3299.
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.
About UTStarcom, Inc.
UTStarcom is a global leader in IP-based, end-to-end networking solutions and international service and support. The company develops, manufactures and markets its broadband, wireless, and terminal solutions to network operators in both emerging and established telecommunications markets worldwide. 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. UTStarcom was founded in 1991 and is headquartered in Alameda, California. The company has research and development centers in the USA, Canada, China, Korea and India.
For more information about UTStarcom, please visit the UTStarcom Web site at www.utstar.com.
Forward-Looking Statements
This release includes forward-looking statements, including the foregoing statements regarding the company’s plans to adjust its operating model and expectations with respect to anticipated future results. 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.
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Company Contact
Barry Hutton
Senior Director, Investor Relations
UTStarcom, Inc.
(510) 769-2807
barry.hutton@utstar.com
UTStarcom, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| | June 30, | | December 31, | |
| | 2008 | | 2007 | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash, cash equivalents and short-term investments | | $ | 254,790 | | $ | 503,078 | |
Accounts and notes receivable, net | | 153,445 | | 343,525 | |
Inventories and deferred costs | | 342,958 | | 524,727 | |
Assets held for sale | | 373,929 | | — | |
Prepaids and other current assets | | 139,187 | | 121,636 | |
Total current assets | | 1,264,309 | | 1,492,966 | |
Long-term assets: | | | | | |
Property, plant and equipment, net | | 207,259 | | 209,094 | |
Long-term deferred costs | | 161,919 | | 164,766 | |
Other long-term assets | | 102,089 | | 117,762 | |
Total assets | | $ | 1,735,576 | | $ | 1,984,588 | |
| | | | | |
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 179,984 | | $ | 148,440 | |
Short-term debt | | 29,158 | | 322,829 | |
Customer advances | | 192,331 | | 229,050 | |
Deferred revenue | | 111,219 | | 100,502 | |
Liabilities held for sale | | 154,953 | | — | |
Other current liabilities | | 230,933 | | 302,395 | |
Total current liabilities | | 898,578 | | 1,103,216 | |
Long-term liabilities: | | | | | |
Long-term debt | | — | | 333 | |
Long-term deferred revenue and other liabilities | | 248,365 | | 259,358 | |
Total liabilities | | 1,146,943 | | 1,362,907 | |
| | | | | |
Minority interest in consolidated subsidiaries | | 796 | | 3,705 | |
Total stockholders’ equity | | 587,837 | | 617,976 | |
Total liabilities, minority interest and stockholders’ equity | | $ | 1,735,576 | | $ | 1,984,588 | |
UTStarcom, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
| | Three months ended June 30 | | Six months ended June 30, | |
| | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | |
Net sales | | $ | 632,756 | | $ | 538,245 | | $ | 1,218,745 | | $ | 1,014,146 | |
Cost of net sales | | 550,808 | | 458,515 | | 1,044,718 | | 859,132 | |
Gross profit | | 81,948 | | 79,730 | | 174,027 | | 155,014 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Selling, general and administrative | | 72,010 | | 88,865 | | 151,754 | | 168,701 | |
Research and development | | 39,286 | | 42,158 | | 80,686 | | 85,819 | |
Amortization of intangible assets | | 1,730 | | 4,046 | | 3,554 | | 8,092 | |
Total operating expenses | | 113,026 | | 135,069 | | 235,994 | | 262,612 | |
| | | | | | | | | |
Operating loss | | (31,078 | ) | (55,339 | ) | (61,967 | ) | (107,598 | ) |
| | | | | | | | | |
Interest expense, net | | (2,167 | ) | (3,926 | ) | (5,421 | ) | (5,742 | ) |
Other income (expense), net | | (920 | ) | 158 | | 53,050 | | 4,129 | |
Loss before income taxes and minority interest | | (34,165 | ) | (59,107 | ) | (14,338 | ) | (109,211 | ) |
Income taxes | | (4,625 | ) | (3,298 | ) | 395 | | (7,640 | ) |
Minority interest in losses of consolidated subsidiaries | | 10 | | 698 | | 520 | | 1,161 | |
Net loss | | $ | (38,780 | ) | $ | (61,707 | ) | $ | (13,423 | ) | $ | (115,690 | ) |
| | | | | | | | | |
Loss per share - Basic and diluted | | $ | (0.31 | ) | $ | (0.51 | ) | $ | (0.11 | ) | $ | (0.96 | ) |
| | | | | | | | | |
Weighted average shares used in per share calculation: | | | | | | | | | |
- Basic and diluted | | 123,119 | | 120,982 | | 122,608 | | 120,941 | |
UTStarcom, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| | Six months ended June 30, | |
| | 2008 | | 2007 | |
| | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | |
Net loss | | $ | (13,423 | ) | $ | (115,690 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | |
Depreciation and amortization | | 19,904 | | 29,737 | |
Gain on sale of investments and liquidation of ownership interest in a variable interest entity | | (48,375 | ) | (366 | ) |
Net gain on sale of fixed assets | | (85 | ) | (2,629 | ) |
Stock-based compensation expense | | 9,844 | | 4,939 | |
Provision for doubtful accounts | | 2,722 | | 2,370 | |
Provision for (recovery of) deferred costs | | 9,089 | | (8,136 | ) |
Deferred income taxes | | (11,541 | ) | 1,267 | |
Other | | 2,185 | | (366 | ) |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | 65,081 | | 84,696 | |
Inventories | | (69,513 | ) | (19,369 | ) |
Deferred costs | | 42,747 | | 31,563 | |
Other assets | | (5,513 | ) | (28,637 | ) |
Accounts payable | | 116,453 | | (89,502 | ) |
Income taxes payable | | 3,800 | | 6,801 | |
Customer advances | | (16,503 | ) | 27,141 | |
Deferred revenue | | (7,025 | ) | (23,982 | ) |
Other current liabilities | | (39,986 | ) | (49,135 | ) |
Net cash provided by (used in) operating activities | | 59,861 | | (149,298 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | |
Additions to property, plant and equipment | | (10,271 | ) | (15,425 | ) |
(Purchase of) proceeds from the disposition of an investment interest | | (2,244 | ) | 1,800 | |
Proceeds from repayment of loan by a variable interest entity | | 7,728 | | — | |
Change in restricted cash | | (6,506 | ) | 6,615 | |
Purchase of short-term investments | | (8,567 | ) | (21,735 | ) |
Proceeds from sale of short-term investments | | 66,580 | | 13,484 | |
Other | | 143 | | (230 | ) |
Net cash provided by (used in) investing activities | | 46,863 | | (15,491 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
Proceeds from borrowings | | 50,000 | | 64,621 | |
Payments on borrowings | | (346,017 | ) | (64,732 | ) |
Other | | (3,637 | ) | 4,728 | |
Net cash (used in) provided by financing activities | | (299,654 | ) | 4,617 | |
Effect of exchange rate changes on cash and cash equivalents | | 9,382 | | 7,972 | |
Net decrease in cash and cash equivalents | | (183,548 | ) | (152,200 | ) |
Cash and cash equivalents at beginning of period | | 437,449 | | 661,623 | |
Cash and cash equivalents at end of period | | $ | 253,901 | | $ | 509,423 | |
