UTStarcom Reports Third Quarter 2005 Financial Results
ALAMEDA, Calif., Nov. 3 /PRNewswire-FirstCall/ -- UTStarcom, Inc.
(Nasdaq: UTSI), a global leader in IP-based, end-to-end networking solutions
and services, today reported financial results for the third quarter of 2005
ended on September 30, 2005.
Net sales for the third quarter of 2005 were
for the quarter was
charges of approximately
with long-lived asset impairment, the tax effect of the impairment and
deferred tax asset valuation allowance.
'UTStarcom continues to focus on meeting the opportunities and challenges
we face as the company evolves,' said
officer of UTStarcom, Inc. 'The challenges include narrowing our strategic
product focus, expanding our worldwide sales, completing our corporate
restructuring and improving our operational execution.'
The Company collected just over
which it generated approximately
'We are pleased with the continued improvements we are making to the
balance sheet, including reductions in inventory, receivables and debt,' added
UTStarcom. 'We are also focused on cutting operating expenses and believe
that, with additional work, we may be able to exceed our initial expense
reduction targets by the first quarter of 2006.'
As discussed during the call on
planning meetings in the third quarter with the aim of narrowing the strategic
focus of the Company's diversification efforts on a go-forward basis. During
these strategic planning meetings, management determined that certain
circumstances have changed sufficiently to indicate that the fair value of
certain of the Company's reporting units may be below their book values. As a
result, management conducted an evaluation of our long-lived assets including
goodwill, intangible assets, and property plant and equipment for impairment.
The preliminary results of management's analysis determined that the fair
values of the majority of the Company's operating units are below their book
values. As such, the Company expects to record non-cash impairment charges of:
-- $193 million for goodwill, -- $2 million for intangible assets, -- $23 million property, plant and equipment
In addition to the impairment charges, the Company has determined that it
is required to record a non-cash tax charge of
The Company expects to conclude the evaluation as to the amounts of the
impairments and reflect the non-cash charges in its quarterly report to be
filed with the SEC by
Restructuring Plan Updates
On its first quarter earnings conference call held on
provided a detailed outline of its restructuring program. The key
deliverables under the restructuring program included reductions in working
per quarter, to approximately
delivery of these reductions was the end of the fourth quarter of 2005. To
date, the Company has reduced its working capital by
its initial goals. In addition, the Company believes that it will approach
the projected operating expense savings by the end of the fourth quarter.
Excluding the impairment and restructuring charges, third quarter operating
expenses were approximately
Company expects to incur during the quarter. In addition, the Company has
identified new areas of targeted savings to be executed in the fourth quarter
of 2005. The Company is targeting to bring its total operating expenses
As such the Company expects to incur restructuring charges of approximately
Consolidated Fourth Quarter 2005 Guidance Total Revenues: Approximately $650-$680 million* Gross Profit Margin: Total Company: 12-15% GAAP EPS: Loss of approximately ($0.45) to ($0.55), inclusive of approximately $20-$25 million of anticipated restructuring charges and an anticipated gain on disposal of assets
*Included in revenue guidance for the fourth quarter is approximately
for which recognition is dependent on the completion of all elements of the
contract prior to the close of the fourth quarter.
The Company will conduct a conference call, which is open to the public,
to discuss these results. The call will take place at
conference call dial-in numbers are as follows:
International -- 706-634-2492.
A replay of the call will be available from approximately
call replay numbers are as follows:
International -- 706-645-9291. The Access Code is 1887911.
Investors will also have the opportunity to listen to the conference call
and the replay over the Internet through UTStarcom's Web site at:
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
For more information about UTStarcom, visit the company's Web site at
This release includes forward-looking statements, including the foregoing
statements regarding the anticipated evolution of the Company to narrow its
strategic product focus, expand world wide sales, complete corporate
restructuring and improve operational execution, anticipated continuing
efforts to reduce inventory, receivables, debt and operational costs,
anticipated ability to exceed the Company's initial expense reduction targets
by the first quarter of 2006, anticipated non-cash accounting charges to be
taken during the quarter ended
completion of the Company's review of such charges, anticipated timing and
magnitude of operating expense savings, anticipated new areas of targeted
savings, anticipated operating expenses for the fourth quarter of 2005 and the
first quarter of 2006, anticipated restructuring charges for the fourth
quarter of 2005 and the guidance given for anticipated total revenues, gross
profit margin and earnings (loss) per share for the fourth quarter of 2005,
including anticipated recognition of revenue relating to certain contracts
during the quarter. 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 possible accounting entries and adjustments that
may be made to the Company's financial statements as part of the close of the
books for the quarter ended
include rapidly changing technology, the changing nature of global
telecommunications markets, both in
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, both in
globally. 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, and filed with the Securities and Exchange
UTStarcom, Inc. Condensed Consolidated Balance Sheets (in thousands) (Unaudited) September 30, December 31, 2005 2004 ASSETS Current assets: Cash, cash equivalents and short- term investments $511,217 $698,815 Accounts receivable, net 579,455 806,613 Notes receivable 22,934 26,982 Inventories, net 474,485 590,832 Deferred costs/Inventories at customer sites under contracts 201,241 198,155 Prepaids 54,107 112,525 Current deferred taxes - 143,123 Restricted cash and short-term investments 36,922 33,347 Other current assets 29,040 42,058 Total current assets 1,909,401 2,652,450 Property, plant and equipment, net 251,009 268,759 Long-term investments 37,427 35,590 Goodwill 3,063 180,627 Intangible assets, net 80,775 98,211 Other long-term assets 31,932 80,368 Total assets $2,313,607 $3,316,005 LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $291,466 $407,536 Short-term debt 226,400 351,183 Income taxes payable 25,244 143,778 Customer advances 159,123 323,938 Deferred revenue 98,719 66,941 Other current liabilities 250,260 241,577 Total current liabilities 1,051,212 1,534,953 Convertible subordinated notes 274,900 410,655 Total liabilities 1,326,112 1,945,608 Minority interest in consolidated subsidiaries 5,287 5,025 Stockholders' equity: Common stock: $0.00125 par value; authorized: 750,000,000 shares; issued and outstanding: 120,013,339 and 114,486,632 at September 30, 2005 and December 31, 2004, respectively 151 144 Additional paid-in capital 1,165,227 1,123,065 Deferred stock compensation (4,052) (6,102) Retained earnings (accumulated deficit) (195,915) 243,452 Accumulated other comprehensive income 16,797 4,813 Total stockholders' equity 982,208 1,365,372 Total liabilities, minority interest and stockholders' equity $2,313,607 $3,316,005 UTStarcom, Inc. Condensed Consolidated Statement of Operations (in thousands, except per share amounts) (Unaudited) Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 Net sales $635,307 $645,016 $2,260,063 $1,956,935 Cost of sales 581,361 507,882 1,858,481 1,467,496 Gross profit 53,946 137,134 401,582 489,439 Operating expenses: Selling, general and administrative 88,708 74,916 299,728 209,689 Research and development 60,797 56,026 193,078 154,276 In-process research and development - - 660 1,400 Amortization of intangible assets 6,643 3,639 20,391 9,946 Restructuring 3,378 - 18,505 - Long-lived asset impairment 218,094 - 218,094 - Total operating expenses 377,620 134,581 750,456 375,311 Operating income (loss) (323,674) 2,553 (348,874) 114,128 Interest income (expense), net (2,203) 133 (8,390) 1,102 Gain on debt extinguishment 20,297 - 31,392 - Other income (expense), net 7,352 1,162 (1,723) 14,211 Income (loss) before income taxes, minority interest and equity in loss of affiliated companies (298,228) 3,848 (327,595) 129,441 Income tax expense (benefit) 103,650 (1,906) 110,048 22,773 Minority interest in (earnings) losses of consolidated subsidiaries 3 (40) 94 (127) Equity in loss of affiliated companies (786) (727) (1,818) (2,925) Net income (loss) $(402,661) $4,987 $(439,367) $103,616 Basic earnings (loss) per share $(3.40) $0.04 $(3.79) $0.91 Diluted earnings (loss) per share $(3.40) $0.04 $(3.79) $0.78 Weighted average shares used in per-share calculation: - Basic 118,262 113,945 115,902 114,110 - Diluted 118,262 133,226 115,902 136,214 Non-GAAP Disclosure of EPS Effect of Non-cash Charges: Goodwill Impairment $(192,929) Intangible Assets Impairment (1,679) Property, Plant and Equipment Impairment (23,486) Impairment charges (218,094) Tax effect (123,316) $(341,410) Basic earnings (loss) per share $(2.89) Weighted average shares used in per-share calculation: 118,262
SOURCE UTStarcom, Inc.