Choose language JP

UTStarcom Releases Third and Fourth Quarter and Full Year 2006 Financial Results

ALAMEDA, Calif., Oct. 10 /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 and fourth
quarters of 2006 and for the full year ended 2006. The Company also announced
the completion of the China sales investigation.

UTStarcom Releases Third and Fourth Quarter and Full Year 2006 Financial Results
UTStarcom Releases Third and Fourth Quarter and Full Year 2006 Financial Results

Announces Completion of the China Sales Investigation

Provides Details of Restructuring Plan

(Logo: http://www.newscom.com/cgi-bin/prnh/20051013/SFTH063LOGO)

Net sales for the third quarter 2006 were $601 million. Gross margins for
the third quarter 2006 were 12.4% and net loss for the quarter was $43
million
, or a loss of ($0.36) per share.

Net sales for the fourth quarter 2006 were $704 million. Gross margins
for the fourth quarter 2006 were 11.1% and net loss for the quarter was $42
million
, or a loss of ($0.35) per share.

Net sales for the full year 2006 were $2.5 billion. Gross margins for the
full year 2006 were 15.7% and net loss for the year was $117.3 million, or a
loss of ($0.97) per share.

Restructuring Plan

On October 2, 2007, the Company's Board of Directors approved a
restructuring plan to reduce operating costs. The initial phase of this plan
includes a worldwide reduction of approximately 11% of the Company's
headcount, or approximately 700 employees. The workforce reduction will be
based primarily in the United States and China and, to a lesser degree, other
international locations. Management expects the headcount reduction phase of
the restructuring plan will be completed in the fourth quarter of 2007. As
such, the Company expects to incur a restructuring charge in the fourth
quarter in connection with the headcount reduction of approximately $10
million
. As a result of these headcount reductions, the Company expects to
realize annual cost savings in salary and compensation-related expenses of
approximately $21 million on an annualized basis.

'The restructuring plan is closely aligned with our overall strategy of
becoming a more focused and operationally efficient company,' said
Peter
Blackmore
, chief operating officer of UTStarcom. 'Headcount reductions are
always difficult; however, they are essential as we strive to attain
consistent profitability and improve our cash flows. We have already started
to implement the plan and expect to achieve the full benefit by the first
quarter of 2008.'

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, October 10, 2007 at
2:00 p.m. (PDT). 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

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
http://www.utstar.com.

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing
statements regarding the anticipated timing, scope, costs, benefits and other
operational impact of the Company's restructuring plan. 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 the
ability of the Company to capitalize on any cost-savings to improve the
operational performance of the Company, 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, 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.

    Company Contact
    Chesha Kamieniecki
    Director of Investor Relations
    UTStarcom, Inc.
    (510) 749-1560



                                 UTStarcom, Inc.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)

                                                 September 30,    December 31,
                   ASSETS                            2006             2005
    Current assets:                               (Unaudited)    (As restated)
        Cash, cash equivalents and short-term
         investments                               $616,740         $658,837
        Accounts receivable, net                    429,086          522,964
        Notes receivable                              8,532            2,065
        Inventories                                 463,390          425,955
        Deferred costs                              209,230          239,876
        Prepaids and other current assets           126,179           99,062
        Short-term restricted cash and
         investments                                 23,835           53,680
           Total current assets                   1,876,992        2,002,439
    Property, plant and equipment, net              212,093          233,403
    Long-term investments                            44,954           26,023
    Goodwill                                          3,063            3,063
    Intangible assets, net                           60,747           75,313
    Long-term deferred costs                        177,007          185,279
    Other long-term assets                           27,817           25,811
           Total assets                          $2,402,673       $2,551,331

     LIABILITIES, MINORITY INTEREST AND
      STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                             $308,189         $320,677
      Short-term debt                               105,010          198,826
      Income taxes payable                           31,147           34,229
      Customer advances                             286,630          221,301
      Deferred revenue                               95,786          101,912
      Other current liabilities                     234,621          291,368
           Total current liabilities              1,061,383        1,168,313

    Long-term deferred revenue                      255,714          273,131
    Long-term debt                                  274,900          274,900
    Other long-term liabilities                      13,843                -
           Total liabilities                      1,605,840        1,716,344

    Minority interest in consolidated subsidiaries    7,500            8,338
    Stockholders' equity:
      Common stock: $0.00125 par value;
       authorized: 750,000,000 shares;
       issued and outstanding: 121,284,976
       and 121,018,036 at September 30,
       2006 and December 31, 2005, respectively         152              152
      Additional paid-in capital                  1,202,072        1,192,201
      Deferred stock-based compensation                   -           (3,591)
      Accumulated deficit                          (452,214)        (376,899)
      Accumulated other comprehensive income         39,323           14,786
    Total stockholders' equity                      789,333          826,649
           Total liabilities, minority interest
            and stockholders' equity             $2,402,673       $2,551,331



                                 UTStarcom, Inc.
                       Consolidated Statement of Operations
                     (in thousands, except per share amounts)
                                   (Unaudited)

                                  Three months ended       Nine months ended
                                     September 30,            September 30,
                                    2006      2005        2006        2005
                                           (As restated)         (As restated)

    Net sales                     $600,899   $597,435  $1,754,406  $2,190,018
    Cost of net sales              526,098    559,548   1,446,864   1,816,837
    Gross profit                    74,801     37,887     307,542     373,181
    Operating expenses:
      Selling, general and
       administrative               80,076     86,414     246,908     297,390
      Research and development      46,305     60,817     139,310     192,297
      Amortization of intangible
       assets                        4,821      6,643      14,567      20,391
      Gain on sale of semiconductor
       design assets               (12,291)         -     (12,291)          -
      Impairment of long-lived
       assets                            -    218,094           -     218,094
      Restructuring                      -      3,378           -      18,505
      In-process research and
       development                       -          -           -         660
    Total operating expenses       118,911    375,346     388,494     747,337

    Operating loss                 (44,110)  (337,459)    (80,952)   (374,156)

    Interest income (expense), net     594     (2,203)      1,406      (8,390)
    Gain on extinguishment of
     subordinated notes                  -     20,297           -      31,392
    Other income (expense), net      1,835      7,352      12,289      (1,723)

    Loss before income taxes,
     minority interest and equity
     in loss of affiliated
     companies                     (41,681)  (312,013)    (67,257)   (352,877)
    Income tax expense              (1,459)  (125,222)     (8,966)   (134,041)
    Minority interest in losses
     of consolidated subsidiaries       92          3         907          94
    Equity in loss of affiliated
     companies                           -       (786)          -      (1,818)
    Net loss                      $(43,048) $(438,018)   $(75,316)  $(488,642)

    Loss per share - Basic and
     diluted                        $(0.36)    $(3.70)     $(0.62)     $(4.22)

    Weighted average shares used
     in per-share calculation:
       -Basic and diluted          120,676    118,262     120,628     115,902



              UTStarcom, Inc.
    Condensed Consolidated Statement of Cash Flows
              (in thousands)
                (Unaudited)                    Nine months ended September 30,
                                                   2006               2005
    CASH FLOWS FROM OPERATING ACTIVITIES:                        (As restated)
      Net loss                                   $(75,316)        $(488,642)
      Adjustments to reconcile net loss to
       net cash provided by (used in)
       operating activities:
         Depreciation and amortization             51,547            78,489
         Gain on sale of semiconductor design
          assets                                  (12,291)                -
         Net loss on sale of assets                 2,183             3,870
         Loss on asset impairment                       -           218,094
         Non-cash restructuring charges                 -            12,389
         Stock-based compensation expense           13,143              191
         (Recovery of) provision for doubtful
          accounts                                  (6,948)          38,115
         (Recovery of) provision for deferred
          costs reserves                            (5,103)          14,564
         Deferred income taxes                        (671)         192,383
         Gain on extinguishment of debt                  -          (31,392)
         Other                                        (102)           3,164
      Changes in operating assets and liabilities:
           Accounts receivable                     105,466          202,650
           Inventories                             (35,659)         116,028
           Deferred costs                           51,324          (55,974)
           Other assets                            (15,585)          84,956
           Accounts payable                        (16,027)        (120,472)
           Income taxes payable                     (3,408)        (118,615)
           Customer advances                        61,761         (164,814)
           Deferred revenue                        (24,740)          93,138
           Other current liabilities               (71,452)           5,504
      Net cash provided by operating activities     18,122           83,626

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to property, plant and equipment   (17,176)         (60,904)
      Investment in affiliates, net of cash
       acquired                                       (302)          (3,550)
      Purchase of business, net of cash
       acquired                                          -          (24,326)
      Proceeds from sale of semiconductor
       design assets                                19,965                -
      Proceeds from disposal of property               136              695
      Change in restricted cash and long-
       term investments                             26,536              176
      Purchase of short-term investments           (40,182)        (149,469)
      Proceeds from sale of short-term
       investments                                  42,121          270,672
      Other                                          1,538             (750)
      Net cash provided by investing activities     32,636           32,544

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Issuance of stock, net of expenses               319            4,327
      Proceeds from borrowing                       63,259          346,284
      Payments on borrowings                      (159,251)        (478,081)
      Cash paid to extinguish debt                       -          (57,136)
      Other                                           (683)           1,801
      Net cash used in financing activities        (96,356)        (182,805)
      Effect of exchange rate changes on
       cash and cash equivalents                     4,437              229
      Net decrease in cash and cash equivalents    (41,161)         (66,406)
        Cash and cash equivalents at
         beginning of period                       645,571          562,532
        Cash and cash equivalents at end of
         period                                   $604,410         $496,126

      Supplemental disclosure of cash flow
       information:
         Cash paid:
           Interest                                 $8,542          $11,294
           Income taxes                             $7,839          $10,872
         Non-cash operating activity
           Accounts receivable transferred to
            notes receivable                       $19,023          $40,210
           Property, plant and equipment
            exchanged for long-term investment      $5,550              $ -



                               UTStarcom, Inc.
                    Condensed Consolidated Balance Sheets
                                (in thousands)

                                                            December 31,
                   ASSETS                              2006            2005
    Current assets:                                              (As restated)
        Cash, cash equivalents and short-term
         investments                                  $671,169       $658,837
        Accounts receivable, net                       406,080        522,964
        Notes receivable                                 5,060          2,065
        Inventories                                    440,445        425,955
        Deferred costs                                 195,393        239,876
        Prepaids and other current assets              101,795         99,062
        Short-term restricted cash and investments      16,666         53,680
          Total current assets                       1,836,608      2,002,439
    Property, plant and equipment, net                 213,155        233,403
    Long-term investments                               47,809         26,023
    Goodwill                                             3,063          3,063
    Intangible assets, net                              56,443         75,313
    Long-term deferred costs                           176,649        185,279
    Other long-term assets                              40,223         25,811
          Total assets                              $2,373,950     $2,551,331

     LIABILITIES, MINORITY INTEREST AND
      STOCKHOLDERS' EQUITY
    Current liabilities:
        Accounts payable                              $304,869       $320,677
        Short-term debt                                102,758        198,826
        Income taxes payable                             2,483         34,229
        Customer advances                              265,812        221,301
        Deferred revenue                                95,742        101,912
        Other current liabilities                      271,400        291,368
          Total current liabilities                  1,043,064      1,168,313

    Long-term deferred revenue                         261,014        273,131
    Long-term debt                                     275,161        274,900
    Other long-term liabilities                         13,858              -
          Total liabilities                          1,593,097      1,716,344

    Minority interest in consolidated subsidiaries
    Stockholders' equity:                                6,493          8,338
        Common stock: $0.00125 par value;
         750,000,000 authorized shares;
         121,299,113 issued and 121,294,645
         outstanding at December 31, 2006;
         121,018,036 issued and outstanding
         at December 31, 2005                              152            152
        Additional paid-in capital                   1,205,553      1,192,201
        Deferred stock compensation                          -         (3,591)
        Accumulated deficit                           (494,244)      (376,899)
        Accumulated other comprehensive income          62,899         14,786
    Total stockholders' equity                         774,360        826,649
          Total liabilities, minority interest
           and stockholders' equity                 $2,373,950     $2,551,331



           UTStarcom, Inc.
      Consolidated Statement of Operations
      (in thousands, except per share amounts)

                                Three months ended December 31,    Year ended
                                        2006          2005            2006
                                            (Unaudited)
                                                  (As restated)

    Net sales                         $704,456      $681,092      $2,458,861
    Cost of net sales                  626,253       618,437       2,073,117
    Operating expenses (income):        78,203        62,655         385,744

      Selling, general and
       administrative                   87,547        74,073         334,455
      Research and development          43,559        54,515         182,869
      Amortization of intangible
       assets                            4,304         5,462          18,871
      Gain on sale of semiconductor
       design assets                         -             -         (12,291)
      Impairment of long-lived assets        -        11,164               -
      Restructuring                          -             -               -
      In-process research and
       development                           -             -               -
    Total net operating expenses       135,410       145,214         523,904

    Operating (loss) income            (57,207)      (82,559)       (138,160)

    Interest income (expense), net       1,734        (1,283)          3,141
    Gain on extinguishment of
     subordinated notes                      -             -               -
    Other income, net                  (11,198)       45,388           1,092

    (Loss) income before income
     taxes, minority interest and
     equity in loss of affiliated
     companies                         (66,671)      (38,454)       (133,927)
    Income tax benefit (expense)        23,991        (2,501)         15,024
    Minority interest in losses of
     consolidated subsidiaries             651           598           1,558
    Equity in loss of affiliated
     companies                               -        (3,645)              -
    Net (loss) income                 $(42,029)     $(44,002)      $(117,345)

    (Loss) earnings per share -
     Basic and diluted                  $(0.35)       $(0.37)         $(0.97)

    Weighted average shares used
     in per-share calculation:         120,676       120,391         120,657
       - Basic and diluted



              UTStarcom, Inc.
    Condensed Consolidated Statement of Cash Flows
              (in thousands)
                                                      Year ended December 31,
                                                       2006           2005
    CASH FLOWS FROM OPERATING ACTIVITIES:                        (As restated)
    Net (loss) income                               $(117,345)      $(532,645)
    Adjustments to reconcile net (loss)
     income to net cash provided by (used in)
     operating activities:
         Depreciation and amortization                 68,039          98,550
         Gain on sale of semiconductor design assets  (12,291)              -
         Net loss on sale of assets                     2,715           2,559
         Impairment of long-lived assets                    -         218,094
         Impairment of long-term investments           13,500               -
         Stock-based compensation expense              16,592             863
         Non-cash settlement of restructuring charges       -          17,250
         In-process research and development                -             660
         Gain on sale of investment                         -         (46,576)
         Provision (recovery) for doubtful accounts    (9,347)         18,210
         Provision for deferred costs                   2,730          12,868
         Gain on extinguishment of
          subordinated notes                                -         (31,392)
         Deferred income taxes                         (1,223)        190,658
         Other                                            (36)         15,897
         Changes in operating assets and liabilities:       -               -
            Accounts receivable                        133,052        268,167
            Inventories                                 (5,571)       165,923
            Deferred costs                              52,478        (49,376)
            Other assets                                (7,490)        95,802
            Accounts payable                           (22,296)       (87,811)
            Income taxes payable                       (28,946)      (110,209)
            Customer advances                           38,423       (150,313)
            Deferred revenue                           (29,328)        80,676
            Other current liabilities                  (27,577)        40,528
    Net cash provided by (used in)
     operating activities                               66,079        218,383
    CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to property, plant and equipment         (26,274)       (64,396)
    Proceeds from sale of semiconductor design assets   35,965              -
    Proceeds from disposition of investment interest       775              -
    Investment in affiliates                              (302)        (3,550)
    Purchase of businesses, net of cash acquired             -        (24,326)
    Purchase of intangible assets                         (658)          (750)
    Change in restricted cash and
     long-term investments                              20,882        (18,418)
    Purchase of short-term investments                 (42,400)      (165,284)
    Proceeds from sale of short-term investments        46,428        346,966
    Other                                                1,649           (105)
    Net cash provided by (used in)
     investing activities                               36,065         70,137
    CASH FLOWS FROM FINANCING ACTIVITIES:
    Issuance of stock, net of expenses                     390          6,952
    Proceeds from borrowings                           100,629        436,678
    Payments on borrowings                            (200,742)      (653,123)
    Repurchase of stock                                    (39)             -
    Proceeds from equity offering                            -              -
    Other                                                  253          6,689
    Net cash provided by (used in)
     financing activities                              (99,509)      (202,804)
    Effect of exchange rate changes on
     cash and cash equivalents                          13,417         (2,677)
    Net increase in cash and cash equivalents           16,052         83,039
    Cash and cash equivalents at beginning of year     645,571        562,532
    Cash and cash equivalents at end of year          $661,623       $645,571

    Supplemental disclosure of cash flow information:
    Cash paid:
        Interest                                        $9,773        $14,197
        Income taxes                                   $13,574        $11,265
    Non-cash operating activities
        Accounts receivable transferred to
         notes receivable                              $22,921        $55,065
        Property, plant and equipment
         exchanged for long-term investment             $5,500            $ -
    Non-cash financing activities
        Common stock issued in conjunction
         with debt extinguishment                          $ -        $37,568

SOURCE UTStarcom, Inc.