UTStarcom Reports Unaudited Second Quarter 2012 Financial Results - Second Quarter Results In Line with Company Expectations -

- Recently Announced Initiative to Divest IPTV Business Proceeding According to Schedule -

BEIJING, Aug. 13, 2012 /PRNewswire-Asia/ -- UTStarcom Holdings Corp. ("UTStarcom" or the "Company") (NASDAQ: UTSI), a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and broadband for cable and telecom operators, today reported unaudited financial results for the second quarter ended June 30, 2012.

Second Quarter 2012 Highlights

  • Second quarter of 2012 net sales on an adjusted basis decreased 17.9% year over year to $56.5 million, compared to $68.7 million of adjusted net sales in the second quarter of 2011 excluding $23.8 million amortization of Personal Handy-phone System ("PHS") deferred revenue (a non-GAAP measure).
  • Second quarter of 2012 gross profit on an adjusted basis decreased 18.1% year over year to $21.7 million, compared to $26.5 million of adjusted gross profit in the second quarter of 2011 excluding $8.3 million gross profit related to amortized PHS deferred revenue.
  • Second quarter 2012 gross profit as a percentage of net sales, or gross margin, was 38.5% compared to adjusted gross margin of 38.6% in the second quarter of 2011 excluding PHS deferred revenue amortization.
  • Second quarter of 2012 operating expenses decreased 21.9% year over year to $19.6 million, compared to $25.1 million in the second quarter of 2011.
  • Second quarter of 2012 operating income on an adjusted basis increased 50.0%, year over year to $2.1 million, compared to adjusted operating income of $1.4 million in the second quarter of 2011 excluding PHS deferred revenue amortization.
  • As of June 30, 2012, cash, cash equivalents and short-term investments were $277.7 million.
  • Net cash provided by operating activities for the second quarter 2012 was $2.9 million, compared to $12.0 million for the second quarter 2011.

"UTStarcom's second quarter performance was consistent with our prior expectations and we are pleased with the overall results," said UTStarcom Chief Executive Officer and Chairman Jack Lu.  "While year over year operational performance was impacted by one-time sales contract in the second quarter of 2011, the Company's improved performance versus the first quarter of 2012 is indicative of the healthy growth in the overall business.  Relative to the first quarter, we realized strong sequential gains in net sales and the efforts we have made to significantly improve gross margin and reduce costs resulted in a substantial increase in operating income, and positive operating cash flow.  Overall, trends in the business remain positive, and the Company continues to have the financial strength to invest, particularly in the media operational support services business which will be a focus going forward and is expected to drive the future success of UTStarcom."

Second Quarter 2012 Financial Results

Net Sales

Three months ended June 30, 2012 and 2011

UTStarcom's net sales for the second quarter of 2012 were $56.5 million, a decrease of 39.0% year over year from $92.5 million for the corresponding period of 2011. Second quarter of 2012 and second quarter 2011 net sales are not comparable as deferred revenue amortization related to PHS of $23.8 million was only included in the second quarter of 2011 but not included in the second quarter of 2012 because deferred revenue amortization related to PHS ended at the end of 2011. Excluding second quarter 2011 amortization of PHS deferred revenue, net sales for the second quarter of 2012 decreased 17.9% year over year.

  • Net sales from equipment for the second quarter of 2012 were $49.9 million, a decrease of 38.6% year over year. The Company's second quarter of 2011 results included deferred revenue amortization related to PHS of $23.8 million.  Excluding second quarter of 2011 PHS deferred revenue amortization, net sales from equipment for the second quarter of 2012 decreased 13.3%. The decrease of equipment sales was driven by decreased sales of PTN products in Japan, partially offset by increased sales of Rolling Stream and GEPON products in China.

    Net sales from equipment in the second quarter of 2012 included $6.6 million of equipment net sales recognized on the release of obligations of historical Personal Access System ("PAS") infrastructure contracts.

    Net sales from equipment in the second quarter of 2011 included $7.4 million of equipment net sales recognized on the Jersey Telecom Limited contract.
  • Net sales from equipment-based services for the second quarter of 2012 were $6.5 million, a decrease of 41.3% year over year. Net sales from equipment-based services in the second quarter of 2011 included $3.9 million of equipment-based services net sales recognized on the Jersey Telecom Limited contract. The decrease was also driven by fewer next generation network ("NGN") service contracts in Europe, Middle East and Africa ("EMEA").
  • Net sales from operational support services for the second quarter of 2012 were approximately $0.02 million as a result of IP signage net sales sharing project. Net sales from operational support services for the second quarter 2011 were approximately $0.06 million

Six months ended June 30, 2012 and 2011

UTStarcom's net sales for the six months ended June 30, 2012 were $103.1 million, a decrease of 33.0% year over year from $153.8 million for the corresponding period of 2011. Net sales for the six months ended June 30, 2012 and six months ended June 30, 2011 are not comparable as deferred revenue amortization related to PHS of $47.4 million was only included in the six months ended June 30, 2011 but not included in the six months ended June 30, 2012 because deferred revenue amortization related to PHS ended at the end of 2011. Excluding the amortization of PHS deferred revenue, net sales for the six months ended June 30, 2012 decreased 3.1% year over year.

  • Net sales from equipment for the six months ended June 30, 2012 were $88.6 million, a decrease of 34.0% year over year. The Company's results for the first half of 2011 include deferred revenue amortization related to PHS of $47.4 million.  Excluding six months ended June 30, 2011 PHS deferred revenue amortization, net sales from equipment for the six months ended June 30, 2012 increased 2.0% year over year.
  • Net sales from equipment in the six months ended June 30, 2012 included $6.6 million of equipment net sales recognized on the release of obligations of historical PAS infrastructure contracts.

    Net sales from equipment in the six months ended June 30, 2011 included $7.4 million of equipment net sales recognized on the Jersey Telecom Limited contract.
  • Net sales from equipment-based services for the six months ended June 30, 2012 were $14.3 million, a decrease of 26.5% year over year. Net sales from equipment-based services in the six months ended June 30, quarter 2011 included $3.9 million of equipment-based services net sales recognized on the Jersey Telecom Limited contract. The decrease was also driven by fewer NGN service contracts in China and EMEA.
  • Net sales from operational support services for the six months ended June 30, 2012 were approximately $0.25 million as a result of IP signage net sales sharing project and technology service net sales generated by the Company's iTV.cn subsidiary. Net sales from operational support services for the six months ended June 30, 2011 were approximately $0.21 million.

Gross Profit

Three months ended June 30, 2012 and 2011

UTStarcom's gross profit was $21.7 million, or 38.5% of net sales, for the second quarter of 2012, compared to $34.8 million, or 37.6% of net sales, for the corresponding period of 2011. Deferred revenue amortization related to PHS of $23.8 million with 34.8% gross margin was included in the second quarter of 2011 results. Second quarter 2011 gross profit, excluding PHS-related gross profit, was $26.5 million, or 38.6% of net sales.

  • Gross profit for equipment sales in the second quarter of 2012 was $20.0 million, a decrease of 36.6% year over year. Gross margin for equipment sales in the second quarter of 2012 was 40.1%, compared to 38.8% for the corresponding period in 2011. Deferred revenue amortization related to PHS of $23.8 million with 34.8% gross margin was included in equipment sales in the second quarter of 2011 results. Gross profit and gross margin for equipment sales, excluding PHS-related gross profit and gross margin were $23.3 million and 40.4%, respectively, for the second quarter of 2011.

    Gross margin for equipment sales in the second quarter of 2012 included gross margin generated from $6.6 million of equipment net sales recognized on the release of obligations of historical PAS infrastructure contracts.

    Gross margin for equipment sales in the second quarter of 2011 included gross margin generated from $7.4 million of equipment net sales recognized on the Jersey Telecom Limited contract.
  • Gross profit for equipment-based services in the second quarter of 2012 was $1.9 million, a decrease of 57.0% year over year. Gross margin for equipment-based services in the second quarter of 2012 was 28.5%, compared to 38.9% for the corresponding period of 2011. Net sales from equipment-based services in the second quarter of 2011 included $3.9 million of equipment-based services net sales recognized on the Jersey Telecom Limited contract. The margin decrease was mainly due to margin decreases on NGN service contracts in EMEA.
  • Gross loss for operational support services in the second quarter of 2012 was approximately $0.15 million as a result of the amortization of the costs of revenue-sharing projects and equipment leasing by the Company's iTV.cn subsidiary. Gross loss from operational support services in the second quarter of 2011 was approximately $1.1 million.

Six months ended June 30, 2012 and 2011

UTStarcom's gross profit was $40.1 million, or 38.9% of net sales, for the six months ended June 30, 2012, compared to $53.8 million, or 35.0% of net sales, for the corresponding period of 2011. Deferred revenue amortization related to PHS of $47.4 million with 34.8% gross margin was included in the Company's results for the first half of 2011. Excluding PHS-related gross profit, gross profit for the six months ended June 30, 2011 was $37.4 million, or 35.1% of net sales.

  • Gross profit for equipment sales in the six months ended June 30, 2012 was $36.3 million, a decrease of 25.5% year over year. Gross margin for equipment sales in the six months ended June 30, 2012 was 40.9%, compared to 36.3% for the corresponding period in 2011. Deferred revenue amortization related to PHS of $47.4 million with 34.8% gross margin was included in equipment sales in the Company's results for the first half of 2011. Gross profit and gross margin for equipment sales, excluding PHS-related gross profit and gross margin, were $32.2 million and 37.1%, respectively, for the six months ended June 30 2011.

    Gross margin for equipment sales in the six months ended June 30, 2012 included gross margin generated from $6.6 million of equipment net sales recognized on the release of obligations of historical PAS infrastructure contracts.

    Gross margin for equipment sales in the six months ended June 30, 2011 included gross margin generated from $7.4 million of equipment net sales recognized on the Jersey Telecom Limited contract.
  • Gross profit for equipment-based services in the six months ended June 30, 2012 was $4.1 million, a decrease of 37.1% year over year. Gross margin for equipment-based services in the six months ended June 30, 2012 was 28.7%, compared to 33.5% for the corresponding period of 2011. Gross profit from equipment-based services in the six months ended June 30, 2011 included $3.9 million of equipment-based service nets sales recognized on the Jersey Telecom Limited contract. The margin decrease was also driven by margin decrease on NGN service contracts in EMEA.
  • Gross loss for operational support services in the six months ended June 30, 2012 was approximately $0.23 million as a result of the amortization of the costs of revenue-sharing projects and equipment leasing by the Company's iTV.cn subsidiary. Gross loss from operational support services in the six months ended June 30, 2011 was approximately $1.3 million.

Operating Expenses

Three months ended June 30, 2012 and 2011

Operating expenses for the second quarter of 2012 were $19.6 million, a decrease of 21.9% year over year, from $25.1 million in the corresponding period in 2011.

  • Selling, general and administrative expenses in the second quarter of 2012 were $11.3 million, a decrease of 38.5% year over year. The decrease was primarily due to a decrease in bad debt expense, a decrease in personnel costs as a result of continued restructuring efforts in 2011, and a reduction in rental costs after relocating the Company's Hangzhou and Beijing offices to new sites in the second quarter 2011.
  • Research and Development ("R&D") expenses in the second quarter of 2012 were $8.5 million, an increase of 26.6% year over year. This increase was primarily due to an increase in consulting expenses.
  • Amortization of intangible assets in the second quarter of 2012 was approximately $0.2 million, a decrease of 33.5% year over year. The decrease was due to the deconsolidation of the Company's iTV.cn subsidiary in June 2012.
  • Net gain on divestitures in the second quarter of 2012 was $0.5 million, which was the contingent gain realized upon releasing the remaining obligations in connection with the sale of China Packet Data Services Node ("PDSN") assets in the third quarter of 2010. There was no net gain on divestitures in the corresponding period of 2011.

Six months ended June 30, 2012 and 2011

Operating expenses for the six months ended June 30, 2012 were $41.8 million, a decrease of 24.5% year over year, from $55.3 million in the corresponding period in 2011.

  • Selling, general and administrative expenses in the six months ended June 30, 2012 were $25.7 million, a decrease of 31.8% year over year. The decrease was primarily due to a decrease in personnel cost as a result of the Company's restructuring actions, decrease in bad debt expense, consistent cost controls to reduce travel expenses, and a reduction in rental costs after relocating the Company's Hangzhou and Beijing offices to new sites in the second quarter of 2011.
  • R&D expenses in the six months ended June 30, 2012 were $15.6 million, an increase of 9.4% year over year. This increase was primarily due to an increase in consulting expenses.
  • Amortization of intangible assets for the six months ended June 30, 2012 was approximately $0.5 million, a decrease of 16.8% year over year. The decrease was due to the deconsolidation of the Company's iTV.cn subsidiary in June 2012.
  • Restructuring costs for the six months ended June 30, 2012 were $0.5 million, compared to costs of $2.7 million for the corresponding period of 2011. The decrease in restructuring costs was primarily the result of substantial completion of the restructuring plans in 2011. UTStarcom does not expect to incur significant additional restructuring charges in 2012 related to previous restructuring plans.
  • Net gain on divestitures in the six months ended June 30, 2012 was $0.7 million which was the contingent gain realized upon releasing the remaining obligations in connection with the sale of PDSN assets in the third quarter of 2010.

Operating Income (Loss)

Operating income for the second quarter of 2012 was $2.1 million, compared to operating income of $9.7 million in the corresponding period of 2011.  Deferred revenue amortization related to PHS of $23.8 million with 34.8% gross margin was included in the second quarter 2011 results. Second quarter 2011 operating income, excluding PHS-related gross profit, was $1.4 million.

Operating loss for the six months ended June 30, 2012 was $1.6 million, compared to an operating loss of $1.4 million in the corresponding period of 2011. Deferred revenue amortization related to PHS of $47.4 million with 34.8% gross margin was included in equipment sales in the Company's results for the first half of 2011. Operating loss of first half 2011 excluding PHS-related gross profit, was $17.9 million.

Other Income (Expense), Net

Three months ended June 30, 2012 and 2011

Other expense, net for the second quarter of 2012 was $5.1 million, compared to other income, net of $3.1 million for the corresponding period of 2011. Other expense, net for the second quarter of 2012 primarily consisted of a $6.7 million foreign exchange loss, attributed to the depreciation of the Indian rupee and Chinese renminbi against the U.S. dollar which partially offset by the appreciation of the Japanese yen against the U.S. dollar in the quarter, partially offset by the income of $1.5 million by release portion of the reserve related to tax liabilities provided to the buyers of our subsidiary in Korea due to expiration of the statute of limitation. Other income, net for the second quarter of 2011 primarily consisted of a $3.0 million foreign exchange gain mainly as a result of the appreciation of the Chinese renminbi and Japanese yen against the U.S. dollar in the quarter.

Six months ended June 30, 2012 and 2011

Other expense, net was $4.6 million for the six months ended June 30 2012 compared to the other income, net of $4.1 million for the corresponding period in 2011. Other expense, net for the six months ended June 30 2012 primarily consisted of a $6.1 million foreign exchange loss, attributed to the depreciation of the Indian rupee and Japanese yen against the U.S. dollar in the quarter, partially offset by the income of $1.5 million by release portion of the reserve related to tax liabilities provided to the buyers of our subsidiary in Korea due to expiration of the   statute of limitation. Other income, net for the second quarter of 2011 primarily consisted of a $3.7 million foreign exchange gain mainly as a result of the appreciation of the Chinese renminbi and Japanese yen against the U.S. dollar.

Net Income (Loss) attributable to UTStarcom Holdings Corp.

Net loss attributable to UTStarcom Holdings Corp. for the second quarter and first half of 2012 was $1.8 million and $6.0 million, respectively, compared with a net income attributable to UTStarcom Holdings Corp. of $11.6 million and $1.3 million, respectively, in the corresponding periods in 2011. Basic and diluted loss per share for the second quarter and first half of 2012 amounted to $0.01 and $0.04, respectively, compared to basic and diluted earnings per share for the second quarter and first half of 2011 of $0.07 and $0.01, respectively.

Cash Flow

  • Net cash provided by operating activities for the second quarter of 2012 was $2.9 million. The Company's operating activities were impacted by a change in operating assets and liabilities of $5.7 million.
  • Net cash used by investing activities for the second quarter of 2012 was $5.3 million. In the second quarter of 2012, the Company exercised its option to repurchase the Company's shares issued in exchange for iTV.cn subsidiary's ordinary shares from Smart Frontier. After the repurchase, the Company decreased its equity ownership in iTV from 75% to 49%, deconsolidated iTV from its consolidated financial statements in June 2012 and recorded the deconsolidation of iTV's cash balance of $6.8 million.  There was no significant gain or loss resulting from the exercise of the repurchase option. Going forward, iTV will be presented as a cost basis investment, on the consolidated balance sheets.
  • Net cash used in financing activities for the second quarter of 2012 was $2.8 million.

As of June 30, 2012, UTStarcom had cash, cash equivalents and short-term investments of $277.7 million.

Update on Strategic Initiatives

On July 27, 2012, the Company announced strategic initiatives to advance its efforts to transition into higher growth, more profitable areas and enhance the value of the Company's business.  These initiatives include the divestiture of the Company's IPTV equipment business and the appointment of Mr. William Wong as Chief Executive Officer of the Company to succeed Mr. Jack Lu, who will leave UTStarcom to lead the IPTV equipment business once the transaction closes. 

At present, Mr. Wong, who has joined the Company as its Chief Operating Officer, and Mr. Lu are working together to ensure a successful completion of the divestiture transaction.  The Company continues to expect the transaction to close by the end of August and the leadership transition will take effect at that time.

As recently announced, the divestiture of the IPTV business is expected to eliminate approximately $17.0 million in annual operating expenses, will remove a portion of the business that has rates of return that are lower than those generated by other parts of the Company, and will leave the Company with higher margin business lines. Based on current market conditions and assuming the IPTV transaction closes at the end of August as expected, the Company expects continued healthy revenue growth within its remaining businesses, with average gross margins expanding to over 35% and break-even operational cash flow in 2012.

As the Company highlighted when the divestiture transaction was announced, the Board of Directors and management will work together to build on initial steps taken with the divestiture to begin to truly transform the business.  They will stay true to a set of core priorities and create an effective plan to grow the business and deliver enhanced shareholder value. The Company will provide updates on this strategy and how it will impact the overall future outlook as appropriate.

Update on Share Repurchase Program

As previously announced, in August 2011 the Company's Board of Directors approved a share repurchase program to repurchase up to $20.0 million of the Company's outstanding shares, in an effort to demonstrate confidence in the long-term prospects of UTStarcom, effectively utilize cash on the consolidated balance sheet, and demonstrate the Company's strong commitment to enhancing shareholder value. 

The Company has continued to leverage its strong cash position and has been repurchasing shares at the maximum rate allowed under this repurchase program. During the second quarter of 2012, the Company repurchased $2.8 million in ordinary shares, bringing the cumulative total to $9.6 million. The Company has $10.4 million remaining under the program, and will continue with its execution.  To support this, the Board of Directors extended the period of the repurchase program for an additional six months.

About Non-GAAP Financial Measures

To supplement the Company's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded prior to each time period reflected. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of GAAP and non-GAAP Financial Data" set forth at the end of this press release.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance by excluding amortization of PHS net sales that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its operating performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.  These non-GAAP measures are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Second Quarter 2012 Conference Call Details

UTStarcom's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on Monday, August 13, 2012 (8:00 p.m. Beijing/Hong Kong Time on August 13, 2012).

The conference call dial-in numbers are as follows:

United States: + 1-800-860-2442
International:   + 1-412-858-4600
China: 800-712-2304
Hong Kong: 800-962475

The conference ID number is 10017226

A replay of the call will be available until 9:00 a.m. U.S. Eastern Time on August 27, 2012.

The conference call replay numbers are as follows:

United States: + 1-877-344-7529
International:   + 1-412-317-0088

The conference ID number for accessing the recording is 10017226

Investors will also have the opportunity to listen to the live conference call and the replay over the Internet through the investor relations section of UTStarcom's web site at: http://www.utstar.com.

About UTStarcom Holdings Corp.

UTStarcom is a leading provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators. The Company sells its solutions to operators in both emerging and established telecommunications and cable 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.

UTStarcom was founded in 1991 and listed on the NASDAQ in 2000. With a new management team in 2011, the Company deployed a revamped growth strategy that concentrates on providing media operation support services through its Video Service Cloud platform. UTStarcom has its operational headquarters in Beijing, China and research and development operations in China and India. For more information about UTStarcom, visit the Company's website at http://www.utstar.com.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Company's expectations relating to its operational support services business, the divestiture of its IPTV equipment business and the Company's performance in 2012. These statements are forward-looking in nature and subject to risks and uncertainties that may cause actual results to differ materially and adversely from the Company's current expectations. These include risks and uncertainties related to, among other things, changes in the financial condition and cash position of the Company, changes in the composition of the Company's management and their effect on the Company, the Company's ability to realize anticipated results of operational improvements and benefits of the divestiture transaction, successfully operate its services business, execute its business plan and manage regulatory matters.  The risks and uncertainties also include the risk factors identified in the Company's latest Annual Report on Form 20-F and Current Reports on Form 6-K,as filed with the Securities and Exchange Commission. The Company is in a period of transition and the conduct of its business is exposed to additional risks as a result. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release, which may change, and UTStarcom assumes no obligation to update any such forward-looking statement.

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Balance Sheets








June 30,


December 31,



2012


2011

ASSETS


(In thousands, except par value)

Current assets:





Cash, cash equivalents and short-term investments


$                    277,686


$                    303,998

Accounts and notes receivable, net


12,818


20,216

Inventories and deferred costs


129,413


137,484

Prepaids and other current assets


38,512


42,099

Total current assets


458,429


503,797

Long-term assets:





Property, plant and equipment, net


9,888


12,199

Goodwill


-


13,820

Intangible assets, net


-


3,625

Long-term deferred costs


28,304


39,741

Other long-term assets


41,807


27,758

Total assets


$                    538,428


$                    600,940






LIABILITIES AND EQUITY





Current liabilities:





Accounts payable


$                      20,832


$                      23,530

Customer advances


81,989


82,589

Deferred revenue


50,545


64,989

Other current liabilities


39,618


52,679

Total current liabilities


192,984


223,787

Long-term liabilities:





Long-term deferred revenue and other liabilities


92,166


106,114

Total liabilities


285,150


329,901






Total equity


253,278


271,039

Total liabilities and equity


$                    538,428


$                    600,940

 

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Operations












Three months ended June 30,


Six months ended June 30,



2012


2011


2012


2011



(in thousands, except per share data)










Net sales


$              56,468


$              92,547


$            103,126


$            153,814

Cost of net sales


34,754


57,772


62,987


99,975

Gross profit 


21,714


34,775


40,139


53,839



38.5 %


37.6 %


38.9 %


35.0 %

Operating expenses:









Selling, general and administrative


11,345


18,449


25,749


37,746

Research and development


8,480


6,700


15,607


14,264

Amortization of intangible assets


206


310


516


620

Restructuring 


5


(380)


548


2,684

Net gain on divestiture


(460)


-


(657)


(34)

Total operating expenses


19,576


25,079


41,763


55,280










Operating income (loss)


2,138


9,696


(1,624)


(1,441)










Interest income, net


765


432


1,192


871

Other income (expense), net


(5,142)


3,138


(4,587)


4,091

Income (loss) before income taxes


(2,239)


13,266


(5,019)


3,521

Income taxes expense


(216)


(1,991)


(2,159)


(2,763)

Net income (loss)


(2,455)


11,275


(7,178)


758










Net loss attributable to noncontrolling interest


630


342


1,194


548

Net income (loss) attributable to UTStarcom Holdings Corp.


$              (1,825)


$              11,617


$              (5,984)


$                1,306










Net income (loss) per share attributable to UTStarcom Holdings Corp.—Basic & Diluted


$                (0.01)


$                  0.07


$                (0.04)


$                  0.01

Weighted average shares outstanding—Basic & Diluted


149,639


155,247


150,861


155,034

 

UTStarcom Holdings Corp.

Unaudited Condensed Consolidated Statements of Cash Flows












 Three months ended June 30, 


 Six months ended June 30, 



2012


2011


2012


2011



(In thousands)

 CASH FLOWS FROM OPERATING ACTIVITIES: 









 Net income (loss) 


(2,455)


$               11,275


$               (7,178)


$                    758

 Adjustments to reconcile net loss to net cash provided by (used in) operating activities: 


-







 Depreciation and amortization 


1,063


730


2,282


1,433

 Amortization of deferred gain on sale-leaseback 


-


(292)


-


(625)

 Provision for (recovery of) doubtful accounts 


(1,306)


1,053


(1,091)


3,749

 Stock-based compensation expense 


504


680


1,240


1,286

 Net gain on divestitures 


(459)


-


(657)


(34)

 Deferred income taxes 


(93)


133


(220)


219

 Other 


(18)


(30)


(131)


(167)

 Changes in operating assets and liabilities: 


-







 Accounts receivable 


9,217


4,758


8,304


1,215

 Inventories and deferred costs 


17,418


26,830


14,572


38,621

 Other assets 


369


(62)


(993)


9,153

 Accounts payable 


410


(3,441)


4,366


(8,464)

 Income taxes payable 


765


3,659


1,732


4,257

 Customer advances 


(1,532)


6,362


815


16,025

 Deferred revenue 


(16,784)


(33,607)


(21,661)


(66,166)

 Other liabilities 


(4,187)


(6,036)


(13,184)


(28,631)










 Net cash provided by (used in) operating activities 


2,912


12,012


(11,804)


(27,371)










 CASH FLOWS FROM INVESTING ACTIVITIES: 









 Additions to property, plant and equipment 


(502)


(5,167)


(2,948)


(6,081)

 Net proceeds from divestitures 


135


-


135


34

 Change in restricted cash  


329


1,119


1,505


(1,620)

 Purchase of an investment interest 


-


(5)


-


(611)

 Contribution of equity investment through a shareholder loan 


-


(7,119)


-


(7,119)

 Deconsolidation of ITV 


(6,841)


-


(6,841)


-

 Purchase of short-term investments 


(410)


(2,521)


(1,767)


(5,713)

 Proceeds from sale of short-term investments 


1,986


4,971


3,834


5,865

 Other 


19


232


135


370

 Net cash used in investing activities 


(5,284)


(8,490)


(5,947)


(14,875)










 CASH FLOWS FROM FINANCING ACTIVITIES: 









 Issuance of ordinary share upon exercise of options 


-


124


-


124

 Repurchase of ordinary share 


(2,842)


-


(3,220)


-

 Net cash provided by (used in) financing activities 


(2,842)


124


(3,220)


124

 Effect of exchange rate changes on cash and cash equivalents 


(881)


3,078


(3,264)


4,172

 Net increase (decrease) in cash and cash equivalents 


(6,095)


6,724


(24,235)


(37,950)

 Cash and cash equivalents at beginning of period 


283,486


306,833


301,626


351,507

 Cash and cash equivalents at end of period 


$             277,391


$             313,557


$             277,391


$             313,557

 

UTSTARCOM HOLDINGS CORP.

August 2012 Conference Call








RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions)

(Unaudited)









To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

GAAP Revenue (a)

$61.3

$92.5

$153.8

$46.7

$56.5

$103.2








Less: Amortization of PHS Revenue

23.6

23.8

47.4

-

-

-








Non-GAAP Revenue

$37.7

$68.7

$106.4

$46.7

$56.5

$103.2








(a) GAAP Revenue for each period is the consolidated revenue as reported on Form 10-Q or Form 6-K, as applicable, for such period.



 

UTSTARCOM HOLDINGS CORP.

August 2012 Conference Call








RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions)

(Unaudited)









To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

GAAP Gross Profit (a)

$19.1

$34.8

$53.9

$18.4

$21.7

$40.1

   GAAP Gross Margin %

31.1%

37.6%

35.0%

39.5%

38.5%

38.9%








Less: Gross Profit from Amortization of PHSRevenue

8.2

8.3

16.5

-

-

-








Non-GAAP Gross Profit

$10.9

$26.5

$37.4

$18.4

$21.7

$40.1

   Non-GAAP Gross Margin %

28.8%

38.6%

35.1%

39.5%

38.5%

38.9%








(a) GAAP Gross Profit and GAAP Gross Margin % for each period is the consolidated gross profit and gross margin % as reported on Form 10-Q or Form 6-K, as applicable, for such period.

 

 

UTSTARCOM HOLDINGS CORP.

August 2012 Conference Call








RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions)

(Unaudited)









To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

GAAP Operating Income (Loss) (a)

($11.1)

$9.7

($1.4)

($3.8)

$2.1

($1.7)








Less: Profit from Amortization of PHS Revenue

8.2

8.3

16.5

-

-

-








Non-GAAP Operating Income (Loss)

($19.3)

$1.4

($17.9)

($3.8)

$2.1

($1.7)








(a) GAAP Operating Income (Loss) for each period is the consolidated operating loss as reported on Form 10-Q or Form 6-K, as applicable, for such period.


 

 

UTSTARCOM HOLDINGS CORP.

August 2012 Conference Call








RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions)

(Unaudited)









To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

GAAP Net Income (Loss) attributable to UTStarcom(a)

($10.3)

$11.6

$1.3

($4.2)

($1.8)

($6.0)








Less: Profit from Amortization of PHS Revenue

8.2

8.3

16.5

-

-

-








Non-GAAP Net Income (Loss) attributable to UTStarcom

($18.5)

$3.3

($15.2)

($4.2)

($1.8)

($6.0)








(a) GAAP Net Income (Loss) for each period is the consolidated net loss as reported on Form 10-Q or Form 6-K, as applicable, for such period.



 

 

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions except share number and per share amount)

(Unaudited)









To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.









 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

GAAP Net Income (Loss) attributable to UTStarcom(a)

($10.3)

$11.6

$1.3

($4.2)

($1.8)

($6.0)








Less: Profit from Amortization of PHS Revenue

8.2

8.3

16.5

-

-

-








Non-GAAP Net Income (Loss) attributable to UTStarcom

(18.5)

3.3

(15.2)

(4.2)

(1.8)

(6.0)








Weighted Average Shares Outstanding—Basic & Diluted

151,328

155,247

155,034

154,819

149,639

150,861








GAAP Net Income (Loss) per Share Attributable to UTStarcom Holdings Corp.—Basic & Diluted(a)

(0.07)

0.07

0.01

(0.03)

(0.01)

(0.04)








Non-GAAP Net Income (Loss) per share attributable to UTStarcom Holdings Corp.—Basic & Diluted

($0.12)

$0.02

($0.10)

($0.03)

($0.01)

($0.04)








(a) GAAP Net Income (Loss) per share for each period is the consolidated net income (loss) as reported on Form 10-Q or Form 6-K, as applicable, for such period.



 


 

RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL DATA

($ in millions)

(Unaudited)

 


To supplement our condensed consolidated financial statements presented on a GAAP basis, UTStarcom uses certain non-GAAP measures which are adjusted to present those metrics as if PHS-related deferred revenue amortization had been excluded in prior years comparatives. We believe this enables year over year comparisons to our recent financial results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of UTStarcom's underlying results and trends. In addition, these adjusted non-GAAP results are among the information management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles in the United States.
















 Qtr ended

 Qtr ended

Six months ended

 Qtr ended

 Qtr ended

Six months ended


31-Mar-11

30-Jun-11

30-Jun-11

31-Mar-12

30-Jun-12

30-Jun-12

Non-GAAP Revenue

$37.7

$68.7

$106.4

$46.7

$56.5

$103.2








Non-GAAP Gross Profit

10.9

26.5

37.4

18.4

21.7

40.1

   Non-GAAP Gross Margin %

28.8%

38.6%

35.1%

39.5%

38.5%

38.9%








Non-GAAP Operating Income (Loss)

($19.3)

$1.4

($17.9)

($3.8)

$2.1

($1.7)








Non-GAAP Net Income (Loss) attributable to UTStarcom

($18.5)

$3.3

($15.2)

($4.2)

($1.8)

($6.0)








Non-GAAP Net Income (Loss) per Share Attributable to UTStarcom Holdings Corp.—Basic & Diluted

($0.12)

$0.02

($0.10)

($0.03)

($0.01)

($0.04)








Please refer to the preceding reconciliation tables  the adjustments to GAAP Revenue, Gross Profit, Operating Income (Loss), Net Income (Loss) and EPS. 

 

SOURCE UTStarcom, Inc.



RELATED LINKS
http://www.utstar.com

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