UTStarcom Releases Financial Results for the First Quarter of 2009

ALAMEDA, Calif., May 7 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (NASDAQ: UTSI) , today reported financial results for the first quarter ended March 31, 2009.

On July 1, 2008, the Company divested its Personal Communications Division ("PCD") which has historically represented a significant portion of the Company's revenues. On December 18, 2008, the Company announced actions to wind down its Korea-based handset manufacturing operations. To enable a comparison of the financial results for the Company on a year-over-year basis the Company has prepared certain pro forma non-GAAP results which present the Company's results as if both the divestiture of PCD and the wind down of the Company's Korea-based handset operations were completed prior to each time period presented. The reconciliation between GAAP and these pro forma non-GAAP financial measures is provided at the end of this press release and on the Company's website.

GAAP Results

Net sales for the first quarter of 2009 were $119 million as compared to $586 million in the first quarter of 2008 primarily reflecting the PCD divestiture and our exit from other non-core businesses. Gross margins for the first quarter of 2009 and 2008 were 18.1% and 15.7%, respectively. The operating loss for the first quarter of 2009 and 2008 was $59 million and $31 million, respectively.

The net loss for the first quarter of 2009 was $67.4 million, or ($0.54) per share, as compared to a net gain of $25.4 million, or $0.21 per share in the first quarter of 2008.

Net cash, cash equivalents and short-term investments as of March 31, 2009 was $301 million compared to $314 million on December 31, 2008.

"Although the first quarter revenue was slightly below our expectations we are encouraged by the first quarter bookings which indicate continued demand for our products. Additionally, our quarter end cash balance was well above the level we previously anticipated," said Peter Blackmore, UTStarcom's chief executive officer and president. "The execution of our recently announced initiatives led to further improvement in the Company's ongoing cost structure."

Mr. Blackmore added, "In order to accelerate our return to profitability we expect to announce further significant initiatives later this month."

Significant Items Impacting the First Quarter 2009 and 2008 Results

The following significant items negatively affected the first quarter 2009 operating loss:

• A net increase of $4.9 million in inventory reserves due to the anticipated decline in demand for PAS handsets.
• A charge of $8.1 million relating to one customer consisting of a $1.5 million inventory reserve and a $6.6 million increase in allowance for doubtful accounts receivables.
• A $4.8 million restructuring charge related to the initiatives announced in December 2008.

The net gain in the first quarter 2008 includes the positive impact of certain significant items including $49 million in gains on sale of investments and a net $9 million tax benefit primarily due to a change in withholding tax laws in China.

Pro Forma Non-GAAP Results

The first quarter 2009 pro forma non-GAAP revenue and gross margins were $80 million and 23.8%, respectively. This compares to non-GAAP revenue and gross margins of $155 million and 36.8% in the first quarter of 2008. The decrease in pro forma non-GAAP revenues and pro forma non-GAAP gross margins primarily reflects the expected volume decline in our PAS business. The first quarter 2009 pro forma non-GAAP operating loss was $59 million compared to $49 million a year ago.

The significant items outlined above also negatively impacted the first quarter pro forma non-GAAP results.

Conference Call

The call will take place at 2:00 p.m. (PST) / 5:00 p.m. (EST) on May 7, 2009. The conference call dial-in numbers are as follows: United States -- 888-889-1058; International -- 706-634-2327. The conference ID number is 9821-6310.

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 9821-6310.

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.

Discussion of Pro Forma Non-GAAP Financial Measures

In order to provide both management and investors with a more complete understanding of UTStarcom's underlying results and trends in light of the PCD divestiture and planned wind down of its Korea-based handset manufacturing operations, UTStarcom has prepared reconciliation tables for comparing GAAP results to non-GAAP measures of revenues, gross profits, operating expenses and operating profit (loss), along with an abbreviated, pro forma non-GAAP profit and loss statement based on these non-GAAP measures. The pro forma non-GAAP measures present the Company's results as if both the July 2008 divestiture of the Company's Personal Communications Division and the wind down of the Company's Korea-based handset operations were completed prior to each time period below.

In addition, these pro forma 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 generally accepted accounting principles in the United States.

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 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 development operations in the United States, China, Korea and India. For more information about UTStarcom, visit the Company's Web site at http://www.utstar.com/.

 

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