Choose your language

UTStarcom Releases Second Quarter 2006 Financial Results

ALAMEDA, Calif., Aug. 9 /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 second quarter of 2006.

UTStarcom Releases Second Quarter 2006 Financial Results
UTStarcom Releases Second Quarter 2006 Financial Results

Second Quarter Revenues of $549.1 Million, Gross Margins of 19.9%, and Loss per Share of ($0.18)

Positive Cash Flow from Operations of Approximately $25 Million in the Second Quarter

(Logo: )

Net sales for the second quarter of 2006 were $549.1 million. Gross
margins for the second quarter were 19.9% and GAAP net loss for the quarter
was $21.4 million, or a loss of ($0.18) per share.

'We are pleased that we continue to demonstrate progress each quarter,'
Fran Barton, executive vice president and chief financial officer of
UTStarcom. 'We believe we are making meaningful improvements to position the
company for long-term profitable growth.'

The Company's cash balance was approximately $647 million at the end of
the second quarter, reflecting approximately $25 million of positive cash flow
from operations, offset by approximately $50 million used to pay down short-
term debt in the quarter.

'We are seeing real demand for our technology on a worldwide basis and are
particularly encouraged by the interest in our IPTV solution which is showing
initial traction in China, India and Latin America,' added
Hong Lu, chief
executive officer of UTStarcom. 'We believe that our global leadership in
IPTV is based on the superiority of our architecture and the significant lead
in time-to-market.'

    Consolidated Third Quarter 2006 Guidance

    Total Revenues:                     Approximately $590-$625 million
    Gross Profit Margin:                Total Company:  16.5-18.5%
    Operating Expenses:                 Approximately: $135-$140 million,
                                        including approximately $4 million in
                                        expenses associated with stock
    GAAP EPS:                           Loss of approximately ($0.23) to

    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, August 9, 2006 at
1:30 p.m. (PDT). The conference call dial-in numbers are as follows: United
-- 888-398-3046; International -- 706-634-2492.

A replay of the call will be available from approximately 5:30 p.m. (PDT)
on August 9, 2006 to 11:59 p.m. (PDT) on August 16, 2006. The conference call
replay numbers are as follows: United States -- 800-642-1687; International --
706-645-9291. The Access Code is 3775097.

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 United States, China, Korea
and India. UTStarcom is a FORTUNE 1000 company.

For more information about UTStarcom, visit the company's Web site at .

Forward-Looking Statements

This release includes forward-looking statements, including the foregoing
statements regarding the anticipated continued improvement in the Company's
financial results and long-term profitable growth, and the guidance given for
anticipated total revenues, gross profit margin, operating expenses (including
expenses associated with stock compensation) and earnings per share for the
third quarter of 2006. 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 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, 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. 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.

                                 UTStarcom, Inc.
                      Condensed Consolidated Balance Sheets
                 (in thousands, except share and per share data)

                                              June 30,        December 31,
                   ASSETS                       2006              2005
    Current assets:
      Cash, cash equivalents and short-term
       investments                            $657,613          $658,837
      Accounts receivable, net                 424,617           522,964
      Notes receivable                          11,593             2,065
      Inventories                              455,015           425,955
      Deferred costs/Inventories at
       customer sites under contracts          256,812           239,876
      Prepaids                                  60,085            61,795
      Short-term restricted cash and
       investments                              71,119            53,680
      Other current assets                      34,092            37,267
        Total current assets                 1,970,946         2,002,439
    Property, plant and equipment, net         216,325           233,403
    Long-term investments                       29,824            26,023
    Goodwill                                     3,063             3,063
    Intangible assets, net                      65,568            75,313
    Other long-term assets                      31,092            25,811
        Total assets                        $2,316,818        $2,366,052

    Current liabilities:
      Accounts payable                        $363,097          $320,677
      Short-term debt                          122,587           198,826
      Income taxes payable                      37,101            33,608
      Customer advances                        291,964           221,301
      Deferred revenue                          66,776            69,030
      Other current liabilities                218,194           289,867
        Total current liabilities            1,099,719         1,133,309

    Long-term debt                             274,900           274,900
    Other long-term liabilities                 27,470            20,958

        Total liabilities                    1,402,089         1,429,167

    Minority interest in consolidated
     subsidiaries                                7,593             8,338
    Stockholders' equity:
      Common stock: $0.00125 par value;
       authorized: 750,000,000 shares;
       issued and outstanding: 120,618,764
       and 120,585,158 at June 30, 2006 and
       December 31, 2005, respectively             152               152
      Additional paid-in capital             1,171,175         1,168,166
      Deferred stock compensation                    -            (3,493)
      Accumulated deficit                     (285,252)         (253,174)
      Accumulated other comprehensive
       income                                   21,061            16,896
    Total stockholders' equity                 907,136           928,547
        Total liabilities, minority interest
         and stockholders' equity           $2,316,818        $2,366,052

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

                                   Three months ended     Six months ended
                                        June 30,              June 30,
                                     2006      2005       2006        2005
                                           As restated            As restated

    Net sales                      $549,146  $719,759  $1,145,717  $1,621,643
    Cost of net sales               439,860   607,621     913,977   1,272,081
    Gross profit                    109,286   112,138     231,740     349,562

    Operating expenses:
      Selling, general and
       administrative                82,423   103,009     165,593     212,020
      Research and development       46,743    65,621      93,052     131,881
      Amortization of intangible
       assets                         4,821     6,776       9,746      13,748
      In-process research and
       development                        -       660           -         660
      Restructuring costs                 -    15,127           -      15,127
    Total operating expenses        133,987   191,193     268,391     373,436

    Operating loss                  (24,701)  (79,055)    (36,651)    (23,874)

    Interest income (expense), net      781    (3,259)        812      (6,188)
    Other income, net                 6,887     8,867      10,454       2,020
    Loss before income taxes,
     minority interest and equity
     in loss of affiliated
     companies                      (17,033)  (73,447)    (25,385)    (28,042)
    Income tax expense               (4,669)     (240)     (7,508)     (7,920)
    Minority interest in losses of
     consolidated subsidiaries          259       313         815          91
    Equity in loss of affiliated
     companies                            -      (574)          -      (1,033)
    Net loss                       $(21,443) $(73,948)   $(32,078)   $(36,904)

    Loss per share - Basic and
     diluted                         $(0.18)   $(0.64)     $(0.27)     $(0.32)

    Weighted average shares used
     in per-share calculation:
      - Basic and diluted           120,608   114,880     120,604     114,702

                                 UTStarcom, Inc.
                 Condensed Consolidated Statement of Cash Flows
                                 (in thousands)

                                               Six months ended June 30,
                                                2006              2005
    CASH FLOWS FROM OPERATING ACTIVITIES:                     As restated
    Net loss                                 $(32,078)         $(36,904)
    Adjustments to reconcile net loss to
     net cash provided by (used in)
     operating activities:
      Depreciation and amortization            34,653            51,411
      Loss on sale and disposal of assets       2,169             3,684
      Loss on asset impairment                      -             6,739
      Stock compensation expense                8,769             1,153
      Provision for doubtful accounts           3,133            33,609
      Provision for inventory reserve           5,978            28,241
      Deferred income taxes                         -            97,466
      Gain on extinguishment of debt                -           (11,094)
      Other                                    (2,930)            2,768
      Changes in operating assets and
       liabilities, net of acquisition:
        Accounts receivable                    97,596           (74,915)
        Inventories                           (36,916)           41,929
        Deferred costs/Inventories at
         customer sites under contracts       (13,677)          (31,966)
        Other current and non-current assets   (7,784)           58,378
        Accounts payable                       39,693            24,830
        Income taxes payable                    3,438          (140,379)
        Customer advances                      69,280          (225,238)
        Deferred revenue                       (2,699)           19,892
        Other current liabilities             (89,469)           11,035
    Net cash provided by (used in)
     operating activities                      79,156          (139,361)
    Additions to property, plant and
     equipment                                (12,288)          (46,325)
    Investment in affiliates, net of cash
     acquired                                    (302)           (2,550)
    Purchase of business, net of cash
     acquired                                       -           (23,806)
    Proceeds from sale of business             19,965                 -
    Proceeds from disposal of property              -               663
    Change in restricted cash and
     investments                              (19,994)            2,708
    Purchase of short-term investments        (21,810)         (123,768)
    Proceeds from sale of short-term
     investments                               25,588           228,649
    Other                                       1,672              (750)
    Net cash (used in) provided by
     investing activities                      (7,169)           34,821
    Proceeds from borrowing                    62,545           278,381
    Payments on borrowings                   (140,053)         (373,081)
    Cash paid to extinguish debt                    -           (15,781)
    Other                                       1,967             4,579
    Net cash used in financing activities     (75,541)         (105,902)
    Effect of exchange rate changes on
     cash and cash equivalents                  5,257            (1,766)
    Net increase (decrease) in cash and
     cash equivalents                           1,703          (212,208)
     BEGINNING OF PERIOD                      645,571           562,532
     PERIOD                                  $647,274          $350,324

    Supplemental disclosure of cash flow
      Cash paid:
        Interest                               $4,596            $8,179
        Income taxes                           $3,529           $11,387
    Non-cash operating activity
      Accounts receivable transferred to
       notes receivable                       $15,376           $34,551
      Property, plant and equipment
       exchanged for long-term investment      $5,500                $-

SOURCE UTStarcom, Inc.