UTStarcom Reports Third Quarter 2004 Results
- Record Third-Quarter Revenues of $645.0 Million, an Increase of
10 Percent Year-Over-Year
- GAAP Earnings of $5.0 Million, or $0.04 Per Share
- Positive Cash Flow From Operations of $98.9 Million
- Conference Call Today at 4:30 p.m. EDT/1:30 p.m. PDT.
ALAMEDA, Calif., Oct. 26 /PRNewswire-FirstCall/ -- UTStarcom, Inc. (Nasdaq:UTSI), a global leader in IP access networking and services, today reported its third quarter revenues and earnings for the three months ended September 30, 2004.
(Logo: newscom.com )
The company will conduct a conference call today, Tuesday, October 26, 2004 to discuss these results. The call will take place at 4:30 p.m. EDT/1:30 p.m. PDT. (Please see Conference Call section below for dial-in numbers.)
"UTStarcom has further diversified its product portfolio and expanded its international customer base over the last quarter," said Hong Lu, chief executive officer of UTStarcom. "Product diversification and increased traction with tier-one carriers outside of China form the cornerstone of UTStarcom's transformation into one of the leading providers of innovative telecom solutions in the world. Demand for our solutions is strong, and this gives us confidence and visibility into our 2005 results. As we work to establish leading market share positions with our global customer base, we will also focus on cost reduction to improve gross margins and deliver long- term profitable growth to our investors."
Net sales for the third quarter of 2004 were $645.0 million, an increase of 10 percent over net sales of $584.4 million reported in the third quarter of 2003. Year-to-date net sales for the nine months ended September 30, 2004 were $1.96 billion, an increase of 48 percent over net sales of $1.32 billion reported for the nine months ended September 30, 2003.
Third quarter gross margins were 21.3 percent. Year-to-date gross margins for the nine months ended September 30, 2004 were 25.0 percent.
GAAP net income for the third quarter of 2004 was $5.0 million, or $0.04 per share. This compares to net income of $59.1 million, or $0.46 per share, for the third quarter of 2003. Year-to-date GAAP net income for the nine months ended September 30, 2004 was $103.6 million, or $0.78 per share. This compares to net income of $135.9 million, or $1.12 per share, for the nine months ended September 30, 2003.
Key Highlights for Q3 2004
Strong Financial Performance
-- Record Q3 revenues of $645.0 million, an increase of 10 percent over Q3 2003
-- Q3 international bookings of $200 million and $600 million September YTD
-- Improved inventory turns of 2.9, up from 2.7 in Q2 2004
-- Positive cash flow from operations of approximately $98.9 million
Key Customer Wins
-- BSNL (India) - Total Control 1000, AN2000 IB
-- Japan Telecom (Japan) - iAN-8000, NetRing(TM) optical solution
-- China Telecom (China) - AN2000 IB
-- Softbank (Japan) - GEPON
-- China Mobile (China) - NetRing optical solution
-- Telmex (CALA) - AN2000 IB
Customer Milestones
-- UTStarcom PAS subscribers in China reached approximately 34 million at the end of Q3, with total PAS subscribers in China estimated at approximately 60 million
-- More than 6.5 million lines of IP-DSLAM have been deployed globally to date
-- More than 55 million lines of mSwitch(TM) have been deployed globally to date
-- UTStarcom's participation as a key IP-DSLAM provider to Softbank has enabled the successful growth of Yahoo! BB's broadband and VoIP services. Approximately 4.5 million people had subscribed for Yahoo! BB broadband service and more than 4.2 million for the BB Phone service by the end of September 2004
-- UTStarcom's IP-based DSLAM and Total Control 1000 solutions are enabling a nationwide roll-out of a broadband access network by BSNL across 198 cities in India
-- Japan Telecom is deploying UTStarcom's iAN-8000 platform to build its next-generation network and deliver new services such as converged voice, data and WiFi over IP to all of Japan
Global Technology Leadership
-- Recognized as second-largest provider worldwide of next-generation softswitch ports and of packet voice gateways in second quarter of 2004 by Infonetics Research
-- Ranked world's second-largest IP-DSLAM provider in second quarter of 2004 by Infonetics Research and Synergy Research Group
-- Introduced high-density, scalable iAN-8000 multi-service access node, supporting TDM, IP-Enabled Voice, and Multimedia Services and integrates functionalities of DLC, VoIP media gateway, and IP DSLAM
-- Collaborated with China Netcom and China Telecom to achieve short message service interconnectivity for nationwide PAS service in China
-- Introduced mVision(TM) -- a comprehensive, end-to-end carrier TVoIP solution
Recent Accolades
-- Ranked #37 in FORTUNE's "100 Fastest Growing Companies" list for 2004
-- Selected for FORTUNE's Top 50 chart in the Investor's Guide 2004 issue
-- Named one of China's 100 largest companies of 2003 in FORTUNE International
Financial Guidance
Guidance for 2004 and 2005 is as follows:
Revenue Range: Q4 2004: $875-$885 million*
FY 2004: $2.8 billion*
FY 2005: $4.0 billion*
Gross Margins: Q4 2004: 17% (core company 22%, ACC 4.5%)
FY 2004: 22%
FY 2005: 25%
GAAP EPS Range: Q4 2004: break-even
FY 2004: $0.76-$0.80
FY 2005: $2.00
(*Includes anticipated revenue of $250 million + in Q4 and full-year 2004 and $900 million in 2005 related to the acquisition of Audiovox Communications Corporation)
In addition, UTStarcom is continuing a thorough review of and improvements to its internal controls as part of the Company's preparation for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In order to achieve compliance by the December 31, 2004 deadline, UTStarcom must sufficiently document all internal controls procedures with respect to its financial reporting, fix any significant deficiencies with respect to its internal controls procedures, and test all internal controls procedures over a reasonable amount of time so that the Company's auditors can assess management's assertion as to the effectiveness of the Company's internal controls of financial reporting. While the Company is dedicating a significant amount of resources to achieve compliance, UTStarcom cannot guarantee that it will be able to comply with the requirements of Section 404 by the December 31, 2004 deadline.
UTStarcom takes its obligation to meet 404 compliance very seriously and is committed to the process. Some of the areas the Company is investing in to improve internal controls include continuing company wide implementation of Oracle ERP and MRP systems, and work with a leading consultant on supply-chain improvements. In addition, in the third quarter UTStarcom hired a chief accounting officer and a chief quality officer. Some of the challenges the Company faces are due to the tremendous amount of growth and expansion it has experienced in a short period of time, as well as the recent implementation of new business systems and continuing improvements to processes to support the Company's growth and improve controls such as Oracle ERP and supply-chain improvements. UTStarcom will continue its efforts and progress not only this year, but on an ongoing basis into 2005.
Conference Call
The company will conduct a conference call, which is open to the public, to discuss these results. The call will take place at 4:30 p.m. EDT/1:30 p.m. PDT. The conference call dial-in numbers are as follows: United States -- 888- 398-3046; International -- 706-634-2492. The Conference Code is 1268033.
A replay of the call will be available from approximately 5:30 p.m. EDT on October 26, 2004 to 11:59 p.m. EDT on November 2, 2004. The conference call replay numbers are as follows: United States -- 800-642-1687; International -- 706-645-9291. The Access Code is 1268033.
Investors will also have the opportunity to listen to the conference call and the replay over the Internet through UTStarcom's web site at: investorrelations.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.
About UTStarcom, Inc.
UTStarcom is a global leader in IP access networking solutions and international service and support. The company sells its wireline, wireless, optical and switching solutions to operators in both fast growth 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 New Jersey, China, and India. UTStarcom is a FORTUNE 1000 company.
For more information about UTStarcom, visit the company's Web site at www.utstar.com.
Forward-Looking Statements
This release includes forward-looking statements, including the foregoing statements regarding product diversification, increased traction with tier-one carriers outside of China, the Company's efforts to establish market share positions, reduce costs and improve gross margins, anticipated results of the Company's acquisitions, anticipated improvements in supply chain management, anticipated efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the guidance given for anticipated gross margins, revenue and earnings per share for the fourth quarter and full-year of 2004 and for 2005. 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, both in China and globally, 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, both in China and globally. The Company also refers readers to the risk factors identified in its latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the Securities and Exchange Commission.
UTStarcom, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September September September September
30, 30, 30, 30,
2004 2003 * 2004 2003 *
Net sales $645,016 $584,382 $1,956,935 $1,320,736
Cost of sales 507,882 398,280 1,467,496 884,445
Gross profit 137,134 186,102 489,439 436,291
Operating expenses:
Selling, general and
administrative 74,916 57,371 209,689 129,917
Research and development 56,026 44,723 154,276 107,613
In process research and
development -- 161 1,400 10,809
Amortization of intangible
assets 3,639 3,081 9,946 5,259
Total operating expenses 134,581 105,336 375,311 253,598
Operating income 2,553 80,766 114,128 182,693
Interest and other income
(expenses) 1,295 (306) 15,313 2,827
Equity in loss of affiliated
companies (727) (1,560) (2,925) (4,280)
Income before income taxes and
minority interest 3,121 78,900 126,516 181,240
Income tax expense (income) (1,906) 19,725 22,773 45,310
Minority interest in earnings
of consolidated subsidiaries (40) (35) (127) (35)
Net income $4,987 $59,140 $103,616 $135,895
Basic earnings per share $0.04 $0.58 $0.91 $1.31
Diluted earnings per share $0.04 $0.46 $0.78 $1.12
Diluted earnings per "If
Converted" share $0.04 N/A N/A N/A
Weighted average shares used
in per-share calculation:
- Basic 113,945 102,814 114,110 103,607
- Diluted 116,307 131,914 136,210 123,194
- Diluted "If Converted"
Shares 133,226 N/A N/A N/A
Three months ended Nine months ended
September September September September
30, 30, 30, 30,
2004 2003 * 2004 2003 *
1. The above unaudited
financial statements include
the following
non-cash expenses:
Cost of Sales $-- $2 $-- $7
Selling, general and
administrative -- 39 51 225
Research and development 83 121 277 3,005
Total stock compensation
expense $83 $162 $328 $3,237
Amortization of intangible
assets $4,102 $3,081 $10,569 $5,259
In-process research and
development $-- $161 $1,400 $10,809
Change in investment portfolio $1,061 $157 $1,562 $380
2. Earnings per share
Basic earnings per share
Income available to common
stockholders $4,987 $59,140 $103,616 $135,895
Effect of Dilutive Securities
7/8% Convertible Subordinated
Notes 816 1,098 2,663 2,473
Diluted earnings per share
Income available to common
stockholders + assumed
conversions $5,803 $60,238 $106,279 $138,368
* Certain reclassifications have been made to prior year balances in
order to conform to the current year presentation
UTStarcom, Inc.
Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, December 31,
2004 2003 *
ASSETS
Current assets:
Cash, cash equivalents and short- term investments $796,203 $422,591
Accounts receivable, net 691,160 324,921
Related parties accounts
receivable, net 46,339 43,944
Notes receivable 24,877 11,362
Inventories, net 439,412 257,038
Deferred costs/Inventories at
customer sites under contracts 168,903 558,977
Prepaid expenses 79,849 136,262
Restricted cash and short term
investments 36,799 24,404
Other current assets 41,313 52,408
Total current assets 2,324,855 1,831,907
Property, plant and equipment, net 255,029 186,076
Long-term investments 25,428 24,066
Goodwill and intangible assets, net 174,087 144,232
Other long term assets 53,427 40,677
Total assets $2,832,826 $2,226,958
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and short term
debt $513,010 $251,176
Income taxes payable 16,783 16,780
Customer advances 279,631 458,654
Deferred revenue 57,874 44,958
Other 191,606 173,139
Total current liabilities 1,058,904 944,707
Long-term debt 402,500 402,500
Minority interest in consolidated
subsidiaries 687 560
Stockholders' equity:
Common stock 143 131
Additional paid-in capital 1,115,433 653,624
Deferred stock compensation (7,233) (7,761)
Retained earnings 260,371 229,777
Other comprehensive income 2,021 3,420
Total stockholders' equity 1,370,735 879,191
Total liabilities and
stockholders' equity $2,832,826 $2,226,958
September 30, December 31,
2004 2003 *
Inventories and deferred costs are
made up of the following:
Inventories at factories $324,244 $166,075
Inventories at customer sites 115,168 90,963
Inventories at customer sites
under contracts 168,903 558,977
Total inventories and deferred
costs $608,315 $816,015
* Certain reclassifications have been made to prior year balances in
order to conform to the current year presentation
SOURCE UTStarcom, Inc.
CO: UTStarcom, Inc.
ST: California
SU: ERN CCA ERP
Web site: utstar.com
prnewswire.com
10/26/2004 16:05 EDT |
