UTStarcom Releases Financial Results for Fourth Quarter and Full Year 2010

For investor and media inquiries, please contact:

Jing Ou-Yang

UTStarcom, Inc.

Phone: +8610 8520 5153

jouyang@utstar.com

Brion Tingler

Kreab Gavin Anderson

Phone: +8610 6535 3567

btingler@kreabgavinanderson.com

UTStarcom, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31,

December 31,

2010

2009

ASSETS

(Unaudited)

(Audited)

Current assets:

Cash, cash equivalents and short-term investments

$352,053

$266,881

Accounts and notes receivable, net

30,177

43,773

Inventories and deferred costs

159,583

202,753

Prepaids and other current assets

62,772

74,354

Total current assets

604,585

587,761

Long-term assets:

Property, plant and equipment, net

4,819

130,612

Goodwill

13,820

-

Intangible assets, net

4,858

-

Long-term deferred costs

132,587

184,978

Other long-term assets

23,614

25,760

Total assets

$784,283

$929,111

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$36,356

$54,115

Customer advances

82,607

120,364

Deferred revenue

182,963

170,777

Other current liabilities

88,923

147,914

Total current liabilities

390,849

493,170

Long-term liabilities:

Long-term deferred revenue and other liabilities

144,494

179,790

Total liabilities

535,343

672,960

Total equity

248,940

256,151

Total liabilities and equity

$784,283

$929,111

UTStarcom, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three months ended December 31,

Year ended December 31,

2010

2009

2010

2009

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Net sales

$76,129

$116,337

$291,535

$386,344

Cost of net sales

68,065

81,361

221,297

321,365

Gross profit

8,064

34,976

70,238

64,979

11 %

30 %

24 %

17 %

Operating expenses:

Selling, general and administrative

19,358

26,452

95,240

140,742

Research and development

9,021

11,260

38,044

63,243

Amortization of intangible assets

206

-

206

-

Impairment of goodwill and other long-lived assets

-

33,287

-

33,287

Restructuring

6,391

5,010

16,018

46,495

Net gain on divestiture

(304)

(432)

(5,548)

(100)

Total operating expenses

34,672

75,577

143,960

283,667

Operating loss

(26,608)

(40,601)

(73,722)

(218,688)

Interest income, net

555

275

1,739

1,541

Other income, net

2,741

5,644

9,808

2,303

Loss before income taxes

(23,312)

(34,682)

(62,175)

(214,844)

Income taxes benefit (expense)

128

(4,694)

(3,115)

(10,860)

Net loss

(23,184)

(39,376)

(65,290)

(225,704)

Net (income) loss attributable to noncontrolling interest

155

(16)

161

16

Net loss attributable to UTStarcom, Inc.

$(23,029)

$(39,392)

$(65,129)

$(225,688)

Net loss per share attributable to UTStarcom, Inc. - Basic and
Diluted

$(0.15)

$(0.31)

$(0.48)

$(1.77)

Weighted average shares used in per share calculation:

Basic and Diluted

152,714

128,581

137,057

127,346

UTStarcom, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, except per share amounts)

(Unaudited)

Three months ended
December 31,

Three months ended
December 31,

2010

2009

(In thousands)

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities

5,223

21,754

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to property, plant and equipment

(833)

(361)

Net proceeds from divestitures

533

-

Deposit received on pending sale of building  

-

7,307

Change in restricted cash  

5,881

(3,868)

Proceeds from settlement of an investment interest

-

1,039

Purchase of an investment interest

(2,152)

-

Purchase of short-term investments

(581)

(431)

Proceeds from sale of short-term investments

2,990

2,534

Other

3

198

Net cash provided by investing activities

5,841

6,418

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase of common stock

(9)

-

Net cash used in financing activities

(9)

-

Effect of exchange rate changes on cash and cash equivalents

3,426

559

Net increase in cash and cash equivalents

14,481

28,731

Cash and cash equivalents at beginning of period

337,026

237,112

Cash and cash equivalents at end of period

$351,507

$265,843

UTStarcom, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, except per share amounts)

Year ended
December 31,

Year ended
December 31,

2010

2009

(Unaudited)

(Audited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash used in operating activities

(92,182)

(67,448)

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to property, plant and equipment

(3,449)

(2,012)

Net proceeds from divestitures

3,381

11,508

Deposit received on pending sale of building  

-

7,307

Change in restricted cash  

13,260

(1,973)

Proceeds from settlement of an investment interest

481

2,639

Purchase of an investment interest

(2,702)

-

Purchase of short-term investments

(12,583)

(6,945)

Proceeds from sale of short-term investments

10,815

10,159

Other

335

635

Net cash provided by investing activities

133,493

21,318

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of stock and option, net of expense

34,594

-

Issuance of common stock upon exercise of options and ESPP

-

367

Repurchase of common stock

(67)

-

Change in bank overdrafts  

-

(755)

Net cash provided by (used in) financing activities

34,527

(388)

Effect of exchange rate changes on cash and cash equivalents

9,826

2,758

Net increase/ (decrease) in cash and cash equivalents

85,664

(43,760)

Cash and cash equivalents at beginning of period

265,843

309,603

Cash and cash equivalents at end of period

$351,507

$265,843

UTSTARCOM, INC.

Mar 11, 2011 Conference Call

RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE

($ 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 the Korea handsets business had been wound down prior to each time period reflected below.  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 

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 Year ended 

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 Qtr ended 

 Year ended 

31-Mar-09

30-Jun-09

30-Sep-09

31-Dec-09

31-Dec-09

31-Mar-10

30-Jun-10

30-Sep-10

31-Dec-10

31-Dec-10

GAAP Revenue (a)

$119

$80

$71

$116

$386

$81

$73

$61

$76

$291

Less: Korea Handset Sales to PCD (b)

39

(3)

8

12

56

3

-

-

-

3

Non-GAAP Revenue

$80

$83

$63

$104

$330

$78

$73

$61

$76

$288

(a) GAAP Revenue for each period is the consolidated revenue as reported on Form 10-Q or Form 10-K, as applicable, for such period, except for the consolidated revenue for the quarters ended December 31, 2008 and 2009, which is derived from the revenue reported in the Form 10-Qs and Form 10-K with respect to fiscal years 2008 and 2009.

(b) Prior to the July 1, 2008 divestiture of PCD, Korea handset did not record revenue for units shipped to PCD as this activity was an intercompany transfer.  After July 1, 2008 this activity was recorded as a third party sale in the Handset segment.

UTSTARCOM, INC.

Mar 11, 2011 Conference Call

RECONCILIATION OF GAAP GROSS PROFIT TO NON-GAAP GROSS PROFIT

($ 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 the Korea handsets business had been wound down prior to each time period reflected below.  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 

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 Qtr ended 

 Year ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Year ended 

31-Mar-09

30-Jun-09

30-Sep-09

31-Dec-09

31-Dec-09

31-Mar-10

30-Jun-10

30-Sep-10

31-Dec-10

31-Dec-10

GAAP Gross Profit (a)

$22

($16)

$24

$35

$65

$27

$23

$12

$8

$70

   GAAP Gross Margin %

18%

(20%)

34%

30%

17%

34%

32%

20%

11%

24%

Less: Korea Handset Gross Profit from Sales to PCD (b)

3

(28)

2

2

(21)

1

1

(1)

1

2

Non-GAAP Gross Profit

$19

$12

$22

$33

$86

$26

$22

$13

$7

$67

   Non-GAAP Gross Margin %

24%

14%

35%

32%

26%

33%

30%

20%

9%

23%

(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 10-K, as applicable, for such period, except for the consolidated gross profit and gross margin % for the quarter ended December 31, 2008 and 2009, which is derived from the gross profit and gross margin % reported in the Form 10-Qs and Form 10-K with respect to fiscal years 2008 and 2009.

(b) Prior to the July 1, 2008 divestiture of PCD, Korea handset earned a gross profit on the intercompany transfer of inventory to PCD.  This gross profit was recorded in the Handset segment.  After July 1, 2008 this activity was recorded as a third party transaction.

UTSTARCOM, INC.

Mar 11, 2011 Conference Call

RECONCILIATION OF GAAP OPERATING EXPENSE TO NON-GAAP OPERATING EXPENSE

($ 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 the Korea handsets business had been wound down prior to each time period reflected below.  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.

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 Year ended 

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 Qtr ended 

 Qtr ended 

 Year ended 

31-Mar-09

30-Jun-09

30-Sep-09

31-Dec-09

31-Dec-09

31-Mar-10

30-Jun-10

30-Sep-10

31-Dec-10

31-Dec-10

GAAP Operating Expense (a)

$81

$70

$58

$76

$285

$46

$28

$35

$35

$144

Less: Korea Handset Operating Expense (b)

3

2

1

-

6

-

-

-

-

0

Non-GAAP Operating Expense

$78

$68

$57

$76

$279

$46

$28

$35

$35

$144

(a) GAAP Operating Expense for each period is the consolidated operating expense as reported on Form 10-Q or Form 10-K, as applicable, for such period, except for the consolidated operating expense for the quarter ended December 31, 2008 and 2009, which is derived from the operating expenses reported in the Form 10-Qs and Form 10-K with respect to the fiscal years 2008 and 2009.

(b) Both prior to and after the July 1, 2008 divestiture of PCD, all direct operating expense relating to Korea handset has been recorded in the Handset segment.

UTSTARCOM, INC.

Mar 11, 2011 Conference Call

RECONCILIATION OF GAAP OPERATING LOSS TO  NON-GAAP OPERATING LOSS

($ 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 the Korea handsets business had been wound down prior to each time period reflected below.  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 

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 Year ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Year ended 

31-Mar-09

30-Jun-09

30-Sep-09

31-Dec-09

31-Dec-09

31-Mar-10

30-Jun-10

30-Sep-10

31-Dec-10

31-Dec-10

GAAP Operating Loss (a)

($59)

($85)

($34)

($41)

($219)

($19)

($5)

($23)

($27)

($74)

Less: Korea Handset Operating Income (Loss) (b)

-

(30)

1

2

(27)

1

1

(1)

1

2

Non-GAAP Operating Loss

($59)

($55)

($35)

($43)

($192)

($20)

($6)

($23)

($28)

($76)

(a)  GAAP Operating Loss for each period is the consolidated operating loss as reported on Form 10-Q or Form 10-K, as applicable, for such period, except for the consolidated operating loss for the quarter ended December 31,  2008 and 2009, which is derived from the operating loss reported in the Form 10-Qs and Form 10-K with respect to fiscal years 2008 and 2009.

(b) Both prior to and after the July 1, 2008 divestiture of PCD, the operating loss relating to Korea handset has been recorded in the Handset segment.

UTSTARCOM, INC.

Mar 11, 2011 Conference Call

ABBREVIATED NON-GAAP P&L STATEMENT (a)

($ 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 the Korea handsets business had been wound down prior to each time period reflected below.  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 

 Qtr ended 

 Qtr ended 

 Year ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Qtr ended 

 Year ended 

31-Mar-09

30-Jun-09

30-Sep-09

31-Dec-09

31-Dec-09

31-Mar-10

30-Jun-10

30-Sep-10

31-Dec-10

31-Dec-10

 Non-GAAP Revenue 

$80

$83

$63

$104

$330

$78

$73

$61

$76

$288

Non-GAAP Gross Profit

19

12

22

33

86

26

22

13

7

67

  Non-GAAP Gross Margin % 

24%

14%

35%

32%

26%

33%

30%

20%

9%

23%

Non-GAAP Operating
    Expense                               

78

68

57

76

279

46

28

35

35

144

 Non-GAAP Operating Loss 

($59)

($55)

($35)

($43)

($192)

(20)

($6)

($23)

($28)

($76)

(a) Please refer to the preceding reconciliation tables for the adjustments to GAAP Revenue, Gross Profit, Operating Expense and Operating Loss.