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UTStarcom Issues Q4 and Full Year 2011 Financial Results
Mar 16, 2012 (Close-Up Media via COMTEX) --
UTStarcom Holdings Corp., a provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators, reported financial results for the fourth quarter and full year ended December 31, 2011.
"We finished the year 2011 with a strong financial performance, exceeding the financial targets we set at the beginning of last year," said UTStarcom President and Chief Executive Officer Jack Lu. "We achieved annual revenues of $320.6 million and net income of $13.4 million primarily through a strong contribution from our traditional equipment business. Our efforts to streamline our corporate structure, prudently manage costs and build more profit-driven employee incentives have all contributed to stronger year-over-year sales and a profitable 2011. We are especially encouraged by the steady progress made in our cable business, which experienced improvements in gross margin and overall product mix in China."
Lu continued, "In 2012, we continue to capitalize on China's push toward triple network convergence and pursuing future opportunities related to the 42 trial cities recently announced. Along with continuing efforts to enhance profitability in our traditional business, we are also developing new initiatives to expand our operating support services business as we strive for ongoing sustainable profitability."
Fourth Quarter and Full Year 2011 Financial Results
Revenues
In a release on March 13, UTStarcom reported that its total revenues for the fourth quarter 2011 were $83.5 million, an increase of 9.6 percent year over year from $76.1 million for the corresponding period of 2010. Total revenues for the full year 2011 were $320.6 million, an increase of 10.0 percent year over year from $291.5 million for the corresponding period of 2010. Deferred revenue amortization related to PHS was included in 2011 results at a rate of approximately $23.8 million per quarter.
Three months ended December 31, 2011 and 2010
-Net sales from equipment for the fourth quarter 2011 were $76.1 million, an increase of 13.0 percent year over year. The increase was mainly driven by increased sales of PTN and MSTP products in Japan and Taiwan, and RollingStream infrastructure product sales in Taiwan. The $2.2 million additional release of PHS deferred revenue also contributed to the year-over-year revenue increase.
-Net sales from equipment-based services for the fourth quarter 2011 were $7.4 million, a decrease of 16.4 percent year over year. The decrease was primarily driven by fewer iPAS maintenance contracts due to the phase out of PHS in China in 2011.
-Net sales from operational support services for the fourth quarter 2011 were approximately $0.02 million as a result of an IP signage revenue sharing project.
Twelve months ended December 31, 2011 and 2010
-Net sales from equipment for the full year 2011 were $285.5 million, an increase of 13.7 percent year over year. The increase was mainly driven by increased sales of PTN products in Japan and RollingStream infrastructure product sales in India and Thailand. The $7.4 million of equipment revenue recognized from the Jersey Telecom Limited contract in the second quarter of 2011 also contributed to the year-over-year increase. The year-over-year increase in equipment sales was partially offset as a result of the wind-down of the Company's handset business and the decrease in sales of other major product lines.
-Net sales from the equipment-based services for the full year 2011 were $34.5 million, a decrease of 14.5 percent year over year. The decrease was mainly due to fewer iPAS maintenance contracts due to the phase out of PHS in China on December 31, 2011, but was partially offset by increased international service contracts.
-Net sales from operational support services for the full year 2011 were $0.5 million, as a result of an IP Signage revenue sharing project.
Gross Profit
UTStarcom's gross profit was $28.6 million, or 34.2 percent of net sales, for the fourth quarter of 2011, compared to $8.1 million, or 10.6 percent of net sales, for the corresponding period of 2010. Gross profit was $114.3 million, or 35.7 percent of net sales, for the full year 2011, compared to $70.2 million, or 24.1 percent of net sales, for the corresponding period of 2010. Deferred revenue amortization related to PHS was included in results of 2011 at a rate of approximate $23.8 million per quarter. Gross margin associated with the PAS deferred revenue is approximately 35 percent.
Three months ended December 31, 2011 and 2010
-Gross profit for equipment sales in the fourth quarter 2011 was $28.5 million, an increase of 332.1 percent year over year. Gross margin for equipment sales in the fourth quarter of 2011 was 37.4 percent, compared to 9.8 percent for the corresponding period in 2010 which included $3.3 million loss contract reserve and $9.9 million inventory write-down. The margin increase was primarily due to increased sales of higher-gross-margin PTN products in the fourth quarter of 2011. Gross margin for equipment sales in China improved in the fourth quarter 2011 compared to the corresponding period of 2010.
-Gross profit for equipment-based services in the fourth quarter of 2011 was $0.5 million, a decrease of 68.3 percent year over year. Gross margin for equipment-based services in the fourth quarter of 2011 was 6.3 percent, compared to 16.7 percent for the corresponding period of 2010. The margin decrease was primarily due to fewer iPAS maintenance contract from the planned service phase out in China in 2011 while service personnel costs remained stable.
-Gross loss for operational support services in the fourth quarter 2011 was approximately $0.4 million as a result of the amortization of the costs of revenue-sharing projects.
Twelve months ended December 31, 2011 and 2010
-Gross profit for equipment sales for the full year 2011 was $107.0 million, an increase of 85.9 percent year over year. Gross margin for equipment sales for the full year 2011 was 37.5 percent, compared to 22.9 percent for the corresponding period of 2010. The margin increase was primarily due to increased sales of higher margin PTN products. The increased gross margin was also caused by higher equipment gross margin generated from $7.4 million equipment revenue recognized from the Jersey Telecom Limited contract in the second quarter 2011, $1.9 million of one-time indemnification from its customer due to a purchase order cancellation in the third quarter 2011 and $2.2 million additional release of PHS deferred revenue in the fourth quarter 2011.
-Gross profit for equipment-based services for the full year 2011 was $9.3 million, a decrease of 26.8 percent year over year. Gross margin for equipment-based services for the full year 2011 was 26.8 percent, compared to 31.4 percent for the corresponding period of 2010. The margin decrease was primarily due to a lower renewal rate of iPAS service contracts driven by the phase out of PHS in China in 2011, while fixed services costs remained relatively constant.
-Gross loss for operational support services for the full year 2011 was $2.0 million as a result of the amortization of the costs of a revenue-sharing project.
Operating Expenses
Operating expenses for the fourth quarter 2011 were $20.0 million, a decrease of 42.2 percent year over year, from $34.7 million in the corresponding period in 2010. Operating expenses for the full year 2011 were $93.1 million, a decrease of 35.3 percent year over year, from $144.0 million in the corresponding period of 2010.
Three months ended December 31, 2011 and 2010
-SG&A expenses in the fourth quarter 2011 were $11.3 million, a decrease of 41.5 percent year over year. The decrease was primarily due to a decrease in personnel costs as a result of restructuring efforts, a decrease in rental costs after relocating the Company's Hangzhou and Beijing offices to new sites in the second quarter of 2011, a reduction in legal and accounting fees, and a decrease in the use of third-party services.
-R & D expenses in the fourth quarter 2011 were $8.5 million, a decrease of 5.4 percent year-over-year. The decrease was primarily due to a decrease in personnel costs as a result of the Company's restructuring efforts.
-Amortization of intangible assets in the fourth quarter 2011 was approximately $0.3 million, an increase of 50.5 percent year over year as a result of the amortization of intangible assets acquired in the iTV Media investment, formerly Stage Smart in November of 2010.
-Restructuring costs for the fourth quarter 2011 were $0.2 million, compared to costs of $6.4 million for the corresponding period of 2010. 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 fourth quarter 2011 was $0.4 million, which consisted of $0.2 million gain on contingent collection of IP Messaging and U.S. PDSN assets and $0.2 million contingent gain realized upon releasing of the remaining obligations in connection with the sale of China PDSN assets. This is compared to $0.3 million of gain on divestitures in the fourth quarter 2010 related to UTStarcom's non-core IP Messaging and U.S. PDSN assets sold in the second quarter of 2010, and EMEA operations sold in the third quarter of 2010.
Twelve months ended December 31, 2011 and 2010
-SG&A expenses for the full year 2011 were $63.9 million, a decrease of 33.0 percent year over year. The decrease was primarily due to a decrease in personnel costs as a result of UTStarcom's restructuring efforts and recent cost reduction measures. The reduced SG&A expenses were also the result of decreases in traveling expenses, legal and accounting fees, third-party services, bad debt expense, and fixed-assets depreciation as a result of the sale of the Company's Hangzhou office building.
-R&D expenses for the full year 2011 were $30.1 million, a decrease of 20.8 percent year over year. The decrease was mainly due to a reduction in personnel and related expenses as a result of the Company's restructuring initiatives, a decrease in traveling expenses as a result of related cost controls, and savings from a reduction in the use of third-party services.
-Amortization of intangible assets for the full year 2011 was approximately $1.2 million, an increase of 501.5 percent year over year as a result of the amortization of intangible assets acquired in the iTV Media investment, formerly Stage Smart, in November 2010.
-Restructuring costs for the full year 2011 were $2.4 million, a decrease of 85.1 percent year over year. The decrease was primarily the result of the completion of the Company's 2009 restructuring plan at the end of 2011. UTStarcom does not expect to incur significant additional restructuring charges in 2012 related to previous restructuring plans.
-Net gain on divestitures for the full year 2011 was $4.5 million, primarily as a result of the contingent gain realized upon entering into a three-party assignment agreement to transfer and release all of the remaining obligations in the third and fourth quarter of 2011 in connection with the sale of China PDSN assets in 2010. This is compared to $5.5 million of gain related to the sale of non-core IP Messaging and U.S. PDSN assets, EMEA operations, China PDSN assets, and the RAS product line recognized in the corresponding period in 2010.
Operating Income
Operating income for the fourth quarter of 2011 was $8.5 million, compared to an operating loss of $26.6 million in the corresponding period of 2010. Operating income for the full year 2011 was $21.2 million, compared to an operating loss of $73.7 million in the corresponding period of 2010.
Net Other Income (Expense)
Three months ended December 31, 2011 and 2010
-Net other expense for the fourth quarter of 2011 was $5.4 million, compared to net other income of $2.7 million for the corresponding period of 2010. Net other expense for the fourth quarter of 2011 primarily consisted of a $5.4 million foreign exchange loss attributed to the depreciation of the Indian rupee against the U.S. dollar, which was partially offset by $0.5 million of subsidy income from the Chinese government. Net other income in the fourth quarter of 2010 primarily consisted of $1.9 million in foreign exchange gain as a result of the appreciation of the Japanese yen against the U.S. dollar during the quarter.
Twelve months ended December 31, 2011 and 2010
-Net other expense for the full year 2011 was $8.6 million, compared to net other income of $9.8 million for the corresponding period in 2010. Net other expense for full year 2011 primarily consisted of $8.9 million in foreign exchange loss, primarily attributed to the depreciation of the Indian rupee against the U.S. dollar and partially offset by foreign exchange gain as a result of the appreciation of the Japanese yen against the U.S. dollar and the appreciation of the Chinese renminbi against the U.S. dollar during the full year. Net other income for the full year 2010 consisted primarily of $8.0 million of foreign exchange gain, primarily resulting from the appreciation of the Indian rupee and Japanese yen against the U.S. dollar, $0.5 million settlement proceeds obtained from MRV Communications ("MRV") related to the Company's investment in MRV that was sold in 2009, $0.5 million of subsidy income from the Chinese government, and $0.8 million of other individually negligible items.
Net Income (Loss)
Net income attributable to UTStarcom shareholders for the fourth quarter and the full year 2011 was $4.1 million and $13.4 million, respectively. Net loss attributable to UTStarcom shareholders for the fourth quarter and full year 2010 was $23.0 million and $65.1 million, respectively.
Basic and diluted earnings per share for the fourth quarter and full year 2011 amounted to $0.03 and $0.09, respectively. Basic and diluted loss per share for the fourth quarter and full year 2010 was $0.15 and $0.48, respectively.
Cash Flow
Three months ended December 31, 2011
-Net cash used in operating activities for the fourth quarter 2011 was $0.2 million. The Company's operating activities were impacted by the change in operating assets and liabilities of $4.0 million.
-Net cash provided by investing activities for the fourth quarter 2011 was $0.8 million.
-Net cash used in financing activities for the fourth quarter 2011 was $4.8 million for repurchasing shares of common stock of the Company.
Twelve months ended December 31, 2011
-Net cash used in operating activities for the full year 2011 was $41.7 million. The results of the Company's operating activities were primarily impacted by the change in operating assets and liabilities of $57.3 million. The increase included $132.6 million for the release of deferred revenue and $38.8 million for settlement of other liabilities as the Company continues to streamline operations, offset by the cash inflows from inventories and deferred cost.
-Net cash used in investing activities for the full year 2011 was $10.8 million. The results of the Company's investing activities were primarily impacted by $9.3 million additions to property, plant and equipment and $8.3 million increase in contribution of equity investment through a shareholder loan and equity investment.
-Net cash used in financing activities for the full year 2011 was $6.2 million mainly used for repurchasing shares of common stock of the Company.
As of December 31, 2011, UTStarcom had cash and cash equivalents of $301.6 million and short-term investments totaling $2.4 million.
UTStarcom is a provider of interactive, IP-based network solutions in iDTV, IPTV, Internet TV and Broadband for cable and telecom operators.
More Information:
www.utstar.com
((Comments on this story may be sent to newsdesk@closeupmedia.com))
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