Zhone Technologies Reports Third Quarter 2012 Financial Results

Zhone Technologies Reports Third Quarter 2012 Financial Results

OAKLAND, Calif.--(BUSINESS WIRE)-- Zhone Technologies, Inc. (NAS: ZHNE) , a global leader in FTTx network access solutions, today reported its financial results for the third quarter ended September 30, 2012.

Revenue for the third quarter of 2012 was $29.2 million compared to $30.8 million for the second quarter of 2012 and $30.2 million for the third quarter of 2011. Net loss for the third quarter of 2012, calculated in accordance with generally accepted accounting principles ("GAAP"), was $4.2 million or $0.14 per share compared with a net loss of $2.1 million or $0.07 per share for the second quarter of 2012 and a net loss of $2.7 million or $0.09 per share for the third quarter of 2011. Adjusted earnings before stock-based compensation, interest, taxes, and depreciation ("adjusted EBITDA") was an adjusted EBITDA loss of $3.2 million for the third quarter of 2012, compared to an adjusted EBITDA loss of $1.7 million for the second quarter of 2012 and an adjusted EBITDA loss of $1.3 million for the third quarter of 2011.


"During the quarter, we restructured our business to focus on our core copper and fiber based product lines with a major emphasis on FiberLAN and next generation broadband products," stated Mory Ejabat, Zhone's chief executive officer. "As a result of that restructuring, we believe that we can return to profitability in the fourth quarter through better gross margins and substantially lower operating expenses."

Cash, cash equivalents and short-term investments at September 30, 2012 was $10.3 million compared to $18.2 million at December 31, 2011.

Zhone will conduct a conference call and audio webcast today, October 17, 2012, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its third quarter 2012 results. This call is open to the public by dialing +1 (866) 713-8564 for U.S. callers and +1 (617) 597-5312forinternational callers and then entering passcode 36366758. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.

A replay of the conference call will be available after the original call by dialing +1 (888) 286-8010for U.S. callers and +1 (617) 801-6888for international callers and then entering passcode 17842684. An audio webcast replay will also be available online at http://www.zhone.com/investors/ for approximately one week following the original call.

Non-GAAP Financial Measures

To supplement Zhone's consolidated financial statements presented in accordance with GAAP, Zhone uses adjusted EBITDA, a non-GAAP measure Zhone believes is appropriate to enhance an overall understanding of Zhone's past financial performance and prospects for the future. These adjustments to GAAP results are made with the intent of providing greater transparency to supplemental information used by management in its financial and operational decision-making. These non-GAAP results are among the primary indicators that management uses as a basis for making operating decisions because they provide meaningful supplemental information regarding the Company's operational performance, including the Company's ability to provide cash flows to invest in research and development, and to fund capital expenditures. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation between net loss calculated on a GAAP basis and adjusted EBITDA on a non-GAAP basis is provided in a table immediately following the Unaudited Condensed Consolidated Statements of Comprehensive Loss.

About Zhone Technologies

Zhone Technologies, Inc. (NAS: ZHNE) is a global leader in all IP multi-service access solutions, serving more than 750 of the world's most innovative network operators. The IP Zhone is the only solution that enables service providers to build the network of the future...today, supporting end-to-end Voice, Data, Entertainment Social Media, Business, Mobile Backhaul and Mobility service. Zhone is committed to building the fastest and highest quality All IP Multi-Service solution for its customers. Zhone is headquartered in California and its products are manufactured in the USA in a facility that is emission, waste-water and CFC free.

Zhone, the Zhone logo, and all Zhone product names are trademarks of Zhone Technologies, Inc. Other brand and product names are trademarks of their respective holders.Specifications, products, and/or products names are all subject to change without notice.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "target," "will," "would," variations of such words, and similar expressions are intended to identify forward-looking statements. In addition, forward-looking statements include, among others, statements that refer to financial estimates; projections of revenue, margins, expenses or other financial items. Readers are cautioned that actual results could differ materially from those expressed in or contemplated by the forward-looking statements. Factors that could cause actual results to differ include, but are not limited to, commercial acceptance of the Company's products; intense competition in the communications equipment market; the Company's ability to execute on its strategy and operating plans; and economic conditions specific to the communications, networking, internet and related industries. In addition, please refer to the risk factors contained in the Company's SEC filings available at www.sec.gov, including without limitation, the Company's annual report on Form 10-K for the year ended December 31, 2011 and the Company's quarterly report on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements for any reason.

ZHONE TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2012

2012

2011

2012

2011

Net revenue

$

29,198

$

30,835

$

30,204

$

87,095

$

91,070

Cost of revenue

20,920

21,556

19,901

$

61,148

59,101

Stock-based compensation

46

7

29

$

63

50

Gross profit

8,232

9,272

10,274

25,884

31,919

Operating expenses:

Research and product development (1)

5,090

4,820

5,294

$

14,835

16,259

Sales and marketing (1)

4,976

4,825

5,557

$

14,516

16,450

General and administrative (1)

2,305

1,719

2,154

$

6,118

6,318

Total operating expenses

12,371

11,364

13,005

35,469

39,027

Operating loss

(4,139

)

(2,092

)

(2,731

)

$

(9,585

)

(7,108

)

Other expense, net

(45

)

6

(4

)

$

(66

)

(9

)

Loss before income taxes

(4,184

)

(2,086

)

(2,735

)

(9,651

)

(7,117

)

Income tax provision (benefit)

14

16

13

$

63

(33

)

Net loss

$

(4,198

)

$

(2,102

)

$

(2,748

)

$

(9,714

)

$

(7,084

)

Other comprehensive loss

(7

)

(20

)

(30

)

$

(23

)

(37

)

Comprehensive loss

$

(4,205

)

$

(2,122

)

$

(2,778

)

$

(9,737

)

$

(7,121

)

Weighted average shares outstanding

Basic

31,086

30,985

30,701

30,927

30,645

Diluted

31,086

30,985

30,701

30,927

30,645

Earnings per common share net income (loss)

Basic

$

(0.14

)

$

(0.07

)

$

(0.09

)

$

(0.31

)

$

(0.23

)

Diluted

$

(0.14

)

$

(0.07

)

$

(0.09

)

$

(0.31

)

$

(0.23

)

(1) Amounts include stock-based compensation costs as follows:

Research and product development

212

41

89

$

297

189

Sales and marketing

182

33

174

$

250

279

General and administrative

394

182

639

$

656

936

788

256

902

1,203

1,404

GAAP net loss

$

(4,198

)

$

(2,102

)

$

(2,748

)

$

(9,714

)

$

(7,084

)

Stock-based compensation

834

263

931

1,266

1,454

Interest expense

26

9

33

53

110

Income taxes

14

16

13

63

(33

)

Depreciation

77

80

447

234

1,343

Non-GAAP Adjusted EBITDA loss

$

(3,247

)

$

(1,734

)

$

(1,324

)

$

(8,098

)

$

(4,210

)

ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES


Condensed Consolidated Balance Sheets
(In thousands)

September 30,

December 31,

2012

2011

Assets

Current assets:

Cash, cash equivalents and short-term investments

$

10,274

$

18,190

Accounts receivable

26,106

31,598

Inventories

25,379

27,393

Prepaid expenses and other current assets

2,619

2,672

Total current assets

64,378

79,853

Property and equipment, net

637

608

Restricted cash

-

58

Other assets

214

213

Total assets

$

65,229

$

80,732

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

11,663

$

11,797

Line of credit

10,000

15,000

Accrued and other liabilities

8,363

10,029

Total current liabilities

30,026

36,826

Other long-term liabilities

4,018

4,379

Total liabilities

34,044

41,205

Stockholders' equity:

Common stock

31

31

Additional paid-in capital

1,072,786

1,071,390

Other stockholders' equity

213

237

Accumulated deficit

(1,041,845

)

(1,032,131

)

Total stockholders' equity

31,185

39,527

Total liabilities and stockholders' equity

$

65,229

$

80,732



Zhone Investor Relations:
+1 510-777-7013
+1 510-777-7001 (Fax)
investor-relations@zhone.com
or
Zhone Public Relations:
+1 404-460-8578
aurora.arlet@edelman.com

KEYWORDS: United States North America California

INDUSTRY KEYWORDS:

The article Zhone Technologies Reports Third Quarter 2012 Financial Results originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.