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8-K - FORM 8-K - ZHONE TECHNOLOGIES INCd8k.htm

Exhibit 99.1

 

        LOGO
LOGO        
Contacts        
Zhone Investor Relations:      Zhone Public Relations:   
Tel: +1 510.777.7013      Tel: +1 702.644.2465   
Fax: +1 510.777.7001      E: sara.zavala@edelman.com   
E: investor-relations@zhone.com        

Zhone Technologies Reports First Quarter 2011 Financial Results

Oakland, CA — April 20, 2011 — Zhone Technologies, Inc. (NASDAQ: ZHNE), a global pioneer in FTTx network access solutions, today reported its financial results for the first quarter ended March 31, 2011.

Revenue for the first quarter of 2011 was $29.6 million compared to $31.1 million for the first quarter of 2010 and $31.0 million for the fourth quarter of 2010. Net loss for the first quarter of 2011, calculated in accordance with generally accepted accounting principles (“GAAP”), was $2.4 million or $0.08 per share compared with a net loss of $3.2 million or $0.11 per share for the first quarter of 2010 and a net loss of $1.3 million or $0.04 per share for the fourth quarter of 2010. Adjusted earnings before stock-based compensation, interest, taxes, and depreciation (“adjusted EBITDA”) was an adjusted EBITDA loss of $1.8 million for the first quarter of 2011, compared to an adjusted EBITDA loss of $1.1 million for the first quarter of 2010 and an adjusted EBITDA loss of $0.7 million for the fourth quarter of 2010.

“During the first quarter, we saw continued strong interest in our MXK multiservice solution and a substantial increase in order backlog,” stated Mory Ejabat, Zhone’s chief executive officer. “We continue to forecast annual revenue growth in 2011 and quarterly adjusted EBITDA profitability.”

Cash, cash equivalents and short-term investments at March 31, 2011 was $19.2 million compared to $21.2 million at December 31, 2010. Cash net of debt obligations at March 31, 2011 was $9.2 million compared to $11.2 million at December 31, 2010.

Zhone will conduct a conference call and audio webcast today, April 20, 2011, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its first quarter 2011 results. This call is open to the public by dialing +1 (866) 770-7051 for U.S. callers and +1 (617) 213-8064 for international callers and then entering passcode 98126341. 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) 286-8010 for U.S. callers and +1 (617) 801-6888 for international callers and then entering passcode 88929723. 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 Operations.

About Zhone Technologies

Zhone Technologies, Inc. (NASDAQ: 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

 

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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, 2010. 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.

 

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ZHONE TECHNOLOGIES, INC.

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

 

     Three Months Ended  
     March 31,
2011
    December 31,
2010
    March 31,
2010
 

Net revenue

   $ 29,572      $ 31,016      $ 31,082   

Cost of revenue

     18,983        18,731        19,710   

Stock-based compensation

     10        11        55   
                        

Gross profit

     10,579        12,274        11,317   
                        

Operating expenses:

      

Research and product development (1)

     5,516        5,430        5,277   

Sales and marketing (1)

     5,494        6,147        5,780   

General and administrative (1)

     2,071        1,926        3,262   
                        

Total operating expenses

     13,081        13,503        14,319   
                        

Operating income (loss)

     (2,502     (1,229     (3,002

Other expense, net

     9        (49     (316
                        

Income (loss) before income taxes

     (2,493     (1,278     (3,318

Income tax provision (benefit)

     (53     (6     (114
                        

Net income (loss)

   $ (2,440   $ (1,272   $ (3,204
                        

Weighted average shares outstanding

      

Basic

     30,591        30,515        30,282   

Diluted

     30,591        30,515        30,282   

Earnings per common share net income (loss)

      

Basic

   $ (0.08   $ (0.04   $ (0.11

Diluted

   $ (0.08   $ (0.04   $ (0.11

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

      

Research and product development

     47        49        164   

Sales and marketing

     52        53        243   

General and administrative

     122        90        1,021   
                        
     221        192        1,428   

GAAP net income (loss)

   $ (2,440   $ (1,272   $ (3,204

Stock-based compensation

     231        203        1,483   

Interest expense

     49        30        322   

Income taxes

     (53     (6     (114

Depreciation

     453        324        446   
                        

Non-GAAP adjusted EBITDA profit (loss)

   $ (1,760   $ (721   $ (1,067
                        

 

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ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands)

 

     March 31,
2011
    December 31,
2010
 
Assets     

Current assets:

    

Cash, cash equivalents and short-term investments

   $ 19,179      $ 21,174   

Accounts receivable

     29,418        29,747   

Inventories

     28,905        31,048   

Prepaid expenses and other current assets

     2,515        2,514   
                

Total current assets

     80,017        84,483   

Property and equipment, net

     5,074        5,274   

Restricted cash

     58        58   

Other assets

     228        296   
                

Total assets

   $ 85,377      $ 90,111   
                
Liabilities and Stockholders’ Equity     

Current liabilities:

    

Accounts payable

   $ 10,783      $ 11,864   

Line of credit

     10,000        10,000   

Current portion of long-term debt

     —          —     

Accrued and other liabilities

     12,251        13,217   
                

Total current liabilities

     33,034        35,081   

Long-term debt, less current portion

     —          —     

Other long-term liabilities

     5,099        5,615   
                

Total liabilities

     38,133        40,696   
                

Stockholders’ equity:

    

Common stock

     31        30   

Additional paid-in capital

     1,069,791        1,069,513   

Other stockholders’ equity

     267        277   

Accumulated deficit

     (1,022,845     (1,020,405
                

Total stockholders’ equity

     47,244        49,415   
                

Total liabilities and stockholders’ equity

   $ 85,377      $ 90,111   
                

 

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