Zhone Technologies Reports Fourth Quarter 2012 Financial Results

  Zhone Technologies Reports Fourth Quarter 2012 Financial Results

Business Wire

OAKLAND, Calif. -- January 23, 2013

Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in FTTx network
access solutions, today reported its financial results for the fourth quarter
ended December 31, 2012.

Revenue for the fourth quarter of 2012 was $28.3 million compared to $29.2
million for the third quarter of 2012 and $33.4 million for the fourth quarter
of 2011. Net profit for the fourth quarter of 2012, calculated in accordance
with generally accepted accounting principles (“GAAP”), was $0.7 million or
$0.02 per share compared with a net loss of $4.2 million or $0.14 per share
for the third quarter of 2012 and a net loss of $4.6 million or $0.15 per
share for the fourth quarter of 2011. Adjusted earnings before stock-based
compensation, interest, taxes, depreciation and impairment of long-lived
assets (“adjusted EBITDA”) was an adjusted EBITDA profit of $0.9 million for
the fourth quarter of 2012, compared to an adjusted EBITDA loss of $3.2
million for the third quarter of 2012 and an adjusted EBITDA profit of $0.3
million for the fourth quarter of 2011.

"We’re very pleased that we met our primary financial goal for 2012 of
achieving positive quarterly adjusted EBITDA and at the same time generated
positive quarterly GAAP net income," stated Mory Ejabat, Zhone's chief
executive officer. "For 2013, our primary financial goal will be maintaining
that profitability through revenue growth in the second half of the year based
on the continued success of our industry leading MXK and the generation of new
revenue from our recently launched FiberLAN Optical LAN Solution."

Cash, cash equivalents and short-term investments at December 31, 2012 was
$11.1 million compared to $18.2 million at December 31, 2011.

Zhone will conduct a conference call and audio webcast today, January 23,
2013, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its fourth
quarter 2012 results. This call is open to the public by dialing +1 (866)
713-8564 for U.S. callers and +1 (617) 597-5312  for  international callers
and then entering passcode 44964913. 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 88555818. 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. (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 industries. In
addition, please refer to the risk factors contained inthe Company'sSEC
filings available at www.sec.gov, including without limitation,the
Company'sannual 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, June 30, 2012 and September 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 Income (Loss)
(In thousands, except per share data)
                                                                 
                                                                      
                 Three Months Ended                     Twelve Months Ended
                 December     September   December     December      December
                 31,          30,          31,          31,           31,
                  2012      2012      2011      2012       2011    
                                                                      
Net revenue      $ 28,290     $ 29,198     $ 33,432     $ 115,385     $ 124,502
Cost of            17,890       20,920       21,379       79,038        80,480
revenue
Stock-based       -         46        11        63         61      
compensation
Gross profit      10,400    8,232     12,042    36,284     43,961  
Operating
expenses:
Research and
product            3,707        5,090        5,121        18,542        21,380
development
(1)
Sales and          4,788        4,976        5,847        19,304        22,297
marketing (1)
General and
administrative     1,100        2,305        1,466        7,218         7,784
(1)
Impairment of
long-lived        -         -         4,236     -          4,236   
assets
Total
operating         9,595     12,371    16,670    45,064     55,697  
expenses
Operating          805          (4,139 )     (4,628 )     (8,780  )     (11,736 )
income (loss)
Other expense,    (45    )   (45    )   79        (111    )   70      
net
Income (loss)
before income      760          (4,184 )     (4,549 )     (8,891  )     (11,666 )
taxes
Income tax        61        14        93        124        60      
provision
Net income       $ 699        $ (4,198 )   $ (4,642 )   $ (9,015  )   $ (11,726 )
(loss)
Other
comprehensive     3         (8     )   (3     )   (21     )   (40     )
loss
Comprehensive    $ 702      $ (4,206 )  $ (4,645 )  $ (9,036  )  $ (11,766 )
income (loss)
                                                                      
Weighted
average shares
outstanding
Basic              31,114       31,086       30,766       30,974        30,671
Diluted            31,114       31,086       30,766       30,974        30,671
                                                                      
Earnings per
common share
Basic            $ 0.02       $ (0.14  )   $ (0.15  )   $ (0.29   )   $ (0.38   )
Diluted          $ 0.02       $ (0.14  )   $ (0.15  )   $ (0.29   )   $ (0.38   )
                                                                      
                                                                      
(1) Amounts
include
stock-based
compensation
costs as
follows:
Research and
product          $ -          $ 212        $ 55         $ 297         $ 244
development
Sales and          -            182          71           250           350
marketing
General and       48        394       79        704        1,015   
administrative
                 $ 48       $ 788      $ 205      $ 1,251     $ 1,609   
                                                                      
GAAP net         $ 699        $ (4,198 )   $ (4,642 )   $ (9,015  )   $ (11,726 )
income (loss)
Stock-based        48           834          216          1,314         1,670
compensation
Interest           49           26           (66    )     102           44
expense
Income taxes       61           14           93           124           60
Depreciation       82           77           467          316           1,810
Impairment of
long-lived        -         -         4,236     -          4,236   
assets
Non-GAAP
Adjusted         $ 939      $ (3,247 )  $ 304      $ (7,159  )  $ (3,906  )
EBITDA income
(loss)
                                                                                


ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(In thousands)
                                                             
                                               December 31,     December 31,
                                               2012             2011
                                                                
Assets
Current assets:                                                 
Cash, cash equivalents and short-term          $ 11,119         $ 18,190
investments
Accounts receivable                              25,820           31,598
Inventories                                      21,404           27,393
Prepaid expenses and other current assets       2,590         2,672      
Total current assets                             60,933           79,853
Property and equipment, net                      583              608
Restricted cash                                  -                58
Other assets                                    208           213        
Total assets                                   $ 61,724       $ 80,732     
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                               $ 7,229          $ 11,797
Line of credit                                   10,000           15,000
Accrued and other liabilities                   8,836         10,029     
Total current liabilities                        26,065           36,826
Other long-term liabilities                     3,719         4,379      
Total liabilities                               29,784        41,205     
Stockholders’ equity:
Common stock                                     31               31
Additional paid-in capital                       1,072,839        1,071,390
Other comprehensive income                       216              237
Accumulated deficit                             (1,041,146 )   (1,032,131 )
Total stockholders’ equity                      31,940        39,527     
Total liabilities and stockholders' equity     $ 61,724       $ 80,732     
                                                                             

Contact:

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
 
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