Zhone Technologies Reports First Quarter 2013 Financial Results

  Zhone Technologies Reports First Quarter 2013 Financial Results

Business Wire

OAKLAND, Calif. -- April 17, 2013

Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in FTTx network
access solutions, today reported its financial results for the first quarter
ended March 31, 2013.

Revenue for the first quarter of 2013 was $28.4 million compared to $27.1
million for the first quarter of 2012 and $28.3 million for the fourth quarter
of 2012. Net income for the first quarter of 2013, calculated in accordance
with generally accepted accounting principles (“GAAP”), was $0.2 million or
$0.01 per share compared with a net loss of $3.4 million or $0.11 per share
for the first quarter of 2012 and a net income of $0.7 million or $0.02 per
share for the fourth quarter of 2012. Adjusted earnings before stock-based
compensation, interest, taxes, and depreciation (“adjusted EBITDA”) was an
adjusted EBITDA profit of $0.6 million for the first quarter of 2013, compared
to an adjusted EBITDA loss of $3.1 million for the first quarter of 2012 and
an adjusted EBITDA profit of $0.9 million for the fourth quarter of 2012.

"We’re very pleased to announce that we achieved or exceeded our revenue,
gross margin and expense targets thereby generating positive free cash flow
from operations and further improving our liquidity," stated Mory Ejabat,
Zhone's chief executive officer. "We’re now focused on generating more
profitability in each consecutive quarter 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 March 31, 2013 was $11.7
million compared to $11.1 million at December 31, 2012.

Zhone will conduct a conference call and audio webcast today, April 17, 2013,
at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its first quarter 2013
results. This call is open to the public by dialing +1 (866) 314-5232 for U.S.
callers and +1 (617) 213-8052  for  international callers and then entering
passcode 35982482. 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 55368696. 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 Income (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, 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
                                        March 31,   December 31,   March 31,
                                         2013       2012       2012   
                                                                    
Net revenue                             $ 28,379     $  28,290      $ 27,062
Cost of revenue                           17,875        17,890        18,672
Stock-based compensation                 -          -          10     
Gross profit                             10,504     10,400     8,380  
Operating expenses:
Research and product development (1)      3,660         3,707         4,925
Sales and marketing (1)                   4,822         4,788         4,715
General and administrative (1)           1,689      1,100      2,094  
Total operating expenses                 10,171     9,595      11,734 
Operating income (loss)                   333           805           (3,354 )
Other expense, net                       (71    )    (45     )   (27    )
Income (loss) before income taxes         262           760           (3,381 )
Income tax provision                     32         61         33     
Net income (loss)                       $ 230        $  699         $ (3,414 )
Other comprehensive income (loss)        (5     )    3          4      
Comprehensive income (loss)             $ 225      $  702       $ (3,410 )
                                                                    
Weighted average shares outstanding
Basic                                     31,118        31,114        30,857
Diluted                                   31,765        31,114        30,857
                                                                    
Earnings per common share
Basic                                   $ 0.01       $  0.02        $ (0.11  )
Diluted                                 $ 0.01       $  0.02        $ (0.11  )
                                                                    
                                                                    
(1) Amounts include stock-based
compensation costs as follows:
Research and product development        $ -          $  -           $ 44
Sales and marketing                       -             -             35
General and administrative               178        48         80     
                                        $ 178      $  48        $ 159    
                                                                    
GAAP net income (loss)                  $ 230        $  699         $ (3,414 )
Stock-based compensation                  178           48            169
Interest expense                          39            49            18
Income taxes                              32            61            33
Depreciation                             82         82         77     
Non-GAAP Adjusted EBITDA income         $ 561      $  939       $ (3,117 )
(loss)
                                                                             

ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES



Condensed Consolidated Balance Sheets

(In thousands)
                                                             
                                               March 31,        December 31,
                                                 2013             2012
                                                                
Assets
Current assets:
Cash, cash equivalents and short-term          $ 11,662         $ 11,119
investments
Accounts receivable                              24,241           25,820
Inventories                                      21,158           21,404
Prepaid expenses and other current assets       2,411         2,590      
Total current assets                             59,472           60,933
Property and equipment, net                      617              583
Other assets                                    195           208        
Total assets                                   $ 60,284       $ 61,724     
                                                                             
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                               $ 5,025          $ 7,229
Line of credit                                   10,000           10,000
Accrued and other liabilities                   9,707         8,836      
Total current liabilities                        24,732           26,065
Other long-term liabilities                     3,339         3,719      
Total liabilities                               28,071        29,784     
Stockholders’ equity:
Common stock                                     31               31
Additional paid-in capital                       1,072,887        1,072,839
Other comprehensive income                       211              216
Accumulated deficit                             (1,040,916 )   (1,041,146 )
Total stockholders’ equity                      32,213        31,940     
Total liabilities and stockholders' equity     $ 60,284       $ 61,724     

Contact:

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