Zhone Technologies Reports Fourth Quarter 2013 Financial Results

  Zhone Technologies Reports Fourth Quarter 2013 Financial Results

Business Wire

OAKLAND, Calif. -- January 22, 2014

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

Revenue for the fourth quarter of 2013 was $32.3 million, compared to $31.5
million for the third quarter of 2013 and $28.3 million for the fourth quarter
of 2012. Net income for the fourth quarter of 2013, calculated in accordance
with generally accepted accounting principles (“GAAP”), was $1.4 million or
$0.04 per share compared with net income of $1.6 million or $0.05 per share
for the third quarter of 2013 and 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 $1.6 million for the fourth quarter of 2013,
compared to an adjusted EBITDA profit of $1.8 million for the third quarter of
2013 and an adjusted EBITDA profit of $0.9 million for the fourth quarter of
2012.

"When we entered 2013, our primary financial goal was to generate
profitability for the year as a whole,” stated Mory Ejabat, Zhone
Technologies' chief executive officer. “Having achieved both top line growth
and profitability, we enter 2014 with two primary financial objectives:
generating continued revenue growth and improving profitability. Our industry
leading MxK and new FiberLAN Optical LAN Solution make us optimistic that we
can continue toward that path adding momentum as we move forward."

Cash and cash equivalents at December 31, 2013 was $15.7 million compared to
$11.1 million at December 31, 2012.

Zhone will conduct a conference call and audio webcast today, January 22,
2014, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its fourth
quarter 2013 results. This call is open to the public by dialing +1 (877)
415-3183 for U.S. callers and +1 (857) 244-7326  for  international callers
and then entering passcode 67293561. 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 89416110. 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 and
the Company's quarterly report on Form 10-Q for the quarters ended March 31,
2013, June 30, 2013, and September 30, 2013. 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. AND SUBSIDIARIES

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,
                 2013         2013         2012         2013          2012
                                                                   
Net revenue      $ 32,306     $ 31,515     $ 28,290     $ 122,248     $ 115,385
Cost of            20,197       19,608       17,890       76,116        79,038
revenue
Stock-based       -         -         -         -          63      
compensation
Gross profit      12,109    11,907    10,400    46,132     36,284  
Operating
expenses:
Research and
product            3,812        3,934        3,707        15,326        18,542
development
(1)
Sales and          5,620        4,644        4,788        20,159        19,304
marketing (1)
General and
administrative    1,283     1,702     1,100     6,199      7,218   
(1)
Total
operating         10,715    10,280    9,595     41,684     45,064  
expenses
Operating          1,394        1,627        805          4,448         (8,780  )
income (loss)
Other income      2         (25    )   (45    )   (92     )   (111    )
(expense), net
Income (loss)
before income      1,396        1,602        760          4,356         (8,891  )
taxes
Income tax
provision         (36    )   6         61        42         124     
(benefit)
Net income       $ 1,432    $ 1,596    $ 699      $ 4,314     $ (9,015  )
(loss)
Other
comprehensive     (38    )   (30    )   3         (151    )   (21     )
income (loss)
Comprehensive    $ 1,394    $ 1,566    $ 702      $ 4,163     $ (9,036  )
income (loss)
                                                                      
Weighted
average shares
outstanding
Basic              31,896       31,480       31,114       31,429        31,010
Diluted            34,287       33,344       31,114       33,021        31,010
                                                                      
Earnings per
common share
Basic            $ 0.04       $ 0.05       $ 0.02       $ 0.14        $ (0.29   )
Diluted          $ 0.04       $ 0.05       $ 0.02       $ 0.13        $ (0.29   )
                                                                      
                                                                      
(1) Amounts
include
stock-based
compensation
costs as
follows:
Research and
product          $ 1          $ 1          $ -          $ 2           $ 297
development
Sales and          1            1            -            2             250
marketing
General and       55        53        48        420        704     
administrative
                 $ 57         $ 55         $ 48         $ 424         $ 1,251
                                                                      
GAAP net         $ 1,432      $ 1,596      $ 699        $ 4,314       $ (9,015  )
income (loss)
Stock-based        57           55           48           424           1,314
compensation
Interest           11           25           49           85            102
expense
Income taxes       (36    )     6            61           42            124
Depreciation      101       92        82        367        316     
Non-GAAP
Adjusted         $ 1,565    $ 1,774    $ 939      $ 5,232     $ (7,159  )
EBITDA income
(loss)


ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(In thousands)
                                                             
                                               December 31,     December 31,
                                               2013             2012
                                                                
Assets
Current assets:
Cash, cash equivalents and short-term          $ 15,686         $ 11,119
investments
Accounts receivable                              33,328           25,820
Inventories                                      19,562           21,404
Prepaid expenses and other current assets       2,269         2,590      
Total current assets                             70,845           60,933
Property and equipment, net                      718              583
Other assets                                    254           208        
Total assets                                   $ 71,817       $ 61,724     
                                                                
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable                               $ 12,689         $ 7,229
Line of credit                                   10,000           10,000
Accrued and other liabilities                   8,865         8,836      
Total current liabilities                        31,554           26,065
Other long-term liabilities                     2,704         3,719      
Total liabilities                               34,258        29,784     
Stockholders’ equity:
Common stock                                     32               31
Additional paid-in capital                       1,074,294        1,072,839
Other comprehensive income                       65               216
Accumulated deficit                             (1,036,832 )   (1,041,146 )
Total stockholders’ equity                      37,559        31,940     
Total liabilities and stockholders' equity     $ 71,817       $ 61,724     

Contact:

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