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Press ReleaseZhone Technologies Reports Fourth Quarter 2007 Financial ResultsOakland, CA — January 31, 2008 —
Zhone Technologies, Inc. (NASDAQ: ZHNE), a global provider of advanced
communications equipment and a leader in VoIP, IPTV, and Ethernet over copper
and fiber access lines, today reported its financial results for the fourth
quarter ended December 31, 2007.
Revenue for the fourth quarter of 2007 was $46.6 million compared with $41.6
million for the third quarter of 2007 and $44.3 million for the fourth quarter
of 2006. Net loss for the fourth quarter of 2007, calculated in accordance
with generally accepted accounting principles (“GAAP”), was $1.2 million or
$0.01 per share compared with a net loss of $1.5 million or $0.01 per share
for the third quarter of 2007, and a net loss of $4.6 million or $0.03 per
share for the fourth quarter of 2006. Pro forma earnings before stock-based
compensation, gain on sale of patents, interest, taxes, impairment,
depreciation and amortization (“EBITDA”) was breakeven for the fourth quarter
of 2007, compared to a pro forma EBITDA loss of $4.9 million for the third
quarter of 2007, and pro forma EBITDA loss of $2.3 million for the fourth
quarter of 2006.
“Our fourth quarter results, highlighted by very strong revenue growth in our
international markets, confirm that service providers around the world are
adopting our market leading access technologies," said Mory Ejabat,
chairman and chief executive officer of Zhone Technologies, Inc. "Our
recent divestitures of legacy product lines allow us to focus maximum
resources on pure-play access technologies for these emerging global
markets.”
Zhone will hold a conference call and audio webcast today, January 31, 2008,
at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its fourth quarter 2007
results. This call is open to the public by dialing +1 (800) 706-7741 for U.S.
callers and +1 (617) 614-3471 for international callers and then entering
passcode 77284281. The audio webcast will be simultaneously available on the
Investor Relations section of Zhone's website at http://www.zhone.com/about/investors/.
A replay of the conference call will be available for approximately one week
following 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
29612165. An audio webcast replay will also be available online at http://www.zhone.com/about/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 pro forma 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 pro forma
EBITDA on a non-GAAP basis is provided in a table immediately following the
Unaudited Condensed Consolidated Statements of Operations. ZHONE TECHNOLOGIES, INC. Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended Year Ended --------------------------- -------------------- December September December December December 31, 30, 31, 31, 31, 2007 2007 2006 2007 2006 -------- --------- -------- --------- ---------- Net revenue $46,613 $41,604 $44,306 $175,448 $194,344 Cost of revenue 30,493 29,066 28,214 116,074 130,857 Stock-based compensation 28 67 155 296 892 -------- --------- -------- --------- ---------- Gross profit 16,092 12,471 15,937 59,078 62,595 -------- --------- -------- --------- ---------- Operating expenses: Research and product development(1) 7,382 8,154 8,628 32,720 36,099 Sales and marketing(1) 8,051 8,446 8,643 33,192 38,225 General and administrative(1) 1,643 2,260 2,968 9,511 14,036 Gain on sale of patents - (5,000) - (5,000) - Amortization and impairment of intangible assets - - - - 116,430 -------- --------- -------- --------- ---------- Total operating expenses 17,076 13,860 20,239 70,423 204,790 -------- --------- -------- --------- ---------- Operating loss (984) (1,389) (4,302) (11,345) (142,195) Other expense, net (142) (16) (248) (363) (207) -------- --------- -------- --------- ---------- Loss before income taxes (1,126) (1,405) (4,550) (11,708) (142,402) Income tax provision 106 125 80 394 264 -------- --------- -------- --------- ---------- Net loss $(1,232) $(1,530) $(4,630) $(12,102) $(142,666) ======== ========= ======== ========= ========== Basic and diluted net loss per share $(0.01) $(0.01) $(0.03) $(0.08) $(0.96) Weighted average shares outstanding used to compute basic and diluted net loss per share 149,907 149,715 149,142 149,623 148,727 (1) Amounts include stock- based compensation costs as follows: Research and product development 92 179 333 717 1,632 Sales and marketing 91 154 294 603 1,380 General and administrative 193 308 498 1,250 1,601 -------- --------- -------- --------- ---------- 376 641 1,125 2,570 4,613 GAAP net loss $(1,232) $(1,530) $(4,630) $(12,102) $(142,666) Stock-based compensation 404 708 1,280 2,866 5,505 Interest expense, net 118 38 299 400 446 Income taxes 106 125 80 394 264 Depreciation 616 716 662 2,660 2,619 Gain on sale of patents - (5,000) - (5,000) - Amortization and impairment of intangible assets - - - - 116,430 -------- --------- -------- --------- ---------- Non-GAAP pro forma EBITDA $12 $(4,943) $(2,309) $(10,782) $(17,402) ======== ========= ======== ========= ========== Revenue by product line: SLMS 32,079 29,227 26,174 123,184 118,209 Legacy, service and other 14,534 12,377 18,132 52,264 76,135 -------- --------- -------- --------- ---------- 46,613 41,604 44,306 175,448 194,344 ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands) December December 31, 31, 2007 2006 --------- --------- Assets Current assets: Cash, cash equivalents and short-term investments $50,165 $64,310 Accounts receivable 33,258 31,828 Inventories 44,698 45,036 Prepaid expenses and other current assets 3,804 3,852 --------- --------- Total current assets 131,925 145,026 Property and equipment, net 20,818 23,704 Goodwill 70,401 70,737 Restricted cash 186 636 Other assets 76 79 --------- --------- Total assets $223,406 $240,182 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $21,276 $18,893 Line of credit 15,000 14,500 Current portion of long-term debt 265 7,673 Accrued and other liabilities 17,888 20,088 --------- --------- Total current liabilities 54,429 61,154 Long-term debt, less current portion 19,140 19,376 Other long-term liabilities 290 2,048 --------- --------- Total liabilities 73,859 82,578 --------- --------- Stockholders' equity: Common stock 150 149 Additional paid-in capital 1,061,849 1,058,317 Other stockholders' equity 610 98 Accumulated deficit (913,062) (900,960) --------- --------- Total stockholders' equity 149,547 157,604 --------- --------- Total liabilities and stockholders' equity $223,406 $240,182 About Zhone Technologies, Inc.
Zhone Technologies, Inc. (NASDAQ: ZHNE) is a provider of advanced
communications equipment to more than 600 operators worldwide. The
company’s broad line of access networking solutions enables the full
range of multi-play services, including residential and business
broadband, VoIP, IPTV, and Ethernet. Zhone’s converged access platform
improves network agility and reduces costs, allowing operators to
rapidly deploy premium services on their existing copper and fiber
infrastructure while providing a seamless migration path to an
efficient, all-IP network. www.zhone.com
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