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Press ReleaseZhone Technologies Reports Second Quarter 2008 Financial ResultsOakland, CA — July 22, 2008 —
Zhone Technologies, Inc. (NASDAQ:ZHNE), a global leader in multi-service
access solutions, today reported its financial results for the second quarter
ended June 30, 2008.
Revenue for the second quarter of 2008 was $40.1 million compared with $43.0
million for the first quarter of 2008 and $44.1 million for the second quarter
of 2007. Net loss for the second quarter of 2008, calculated in accordance
with generally accepted accounting principles ("GAAP"), was $80.3
million or $0.53 per share compared with a net loss of $0.9 million or $0.01
per share for the first quarter of 2008, and a net loss of $4.6 million or
$0.03 per share for the second quarter of 2007. Pro forma earnings before
stock-based compensation, interest, taxes, depreciation, lease liability
accruals, gain on sale of intangible assets, and goodwill impairment
("EBITDA") was a $5.2 million loss for the second quarter of 2008,
compared to a pro forma EBITDA loss of $2.8 million for the first quarter of
2008, and pro forma EBITDA loss of $2.9 million for the second quarter of
2007.
Zhone's chief executive officer Mory Ejabat stated, "Our results for
the second quarter were unfortunately overshadowed by events with our largest
customer in Latin America, who made a request for unacceptably aggressive
price reductions late in the negotiations over a multi-million dollar
expansion. Our fundamentals in other markets remain strong, and we will
continue to build on them to improve gross margins while reducing expenses to
achieve profitability."
Zhone will conduct a conference call and audio webcast today, July 22, 2008,
at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its second quarter 2008
results. This call is open to the public by dialing +1 (800) 901-5213 for U.S.
callers and +1 (617) 786-2962 for international callers and then entering
passcode 83213297. 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 66470411. 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 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 Six Months Ended ----------------------------- ------------------- June 30, March 31, June 30, June 30, June 30, 2008 2008 2007 2008 2007 ------------------------------------------------- Net revenue $ 40,069 $ 43,033 $ 44,085 $ 83,102 $ 87,231 Cost of revenue 28,412 29,177 29,028 57,589 56,515 Stock-based compensation 41 50 81 91 201 ------------------------------------------------- Gross profit 11,616 13,806 14,976 25,422 30,515 ------------------------------------------------- Operating expenses: Research and product development (1) 7,156 7,144 8,528 14,300 17,184 Sales and marketing (1) 7,855 7,742 8,068 15,597 16,695 General and administrative (1) 6,388 3,012 2,783 9,400 5,608 Gain on sale of intangible assets (93) (3,204) - (3,297) - Goodwill impairment 70,401 - - 70,401 - ------------------------------------------------- Total operating expenses 91,707 14,694 19,379 106,401 39,487 ------------------------------------------------- Operating loss (80,091) (888) (4,403) (80,979) (8,972) Other expense, net (150) (20) (26) (170) (205) ------------------------------------------------- Loss before income taxes (80,241) (908) (4,429) (81,149) (9,177) Income tax provision 93 33 125 126 163 ------------------------------------------------- Net loss $(80,334) $ (941) $ (4,554) $(81,275) $ (9,340) ================================================= Basic and diluted net loss per share $ (0.53) $ (0.01) $ (0.03) $ (0.54) $ (0.06) Weighted average shares outstanding used to compute basic and diluted net loss per share 150,260 150,072 149,533 150,166 149,462 (1) Amounts include stock-based compensation costs as follows: Research and product development 128 145 184 273 446 Sales and marketing 128 138 147 266 358 General and administrative 343 303 360 646 749 ------------------------------------------------- 599 586 691 1,185 1,553 GAAP net loss $(80,334) $ (941) $ (4,554) $(81,275) $ (9,340) Stock-based compensation 640 636 772 1,276 1,754 Interest expense, net 190 136 77 326 244 Income taxes 93 33 125 126 163 Depreciation 579 556 672 1,135 1,328 Lease liability accrual 3,305 - - 3,305 - Gain on sale of intangible assets (93) (3,204) - (3,297) - Goodwill impairment 70,401 - - 70,401 - ------------------------------------------------- Non-GAAP pro forma EBITDA $ (5,219) $ (2,784) $ (2,908) $ (8,003) $ (5,851) ================================================= ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands) June 30, December 31, 2008 2007 ----------- ------------- Assets Current assets: Cash, cash equivalents and short-term investments $ 50,068 $ 50,165 Accounts receivable 30,246 33,258 Inventories 37,199 44,698 Prepaid expenses and other current assets 2,624 3,804 ------------------------- Total current assets 120,137 131,925 Property and equipment, net 20,482 20,818 Goodwill - 70,401 Restricted cash 121 186 Other assets 62 76 ------------------------- Total assets $ 140,802 $ 223,406 ========================= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 17,525 $ 21,276 Line of credit 15,000 15,000 Current portion of long-term debt 356 265 Accrued and other liabilities 14,485 17,888 ------------------------- Total current liabilities 47,366 54,429 Long-term debt, less current portion 18,884 19,140 Other long-term liabilities 4,950 290 ------------------------- Total liabilities 71,200 73,859 ------------------------- Stockholders' equity: Common stock 150 150 Additional paid-in capital 1,063,372 1,061,849 Other stockholders' equity 417 610 Accumulated deficit (994,337) (913,062) ------------------------- Total stockholders' equity 69,602 149,547 ------------------------- Total liabilities and stockholders' equity $ 140,802 $ 223,406 ========================= About Zhone Technologies -- Access for a Converging World
Zhone Technologies, Inc. (NASDAQ: ZHNE) is a global leader in
multi-service access network solutions, serving more than 700 of the
world's most innovative network operators. The company offers the
industry's broadest fully-integrated portfolio of MSAP, FTTx, EFM
and Wi-Fi access technologies, enabling a full suite of services,
including residential and business broadband, VoIP, and High-Definition
IPTV. Zhone's converged multi-service access platform helps
operators rapidly deploy premium services using copper, fiber, and
wireless while improving network agility and reducing costs.
www.zhone.com
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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 projected improvement of
gross margins; and anticipated reduction of expenses. 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 our products; intense competition in the
communications equipment market; our ability to execute on our 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 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, 2007 and Zhone's quarterly reports on Form 10-Q
for the quarter ended March 31, 2008. 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. Zhone undertakes no obligation to
update or revise any forward-looking statements for any reason. |
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