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Press ReleaseZhone Technologies Reports Third Quarter 2008 Financial ResultsOakland, CA — October 21, 2008 —
Zhone Technologies, Inc. (NASDAQ:ZHNE), a global leader in multi-service
access solutions, today reported its financial results for the third quarter
ended September 30, 2008.
Revenue for the third quarter of 2008 was $32.0 million compared with $40.1
million for the second quarter of 2008 and $41.6 million for the third quarter
of 2007. Net loss for the third quarter of 2008, calculated in accordance with
generally accepted accounting principles ("GAAP"), was $6.5 million
or $0.04 per share compared with a net loss of $80.3 million or $0.53 per
share for the second quarter of 2008, and a net loss of $1.5 million or $0.01
per share for the third quarter of 2007. Pro forma earnings before stock-based
compensation, interest, taxes, depreciation, restructuring, lease liability
accruals, gain on sale of intangible assets, and goodwill impairment
("EBITDA") was a $4.6 million loss for the third quarter of 2008,
compared to a pro forma EBITDA loss of $5.2 million for the second quarter of
2008, and pro forma EBITDA loss of $4.9 million for the third quarter of
2007.
Zhone's chief executive officer Mory Ejabat stated, "Our new product
releases and customer wins were unfortunately overshadowed by weaker than
expected financial performance. The global credit contraction caused many of
our customers to defer or reduce network expansion. Until the economic
environment improves, we will continue to reduce operating expenses and
improve gross margins by reducing the cost of our products."
Zhone will conduct a conference call and audio webcast today, October 21,
2008, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its third 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 Nine Months Ended ----------------------------- ------------------- September June 30, September September September 30, 30, 30, 30, 2008 2008 2007 2008 2007 ------------------------------------------------- Net revenue $ 32,020 $ 40,069 $ 41,604 $115,122 $128,835 Cost of revenue 22,332 28,412 29,066 79,921 85,581 Stock-based compensation 44 41 67 135 268 ------------------------------------------------- Gross profit 9,644 11,616 12,471 35,066 42,986 ------------------------------------------------- Operating expenses: Research and product development (1) 6,480 7,156 8,154 20,780 25,338 Sales and marketing (1) 6,483 7,855 8,446 22,080 25,141 General and administrative (1) 2,834 6,388 2,260 12,234 7,868 Gain on sale of intangible assets - (93) (5,000) (3,297) (5,000) Goodwill impairment - 70,401 - 70,401 - ------------------------------------------------- Total operating expenses 15,797 91,707 13,860 122,198 53,347 ------------------------------------------------- Operating loss (6,153) (80,091) (1,389) (87,132) (10,361) Other expense, net (326) (150) (16) (496) (221) ------------------------------------------------- Loss before income taxes (6,479) (80,241) (1,405) (87,628) (10,582) Income tax provision 50 93 125 176 288 ------------------------------------------------- Net loss $ (6,529) $(80,334) $ (1,530) $(87,804) $(10,870) ================================================= Basic and diluted net loss per share $ (0.04) $ (0.53) $ (0.01) $ (0.58) $ (0.07) Weighted average shares outstanding used to compute basic and diluted net loss per share 150,443 150,260 149,715 150,258 149,512 (1) Amounts include stock-based compensation costs as follows: Research and product development 116 128 179 389 625 Sales and marketing 146 128 154 412 512 General and administrative 292 343 308 938 1,057 ------------------------------------------------- 554 599 641 1,739 2,194 GAAP net loss $ (6,529) $(80,334) $ (1,530) $(87,804) $(10,870) Stock-based compensation 598 640 708 1,874 2,462 Interest expense, net 293 190 38 619 282 Income taxes 50 93 125 176 288 Depreciation 573 579 716 1,708 2,044 Restructuring 380 - - 380 - Lease liability accrual - 3,305 - 3,305 - Gain on sale of intangible assets - (93) (5,000) (3,297) (5,000) Goodwill impairment - 70,401 - 70,401 - ------------------------------------------------- Non-GAAP pro forma EBITDA $ (4,635) $ (5,219) $ (4,943) $(12,638) $(10,794) ================================================= *T -0- *T ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES Unaudited Condensed Consolidated Balance Sheets (In thousands) September 30, December 31, 2008 2007 ------------- ------------ Assets Current assets: Cash, cash equivalents and short- term investments $ 41,251 $ 50,165 Accounts receivable 26,595 33,258 Inventories 42,858 44,698 Prepaid expenses and other current assets 2,908 3,804 -------------------------- Total current assets 113,612 131,925 Property and equipment, net 20,102 20,818 Goodwill - 70,401 Restricted cash 122 186 Other assets 55 76 -------------------------- Total assets $ 133,891 $ 223,406 ========================== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 17,196 $ 21,276 Line of credit 15,000 15,000 Current portion of long-term debt 363 265 Accrued and other liabilities 14,276 17,888 -------------------------- Total current liabilities 46,835 54,429 Long-term debt, less current portion 18,811 19,140 Other long-term liabilities 4,563 290 -------------------------- Total liabilities 70,209 73,859 ------------- ------------ Stockholders' equity: Common stock 151 150 Additional paid-in capital 1,064,012 1,061,849 Other stockholders' equity 385 610 Accumulated deficit (1,000,866) (913,062) -------------------------- Total stockholders' equity 63,682 149,547 -------------------------- Total liabilities and stockholders' equity $ 133,891 $ 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
Contacts:
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 product 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 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 quarters ended June 30, 2008 and 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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