Form 8-K ZHONE TECHNOLOGIES INC For: Jul 21

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July 21, 2016 4:16 PM EDT


 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
FORM 8-K 
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 21, 2016
 
 
 
ZHONE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
  
 
 
 
Delaware
 
000-32743
 
22-3509099
(State or Other Jurisdiction
of Incorporation)
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)
7195 Oakport Street
Oakland, California 94621
(Address of Principal Executive Offices, Including Zip Code)
 
 
 
(510) 777-7000
(Registrant’s Telephone Number, Including Area Code)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 





Item 2.02
Results of Operations and Financial Condition.
On July 21, 2016, Zhone Technologies, Inc. issued a press release announcing its second quarter 2016 results. The information furnished in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits
The following exhibit is filed herewith:
Exhibit
Number
  
Description
 
 
99.1
  
Press Release dated July 21, 2016 issued by Zhone Technologies, Inc.


































SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
Date: July 21, 2016
 
Zhone Technologies, Inc.
 
 
 
 
 
By:
 
/s/ Kirk Misaka
 
 
 
 
Kirk Misaka
 
 
 
 
Chief Financial Officer




Exhibit 99.1
Contacts
 
Zhone Investor Relations:
Zhone Public Relations:
Tel: +1 510.777.7013
Tel: +1 760.814.8194
Fax: +1 510.777.7001
 

Zhone Technologies Reports Second Quarter 2016 Financial Results

Oakland, CA - July 21, 2016 - Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in the fiber access market, today reported its financial results for the quarter ended June 30, 2016.

Revenue for the second quarter of 2016 was $22.6 million, compared to $20.6 million for the first quarter of 2016 and $27.5 million for the second quarter of 2015. Net loss for the second quarter of 2016, calculated in accordance with generally accepted accounting principles (“GAAP”), was $1.6 million or $0.05 per share compared with net loss of $3.4 million or $0.10 per share for the first quarter of 2016 and net loss of $0.4 million or $0.01 per share for the second quarter of 2015. Adjusted earnings before stock-based compensation, interest, taxes, depreciation and merger transaction costs (“adjusted EBITDA”) was an adjusted EBITDA loss of $0.1 million for the second quarter of 2016, compared to an adjusted EBITDA loss of $0.7 million for the first quarter of 2016 and an adjusted EBITDA profit of $0.1 million for the second quarter of 2015.

"The changes we made over the past two years are beginning to bear fruit in 2016 and will create sustainable revenue growth and profitability for the future," stated Jim Norrod, Zhone's chief executive officer. "Despite the impending transaction, we continue to maintain focus on our stand alone financial performance and are driving the initiatives that will create revenue growth and margin expansion, while maintaining cost efficiencies."

Cash and cash equivalents at June 30, 2016 were $8.3 million compared to $10.1 million at December 31, 2015.

Zhone will conduct a conference call and audio webcast today, July 21, 2016, at approximately 2:00 p.m. PT / 5:00 p.m. ET to review its second quarter 2016 results. This call is open to the public by dialing +1 (888) 306-9369 for U.S. callers and +1 (503) 406-4059 for international callers, and then entering passcode 45192181. The audio webcast will be simultaneously available on the Investor Relations section of Zhone's website at http://www.zhone.com/investors/.

A recording of the conference call will be available after the original call by dialing +1 (855) 859-2056 for U.S. callers and +1 (404) 537-3406 for international callers, and then entering passcode 45192181. An audio webcast recording will also be available online at http://www.zhone.com/investors/ for approximately one week following the original call.



1



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 income 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 fiber access transformation for service provider and enterprise networks, 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 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, 2015 and the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2016. 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.

2


ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share data)

 
Three Months Ended
 
Six Months Ended
 
June 30,
2016
 
March 31,
2016
 
June 30, 2015
 
June 30, 2016
 
June 30, 2015
Net revenue
$
22,599

 
$
20,599

 
$
27,493

 
$
43,198

 
$
54,615

Cost of revenue
13,831

 
12,347

 
17,268

 
26,178

 
34,215

Stock-based compensation
1

 
1

 
1

 
2

 
5

Gross profit
8,767

 
8,251

 
10,224

 
17,018

 
20,395

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and product development (1)
3,422

 
3,558

 
3,942

 
6,980

 
7,992

Sales and marketing (1)
3,884

 
3,802

 
4,387

 
7,686

 
8,769

General and administrative (1)
3,099

 
4,253

 
2,208

 
7,352

 
4,485

Total operating expenses
10,405

 
11,613

 
10,537

 
22,018

 
21,246

Operating loss
(1,638
)
 
(3,362
)
 
(313
)
 
(5,000
)
 
(851
)
Interest income (expense), net
3

 
(5
)
 
(16
)
 
(2
)
 
(69
)
Other income (expense), net
25

 
(36
)
 
(15
)
 
(11
)
 
(4
)
Loss before income taxes
(1,610
)
 
(3,403
)
 
(344
)
 
(5,013
)
 
(924
)
Income tax provision
31

 
29

 
22

 
60

 
44

Net loss
$
(1,641
)
 
$
(3,432
)
 
$
(366
)
 
$
(5,073
)
 
$
(968
)
Other comprehensive income (loss)
19

 
(35
)
 
18

 
(16
)
 
(71
)
Comprehensive loss
$
(1,622
)
 
$
(3,467
)
 
$
(348
)
 
$
(5,089
)
 
$
(1,039
)
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
Basic
33,847

 
33,841

 
32,665

 
33,844

 
32,635

Diluted
33,847

 
33,841

 
32,665

 
33,844

 
32,635

Earnings per common share
 
 
 
 
 
 
 
 
 
Basic
$
(0.05
)
 
$
(0.10
)
 
$
(0.01
)
 
$
(0.15
)
 
$
(0.03
)
Diluted
$
(0.05
)
 
$
(0.10
)
 
$
(0.01
)
 
$
(0.15
)
 
$
(0.03
)
(1) Amounts include stock-based compensation costs as follows:
 
 
 
 
 
 
Research and product development
$
13

 
$
13

 
$
13

 
$
26

 
$
26

Sales and marketing
25

 
26

 
24

 
51

 
49

General and administrative
59

 
2,496

 
262

 
2,555

 
393

 
$
97

 
$
2,535

 
$
299

 
$
2,632

 
$
468

GAAP net loss
$
(1,641
)
 
$
(3,432
)
 
$
(366
)
 
$
(5,073
)
 
$
(968
)
Stock-based compensation
98

 
2,536

 
300

 
2,634

 
473

Interest expense
1

 
8

 
18

 
9

 
73

Income taxes
31

 
29

 
22

 
60

 
44

Depreciation
179

 
191

 
174

 
370

 
384

Merger transaction costs
1,247

 
—

 
—

 
1,247

 
—

Non-GAAP Adjusted EBITDA
$
(85
)
 
$
(668
)
 
$
148

 
$
(753
)
 
$
6



3


ZHONE TECHNOLOGIES, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(In thousands)

 
June 30,
2016
 
December 31,
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
8,335

 
$
10,113

Accounts receivable
26,536

 
28,209

Inventories
14,449

 
14,802

Prepaid expenses and other current assets
2,530

 
1,914

Total current assets
51,850

 
55,038

Property and equipment, net
4,383

 
1,358

Other assets
249

 
249

Total assets
$
56,482

 
$
56,645

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
13,487

 
$
10,053

Line of credit
2,000

 
5,000

Accrued and other liabilities
6,272

 
5,742

Total current liabilities
21,759

 
20,795

Other long-term liabilities
2,992

 
1,693

Total liabilities
24,751

 
22,488

Stockholders’ equity:
 
 
 
Common stock
34

 
34

Additional paid-in capital
1,080,122

 
1,077,459

Other comprehensive loss
(372
)
 
(356
)
Accumulated deficit
(1,048,053
)
 
(1,042,980
)
Total stockholders’ equity
31,731

 
34,157

Total liabilities and stockholders’ equity
$
56,482

 
$
56,645



4

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