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Zhone Technologies Reports Fourth Quarter 2011 Financial Results

Zhone Technologies, Inc. (NASDAQ: ZHNE), a global leader in FTTx network access solutions, today reported its financial results for the fourth quarter ended December 31, 2011.

Revenue for the fourth quarter of 2011 was $33.4 million compared to $30.2 million for the third quarter of 2011 and $31.0 million for the fourth quarter of 2010. Adjusted earnings before stock-based compensation, interest, taxes, depreciation, and impairment of long-lived assets (“adjusted EBITDA”) was an adjusted EBITDA profit of $0.3 million for the fourth quarter of 2011, compared to an adjusted EBITDA loss of $1.3 million for the third quarter of 2011 and an adjusted EBITDA loss of $0.7 million for the fourth quarter of 2010. During the fourth quarter of 2011, an impairment charge of $4.2 million was recorded against long-lived assets. The resulting net loss for the fourth quarter of 2011, calculated in accordance with generally accepted accounting principles (“GAAP”), was $4.6 million or $0.15 per share compared with a net loss of $2.7 million or $0.09 per share for the third quarter of 2011 and a net loss of $1.3 million or $0.04 per share for the fourth quarter of 2010.

"We’re pleased to announce strong revenue growth across all regions during the quarter," stated Mory Ejabat, Zhone's chief executive officer. "Fourth quarter revenue grew 11 percent sequentially over third quarter revenue and 8 percent year over year as compared to last year’s fourth quarter revenue. With this strong top line growth, we also achieved our other major financial objective for the quarter and generated positive adjusted EBITDA."

Total revenue for 2011 was $124.5 million as compared to $129.0 million for 2010. Adjusted earnings before stock-based compensation, interest, taxes, depreciation, gain on sale of the Oakland Campus, and impairment of long-lived assets (“adjusted EBITDA”) was an adjusted EBITDA loss of $3.9 million for 2011, compared to an adjusted EBITDA loss of $2.0 million for 2010. Net loss for 2011, calculated in accordance with generally accepted accounting principles (“GAAP”), was $11.7 million or $0.38 per share compared to a net loss of $4.8 million or $0.16 per share for 2010. The net loss for 2011 includes the $4.2 million impairment charge recorded against long-lived assets. The Company reviews long-lived assets, including intangible assets, for impairment annually or whenever changes in circumstances indicate that the carrying value of an asset may not be recoverable. Due to the significant decrease in the market capitalization recently, the Company determined that the indicators of impairment existed similar to the conditions that existed during the second quarter of 2008 when the Company last impaired assets.

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