$DZSI
DZS INC.

2014 Q3 Form 10-Q Financial Statement

#000110168014000025 Filed on November 06, 2014

View on sec.gov

Income Statement

Concept 2014 Q3 2013 Q3
Revenue $29.44M $31.52M
YoY Change -6.6% 7.94%
Cost Of Revenue $18.68M $19.61M
YoY Change -4.72% -6.48%
Gross Profit $10.75M $11.91M
YoY Change -9.68% 44.64%
Gross Profit Margin 36.53% 37.78%
Selling, General & Admin $8.799M $6.346M
YoY Change 38.65% -12.84%
% of Gross Profit 81.82% 53.3%
Research & Development $4.611M $3.934M
YoY Change 17.21% -22.71%
% of Gross Profit 42.88% 33.04%
Depreciation & Amortization $110.0K $100.0K
YoY Change 10.0% 42.86%
% of Gross Profit 1.02% 0.84%
Operating Expenses $13.41M $10.28M
YoY Change 30.45% -16.9%
Operating Profit -$2.656M $1.627M
YoY Change -263.25% -139.31%
Interest Expense $36.00K $25.00K
YoY Change 44.0% -3.85%
% of Operating Profit 1.54%
Other Income/Expense, Net $0.00 $0.00
YoY Change -100.0%
Pretax Income -$2.692M $1.602M
YoY Change -268.04% -138.29%
Income Tax $13.00K $6.000K
% Of Pretax Income 0.37%
Net Earnings -$2.705M $1.596M
YoY Change -269.49% -138.02%
Net Earnings / Revenue -9.19% 5.06%
Basic Earnings Per Share -$0.08 $0.05
Diluted Earnings Per Share -$0.08 $0.05
COMMON SHARES
Basic Shares Outstanding 32.38M shares 31.48M shares
Diluted Shares Outstanding 32.38M shares 33.34M shares

Balance Sheet

Concept 2014 Q3 2013 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $13.50M $14.30M
YoY Change -5.59% 38.83%
Cash & Equivalents $13.54M $14.30M
Short-Term Investments
Other Short-Term Assets $3.200M $2.400M
YoY Change 33.33% -7.69%
Inventory $17.67M $21.18M
Prepaid Expenses
Receivables $34.17M $29.36M
Other Receivables $0.00 $0.00
Total Short-Term Assets $68.56M $67.25M
YoY Change 1.96% 4.46%
LONG-TERM ASSETS
Property, Plant & Equipment $802.0K $642.0K
YoY Change 24.92% 0.78%
Goodwill
YoY Change
Intangibles
YoY Change
Long-Term Investments
YoY Change
Other Assets $255.0K $251.0K
YoY Change 1.59% 17.29%
Total Long-Term Assets $1.057M $893.0K
YoY Change 18.37% 4.94%
TOTAL ASSETS
Total Short-Term Assets $68.56M $67.25M
Total Long-Term Assets $1.057M $893.0K
Total Assets $69.62M $68.14M
YoY Change 2.17% 4.46%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $13.38M $11.55M
YoY Change 15.91% -1.01%
Accrued Expenses $8.000M $8.700M
YoY Change -8.05% 3.57%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $10.00M
YoY Change -100.0% 0.0%
Long-Term Debt Due $10.00M
YoY Change
Total Short-Term Liabilities $31.40M $30.20M
YoY Change 4.0% 0.56%
LONG-TERM LIABILITIES
Long-Term Debt $0.00 $0.00
YoY Change
Other Long-Term Liabilities $2.064M $2.688M
YoY Change -23.21% -33.1%
Total Long-Term Liabilities $2.064M $2.688M
YoY Change -23.21% -33.1%
TOTAL LIABILITIES
Total Short-Term Liabilities $31.40M $30.20M
Total Long-Term Liabilities $2.064M $2.688M
Total Liabilities $33.47M $32.88M
YoY Change 1.78% -3.41%
SHAREHOLDERS EQUITY
Retained Earnings -$1.039B -$1.038B
YoY Change 0.06% -0.34%
Common Stock $1.075B $1.073B
YoY Change 0.15% 0.06%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $36.15M $35.26M
YoY Change
Total Liabilities & Shareholders Equity $69.62M $68.14M
YoY Change 2.17% 4.46%

Cashflow Statement

Concept 2014 Q3 2013 Q3
OPERATING ACTIVITIES
Net Income -$2.705M $1.596M
YoY Change -269.49% -138.02%
Depreciation, Depletion And Amortization $110.0K $100.0K
YoY Change 10.0% 42.86%
Cash From Operating Activities -$1.900M $1.540M
YoY Change -223.38% -156.41%
INVESTING ACTIVITIES
Capital Expenditures -$210.0K -$120.0K
YoY Change 75.0% -14.29%
Acquisitions
YoY Change
Other Investing Activities $0.00
YoY Change
Cash From Investing Activities -$210.0K -$120.0K
YoY Change 75.0% -7.69%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 10.00K 180.0K
YoY Change -94.44% 800.0%
NET CHANGE
Cash From Operating Activities -1.900M 1.540M
Cash From Investing Activities -210.0K -120.0K
Cash From Financing Activities 10.00K 180.0K
Net Change In Cash -2.100M 1.600M
YoY Change -231.25% -156.34%
FREE CASH FLOW
Cash From Operating Activities -$1.900M $1.540M
Capital Expenditures -$210.0K -$120.0K
Free Cash Flow -$1.690M $1.660M
YoY Change -201.81% -164.09%

Facts In Submission

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us-gaap Revenue Recognition Multiple Element Arrangements
RevenueRecognitionMultipleElementArrangements
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Revenue Recognition</font></div><div style="line-height:120%;padding-top:6px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company recognizes revenue when the earnings process is complete. The Company recognizes product revenue upon shipment of product under contractual terms which transfer title to customers upon shipment, under normal credit terms, net of estimated sales returns and allowances at the time of shipment. Revenue is deferred if there are significant post-delivery obligations or if the fees are not fixed or determinable. When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled. The Company&#8217;s arrangements generally do not have any significant post-delivery obligations. If the Company&#8217;s arrangements include customer acceptance provisions, revenue is recognized upon obtaining the signed acceptance certificate from the customer, unless the Company can objectively demonstrate that the delivered products or services meet all the acceptance criteria specified in the arrangement prior to obtaining the signed acceptance.&#160;In those instances where revenue is recognized prior to obtaining the signed acceptance certificate, the Company uses successful completion of customer testing as the basis to objectively demonstrate that the delivered products or services meet all the acceptance criteria specified in the arrangement. The Company also considers historical acceptance experience with the customer, as well as the payment terms specified in the arrangement, when revenue is recognized prior to obtaining the signed acceptance certificate. When collectability is not reasonably assured, revenue is recognized when cash is collected.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company makes certain sales to product distributors. These customers are given certain privileges to return a portion of inventory. Return privileges generally allow distributors to return inventory based on a percent of purchases made within a specific period of time. The Company recognizes revenue on sales to distributors that have contractual return rights when the products have been sold by the distributors, unless there is sufficient customer specific sales and sales returns history to support revenue recognition upon shipment. In those instances when revenue is recognized upon shipment to distributors, the Company uses historical rates of return from the distributors to provide for estimated product returns.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company derives revenue primarily from stand-alone sales of its products. In certain cases, the Company&#8217;s products are sold along with services, which include education, training, installation, and/or extended warranty services. As such, some of the Company&#8217;s sales have multiple deliverables. The Company&#8217;s products and services qualify as separate units of accounting and are deemed to be non-contingent deliverables as the Company&#8217;s arrangements typically do not have any significant performance, cancellation, termination and refund type provisions. Products are typically considered delivered upon shipment. Revenue from services is recognized ratably over the period during which the services are to be performed.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">For multiple deliverable revenue arrangements, the Company allocates revenue to products and services using the relative selling price method to recognize revenue when the revenue recognition criteria for each deliverable are met. The selling price of a deliverable is based on a hierarchy and if the Company is unable to establish vendor-specific objective evidence of selling price (&#8220;VSOE&#8221;) it uses third-party evidence of selling price (&#8220;TPE&#8221;), and if no such data is available, it uses a best estimated selling price (&#8220;BSP&#8221;). In most instances, particularly as it relates to products, the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements. This may be due to infrequently selling each element separately, not pricing products within a narrow range, or only having a limited sales history. When VSOE cannot be established, the Company attempts to establish the selling price of each element based on TPE. Generally, the Company&#8217;s marketing strategy differs from that of the Company&#8217;s peers and the Company&#8217;s offerings contain a significant level of customization and differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products&#8217; selling prices are on a stand-alone basis. Therefore, the Company is typically not able to determine TPE for the Company&#8217;s products.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">When the Company is unable to establish selling price using VSOE or TPE, the Company uses BSP. The objective of BSP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. The BSP of each deliverable is determined using average discounts from list price from historical sales transactions or cost plus margin approaches based on the factors, including but not limited to, the Company&#8217;s gross margin objectives and pricing practices plus customer and market specific considerations.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company has established TPE for its training, education and installation services. TPE is determined based on competitor prices for similar deliverables when sold separately. These service arrangements are typically short term in nature and are largely completed shortly after delivery of the product. Training and education services are based on a daily rate per person and vary according to the type of class offered. Installation services are based on daily rate per person and vary according to the complexity of the products being installed.</font></div><div style="line-height:120%;padding-top:12px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Extended warranty services are priced based on the type of product and are sold in </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">one</font><font style="font-family:inherit;font-size:10pt;"> to </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">five</font><font style="font-family:inherit;font-size:10pt;"> year durations. Extended warranty services include the right to warranty coverage beyond the standard warranty period. In substantially all of the arrangements with multiple deliverables pertaining to arrangements with these services, the Company has used and intends to continue using VSOE to determine the selling price for the services. The Company determines VSOE based on its normal pricing practices for these specific services when sold separately.</font></div></div>
CY2014Q3 us-gaap Sales Revenue Net
SalesRevenueNet
29436000 USD
us-gaap Sales Revenue Net
SalesRevenueNet
89942000 USD
CY2013Q3 us-gaap Sales Revenue Net
SalesRevenueNet
31515000 USD
us-gaap Sales Revenue Net
SalesRevenueNet
90467000 USD
us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
14257000 USD
CY2013Q3 us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
4644000 USD
us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
14539000 USD
CY2014Q3 us-gaap Selling And Marketing Expense
SellingAndMarketingExpense
4775000 USD
us-gaap Share Based Compensation
ShareBasedCompensation
531000 USD
us-gaap Share Based Compensation
ShareBasedCompensation
367000 USD
CY2013Q4 us-gaap Stockholders Equity
StockholdersEquity
37559000 USD
CY2014Q3 us-gaap Stockholders Equity
StockholdersEquity
36154000 USD
us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Use of Estimates</font></div><div style="line-height:120%;padding-top:6px;padding-left:72px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.</font></div></div>
CY2013Q3 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
33344000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
32599000 shares
us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
32346000 shares
CY2014Q3 us-gaap Weighted Average Number Of Diluted Shares Outstanding
WeightedAverageNumberOfDilutedSharesOutstanding
32384000 shares
CY2014Q3 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
32384000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
32346000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
31273000 shares
CY2013Q3 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
31480000 shares
CY2013Q4 zhne Accrued Expenses And Other Current Liabilities
AccruedExpensesAndOtherCurrentLiabilities
8865000 USD
CY2014Q3 zhne Accrued Expenses And Other Current Liabilities
AccruedExpensesAndOtherCurrentLiabilities
8021000 USD
CY2014Q3 zhne Allowance For Doubtful Accounts Receivable And Sales Returns Current
AllowanceForDoubtfulAccountsReceivableAndSalesReturnsCurrent
1247000 USD
CY2013Q4 zhne Allowance For Doubtful Accounts Receivable And Sales Returns Current
AllowanceForDoubtfulAccountsReceivableAndSalesReturnsCurrent
1452000 USD
CY2014Q3 zhne Loanand Lettersof Credit Reserve
LoanandLettersofCreditReserve
3400000 USD
zhne Provision For Doubtful Accounts Receivable And Sales Returns
ProvisionForDoubtfulAccountsReceivableAndSalesReturns
1203000 USD
zhne Provision For Doubtful Accounts Receivable And Sales Returns
ProvisionForDoubtfulAccountsReceivableAndSalesReturns
-205000 USD
zhne Standard Product Warranty Time Period
StandardProductWarrantyTimePeriod
P1Y
zhne Termination Notice Period
TerminationNoticePeriod
P30D
dei Amendment Flag
AmendmentFlag
false
dei Current Fiscal Year End Date
CurrentFiscalYearEndDate
--12-31
dei Document Fiscal Period Focus
DocumentFiscalPeriodFocus
Q3
dei Document Fiscal Year Focus
DocumentFiscalYearFocus
2014
dei Document Period End Date
DocumentPeriodEndDate
2014-09-30
dei Document Type
DocumentType
10-Q
dei Entity Central Index Key
EntityCentralIndexKey
0001101680
CY2014Q4 dei Entity Common Stock Shares Outstanding
EntityCommonStockSharesOutstanding
32498067 shares
dei Entity Filer Category
EntityFilerCategory
Smaller Reporting Company
dei Entity Registrant Name
EntityRegistrantName
ZHONE TECHNOLOGIES INC
dei Trading Symbol
TradingSymbol
ZHNE

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