2009-11-04 12:13:09 -
-- Q3 Revenues of $114.9 million; up 8% year over year-- Q3 GAAP Gross Margin of 66%, and non-GAAP Gross Margin of 68% (as reconciled below);-- Q3 GAAP Operating Margin of 19%, and non-GAAP Operating Margin of 23% (as reconciled below);-- Q3 GAAP Diluted EPS from Continuing Operations of $0.14 per share; up 8% year over year-- Q3 Non-GAAP Diluted EPS from Continuing Operations of $0.27 per share (as reconciled below); up 42% year over year MORRISVILLE, NC -- (Marketwire) -- 11/04/09 -- Tekelec ("the Company"), (NASDAQ: TKLC), the network signaling, mobile messaging and performance management company, today announced its earnings for the third quarter of 2009.
2009 Third Quarter Results from Continuing Operations
Revenue from continuing operations for the third quarter of 2009 was $114.9 million, up 8% compared to $106.0 million for the third quarter of 2008.
The Company had orders of $94.7 million for the quarter, up 8% from $87.4 million for the third quarter of 2008. As of September 30, 2009, backlog was $336.7 million compared to $353.3 million as of June 30, 2009 and $369.0 million as of September 30, 2008.
On a GAAP basis, the Company reported income from continuing operations for the third quarter of 2009 of $9.4 million, or $0.14 per diluted share, with the earnings per share up 8% compared to $8.6 million, or $0.13 per diluted share, for the third quarter of 2008. Our third quarter 2009 GAAP results include a non-cash impairment charge of $10.8 million ($5.7 million net of tax related adjustments), or $0.08 per diluted share, related to a decline in the fair value of our equity interest in Genband, a privately held company. GAAP operating margins from continuing operations were 19% for the third quarter of 2009 and 14% for the third quarter of 2008.
On a non-GAAP basis, net income from continuing operations for the third quarter of 2009 was $18.2 million, or $0.27 per diluted share, with earnings per share up 42% compared to $12.5 million, or $0.19 per diluted share, for the third quarter of 2008. Non-GAAP operating margins from continuing operations for the third quarter of 2009 were 23% compared with 18% for the third quarter of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.
Frank Plastina, Tekelec's president and chief executive officer, stated, "Tekelec continues to focus on business fundamentals and strong execution which generated non-GAAP operating margin of 23% and $11.9 million of cash flow from operations for the quarter. Also, our next generation products continue to gain traction and we now have a total of eight Tier-1 customers who have purchased our Eagle XG platform."
Year-to-Date Results from Continuing Operations
For the first nine months of 2009, revenue from continuing operations was $345.8 million, up 1% compared to $340.7 million for the first nine months of 2008. For the first nine months of 2009, the Company had orders of $267.4 million, down 9% compared to $292.7 million for the first nine months of 2008.
On a GAAP basis, the Company reported income from continuing operations for the first nine months of 2009 of $31.5 million, or $0.47 per diluted share, with earnings per share down 10% compared to $35.8 million, or $0.52 per diluted share, for the first nine months of 2008. Our GAAP results for the first nine months of 2009 include a non-cash impairment charge of $13.6 million ($8.5 million net of tax related adjustments), or $0.13 per diluted share, related to a decline in the fair value of our equity interest in Genband, a privately held company. Our GAAP results for the first nine months of 2008 included a one-time tax benefit of $3.7 million, or $0.05 per diluted share, resulting from the utilization of certain capital losses generated by the 2007 sale of our switching business. GAAP operating margins from continuing operations were 17% and 14% for the nine months ended September 30, 2009 and 2008, respectively.
On a non-GAAP basis, net income from continuing operations for the first nine months of 2009 was $51.0 million, or $0.76 per diluted share, with the earnings per share up 13%, compared to $46.4 million, or $0.67 per diluted share, for the first nine months of 2008. Non-GAAP operating margins from continuing operations for the first nine months of 2009 were 22% as compared with 19% for the first nine months of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.
Balance Sheet and Liquidity
As of September 30, 2009, the Company's consolidated cash and cash equivalents totaled $266.6 million, compared to $242.9 million at June 30, 2009. In addition, the Company held $98.4 million of auction rate securities and associate put rights which it has the right to convert to cash on June 30, 2010. Cash flows from continuing operations were $11.9 million for the third quarter of 2009, compared to $30.9 million for the third quarter of 2008. The third quarter of 2008 included an $18.9 million income tax refund. Working capital at September 30, 2009 was $393.9 million, compared to $358.5 million at June 30, 2009, with the increase due primarily to the positive cash flow generated during the third quarter.
2009 Full Year Guidance
For the full year 2009, we now believe that our order entry will range between $390 million and $420 million. We believe our revenues will continue to range between $450 million and $460 million and that our gross margins will range between 66% and 67%. We also now expect full year non-GAAP diluted EPS to range between $0.95 and $1.00 per share and GAAP diluted EPS to range between $0.61 to $0.66 per share. See table below for a reconciliation of our GAAP to non-GAAP guidance.
2009 Guidance
Orders $390M - $420M
Revenues $450M - $460M
Non-GAAP GM % 66% - 67% *
GAAP Diluted EPS $0.61 - $0.66
Non-GAAP Diluted EPS $0.95 - $1.00 *
* Excludes $13.9M of estimated stock-based compensation expense, $8.3M of
estimated amortization of purchased technology and acquisition-related
expenses, a $13.6M non-cash charge related to a decline in fair value of
the equity interest in Genband, a privately held investment, and a ($0.7M)
property tax refund associated with assets of our former SSG business unit
(net of associated tax impact related to all of the adjustments above of
approximately $11.9M) which are included in GAAP EPS. These Non-GAAP
adjustments after tax represent approximately $0.34 per share. Of these
amounts, approximately $7.0M would increase Non-GAAP cost of sales and
reduce the Non-GAAP gross margin.
"Live" Webcast and Replay
Tekelec will host a live webcast of its conference call on Wednesday, November 4, 2009, at 8:00 a.m. EST for its management to discuss third quarter 2009 results and certain forward-looking information concerning management's outlook for the business. To access the webcast, visit Tekelec's web site located at www.tekelec.com :
, enter the Investor Relations section and click on the webcast icon. A webcast replay will be available at approximately 11:00 a.m. EST on Wednesday, November 4, 2009, and for 90 days thereafter. The Company also plans to provide on its web site prior to the commencement of the call certain GAAP and non-GAAP information (including GAAP to non-GAAP reconciliations) for the quarterly and year-to-date periods.
Telephone Replay
A telephone replay of the call will also be available for one week after the live webcast by calling either (800) 642-1687 or (706) 645-9291, and entering the conference ID #34780782.
Non-GAAP Information
Certain non-GAAP financial measures are included in this press release, including a full non-GAAP statement of operations. In the calculation of these measures, Tekelec generally excludes certain items such as amortization of acquired intangibles, restructuring and other charges, non-cash stock-based compensation charges, and unusual, non-recurring gains and charges. Tekelec believes that excluding such items provides investors and management with a representation of the Company's core operating performance and with information useful in assessing its prospects for the future and underlying trends in Tekelec's operating expenditures and continuing operations. Management uses such non-GAAP measures and the non-GAAP statements of operations to (i) evaluate financial results, (ii) manage the Company's operations, and (iii) establish operational goals.
Further, each of the individual non-GAAP measures within the non-GAAP statement of operations and the non-GAAP statement of operations itself are utilized by the Company's management and board of directors to assist in determining incentive compensation and evaluating key trends within the business. In addition, since the Company has historically reported non-GAAP measures to the investment community, the Company believes the inclusion of this information provides consistency in our financial reporting. The release and the attachments to this release provide a reconciliation of each of the non-GAAP measures, including those included in the full non-GAAP statement of operations, referred to in this release to the most directly comparable GAAP measure. The non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial measures.
FORWARD-LOOKING STATEMENTS
Certain statements made in this press release are forward looking, reflect the Company's current intent, belief or expectations and involve certain risks and uncertainties. The Company's actual future performance may differ materially from such expectations as a result of important risk factors, which include, in addition to those identified in the Company's 2008 Form 10-K, 2009 First, Second and Third Quarter Form 10-Qs and its other filings with the Securities and Exchange Commission, the effect of the current or escalating economic crisis including the impact of credit availability and currency fluctuations on overall capital spending by our customers, the current or further detrimental changes in general economic, social, or political conditions in the countries in which we operate, the timeliness and functional competitiveness of our product releases, the timing of our recognition of revenues and changes to the accounting rules related thereto, our ability to maintain OEM, partner, and vendor support and supply relationships, the extent to which any customer outsourcing to our competitors and supplier consolidation increase the influence of competitors on our customers' purchases, business interruptions at the Company, its suppliers or customers resulting from the recent or subsequent flu pandemics, our ability to compete with other manufacturers that have lower cost bases than ours and/or are partially supported by foreign governments or employ other unfair trade practices, our ability to integrate acquisitions, our ability to protect intellectual property rights or the risk of infringing and litigating with others regarding their intellectual property rights, and changes in the market price of the Company's common stock. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.
About Tekelec
Tekelec, a global leader in core multimedia session control and network intelligence, ensures scalable, secure and highly available communications. The company's market-leading signaling solutions enable the interworking of different network applications, technologies and protocols, providing a smooth transition to next-generation networks.
Tekelec has more than 20 offices around the world serving customers in more than 100 countries, with corporate headquarters located near Research Triangle Park in Morrisville, N.C., U.S.A. For more information, please visit www.tekelec.com :
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TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(1)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
(Thousands, except per share data)
Revenues $ 114,914 $ 105,996 $ 345,755 $ 340,661
Cost of sales:
Cost of goods sold 37,064 33,775 113,777 116,113
Amortization of
purchased technology 1,567 587 4,599 1,761
---------- ---------- ---------- ----------
Total cost of sales 38,631 34,362 118,376 117,874
---------- ---------- ---------- ----------
Gross profit 76,283 71,634 227,379 222,787
---------- ---------- ---------- ----------
Operating expenses:
Research and development 24,200 25,082 75,603 75,706
Sales and marketing 17,168 18,159 51,574 55,269
General and
administrative 13,148 13,272 40,288 40,477
Restructuring and other - - - 243
Acquired in-process
research and development - - - 2,690
Amortization of
intangible assets 327 109 960 327
---------- ---------- ---------- ----------
Total operating
expenses 54,843 56,622 168,425 174,712
---------- ---------- ---------- ----------
Income from operations 21,440 15,012 58,954 48,075
---------- ---------- ---------- ----------
Other income (expense), net:
Interest income 282 1,749 916 7,325
Interest expense (67) (9) (179) (1,920)
Impairment of investment
in privately-held
company (10,829) - (13,587) -
Loss on sale of
investments - - - (2)
Unrealized gain on ARS
portfolio and Put
right, net 288 - 1,723 -
Other, net (340) (2,193) (2,160) (3,699)
---------- ---------- ---------- ----------
Total other income
(expense), net (10,666) (453) (13,287) 1,704
---------- ---------- ---------- ----------
Income from continuing
operations before
provision for income taxes 10,774 14,559 45,667 49,779
Provision for income taxes 1,373 5,941 14,148 13,980
---------- ---------- ---------- ----------
Income from continuing
operations 9,401 8,618 31,519 35,799
Income from discontinued
operations, net of taxes - 3,755 - 5,373
---------- ---------- ---------- ----------
Net income $ 9,401 $ 12,373 $ 31,519 $ 41,172
========== ========== ========== ==========
Earnings per share from
continuing operations:
Basic $ 0.14 $ 0.13 $ 0.47 $ 0.54
Diluted 0.14 0.13 0.47 0.52
Earnings per share from
discontinued operations:
Basic $ - $ 0.06 $ - $ 0.08
Diluted - 0.06 - 0.08
Earnings per share:
Basic $ 0.14 $ 0.19 $ 0.47 $ 0.62
Diluted 0.14 0.19 0.47 0.60
Weighted average number of
shares outstanding-
continuing operations:
Basic 67,215 65,961 66,748 66,372
Diluted 68,022 66,763 67,465 70,972
Weighted average number of
shares outstanding:
Basic 67,215 65,961 66,748 66,372
Diluted 68,022 66,763 67,465 70,972
(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Condensed Consolidated Statements of Operations are for the thirteen and thirty-nine weeks ended October 2, 2009 and September 26, 2008.
###PRECONTENT2###
(1) Please refer to the attached reconciliations of the GAAP Statements of Operations to the above Non-GAAP Statements of Operations.
(2) The above Non-GAAP Statements of Operations assume non-GAAP effective income tax rates of 31% and 33% for the three months ended September 30, 2009 and 2008, respectively.
The above Non-GAAP Statements of Operations assume non-GAAP effective income tax rates of 32% and 30% for the nine months ended September 30, 2009 and 2008, respectively.
(3) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Non-GAAP Statements of Operations for Continuing Operations are for the thirteen and thirty-nine weeks ended October 2, 2009 and September 26, 2008.
###PRECONTENT3###
(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter.
The accompanying Unaudited Condensed Consolidated Balance Sheet is as of October 2, 2009.
###PRECONTENT4###
(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Condensed Consolidated Statements of Cash Flows are for the thirty-nine weeks ended October 2, 2009 and September 26, 2008.
###PRECONTENT5###
(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(2) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of Steleus, iptelorg and mBalance.
(3) The adjustment represents consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4) The adjustment represents a net charge associated with our investment in Genband received in exchange for our SSG business unit in 2007. Specifically, we incurred an impairment charge of $10.8 million as a result of a decline in the estimated fair value of our investment as compared to historical cost. Partially offsetting this impairment is a one time property tax refund of $0.7 million received associated with the former assets of our SSG business unit.
(5) The adjustment represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate.
(6) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirteen weeks ended October 2, 2009.
###PRECONTENT6###
(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(2) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of Steleus, iptelorg and mBalance.
(3) The adjustment represents consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4) The adjustment represents a net charge associated with our investment in Genband received in exchange for our SSG business unit in 2007. Specifically, we incurred an impairment charge of $13.6 million as a result of a decline in the estimated fair value of our investment as compared to historical cost. Partially offsetting this impairment is a one time property tax refund of $0.7 million received associated with the former assets of our SSG business unit.
(5) The adjustment represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate.
(6) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirty-nine weeks ended October 2, 2009.
###PRECONTENT7###
(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(2) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of Steleus and iptelorg.
(3) The adjustment represents consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4) The adjustment represents the income tax effect of footnotes (1), (2) and (3) in order to reflect our non-GAAP effective tax rate.
(5) The adjustment represents the elimination of our discontinued operations.
(6) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The above schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirteen weeks ended September 26, 2008.
###PRECONTENT8###
(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.
(2) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of Steleus and iptelorg.
(3) The adjustment represents consideration payable to Estacado that is contingent upon the continued employment of certain former Estacado employees by Tekelec.
(4) The adjustment represents an arbitration award and associated legal fees in favor of our former President and CEO, Fred Lax.
(5) The adjustment represents acquired in-process research and development related to the Estacado purchase.
(6) The adjustment represents the elimination of costs incurred during 2008 related to restructuring certain functions in our EAAA region and changes in estimates related to our 2007 realignment activities.
(7) The adjustment represents the income tax effect of excluding second quarter discrete tax benefits totaling $3.7 million related to reversing a valuation allowance on deferred tax assets generated by the loss on sale of SSG. Also included in the adjustment is the income tax effect of footnotes (1), (2), (3), (4), (5) and (6) in order to reflect our Non-GAAP effective tax rate.
(8) The adjustment represents the elimination of our discontinued operations.
(9) For the nine months ended September 30, 2008, the calculations of diluted earnings per share include a potential add-back to net income of $1,085,000 for assumed after-tax interest cost and 3,961,000 weighted average shares related our previously outstanding convertible debt using the "if-converted" method.
(10) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The above schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirty-nine weeks ended September 26, 2008.
Investor Contacts:
Mike Gallentine
Director of Investor Relations
919-461-6825 office
Email Contact :
Press Contacts:
Joanne Latham
Director, Marketing Communications
919-653-9655 office
Email Contact :
