Tekelec Reports Q1 641325

Tekelec announced its results for the three months ended March 31, 2007

May 3, 2007

4 Min Read

MORRISVILLE, N.C. -- Tekelec (NASDAQ: TKLC), a leading developer of high-performance network applications for next-generation fixed, mobile and packet networks, today announced its results for the three months ended March 31, 2007. Results from continuing operations for all periods presented include the results from the Network Signaling Group (“NSG”) and the Communications Software Solutions Group (“CSSG”). Results of the Company’s Switching Solutions Group (“SSG”) for the first quarter of 2007 and 2006 and the results of the IEX contact center (“IEX”) business unit for the first quarter of 2006 are included in the results from discontinued operations.

Results from Continuing Operations

Revenue from continuing operations for the first quarter of 2007 was $108.8 million, up 68% compared to $64.9 million for the first quarter of 2006. For the first quarter of 2007, the Company had orders from continuing operations of $79.2 million, compared to $86.4 million for the first quarter of 2006. Backlog from continuing operations as of March 31, 2007 was $360.0 million compared to $389.6 million as of December 31, 2006.

On a GAAP basis, the Company reported income from continuing operations for the first quarter of 2007 of $3.0 million, or $0.04 per diluted share, compared to a loss from continuing operations of $10.3 million, or $0.15 loss per diluted share, for the first quarter of 2006. On a non-GAAP basis, income from continuing operations for the first quarter of 2007 was $10.6 million, or $0.15 per diluted share, compared to a loss from continuing operations of $6.9 million, or $0.10 loss per diluted share, for the first quarter of 2006. Please refer to the attached financial statement schedules for a reconciliation of the Company’s GAAP operating results to its non-GAAP operating results.

Results from Discontinued Operations

The Company completed the sale of the SSG business to GENBAND Inc. (“GENBAND”) on April 21, 2007 and the results of the operations of SSG have been presented as a discontinued operation in the three months ended March 31, 2006 and March 31, 2007. In addition, the Company completed the sale of the IEX contact center business to NICE Systems, Inc. on July 6, 2006 and the operations of IEX have been presented as a discontinued operation in the three months ended March 31, 2006. On a GAAP basis, the loss from discontinued operations in the first quarter of 2007 was $53.5 million, or $0.76 loss per diluted share, compared to a loss from discontinued operations of $6.2 million, or $0.09 loss per diluted share, in the first quarter of 2006.

Loss on Sale of SSG

On April 21, 2007, the Company completed the sale of the SSG business to GENBAND for total proceeds of $16 million which included $11.2 million of GENBAND stock issued at the closing and $3.8 million of GENBAND stock held in escrow until the expiration of the one year indemnity period. In addition, the Company received $1 million in cash at closing. The Company estimates that the total loss on the disposition of SSG will be between $50 and $60 million on an after tax basis. The actual net loss is subject to change pending final determination of the net assets of the SSG business on the closing date, the actual expense of severance costs, facility costs, transaction costs and other adjustments. The estimated cash impact on Tekelec after tax benefits is not expected to be significant.

The current estimated loss on disposition of SSG of $50 to $60 million net of tax, includes (i) a pretax impairment charge of $59.6 million recorded on the net assets during the first quarter of 2007, reflecting the estimated impairment of the assets on the balance sheet as of March 31, 2007 in anticipation of the sale of the SSG business; (ii) a pretax restructuring charge of $10.4 million recorded during the first quarter of 2007, representing estimated severance and other employee termination costs associated with employees not transferring to GENBAND, and (iii) an estimated pretax restructuring charge of $6.0 to $8.0 million associated with certain lease exit and moving costs to be incurred in connection with our exit of the facilities in Plano, Texas utilized by the SSG business. We currently expect to complete this exit the second half of 2007.

Tekelec

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