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TNS Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2012 06:16AM

TNS Inc. (TNS) filed Quarterly Report for the period ended 2012-06-30. Tns, Inc. has a market cap of $375.1 million; its shares were traded at around $14.93 with a P/E ratio of 7.5 and P/S ratio of 0.7. Tns, Inc. had an annual average earning growth of 14.9% over the past 10 years.



Highlight of Business Operations:

On October 1, 2010, we completed the acquisition of Cequint, Inc. (Cequint) in accordance with the terms and conditions of the Agreement and Plan of Merger dated September 8, 2010 (see Note 2). The purchase price, following working capital adjustments, included an initial payment of $50.0 million, consisting of $46.9 million in cash and $3.1 million (178,823 shares) in TNS common stock issued to certain Cequint shareholders, and may be adjusted in the future for a potential additional $52.5 million in cash based upon the achievement of four specified profit milestones not to extend past May 31, 2014, for a potential total purchase price of $102.5 million. In addition to the contingent consideration of up to $52.5 million, there are additional performance payments which may be payable to key personnel, based on the achievement of the same four profit-related milestones of up to $10.0 million. To the extent the additional $10.0 million is probable to be earned, it will be amortized over the expected service period and included in operating expenses in our consolidated statements of comprehensive income. During the three and six months ended June 30, 2012, $0.3 million and $0.5 million, respectively, of compensation expense has been included in selling, general, and administrative expense. During the three and six months ended June 30, 2011, $0.1 million of compensation expense has been included in selling, general, and administrative expense. We funded the transaction through a new $50.0 million term loan facility using a portion of the accordion feature of our November 2009 Credit Facility (see Note 4).

Engineering and development expense. Engineering and development expense decreased $0.8 million, or 6.5%, to $10.9 million for the three months ended June 30, 2012, from $11.7 million for the three months ended June 30, 2011. On a constant dollar basis, engineering and development expense decreased $0.6 million, or 5.8%, to $11.1 million, and represented 7.9% and 8.3% of revenues for the three months ended June 30, 2012 and 2011, respectively. The decrease in engineering and development costs was primarily due to an increase in capitalized software development costs, which are offset against engineering and development costs, of $1.2 million due to increased utilization of current employees and new resources to focus on our investment in our growth initiatives, partially offset by additional headcount related costs of $0.6 million.

Selling, general and administrative expense. Selling, general and administrative expenses decreased $1.0 million, or 4.0%, to $24.4 million for the three months ended June 30, 2012, from $25.4 million for the three months ended June 30, 2011. On a constant dollar basis selling, general and administrative expenses would have decreased $0.5 million, or 2.0%, to $24.9 million and represented 17.9% of revenues for each the three months ended June 30, 2012 and 2011. The decrease is primarily due to a $1.5 million decrease in variable cash incentive compensation and $0.8 million reduction in third party commission expense to a financial services division customer in connection with the restructuring of their agreement on October 1, 2011. These decreases were partially offset by $1.0 million increase of stock compensation expense due primarily to the timing of the grant of stock based awards and an increase of $0.9 million in payroll and overhead expense due to increased headcount and other costs to align our resources with our growth initiatives.

Engineering and development expense. Engineering and development expense decreased $0.4 million, or 1.9%, to $21.9 million for the six months ended June 30, 2012, from $22.3 million for the six months ended June 30, 2011. On a constant dollar basis, engineering and development expense decreased $0.3 million, or 1.4%, to $22.0 million, and represented 7.9% and 8.1% of revenues for the six months ended June 30, 2012 and 2011, respectively. The decrease in engineering and development costs was primarily due to an increase in capitalized software development costs, which are offset against engineering and development costs, of $3.0 million due to increased utilization of current employees and new resources to focus on our investment in our growth initiatives, partially offset by additional headcount related costs of $2.7 million.

Selling, general and administrative expense. Selling, general and administrative expenses increased $0.5 million, or 1.2%, to $49.8 million for the six months ended June 30, 2012, from $49.3 million for the six months ended June 30, 2011. On a constant dollar basis, selling, general and administrative expenses would have increased $1.1 million, or 2.2%, to $50.4 million and represented 18.1% and 17.9% of revenues for the six months ended June 30, 2012 and 2011, respectively. The increase is primarily due to $1.8 million increase of stock compensation expense due primarily to the timing of issuance of performance awards in the third quarter of 2011, $1.6 million in payroll and overhead expense due to increased headcount and other costs to align our resources with our growth initiatives, and $0.2 million increase in variable compensation. These increases were partially offset by a $1.6 million reduction in commission expense to a financial services division customer in connection with the restructuring of their agreement on October 1, 2011 and $0.9 million decrease in professional fees and other costs.

Read the The complete Report



Stocks Discussed: TNS,
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