Tekelec (TKLC, Financial) filed Quarterly Report for the period ended 2010-09-30.
Tekelec has a market cap of $882.5 million; its shares were traded at around $13.26 with a P/E ratio of 14.1 and P/S ratio of 2. TKLC is in the portfolios of Chuck Royce of Royce& Associates, Paul Tudor Jones of The Tudor Group, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Revenues decreased on a quarter-over-quarter and year-over-year basis, to $108.3 million and $333.8 million in the third quarter and first nine months of 2010, respectively, from $114.9 million and $345.8 million in the third quarter and first nine months of 2009, respectively. As mentioned above, our revenues have been negatively impacted by the trend in orders for our Eagle 5 products. Also contributing to lower revenues in 2010 relative to those in 2009 is a reduction in performance management revenues, primarily due to the completion of an $8.7 million performance management project in Europe in the third quarter of 2009. This resulted in the third quarter results in 2009 being higher than typical trends associated with this product and led to the resulting year-over-year decline in revenues for this product in 2010. Partially offsetting these decreases are increases in our policy management and subscriber data management products revenues following the second quarter 2010 acquisitions of Camiant and Blueslice.
Operating Income decreased by $21.0 million from $21.4 million in the third quarter of 2009 to $0.4 million in the third quarter of 2010, primarily due to a reduction in gross margins of $16.3 million, and an increase in expense of $8.9 million as a result of acquiring Camiant and Blueslice in the second quarter of 2010. Partially offsetting these items was a decrease in incentive compensation as a result of lower orders and operating performance as compared to our incentive targets for the 2010 period.
Diluted Earnings (Loss) per Share declined from $0.14 per share in the third quarter of 2009 to $0.00 in the third quarter of 2010, and from $0.47 per share in the nine months ending September 30, 2009 to $0.33 per share in the first nine months of 2010, primarily due to the decreases in operating income during the three and nine months ended September 30, 2010 for the reasons discussed above.
Revenues decreased by 6% to $108.3 million in the third quarter of 2010 from $114.9 million in the third quarter of 2009. On a year-to-date basis, revenue decreased by 3% to $333.8 million for the nine months ended September 30, 2010 as compared to $345.8 million for the nine months ended September 30, 2009. Foreign currency fluctuations had a negative year-over-year impact on third quarter and year-to-date 2010 revenues of approximately $3.0 million and $5.0 million, respectively. The following discussion provides a more detailed analysis of changes in revenues by product line.
For the nine months ended September 30, 2010 our cost of goods sold increased by $2.2 million in terms of absolute dollars and increased by 2% as a percentage of revenues as compared to the same period in 2009. As mentioned earlier, a higher percentage of our revenues in 2010 are from services, which have a lower gross margin than product related revenues. In addition, our revenue mix has shifted from the U.S. to regions that have lower margins such as India. Offsetting these increases in cost is a net year-over-year reduction in cost of goods sold of $6.3 million related to warranty related charges. Specifically, our cost of goods sold during the first nine months of 2009 included a $5.0 million warranty charge related to our performance management solution. During 2010, we have continued to update our estimates and have reduced the warranty accrual by approximately $1.3 million, with the majority of this reduction occurring in the third quarter of 2010 as discussed above.
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Tekelec has a market cap of $882.5 million; its shares were traded at around $13.26 with a P/E ratio of 14.1 and P/S ratio of 2. TKLC is in the portfolios of Chuck Royce of Royce& Associates, Paul Tudor Jones of The Tudor Group, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
In the third quarter of 2010, our revenues declined by 6% from $114.9 million to $108.3 million as compared to the third quarter of 2009, and on a year-to-date basis, our revenues declined by 3%, from $345.8 million in the first nine months of 2009 to $333.8 million in the first nine months of 2010. Historically, a substantial portion of our revenues were derived from existing backlog, and trends in our orders had not been reflected in our revenues in the same period. However, given the recent declines in our orders and resulting backlog, our revenues are beginning to be negatively impacted by the recent trend in orders. Our revenues and operating results may become more sensitive to and more closely follow recent order trends in the future, if our existing backlog continues to decline as a result of several sequential periods with lower than anticipated orders.Revenues decreased on a quarter-over-quarter and year-over-year basis, to $108.3 million and $333.8 million in the third quarter and first nine months of 2010, respectively, from $114.9 million and $345.8 million in the third quarter and first nine months of 2009, respectively. As mentioned above, our revenues have been negatively impacted by the trend in orders for our Eagle 5 products. Also contributing to lower revenues in 2010 relative to those in 2009 is a reduction in performance management revenues, primarily due to the completion of an $8.7 million performance management project in Europe in the third quarter of 2009. This resulted in the third quarter results in 2009 being higher than typical trends associated with this product and led to the resulting year-over-year decline in revenues for this product in 2010. Partially offsetting these decreases are increases in our policy management and subscriber data management products revenues following the second quarter 2010 acquisitions of Camiant and Blueslice.
Operating Income decreased by $21.0 million from $21.4 million in the third quarter of 2009 to $0.4 million in the third quarter of 2010, primarily due to a reduction in gross margins of $16.3 million, and an increase in expense of $8.9 million as a result of acquiring Camiant and Blueslice in the second quarter of 2010. Partially offsetting these items was a decrease in incentive compensation as a result of lower orders and operating performance as compared to our incentive targets for the 2010 period.
Diluted Earnings (Loss) per Share declined from $0.14 per share in the third quarter of 2009 to $0.00 in the third quarter of 2010, and from $0.47 per share in the nine months ending September 30, 2009 to $0.33 per share in the first nine months of 2010, primarily due to the decreases in operating income during the three and nine months ended September 30, 2010 for the reasons discussed above.
Revenues decreased by 6% to $108.3 million in the third quarter of 2010 from $114.9 million in the third quarter of 2009. On a year-to-date basis, revenue decreased by 3% to $333.8 million for the nine months ended September 30, 2010 as compared to $345.8 million for the nine months ended September 30, 2009. Foreign currency fluctuations had a negative year-over-year impact on third quarter and year-to-date 2010 revenues of approximately $3.0 million and $5.0 million, respectively. The following discussion provides a more detailed analysis of changes in revenues by product line.
For the nine months ended September 30, 2010 our cost of goods sold increased by $2.2 million in terms of absolute dollars and increased by 2% as a percentage of revenues as compared to the same period in 2009. As mentioned earlier, a higher percentage of our revenues in 2010 are from services, which have a lower gross margin than product related revenues. In addition, our revenue mix has shifted from the U.S. to regions that have lower margins such as India. Offsetting these increases in cost is a net year-over-year reduction in cost of goods sold of $6.3 million related to warranty related charges. Specifically, our cost of goods sold during the first nine months of 2009 included a $5.0 million warranty charge related to our performance management solution. During 2010, we have continued to update our estimates and have reduced the warranty accrual by approximately $1.3 million, with the majority of this reduction occurring in the third quarter of 2010 as discussed above.
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