Printer Friendly

Tellabs Fourth-Quarter Revenue Rises 37% to $521 Million; Full-Year Revenue up 53% to $1.9 Billion.

NAPERVILLE, Ill., Jan. 26 /PRNewswire-FirstCall/ -- Tellabs reported fourth-quarter 2005 revenue of $521 million, up 37% from $379 million in the fourth quarter of 2004. For the year 2005, Tellabs revenue totaled $1.9 billion, up 53% from $1.2 billion in 2004. Compared with the full revenues of Tellabs, AFC and Vinci Systems, revenue increased 16% for the fourth quarter of 2005 and 13% for the full year.

Tellabs earned $92 million or 20 cents per share in the fourth quarter of 2005 on a GAAP basis, compared with a year-ago net loss of $139 million or 32 cents per share. Excluding charges of $7.9 million as detailed in the attached reconciliation of non-GAAP adjustments, Tellabs reported non-GAAP earnings of $100 million or 22 cents per share (diluted) in the fourth quarter of 2005.

For the year 2005, Tellabs earned $176 million or 39 cents per share on a GAAP basis. Excluding charges of $62.7 million, Tellabs' 2005 non-GAAP earnings were $252 million or 55 cents per share, up 38% from $182 million in 2004.

"Customer demand for broadband wireless and fiber access continues to propel Tellabs' growth," said Krish A. Prabhu, Tellabs president and chief executive officer. "Tellabs is well-positioned to grow as our customers invest in upgrading their network infrastructure to handle the proliferation of broadband devices and multimedia Internet content."

Transport -- Revenue from transport systems totaled $170 million, up 8% from $157 million in the fourth quarter of 2004. For the full year, transport revenue was $638 million, up 7% from $598 million in 2004.

Access -- Revenue from access solutions totaled $180 million, up from $53 million in the fourth quarter of 2004. Compared with the full fourth-quarter 2004 access revenues of Tellabs, AFC and Vinci Systems, access revenue increased 46%. Access revenue for 2005 was $617 million, up from $53 million in 2004. Full-year 2005 access revenue was 29% higher than the full 2004 access revenues of Tellabs, AFC and Vinci Systems.

Managed Access -- Revenue from managed access systems was $91 million, down 19% from $112 million in the fourth quarter of 2004. Managed access revenue for 2005 was $365 million, up 10% from $331 million in 2004.

Broadband Data -- Revenue of broadband data products was $31 million, compared with $3 million in the fourth quarter of 2004. Full-year 2005 revenue in broadband data was $60 million, more than triple the 2004 year-end revenue of $17 million.

Voice-Quality Enhancement -- Revenue from voice-quality enhancement amounted to $6 million, versus $13 million in the fourth quarter of 2004. VQE revenue for the full year was $36 million, down from $75 million in 2004. Since Tellabs has incorporated voice-quality enhancement features into its transport products, in 2006 the company will include this revenue in the transport category.

Services and Solutions-Services and solutions revenue was $44 million, up 8% from $40 million in the fourth quarter of 2004. Services revenue for 2005 totaled $167 million in 2005, up 6% over the 2004 total of $158 million.

Share repurchase authorized -- The Tellabs Board of Directors has approved a repurchase of up to $100 million of the company's shares pursuant to a plan under Rule 10b5-1 of the Securities and Exchange Act of 1934. Over a one-year period, the company intends to use cash generated by employee stock option exercises (other than those of company officers and the Board of Directors) to repurchase stock.

This Rule 10b5-1 authorization is in addition to approximately $107 million worth of shares that remain available for repurchase under the $300 million share repurchase program announced on Feb. 2, 2005. Since announcing that repurchase, Tellabs has repurchased 24.4 million shares for approximately $193 million.

Tellabs cash and cash equivalents and marketable securities totaled $1.2 billion at the end of 2005.

Simultaneous Webcast and Teleconference Replay -- Tellabs will host an investor teleconference at 7:30 a.m. Central time today to discuss its fourth-quarter 2005 results. Internet users can hear a simultaneous webcast of the teleconference at tellabs.com; click on the webcast icon. A taped replay of the call will be available beginning at approximately 9:30 a.m. Central time today until 9:30 a.m. Central time on Saturday, January 28, at 800-633- 8284. (Outside the United States, call 402-977-9140.) When prompted, enter the Tellabs reservation number: 21280524.

Tellabs advances telecommunications networks to meet the evolving needs of end-users. Broadband solutions from Tellabs enable service providers to deliver high-quality voice, video and data services over wireline and wireless networks around the world. Tellabs is part of the NASDAQ-100 Index and the S&P 500. http://www.tellabs.com/

Forward-Looking Statements - This news release contains forward-looking statements that involve risks and uncertainties. Actual results may differ from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the introduction of new products, the entrance into new markets, the integration of new businesses, the ability to secure necessary resources, the response of customers and competitors, and the economic changes generally impacting the telecommunications industry. The company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. For a more detailed description of the risk factors, please refer to the company's SEC filings.

Tellabs(R) is a trademark of Tellabs or its affiliates in the United States and/or other countries. Any other company or product names mentioned herein may be trademarks of their respective companies.
 TELLABS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 Three Months Ended Year Ended
 (In millions, except per-share data) 12/30/05 12/31/04 12/30/05 12/31/04
 Unaudited Unaudited
 Revenue
 Products $477.5 $338.9 $1,716.3 $1,074.2
 Services 43.9 40.5 167.1 157.6
 521.4 379.4 1,883.4 1,231.8
 Cost of Revenue
 Products 243.7 174.0 908.8 472.1
 Services 29.5 26.8 119.6 102.7
 273.2 200.8 1,028.4 574.8
 Gross Profit 248.2 178.6 855.0 657.0

 Gross profit as a percentage of
 revenue 47.6% 47.1% 45.4% 53.3%

 Gross profit as a percentage of
 revenue - products 49.0% 48.7% 47.0% 56.1%
 Gross profit as a percentage of
 revenue - services 32.8% 33.8% 28.4% 34.8%

 Operating Expenses
 Research and development 87.6 67.8 344.0 250.3
 Sales and marketing 41.7 42.8 175.5 155.1
 General and administrative 25.7 21.9 95.6 81.5
 Restructuring and other charges (1.3) 0.1 12.9 14.1
 Asset impairment charge -- 47.2 -- 47.2
 Net loss on sale of real estate -- 20.6 -- 20.6
 Purchased in-process research and
 development 2.2 102.1 2.2 102.1
 Amortization of purchased
 intangibles 7.9 6.1 36.0 17.8
 163.8 308.6 666.2 688.7

 Operating Earnings (Loss) 84.4 (130.0) 188.8 (31.7)

 Other Income
 Interest income, net 9.4 7.3 28.3 26.9
 Other income (expense), net (0.4) (5.3) (4.0) (5.4)
 9.0 2.0 24.3 21.5

 Earnings Before Income Tax 93.4 (128.0) 213.1 (10.2)
 Income tax (expense) benefit (1.3) (10.7) (37.3) (19.6)
 Net Earnings (Loss) $92.1 ($138.7) $175.8 ($29.8)


 Net Earnings Per Share
 Basic $0.21 ($0.32) $0.39 ($0.07)
 Diluted $0.20 ($0.32) $0.39 ($0.07)

 Weighted Average Shares Outstanding
 Basic 448.4 433.1 449.9 420.2
 Diluted 455.2 433.1 454.5 420.2

 Amortization of deferred stock
 compensation related to acquisitions
 is included in the following cost
 and expense categories
 by period:

 Cost of revenue $ -- $0.1 $0.3 $0.1
 Research and development 2.4 1.1 9.9 5.0
 Sales and marketing 0.1 0.1 0.3 0.2
 General and administrative 0.1 -- 0.4 --
 $2.6 $1.3 $10.9 $5.3



 TELLABS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS


 12/30/05 12/31/04
 (In millions, except share amounts) (Unaudited)

 Assets
 Current Assets
 Cash and cash equivalents $880.8 $292.9
 Investments in marketable securities 308.9 823.3
 1,189.7 1,116.2

 Other marketable securities - Cisco stock 180.8 204.0
 Accounts receivable, net of returns
 and allowances of $8.4 and $14.8 319.4 309.4
 Inventories
 Raw materials 28.3 39.2
 Work in process 11.7 13.6
 Finished goods 69.1 63.6
 109.1 116.4
 Income taxes 15.9 38.9
 Miscellaneous receivables and other
 current assets 58.1 50.0
 Total Current Assets 1,873.0 1,834.9

 Property, Plant and Equipment 614.0 619.1
 Less: accumulated depreciation (313.9) (290.3)
 300.1 328.8
 Goodwill 1,111.9 1,092.3
 Intangible Assets, Net of Amortization 117.2 156.0
 Other Assets 112.7 133.1
 Total Assets $3,514.9 $3,545.1

 Liabilities and Stockholders' Equity
 Current Liabilities
 Accounts payable $97.1 $96.3
 Accrued liabilities 211.2 206.4
 Restructuring and other charges 7.2 13.4
 Cisco stock loan 180.8 204.0
 Income taxes 28.9 15.9
 Total Current Liabilities 525.2 536.0

 Long-Term Restructuring Liabilities 24.0 33.0
 Income Taxes 95.9 127.9
 Other Long-Term Liabilities 55.1 51.0

 Stockholders' Equity
 Preferred stock: authorized
 5,000,000 shares of $0.01 par
 value; no shares issued and outstanding -- --
 Common stock: authorized
 1,000,000,000 shares of $0.01 par
 value; 477,045,901 and 466,910,981
 shares issued, including treasury stock 4.8 4.7
 Additional paid-in capital 1,238.7 1,145.9
 Deferred compensation expense (10.9) (21.8)
 Treasury stock, at cost: 27,661,859
 and 3,250,000 shares (322.8) (129.6)
 Retained earnings 1,847.9 1,672.1
 Accumulated other comprehensive income 57.0 125.9
 Total Stockholders' Equity 2,814.7 2,797.2
 Total Liabilities and Stockholders' Equity $3,514.9 $3,545.1



 TELLABS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 (Unaudited)

 Year Ended
 (in millions) 12/30/05 12/31/04
 Operating Activities
 Net Earnings (Loss) $175.8 $(29.8)
 Adjustments to reconcile net
 earnings to net cash
 provided by operating activities:
 Depreciation and amortization 126.1 82.3
 Deferred taxes (15.6) 11.6
 Deferred compensation amortization 16.3 6.5
 Tax benefit associated with
 stock option exercises 14.0 -
 Restructuring and other charges 12.9 11.7
 Purchased in-process research
 and development 2.2 102.1
 Asset impairment charge -- 47.2
 Net loss on sale of real estate -- 20.6

 Net change in assets and
 liabilities, net of effects
 from acquisitions:
 Accounts receivable (15.0) (49.6)
 Inventories 7.0 (24.8)
 Miscellaneous receivables and
 other current assets 3.8 64.4
 Other assets (11.8) (9.1)
 Accounts payable (15.5) 13.0
 Accrued liabilities (27.6) 10.9
 Restructuring and other charges (24.2) (52.2)
 Income taxes 9.4 18.1
 Long-term liabilities 0.6 (8.2)
 Net Cash Provided by (Used For)
 Operating Activities 258.4 214.7

 Investing Activities
 Capital expenditures (61.8) (41.4)
 Disposals of property, plant and equipment 15.6 31.5
 Payments for purchases of investments (661.9) (1,318.8)
 Proceeds from sales and
 maturities of investments 1,180.4 1,379.1
 Payments for acquisitions, net of
 cash acquired -- (244.3)
 Net Cash Provided by (Used For)
 Investing Activities 472.3 (193.9)

 Financing Activities
 Proceeds from issuance of common
 stock under stock plans 71.6 8.9
 Repurchase of common stock (193.2) --
 Net Cash (Used) Provided by
 Financing Activities (121.6) 8.9
 Effect of Exchange Rate Changes on Cash (21.2) 17.3
 Net Increase in Cash and Cash Equivalents 587.9 47.0
 Cash and Cash Equivalents at
 Beginning of Year 292.9 245.9
 Cash and Cash Equivalents at End of Period $880.8 $292.9



 RESULTS OF OPERATIONS

 Forward-Looking Statements



This presentation contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect management's expectations, estimates and assumptions, based on the information available at the time the document was prepared. These forward-looking statements include, but are not limited to, statements regarding future events, plans, goals, objectives and expectations. The words "anticipate," "believe," "estimate," "target," "expect," "predict," "plan," "possible," "intend," "likely," "will," "would," "should," "could," "may", "continue" and similar expressions are intended to identify forward-looking statements.

Results of Operations

In the fourth quarter of 2004, we acquired all of the operations of AFC and Vinci Systems and have included them in our consolidated financial statements as of their acquisition dates. Access products and services have a lower average gross margin than Tellabs other products and services. The products of AFC and Vinci are categorized below as the access products.

For the fourth quarter, our 2005 revenue grew by 37% to $521.4 million compared with $379.4 million for 2004, and full-year 2005 revenue increased 53% to $1,883.4 million compared with $1,231.8 million for 2004. Although the majority of 2005 revenue growth for both the quarter and full year was due to the addition of access products, we also saw improvement in most other product categories, driven by continued strong demand from both wireless and wireline customers. The fourth quarter consolidated gross margin of 47.6% represents the third consecutive quarter of gross margin improvement. Our operating expenses declined due to the absence of charges in the fourth quarter of 2005. We earned $92.1 million or $0.20 per share in the fourth quarter of 2005, compared with a net loss of $138.7 million or $0.32 per share in the fourth quarter of 2004. Net earnings for 2005 were $175.8 million or $0.39 per share, compared with a net loss of $29.8 million or $0.07 per share in 2004.
 Revenue

 Fourth Quarter Year

 2005 2004 Change 2005 2004 Change
 Transport $170.0 $157.3 8% $637.9 $597.9 7%
 Access 179.9 53.3 N/M 617.0 53.3 N/M
 Managed Access 91.0 112.2 (19)% 364.8 331.0 10%
 Broadband Data 31.1 3.2 N/M 60.3 17.4 N/M
 Voice Quality
 Enhancement 5.5 12.9 (57)% 36.3 74.6 (51)%
 Services 43.9 40.5 8% 167.1 157.6 6%
 Total $521.4 $379.4 37% $1,883.4 $1,231.8 53%

 North America $397.3 $240.7 65% $1,419.4 $813.0 75%
 International $124.1 $138.7 (11)% $464.0 $418.8 11%




Transport revenue for the fourth quarter and full year of 2005 increased 8% and 7%, respectively, over the equivalent periods of 2004 due to demand for wireless services. Shipments to our North American wireless customers accounted for approximately 54% of all transport product revenue compared with 42% in the fourth quarter of last year. Approximately 68% of our Tellabs(R) 5500 digital cross-connect system fourth-quarter revenue came from port-card growth on our installed base, with the balance consisting of new systems, system expansions and software upgrades. That compares with 69% in the fourth quarter of 2004 and 80% in the third quarter of 2005. We shipped approximately 1.9 million T-1 equivalents during the fourth quarter of 2005 compared with 1.7 million T-1 equivalents in the fourth quarter of 2004. For the full-year 2005, we shipped 7.3 million T-1 equivalents compared to 6.4 million in 2004. These results are an indication that our customers are continuing to use the Tellabs 5500 system to build out their networks

Revenue from our access products totaled $179.9 million and $617.0 million for the quarter and full-year 2005. Over half of fourth-quarter revenue was related to fiber-to-the-premises and fiber-to-the-curb deployments, with most of the balance coming from copper-based access solutions. For the year, approximately 50% of access product revenue was related to fiber access.

Revenue from our managed access products for the fourth quarter and full year of 2005 totaled $91.0 million and $364.8 million, respectively, compared with $112.2 million and $331.0 million in the same periods in 2004. The fourth quarter of 2004 benefited from a delay in deliveries from the third quarter of 2004. The full-year improvement was driven by strong demand for new Ethernet-over-SDH applications and 3G wireless network build-outs.

Revenue from our broadband data products for the fourth-quarter and full year of 2005 totaled $31.1 million and $60.3 million, respectively, compared with $3.2 million and $17.4 million, respectively, in the same periods in 2004. We continued to gain traction in 2005 with our multi-service platforms, which include the Tellabs(R) 8800 multi-service router series products and Tellabs(R) 8600 managed edge system products, expanding our customer base to include wireless carriers and cable operators.

Revenue from our voice quality enhancement (VQE) products for the fourth quarter and year-to-date periods of 2005 totaled $5.5 million and $36.3 million, respectively, compared with $12.9 million and $74.6 million in the same periods in 2004. This decrease was primarily due to VQE technology migrating from stand-alone products to integration into higher-order transport and switching platforms, which caused the decrease in both quarterly and full- year revenues.

Revenue from services for the fourth quarter and year-to-date periods of 2005 totaled $43.9 million and $167.1 million, respectively, compared with $40.5 million and $157.6 million in the same periods in 2004, principally due to higher product sales.
 Gross Margin

 Fourth Quarter Year
 2005 2004 Change 2005 2004 Change
 Consolidated
 Margin 47.6% 47.1% 0.5% 45.4% 53.3% (7.9)%
 Products Margin 49.0% 48.7% 0.3% 47.0% 56.1% (9.1)%
 Services Margin 32.8% 33.8% (1.0)% 28.4% 34.8% (6.4)%





Gross margins were higher for the quarter compared with the same quarter in 2004 due to a product mix favoring transport products, partially offset by impact of access products. For the year, consolidated gross margins decreased compared with 2004, primarily due to the inclusion of access products and services for the full year, partially offset by higher margins on transport products.

Product margins for the fourth quarter were up due to lower product cost, partially offset by the impact of access products. Beginning in the third quarter, we began shipping a new version of the optical networking terminal (ONT) which has a cost that is closer to breakeven compared with the prior version.

Services margin for both the fourth quarter and full year of 2005 declined due to the inclusion of lower margin services in the access business and higher material costs.
 Operating Expenses

 Fourth Quarter Year
 2005 2004 Change 2005 2004 Change
 Total Operating
 Expenses $163.8 $308.6 $(144.8) $666.2 $688.7 $(22.5)
 Items included in
 the total:
 Restructuring and
 other charges (1.3) 0.1 (1.4) 12.9 14.1 (1.2)
 Purchased in-process
 R&D 2.2 102.1 (99.9) 2.2 102.1 (99.9)
 Amortization of
 purchased intangibles 7.9 6.1 1.8 36.0 17.8 18.2
 Amortization of deferred
 stock compensation 2.6 1.2 1.4 10.6 5.2 5.4
 Asset impairment charge -- 47.2 (47.2) -- 47.2 (47.2)
 Net loss on sale of
 real estate -- 20.6 (20.6) -- 20.6 (20.6)
 All other $152.4 $131.3 $21.1 $604.5 $481.7 $122.8




Operating expenses declined due to the absence of charges in the fourth quarter of 2005. Excluding the charges, operating expense was up due to the inclusion of operating expenses at AFC and Vinci. As a percentage of revenue, however, operating expenses excluding charges declined in both the fourth quarter and full year 2005 compared with the same periods in 2004.
 Other Income

 Fourth Quarter Year
 2005 2004 Change 2005 2004 Change
 Interest income,
 net $9.4 $7.3 $2.1 $28.3 $26.9 $1.4
 Other income
 (expense), net (0.4) (5.3) 4.9 (4.0) (5.4) 1.4
 Total $9.0 $2.0 $7.0 $24.3 $21.5 $2.8




Interest income for the fourth quarter and full year 2005 were greater than that of the comparable 2004 periods primarily due to higher interest rates on short-term investments.

Income Taxes

For the fourth quarter of 2005, we recorded a tax expense of $1.3 million compared to tax expense of $10.7 million in the year-ago quarter. Our tax expense includes a $10.1 million benefit relating to the lapsing of the statute of limitations in an international jurisdiction. For the full year 2005, we recorded tax expense of $37.3 million compared to a tax expense of $19.6 million for the full year 2004. In addition to the tax benefit previously mentioned, our full year 2005 tax provision includes income tax expense of $15.4 million associated with our repatriation of $600.0 million from our foreign subsidiaries under favorable provisions of the American Jobs Creation Act of 2004.

Financial Condition, Liquidity & Capital Resources

Our principal source of liquidity remained our cash, cash equivalents and marketable securities of $1,189.7 million, which increased by $101.4 million during the quarter and $73.5 million since year end. The increase was driven primarily by cash from operating activities, partially offset by $192.6 million used to repurchase 24.4 million shares under our previously discussed stock repurchase program. This program allows us to repurchase up to $300.0 million in shares of our common stock. During the fourth quarter of 2005, we repurchased $35.1 million or 3.6 million shares of our common stock.

In January 2006, our Board of Directors approved the repurchase of up to $100 million of our shares pursuant to a plan under Rule 10b5-1 of the Securities and Exchange Act of 1934. Over a one-year period, we intend to use cash generated by employee stock option exercises (other than those of our officers and the Board of Directors) to repurchase stock. Rule 10b5-1 allows us to repurchase our shares according to a predefined plan during periods when we normally would not be active in the market because of our internal trading blackout period. This program is in addition to the shares remaining under the $300.0 million share repurchase program previously mentioned.

We believe that the current level of working capital, particularly cash and marketable securities, is sufficient to meet our normal operating requirements for the foreseeable future. Further, we believe that sufficient resources exist to support our future growth and strategic needs. Future sources of working capital may be from cash-on-hand, cash generated from future operations, short-term or long-term financing, equity offerings or any combination of these sources.

Our current policy is to retain our earnings to provide funds to enhance stockholder value by expanding our business, repurchasing our common stock and for operating activities. We do not anticipate paying a cash dividend in the foreseeable future.
 TELLABS, INC.
 NON-GAAP RESULTS OF OPERATIONS (1)
 (Unaudited)

 Three Months Ended Year Ended
 (In millions, except
 per-share data) 12/30/05 12/31/04 Change 12/30/05 12/31/04 Change
 Revenue
 Products $477.5 $338.9 $1,716.3 $1,074.2
 Services 43.9 40.5 167.1 157.6
 521.4 379.4 37.4% 1,883.4 1,231.8 52.9%
 Cost of Revenue
 Products 243.7 173.3 908.5 474.4
 Services 29.5 26.8 119.6 102.7
 273.2 200.1 1,028.1 577.1
 Gross Profit 248.2 179.3 38.4% 855.3 654.7 30.6%

 Gross profit as a
 percentage of revenue 47.6% 47.3% 0.3% 45.4% 53.1% -7.7%

 Gross profit as a
 percentage of revenue -
 products 49.0% 48.9% 0.1% 47.1% 55.8% -8.8%
 Gross profit as a
 percentage of revenue -
 services 32.8% 33.8% -1.0% 28.4% 34.8% -6.4%

 Operating Expenses
 Research and
 development 85.2 66.7 334.1 245.3
 Sales and marketing 41.6 42.7 175.2 154.9
 General and
 administrative 25.6 21.9 95.2 81.5
 152.4 131.3 604.5 481.7

 Operating Earnings 95.8 48.0 250.8 173.0

 Other Income
 Interest income, net 9.4 7.3 28.3 26.9
 Other income
 (expense), net (3.9) 4.1 (3.3) 4.0
 5.5 11.4 25.0 30.9

 Earnings Before Income
 Tax 101.3 59.4 275.8 203.9
 Income tax (expense)
 benefit (1.5) (10.9) (23.8) (21.6)
 Net Earnings $99.8 $48.5 $252.0 $182.3


 Net Earnings Per Share
 Basic $0.22 $0.11 $0.56 $0.43
 Diluted $0.22 $0.11 $0.55 $0.43

 Weighted Average Shares
 Outstanding
 Basic 448.4 433.1 449.9 420.2
 Diluted 455.2 437.6 454.5 424.7



 (1) In addition to reporting financial results in accordance with
 generally accepted accounting principles, or GAAP, Tellabs, Inc.
 provides non-GAAP results of operations as additional information
 for its operating results. These measures are not in accordance with,
 or an alternative for, GAAP and may be different from measures used by
 other companies. The non-GAAP results of operations eliminate certain
 items of expenses and losses from cost of goods sold, operating
 expenses and other income and expenses. The Company's management
 believes that this presentation allows investors to evaluate the
 current operational and financial performance of the Company's core
 business as an indicator of future operational and financial
 performance. The Company's management uses these measures for
 reviewing its financial results and for business planning and
 performance. Tellabs, Inc.'s management discloses this information
 externally along with a complete reconciliation of their comparable
 GAAP amounts, to provide access to the detail and general nature of
 adjustments made to GAAP financial results. Furthermore, while some of
 these items have been periodically reported in Tellabs, Inc.'s results
 of operations, including significant restructuring and other charges,
 their occurrence in future periods is dependent upon future business
 and economic factors, among other evaluation criteria, and may
 frequently be beyond the control of management.

 See the attached schedule disclosing the adjustments made to the above
 non-GAAP results of operations.



 Tellabs, Inc.
 Reconciliation of Non-GAAP Adjustments
 (Amounts in millions, except per-share data)
 (Unaudited)


 Three Months Ended Year Ended
 12/31/05 (a) 12/31/05 (b)

 As Adjust- Non- As Adjust- Non-
 Reported ments GAAP Reported ments GAAP
 Cost of Goods Sold 273.2 0.0 273.2 1,028.4 (0.3) 1,028.1

 Gross Profit 248.2 0.0 248.2 855.0 0.3 855.3

 Total Operating Expenses 163.8 (11.4) 152.4 666.2 (61.7) 604.5

 Other Income 9.0 3.5 5.5 24.3 (0.7) 25.0

 Income Tax (Expense)
 Benefit (1.3) (0.2) (1.5) (37.3) 13.5 (23.8)

 Net Earnings 92.1 7.7 99.8 175.8 76.2 252.0

 Earnings Per
 Share - Basic $0.21 $0.01 $0.22 $0.39 $0.17 $0.56
 Earnings Per
 Share - Diluted $0.20 $0.02 $0.22 $0.39 $0.16 $0.55



 Three Months Ended Year Ended
 12/31/04 (c) 12/31/04 (d)

 As Adjust Non- As Adjust Non-
 Reported -ments GAAP Reported -ments GAAP
 Cost of Goods Sold 200.8 (0.7) 200.1 574.8 2.3 577.1

 Gross Profit 178.6 0.7 179.3 657.0 (2.3) 654.7

 Total Operating
 Expenses 308.6 (177.3) 131.3 688.7 (207.0) 481.7

 Other Income 2.0 (9.4) 11.4 21.5 (9.4) 30.9

 Income Tax (Expense)
 Benefit (10.7) (0.2) (10.9) (19.6) (2.0) (21.6)

 Net (Loss) Earnings (138.7) 187.2 48.5 (29.8) 212.1 182.3

 Earnings Per
 Share - Basic ($0.32) $0.43 $0.11 ($0.07) $0.50 $0.43
 Earnings Per
 Share - Diluted ($0.32) $0.43 $0.11 ($0.07) $0.50 $0.43

 (a) The $11.4 million charge to Operating Expenses reflects $7.9 million
 for amortization of purchased intangible assets, $2.6 million for
 amortization of deferred compensation related to acquisitions, $2.2
 million related to in-process research and development charges for a
 prior year acquisition, partially offset by a credit of $1.3 million
 for an adjustment of restructuring related lease obligations.

 The $3.5 million credit to Other Income reflects adjustments to the
 fair value of equity investments.

 (b) The $0.3 million charge to Cost of Goods Sold reflects amortization of
 deferred compensation related to acquisitions.

 The $61.7 million charge to Operating Expenses reflects $36.0 million
 for amortization of purchased intangible assets, $10.6 million for
 amortization of deferred compensation related to acquisitions, $2.2
 million related to in-process research and development charges for a
 prior year acquisition, $0.5 million for severance and related costs
 due to the outsourcing of repair and return activities, $11.0 million
 for severance and related costs due to previously announced headcount
 reductions primarily in Denmark, Finland, and the US, $3.1 million for
 the impairment of property, plant and equipment disposed of or held
 for sale, $0.4 million in additional loss on the sale of the Denmark
 facility, $0.5 million for other costs primarily related to excess
 software licenses, $0.2 million accrual reversal to reflect proceeds
 received in excess of original estimates on the sale of property,
 plant and equipment, a credit of $2.4 million for an adjustment for
 restructuring related lease obligations.

 The $0.7 million charge to Other Income reflects adjustments to the
 fair value of equity investments.

 The $13.5 million charge to income taxes includes $15.4 million from
 the impact of the repatriation of approximately $600.0 million in
 foreign short-term investments.

 (c) The $0.7 million charge to Cost of Goods Sold reflects a $0.5 million
 charge adjusting the Q4 2004 international manufacturing outsourcing
 for excess manufacturing equipment, a $0.1 million charge for purchase
 commitments and a $0.1 million charge for amortization of deferred
 compensation related to acquisitions.

 The $177.3 million charge to Operating Expenses reflects $102.1
 million of purchased in-process R&D charges related to fourth quarter
 acquisitions, a $47.2 million charge for asset impairment related to
 the 2002 acquisition of Ocular Networks, a $21.1 million loss on the
 sale of the Denmark facility, $6.1 million for the amortization of
 purchased intangibles, $1.2 million for the amortization of deferred
 compensation related to acquisitions, a $0.5 million gain on the sale
 of a parcel of undeveloped land in the U.S., a $1.6 million charge for
 severance and related payments for the Denmark reorganization, a $1.3
 million expense reduction due to favorable sublease activity in the
 excess leased facilities, and a $0.2 million expense reduction due to
 completion of previously announced severance actions.

 The $9.4 million charge to Other Income is related to the write-down
 of certain investments.

 (d) The $2.3 million reduction of Cost of Goods Sold reflects a $4.7
 million increase in the loss on the sale of our North American
 manufacturing facilities, a $4.8 million charge for costs associated
 with the outsourcing of our international manufacturing operations, a
 $0.1 million charge for purchase commitments, a $0.1 million charge
 for amortization of deferred compensation related to acquisitions, and
 a $12.0 million reversal of a prior accrual for excess purchase
 commitments due to a favorable settlement with a vendor.

 The $207.0 million charge within Operating Expenses reflects $102.1
 million for purchased in-process R&D charges related to the fourth
 quarter acquisitions, a $47.2 million charge for asset impairment
 related to the 2002 acquisition of Ocular Networks, a $21.1 million
 loss on the sale of the Denmark facility, $17.8 million for
 amortization of purchased intangibles, $5.2 million for amortization
 of deferred compensation related to acquisitions, a $0.5 million gain
 on the sale of a parcel of undeveloped land in the U.S., a $5.2
 million charge for severance and related payments, a $13.2 million
 charge for assets disposed of or sold, a $1.9 million charge for
 consolidation of excess leased facilities in North America, a $2.4
 million charge for other obligations, a $5.2 million expense reduction
 for proceeds from the sale of property, plant and equipment in excess
 of our original estimate, a $3.2 million expense reduction of reserves
 for consolidation of excess leased facilities, and a $0.2 million
 expense reduction from renegotiating a software license obligation.



CONTACT: Media: Ariana Nikitas, +1-630-798-2532, ariana.nikitas@tellabs.com, or Investors: Tom Scottino, +1-630-798-3602, tom.scottino@tellabs.com, both of Tellabs

Web site: http://www.tellabs.com/
COPYRIGHT 2006 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2006 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Jan 26, 2006
Words:5572
Previous Article:First Cold & Flu Relief Product Allows 'Freedom of Choice' in Medicine Taste.
Next Article:Strategic Hotel Capital, Inc. Announces Upsizing and Pricing of Common Stock Public Offering.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters