TNS Inc. has reported a fourth-quarter loss due, in part, to severance payments, but analysts said it appears to have righted itself after weathering an extended boardroom battle for control of the company.
The Reston, Va., provider of data services for card transactions reported a net loss Monday for the quarter of $6.7 million, or 28 cents per share, compared to net income of $1.4 million, or 6 cents, the year earlier.
In the past year, TNS’ former chairman and chief executive, John J. McDonnell Jr., made several bids to buy the company that he founded in the early 1990s. His last offer, for $16 per share, was rejected last month by TNS, which said it undervalued the company.
TNS shares were trading at $16.85 at midday Tuesday, down 1.98% from Monday’s close.
Henry Graham, TNS’ current CEO, alluded to the ownership struggle during a conference call with analysts.
“We’ve seen no fallout as a result of all the changes that we’ve made,” Mr. Graham said. “We’ve had no customer feel that there’s a need to pick up and leave TNS as a result of everything that’s gone on. And I think we’re in pretty good shape today as far as customer relationships are concerned.”
Though 2006 “was a trying year for TNS,” he said, the company has “emerged with a leaner organization, an energized work force, and a clear corporate emphasis on fundamental execution.”
TNS reported a one-time, pretax charge of $5.7 million for the quarter, which included severance pay for fired employees.
Chris Penny, an analyst at Friedman, Billings, Ramsey & Co. Inc., said in an interview Tuesday that “when you back out all those one-time charges” the company’s earnings per share were an adjusted 23 cents.
Mr. McDonnell and his son, John J. McDonnell 3rd, had earlier created a company, Dunluce Acquisition Corp., as a vehicle to support their recent buyout offer, Mr. Penny noted. The son resigned his posts as Dunluce’s president and board secretary on Tuesday, and though Mr. Penny said he did not know the reason, he speculated that the McDonnells are not currently pursuing a buyout.
“It’s a pretty good indication that things have quieted down for the McDonnell family,” he said.
The elder Mr. McDonnell did not reply to messages Tuesday.
Mr. Penny also said that, because TNS’ numbers are doing better, “the company’s not interested in selling at the prices that are being thrown around.”
Last year was a period “of distractions, and there’s got to be a point where you say ‘enough is enough’ so you can focus on the business,” he said. “And that’s what they’re doing now.”
Tien-Tsin Huang, an analyst at JPMorgan Securities Inc., wrote in a research note published Tuesday that the company’s quarterly results were one to two cents ahead of his, and Wall Street’s, estimates.
“TNS seems to be on the path toward better execution, with potential for shareholder-friendly capital structure changes,” he wrote. “We feel better about the outlook, but we remain neutral on the stock as it remains a show-me story with back-end-loaded expectations.”
The company has gone through an extensive cost-reduction review that was completed at the end of 2006. TNS said it expects to report earnings growth of 24 cents to 37 cents a share this year, for a total of 97 cents to $1.07 per share.
