8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 6, 2008

TEKELEC

(Exact name of registrant as specified in its charter)

California	000-15135	95-2746131
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
5200 Paramount Parkway, Morrisville, North Carolina		27560
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (919) 460-5500

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition	1
Item 9.01 Financial Statements and Exhibits	1
Exhibit 99.1

i

Item 2.02 Results of Operations and Financial Condition

     On May 6, 2008, Tekelec (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2008. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”) and is incorporated by reference herein.

     The information in this Current Report on Form 8-K and in Exhibit 99.1 furnished herewith shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01. Financial Statements and Exhibits

(d) Exhibit

               The following Exhibit 99.1 is furnished as a part of this Current Report on Form 8-K:

Exhibit No.	Description
99.1	Press Release dated May 6, 2008 of the Company

1

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Tekelec
Dated: May 6, 2008	By:	/s/ Franco Plastina
		Franco Plastina
		President and Chief Executive Officer

2

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated May 6, 2008 of the Company

EX-99.1

Exhibit 99.1

N     E     W     S

R     E     L     E     A     S     E

For Immediate Release

Tekelec Announces First Quarter 2008 Results

• Revenues of $118.2 million, up 9% Year-Over-Year,

• Orders of $82.4 million, up 4% Year-Over-Year,

• GAAP EPS of $0.17 per share, up 325% Year-Over-Year, and

• Non-GAAP EPS of $0.25 per share, up 67% Year-Over-Year as reconciled below

Morrisville, N.C. May 6, 2008 — 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, 2008.

Results from Continuing Operations

Revenue from continuing operations for the first quarter of 2008 was $118.2 million, up 9% compared to $108.8 million for the first quarter of 2007. For the first quarter of 2008, the Company had orders from continuing operations of $82.4 million, up 4% compared to $79.2 million for the first quarter of 2007. Backlog from continuing operations as of March 31, 2008 was $381.2 million, compared to $417.0 million as of December 31, 2007. Non-GAAP operating margins for the first quarter of 2008 were 22% as compared to 12% for the first quarter of 2007. Cash flows from continuing operations for the first quarter of 2008 were $38.4 million, up 59% from $24.2 million in the first quarter of 2007.

On a GAAP basis, the Company’s income from continuing operations for the first quarter of 2008 was $11.9 million, or $0.17 per diluted share, up 325% compared to income from continuing operations of $3.0 million, or $0.04 per diluted share, for the first quarter of 2007. On a non-GAAP basis, income from continuing operations for the first quarter of 2008 was $18.3 million, or $0.25 per diluted share, up 67%, compared to income from continuing operations of $10.6 million, or $0.15 per diluted share, for the first quarter of 2007. Please refer to the attached financial statement schedules for a reconciliation of the Company’s GAAP operating results to its non-GAAP operating results.

Frank Plastina, president and chief executive officer of Tekelec, stated “We were pleased by our operating results for the quarter. Operating margins and cash flows from continuing operations were particularly strong. Also, we were pleased with the level of new orders we generated in the first quarter following the very strong orders received during the fourth quarter of 2007. In fact, we continued to extend our footprint worldwide by adding seven new customers during the quarter.”

Results from Discontinued Operations

The Company completed the sale of our Switching Solutions Group (“SSG”) 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, 2008 and 2007. During the first quarter of 2007, the Company recorded a loss of $53.5 million, net of tax, or $0.76 per diluted share related to the operations and sale of SSG. In the first quarter of 2008, the Company recorded net income of $1.6

Corporate Office: 5200 Paramount Parkway, Morrisville, N.C. 27560 • Tel 919.460.5500 • Fax 919.460.0877

million, net of tax, or $0.02 per diluted share related to our settlement of lease obligations associated with SSG at an amount that was less than previously estimated.

Consolidated Results

On a GAAP basis, the Company generated net income of $13.5 million or $0.19 per diluted share on a consolidated basis for the three months ended March 31, 2008 compared to net a loss on a consolidated basis for the three months ended March 31, 2007 of $50.5 million, or $0.72 loss per diluted share.

Balance Sheet Results

At March 31, 2008, the Company held $119.5 million of Student Loan Auction Rate Securities (“SLARS”) valued at fair value in accordance with FAS 115 and 157. As a result of the valuation, the Company recorded a decline in value of $4.5 million ($2.7 million net of tax) in the quarter ended March 31, 2008. This decline in fair value is considered to be temporary and accordingly, the write-down was recorded in accumulated other comprehensive income within shareholders’ equity.

The Company reclassified these SLARS at March 31, 2008 from short-term to long-term investments because of the uncertainty as to when liquidity will return to the student loan auction rate market. Accordingly, Tekelec’s consolidated cash, cash equivalents and short-term investments at March 31, 2008 totaled $316.5 million, down from $419.5 million at December 31, 2007. Short-term deferred revenues were $175.9 million at March 31, 2008, up from $166.3 million at December 31, 2007.

Stock Repurchase Program

As previously announced in March 2008, Tekelec’s Board of Directors approved a stock repurchase program utilizing a Rule 10b5-1 plan that authorizes the Company to repurchase up to $50 million of the Company’s common stock. The timing, duration and actual number of shares repurchased will depend on a variety of factors including price, regulatory requirements and other market conditions. The Company may terminate the repurchase program at any time. As of April 30, 2008, the Company had repurchased approximately 2.6 million shares at a total cost of approximately $33.7 million.

Conference Call

Tekelec has scheduled a conference call for Tuesday, May 6, 2008, for management to discuss first quarter 2008 results. The Company also plans to provide on its web site immediately prior to the call non-GAAP numbers (including GAAP reconciliations) for the first quarter and to discuss during this call certain forward looking information concerning the Company’s prospects for 2008.

“Live” Webcast and Replay

Tekelec will host a live webcast of its conference call on Tuesday, May 6, 2008, at 8:00 a.m. EDT. To access the webcast, visit Tekelec’s web site located at www.tekelec.com, enter the Investor Relations section and click on the webcast icon. A webcast replay will be available at approximately 11:00 a.m. on May 6th and for 90 days thereafter.

Telephone Replay

A telephone replay of the call will also be available for one week after the live webcast by calling either (800) 642-1687 or (706) 645-9291, and entering the conference ID #44213630.

Non-GAAP Information

Certain non-GAAP financial measures are included in this press release, including a full non-GAAP statement of operations. In the calculation of these measures, Tekelec generally excludes certain items such as amortization of acquired intangibles, restructuring and other charges, non-cash stock-based compensation charges, acquisition-related charges, and unusual, non-recurring gains and charges. Tekelec believes that excluding such items provides investors and management with a representation of the Company’s core operating performance and with information useful in assessing its prospects for the future and underlying trends in Tekelec’s operating expenditures and continuing operations. Management uses such non-GAAP measures and the resulting non-GAAP statements of operations to (i) evaluate financial results, (ii) manage the Company’s operations, and (iii) establish operational goals. Further, each

of the individual non-GAAP measures within the non-GAAP statement of operations and the non-GAAP statement of operations itself are utilized by the Company’s management and board of directors to determine incentive compensation and evaluate key trends within the business. In addition, since the Company has historically reported non-GAAP measures to the investment community, the Company believes the inclusion of this information provides consistency in our financial reporting. The attachments to this release provide a reconciliation of each of the non-GAAP measures, including the full non-GAAP statement of operations, referred to in this release to the most directly comparable GAAP measure, GAAP net income from continuing operations. The non-GAAP financial measures are not meant to be considered a substitute for the corresponding GAAP financial measures.

FORWARD-LOOKING STATEMENTS

Certain statements made in this press release are forward looking, reflect the Company’s current intent, belief or expectations and involve certain risks and uncertainties. The Company’s actual future performance may differ materially from such expectations as a result of important risk factors, which include, in addition to those identified in the Company’s 2007 Form 10-K and its other filings with the Securities and Exchange Commission, the impact of the liquidity crisis in the United States credit markets, valuation of Student Loan Auction Rate Securities, the timeliness and functional competitiveness of our product releases, our ability to maintain OEM, partner, and vendor support and supply relationships, changes in the market price of the Company’s common stock and reductions in telecommunications carrier capital spending. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

About Tekelec

Tekelec leverages its global leadership in core multimedia session control and network intelligence to ensure scalable, secure and highly available communications. The Company’s leading signaling solutions enable the interworking of different network applications, technologies and protocols, providing a smooth transition to next-generation networks. Corporate headquarters are located near Research Triangle Park in Morrisville, N.C., U.S.A., with research and development facilities and sales offices throughout the world. For more information, please visit www.tekelec.com.

###

Tekelec Investor Contact:
Joanne Latham
Director of Corporate Communications
Joanne.Latham@tekelec.com
+1 919.653.9655

Q1 2008 Results

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
	2008			2007
	(Thousands, except per share data)
Revenues	$	118,243		$	108,793
Cost of sales:
Cost of goods sold		39,946			51,902
Amortization of purchased technology		587			587
Total cost of sales		40,533			52,489
Gross profit		77,710			56,304
Operating expenses:
Research and development		24,408			22,207
Sales and marketing		18,204			18,665
General and administrative		14,257			13,032
Acquired in-process research and development		2,690			—
Restructuring and other		(50	)		—
Amortization of intangible assets		109			46
Total operating expenses		59,618			53,950
Income from operations		18,092			2,354
Other income (expense), net:
Interest income		3,281			3,940
Interest expense		(1,132	)		(895	)
Gain (loss) on sale of investments		(2	)		138
Other, net		(516	)		(726	)
Total other income, net		1,631			2,457
Income from continuing operations before provision for income taxes		19,723			4,811
Provision for income taxes		7,860			1,811
Income from continuing operations		11,863			3,000
Income (loss) from discontinued operations, net of taxes		1,618			(53,472	)
Net income (loss)	$	13,481		$	(50,472	)
Earnings per share from continuing operations:
Basic	$	0.18		$	0.04
Diluted		0.17			0.04
Earnings (loss) per share from discontinued operations:
Basic	$	0.02		$	(0.78	)
Diluted		0.02			(0.76	)
Earnings (loss) per share:
Basic	$	0.20		$	(0.73	)
Diluted		0.19			(0.72	)
Weighted average number of shares outstanding-continuing operations:
Basic		67,517			68,914
Diluted		74,199			70,248
Weighted average number of shares outstanding:
Basic		67,517			68,914
Diluted		74,199			70,248

Q1 2008 Results

TEKELEC
UNAUDITED NON-GAAP⁽¹⁾ STATEMENTS OF OPERATIONS FOR CONTINUING OPERATIONS

	Three Months Ended March 31,
	2008		2007
	(Thousands, except per share data)
Revenues	$	118,243	$	108,793
Cost of sales:
Cost of goods sold		39,575		46,383
Gross profit		78,668		62,410
Research and development		23,599		21,193
Sales and marketing		17,457		17,648
General and administrative		11,789		10,177
Total operating expenses		52,845		49,018
Income from operations		25,823		13,392
Interest and other income, net		1,631		2,457
Income from continuing operations before provision for income taxes		27,454		15,849
Provision for income taxes (2)		9,197		5,246
Net income from continuing operations	$	18,257	$	10,603
Earnings per share:
Basic	$	0.27	$	0.15
Diluted		0.25		0.15
Earnings per share weighted average number of shares outstanding:
Basic		67,517		68,914
Diluted		74,199		76,609

Notes to Unaudited Non-GAAP Statements of Operations for Continuing Operations:

(1) Please refer to the attached reconciliations of the GAAP Statements of Operations to the above Non-GAAP Statements of Operations.

(2) The above Non-GAAP Statements of Operations assume effective income tax rates of 33.5% and 33% for the three months ended March 31, 2008 and 2007, respectively.

Q1 2008 Results

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2008		2007
	(Thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	252,710	$	105,550
Short-term investments, at fair value		63,749		313,922
Total cash, cash equivalents and short-term investments		316,459		419,472
Accounts receivable, net		130,037		147,092
Inventories		21,842		20,543
Income taxes receivable		24,199		28,361
Deferred income taxes		28,093		18,793
Deferred costs and prepaid commissions		51,872		57,203
Prepaid expenses and other current assets		11,126		14,726
Total current assets		583,628		706,190
Long-term investments, at fair value		119,487		—
Property and equipment, net		31,243		32,510
Investments in privately-held companies		18,553		18,553
Deferred income taxes, net		69,805		83,418
Other assets		1,350		1,320
Goodwill		22,951		22,951
Intangible assets, net		16,252		16,948
Total assets	$	863,269	$	881,890
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21,052	$	45,388
Accrued expenses		30,796		21,259
Accrued compensation and related expenses		27,289		40,234
Current portion of deferred revenues		175,856		166,274
Convertible debt		125,000		125,000
Liabilities associated with SSG		2,388		5,767
Total current liabilities		382,381		403,922
Deferred income taxes		1,248		1,295
Long-term portion of deferred revenues		9,871		8,917
Other long-term liabilities		6,038		6,569
Total liabilities		399,538		420,703
Commitments and Contingencies
Shareholders’ equity:
Common stock, without par value, 200,000,000 shares authorized; 66,597,656 and 67,479,916 shares issued and outstanding, respectively		310,203		319,761
Retained earnings		152,860		139,379
Accumulated other comprehensive income		668		2,047
Total shareholders’ equity		463,731		461,187
Total liabilities and shareholders’ equity	$	863,269	$	881,890

Q1 2008 Results

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months ended March 31,
	2008			2007
	(Thousands)
Cash flows from operating activities:
Net income (loss)	$	13,481		$	(50,472	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss (income) from discontinued operations		(1,618	)		53,472
Loss (gain) on sale of investments		2			(138	)
Provision for doubtful accounts and returns		416			92
Inventory write downs		1,403			1,693
Depreciation		4,137			4,565
Amortization of intangibles		696			633
Amortization, other		327			753
Acquired in-process research and development		2,690			—
Deferred income taxes		5,182			—
Stock-based compensation		3,128			7,650
Excess tax benefits from stock-based compensation		(317	)		(1,482	)
Changes in operating assets and liabilities, net of business disposal:
Accounts receivable		16,169			33,888
Inventories		(3,420	)		1,252
Deferred costs		5,331			13,217
Prepaid expenses and other current assets		2,820			(3,214	)
Accounts payable		(24,062	)		(1,867	)
Accrued expenses		9,568			(9,686	)
Accrued compensation and related expenses		(12,729	)		(12,771	)
Deferred revenues		11,599			(22,600	)
Income taxes payable/receivable		3,631			9,222
Total adjustments		24,953			74,679
Net cash provided by operating activities — continuing operations		38,434			24,207
Net cash used in operating activities — discontinued operations		(889	)		(3,708	)
Net cash provided by operating activities		37,545			20,499
Cash flows from investing activities:
Proceeds from sales and maturities of investments		710,823			141,034
Purchases of investments		(584,524	)		(170,299	)
Purchases of property and equipment		(1,834	)		(4,106	)
Payments related to acquired in-process research and development		(2,690	)		—
Other non-operating assets		(38	)		76
Net cash provided by (used in) investing activities — continuing operations		121,737			(33,295	)
Net cash provided by investing activities — discontinued operations		—			346
Net cash provided by (used in) investing activities		121,737			(32,949	)
Cash flows from financing activities:
Payments for repurchase of common stock		(13,444	)		—
Proceeds from issuance of common stock		758			8,337
Excess tax benefits from stock-based compensation		317			1,482
Net cash provided by (used in) financing activities		(12,369	)		9,819
Effect of exchange rate changes on cash		247			183
Net change in cash and cash equivalents		147,160			(2,448	)
Cash and cash equivalents, beginning of period		105,550			45,329
Cash and cash equivalents, end of period		252,710			42,881
Less cash and cash equivalents of discontinued operations		—			1,255
Cash and cash equivalents of continuing operations at end of period	$	252,710		$	41,626

Q1 2008 Results

TEKELEC
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME

	Three Months Ended March 31, 2008
	GAAP						Non-GAAP
	Continuing						Continuing
	Operations			Adjustments			Operations
Revenues	$	118,243		$	—		$	118,243
Cost of sales:
Cost of goods sold		39,946			(371	)(1)		39,575
Amortization of purchased technology		587			(587	)(2)		—
Total cost of sales		40,533			(958	)		39,575
Gross profit		77,710			958			78,668
Operating Expenses:
Research and development		24,408			(662	)(1)		23,599
					(147	)(3)
Sales and marketing		18,204			(747	)(1)		17,457
General and administrative		14,257			(1,568	)(1)		11,789
					(900	)(4)
Acquired in-process research and development		2,690			(2,690	)(5)		—
Restructuring and other		(50	)		(170	)(6)		—
					220	(1),(6)
Amortization of intangible assets		109			(109	)(2)		—
Total operating expenses		59,618			(6,773	)		52,845
Income from operations		18,092			7,731			25,823
Interest and other income, net		1,631			—			1,631
Income from continuing operations before provision for income taxes		19,723			7,731			27,454
Provision for income taxes		7,860			1,337	(7)		9,197
Income from continuing operations		11,863			6,394			18,257
Income from discontinued operations, net of taxes		1,618			(1,618	)(8)		—
Net income	$	13,481		$	4,776		$	18,257
Earnings per share from continuing operations:
Basic	$	0.18					$	0.27
Diluted (9)		0.17						0.25
Earnings per share:
Basic	$	0.20					$	0.27
Diluted (9)		0.19						0.25
Weighted average number of shares outstanding:
Basic		67,517						67,517
Diluted (9)		74,199						74,199

(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.

(2) The adjustments represent the amortization of purchased technology, other intangibles and acquired backlog related to the acquisitions of Steleus and iptelorg.

(3) The adjustment represents consideration payable to the former Estacado employees that is contingent upon their continued employment by Tekelec.

(4) The adjustment represents an arbitration judgment and associated legal fees in favor of our former President and CEO, Fred Lax.

(5) The adjustment represents acquired in-process research and development related to the Estacado purchase.

(6) The adjustment represents the elimination of costs incurred during 2008 related to our initiating a plan to centralize certain functions in our EAAA region and changes in estimates related to our 2007 realignment activities.

(7) The adjustment represents the income tax effect of footnotes (1), (2), (3), (4), (5) and (6) in order to reflect our Non-GAAP effective tax rate of 33.5%.

(8) The adjustment represents the elimination of our discontinued operations.

(9) For the three months ended March 31, 2008, the calculations of diluted earnings per share include a potential add-back to net income of $581,000 for assumed after-tax interest cost and 6,361,000 weighted average shares related to the convertible debt using the “if-converted” method.

Q1 2008 Results

TEKELEC
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME

	Three Months Ended March 31, 2007
	GAAP						Non-GAAP
	Continuing						Continuing
	Operations			Adjustments			Operations
Revenues	$	108,793		$	—		$	108,793
Cost of sales:
Cost of goods sold		51,902			(519	)(1)		46,383
					(5,000	)(2)		—
Amortization of purchased technology		587			(587	)(3)		—
Total cost of sales		52,489			(6,106	)		46,383
Gross profit		56,304			6,106			62,410
Operating Expenses:
Research and development		22,207			(1,014	)(1)		21,193
Sales and marketing		18,665			(1,017	)(1)		17,648
General and administrative		13,032			(2,186	)(1)		10,177
					(669	)(4)
Amortization of intangible assets		46			(46	)(3)		—
Total operating expenses		53,950			(4,932	)		49,018
Income from operations		2,354			11,038			13,392
Interest and other income, net		2,457						2,457
Income from continuing operations before provision for income taxes		4,811			11,038			15,849
Provision for income taxes		1,811			3,435	(5)		5,246
Income from continuing operations		3,000			7,603			10,603
Loss from discontinued operations, net of taxes		(53,472	)		53,472	(6)		—
Net income (loss)	$	(50,472	)	$	61,075		$	10,603
Earnings per share from continuing operations:
Basic	$	0.04					$	0.15
Diluted (7)		0.04						0.15
Earnings (loss) per share:
Basic	$	(0.73	)				$	0.15
Diluted (7)		(0.72	)					0.15
Weighted average number of shares outstanding:
Basic		68,914						68,914
Diluted (7)		70,248						76,609

(1) The adjustments represent stock-based compensation expense recognized related to awards of stock options, restricted stock or restricted stock units and stock appreciation rights granted under our equity incentive plans and stock purchase rights granted under our employee stock purchase plan.

(2) The adjustments represent the charge associated with product credits issued to Bouygues Telecom, S.A. as part of our settlement of the Bouygues litigation.

(3) The adjustments represent the amortization of purchased technology, other intangibles and acquired backlog related to the acquisitions of Steleus and iptelorg.

(4) The adjustment represents legal expenses incurred to settle the Bouygues litigation.

(5) The adjustment represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate of 33%.

(6) The adjustment represents the elimination of the results of our discontinued operations.

(7) For the three months ended March 31, 2007, the calculations of diluted earnings per share related to GAAP continuing operations exclude the potential add-back to net income of $581,000 for assumed after-tax interest cost and 6,361,000 weighted average shares related to the convertible debt using the “if-converted” method. The calculation of diluted earnings per share related to Non-GAAP continuing operations includes the potential add-back to net income of $581,000 for assumed after-tax interest cost and 6,361,000 weighted average shares related to the convertible debt using the “if-converted” method.