8-K

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): April 23, 2003

TEKELEC

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation)

0-15135	95-2746131
(Commission File Number)	(I.R.S. Employer Identification No.)
26580 W. Agoura Road, Calabasas, CA	91302
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (818) 880-5656

TABLE OF CONTENTS

	Item 7. Financial Statements and Exhibits.
	Item 9. Regulation FD Disclosure.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 7. Financial Statements and Exhibits.

     (c)  Exhibits.

     The following exhibit is filed as a part of this Current Report on Form 8-K:

Exhibit No.	Description
99.1	Press Release dated April 23, 2003 of Tekelec

Item 9. Regulation FD Disclosure.

     The following information, although listed under Item 9 of this Current Report on Form 8-K, is being furnished under “Item 12. Results of Operations and Financial Condition.”

     On April 23, 2003, Tekelec issued a press release announcing its financial results for the fiscal quarter ended March 31, 2003. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

2

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: April 23, 2003	By:	/s/ Frederick M. Lax Frederick M. Lax President and Chief Executive Officer

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated April 23, 2003 of Tekelec

4 EX-99.1 3 v89469exv99w1.htm EXHIBIT 99.1

EXHIBIT 99.1

FOR RELEASE April 23, 2003 at 4:15 P.M. EDT

Contact: Michael Attar
Director Investor Relations
(818) 880-7821

Tekelec Announces First Quarter Financial Results;
Achieves Revenue of $55.0 Million

CALABASAS, CA (April 23, 2003)... Tekelec (Nasdaq:TKLC) today reported financial results for its first quarter ended March 31, 2003.

     Revenues for the first quarter were $55.0 million, compared to $60.4 million in the first quarter of 2002. On a GAAP basis, Tekelec’s net income from continuing operations was $1.5 million, or $0.02 per diluted share, compared to $2.5 million, or $0.04 per diluted share, in the first quarter of 2002. Non-GAAP net income, which excludes the effects of acquisition-related amortization and discontinued operations, was $3.3 million, or $0.05 per diluted share, compared to non-GAAP net income of $4.3 million, or $0.07 per diluted share, in the first quarter of 2002. Orders received for Tekelec products and services in the first quarter were $57.7 million, compared to $64.9 million in the first quarter of 2002.

     All historical results stated above exclude any activities of the network diagnostics business, which Tekelec sold in the third quarter of 2002.

     Tekelec President and CEO Frederick M. Lax commented, “Our team executed well during the first quarter. Given the current macro environment and ongoing challenges in the telecommunications industry, we believe this is a significant accomplishment. Tekelec exceeded consensus revenue and profit expectations and continued to generate solid cash flow from operations. Order volume provided us with a strong book-to-bill ratio, which is a positive indicator for Tekelec. We made good progress on our strategic objectives of leveraging our signaling platform to offer more value-added applications to our customers, developing our next-generation switching portfolio and expanding internationally.”

     “Regarding value-added applications, at the 3GSM World Congress in Cannes, France, we announced additional applications that will reside on our EAGLE ® 5 Signaling Application

5

Exhibit 99.1

System platform. The TekWare mobile messaging product family will allow mobile operators to attract and retain customers, while increasing their average revenue per user. The Equipment Identity Register application will allow GSM operators to combat the fraudulent use of stolen cellular phones.”

     “To enhance our next-generation switching portfolio, at CTIA we announced our new next-generation switching platform, GenuOne^TM, which will serve as the foundation for all of our next-generation switching solutions. This platform offers industry leading performance and scalability.”

     “Regarding international expansion, we are pleased to announce our entry into the India telecommunications market with the sale of our EAGLE ® 5 SAS to Tata Teleservices Ltd. India is one of the fastest growing telecommunications markets in the world and exactly the kind of market we are working to penetrate with our global expansion efforts.”

     Divisional Results

     Network Systems revenue in the first quarter was $46.0 million, compared to $51.3 million in Q1 2002. IEX Contact Center Division revenue was essentially flat compared to Q1 2002 at $9.0 million.

Q2 FINANCIAL GUIDANCE

	Q2 2003 Guidance	Comparable Q2 2002 Results
Total Revenue:	$57 million — $60 million	$68.0 million1
GAAP EPS from Continuing Ops	$0.02 — $0.03 per diluted share	$0.08 per diluted share1
Non-GAAP EPS:	$0.05 — $0.06 per diluted share2	$0.11 per diluted share1,2

1)	The Company’s Comparable Q2 2002 Results exclude Tekelec’s network diagnostics division, whose sale to Catapult Communications was completed in Q3 2002.
2)	The non-GAAP earnings per share (“EPS”) guidance above excludes the effects of acquisition-related amortization, net of the related tax benefit.

6

Exhibit 99.1

     Lax concluded, “In the first quarter, Tekelec again proved that it can deliver under difficult market circumstances. While we are pleased with our results, conditions in the telecom industry remain challenging. Regardless, we will remain focused on achieving our strategic objectives to position ourselves to take advantage of future growth opportunities.”

About Tekelec

     Tekelec is a leading developer of telecommunications signaling solutions, packet-telephony infrastructure, network monitoring technology, and value-added applications. Tekelec’s innovative solutions are widely deployed in traditional and next-generation wireline and wireless networks and contact centers worldwide. Corporate headquarters are located in Calabasas, Calif., with research and development facilities and sales offices throughout the world. For more information, please visit www.tekelec.com.

Non-GAAP Results

     In the calculation of the company’s non-GAAP earnings, Tekelec excludes certain items such as amortization of acquired intangibles, discontinued operations, and unusual, non-recurring charges. Tekelec believes that excluding such items provides investors with a representation of the Company’s core performance, and a non-GAAP base line for assessing the future earnings potential of the company. Management believes the non-GAAP measure helps indicate underlying trends in Tekelec’s business, and management uses non-GAAP measures to establish operational goals. The attachments to this release provide a reconciliation of the non-GAAP measures referred to in this release to the most directly comparable GAAP measures.

Forward Looking Statements

     Certain statements made in this news release are forward looking, reflect the Company’s current intent, belief or expectations and involve certain risks and uncertainties. There can be no assurance that the Company’s actual future performance will meet the Company’s expectations. As discussed in the Company’s 2002 Annual Report on Form 10-K and other filings with the SEC, the Company’s future operating results are difficult to predict and subject to significant fluctuations. Factors that may cause future results to differ materially from the Company’s

7

Exhibit 99.1

current expectations include, among others: overall telecommunications spending, changes in general economic conditions, the timing of significant orders and shipments, the lengthy sales cycle for the Company’s products, the timing of the convergence of voice and data networks, the ability of carriers to utilize excess capacity of signaling infrastructure and related products in the network, the capital spending patterns of customers, the dependence on wireless customers for a significant percentage and growth of the Company’s revenues, the success or failure of strategic alliances or acquisitions, the timely development and introduction of new products and services, product mix, the geographic mix of the Company’s revenues and the associated impact on gross margins, market acceptance of new products and technologies, carrier deployment of intelligent network services, the ability of our customers to obtain financing, the level and timing of research and development expenditures, regulatory changes, and the expansion of the Company’s marketing and support organizations, both domestically and internationally. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

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Exhibit 99.1

TEKELEC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended
			March 31,
			2003			2002
			(thousands)
Revenues			$	55,006		$	60,364
Costs and expenses:
	Cost of goods sold			13,081			18,732
	Amortization of purchased technology			2,531			2,597
	Research and development			14,213			13,354
	Selling, general and administrative			21,951			20,845
	Amortization of intangibles			400			400
Income from operations				2,830			4,436
	Interest and other income (expense), net			(684	)		(739	)
Income from continuing operations before provision for income taxes				2,146			3,697
	Provision for income taxes(1)			632			1,184
	Income from continuing operations			1,514			2,513
Loss from discontinued operation, net of income taxes of
$976 for the three months ended March 31, 2002				—			(1,192	)
		Net income	$	1,514		$	1,321
Earnings per share from continuing operations
	Basic		$	0.02		$	0.04
	Diluted			0.02			0.04
Loss per share from discontinued operation
	Basic		$	—		$	(0.02	)
	Diluted			—			(0.02	)
Earnings per share
	Basic		$	0.02		$	0.02
	Diluted			0.02			0.02
Earnings (Loss) per share weighted average number
of shares outstanding:
	Basic			60,934			60,143
	Diluted			61,632			61,776

	Notes to Condensed Consolidated Statements of Operations (000’s):
(1)	Provision for income taxes includes the effect of nondeductible acquisition-related costs and a benefit for the utilization of deferred tax liabilities related to certain of these acquisition-related costs:
	- For each of the three months ended March 31, 2003 and 2002, the benefit was $1,050.

9

Exhibit 99.1

TEKELEC
NON-GAAP⁽¹⁾ STATEMENTS OF OPERATIONS

(unaudited)

		Three Months Ended
		March 31,
		2003			2002
		(thousands)
Revenues		$	55,006		$	60,364
Costs and expenses:
	Cost of goods sold		13,212			18,929
	Research and development		14,213			13,354
	Selling, general and administrative		21,951			20,845
Income from operations			5,630			7,236
	Interest and other income (expense), net		(684	)		(739	)
Income before provision for income taxes			4,946			6,497
	Provision for income taxes(2)		1,682			2,234
	Non-GAAP net income	$	3,264		$	4,263
Non-GAAP earnings per share
	Basic	$	0.05		$	0.07
	Diluted		0.05			0.07
Non-GAAP weighted average number of shares outstanding:
	Basic		60,934			60,143
	Diluted		61,632			61,776

	Notes to Non-GAAP Statements of Operations (000’s):
(1)	The above Non-GAAP Statements of Operations exclude the effects of the following:
	- Results of operations related to the sale of Network Diagnostics Division, resulting in an exclusion of loss from discontinued operation, net of income tax benefit, for the three months ended March 31, 2002 in the amount of $1,192.
	- For the three months ended March 31, 2003 and 2002, the amortization of purchased technology and other intangibles related to the acquisition of IEX amounted to $2,800. The related income tax benefits for each of the three months ended March 31, 2003 and 2002 was $1,050, resulting in a net exclusion of $1,750.
(2)	The above Non-GAAP Statements of Operations assume an effective tax rate of 34% for the three months ended March 31, 2003 and 2002, respectively.

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Exhibit 99.1

TEKELEC
CONDENSED CONSOLIDATED BALANCE SHEETS

			March 31,		December 31,
			2003		2002
			(unaudited)
			(thousands)
ASSETS
Current assets:
		Cash and cash equivalents	$	181,884	$	167,283
		Short-term investments, at fair value		12,961		14,289
		Accounts receivable, net		47,482		44,061
		Inventories		10,530		10,560
		Deferred income taxes, net		13,807		13,806
		Prepaid expenses and other current assets		18,212		16,491
		Total current assets		284,876		266,490
Long-term investments, at fair value				120,599		128,258
Property and equipment, net				18,768		21,387
Investments in privately-held companies				16,525		16,525
Deferred income taxes				11,502		11,502
Other assets				2,078		2,263
Long-term notes receivable ($17,300 face amount)				17,885		17,987
Goodwill, net				44,942		44,942
Intangible assets, net				13,409		16,329
		Total assets	$	530,584	$	525,683
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current portion of deferred revenues		$	34,748	$	28,355
	Other current liabilities			47,408		50,223
	Total current liabilities			82,156		78,578
Long-term convertible debt				128,010		126,973
Long-term portion of deferred revenues				3,205		3,632
Deferred income taxes				13,444		14,493
		Total liabilities		226,815		223,676
Total shareholders’ equity				303,769		302,007
		Total liabilities and shareholders’ equity	$	530,584	$	525,683

11

Exhibit 99.1

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME

			Three Months Ended March 31, 2003
								(thousands)
			GAAP					Adjustments			Non-GAAP
Revenues			$	55,006				$	--		$	55,006
Costs and expenses:
	Cost of goods sold			13,081					—			13,081
	Amortization of purchased technology			2,531					(2,400	)(1)		131
		Total cost of sales		15,612					(2,400	)		13,212
	Gross Profit			39,394		71.6	%		2,400			41,794		76.0	%
	Research and development			14,213					—			14,213
	Selling, general and administrative			21,951					—			21,951
	Amortization of intangibles			400					(400	)(1)		—
		Total operating expenses		36,564					(400	)		36,164
Income from operations				2,830					2,800			5,630
	Interest and other income (expense), net			(684	)				—			(684	)
Income from continuing operations before
provision for income taxes				2,146					2,800			4,946
	Provision for income taxes			632					1,050	(2)		1,682
	Net income		$	1,514				$	1,750		$	3,264
Earnings per share
	Basic		$	0.02							$	0.05
	Diluted			0.02								0.05
Earnings per share weighted average number of shares outstanding:
	Basic			60,934								60,934
	Diluted			61,632								61,632

⁽¹⁾ The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX.

⁽²⁾ The adjustment represents the tax effect of the adjustment of amortization of technology and other intangibles in order to reflect our effective tax rate at 34%.

12

Exhibit 99.1

TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME

						Three Months Ended March 31, 2002
									(thousands)
			GAAP						Adjustments			Non-GAAP
Revenues			$	60,364					$	--		$	60,364
Costs and expenses:
	Cost of goods sold			18,732						—			18,732
	Amortization of purchased technology			2,597						(2,400	)(1)		197
		Total cost of sales		21,329						(2,400	)		18,929
	Gross profit			39,035			64.7	%		2,400			41,435		68.6	%
	Research and development			13,354						—			13,354
	Selling, general and administrative			20,845						—			20,845
	Amortization of intangibles			400						(400	)(1)		—
		Total operating expenses		34,599						(400	)		34,199
Income from operations				4,436						2,800			7,236
	Interest and other income (expense), net			(739	)					—			(739	)
Income from continuing operations before provision for income taxes				3,697						2,800			6,497
	Provision for income taxes			1,184						1,050	(2)		2,234
	Income from continuing operations			2,513						1,750			4,263
Loss from discontinued operation, net of
income taxes of $976 for the three months
ended March 31, 2002				(1,192	)					1,192	(3)		—
	Net income		$	1,321					$	2,942		$	4,263
Earnings per share from continuing operations
	Basic		$	0.04								$	0.07
	Diluted			0.04									0.07
Loss per share from discontinued operation
	Basic		$	(0.02	)							$	—
	Diluted			(0.02	)								—
Earnings per share
	Basic		$	0.02								$	0.07
	Diluted			0.02									0.07
Earnings (loss) per share weighted average number of shares outstanding:
	Basic			60,143									60,143
	Diluted			61,776									61,776

⁽¹⁾ The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX.

⁽²⁾ The adjustments represents the tax effect of the adjustment of the amortization of technology and other intangibles in order to reflect our effective tax rate at 34%.

⁽³⁾ The adjustment represents the results of the discontinued operation related to the sale of Network Diagnostics, net of income tax benefit.

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EX-99.1

Tekelec