-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P7V12jBFXnfipO0G8fUlGFLOuHoquaQ1QRJ9jpxq8fjJ+YlE2jMhrOKTdpP6FT0b RvuW9jYOW6gyhLeujmvc0g== 0001157523-04-000755.txt : 20040129 0001157523-04-000755.hdr.sgml : 20040129 20040129163048 ACCESSION NUMBER: 0001157523-04-000755 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040129 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEKELEC CENTRAL INDEX KEY: 0000790705 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 952746131 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15135 FILM NUMBER: 04552851 BUSINESS ADDRESS: STREET 1: 26580 W AGOURA RD CITY: CALABASAS STATE: CA ZIP: 91302 BUSINESS PHONE: 8188805656 MAIL ADDRESS: STREET 1: 26580 W AGOURA RD CITY: CALABASAS STATE: CA ZIP: 91302 8-K 1 a4561195.txt TEKELEC 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): January 29, 2004 ---------------- 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 Item 7. Financial Statements and Exhibits. (c) Exhibits. The following exhibit is furnished as a part of this Current Report on Form 8-K: Exhibit No. Description ----------- ----------- 99.1 Press Release dated January 29, 2004 of Tekelec Item 12. Results of Operations and Financial Condition. On January 29, 2004, Tekelec issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2003. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information in this Form 8-K and in the exhibit 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 it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. 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: January 29, 2004 By: /s/ Frederick M. Lax ----------------------- Frederick M. Lax President and Chief Executive Officer 3 EXHIBIT INDEX Exhibit No. Description of Exhibit ---------- ---------------------- 99.1 Press Release dated January 29, 2004 of Tekelec 4 EX-99 3 a4561195ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Tekelec Announces Fourth Quarter Financial Results; Achieves Revenue of $75.0 Million and Record Orders of $138.1 Million CALABASAS, Calif.--(BUSINESS WIRE)--Jan. 29, 2004--Tekelec (Nasdaq:TKLC) today reported financial results for its fourth quarter and year ended December 31, 2003. Revenue for the fourth quarter of 2003 was $75.0 million, compared to $58.4 million in the fourth quarter of 2002. On a GAAP basis, Tekelec's net income was $7.3 million, or $0.11 per diluted share, for the fourth quarter of 2003, compared to a net loss of $658,000, or $0.01 per diluted share, in the fourth quarter of 2002. Non-GAAP net income for the fourth quarter of 2003, which excludes the effects of acquisition-related amortization, was $8.9 million, or $0.13 per diluted share, compared to non-GAAP net income of $5.0 million, or $0.08 per diluted share, in the fourth quarter of 2002. Orders received in the fourth quarter for Tekelec products and services were $138.1 million, compared to $75.4 million in the fourth quarter in 2002. Revenue for the full year 2003 was $263.7 million compared to $260.3 million in 2002. GAAP income from continuing operations for the full year 2003, which excludes any adjustment to the gain on the sale of discontinued operation, was $15.2 million, compared to $15.9 million in 2002. Non-GAAP net income for 2003 was $23.7 million, or $0.38 per diluted share, compared to non-GAAP net income of $26.7 million, or $0.44 per diluted share, for 2002. Non-GAAP results for the full year exclude the effects of acquisition-related amortization, the write-off of in-process research and development, the write-off of unamortized bond issuance costs, and the adjustment to the gain on the sale of discontinued operation. Tekelec President and CEO Fred Lax commented, "Our team did an outstanding job of executing during the fourth quarter, with revenue increasing 6% sequentially and orders up 85% sequentially. The order volume of $138 million and book-to-bill ratio over 1.8 are the highest in the history of the company. We continued to operate profitably, while exceeding both consensus revenue and profit expectations. The strong order levels achieved throughout 2003 also give us the highest book-to-bill ratio, on a full year basis, in the history of the Company. "With regard to global expansion, we were pleased to add Orange Netherlands as a customer, with its purchase of our industry-leading mobile number portability solution, as we continue to expand our relationship with France Telecom and its Orange group subsidiaries. The relationship now includes Orange Romania, Uni2 in Spain, Orange France, MobiNil in Egypt, and Orange UK, in addition to Orange Netherlands. "In Latin America, the signing of a multi-million dollar contract with Telmex, the largest telecommunications company in Mexico, for our Eagle platform and multiple value-added applications, was a significant accomplishment. This, combined with a multiphase contract with Telecom Italia Mobile Brazil, beginning with our GSM migration solution, demonstrates the success we are having in the rapidly growing Latin American market. "In addition, we continue to make solid progress in India, adding Bharti Enterprises, one of India's leading wireless operators, as a customer, with its purchase of our Eagle platform. Bharti represents our third Indian customer, joining Tata and Reliance Infocomm. "In terms of next generation switching, our Santera business unit added two customers during the quarter and made a solid contribution to overall Company results, with revenues increasing by almost 24% sequentially. We continued to have good success across Class 4, Class 5 and wireless applications. An increasing number of service providers, including a number of tier 1 operators, have expressed their intentions or have announced definitive plans to implement packet networks, providing further validation for the packet telephony market. "Today we also announced that US LEC, an integrated telecom carrier providing voice, data, and Internet services to 17,000 mid-to-large size businesses throughout the eastern United States, has selected SanteraOne to offer new services with Class 4 and Class 5 functionality. The strength of Tekelec's expertise in both signaling and switching, unique among next-gen equipment suppliers, was a key differentiator in helping us to win the switching business." Business Unit Results Network Signaling revenue for the fourth quarter of 2003 was $60.0 million, compared to $49.5 million in fourth quarter of 2002. IEX Contact Center revenue was $9.3 million, compared to $8.9 million in fourth quarter of 2002. Next-Generation Switching revenue was $5.7 million in the current quarter. Q1 FINANCIAL GUIDANCE Q1 2004 Guidance Q1 2003 Results Total Revenue: $73.0 million - $75.0 million $55.0 million GAAP EPS: $0.05 - $0.07 per diluted share(1) $0.02 per diluted share (1) For the 1st quarter of 2004, Tekelec expects expenses to include amortization of acquired intangibles of approximately $1.5 million, pre-tax. In addition, the Company expects amortization of acquired intangibles at the Santera business unit level to total approximately $1.0 million, after the allocation to Santera's minority shareholders. Lax concluded, "The Tekelec team made significant progress in 2003 on our key strategic objectives of extending our signaling solutions leadership and associated value-added applications, developing our next generation switching portfolio, and prudently pursuing global expansion. As we look to 2004, we are confident that our approach of investing consistent with our strategic objectives has positioned us well to take advantage of future growth opportunities and will enable us to continue to increase shareholder value." About Tekelec Tekelec is a leading developer of telecommunications signaling and switching 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, California, with research and development facilities and sales offices throughout the world. For more information, please visit www.tekelec.com. Non-GAAP Information Certain non-GAAP financial measures are included in this press release. In the calculation of these measures, 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 and management with a representation of the Company's core operating performance and with information useful in assessing our prospects for the future and underlying trends in Tekelec's operating expenditures and continuing operations. Management uses such non-GAAP measures to evaluate financial results and to establish operational goals. In addition, since the Company has historically reported non-GAAP measures to the investment community, we believe the inclusion of this information provides consistency in our financial reporting. The attachments to this release provide a reconciliation of non-GAAP net income 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, which have been prepared in accordance with generally accepted accounting principles. 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 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 success or failure of strategic alliances or acquisitions including the success or failure of the integration of Santera's operations with those of the Company, the ability of carriers to utilize excess capacity of signaling infrastructure and related products in their networks, the capital spending patterns of customers, the dependence on wireless customers for a significant percentage and growth of the Company's revenues, 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. TEKELEC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Year Ended December 31, December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------- (unaudited) (thousands, except per share data) Revenues $75,025 $58,423 $263,700 $260,341 Costs and expenses: Cost of goods sold 14,688 14,238 58,697 66,536 Amortization of purchased technology 3,076 2,506 11,178 10,169 Research and development 22,145 14,597 73,328 59,746 Selling, general and administrative 29,566 27,095 104,247 95,973 Acquired in-process research and development -- -- 2,900 -- Amortization of intangibles 532 400 1,900 1,600 - ---------------------------------------------------------------------- Income (Loss) from operations 5,018 (413) 11,450 26,317 Interest and other income (expense), net 954 (553) (2,483) (2,263) - ---------------------------------------------------------------------- Income (Loss) from continuing operations before provision for income taxes 5,972 (966) 8,967 24,054 Provision for income taxes(1) 5,966 (308) 13,600 8,140 - ---------------------------------------------------------------------- Income (Loss) from continuing operations before minority interest 6 (658) (4,633) 15,914 Minority interest 7,272 -- 19,792 -- - ---------------------------------------------------------------------- Income (Loss) from continuing operations 7,278 (658) 15,159 15,914 - ---------------------------------------------------------------------- Loss from discontinued operation, net of income taxes of $2,762 for the twelve months ended December 31, 2002 -- -- -- (3,308) - ---------------------------------------------------------------------- Gain on disposal of discontinued operation, net of income taxes of $13,345 for the twelve months ended December 31, 2002 -- -- 3,293 28,312 - ---------------------------------------------------------------------- Net income (loss) $ 7,278 $ (658) $ 18,452 $ 40,918 ====================================================================== Earnings (Loss) per share from continuing operations: Basic $ 0.12 $ (0.01) $ 0.25 $ 0.26 Diluted 0.11 (2) (0.01) 0.24 0.26 - ---------------------------------------------------------------------- Loss per share from discontinued operation: Basic $ -- $ -- $ -- $ (0.05) Diluted -- -- -- (0.05) - ---------------------------------------------------------------------- Earnings per share from gain on disposal of discontinued operation: Basic $ -- $ -- $ 0.05 $ 0.47 Diluted -- -- 0.05 0.46 - ---------------------------------------------------------------------- Earnings (Loss) per share: Basic $ 0.12 $ (0.01) $ 0.30 $ 0.68 Diluted 0.11 (2) (0.01) 0.29 0.67 ====================================================================== Earnings (Loss) per share weighted average number of shares outstanding: Basic 61,481 60,687 61,163 60,358 Diluted 70,544 (2) 60,687 62,911 61,386 - ---------------------------------------------------------------------- Notes to Condensed Consolidated Statements of Operations (000s): (1) Santera, a majority-owned company, is included in the consolidated results of operations of Tekelec. The consolidated provision for income taxes does not include any benefit from the losses generated by Santera due to the following: -- Santera's losses cannot be included on Tekelec's consolidated federal tax return because its ownership interest in Santera does not meet the threshold to consolidate under income tax rules and regulations. -- A full valuation allowance has been established on the tax benefits generated by Santera as a result of Santera's historical operating losses. (2) For the three months ended December 31, 2003, the calculation of earnings per share includes, for the purposes of the calculation, the add-back to net income of $590 for assumed after-tax interest cost related to the convertible debt using the "if-converted" method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the three months ended December 31, 2003 includes 6,361 shares related to the convertible debt using the "if-converted" method. For all other periods presented, the results of the "if-converted" calculations are anti-dilutive and therefore excluded from earnings per share. TEKELEC NON-GAAP (1) STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Year Ended December 31, December 31, 2003 2002 2003 2002 - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $75,025 $58,423 $263,700 $260,341 Costs and expenses: Cost of goods sold 14,931 14,344 59,349 67,105 Research and development 22,145 14,597 73,328 59,746 Selling, general and administrative 29,566 21,207 104,247 90,085 - ---------------------------------------------------------------------- Income from operations 8,383 8,275 26,776 43,405 Interest and other income (expense), net 954 (553) (1,437) (2,263) - ---------------------------------------------------------------------- Income before provision for income taxes 9,337 7,722 25,339 41,142 Provision for income taxes(2) 6,523 2,703 17,089 14,400 - ---------------------------------------------------------------------- Income before minority interest 2,814 5,019 8,250 26,742 Minority interest 6,107 -- 15,469 -- - ---------------------------------------------------------------------- Non-GAAP net income $ 8,921 $ 5,019 $ 23,719 $ 26,742 ====================================================================== Non-GAAP earnings per share: Basic $ 0.15 $ 0.08 $ 0.39 $ 0.44 Diluted 0.13 (3) 0.08 0.38 0.44 ====================================================================== Non-GAAP earnings per share weighted average number of shares outstanding: Basic 61,481 60,687 61,163 60,358 Diluted 70,544 (3) 61,400 62,911 61,386 - ---------------------------------------------------------------------- Notes to Non-GAAP Statements of Operations (000s): (1) The above Non-GAAP Statements of Operations exclude the effects of the following: -- Write-off of bond issuance costs of $1,046 related to the July 2003 retirement of the convertible debt issued in 1999. -- Results of operations related to the sale of Network Diagnostics Division completed in August 2002, resulting in an exclusion of loss from discontinued operation, net of income tax benefit, for the twelve months ended December 31, 2002 in the amount of $3,308. -- Gain on disposal of discontinued operation, net of income taxes, related to the sale of the Network Diagnostics Division for the twelve months ended December 31, 2003 and 2002 in the amounts of $3,293 and $28,312, respectively. -- For the three and twelve months ended December 31, 2003, the amortization of purchased technology and other intangibles related to the acquisitions of IEX and Santera amounted to $3,365 and $12,426, respectively. The related income tax benefits for the three and twelve months ended December 31, 2003 were $557 and $3,133, respectively. For the twelve months ended December 31, 2003, the write-off of in-process research and development related to the acquisition of Santera was $2,900. The minority interest impact of the amortization and write-off for the three and twelve months ended December 31, 2003 was $1,165 and $4,323, respectively. -- For the three and twelve months ended December 31, 2002, the amortization of purchased technology and other intangibles related to the acquisition of IEX amounted to $2,800 and $11,200, respectively. The related income tax benefits for the three and twelve months ended December 31, 2002 were $1,050 and $4,160, respectively. (2) The above Non-GAAP Statements of Operations assume an effective tax rate of 34% for the Tekelec business excluding Santera for the three and twelve months ended December 31, 2003. There were no income tax benefits associated with the losses generated by Santera. An effective tax rate of 35% was included for the three and twelve months ended December 31, 2002. (3) For the three months ended December 31, 2003, the calculation of earnings per share includes, for the purposes of the calculation, the add-back to net income of $590 for assumed after-tax interest cost related to the convertible debt using the "if-converted" method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the three months ended December 31, 2003 includes 6,361 shares related to the convertible debt using the "if-converted" method. For all other periods presented, the results of the "if-converted" calculation are anti-dilutive and therefore excluded from earnings per share. TEKELEC CONDENSED CONSOLIDATED BALANCE SHEETS Dec. 31, Dec. 31, 2003 2002 - ---------------------------------------------------------------------- (thousands) ASSETS Current assets: Cash and cash equivalents $ 45,261 $121,636 Short-term investments, at fair value 83,800 59,936 Accounts receivable, net 52,781 44,061 Current portion of notes receivable ($17,300 principal amount) 17,580 -- Inventories 21,434 10,560 Deferred income taxes, net 4,958 13,806 Prepaid expenses and other current assets 22,088 16,491 - ---------------------------------------------------------------------- Total current assets 247,902 266,490 Long-term investments, at fair value 210,298 128,258 Property and equipment, net 22,172 21,387 Investments in privately-held companies 17,322 16,525 Deferred income taxes 7,876 11,502 Other assets 6,342 2,263 Long-term notes receivable ($17,300 principal amount) -- 17,987 Goodwill 68,903 44,942 Intangible assets, net 34,118 16,329 - ---------------------------------------------------------------------- Total assets $614,933 $525,683 ====================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of deferred revenues $ 50,105 $ 28,355 Other current liabilities 62,758 50,223 - ---------------------------------------------------------------------- Total current liabilities 112,863 78,578 Long-term convertible debt 125,000 126,973 Long-term portion of notes payable 2,574 -- Long-term portion of deferred revenues 3,687 3,632 Deferred income taxes 790 14,493 - ---------------------------------------------------------------------- Total liabilities 244,914 223,676 - ---------------------------------------------------------------------- Minority interest 41,208 -- - ---------------------------------------------------------------------- Total shareholders' equity 328,811 302,007 - ---------------------------------------------------------------------- Total liabilities and shareholders' equity $614,933 $525,683 ====================================================================== TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Three Months Ended December 31, 2003 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $ 75,025 $ -- $ 75,025 Costs and expenses: Cost of goods sold 14,688 -- 14,688 Amortization of purchased technology 3,076 (2,833) (1) 243 - ---------------------------------------------------------------------- Total cost of sales 17,764 (2,833) 14,931 - ---------------------------------------------------------------------- Gross Profit 57,261 76.3% 2,833 60,094 80.1% - ---------------------------------------------------------------------- Research and development 22,145 -- 22,145 Selling, general and administrative 29,566 -- 29,566 Amortization of intangibles 532 (532) (1) -- - ---------------------------------------------------------------------- Total operating expenses 52,243 (532) 51,711 - ---------------------------------------------------------------------- Income from operations 5,018 3,365 8,383 Interest and other income (expense), net 954 -- 954 - ---------------------------------------------------------------------- Income from continuing operations before provision for income taxes 5,972 3,365 9,337 Provision for income taxes 5,966 557 (2) 6,523 - ---------------------------------------------------------------------- Income from continuing operations before minority interest 6 2,808 2,814 Minority interest 7,272 (1,165) (3) 6,107 - ---------------------------------------------------------------------- Net income $ 7,278 $ 1,643 $ 8,921 ====================================================================== Earnings per share: Basic $ 0.12 $ 0.15 Diluted (4) 0.11 0.13 ====================================================================== Earnings per share weighted average number of shares outstanding: Basic 61,481 61,481 Diluted (4) 70,544 70,544 - ---------------------------------------------------------------------- (1) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of IEX and Santera. (2) The adjustment represents the income tax effect of footnote (1) in order to reflect our non-GAAP effective tax rate at 34% for the Tekelec business, excluding Santera. (3) The adjustment represents the minority interest impact of footnote (1). (4) For the three months ended December 31, 2003, the calculation of earnings per share includes, for the purposes of the calculation, the add-back to net income of $590 for assumed after-tax interest cost related to the convertible debt using the "if-converted" method of accounting for diluted earnings per share. The weighted average number of shares outstanding for the three months ended December 31, 2003 includes 6,361 shares related to the convertible debt using the "if-converted" method. TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Year Ended December 31, 2003 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $263,700 $ -- $ 263,700 Costs and expenses: Cost of goods sold 58,697 -- 58,697 Amortization of purchased technology 11,178 (10,526) (1) 652 - ---------------------------------------------------------------------- Total cost of sales 69,875 (10,526) 59,349 - ---------------------------------------------------------------------- Gross profit 193,825 73.5% 10,526 204,351 77.5% - ---------------------------------------------------------------------- Research and development 73,328 -- 73,328 Selling, general and administrative 104,247 -- 104,247 Acquired in-process research and development 2,900 (2,900) (1) -- Amortization of intangibles 1,900 (1,900) (1) -- - ---------------------------------------------------------------------- Total operating expenses 182,375 (4,800) 177,575 - ---------------------------------------------------------------------- Income from operations 11,450 15,326 26,776 Interest and other income (expense), net (2,483) 1,046 (2) (1,437) - ---------------------------------------------------------------------- Income from continuing operations before provision for income taxes 8,967 16,372 25,339 Provision for income taxes 13,600 3,489 (3) 17,089 - ---------------------------------------------------------------------- Income (Loss) from continuing operations before minority interest (4,633) 12,883 8,250 Minority interest 19,792 (4,323) (4) 15,469 - ---------------------------------------------------------------------- Income from continuing operations 15,159 8,560 23,719 Gain on disposal of discontinued operation 3,293 (3,293) (5) -- - ---------------------------------------------------------------------- Net income $ 18,452 $ 5,267 $ 23,719 ====================================================================== Earnings per share from continuing operations: Basic $ 0.25 $ 0.39 Diluted 0.24 0.38 - ---------------------------------------------------------------------- Earnings per share from gain on disposal of discontinued operation: Basic $ 0.05 $ -- Diluted 0.05 -- - ---------------------------------------------------------------------- Earnings per share: Basic $ 0.30 $ 0.39 Diluted 0.29 0.38 ====================================================================== Earnings per share weighted average number of shares outstanding: Basic 61,163 61,163 Diluted 62,911 62,911 - ---------------------------------------------------------------------- (1) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX and Santera and the write-off of in-process research and development related to the acquisition of Santera. (2) The adjustment represents the write-off of unamortized bond issuance costs of $1,046 related to the July 2003 retirement of the convertible debt issued in 1999. (3) The adjustment represents the income tax effects of footnotes (1) and (2) in order to reflect our non-GAAP effective tax rate at 34% for the Tekelec business, excluding Santera. (4) The adjustment represents minority interest impact of footnote (1). (5) The adjustment represents the gain on the sale of the Network Diagnostics Division and was due to the settlement of the final working capital adjustment in accordance with the asset purchase agreement. TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Three Months Ended December 31, 2002 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $58,423 $ -- $ 58,423 Costs and expenses: Cost of goods sold 14,238 -- 14,238 Amortization of purchased technology 2,506 (2,400) (1) 106 - ---------------------------------------------------------------------- Total cost of sales 16,744 (2,400) 14,344 - ---------------------------------------------------------------------- Gross Profit 41,679 71.3% 2,400 44,079 75.4% - ---------------------------------------------------------------------- Research and development 14,597 -- 14,597 Selling, general and administrative 27,095 (5,888) (2) 21,207 Amortization of intangibles 400 (400) (1) -- - ---------------------------------------------------------------------- Total operating expenses 42,092 (6,288) 35,804 - ---------------------------------------------------------------------- Income (Loss) from operations (413) 8,688 8,275 Interest and other income (expense), net (553) -- (553) - ---------------------------------------------------------------------- Income (Loss) from continuing operations before provision for income taxes (966) 8,688 7,722 Provision for income taxes (308) 3,011 (3) 2,703 - ---------------------------------------------------------------------- Net income (loss) $ (658) $ 5,677 $ 5,019 ====================================================================== Earnings (Loss) per share: Basic $ (0.01) $ 0.08 Diluted (0.01) 0.08 ====================================================================== Earnings (Loss) per share weighted average number of shares outstanding: Basic 60,687 60,687 Diluted 60,687 61,400 - ---------------------------------------------------------------------- (1) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX. (2) The adjustment represents a non-recurring charge for the retirement benefits for the Company's former Chief Executive Officer. (3) The adjustments represent the income tax effects of footnote (1) and (2) in order to reflect our non-GAAP effective tax rate of 35%. TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Year Ended December 31, 2002 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $260,341 $ -- $ 260,341 Costs and expenses: Cost of goods sold 66,536 -- 66,536 Amortization of purchased technology 10,169 (9,600) (1) 569 - ---------------------------------------------------------------------- Total cost of sales 76,705 (9,600) 67,105 - ---------------------------------------------------------------------- Gross profit 183,636 70.5% 9,600 193,236 74.2% - ---------------------------------------------------------------------- Research and development 59,746 -- 59,746 Selling, general and administrative 95,973 (5,888) (2) 90,085 Amortization of intangibles 1,600 (1,600) (1) -- - ---------------------------------------------------------------------- Total operating expenses 157,319 (7,488) 149,831 - ---------------------------------------------------------------------- Income from operations 26,317 17,088 43,405 Interest and other income (expense), net (2,263) -- (2,263) - ---------------------------------------------------------------------- Income from continuing operations before provision for income taxes 24,054 17,088 41,142 Provision for income taxes 8,140 6,260 (3) 14,400 - ---------------------------------------------------------------------- Income from continuing operations 15,914 10,828 26,742 - ---------------------------------------------------------------------- Loss from discontinued operation, net of income taxes of $2,707 for the nine months ended December 31, 2002 (3,308) 3,308 (4) -- - ---------------------------------------------------------------------- Gain on disposal of discontinued operation, net of income taxes of $13,345 28,312 (28,312) (4) -- - ---------------------------------------------------------------------- Net income $ 40,918 $(14,176) $ 26,742 ====================================================================== Earnings per share from continuing operations: Basic $ 0.26 $ 0.44 Diluted 0.26 0.44 - ---------------------------------------------------------------------- Earnings per share from discontinued operation: Basic $ (0.05) $ -- Diluted (0.05) -- - ---------------------------------------------------------------------- Earnings per share from gain on disposal of discontinued operation: Basic $ 0.47 $ -- Diluted 0.46 -- - ---------------------------------------------------------------------- Earnings per share: Basic $ 0.68 $ 0.44 Diluted 0.67 0.44 ====================================================================== Earnings (Loss) per share weighted average number of shares outstanding: Basic 60,358 60,358 Diluted 61,386 61,386 - ---------------------------------------------------------------------- (1) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisition of IEX. (2) The adjustment represents a non-recurring charge for the retirement benefits for the Company's former Chief Executive Officer. (3) The adjustment represents the income tax effects of footnotes (1) and (2) in order to reflect our non-GAAP effective tax rate at 35%. (4) The adjustment represents the results of the discontinued operation and the gain related to the sale of the Network Diagnostics Division, net of income taxes. CONTACT: Tekelec Michael Attar, 818-880-7821 -----END PRIVACY-ENHANCED MESSAGE-----