-----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, Jltfm0hyr1ctiMLZkarNisSgUWif40+J4TFvwrTo2dw/LCMZO16ZZsMfUzO1kMo6 VAp2nkYXztjFryBZA6CWkQ== 0001157523-04-003671.txt : 20040422 0001157523-04-003671.hdr.sgml : 20040422 20040422163751 ACCESSION NUMBER: 0001157523-04-003671 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040422 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040422 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: 04748549 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 a4622756.txt TEKELEC 8-K DOCUMENT 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 22, 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 April 22, 2004 of Tekelec Item 12. Results of Operations and Financial Condition. On April 22, 2004, Tekelec issued a press release announcing its financial results for the fiscal first quarter ended March 31, 2004. 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: April 22, 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 April 22, 2004 of Tekelec 4 EX-99.1 3 a4622756ex99.txt PRESS RELEASE Exhibit 99.1 Tekelec Announces First Quarter Financial Results; Achieves Revenue of $78.9 Million, Strategic Initiatives Continue to Gain Traction CALABASAS, Calif.--(BUSINESS WIRE)--April 22, 2004--Tekelec (Nasdaq:TKLC) today reported financial results for its first quarter ended March 31, 2004. Revenue for the first quarter of 2004 was $78.9 million, compared to $55.0 million in the first quarter of 2003. On a GAAP basis, Tekelec's net income was $5.8 million, or $0.09 per diluted share, for the first quarter of 2004, compared to net income of $1.5 million, or $0.02 per diluted share, in the first quarter of 2003. Non-GAAP net income for the first quarter of 2004, which excludes the effects of acquisition-related amortization and restructuring charges, was $8.1 million, or $0.12 per diluted share, compared to non-GAAP net income of $3.3 million, or $0.05 per diluted share, in the first quarter of 2003. Orders received in the first quarter for Tekelec products and services were $86.1 million, compared to $57.7 million in the first quarter in 2003. Tekelec President and CEO Fred Lax commented, "Tekelec's performance in the first quarter was strong, with revenue increasing 5% sequentially and 43% year-over-year, and with orders up 50% year-over-year. For the first time since 1993, revenues increased sequentially in the first quarter, unlike the 10 - 20% seasonal decline typically experienced in 1st quarter revenues. We continued to operate profitably, exceeding consensus expectations for both revenue and profit, and generated positive cash flow from operations. Strong order volumes again provided us with a book-to-bill ratio greater than one, which is particularly noteworthy following the 1.8 book-to-bill we achieved in the fourth quarter of 2003. "Highlighting the continued momentum we are gaining in our global expansion strategic initiative, 23% of sales occurred outside of the United States in the quarter, compared to 18% in the first quarter of 2003. We were pleased to add Societe Reunionnaise de Radiotelephone in La Reunion, a subsidiary of the leading French operator SFR, as a customer, with its purchase of our Eagle platform, as we continue to expand our relationship with SFR, the second largest wireless operator in France. "With regard to our next-generation switching strategic initiative, our next-gen switching business unit added six new customers during the quarter and made a solid contribution to overall Company results, with revenues increasing 13% sequentially. We continued to have solid success with our Class 4, Class 5 and wireless applications. Today we announced that Pac-West, a provider of broadband integrated communications services to service providers and business customers in the western United States, has selected Tekelec as both its next-gen switching and signaling solutions provider. Tekelec has been designated as the exclusive supplier for all next-gen switching as well as signaling projects for Pac-West for the next three years and was selected after an extensive evaluation by Pac-West of several next-gen switching providers. "Further demonstrating our ongoing commitment to be a leader in next-gen switching, we closed the acquisition of Taqua in early April. Since we first announced the transaction, Taqua's business activity has accelerated, adding 15 new customers and reaching 100 total Taqua system deployments, bringing Tekelec's total next-gen switching customer base to over 130 customers. Taqua is a market-leader in providing Class 5 solutions optimized for the small switch market, typically switches with less than 5,000 lines in service. Small switches account for more than 70% of the wireline Class 5 switches deployed worldwide. This acquisition significantly enhances our overall next-gen switching product portfolio, complementing the Class 4, Class 5, and wireless switching solutions that Tekelec already provides." Business Unit Results Network Signaling revenue for the first quarter of 2004 was $63.2 million, compared to $46.0 million in first quarter of 2003. IEX Contact Center revenue was $9.3 million, compared to $9.0 million in first quarter of 2003. Next-Generation Switching revenue was $6.4 million in the current quarter. Q2 FINANCIAL GUIDANCE Q2 2004 Guidance Q2 2003 Actual Results Total Revenues: $86.0 million - $88.0 million $62.9 million GAAP EPS: $0.01 - $0.02 per diluted share(1) $0.02 per diluted share _______________ (1) For the 2nd quarter of 2004, Tekelec expects expenses to include amortization of acquired intangibles and amortization of non-cash stock based deferred compensation of approximately $2.0 million, pre-tax and a one-time in-process research and development charge of $3 to $5 million, pretax. In addition, the Company expects amortization of acquired intangibles at the Santera business unit level to total approximately $500,000, after the allocation to Santera's minority shareholders. Lax concluded, "The sequential revenue growth, strong book-to-bill ratio, on-going profitability and positive cash flow from operations achieved in the quarter demonstrate the traction we are gaining on our strategic objectives focused on signaling solutions leadership, next-gen switching, and global expansion. I am confident that Tekelec is well positioned to capitalize on significant market opportunities." 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, non-cash stock based compensation charges, 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 2003 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 and Taqua'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 March 31, 2004 2003 - ---------------------------------------------------------------------- (unaudited) (thousands, except per share data) Revenues $ 78,870 $ 55,006 Costs and expenses: Cost of goods sold 19,385 13,081 Amortization of purchased technology 3,064 2,531 Research and development 20,619 14,213 Selling, general and administrative 32,271 21,951 Amortization of intangibles 532 400 Restructuring (1) 942 -- - ---------------------------------------------------------------------- Income from operations 2,057 2,830 Interest and other income (expense), net 468 (684) - ---------------------------------------------------------------------- Income from continuing operations before provision for income taxes 2,525 2,146 Provision for income taxes 6,253 (2) 632 - ---------------------------------------------------------------------- Income (Loss) from continuing operations before minority interest (3,728) 1,514 Minority interest 9,577 -- - ---------------------------------------------------------------------- Net income $ 5,849 $ 1,514 ====================================================================== Earnings per share: Basic $ 0.09 $ 0.02 Diluted 0.09 0.02 ====================================================================== Earnings per share weighted average number of shares outstanding: Basic 62,034 60,934 Diluted 65,194 61,632 - ---------------------------------------------------------------------- Notes to Condensed Consolidated Statements of Operations (000's): (1) This amount represents restructuring costs related to the relocation of our manufacturing operations. (2) For the three months ended March 31, 2004, 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. TEKELEC NON-GAAP (1) STATEMENTS OF OPERATIONS (unaudited) Three Months Ended March 31, - ---------------------------------------------------------------------- 2004 2003 (thousands, except per share data) Revenues $ 78,870 $ 55,006 Costs and expenses: Cost of goods sold 19,616 13,212 Research and development 20,619 14,213 Selling, general and administrative 32,271 21,951 - ---------------------------------------------------------------------- Income from operations 6,364 5,630 Interest and other income (expense), net 468 (684) - ---------------------------------------------------------------------- Income before provision for income taxes 6,832 4,946 Provision for income taxes (2) 7,140 1,682 - ---------------------------------------------------------------------- Income (Loss) before minority interest (308) 3,264 Minority interest 8,412 -- - ---------------------------------------------------------------------- Non-GAAP net income $ 8,104 $ 3,264 ====================================================================== Non-GAAP earnings per share: Basic $ 0.13 $ 0.05 Diluted 0.12 (3) 0.05 ====================================================================== Non-GAAP earnings per share weighted average number of shares outstanding: Basic 62,034 60,934 Diluted 71,555 (3) 61,632 - ---------------------------------------------------------------------- Notes to Non-GAAP Statements of Operations (000's): (1) The above Non-GAAP Statements of Operations exclude the effects of the following: - -- For the three months ended March 31, 2004, restructuring costs related to the relocation of our manufacturing operations amounted to $942. - -- For the three months ended March 31, 2004, the amortization of purchased technology and other intangibles related to the acquisitions of IEX and Santera amounted to $3,365. The related income tax benefits for the three months ended March 31, 2004 were $557. - -- For the three months ended March 31, 2003, the amortization of purchased technology and other intangibles related to the acquisition of IEX amounted to $2,800. The related income tax benefits for the three months ended March 31, 2003 were $1,050. (2) The above Non-GAAP Statements of Operations assume an effective tax rate of 35% and 34% for the Tekelec business excluding Santera for the three months ended March 31, 2004 and 2003, respectively. There were no income tax benefits associated with the losses generated by Santera. (3) For the three months ended March 31, 2004, the calculation of earnings per share includes, for the purposes of the calculation, the add-back to net income of $581 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 March 31, 2004 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 CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2004 2003 - ---------------------------------------------------------------------- (thousands) ASSETS Current assets: Cash and cash equivalents $ 118,123 $ 45,261 Short-term investments, at fair value 66,948 83,800 Accounts receivable, net 65,766 52,781 Current portion of notes receivable ($17,300 principal amount) 17,478 17,580 Inventories 24,284 21,434 Deferred income taxes, net 6,309 4,958 Prepaid expenses and other current assets 25,358 22,088 - ---------------------------------------------------------------------- Total current assets 324,266 247,902 Long-term investments, at fair value 157,032 210,298 Property and equipment, net 23,392 22,172 Investments in privately-held companies 17,322 17,322 Deferred income taxes 9,419 7,876 Other assets 6,957 6,342 Goodwill 68,903 68,903 Intangible assets, net 30,524 34,118 - ---------------------------------------------------------------------- Total assets $ 637,815 $ 614,933 ====================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of deferred revenues $ 58,095 $ 50,105 Other current liabilities 74,891 62,758 - ---------------------------------------------------------------------- Total current liabilities 132,986 112,863 Long-term convertible debt 125,000 125,000 Long-term portion of notes payable 2,228 2,574 Long-term portion of deferred revenues 2,487 3,687 Deferred income taxes -- 790 - ---------------------------------------------------------------------- Total liabilities 262,701 244,914 - ---------------------------------------------------------------------- Minority interest 31,631 41,208 - ---------------------------------------------------------------------- Total shareholders' equity 343,483 328,811 - ---------------------------------------------------------------------- Total liabilities and shareholders' equity $ 637,815 $ 614,933 ====================================================================== TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Three Months Ended March 31, 2004 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) Revenues $78,870 $ -- $78,870 Costs and expenses: Cost of goods sold 19,385 -- 19,385 Amortization of purchased technology 3,064 (2,833)(1) 231 - ---------------------------------------------------------------------- Total cost of sales 22,449 (2,833) 19,616 - ---------------------------------------------------------------------- Gross Profit 56,421 71.5% 2,833 59,254 75.1% - ---------------------------------------------------------------------- Research and development 20,619 -- 20,619 Selling, general and administrative 32,271 -- 32,271 Amortization of intangibles 532 (532)(1) -- Restructuring 942 (942)(2) - ---------------------------------------------------------------------- Total operating expenses 54,364 (1,474) 52,890 - ---------------------------------------------------------------------- Income from operations 2,057 4,307 6,364 Interest and other income (expense), net 468 -- 468 - ---------------------------------------------------------------------- Income from continuing operations before provision for income taxes 2,525 4,307 6,832 Provision for income taxes 6,253 887 (3) 7,140 - ---------------------------------------------------------------------- Income (Loss) from continuing operations before minority interest (3,728) 3,420 (308) Minority interest 9,577 (1,165)(4) 8,412 - ---------------------------------------------------------------------- Net income $ 5,849 $ 2,255 8,104 ====================================================================== Earnings per share: Basic $ 0.09 $ 0.13 Diluted 0.09 0.12 (5) ====================================================================== Earnings per share weighted average number of shares outstanding: Basic 62,034 62,034 Diluted 65,194 71,555 (5) - ---------------------------------------------------------------------- (1) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of IEX and Santera. (2) The adjustment represents restructuring costs related to the relocation of our manufacturing operations. (3) The adjustment represents the income tax effect of footnotes (1) and (2) in order to reflect our non-GAAP effective tax rate at 35% for the Tekelec business, excluding Santera. (4) The adjustment represents the minority interest impact of footnote (1). (5) For the three months ended March 31, 2004, the non-GAAP calculation of earnings per share includes, for the purposes of the calculation, the add-back to net income of $581 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 March 31, 2004 includes 6,361 shares related to the convertible debt using the "if-converted" method. TEKELEC IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME (unaudited) Three Months Ended March 31, 2003 GAAP Adjustments Non-GAAP - ---------------------------------------------------------------------- (thousands, except per share data) 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 adjustments represent the income tax effects of footnote (1) in order to reflect our non-GAAP effective tax rate of 34%. CONTACT: Tekelec Michael Attar, 818-880-7821 -----END PRIVACY-ENHANCED MESSAGE-----