SOURCE: Tekelec

Tekelec

February 11, 2010 06:00 ET

Tekelec Announces Strong Q4 and Full Year 2009 Operating Results

-- Q4 Orders of $162.4 million: up 1% year over year;

-- Q4 Revenues of $123.5 million; up 3% year over year;

-- Q4 GAAP Gross Margin of 67%, and non-GAAP Gross Margin of 69% (as reconciled below);

-- Q4 GAAP Operating Margin of 18%, and non-GAAP Operating Margin of 25% (as reconciled below);

-- Q4 GAAP Diluted EPS from Continuing Operations of $0.23 per share; up 21% year over year;

-- Record full year 2009 non-GAAP Diluted EPS of $1.04 per share, up 11% year over year and full year non-GAAP operating margin of 23% (as reconciled below)

MORRISVILLE, NC--(Marketwire - February 11, 2010) - Tekelec, ("the Company"), (NASDAQ: TKLC), the IP core network signaling and mobile data management company, today announced its earnings for the fourth quarter and full year 2009.

2009 Fourth Quarter Results from Continuing Operations

Revenue from continuing operations for the fourth quarter of 2009 was $123.5 million, up 3% compared to $119.9 million for the fourth quarter of 2008. The Company had orders of $162.4 million for the quarter, up 1% from the fourth quarter of 2008, and the second consecutive quarter of year-over-year growth. As of December 31, 2009, backlog was $373.6 million compared to $336.7 million as of September 30, 2009 and $412.1 million as of December 31, 2008.

On a GAAP basis, gross margins for the fourth quarter of 2009 were 67%, compared with 68% in the fourth quarter of 2008. Non-GAAP gross margins for the fourth quarter of 2009 increased to 69%, up from 68% for the fourth quarter of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.

On a GAAP basis, the Company reported income from continuing operations for the fourth quarter of 2009 of $15.9 million, or $0.23 per diluted share, with earnings per share up 21% compared to $12.8 million, or $0.19 per diluted share, for the fourth quarter of 2008. GAAP operating margins from continuing operations were 18% for the fourth quarter of 2009 up from 14% for the fourth quarter of 2008.

On a non-GAAP basis, net income from continuing operations for the fourth quarter of 2009 was $19.4 million, or $0.28 per diluted share, with earnings per share up 4% compared to $18.2 million, or $0.27 per diluted share, for the fourth quarter of 2008. Non-GAAP operating margins from continuing operations for the fourth quarter of 2009 were 25%, up from 21% for the fourth quarter of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.

Frank Plastina, Tekelec's president and chief executive officer, stated, "We are very pleased with our operating results, and in particular, with the strength of our orders for the fourth quarter. Our orders for the quarter were up 1% compared to 2008. For the last six months of the year, orders were up 4% over the same period in 2008 and we generated a book-to-bill ratio of approximately 1.10 to 1 during the second half of 2009. Our strong financial performance during the fourth quarter and full year of 2009, including year-over-year revenue growth for the quarter and year, along with record earnings per share of $1.04 for the full year, reflect our disciplined approach to bringing value to our customers and shareholders despite the difficult competitive and financial climate."

Full Year Results from Continuing Operations

For the full year 2009, revenue from continuing operations was $469.3 million, up 2% compared to $460.6 million for the full year of 2008. For the full year of 2009, the Company had orders of $429.8 million, down 5% compared to $453.3 million for the full year of 2008.

For the full year of 2009, GAAP gross margins were 66%, unchanged from the prior year. Non-GAAP gross margins for the full year 2009 increased to 68%, up from 67% for the full year of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.

On a GAAP basis, the Company reported income from continuing operations for the full year of 2009 of $47.4 million, or $0.70 per diluted share, with earnings per share down 1% compared to $48.6 million, or $0.71 per diluted share, for the full year of 2008. Our GAAP results for the full year 2009 include a non-cash loss on the sale of our shares in Genband of $13.6 million ($8.5 million net of tax related adjustments), or $0.13 per diluted share. Our GAAP results for the full year 2008 included a one-time tax benefit of $3.7 million, or $0.05 per diluted share, resulting from the utilization of certain capital losses generated by the 2007 sale of our switching business. GAAP operating margins from continuing operations were 17% and 14% for the full years ended December 31, 2009 and 2008, respectively.

On a non-GAAP basis, net income from continuing operations for the full year of 2009 was $70.4 million, or $1.04 per diluted share, with the earnings per share up 11%, compared to $64.7 million, or $0.94 per diluted share, for the full year of 2008. Non-GAAP operating margins from continuing operations for the full year of 2009 were 23% as compared with 20% for the full year of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company's GAAP financial measures and operating results to its non-GAAP financial measures and operating results.

Balance Sheet and Liquidity

As of December 31, 2009, the Company's consolidated cash and cash equivalents totaled $277.3 million, compared to $266.6 million at September 30, 2009. In addition, the Company held $92.9 million of auction rate securities and associated put rights which it has the right to convert to cash on June 30, 2010. Our cash, cash equivalents and short-term investments equaled $5.49 per share as of December 31, 2009. Cash flows from continuing operations were $8.0 million for the fourth quarter of 2009, compared to $18.1 million for the fourth quarter of 2008. Working capital at December 31, 2009 was $441.3 million, compared to $393.9 million at September 30, 2009, with the increase due primarily to an increase in accounts receivable and a reduction in deferred revenues.

2010 Full Year Guidance

While there remains uncertainty in current economic conditions, based on improved visibility compared to last year, we are providing full year guidance for 2010. We believe that full year revenues will range between $470 and $480 million and gross margins will be in the mid to high sixty percent range. Finally, we believe that our non-GAAP EPS range will be between $1.10 and $1.15 per diluted share and we expect the range for GAAP EPS will be between $0.90 and $0.95 cents per diluted share. In addition, we expect our book to bill ratio to be approximately one to one for the year.

                              2010 Guidance
                 Revenues                     $470M - $480M
           Non-GAAP Gross Margin %           Mid to High 60s
           Non-GAAP Diluted EPS               $1.10 - $1.15 *
             GAAP Diluted EPS                 $0.90 - $0.95
            Book to Bill Ratio             Approximately 1 to 1

* Excludes $13.2M of estimated stock-based compensation, $7.1M of estimated
amortization of purchased technology and acquisition-related expenses, (net
of the associated tax impact related to all of the adjustments above of
approximately $6.7M) which are included in GAAP EPS.  These Non-GAAP
adjustments after tax represent approximately $0.20 per share.

This guidance assumes that the Company does not adopt the new software revenue recognition rules during 2010. If these new rules are adopted in 2010, the guidance will be updated accordingly.

"Live" Webcast and Replay

Tekelec will host a live webcast of its conference call on Thursday, February 11, 2010, at 8:00 a.m. EST for its management to discuss fourth quarter 2009 results and certain forward-looking information concerning management's outlook for the business. 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. EST on Thursday, February 11, 2010, and for 90 days thereafter. The Company also plans to provide on its web site prior to the commencement of the call certain GAAP and non-GAAP information (including GAAP to non-GAAP reconciliations) for the quarterly and year-to-date periods.

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 #49860213.

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, 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 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 assist in determining incentive compensation and evaluating 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 release and the attachments to this release provide a reconciliation of each of the non-GAAP measures, including those included in the full non-GAAP statement of operations, referred to in this release to the most directly comparable GAAP measure. 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 2008 and upcoming 2009 Form 10-K, 2009 First, Second and Third Quarter Form 10-Qs and its other filings with the Securities and Exchange Commission, the current or further detrimental changes in general economic, social, or political conditions in the countries in which we operate including the impact of credit availability and currency fluctuations on overall capital spending by our customers, the timeliness and functional competitiveness of our product releases, the timing of our recognition of revenues and changes to the accounting rules related thereto, UBS' failure to fulfill its obligation to repurchase the Company's auction rate securities in June 2010, the extent to which any customer outsourcing to our competitors or supplier consolidation increases the influence of competitors on our customers' purchases, our ability to compete with other manufacturers that have lower cost bases than ours and/or are partially supported by foreign governments or employ other unfair trade practices, our ability to integrate acquisitions, our ability to protect intellectual property rights or the risk of infringing and litigating with others regarding their intellectual property rights, our ability to maintain OEM, partner, and vendor support and supply relationships, and changes in the market price of the Company's common stock. 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, a global leader in core multimedia session control, mobile messaging and network intelligence, ensures scalable, secure and highly available communications. The company's market-leading signaling solutions enable the interworking of different network applications, technologies and protocols, providing a smooth transition to next-generation networks. Tekelec has more than 25 offices around the world serving customers in more than 100 countries, with corporate headquarters located near Research Triangle Park in Morrisville, N.C., U.S.A. For more information, please visit www.tekelec.com.

                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                 Three Months Ended       Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
                                    (Thousands, except per share data)
                                ------------------------------------------

Revenues                        $ 123,506  $ 119,903  $ 469,261  $ 460,564
Cost of sales:
   Cost of goods sold              38,640     38,147    152,417    154,260
   Amortization of purchased
    technology                      1,605        746      6,204      2,507
                                ---------  ---------  ---------  ---------
      Total cost of sales          40,245     38,893    158,621    156,767
                                ---------  ---------  ---------  ---------
      Gross profit                 83,261     81,010    310,640    303,797
                                ---------  ---------  ---------  ---------
Operating expenses:
   Research and development        24,734     24,907    100,337    100,613
   Sales and marketing             17,070     19,409     68,644     74,678
   General and administrative      15,718     15,762     56,006     56,239
   Restructuring and other          2,984        891      2,984      1,134
   Acquired in-process research
      and development                   -      3,000          -      5,690
   Amortization of intangible
    assets                            261        111      1,221        438
                                ---------  ---------  ---------  ---------
      Total operating expenses     60,767     64,080    229,192    238,792
                                ---------  ---------  ---------  ---------
Income from operations             22,494     16,930     81,448     65,005
                                ---------  ---------  ---------  ---------
Other income (expense), net:
   Interest income                    243      1,722      1,159      9,047
   Interest expense                   (64)       (66)      (243)    (1,986)
   Impairment of investment in
    privately-held company              -          -    (13,587)         -
   Unrealized gain (loss) on
    investments carried at fair
    value, net                        123     (1,964)     1,846     (1,964)
   Other, net                      (1,770)       209     (3,930)    (3,492)
                                ---------  ---------  ---------  ---------
      Total other income
       (expense), net              (1,468)       (99)   (14,755)     1,605
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before
 provision for income taxes        21,026     16,831     66,693     66,610
Provision for income taxes          5,143      4,060     19,291     18,040
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                        15,883     12,771     47,402     48,570
Income from discontinued
 operations, net of taxes               -      1,096          -      6,469
                                ---------  ---------  ---------  ---------
Net income                      $  15,883  $  13,867  $  47,402  $  55,039
                                =========  =========  =========  =========

Earnings per share from
 continuing operations:
   Basic                        $    0.24  $    0.19  $    0.71  $    0.73
   Diluted                           0.23       0.19       0.70       0.71

Earnings per share from
 discontinued operations:
   Basic                        $       -  $    0.02  $       -  $    0.10
   Diluted                              -       0.02          -       0.09

Earnings per share:
   Basic                        $    0.24  $    0.21  $    0.71  $    0.83
   Diluted                           0.23       0.21       0.70       0.80

Weighted average number of
 shares outstanding-continuing
 operations:
   Basic                           67,355     66,113     66,900     66,307
   Diluted                         68,208     66,521     67,651     69,859

Weighted average number of
 shares outstanding:
   Basic                           67,355     66,113     66,900     66,307
   Diluted                         68,208     66,521     67,651     69,859





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

                                    Three Months Ended      Year Ended
                                        December 31,       December 31,
                                    ------------------  -------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  ---------
                                      (Thousands, except per share data)
                                    ---------------------------------------
Revenues                            $123,506  $119,903  $469,261  $ 460,564
Cost of sales:
 Cost of goods sold                   38,375    37,862   151,367    152,985
                                    --------  --------  --------  ---------
Gross profit                          85,131    82,041   317,894    307,579
                                    --------  --------  --------  ---------
Research and development              24,195    24,179    97,740     97,665
Sales and marketing                   16,333    18,730    65,518     71,828
General and administrative            13,777    13,705    48,362     48,091
                                    --------  --------  --------  ---------
    Total operating expenses          54,305    56,614   211,620    217,584
                                    --------  --------  --------  ---------
Income from operations                30,826    25,427   106,274     89,995
Other income (expense), net           (1,468)      (99)   (1,838)     1,605
                                    --------  --------  --------  ---------
Income from continuing operations
 before provision for income taxes    29,358    25,328   104,436     91,600
Provision for income taxes (2)         9,982     7,092    34,037     26,944
                                    --------  --------  --------  ---------
Net income from continuing
 operations                         $ 19,376  $ 18,236  $ 70,399  $  64,656
                                    ========  ========  ========  =========

Earnings per share:
Basic                               $   0.29  $   0.28  $   1.05  $    0.98
Diluted                                 0.28      0.27      1.04       0.94

Weighted average number of shares
 outstanding:
Basic                                 67,355    66,113    66,900     66,307
Diluted                               68,208    66,521    67,651     69,859


(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 non-GAAP
effective income tax rates of 34% and 28% for the three months ended
December 31, 2009 and 2008, respectively. The above Non-GAAP Statements of
Operations assume non-GAAP effective income tax rates of 33% and 29% for
the years ended December 31, 2009 and 2008, respectively.




                                  TEKELEC
              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                                          December 31,
                                                    -----------------------
                                                        2009        2008
                                                    ----------- -----------
                                                       (Thousands, except
                                                          share data)
                       ASSETS
Current assets:
    Cash and cash equivalents                       $   277,259 $   209,441
    Trading securities, at fair value                    81,788           -
    Put right, at fair value                             11,069           -
    Accounts receivable, net                            157,369     171,630
    Income taxes receivable                               1,617           -
    Inventories                                          23,353      23,704
    Deferred income tax asset, current                   66,758      44,253
    Deferred costs and prepaid commissions               56,645      56,588
    Prepaid expenses and other current assets             8,950      11,061
                                                    ----------- -----------
        Total current assets                            684,808     516,677
Long-term trading securities, at fair value                   -      87,198
Put right, at fair value                                      -      18,738
Property and equipment, net                              35,267      34,904
Investments in privately held companies                       -      22,297
Deferred income taxes, net, non current                  39,153      71,287
Other assets                                              1,661       1,415
Goodwill                                                 42,102      41,741
Intangible assets, net                                   31,017      37,703
                                                    ----------- -----------
        Total assets                                $   834,008 $   831,960
                                                    =========== ===========

        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                $    28,114 $    25,308
    Accrued expenses                                     25,372      30,723
    Accrued compensation and related expenses            40,980      40,953
    Current portion of deferred revenues                149,065     201,838
    Income taxes payable, current                             -       7,300
    Liabilities of discontinued operations                    -         184
                                                    ----------- -----------
        Total current liabilities                       243,531     306,306

Deferred income taxes, non current                        5,477       7,071
Long-term portion of deferred revenues                    5,590       7,591
Other long-term liabilities                               4,863       6,146
                                                    ----------- -----------
        Total liabilities                               259,461     327,114
                                                    ----------- -----------
Commitments and Contingencies

Shareholders' equity:
    Common stock, without par value, 200,000,000
     shares authorized; 67,382,600 and 66,139,690
     shares issued and outstanding, respectively        330,909     309,550
    Retained earnings                                   241,820     194,418
    Accumulated other comprehensive income                1,818         878
                                                    ----------- -----------
        Total shareholders' equity                      574,547     504,846
                                                    ----------- -----------
        Total liabilities and shareholders' equity  $   834,008 $   831,960
                                                    =========== ===========




                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Year Ended December 31,
                                                    ----------------------
                                                       2009        2008
                                                    ----------  ----------
                                                         (Thousands)
Cash flows from operating activities:
Net income                                          $   47,402  $   55,039
Adjustments to reconcile net income to net cash
 provided by operating activities:
    Income from discontinued operations                      -      (6,469)
    Impairment of investment in privately-held
     company                                            13,587           -
    Loss on sale of investments                              -           2
    Unrealized loss (gain) on investments carried
     at fair value, net                                 (1,846)      1,964
    Provision for doubtful accounts and sales
     returns                                             2,228       1,339
    Provision for warranty                               3,875       2,800
    Inventory write downs                                6,165       6,588
    Loss on disposals of fixed assets                      147         648
    Depreciation                                        18,105      17,426
    Amortization of intangibles                          7,425       2,945
    Amortization, other                                    748         939
    Acquired in-process research and development             -       5,690
    Deferred income taxes                                8,035     (12,276)
    Stock-based compensation                            13,537      13,298
    Excess tax benefits from stock-based
     compensation                                         (840)     (1,563)
    Changes in operating assets and liabilities:
        Accounts receivable                             13,723     (22,718)
        Inventories                                     (5,752)     (8,911)
        Deferred costs                                     819        (859)
        Prepaid expenses and other assets                1,178       1,604
        Accounts payable                                 2,545     (17,310)
        Accrued expenses                                (9,498)        245
        Accrued compensation and related expenses       (2,538)     (2,201)
        Deferred revenues                              (56,561)     34,261
        Income taxes receivable/payable                 (9,679)     33,474
                                                    ----------  ----------
            Total adjustments                            5,403      50,916
                                                    ----------  ----------
            Net cash provided by operating
             activities - continuing operations         52,805     105,955
            Net cash used in operating activities -
             discontinued operations                      (184)     (2,680)
                                                    ----------  ----------
            Net cash provided by operating
             activities                                 52,621     103,275
                                                    ----------  ----------

Cash flows from investing activities:
    Proceeds from sales and maturities of
     investments                                        23,635     790,635
    Purchases of investments                                 -    (584,524)
    Purchase of acquired business, net of cash
     acquired                                                -     (35,766)
    Purchases of property and equipment                (18,720)    (19,686)
    Payments related to acquired in-process
     research and development                                -      (2,690)
                                                    ----------  ----------
            Net cash provided by investing
             activities                                  4,915     147,969
                                                    ----------  ----------

Cash flows from financing activities:
    Repayment of convertible debt                            -    (125,000)
    Repurchases of common stock                              -     (33,779)
    Proceeds from issuance of common stock               9,886      11,922
    Excess tax benefits from stock-based
     compensation                                          840       1,563
                                                    ----------  ----------
            Net cash provided by (used in)
             financing activities                       10,726    (145,294)
                                                    ----------  ----------

Effect of exchange rate changes on cash                   (444)     (2,059)
                                                    ----------  ----------
            Net change in cash and cash equivalents     67,818     103,891
Cash and cash equivalents, beginning of period         209,441     105,550
                                                    ----------  ----------
Cash and cash equivalents, end of period            $  277,259  $  209,441
                                                    ==========  ==========




                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME

                                   Three Months Ended December 31, 2009
                                 -----------------------------------------
                                     (Thousands, except per share data)
                                 -----------------------------------------
                                     GAAP                        Non-GAAP
                                 Continuing                    Continuing
                                 Operations   Adjustments      Operations
                                 -----------  -----------      -----------

Revenues                         $   123,506  $         -      $   123,506
Cost of sales:
 Cost of goods sold                   38,640         (265)(1)       38,375
 Amortization of purchased
  technology                           1,605       (1,605)(2)            -
                                 -----------  -----------      -----------
Total cost of sales                   40,245       (1,870)          38,375
                                 -----------  -----------      -----------
Gross profit                          83,261        1,870           85,131
                                 -----------  -----------      -----------
Operating Expenses:
Research and development              24,734         (319)(1)       24,195
                                                     (220)(3)
Sales and marketing                   17,070         (737)(1)       16,333
General and administrative            15,718       (1,941)(1)       13,777
Restructuring and other                2,984       (2,984)(4)            -
Amortization of intangible
 assets                                  261         (261)(2)            -
                                 -----------  -----------      -----------
Total operating expenses              60,767       (6,462)          54,305
                                 -----------  -----------      -----------
Income from operations                22,494        8,332           30,826
                                 -----------  -----------      -----------
Other income (expense), net           (1,468)           -           (1,468)
                                 -----------  -----------      -----------
Income from continuing
 operations before provision for
 income taxes                         21,026        8,332           29,358
                                 -----------  -----------      -----------
Provision for income taxes             5,143        4,839 (5)        9,982
                                 -----------  -----------      -----------
Net income from continuing
 operations                      $    15,883  $     3,493      $    19,376
                                 -----------  -----------      -----------


Earnings per share:
Basic                            $      0.24                   $      0.29
Diluted                          $      0.23                   $      0.28

Weighted average number of
 shares outstanding:
Basic                                 67,355                        67,355
Diluted                               68,208                        68,208

(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
and other intangibles related to the acquisitions of Steleus,
iptelorg and mBalance.

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

(4) The adjustment represents the elimination of the costs associated
with our restructuring activities.

(5) The adjustment represents the exclusion of a $1.4 million tax
benefit related to the write-off for statutory and tax purposes of
certain intangible assets held by one of our international subsidiaries.
These intangible assets had no corresponding book basis.
Also included in the adjustment is the income tax effect of footnotes (1),
(2), (3) and (4) in order to reflect our non-GAAP effective
tax rate.




                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME


                                         Year Ended December 31, 2009
                                   ---------------------------------------
                                     (Thousands, except per share data)
                                   ---------------------------------------
                                      GAAP                       Non-GAAP
                                   Continuing                   Continuing
                                   Operations  Adjustments      Operations
                                   ----------  -----------      ----------

Revenues                           $  469,261  $         -      $  469,261
Cost of sales:
 Cost of goods sold                   152,417       (1,050)(1)     151,367
 Amortization of purchased
  technology                            6,204       (6,204)(2)           -
                                   ----------  -----------      ----------
Total cost of sales                   158,621       (7,254)        151,367
                                   ----------  -----------      ----------
Gross profit                          310,640        7,254         317,894
                                   ----------  -----------      ----------
Operating Expenses:
Research and development              100,337       (1,717)(1)      97,740
                                                      (880)(3)
Sales and marketing                    68,644       (3,126)(1)      65,518
General and administrative             56,006       (7,644)(1)      48,362
Restructuring and other                 2,984       (2,984)(4)           -
Amortization of intangible assets       1,221       (1,221)(2)           -
                                   ----------  -----------      ----------
Total operating expenses              229,192      (17,572)        211,620
                                   ----------  -----------      ----------
Income from operations                 81,448       24,826         106,274
                                   ----------  -----------      ----------
Other income (expense), net           (14,755)      12,917 (5)      (1,838)
                                   ----------  -----------      ----------
Income from continuing operations
 before provision for income taxes     66,693       37,743         104,436
                                   ----------  -----------      ----------
Provision for income taxes             19,291       14,746 (6)      34,037
                                   ----------  -----------      ----------
Net income from continuing
 operations                        $   47,402  $    22,997      $   70,399
                                   ----------  -----------      ----------


Earnings per share:
Basic                              $     0.71                   $     1.05
Diluted                            $     0.70                   $     1.04

Weighted average number of shares
 outstanding:
Basic                                  66,900                       66,900
Diluted                                67,651                       67,651


(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
and other intangibles related to the acquisitions of Steleus,
iptelorg and mBalance.

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

(4) The adjustment represents the elimination of the costs associated
with our restructuring activities.

(5) The adjustment represents a net charge associated with our
investment in Genband received in exchange for our SSG business
unit in 2007.  Specifically, we incurred an impairment charge of $13.6
million as a result of a decline in the estimated fair value of our
investment as compared to historical cost.  Partially offsetting this
impairment is a one time property tax refund of $0.7 million received
associated with the former assets of our SSG business unit.

(6) The adjustment represents the exclusion of a $1.4 million tax
benefit related to the write-off for statutory and tax purposes of
certain intangible assets held by one of our international subsidiaries.
These intangible assets had no corresponding book basis.
Also included in the adjustment is the income tax effect of footnotes (1),
(2), (3), (4) and (5) in order to reflect our non-GAAP effective
tax rate.





                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME


                                     Three Months Ended December 31, 2008
                                   ---------------------------------------
                                     (Thousands, except per share data)
                                   ---------------------------------------
                                      GAAP                       Non-GAAP
                                   Continuing                   Continuing
                                   Operations  Adjustments      Operations
                                   ----------  -----------      ----------

Revenues                           $  119,903  $         -      $  119,903
Cost of sales:
 Cost of goods sold                    38,147         (285)(1)      37,862
 Amortization of purchased
  technology                              746         (746)(2)           -
                                   ----------  -----------      ----------
Total cost of sales                    38,893       (1,031)         37,862
                                   ----------  -----------      ----------
Gross profit                           81,010        1,031          82,041
                                   ----------  -----------      ----------
Operating Expenses:
Research and development               24,907         (508)(1)      24,179
                                                      (220)(3)
Sales and marketing                    19,409         (679)(1)      18,730
General and administrative             15,762       (2,057)(1)      13,705
Restructuring and other                   891         (891)(4)           -
Acquired in-process research and
 development                            3,000       (3,000)(5)           -
Amortization of intangible assets         111         (111)(2)           -
                                   ----------  -----------      ----------
Total operating expenses               64,080       (7,466)         56,614
                                   ----------  -----------      ----------
Income from operations                 16,930        8,497          25,427
                                   ----------  -----------      ----------
Other income (expense), net               (99)           -             (99)
                                   ----------  -----------      ----------
Income from continuing operations
 before provision for income taxes     16,831        8,497          25,328
                                   ----------  -----------      ----------
Provision for income taxes              4,060        3,032 (6)       7,092
                                   ----------  -----------      ----------
Income from continuing operations      12,771        5,465          18,236
                                   ----------  -----------      ----------
Income from discontinued
 operations, net of taxes               1,096       (1,096)(7)           -
                                   ----------  -----------      ----------
Net income                         $   13,867  $     4,369      $   18,236
                                   ----------  -----------      ----------


Earnings per share from continuing
 operations:
Basic                              $     0.19                   $     0.28
Diluted                                  0.19                         0.27

Earnings per share:
Basic                              $     0.21                   $     0.28
Diluted                                  0.21                         0.27

Weighted average number of shares
 outstanding:
Basic                                  66,113                       66,113
Diluted                                66,521                       66,521

(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
and other intangibles related to the acquisitions of Steleus, iptelorg and
mBalance.

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

(4) The adjustment represents the elimination of the costs associated
with our restructuring activities.

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

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

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





                                  TEKELEC
        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME


                                         Year Ended December 31, 2008
                                   ----------------------------------------
                                     (Thousands, except per share data)
                                   ----------------------------------------
                                      GAAP                       Non-GAAP
                                   Continuing                   Continuing
                                   Operations  Adjustments      Operations
                                   ----------- -----------      -----------

Revenues                           $   460,564 $         -      $   460,564
Cost of sales:
 Cost of goods sold                    154,260      (1,275)(1)      152,985
 Amortization of purchased
  technology                             2,507      (2,507)(2)            -
                                   ----------- -----------      -----------
Total cost of sales                    156,767      (3,782)         152,985
                                   ----------- -----------      -----------
Gross profit                           303,797       3,782          307,579
                                   ----------- -----------      -----------
Operating Expenses:
Research and development               100,613      (2,141)(1)       97,665
                                                      (807)(3)
Sales and marketing                     74,678      (2,850)(1)       71,828
General and administrative              56,239      (7,248)(1)       48,091
                                                      (900)(4)
Restructuring and other                  1,134      (1,350)(5)            -

                                                       216 (1),(5)
Acquired in-process research and
 development                             5,690      (5,690)(6)            -
Amortization of intangible assets          438        (438)(2)            -
                                   ----------- -----------      -----------
Total operating expenses               238,792     (21,208)         217,584
                                   ----------- -----------      -----------
Income from operations                  65,005      24,990           89,995
                                   ----------- -----------      -----------
Other income (expense), net              1,605           -            1,605
                                   ----------- -----------      -----------
Income from continuing operations
 before provision for income taxes      66,610      24,990           91,600
                                   ----------- -----------      -----------
Provision for income taxes              18,040       8,904 (7)       26,944
                                   ----------- -----------      -----------
Income from continuing operations       48,570      16,086           64,656
                                   ----------- -----------      -----------
Income from discontinued
 operations, net of taxes                6,469      (6,469)(8)            -
                                   ----------- -----------      -----------
Net income                         $    55,039 $     9,617      $    64,656
                                   ----------- -----------      -----------

Earnings per share from continuing
 operations:
Basic                              $      0.73                  $      0.98
Diluted (9)                               0.71                         0.94

Earnings per share:
Basic                              $      0.83                  $      0.98
Diluted (9)                               0.80                         0.94

Weighted average number of shares
 outstanding:
Basic                                   66,307                       66,307
Diluted (9)                             69,859                       69,859

(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
and other intangibles related to the acquisitions of Steleus, iptelorg and
mBalance.

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

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

(5) The adjustment represents the elimination of the costs associated
with our restructuring activities.

(6) The adjustment represents acquired in-process research and
development related to the mBalance and Estacado purchases.

(7) The adjustment represents the exclusion of discrete tax benefits
totaling $3.7 million related to reversing a valuation allowance on
deferred tax assets generated by
the loss on sale of our former Switching Solutions Group.  Also included in
the adjustment is the income tax effect of footnotes (1), (2), (3), (4),
(5) and (6) in order to reflect our non-GAAP effective tax rate.

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

(9) For the year ended December 31, 2008, the calculations of diluted
earnings per share include a potential add-back to net income of $1,085,000
for assumed after-tax interest cost and 2,971,000 weighted average shares
related to our previously outstanding convertible debt using the
"if-converted" method.

Contact Information

  • Investor Contacts:
    Mike Gallentine
    Director of Investor Relations
    919-461-6825 office
    Email Contact

    Press Contacts:
    Joanne Latham
    Director, Marketing Communications
    919-653-9655 office
    Email Contact