Tekelec (TKLC) 8-K Tekelec Announces Q2 2009 Results Delivers strong quarterly revenues and earnings, orders in line with guidance

Exhibit 99.1

FOR IMMEDIATE RELEASE

Tekelec Announces Q2 2009 Results
Delivers strong quarterly revenues and earnings, orders in line with guidance

• Q2 Orders of $104.7 million;

• Q2 Revenues of $114.2 million;

• Q2 GAAP Gross Margin of 67%, and non-GAAP Gross Margin of 68% (as reconciled below);

• Q2 GAAP Operating Margin of 17%, and non-GAAP Operating Margin of 22% (as reconciled below);

• Q2 GAAP Diluted EPS from Continuing Operations of $0.14 per share;

• Q2 Non-GAAP Diluted EPS from Continuing Operations of $0.25 per share (as reconciled below);

Morrisville, N.C.August 5, 2009 — Tekelec (“the Company”), (NASDAQ: TKLC), the network signaling, mobile messaging and performance management company, today announced its earnings for the second quarter of 2009.

2009 Second Quarter Results from Continuing Operations

Revenue from continuing operations for the second quarter of 2009 was $114.2 million, down 2% compared to $116.4 million for the second quarter of 2008. The Company had orders of $104.7 million for the quarter, down 15% from $122.9 million for the second quarter of 2008. As of June 30, 2009, backlog was $353.3 million compared to $359.3 million as of March 31, 2009 and $387.6 million as of June 30, 2008.

On a GAAP basis, the Company reported income from continuing operations and consolidated net income for the second quarter of 2009 of $9.8 million, or $0.14 per diluted share, with the earnings per share down 36% compared to $15.3 million, or $0.22 per diluted share, for the second quarter of 2008. The second quarter 2009 GAAP results include a non-cash impairment charge of $2.8 million, or $0.04 per diluted share related to a decline in the fair value of the equity interest in Genband, a privately held investment. The second quarter of 2008 results 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 sale of our Switching business. GAAP operating margins from continuing operations were 17% for the second quarter of 2009 and 13% for the second quarter of 2008.

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

On a non-GAAP basis, net income from continuing operations and consolidated net income for the second quarter of 2009 was $16.8 million, or $0.25 per diluted share, with the earnings per share up 9% compared to $15.7 million, or $0.23 per diluted share, for the second quarter of 2008. Non-GAAP operating margins from continuing operations for the second quarter of 2009 were 22% compared with 17% for the second quarter of 2008. Please refer to the attached financial statement schedules for a reconciliation of the Company’s GAAP operating results to its non-GAAP operating results.

Frank Plastina, Tekelec’s president and chief executive officer, stated, “In the second quarter Tekelec continued to achieve solid operating results with strong revenues and operating margins despite a challenging economic backdrop around the world. Our orders in the first half of the year were consistent with our expectations and we continue to expect our orders to strengthen in the second half of the year. We generated operating margins of 22% on a non-GAAP basis in the second quarter while continuing to aggressively invest in new products.”

Year-to-Date Results from Continuing Operations

For the first six months of 2009, revenue from continuing operations was $230.8 million, down 2% compared to $234.7 million for the first six months of 2008. For the first six months of 2009, the Company had orders from continuing operations of $172.7 million, down 16% compared to $205.3 million for the first six months of 2008.

On a GAAP basis, the Company reported income from continuing operations for the first six months of 2009 of $22.1 million, or $0.33 per diluted share, with the earnings per share down 15% compared to $27.2 million, or $0.39 per diluted share, for the first six months of 2008. The GAAP results for the first six months of 2009 include a non-cash impairment charge of $2.8 million, or $0.04 per diluted share related to a decline in the fair value of the equity interest in Genband, a privately held investment. The GAAP results for the first six months of 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 sale of our Switching business. GAAP operating margins from continuing operations were 16% and 14% for the six months ended June 30, 2009 and 2008, respectively.

On a non-GAAP basis, net income from continuing operations for the first six months of 2009 was $32.8 million, or $0.49 per diluted share, with the earnings per share up 2%, compared to $34.0 million, or $0.48 per diluted share, for the first six months of 2008. Non-GAAP operating margins from continuing operations for the first six months of 2009 were 21% as compared with 19% for the first six months 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 June 30, 2009, the Company’s consolidated cash and cash equivalents totaled $242.9 million, compared to $231.6 million at March 31, 2009. Cash flows from continuing operations were $12.2 million for the second quarter of 2009, compared to $18.5 million for the second quarter of 2008. Working capital at June 30, 2009 was $358.5 million, compared to $233.8 million at March 31, 2009, with the increase due primarily to the reclassification of $87.3 million of auction rate securities and the related Put right of $14.6 million from long-term in the prior quarter to short-term in the current quarter.

2009 Full Year Guidance

For the full year 2009, we continue to believe that our full year 2009 order entry will range between $420 million and $460 million and gross margins will range between 65% and 67%. Based on year-to-date results and current expectations for the remainder of the year, we are raising the lower end of the guidance for revenues and non-GAAP Diluted EPS. We now expect full year revenues to range between $450 million and $460 million and non-GAAP Diluted EPS to range between $0.90 and $0.95 cents per share. We expect GAAP Diluted EPS to range between $0.63 to $0.68 cents per share. See table below for reconciliation of GAAP to non-GAAP measures.

	2009 Guidance
Orders		$420M - $460M
Revenues		$450M - $460M
Non-GAAP GM %		65% - 67% *
GAAP Diluted EPS		$0.63 - $0.68
Non-GAAP Diluted EPS		$0.90 - $0.95 *

*    Excludes $14.2M of estimated stock-based compensation expense, $8.2M of estimated amortization of purchased technology and acquisition-related expenses, and a $2.8M impairment charge related to the decline in fair value of the equity interest in Genband, a privately held investment, (net of associated tax impact of approximately $6.7M) which are included in GAAP EPS. These Non-GAAP adjustments after tax represent approximately $0.27 per share. Of these amounts, approximately $7.0M would increase Non-GAAP cost of sales and reduce the Non-GAAP gross margin.

“Live” Webcast and Replay

Tekelec will host a live webcast of its conference call on Wednesday, August 5, 2009 at 8:00 a.m. EDT for its management to discuss second 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. EDT on Wednesday, August 5, 2009, 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 second quarters of 2009 and 2008 and to discuss during this call certain forward-looking information concerning management’s outlook for the business.

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 # 19458335.

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 Form 10-K, 2009 First and Second Quarter Form 10-Q and its other filings with the Securities and Exchange Commission, the effect of the current or escalating economic crisis including the impact of credit availability and currency fluctuations on overall capital spending by our customers, the current or further detrimental changes in general economic, social,

or political conditions in the countries in which we operate, the timeliness and functional competitiveness of our product releases, the timing of our recognition of revenues and changes to the accounting rules related thereto, our ability to maintain OEM, partner, and vendor support and supply relationships, business interruptions at the Company, its suppliers or customers resulting from the recent or subsequent flu pandemics, 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, 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 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 20 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.

Investor Contacts:
Mike Gallentine
Director of Investor Relations
919-461-6825 office
Michael.Gallentine@tekelec.com

Press Contacts:
Joanne Latham
Director, Marketing Communications
919-653-9655 office
Joanne.Latham@tekelec.com

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS⁽¹⁾

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
				(Thousands, except per share data)
Revenues	$	114,183		$	116,422		$	230,841		$	234,665
Cost of sales:
Cost of goods sold		36,364			42,392			76,713			82,338
Amortization of purchased technology		1,515			587			3,032			1,174
Total cost of sales		37,879			42,979			79,745			83,512
Gross profit		76,304			73,443			151,096			151,153
Operating expenses:
Research and development		25,551			26,216			51,403			50,624
Sales and marketing		17,110			18,906			34,406			37,110
General and administrative		13,717			12,948			27,140			27,205
Restructuring and other		—			293			—			243
Acquired in-process research and development		—			—			—			2,690
Amortization of intangible assets		315			109			633			218
Total operating expenses		56,693			58,472			113,582			118,090
Income from operations		19,611			14,971			37,514			33,063
Other income (expense), net:
Interest income		264			2,295			634			5,576
Interest expense		(57	)		(779	)		(112	)		(1,911	)
Impairment of investment in privately-held company		(2,758	)		—			(2,758	)		—
Loss on sale of investments		—			—			—			(2	)
Unrealized gain on ARS portfolio and Put right, net		321			—			1,435			—
Other, net		(402	)		(990	)		(1,820	)		(1,506	)
Total other income (expense), net		(2,632	)		526			(2,621	)		2,157
Income from continuing operations before provision for income taxes		16,979			15,497			34,893			35,220
Provision for income taxes		7,226			179			12,775			8,039
Income from continuing operations		9,753			15,318			22,118			27,181
Income from discontinued operations, net of taxes		—			—			—			1,618
Net income	$	9,753		$	15,318		$	22,118		$	28,799
Earnings per share from continuing operations:
Basic	$	0.15		$	0.23		$	0.33		$	0.41
Diluted		0.14			0.22			0.33			0.39
Earnings per share from discontinued operations:
Basic	$	—		$	—		$	—		$	0.02
Diluted		—			—			—			0.02
Earnings per share:
Basic	$	0.15		$	0.23		$	0.33		$	0.43
Diluted		0.14			0.22			0.33			0.41
Weighted average number of shares outstanding-continuing operations:
Basic		66,744			65,638			66,514			66,578
Diluted		67,502			71,953			67,185			73,076
Weighted average number of shares outstanding:
Basic		66,744			65,638			66,514			66,578
Diluted		67,502			71,953			67,185			73,076

(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Condensed Consolidated Statements of Operations are for the thirteen and twenty-six weeks ended July 3, 2009 and June 27, 2008.

TEKELEC
UNAUDITED NON-GAAP STATEMENTS OF OPERATIONS FOR CONTINUING OPERATIONS⁽¹⁾⁽³⁾

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
			(Thousands, except per share data)
Revenues	$	114,183	$	116,422	$	230,841	$	234,665
Cost of sales:
Cost of goods sold		36,092		42,062		76,215		81,637
Gross profit		78,091		74,360		154,626		153,028
Research and development		24,821		25,436		49,916		49,035
Sales and marketing		16,314		18,227		32,870		35,684
General and administrative		11,634		11,132		23,248		22,921
Total operating expenses		52,769		54,795		106,034		107,640
Income from operations		25,322		19,565		48,592		45,388
Interest and other income, net		126		526		137		2,157
Income from continuing operations before provision for income taxes		25,448		20,091		48,729		47,545
Provision for income taxes(2)		8,643		4,392		15,886		13,589
Net income from continuing operations	$	16,805	$	15,699	$	32,843	$	33,956
Earnings per share:
Basic	$	0.25	$	0.24	$	0.49	$	0.51
Diluted		0.25		0.23		0.49		0.48
Weighted average number of shares outstanding:
Basic		66,744		65,638		66,514		66,578
Diluted		67,502		71,953		67,185		73,076

(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 34.0% and 21.9% for the three months ended June 30, 2009 and 2008, respectively. The above Non-GAAP Statements of Operations assume non-GAAP effective income tax rates of 32.6% and 28.6% for the six months ended June 30, 2009 and 2008, respectively.
(3)	We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Non-GAAP Statements of Operations for Continuing Operations are for the thirteen and twenty-six weeks ended July 3, 2009 and June 27, 2008.

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,(1)		December 31,
	2009		2008
	(Thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	242,905	$	209,441
Trading securities, at fair value		87,296		—
Put right, at fair value		14,575		—
Accounts receivable, net		126,996		171,630
Income taxes receivable		777		—
Inventories		30,705		23,704
Deferred income taxes		41,952		44,253
Deferred costs and prepaid commissions		45,810		56,588
Prepaid expenses and other current assets		9,666		11,061
Total current assets		600,682		516,677
Long-term trading securities, at fair value		—		87,198
Put right, at fair value		—		18,738
Property and equipment, net		37,473		34,904
Investments in privately held companies		19,539		22,297
Deferred income taxes, net		66,341		71,287
Other assets		1,371		1,415
Goodwill		41,614		41,741
Intangible assets, net		34,207		37,703
Total assets	$	801,227	$	831,960
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	29,370	$	25,308
Accrued expenses		25,362		30,723
Accrued compensation and related expenses		27,028		40,953
Current portion of deferred revenues		160,416		201,838
Income taxes payable		—		7,300
Liabilities of discontinued operations		—		184
Total current liabilities		242,176		306,306
Deferred income taxes		6,026		7,071
Long-term portion of deferred revenues		7,104		7,591
Other long-term liabilities		7,079		6,146
Total liabilities		262,385		327,114
Commitments and Contingencies
Shareholders’ equity:
Common stock, without par value, 200,000,000 shares authorized; 66,972,524 and 66,139,690 shares issued and outstanding, respectively		320,997		309,550
Retained earnings		216,536		194,418
Accumulated other comprehensive income		1,309		878
Total shareholders’ equity		538,842		504,846
Total liabilities and shareholders’ equity	$	801,227	$	831,960

(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Condensed Consolidated Balance Sheet is as of July 3, 2009.

TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,(1)
	2009			2008
	(Thousands)
Cash flows from operating activities:
Net income	$	22,118		$	28,799
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations		—			(1,618	)
Loss on sale of investments		—			2
Impairment of investment in privately-held company		2,758			—
Unrealized gain on ARS portfolio and Put right, net		(1,435	)		—
Provision for (recovery of) doubtful accounts and sales returns		185			(84	)
Provision for warranty		5,000			2,800
Inventory write downs		1,207			3,223
Loss on disposals of fixed assets		54			279
Depreciation		9,358			8,465
Amortization of intangibles		3,665			1,392
Amortization, other		375			487
Acquired in-process research and development		—			2,690
Deferred income taxes		5,877			(12,920	)
Stock-based compensation		6,973			6,517
Excess tax benefits from stock-based compensation		(544	)		(1,234	)
Changes in operating assets and liabilities:
Accounts receivable		46,101			5,105
Inventories		(8,168	)		(4,562	)
Deferred costs		11,133			(1,512	)
Prepaid expenses and other assets		1,219			4,416
Accounts payable		3,947			(16,627	)
Accrued expenses		(10,663	)		4,813
Accrued compensation and related expenses		(15,879	)		(7,281	)
Deferred revenues		(43,858	)		17,441
Income taxes receivable/payable		(6,502	)		16,340
Total adjustments		10,803			28,132
Net cash provided by operating activities — continuing operations		32,921			56,931
Net cash used in operating activities — discontinued operations		(184	)		(1,767	)
Net cash provided by operating activities		32,737			55,164
Cash flows from investing activities:
Proceeds from sales and maturities of investments		5,500			772,583
Purchases of investments		—			(584,524	)
Payments related to acquired in-process research and development		—			(2,690	)
Purchases of property and equipment		(12,138	)		(10,441	)
Other non-operating assets		—			(71	)
Net cash provided by (used in) investing activities		(6,638	)		174,857
Cash flows from financing activities:
Repayment of convertible debt		—			(125,000	)
Repurchase of common stock		—			(33,700	)
Proceeds from issuance of common stock		5,987			9,547
Excess tax benefits from stock-based compensation		544			1,234
Net cash provided by (used in) financing activities		6,531			(147,919	)
Effect of exchange rate changes on cash		834			491
Net change in cash and cash equivalents		33,464			82,593
Cash and cash equivalents, beginning of period		209,441			105,550
Cash and cash equivalents, end of period	$	242,905		$	188,143

(1) We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying Unaudited Condensed Consolidated Statements of Cash Flows are for the twenty-six weeks ended July 3, 2009 and June 27, 2008.

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

	Three Months Ended June 30, 2009(6)
	(Thousands, except per share data)
	GAAP						Non-GAAP
	Continuing						Continuing
	Operations			Adjustments			Operations
Revenues	$	114,183		$	—		$	114,183
Cost of sales:
Cost of goods sold		36,364			(272	)(1)		36,092
Amortization of purchased technology		1,515			(1,515	)(2)		—
Total cost of sales		37,879			(1,787	)		36,092
Gross profit		76,304			1,787			78,091
Operating Expenses:
Research and development		25,551			(510	)(1)		24,821
					(220	)(3)
Sales and marketing		17,110			(796	)(1)		16,314
General and administrative		13,717			(2,083	)(1)		11,634
Amortization of intangible assets		315			(315	)(2)		—
Total operating expenses		56,693			(3,924	)		52,769
Income from operations		19,611			5,711			25,322
Interest and other income, net		(2,632	)		2,758	(4)		126
Income from continuing operations before provision for income taxes		16,979			8,469			25,448
Provision for income taxes		7,226			1,417	(5)		8,643
Net income from continuing operations	$	9,753		$	7,052		$	16,805
Earnings per share:
Basic	$	0.15					$	0.25
Diluted	$	0.14					$	0.25
Weighted average number of shares outstanding:
Basic		66,744						66,744
Diluted		67,502						67,502

(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 impairment charge as a result of a decline in the estimated fair value as compared to historical cost for one of our investments in privately held companies.
(5)	The adjustment represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate.
(6)	We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirteen weeks ended July 3, 2009.

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

	Six Months Ended June 30, 2009(6)
	(Thousands, except per share data)
	GAAP						Non-GAAP
	Continuing						Continuing
	Operations			Adjustments			Operations
Revenues	$	230,841		$	—		$	230,841
Cost of sales:
Cost of goods sold		76,713			(498	)(1)		76,215
Amortization of purchased technology		3,032			(3,032	)(2)		—
Total cost of sales		79,745			(3,530	)		76,215
Gross profit		151,096			3,530			154,626
Operating Expenses:
Research and development		51,403			(1,047	)(1)		49,916
					(440	)(3)
Sales and marketing		34,406			(1,536	)(1)		32,870
General and administrative		27,140			(3,892	)(1)		23,248
Amortization of intangible assets		633			(633	)(2)		—
Total operating expenses		113,582			(7,548	)		106,034
Income from operations		37,514			11,078			48,592
Interest and other income, net		(2,621	)		2,758	(4)		137
Income from continuing operations before provision for income taxes		34,893			13,836			48,729
Provision for income taxes		12,775			3,111	(5)		15,886
Net income from continuing operations	$	22,118		$	10,725		$	32,843
Earnings per share:
Basic	$	0.33					$	0.49
Diluted	$	0.33					$	0.49
Weighted average number of shares outstanding:
Basic		66,514						66,514
Diluted		67,185						67,185

(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 impairment charge as a result of a decline in the estimated fair value as compared to historical cost for one of our investments in privately held companies.
(5)	The adjustment represents the income tax effect of footnotes (1), (2), (3) and (4) in order to reflect our non-GAAP effective tax rate.
(6)	We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the twenty-six weeks ended July 3, 2009.

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

	Three Months Ended June 30, 2008(7)
	(Thousands, except per share data)
	GAAP					Non-GAAP
	Continuing					Continuing
	Operations		Adjustments			Operations
Revenues	$	116,422	$	—		$	116,422
Cost of sales:
Cost of goods sold		42,392		(330	)(1)		42,062
Amortization of purchased technology		587		(587	)(2)		—
Total cost of sales		42,979		(917	)		42,062
Gross profit		73,443		917			74,360
Operating Expenses:
Research and development		26,216		(560	)(1)		25,436
				(220	)(3)
Sales and marketing		18,906		(679	)(1)		18,227
General and administrative		12,948		(1,816	) (1)		11,132
Restructuring and other		293		(289	)(4)		—
				(4	)(1),(4)
Amortization of intangible assets		109		(109	)(2)		—
Total operating expenses		58,472		(3,677	)		54,795
Income from operations		14,971		4,594			19,565
Interest and other income, net		526		—			526
Income from continuing operations before provision for income taxes		15,497		4,594			20,091
Provision for income taxes		179		4,213	(5)		4,392
Net income from continuing operations	$	15,318	$	381		$	15,699
Earnings per share:
Basic	$	0.23				$	0.24
Diluted(6)		0.22					0.23
Weighted average number of shares outstanding:
Basic		65,638					65,638
Diluted(6)		71,953					71,953

(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 and iptelorg.
(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 costs incurred during 2008 related to restructuring certain functions in our EAAA region.
(5)	The adjustment represents the income tax effect of excluding second quarter discrete tax benefits totaling $3.7 million related to reversing a valuation allowance on deferred tax assets generated by the loss on sale of SSG. 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.
(6)	For the three months ended June 30, 2008, the calculations of diluted earnings per share include a potential add-back to net income of $504,000 for assumed after-tax interest cost and 5,522,000 weighted average shares related to our formerly outstanding convertible debt using the “if-converted” method.
(7)	We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the thirteen weeks ended June 27, 2008.

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

	Six Months Ended June 30, 2008(10)
	(Thousands, except per share data)
	GAAP					Non-GAAP
	Continuing					Continuing
	Operations		Adjustments			Operations
Revenues	$	234,665	$	—		$	234,665
Cost of sales:
Cost of goods sold		82,338		(701	)(1)		81,637
Amortization of purchased technology		1,174		(1,174	)(2)		—
Total cost of sales		83,512		(1,875	)		81,637
Gross profit		151,153		1,875			153,028
Operating Expenses:
Research and development		50,624		(1,222	)(1)		49,035
				(367	)(3)
Sales and marketing		37,110		(1,426	)(1)		35,684
General and administrative		27,205		(3,384	)(1)		22,921
				(900	)(4)
Acquired in-process research and development		2,690		(2,690	)(5)		—
Restructuring and other		243		(459	)(6)		—
				216	(1),(6)
Amortization of intangible assets		218		(218	)(2)		—
Total operating expenses		118,090		(10,450	)		107,640
Income from operations		33,063		12,325			45,388
Interest and other income, net		2,157		—			2,157
Income from continuing operations before provision for income taxes		35,220		12,325			47,545
Provision for income taxes		8,039		5,550	(7)		13,589
Income from continuing operations		27,181		6,775			33,956
Income from discontinued operations, net of taxes		1,618		(1,618	)(8)		—
Net income from continuing operations	$	28,799	$	5,157		$	33,956
Earnings per share from continuing operations:
Basic	$	0.41				$	0.51
Diluted(9)		0.39					0.48
Earnings per share:
Basic	$	0.43				$	0.51
Diluted(9)		0.41					0.48
Weighted average number of shares outstanding:
Basic		66,578					66,578
Diluted(9)		73,076					73,076

(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 and iptelorg.
(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 acquired in-process research and development related to the Estacado purchase.
(6)	The adjustment represents the elimination of costs incurred during 2008 related to restructuring certain functions in our EAAA region and changes in estimates related to our 2007 realignment activities.
(7)	The adjustment represents the income tax effect of excluding second quarter discrete tax benefits totaling $3.7 million related to reversing a valuation allowance on deferred tax assets generated by the loss on sale of SSG. 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 six months ended June 30, 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 5,942,000 weighted average shares related to our formerly outstanding convertible debt using the “if-converted” method.
(10)	We operate under a thirteen-week calendar quarter. For financial statement presentation purposes, the reporting periods are referred to as ended on the last day of the calendar quarter. The accompanying schedule of Unaudited Impact of Non-GAAP Adjustments on Net Income is for the twenty-six weeks ended June 27, 2008.