Exhibit 99.1
Tekelec Announces Q4 2008 and Full Year Results
| | • | | Q4 Revenues of $119.9 million, up 4% Year-over-Year; Record Full Year Revenues up 7% |
| |
| | • | | Q4 Orders of $160.6 million, down 14% as compared to a record Q4 2007; Full Year Orders down 1% |
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| | • | | Q4 GAAP EPS from Continuing Operations of $0.19 per share, up 36% Year-Over-Year; Full Year GAAP EPS from Continuing Operations per share up 87 % |
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| | • | | Q4 Non-GAAP EPS from Continuing Operations of $0.27 per share (as reconciled below), up 29% Year-Over-Year; Record Full Year Non-GAAP EPS from Continuing Operations (as reconciled below) of $0.94 per diluted share, up 42% |
| |
| | • | | Q4 Cash flow from Continuing Operations of $18.0 million down 30% Year-over-Year, Record Full Year Cash flow from Continuing Operations of $106 million up 102% |
Morrisville, N.C.February 11, 2009 — Tekelec (“the Company”), (NASDAQ: TKLC), the network signaling, mobile messaging and performance management company, today announced its earnings for the fourth quarter and full year of 2008.
2008 Fourth Quarter Results from Continuing Operations
Revenue from continuing operations for the fourth quarter of 2008 was $119.9 million, up 4% compared to $115.2 million for the fourth quarter of 2007. The Company had orders of $160.6 million for the quarter. This order total was the second highest in the Company’s history but was down 14% compared to the record orders of $186.2 million for the fourth quarter of 2007. As of December 31, 2008, our backlog was $412.1 million compared to $369.0 million as of September 30, 2008 and $417.0 million as of December 31, 2007.
On a GAAP basis, the Company reported income from continuing operations for the fourth quarter of 2008 of $12.8 million, or $0.19 per diluted share, up 36%, compared to income from continuing operations of $10.1 million, or $0.14 per diluted share, for the fourth quarter of 2007. On a non-GAAP basis, net income from continuing operations for the fourth quarter of 2008 was $18.2 million, or $0.27 per diluted share, up 29%, compared to net income from continuing operations of $14.9 million, or $0.21 per diluted share, for the fourth quarter of 2007. Please refer to the attached financial statement schedules for a reconciliation of the Company’s GAAP operating results to its non-GAAP operating results.
Corporate Office: 5200 Paramount Parkway, Morrisville, N.C. 27560• Tel 919.460.5500• Fax 919.460.0877
Full Year 2008 Results from Continuing Operations
Revenue from continuing operations for the full year 2008 was $460.6 million,up 7% compared to $431.8 million for the full year 2007. For the full year 2008, the Company had orders from continuing operations of $453.3 million, down 1% compared to $459.2 million for the full year 2007.
On a GAAP basis, the Company reported income from continuing operations for the full year 2008 of $48.6 million, or $0.71 per diluted share, up 87%, compared to income from continuing operations of $26.9 million, or $0.38 per diluted share, for the full year 2007. On a non-GAAP basis, income from continuing operations for the full year 2008 was $64.7 million, or $0.94 per diluted share, up 42%, compared to income from continuing operations of $48.3 million, or $0.66 per diluted share, for the full year 2007. Please refer to the attached financial statement schedules for a reconciliation of the Company’s GAAP operating results to its non-GAAP operating results.
GAAP operating margins from continuing operations were 14% and 6% for the full year 2008 and 2007, respectively. Non-GAAP operating margins from continuing operations for the full year 2008 were 20% compared with 13% for 2007. Cash flows from continuing operations for the year ended December 31, 2008 were $106 million, up 102% compared to $52.5 million for the full year 2007.
Frank Plastina, Tekelec’s president and chief executive officer, stated “We are very pleased with our strong operating results for the fourth quarter and full year of 2008. For 2008, we delivered record revenue, non-GAAP earnings per share and cash flows from operations in a very challenging economic environment. Our strong gross margin performance enabled us to generate a 20% non-GAAP operating margin for the full year.”
Consolidated Results, Including the Impact of Discontinued Operations
On a GAAP basis, consolidated net income for the three months ended December 31, 2008 was $13.9 million, or $0.21 per share, up 40%, compared to $10.4 million, or $0.15 per share consolidated net income for the three months ended December 31, 2007. On a GAAP basis, consolidated net income for the twelve months ended December 31, 2008 was $55.0 million, or $0.80 per diluted share, compared to a consolidated net loss for the twelve months ended December 31, 2007 of $(35.3) million, or $(0.43) per diluted share. The full year 2008 net income included income from discontinued operations of $6.5 million, while 2007 net income included a loss from discontinued operations of $(62.2) million related to the sale of the Company’s SSG business.
Balance Sheet and Liquidity
As of December 31, 2008, the Company’s consolidated cash and cash equivalents totaled $209.4 million, compared to $228.6 million at September 30, 2008 and to $419.5 million in cash, cash equivalents and short-term investments at December 31, 2007. Cash flows from continuing operations were $18.1 million for the fourth quarter and $106.0 million for the year. During 2008, the Company used a portion of its cash balance and cash flows from operations to repay Convertible Notes totaling $125.0 million, repurchase approximately 2.6 million shares of Tekelec common stock at a cost of $33.8 million, and acquire mBalance for $35.8 million in net cash.
Deferred revenues were $209.4 million at December 31, 2008, compared to $211.7 million at September 30, 2008 and $175.2 million at December 31, 2007.
At December 31, 2008, the Company continued to hold $87.2 million of Student Loan Auction Rate Securities (“SLARS”) valued at fair value in accordance with FAS 115 and 157. This valuation reflects a cumulative decline in value of $20.7 million recorded in 2008. As a result of entering into the previously announced auction rate securities rights agreement with UBS (the “UBS Rights Agreement”) on October 31, 2008, these securities are now classified as trading securities. Accordingly, as required by FAS 115 the $20.7 million write down was recorded as a non-operating expense in the income statement during the fourth quarter of 2008.
Under the terms of the UBS Rights Agreement, UBS has the right, at its discretion, to purchase these securities at par plus accrued interest at any time until July 2, 2012 and Tekelec has the right to require UBS to purchase the securities at par plus accrued interest at its election any time between June 30, 2010 and July 2, 2012. The Company’s rights under the UBS Rights Agreement were valued at fair value at December 31, 2008 in accordance with FAS 157 and FAS 159. The fair value of the rights was $18.7 million and this value was recorded as a non-operating gain during the fourth quarter of 2008.
The net impact of recording both the ARS and the UBS Rights Agreement at fair value at December 31, 2008 was to reduce GAAP and non-GAAP income before taxes by $2.0 million for the quarter and year ended December 31, 2008. Any future changes in fair value of either of these investments will be recorded in non-operating income. We will continue to classify our SLARS and the Company’s rights under the UBS Rights Agreement as long-term investments until we believe that we are within twelve months of a liquidity event.
Guidance
Given the current economic conditions and the associated lack of visibility, we are only providing guidance for the first six months of the year. We expect revenue for the first half of 2009 to range between $225 million and $240 million. For the first six months, we expect GAAP EPS to range from $0.25 to $0.35 per share and non-GAAP EPS to range from $0.36 to $0.46 per share. In addition, we anticipate that our new orders for the first six months of the year will range between $160 million to $180 million with the second quarter orders expected to be significantly higher than the first quarter. See table below for reconciliation of non-GAAP to GAAP measures.
| | | |
| | | 2009 Guidance |
| | | Six Months Ending June 30, 2009 |
| | | |
Revenues ($M)
Non-GAAP Gross Margin %
GAAP EPS
Non-GAAP EPS
Orders ($M) | | $225M — $240M
64% — 67%*
$0.25 — $0.35
$0.36 — $0.46*
$160M — $180M |
* Excludes $6.6M of estimated stock-based compensation, $4.1M of estimated amortization of purchased technology and acquisition-related expenses, (net of associated tax impact of approximately $3.2M) which are included in GAAP EPS. These Non-GAAP adjustments after tax represent approximately $0.11 per share. Of these amounts, approximately $2.5M would reduce the Non-GAAP gross margin.
Conference Call
Tekelec has scheduled a conference call for Wednesday, February 11, 2009, for its management to discuss fourth quarter and full year 2008 results. 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 reconciliations) for the fourth quarter and the years ended December 31, 2008 and 2007 and to discuss during this call certain forward looking information concerning the Company’s prospects for 2009.
“Live” Webcast and Replay
Tekelec will host a live webcast of its conference call on Wednesday, February 11, 2009 at 8:00 a.m. 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. on Wednesday, February 11, 2009, and for 90 days thereafter.
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 # 82423318.
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 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 2007 Form 10-K, First Quarter 2008 Form 10-Q, Second Quarter 2008 Form 10-Q, Third Quarter 2008 Form 10-Q and its other filings with the Securities and Exchange Commission, the effect of the current or escalating economic crisis on overall telecommunications 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, our ability to maintain OEM, partner, and vendor support and supply relationships, 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, changes in the market price of the Company’s common stock and reductions in telecommunications carrier capital spending. 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 leverages its global leadership in core multimedia session control and network intelligence to ensure scalable, secure and highly available communications. The company’s leading signaling solutions enable the interworking of different network applications, technologies and protocols, providing a smooth transition to next-generation networks. Corporate headquarters are located near Research Triangle Park in Morrisville, N.C., U.S.A., with research and development facilities and sales offices throughout the world. 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
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | (Thousands, except per share data) | |
Revenues | | $ | 119,903 | | | $ | 115,226 | | | $ | 460,564 | | | $ | 431,800 | |
Cost of sales: | | | | | | | | | | | | | | | | |
| Cost of goods sold | | | 38,147 | | | | 44,280 | | | | 154,260 | | | | 176,323 | |
| Amortization of purchased technology | | | 746 | | | | 588 | | | | 2,507 | | | | 2,354 | |
| | | | | | | | | | | | | |
| Total cost of sales | | | 38,893 | | | | 44,868 | | | | 156,767 | | | | 178,677 | |
| | | | | | | | | | | | | |
| Gross profit | | | 81,010 | | | | 70,358 | | | | 303,797 | | | | 253,123 | |
| | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | |
| Research and development | | | 24,907 | | | | 23,190 | | | | 100,613 | | | | 92,223 | |
| Sales and marketing | | | 19,409 | | | | 18,923 | | | | 74,678 | | | | 72,559 | |
| General and administrative | | | 15,762 | | | | 14,973 | | | | 56,239 | | | | 55,121 | |
| Acquired in-process research and development | | | 3,000 | | | | 419 | | | | 5,690 | | | | 419 | |
| Restructuring and other | | | 891 | | | | 1,823 | | | | 1,134 | | | | 6,625 | |
| Amortization of intangible assets | | | 111 | | | | 109 | | | | 438 | | | | 249 | |
| | | | | | | | | | | | | |
| Total operating expenses | | | 64,080 | | | | 59,437 | | | | 238,792 | | | | 227,196 | |
| | | | | | | | | | | | | |
| Income from operations | | | 16,930 | | | | 10,921 | | | | 65,005 | | | | 25,927 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other income (expense), net: | | | | | | | | | | | | | | | | |
| Interest income | | | 1,722 | | | | 4,740 | | | | 9,047 | | | | 17,446 | |
| Interest expense | | | (66 | ) | | | (837 | ) | | | (1,986 | ) | | | (3,591 | ) |
| Gain (loss) on sale of investments | | | — | | | | 1 | | | | (2 | ) | | | 224 | |
| Gain on recognition of UBS rights at fair value | | | 18,738 | | | | — | | | | 18,738 | | | | — | |
| Unrealized loss on trading securities | | | (20,702 | ) | | | — | | | | (20,702 | ) | | | — | |
| Other, net | | | 209 | | | | (1,046 | ) | | | (3,490 | ) | | | (4,034 | ) |
| | | | | | | | | | | | | |
| Total other income (expense), net | | | (99 | ) | | | 2,858 | | | | 1,605 | | | | 10,045 | |
| | | | | | | | | | | | | |
| Income from continuing operations before provision for income taxes | | | 16,831 | | | | 13,779 | | | | 66,610 | | | | 35,972 | |
| Provision for income taxes | | | 4,060 | | | | 3,720 | | | | 18,040 | | | | 9,081 | |
| | | | | | | | | | | | | |
Income from continuing operations | | | 12,771 | | | | 10,059 | | | | 48,570 | | | | 26,891 | |
Income (loss) from discontinued operations, net of taxes | | | 1,096 | | | | 348 | | | | 6,469 | | | | (62,227 | ) |
| | | | | | | | | | | | | |
Net income (loss) | | $ | 13,867 | | | $ | 10,407 | | | $ | 55,039 | | | $ | (35,336 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.19 | | | $ | 0.15 | | | $ | 0.73 | | | $ | 0.39 | |
| Diluted | | | 0.19 | | | | 0.14 | | | | 0.71 | | | | 0.38 | |
| | | | | | | | | | | | | | | | | |
Earnings (loss) per share from discontinued operations: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.02 | | | $ | 0.01 | | | $ | 0.10 | | | $ | (0.89 | ) |
| Diluted | | | 0.02 | | | | 0.00 | | | | 0.09 | | | | (0.81 | ) |
| | | | | | | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.21 | | | $ | 0.15 | | | $ | 0.83 | | | $ | (0.51 | ) |
| Diluted | | | 0.21 | | | | 0.15 | | | | 0.80 | | | | (0.43 | ) |
| | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding-continuing operations: | | | | | | | | | | | | | | | | |
| Basic | | | 66,113 | | | | 68,443 | | | | 66,307 | | | | 69,531 | |
| Diluted | | | 66,521 | | | | 75,235 | | | | 69,859 | | | | 76,796 | |
| | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 66,113 | | | | 68,443 | | | | 66,307 | | | | 69,531 | |
| Diluted | | | 66,521 | | | | 75,235 | | | | 69,859 | | | | 76,796 | |
TEKELEC
UNAUDITED NON-GAAP STATEMENTS OF OPERATIONS FOR CONTINUING OPERATIONS(1)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | (Thousands, except per share data) | |
Revenues | | $ | 119,903 | | | $ | 115,226 | | | $ | 460,564 | | | $ | 431,800 | |
| Cost of sales: | | | | | | | | | | | | | | | | |
| Cost of goods sold | | | 37,862 | | | | 43,913 | | | | 152,985 | | | | 169,668 | |
| | | | | | | | | | | | | |
Gross profit | | | 82,041 | | | | 71,313 | | | | 307,579 | | | | 262,132 | |
| | | | | | | | | | | | | |
| Research and development | | | 24,179 | | | | 22,554 | | | | 97,665 | | | | 89,380 | |
| Sales and marketing | | | 18,730 | | | | 18,222 | | | | 71,828 | | | | 69,189 | |
| General and administrative | | | 13,705 | | | | 13,307 | | | | 48,091 | | | | 46,821 | |
| | | | | | | | | | | | | |
| Total operating expenses | | | 56,614 | | | | 54,083 | | | | 217,584 | | | | 205,390 | |
| | | | | | | | | | | | | |
Income from operations | | | 25,427 | | | | 17,230 | | | | 89,995 | | | | 56,742 | |
| Interest and other income (expense), net | | | (99 | ) | | | 2,858 | | | | 1,605 | | | | 10,045 | |
| | | | | | | | | | | | | |
Income from continuing operations before provision for income taxes | | | 25,328 | | | | 20,088 | | | | 91,600 | | | | 66,787 | |
Provision for income taxes(2) | | | 7,092 | | | | 5,205 | | | | 26,944 | | | | 18,525 | |
| | | | | | | | | | | | | |
Net income from continuing operations | | $ | 18,236 | | | $ | 14,883 | | | $ | 64,656 | | | $ | 48,262 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.28 | | | $ | 0.22 | | | $ | 0.98 | | | $ | 0.69 | |
| Diluted | | | 0.27 | | | | 0.21 | | | | 0.94 | | | | 0.66 | |
| | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 66,113 | | | | 68,443 | | | | 66,307 | | | | 69,531 | |
| Diluted | | | 66,521 | | | | 75,235 | | | | 69,859 | | | | 76,796 | |
(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 28% and 26% for the three months ended December 31, 2008 and 2007, respectively. The above Non-GAAP Statements of Operations assume non-GAAP effective income tax rates of 29% and 28% for the year ended December 31, 2008 and 2007, respectively.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | |
| | | December 31, | |
| | | 2008 | | | 2007 | |
| | | (Thousands, except share data) | |
| | | | | | | | | |
ASSETS
|
Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 209,441 | | | $ | 105,550 | |
| Short-term investments, at fair value | | | — | | | | 313,922 | |
| | | | | | | |
| Total cash, cash equivalents and short-term investments | | | 209,441 | | | | 419,472 | |
| Accounts receivable, net | | | 171,630 | | | | 147,092 | |
| Inventories | | | 23,704 | | | | 20,543 | |
| Income taxes receivable | | | — | | | | 28,361 | |
| Deferred income taxes | | | 44,253 | | | | 18,793 | |
| Deferred costs and prepaid commissions | | | 56,588 | | | | 57,203 | |
| Prepaid expenses and other current assets | | | 11,061 | | | | 14,726 | |
| | | | | | | |
| Total current assets | | | 516,677 | | | | 706,190 | |
| | | | | | | | | |
| Long-term trading securities, at fair value | | | 87,198 | | | | — | |
| Put right, at fair value | | | 18,738 | | | | — | |
| Property and equipment, net | | | 34,904 | | | | 32,510 | |
| Investments in privately-held companies | | | 22,297 | | | | 18,553 | |
| Deferred income taxes, net | | | 71,287 | | | | 83,418 | |
| Other assets | | | 1,415 | | | | 1,320 | |
| Goodwill | | | 41,741 | | | | 22,951 | |
| Intangible assets, net | | | 37,703 | | | | 16,948 | |
| | | | | | | |
| Total assets | | $ | 831,960 | | | $ | 881,890 | |
| | | | | | | |
| | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
| | | | | | | | | |
Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 25,308 | | | $ | 45,388 | |
| Accrued expenses | | | 30,723 | | | | 21,259 | |
| Accrued compensation and related expenses | | | 40,953 | | | | 40,234 | |
| Convertible debt | | | — | | | | 125,000 | |
| Current portion of deferred revenues | | | 201,838 | | | | 166,274 | |
| Income taxes payable | | | 7,300 | | | | — | |
| Liabilities of discontinued operations | | | 184 | | | | 5,767 | |
| | | | | | | |
| Total current liabilities | | | 306,306 | | | | 403,922 | |
| Deferred income taxes | | | 7,071 | | | | 1,295 | |
| Long-term portion of deferred revenues | | | 7,591 | | | | 8,917 | |
| Other long-term liabilities | | | 6,146 | | | | 6,569 | |
| | | | | | | |
| Total liabilities | | | 327,114 | | | | 420,703 | |
| | | | | | | |
Commitments and Contingencies Shareholders’ equity: | | | | | | | | |
| Common stock, without par value, 200,000,000 shares authorized; 66,139,690 and 67,479,916 shares issued and outstanding, respectively | | | 309,550 | | | | 319,761 | |
| Retained earnings | | | 194,418 | | | | 139,379 | |
| Accumulated other comprehensive income | | | 878 | | | | 2,047 | |
| | | | | | | |
| Total shareholders’ equity | | | 504,846 | | | | 461,187 | |
| | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 831,960 | | | $ | 881,890 | |
| | | | | | | |
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2008 | | | 2007 | |
| | | (Thousands) | |
Cash flows from operating activities: | | | | | | | | |
| Net income (loss) | | $ | 55,039 | | | $ | (35,336 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
| Loss (income) from discontinued operations | | | (6,469 | ) | | | 62,227 | |
| Loss (gain) on sale of investments | | | 2 | | | | (224 | ) |
| Gain on recognition of UBS rights at fair value | | | (18,738 | ) | | | — | |
| Unrealized loss on trading securities | | | 20,702 | | | | — | |
| Provision for doubtful accounts and returns | | | 1,339 | | | | 1,335 | |
| Inventory write downs | | | 6,588 | | | | 10,841 | |
| Loss on disposal of fixed assets | | | 648 | | | | 984 | |
| Depreciation | | | 17,426 | | | | 15,485 | |
| Amortization of intangibles | | | 2,945 | | | | 2,603 | |
| Amortization of deferred financing costs and other | | | 939 | | | | 1,656 | |
| Acquired in-process research and development | | | 5,690 | | | | 419 | |
| Deferred income taxes | | | (12,276 | ) | | | (176 | ) |
| Stock-based compensation | | | 13,298 | | | | 15,682 | |
| Excess tax benefits from stock-based compensation | | | (1,563 | ) | | | (3,914 | ) |
| Changes in operating assets and liabilities, net of business disposal: | | | | | | | | |
| Accounts receivable | | | (22,718 | ) | | | (16,946 | ) |
| Inventories | | | (8,911 | ) | | | (4,465 | ) |
| Deferred costs | | | (859 | ) | | | (2,093 | ) |
| Prepaid expenses and other assets | | | 1,604 | | | | 4,377 | |
| Accounts payable | | | (17,310 | ) | | | 3,725 | |
| Accrued expenses | | | 3,045 | | | | (6,713 | ) |
| Accrued compensation and related expenses | | | (2,201 | ) | | | 5,318 | |
| Deferred revenues | | | 34,261 | | | | (19,439 | ) |
| Income taxes payable/receivable | | | 33,474 | | | | 17,149 | |
| | | | | | | |
| Total adjustments | | | 50,916 | | | | 87,831 | |
| | | | | | | |
| Net cash provided by operating activities — continuing operations | | | 105,955 | | | | 52,495 | |
| Net cash used in operating activities — discontinued operations | | | (2,680 | ) | | | (18,443 | ) |
| | | | | | | |
| Net cash provided by operating activities | | | 103,275 | | | | 34,052 | |
| | | | | | | |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
| Proceeds from sales and maturities of investments | | | 790,635 | | | | 703,949 | |
| Purchases of investments | | | (584,524 | ) | | | (638,822 | ) |
| Purchase of acquired business, net of cash acquired | | | (35,766 | ) | | | — | |
| Payments related to acquired in-process research and development | | | (2,690 | ) | | | (2,519 | ) |
| Purchases of property and equipment | | | (19,686 | ) | | | (20,234 | ) |
| Other non-operating assets | | | — | | | | 128 | |
| | | | | | | |
| Net cash provided by investing activities — continuing operations | | | 147,969 | | | | 42,502 | |
| Net cash used in investing activities — discontinued operations | | | — | | | | (3,241 | ) |
| | | | | | | |
| Net cash provided by investing activities | | | 147,969 | | | | 39,261 | |
| | | | | | | |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| Repayment of convertible debt | | | (125,000 | ) | | | — | |
| Repurchase of common stock | | | (33,779 | ) | | | (50,122 | ) |
| Proceeds from issuance of common stock | | | 11,922 | | | | 30,686 | |
| Excess tax benefits from stock-based compensation | | | 1,563 | | | | 3,914 | |
| | | | | | | |
| Net cash used in financing activities | | | (145,294 | ) | | | (15,522 | ) |
| | | | | | | |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | (2,059 | ) | | | 2,308 | |
| | | | | | | |
| Net change in cash and cash equivalents | | | 103,891 | | | | 60,099 | |
Cash and cash equivalents, beginning of period | | | 105,550 | | | | 45,451 | |
| | | | | | | |
Cash and cash equivalents, end of period | | $ | 209,441 | | | $ | 105,550 | |
| | | | | | | |
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS
| | | | | | | | | | | | | | | | | |
| | | 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 | |
| Acquired in-process research and development | | | 3,000 | | | | (3,000 | ) | | | (4) | | | | — | |
| Restructuring and other | | | 891 | | | | (891 | ) | | | (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 | |
| |
| Interest and other 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 acquired in-process research and development related to the mBalance purchase.
(5) The adjustment represents the elimination of the costs associated with our restructuring activities.
(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 of 28%.
(7) The adjustment represents the elimination of our discontinued operations.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS
| | | | | | | | | | | | | | | | | |
| | | 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) | | | | | |
| Acquired in-process research and development | | | 5,690 | | | | (5,690 | ) | | | (5) | | | | — | |
| Restructuring and other | | | 1,134 | | | | (1,350 | ) | | | (6) | | | | — | |
| | | | | | | | 216 | | | | (1),(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 | |
| |
| Interest and other income, 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 acquired in-process research and development related to the mBalance and Estacado purchases.
(6) The adjustment represents the elimination of the costs associated with our restructuring activities.
(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 of 29%.
(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.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2007 | |
| |
| | | (Thousands, except per share data) | |
| |
| | | GAAP | | | | | | | | | | | Non-GAAP | |
| | | Continuing | | | | | | | | | | | Continuing | |
| | | Operations | | | Adjustments | | | Operations | |
| |
Revenues | | $ | 115,226 | | | $ | — | | | | | | | $ | 115,226 | |
Cost of sales: | | | | | | | | | | | | | | | | |
| Cost of goods sold | | | 44,280 | | | | (367 | ) | | | (1) | | | | 43,913 | |
| Amortization of purchased technology | | | 588 | | | | (588 | ) | | | (2) | | | | — | |
| |
Total cost of sales | | | 44,868 | | | | (955 | ) | | | | | | | 43,913 | |
| |
Gross profit | | | 70,358 | | | | 955 | | | | | | | | 71,313 | |
| |
Operating Expenses: | | | | | | | | | | | | | | | | |
| Research and development | | | 23,190 | | | | (636 | ) | | | (1) | | | | 22,554 | |
| Sales and marketing | | | 18,923 | | | | (701 | ) | | | (1) | | | | 18,222 | |
| General and administrative | | | 14,973 | | | | (1,666 | ) | | | (1) | | | | 13,307 | |
| Acquired in-process research and development | | | 419 | | | | (419 | ) | | | (3) | | | | — | |
| Restructuring and other | | | 1,823 | | | | (1,597 | ) | | | (4) | | | | — | |
| | | | | | | | (226 | ) | | | (1) | | | | | |
| Amortization of intangible assets | | | 109 | | | | (109 | ) | | | (2) | | | | — | |
| |
Total operating expenses | | | 59,437 | | | | (5,354 | ) | | | | | | | 54,083 | |
| |
Income from operations | | | 10,921 | | | | 6,309 | | | | | | | | 17,230 | |
| |
| Interest and other income, net | | | 2,858 | | | | — | | | | | | | | 2,858 | |
| |
Income from continuing operations before provision for income taxes | | | 13,779 | | | | 6,309 | | | | | | | | 20,088 | |
| |
| Provision for income taxes | | | 3,720 | | | | 1,485 | | | | (5) | | | | 5,205 | |
| |
Income from continuing operations | | | 10,059 | | | | 4,824 | | | | | | | | 14,883 | |
| |
| Income from discontinued operations, net of taxes | | | 348 | | | | (348 | ) | | | (6) | | | | — | |
| |
Net income | | $ | 10,407 | | | $ | 4,476 | | | | | | | $ | 14,883 | |
| |
| | | | | | | | | | | | | | | | | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.15 | | | | | | | | | | | $ | 0.22 | |
Diluted(7) | | | 0.14 | | | | | | | | | | | | 0.21 | |
| | | | | | | | | | | | | | | | | |
Earnings per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.15 | | | | | | | | | | | $ | 0.22 | |
Diluted(7) | | | 0.15 | | | | | | | | | | | | 0.21 | |
| | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 68,443 | | | | | | | | | | | | 68,443 | |
Diluted(7) | | | 75,235 | | | | | | | | | | | | 75,235 | |
(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 acquired in-process research and development related to certain signaling technology.
(4) The adjustment represents the eliminations of the costs associated with our restructuring activities.
(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 of 26%.
(6) The adjustment represents the elimination of our discontinued operations.
(7) For the three months ended December 31, 2007, the calculations of diluted earnings per share include a potential add-back to net income of $581,000 for assumed after-tax interest cost and 6,361,000 weighted average shares related to our previously outstanding convertible debt using the “if-converted” method.
TEKELEC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED IMPACT OF NON-GAAP ADJUSTMENTS
| | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2007 | |
| |
| | | (Thousands, except per share data) | |
| |
| | | GAAP | | | | | | | | | | | Non-GAAP | |
| | | Continuing | | | | | | | | | | | Continuing | |
| | | Operations | | | Adjustments | | | Operations | |
| |
Revenues | | $ | 431,800 | | | $ | — | | | | | | | $ | 431,800 | |
Cost of sales: | | | | | | | | | | | | | | | | |
| Cost of goods sold | | | 176,323 | | | | (1,655 | ) | | | (1) | | | | 169,668 | |
| | | | | | | | (5,000 | ) | | | (2) | | | | | |
| Amortization of purchased technology | | | 2,354 | | | | (2,354 | ) | | | (3) | | | | — | |
| |
Total cost of sales | | | 178,677 | | | | (9,009 | ) | | | | | | | 169,668 | |
| |
Gross profit | | | 253,123 | | | | 9,009 | | | | | | | | 262,132 | |
| |
Operating Expenses: | | | | | | | | | | | | | | | | |
| Research and development | | | 92,223 | | | | (2,843 | ) | | | (1) | | | | 89,380 | |
| Sales and marketing | | | 72,559 | | | | (3,370 | ) | | | (1) | | | | 69,189 | |
| General and administrative | | | 55,121 | | | | (7,588 | ) | | | (1) | | | | 46,821 | |
| | | | | | | | (712 | ) | | | (4) | | | | | |
| Acquired in-process research and development | | | 419 | | | | (419 | ) | | | (5) | | | | — | |
| Restructuring and other | | | 6,625 | | | | (6,399 | ) | | | (6) | | | | — | |
| | | | | | | | (226 | ) | | | (1) | | | | | |
| Amortization of intangible assets | | | 249 | | | | (249 | ) | | | (3) | | | | — | |
| |
Total operating expenses | | | 227,196 | | | | (21,806 | ) | | | | | | | 205,390 | |
| |
Income from operations | | | 25,927 | | | | 30,815 | | | | | | | | 56,742 | |
| |
| Interest and other income, net | | | 10,045 | | | | — | | | | | | | | 10,045 | |
| |
Income from continuing operations before provision for income taxes | | | 35,972 | | | | 30,815 | | | | | | | | 66,787 | |
| |
| Provision for income taxes | | | 9,081 | | | | 9,444 | | | | (7) | | | | 18,525 | |
| |
Income from continuing operations | | | 26,891 | | | | 21,371 | | | | | | | | 48,262 | |
| |
| Loss from discontinued operations, net of taxes | | | (62,227 | ) | | | 62,227 | | | | (8) | | | | — | |
| |
Net income (loss) | | $ | (35,336 | ) | | $ | 83,598 | | | | | | | $ | 48,262 | |
| |
| | | | | | | | | | | | | | | | | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.39 | | | | | | | | | | | $ | 0.69 | |
Diluted(9) | | | 0.38 | | | | | | | | | | | | 0.66 | |
| | | | | | | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.51 | ) | | | | | | | | | | $ | 0.69 | |
Diluted(9) | | | (0.43 | ) | | | | | | | | | | | 0.66 | |
| | | | | | | | | | | | | | | | | |
Weighted average number of shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 69,531 | | | | | | | | | | | | 69,531 | |
Diluted(9) | | | 76,796 | | | | | | | | | | | | 76,796 | |
(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 charge associated with product credits issued to Bouygues Telecom, S.A. as part of our settlement of the Bouygues litigation.
(3) The adjustments represent the amortization of purchased technology and other intangibles related to the acquisitions of Steleus and iptelorg.
(4) The adjustment represents legal expenses incurred to settle the Bouygues litigation.
(5) The adjustment represents acquired in-process research and development related to certain signaling technology.
(6) The adjustment represents the eliminations of the costs associated with our restructuring activities.
(7) The adjustment represents the income tax effect of footnotes (1), (2), (3), (4), (5) and (6) in order to reflect our non-GAAP effective tax rate of 28%.
(8) The adjustment represents the elimination of our discontinued operations.
(9) For the year ended December 31, 2007, the calculations of diluted earnings per share include a potential add-back to net income of $2,324,000 for assumed after-tax interest cost and 6,361,000 weighted average shares related to our previously outstanding convertible debt using the “if-converted” method.
