EXHIBIT 99.1
TEKELEC ANNOUNCES Q4 RESULTS;
ACHIEVES ORDERS OF $159.7 MILLION AND REVENUE OF $115.9 MILLION;
ANNOUNCES SBC AS NEW SIGNALING CUSTOMER
CALABASAS, CA (Feb 24, 2005)... Tekelec (Nasdaq: TKLC) today reported financial
results for its fourth quarter and year ended December 31, 2004.
Revenue for the fourth quarter of 2004 was $115.9 million, compared
to $75.0 million in the fourth quarter of 2003. On a GAAP basis, Tekelec's net
income was $13.3 million, or $0.18 per diluted share, for the fourth quarter of
2004, compared to net income of $7.3 million, or $0.11 per diluted share, in the
fourth quarter of 2003. Fourth quarter 2004 net income includes a $3.8 million
one-time, non-cash charge for the write-off of acquired in-process research and
development related to the Steleus acquisition and a $20.3 million gain on
Santera's warrants in Spatial Wireless common stock. Non-GAAP net income for the
fourth quarter of 2004, which excludes the effects of acquisition-related
amortization, the write-off of acquired in-process research and development, the
restructuring charge related to our manufacturing move, and the gain recognized
on Santera's warrants in Spatial Wireless common stock, was $11.9 million, or
$0.17 per diluted share, compared to non-GAAP net income of $8.9 million, or
$0.13 per diluted share, in the fourth quarter of 2003. Orders received in the
fourth quarter for Tekelec products and services were $159.7 million, compared
to $138.1 million in the fourth quarter in 2003.
Revenue for the full year 2004 was $397.1 million compared to $263.7
million in 2003. GAAP net income for the full year 2004 was $37.6 million,
compared to $18.5 million in 2003. Net income for 2004 includes $14.2 million in
non-cash charges for the write-off of acquired in-process research and
development related to the Taqua, VocalData, and Steleus acquisitions, a $9.9
million pre-tax gain on Tekelec's investment in Telica, a $2.2 million pre-tax
gain on the settlement of the Catapult convertible notes, and a $20.3 million
gain on Santera's warrants in Spatial Wireless common stock. Net income for
2003 includes a $2.9 million one-time, non-cash charge for the write-off of
acquired in-process research and development related to the Santera acquisition
and a $3.3 million gain on disposal of discontinued operations. Non-GAAP net
income for 2004 was $44.3 million, or $0.64 per diluted share, compared to
non-GAAP net income of $23.7 million, or $0.38 per diluted share, for 2003.
Non-GAAP results for the full year 2004 exclude the effects of
acquisition-related amortization, restructuring charges related to the
manufacturing move, the write-offs of in-process research and development, the
write-off of certain acquired intangibles as a result of our previously
announced rebranding activities, the gain on Tekelec's investment in Telica, the
gain on the settlement of the Catapult convertible notes, and the gain on
Santera's warrants in Spatial Wireless common stock.
Tekelec President and CEO Fred Lax commented, "As we recently
announced, Tekelec has concluded its discussions with the SEC regarding the
accounting for the acquisition of the Company's majority interest in its Santera
subsidiary and the allocation of Santera's profits and losses between Tekelec
and Santera's minority shareholders following the acquisition. The discussions
resulted in no changes to the Company's prior accounting for the Santera
acquisition, and Tekelec's previously issued financial statements are correct as
previously reported.
"I am pleased to report that Tekelec's performance in the fourth
quarter was strong, with both revenue and earnings ahead of guidance. As we
described in our earlier release, the $115.9 million of revenue this quarter is
the highest in the history of the Company, increasing 9% sequentially and 54%
year-over-year. The $159.7 million of orders generated during the quarter, a 16%
increase year-over-year, is also the highest total in the history of the
Company, surpassing the previous order record of $151 million achieved in Q3
`04. The book-to-bill ratio of approximately 1.4 indicates the continuing
strength of Tekelec's business, with all Groups achieving a book-to-bill ratio
above 1. For the full year, the order total of $520.1 million and revenues of
$397.1 million represent a 54% order increase and 51% revenue increase over the
2003 totals, producing a 1.3 book-to-bill for the full year. These full year
order, revenue, and book-to-bill ratios are all records for the Company.
Finally, regarding global expansion, approximately 31% of sales during the
quarter were from outside the U.S., demonstrating the progress we are making on
our global expansion efforts.
"Since we announced partial results a few weeks ago, I would like to
highlight an important customer announcement reflecting our continued progress
on our signaling solutions strategic initiative. We are delighted to announce a
five-year contract with SBC Services to deploy Tekelec's Eagle 5 platform with
LNP to upgrade the SBC signaling network. Over the next three to five years,
approximately 20 Eagle systems will be activated in the SBC network. This is a
significant customer win for Tekelec which highlights the ongoing growth
opportunities for our signaling platform in the U.S. market and further confirms
our ability to displace incumbent signaling providers."
GROUP REVENUE RESULTS
The year-over-year Group revenue results are as follows:
REVENUE ($ IN MILLIONS)
GROUP Q4 2004 Q4 2003
Switching Solutions $20.4 $5.7
Network Signaling $78.9 $55.8
Communications Software (1) $5.1 $4.2
IEX Contact Center $11.5 $9.3
(1) As a result of the Steleus acquisition, a new operating Group,
Communications Software Solutions, was created in Q4 2004. This Group consists
of the Steleus solutions and Tekelec's existing business intelligence
applications and other network element independent solutions that were
previously reported as part of the Network Signaling Group. The revenue related
to these products was reclassified from the Network Signaling Group to the
Communications Software Solutions Group for 2003 and 2004. The Communications
Software Solutions Group revenue for Q4 2003 does not include any Steleus
revenue.
Q1 FINANCIAL GUIDANCE
Q1 2005 GUIDANCE Q1 2004 ACTUAL RESULTS
Total Revenues: $114.0 million - $117.0 million $78.9 million
GAAP Net Income $0.07 - $0.09 per diluted share(1) $0.09 per diluted share
- ----------
(1) For the 1st quarter of 2005, Tekelec expects expenses to include
amortization of acquired intangibles and amortization of non-cash stock
based deferred compensation of approximately $3.0 million, pre-tax.
Lax concluded, "The sequential revenue growth, strong book-to-bill ratio,
on-going profitability and positive cash flow from operations achieved in the
quarter demonstrate the traction we are gaining on our strategic objectives
focused on signaling solutions, expanding our portfolio of value-added
applications, developing our next-gen switching solutions, and prudently
pursuing global expansion. As we look to 2005, we are confident that our
approach of investing consistent with these strategic objectives has positioned
us to take advantage of future growth opportunities."
ABOUT TEKELEC
Tekelec is a leading developer of now and next-generation switching and
signaling telecommunications solutions, network performance management
technology, and value-added applications. Tekelec's innovative solutions are
widely deployed in traditional and next-generation wireline and wireless
networks and contact centers worldwide. Corporate headquarters are located in
Calabasas, CA. with research and development facilities and sales offices
throughout the world. For more information, please visit www.tekelec.com.
NON-GAAP INFORMATION
Certain non-GAAP financial measures are included in this press
release. In the calculation of these measures, Tekelec excludes certain items
such as amortization of acquired intangibles, discontinued operations, non-cash
stock based compensation charges, and unusual, non-recurring charges. Tekelec
believes that excluding such items provides investors and management with a
representation of the Company's core operating performance and with information
useful in assessing our prospects for the future and underlying trends in
Tekelec's operating expenditures and continuing operations. Management uses such
non-GAAP measures to evaluate financial results and to establish operational
goals. In addition, since the Company has historically reported non-GAAP
measures to the investment community, we believe the inclusion of this
information provides consistency in our financial reporting. The attachments to
this release provide a reconciliation of non-GAAP net income referred to in this
release to the most directly comparable GAAP measure, GAAP net income from
continuing operations. The non-GAAP financial measures are not meant to be
considered a substitute for the corresponding GAAP financial measures.
FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward looking, reflect the
Company's current intent, belief or expectations and involve certain risks and
uncertainties. There can be no assurance that the Company's actual future
performance will meet the Company's expectations. As discussed in the Company's
2003 Annual Report on Form 10-K and other filings with the SEC, the Company's
future operating results are difficult to predict and subject to significant
fluctuations. Factors that may cause future results to differ materially from
the Company's current expectations include, among others: overall
telecommunications spending, changes in general economic conditions, the timing
of significant orders and shipments, the lengthy sales cycle for the Company's
products, the timing of the convergence of voice and data networks, the success
or failure of strategic alliances or acquisitions including the success or
failure of the integration of Santera,Taqua, Steleus, and VocalData's operations
with those of the Company, the ability of carriers to utilize excess capacity of
signaling infrastructure and related products in their networks, the capital
spending patterns of customers, the dependence on wireless customers for a
significant percentage and growth of the Company's revenues, the timely
development and introduction of new products and services, product mix, the
geographic mix of the Company's revenues and the associated impact on gross
margins, market acceptance of new products and technologies, carrier deployment
of intelligent network services, the ability of our customers to obtain
financing, the timing of revenue recognition of multiple elements in an
arrangement sold as part of a bundled solution, the level and timing of research
and development expenditures, regulatory changes, and the expansion of the
Company's marketing and support organizations, both domestically and
internationally. The Company undertakes no obligation to publicly update any
forward-looking statements whether as a result of new information, future events
or otherwise.
TEKELEC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
----------------------------------------------------
(thousands, except earnings per share data)
REVENUES $ 115,948 $ 75,025 $ 397,072 $ 263,700
COSTS AND EXPENSES:
Cost of goods sold 32,429 14,688 101,451 58,697
Amortization of purchased technology 2,175 3,076 9,128 11,178
Research and development 27,943 22,145 98,192 73,328
Selling, general and administrative 43,757 29,566 151,796 104,247
Acquired in-process research and development 3,800 -- 14,200 2,900
Amortization of intangibles 801 532 2,505 1,900
Restructuring(1) 339 -- 1,666 --
--------- --------- --------- ---------
Income (Loss) from operations 4,704 5,018 18,134 11,450
Interest and other income (expense), net 309 954 461 (2,483)
Gain on warrants in privately-held company 20,321 -- 20,321 --
Gain on notes receivable -- -- 2,186 --
Gain on investment in privately-held company -- -- 9,869 --
--------- --------- --------- ---------
Income (Loss) from continuing operations before
provision for income taxes 25,334 5,972 50,971 8,967
Provision for income taxes(2) 7,028 5,966 34,106 13,600
--------- --------- --------- ---------
Income (Loss) from continuing operations before
minority interest 18,306 6 16,865 (4,633)
Minority interest (5,004) 7,272 20,719 19,792
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 13,302 7,278 37,584 15,159
--------- --------- --------- ---------
Gain on disposal of discontinued operation(3) -- -- -- 3,293
NET INCOME (LOSS) $ 13,302 $ 7,278 $ 37,584 $ 18,452
========= ========= ========= =========
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic $ 0.21 $ 0.12 $ 0.60 $ 0.25
Diluted(4) 0.18 0.11 0.55 0.24
--------- --------- --------- ---------
EARNINGS PER SHARE FROM GAIN ON DISPOSAL OF
DISCONTINUED OPERATION
Basic $ -- $ -- $ -- $ 0.05
Diluted(4) -- -- -- 0.05
--------- --------- --------- ---------
EARNINGS PER SHARE
Basic $ 0.21 $ 0.12 $ 0.60 $ 0.30
Diluted(4) 0.18 0.11 0.55 0.29
--------- --------- --------- ---------
EARNINGS PER SHARE WEIGHTED AVERAGE NUMBER of shares outstanding:
Basic 64,861 61,481 63,131 61,163
Diluted(4) 75,331 70,544 72,683 62,911
Notes to Condensed Consolidated Statements of Operations (000's):
(1) This amount represents restructuring costs related to the relocation of
our manufacturing operations.
(2) For the three months and year ended December 31, 2004, Santera, a
majority-owned company, is included in the consolidated results of
operations of Tekelec. The consolidated provision for income taxes does
not include any benefit from the losses generated by Santera due to the
following:
- - Santera's losses cannot be included on Tekelec's consolidated federal
tax return because its ownership interest in Santera does not meet the
threshold to consolidate under income tax rules and regulations.
- - A full valuation allowance has been established on the income tax
benefits generated by Santera as a result of Santera's historical
operating losses.
(3) The sale of the Network Diagnostics Division in August 2002 resulted in
a gain on the disposal of discontinued operation for the year ended
December 31, 2003 and was due to the settlement of the final working
capital adjustment in accordance with the asset purchase agreement.
(4) For the three months and year ended December 31, 2004 and the three
months ended December 31, 2003, the calculation of earnings per share
includes, for the purposes of the calculation, the add-back to net
income of $581, $2,324, and $590, respectively, for assumed after-tax
interest cost related to the convertible debt using the "if-converted"
method of accounting for diluted earnings per share. The weighted
average number of shares outstanding for the three months and year ended
December 31, 2004 and the three months ended December 31, 2003 includes
6,361 shares, respectively, related to the convertible debt using the
"if-converted" method. For the year ended December 31, 2003, the results
of the "if-converted" calculations are anti-dilutive and therefore
excluded form earnings per share.
TEKELEC
NON-GAAP (1) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
------------------------------------------------------------
(thousands, except per share data)
REVENUES $ 115,948 $ 75,025 $ 397,072 $ 263,700
COSTS AND EXPENSES:
Cost of goods sold 32,620 14,931 102,247 59,349
Research and development 27,747 22,145 97,764 73,328
Selling, general and administrative 42,993 29,566 150,469 104,247
--------- --------- --------- ---------
Income from operations 12,588 8,383 46,592 26,776
Interest and other income (expense), net 309 954 461 (1,437)
--------- --------- --------- ---------
Income before provision for income taxes 12,897 9,337 47,053 25,339
Provision for income taxes (2) 8,294 6,523 33,421 17,089
--------- --------- --------- ---------
Income before minority interest 4,603 2,814 13,632 8,250
Minority interest 7,319 6,107 30,657 15,469
--------- --------- --------- ---------
NON-GAAP NET INCOME $ 11,922 $ 8,921 $ 44,289 $ 23,719
--------- --------- --------- ---------
NON-GAAP EARNINGS PER SHARE
Basic $ 0.18 $ 0.15 $ 0.70 $ 0.39
Diluted 0.17 0.13 0.64 0.38
========= ========= ========= =========
Non-GAAP earnings per share weighted average number
of shares outstanding:
Basic 64,861 61,481 63,131 61,163
Diluted 75,331(3) 70,544(4) 72,683(3) 62,911(4)
Notes to Non-GAAP Condensed Consolidated Statements of Operations (000's):
(1) The above Non-GAAP Statements of Operations exclude the effects of the
following:
- - For the three months and year ended December 31, 2004, restructuring
costs related to the relocation of our manufacturing operations amounted
to $339 and $1,666, respectively.
- - For the three months and year ended December 31, 2004, amortization of
deferred stock compensation related to stock options and restricted
stock units granted amounted to $964 and $1,433, respectively.
- - For three months and year ended December 31, 2004 the amortization of
purchased technology and other intangibles related to the acquisitions
of Santera, Taqua, VocalData and Steleus amounted to $2,781 and $10,827,
respectively. The related income tax benefits for the three months and
year ended December 31, 2004 were $818 and $2,340, respectively. For the
three months and year ended December 31, 2004, the write-off of
in-process research and development related to the acquisition of
Steleus was $3,800. For the year ended December 31, 2004, the write-off
of in-process research and development related to the acquisitions of
Taqua and VocalData were $8,000 and $2,400, respectively.
- - For the three months and year ended December 31, 2003, the amortization
of purchased technology and other tangibles related to the acquisition
of IEX and Santera amounted to $3,365 and $12,426, respectively. The
related income tax benefits for the three months and year ended December
31, 2003 were $557 and $3,133, respectively. For the year ended December
31, 2003, the write-off of in-process research and development related
to the acquisition of Santera was $2,900. The minority interest impact
of the amortization and write-off for the three months and year ended
December 31, 2003 was $1,165 and $4,323, respectively.
- - For the three months and year ended December 31, 2004, a gain of $20,321
on Santera's warrants in Spatial Wireless common stock.
- - For the year ended December 31, 2004, a gain of $2,186 on the settlement
of our convertible notes receivable from Catapult.
- - For the year ended December 31, 2004, a gain of $9,869 on the sale of
our investment in Telica.
- - For the year ended December 31, 2003 write-off of bond issuance costs of
$1,046 related to the July 2003 retirement of the convertible debt
issued in 1999.
- - For the year ended December 31, 2003, the gain on disposal of
discontinued operation of $3,293, net of income taxes, related to the
sale of the Network Diagnostics Division.
(2) The above Non-GAAP Statements of Operations assume an effective income
tax rate of 35% and 34% for the Tekelec business excluding Santera for
the three months and year ended December 31, 2004 and 2003,
respectively. There were no income tax benefits associated with the
losses generated by Santera.
(3) For the three months and year ended December 31, 2004, the calculation
of earnings per share includes, for the purposes of the calculation, the
add-back to net income of $581 and $2,324, respectively for assumed
after-tax interest cost related to the convertible debt using the
"if-converted" method of accounting for diluted earnings per share. The
weighted average number of shares outstanding for both the three months
and year ended December 31, 2004 includes 6,361 shares related to the
convertible debt using the "if-converted" method.
(4) For the three months ended December 31, 2003, the calculation of
earnings per share includes, for the purposes of the calculation, the
add-back to net income of $590 for assumed after-tax interest cost
related to the convertible debt using the "if-converted" method of
accounting for diluted earnings per share. The weighted average number
of shares outstanding for the three months ended December 31, 2003
includes 6,361 shares related to the convertible debt using the
"if-converted" method.
TEKELEC
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, December 31,
2004 2003
(unaudited)
-------------------------
(thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 48,925 $ 45,261
Short-term investments, at fair value 136,851 83,800
Accounts receivable, net 107,850 52,781
Current portion of notes receivable ($17,300
principal amount) -- 17,580
Inventories 33,654 21,434
Deferred income taxes, net 29,307 4,958
Prepaid expenses and other current assets 44,639 22,088
-------- --------
Total current assets 401,226 247,902
Long-term investments, at fair value 93,622 210,298
Property and equipment, net 30,617 22,172
Investments in privately-held companies 7,322 17,322
Deferred income taxes 34,285 7,876
Other assets 6,757 6,342
Goodwill, net 130,174 68,903
Intangible assets, net 83,538 34,118
-------- --------
Total assets $787,541 $614,933
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of deferred revenues $ 92,182 $ 50,105
Other current liabilities 96,055 62,758
-------- --------
Total current liabilities 188,237 112,863
Long-term convertible debt 125,000 125,000
Long-term portion of notes payable 78 2,574
Long-term portion of deferred revenues 2,187 3,687
Deferred income taxes 20,600 790
-------- --------
Total liabilities 336,102 244,914
-------- --------
Minority interest 20,489 41,208
-------- --------
Total shareholders' equity 430,950 328,811
-------- --------
Total liabilities and shareholders' equity $787,541 $614,933
======== ========
TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)
THREE MONTHS ENDED DECEMBER 31, 2004
GAAP ADJUSTMENTS NON-GAAP
--------------------------------------------------
(thousands, except per share data)
REVENUES $ 115,948 $ -- $ 115,948
COSTS AND EXPENSES:
Cost of goods sold 32,429 (579)(1)(2) 31,850
Amortization of purchased technology 2,175 (1,405)(2) 770
------------- ------- ----------
Total cost of sales 34,604 (1,984) 32,620
------------- ------- ----------
GROSS PROFIT 81,344 70.2% 1,984 83,328 71.9%
------------- ------- ----------
Research and development 27,943 (196)(1) 27,747
Selling, general and administrative 43,757 (764)(1) 42,993
Acquired in-process research and development 3,800 (3,800)(2) --
Amortization of intangibles 801 (801)(2) --
Restructuring 339 (339)(3) --
------------- ------- ----------
Total operating expenses 76,640 (5,900) 70,740
------------- ------- ----------
Income (Loss) from operations 4,704 7,884 12,588
Interest and other income (expense), net 309 -- 309
Gain on warrants in a privately-held company 20,321 (20,321)(4) --
------------- ------- ----------
Income (Loss) from continuing operations before
provision for income taxes 25,334 (12,437) 12,897
Provision for income taxes 7,028 1,266(5) 8,294
------------- ------- ----------
Income (Loss) from continuing operations before minority interest 18,306 (13,703) 4,603
Minority Interest (5,004) 12,323(6) 7,319
------------- ------- ----------
NET INCOME (LOSS) $ 13,302 $ (1,380) $ 11,922
============= ========= ==========
Earnings per share
Basic $ 0.21 $ 0.18
Diluted (7) 0.18 0.17
------------- ------- ----------
Earnings per share weighted average number of shares outstanding:
Basic 64,861 64,861
Diluted (7) 75,331 75,331
============= ========= ==========
(1) The adjustments represent the amortization of deferred stock
compensation related to stock options and restricted stock units assumed
or granted in 2004.
(2) The adjustments represent the amortization of purchased technology and
other intangibles related to the acquisition of Santera, Taqua,
VocalData and Steleus and the write-off of acquired in-process research
and development related to the acquisition of Steleus.
(3) The adjustment represents restructuring costs related to the relocation
of our manufacturing operation.
(4) The adjustment represents a gain on Santera's warrants in Spatial
Wireless common stock.
(5) The adjustments represents the income tax effect of footnotes (1), (2),
(3), and (4) in order to reflect our non- GAAP effective tax rate at 35%
for the Tekelec business, excluding Santera.
(6) The adjustment represents the minority interest impact of footnote (2)
and (4).
(7) For the three months ended December 31, 2004, the calculation of
earnings per share includes for the purpose of calculation the add-back
to net income of $581 for assumed after-tax interest cost related to the
convertible debt using the "if-converted" method of accounting for
diluted earnings per share. The weighted average number of shares
outstanding for the three months ended December 31, 2004 includes 6,361
shares related to the convertible debt using the "if-converted" method.
TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)
THREE MONTHS ENDED DECEMBER 31, 2003
GAAP ADJUSTMENTS NON-GAAP
--------------------------------------------------------
(thousands, except per share data)
Revenues $ 75,025 $ -- $ 75,025
Costs and expenses:
Cost of goods sold 14,688 -- 14,688
Amortization of purchased technology 3,076 (2,833)(1) 243
------------- ------------- -----------
Total cost of sales 17,764 (2,833) 14,931
------------- ------------- -----------
Gross Profit 57,261 76.3% 2,833 60,094 80.1%
------------- ------------- -----------
Research and development 22,145 -- 22,145
Selling, general and administrative 29,566 -- 29,566
Amortization of intangibles 532 (532)(1) --
------------- ------------- -----------
Total operating expenses 52,243 (532) 51,711
------------- ------------- -----------
Income from operations 5,018 3,365 8,383
Interest and other income (expense), net 954 -- 954
------------- ------------- -----------
Income from continuing operations before
provision for income taxes 5,972 3,365 9,337
Provision for income taxes 5,966 557(2) 6,523
------------- ------------- -----------
Income from continuing operations before
minority interest 6 2,808 2,814
Minority interest 7,272 (1,165) 6,107
------------- ------------- -----------
Net income $ 7,278 $ 1,643 8,921
============= ============= ===========
EARNINGS PER SHARE:
Basic $ 0.12 $ 0.15
Diluted (4) 0.11 0.13
============= ============= ===========
EARNINGS PER SHARE WEIGHTED AVERAGE NUMBER of shares outstanding:
Basic 61,481 61,481
Diluted (4) 70,544 70,544
------------- ------------- -----------
(1) The adjustments represent the amortization of purchased technology and
other intangibles related to the acquisition of IEX and Santera.
(2) The adjustment represents the income tax effect of the adjustment of
amortization of technology and other intangibles in order to reflect our
non-GAAP effective tax rate at 34% for the Tekelec business, excluding
Santera.
(3) The adjustment represents the minority interest impact of (1).
(4) For the three months ended December 31, 2003, the calculation of earnings
per share includes, for the purposes of the calculation, the add-back to
net income of $590 for assumed after-tax interest cost related to the
convertible debt using the "if-converted" method of accounting for
diluted earnings per share. The weighted average number of shares
outstanding for the three months ended December 31, 2003 includes 6,361
shares related to the convertible debt using the "if-converted" method.
TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)
YEAR ENDED DECEMBER 31, 2004
GAAP ADJUSTMENTS NON-GAAP
(thousands, except per share data)
Revenues $ 397,072 $ -- $ 397,072
Costs and expenses:
Cost of goods sold 101,451 (588)(1)(2) 100,863
Amortization of purchased technology 9,128 (7,744)(2) 1,384
------------- ------------ ------------
Total cost of sales 110,579 (8,332) 102,247
------------- ------------ ------------
Gross profit 286,493 72.2% 8,332 294,825 74.2%
------------- ------------ ------------
Research and development 98,192 (428)(1) 97,764
Selling, general and administrative 151,796 (1,327)(1) 150,469
Acquired in-process research and development 14,200 (14,200)(2) --
Amortization of intangibles 2,505 (2,505)(2) --
Restructuring 1,666 (1,666)(3) --
------------- ------------ ------------
Total operating expenses 268,359 (20,126) 248,233
------------- ------------ ------------
Income from operations 18,134 28,458 46,592
Interest and other income (expense), net 461 -- 461
Gain on warrants in privately-held company 20,321 (20,321)(6) --
Gain on note receivable 2,186 (2,186)(4) --
Gain on investment in privately-held company 9,869 (9,869)(5) --
------------- ------------ ------------
Income from continuing operations before
provision for income taxes 50,971 (3,918) 47,053
Provision for income taxes 34,106 (685)(7) 33,421
------------- ------------ ------------
Income (Loss) from continuing operations before minority interest 16,865 (3,233) 13,632
Minority Interest 20,719 9,938(8) 30,657
------------- ------------ ------------
NET INCOME $ 37,584 6,705 $ 44,289
============= ============ =============
EARNINGS PER SHARE
Basic $ 0.60 $ 0.70
Diluted (9) 0.55 0.64
------------- ------------ ------------
EARNINGS PER SHARE WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 63,131 63,131
Diluted (9) 72,683 72,683
============= ============ =============
(1) The adjustments represent the amortization of deferred stock
compensation related to stock options and restricted stock units assumed
or granted in 2004.
(2) The adjustments represent the amortization of purchased technology and
other intangibles related to the acquisition of IEX, Santera, Taqua,
VocalData and Steleus and the write-off of in-process research and
development related to the acquisition of Taqua, VocalData and Steleus.
(3) The adjustment represents restructuring costs related to the relocation
of our manufacturing operation.
(4) The adjustment represents a gain on the settlement of our convertible
notes receivable from Catapult.
(5) The adjustment represents a gain on the sale of our investment in
Telica.
(6) The adjustment represents a gain on Santera's warrants in Spatial
Wireless common stock.
(7) The adjustments represents the income tax effects of footnotes (1), (2),
(3), (4), (5) and (6) in order to reflect our non- GAAP effective tax
rate at 35% for the Tekelec business, excluding Santera.
(8) The adjustment represents the minority interest impact of footnote (2)
and (6).
(9) For the year ended December 31, 2004, the calculation of earnings per
share includes for the purpose of calculation the add-back to net income
of $2,324 for assumed after-tax interest cost related to the convertible
debt using the "if-converted" method of accounting for diluted earnings
per share. The weighted average number of shares outstanding for the
year ended December 31, 2004 includes 6,361 shares related to the
convertible debt using the "if-converted" method.
TEKELEC
IMPACT OF NON-GAAP ADJUSTMENTS ON NET INCOME
(unaudited)
YEAR ENDED DECEMBER 31, 2003
GAAP ADJUSTMENTS NON-GAAP
(thousands, except per share data)
REVENUES $ 263,700 $ -- $ 263,700
COSTS AND EXPENSES:
Cost of goods sold 58,697 -- 58,697
Amortization of purchased technology 11,178 (10,526) (1) 652
------------- -------------- -------------
Total cost of sales 69,875 (10,526) 59,349
------------- -------------- -------------
GROSS PROFIT 193,825 73.5% 10,526 204,351 77.5%
------------- -------------- -------------
Research and development 73,328 -- 73,328
Selling, general and administrative 104,247 -- 104,247
Acquired in-process research and development 2,900 (2,900) (1) --
Amortization of intangibles 1,900 (1,900) (1) --
------------- -------------- -------------
Total operating expenses 182,375 (4,800) 177,575
------------- -------------- -------------
Income from operations 11,450 15,326 26,776
Interest and other income (expense), net (2,483) 1,046 (2) (1,437)
------------- -------------- -------------
Income from continuing operations before
provision for income taxes 8,967 16,372 25,339
Provision for income taxes 13,600 3,489 (3) 17,089
------------- -------------- -------------
Income (Loss) from continuing operations before
minority interest (4,633) 12,883 8,250
Minority interest 19,792 (4,323) (4) 15,469
------------- -------------- -------------
INCOME FROM CONTINUING OPERATIONS 15,159 8,560 23,719
Gain on disposal of discontinued operation 3,293 (3,293) (5) --
------------- -------------- -------------
NET INCOME $ 18,452 $ 5,267 $ 23,719
============= ============== =============
EARNINGS PER SHARE FROM CONTINUING OPERATIONS:
Basic $ 0.25 $ 0.39
Diluted 0.24 0.38
------------- -------------- -------------
EARNINGS PER SHARE FROM GAIN ON DISPOSAL OF
DISCONTINUED OPERATION:
Basic $ 0.05 $ --
Diluted 0.05 --
------------- -------------- -------------
EARNINGS PER SHARE:
Basic $ 0.30 $ 0.39
Diluted 0.29 0.38
============= ============== =============
EARNINGS PER SHARE WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 61,163 61,163
Diluted 62,911 62,911
------------- -------------- -------------
(1) The adjustments represent the amortization of purchased technology and
other intangibles related to the acquisition of IEX and Santera and the
related income tax benefit and the write-off of in-process research and
development related to the acquisition of Santera.
(2) The adjustment represents the write-off of unamortized bond issuance
costs of $1,046 related to the July 2003 retirement of the convertible
debt issued in 1999.
(3) The adjustment represents the income tax effects of footnotes (1) and
(2) in order to reflect our non-GAAP effective tax rate at 34% for the
Tekelec business, excluding Santera.
(4) The adjustment represents minority interest impact of footnote (1).
(5) The adjustment represents the gain on the sale of the Network
Diagnostics Division and was due to the settlement of the final working
capital adjustment in accordance with the asset purchase agreement.