Teradyne Reports Fourth Quarter and Fiscal Year 2015 Results

(6) Under GAAP, when calculating diluted earnings per share, convertible debt must be assumed to have converted if the effect on EPS would be dilutive. Diluted shares assume the conversion of the convertible debt as the effect would be dilutive. Accordingly, for the twelve months ended December 31, 2014, 5.0 million shares have been included in diluted shares.


CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

	December 31, 2015		December 31, 2014

Assets
Cash and cash equivalents	$	264,705	$	294,256
Marketable securities		477,696		533,787
Accounts receivable		211,293		151,034
Inventories, net		153,588		105,129
Deferred tax assets		54,973		57,239
Prepayments		91,519		95,819
Other current assets		6,194		6,582
Total current assets		1,259,968		1,243,846

Net property, plant and equipment		273,414		329,038
Marketable securities		265,928		470,789
Deferred tax assets		7,404		7,494
Other assets		13,080		10,419
Retirement plans assets		636		12,896
Intangible assets, net		239,831		190,600
Goodwill		488,413		273,438
Total assets	$	2,548,674	$	2,538,520

Liabilities
Accounts payable	$	92,358	$	47,763
Accrued employees' compensation and withholdings		113,994		100,994
Deferred revenue and customer advances		85,527		71,603
Other accrued liabilities		43,727		50,247
Contingent consideration		15,500		895
Accrued income taxes		21,751		20,049
Total current liabilities		372,857		291,551

Long-term deferred revenue and customer advances		25,745		19,929
Retirement plans liabilities		103,531		108,460
Deferred tax liabilities		26,663		23,315
Long-term other accrued liabilities		32,156		13,830
Long-term contingent consideration		21,936		2,455
Total liabilities		582,888		459,540

Shareholders' equity		1,965,786		2,078,980

Total liabilities and shareholders' equity	$	2,548,674	$	2,538,520


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

	Quarter Ended						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Cash flows from operating activities:
Net (loss) income	$	(641	)	$	(103,811	)	$	206,477		$	81,272
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		15,649			20,558			68,180			73,390
Amortization		20,433			17,032			72,592			79,154
Stock-based compensation		7,372			8,434			30,452			40,307
Provision for excess and obsolete inventory		2,393			688			21,332			22,193
Retirement plans actuarial losses		17,755			46,564			17,755			46,564
Deferred taxes		(6,736	)		4,336			(20,709	)		(4,411	)
Contingent consideration adjustment		5,089			-			2,489			(630	)
Tax benefit related to employee stock compensation awards		(1,107	)		1,191			(4,320	)		(535	)
Non-cash charge for the sale of inventories revalued at the date of acquisition		-			-			1,567			-
Gain from the sale of an equity investment		-			-			(5,406	)		-
Goodwill impairment		-			98,897			-			98,897
Other		(1,194	)		1,395			1,329			3,505
Changes in operating assets and liabilities, net of business acquired:
Accounts receivable		33,940			171,730			(57,177	)		8,060
Inventories		(22,517	)		12,905			10,859			51,172
Prepayments and other assets		(6,257	)		(6,247	)		9,272			41,537
Accounts payable and other accrued expenses		(4,502	)		(74,539	)		48,161			(45,430	)
Deferred revenue and customer advances		10,225			7,767			16,976			22,033
Retirement plans contributions		(9,097	)		(30,635	)		(12,095	)		(33,916	)
Accrued income taxes		(20,077	)		(1,308	)		5,600			8,900
Net cash provided by operating activities		40,728			174,957			413,334			492,062

Cash flows from investing activities:
Purchases of property, plant and equipment		(23,151	)		(22,630	)		(89,878	)		(168,982	)
Purchases of available-for-sale marketable securities		(466,396	)		(734,687	)		(1,424,002	)		(1,578,743	)
Proceeds from maturities of available-for-sale marketable securities		29,901			74,793			360,264			570,358
Proceeds from sales of available-for-sale marketable securities		472,397			623,669			1,316,131			859,729
Acquisition of business, net of cash acquired		-			(19,419	)		(282,741	)		(19,419	)
Proceeds from the sale of an equity investment		-			-			5,406			-
(Purchase of) proceeds from life insurance		-			(207	)		1,098			4,184
Net cash provided by (used for) investing activities		12,751			(78,481	)		(113,722	)		(332,873	)

Cash flows from financing activities:
Issuance of common stock under employee stock purchase and stock option plans		1,287			261			19,432			21,291
Repurchase of common stock		(73,106	)		-			(299,949	)		-
Tax benefit related to employee stock compensation awards		1,107			(1,191	)		4,320			535
Dividend payments		(12,279	)		(12,994	)		(50,713	)		(37,425	)
Payment of revolving credit facility costs		-			-			(2,253	)		-
Payments of long-term debt		-			-			-			(190,972	)
Net cash used for financing activities		(82,991	)		(13,924	)		(329,163	)		(206,571	)

(Decrease) increase in cash and cash equivalents		(29,512	)		82,552			(29,551	)		(47,382	)
Cash and cash equivalents at beginning of period		294,217			211,704			294,256			341,638
Cash and cash equivalents at end of period	$	264,705		$	294,256		$	264,705		$	294,256

GAAP to Non-GAAP Earnings Reconciliation

(In millions, except per share amounts)
	Quarter Ended
	December 31, 2015			% of Net Revenues								October 4, 2015			% of Net Revenues								December 31, 2014			% of Net Revenues

Net revenues	$	318.4										$	466.0										$	323.2

Gross profit - GAAP	$	166.0		52.1	%							$	258.6		55.5	%							$	160.2		49.6	%
Pension mark-to-market adjustments (1)		8.3		2.6	%								-		-									12.7		3.9	%
Inventory step-up		-		-									1.0		0.2	%								-		-
Gross profit - non-GAAP	$	174.3		54.7	%							$	259.6		55.7	%							$	172.9		53.5	%

(Loss) income from operations - GAAP	$	(9.7	)	-3.0	%							$	86.8		18.6	%							$	(126.2	)	-39.0	%
Acquired intangible assets amortization		19.9		6.3	%								20.1		4.3	%								16.0		5.0	%
Goodwill impairment (2)		-		-									-		-									98.9		30.6	%
Restructuring and other (3)		5.2		1.6	%								0.3		0.1	%								1.2		0.4	%
Pension mark-to-market adjustments (1)		17.8		5.6	%								-		-									46.6		14.4	%
Inventory step-up		-		-									1.0		0.2	%								-		-
Income from operations - non-GAAP	$	33.2		10.4	%							$	108.2		23.2	%							$	36.5		11.3	%


						Net Income per Common Share											Net Income per Common Share											Net Income per Common Share
	December 31, 2015			% of Net Revenues		Basic			Diluted			October 4, 2015			% of Net Revenues		Basic			Diluted			December 31, 2014			% of Net Revenues		Basic			Diluted
Net (loss) income- GAAP	$	(0.6	)	-0.2	%	$	(0.00	)	$	(0.00	)	$	71.5		15.3	%	$	0.34		$	0.34		$	(103.8	)	-32.1	%	$	(0.48	)	$	(0.48	)
Acquired intangible assets amortization		19.9		6.3	%		0.10			0.10			20.1		4.3	%		0.10			0.09			16.0		5.0	%		0.07			0.07
Goodwill impairment (2)		-		-			-			-			-		-			-			-			98.9		30.6	%		0.46			0.45
Inventory step-up		-		-			-			-			1.0		0.2	%		0.00			0.00			-		-			-			-
Pension mark-to-market adjustments (1)		17.8		5.6	%		0.09			0.09			-		-			-			-			46.6		14.4	%		0.22			0.21
Restructuring and other (3)		5.2		1.6	%		0.03			0.03			0.3		0.1	%		0.00			0.00			1.2		0.4	%		0.01			0.01
Exclude discrete tax items (4)		(6.3	)	-2.0	%		(0.03	)		(0.03	)		(3.3	)	-0.7	%		(0.02	)		(0.02	)		1.5		0.5	%		0.01			0.01
Tax effect of non-GAAP adjustments		(9.9	)	-3.1	%		(0.05	)		(0.05	)		(4.7	)	-1.0	%		(0.02	)		(0.02	)		(29.3	)	-9.1	%		(0.14	)		(0.13	)
Net income - non-GAAP	$	26.1		8.2	%	$	0.13		$	0.13		$	84.9		18.2	%	$	0.40		$	0.40		$	31.1		9.6	%	$	0.14		$	0.14

GAAP and non-GAAP weighted average common shares - basic		205.1											210.0											216.5
GAAP weighted average common shares - diluted		205.1											211.7											216.5
Include dilutive shares		2.1											-											2.3
Non-GAAP weighted average common shares - diluted		207.2											211.7											218.8

(1)Actuarial losses recognized under GAAP in accordance with Teradyne's mark-to-market pension accounting.

(2)Goodwill impairment related to Teradyne's Wireless Test business segment.

(3)Restructuring and other consists of:

	Quarter Ended
	December 31, 2015											October 4, 2015											December 31, 2014
Employee severance	$	0.1										$	1.2										$	0.8
Acquisition costs		-											0.1											0.4
Contingent consideration fair value adjustment		5.1											(1.0	)										-
	$	5.2										$	0.3										$	1.2

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